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27 April 2018
Bitcoin and Ethereum are perceived by many unknowing people as cryptocurrencies, which means that the general view of an average unaware individual comes to believing that all cryptocurrencies or blockchain-based projects are similar. However, Bitcoin and Ethereum have definitive distinctions making them unique and virtually incommensurable. Here is why.
Bitcoin started back in 2009 and ever since has been all about being just a cryptocurrency, while Ethereum, relatively younger than Bitcoin as it was launched in 2014, has been created for more extensive list of purposes. Ethereum is, among other things, a ledger technology used by many startups and well-established companies for developing and starting new projects, programs and applications.
Ethereum is currently widely used for holding crowdsales of tokens based on Ethereum ERC20 protocol. Many startups have successfully completed their Initial Coin Offerings using Ethereum platform as the basis for their products and technologies. One of the most successful projects was DAO, that managed to raise as much as $150 million during its crowdfunding campaign conducted on the basis of Ethereum technology. Thus, Ethereum is also widely used a hub for crowdfunding projects.
Over the time of its existence, Bitcoin has given life to countless cryptocurrencies, which were created on the top of Bitcoin’s blockchain. Their key differentiators were some improved performance like higher speeds of transactions, better privacy protection or security of data transmission.
Ethereum is considered as by all means a faster blockchain in contrast to Bitcoin, enabling participants to settle their transactions in a matter of 14 to 15 seconds unlike Bitcoin, where users wait for 10 or more minutes to complete their purchase or sale of BTC.
The blockchain at the heart of Bitcoin structure, to put it simple, is just a database of wallets keeping cryptocurrency for the account holders, while Ethereum features higher level of sophistication of its blockchain, as it can store computer code, which can use the CPU power for the operation of the network.
Another key aspect differentiating Ethereum from Bitcoin is an ability to make ‘smart contracts’ usually practiced by parties entering into a deal. This process automates the contracts conclusion and performance, and the operating principle is as follows: the deal will be completed if some predetermined conditions are met. Thus, a party selling goods will send the cargo to the recipient provided that the system notifies it that the other party has completed the payment.
Bitcoin and Ethereum definitely differ in terms of their financial elements: Bitcoin is making 12.5 new coins once in every 10 minutes, equal to 75 coins an hour, while Ethereum is making 3 new Ether coins once in every 15 seconds, equal to 720 coins an hour.
Bitcoin has limitations pre-established for the total volume of coins to be issued in general, which is 21 million. Ethereum has not established a hard cap on the volume of Ethers to be issued and circulating. So far about 100 million Ethers have been issued.
Bitcoin and Ethereum have only one common feature: both of them have their own cryptocurrency coins, and as such may be used for transactions between the parties: mostly for investment purposes. This is all about their similarity. Ethereum, as we can see, is a more sophisticated and complicated technology with abundance of unique opportunities existing for businesses and individuals. Ethereum technology may be used for crowdfunding projects, for creating special applications like security systems for protecting privacy and sensitive data or social networks based on blockchain technology with improved user experience. Ethereum is also used for performing smart contracts, which automate the process of interaction between the parties, reducing the time and costs associated with direct meeting and signing paper contracts. While Bitcoin remains the number one cryptocurrency as is evidenced by its market capitalization and the exchange rate of BTC-USD, Ethereum will remain as the number one blockchain project killing more birds with one stone.
Exciting articles several times a month