The Ethereum network's cryptocurrency, Ether (ETH), is the second most popular digital token after bitcoin (BTC). Comparisons between the two are therefore inevitable.
Ether and bitcoin are comparable in many ways: Each is a type of digital money that can be bought and traded over the internet and stored in a number of different cryptocurrency wallets.
Both of these coins are decentralised, which means that no central bank or other authority issues or regulates them. Blockchain, a distributed ledger technology, is used in both.
However, there are some significant variances in market value between the two most popular cryptocurrencies. We'll look at the similarities and distinctions between bitcoin and ether further down.
Bitcoin Basics
Bitcoin was first introduced in January of 2009. In contrast to government-issued currencies, it provided a novel notion spelt forth in a white paper by the enigmatic Satoshi Nakamoto: bitcoin claims to be online money that is secure and decentralised.
There are no actual bitcoins, only balances tied to a cryptographically secure public ledger.
Although bitcoin was not the first effort at an online currency of this type, it was the most successful in its early phases, and it is widely regarded as a predecessor in some way to almost all other cryptocurrencies launched in the previous decade.
Authorities and political bodies have gradually accepted the concept of a virtual, decentralised currency.
Despite being frequently scrutinised and contested, bitcoin has managed to carve out a niche for itself in the financial system and continues to coexist with it despite not being a legally recognised form of payment or store of value.
At the onset of the cryptocurrency boom in 2017, Bitcoin's market value accounted for almost 87 per cent of the whole cryptocurrency market. Bitcoin's market share had fallen to 42 per cent of the cryptocurrency market by February 2022, while other cryptocurrencies grew in popularity.
Ethereum Basics
Beyond permitting digital money, blockchain technology is being used to construct apps. Since its inception in July 2015, Ethereum has grown to become the largest and most well-known open-ended decentralised software platform.
Ethereum enables the creation and execution of smart contracts and decentralised programmes (dApps) without the danger of downtime, fraud, control, or third-party interference. Ethereum has its own blockchain-based programming language that developers may use to construct and run distributed apps.
Ethereum has a wide range of applications that are powered by its own cryptographic coin, ether (commonly abbreviated as ETH). Ethereum held a presale for ether in 2014, which garnered a massive response.
Ether is utilised by developers to construct and execute apps on the Ethereum platform and acts as a fuel for performing instructions.
Ether is largely used for two purposes: it is traded on exchanges as digital money, similar to other cryptocurrencies, and it is utilised to run programmes on the Ethereum network. According to Ethereum, "people all across the world use ETH to make payments, as a store of wealth, or as collateral."
Key Differences
While both Bitcoin and Ethereum use distributed ledgers and encryption, the two networks are substantially different in terms of technology. For example, Ethereum network transactions may include executable code, but data attached to Bitcoin network transactions are typically used primarily to keep track of transactions.
Other differences include block time (an ether transaction is completed in seconds, but a bitcoin transaction takes minutes) and the algorithms used: SHA-256 for Bitcoin and Ethash for Ethereum.
Both Bitcoin and Ethereum now employ the proof of work (PoW) consensus system, which allows the nodes of the respective networks to agree on the status of all information recorded on their blockchains and prevents certain sorts of economic assaults.
As part of its Eth2 update, Ethereum will switch to a new mechanism called proof of stake (PoS) in 2022. Ethereum will become more scalable, safe, and long-lasting as a result of this update.
Because of the processing power required, proof of work has been criticised as being extremely energy-intensive.
Proof of stake replaces miners with validators, who stake their bitcoin holdings to activate the capacity to produce new blocks, making it less energy-intensive.
However, the Bitcoin and Ethereum networks are distinct in terms of their general objectives.
While bitcoin was founded as a substitute for national currencies and hence seeks to be a means of exchange and a store of value, Ethereum was designed as a platform for immutable, programmable contracts and applications using its own currency.
Although BTC and ETH are both digital currencies, Ethereum's primary goal is to make the Ethereum smart contract and dApp platform easier to use and monetize.
Ethereum is another example of a blockchain that supports the Bitcoin network but does not compete with it in theory.
However, ether's popularity has caused it to compete with all cryptocurrencies, especially in terms of the trading volume. Since its debut in mid-2015, ether has ranked second to bitcoin in terms of market capitalization for most of its existence.
So these were some of the major differences (and similarities) between two of the most groundbreaking and popular cryptocurrencies in the market. And now, it’s up to you to decide which one of these tingles your investor senses!
Written By – Devika Mishra
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