Ethereum vs. Bitcoin: What Differentiates the Two Most Popular Crypto Coins?
- By Localcoin
- October 22, 2021
At Localcoin, our mission is to provide a simple, secure buying and selling experience of digital currency for customers across North America. From running North America’s largest Bitcoin ATM network to our online retail platform, we are constantly seeking to innovate in the blockchain infrastructure space. Welcome to our blog, where customers can educate themselves on the world of cryptocurrency, learn more about our company vision and more!
As the two largest crypto coins, Ether and Bitcoin are naturally subject to constant comparison. Investors want to know more about how they hold up to each other so that they can pick a side in the Ethereum vs. Bitcoin debate, or, just to be more informed when choosing where to invest. If you’re one of these investors that’s interested in how Bitcoin and Ether stack up against one another, you’ve come to the right place. Continue reading to better understand the similarities and differences between the two most popular crypto coins in the world.
Browse This Content:
- A Background on Bitcoin
- A Background on Ethereum
- Ethereum vs. Bitcoin: How Do They Compare?
- Which Coin is Right for Me?
- Here’s Where to Buy Bitcoin and Ethereum
A Background on Bitcoin
Before we can compare Ethereum vs. Bitcoin, we have to understand them both separately. Right off the bat, it’s important to understand that as the first cryptocurrency, Bitcoin was the basis that Ethereum was built upon. You may already be familiar with Bitcoin, but here’s a short background on what it is and why it came into existence:
Bitcoin was the world’s first digital, decentralized medium of exchange. Bitcoin was invented by an anonymous individual or group of individuals under the alias “Satoshi Nakamoto”. In 2009, Nakamoto mined the starting block of the blockchain (the technology that powers Bitcoin), and embedded in it was the text, “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” This illustrated that Bitcoin was created largely in response to the 2008 Financial Crisis. This crisis, caused by some of the largest banks in the world, made clear the potential risks associated with relying on banks as intermediaries in all of our financial transactions. Thus, Bitcoin was born. According to Nakamoto, Bitcoin would be able to:
- Eliminate the need to share personal information with an intermediary,
- Reduce fraud and counterfeiting,
- Reduce transaction fees, especially when transferring money globally,
- Prevent inflation and manipulation with a limited amount of Bitcoin that can be mined (21 billion), and more.
This would all be possible using blockchain technology and its ability to harness the power of thousands of computer nodes on a network. Computers on the network input and verify immutable transactions on the blockchain, with Bitcoin rewards as the incentive. This peer-to-peer enabled network successfully operates without a centralized authority, and has been the basis for thousands of “altcoins” (other types of crypto coins) — including Ethereum, which would soon become Bitcoin’s biggest competitor.
Click and find out how does cryptocurrency gain value.
A Background on Ethereum
The cryptocurrency associated with the Ethereum network, better known as Ether, is the second largest cryptocurrency to Bitcoin as of September 2021. Launched in 2015, the Ethereum network was inspired by the decentralized nature of Bitcoin, and the possibilities for its adoption outside of the world of finance. Unlike Bitcoin, Ethereum was not created with the intention of simply being an alternative medium of exchange; Ethereum is actually a blockchain-based platform for apps, and Ether was born as a method of payment for the platform.
The Ethereum platform allows software developers to create and monetize decentralized applications (dapps) of any kind. They can’t be censored, taken down or otherwise influenced by centralized servers on the internet. Instead of being hosted on one server controlled by an entity, these apps are powered by blockchain technology and written in Ethereum’s coding language, Solidity. Examples of dapps in existence right now include ones for gaming, insurance, crowdfunding, trading cryptocurrency and more.
The computers needed to maintain the Ethereum network and write code are expensive — that’s where Ether comes in. App creators must pay to use the Ethereum network in the form of Ether. Similarly to Bitcoin, the Ethereum network uses a proof-of-work system to uphold the blockchain and confirm transactions, using Ether.
Ethereum vs. Bitcoin: How Do They Compare?
Now that you understand the motivations behind the creation of Bitcoin and Ether and the technology that powers them, let’s outline some of their most relevant similarities and differences.
Similarities Between Ethereum and Bitcoin
1. They are both motivated by decentralization from intermediaries
The privacy, freedom and security that comes from decentralization motivates both Bitcoin and Ethereum.
2. They both utilize blockchain technology and a proof-of-work system
Bitcoin and Ethereum both exist on blockchains that are upheld by computers and miners, with newly minted coins as the incentive for maintaining the network.
3. They are both used as an alternative, digital medium of exchange
Bitcoin and Ether can both be purchased on exchanges and crypto ATMs and used as a form of currency.
Differences Between Ethereum and Bitcoin
1. They exist for different purposes
Bitcoin was invented with the intention of decentralizing financial transactions. The Ethereum network was created with the intention of decentralizing the internet.
2. They use blockchain technology in different ways
Bitcoin uses blockchain technology as a digital ledger while Ethereum uses a blockchain to run dapps.
3. They differ largely in size
Although Bitcoin and Ethereum rank as the top two crypto coins, Bitcoin remains significantly larger by market capitalization as of September 2021.
Which Coin is Right for Me?
Your personal crypto investment strategy is just that — personal. While many factors will come into play when you decide when, where and how to invest in crypto, keep in mind that you’re not just investing in the value of a coin. In addition to investing in the predicted future of a given coin’s value, you’re also investing in the predicted future of their impact. As you make strategic moves in hopes of capitalizing on a coin’s volatility, don’t discount your personal values, beliefs and hopes for the future of decentralization.
Don’t forget that you don’t have to pick a side in the Ethereum vs. Bitcoin debate. One may align more with your investment goals, but you can always invest in and use both if you so choose!
Here’s Where to Buy Bitcoin and Ethereum
One of the most convenient ways to buy and sell Bitcoin or Ethereum is through a crypto ATM. Localcoin ATMs offer a simple, user-friendly way for anyone to buy and sell cryptocurrency. Newcomers and experts alike can easily access Localcoin ATMs in their communities, whenever and wherever they need to. As one of North America’s largest Bitcoin ATM networks, with more than 650 terminals across Canada and the U.S, Localcoin is making cryptocurrency accessible for everyone.