Bitcoin and Ethereum have been the two cryptocurrencies that have proven their legitimacy in real-world applications. They are two of the dominant players in the crypto sphere, with market caps of $18 billion USD (Ethereum) and $ 153billion USD (Bitcoin). While making investments or potential trades, investors need to analyze data and signals from online tools such as News Spy to understand the difference between the two and make the right decision.
The core of both cryptocurrencies is blockchain, a decentralized public ledger that can record all the transactions over its system. Each transaction is uploaded as a block in chronological order to a chain. It is then sent to a node for validation and thereafter is incorporated in the decentralized system as integrated data. This type of system excludes any involvement of a third party like a bank and is secure from cybercriminal activity. It is this promise of transparency and security that has attracted an exploding number of investors and traders over the network.
Bitcoin and Ethereum- decentralized entities
Though they have some basic common grounds, the two crypto assets are fundamentally different from each other. While Bitcoin is a decentralized digital currency designed to behave in a peer-to-peer manner, Ethereum is a decentralized computing platform that enables smart contract programming to its users- stored at and run on its own network. This is fuelled by its customized cryptocurrency, ether.
Unlike Bitcoin that has been gaining increasing popularity as a secure store of value, ether is not a digital currency of commerce. It is a platform-specific currency used over the Ethereum network.
Dapps (or decentralized applications) are built around smart contracts and run on the Ethereum network, where users connect peer-to-peer with no third-party involvement. The running cost of dapps is fuelled by Ethereum tokens that are commonly issued in the form of token sales or initial coin offerings (ICOs).
Nevertheless, as mentioned, there are many notorious differences between the two- ranging from its core purpose over blockchain to its use cases. However, the use of distinct underlying algorithms for its encryption mechanisms deployment forms the foundation of the difference.
Let us discuss some key pointers that would highlight the distinction between the two.
Mining algorithm. While Bitcoin works on the Proof-of-Work algorithm where miners are rewarded for processing transactions, Ethereum’s algorithm is directed towards Proof-of-Stake where miners are replaced by validators. These validators are required to own a said number of ETH coins that are employed to certify the validity of the block.
Transaction costs. All Bitcoin transactions have a fixed cost applied to them, regardless of their size. Ether, on the other hand, uses the system of “gas” to measure the quantity of work for a particular smart project. The transaction cost, then, depends on the factor- complexity, storage needs, and bandwidth usage.
Block time is the rate at which the blocks are mined. For Bitcoin, it is set to 10 minutes, while Ethereum is quicker (12-14 seconds). The rapid block time and efficient processibility is attributed to its “Ghost Protocol”.
Block size. Bitcoin has limited the maximum size of 1Mb for a block to check the processing time for every transaction. Ethereum has no such limit, except for the maximum amount of gas a complete box is allowed to consume.
Monetary supply. The maximum number of Bitcoins in supply during a year is 21 million, while the total amount of Ether in circulation is unlimited in its potential!
From the holistic point, there exist relative notions between BTC and ETH. On one hand, Bitcoin resolves the trust issues associated with the transactions, Ethereum plays its role in sealing the loops with smart contracts. Hence, both create a blend that is aimed at building the user’s trust in blockchain that was never witnessed earlier.
Founder Dinis Guarda
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