What Is The Difference Between Bitcoin and Ethereum?

Wrote this one a couple of months ago, so the prices mentioned are probably not currently valid, but it might be a good refresher for people that wish some basic info on Bitcoin and Ethereum.

Bitcoin and Ethereum are taking over the world of investors! By the end of November 2017, Bitcoin was worth over $9,000 and Ethereum hit almost $500. But with the value these two cryptocurrencies have attained so far, the larger public is neither sure what these two terms stand for, nor what the similarities and differences between them are.

To sort out the possible ambiguities, here is a brief guide between the similarities and differences between Bitcoin and Ethereum.

What Are The Similarities Between Bitcoin and Ethereum?
The key element Bitcoin and Ethereum share is that they both belong to open blockchain systems. The term open concerns two elements both systems share. One is that they both are publicly distributed, and the other is that they are open source systems, meaning that anyone can develop their very own blockchain that is based on the technology they opt for.

Both systems also involve distributed ledgers and the use of cryptography which serves as the key element of security for both systems. Another element Bitcoin and Ethereum share is the process of so-called mining, the general method of accumulating Bitcoins or Ethers. Bitcoins and Ethers are the units of measurement for the two systems.

And while both systems have the currency and measurement units in their definitions, neither is an actual physical currency. Yet. Both still exist only as an accounting category. Which doesn’t mean such attempts will not be made.

The fact that both systems are open source, means that each has its own clones, like a number of systems based on Ethereum like Expanse and Musicoin. Also, new blockchains can be formed and separate from the existing one and form their own network. A recent example of that is Bitcoin Cash.

Differences Between Bitcoin and Ethereum
While some of the differences between Bitcoin and Ethereum are quite easy to comprehend for the uninitiated, others are a bit more technical and not easy to catch in an instant.

It is easy to see that each of the systems operates their own, separate peer to peer (P2P) network. It is also easy to notice the difference in value each Bitcoin and Ether caries. But, that is where all the essential differences and technical elements step in. These need to be pointed out.

The two systems were not developed simultaneously; Bitcoin came first. It was created in 2009, while Ethereum was launched in 2015. Each of these two systems also has a somewhat different purpose. Bitcoin’s original purpose was to serve as an alternative to regular money, while Ether’s key purpose is to facilitate and monetize the work of Ethereum, the system itself.

In more specific terms, Bitcoin was created as a system which can store value that is not connected to any specific governing mechanism. On the other hand, Ethereum’s key purpose was to provide a blockchain system that can support distributed applications and smart contracts. Along with storing value, Ethereum is envisaged as a method of payment for the cost of these smart contacts, dapp’s.

The visible difference in value between Bitcoins and Ethers comes from the total supply of their value storage units. Currently, there are something over 16.5 million bitcoins in circulation, while there are registered 95 million Ethereums. The fact that dictates this current price difference is that early miners of Bitcoin currently own most of the coins that will ever be in circulation and that the ownership of Ethereum will be on a constant rise.

From there on, the differences get more technical. Ethereum has faster transaction times — 14 to 15 seconds, compared to Bitcoin’s 10 minutes. There is also a distinct difference in the economic model of the two systems — Bitcoin block rewards are divided into half every 4 years, while Ethereum releases the same amount of Ether units every year.

The two systems also have a different method of costing transactions. Ethereum’s methods vary and depend on technical needs like computational complexity, bandwidth use, and storage. On the other hand, Bitcoin transactions are equally competing with each other.

The two systems also have more technically differing elements like the internal codes they use. Bitcoin utilizes stack-based language, while Ethereum’s internal language is Turing-complete code, which is by many experts considered more flexible.

Other more specific technical differences exist, but possible investors concentrate on one question — which of the two main cryptocurrencies is more profitable in the long run? From the trading perspective and based on all the similarities and differences, many experts seem to predict that Ether is gaining in popularity and has a rising market capitalization, making it very competitive with all cryptocurrencies, including Bitcoin.

The value of both Bitcoin and Ethereum might vary in the future. But the fact is that they have established themselves as an integral part of the the currency marked and they will also play an important role in the development of the computational technology. Having in mind what they share and where the differences between the two exist can be critically important for anybody that intends to get involved with either of the two. Or both.