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In the past years, Bitcoin and Ethereum have been topping the cryptocurrency market chart. They are the two most discussed cryptocurrencies in the world. More people view Ethereum as Bitcoin’s competitors, like Microsoft and Apple. In the real sense of it, Bitcoin and Ethereum are different, and they serve different purposes. 

What is the difference between Bitcoin and Ethereum?

Bitcoin and Ethereum both make use of blockchain technology, and they are the highest valued cryptocurrency, but they both differ widely in many aspects.

Concept

Bitcoin is created to act as a primary alternative (a sort of replacement) for fiat currencies without the bureaucracies of the exchange rate and other issues bedeviling fiat currencies ($, £, etc.). While Ethereum is created as a platform for smart contracts, which intends to eliminate third-party interference between the client and the contractor. 

In practice, Bitcoin also permits smart contracts, but it is widely known as a superior alternative to fiat currencies. While Ethereum is widely known for its smart contract capabilities, it also operates a digital currency.

Ethereum Chart Live

24 Hour Bitcoin vs. Ethereum price comparison

 

Buy Ethereum

Just like BTC, Ethereum is wildly popular in the crypto community and traded on virtually every exchange you can find Bitcoin on. Ethereum ranks second in market capitalization and daily volume and has held that title for years. 

Most people in the US buy Ethereum, at a trusted cryptocurrency broker like Coinbase or Uphold

Most brokers allow you to buy Ethereum directly with debit or credit card. If you buy on an exchange, you will likely need to make the purchase with Bitcoin. (BTC/ETH)

Presently, the price of Bitcoin fluctuates between $7000 – $10,000. This is a sure sign of recovering after crashing from an all-time high of nearly $20,000 in December 2017 to a low point of less than $4,000 in November 2017.

Presently, Ethereum’s Ether fluctuates between $160 to a little above $200. Like Bitcoin, Ether rose to an all-time high of $1300 in December 2017 and also crashed to less than $100 in 2017.

Bitcoin

Bitcoin vs. Ethereum - How do they compare? 1

Bitcoin is the first global decentralized digital currency created as an alternative to fiat currencies. Bitcoin was introduced in 2008 by Satoshi Nakamoto, a man of unknown origin. The aim of creating Bitcoin is to empower people to have full access and control of their finances without the interference of traditional financial institutions.

Transactions made with Bitcoin are not regulated by third parties, but by a group of peer-to-peer computer networks which forms the basis of blockchain.

The blockchain is a virtual ledger system stored on peer-to-peer computer networks. What makes blockchain technology and transactions impressive is its immutability and the transparency, which makes all transactions visible to all on the peer-to-peer network. Each ledger added to the network forms a blockchain.

Ethereum 

ethereum compared

Ethereum was established in 2015 as the largest decentralized platform for running Smart contracts and Distributed Applications (dApps).

Smart contracts are like contracts in the real world, but utterly digital without the need for censorship or third-party mediation. This enables smart contract participants to negotiate and interact directly without using a third-party mediator. 

 Therefore, Ethereum is not a digital currency but a platform that runs contracts between parties using the blockchain. Ethereum has its cryptocurrency known as Ether (ETH).

Supply 

Bitcoin has about 18 million coins in circulation, while Ethereum’s has about 100 million coins in circulation. 

Presently, 12.5 bitcoins are issued every 10 minutes. Every four years, this figure will be reduced by half. This implies that Bitcoin is bound to have a deflationary rate as time goes by. 

Ether has more than a hundred million coins in circulation presently, with an issuance rate of two coins for every 15 seconds.

Transaction Fees

Bitcoin has higher transaction fees compared with Ethereum. This might be because of Bitcoin’s higher value and a smaller block size of 1MB.

Transaction time

On average, Ethereum’s block time is roughly about 15 seconds, while Bitcoin’s block time stands about 10 minutes. This implies that transactions done with Ethereum’s Ether are faster than transactions done with Bitcoin. 

Initial coin offer (ICO)

In the early phase of Bitcoin, it was thought to have been mined solely by Nakamoto Satoshi, before the influx of other miners. Presently, Satoshi’s coin holding is estimated to be no more than 5% of the total Bitcoin in circulation.

ETH came on stage with an initial coin offer (ICO), which saw the trading of 31,529BTC for 60,102,215 ETH before the launch of Ethereum’s blockchain. It is estimated that Ethereum’s founders hold 14% of the total supply of ETH.

History of Ethereum

vitalik buterin ethereum

Ethereum got its name and concept from Vitalik Buterian, a 19-year-old programmer actively involved with Bitcoin.

Moreover, Vitalik published Ethereum white paper containing all of Ethereum’s architecture. A development team made up of Vitalink Buterin, Mihai Alise, Anthony Di Lorio, and Charles Hoskinson was formed to pursue Ethereum’s goal.

In 2014, Vitalik formally announced the formation of Ethereum in the Bitcoin conference in Florida, USA, and also made known his intention to collaborate with Dr. Garvin Wood and Wilcke as Ethereum’s co-founder. 

Nevertheless, by April 2014, the Yellow paper specifying the creation of the Ethereum Virtual Machine (EVM) was published. 

Ether’s Launch 

Ethereum required funding to kick-off. Rather than sourcing for funds from capital markets and other financial institutions, Vitalik and Co decided to raise money from ICO. This led to the creation of Ether. 

Ether’s ICO was a massive success as $18.4 million was realized from the sale of 11.9 million Ether token sold as ICO from July 2014 to September 2014.

The DAO Hack

The Decentralized Anonymous Organizations (DAOs), is a smart contract (more like the board of trustees) which contains the code on how Ethereum will be managed and will also give voting rights to holders of DAO tokens.

$150 million was realized from the sale of DAO tokens. This made DAO a significant focus for Hackers.

Hackers exploited a bug (loophole) that allows investors to withdraw as much as four times their investors to withdraw $50 million worth of Ether from the smart contract, representing about 15% of the total Ether in circulation. The hack led to the implementation of ‘hard fork’ in a bid to reverse the contract and refund affected investors by creating a new blockchain.

In the same vein, the ‘hard fork’ broke the blockchain’s core law of immutability, which grants that transactions done cannot be unchanged. This led to a dispute within the Ethereum community leading to Ethereum’s split into two blockchains, Ethereum, and Ethereum classic. 

Ethereum migrated to a new blockchain (daughter blockchain) with all stolen funds reversed, while Ethereum classic retained the old blockchain (parent blockchain) without altering the DAO hack.

Ethereum Creator

Vitalik Buterin, a Russian-Canadian programmer, was born on January 31, 1994. He is the co-founder of Bitcoin Magazine, and the creator Ethereum blockchain platform, which acts as the world computer for decentralized applications and smart contracts. 

Twenty-five years old, Vitalik Buterin was in Moscow, Russia. Vitalik’s family migrated to Canada when he was 6years old. In Canada, Buterin attended a school for gifted children, where he began learning maths, economics, and programming. Valik attended Abelard School, a private high school where he had an exciting and productive phase of life.

Vatalik does not believe in the traditional school system. He said “… education is ultimately much more than simply memorizing individual facts or learning individual concepts. What matters most is learning how to think, reason, learn.”

At 17, Vitalik learned about Bitcoin from his father, who was a computer scientist. At 18, he won a bronze medal in the International Olympiad in Informatics. At 18, he traveled the world and rubbed minds with other developers. Later in 2013, he returned to Canada to lay the foundation of Ethereum.

Vitalik attended the University of Waterloo before dropping out to work fulltime on the Ethereum project in 2014 after receiving $100,000 the Thiel Fellowship. He received an honorary doctorate from the University of Basel’s Faculty of Business and Economics. 

Pros and cons of Ethereum

Ethereum remains one of the largest blockchain platforms for offering decentralized app services and smart contracts.

If you’re thinking about investing in Ethereum, here are some key pros and cons you should consider about Ethereum.

Pros

  • Leadership 

Ethereum has a dedicated team of leaders in the likes of Vitalik Buterin, Vlad Zamfir, Joseph Lubin, Dr. Garbin Howard, etc. These are talented leaders focused and committed to Ethereum’s growth. The leadership quality of Ethereum is evidenced in the founders’ goals and clarity of vision to lead Ethereum.

The leadership team of Ethereum has solved many issues facing Ethereum successfully, as it is evidenced in the successful resolution of the DAO hack and the DoS attacks.

  • Ethereum’s blockchain functionality

Ethereum blockchain supports other functions like decentralized apps, smart contracts, and decentralized autonomous organizations (DAOs). Ethereum’s multi-functionality makes it a blockchain of choice for investors.

  • Ethereum has the support of top venture capitalists

Ethereum has the backing of top venture capitalists like Union Square Ventures, Andreessen Horowitz, Fred Ehrsam, and Naval Ravikant.

  • No of daily transactions

The Ethereum blockchain has more users compared with Bitcoin. For instance, Bitcoin recorded a total of 187,001 on September 2, 2018, against Ethereum’s blockchain, which recorded a whopping sum of 620,267 transactions on the same day. 

  • Security

Although Ethereum has its fair share of security issues, nevertheless, it has grown above these issues when compared with other newer networks battling grave security issues.

  • Reliability

The Ethereum network is a reliable network with very smaller downtime because it is a decentralized network working on thousands of nodes.

  • Roadmap

Ethereum has a clearly defined roadmap. In an interview with Vitalik, he stated Ethereum’s explicit goal of scaling Ethereum’s network to provide second-layer solutions like Plasma and Sharding. With these solutions, Ethereum will be able to process more than a million transactions per second.

Cons 

  • Ethereum’s multi-function platform makes its platform a weak platform compared with Bitcoin’s dedicated platform.
  • Scaling up to second layer solutions might cause a breakdown in Ethereum’s system, which might be a loophole for hackers to exploit. 
  • There are not enough tutorials to facilitate newcomers learning about the Ethereum blockchain.

Proof-of-work vs. Proof-of-stake 

proof of work vs proof of stake

Here are essential things you should know about the Proof of work and the Proof of stake.

Proof-of-work is a complex process involving miners competing to validate a transaction in a blockchain by solving complex algorithmic problems, which proves and validates every transaction before they are added to the blockchain. Miners are rewarded with coins for authenticating a transaction. 

Although mining holds promising solutions to real-world problems, it, however, requires substantial computational power and hardware, resources (like electricity), which leads to increasing ecological challenges.

Proof-of-stake promises to be an eco-friendly alternative to Proof-of-work; herein are significant points you should be aware of concerning Proof of work and Proof of stake.

  • The chances of adding a new block (mining) are determined by the amount of computational work done by the miner.
  • In Proof of stake, the chances of adding a new block are determined by the miner’s stake.
  • The first miner to solve algorithmic puzzle receives a reward for each block added. While in Proof of stake, validators are paid fees for each block added. 
  • Proof of work is getting more centralized because of its competitive nature and substantial computational requirements. Proof-of-stake has a high tendency to be an energy and cost-efficient way of adding a new block to the blockchain.

Ethereum’s purported to migrate from Proof-of-Work to Proof-of-stake due to its promises of great benefits. However, investors are skeptic about the implication of the switch. 

Ethereum competitors

Ethereum is the first blockchain network to utilize the blockchain technology to diversify from digital currency to a decentralized platform.

Presently, several notable competitors are challenging Ethereum’s position.

  1. EOS

EOS, like Ethereum, is a platform that supports smart contracts and decentralized apps. Launched in 2018 after a successful £4billion ICO completion, EOS presently supports 6,000 transactions per second against Ether’s 15 transactions per second.

  1. Stellar

Stellar was established in 2014 as a platform to connect banks, payment systems, and people. It is a reliable, fast and cheap means of transacting money. Stellar’s blockchain has smart contract capabilities, which makes it a significant competitor with Ethereum. However, it cannot be used to develop decentralized apps because its smart contracts are not coded in the Turing-complete language. 

  1. Cardano 

Cardano was established in 2015. It claims to be the first scientifically evolved and research-driven blockchain. Like Ethereum, Cardano supports both dApps and smart contracts. However, it has a higher transaction rate of 257 transactions per second against Ethereum’s 15 transactions per minute. 

Also, Cardano is already utilizing the proof-of-stake consensus mechanism, known as Ouroboros, which Cardono claims to be ‘the only consensus protocol with mathematically proven security. 

The future of Ethereum

Ethereum’s future lies in upgrading to the purported Ethereum 2.0, which promises increased scalability in the number of transactions processed per second. To keep it ahead of its competitors, some of which have as high as 10,000 transaction rates per second.

Presently, Ethereum is in the middle of solving its scalability issue as it prepares to make the switch to Proof-of-stake (Casper).

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Patrick Moore
Patrick has been a part of the cryptocurrency community since 2014 and created CryptoWhat in 2015 to help new users learn more about cryptocurrencies. Despite not being a financial expert, his passion for cutting-edge technology drives him to share knowledge and information with as many people as possible about the potential of cryptocurrencies and how they will change the financial sector.