Global Poker never ceases to amaze us! This time they are welcoming autumn in no other better way than with their first-ever Fall Carnival event that will go on from September 26th to October 2nd! Bear with us with this short article where we will explain anything you need to know about this fun event!Read more
How is Ethereum Different From Bitcoin?
Bitcoin and Ether are the two most popular cryptocurrencies in the world, so it's natural for people to compare the two. While it's true that there are a number of similarities between these two alternative currencies, a number of key differences exist that set them apart. In this article, we'll look at some background info on both Bitcoin and Ethereum, before pitting each against the other to see how they fare.
Bitcoin (BTC, ₿) is well-known as the world's first cryptocurrency and is still the most popular by market share. It was developed and launched back in 2009 by the individual or group known as Satoshi Nakamoto.
Originally intended to operate as an alternative form of currency for everyday purchases, Bitcoin operates on its own blockchain, which is an open-source, decentralised public ledger of transactions.
Transactions on the Bitcoin blockchain are protected using cryptography, with the process of mining used as both a method of verifying transactions and causing the release of newly 'minted' Bitcoin into circulation.
Mining can be performed by anyone with a powerful enough computer, which is then tasked with brute force guessing the next block's hash. The successful miner reaps the reward of both that block's transaction fees and newly released BTC at a specified rate (current block reward: 6.25 BTC).
Bitcoin is known for its volatility, amongst other things, which resulted in its original purpose as an alternative currency not being realised. After public debate, Bitcoin changed its purpose from being a potential alternative currency to be more of a form of value storage for investment purposes, similar to gold. Those who wanted the coin to remain as an alternative currency forked to create Bitcoin Cash.
As the first successful cryptocurrency, Bitcoin became the springboard for many altcoins, with more than 19,000 in existence today. Though Bitcoin is only accepted as payment at very few online retailers (but many best online casinos!), it is recognised by numerous governments around the world, with two countries, El Salvador and the Central African Republic both officially adopting the coin as legal tender.
Contrary to popular belief, Ethereum is actually the blockchain on which the cryptocurrency Ether (ETH, Ξ) operates. Created in 2013 by Vitalik Buterin alongside several other co-founders including Cardano creator Charles Hoskinson, Ethereum was crowd-funded to launch in 2015 as a decentralised, open-source blockchain similar to Bitcoin, but offering additional functionalities.
The cryptocurrency Ether is currently the second most popular in the world by market share after Bitcoin, but it is also used as a kind of fuel for the various uses of the network on which it operates.
Aside from operating in a similar way to the Bitcoin blockchain in terms of cryptocurrency, the Ethereum network also allows anyone to develop and build decentralised applications (dApps), offer financial services such as lending and borrowing of ETH through Decentralised Finance (DeFi) apps, and create and exchange Non-Fungible Tokens (NFTs), which are virtual items of perceived value such as images or GIFs.
In addition, many other altcoins operate on the Ethereum blockchain. Together with its wide-ranging use cases, this makes Ethereum arguably more useful and compatible than Bitcoin.
Bitcoin VS Ethereum
Having covered the basics, it's clear that there are already some key differences between Bitcoin and Ethereum that set them apart from each other. Though they both operate a form of digital currency on each of their platforms and their blockchain technology is similar, various other aspects of their inner workings are very different. Here we look into the details of how each of these blockchains and their associated cryptocurrencies actually works, so we can compare and contrast the two.
Because of Bitcoin's dedication to becoming an alternative form of currency, its blockchain is really only designed for use as a ledger of transactions. That means only pertinent information can be affixed to those transactions.
One aspect of Ethereum proposed by Vitalik Buterin that would allow the new blockchain to operate better than that of Bitcoin is the ability to create and run executables. It's for this reason that Ethereum was designed to also carry executable code to run the various applications it supports.
Block and Throughput Times
While the Bitcoin blockchain is able to handle 7 transactions per second, the Ethereum blockchain can deal with 30 transactions per second (expected to rise to tens of thousands per second once the planned upgrade to Ethereum 2.0 is complete), resulting in transactions on the latter being much faster.
The time it takes for one block in the BTC blockchain to be mined is around 10 minutes, while it's a much faster 14 or so seconds on Ethereum, which is another reason for its speedy transactions.
Of course, not all blocks are equal. 1 block on the Bitcoin blockchain is limited to 1 MB in size, whereas blocks on the Ethereum blockchain are not limited by size but by what's called gas. Ether transactions are fuelled by both a gas limit and a gas price, both of which the sender can adjust to control the likelihood of their transaction getting picked up and included in the next block by miners. Bitcoin's transaction fees work in a similar way but it's the block size that's limited rather than the gas in this case.
Both Bitcoin and Ethereum use what's called hashing as a way of maintaining the security of their transactions. Hashing is a type of cryptography that takes a small piece of information and turns it into a fixed-length string of numbers and letters that can then be safely stored instead of the sensitive information itself.
Each block has its own unique hash that miners are then tasked with finding the function of in order to be awarded the right to create the new block and receive the associated transaction fees and coin (6.25 BTC, 2 ETH) reward.
Though this hashing process is similar between the two blockchains, different algorithms are used in each case: Bitcoin uses SHA-256 while Ethereum uses Ethash.
There are several ways in which blockchain transactions can be validated, with what's called Proof of Work (POW) being the most common at the moment. Both Bitcoin and Ethereum verify transactions using the POW protocol, which involves allowing miners to compete with each other for the right to create the next block in the chain and reap the associated rewards.
The problem with this protocol is it involves the use of massive amounts of energy by the competing miners, the vast majority of which is wasted effort as only one miner can claim the reward.
Another validation protocol called Proof of Stake (POS) changes the process slightly by allowing miners to stake their cryptocurrency for the opportunity to verify transactions and thus create the next block in the blockchain. As a result, transactions can be approved with much less energy expenditure, making it a far more eco-friendly protocol.
Ethereum is currently in the process of upgrading to Ethereum 2.0 (Eth2), which involves splitting the network into parallel blockchains in a process called sharding and having them all involved in a consensus blockchain based on the POS protocol. This is expected to result in faster and more secure transactions and increased scalability.
The aim of Bitcoin from the beginning was to offer an alternative form of currency that was not controlled by any banks or financial institutions, hence the term decentralised. Though the timing of Bitcoin's release just after the 2008 financial crisis implies it was some sort of anarchical response, a white paper published shortly after the first Bitcoin block was created suggested deeper motivations.
“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust,” said Satoshi Nakamoto.
Bitcoin was thus created to eliminate the corruptible trust-based nature of existing currencies and provide an alternative whose security methods and mode of operation was transparent for all to see.
In contrast, becoming a cryptocurrency on the same level as Bitcoin was not on the agenda for Ethereum. Ether was created as a way of fuelling and monetising the creation and operation of smart contracts and dApps that use the Ethereum blockchain.
However, because of the additional functionalities that Ethereum offers, all of which require Ether to fuel, the circulation of ETH means it is second only to Bitcoin, making it something of a competing cryptocurrency all the same.
Though originally designed to work as an alternative currency, Bitcoin is today seen as more of a form of value storage like gold, best suited for long term investment. The coin's volatility and slow uptake by every day retailers means it couldn't fulfil its purpose as a competitor for fiat currencies, even though its decentralised nature already placed it as a better alternative to banks and other financial institutions in the minds of ordinary people.
In contrast to the single purpose of Bitcoin, Ethereum's multi-faceted design means it offers many more possibilities. In addition to Ether serving as a cryptocurrency (although not in the same way Bitcoin was designed to do), the Ethereum blockchain allows the creation and operation of decentralised apps (dApps), decentralised finance (DeFi) opportunities such as borrowing and lending, Non-Fungible Tokens (NFTs), crowdfunding, exchanges, decentralised autonomous organisations (DAOs) and even provably fair games.
Bitcoin is the highest valued cryptocurrency in the world right now, with 1 BTC currently worth around $31,600. Though Ether's value of approximately $1,900 per coin is just a fraction of Bitcoin's, it is the second most valued crypto.
For comparison, the current market cap of Bitcoin is $600 billion compared to the $234 billion of Ether.
It's common to assume that Ether and Bitcoin are two competing cryptocurrencies squabbling for a position at the top of a 19,000-strong heap of alternative coins. However, when you look a bit closer, Ethereum and Bitcoin have far more differences between them than similarities.
While Bitcoin was originally intended to become an alternative currency that operated outside of the potentially corrupting influence of banks and other financial institutions, Ether only rose to the number two cryptocurrency spot incidentally, with the blockchain originally created to provide a platform for decentralised apps, finance and a host of other purposes.
Looking for more info on the differences between Ethereum and Bitcoin? Check our FAQs.
What's the main difference between Bitcoin and Ethereum?
The main difference between Bitcoin and Ethereum is that Bitcoin is solely a blockchain-based cryptocurrency whereas Ethereum supports a wide range of functions from decentralised apps and decentralised finance to provably fair games and non-fungible tokens, with its unit of currency, the Ether, used as fuel for driving these functions.
How many BTC and ETH are in circulation?
At present, there are almost 19 million Bitcoin in circulation from a maximum supply of 21 million. There are currently 119 million ETH in circulation, with no maximum supply.
What can you do with BTC and ETH?
Though there aren't yet very many places that accept Bitcoin or Ether as payment methods, apart from some very large online retailers, many people are using the cryptocurrencies to play casino games. Numerous crypto casinos exist that allow members to deposit and play slots, table games and live dealer games in BTC or ETH for the chance to win even more.
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