When it comes to cryptocurrency, two big heavyweights tend to dominate the conversation: Bitcoin and Ethereum.
Both of these digital assets have consistently topped the cryptocurrency market in terms of capitalization. Aside from that, these coins have also been the primary driving force behind some of the biggest rallies (and crashes) in the robust and volatile history of cryptocurrency.
If you’ve just recently entered the fray, you might be wondering what exactly the difference is between these two digital assets. If so, you’re in for a treat.
Here’s a quick rundown of how Bitcoin and Ethereum set themselves apart.
The History of Bitcoin
It’s a normal day in 2009. The world is still reeling from the effects of the global financial crisis. And amid all this turmoil, a white paper has just been released.
This white paper, written by an anonymous individual (or group) going by the name Satoshi Nakamoto, outlined a new kind of payment system—one that would be immune to the volatility and manipulation of the current financial system.
This payment system, Satoshi Nakamoto proposed, would be based on a decentralized network of computers, or nodes, that would verify and record transactions using cryptography.
This system—which came to be known as the blockchain—would be auditable, transparent, and secure.
The first implementation of Nakamoto’s vision was Bitcoin, a cryptocurrency that would come to eventually dominate the digital asset market.
With only about 21 million BTC in existence, Bitcoin’s scarcity has helped drive up its price, making it the most valuable cryptocurrency in the world, despite crashes and bearish trends.
The History of Ethereum
Ethereum, on the other hand, was proposed by an actual person: Vitalik Buterin.
Buterin, a then-19-year-old programmer, was heavily involved in the Bitcoin community at the time and had become frustrated with the coin’s limited functionality.
In response, he proposed a new platform that would allow developers to build decentralized applications (dApps) on top of a blockchain.
This platform, which came to be known as Ethereum, would be like Bitcoin in a sense that it can feature its cryptocurrency.
But on top of that, a plethora of use cases such as smart contracts and decentralized exchanges would eventually emerge in the Ethereum blockchain.
This increased functionality, as well as the ideal timing, has propelled Ethereum to become the second-most valuable cryptocurrency in the world.
How BTC and ETH Differ
Now that we’ve got a basic understanding of the history and purpose of both Bitcoin and Ethereum, let’s take a more in-depth look at how these two digital assets differ.
1) Use Case
One of the most significant ways in which BTC and ETH differ is in their respective use cases.
Bitcoin, as we’ve mentioned, was designed primarily as a payment system. As such, its main use case is as a digital currency or store of value. This means they’re primarily used to purchase goods and services or as an investment.
On the other hand, Ethereum was made to serve as a platform for decentralized apps. This means that, on top of acting as digital currency, ETH can fuel blockchain projects just through the power of code.
Non-fungible tokens and other digital assets are also stored on Ethereum’s blockchain, which can’t be done natively through Bitcoin.
2) Supply Cap
Another key difference between BTC and ETH is their supply cap.
As we mentioned earlier, there will only ever be 21 million Bitcoin created. This is because the code that creates Bitcoin stipulates that no more than 21 million BTC can ever be mined.
Ethereum, on the other hand, has a circulation of 118 million Ethereum. However, as the proof of stake (PoS) consensus algorithm is introduced, this number is expected to decrease over time as ETH becomes more scarce.
3) Price
With the volatile nature of the cryptocurrency market, it’s hard to make any long-term predictions about price. However, we can take a look at the historical data to get an idea of how BTC and ETH have performed.
On the whole, Bitcoin has always been a leg up on Ethereum in terms of price. This is likely because BTC was the first mover in the space and, as such, has always had more name recognition.
Ethereum may lag behind by a considerate margin, but it tends to shadow the movements of Bitcoin in recent years.
4) Transaction Fees
When it comes to transaction fees, BTC and ETH are also vastly different from each other.
Bitcoin’s transaction times can take anywhere between 40 to 90 minutes, depending on the congestion of the network. Ethereum’s transaction times are far quicker, coming in at around 15 seconds to 22 minutes per transaction, once again, depending on congestion.
However, the increase in speed comes at a cost. Ethereum’s transaction fees (dubbed gas fees) are significantly higher than Bitcoin’s. On top of that, Ethereum also is a platform for NFTs—which are notorious for high energy consumption.
However, with Ethereum 2.0 on the horizon—which will see the network transition to a proof of stake consensus algorithm—transaction fees and energy consumption are expected to decrease significantly.
Regards,
Chelsea Rogers
Guest Post Contributor
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)
