No one will argue that Bitcoin is the most popular cryptocurrency on the market. Being the trailblazer that got the ball rolling for digital currencies to be embraced by the mainstream, this crypto has impacted the world of finance in numerous ways. No longer is fiat currency the sole form of cash; now, there are digital variants.
Some copy Bitcoin’s formula. Others set out to rectify the shortcomings of the front-runner. Whatever their intent, they too want to make a name for themselves and potentially become just as massive as Bitcoin. This is where Ethereum enters the picture.
Having essentially been stuck in second place for years, Ethereum is a crypto that many believe could reach the same heights as Bitcoin. In fact, it has the capacity to dethrone it due to how unique its system is and how positive the reception has been. This rivalry – as well as speculation of it becoming the new front-runner – raises the question of how unique is Ethereum? What makes it completely separate from Bitcoin? Moreover, what about it makes many crypto enthusiasts think that it could overtake Bitcoin?
Ethereum: different tech
The best way to describe Ethereum is that it is a global computing platform fuelled by its native token, Ether (ETH). When demand for computing power on the Ethereum blockchain surges, so too does ETH demand.
Ethereum facilitates smart contract deployment, allowing them to be built and operated without any instances of third-party downtime, fraud, control, or intrusion. Ethereum is accompanied by its own programming language that runs on a blockchain, thus enabling developers to create and run decentralized applications (DApps).
What makes Ethereum distinct is not the fact that it is another cryptocurrency but the technology behind it. Just like Bitcoin, Ether is bought and sold. Investors use it to buy their way into ICO opportunities. Additionally, the value of ETH almost mirrors that of BTC. For example, if you look at an Ethereum to CAD chart, you will find that its highs almost match with Bitcoin’s.
Generally speaking, there are two purposes for Ether:
- Being traded as a digital currency on exchanges in a similar manner as other cryptocurrencies.
- Being used on the Ethereum network to operate various applications. Ethereum states that people around the world use ETH as a payment method, a store of value, and even collateral.
Bitcoin: the (current) leader
Bitcoin promised an online currency that is fully secured and never having any central authority involvement, unlike currencies that are government-issued. Physical forms of bitcoins do not exist; there are only balances connected to a cryptographically secure public ledger.
Bitcoin was not technically the first attempt at crafting an online currency of this kind. However, it was the first digital currency to successfully create a transfer method of value between two people anywhere on Earth. It has gone on to be a predecessor of sorts to pretty much all cryptocurrencies that have been produced over the years.
The crypto’s creator, Satoshi Nakamoto, made a breakthrough by inventing blockchain, which records every Bitcoin transaction. This provided a solution to the “double-spend problem.” To elaborate, it made sure that people were unable to send fake bitcoin or bitcoin that had already been sent to another person. Moreover, Bitcoin transactions could transpire independently from any involvement or interference by financial intermediaries. These include banks, governments, and corporations.
The primary difference between Ethereum and Bitcoin is that Bitcoin is a currency and nothing more. Ethereum, on the other hand, is a ledger technology that companies use to construct new programs. Both cryptos run on blockchain technology, but Ethereum’s is comparatively stronger.
Bitcoin was designed to do one thing, and that is to offer people a way to anonymously transfer value to each other without central banker participation. Ethereum expanded on the concept of the blockchain rather than copy Bitcoin as a currency. Therefore, Ethereum is capable of doing an array of things rather than just function as a platform to provide a store of value token.
Think of it this way: if Bitcoin was the first version, Ethereum is the second version.
Another difference – one that is arguably less significant – is their technology. Ethereum network transactions often contain executable code, while data attached to transactions on the Bitcoin network are usually only for recording notes. There are also the block times (ETH transactions are confirmed in seconds whereas bitcoin transactions are confirmed in minutes) and their algorithms (Bitcoin uses SHA-256 and Ethereum uses Ethash).