It has been a very exciting year for Cryptocurrency with the market value of most major Cryptos increasing dramatically over the past 12 months. Investors saw the increasing adoption of Cryptocurrency as a payment method and decided to back its potential.
In addition to inflows of capital from investors keen to hold Cryptocurrency, substantial resources were also invested in the technical development of various Cryptocurrencies.
The underlying infrastructure needed to support the wider adoption and use of Cryptocurrency also benefited from increased levels of innovation and development throughout the year.
In the midst of all this activity two Cryptocurrencies in particular have attracted a lot of attention; Bitcoin and Ethereum. This has been for a variety of reasons, but it has resulted in these two Cryptos being the most widely held ones at present.
But what is the difference between Bitcoin and Ethereum? This article will take you on a short journey through the Crypto landscape to explain what these differences are.
Bitcoin was the very the first Cryptocurrency. It was invented by an unknown person or group of people under the name Satoshi Nakamoto and released as open-source software in 2009.
It operates on a peer-to-peer basis with transactions taking place between users directly, without an intermediary. Essentially people can send Bitcoins to each other directly thus transferring value to each other without having to go through a bank or other payment provider.
These transactions are verified by network nodes through the use of cryptography and recorded in a publicly available ledger known as a Blockchain.
What exactly is a Blockchain?
A Blockchain is a public record of all transactions in a particular system that have ever been executed. It cannot be tampered with or edited and is protected by cryptography.
A Blockchain thus stands as an unchangeable record of all transactions on a network, accessible to all participants. It is essentially a public record of all of the transaction which have taken place on a particular network, but it can also be much more.
Whilst Blockchain technology, in the beginning, was used as a method to simply record transactions between people using things like Bitcoin, it is now being developed further and used to support applications which are beyond just a digital currency like Bitcoin.
Ethereum is one of those advances. Launched in 2014, it is an open-ended decentralized software platform that enables smart contracts and Distributed Applications to be built and run. This is designed to happen without any downtime or interference from a third party by using Blockchain technology in a different way to Bitcoin.
Ethereum is not just a platform but also a programming language running on a blockchain. It is designed to help developers to build and publish distributed applications, not just transfer value between each other. It is far more than just another Cryptocurrency.
No one owns the Ethereum network itself, but the system runs it cannot be run for free. The network needs ‘ether’, a unique piece of code that can be used to pay for the computational resources needed to run an application or program. Ether is the token you see traded widely on Crypto exchanges.
The potential applications of Ethereum are wide-ranging and it is really only at the beginning of what could be a very exciting journey.
Difference Between Bitcoin and Ethereum?
While both Bitcoin and Ethereum are powered by the principle of a distributed ledger that is really where the major similarities end.
The difference between Bitcoin and Ethereum is their purpose. While Bitcoin is created as an alternative to regular money and is thus a method of payment and store of value, Ethereum is developed as a platform which facilitates peer-to-peer contracts and other software applications.
While Bitcoin and Ether, the token which runs on Ethereum, are both digital currencies, the primary purpose of Ether is not to be used to make payments but to assist developers in running distributed applications on the Ethereum platform.
As we have seen Bitcoin was designed to transfer value anonymously just like any other coin but Ethereum has much more advanced aims. It wants to be a platform which can be used to distribute other software applications and facilitate far more complex types of interaction than just the transfer for value.
Ethereum and its goals are more in line with the greater discussion around Blockchain based technology we can see today. Companies around the world see the Blockchain as something which can be used for much more than just value transfer.
It is certainly a very exciting time to be involved in this area. A public peer to peer ledger that cannot be tampered with offers up so many more possibilities than what it is being used for at present. Possibly far more than Satoshi Nakamoto could have envisaged all the way back in 2008.
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