What is the difference between Ethereum and Bitcoin?

Analyzing the differences between Bitcoin and Ethereum

creator of coins

It is no secret to anyone that the creator of Bitcoin, blockchain technology and the concept of cryptocurrencies is Satoshi Nakamoto , who published the first version of Bitcoin in 2009. A work that would later give rise to all that avalanche of thousands and thousands of cryptocurrencies that would be born derived from his work. Nobody knows who Satoshi Nakamoto is, nor speaks to give his opinion of him by letting Bitcoin grow freely.

For his part, the creator of Ethereum is a large team of developers, Token swap platform development among which Vitalik Buterin stands out, a young man who was the forerunner of the initial vision, wanting to create something much bigger and more complex than Bitcoin, trying to transform the world of cryptocurrencies. with the advent of Turing Complete smart contracts. He is a person currently known to many people, a public figure, who constantly gives his opinion of him influencing the growth of Ethereum.

development finance

Currently, most of the development of Bitcoin remains the same. In fact, most developers do not receive stipends for their work. On the other hand, only some of them receive a stipend thanks to donations from procrypt people, foundations and organizations . And finally, only a few earn salaries for jobs related to the crypto world of Bitcoin in other companies, and not directly for their work in the protocol. Even the initial Core participated in the development of Bitcoin without receiving any payment for their work.

With this capital, developers, designers, translators and other people who contributed to making Ethereum a reality were paid. This is not really negative, paying for people’s work is laudable and fair, but the ICO model that Ethereum used for its development served as a pattern, so that many other projects will try it with dire consequences and billions of dollars in losses, due to ICO scams . On the other hand, after Ethereum, very powerful business interests were established, starting with the Ethereum Enterprise Alliance and ConsenSys , which on many occasions have been rejected by the community for their questionable practices.

Decentralization level

As far as decentralization is concerned, Bitcoin is the most decentralized cryptocurrency that exists in the entire crypto world. It is the network with the largest number of nodes, miners, developers, computing power and forks. In addition, the development of Bitcoin is much more decentralized than Ethereum, since in the latter, its developers generate a strong centralization, marking the path that the development of Ethereum must follow.

On the other hand, Ethereum is a project that at the time was tainted for breaking the immutability of the blockchain, by rewriting a part of its history to erase and the blockchain, giving rise to Ethereum Classic (ETC) , which would be the original Ethereum cryptocurrency and blockchain by not accepting said writing. This is something that has not happened in Bitcoin, since it breaks one of the principles of the blockchain and gives rise to censorship.

coin price

One of the first differences that we usually see between Bitcoin and Ethereum is the price differential that exists between the two . Bitcoin has always had a higher value than Ethereum, and some reasons for this are: Bitcoin is limited, it is more accepted, it has a much larger user base and it generates more trust as it is a project with more time and maturity.

Ethereum, on the other hand, has a much lower value per ether token. In addition, many people are shocked by the fact that some tokens that live among Ethereum smart contracts have a much higher value than the same cryptocurrency (Ether) on its blockchain. However, the common mistake is to look at the price and not the capitalization. In the case of Maker, although its tokens are worth more, it has a much smaller market capitalization than Ethereum.

Total coin issue

Another difference between Bitcoin and Ethereum is the issuance of coins. In the case of Bitcoin, the emission is determined at a total of approximately 21 million bitcoins , it can never exceed that amount. In addition, the emission of Bitcoin decreases over time until it reaches 0, thus being a deflationary type emission.

Instead, Ethereum features an inflationary total issuance and an infinite issuance of coins in its entirety . The latter is a point still discussed by the community, and there is no consensus on what should be done about it. To this is added that Ethereum has an inflation control that prevents inflation of more than 2% per year from being generated, based on the total number of active coins within the system. There are currently more than 111 million Ether in circulation and more will continue to be generated, even when Ethereum 2.0 and its Proof of Stake (PoS) mining model go live .

cryptocurrency mining

Mining is another of the big differences between Bitcoin and Ethereum. First of all, Bitcoin uses the well-known Proof of Work (PoW) model , using the HashCash algorithm and the SHA-256 hash function to do the computational work. This is a mining model that is currently only possible using ASIC miners due to the enormous computational power that the Bitcoin network has. In fact, the Bitcoin network is so powerful that not all of the TOP 500 supercomputers together would surpass it in power.

Another important feature of Bitcoin mining is that it generates a new block approximately every 10 minutes, suffers from difficulty adjustments every 2016 blocks (about 14 days) and has a halving (halving of the block reward) every 210,000 blocks (approximately 4 years). Currently, the generation of coins for each new block mined in Bitcoin is 6.25 BTC.

Mining is intensive in memory use, so in principle it was resistant to ASICs, a situation that was overcome in 2018 with the appearance of the first ASIC for this cryptocurrency, the AntMiner E3. However, mining in Ethereum is still possible using GPUs , which is not possible in Bitcoin.

Important characteristics of mining in Ethereum is that it generates a new block approximately every 10-20 seconds, it suffers from continuous difficulty adjustments, and it does not have a halving system itself, but its emission value decreases according to a consensus reached in the community .

commission management

One point that makes a difference between Bitcoin and Ethereum is the way they handle mining fees . In Bitcoin, mining commissions take into account values ​​​​such as its complexity due to the number of inputs and outputs, since this affects the size of the space occupied by the transaction. This space is what will finally tell you the price of the transaction and the commission to be paid is dictated by the demand and supply generated by users depending on network congestion.

That is, in Bitcoin, if the network is very congested, the high demand for transactions will make the supply of Bitcoin block space (limited to 2 MB maximum under SegWit ) insufficient to serve everyone. In case the network has many transactions to process, the miners will prioritize those who pay more satoshis (the smallest decimal unit of bitcoin) per commission byte. This results in that if you want to be confirmed in the next block, you will have to pay a high commission. The ones that pay less will not be a priority for the miners and they will process them when there is less overload.