Both, Ethereum and Bitcoin, pulled all eyes towards themselves as soon as they were launched. The credit solely goes to the novelty of technology used. However, it is, now, crucial for the fintech industry to closely observe the difference between these two technologies.
Bitcoin
It is a cryptocurrency and digital payment system. The technology was mysteriously presented in a whitepaper by Satoshi Nakamoto. Bitcoin is one of the largest currency of its type in terms of total value in the market. Bitcoin is regarded as the first digital currency, although certain (unnoticeable) trials were made prior to its launch.
Bitcoin mining is popular among enthusiasts. In this activity, Bitcoin is rewarded to the users when they offer their computing power to record and validate transactions. Besides being mined, Bitcoin can also be used as exchange currency or for regular transaction purposes.
Further, Bitcoin formed the basis of development for the blockchain technology. Since Bitcoin transaction are peer-to-peer and direct, it needed a secured ledger technology. And this led to sprouting of blockchain technology.
Bitcoin is not yet accepted as a formal tender of transaction or storage of value. But, over years, it has created a niche for itself and continues to be a part of the financial system, despite of being repeatedly debated.
Ethereum
Ethereum is a blockchain-based open source distributed platform for creating Decentralized Applications over smart contracts. The technology produces peer-to-peer contracts using Ether as token. Smart contracts, on the other hand, are applications that can facilitate, check and enforce the negotiation or performance of a contract.
Ethereum has a far-fetched range of applications, majority of them revolving around Ether. Ether is a like a transportation system for traversing around the Ethereum platform. Ether is sought after by developers for 2 reasons-
-for being used as a medium of ex-change, just as other cryptocurrencies.
-for running applications (and monetizing them) on Ethereum.
Differentiating between the two
Both Ethereum and Bitcoin are backed by the distributed ledger technology. Still, they are different in many technical ways. Some of these are briefly listed below:
- Ethereum uses Turning complete as programming language while that for Bitcoin is a stack-based language.
- Transactions in Ethereum take place in seconds. But, block time for Bitcoin may extend to minutes.
- Ethereum uses ethash while Bitcoin uses secure has algorithm (SHA256) as their basic building blocks.
- Bitcoin was created as an alternative to the traditional legal tenders of transactions. Ethereum, though, was created as platform to define and design peer-to-peer applications using smart contracts.
- Since both Ether and Bitcoin are both cryptocurrency, the basic purpose of Ether is to help users create decentralized apps using Ethereum.
In nutshell, Ethereum is an advanced technology designed using blockchain, which in turn supports Bitcoin. Ethereum has no purpose of competing with Bitcoin. Thus, Bitcoin and Ethereum are different versions of the same technology (Blockchain) that driven by entirely different intentions.
Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.
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