In the world of thousands of cryptocurrencies, Bitcoin and Ethereum are the most popular cryptocurrencies. These two cryptocurrencies have climbed the ladder of popularity because of their contributions to the cryptocurrency ecosystem.
Bitcoin is the forerunner of cryptocurrencies and the ecosystem. Satoshi Nakamoto created the cryptocurrency in 2009, and it gained the name “gold 2.0”, others called it digital gold. Ethereum on the other hand is the beginning of global decentralization.
Bitcoin got the name “digital gold or gold 2.0” because it shared some characteristics with gold like scarcity and durability. The only similarities that bitcoin did not share with the precious metal are its ease of division and storage.
People describe Ethereum as the world’s decentralized global computer because it is the building block for decentralized applications. It means that the applications that run on the Ethereum blockchain have no one controlling them centrally.
Using different metric measurements, the top two cryptocurrencies in the world today are Bitcoin and Ethereum. Some of these metrics are;
- MarketCap – the cryptocurrency’s total circulating supply in dollar values.
- Trading volumes on various exchanges and marketplaces
- Special wallet addresses – special character strings representing accounts and their equivalents on the blockchain crypto network.
What is Bitcoin?
Bitcoin (BTC) is the pioneer of cryptocurrencies. The cryptocurrency functions without approval from any central authority. Satoshi Nakamoto mined the genesis block (the first data block on the BTC blockchain).
Since that time, bitcoin has gained steady adoption rates over the years. The aim of creating bitcoin was to have an electronic cash system away from the control of central authorities. Satoshi Nakamoto wanted the bitcoin transactions to be P2P (Peer to Peer).
Satoshi wrote the whitepaper for the cryptocurrency in 2008. The cryptocurrency as it was designed allows those who own it to manage their finances without the involvement of central authorities like banks, governmental agencies, and financial institutions.
Rather than centralized control, bitcoin runs on a set of rules that the decentralized users of its blockchain software agree to. The software rules state the operation methods of transactions, the transaction confirmation time, the supply limit (21 Million), and other factors.
Bitcoin became the first cryptocurrency that was developed on the DLT (Decentralized Ledger Technology). This DLT is also called Blockchain. There are a couple of problems that blockchain technology came into the picture to solve. Thes problems included the ‘Byzantine Generals Problem.’
This term is used for describing the issues decentralized systems face in trying to agree on the same truth. Bitcoin solved the problem using blockchain technology and the Proof of Work consensus mechanism.
This proof of work consensus mechanism allows all the different miners who play the role of generals to solve the problem. Every node on the bitcoin blockchain tries to validate every transaction that looks like the communications that the generals receive.
The Bitcoin blockchain is available to the public and every transaction history is there for all to see. The data is also distributed to different nodes on the bitcoin blockchain to avoid the data being tampered with.
The other participants will reject any blockchain version that is different from that of the generals. A different version is called tempering and the participants detect these malicious activities through HASHES.
Although bitcoin came into the picture as a medium for exchanging goods and services, a lot of people have now adopted it as a store of value. They have used it to store the value of their other tangible assets.
What is Ethereum?
Ethereum is a distributed network on the blockchain and a decentralized open-source network that is run with ETH (Ether). Ether is the native cryptocurrency of the Ethereum Blockchain. While Bitcoin was primarily designed for monetary transactions and also as a store of value, Ethereum is for building decentralized applications on the blockchain network.
The Ethereum Blockchain uses its native currency to carry out transactions and interact with applications on its network. Vitalik Buterin (Ethereum’s co-founder) wrote and published the Ethereum whitepaper in 2013. The whitepaper contained details of smart contracts and how they will be written codes of agreements that execute themselves.
Ethereum was launched in 2015, and that was the massive start of total internet decentralization. Just like Bitcoin, Ethereum is a decentralized platform, it is not under the control of any central authority or body. The Ethereum blockchain also uses Proof of Work to validate transactions and avoid tampering just like the Bitcoin blockchain.
Smart contract coders use the Ethereum programming language (Solidity) to write their smart contracts. Ethereum applications have a wide range of uses, thanks to the ability to run smart contracts. Smart contracts now allow people to create digital unique tangibles like Non Fungible Tokens.
As people make transactions on the Ethereum blockchain, they pay in Ether. The transactions caused the price of Ether to go up, and just like bitcoin, people began to use Ether as a store of value.
Similarities Between Bitcoin and Ethereum
These two popular cryptocurrencies share some similarities, these similarities are;
- They run on blockchain technology.
- You can store them in digital wallets
- Their wallet addresses are strings of alphanumeric characters
- You can trade both cryptocurrencies on cryptocurrency exchanges and marketplaces
- They are both decentralized cryptocurrencies. It means that they are not controlled by a central authority.
- They rely on computer nodes for transparency operations
Differences Between Bitcoin and Ethereum
As much as these two cryptocurrencies share some similarities, there are also very sharp differences between them. The differences that exist between Bitcoin and Ethereum are;
- Bitcoin is used for value storage primarily while Ethereum is used for interactions of apps developed on the Ethereum Blockchain.
- Bitcoin is the haven for value preservation while Ethereum is used to run decentralized finance (DeFi) services on the blockchain network.
- Bitcoin uses Omni Layer for creating and trading cryptocurrencies in the bitcoin blockchain, while Ethereum uses the ERC-20 standard.
- Bitcoin transactions are naturally like monetary transactions with encoded notes and messages, while Ethereum transactions are naturally based on smart contract executions.
- It takes about 10 minutes for a new block to be added to the bitcoin blockchain, while for Ethereum, it takes only 15 seconds.
- The wallet address of bitcoin starts with either 1, 3, or ‘bc1’, while that of Ethereum starts with 0x.
- Bitcoin still works on the Proof of Work consensus mechanism which is energy consuming, while it is moving to the Proof of Stake consensus mechanism. The proof of stake is less energy-consuming.
Bitcoin and Ethereum are like siblings having one father and different mothers. They all run on blockchain technology but were designed to meet different needs. These two cryptocurrencies are the biggest names that exist today in the ecosystem. They are a good start for those who are just beginning their crypto investment journey.