Bitcoin is the original cryptocurrency, so it’s called the “old kid on the block.” The first generation of cryptocurrency was born in 2009. The guy who created it, Satoshi Nakamoto, didn’t want his identity revealed because he believed that if people could learn about his identity, they would be able to find him and stop him from creating more cryptocurrencies.
Ethereum is one of the most popular second-generation coins, and it was created in 2015. Millions of people have started using Ethereum because of its smart contract system, which makes decentralized applications possible without needing a central authority like banks or governments to manage them.
Ethereum Has a Much Better Scalability
Apart from their respective cryptocurrency prices, one of the biggest differences between bitcoin and Ethereum is their transaction volumes. Simply put, this refers to how many transactions can be handled simultaneously by each cryptocurrency.
While both currencies are decentralized and allow for peer-to-peer transactions without a middleman like a bank or credit card company, the way they process transactions differs greatly. The more transactions included in a block, the larger it becomes and the longer it takes to process. This is called a block size limit. You can think of this as the “payload” that’s delivered to other users.
Ethereum currently has its block size limit set at around 8 MB, allowing more data to be processed at once. In theory, this means it can handle more payments per second and more complex smart contracts.
Theoretically, Ethereum will eventually handle up to 100,000 payments per second while Bitcoin is limited to just 7 TPS (transactions per second).
Bitcoin’s limitation comes from its design. However, Ethereum’s impending scalability issues will be fixed with upcoming updates in 2018.
Bitcoin Is More Decentralized and Limited
Bitcoin and Ethereum are cryptocurrencies, but the two are not at all similar. The main difference apart from the fact that bitcoin is 13 times the cryptocurrency value of Ethereum is that bitcoin is more decentralized, while Ethereum has a more centralized network.
The benefits of decentralization are that no one can control it, so it’s less likely to be shut down. This also means that no one can change it as easily and quickly as someone who has control over the network might want to do.
Those in favor of decentralization point to this as a good thing because if there was just one source or point of failure with bitcoin, theoretically it could be hacked or shut down entirely by someone who managed to take over 51% of the network.
Those against decentralization often argue that this makes using the currency more difficult because you have to find other people who are willing to accept your coins as payment for goods or services.
However, in some places around the world, it’s easier than others to buy things with bitcoin just because there’s so much decentralized technology being used. This is due to lower costs and faster networks available in these places.
Differences in Algorithm
The most notable difference between bitcoin and Ethereum is that Bitcoin uses a Proof of Work algorithm, while Ethereum uses a Proof of Stake algorithm.
With Proof of Work, a computer must solve problems to release its work on the network. With Proof of Stake, a computer vouches for its work by keeping the same portion of each block mined.
When you’re looking to invest in cryptocurrency markets, the first thing that comes to mind is: “Bitcoin or Ethereum?” Before you make your choice, it’s important to know the differences between these two popular cryptocurrencies.
Though they’re both based on blockchain technology and offered as a way of transferring value between two parties without a centralized bank or agency managing the transaction, some key differences set them apart.
In most cases, bitcoin is seen as the more stable option for people who want to simply hold onto their cryptocurrency without much fuss. It has a larger market cap and is less volatile than other coins such as Ethereum. On top of this, bitcoin transaction fees are usually much lower than those for Ethereum transactions, which makes it easier for someone with very little technical knowledge to use the coin if they want to convert their money into digital currency.
Though bitcoin might be easier and cheaper for you to use right now, Ethereum may be better suited if you’re planning on using cryptocurrency in different ways. Some examples would be building a new app or d-app (decentralized application) based on blockchain technology. Ethereum has more features than bitcoin does and its market cap has grown significantly over time. This is making it more appealing to investors.
The difference between bitcoin and Ethereum boils down to the technology behind them. Bitcoin is a cryptocurrency, made possible through blockchain technology. Ethereum is another cryptocurrency, but it uses a different blockchain technology called the “Ethereum Virtual Machine” (EVM). The EVM makes it possible to build decentralized applications (DApps) using smart contracts on top of the Ethereum blockchain.
Bitcoin is like a bicycle. You can use it for one purpose only. It is to be ridden from point A to point B and it’s perfect for that job. Ethereum is more like a car because you can use that one Ethereum network as a foundation for many different uses and applications.