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What are the differences between Bitcoin and Ethereum? | Comparison of Bitcoin and Ethereum
Bitcoin and Ethereum are two of the largest digital currencies in terms of market capitalization that contribute significantly to the crypto economy. The competition between Ethereum and Bitcoin has been going on for a long time. Today we are going to compare Bitcoin with Ethereum and examine these two digital currencies from different aspects.
Bitcoin is known as digital gold due to its limited supply, which makes it as valuable as precious metals, as well as the ease of storage and the halving event. Ethereum, on the other hand, is considered the world’s decentralized computer because the network is used to run decentralized applications (dApps), or applications that are not controlled by a central authority.
By many measures, these two digital currencies are superior to other digital currencies in the crypto world, but there are many fundamental differences between them. Among the things where Bitcoin and Ethereum differ from each other are the agreement mechanism, the number of transactions per second, the number of supply and use cases. Next, we enter the world of these two popular cryptocurrencies and discuss the differences between Bitcoin and Ethereum.
The name of the digital currency Bitcoin (Bitcoin)
Abbreviation of BTC
The current price is $22,127.63
Rank on Coin Market Cap site 1
Daily trading volume is $22,443,673,605
Total supply $19,311,212
Amount in circulation $19,311,212
Official website https://bitcoin.org/
Whitepaper https://bitcoin.org/bitcoin.pdf
Bitcoin, which was launched in 2009 by an unknown person or group named Satoshi Nakamoto, has gained a lot of popularity over the years and is also considered as the “digital dollar”. It is the first decentralized currency (a currency not issued or regulated by a government) that provides a public ledger balance and is cryptographically protected.
This means that the entire Bitcoin network is dependent on a decentralized network of users and operates on a Proof-of-Work (PoW) algorithm. The rules provided by the network govern various factors, including the supply limit of 21 million bitcoins. In the continuation of the discussion of comparing Bitcoin with Ethereum, we will get to know Ethereum.
To see more information about Bitcoin digital currency, click here on the famous Coin Market Cap site.
The name of the digital currency Ethereum (Ethereum)
Abbreviation of ETH
Current price $1,550.49
Rank on Coin Market Cap 2 site
The daily trading volume is $6,814,169,621
Total supply $122,373,866
Amount in circulation $122,373,866
Official website https://www.ethereum.org/
White Paper https://github.com/ethereum/wiki/wiki/White-Paper
Ethereum, the second largest digital currency after Bitcoin, was introduced based on a white paper published by Vitalik Buterin in 2013. This document included the use of smart contracts, which are necessary to run decentralized applications. These dApps enable ether and other digital assets to be used in a variety of ways. Among these methods, collateral for loans or lending to borrowers for profit can be mentioned.
Ethereum has taken blockchain technology to a higher level by conducting transactions and communicating with programs running on its network. On September 15, 2022, Ethereum successfully switched its consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS). In this way, Ethereum can have an execution layer to manage interaction with smart contracts and a consensus layer to synchronize chain information across its network.
In addition, PoS reduces Ethereum’s energy consumption by approximately 99.95%; This means that transaction fees in this network will be reduced and users will be more satisfied. Now that we know the basics of Bitcoin and Ethereum, let’s talk about the differences between these two digital currencies.
Public and cryptographic blockchains are the foundation of both the Bitcoin and Ethereum networks. But they are very different from each other in terms of consensus algorithms, applications and other technical parameters. The most important differences are mentioned below.
Comparing Bitcoin with Ethereum in terms of consensus algorithm, it is necessary to know that both Bitcoin and Ethereum use “Blockchain” technology, but Ethereum is much more reliable. Ethereum is the 2.0 version of Bitcoin, which has made it possible to develop decentralized applications on its platform. Proof of Work (PoW), a consensus technique used by Bitcoin, enables network nodes to agree on the state of all collected data and protect against certain network attacks. The fact that proof of work requires a lot of power and is therefore very energy intensive is one of its main drawbacks.
Proof of Stake (PoS), on the other hand, uses staking instead of mining which consumes less energy. In staking instead of mining, users, referred to as validators, share their holdings to create new blocks.
Because Bitcoin was created as an alternative to fiat currency, it is intended to serve as both a medium of trade and a store of wealth. With Ethereum, users will have more ownership of their data and the ability to create and run programs on the blockchain.
While Bitcoin
N and Ethereum are both digital currencies, the main purpose of Ether is to facilitate and make more profitable for smart contracts, decentralized applications and other blockchain-based solutions. ERC-20 tokens that are based on Bitcoin also exist on the Ethereum network. A tokenized version of Bitcoin has been developed and deployed on Ethereum to benefit DApps.
Another important issue that should be addressed when comparing Bitcoin with Ethereum is the future of these two digital currencies. One of the main obstacles that prevent the use of digital currencies is scalability. A blockchain network can handle up to billions of transactions per second (TPS) if properly scaled. In this situation, the Lightning Network reduces the energy costs associated with the Bitcoin blockchain by off-chain collision and settlement. The network enables new use cases, such as fast micropayments.
Similarly, due to Ethereum blockchain traffic congestion, users incur significant transaction fees. Connecting Layer 2 networks to the Ethereum Layer 1 chain is an easy solution to the network congestion problem. These L2 scaling options act as highways that connect to the Ethereum highway, offloading traffic and making it more efficient.
One of the Ethereum layer 3 sidechains is Polygon. Polygon, also known as MATIC currency, can do about 7000 TPS.
In many ways, Ether and Bitcoin are similar. However, your purpose of using the two platforms will determine which network is best for you. Ethereum is the best choice for developing decentralized applications or dApps and smart contracts, but Bitcoin works better as a peer-to-peer payment mechanism.
