You’re probably reading this article because you want to know which of the top two cryptos to invest in. Because that’s simply what Bitcoin (BTC) and Ethereum (ETH) are- the two largest cryptocurrencies by market cap.
This article will provide valuable insight into notable similarities and differences between these two cryptocurrency tokens. Read on and find out.
What is Bitcoin?
Bitcoin is the first cryptocurrency. Hence, its dominance in the cryptocurrency market is primarily due to its pioneering status in the blockchain industry. At the time of writing this article, Bitcoin is valued at $64,302.73, with a market cap of $1.2 trillion.
It was launched in 2009 by blockchain founder Satoshi Nakamoto as the world’s first digital currency. Being the first of its kind to attain widespread success and popularity, Bitcoin has inspired several other cryptocurrencies, one of which is Ethereum.
What is Ethereum?
Ethereum is the cryptocurrency market’s second-largest token by market cap.
While it does not come near Bitcoin in terms of financial value, it sits pretty in second place with a value of $3,938.67. In addition, it has a market cap of $464.8 billion, with a trading volume of $23 billion in the past 24 hours (at the time of writing this article).
Ethereum (ETH) exists as a hard fork of Ethereum Classic (ETC), with the Ethereum Virtual Machine (EVM) forming the computer basis of the decentralized network. You can buy Ethereum to use in building DApps on the network.
Similarities between Bitcoin and Ethereum
As digital currencies, Bitcoin and Ethereum share a number of key similarities, as highlighted below:
They are both Proof-of-Work Tokens
Both of them are digital tokens that are non-centrally issued. That is to say that the government or a Central Bank does not regulate their distribution and issuance.
Just as well, both tokens function on what is known as the proof-of-work consensus. The implication of this is that the confirmation and verification of transactions on both blockchain networks cannot be done without the consensus of the different nodes or participants of the network.
Resulting from the implications of the former, i.e., proof-of-work consensus, both networks process transactions quite slowly, compared to altcoins such as Tron, Solana, and Bitcoin Cash.
Differences between Ethereum and Bitcoin
Even though Ethereum and Bitcoin are the two largest crypto tokens by market cap, they are quite different. Bitcoin price is about ten times higher than Ethereum price. And each token was developed with different dynamics in mind.
Unlike Bitcoin, the miners of Ethereum get to charge transaction fees before the confirmation of transactions. This means that miners get to earn within the Ethereum network.
The availability of Bitcoin is fixed at a supply of $21,000,0000 units. On the other hand, the supply of Ethereum is unlimited, meaning that it is not subject to the scarcity that plagues Bitcoin.
This may also explain Bitcoin’s much higher value.
Goals and Purposes
Bitcoin was created with a very different purpose in mind from Ethereum. Bitcoin represents an international digital financial token. On the other hand, Ethereum was created to operate as a decentralized network to facilitate the building of blockchain-based applications.
Thus, users can use Ethereum to alter how securities trading and mortgage transfers work.
Instead of simply being a digital currency, Ethereum goes one further to enable the deployment of decentralized applications and smart contracts. On the network, all of these can be built without any third-party interference.
Just as well, Ethereum has its own programming language on which its distributed apps are built and run.
Data on the Bitcoin network involving transactions are simply for the sake of reference or note-keeping. On the other hand, transactions on Ethereum’s network may consist of executable code.
Bitcoin operates using the proof-of-work consensus. Here, users cannot verify transactions individually except by a consensual agreement by all the other members or nodes within the network.
In the Ethereum blockchain, the proof-of-stake is used. Here, users within the network have to put up a stake in the form of Ethereum collateral to validate transactions. Higher stakes equal higher value within the blockchain.
For now, Bitcoin’s value continues to skyrocket. Postulations have been made by cryptocurrency speculators as to the prospects of Bitcoin and Ethereum in the future, with the volatility of both considered at length.
While investors may be inclined to invest in Bitcoin due to its higher price, Ethereum promises to deliver even more, particularly for blockchain developers.