Ethereum vs. Bitcoin

Ethereum vs Bitcoin

If you're starting to invest in cryptocurrency, you've probably heard of Bitcoin and Ethereum, two of the biggest blockchains in terms of value and influence.

You've probably even stumbled across this page hoping to understand what makes Ethereum and Bitcoin different. Well, it turns out that comparing Ethereum vs Bitcoin is a great way to learn not only that, but also about cryptoactives in general.

Bitcoin

Bitcoin was created as a response to government currency manipulation and seeks to serve as an alternative to traditional government currencies.

Ethereum

Ethereum, on the other hand, was built to be a kind of operating system for any number of custom assets and programs.

While this may be an oversimplification of how these two incredibly complex networks work, the purpose of this article is to provide a comparison of Bitcoin and Ethereum so you can begin to better understand and see the differences.

Bitcoin Monetary Policy

One of Bitcoin's biggest value propositions is its monetary policy — just 21 million BTC will be introduced into the network economy.

When the first block was extracted in 2009, 50 BTC have been released, a block reward that is cut in half every four years. This event is known as known as the halving or halvening.

Ethereum Monetary Policy

Ether (ETH) is the main cryptocurrency that powers the Ethereum. Similar to Bitcoin, ETH is mined in each block and distributed to your miners.

However, where the Bitcoin has limited supply, Ethereum does not impose a limit on the amount of ETH that can be mined and its supply is scheduled to increase 4,5% each year.

Bitcoin Creation Date

O white paper Bitcoin was posted on October 31, 2008 in the cryptography mailing list. The software was later released on January 9, 2009.

Ethereum Creation Date

The Ethereum white paper was published in late 2013 and the software was released July 2015. In 2021, the network is scheduled to complete a comprehensive review of its software that will bring it closer to completing its roadmap.

Bitcoin Creator

Bitcoin was created by an individual or group with a pseudonym under the name of Satoshi Nakamoto. To this day, the creator of Bitcoin remains unknown.

Ethereum Creator

Ethereum was created by Vitalik Buterin, from (with many others contributing to its code). Buterin was the founder of Bitcoin Magazine and Theil Fellow 2014.

Bitcoin Overview

Bitcoin Overview

Bitcoin is open source software that allows its global user base to manage a supply of digital money beyond the control of any government or central bank.

It was created in response to the 2008 global economic crisis as a way to fight inflation. In fact, the first mined block contained the message: "The Times 03/Jan/2009 Chancellor on the brink of second bailout for banks," a message that many believe signifies the project's revolutionary intent.

Bitcoin software allows computers running it to manage a ledger (the blockchain) that counts all transactions made using its currency (BTC), applying a variety of rules.

The Bitcoin blockchain is a complete record of network transaction history validated by nodes (nodes) or individuals running your software.

This ensures that each BTC cannot be copied or modified and that bitcoins cannot be created or used in a way that goes against its rules.

Bitcoins are scarce, divisible and transferable, making them a valuable cash alternative.

Bitcoin Price Chart

Ethereum Overview

Ethereum Overview

Ethereum was created with the intention of becoming a global open source platform for custom assets and new types of cost-effective applications.

Considered one of the most ambitious blockchain projects to date, Ethereum seeks to leverage blockchain technology to decentralize products and services across a wide range of use cases beyond money.

So far, Ethereum has seen a few distinct phases that emphasize different aspects of its capabilities.

First, entrepreneurs migrated to Ethereum in 2017 during its famous “ICO boom”, where creators were trying to raise money for new projects using new assets in the Ethereum blockchain.

During this time, Ethereum was seen as a sort of global capital allocator and funding mechanism.

A new phase of Ethereum, called decentralized finance (DeFi), began to attract attention in 2020.

This movement has seen the creation of decentralized applications (dapps) designed to automate financial services such as loans or loans without the need for a bank, or traditional intermediary.

Ethereum Price Chart

Bitcoin Network Design

The heart of Bitcoin's design is the ability for two users to send BTC to each other from anywhere in the world, without the need for an intermediary.

To keep your network secure and decentralized, while regulating the supply of new money that is released into your economy, Bitcoin uses a process called “mining”.

In this system, called Proof of Work (PoW), miners race to complete cryptographic puzzles to propose the blocks that make up the Bitcoin blockchain.

When a block is discovered by a miner, it is advertised to the network, and when it is verified by each node, the miner is compensated in the newly created BTC.

Ethereum Network Design

To create dapps, developers write programs, called smart contracts, and deploy that code into the Ethereum blockchain. These dapps are essentially large constructs of smart contracts that can be put into action if and when specific results are achieved.

Similar to Bitcoin, Ethereum employs Proof of Work (PoW) mining to power its blockchain.

However, the network is in the process of migrating to Ethereum 2.0, at which point it plans to change its consensus mechanism to an alternative called Proof of Participation (PoS).

Under this model, any user who has a minimum of 32 ETH can lock these funds into a contract and earn rewards for solving the calculations needed to add new blocks to the blockchain.

First Cryptocurrency Attempts

It wasn't until the 1970s that commercial and civil uses of cryptography began to be explored more widely.

It was then that the cypherpunk movement was born, dedicated to building new systems through cryptography and open source code.

The main initial projects included:

eCash by Dr. David Chaum: The first major attempt to create a digital currency, eCash users would store their money in a digital format, cryptographically signed by a bank, and could then spend it at any store that would accept eCash.

Dr. Adam Back Hashcash: An anti-spam engine that added a cost to sending emails and did not require users to create an account to access it.

B-money by Wei Dai: A proposal for an anonymous and distributed digital teller system, where each participant kept a separate database of how much money belongs to the users. Participants were encouraged to remain honest, putting their money at risk.

Reusable proof of work (RPOW) by Hal Finney: A scheme for creating unique cryptographic tokens that can only be used ​​once. In this system, validation and double-spend prevention were done by a central server

Nick Szabo's Bit Gold: A digital collectible based on Finney's RPOW. Units would be evaluated based on the amount of computational work performed. Bit Gold also introduced the idea of ​​digital currency scarcity.

Despite their similar view, most early attempts at cryptocurrency failed due to the inability to avoid central control and the inability of their units to sustain an economic value.

That is, until October 31, 2008, when Bitcoin was introduced by a pseudonym actor or actors, who built on these earlier ideas while addressing their shortcomings.

 

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