Chris Castiglione Teacher at One Month. Faculty at Columbia University where I teach Digital Literacy. I write about coding, the internet, and social impact.

Bitcoin vs. Ethereum: What’s the Difference?

3 min read

What’s the difference between Bitcoin and Ethereum?

First, it’s important to understand that there are two categories of digital coins: Cryptocurrencies (e.g. Bitcoin, Litecoin, ZCash, Monero, etc) and Tokens (e.g. Ethereum, Filecoin, Storj, Blockstack, etc.)

Bitcoin is a “Cryptocurrency”

Bitcoin and other cryptocurrencies are competing against existing money (and gold) to replace them with a truly global currency.

The promise of Bitcoin is that it is:

  • A global currency which allows individuals to own their own money (without having to rely on national banks).
  • Lower fees for transferring money across geographic borders.
  • Financial stability for people who live in countries with unstable currencies. (e.g. In 2016, Venezuela’s currency hit an inflation rate of 800%). In addition, two-thirds of the current global population has no access to banking or limited access — Bitcoin is changing that.

Ethereum is a “Token”

What Bitcoin does for money, Ethereum does for contracts. Ethereum’s innovation is that it allows you to write Smart Contracts: basically, any digital agreement where you can say “if this” happens, “then something else happens.” For example:

  • If I vote for the President, then my vote is official and no one else can vote as me.
  • If I sign my name on this document, then I own the car, and you no longer own the car.
  • Up until now, we’ve carried out these agreements with a signature at the bottom of a paper document. Ethereum dramatically improves this model because it is digital, and proof of the transaction can never be deleted.

Comparison chart: Bitcoin vs. Ether

Bitcoin (BTC)Ether (ETH)
What is it? A currency A token
InventorSatoshi NakamotoVitalik Buterin, Joseph Lubin, Gavin Wood, etc. 
Went aliveJanuary 2009July 2015
Supply StyleDeflationary (a finite # of bitcoin will be made)Inflationary (much like fiat currency, where more tokens can be made over time)
Supply Cap21 million in total18 million every year
Smallest Unit1 Satoshi = 0.00000001 BTC1 Wei = 0.000000000000000001 ETH
New token issuance timeEvery 10 minutes approximatelyEvery 10 to 20 seconds
Amount of new token at issuance12.5 at the moment. Half at every 210,000 blocks5 per every new block
UtilityUsed for purchasing goods and services, as well as storing value (much like how we currently use gold). Used for making dApps (decentralized apps) on the Ethereum blockchain. 
PriceAround $5300 (in 2019) Around $173 (in 2019) 
PurposeBitcoin is a new currency created to compete against the gold standard and fiat currenciesEthereum is a token capable of facilitating Smart Contracts (For example a lawyer’s contract, an  exchange of ownership of property, and voting)

Bitcoin vs. Ethereum: Side by Side Comparison 

Bitcoin itself is two things: (1) it’s a digital currency known bitcoin (lowercase, also referred to as BTC) and Bitcoin is a technology (also known more generally as blockchain). Both are called the same thing which admittedly can be confusing for newbies.

  • Bitcoin = The name of the Bitcoin network
  • bitcoin = The currency (or BTC)

With Ethereum it’s similar but slightly different: the token is called ether (or ETH) and the network is Ethereum. 

  • Ethereum = The Ethereum network
  • ether = The token (of ETH)
Bitcoin vs. Ethereum: What's the Difference?
Bitcoin vs. Ethereum: What’s the Difference?

Where Can I Buy bitcoin and ether?

Coinbase is the most popular, and easiest place to buy both bitcoin and ethereum. Other popular exchanges where you can buy Bitcoin and Ethereum include Gdax (owned by Coinbase), or Kraken

Join Coinbase now and get $10 of free Bitcoin if you buy or sell $100.

How Much Does BTC and ETH Cost?

You can visit Coinmarketcap anytime for the latest price of BTC and ETH.

It’s important to know that you don’t have to buy one entire BTC or ETH, you can buy a smaller percentage of either.

Bitcoin vs. Ethereum: How Many Tokens are Available?

For Bitcoin, the total supply cap is set at 21 million. At the moment, according to CoinMarketCap, the circulating supply is around 18,586,737 BTC

A new BTC is generated approximately every 10 minutes. And after 2140 no more new bitcoins will be created, which is why Bitcoin is said to be deflationary (the opposite of inflation).

When new bitcoins are created miners compete to get them. Miners are people with can play one of two possible roles: they use their computers to claim new bitcoin and/or they help verify transactions on the network — much like a bookkeeper. 

There’s no set cap for a total supply of ETH. At the moment, around 96,815,798 ETH are circulating.

Bitcoin vs. Ethereum: Purpose

You can use Bitcoin to send or receive money or to purchase goods at popular sites like Overstock.com, Namecheap, or Tesla. You can also hold your bitcoin as an investment, or for long term storage of value (kind of like how people invest in gold). 

Ether is not as popular as BTC for purchasing goods. At the moment ether is mainly being used by developers building applications on top of it. Over time, and as more apps are developed, the value of ether will likely move from being speculative (as it is now), to more useful in everyday life. 

How to Store bitcoin and ether 

Once you buy digital currency you’re going to want to store it in cold storage (this is a much more secure place to store your currency. Exchanges like Coinbase are where you want to buy currency, but after you purchase the currency it is not advisable to leave your money at the exchange.)

Bitcoin, ether and many other types of coins can be stored on a cold storage option like Trezor or a Ledger.  If you’re serious about buying, sending, or storing larger amounts of cryptocurrencies I’d suggest you pick one up.

Want to Learn More About the Differences Between Bitcoin and Ethereum?

I teach about Bitcoin, Ethereum and blockchain at Columbia University’s Business School. And also teach online with One Month. You can join over 60,000 students at One Month where we offer a 30-day Learn Bitcoin and Ethereum course. The course covers blockchain and the top 5 most popular cryptocurrencies. 

Bitcoin vs. Ethereum What's the Difference?
Bitcoin vs. Ethereum What’s the Difference?

 

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Chris Castiglione Teacher at One Month. Faculty at Columbia University where I teach Digital Literacy. I write about coding, the internet, and social impact.

37 Replies to “Bitcoin vs. Ethereum: What’s the Difference?”

  1. Simply explained and easy to understand. A nice read, i share it with my family to educate them on bitcoin. Thanks.

  2. I’m a bit confused why you don’t consider ether (or any other token) cryptocurrency?
    From my understanding, the point of issuing a token is for use (a transfer of value) within the network (like file storage with Filecoin). These tokens can therefore be used for product/service as well as transferred to other fiat currency via an exchange. So bitcoin enables the exchange of bitcoin for product/service in the network, and “tokens” (or “cryptocurrencies” as I refer to them), enable the exchange of token for product/service in the network.
    Thanks for any clarifications!
    Kevin

    1. Hey Kevin,

      You’ll find that there are many ways to talk about the same thing. Which is partially what makes it confusing. (e.g. cryptocurrencies, digital currency, altcoin, tokens, etc)

      You’re right, people do use the term cryptocurrency when referring to Ethereum. And sometimes people say “cryptocurrency token” as shown on:
      https://en.wikipedia.org/wiki/Ethereum

      Another way it’s being referred to is as a “cryptoasset” – as explained by Chris Burniske in his recent book of the same name where he argues, “I believe in a taxonomy of cryptoassets that goes far beyond currencies.”
      https://medium.com/@cburniske/cryptoasset-valuations-ac83479ffca7

      Personally, I believe that ether is more than a currency. Ether has a specific niche it’s filling. Therefore I’m not using “cryptocurrency” because ether is not directly competing against other fiat currencies like the US dollar.

      The word “token” is gaining popularity for digital assets that aren’t competing directly against currency, and I think it makes sense. You can see this illustrated in two recent token sales by Filecoin and Blockstack.

      See:
      https://filecoin.io/
      https://blockstack.org/

      These are both Y Combinator companies where I know the founders are some of the smartest people I know who are working to improving the future of how we think about the digital asset space. It’s also how it’s referred to on Y Combinator’s blog: https://blog.ycombinator.com/the-token-effect/

  3. Pingback: Quick explanation of the Blockchain Cryptocurrencies Key Technical Concepts – Garage inside Garage blog
  4. Very easy to understand and specially for newbies. I have read somewhere that Bitcoin is safer and more widely accepted. It has more utility for the time being.But Ethereum is cheaper, and it has a much a higher ceiling considering its utility. Can you share your opinion which is better?

    1. I don’t think one is better, they have different uses. Bitcoin is better for storing value (like gold), and as a currency competing with fiat currencies. While ether is better for writing smart contracts, and Dapps on top of it. At the moment you’re right, bitcoin is more widely accepted for transactions.

  5. Anybody can create a Bitcoin account called a wallet on a computer or smartphone. To create an account, you don’t need to supply a name, address, or email. And because you don’t even need an internet connection to create an account, it can be tough to track who owns which account.

  6. Bitcoin has gained so much popularity in the recent years and is now the trending topic in all major news websites. If this is the case then you need to decide for yourself if you think this is a good time to Buy Bitcoin. Thanks for sharing this!

  7. Here is the first auction house that is willing to take bitcoin The Information Technology Xchange you can see the list of auctions here. https://theitx.com/itx-1.php shows it here Currency: US Dollar or Bitcoin at halfway toward the bottom. let me know what you think or do you know of any other auction places that take it?

  8. I always hear about Bitcoin when people discuss cryptocurrencies. I know there are so many variants out there, so thanks for sharing this analysis of the similarities and differences. The comparison chart is great. I already know a few friends I am going to share this article with. It’ll help answer some questions for them.

  9. I was very pleased to find this site.I wanted to thank you for this great read!! I definitely enjoying every little bit of it and I have you bookmarked to check out new stuff you post

  10. Pingback: Bitcoin or Ethereum: Which is Better to Buy?
  11. I think in today`s scenario Ethereum is best option to buy because Bitcoin is going very down.

  12. That’s really interesting that bitcoin lets you own your own money without having to rely on banks. I want to find something that I can invest in without having to worry about banks failing or anything like that. It seems like it’d be a good idea for me to find somewhere that I can buy bitcoin at.

  13. I think nowadays Ethereum is good rather than Bitcoin because Bitcoin is going down day by day and Ethereum is going up.

  14. I was always confused in between both and this is the best place where i get a clear description for both of them. Thank you for the information, appreciate your efforts.

  15. Great review, what Bitcoin does for money, Ethereum does for contracts. Have to keep that in mind

  16. Pingback: Bitcoin vs. Ethereum | Bitcoin and Wallet
  17. Pingback: Bitcoin vs. Bitcoin Cash - One Month
  18. “First, I am a complete newbie here and i’m trying to buy a digital product. I am really open to more tips.
    So, I am about to sign up to buy bitcoin from localbitcoin and they are asking for my email address. Is it ok to use my protonmail.com email address for privacy purpose? I’m taking your advise not to link my real life info, but I have to buy the bitcoin through paypal, which has my real life info. I’m confused! Please help! Thanks for your time.”

  19. Hi. is using Jaxx an easy and secure way of buying different types of cryptocurrency? And if there are any other programs that you would recommend in purchasing this currency?

  20. BTC or, bitcoins, are primarily used for purchases on Dark Net Markets(DNM). For this reason alone it will always cost a bit and usually be somewhat of a pain in the ass. I’ve used Localbitcoins in the past and have been using Virwox without incident for the past 6 months. Both of these sites will cost you in fees, that’s just how it is. I’m not aware of any BTC sellers who take less than 15% on orders of under $300. Many won’t even accept under$100, which I normally don’t need to buy. Given that, Virwox let’s you deposit much smaller amounts, but they’re fees end up close to 20%. That’s basically a convenience fee. After 2 deposits are made you get your BTC within 2 hrs, the first 2 are 48 hrs. Also, you must use the same method of purchase ex.(PayPal) each time to get your BTC within 2 hrs. If you suddenly change from PayPal to a CC or something similar, chances are that you’ll have to again wait the 48 hrs. This is due to an automatic security feature of the site. It happened to me. I brought it to their attention, letting them know that it wasn’t in their FAQ or anywhere else on the site. They responded quickly and I had my BTC within 3 hrs. Basically, for convenience both localbitcoins and Virwox are good choices. Just make sure that you read the FAQ and educate yourself or you could end up in a shitty situation. If you want complete anonymity, pay with cash at the seller’s bank or in person(both of which are risky) You’re much more likely to get scammed and/or waiting a while for your BTC when you’re dealing with an individual instead of Virwox. Just make sure to check out the seller’s feedback and hopefully it all works out. There will ALWAYS be fees and other obstacles when dealing with an unregulated currency. If it’s too much to deal with maybe you should just buy your goods IRL instead. In the end, It’s all about convenience.

  21. As far as I am aware, no reputable and long-standing site extends this facility to their customers. The risk of charge backs are just too great. In addition, cryptocurrency trading is against PayPal’s T&C, so both the seller and buyer’s account could be frozen at the snap of a finger. Case in point, CoinPal: Buy Bitcoins with PayPal . Do yourself a favor and avoid the inevitable heartache.

  22. I’m a fellow Canadian as well and found we can buy ether from Coinbase. Did you consider buying from Coinbase instead of buying bitcoin then convert into ether?

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