In this world of a digital revolution, everything is getting into the world of coding and decoding. The currencies are also no exception. With traditional and/or physical currencies that exist, they usually have this formal backing by the respective government.
The system is majorly centralized. A great mishap was the crashing down of financial institutions back in the year 2008. Here is when the world of digital currency which is majorly decentralized opened up.
Bitcoin is the first digital currency working on blockchain technology. With its inception, it gave ways to another way of cryptocurrencies and digital means to carry out transactions. The Ethereum technology is what followed and also works on the blockchain technology.
Since both of them use the same technology as the base, it could be confusing to distinguish between them. So let us explore them in detail.
Understanding The Two
Before getting into the finer details and differentiating between them, let us consider the underlying technology for each of them. This will give you a brief idea and clarify the points of differences as well.
The blockchain technology is an online system of ledger wherein each entry is validated, secure and open to all. There is a system of coding and decoding required to carry out and record any transaction.
So Bitcoin is a digital currency that works on this blockchain technology. It is touted to emerge in the year 2008 by Santoshi Nakamoto with the release of a white paper. This innovation has garnered lots of attention as it is a decentralized system of carrying out financial transactions. It involves two Bitcoin users to transact securely and instantly.
Coming to Ethereum, this is a platform, unlike the formerly mentioned digital currency. It was launched in the year 2015. There is a team that has developed forthcoming systems out of this platform. This has its digital currency by the name ‘ether’.
So the basic confusion must have been clear by now. Another noteworthy point that might lead to confusion is the similarity that they hold. The Ethereum platform also works on the blockchain technology.
But in any technology, there are different sub-domains through which any product works. This is the major point of difference between these two. Let us delve deep into understanding the differences between the two.
Points of Differences
The Bitcoin is a cryptocurrency that has to be mined and transacted. Currently, it has got huge market capital. While the Ethereum platform is meant to serve a different purpose. It is a base to build up your decentralized applications.
It can also be used for smart contracts. While its digital currency or coin named ether can be used in the same manner as Bitcoin, this platform serves as the largest open-source base.
Nevertheless, both are of interest to investors who buy and sell them, or trade on their prices using systems such as the Bitcoin Loophole.
With that said, the points of differences which clarifies both the intent, usage and the underlying technology are explained below.
- Financial Whereabouts
When we look at the daily transactions of the two, their financial history and expected future working, we get a glimpse of what and how these transactions are about.
If we look at the current price of the Bitcoin, it is around $10k, fluctuating daily. While the current price of ether stands as low as $248.96. But when the number of transactions carried out daily is averaged out, Ethereum has more to its side.
The Ethereum transactions were 855,383 while Bitcoin had only 375,326 transactions per day. This gives an idea about how and where firms are making use of this technology.
- Mining and More
The mining of either Bitcoin or Ethereum would require a consensus mechanism. Now, this is a zero-fault mechanism to carry out the digital transactions using the blockchain technology and validating each transaction. The two most commonly used mechanisms are proof-of-work and proof-of-stake.
While Bitcoin makes use of proof-of-work wherein miners have to use this trial and error kind system to make use of the blocks. The Ethereum goes ahead and intends to work on a proof-of-stake system as per the Casper protocol. This will pluck out the loopholes of the former and slower techniques.
- Their Tech Spaces
The programming language used in Bitcoin is stack-based while the Ethereum is based on turning complete programming language. The former uses a more secure hash algorithm i.e. SHA-256 while the latter uses an ethash mechanism.
- Operational Costs Involved
The operational or the transactional fees for each of the Bitcoin mined is comparatively more than Ethereum. On average, for mining Bitcoin, each transaction is charged and varies as per the speed of each transaction.
On the other hand, the Ethereum uses this new ‘gas’ system. Here the ‘gas’ is a unit that will quantify the computation required for carrying out the operations.
- The Most Important Point of Difference
The main purpose for which the two high-level technologies. The Bitcoin is mainly for carrying out safe and reliable digital transactions. It has similar usage as that of physical currencies.
While the Ethereum is also a payment system due to the coin ether but it is more than that. It is a platform to make applications and run smart contracts. It is this open-source software wherein anywhere can create successful applications.
Benefits Of Using The Two
The two of the digital currencies have their own set of advantages. These will give you a better way to narrow down on one of them. Here are a few of the advantages of using Bitcoin:
- It lessens the risk of fraud.
- It has comparatively lower transaction fees.
- One can safely and securely use it from anywhere in the world.
- It offers quick payments for people and businesses.
Here are a few advantages of using Ethereum:
- It is a quite robust and stable platform to be used.
- One can easily rely on the chunk of data sent and used over this platform.
- It allows the rapid deployment of the blockchain networks.
- It’s innovative and conformation to newer technology allows it to have enhanced scalability. This also improves its performance.
The basics of both of these technologies must have given you a rough idea about their working and core philosophy. Deciding and narrowing down on anyone is a tough choice. But when one focuses on the intended benefits, usage and the end purpose to be served, it should not be a problem.
Both of these are emerging and innovative technologies that are being used by businesses a lot these days. Owing to their benefits and ease of use, it is expected that soon many businesses will get into mining.
Having said that, being a decentralized system, people also doubt about its credibility. Also with newer cryptocurrencies coming up, it is difficult to choose. Added to that is the fact that very few or almost no government has extended its support to this technology.
So there are pros and cons of these technologies. However, until the data remains secure and the transactions are okay, it shouldn’t be a problem. Its future remains in the hands of the governments. If it is validated then definitely it will find a great boom in the market.
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