Bitcoin vs. Ethereum – The difference

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February 6, 2023
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Bitcoin vs. Ethereum – The difference

A quick look at any digital currency data aggregator will lead you to believe that Bitcoin and Ethereum are the market’s top-ranking cryptocurrencies, boasting significant market capitalization that far exceeds any other competitor.

However, deeper analysis will surely unveil that Ethereum is not a cryptocurrency per se, but rather a development platform that’s powered by ether (ETH). This is one of the many differences between crypto’s best-known projects, and we’re here to cover the rest.

Bitcoin vs. Ethereum – Purpose

Bitcoin represents the world’s first cryptocurrency to hit the mainstream, positioning itself on the path to achieving mass-adoption. Originally, Bitcoin was created to facilitate value transfers in a peer-to-peer manner through the usage of blockchain technology. The coin seamlessly fixes many of the pressing concerns of today’s outdated financial system, by providing cheap, quick, and secure monetary transfers. In time, however, Bitcoin’s role as a payment method gradually decreased as the coin established itself as a store of value. With an actively-rising value, wealth storage via Bitcoin is proving very profitable for people worldwide. Of course, payments can still be made easily, but scalability issues have led to higher transaction costs that make Bitcoin unviable for day-to-day payments.

On the other hand, Ethereum is a community-built technology designed to serve a plethora of goals. Most notably, Ethereum is a programmable blockchain that supports the deployment of smart contracts alongside the storage and transfer of digital assets. Developers worldwide are rushing to build decentralized applications (dApps) on-top of Ethereum that make use of its blockchain to provide censorship resistance, financial safety, and decentralized decision-making through governance protocols. Ethereum is powered by ether, its native cryptocurrency that has seen a rapid rise in value. While ether is certainly usable as a means of payment, its original purpose lies in powering dApps and assets deployed on the Ethereum chain.

What is Ethereum and how does it compare to bitcoin?

In sum, Ethereum is an advancement based on the principle of blockchain that supports bitcoin but with a purpose that does not compete with Bitcoin. However, the popularity and rising market capitalization of Ether brings it in competition with all cryptocurrencies, especially from the trading perspective.

What is Ethereum (ETH) ?

Ethereum (ETH) has received a lot of attention since its announcement at the North American Bitcoin Conference in early 2014 by Vitalik Buterin. As a natural consequence of its rising popularity, Ethereum has constantly been compared to Bitcoin (BTC), the first decentralized, digital currency.

How many Ethereum tokens are in circulation?

Technically, the supply of ETH is unconstrained, and there are currently more than 122 million in circulation. That said, the 2022 Ethereum “Merge” is expected to dramatically slow the creation of new tokens, and possibly even make Ether deflationary, with more of it being burned than created each year.

What’s the difference between ETH and BTC?

Ethereum’s high gas fees. One area where ETH definitely loses out to BTC, for the time being at least, is transaction fees. While Ethereum-based transactions tend to be far faster than Bitcoin transactions, there’s a steep cost that comes with that convenience, known as gas fees.

Bitcoin vs. Ethereum – Blockchain Infrastructure

Both projects are based on a similar blockchain infrastructure that assures decentralization, immutability, censorship resistance, low costs, and quick transactions. Similarly, both chains run on the proof-of-work (PoW) consensus mechanism, while relying on the hard work of miners rushing to solve the PoW problem in exchange for block rewards.

However, there are some notable differences worth keeping in mind.

Bitcoin’s blockchain does not support the creation of decentralized apps or the deployment of smart contracts. Its architecture was simply not built to fulfill such goals, as Bitcoin’s main purpose is to store and transfer wealth. In comparison, Ethereum makes use of the Ethereum Virtual Machine (EVM) to process self-enforcing smart contract requests that serve multiple purposes within the growing blockchain-based economy.

The Ethereum blockchain supports an unlimited number of assets that are compatible with the ERC-20 standard, including multi-billion dollar stablecoins like Tether and USDC. Such assets are easily transferable and usable within the booming DeFi and dApp economies, which have been standardized to support the Ethereum chain. Transactions also process noticeably quicker than Bitcoin, thanks to the reduced block time.

Bitcoin vs. Ethereum – Economic Differences

Bitcoin’s maximum supply is capped at 21 million coins, 18.9 million of which have been minted so far. Considering the halving event that occurs every four years, the entire Bitcoin supply will be placed into circulation by the year of 2140. Bitcoin is currently valued at $41,420, and has achieved an all-time high of $69,044 following 2021’s bull run. With a market cap of $787 billion, 42% of all crypto value is held in Bitcoin.

Ether does not have a maximum supply limit, but the minting of new coins is under control via mining difficulty, so inflation is not a concern. Ether is also not prone to halving events, which may explain why its market cap has remained much lower than Bitcoin’s, despite the circulating supply of 119 million ETH. The cryptocurrency is currently valued at $3,014, and has achieved an all-time high of $4,878 in November 2021. With a market cap of $360 billion, roughly 18% of all crypto value is held in ether. However, the Ethereum blockchain is home to numerous high-cap ERC-20 tokens, including the likes of USDT and USDC, holding a combined market cap of over $131 billion. As such, Ethereum’s market dominance is significantly higher if we consider the combined value of all ERC-20 tokens.

Bitcoin vs. Ethereum – Creators

The real identity of Bitcoin’s creator remains unknown to this day. Multiple conspiracies surrounding Satoshi Nakamoto’s identity have been debunked, as no imposter has managed to prove they’ve fathered Bitcoin.

On the other hand, Ethereum was founded by Vitalik Buterin, a Russian-Canadian programmer who started off on his crypto journey as a writer. He soon realized that blockchain technology could facilitate more than P2P payments, so he co-founded Ethereum as an open-source project alongside a team of talented developers.

Bitcoin vs. Ethereum – Future Roadmap

In the case of both projects, development decisions are taken by those who support the infrastructure by operating mining hardware and nodes. Those who agree on a proposed change simply sync the updated blockchain, whereas those who do not may choose to undergo a hard fork.

Bitcoin’s development through Bitcoin Core has been slow and conservative, with multiple debates surrounding the coin’s future. Updates are still being rolled out, but significant changes are often met with resistance.

Ethereum has been much quicker at rolling out updates necessary for the benefit of the network. In fact, the development team is working on Ethereum 2.0, a long-overdue update that will increase Ethereum’s scalability by shifting from proof-of-work to proof-of-stake, and by introducing shard chains. In doing so, Ethereum’s position as the leading infrastructure for DeFi, dApps, and digital assets will be strengthened.

Bitcoin vs. Ethereum – Crypto Gambling

There are many projects and even industries in which Bitcoin and Ethereum are used separately, depending on the characteristics of the business and the specific task. Though, in the rapidly developing crypto gambling industry, these two cryptocurrencies have almost the same applied value, mainly due to their high popularity.

Thus, the vast majority of crypto casinos support payments in both Bitcoin and Ethereum. This is exactly the case where the personal preferences of users play a decisive role.

However, some crypto casino players may prefer Ethereum over Bitcoin because of its faster transaction speed. That difference is notable mostly during periods of high Bitcoin network load.

Bitcoin, in its turn, is considered by users as a more reliable and stronger coin. In addition, its popularity is still higher than of any other cryptocurrency. There are many who have only bitcoins in their crypto portfolio and don’t want to bother exchanging it for Ethereum just for occasional gambling sessions.

Bottom Line

With these aspects in mind, it becomes apparent that Bitcoin and Ethereum have less in common than one may assume. This is certainly beneficial for the cryptocurrency market, as both projects innovate in their own way, creating additional opportunities for blockchain enthusiasts worldwide.

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