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Bitcoin and Ethereum are the top two projects that are extremely important and valuable in the cryptocurrency space. Both serve unique purposes and have a significant fan following amongst investors, traders, hobbyists, and blockchain developers.
Apart from the aforementioned folks, both digital currency systems boast of increasingly high corporate and institutional demand. Financial and technology organizations and firms from miscellaneous other verticals have shown interest in adopting Bitcoin and Ethereum.
But despite their surging popularity, there are notable differences. Discussing these differences can help us appreciate the two blockchain-based protocols. Speaking of protocols, let’s start by differentiating them, and then we can move on to the individual cryptocurrency differences.
Bitcoin vs Ethereum: Protocol Differences
Bitcoin emerged as a by-product of the 2008 Great Recession. Anonymous creator Satoshi Nakamoto presented the white paper in 2009, in which he introduced Bitcoin as a ‘Peer-to-Peer Electronic Cash System’. This system consists of the Bitcoin blockchain and the cryptocurrency bitcoin (BTC).
Vitalik Buterin presented the Ethereum white paper in 2013. With the launch in 2015, the project was introduced as the world’s first programmable blockchain with ether (ETH) as the currency of exchange.
Both blockchains have a distributed public ledger design and employ proof of work (PoW) mining to verify and process cryptocurrency transactions. Miners solve complex mathematical algorithms with industry-grade computing hardware to validate settlements and add them to the respective blockchains post-confirmation. To know more about PoW check out the video below:
Ethereum: The Smart Contract and dApp Building Platform
But Ethereum has a leg up on Bitcoin when it comes to usability. That advantage comes from its ability to support the development of smart contracts and decentralized applications (Apps).
This actually catalyzed the ICO boom of 2017 where numerous blockchain-based applications sprung up showcasing the immense technological prowess of Ethereum as a dApp building platform, with Solidity its smart contract programming language becoming the industry standard.
Did you lose yourself at smart contracts? A detailed article from our end on the same is in works. Until then see the video below to understand them visually:
Anyone can code applications involving some digital value, that executes as programmed and can be accessed from anywhere in the world. That’s Ethereum’s USP for users.
Apart from financial transactions, the network’s native cryptocurrency token ETH monetizes the operation of these applications. Ethereum developers intend the platform to become the decentralized version of the internet.
Bitcoin is primarily functioning as a peer-to-peer financial settlement system with bitcoin largely gaining prominence as a value preserving investment asset, similar to gold. Media portals and financial commentators haven’t shied away from calling BTC as ‘Gold 2.0’ or ‘digital gold’.
Bitcoin vs Ethereum: Other Differences
Cryptocurrency Supply and Circulation
Bitcoin’s code by default has a production cap on the number of bitcoins that will be ever produced and that’s 21 million. Currently, there are 18.4 million BTC in circulation which means that these many coins have already been mined.
Contrary to BTC there doesn’t seem to be a limit in ETH supply, and the total number of ethers in circulation crossed the 100 million mark two years back. Now that figure stands at 111 million.
Block Size and Transaction Stats
Over the years, the average Bitcoin block size has considerably increased and is now trending at 1.2 MB/block. Bitcoin’s block size has been in discussion quite a lot. This has resulted in the formation of different cryptocurrency systems altogether.
These systems split from the main Bitcoin blockchain through a process called forking, and are called ‘hard forks’. Some of the well-known forks of Bitcoin are Bitcoin Cash, Bitcoin SV, Bitcoin Gold, Bitcoin Diamond, etc. Get more clarity about Bitcoin hard forks from the video below:
The average size for Ethereum blocks has also been variable since its inception, mostly trending in the 20 KB to 30 KB range. Ethereum also had its share of forks. Contrary to Bitcoin’s forks, almost all forking events were upgrades. Ethereum forking events are calculated steps taken for the blockchain to transition from the PoW mining system to PoS (proof-of-stake). More on proof-of-stake below:
Gas and Transaction Fees
Successful completion of financial transactions or transactions involving smart contracts on Ethereum has to be paid for with ‘gas’. Measured in Gwei, a subunit of ether, the value of gas to be charged to process a transaction is determined by Ethereum miners. They can choose to forego a transaction if the gas prices are not satisfactory.
The scenario is a bit different in Bitcoin. Miners charge transaction fees to process transfers but there’s a preference-based model involved. A higher fee needs paying for transactions that are urgent and require faster processing. Depending on the fees, transactions get cleared in either a single block or multiple blocks.
Bitcoin can process around 5-7 transactions per second whereas Ethereum can deal with 12-15 transactions per second.
The Ethereum blockchain has gone from processing around 500,000 to 1 million transactions per day this year. Normally, Bitcoin manages between 300,000 to 700,000 transactions per day though mostly it stays at around 300,000. Average Ethereum block confirmation time is around 15 seconds whereas for Bitcoin it can range from several minutes to a few hours.
Even with all their differences Bitcoin and Ethereum will remain attractive cryptocurrency projects in both financial as well as development terms. If you are looking to buy bitcoin, Ethereum, or both, you can do so through WazirX. Visit this link to know more: https://wazirx.com/
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Frequently Asked Questions
Is Bitcoin And Cryptocurrency The Same Thing?
Bitcoin is a cryptocurrency that was designed to facilitate cross-border transactions, eliminate government control over transactions, and streamline the entire process without third-party intermediaries. The absence of intermediaries has resulted in a significant reduction in transaction costs. Satoshi Nakamoto, the creator of Bitcoin, created the first cryptocurrency in 2008. It began as open-source software for money transfers. Since then, plenty of cryptocurrencies have emerged, with some focusing on specific fields.
Is Bitcoin Safe And Legal In India?
In 2020, the Supreme Court of India lifted the RBI’s restrictions on cryptocurrencies. According to the Supreme Court, the existence of Bitcoin or another cryptocurrency is unregulated but not unlawful. The verdict has greatly aided the world of digital money in the country. To put it another way, investing in Bitcoin is perfectly legal, and you may do so through various apps and traders.
What Are The Chances Of Bitcoin Crashing?
Two Yale University economists (Yukun Liu and Aleh Tsyvinski) produced research titled "Risks and Returns of Cryptocurrency" in 2018. They looked at the possibility of Bitcoin crashing to zero in a single day. The authors discovered that the chances of an undefined tragedy crashing Bitcoin to zero ranged from 0 percent to 1.3 percent and was around 0.4 percent at the time of publishing, using Bitcoin's history returns to determine its risk-neutral disaster probability. Others claim that because Bitcoin has no intrinsic value, it will inevitably crash to zero. On the other hand, Bitcoin advocates argue that the currency is backed by customer confidence and mathematics.
How Bitcoin Mining Works?
Bitcoin mining is a crucial element of the blockchain ledger's upkeep and development and the act of bringing new Bitcoins into circulation. It's done with the help of cutting-edge computers that solve exceedingly challenging computational arithmetic problems. Auditor miners are rewarded for their work. They're in charge of ensuring that Bitcoin transactions go through smoothly and legitimately. This standard was established by Satoshi Nakamoto, the founder of Bitcoin, to keep Bitcoin users ethical. By confirming transactions, miners assist in avoiding the "double-spending issue."
How Can I Convert Bitcoins To Cash?
Bitcoin may be converted to cash in various ways, including crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, and Peer to Peer Transactions. You may do this by using Bitcoin exchanges like WazirX. You may also sell Bitcoin for cash faster and more anonymously through a peer-to-peer marketplace.
What Type Of Currency Is Bitcoin?
Bitcoin is a type of digital currency or cryptocurrency. In January 2009, Bitcoin was established. It's based on Satoshi Nakamoto's ideas, which he laid out in a whitepaper. The name of the individual or people who invented the technology remains unknown.
How Can I Get Bitcoin?
To begin, go to the WazirX website and register. After that, you will receive a verification email. The link received by verification mail will only be available for a few seconds, so make sure you click it as quickly as possible. This will successfully verify your email address. The following step is to set up security, so choose the best solution for you. After you've set up the security, you'll be given the option of continuing with or without completing the KYC process. Following that, you'll be sent to the Funds & Transfers section, where you can begin depositing Bitcoins into your wallet. You may also use INR to fund your WazirX Bitcoin wallet and then use it to purchase Bitcoin.
How Many Bitcoins Will Ever Be Created?
The source code of Bitcoin stipulates that it must have a restricted and finite quantity. As a result, only 21 million Bitcoins will ever be generated. These Bitcoins are added to the Bitcoin supply at a predetermined rate of one block every ten minutes on average. The supply of Bitcoins will be depleted once miners have unlocked this number of Bitcoins. It's possible, however, that the protocol for Bitcoin will be altered to allow for a higher supply.
Is Bitcoin Cash A Good Investment?
Bitcoin Cash is a hard fork of Bitcoin formed in 2017 to address Bitcoin's scalability and challenges. Bitcoin Cash seeks to make global transactions faster, cheaper, and more secure. Bitcoin Cash is now accepted by thousands of online and offline businesses all over the world. Studied correctly, Bitcoin Cash may be an investment worthy of consideration.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
