10 Differences between Bitcoin and Ethereum – Latest In Crypto
Bitcoin and Ethereum are the two heavyweights of the cryptocurrency ecosystem and have most of the mainstream attention as a consequence of their exponentially rising popularity and price over the past 5–10 years. Although Ethereum has constantly been compared to BTC, it is important to understand the differences and similarities between them to understand their unique value proposition and evaluate them correctly.
Bitcoin utilizes a blockchain for a peer to peer cash system only, whereas Ethereum is a platform that can utilize blockchain for any decentralized application or smart contract. An analogy provided by the founder of Ethereum Vitalik Buterin is that Bitcoin can be thought of as a calculator in that it does one thing well, but Ethereum is the smartphone which has a calculator application as well as a variety of other uses.
Bitcoin transaction data is only for keeping notes/keeping track of transactions, whereas Ethereum transactions may also contain executable code. This allows Ethereum to support smart contracts which are coded programs that self execute upon pre-coded criteria. This is because whilst Bitcoin has just a basic scripting language built in, Ethereum has a full general purpose programming language Solidity that allows for more complex programming.
As Ethereum is a blockchain platform it can launch Initial Coin Offerings (ICO’s) on Ethereum, but Bitcoin has no such capability. ICOs launched on the platform are built upon Ethereum’s standard ERC20 protocol. EOS is an example of a cryptocurrency token built upon Ethereum, which is a top 10 cryptocurrency token in its own right and is built for large scale blockchain applications
BTC network currency VS ETH network currency
Bitcoin’s applications and transactions are powered by the currency BTC, whereas Ethereum’s network is run by the currency Ether (ETH). This cost, known as gas, is assigned to every use of the Ethereum blockchain, whereas Bitcoin transaction costs are based simply on their size. This difference is also a similarity as ETH & BTC both have function to globally transfer funds digitally and securely.
The renowned founder of Bitcoin, Satoshi Nakamoto, is anonymous, whereas the founders of Ethereum (Anthony Di Iorio, Vitalik Buterin, Charles Hoskinson, Mihai Alisie, & Amir Chetrit) are well known in the cryptocurrency space. The Ethereum whitepaper was initially described by Vitalik Buterin, a Toronto based programmer. The anonymity of Satoshi Nakomoto allows Bitcion to be fundamentally decentralized and resilient, whereas the leadership of Vitalik Buterin also benefits Ethereum through the growth of business partnerships and strategic direction.
Bitcoin’s development team is its digital GitHub community which is open-source but vetted by experienced engineers. The development team of Ethereum is spearheaded by the non-profit organisation the Ethereum Foundation. This Foundation is based in Switzerland and comprises of a worldwide team of passionate developers to promote and support the platform and research utilising the initial $18m from the initial 2014 crowdfunding.
Bitcoin’s SHA-256 encryption VS EThash encryption function
Whilst both Bitcion and Ethereum currently use Proof of Work (PoW) consensus protocols, they utilise different encryption protocols: Bitcoin uses the SHA-256 protocol to encrypt blocks, whereas Ethereum utilises the EThash function is developed specifically for and by Ethereum. Both are one-way cryptographic hash functions, but EThash resists ASIC miners as it is memory intensive, and Bitcoin’s SHA-256 favors ASIC miners as it needs to brute force cryptographic problems. This indirectly allows for Ethereum to have greater mining decentralization as special-purpose ASIC chips are not suited for mining Ethereum. Ethereum also has plans to supplment the main PoW blockchain with a Proof of Stake sidechain, which will improve scalability and efficiency of the entire network.
The Bitcoin network has fixed total lifetime supply at 21 million BTC coins, whereas Ethereum has no cap on the total lifetime supply. It’s mining rates also differ as the Bitcoin network issues 12.5 new Bitcoins every 10 minutes, whilst Ethereum creates 3 new ETH tokens every 15 seconds. As of Dec 19 Bitcoin has had more than 18 million BTC mined (more than 85% of the total lifetime supply), whereas ETH has had over 100 million ETH mined.
In their current states utilising PoW algorithms, the expected block time for the Bitcoin network is 10 minutes whereas Ethereum’s expected block time is 10 to 19 seconds. These block times are an indicator of the difficulty level on the PoW cryptography, and these expected block times are set at a constant value respectively to ensure that miners cannot compromise the security of the network by adding more computational power.
The Bitcoin network utilizes a fixed block size of 1 MB, whereas Ethereum’s block size varies and is bound by how many units of ETH (or gas) can be spent per block (also known as the block gas limit). This limit is determined and adjusted by Ethereum miners because it affects the resources necessary to effectively mine Ethereum. An adjustable block size means that Ethereum is able to scale as required. In practice Bitcoin processes 7 transactions per second and Ethereum 15 transactions per second.
From the list above, some points may seem like Ethereum is superior in functionality to Bitcoin, however they have vastly different use-cases to each other as a blockchain platform and a peer-to-peer digital cash system respectively. This list also just covers the fundamental differences between these two cryptocurrencies but does not measure their real world utility or use case, or any subjective sentiment towards the token or market.
Both Bitcoin and Ethereum are both huge proponents for the blockchain and cryptocurrency industry in general, and have therefore been able to work in tandem to launch the entire cryptocurrency ecosystem.