A cryptocurrency is a decentralized form of money. A decentralized system is a system in
which no one can control it, and everyone has an equal say in the transactions carried out. There
is no central authority that manages the cryptocurrency, and thus there are no service charges and
transactions fees. Cryptocurrency is the latest trend in digital payment methods. The user base of
cryptocurrencies such as Bitcoin and Ethereum is increasing exponentially worldwide.
Bitcoin
Bitcoin is the first-ever cryptocurrency created in 2009! It was created by someone under
the pseudonym of Satoshi Nakamoto (Churchill, 2015). It is a form of digital currency that works
on cryptography, and hence it is more secure than most other forms of transactions. Bitcoin was
developed as an alternative to traditional currencies to reduce corruption and the black market;
its unregulated nature allows for this purpose. Banks are no longer needed because Bitcoin acts
as an online bank itself, with its users operating their money supply directly from their digital
wallets. Bitcoin can also be used as an investment since it is available for trade on several online
exchanges. As a store of value, users can hold their Bitcoin until the prices go up and then sells
them off. Bitcoin users are not tied to any particular country: they can send and receive bitcoins
anonymously.
Ethereum
Ethereum is a blockchain-based open software platform, enabling developers to build and
deploy decentralized applications. Ether is the cryptocurrency used for trading and investing on
the Ethereum platform, and it also pays for transaction fees and computational services on the
network (Dannen, 2017). Ethereum’s creators’ key aim was to develop a platform that allows
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users to write smart contracts on the blockchain easily. These are then followed through without
any third parties (middlemen). The Ethereum platform has since graduated from its ‘beta’ status
to become a dominant player in the cryptocurrency ecosystem.
Similarities
Both Bitcoin and Ethereum have a transparent record of transactions between parties.
They also have a peer-to-peer payment system without a central authority. Furthermore, they
both have security and immutability through a network of miners. Both digital currencies have
suffered from the same problematic transaction malaise – slow payments processing times
coupled with sky-high fees. They have dealt with the convoluted process of sending money
between users, questioning their long-term viability.
Differences
The main difference between Ethereum and Bitcoin comes down to purpose. Bitcoin was
created purely as an alternative to regular money, whereas Ethereum has tokens called “ether”
that can be traded or used to send messages through its blockchain. Bitcoin is a payment system,
whereas Ethereum is the system for creating new cryptocurrencies. Furthermore, Miners use
BTC to mine Bitcoin, whereas they use an algorithm called “Gas” to mine Ethereum.
Conclusion
To summarize, both Bitcoin and Ethereum are decentralized forms of money that no one
can control. Bitcoin was the first cryptocurrency created. Furthermore, both currencies have
suffered from the same problematic transaction malaise. Bitcoin was purely designed to replace
regular money, whereas Ethereum was created to trade and send messages. As a result of the
many benefits that cryptocurrencies have, its’ user base is increasing exponentially worldwide.
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References
Churchill, E. F. (2015). Why should we care about bitcoin?. interactions, 22(5), 20-21.
https://doi.org/10.1145/2810199
Dannen, C. (2017). Introducing Ethereum and solidity (Vol. 318). Berkeley: Apress.
https://link.springer.com/content/pdf/bfm%253A978-1-4842-2535-6%252F1.pdf