Bitcoin (BTC) and Ethereum (ETH) are the two most important cryptocurrencies in the world in terms of market capitalization. Technically different, both enjoy significant success among different audiences for different uses.
Do you want to know the differences between Bitcoin and Ethereum? Keep reading the Ethereum vs Bitcoin comparison below pitting the two cryptocurrencies against each other to help you choose which one to use.
Bitcoin Vs. Ethereum: The Comparison of Cryptocurrencies
These two cryptocurrencies have varying characteristics which make each one suited for particular purposes. Discover below the comparison between Ethereum and Bitcoin coins to see how different they are.
What is Bitcoin?
Almost everyone in the world is familiar with Bitcoin today, at least by name, since it was the pioneer in the crypto domain. The BTC whitepaper was written in 2008 by the mysterious Satoshi Nakamoto, who launched the cryptocurrency officially in January 2009.
Since its creation, the price of Bitcoin has experienced multiple cycles. It had its first bull run in November 2013 when its price first crossed $1,000. But it was the 2017 bull run that brought attention to it and other cryptocurrencies when it hit $19,783 on December 16, 2017. The momentum did not continue, though, and the price quickly fell to around $3,740 at the end of 2018.
However, the most notable Bitcoin bull run would follow starting in late 2020. It was during this period that Bitcoin set its historical all-time high (ATH) with a price of $68,789 reached on November 10, 2021. Since then the price of Bitcoin remained somewhat stagnant until recently when another bull run started, pushing prices to $46,600 at the time of writing.
Bitcoin Market Capitalization
Bitcoin overwhelmingly dominates the entire crypto market in terms of capitalization taking up 53.3%. At the time of writing this article, the market capitalization of Bitcoin was $912.7 billion while its dominance in the overall crypto market is 53.3% according to CoinMarketCap. While this figure may decrease, it still shows that Bitcoin remains the flagship of cryptocurrencies.
The Vision of Bitcoin
The goal of creating Bitcoin was to serve as an electronic payment method beyond the control of traditional banking institutions. Today, it has also come to serve as a store of value, being regarded as digital gold.
Indeed, the Bitcoin network was designed to stimulate the value of its coin in the long term. How? The number of bitcoins created is limited to 21 million. This limit will be reached by around 2140. Currently, more than 19 million BTC coins are in circulation.
What is Ethereum?
Ethereum (ETH) appeared more recently compared to Bitcoin, making it the lesser-known of the two. Its whitepaper outlining the fundamentals of Ethereum was published in 2013 by Vitalik Buterin while the cryptocurrency itself was launched in the summer of 2014.
Following in the footsteps of Bitcoin, the price of Ethereum started to surge at the end of 2017 and the beginning of 2018. In January 2018, the price of ETH exceeded $1,100 for the first time. However, the historical record for the price of Ethereum dates back to 2021 when the entire crypto market was surging. The record ETH price is $4,891 and was reached on November 16, 2021.
Ethereum Market Cap
Ethereum is the second-largest cryptocurrency in terms of market capitalization with over $275.66 billion (at the time of writing this article). While this level of capitalization is more than two times lower than that of Bitcoin, it is still significantly higher than that of the third-largest cryptocurrency, Tether (USDT), with $94.15 billion. Ethereum’s dominance in the crypto market is 16.1%.
The Vision of Ethereum
Ethereum does not operate in the same realm as Bitcoin. In this regard, Bitcoin and Ethereum cannot be considered competitors. While Bitcoin primarily serves as a means of payment, Ethereum is a platform designed for decentralized applications (dApps).
A decentralized application operates automatically without the need for a third party, made possible through smart contracts. Ethereum facilitates the development and operation of such dApps, which form the foundation of Web 3.0. These dApps are present in various domains, such as:
- DeFi: Uniswap, MetaMask Swap
- NFT: OpenSea, Rarible, LooksRare
- Sports: Sorare
- Play-to-earn (P2E) Games: Axie Infinity
Currently, the five most important applications on Ethereum in terms of trading volume are:
- Uniswap V3
- Uniswap V2
- 0x Protocol
- MetaMask Swap
- 1inch Network
Unlike Bitcoin, Ethereum does not have a limit on the circulating supply of coins. Currently, over 120 million ETH coins are in circulation. However, similar to Bitcoin, the Ethereum network ensures a deflationary logic. How? While Bitcoin limits issuance, Ethereum destroys some tokens. This action is called ‘burning’. Thus, the Ethereum network burns (removes from circulation) some of its coins, notably those used to pay transaction fees.
Ethereum Vs. Bitcoin: The Comparison of Blockchains
Ethereum and Bitcoin have separate, individual blockchains, which can be likened to different engines in different vehicles. Below, discover the similarities and differences between the Ethereum and Bitcoin blockchains, particularly in terms of performance and mining.
Similarities between the Bitcoin and Ethereum blockchains
Despite Ethereum and Bitcoin having two distinct visions, their blockchains share some similarities.
Two crypto heavyweights
The Bitcoin and Ethereum blockchains collectively dominate the crypto market. In other words, these two blockchains significantly lead the crypto market and have been the most widely used blockchains for over a decade. They also boast a substantial history, with Ethereum existing for over 10 years and Bitcoin for 15 years. In an emerging field like cryptocurrencies, this is considered a canonical age!
Two strong cryptocurrencies serving as a store of value
Although Bitcoin and Ethereum have different goals, both cryptocurrencies can serve as a store of value. Due to their extensive development and popularity, these two cryptos are poised for a bright future. Therefore, if one had to choose only one or two cryptocurrencies to invest in to protect their capital, it would be Bitcoin and Ethereum.
Currently, these two cryptos are leaders in their respective domains:
- Bitcoin is the best crypto serving as a payment system. It has even been adopted as legal tender in certain countries, such as El Salvador, for example.
- Ethereum, on the other hand, is the undisputed leader in the burgeoning field of decentralized finance (DeFi). Currently, over half of the funds locked for DeFi purposes are on applications operating on the Ethereum blockchain. Considering another rapidly growing domain, such as NFTs (non-fungible tokens), Ethereum dominates decisively once again.
Not surprisingly, both cryptos are supported by numerous personalities and financial experts. Finally, they operate on a deflationary mechanism, which should stimulate their prices.
Differences Between Bitcoin and Ethereum Blockchains
Discover below some major differences between the Ethereum and Bitcoin blockchains.
Use of Smart Contracts
As mentioned above, the Ethereum blockchain enables the development of decentralized applications that utilize smart contracts (or computer programs). On Ethereum, smart contracts are coded in Solidity, a programming language specific to ETH but closely related to C++. The Ethereum Virtual Machine (EVM) then compiles these codes and runs them on the blockchain.
At present, Bitcoin attempts to perform a similar function using Ordinals to encode NFTs, but the market has not picked up. It was an innovative application of the Bitcoin blockchain because it wasn’t built with the capability to handle smart contracts.
PoW Vs. PoS Consensus
Mining is the activity that validates a block of transactions and records it on the blockchain, simultaneously creating new cryptocurrencies as a reward for the miner(s). The two main ways (protocols) to conduct mining are Proof-of-Work (PoW) and Proof-of-Stake (PoS). Bitcoin uses the former (PoW) while Ethereum uses the latter (PoS).
With PoW, when a block is ready to be mined, network ‘miners’ compete. The goal for miners is to be the first to find a mathematical solution, hence ‘Proof of Work’. This competition involves significant computational power, as mining equipment must perform numerous iterations to find the correct solution. While this model is effective, it has been criticized for its environmental impact due to high electricity use.
On the other hand, PoS doesn’t require any extensive computational power. Instead, any holder of the cryptocurrency can choose to stake their holdings, effectively locking them up in the blockchain for some time. The network then randomly selects a staker as the designated miner and rewards them by issuing newly minted cryptos. Ethereum shifted to this system in September 2022, after running on a PoW protocol since its inception.
BTC vs. ETH: Comparison Table
|Year of whitepaper writing
|Vitalik Buterin, Gavin Wood, Charles Hoskinson, Anthony Di Iorio, and Joseph Lubin
|Decentralized payment method Store of value
|Development of decentralized applications Store of value
|Market capitalization ranking
|All-time high (ATH)
|Total number of tokens
Bitcoin Vs. Ethereum: Conclusion
Bitcoin and Ethereum are two fundamentally different cryptocurrencies because they do not have the same objective. Bitcoin aims to become a new decentralized means of payment and a store of value. Meanwhile, Ethereum focuses on decentralization by developing applications and promoting decentralized finance. While both cryptocurrencies have managed to build really large ecosystems, they are nevertheless very different and in no way directly competitive.
These two cryptocurrencies come together from the perspective of their success. They have indeed managed to attract a large number of investors, including some institutions. Each is a leader in its field, and numerous developments are underway to strengthen their positions. In other words, Bitcoin and Ethereum have a bright future ahead. Moreover, they have the advantage of not being in direct competition and can, therefore, coexist perfectly.
If you are new to crypto and are looking for a robust and promising option, consider either Bitcoin or Ethereum!
Ethereum Vs. Bitcoin: A Weakening Correlation
In addition to these factors, another no less important difference emerged in early May in the Ethereum vs Bitcoin battle. The correlation between the price of Ethereum and that of Bitcoin has fallen below 80%. This is a factor that, when high, indicates that the prices of both cryptocurrencies follow the same trends, that is, they rise and fall together.
The reduction of this correlation tends to show that the differences between the two projects are becoming more pronounced, and in the future, they will be less dependent on each other, leading their prices to evolve in different directions.
Analysts from Coinbase, namely Brian Cubellis and David Duong, attribute this phenomenon to Ethereum’s hard fork, The Merge, which saw the blockchain transition from a PoW to a PoS mining protocol. The circulation of more Ethereum is therefore necessary for a stricter correlation to resume between the two most valuable cryptocurrencies in the market.