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Bitcoin vs Ethereum: Fueled by different visions

Bitcoin Vs Ethereum

Bitcoin and Ethereum are cryptocurrencies that are based on blockchain-based decentralized entries. Bitcoin with its native coin BTC and Ethereum with its native coin ETH, where both the coins can be used as an exchange value outside their ecosystem.

Bitcoin is a digital currency which is a decentralized peer-to-peer network and doesn’t require any individual institution or a person to control it. Bitcoin was first introduced by an anonymous programmer under the name of Satoshi Nakamoto in 2009. 

Ethereum is also a blockchain platform that allows any individual to build and use the decentralized platform that runs completely on blockchain technology. Vitalik Buterin, Gavin Wood and Jeffrey Wilcke found Ethereum in 2013. According to our Market Intelligence Platform, Ethereum raised a whopping $18 million in an Initial Coin Offering (ICO) event it launched in 2014.

Bitcoin and Ethereum being the most significant project in the crypto space their primary purposes are completely different. To understand more about Bitcoin Vs Ethereum, read on.

Bitcoin vs Ethereum: Key Highlights

Bitcoin

· October 2008: The Bitcoins whitepaper published.

· January 2009: Bitcoins first ever transaction.

· December 2009: 0.2 Version released.

· November 2010: The market cap crosses $1 million.

· October 2011: Bitcoin forks to create Litecoin.

· June 2012: Block 181919 made with 1322 exchanges. The biggest block to date.

· June 2012: Coinbase launches.

· September 27, 2012: Bitcoin Foundation formed.

· June 2015: BitLicense established. This is one of the most noteworthy cryptographic money regulations.

· August 2017: Bitcoin forks again to create Bitcoin Cash.

· September 2017: China bans BTC exchange.

· December 2017: First Bitcoin futures contracts were propelled by CBOE Global Markets (CBOE) and the Chicago Mercantile Exchange (CME).

· September 2018: Cryptocurrencies fell 80% from their top in January 2018, aggravating the 2018 cryptocurrency crash worse than the Dot-com air bubble’s 78% breakdown.

· November 2018: Bitcoin’s market cap fell beneath $100 billion since October 2017.

· October 2018: 10-year anniversary of Bitcoin

Ethereum

· November 2013: The Ethereum whitepaper published by Vitalik Buterin.

· January 2014: The development of the Ethereum platform was openly announced. The first Ethereum development group comprised of Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson.

· August 2014: Ethereum closes its ICO and raises $18.4 million.

· July 2015: The primary phase of Ethereum’s development, “Frontier” was released.

· March 2016: The first “stable” Ethereum release.

· June 2016: The DAO hack occurs and the $50 million worth of Ether, which was 15% of all the Ether in circulation back at the time.

· October 16, 2017: The Metropolis Byzantium hardfork update occurs.

· February 28, 2019: The Metropolis Constantinople hardfork update occurs.

Bitcoin Vs Ethereum

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Although not meant to be a P2P digital currency Ethereum token (ETH) is the second largest cryptocurrency by market capitalization at a cool $22 billion, as of 24th July 2019. So why is Ethereum so popular despite not serving the primary service of payments like most other cryptocurrencies? It’s all thanks to Etherem’s platform which enables developers to build decentralized applications on it. 

For comparison, Bitcoin entire market capitalization is at a whopping $173 billion as of 24th July 2019, and dominates the entire cryptocurrency market with over 65% market share.

Bitcoin vs Ethereum: The key differences

There various categories where Bitcoin and Ethereum are different from each other and some of those categories are as follows:

· Purpose

· Mining

· Price History

· Block Size

· Gas vs Transaction Fees

· Internal Economics

Bitcoin vs Ethereum: Purpose of each

The main difference between these two projects is the purpose of the development of these two projects. Most people just assume that Bitcoin and Ethereum have the same difference. To be clearer, let’s look at the reason behind the development of Bitcoin and Ethereum.

Bitcoin

Bitcoin came into the limelight after the financial crisis in 2008. That was a time when the public had no faith in banks or any financial institutions. At this time Satoshi Nakamoto used cryptographic hash functions and public key cryptography to create Bitcoin. The whole purpose of creating Bitcoin has never changed. The purpose of Bitcoin is to be a global decentralized financial system and giving people full power and control over their finances. While Bitcoin lacks the adaptability to be a traditional currency system, it has the ability to become a digital store-of-value.

Ethereum

Ethereum is not meant for payment systems only. The founder of Ethereum Vitalik Buterin says that blockchain is not just meant for payment-service it has more utility than that. Vitalik has a thought that by leveraging the blockchain technology. Developers can create real-world applications on top of it. This can be done by creating smart contracts and carry them out on top of Ethereum.

The Smart contract is nothing but a computer code that runs on top of a blockchain that contains a set of rules in which the members of the contract agree to interact with others. Some of the features of smart contract interactions are:

· The members of the smart contract can directly connect with one another without the requirement for a middleman or an outsider.

· Each progression of a smart contract must be implemented after the execution of the immediately previous step.

· The smart contract goes about as a blueprint for a decentralized application (DApp).

· The whole content and data that is inside a DApp are not owned by any single entity.

Bitcoin vs Ethereum: Mining

Bitcoin and Ethereum are now using the proof-of-work (POW) consensus mechanism. But Ethereum is planning to shift to proof-of-stake (POS) soon, by using the Caper protocol.

Bitcoin and Ethereum — Proof of Work

Proof-of-work is meant for miners to use their computational powers to solve cryptographical puzzles. The miner who solves the problem will get to add. A new. Block to the blockchain and will get another block reward in return. SHA-256 hashing algorithm is being used by Bitcoin for mining purposes. This how the process works:

· An arbitrary string called the “nonce” is added to the hash of the previous block.

· The resultant string is hashed and afterward checked against the network difficulty.

· In the event that the hash fulfills the conditions, at that point, the block is added to the chain.

· If not, the procedure repeats until the ideal outcome is achieved.

There are two basic things to note about POW:

· The way toward getting the expected outcome to meet the difficult conditions ought to be incredibly hard, tedious, and resource-heavy.

· The way toward checking whether the miner was successfully able to mine a block ought to be simple.

After a short time, miners found that they could exponentially increase their mining power by combining and forming mining pools by means of parallel processing. In parallel processing, program instructions are divided among various processors. By doing this, the running time of that program reduces, and that is essentially what the mining pools are doing. The greatest asset of the POW instrument is the security it gets to the framework. Since mining on the Bitcoin chain is so costly, the miners don’t have any motivation to work against the system, and mine on any parallel chains just to squander their money for no reason.

Be that as it may, POW chains certainly have a ton of defects:

· They are slow.

· They sometimes tend to be centralized.

· They waste a ton of energy.

This is the reason numerous new crypto projects are hoping to utilize alternative consensus mechanisms like proof-of-stake.

Ethereum in the future — Proof of Stake

Ethereum at present uses the POW consensus mechanism for mining, however, they are hoping to move onto Proof-of-stake (POS) mechanism utilizing Casper Protocol. Proof-of-stake will make the whole mining procedure virtual and supplant miners with validators.

The means by which the procedure will work is as follows:

· The validators should bolt up a portion of their coins as a stake.

· From that point forward, they will begin validating the blocks. This means, that they find a block which they think can be added to the chain, they will validate it by putting down a bet on it.

· In the event that the block gets appended, at that point, the validators will get a reward proportionate to their bets.

The POS protocol is significantly more resource-friendly than POW. In POW, you NEED to squander a lot of resources to go along with the protocol. Casper is the POS protocol that Ethereum has gone with. Casper is a protocol that uses POS with a punishment mechanism. Let’s look at how POS under Casper would work:

· The validators stake a few of their Ethers as a stake.

· From that point forward, they will begin validating the blocks. This means, when they find a block that they think can be added to the chain, they will validate it by placing a bet on it.

· In the event that the block gets appended, at that point, the validators will get a reward proportionate to their bets.

· In case, a validator acts maliciously and tries to do “nothing at stake,” then they will immediately be reprimanded and their whole stake will be slashed.

Casper is intended to work in a trustless framework and be more Byzantine Fault Tolerant. Any individual who acts in a malignant/Byzantine way will get immediately punished by having their stake sliced off. This is the place it contrasts from most different POS protocols. Malicious components have something to lose so it is impossible for nothing to be at stake. Impeccably implementing Casper and Proof of Stake will be critical if Ethereum plans to scale up.

Bitcoin Vs Ethereum

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A comparison of on-chain metrics like mining difficulty, network hashrate of Ethereum and Bitcoin during the past six months, reveals some interesting details. While both metrics observed a sharp decline in Ethereum, for Bitcoin it has consistently gone up. So is this good? An increasing hashrate means miners are competing more for rewards, this means despite the increasing mining difficulty miners are keen on Bitcoin rewards.

Bitcoin vs Ethereum: Price history

The pricing history of Bitcoin and Ethereum will an interesting perspective of each coin.

Bitcoin

· Bitcoin achieved its all-time high price in December 2017.

· Bitcoin from $10,000 it went up to $20,000 in just two weeks.

· Bitcoin took 50 days to crash from it’s all-time to $6,875.

· Now Bitcoin is in the journey of recovery.

· Bitcoin had six consecutive bearish months from May 2018 to January 2018.

· But from February 2019 Bitcoin experienced a four-month straight bullish.

Ethereum

· For Ethereum it took only a week to go up from $750 to $1300 on January 2018.

· Just like Bitcoin, Ethereum is also on the journey to recovery.

· Ethereum has seven continuous bearish months from May 2018 to November 2018.

· Out of the last six, Ethereum had five bullish sessions.

Bitcoin vs Ethereum: Block Size

The most controversial topic in the crypto space is the block size. This topic split the Bitcoin community apart. So, let’s take a look at it.

Bitcoin Block Size

Satoshi Nakamoto at first hardcoded a 1 MB size limit to the Bitcoin blocks to counteract spam exchanges. Nonetheless, as Bitcoin became increasingly well known, scalability turned into the requirement for the day. This is when individuals began debating about the block size. There was a segment of the community which needed to expand the block size to 2 MB, while another segment needed to keep the block size at 1 MB and execute the SegWit mechanism. Here are the contentions displayed by both segments of the community:

Arguments against block size increase:

· Miners will lose motivating force since transaction fees will decrease: Since the block sizes will increase transaction will be effectively embedded, which will fundamentally bring down the transaction charges. There are fears this may disincentivize the miners and they may proceed towards greener fields. In the event that the number of miners decreases, at that point this will decrease the overall hashrate of Bitcoin.

· Bitcoins shouldn’t be utilized for ordinary purposes: Some individuals from the network don’t want Bitcoin to be utilized for regular everyday transactions. These individuals feel that Bitcoins have a higher purpose than simply being a normal regular currency.

· It will split the network: A block size increment will definitely cause a fork in the framework, which will make two parallel Bitcoins and henceforth split the network all the while. This may demolish the harmony in the network.

· It will cause increased centralization: Since the system size will increase, the amount of processing power required to mine will increase too. This will take out all the little mining pools and give mining powers only to the large-scale pools. In return, this will increase centralization, which conflicts with the very quintessence of Bitcoins.

· SegWit or Segregated Witness will expand the size of the blocks without causing a hard fork. SegWit will put the signature data of the exchanges on a side-chain.

Arguments for the block size increase:

· Block size increase works to the miner’s advantage: Increased block size will mean increment exchanges per block which will, thus, increase the number of exchange charges that a miner may make from mining a block.

· Bitcoin needs to develop more and be increasingly open to the “common man.” If the block size doesn’t change at that point there is an undeniable possibility that the transaction fees will become even more elevated. At the point when that occurs, the normal man will never be able to utilize it and it will be used solely by the rich and huge organizations. That has never been the reason for Bitcoin.

· The changes won’t occur at the same time, they will go step by step and happen over some time. The greatest dread that individuals have with regards to the block size change is that an excessive number of things will be affected at the same time and that will cause real disruption. However, individuals who are “pro block size increase,” imagine that it is an unfounded dread as a large portion of the changes will be managed over time.

· SegWit will completely change the Bitcoin’s architecture and will no longer be the original version.

This argument divided the whole community into two halves. The two parts being Bitcoin and Bitcoin cash. Bitcoin activated SegWit whereas, Bitcoin cash didn’t activate SegWith and increased the block size to 8 MB.

Ethereum Block Size

Ethereum blocks being different instead of the size they are capped by the amount of gas each of them can store. Each block in Ethereum is limited by 6.7 million. Those transactions whose gas requirement add up to equal or less than the gas limit only those transactions miners can add. Generally, a one-on-one transaction takes up 21,00o units of gas.

Bitcoin vs Ethereum: Transaction fees vs Gas

Everyone one of the transactions lines up in the mempool. The. miners get pick up the transactions and put them into the blocks that are mined by them. The moment the miners but them into the block it gets fulfilled. As the work that is performed by the miners is very critical, it is very important to incentivize them in the right manner. How incentivization works in Bitcoin and Ethereum completely different.

Bitcoin Transaction Fees

Each and every transaction is charged some transaction fees by miners in Bitcoin. In order to process your transaction much faster then, you need to pay large fees to get your transaction done and incentivize the miners. So, it completely depends on how much fees you pay to get your confirmation within one block or you will have to wait for two or three blocks.

Ethereum Gas

Ethereum, however, uses a gas system instead of transaction fees. Gas is nothing but a unit that measures the amount of computational effort that it will take to execute certain tasks. All the smart contracts that keep running in the EVM are coded solidity (Ethereum is wanting to proceed to Viper from Solidity in the future.) Each line of code in solidity requires a specific measure of gas to get computed. To get a better understanding of this gas system lets take an example. Think you are going on an excursion and before you do you make sure to follow these steps:

· You go to your nearest gas station and you specify how much gas you want to fill in your car.

· You get that gas topped off in your car.

· You pay the gas station the amount for the gas you filled.

Now let’s take a look at it with Ethereum.

· Well, the gas is gas.

· The gas station is the miner.

· The money you paid would be the miner’s fees.

The operations that users want to execute in Ethereum will have to provide gas such as to cover its data which is also known as intrinsic gas and also to cover its entire computation.

Bitcoin vs Ethereum: Internal Economics

We all know the basic concept, supply and demand. The greater the demand, the lesser the supply and the price of the product will be very high. Also, the lesser the demand, the greater the supply and the price of the product will be very low. The point when the supply and demand meet is known as equilibrium.

Bitcoin

The hard limit of Bitcoin is 21 billion coins. With hard-cap, Bitcoin can use the supply-demand equation to maintain its price. Before it was simpler of miners to mine these coins and would get a block reward of 50 BTC each and every time they mined a block.

Ethereum

Ethereum doesn’t have a market cap limit like Bitcoin and Litecoin. Ethereum didn’t keep a capped supply as it is trying to be a platform for decentralized services. The block reward of Ethereum is reduced from 3 ETH to 2 ETH as per the Ethereum-Improvement-protocol 1234. The total supply won’t get out of control because the block reward is very low when compared to Bitcoin and Litecoin.

Thus, this is an article that covered the most important aspects of Ethereum vs Bitcoin. Bitcoin and Ethereum are very important and valuable projects. If for an investor who is not serious about the crypto industry, the investor will never go wrong in buying BTC or ETH as both of them will bring greater value to the cryptocurrency industry.

 


 

 

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