When someone talks about cryptocurrencies, Bitcoin is commonly held up as the shining example while everything else is just an altcoin, an alternative type of digital currency.
In reality, Ethereum has remained a second place contender for a long time and arguably has a stronger long term outlook than Bitcoin. But when you’re talking about Ethereum vs Bitcoin – what’s the difference between the two?
Bitcoin was rolled out as an alternative to fiat currencies, a way to preserve value outside of money that governments can devalue in an instant either deliberately or accidentally through public policy.
Ethereum was designed with a whole ecosystem intending to integrate it into business finances, legal document tracking and building decentralised apps that use its blockchain. This is a very different goal than “let’s replace traditional money”. However, Ethereum tokens do have value as an alternative currency, hence its price moving in tandem to Bitcoin’s value.
Arguably, the inherent value to businesses of Ether is what will help it retain its value even as Bitcoin collapses.
Ethereum uses ethash. Bitcoin uses the secure hash algorithm SHA-256. The differences, though, go much deeper. Ethereum is a Turing complete programming language; this means there are relatively few programmers who work on it. The programming for Bitcoin is a stack language.
One of the big advantages of this difference is that transactions for Ethereum run in seconds, while transactions in Bitcoin take minutes to process. This speed advantage has real world implications, specifically when you’re trying to advertise yourself as a viable alternative to currencies.
There’s the practical benefit of being able to process purchases at the speed someone in the checkout line wants instead of asking them to wait half an hour to make sure the payment cleared. Another difference is the block time; Ethereum’s block time is between fourteen and fifteen seconds while Bitcoin’s block time is ten minutes.
Ethereum is an open-ended, decentralised platform full of distributed applications, called DApps. Developers can build and distribute applications without third party controls like the Apple App Store or Google Play store. These apps run on Ether, the “gas” that powers all centralised apps on the Ethereum network.
Bitcoin operates on its own block chain but doesn’t have any programming component. The purpose of the Bitcoin block chain is purely the verification of Bitcoin transactions and mining activity.
Ethereum releases the same number of Ether each year continually. Bitcoin block rewards fall by 50% every four years, guaranteeing diminishing returns. Early miners own the most Bitcoins ever mined, though an unknown percentage are lost. Ethereum is releasing a steady supply that is still available to miners.
Read Crypto Head’s guide on how to buy Ethereum if you want to invest in this cryptocurrency or want to start mining it.
Ethereum is designed for open source development of apps intended to support business, not just run as an alternative currency. This is what makes it so much different than Bitcoin, which is really being used for speculation principally.
They operate in totally 2 different universes, so before you invest in any, make sure that you understand the purpose and the technology behind them.