What makes Ethereum different from Bitcoin?


The crypto market is going through a slow awakening from the crypto winter and choking collapse of FTX, showing that the industry can recover even from hard blows. Over the last few months, Ethereum and Bitcoin have seen their values drop, but it seems like 2023 will bring positive news, and all digital currencies are registering slight price rises.

Bitcoin and Ethereum are the two top leading currencies by market capitalisation, and experts believe that they will bounce back nicely during the following bull market, despite the present turmoil in the sector. Will Ethereum perform better? What impact does the Merge have on the market? And how to buy Ethereum if you want to diversify your portfolio with cryptocurrencies?

What’s Ethereum?

Ethereum has been the second-largest cryptocurrency network over the last few years, and contrary to most beliefs, it’s not a digital currency but a blockchain ecosystem that houses a native currency called Ether.

Bitcoin’s creator wanted to develop a digital currency that transforms the way people view financial instruments and use traditional money, like the pound, dollar, or euro. Similarly to Bitcoin, Ether is supposed to be an alternative to fiat currencies, but Ethereum is more than a digital currency used as a medium of exchange. It serves several purposes, from enabling the development of decentralised applications (dApps) to the creation of NFTs. dApps share some of Bitcoin’s features because they’re entirely accessible, permissionless, and trustless.

Since its launch in 2015, Ethereum has been an open-source network that stops surveillance and censorship. The project’s purpose is to provide everyone with access to commerce and financial service, and it enables the development of other digital currencies. Ethereum has introduced smart contracts for the first time in the sector. According to IBM, smart contracts are programs stored on the Ethereum network that run automatically when a series of conditions are met. Due to its multiple utility cases, Ethereum is often described as a more versatile platform than Bitcoin.

What’s Bitcoin?

Satoshi Nakamoto launched Bitcoin, the world’s first digital currency, in 2008. Despite several other attempts to develop cryptocurrencies before, none proved as practical as Bitcoin. It has held its place firm and catapulted the crypto sector into mainstream popularity in a couple of years. Since its introduction on the market, it has remained the largest digital currency by market capitalisation globally. One of its most interesting features is that it has a limited supply – Nakamoto created the algorithm to allow the creation of a maximum of 21 million coins. Once Bitcoin reaches this limit (estimated at around 2140), no more coins will be minted. For example, the US dollar had over 40% of its supply printed in the last two years, which triggered a dramatic price decrease. Its limited supply makes it one of the most valuable digital assets one could purchase.

Besides its limited supply, other characteristics also make it an appealing alternative asset to add to one’s portfolio. Bitcoin, similarly to other blockchains, is a decentralised network, allowing no central authority to supervise or gain control over its processes. A peer-to-peer network verifies each transaction, ensuring the security and privacy of users’ information.

Similarities between Ethereum and Bitcoin

Bitcoin and Ethereum are the most popular and largest cryptocurrencies worldwide by market cap, trading volume, and wallet users. However, the similarities between the two are extensive. Both are decentralised networks in nature, meaning that no third party or central authority controls or manages them. Also, no authority or government regulates Bitcoin, Ethereum, or another cryptocurrency. Ethereum and Bitcoin have their own blockchains with native digital currencies, enabling the creation of crypto wallets, so users can store their coins and complete transactions.

Bitcoin and Ethereum are developed with the help of blockchain technology which relies on a global network of computers called nodes that add and verify transactions to the network. Every node has access to a copy of the ecosystem to prevent the blockchain system from being replicated or falsified.

However, besides being developed on decentralised blockchains, using cryptographic encryption and open-source software, and having their own native currencies, Ethereum and Bitcoin have different functionalities and utility cases. In fact, Ethereum was built to solve Bitcoin’s shortcomings and has been the first alternative coin. Now it’s the leading altcoin in the crypto sector.

Differences between Ethereum and Bitcoin

Bitcoin was created to become a superior form of money, but it lacks the additional functionality of tokens and smart contracts found on the Ethereum network. While both Bitcoin and Ethereum enable developers to build on top of them and store data, Ethereum allows them to create their own tokens so they can govern their apps. Ethereum provides this facility through the ERC-20, which corresponds to DAI and UNI, and ERC-721, which corresponds to NFTs.

Besides, developers can also make smart contracts on Ethereum, apps that use Ethereum like a worldwide computer that executes programming contracts automatically when conditions are met. Smart contracts enable multiple use cases on the Ethereum ecosystem, which no longer requires intermediaries and two sided marketplaces. Bitcoin supporters argue that the smart contract functionality drifts away from the cryptocurrency’s main innovation of offering better money. Some would even state that Ethereum’s bells and whistles compromise the blockchain’s integrity. On the other hand, Ethereum’s supporters argue that altcoin’s extra functionalities are essential in the sector.

Market capitalisation is a metric used to determine how valuable or popular a digital currency is in the market. At present, Bitcoin dominates the market with the largest market cap, and Ethereum occupies the second position.

Ethereum and Bitcoin use different issuance methods according to their unique protocols and conditions outlined by their developers. Both blockchains reward individuals in the native currency for validating blocks. While Bitcoin offers a fixed amount for every block, Ethereum uses a more complex mechanism and the reward is decided with the help of mathematical equations.

Is Ethereum better than Bitcoin?

The answer depends on what you’re looking for when buying crypto. They offer different perks, so you must decide which fits your goals better.

None of the information on this website is investment or financial advice and does not necessarily reflect the views of CryptoMode or the author. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website by its authors or clients. Always conduct your research before making financial commitments, especially with third-party reviews, presales, and other opportunities.