Ethereum vs. Bitcoin
If you’re just getting started investing in cryptocurrency, you’ve more than likely heard of Bitcoin and Ethereum, two of the biggest blockchains in terms of value and influence.
You’ve probably even stumbled across this page in the hopes of getting an understanding of what makes Ethereum and Bitcoin different. Well, it so happens that comparing Ethereum and Bitcoin is a great way to learn not just that, but also about crypto assets in general.
Let’s start with a 10,000-foot view.
BITCOIN
Bitcoin was created as a response to government monetary manipulation, and it seeks to serve as an alternative to traditional government currencies.
ETHEREUM
Ethereum, on the other hand, was built to be a kind of operating system for any number of custom assets and programs.
While this may be an oversimplification of how these two incredibly complex networks work, the goal of this article is to give you a side-by-side comparison of Bitcoin and Ethereum so you can start to better understand and appreciate the differences yourself.
How Bitcoin and Ethereum work
Bitcoin
Bitcoin is an open-source software that allows its global user base to manage a digital money supply outside the control of any government or central bank.
It was created in response to the 2008 global economic crisis as a means to combat inflation. In fact, the first mined block contained the message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,” a message many believe signifies the project’s revolutionary intent.
The Bitcoin software enables the computers running it to manage a ledger (the blockchain) that accounts for all transactions made using its currency (BTC) by enforcing a variety of rules.
The Bitcoin blockchain is a full record of the network’s transaction history validated by nodes, or individuals running its software. This ensures that each BTC cannot be copied or modified, and that bitcoins cannot be created or used in a way that is against its rules.
Bitcoins are scarce, divisible and transferable, making them a valuable alternative money.
Ethereum
Ethereum was created with the intention of becoming a global, open-source platform for custom assets and new kinds of economic applications.
Considered to be one of the most ambitious blockchain projects to date, Ethereum seeks to leverage blockchain technology to decentralize products and services in a wide range of use cases beyond money.
To date, Ethereum has seen a few distinct phases that have emphasized different aspects of its capabilities.
First, entrepreneurs flocked to Ethereum in 2017 during its famous “ICO boom”, where creators would try to raise money for new projects using new assets on the Ethereum blockchain.During this time, Ethereum was seen as something of a global capital allocator and funding mechanism.
A new phase of Ethereum, called decentralized finance (DeFi), has started garnering attention in 2020. This movement saw the creation of decentralized applications (dapps) intended to automate financial services like lending or borrowing without the need for a traditional bank or intermediary.
Useful resources
If you are interested in learning more about Bitcoin and Ethereum, please visit Kraken’s “What is Bitcoin?” and “What is Ethereum?” pages.
If you want to learn more about the consensus mechanisms that power each blockchain, then the “Proof of Work vs. Proof of Stake” page is where you want to go!
Want more in depth information on specific cryptocurrencies and blockchain projects? If so, visit our Learn Center to further your education on this ever-growing space.