Similar in many ways, Bitcoin and Ethereum are digital currencies traded using online exchanges. Moreover, they are stored in cryptocurrency wallets of different kinds. The tokens are decentralized; that is to say, they are neither regulated nor issued by a central bank. A key component for both is the blockchain, a distributed ledger technology.
How Do Bitcoin and Ethereum Differ?
There are many significant distinctions between the two cryptocurrencies, and this article will shed new light on the main differences between Bitcoin and Ethereum.
First and foremost, Bitcoin is considered to be the digital gold of the marker, while Ethereum is the digital silver. The first one is the best-known, most popular, and the most prominent cryptocurrency globally. The second one is the second largest currency by market cap. You can change your currency whenever you want.
As a medium of exchange, Bitcoin was developed to be an alternative to traditional currencies. At the same time, Ethereum is famous for its programmable blockchain finding application in lots of areas such as:
- Smart contracts
Being powered by the principle of ledgers and cryptography, these two currencies are technically different. Their main differences include the specifics of transactions, algorithms they run on, and the block time. In Canada, citizens can exchange Canadian dollars for Bitcoin or Ethereum with Shakepay, which includes earning $30 after buying $100 of crypto.
Do They Compete?
Some people may be astonished that there were other online currencies before the advance of Bitcoin. Yet, as the most successful one, Bitcoin is the predecessor of many cryptocurrencies that came forward in the last decade. The concept of decentralized currency carved out a niche and is a challenge for the worldwide financial system. If you go deep into the development of Ethereum, you will see that it had no intention to compete with Bitcoin but to complement. However, it has been a powerful competitor over time.
There is another distinction that is worth paying attention to. Currently, both Bitcoin and Ethereum use a consensus protocol, PoW (proof of work). Due to the latter, the nodes of the networks agree on the state of all information that is recorded on the blockchain, thus preventing economic attacks on the networks. However, in 2022, Ethereum will start using PoS (proof of stake) instead of PoW. Experts believe that the move to a new upgrade will make Ethereum more sustainable and secure. Because of the required computational power, proof of work is energy-intensive, while proof of stake does its best to substitute computational power and uses the method of staking, in other words, reducing its energy-intensive level and replacing miners with validators.
Another vivid distinction comes forward as soon as we start analyzing the two currencies from the angle of the main goal and principle strategy. Since its launch, Bitcoin has aimed to serve as an alternative to national currencies. In contrast, Ethereum has another purpose, mainly to serve as a platform that helps facilitate programmatic contracts and applications utilizing its own form of currency.
In other words, while the aim of the first one is the alternative monetary system, the purpose of the second one is the process of facilitation and monetization of the operation of the Ethereum smart contract.