Before establishing the differences between Bitcoin and Ethereum it is essential to explain the virtues of both platforms separately. In this way, its advantages and disadvantages can be evaluated more objectively .
Why is it important to explain the differences between the two digital currencies ? Thus, you can identify which currency works best for you. Besides, it is a resource that you can take advantage of to deepen your knowledge in this regard.
Let’s start by answering the following questions: is bitcoin and ethereum the same? Do they work the same way?
To the surprise of many, they are worlds that are digitized in the same system but that have different visions.
What is bitcoin?
Bitcoin is a technological platform that works like a currency that is useful to carry out transactions as it would be done in a bank. In other words, bitcoin is a cryptocurrency with which you can pay debts, buy products, among other activities.
Technically, there are the terms Bitcoin and bitcoin . Actually, the only difference is not just that one is written with the uppercase letter “b” and the other is lowercase. In relation to the above, the first means the digital platform that stores all the data and, the second, the virtual currency.
Having clarified this point, it is pertinent to mention that this platform is in a certain way “free”, what does this mean? Which is managed by users in all parts of the world who have an internet connection. This does not mean that they control it, only that they use it freely.
What is Ethereum?
Ethereum is a “token”, but is a cryptocurrency the same as a token? Generally speaking, both are a digital currency. However, ethereum is a kind of digital contract.
Like bitcoin, ethereum handles two concepts which are Ethereum and ether. The first makes mention of the great digital platform. On the other hand, ether is the token, that is, the currency.
Differences of digital currencies
What is the difference between Bitcoin and Ethereum? To know in detail, it is essential to remember the beginnings of both networks.
First, the creative mind of the coins must be discussed. This allows us to contextualize and know the purpose of each one. In this sense, Bitcoin was the idea of a user who to this day remains anonymous and his name is Satoshi Nakamoto.
What is really important is that this person or group of people under that name incorporated this way of making transactions for the first time in 2008 .
For its part, Ethereum does have a creator identified as Vitalik Buterin, but this achievement is shared with other creatives named Gavin Wood and Joseph Lubin. The launch of this platform under a domain occurred in 2014.
Now yes, this is just a very superficial difference between bitcoin and ethereum for what both platforms save. Thus, the relevant differences are:
Digital currency value
Currently and since the Ethereum currency was integrated into the market, the value of cryptocurrencies has varied. But, today its amount is not the same.
- Bitcoin today is trading at $ 7,475.49 a bitcoin.
- As for Ethereum, its current value is $ 136,000 an ether.
It refers to the main function that each of the coins performs. It is evident that both have a different vision within the network, which are:
- Bitcoin was designed as a fast , reliable and uncontrolled payment method by a financial entity or government.
This is possible thanks to the blockchain that shows each of the movements. On the other hand, this process is streamlined because it does not have to be approved by a bank, which usually takes only an hour.
- Ethereum works as a payment system. However, his work encompasses much more than that. This mechanism annexes as another function the modality of “ smart contracts”.
Unlike Bitcoin, Ethereum is a platform for making deals that cannot be altered by third parties. Nor does it allow the scam and the document remains forever, that is, it is not lost.
This point shows the dissimilarity that exists between the two. As for the units that are used to trade and the decimals vary in one currency and another.
The Bitcoin (BTC) is subdivided into smaller figures. So, you can find from the most complete to the simplest, these are:
- A bitcoin which consists of 8 decimal places.
- 1 millibitcoin which is equal to (1 mBTC = 0.001 BTC).
- A microbitcoin that is equal to (1 µBTC = 0.000001 BTC).
- 1 shatoshi that is equal to (1 shatoshi = 0.00000001 BTC).
Instead, ether has 18 decimal places in its number. In addition, its symbology form from least to greatest is:
So an ether represents 1000 times more than the next part of the figure, in this case a finney. At the same time, a finney is 1000 times more than a szabo, and so on until he reaches the wei.
Better known as cryptographic algorithms , it is the way to protect the information. This is important, since they are parameters that are established in order to reserve data.
But, do these platforms not offer all the necessary information to users? If they provide it, what the algorithm refers to is that it remains total and certain security on the platform.
- Bitcoin uses the “Secure Hash Algorithm (SHA256)” calculation .
- It is very different in Ethereum whose algorithm is more developed than that of Bitcoin. In this platform it is known as “SHA3 Protocol”.
Digital currency type
At the beginning it was mentioned that Bitcoin and Ethereum are cryptocurrencies but different. Just like they don’t pursue common goals.
- Bitcoin being a currency to trade , that is, to settle payments. He struggles closely with decree money and gold.
On the one hand, it is a decentralized currency that circulates worldwide.
- Ethereum is a digital token type currency . What characterizes it is the fact that it constitutes a digital asset .
For this reason, tokens are parts that serve to symbolize other things.
Programming within the network
Programming is the way the machines, which are the miners, understand what they have to do and how they have to do it. In simple words, it is the base of all the movements executed in the network.
- Bitcoin uses the C ++ language consisting of 70 characters or less.
This type of language has a flattering aspect in that it is difficult to manipulate and hack the blockchain sequence. Therefore, although it benefits, it must be considered that it is a limited technology.
- The opposite occurs with Ethereum , which manages a more complete and enriching programming system called Turing complete.
Within this computer language 7 different types of language are indicated for programming. ¿ What is the advantage of this system over the Bitcoin?
It is a broader program that allows to optimize the market and cover other fields. Another important point is that it has no limitations with a transfer book.
One possibility of result that may be counterproductive is that being a more complete language there is room for more errors. Also, you must have an in-depth knowledge of the system in order to use it and it can take a long time to learn.
This digital economy can be destabilized if basic financial principles are breached , such as the exorbitant issue of digital currencies. For this reason, one of the networks has indicated the limits of its currency.
- The case of the maximum amount to be issued corresponds to Bitcoin. The network has set a maximum limit of creating 21 million bitcoin .
Even so, with this limitation bitcoin is a currency with an inflationary system, which will become deflationary once it reaches 21 million. This indicates that it does not go along with inflation and that at some point it will lose the value it now has.
- Far removed from this concept is the one established for Ethereum. Currently, you do not have a defined quantity to issue.
To some extent, it has a restriction on the annual creation of up to about 18 million digital currency. Likewise, it works with an inflationary system , which means that each time it is issued, its value increases.
Value of movements
As mentioned, the cost of a transaction differs on one platform relative to the other. This applies to the size of the block.
- In the Bitcoin network, the cost is not calculated by the number of shares, but by the final size of the shares .
Consequently, the dimensions of a block cannot exceed 1 Mb . Furthermore, everything is designed so that no transaction has priority over another.
- Ethereum uses other ways to set a cost based on computing characteristics.
In this sense, the value lies in the complexity of the transaction and how much storage capacity it requires.
The way in which this calculation is carried out is through a computer value called “Gas”. The movements need certain amounts of this “Gas” to verify them. It should be noted that for the action to be approved, the gas limit for the block must not be exceeded .
The speed with which the blocks execute in Bitcoin vs Ethereum is a precious time that is different in each network.
- With bitcoin, transactions can take time to be confirmed, certified and incorporated into the blockchain within 10 minutes .
- Otherwise, it happens on the Ethereum network. The maximum time it takes for the block to appear in the chain is only 16 seconds .
For these situations, Ethereum beats Bitcoin in the transaction of its movements. Because on the Ethereum network it is immediate, therefore, more advantageous, while Bitcoin takes time to be able to carry out the settlement.
It should be noted that this aspect very well differentiates the rate at which actions move and execute. And these movements speak directly of the speed of the platform.
¿ How to pay mining digital currencies? They are rewarded with cryptocurrencies, respectively bitcoin and ether. What if they change in relation to this issue is the way they receive payment.
- Bitcoin pays the miner for each block that it validated in a certain time. Once you carry out these processes, you will be paid bitcoin.
- Similar occurs in Ethereum, it pays to validate blocks, but it also does to certify smart contracts.
An interesting fact that adds better job guarantees to the Ethereum network is because they have a system called “Gas price”. It is a tip for the maintenance of computers. This symbolizes a motivation for miners to prioritize transactions.
This aspect, although it is shared by both networks, is different in how it is executed.
This is simple, it was commented that for a block to be added to the chain it must be verified. What was not exposed is how do you authorize a block to be integrated in the chain ?
The answer is by solving difficult arithmetic problems .
- Bitcoin uses proof of work.
These mechanisms more than positive aspects, what they entail are disadvantages. First, there is no real team among the miners. This is due to the fact that there is no collaboration and no sanction for those who breach the procedures.
- For its part, Ethereum tries to implement another form of proof of work.
Basically, it consists of changing the word “work” for the word “participation”. With this method, the mining community is forced to now validate the need to invest an ether in order to validate the blocks.
Features of digital currencies
So far, both Bitcoin and Ethereum share certain elements. Specifically, the following can be highlighted:
The two currencies work with the blockchain , this is the way in which the transactions carried out on the platforms are organized .
This method of performing movements is decentralized , this means that the process is completely transparent. Likewise, each user who accesses the network can see each of the actions in real time. In turn, none of these movements can be altered.
It should be noted that there is one in the implementation of this technology in each of the currencies.
They come from mining
When you first hear the term “mining” in cryptocurrencies you automatically think that the meaning is literal. But, this does not work like this.
I explain to you, mining is the process by which transactions are authorized or certified on the network. But who performs these validations? They are carried out by computers called “miners”.
These machines that require expensive and advanced technology are responsible for processing movements. Of course, behind the computers there are human personnel who monitor their operation.
Now, if the teams take care of everything, what are the people behind them doing? Very easy, all that equipment needs financial resources to function. This is where the owners must pay for the investment.
As a reward to the miners for their work, the network rewards them with the digital currency.
Decentralization means that there is no banking or executive institution to handle the movements that occur in the network. In other words, the platform is managed by the same users through computer machines.
This creates an environment for the party to interact without intermediaries and observing exactly the moment of the execution of the transaction.
Which of the cryptocurrencies is more convenient?
It depends on the goals you want to achieve. Both networks are an excellent opportunity to invest or simply to carry out commercial transactions or digital contracts .
You have to visualize the world of cryptocurrencies as a virtual market , where at any time the value of the currency can increase or decrease.
If you have to choose one of them, you can bet on Ethereum. Despite the fact that Bitcoin has strived to improve the systems and make them faster and more functional, the technology that Ethereum has is greater.
It considers that, at the present time, the Ethereum network has not been fully consolidated . It takes a little time for the potential of this platform to truly flourish.
Likewise, when that moment arrives and you have already invested before, the fruits of your harvest will be enormous in the network.
However, do not leave the Bitcoin network behind , because it is a stable system and even if its variations were, it is still profitable to implement its use.
Finally, you can work with either of the two digital currencies, taking advantage of the potential of each one, until the moment you decide to continue with a particular network.