Bitcoin is a digital alternative to fiat currencies, first proposed by Satoshi Nakamoto in 2008. No one knows who he is, but as the holder of the private key to the first Bitcoin block, he will be very rich. The "Bitcoin" in the white paper has become legendary. Investopedia has updated an article exploring whether the Nakamoto white paper is correct.
Ethereum
In 2013, a Bitcoin enthusiast named Vitalik Buterin worked on a project called "Mastercoin". He proposed a global computer called "Ethereum" based on blockchain, and after crowdfunding and several years of development, he released the first version.
Similarities between Bitcoin and Ethereum
Bitcoin and Ethereum are based on blockchain technology, where records cannot be changed, new blocks are added regularly, and those who add new blocks receive rewards.
Both Bitcoin and Ethereum are decentralized digital currencies with no central controller. The Ethereum Foundation oversees the Ethereum project but does not own or control it. Anyone with an internet connection can use Bitcoin and Ethereum to make transactions.
Cryptocurrencies include Bitcoin and Ethereum. Both have a constantly changing value, can be sent between parties, and bought and sold on exchanges. Someone might use Ethereum but not understand how it works or how it differs from Bitcoin.
Bitcoin and Ethereum use a "proof of work" mechanism to generate rewards and as a way for computers to reach consensus. Initially it was possible to mine from a laptop, but the difficulty quickly increased and became meaningless. Ethereum's blocks are added faster than Bitcoin, but its puzzles should be easier.
difference
There are many cryptocurrencies that are very similar to Bitcoin in that they are based on a large part of Bitcoin’s technology, for example, Litecoin (Bitcoin’s little brother) and Bitcoin Cash (the Robbie Williams of Bitcoin).
Ethereum’s code and design are different in every way: because it was designed for completely different reasons than Bitcoin: it was designed to be a world computer, not an alternative currency.
A smart contract is a piece of computer code on a blockchain that can be triggered to execute functions when certain conditions are met. Ethereum did not invent the concept of smart contracts, but it made them smarter: for example, including executable code as data in transactions facilitated this innovation.
Ethereum has built-in functionality for smart contracts to create tokens, and the ERC20 standard makes it compatible with Ethereum wallets. ERC20 tokens are widely used, and the creation of other standards has led to NFTs and security tokens.
Having thousands of tokens on a single blockchain (including “stablecoins” that represent real-world assets like the dollar and gold) means you could build an entire financial ecosystem on Ethereum: people have done it!
Bitcoin itself does not have the ability to carry other currencies, but the Mastercoin project (later renamed Omni) created a new layer on top of Bitcoin that made it possible. Among them, Tether is the most successful project, which is a controversial dollar-alternative stablecoin used on the Bitcoin blockchain and used by exchanges as a real dollar substitute.
Because humans are pretty smart, there is now Tether and Bitcoin on the Ethereum blockchain as well (called “Wrapped Bitcoin”).
Oh, and there’s one big difference: there will only ever be 21 million Bitcoins (they’ve mined 18 million so far), but Ethereum is unlimited.
Ethereum will move to proof of stake, rather than using Bitcoin’s proof of work mechanism. This means that instead of being rewarded for the creation of new coins based on the amount of work done by your computer, rewards will be given to those who “put” their coins back into the blockchain.
Gold and Silver
Bitcoin is often referred to as “digital gold” because it is a “store of wealth” (real-world gold, while useful, is more of a store of value than anything else — 92% of the world’s gold is used to store wealth).
Ethereum is often referred to as “digital silver” because people like to make the comparison and because it is the second-largest cryptocurrency by market cap after Bitcoin. In addition, like silver, Ethereum can be used for a variety of purposes.
Bitcoin or Ethereum – Where Do You Stand?
A common mistake that investors in Ethereum and Bitcoin make is to assume that one will rise while the other will fall. In reality, Ethereum generally follows the trend of Bitcoin. While sometimes one rises while the other falls, in market downturns, both usually fall against the dollar, with consequences for the entire cryptocurrency ecosystem.
What’s more, the crypto market is now more correlated with the stock market than ever before as they become increasingly entangled as crypto becomes a viable alternative investment for portfolios.
Bitcoin outlook is based on transaction capacity and scarcity, with a five-year trend upward. Apart from transaction speed, Bitcoin has not changed much.
Ethereum is about to undergo a major upgrade, and its success has led to network congestion and rising fees.
A successful upgrade could enable traditional finance to move to Ethereum’s instant settlement and 24/7 transactions.
Ethereum was chosen for its security and unhackability, which, if achieved, could potentially surpass Bitcoin in price despite its unlimited supply.
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