Sure, Bitcoin and Ethereum appear to be the same as they are both “cryptocurrencies” or “digital assets,” but that is far from the truth! This is because Bitcoin and Ethereum serve completely different purposes and have unique features that have been a part of their design since day one.
In this guide, let’s look into the differences between Bitcoin and Ethereum so that you can make better investment decisions when buying them.
Introduction to Bitcoin
Upon its launch in 2009 during the global financial crisis, Bitcoin was the first decentralized digital asset ever introduced. Its sole design purpose was to make sure it operates independently and does not have any centralized influence, which is also a reason many believe why to date, Satoshi Nakamoto, the founder of Bitcoin, remains anonymous.
Due to the perceived scarcity and durability of Bitcoin, it is sometimes referred to as digital gold, as it serves as a store of value and a medium of exchange, quite similar to gold. Furthermore, bitcoin also facilitates transactions without the involvement of an intermediary or a centralized authority therefore, it is viewed as quite similar to gold that lives only in the digital world.
However, bitcoin uses a consensus mechanism known as “proof of work,” which helps to broadcast, store, and confirm transactions, but it comes with a big issue as it takes a lot of energy. This is why Bitcoin is often criticized for being less eco-friendly.
Introduction to Ethereum
On the other hand, Ethereum is completely different because it is designed to be more than just a digital asset by its founder Vitalik Buterin. This is why Ethereum is largely a decentralized platform, as it enables the development and execution of smart contracts.
With the power of smart contracts, which ensures the uniqueness of each element, Ethereum supports the development of Non-Fungible Tokens or NFTs, Decentralized Autonomous Organizations (DAOs), and Decentralized Finance (DeFi), among other developing decentralized applications.
ETH or Ether is the native digital asset of Ethereum, which powers all operations that take place on its platform. Furthermore, new blocks are added on Ethereum after every 15 seconds as compared to every 10 minutes on Bitcoin, making transactions much faster.
While similar to Bitcoin, Ethereum also used a proof-of-work consensus mechanism, but in 2022 it moved to a new consensus mechanism known as proof-of-stake, which is considered to be environmentally friendly as it requires very little energy to support Ethereum’s operations.
Differences between Bitcoin and Ethereum
The following are the key differences between Bitcoin and Ethereum:
| Aspect | Bitcoin | Ethereum |
| Purpose | Primarily a store of value, aims to replace national currencies. | Functional, supports applications and smart contracts, maintains a decentralized payment network. |
| Comparison to Metals | Considered digital gold due to its fixed supply and less volatility. | Considered digital silver due to practicality, lower adoption rate, and higher volatility. |
| Blockchain Functionality | Very limited, mainly transactional. | Highly functional, supports numerous crypto projects and decentralized applications (Layer 2). |
| Block Limit | Fixed block limit of 1 MB. | No block limit, allows greater flexibility for application development. |
| Supply Limit | Fixed supply of 21 million coins. | No fixed supply, potential for inflationary issues. |
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