Currently, Bitcoin and Ethereum are two of the most recognized cryptocurrencies globally, and although both cryptocurrencies are based on blockchain technology, they have certain important differences, especially regarding their future development. In this article, we will analyze what these fundamental differences are.
Smart contracts vs cryptocurrencies
Ethereum is a platform that works thanks to a created cryptocurrency (Ether) that functions as a kind of “fuel” that makes it possible to develop different activities and projects around said platform. This network is used to develop, create, trade, and publish applications whose operation is based on smart contracts and the creation of tokens, which are adjusted to the business carried out; In another way, Bitcoin is based 100% on its own cryptocurrency, possessing a network in which its operations operate regardless of the business or operation for which said cryptocurrency is used.
Bitcoin was created in 2008 by an anonymous programmer calling himself Satoshi Nakamoto, about whom not enough details are known. Bitcoin is the pioneer of cryptocurrencies and was the one who unveiled blockchain technology (technology that supports it). Bitcoin does not have a visible founder and is not dependent on any company, organization, foundation, institution, or government. We must consider that Bitcoin, being the “pioneer” cryptocurrency, has an age that has given it a great advantage over other new cryptocurrencies, especially in terms of popularity, laws, and dissemination.
Ethereum was created by Vitalik Buterin (along with other programmers) in 2015 as a decentralized platform for signing smart contracts, financial transactions, and the creation of tokens; currently, Ethereum does not depend on any company, institution, or government; however, unlike Bitcoin, Ethereum has authors that can be clearly identified and depends on the Ethereum foundation.
Production equipment and number of units
For manufacturing bitcoins, powerful and high-cost computer equipment is required; another point that we must consider is many energy resources (consumed by the powerful computers) to create new Bitcoins. As for the number of units, its production is limited to 21 million units. On the other hand, Ethereum only needs a standard computer to be mined, which means fewer energy resources and low cost. Regarding its number of units, the only limitation is that a person cannot produce more than 18,000 units per year (estimated that there are currently over 112 million coins in circulation).
Liquidity refers to the volume that exists of that value in the market, in addition to how easy it is to buy or sell a cryptocurrency; Although many cryptocurrencies have been created in recent years, most lack liquidity. Bitcoin and Ethereum have high liquidity; however, their difference is found in the amounts they handle; according to expert calculations, bitcoins worth 27 trillion dollars are moved daily, while in Ethereum, 17 trillion are mobilized dollars approx. (at the same time).
As we saw in our previous article, the time each cryptocurrency takes in its transactions is one of the primary factors to consider; for example, Bitcoin takes approximately 10 minutes to confirm an operation, while in Ethereum, this confirmation is faster, since it takes approximately 12 and 17 seconds; this difference between both cryptocurrencies has also influenced how they are used. On the one hand, Bitcoin’s times are compatible to buy high-value products or services that do not require an immediate confirmation (for example, cryptocurrencies such as investment or real estate), in the case of Ethereum, its compatibility is more related to the acquisition of products or services of immediate confirmation and delivery.
When it comes to dividing the value of the cryptocurrency into decimals, Bitcoin reaches 8 decimal places; the small units of Bitcoin are called Milli Bitcoin, micro Bitcoin, and Satoshi (smallest fraction of all). While in Ethereum, its division reaches 18 decimal places: the Ether currency is divided into Finney, Szabo, Shannon, Babbage, Lovelaces, and Wei.
Which cryptocurrency is better?
Both cryptocurrencies enjoy great credibility and liquidity, and despite their differences, the two are still relevant globally, as they tend to complement each other in many respects. Due to its popularity and value, we can say that currently, Bitcoin is at number one, while Ethereum is at number two; however, this is just a “snapshot of the moment,” which means that this may change in the future.
We must consider that due to its special characteristics, each cryptocurrency faces its own challenges to continue growing and be massively / globally adopted; for example, in the case of Bitcoin, its main challenges are its high consumption of resources and the speed of its transactions. While in the case of Ethereum, one of the possible obstacles is that it does not have a limited number of units and that behind its creation, there are clearly identified people and foundations (which does not happen in Bitcoin) which could at some point exert some influence on its future development.
What do you think about this topic? Which cryptocurrency seems better to you: Ethereum or Bitcoin?
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