Bitcoin vs Etherum:
What Sets Them Apart
The world got its first glimpse of Bitcoin back on October 31, 2008 when its pseudo-anonymous creator Satoshi Nakamoto released a white paper called “Bitcoin: A Peer-to-Peer Electronic Cash System“.
A few months later, on January 3, 2009, the Bitcoin network went live when Satoshi mined the first block, also known as the Genesis Block or Block 0, which contained 50 BTC. A week after that, renowned programmer and cryptocurrency supporter Hal Finney received 10 BTC from Satoshi himself and became the recipient of the first-ever Bitcoin transaction.
Meanwhile, Ethereum was proposed in 2013 by its co-founder Vitalik Buterin, who was only 19 years old at that time. An initial coin offering (ICO) followed in 2014, and the first live release of Ethereum called Frontier was launched in 2015 by Buterin, together with a group of other blockchain enthusiasts, including co-founder Joe Lubin, who is also the founder of ConsenSys.
According to reports, Buterin coined Ethereum from the word “ether”, which also happens to be the name of its native cryptocurrency, after he stumbled on the now-disproved concept on Wikipedia.
|Bitcoin (BTC)||Ethereum (ETH)|
|Founders/Creators||Satoshi Nakamoto||Vitalik Buterin|
|Native Coin||Bitcoin (BTC)||Ether (ETH)|
|Consensus Mechanism||Proof of Work||Proof of Work to Proof of Stake|
|Hashing Algorithm||$64,894.72 (April 14, 2021)||$4,762.84 (November, 8, 2021)|
|Block Time||9 minutes 26 seconds||13.3 seconds|
The comparison between Bitcoin and Ethereum comes with the territory as two of the largest cryptocurrencies by market capitalization to date. However, they could not be more different from each other than day to night, apples to oranges, or even Godzilla versus Kong.
While legendary in their respective rights, Bitcoin and Ethereum actually share more differences than similarities, starting from the reason why each was created, to how they work, and especially to the problems that they aim to solve in the world.
In a nutshell, Bitcoin can refer both to its blockchain network and to its native cryptocurrency, which is usually shortened to BTC. Ethereum, on the other hand, is a platform that runs smart contracts, and its native cryptocurrency is called ether, also known as ETH.
Bitcoin was designed as an alternative monetary system that could be used as a medium of exchange or as a store of value, which is pretty much how we use money today, except in a completely digital format.
Ethereum, in contrast, is a platform that allows developers to build and deploy smart contracts and decentralized applications or dapps.
In an interview with Business Insider, Buterin once explained that based on their functionality, Bitcoin works like a pocket calculator that does one thing well, while Ethereum is more like a smartphone where you can use different applications.
For their cryptocurrencies, BTC has a limited supply of 21 million, while there is no definite maximum number set in stone for ETH. However, both BTC and ETH are traded on major exchanges all over the world, can be stored in various types of cryptocurrency wallets, are decentralized since they are not issued by a central bank, and are powered by blockchain technology.
While BTC functions as a digital currency and users pay a certain amount of BTC as fee for every transfer transaction, ETH functions as a utility token and is used as “gas fee” to run transactions based on smart contracts deployed on the Ethereum platform.
How They Work
At present, both Bitcoin and Ethereum networks use the consensus mechanism called proof of work to validate and ensure that only legitimate transactions get added to the blockchain.
In a proof of work system, the blockchain is operated by nodes, which are powerful computers run by people or pools called miners. Each of these nodes has a copy of the blockchain, and whenever there is a new transaction, these nodes compete against each other to verify the transaction first.
This process is called mining and consumes a vast amount of energy because it involves solving complex mathematical puzzles using state-of-the-art computers with powerful computational powers. In return, the miner that’s able to solve the puzzle first, verify the transaction, and add it to the blockchain gets rewarded with newly minted coins.
As of August 2021, the average time for a block to be processed is 9 minutes 26 seconds for Bitcoin and 13.3 seconds for Ethereum. During the same period, ETH miners get 2 ETH per block while BTC miners earn 6.25 BTC per block.
This has not always been the case for Bitcoin, as it goes through a regular event called halving after every 210,000 blocks mined or roughly every four (4) years. During this event, the amount of reward that miners can earn by mining is reduced by half.
Meanwhile, due to the massive energy needed and its corresponding environmental concerns, Ethereum is working towards upgrading its current proof of work system and switching to a more energy sustainable proof of stake mechanism.
Whereas proof of work miners use powerful hardwares that exhaust huge amounts of electricity to validate transactions, proof of stake validators stake a certain amount of cryptocurrency to validate blocks.
Today, BTC and ETH remain two of the most popular cryptocurrencies throughout the world. BTC had recently reached an all-time high (ATH) of $64,000 last April 14, 2021, while ETH broke records when it reached $4,300+ on May 12, 2021 earlier this year.
While it is true to a certain extent that Bitcoin can be considered as the gold standard when it comes to cryptocurrencies, it would not be entirely correct to consider Ethereum as its underdog.
As discussed, they set out to do different things, and while there are still growing pains along the way, there is no denying that Bitcoin and Ethereum are revolutionizing the way we do things at present.
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