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What Is The Difference Between Bitcoin And Ethereum?

BitForex Editor
Oct 21, 2020

The concept of Bitcoin and Ethereum is one that is very popular and widely talked about in the cryptocurrency world. Ether, which is the cryptocurrency that is closely associated with the Ethereum network, is regarded as the second most prominent and widely used digital token after Bitcoin. Bitcoin is one cryptocurrency that has been able to stay on top of the poll and rank as number one based on market value. As** Ethereum** remains the second-largest cryptocurrency, it is only natural that comparisons are made between the two top cryptocurrencies making waves in the crypto world.

Bitcoin and Ethereum share various similarities as both are traded via online exchanges as digital currencies, and they are stored in different types of cryptocurrency wallets, but more importantly, both of these digital currencies are decentralized, which means that they are not regulated or controlled by any single or central authority. They both make use of a blockchain, which serves as a distributed ledger technology.

The introduction of Bitcoin paved the way for a new form of digital currency, which fully functioned outside the control of any corporation or the government. As time went by, people began to discover one of the underlying innovations Bitcoin provided, which was that the blockchain could serve other purposes. Ethereum proposed the utilization of blockchain technology for not only the use of ensuring a payment network that is decentralized but also for computer codes storing, which can serve the purpose of securing decentralized applications and financial contracts. The main purpose of the creation of** Ethereum** was to complete and not compete with Bitcoin; however, it still emerged as a competitor on cryptocurrency exchanges.

Though Bitcoin and Ethereum share various similarities, there are, however, crucial distinctions between these two prominent cryptocurrencies, which is very necessary to know, especially if you are looking to invest in either of the cryptocurrencies, but before doing that, it is essential to have an in-depth understanding of Bitcoin and Ethereum.

What is Bitcoin?

The name Bitcoin is one that is prominent in the cryptocurrency world is a digital currency which was created in 2009. It was based on the ideas outlined in a white paper by an unknown individual under the alias or pseudonym of Satoshi Nakamoto. The identity of the individual or group who is responsible for the creation of the said technology remains a mystery. Bitcoin offers users the benefits of reduced transaction fees as opposed to the traditional online payment method, plus it is operated by a decentralized authority, which is different from government-issued currencies.

Bitcoin doesn’t come in a physical form like government-issued currencies but rather as balances present on a public ledger that everyone has access to with every Bitcoin transaction, which is verified and validated by a large amount of computing power. One notable feature of Bitcoin is that it is not issued or controlled by any government or banks. Irrespective of the fact that Bitcoin is not a legal tender, it still charts high in terms of popularity and has also inspired and paved the way for the launch of various other virtual currencies.

It is essential to know that Bitcoin was not the first attempt at an online currency of this type, but it was, however, one of the most successful in its early stages, which is what earned it the title of the predecessor in some way to all other cryptocurrencies which have been created over the years.

The concept of virtual, decentralized currency has gained recognition and acceptance among various government bodies and organizations over the years. Cryptocurrencies might not be formally recognized as a means of payment; however, it has managed to set a standard for itself as well as also continuing to co-exist with the financial system irrespective of its system being debated continuously and scrutinized.

What is Ethereum?

Usually, when someone talks about Bitcoin, they often make reference to Ethereum. As earlier stated, it is the second-largest cryptocurrency network after Bitcoin; however,Ethereum, though based on the designs of Bitcoin, took the technology behind its operations and expanded on its potentials by enabling users to create a decentralized application on the blockchain of Ethereum.

 Since its launch in July 2015, Ethereum has successfully become one of the largest and well-established decentralized platforms. It enables the deployment of decentralized and smart contracts that are created to function without interference or control from a third party.Ethereum is equipped with its programming language that functions on a blockchain, which in turn enables developers to create and operate distributed applications.

Ethereum launched a presale for ether in 2014, which received an encouraging response. Ether can be likened fuel used to carry out commands on the Ethereum platform and serves the purpose of building applications on the platform. Ether serves two main purposes, including being used to run applications as well as a digital currency for trading.

Major Differences Between Bitcoin And Ethereum

Though Bitcoin and Ethereum are powered by the principles of cryptography and distributed ledgers, the two, however, have distinct differences. For example, Bitcoin network transaction data serve the purpose of only keeping notes while executable code ae contained on the Ethereum network. Some other notable differences can also be seen in block time as transactions on Ethereum are confirmed in seconds while it takes minutes for Bitcoin to confirm a transaction.

Another difference between Bitcoin and Ethereum can also be seen in their aims. The purpose of Bitcoin's creation was to provide an alternative means to national currencies as well aspiring to be a medium of exchange while Ethereum, on the other hand, as a platform was created to enable unchangeable application and contracts via its currency.

Ether serves as another use case for a blockchain that supports the Bitcoin platform and should not necessarily be in competition with Bitcoin. However, due to the popularity and recognition of the Ethereum platform, it has pushed it into competition with Bitcoin among other cryptocurrencies based on the trader’s perspective. It is necessary to note that the ether ecosystem is small compared to that of Bitcoin. As of January 2020, ether’s market cap was below 16 billion dollars, and Bitcoin surpassing it at a wide margin with 147 billion dollars.

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