The cryptocurrency of the Ethereum network is undoubtedly the second most popular digital token after Bitcoin (BTC). Indeed, as it is the second-largest cryptocurrency by market capitalization, comparisons between Ethereum and Bitcoin are quite natural. Let’s take a moment to understand their differences.
Ethereum in a few words
The blockchain technology is used to create applications that go beyond the simple establishment of a digital currency. Launched in July 2015, Ethereum is currently the largest and most well-established open decentralized software platform in the world. Ethereum allows the deployment of smart contracts and decentralized applications, also known as “dapps.” These can be built and executed without any downtime, fraud, control, or interference from a third party. Ethereum has its own programming language that runs on a blockchain, enabling developers to build and run distributed applications.
Major Differences
While both Bitcoin and Ethereum are powered by the principle of decentralized ledgers and cryptography, they differ technically in many ways. For example, transactions on the Ethereum network can contain executable code, while the data attached to transactions on the Bitcoin network is generally only used for recording. Other differences involve block time. It is important to note that a transaction on the Ethereum network is confirmed in a few seconds compared to a few minutes for Bitcoin. A significant difference.
Furthermore, the algorithms on which they operate are different: Ethereum uses Ethash while Bitcoin uses SHA-256.
Ethereum: A Competitor to Bitcoin?
The major difference between Bitcoin and Ethereum concerns their overall objectives. While Bitcoin was created as an alternative to national currencies and thus aspires to be a means of exchange and a store of value, Ethereum was designed as a platform to facilitate immutable, programmatic contracts and applications through its own currency. BTC and ETH are both digital currencies.
However, the primary goal of Ethereum is not to establish itself as an alternative monetary system. Its aim is to facilitate and monetize the operation of the smart contracts and decentralized applications platform. Ethereum is a different use case of a blockchain that supports the Bitcoin network and theoretically should not directly compete with Bitcoin.
However, the popularity of Ether has driven it to compete with all cryptocurrencies, particularly from the merchants’ perspective. For most of its history, since its launch in mid-2015, Ether has been close to Bitcoin in rankings of leading cryptocurrencies by market capitalization.
That being said, it is important to keep in mind that the Ether ecosystem is much smaller than that of Bitcoin: in January 2020, Ether’s market capitalization was slightly below $16 billion, whereas Bitcoin’s was nearly 10 times higher, at over $147 billion.
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