Is Bitcoin (BTC) different from Ethereum (ETH)?

There is a tendency to think that Bitcoin (BTC) and Ethereum (ETH) are similar cryptocurrencies. But in truth, there are differences between these assets.

Two crypto-currencies, different stories

While Bitcoin is considered the king of cryptocurrencies, Ethereum could be referred to as the prince. For a good reason, one almost doesn't go without the other. Both digital assets hover in the top tier of cryptocurrencies on the market. They may be similar in one respect - they are electronic currencies - but the differences are legion.

Where did Bitcoin (BTC) and Ethereum (ETH) come from?

Before we look at the similarities and dissimilarities between Bitcoin (BTC) and Ethereum (ETH), it's good to give a brief history of both digital assets.

Bitcoin (BTC) is a cryptocurrency launched in 2009 by Satoshi Nakamoto, a pseudonym. The concept of electronic money had indeed been around for years before 2009, but Bitcoin (BTC) is still and remains the world's leading cryptocurrency. Interesting detail: since its launch, it has risen to the top of the e-currency chain. In terms of capitalization, it has the highest amount.

If Satoshi Nakamoto is the father of Bitcoin (BTC), in the case of Ethereum (ETH), we are talking more about the genius of Vitalik Buterin. At the age of 27, the computer scientist and entrepreneur became a billionaire thanks to his invention: Ethereum (ETH).

What are the similarities between Bitcoin and Ethereum?

Even though they have different histories, Bitcoin (BTC) and Ethereum (ETH) have some common characteristics. In fact, these characteristics are common to all cryptocurrencies. Let's go through them.

The first point of similarity between the two digital assets is that they operate based on a decentralized system which means that they are not dependent on any central authority or government. As a result, they offer absolute freedom to their users, who can carry out transactions without following the same rules that apply to fiat money.

Furthermore, BTC and ETH operate based on a blockchain. The role of the blockchain is to aggregate, order, and protect the transactions that users make. Users mine cryptocurrencies using their computers and thus contribute to the development and security of the blockchain.

Currently, Bitcoin (BTC) and Ethereum (ETH) rely on the Proof of Work system. It validates a block of transactions and offers a reward to the fastest miners. The hash function differs between the two cryptocurrencies (Keccak-256 for ETH and SHA-256 for BTC). Nevertheless, the process is based on a 256-bit hash in both cases, and the mining principle remains the same.

One last point of similarity: BTC and ETH are available on several exchange platforms. Binance, Coinbase, Kraken, Gemini, Bittrex... Almost all cryptocurrency exchanges offer to trade using Bitcoin (BTC) and Ethereum (ETH). Moreover, the ways of acquiring these assets are generally the same. It is possible to opt for a peer-to-peer exchange or to deposit cash at ATMs.

What are the differences between Bitcoin and Ethereum?

As we have seen, similarities between Bitcoin (BTC) and Ethereum (ETH) abound. For all that, there are fundamental differences between these cryptocurrencies.

First difference: Transaction fees

The transaction fee defines how fast the miners process. For Bitcoin (BTC), miners are stimulated and process the transaction more quickly when the fee is high. Conversely, suppose the fee is relatively low. In that case, processing may take longer, as it will take a few blocks to integrate the transaction.

With Ethereum (ETH), the principle is different. Everything is based on a "gas" system. Each transaction corresponds to a calculation cost that is defined in "gas." To illustrate, the ETH "gas" can be compared to the gasoline that is inserted into the tank of a car to make it move. The "gas" makes Ethereum (ETH) work. The amount of gas required for a transaction defines the fees that must be paid to miners.

Second difference: The size of the blocks

For Bitcoin (BTC), the block size is limited to 1MB. However, for scalability issues, there was an update that increased the block size. This launched a new cryptocurrency derived from Bitcoin (BTC): the Bitcoin Cash (BCH).

For Ethereum (ETH), block sizes are determined by the maximum allowable amount of gas. A block cannot admit more than 6.7 million gases.

Third difference: The token limit

The Bitcoin network (BTC) expects a total of 21 million tokens to be in circulation. According to analysts, the last token will be issued in 2140. Once that happens, no more tokens will be launched, which gives the cryptocurrency a rare character. Currently, according to experts, 88% of tokens have already been mined. Note that to manage the issuance of BTC, the network uses a Halving system. For every 210,000 blocks, a Halving takes place, which halves the miners' remuneration.

Ethereum (ETH) follows a different mode of operation than Bitcoin (BTC). With it, there is no limit to tokens in circulation. In other words, there is no risk of ETH going extinct, even in 2140! However, the reward for ETH miners is much less attractive than for BTC miners.

Fourth difference: the objective

The purpose related to the creation of the two cryptocurrencies is probably what constitutes the most significant difference between them. Although we mention it last, it is no less critical.

Strictly speaking, Bitcoin (BTC) is a purely electronic currency. It was conceived and designed by Satoshi Nakamoto to allow its users to make transactions. Thus, Bitcoin was made to become a natural and perfect alternative to fiat currency and the traditional banking system. In other words, BTC was created to replace the dollar ($), the euro (€), etc.

Conversely, again in the strict sense, Ethereum (ETH) is not a cryptocurrency. In truth, the name of the electronic currency is Ether. Ethereum is the name of the process that supports Ether. Like Bitcoin (BTC), Ether exists to offer the ability to do peer-to-peer transactions. However, Ethereum (ETH) goes beyond the concept of a cryptocurrency.

The optics in which Vitalik Buterin created Ethereum facilitate the development of decentralized applications (DApps) based on "smart contracts." So, the process is made to host applications. Moreover, because the characteristics of Ethereum seduce them, several professionals use it in various fields: banking, industry, hosting, art, finance, data storage, etc.

In short Bitcoin (BTC) and Ethereum (ETH) are digital assets with different purposes. The mode of operation is also not the same. Above all, while the former is created to allow transactions without the constraints of fiat currency, the latter is designed primarily to host applications.