As we have already introduced Ethereum and Bitcoin in a previous article, let us now get a little more into details by understanding the main differences between the two cryptocurrencies and the two blockchains.
Bitcoin, the first of cryptocurrencies
Bitcoin was the first cryptocurrency ever created, it was intended as such and became the first virtual currency. No physical Bitcoins exist. The cryptocurrency was initially invented to remove the need for banks in money transactions. This was made possible thanks to blockchain which guarantees a very high level of security and is almost impossible to hack. Indeed, to ‘hack’ the Bitcoin blockchain you would have to take control of 51% of the total blockchain. This is because every information on the blockchain has to be validated by the other users of the platform to be considered as true. For transactions to be validated, miners allocated calculation power to the blockchain and are compensated for that in Bitcoin.
So, if someone took control of more than half of this blockchain, then he could validate all transaction by himself because he represents the majority of users. This means he could potentially say that he owns all the addresses on the Bitcoin blockchain and the amount of Bitcoin on each. This has never happened obviously as if someone were to hack the Bitcoin blockchain then the value of Bitcoin would plummet as quickly as the trust of its users. So, Bitcoin is the ancestor of all cryptocurrencies and a perfect demonstration of the security blockchain can offer.
What about Ethereum?
At first sight, Ethereum looks very similar to Bitcoin in the sense that they both use blockchains as there working principle. But let us remember that the Ethereum blockchain was initially meant as a system and that the cryptocurrency Ether was only created later. That is one point on which Ethereum and Bitcoin are very different.
Another difference is that the Bitcoin blockchain was not meant to be modified and used by people to develop new applications. However, the Ethereum blockchain does just what the Bitcoin blockchain can’t, it allows people to set up their own application in an anonymous, safe and middleman-free environment. This is made possible because Ethereum was created with its own programming language as opposed to Bitcoin.
People can even create their own cryptocurrency as ERC20 tokens which is one of the reason the Ethereum blockchain is a go-to choice for companies who decide to launch their ICOs and create their personal token. Bitcoin being an older implementation of blockchain is also a much slower and more limited system than Ethereum. A new block is created every 10 minutes in Bitcoin whereas it takes 14s for Ethereum which makes transaction validation much faster.
The last major difference between the two blockchains is that both rely on proof of work (POW) algorithm but this is soon going to change as Ethereum is heading towards a proof of stake (POS) algorithm in its next version Serenity.
In the end Ethereum and Bitcoin both rely on the same technology that is blockchain but demonstrate two very different ways of using it. Ethereum is faster and more flexible, a kind of update from its older brother Bitcoin which started paving the way for blockchain technology almost 10 years ago.