The introduction to Bitcoin
Bitcoin is a decentralized digital currency created in 2009 by the mysterious and pseudonymous Satoshi Nakamoto. Until now, the identity of the person (or persons) who created the technology is still a mystery.
Bitcoin is known as a type of cryptocurrency because it uses cryptography to keep it secure. There are no physical coins; only balances are kept on a public ledger that everyone has transparent access. Bitcoin is not released or backed by governments or banks, nor is an individual bitcoin valuable as a commodity.
The Bitcoin system is a collection of nodes (or miners) that run Bitcoin's code and store its blockchain. Regarding blockchain, it's a collection of blocks; each block is linked to a previous block forming a chain. Within each block is a set of transactions. Because all of the nodes running the blockchain have the same list of blocks and transactions, it is difficult to change a previous transaction or block unless you have more than 51% of the network's computing power, which is impossible to attain.
The introduction to Ethereum
Vitalik Buterin created Ethereum in 2015 as an upgrade to the perceived limits of Bitcoin. Its use case provided more opportunities for developers to create new decentralized applications.
Ethereum is a global computing platform powered by its native cryptocurrency, Ether (ETH). Solidity is Ethereum’s programming language and is used to create smart contracts that can be deployed on the blockchain. P2P apps built on Ethereum are known as decentralized apps (dApps) and are capable of providing trustless products and services. To use the computing power of the Ethereum network to execute your defined script in the smart contract, you need to pay the cost by ETH - known as the native currency on the Ethereum network.
The similarity between Bitcoin and Ethereum
Both Bitcoin and Ethereum were built to help people transfer assets from one to another without a central bank.
In addition, both of them are using proof of work consensus to validate transactions, which means once 51% of the network’s nodes agree that a transaction is valid, it’s permanently written on the blockchain.
Ether and Bitcoin are cryptocurrencies, and have a limited supply. However, Bitcoin’s supply is finite, with only about 21 million released. Ethereum, on the other hand, has a token burn and mint mechanism to curb the inflation rate.
Another similarity between Bitcoin and Ethereum is network adoption. Both of them have the two most valuable cryptocurrencies by market capitalization. While Bitcoin has more institutional taking on, Ethereum has a large active user base and transacts far more volume than Bitcoin.
Difference between Bitcoin and Ethereum
Bitcoin and Ethereum can be used as digital currency, but that is not Ethereum’s primary purpose. Instead, the Ethereum platform allows the execution of smart contract scripts by using the global computing power of EVM. As a result, Ethereum can implement many things well instead of serving solely as a store of value.
Ethereum is such a flexible platform. While some people can hold their Bitcoin on the Ethereum chain instead of the Bitcoin blockchain, they cannot hold Ether on the Bitcoin blockchain in the opposite direction.
The average period for a block to be committed on the Bitcoin network is 10 minutes, while on the Ethereum network, it is about 15 seconds. That can be explained by the requirement of code execution time in smart contracts on the Ethereum network, which needs to be fast. Meanwhile, the time to mine one block on the Bitcoin network is slower to reduce the inflation rate and the number of new bitcoins mined.
Conclusion
Bitcoin and Ethereum are the two most popular blockchain networks in the world. Both blockchains can be used to store and transfer value. While Bitcoin is focused on cryptocurrencies, Ethereum goes a step further by providing a virtual machine and smart contracts that enable users to implement decentralized applications. However, the backbone of Ethereum and Bitcoin is the same. Both of these cryptos run on blockchain technology to secure their network. No longer do we have to rely on giving others our precious data to make transactions - blockchain provides us with the power to create a trustless, immutable way to do business.
References
[1] Developer Guides of Bitcoin developer, developer.bitcoin.org, accessed April 12th, 2022.
[2] How does Ethereum work, preethikasireddy.com, accessed April 12th, 2022.
[3] Ethereum Development Documentation, ethereum.org, accessed April 12th, 2022.