This is our second post on Bitcoin and Ethereum where we look at the similarities and differences between Bitcoin and Ethereum.
As you might remember, we have talked about what Bitcoin and Ethereum are and their philosophies in our earlier posts. To sum up those, let’s quickly recap the similarities between these two systems in this post. We will talk about their differences in our next post.
How are they different?
The similarities between Bitcoin and Ethereum comee from the main fact that both are born out of the same community. However, once Ethereum started developing and maturing it has followed its own path.
|Image by Kranich17 from Pixabay|
Differences between these two systems are significant and actually quite visible. We will focus on just two of them here.
Money vs computer
First of all, Bitcoin aims to be a digital money that can be used among people freely, without any interference from a third party. That is the sole aim of Bitcoin.
We need to emphasize that this is not an insignificant task. Given that all the power struggles in the world are primarily stemmed from economic causes, the Bitcoin community is quite right in just focusing on this issue. (That is why there are memes created such as ‘laser eyes’). As many outsiders observed (such as Michael Saylor), the main strength of Bitcoin is its community and how they are philosophically attached to the ideals of Bitcoin.
Ethereum on the other hand, tends to be more technology-focused. Its aim is to be a computer that can be used by anyone in the world without interference from a third party. So while Bitcoin helps people preserve and exchange value in digital life, Ethereum aims to give people the ability to execute other financial and non-financial activities in the same space.
BTC is the currency of Bitcoin and it is carefully monitored, measured and maintained by its community. Its emission schedule is determined to the last digit, and calculated every ten minutes. (There are sites dedicated to that. For example at the time of this post, 89.788% of Bitcoin was issued. Everyone knows this and everyone can check that in the Bitcoin system (with UTXO mechanism).
ETH is the currency of Ethereum however the community sees it as the oil in the machine, the currency that facilitates the transactions. However, its emission policy is much looser compared to BTC. While BTC is issued every 10 minutes, ETH is issued every 10–15 seconds. Such a high-frequency results in many discrepancies between various nodes in terms of the outstanding ETH amount, and these are fixed later on. Besides, the emission schedule is not fixed in Ethereum. There are currently around 114 million ETH issued, but the community may change how much it will issue. (This also holds true for Bitcoin by the way - the community may decide to change the schedule but it seems very unlikely that they will change such a core property).
In fact, with a recent improvement proposal (EIP 1559), Ethereum has started burning ETH, where there is more demand than available capacity. In Bitcoin, all the transaction fees are captured by miners. Ethereum was initially the same but starting August 2021, transactions up to a certain level are burnt and excessive fees (or tips) are sent to miners.
Bitcoin and Ethereum has dozens of differences in terms of technical specifications such as:
- Timing of blocks (10 minutes vs 15 minutes)
- Speed of technology (relatively slow vs faster)
- Version (Bitcoin always same vs Ethereum 2.0 coming)
- Consensus protocols (PoW vs PoS or BFT vs Casper in new Ethereum 2.0).
- … and many others…
As we mentioned in previous post, while we read lots of arguments between Bitcoin maximalists and Ethereans, given the fact that these two systems have very different aims this is quite normal, in fact, it is healthy. Going forward, with the new ETH 2.0 on its way, these two systems will fall apart even further, and that is quite OK.
None of the views expressed in this article should be considered as investment advice