As Bitcoin enters the mainstream, many people are discovering the crypto markets for the first time. But, like any new sector, it is difficult to get a grasp on what Bitcoin is exactly and why it commands all the headlines.
After all, there are thousands of other cryptocurrencies available, not least of which is Ethereum, the second-largest cryptocurrency after Bitcoin and perceived by many as a like-for-like alternative.
It is important, therefore, to distinguish the key differences between Bitcoin and Ethereum and why those differences matter:
Bitcoin is akin to a digital gold
The most obvious place to start is Bitcoin. It is by far the largest cryptocurrency, to the point where it has become a byword for the crypto market as a whole. However, there are still many myths surrounding Bitcoin, which need addressing if you are to differentiate between it and Ethereum.
Firstly, the use cases of Bitcoin and other cryptocurrencies are completely different. A common complaint aimed at Bitcoin is that the underlying blockchain is cumbersome and difficult to build another network on top of.
This misses the point completely. Bitcoin was designed from the start to be a standalone digital asset. It’s strictly limited supply of 21 million Bitcoins (not all of which will be mined until 2140) gives it scarcity, one of the primary requirements of any store of value.
It is also almost impossible to destroy and impossible to replace or copy. In this regard, Bitcoin should be regarded as a digital equivalent of gold, and only it is far easier to store – in a hard wallet such as the Keevo Wallet – and transport.
It does not have any other use cases other than this.
Ethereum uses ETH to power its network
While Bitcoin is used as a store of value, Ethereum has a completely different use case. Its currency – ETH – is used to power the network and act as building blocks to create decentralized systems on top of it. If Bitcoin is digital gold, then ETH is closer to digital oil or steel. This is why it is a mistake to treat the two currencies as like for like. They are completely different entities.
People can use the Ethereum blockchain network to build structures on top of – such as decentralized finance applications (Defi), decentralized exchanges, and gaming networks. ETH is also commonly used to pay for NFTs (non-fungible tokens) because many are created and sold over the Ethereum network.
Bitcoin is completely decentralized
One of the key strengths of the Bitcoin network is its complete decentralization. This means no individual, business, or country has any control whatsoever over the network itself. It cannot be changed, regulated internally, or shut down (barring a complete global internet outage). It exists as an entity in its own right.
Of course, Bitcoin had to be created by someone – and it was – but they handed over control long ago and remain anonymous to this day – known only by the pseudonym Satoshi Nakamoto.
This is in contrast to Ethereum. While the network itself is decentralized, Ethereum is still a company with a founder and figurehead (Vitalik Buterin) who can change the network and coin supply at will.
