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Bitcoin vs. Ethereum: What Are the Key Differences? (2022)

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Bitcoin vs. Ethereum: What Are the Key Differences? (2022)

Bitcoin vs. Ethereum: What Are the Key Differences? (2022)

2009 is truly a revolutionary year in the crypto space. This is mainly because it was the birth year of Bitcoin (a digital currency that competes with fiat money). As we all know, Bitcoin has done more than just create a virtual asset; has helped tech innovators realize the idea of ​​blockchain technology. Using the same technology, Ethereum, a platform for application development, was born in 2014. By 2020, there will be hundreds of cryptocurrencies in the market, with Bitcoin and Ethereum topping the cryptocurrency chart. But which of these cryptocurrencies is a good bet in 2021?

Ethereum (or technically Ether – Ethereum is the blockchain on which the cryptocurrency is based. However, the term Ethereum is often used) could be the best cryptocurrency to invest in 2021 based on the recent introduction of the Ethereum 2.0 phase. 0 update. At the same time, Bitcoin remains an important investment channel as it is the undisputed number one in the cryptocurrency sector and its use by companies/regulators is on the rise.

Today we will discover the classic comparison between Ethereum and Bitcoin through the following points:

What is Bitcoin (BTC)?

Bitcoin is a cryptocurrency or digital currency that allows peer-to-peer transfers over a decentralized network. At the same time, every transaction is recorded on the Bitcoin blockchain network. And also the first unregulated digital currency to be accepted worldwide.

Bitcoin was born when Satoshi Nakamoto, one person or group of people, released his report and later birth ban in 2009. While there is an unlimited supply of cryptocurrency online, Bitcoin’s supply is limited. Only 21 million BTC can be mined, so its value will continue to rise as supply decreases.

Bitcoin’s main goal was to create a digitized asset medium for the transfer of value without a central authority.

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What is Ethereum?

While it is quite common to draw parallels between Bitcoin and Ethereum, this is not quite the case. Ethereum positions itself as an open source platform built for building decentralized applications. Not only does it serve as a store of value, but it is also possible to build real applications on the Ethereum network.

Vitalik Buterin and his team proposed the idea of ​​Ethereum in 2014 and launched the Ethereum network in 2015. Ethereum has some important differences from Bitcoin, notably the ability to write smart contracts (self-executing code) and build applications decentralized (DApps). build on the Ethereum blockchain.

Ethereum is already in the process of moving to Ethereum 2.0, making significant changes that will make the Ethereum network scalable, fast, and efficient going forward.

In general, Ethereum, along with all cryptocurrencies except Bitcoin, is also an altcoin. Some of the most popular altcoins by market capitalization are:

  • Ethereum
  • XRP
  • Bind
  • bitcoins
  • Bitcoin cash
  • Chain link
  • Cardan

What is happening around Bitcoin and Ethereum?

Understanding the ongoing events and developments of both cryptocurrencies provides a clear picture of the project’s prospects. And in general, so you can do better analysis to support your future trading strategies.

Future Bitcoin Projects: Bitcoin Halving

It is one of the most significant events in the history of the crypto space. But what halves Bitcoin?

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Bitcoin halving is the principle of decreasing block rewards for every 210,000 blocks of Bitcoin mined. And the halving happens once every four years. Bitcoin’s latest halving took place on May 11, 2020, when the rewards per block were reduced to 6.25 BTC from the previous 12.50 BTC. It is believed that the last Bitcoin will be mined by 2140.

According to the Bitcoin algorithm, there are a total of 33 halvings, after which the block rewards reach less than one Satoshi. Most Bitcoin halvings track BTC price volatility, but its third halving was relatively stable.

Ethereum Projects and Events: Ethereum 2.0 Phase 0 Update

Ethereum is undergoing some significant updates to improve its utility and scalability for future application development. Ethereum 2.0 is a gradual upgrade of the Ethereum ecosystem, which includes Beacon Chains, Shard Chains and Docking.

The major update involves the transition from Ethereum’s resource-intensive Proof of Work (PoW) consensus algorithm to the Proof of Stake (PoS) algorithm. The first phase of its update introduced Beacon Chain, which brings PoS to the Ethereum ecosystem.

The main purpose of the Beacon Chain is to coordinate the Ethereum network of shards and stakers. The Beacon Chain is required for the second phase of the Ethereum 2.0 upgrade, as it will completely replace the Ethereum mainnet in the future.

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Chainlink smart contract collaborations

Chainlink is Oracle’s network of DeFi and has quickly become a popular way for smart contracts to interact with external data. The startup is already partnering with some leading tech companies including Google to bolster future development. Chainlink has announced its support for Ethereum infrastructure projects, hinting at significant future collaboration.

From Ethereum’s perspective, this cooperation increases the utility of Ethereum smart contracts. DApps using Ethereum have access to trusted and secure data sources via Chainlink. At the same time, blockchain networks can communicate with other blockchains without interruptions.

Key considerations for Bitcoin and Ethereum investors

As a cryptocurrency enthusiast and investor, it is very important to understand the characteristics and issues associated with various crypto assets, including Bitcoin and Ethereum.

Scalability and development

For any crypto-asset or blockchain platform to gain widespread acceptance, rapid scaling is not only critical but also detrimental to its future adoption.

Bitcoin dominates the cryptocurrency industry by its market capitalization alone, but the Bitcoin blockchain has significant scalability issues. Conversely, Ethereum has solved some of Bitcoin’s problems, but it has its limitations.

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Slow block creation

Bitcoin and Ethereum are based on a PoW consensus algorithm that limits the speed of the network. It takes about 10 minutes to create or mine a block of Bitcoin. In contrast, Ethereum only takes about 10-19 seconds, which is faster than Bitcoin, but still nowhere near centralized systems that process thousands of transactions per second. Although Ethereum 2.0 updates are expected to increase the number of transactions per second (TPS) to 100,000 TPS.

Low response time or latency in approvals

Cryptocurrencies have greatly improved the acceptance of transactions or transfers. Result? The transaction is approved in minutes instead of days. However, they are nowhere near the immediate response of their centralized counterparts like Visa or Mastercard. At the same time, if other miners don’t accept the block, the transactions have to be included in another block for confirmation (validation).

Market value

Miners receive bulk rewards for validating Ethereum and Bitcoin transactions. As the cost of computing power and block difficulty increase, miners prefer higher fees, which increases average transaction fees.

When looking closely at the scalability challenges of Bitcoin and Ethereum, it is important to highlight the continued evolution of these cryptocurrencies. Bitcoin is limited in usability and block size, and there is little room for further development.

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