Bitcoin and Ethereum are two of the most popular cryptocurrencies globally, while there are some similarities between them, they are different. While both use blockchain technology, bitcoin was designed to be a digital currency and the ethereum blockchain was created as a general implementation. Though both offer decentralized and anonymous transactions, they function differently. Here’s the difference between these two cryptocurrencies.
What is Bitcoin?
Bitcoin is the first cryptocurrency to be created using a breakthrough technology called the blockchain. A blockchain, in simple terms, is a digital ledger that records every transaction. It was a solution to the double send problem and ensured that no one could send an already sent coin to someone else or send fake coins. That also meant that no third-party financial intermediaries like banks were needed for successful transactions. Bitcoin, which had zero net worth when it was launched in 2009, has breached the $65,000 mark in 2021. Check out the current price for 1 bitcoin to INR to know its value.
What is Ethereum?
Ethereum is another popular cryptocurrency and is built on Bitcoin’s innovation. But it does more than just a digital currency. It can power applications that no one can take down, and everyone can use. It is called the programmable blockchain of the world, as anyone can use the platform and build applications. So it means that Ethereum can be used for more than payments and is a marketplace for apps, games, and services. It is a place with no censorship, and no data can be stolen. No wonder the ethereum price INR and other fiat currencies are high!
Key Differences between Ethereum and Bitcoin.
Both Ethereum and Bitcoin are based on cryptography and distributed ledgers, but their technical specifications are different. Bitcoin is digital gold and is used to store value, and Ether, the currency of Ethereum, powers the applications and its network.
- Issuing tokens: Both Ethereum and Bitcoin can issue new tokens. The Omni layer platform is used for trading and creating currencies on the Bitcoin blockchain. The Omni layer is based on stable coins. Ethereum tokens follow many different standards, and the most popular is ERC 20. In the ERC-20, there are a defined set of rules for the tokens, and many functions have to be implemented for launching new tokens.
- Nature of transactions: By default, Bitcoin transactions are monetary. But they can have messages and notes affixed to the data fields in all the transactions. On the other hand, ethereum transactions have a programmable code to create smart contracts. Even self-executing contracts can be created and applications built.
- Public wallets: The addresses of the public wallet on both networks are different. These are unique identifiers that are similar to the bank account number. These allow the users to send or receive funds. Bitcoin addresses start with 1, a 3, or bc1, and Etherium starts with Ox.
- Scalability: ETH and BTC follow different approaches to solving the issue of scalability. Bitcoin uses the SegWit, segregated witness, which allows efficient use of space in every Bitcoin block. Developers have been working on a two-layer scaling solution called the Lightning Network. So the transactions are fast and fees are less. Ethereum, too, is implementing a two-layer scaling solution and is called Sharding. These have a better rate of transactions and reduced congestion.
There are many noticeable differences between these two cryptocurrencies which set them apart. While many argue they are competitors, in reality, they complement each other as they serve different purposes. In a portfolio, it is essential to have both as they provide balance as both are safe havens where their value is expected to rise or be preserved during downturns.