As cryptocurrencies have literally taken over the world of finance currently, and not only, many investors and people wonder what makes them so special. There is the controversy that eventually all cryptocurrencies will go to zero, as they have no intrinsic value and their prices are driven entirely by market sentiment. While this may be true, two of the most popular and the two largest cryptocurrencies by market cap are Bitcoin and Ethereum. These two are considered the “giants” in the league and it’s good to establish how they are different and how they are the same.
Bitcoin is the first cryptocurrency to emerge in 2009. 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. Bitcoin was 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. People have invested in bitcoin primarily because it promises to “decentralize” how financial markets work and how the common person can take charge of his/her finances.
Bitcoin introduced to the world the technology of blockchain, a decentralized way of conducting transactions. 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.
In addition, there are multiple considerations when it comes to interpreting the value of Bitcoin – some perceive it as a store of value, others – as medium of exchange.
Ethereum is actually not a cryptocurrency. In fact, Ethereum is a platform for the creation and utilization of smart contracts to conduct different transactions of different nature. The Ethereum network, however, is fueled by the coin Ether. The Ethereum project was released in 2014 by Vitalik Buterin, and it has quickly become one of the most influential cryptocurrencies around.
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.
The main misconception comes from the fact that not everything built on blockchain is a cryptocurrency. Both platforms are currently being treated, and traded, as a medium of exchange. 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.
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.
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.
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. Bitcoin and the blockchain technology are actually the building blocks for Ethereum and Ripple. Bitcoin has changed the way people see money and what makes something qualify as such. It has moved masses towards analyzing 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.
Bitcoin and Ethereum are essentially very different in their nature and in their goals. While the value of Bitcoin is driven by its security, privacy, and overall popularity and acceptance, the value of 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 and one cannot be compared with the other on the same scale.