Both Bitcoin and Ethereum are the most widely discussed cryptocurrencies, especially after the unparalleled bull run at the end of 2017 launched prices to unseen heights. While Bitcoin and Ethereum are among the leading and most popular cryptocurrencies, the technology backing each one of them is fairly remote.
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Bitcoin represents a distributed peer-to-peer (P2P) digital currency which can be transferred in an instant, safely and securely between two parties, regardless of their current whereabouts. It’s essentially digital money that you can send to any other Bitcoin user who lives anywhere in the world.
Bitcoin was initially introduced in October 2008 with a whitepaper published by an anonymous person (or group of people) known as Satoshi Nakamoto. The document itself is called “Bitcoin: A Peer-to-Peer Electronic Cash System.”
Bitcoin is created on the base of blockchain technology. The blockchain represents a public ledger that contains the transactions in a given system which have ever been executed. The ledger itself is stored throughout the entire network and to update one is to update all.
When a transaction is broadcasted and included in a mined block, it is added to the blockchain and it can’t be reversed or altered in any way. It will remain in the public ledger and it will be verifiable at any given moment.
Ethereum represents a decentralized platform which runs smart contracts. These are described as applications which run exactly as programmed. Ethereum is not a currency – it’s a platform. It has its own digital currency called Ether (ETH).
Special attention is needed to be paid to understand the way mining works for both. Even though the core of both Bitcoin and Ethereum is blockchain technology, the key differences can be observed when it comes to their consensus algorithms. Both Ethereum and Bitcoin have their own distinct consensus algorithms which means that the ways they verify the validity of the information being added to the ledger are different.
Bitcoin mining is based on the Proof of Work (PoW) algorithm, the probability of one mining a block is based on the amount of computational work he has done. The mining reward will be given to the very first miner who manages to solve a complex cryptographic puzzle of each block. As per the concept of PoW, each network miner competes with all of the other in using computational power.
Like Bitcoin Ethereum mining is based on Proof of Work (PoW), this allows the decentralized Ethereum network to come to consensus, or agree on things like account balances and the order of transactions. The proof-of-work protocol, known as Ethash, requires miners to go through an intense race of trial and error to find the nonce for a block. Only blocks with a valid nonce can be added to the chain. This prevents users "double spending" their coins and ensures that the Ethereum chain is incredibly difficult to attack or overwrite.
Bitcoin’s average block time is a little bit more than eight minutes, while Ethereum’s block time is around 25 seconds.
There are plenty of alternatives to Bitcoin which have managed to gain both value and popularity during the years.
Bitcoin Cash is the result of a hard fork (network split) which took place on August 1st, 2017. In a nutshell, a group of members of the Bitcoin community wanted to increase bitcoin’s block size. The resulting change caused the network to split in two.
Another popular alternative to Bitcoin is Litecion (LTC). It’s also a peer-to-peer digital currency which is intended to enable instant and cheap payments to people around the world.
Monero (XMR) is another alternative to Bitcoin. It is a cryptocurrency which places the emphasis on security, privacy, and the fact that it is supposedly untraceable.
Naturally, there are many other coins that one can use, but Bitcoin has long established itself as the predominant market leader, accounting for nearly half of the entire coin market cap.
As we explained before, Ethereum is a platform rather than a digital currency and, as such, we’d be looking at other platforms which are designated to enable the creation of decentralized apps.
Much like Bitcoin and Bitcoin Cash, Ethereum has also gone through its internal disagreements. Ethereum Classic (ETC) is perhaps one of the popular alternatives to Ethereum. It is the result of a hard fork which split the network in two.
Another popular alternative to Ethereum is NEO. The NEO blockchain is perhaps the very first one to be launched as a dedicated, open-source blockchain-based project in China and is even commonly referred to as the “Chinese Ethereum.”
Another popular alternative is Cardano (ADA), it is another decentralized, fully open-source public blockchain and cryptocurrency project, which powers the ADA cryptocurrency. It uses a different kind of approach to “mining” than other blockchain platforms. Rather than requiring energy-intensive resources as proof of work (one of the major drawbacks of Bitcoin and other mining-based cryptocurrencies), the new algorithm eliminates this intensive mechanism, yet it still has been proven to be mathematically secure — to the level of Bitcoin (the most secure platform to date).
EOS is one of many Ethereum alternatives. EOS is a cryptocurrency designed to support large-scale applications. There are no fees to send or receive EOS. Instead, the protocol rewards the entities that run the network periodically with new EOS, effectively substituting inflation for transaction fees.
Another popular alternative to Ethereum is Dfinity, it is a decentralized network design whose protocols generate a reliable “virtual blockchain computer” running on top of a peer-to-peer network upon which software can be installed and can operate in the tamperproof mode of smart contracts.
Stratis (STRAX) is also a platform which competes with Ethereum. It supports C# compatible with the Microsoft .Net framework. The network is designated to provide end-to-end for C#-based blockchain applications.
As you can see, there are plenty of things to know about both Bitcoin and Ethereum. While they are commonly regarded as the two largest digital currencies, the truth is rather different. Choose wisely and do some research before investing.
While entering in the world of cryptocurrency investing, it’s important to make those fundamental differences. Bitcoin and Ethereum are just two of the most well-known projects in the field but there are over 2,000 different ones and each one of them has its own specifications. Sign up to start trading safely and securely at worlds best crypto platform.