New to crypto? Just learning about all the different coins? It’s a bit confusing we know.
When we first got into crypto many, many years ago we didn’t really think there was any difference between Bitcoin and Ethereum. An easy mistake to make given they’re both cryptocurrencies and both constantly talked about by the “experts” in the same way.
They’re completely different things though, not even remotely close to one another and anyone that compares them or says they compete with each other needs their brain inspected with an ice cream scoop.
|Purpose||Trustless Money||App Platform|
|Creators||Satoshi Nakamoto||Vitalik Buterin,|
|Proof of Stake|
|Block Size||1 MB -> 4 MB||30 Million Gas|
|Block Time||10 min||12 sec|
|Supply||21 Million BTC||Infinite|
What Is Bitcoin?
So what exactly is Bitcoin? Bitcoin is the first and most globally recognised cryptocurrency. It is a free, fully open source, decentralised and entirely digital currency for all that was launched in 2009 by Satoshi Nakamoto.
OK explain Bitcoin to me like I’m 5: Bitcoin is online money that enables instant payments. Free for anyone, anywhere in the world to use at any time. It uses peer-to-peer technology (like torrents) and can be used without any permission from a government or central authority. It cannot be stopped or censored. Its rules cannot be changed, no matter how rich or powerful a country or person is.
What Is Ethereum?
After Bitcoins success started to become more well known and Blockchain became better understood others started to try and use them for other uses. In 2015 Ethereum was launched to use this new decentralised, blockchain technology to enable a “computer of the world” that ran what it called decentralised apps or dApps.
Ethereum would run on thousands of computers around the world which would in turn run the code that powered these dApps. Due to its decentralisation and smart contracts (contracts enforced through code not law) it would be without downtime, fraud, control or interference from third parties.
In 2014 it launched a presale for the native token ether (ETH). While the intended, main purpose of this token is to pay for transaction fees on the Ethereum network, ETH is also used and traded as a digital currency on exchanges and even held as an investment.
Difference Between Bitcoin And Ethereum
While Ethereum and Bitcoin are technically both cryptocurrencies, there is a big difference between Bitcoin and cryptocurrency. In fact, we’re of the belief that There’s Bitcoin And Literally Everything Else. But just like with all cryptocurrencies, both of them have the following core attributes in common:
- They are digital only
- They are secured using cryptography
- They are not issues by a central authority
- They use distributed ledger technology
Beyond these few similarities though, the two differ greatly. From their block time, transactional throughput, purposes and especially consensus mechanisms they should never be considered similar or even competitors.
To begin with, the most important difference between the two is what their ultimate purpose is. Bitcoin is digital money that doesn’t require any trusted third parties to operate (just like gold).
Ethereum on the other hand is built to facilitate and monetise the operation of smart contracts and dApps. To run code in a decentralised and automatic fashion that then enables any number of other use cases like gambling, games, futures contracts, exchanges and more.
Proof of Work vs. Proof of Stake
Bitcoins consensus protocol is Proof of Work (PoW) while Ethereum uses Proof of Stake (PoS). The two couldn’t be more different.
Bitcoin Miners must solve a mathematical challenge and then provide the results of this work in order to show they have generated a valid new block for the network. This new block is then accepted or rejected by all the nodes on the Bitcoin network. We would encourage you to read our full, in depth piece on the subject: Bitcoin Proof Of Work: Everything You Should Know. We consider it essential reading when learning about Bitcoin as PoW is extremely misunderstood in what roles it plays and its critical importance to Bitcoin.
Ethereum PoS works by having a large number of “staking nodes” (also called validators). These nodes must deposit or “stake” 32 ETH as collateral in order to be able to participate. When a new block needs to be mined, the network randomly picks a validator node and they then produce and distribute the new block. If the staking node is behaving dishonestly or lazily, their collateral can be destroyed or “burned” as punishment. This is similar to how the bond that a person renting might not be returned to them if they do damage to the rental property.
Ethereum vs Bitcoin Market Cap
Bitcoin has always had a far larger market cap than Ethereum and still does today. Bitcoins market cap has varied from around $500-$1,000 billion USD over the past two years while Etherems has hovered around $200-$600 billion USD.
For years now Ethereum bulls have been talking up the “flippening’ which is the prophesied day that Ethereum will become bigger than Bitcoin. We’re highly sceptical of this ever happening though as Bitcoin was the first and biggest cryptocurrency network. The Network Effect is a real and incredibly powerful thing to the point that it’s near impossible to overcome once something is as entrenched as Bitcoin is.
The Athena Assessment
Given Bitcoin and Ethereum are the two largest cryptocurrencies it’s natural for newcomers to assume they’re both “the same thing” or want to do a Ethereum vs Bitcoin investment comparison, but this misses the forest for the trees. You’re comparing a digital bar of gold to a tech stock.
Bitcoin has no CEO, no company and no owner. It’s like the Internet or electricity or other broad, global networks that no single person, business or country controls. It’s digital money that doesn’t require any trusted third parties to operate (just like gold).
Ethereum is similar to a traditional company with lead developers that control it. It has highly centralised servers (validators) that can be targeted and shut down. These PoS servers have also been regulated and routinely sensor transactions as per the OFAC rules. They are owned by businesses that must obey governments law.
The issuing token “ETH” is extremely likely to be regulated as a security requiring all the rules and regulation that comes with it. The lead developers and investors all benefit from pre-mining of these ETH tokens and have considerable control over its price through buying and selling large quantities of it.
While they might both be used in exchanges of value, they’re very different beasts. No sane person would compare gold to Fortnite V-Bucks but that’s what many experts do. One is (we think) the new universal reserve currency of the world. The other is a tech stock and security just like the shares of Google or Apple.
There’s nothing wrong with investing in either. Ethereum could be exceptionally successful or it could go to zero. Similarly Bitcoin could also go to zero, however we chose to focus on it and encourage its adoption as best we can as it alone has the potential to do some truly amazing things for humanity, things that go beyond creating a new way to gamble or trade.
Bitcoin is true, global, financial equality and inclusion. Bitcoin is hope. Ethereum is a tech stock. That’s the difference. And we know which one we’d rather help succeed.
What’s The Difference Between Bitcoin And Ethereum Mining?
The main difference between Bitcoin and Ethereum mining is that Bitcoin uses Proof of Work (PoW) as its consensus protocol while Ethereum uses Proof of Stake (PoS). This means that they use completely different ways of generating and validating new blocks that get added to the blockchain. For more information, check out our piece on What Is Bitcoin Mining?
Is Ethereum Better Than Bitcoin?
This is the incorrect question to ask, they have different purposes and neither one is better than the other as they do different things.
Bitcoin is digital money that doesn’t require any trusted third parties to operate (just like gold). Ethereum is built to facilitate and monetise the operation of smart contracts and dApps. To run code in a decentralised and automatic fashion that then enables any number of other use cases like gambling, games, futures contracts, exchanges and more.
Can Ethereum Be Worth More Than Bitcoin?
While there is no technical limit to stop Ethereum being valued more by investors, we think this is unlikely to happen. Bitcoin has the potential to consume significant parts of multiple trillion dollar industries such as gold, bonds, shares, real estate, silver, art and more.
Ethereum by contrast is targeting dApps which, while a very large market, doesn’t hold a candle to the other ones mentioned above. Furthermore, it’s been almost 15 years now and Ethereum has never once come close to Bitcoin’s trading price or market cap.
What Are Bitcoin and Ethereum’s Shares Of The Crypto Market?
What Are Some Similarities Between Bitcoin And Ether?
Both Bitcoin and Ethereum have the following core attributes in common:
– They are digital only
– They are secured using cryptography
– They are not issues by a central authority
– They use distributed ledger technology