With the growing popularity and media attention of Bitcoin and Ethereum, you’ve likely heard these terms more and more often. So what are they and how are they different? In this blog post, we are going to provide some basic explanations.
Comparison chart between Bitcoin and Ether:
|Bitcoin (BTC)||Ether (ETH)|
|What is it?||Generated on the Bitcoin blockchain||Generated on the Ethereum blockchain|
|Inventor||Satoshi Nakamoto||Vitalik Buterin; Other co-founders include Gavin Wood and Joseph Lubin|
|Went alive||January 2009||July 2015|
|Supply Cap||21 million in total||18 million every year|
|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||Trade and investment; Payment for retailers/services that accept it.||Trade and investment; Use for application development on top of the Ethereum blockchain|
|Price||Around $5,500 at the moment||Around $300 at the moment|
|Purpose||A new currency created to compete against the gold standard and fiat currencies||A token capable of facilitating Smart Contracts (For example: a lawyer’s contract, an exchange of ownership of property, and voting)|
Ethereum vs. Ether
First of all, when you talk about “Bitcoin,” you may refer to two things: a specific technology (known as Bitcoin’s blockchain), and the token this blockchain generates (which is BTC). Both are called the same thing: “Bitcoin,” which admittedly can be confusing for newbies.
- Bitcoin = The name of the Bitcoin network
- Bitcoin = The token is also called Bitcoin (or BTC)
With Ethereum, it is different, which should only refer to the blockchain called Ethereum. The token that this blockchain generates is called ether (ETH).
- Ethereum = The Ethereum network
- Ether = The token has its own name!
For this blog post, we will focus on the difference between BTC and ETH – the tokens. But we want to bring upfront these concepts so that you don’t get confused. For the blockchain Ethereum v.s. Bitcoin, we will go into more details in another blog post.
Bitcoin vs. Ether: What’s the difference?
When you read about the price of Bitcoin and Ethereum, that is referring to the prices of the tokens, namely BTC and ETH. You can buy tokens at different exchange platforms, such as Coinbase, Gdax, or Kraken.
In order to keep the blockchain network running, the two systems allow individual nodes to participate and compete with each other to receive tokens as awards. Bitcoin blockchain rewards BTC. Ethereum blockchain rewards ETH. Just like U.S. companies compensate employees with dollars and Chinese companies reward workers with yuan, although dollars and yuan are centrally issued currencies. BTC and ETH, however, are generated by their underlying blockchain and the blockchain belongs to everyone who participates in, not any single central authority.
Bitcoin vs. Ether: How many tokens are available?
Approximately every 10 minutes, new BTC will be generated to reward the participant who mines the next block. How many? It’s 12.5 BTC per block for now. When it first started on January 3, 2009, it was 50 BTC per new block.
The rule is when the Bitcoin blockchain reaches every 210,000 blocks, then the reward will half. So while the reward was 50 BTC in 2009, it has gone down to 25 BTC at the 210,000th block in November 2012 and further decreased to 12.5 when the chain reached the 420,000th block in July 2016. So you can see it’s about every four years.
Now we are at some 487,000th-ish block. When it reaches the 630,000th, the reward will be 6.25 BTC. Here you can see the countdown for the next halving.
We said “approximately every 10 minutes,” that’s because the difficulty of making the next block goes up as time passes. So it could take longer for participants to have the chance to get fewer BTC in the future.
For ETH, it comes up much more quickly, around every 10 – 20 seconds and every new block will reward one participant with 5 ETH. While there’s no set cap for a total supply of ETH, there’s a rule that new ETH tokens awarded each year cannot exceed 18 million. At the moment, around 94,815,798 ETH are circulating.
Since every year the growth rate of new ETH and BTC issued will slow down, both tokens are said to be deflationary.
Bitcoin vs. Ether: What can I do with them?
For both BTC and ETH, you can trade them in exchanges. For Bitcoin, you can also find some retailers in the world that accept it as a payment method. Japan, for example, recognizes Bitcoin legally as a payment. Following the new regulation, Bic Camera Inc, a local gadget chain, now accepts BTC as payment. Some restaurants in New York City also allow customers to pay BTC.
ETH, however, is not as popular as BTC at a consumer level. But because of the key feature of the Ethereum blockchain that allows developers to build applications on top of it, the ETH token can be used by developers for their programming projects.