Bitcoin vs Ethereum: Key Differences

In recent years, the cryptocurrency market has witnessed an open rivalry between two crypto giants: Bitcoin and Ethereum. While the first cryptocurrency continues to dominate in market capitalization, the altcoin is steadily gaining ground, attracting a growing users’ number. Let’s find out how is Ethereum different from Bitcoin and explore the unique value they bring to the table.

A Quick Look at Bitcoin

Bitcoin (BTC) is the world’s first and most famous cryptocurrency. Created in 2008 by the mysterious Satoshi Nakamoto, it’s a decentralized virtual currency with open-source code. With a capped supply, Bitcoin has become a favorite among investors and is often referred to as ‘digital gold.’ Beyond being an investment tool, people use Bitcoin to pay for goods and services, solidifying its role in the digital economy.

A Quick Look at Ethereum

Ethereum is an open software platform designed for building and running smart contracts and decentralized applications. Its native cryptocurrency, Ether – ETH, powers transactions within the Ethereum network. As an altcoin — a term used for all cryptocurrencies launched after Bitcoin — Ether has carved out its own niche in the blockchain ecosystem.

Ether ranks as the second-largest cryptocurrency by market capitalization, valued at $407.9 billion as of Fall 2024. Ethereum was created by Vitalik Buterin in 2013, with co-founders Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson joining forces to bring the vision to life. The blockchain platform officially launched in 2015, revolutionizing the crypto space with its innovative capabilities.

What Sets Bitcoin and Ethereum Apart

So what is the difference between the BTH and ETH? Let’s look into their key features outlined in this guide.

Bitcoin is primarily a Peer-to-Peer payment system, while Ethereum serves as both a digital currency and a platform for building other apps. Unlike Bitcoin’s capped supply of 21 million coins, Ether has no emission limit. BTC can be mined using the Proof-of-Work – PoW consensus algorithm. However, Ethereum uses a more energy-efficient Proof-of-Stake – PoS model, setting it apart in terms of sustainability and scalability.

In March 2022, the final testnet was launched, and by the fall of 2022, Ethereum successfully transitioned to the Proof-of-Stake – PoS algorithm, marking the end of altcoin’s mining era. Meanwhile, Bitcoin’s mining difficulty continues to rise, and its block reward halves approximately every four years, making the mining process more challenging over time.

Another key difference between Bitcoin and Ethereum lies in transaction speed: Bitcoin transactions take about 10 minutes to confirm, while Ethereum processes them in approximately 4 minutes, offering faster settlement times.

Ethereum vs Bitcoin: Key Differences

While Bitcoin focuses on being a digital currency, Ethereum’s developers expanded blockchain technology beyond payments. Ethereum introduced smart contracts, enabling decentralized applications – dApps – creation.

Smart contracts are the digital equivalent of legal agreements. They use blockchain technology to automate transactions and execute terms without the need for intermediaries. These contracts power decentralized applications, which function like smartphone apps on Android or iOS but with one main difference: they operate independently, without being controlled by a single company or authority.

Ethereum gained significant interest from major organizations. Giants like JPMorgan Chase & Co. and Microsoft see its potential as a groundbreaking platform. Some experts even compare investing in Ethereum to investing in a tech company, given its role in powering innovative blockchain solutions and decentralized applications.

If you’re wondering which is better, Bitcoin vs Ethereum, you should find out its biggest difference. It lies in their ultimate goals. Bitcoin aims to become a globally accepted currency, while Ethereum’s vision is to be a platform that supports smart contracts and decentralized applications, driving innovation across various industries.

Both Bitcoin and Ethereum are decentralized networks that are open for public viewing and built on open-source software. The prices of the leading cryptocurrency, Bitcoin, and the second most popular altcoin, Ethereum, are influenced by market fluctuations, reflecting volatility in the crypto space.

Insights into Bitcoin and Ethereum Blockchains

Bitcoin and Ethereum are prime examples of digital payment systems powered by blockchain technology and encryption. While they share similarities, key differences set them apart.

The Bitcoin blockchain is a database that records every cryptocurrency transaction. In contrast, Ethereum is a more advanced system capable of storing computer code, enabling decentralized applications to tap into the network's collective processing power. The concept behind Ethereum is that businesses, governments, and individuals can buy and sell ETH to access Ethereum's vast distributed resources for running their own applications.

The first groundbreaking applications on Ethereum were smart contracts. Ethereum's network also supports creating other tokens with the ETH protocol, distributed across various blockchains for public or private purposes. These tokens can be designed by organizations to represent shares, voting rights, or even as tools for identity verification. Additionally, Ethereum's blockchain is the foundation for creating non-fungible tokens.

Ethereum and Bitcoin operate on separate protocols, with processes that aren’t connected with each other. This means that transactions allowed on one platform might not work on the other. For instance, Ethereum transactions often include executable code, enabling smart contract functionality. In contrast, Bitcoin blockchain transactions are solely focused on record-keeping.

Bitcoin and Ethereum Foundation

One of the main similarities between Bitcoin and Ethereum lies in blockchain.

Ether (ETH) is the native token of the Ethereum platform, designed to facilitate transactions within its network. Like Bitcoin, ETH is built on blockchain technology, which securely records every cryptocurrency transaction on a decentralized ledger.

Bitcoin is a payment network that enables seamless transactions between users anywhere in the world. Today, BTC is primarily viewed as an investment asset. On the other hand, Ethereum aims to build a decentralized infrastructure that operates without being controlled by any single organization.

Decentralized finance – DeFi – apps built on blockchain technology are now immensely popular on the Ethereum platform. These innovative tools are reshaping traditional financial systems by offering open and decentralized alternatives.

Unlike many other cryptocurrencies, ETH tokens serve a specific purpose: powering the computations of decentralized apps within the Ethereum network. While users can exchange other cryptocurrencies for ETH, only ETH can be used to fuel Ethereum transactions. It cannot be substituted with other digital currencies for this computational role. Both BTC and ETH operate independently of any other currency, maintaining their unique value and purpose.

Cryptocurrencies Built on Ethereum

Ethereum's network allows new token creation, giving rise to cryptocurrencies like Polygon, Decentraland, Uniswap, Chainlink, and Basic Attention Token. These altcoins use the ERC-20 standard, ensuring compatibility and integration ease. Most digital wallets support ERC-20 tokens, making them widely accessible across the cryptocurrency ecosystem.

Ethereum is the foundation for numerous innovative projects like MakerDao, Axie Infinity, Aave, and SushiSwap. Today, over 3000 decentralized applications operate on the Ethereum blockchain, offering users greater control over their data compared to traditional platforms like the centrally governed Robinhood. These dApps take a decentralized approach to data management, empowering users by returning control through blockchain technology.

The decentralized finance key goal is to expand the cryptocurrencies’ use, moving beyond simple transactions to more complex financial activities like lending and derivatives. Since Ethereum is an open-source platform, many projects built on it are experimental — and sometimes even fraudulent.

Is Ethereum Linked to Bitcoin?

Let’s dive into the Bitcoin and Ethereum world and find out which is better, BTC vs ETH.

Both Ethereum and Bitcoin exhibit high volatility, and the Ethereum’s price is often influenced by Bitcoin's market price. This correlation is due to the significant trading volume that occur in the ETH/BTC pair, which ties Ethereum’s value to Bitcoin's fluctuations on the market.

In addition to Bitcoin's influence, Ethereum’s price is primarily determined by market supply and demand, much like stocks. An increase in demand for Ethereum drives the price up, while a surge in sell orders can cause the token's value to drop. This dynamic creates a responsive and fluctuating market for ETH.

Overall, market sentiment plays a significant role in all cryptos’ price movements, including Ethereum. Prices can rise or fall sharply in response to shifts in global market capitalization and trading volumes on exchanges. Media coverage and celebrity endorsements are powerful tools that can influence investor behavior, often leading to market fluctuations driven by external hype or attention.

Crypto market regulation by government agencies has a direct impact on digital currency prices. Different countries have varying views on the volatility and anonymity associated with crypto transactions, which can influence market behavior. Restrictions within the crypto industry often lead to price declines, while positive regulatory outlooks can act as catalysts for growth, driving market optimism and price increases.

Bitcoin and Ethereum remain the leading cryptocurrencies on the market. Despite their high volatility, investor interest remains strong. Large corporations and financial institutions are increasingly leveraging the benefits of digital currencies, and their acceptance at the government level continues to grow.

F.A.Q.

What’s the difference between the Ethereum and Solana wallet?

The key difference between Ethereum (ETH) and Solana wallets lies in the blockchains they operate on and the capabilities they offer. A Solana wallet is designed primarily to store and manage SOL cryptocurrency. In contrast, an Ethereum wallet is a comprehensive ecosystem that allows users to perform transactions, interact with smart contracts, and more.

The wallets also differ in terms of transaction speed and fees. Solana wallets offer low fees and high transaction speeds, while Ethereum wallets tend to have higher fees and slower transaction times due to the nature of its network.

What is the difference between Ethereum and Ethereum Classic?

Ethereum (ETH) is the original blockchain, while Ethereum Classic (ETC) emerged from Ethereum’s hard fork in 2016. The primary distinction between the two blockchains lies in their approach to code changes. Ethereum supports the ability to make modifications and correct errors within the code, while Ethereum Classic follows the principle of ‘code is law,’ meaning it upholds the original, unaltered code, regardless of potential issues or vulnerabilities.

What is the difference between Bitcoin and altcoins?

Bitcoin is the first cryptocurrency and the pioneer that laid the foundation for all digital currencies. Altcoins refer to all other cryptocurrencies that were created after Bitcoin, offering various features, technologies, and use cases different from those of Bitcoin.

Which cryptos have strong development prospects?

The key criteria for identifying promising cryptocurrencies include an active community, innovative development, and real-world applications. Cryptocurrencies that are traditionally considered to have strong future potential include Ethereum (ETH), Solana (SOL), Cardano (ADA), Polkadot (DOT), and Avalanche (AVAX).