What is the difference between Ethereum and Bitcoin?

Bitcoin (BTC) and Ethereum (ETH) are two of the most popular cryptocurrencies in the world today. With market capitalizations of $765 billion and $261 billion respectively, these digital currencies have come a long way since their early days.

Bitcoin (BTC)

Being the older of the two, BTC is the more popular of the two cryptocurrencies. Developed in 2009 by the mysterious Satoshi Nakamoto, Bitcoin is the first cryptocurrency in the world.

It traces its origins back to 1998 where computer programmer Wei Dai first proposed the idea of a new form of money. One that utilizes cryptography to control its creation, maintenance, and transactions.

Since then, Bitcoin has come a long, long way. After its inception, Bitcoin was used as a medium of exchange on the deepweb where it was prized for its ability to transfer funds immediately and with a great degree of privacy.

While Bitcoin is not recognized by most governments as a form of legal tender, it is slowly and steadily becoming increasingly popular. This is likely due to the ease in which payments can be made and received using Bitcoin.

However, most governments take a dim view of cryptocurrencies and on some occasions have even banned the use of cryptos as a means of payment.

Ethereum (ETH)

Ethereum was released in 2014 but development first began in 2013 at the hands of programmer Dr. Gavin Woods.

Shortly thereafter, Woods was joined by a 19-year old programmer named Vitalik Butarin, who was then a writer for Bitcoin magazine. With the help of several other associates, Butarin and Woods would develop Ethereum (ETH).

Here’s a fun fact: Ethereum is actually the network that powers the cryptocurrency Ether (ETH). However, for simplicity’s sake we will be using Ethereum to describe the cryptocurrency ETH.

Ethereum holds the distinction of being able to facilitate the development of decentralized apps (dapps) and smart contracts that can be automatically executed from any computer.

As an open-ended platform, third-party developers are able to use Ethereum to build and distribute their own applications. This has led many to regard Ethereum as being the working man’s cryptocurrency. You can find the best Ethereum wallets to store it if you click here.

Similarities

1. Both are traded on online exchanges

Both Bitcoin and  Ethereum are used as a medium of exchange on a variety of sites. Being both popular and highly-sought, these crytos are traded on online exchanges and used as investments, collateral, or as money.

2. Bitcoin and Ethereum are transferred/stored on crypto wallets

Because digital assets like BTC and ETH do not exist in a physical form, they need to be stored on specialized crypto wallets. These wallets are either online service providers or specialized external drives that safeguard all of your hard-earned cryptos.

Most wallets can accept both Bitcoin and Ethereum and can be used to purchase, send, and receive cryptos.

3. They are both decentralized and unregulated

Unlike fiat currencies, the cryptocurrency market is entirely decentralized and unregulated. Instead, the supply of Bitcoin and Ethereum is entirely fixed and new cryptos can be mined by anyone in the community. This means that governments or any type of monetary authority will not be able to influence or intervene in the market.

Thus, the crypto market is well-known for its extremely volatile nature where prices can change suddenly with little-to-no warning.

4. Both are powered by the blockchain

The one thing that powers all cryptocurrencies is the blockchain. It is essentially a digital ledger that stores and records the summary of all transactions and ownership records.

New cryptocurrencies are released from mining i.e. verifying the validity of a blockchain record. This keeps the blockchain healthy and prevents fraudulent transactions from taking place.

Differences

1. Ethereum does not have a supply cap

When Bitcoin was being developed, creator Satoshi Nakamoto wanted to ensure that he/she would be creating a currency with inflation-proof characteristics. 

To do so, Nakamoto limited the supply of Bitcoins to only 21 million. This ensured that it would be theoretically impossible for an oversupply of Bitcoins to occur.

Ethereum however does not have a hard supply cap – instead, it is programmed to release ETH in proportion to demand. This has not gone down well with some members of the community, and co-founder Vitalik Buterin has even pushed for an implementation of a hard cap.

2. Bitcoin halves every 4 years

Unlike Ethereum, Bitcoin undergoes what is known as halving once every 4 years. Halving describes the process where the amount of BTC rewarded for each solved block is reduced by 50%. It is intended to control the quantity of Bitcoins in circulation by reducing the incentive to mine for Bitcoin.

Closing Thoughts

While relatively similar on the surface, Bitcoin and Ethereum do have their fair share of differences that differentiates them.

Both may have their own fair share of merits but it’s up to you to decide on which coin to invest in.

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