Today, we have over 2,000 digital currencies. All of them are struggling to attract attention, develop their technology just a bit better and faster than the opposition, and establish dominance in the crypto market. However, even today, the two most talked-about coins remain those that represent the first and second generation of crypto — Bitcoin (BTC) and Ethereum (ETH).
The two are not exactly rivals, as they do not aim to do the same thing. Bitcoin is still number one digital currency to date, 10 years after it came to be. Ethereum is less than four years old, but its appearance marked a big difference in the way we view cryptocurrency and blockchain. However, one of the biggest questions regarding these two coins still remains: Which one is better? Let's compare them and find out.
Before we actually compare the two, let's see each coin individually, first. Bitcoin, for example, represents a distributed P2P digital currency that aims to provide its holders with instant and secure payments, anywhere in the world. It was introduced by an anonymous individual or group, known only by alias Satoshi Nakamoto.
Nakamoto published Bitcoin's white paper on October 31st, 2008, and has presented it as a way for the people to take back the power which banks and other financial institutions are misusing. In this white paper, Bitcoin was described as a P2P electronic cash system that is based on blockchain technology.
Blockchain technology represents a public ledger that records all transactions that are executed and prevents data manipulation. This makes it an excellent method of keeping track of transaction history, but it also has numerous other use cases, which will be discussed later on. Blockchain, as the name suggests, consists of blocks, which are basically groups of transactions that come together, and are verified by Bitcoin miners.
Miners get a reward in form of new BTC coins for “solving” blocks, which is how the system can function without any form of central authority.
Ethereum is the representative of the second generation of cryptocurrency, and for years, it was the second largest coin by market cap. It lost that rank only recently, but many believe that it will get it back eventually. The launch of this altcoin represents a big turning point in blockchain and crypto world, as it introduced additional use cases for blockchain technology.
Until ETH came to be, blockchain's only purpose was to support cryptocurrencies. However, Ethereum pointed out that his technology can be used in many different ways, such as for the creation of decentralized apps, smart contracts, and alike. This was just a start, though, as now developers realized that there are new ways that blockchain can be utilized. Due to its nature, it can prevent things like fraud, censorship, or downtime. It is even resistant to third-party interference, and so, the potential for the next generation of the internet was born.
This is also the biggest difference between Bitcoin and Ethereum. While Bitcoin is a cryptocurrency — a form of online cash that is used for making payments, Ethereum is a platform, which uses its own coin, Ether (ETH).
Bitcoin Vs Ethereum
As we have seen already, it is difficult to talk about these two coins without noticing differences immediately. They are considered to be cryptocurrencies, despite the fact that Ethereum is only a cryptocurrency in addition to being something bigger.
Another big difference between the two is the way mining works for them. As mentioned, blockchain technology is at the core of both of these projects. However, the difference lies in their consensus algorithms, as they use different ones. Bitcoin uses a PoW algorithm, where miners' rewards are based on the amount of computing power they use for solving blocks. More provided computing power means bigger reward, but also higher resource consumption, which leads to larger bills.
Ethereum does things differently, and it uses the PoS algorithm. Here, the probability of validating a block doesn't depend on users' computer power, but of the size of a stake that they hold. In other words, it all depends on how many ETH coins you own. They also do not receive block rewards, but instead, they get network fees as their reward, and this reward is called gas.
Another difference worth mentioning is the speed of the two. Ethereum can process twice the amount of transactions per second than Bitcoin, but it also does it much faster.
When it comes to their prices, there is also a pretty big difference. Bitcoin's all-time high was over $20,000 per coin, while ETH's highest price was at around $1,400. Both of these prices were reached in late 2017. However, Bitcoin has started 2017 with the value of $900, which means that it managed to grow over 20 times by the end of the year. ETH, however, started off with a price of only $10, which means that it had a 140x increase.
Both coins suffered great losses in 2018 due to a constant bear market, and ETH even lost its place as the second largest coin by market cap to XRP only days ago. However, neither of these coins is dead, and they are both expected to make a comeback at some point in the near future.
Bitcoin Vs Ethereum Conclusion
And, that's it. Obviously, the two are far too different to be directly compared, and they cannot even be considered rivals. They have different goals in mind, and they serve different purposes. In a way, both of them are number one, Bitcoin is only bigger in terms of value and market cap. Although, it should be mentioned that Bitcoin has had 10 years to grow to this size, while ETH only had 3. It is possible that both coins will be replaced by younger, more advanced currencies at some point. However, for now, Bitcoin and Ethereum remain among the largest and most popular coins in the space.