Bitcoin and Ethereum are the most widely used cryptocurrencies on the market, with the highest market cap; $385,790.93M for Bitcoin and $196,747.33M for Ethereum, according to Binance market analysis.
They are decentralized digital assets traded on online exchanges and normally stored in cryptocurrency wallets. They both depend on the distributed ledger technology called the blockchain to validate and record transaction processes.
While Bitcoin is regarded as the first cryptocurrency and the most supported by businesses, it is closely followed by Ethereum. Ethereum founders studied Bitcoin and built new features based on the ideas. Although Ethereum did not have the same pioneering impact as Bitcoin, it ranks as the next most valuable currency on the crypto market after Bitcoin.
Bitcoin is considered to be digital gold, while Ethereum the digital silver.
Before we delve into what makes Ethereum unique from Bitcoin, it is good to understand the primary distinctions between these two giants of the crypto market.
Bitcoin vs. Ethereum: What is the Difference?
Let's see how Bitcoin and Ethereum differ.
History
Satoshi Nakamoto introduced Bitcoin in 2009, while the idea of Ethereum was first released in 2013 by a researcher and programmer named Vitalik Buterin.
Overall Objectives
Bitcoin was created primarily as a substitute for conventional currencies and as a means of trade and a store of assets, while Ethereum was built as a platform to enable immutable, programmable contracts and applications using its currency.
Consensus algorithm
Bitcoin and Ethereum currently depend on a consensus model called proof-of-work. It allows the nodes of the respective networks to agree on the current state of all data stored on their blockchains and guards against some types of network attacks. But this September, Ethereum will switch to a different consensus model called proof-of-stake, based on the stake of a transaction validator. This update will make Ethereum more scalable, safe, and sustainable.
Mining
For Ethereum, mining is done with GPUs(Graphical Processing Units), while for Bitcoin, mining is done with more powerful processors known as ASICs(Application-Specific Integrated Circuits)
Time for Adding New Blocks of Data
On the Bitcoin network, blocks are added every 10 minutes, whereas they take just 15 seconds on the Ethereum network.
Hashing Algorithms
Bitcoin uses SHA-256 as its hashing algorithm. Ethereum uses a cryptographic algorithm called Ethash.
The Supply Edge
The overall supply of bitcoin is 21 million, and the number of Bitcoins will never exceed this quantity. On the other hand, the overall number of ETHs that can be mined is unlimited.
What So Special About Ethereum?
Ethereum is unique in its way in that;
While Bitcoin focuses on processing transactions and cryptocurrencies, the Ethereum network makes functionality for developing other projects beyond just digital currency. Ethereum network can be programmed to build and work on new tools, applications(DApps), DeFi, smart contracts, and NFTs.
Compared to Bitcoin, the Ethereum platform executes transactions more quickly. As I highlighted before, it takes just 15 seconds for new blocks to be added to the Ethereum network.
Ethereum network provides smart contracts and leverages blockchain technology to lower costs and offer more security than conventional contracts for exchange.
Ethereum allows for an unlimited number of tokens in supply.
The latest buzz about Ethereum is that the network has moved from the normal proof-of-work consensus protocol(used by Bitcoin) to the more energy-efficient proof-of-stake protocol. The merge is something special about the Ethereum network.
In the Merge, Ethereum validators won’t have to rely on “miners,” who use powerful computers to protect the blockchain and validate transactions, but rather validators can “stake” their ether to safeguard the network in exchange for new coins. Also, the Merge is anticipated to cut Ethereum’s energy use by about 95.95%. This will promote ETH as an eco-friendly blockchain.
Since news of the Merge and its potential outcomes rocked the crypto world, there has been much speculation over whether Ethereum will overtake Bitcoin to become the dominant cryptocurrency. Will this be possible or not?
Watch out for the following article on what "the merge" means for the Ethereum network…
Bottom Line
The two cryptocurrencies; Bitcoin and Ethereum, serve different purposes, which make them unique on their own, and instead of posing as rivals, they could be complementary to one another.