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 vs 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.
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.
Cách Bitcoin và Ethereum hoạt động
DATE FOUNDED
Bitcoin
The Bitcoin white paper was published on October 31, 2008 on the cryptography mailing list. The software later went live on January 9, 2009.
Ethereum
The Ethereum white paper was published in late 2013 and the software went live in July 2015. In 2021, the network is scheduled to complete an extensive overhaul of its software that will bring it closer to the completion of its roadmap.
CREATOR
Bitcoin
Bitcoin was created by a pseudonymous individual or group under the name Satoshi Nakamoto. To this day, Bitcoin’s creator remains unknown.
Ethereum
Ethereum was created by 19-year-old Vitalik Buterin (with many others contributing to its code). Buterin was previously a founder at the publication Bitcoin Magazine and a 2014 Theil Fellow.
TICKER
Bitcoin
BTC (Note: You may see BTC appear as XBT on other platforms)
Ethereum
ETH (Note: ETC is an earlier version of the Ethereum software, now managed separately).
VISION
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.
LAUNCH & ISSUANCE
Bitcoin
Bitcoin’s white paper, titled “Bitcoin: A Peer-to-Peer Electronic Cash System” , was released by Satoshi Nakamoto in 2008.
The first 50 bitcoins were mined upon the release of the software, enabling a decentralized network of computers to run a digital economy that is still thriving today.
Satoshi famously left the project in 2011 and hasn’t been heard of since, though you can find out more about his (or her) attitudes toward the technology in various emails and forum posts.
Since then, hundreds of developers have contributed to improving Bitcoin’s code, whether it is routine bug fixes or great, efficiency driven, improvements.
Ethereum
Vitalik Buterin envisioned Ethereum as a “world computer” on which anyone could launch and run an application.
This idea was propelled forward by a non-profit, the Ethereum Foundation, which sold 72 million ETH, Ethereum’s cryptocurrency, in a crowdsale, to raise $18 million at the time.
However, what would distinguish Ethereum early on was the vibrant developer community that would soon spin up around the project.
Meaningful contributions to its technology would be made by developers like Gavin Wood, Jeff Wilke, Joseph Lubin and Charles Hoskinson, who all would go on to become prominent voices in the blockchain ecosystem.
NETWORK DESIGN
Bitcoin
Central to Bitcoin’s design is the ability for two users to send each other BTC from anywhere around the world, without the need for an intermediary.
In order to keep its network secure and decentralized, while regulating the supply of new money that gets released into its economy, Bitcoin uses a process called “mining”.
In this system, called Proof of Work (PoW), miners race to complete cryptographic puzzles to propose blocks that make up the Bitcoin blockchain.
When a block is discovered by a miner, it is announced to the network, and, when it’s verified by every node, the miner gets compensated in newly minted BTC.
Ethereum
In order to create dapps, developers write programs, called smart contracts, and deploy this code to the Ethereum blockchain. These dapps are essentially large constructions of smart contracts that can be set in motion if and when specific outcomes are met.
Similar to Bitcoin, Ethereum employs Proof of Work (PoW) mining to power its blockchain.
However, the network is in the process of migrating towards Ethereum 2.0, at which time it plans to alter its consensus mechanism to an alternative called Proof of Stake (PoS).
Under this model, any user who owns a minimum of 32 ETH could lock those funds in a contract and earn rewards for solving computations needed to add new blocks to the blockchain.
Of note: Participants wishing to stake less than 32 ETH can do so using Kraken's staking platform and earn a portion of the staking rewards.
CHÍNH SÁCH TIỀN TỆ
Bitcoin
One of the biggest value propositions of Bitcoin is its monetary policy – only 21 million BTC will ever be introduced into the network’s economy.
When the first block was mined in 2009, 50 BTC were released, a block reward that is cut in half roughly every four years. This event is known as the halving, or halvening.
Through this process, more than 18 million BTC have been made available as of 2020. The last bitcoin is projected to be mined in 2140.
Ethereum
Ether (ETH) is the main cryptocurrency powering Ethereum. Similar to Bitcoin, ETH is minted in every block and distributed to its miners.
However, where Bitcoin has a limited supply, Ethereum does not place a limit on the amount of ETH that can be minted, and its supply is programmed to increase by 4.5% each year.
Notably, changes to the monetary policy are proposed by developers and voted on by nodes and miners running the software.
The Ethereum blockchain is also powered by another cryptographic function called “gas,” which is a special computational unit used for the computation fees. Of note, the more complex the computation, the more gas a given program will require.
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.