What’s The Difference Between Bitcoin and Ethereum?

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Bitcoin stack

What, if any, are the differences between Bitcoin and Ethereum? To the newcomer to the Cryptocurrency world, this is an obvious starting question. Most people will simply presume they’re two types of the same thing — which, as you’ll see below, is actually an incorrect assumption. These two popular cryptocurrencies actually differ.

So you’re relatively new to Cryptocurrency., let’s begin your education. There are two completely different categories of digital coins: Cryptocurrencies (Chief among their ranks are Bitcoin, Litecoin, ZCash and Monero), and Tokens (Here the main players are Ethereum, Filecoin, Storj and Blockstack).

So as we’ve seen above, Bitcoin is a “Cryptocurrency”. Bitcoin — as well as all the other Cryptocurrencies out there — are competing against existing money (and gold) to replace them with a truly global currency.

It’s a global currency (that is digital money) which allows individuals to own their own money (without having to rely on national banks).

What advantages does Bitcoin offer? Lower fees for transferring money across geographic borders; as well as financial stability for people who live in countries with unstable currencies. (e.g. In 2016, the Venezuela national currency hit an inflation rate of 800%).

Plus, two-thirds of the current global population have little or no access to banking — Bitcoin is changing that.

So by comparison, what then is Ethereum? It is a “token”. What Bitcoin does for money, Ethereum does for contracts. The digital currency, Ethereum, has an innovation that allows you to write Smart Contracts: basically any digital agreement where you can say “if this” happens, “then something else happens”, for example:

  • If I vote for the President, then my vote is official and no one else can vote like me.
  • If I sign my name on this document, then I own the car, and you no longer own the car.

Up until now, we’ve carried out these agreements with a signature at the bottom of a paper document. Ethereum improves this model by a lot because it is digital, meaning proof of the transaction can never be deleted/removed. This allows worldwide, instantaneous access to the same contracts, speeding up business decisions and deals exponentially.

An Easy Visual Comparison: Bitcoin vs. Ethereum

Bitcoin (BTC) Ethereum (ETH)

What is it?

A currency | A token

Inventor

Satoshi Nakamoto | Vitalik Buterin, Joseph Lubin, Gavin Wood, etc.

Live Date

January 2009 | July 2015

Supply Style

Deflationary (a finite # of bitcoin will be made) | Inflationary (much like fiat currency, where more tokens can be made over time)

Supply Cap

21 million in total | 18 million every year

Smallest Unit

1 Satoshi = 0.00000001 BTC | 1 Wei = 0.000000000000000001 ETH

New token issuance time

Every 10 minutes approximately | Every 10 to 20 seconds

Amount of new token at issuance

12.5 at the moment, Half at every 210,000 blocks | 5 per every new block

Utility

Used for purchasing goods and services, as well as storing value (much like how we currently use gold). | Used for making dApps (decentralized apps) on the Ethereum blockchain.

Price

Bitcoin’s price is around £6,000 at the moment (March 2020) | Around £154 at the moment (March 2020)

Purpose

A new currency created to compete against the gold standard and fiat currencies | A token capable of facilitating Smart Contracts (For example; a lawyer’s contract, an exchange of ownership of property, and voting)

Bitcoin itself is two things: (1) it’s a digital currency known bitcoin (lowercase, also referred to as BTC) and (2) Bitcoin is a technology (also known more generally as bitcoin blockchain). Both are called the same thing which admittedly can be confusing for newbies.

So to clarify; Bitcoin = The name of the Bitcoin network and then bitcoin = The currency (or BTC).

With Ethereum it’s similar but slightly different: the token is called ether (or ETH) and the network is Ethereum.

So to clarify: Ethereum = The Ethereum network and then ether = The token (of ETH).

Ethereum continues to increase in popularity, as its usefulness in world business deals and contracts becomes more and more obvious with time (and of course with practical demonstrations of its power by means of people using it).

It’s also obviously going to be a factor that Ethereum is a lot less expensive to buy into than Bitcoin, making it an easier beginner’s investment option. Also in Ethereum’s favour is the fact that it’s steadily increased in value over the past year, even though the uncertainty of Brexit etc so it becomes a fairly good bet in terms of security too.

In fact, in a world where traditional currencies are struggling (you can look at the recent trends for the UK sterling and US dollar) the likes of Bitcoin and Ethereum are, to most investors, a far safer bet than the traditional currencies. If you’re just starting out, check out Coinbase as a great trading centre to begin making your investments.

Remember as with all things that the value can go down as well as up, so you should only invest what you can afford to lose if the market does actually crash overnight.

Next time, we’ll look more closely at Coinbase and getting started trading in Crypto. Hopefully, some tips will help you avoid any potential pitfalls out there!

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