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|
|Inventor||Satoshi Nakamoto||Vitalik Buterin, Joseph Lubin, Gavin Wood, etc.|
|Went alive||January 2009||July 2015|
|Supply Style||Deflationary (a finite # of bitcoin will be made)||Inflationary (much like fiat currency, where more tokens can be made over time)|
|Supply Cap||21 million in total||18 million every year|
|Smallest Unit||1 Satoshi = 0.00000001 BTC||1 Wei = 0.000000000000000001 ETH|
|New token issuance time||Every 10 minutes approximately||Every 10 to 20 seconds|
|Amount of new token at issuance||12.5 at the moment. Half at every 210,000 blocks||5 per every new block|
|Utility||Used 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.|
|Price||Around $18,000 (in 2020)||Around $610 (in 2020)|
|Purpose||Bitcoin is a new currency created to compete against the gold standard and fiat currencies||Ethereum 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)
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.