What's the Main Difference Between Bitcoin and Ethereum?

According to one study, 1 in 10 people invest in cryptocurrency.

If you’re interested in investing in crypto, there are many different options out there. But you might be wondering what the difference between Bitcoin and Ethereum is.

Thankfully, we’re here to walk you through it, so keep reading to learn about crypto and for some investing tips to help you make money!

What is Cryptocurrency?

To understand the differences, you have to start with the foundational blocks as well. Cryptocurrency is a term that’s used to define new assets that you can invest in.

These currencies are all online, and they store a value that people can use to pay for things. However, a lot of cryptocurrencies aren’t widely accepted, so you can’t exchange them for anything other than another crypto.

Because cryptocurrency is only in the digital world, many people don’t trust it. But, it exists and is real because it’s stored in mathematics. Crypto is just a very difficult algorithm.

The algorithm tells people who owns that unit, which is known as a blockchain. This is where Bitcoin comes in.

Bitcoin was the first successful cryptocurrency, and it is based on blockchain. This means that the digital data can be distributed and duplicated, so people can almost copy and paste more money for themselves.

To prevent this, many cryptocurrencies have encryption now. There’s a private key that will only give editing permission to people who have authorization.

What is Bitcoin?

So to start with, Bitcoin was invented in 2009. Bitcoin wasn’t the first one, but it was definitely the first one that became incredibly popular. It was a new idea for online currency, and it had a central authority rather than being based on government currencies.

Around the world, there is no physical Bitcoin, but they are only online. The balances of crypto have a secure public ledger.

Because of how popular Bitcoin has become, it’s paved the way for other cryptocurrencies to become popular as well.

What is Ethereum?

Ethereum came after Bitcoin, and it came out in 2013. While Bitcoin uses blockchain, Ethereum uses blockchain on a decentralized computer.

Ethereum is open-source and decentralized. It’s distributed on a network that’s powered by Ether. You can use this Ether to make transactions and interact with other types of cryptocurrency.

The entire Ethereum network launched in 2015, and it was one of the biggest projects in cryptocurrency at the time. Their goal was to make sure that everything on the Internet was decentralized. This was similar to Bitcoin because it didn’t have a governing body ruling over it.

However, it does use PoW to make sure that no one is trying to tamper with any of the data that’s in the blockchain.

Ethereum also has its own type of programming language. This is called Solidity. This language programs contracts that run on blockchain technology.

This technology makes Ethereum even more widely available to use. Since Ethereum is newer than Bitcoin, there is still a lot of developing work that needs to be done, but it’s gaining popularity quickly.

For example, on the Ethereum network, nonfungible tokens (NFTs) are also becoming very popular.

Differences

While Bitcoin and Ethereum are two popular types of cryptocurrency, they have many differences.

When Ethereum was created, it wasn’t meant to compete with Bitcoin. In fact, they’re very different, and it’s hard to compare the two.

But Ethereum has become so popular that it’s put itself in competition with other cryptocurrencies, and many people have a hard time deciding which to invest in. However, keep in mind that Ethereum has a smaller ecosystem than Bitcoin.

Uses

One other difference was their use. Bitcoin, being launched first, was meant to be a peer-to-peer cash system that was digital. The digital aspect would let transactions started, verified, and processed without needing anyone in the middle to handle it.

However, Ethereum took that a step further to be able to host applications, which Bitcoin is not good at.

Ethereum, which launched years later, started in order to connect people around the globe to different contracts that could execute themselves. This contract, called smart contracts, helps to facilitate the creation of different apps.

These apps can have all kinds of different functions, but they all work on the Ethereum network.

Mining

You’ve probably heard that you can mine for crypto, and you can mine Bitcoin and Ethereum as well.

For Bitcoin, miners will validate transactions and prove their work. However, this is the same way that miners do it for Etherum. They tried and solve a hard math problem and then prove that they were the first ones to solve it.

If they were the first ones, they’ll add it to the blockchain.

Etherum is moving to use something that is called proof of stake. This proof of stake says that no person can mine a block depending on how many coins they own.

So if you hold more coins, you can mine more as well.

But with Bitcoin, every time you add a block to the chain, you get more Bitcoins. However, the rewards get smaller as you go on. With Ethereum, the reward for mining will never be cut in half.

Technology

Bitcoin and Ethereum are powered by different technical aspects.

On the Ethereum network, there is an executable code. However, on the Bitcoin network, the transactions only keep notes of what happened.

They also have different times between transactions. A Bitcoin transaction can take a few minutes, but an Ether transaction can only take a few seconds. This is thanks to their block time.

They also have different algorithms though.

Bitcoin will use an SHA-256, but Ethereume uses an hash algorithm.

Goals

Bitcoin and Ethereum also have different goals. For example, the creators of Bitcoin made it so that there was an alternative to the national currency.

They wanted something that would have store value and be used to exchange for goods and services.

On the other hand, Ethereum wanted to be a platform that would coordinate contracts and applications using its own currency.

While they’re both digital currencies, Ethereum didn’t want to make itself a monetary system. Instead, it wanted to use that to create a decentralized application platform.

Fees

When you buy or invest in Bitcoin or Ethereum, you’ll also have to deal with fees. But with Bitcoin, the fees for each transaction are optional.

You can decide if you want to pay a miner more money or not. Paying him more money will get you special attention for your transaction. But keep in mind that the transaction will go through even if you don’t pay that extra money.

However, if you’re buying on Ethereeum, the transaction fee needs to be paid for it to go through. When you pay the fee, it gets converted into something called gas.

This gas is what helps to drive the computation which will add your block to the chain.

Similarities

In spite of all the differences these two cryptocurrencies have, they share a lot of similarities.

For example, they were both made because people wanted to decentralize economies and industries. They wanted to change the value system that we use around the world.

These platforms wanted to address those concerns; they just took different routes to get there.

What is the Future of These Coins?

Ethereum and Bitcoin have different factors that determine how much the coin is worth. These are important to know if you’re going to invest in them.

You’ll have to ask questions like how is it accepted today? Will this trend continue into the future?

Does the historical data give me any insight? How do people use each coin?

Bitcoin has always had a little bit of a higher price than Ether. However, the cryptocurrency market is very volatile, and it’ll probably stay that way for the future.

It can b harder to determine the value of the cryptocurrency market when you compare it to stocks or commodities that are regulated.

What Should You Invest In?

When you invest in cryptocurrency through bytefederal.com or some other platform, you may be wondering which one you should choose. For the best answer, you may want to consult with a financial advisor.

However, the long-term growth of a cryptocurrency, whether it’s Bitcoin or Ethereum, will depend on how well the applications are being used and what assets they have.

If Bitcoin is widely accepted as the standard, this one would be a good investment. But the Ethereum network could become stronger, and then that might be the widely accepted version.

However technology is always changing, and there are many other algorithms that could even take over Ethereum or Bitcoin.

You’ll also have to keep in mind whether or not governments will ban them. For example, countries like China and Korea started regulating both Ethereum and Bitcoin.

Keep in mind that a lot of the increases in the value for both cryptos are due to people buying in and hoping that they grow later on. So a lot of the rates could be inflated, and if it crashes, then you could lose a lot of money.

How to Buy

When you’ve decided which coin you want to purchase (or both), you’ll have several different methods.

The first main way is to buy crypto as a vehicle of investment. That’s because the prices are always changing, and many people are trying to buy them now so they can enjoy the profits over time. However, keep in mind there is nothing guaranteeing that the value will go up.

Many people are purchasing them now so that they can make purchases in their daily life. But crypto isn’t always accepted everywhere, and companies have only just started accepting it.

You’ll be able to do this by buying digital currency on an online exchange platform. Once you do that, you’ll have to store them in some kind of digital wallet. There are two kinds: software and a hardware wallet.

When you have a secure transaction record, you’ll be able to store the keys and then use that to sell or buy more crypto.

There are many online exchanges, and some of the popular ones include:

Gemini
Coinbase
Binance
Kraken

You can link your bank account to these so that you can use your money to purchase crypto. Once you do, it’ll automatically go into your crypto wallet.

However, if you don’t want to use that online platform, the second way to do it is to use popular platforms like CashApp, PayPal, Venmo, SoFI, and Robinhood to sell and buy cryptocurrencies. But you may be limited on your options.

Keep in mind that if you purchase crypto through one of these mainstream apps, you won’t be able to get access to the public or private key. That’s because you’re using a middleman.

This option is more for people who want to invest in cryptocurrency and just gain money as the investment grows. If you want to use it as a form of digital payment, try using the online exchange instead.