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Ethereum vs Bitcoin: Key Differences

by Olufisayo
Published: Last Updated on
Ethereum vs Bitcoin

Are you interested in investing in cryptocurrency?

If you’ve done any research on cryptocurrency investments, you’ve probably heard of two of the most prominent players in the game: Bitcoin and Ethereum. Bitcoin and Ethereum are both forms of cryptocurrency.

It’s estimated that around 33 million Americans have purchased Bitcoin (about 11% of the population), and the number of Ethereum purchasers is not far behind.

Before you make the move to invest in cryptocurrency, you need to understand the differences between these digital assets. Read on to learn all about Ethereum vs. Bitcoin.

What is Cryptocurrency?

Before we explain Ethereum vs. Bitcoin, let’s talk about cryptocurrency in a general sense. Essentially, cryptocurrency is an alternative to fiat currency (Euros, dollars, etc.) that is controlled by banks and government institutions.

While you can withdraw fiat currency from a bank and hold it in your hand, the same is not true for cryptocurrency. Instead of storing cryptocurrency in a physical wallet or a bank account, you store it in a digital wallet.

Each digital wallet comes with a unique code that only you have access to. The digital wallet can reside on your mobile device or on your desktop computer.

What is Bitcoin?

Part of the reason Bitcoin is so popular is that it was the first-ever digital currency. Bitcoin came about in 2009 after someone under the pseudonym Satoshi Nakamoto released a white paper entitled Bitcoin: A Peer-to-Peer Electronic Cash System.

The whitepaper goes into detail about the benefits of a decentralized form of currency that wouldn’t require a third-party vendor. In other words, the currency would allow people to make peer-to-peer transactions without the interference of a bank or another entity.

As we mentioned, cryptocurrency doesn’t exist in a physical form, and this is also true for Bitcoin. Rather, your Bitcoin balance is secured on a public ledger. Bitcoin led the charge for the formation of other currencies, with Ethereum being one of them. You can check out https://virgocx.ca/ to learn more about buying, trading, and selling Bitcoin safely.

What is Ethereum?

Ethereum is a newer alternative to Bitcoin that was launched in July of 2015. While Bitcoin is the oldest and most popular cryptocurrency, Ethereum is the largest and most established decentralized, open-source blockchain.

Ether is the cryptocurrency that is native to the platform. Ether trades as a digital currency in the same fashion that other cryptocurrencies do.

Ethereum also allows you to deploy decentralized applications and smart contracts. You can build and run these applications and contracts without any downtime, control, interference, or fraud from a third party. Ethereum also has its own programming language that runs on its blockchain. This allows developers to build and distribute their own applications.

Why Do People Use Ethereum and Bitcoin?

People use Ethereum and Bitcoin for many similar reasons. Here are some of the biggest benefits of these cryptocurrencies:

Decentralization

As we mentioned, decentralization is one of the major benefits of cryptocurrency. When you use Ethereum or Bitcoin, the only parties involved are you and the sender. Because no banks are involved, you have a much higher level of privacy when conducting transactions.

Another major benefit of decentralized currencies is that they’re not subject to inflation and deflation. They also aren’t subject to location-based exchange rates. In other words, a purchase won’t be devalued due to tariffs.

Accessibility

Bitcoin and Ethereum are also highly accessible. To send and receive cryptocurrencies, you only need access to a smart device. You can also make payments and investment decisions at any time and from anywhere.

Additionally, cryptocurrency payments go through right away. You don’t need to worry about transactions being slowed down due to

Fee Structure

Cryptocurrencies also come with a different fee structure than banks. With cryptocurrencies, you don’t have to deal with withdrawal fees, deposit fees, or maintenance fees.

Cryptocurrencies don’t come with any fees when purchasing, but you may need to pay a fee for digital wallet storage.

Ethereum vs. Bitcoin: Key Differences

Now that you understand how Ethereum and Bitcoin are similar let’s talk about some of their key differences.

While both Ethereum and Bitcoin are powered by distributed ledgers, the two cryptocurrencies have many technical differences. One of the biggest differences is that Ethereum transactions contain an executable code. On the other hand, data connected to Bitcoin transactions are typically only used for storing notes.

Another key difference to note is in regards to the block time. Ether transactions are typically confirmed in a matter of seconds, while Bitcoin transactions can take a few minutes to confirm.

The algorithm to confirm Ether transactions uses something called eta-hash, while Bitcoin transactions use something called SHA-256. Basically, you just need to understand that these algorithms come with computational differences.

Perhaps the most important difference to take into consideration is that these two cryptocurrencies have different objectives. Ether’s primary purpose is to establish itself as an alternative monetary system. On the other hand, Bitcoin’s main objective is to serve as an alternative to traditional fiat currency.

Due to Ethereum being a blockchain software, it theoretically shouldn’t be in competition with Bitcoin. However, due to its popularity, it has been pushed into the competitive cryptocurrency space by investors.

However, it’s important to keep in mind that ether’s overall ecosystem is much smaller than Bitcoin’s.

Ethereum vs. Bitcoin: Which One Will You Choose?

Now that you’ve read this guide on Ethereum vs. Bitcoin, it’s time to decide which digital currency is right for you. Most investors start with one form of digital currency before adding another to their portfolio.

If you decide to invest in Bitcoin first, you can always invest in Ethereum later on. You can also check back in with our blog for more crypto news!

Photo by Worldspectrum from Pexels

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