In term of market capitalization, Bitcoin and Ethereum are the two most popular digital token, and they are similar in many ways. In this blog, we will consider some differences between Bitcoin and Ethereum by discussing how each of these cryptocurrencies operate and how they serve different use cases. For a beginner who don’t know much about this 2 cryptocurrencies, this guide is perfect for you.
Differences Between Bitcoin and Ethereum?
Bitcoin and Ethereum are decentralized computation networks and between them, there are some subtle engineering tradeoffs. By having a limited set of functionalities, trading Bitcoin is ensured to prevent bad actors from exploiting the system, and it receive assistance from the enormous amount of hash power. Ethereum trades with Turing-complete EVM (Ethereum Virtual Machine) created can host and run decentralized applications through smart contracts.
A consensus algorithm called Proof-of-Work (PoW) are used by both Both Bitcoin and Ethereum. Inside of it, a global decentralized network of specialized hardware equipment secures the network in a mining process. On the other hand, the whole Bitcoin consensus process has largely unchanged, while significant developments are happening in the Ethereum ecosystem.
Ethereum intends to switch to a Proof-of-Stake (PoS) consensus process in which validators, rather than miners, would protect the network. To validate and generate blocks, validators will stake a certain quantity of tokens on the network. This upgrade is known as Ethereum 2.0, and it is the most significant and much anticipated version in Ethereum’s history.
Block Confirmation Times
Ethereum is much faster than Bitcoin, regarding transaction speeds and block confirmation times. While each block on the Bitcoin blockchain takes an average of 10 minutes to confirm, only 10-20 seconds is taken for each block in the Ethereum network to confirm. On average, Bitcoin can manage 5-7 transactions per second, and Ethereum can handle up to 10 transactions per second.
More on-chain transactions can be handled by Ethereum than Bitcoin, which is served for considering the ecosystem of decentralized applications (DApps) on the Ethereum blockchain. It is expected that Ethereum 2.0 with its Proof-of-Stake consensus algorithm can handle 100,000 transactions per second.
Supply of Tokens
There are a fixed supply of 21 million BTCs that will be ever created. For each new block successfully mined, new BTCs are minted. The block rewards are cut in half every 210,000 blocks in a process known as halving.
In contrast, there is a lack of a hard cap on the total supply of ETH and a deflationary monetary system like Bitcoin in Ethereum. But, after the EIP-1559 upgrade scheduled in August 2021, Ethereum will implement a new mechanism introducing a deflationary characteristic in Ethereum.
To manage the ownership of BTCs on the network, the Bitcoin protocol uses Unspent Transaction Outputs (UTXOs) to manage. Every BTC on the network is an unspent transaction output that is associated with a private key and a public address. When someone transfers a particular quantity of BTC to another address, they do not simply leave your wallet, but the ownership of the UTXO is transferred to another address.
Ethereum uses an account-based model in which your account is debited or credited based on incoming and outgoing transactions. The UTXO model used in Bitcoin costs quite a lot, but the account-based model used in Ethereum is simple and saves a lot of computational effort.
What is Ethereum Used For?
Ethereum with a Turing-complete EVM (Ethereum Virtual Machine) is a programmable blockchain platform that can run smart contracts. Turing-complete is a mathematical model of computation, which simply means you can build any general purpose program for real-world scenarios.
Ethereum is the crypto ecosystem’s innovation hub, spawning a variety of enterprises such as:
- New forms of fundraising (ICOs and STOs)
- Decentralized Finance (DeFi) applications and protocols
- Non-Fungible Tokens (NFTs)
In a thriving digital economy, Ethereum is home to multiple decentralized apps for digital money, worldwide payments, exchanges, peer-to-peer lending, and others.
What is Bitcoin Used For?
Bitcoin is the digital gold that is getting widespread adoption from institutions such as Tesla, Grayscale Bitcoin Trust, MicroStrategy, and others. El Salvador, a tiny Central American country, has finally certified Bitcoin as legal cash. Other nations, including Paraguay, Panama, Brazil, and Mexico, have indicated interest in Bitcoin adoption.
Bitcoin is extensively utilized as a store of value, serving as a digital equivalent of gold. In comparison to Ethereum, there isn’t much development work going on with Bitcoin, owing to its lack of protocol flexibility.
Is Ethereum Better Than Bitcoin?
Ethereum and Bitcoin are two different networks that have made certain trade-offs. Bitcoin has chosen security, while Ethereum has chosen flexibility by design. One is not better than the other; they both compliment each other. With cross-chain interoperability solutions, decentralized applications will benefit from Ethereum’s flexibility and the unmatched security offered by Bitcoin.
Bitcoin and Ethereum are the two largest crypto-networks in today with some small differences. After this article, Izamza.com hopes that you can consider the characteristics of each of them on your own and decide which one you prefer.