What Is Bitcoin?
Before understanding the differences between Bitcoin and Ethereum, you must know what each entails. So, what is Bitcoin? Bitcoin is a cryptocurrency; that means that it is a medium of exchange that is encrypted and nearly impossible to trace. Transactions made through this coin are anonymous except for the origin and destination addresses for each operation. They were created by Satoshi Nakamoto and launched in 2009; while the origin of Bitcoin is attributed to that name, no one knows who Nakamoto is, or even if it is just one person. Since its launch, the cryptocurrency started to earn a following thanks to its promises of modernising the economy through decentralisation.
Decentralisation is often mentioned when speaking of cryptocurrencies and Bitcoin started it by introducing the concept of a blockchain platform as well as the chain itself. The promises of a decentralised economy come from the fact that anyone with the appropriate computing power and equipment can record transactions into it. Why transactions? Because the blockchain acts like Bitcoin’s public ledger, where all movements from one address to another are recorded. The main objective for Bitcoin is to be a medium of exchange; that is to replace what we know today as “money” or fiat currencies as the main unit of value. The strengths it has to become what it aims to do are its security, privacy, and efficiency. What drives the price for Bitcoin is its spread acceptance and confidence, which are driven by those advantages.
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What Is Ethereum?
The Ethereum project is an interesting “cryptocurrency”. The main reason for that is that it is not a currency. What do I mean? Well, many people have the misconception that everything built over a blockchain and has a tokenisation system is a blockchain. In reality, Ethereum is a platform for the creation and utilisation of smart contracts to conduct different transactions of different nature. While it is true that the Ethereum project has an innate crypto coin, the Ether (which is also encrypted and used as a currency), the idea behind it is not to replace money in any way. The Ethereum project was released in 2014 by Vitalik Buterin, and it has quickly become one of the most influential cryptocurrencies around; it even competes with Bitcoin for that title.
Why is Ethereum so influential? Well, because its blockchain takes what Bitcoin brought and elevates it to a whole new level. It not only allows for the transmission of value; those previously mentioned smart contracts are a revolutionary technology which was introduced by this platform. They are self-executing programmes that activate as soon as specified conditions are made. Users of the Ethereum platform can create their own smart contracts and set everything from their requirements to the actions they perform. As such, smart contracts can be used for virtually everything, from escrow services to communications. Another reason for its influence is the creation of the ERC20 token “template”, which started the ICO craze of 2017.
Why Do People Confuse Them?
People tend to think that, as we said previously, everything built on top of a blockchain is a cryptocurrency. After all, if Bitcoin is built over a blockchain, and it is a crypto coin, then everything else is one as well. Let us tell you, that is definitely not the case; not even having a crypto token makes something a cryptocurrency. Both platforms are currently being treated, and traded, as a medium of exchange. And, while they CAN be used as such, that does not make them have the same innate functionality or the same goal. Comparing Bitcoin vs Ethereum is seen like comparing a Dollar with a Euro, while it is actually more akin to comparing a Dollar with salt or silver and gold coins.
However, both do have their own coins (Bitcoin and the Ether from Ethereum), and both can be used as money. However, that is only due to the definition of what money is and how different elements can qualify as such. Today, Ethereum, Ripple, and many other platforms with cryptocurrencies within them are seen as cryptocurrencies themselves; it is enough to hear how people refer to Ether (Ethereum’s coin) Ethereum, confusing the platform with the currency. Nevertheless, the entirety of the blame cannot be placed on investors. Below, you will find some of their similarities.
- Both Are Decentralised and Blockchain-Based.
This is the main reason that points people to conclude that a platform is a cryptocurrency and a medium of exchange. It may sound humorous, but the truth is that many investors think that blockchain equals cryptic medium of exchange. Ethereum may be a platform for smart contracts fuelled by a cryptocurrency, but it is only another coin thanks to having the Ether. Despite the differences between Bitcoin and Ethereum, the truth remains that both are technically and significantly similar. Regardless of having different objectives (which we already talked about and will explain in a moment), there is an inherent truth in that both function on top of a blockchain and include an asset that is valuable and usable as a medium of exchange.
For Bitcoin, it is its homonymous crypto coin; for Ethereum, it is the Ether token, even though traders also refer to it as Ethereum. Both are useful to make fast and secure transaction without being limited by borders. Additionally, neither of them is controlled by a central entity, and the emission of new units is done by volunteers amongst the members of the community. Both platforms have similar technical features.
- Both Are Usable As Money.
As touched briefly in the previous point, both coins can be used as a medium of exchange thanks to their characteristics. Both coins from each platform are valuable, limited, and divisible. As such, both of them enjoy the same foundations traditionally given to what elements can be used as money. When we said that comparing Bitcoin vs Ethereum was like comparing the Dollar with salt, we meant that both could be (and have been) used as money.
The first medium of exchange was salt since it was valuable, limited, and could be divided in smaller portions. If we take those characteristics, it is very similar to what gold is, or even how Dollars work. However, both are different even in those same features, even if only slightly so. The same applies to Ethereum and Bitcoin; despite one being aimed towards fuelling smart contracts and the other towards transmitting value, both can be used for the latter. In this case, Bitcoin would be a Dollar and Ethereum the salt. Also, the value for both BTC and ETH comes from how popular and accepted each platform is and the advantages offered by them, even if they vary between the two.
How Are They Different?
Despite their similarities, both platforms, and even the concepts, are very different from one another. That is a fact that we couldn’t keep quiet even while mentioning their similarities. While they are technically almost equals, they are fundamentally very different. Not only do they have different features, but they even have different objectives and purposes. To the eyes of those who are only interested in trading and exchanging Ethereum and Bitcoin, and even other cryptocurrencies, they are almost the same thing. Not just as numbers and assets, but as concepts, too. It is easy to clump cryptocurrencies together and ignore the fact that there is a whole platform behind them, not just the blockchain, but also a plethora of goals and features.
The differences between Bitcoin and Ethereum come in that last sense. They have similar functions and technical specifications, but they are aimed towards very different milestones. And it is not like it is very different to spot shallow differences, those are plenty. Bitcoin has a much higher price than Ethereum, and it is much older as well. Ethereum has a higher coin volume in the market and it is often easier to trade due to the prices. But, it is the fundamental differences that matter.
- They Have Different Goals.
The main point that has been mentioned here and in every Bitcoin vs Ethereum post in forums is that they have completely different aims. And that is for a good reason since it is completely true. From the previous explanations of each project, it is easy to deduct that this is the main difference between the two. The goal for Bitcoin is to replace money, to put it bluntly. Some people say that its objective is to be a parallel currency; similar to how a Euro is a parallel currency to the Dollar and not its replacement.
But, despite what a lot of people may say or embellish, the ultimate objective for Bitcoin is to be a more effective medium of exchange and provide the world with a new method for payments and value transmission. Ethereum, on the other hand, has the set goal of creating an ecosystem centred on smart contracts and their applications. What it aims to do is to create a platform that can make virtually every service more efficient. From banking to communications, as we already stated, smart contracts can be developed and applied for almost anything, and what that strives to do is the goal of Ethereum.
- They Have Influenced The World Differently.
To have different objectives means that they will impact the world in different ways as well. And that is completely true and visible today. Bitcoin has influenced and shaken the world wildly due to many reasons related to being a pioneer. It introduced the blockchain technology, which means that platforms like Ethereum or Ripple exist thanks to it. However, if we focus on its objective, Bitcoin has changed the way people see money and what makes something qualify as such. It has moved masses towards analysing the concept of a medium of exchange, and that is due to it being aimed towards that goal.
However, Ethereum has influenced the world in a completely different way. Through the development of smart contracts and the ERC20 token, the Ethereum project has given birth to a large portion of the cryptocurrencies we have today. From health service databanks to libraries, and from new banking systems to integrated lending platforms, many different projects have taken the features of the Ethereum platform to create their own solutions for modern issues. The ICO craze that made cryptocurrencies so popular and skyrocketed prices for Bitcoin and others was caused by how Ethereum made creating new crypto coins much easier.
Conclusion: Why Are They Different?
There are many differences between Bitcoin and Ethereum which make the Bitcoin vs Ethereum debate an interesting trip into the concepts of money, value, and change. While it is true that both can be used as a medium of exchange and are technically very similar, the truth remains that they have completely different set goals. Not only that, but even the source for their value differs from one another. While the value of Bitcoin is driven by its security, privacy, and overall popularity and acceptance, the value for Ethereum and its Ether coin comes from its versatility. Ethers are valuable because they are necessary to operate on the Ethereum platform and access its smart contracts. That is what makes Ether so desirable whereas Bitcoin is desirable due to its perceived value, more akin to what fiat money is today. As such, “Bitcoin vs Ethereum” is not a fight. Both platforms have their place in the world.