Bitcoin vs Ethereum: what's the difference?

We hear a lot about Bitcoin and Ethereum, but what is the difference between these two cryptocurrencies, and why does the latter just attract growing interest? Cryptocurrencies have earned a reputation since the first exchanges in Bitcoin in 2009. It is also this cryptocurrency that launched the blockchain revolution. A decentralized system of financial transactions, relying on a network of individuals who undermine, ie solve complex mathematical operations to make the system work, in exchange for Bitcoins.

Bitcoin historically precedes Ethereum
The advantage of the blockchain system is that it replaces all the intermediaries generally needed to establish trust in transactions. Some information, such as the amounts transiting from one portfolio address to another, is public, which makes it easy to verify whether a transaction has been completed. The blockchain manages a number that will be finite term of Bitcoins introducing a notion of rarity. Thus, in addition to being a means of payment, Bitcoin is also an investment - some warn nevertheless risks and prefer the comparison with a gambling. The price of cryptocurrency has also surged in the space of two years from a few hundred euros to more than 10,000 euros today.

It is now attracting some institutional investors who want to create products in traditional markets based on Bitcoin prices. In addition, Bitcoin is open source, which means that everyone can see their code, and propose improvements. But also use it to create other cryptocurrencies. This is because the source code of Bitcoin, or rather the blockchain technology is open source that other cryptocurrencies are quickly created in its wake. Ethereum is a good example since its creation in 2015. Ethereum has some originalities compared to Bitcoin.

Ethereum vs Bitcoin: abundance vs. rarity
There will eventually be a finite number of Bitcoins - about 21 million. These are created progressively by the miners in exchange for the provision of their computing capacity for the network. Rather, it is a good thing to store value - although it does not guarantee that it will remain high: the value of the price will always depend on supply and demand, which means that enough money is needed. people are willing to buy Bitcoins at a certain price for cryptocurrency to have a certain price.

The Ethereum does not try to create a rarity with the Ether, its cryptocurrency. New units will be unlocked indefinitely. Besides, Ethereum does not only run Ether, which is only a modality for running its intelligent contract trading system - it also allows you to create decentralized applications. With this approach, the Ether price has also exploded, and in mid-2017 Ethereum surpassed Bitcoin in terms of transaction volume - partly also thanks to smart contracts.

And that does not seem to stop with today two times more transactions in Ether than Bitcoin. What appeals to its users is its optimization: transfers are faster and cheaper than those in Bitcoins. The user chooses the amount of the fee himself - if he chooses a fee below the average rate, the execution will take longer.

The Ethereum is a multi-purpose platform: cryptocurrencies, secure contracts, gambling, crowdfunding, companies ...
As we said before, the Ethereum is more of a pluralistic way of using the Blockchain system for its own ad hoc cryptocurrency, Ether, than other cryptocurrencies that use the same Blockchain and especially secure contracts that allow structures and systems to be put in place at a lower cost that would normally require expensive middlemen to operate. Ether is not the only ad-hoc currency Ethereum, there is also the gas that is only used to pay transaction fees (in Ether).

The price of gas is currently extremely low which guarantees extremely cheap transactions. We can say that the big advantage of Ethereum on Bitcoin is that it is able to do everything. In particular so-called smart contracts, which are triggered when certain conditions are met. This makes it possible to build structures or even complex firms, for example companies where the whole aspect of transaction management would be operated in a fully automated way. Result: less costs, no risk of shenanigans, more confidence ...

Ethereum is much less energy consuming than Bitcoin
There is little talk of this aspect of cryptocurrencies, but these are formidable for the environment, in especially Bitcoin. The system absorbs in fact 37 terawatt-hours of electricity a year, which is about what a country like Qatar consumes. This is fairly straightforward: mining is based on the participation of many more industrial individuals and ASIC computing unit farms around the world. The more interest around the cryptocurrency increases, the more the miners climbs too. Alas, it is complicated and expensive to mine Bitcoins under profitable conditions, and economically strong.

This does not prevent millions of people from connecting machines that are not optimized for this task. In comparison, the Ethereum consumes only 9 terawatt hours, which is only the power consumption of a country like Costa Rica. But the designers of Ethereum still wish to reduce this footprint by moving to a new mining system, always decentralized but less atomized, ie with fewer actors. The system is the Proof-of-Stake system. To put it simply, it is a matter of favoring the miners who have already won the mining war. And who therefore use adequate equipment.

Ethereum vs Bitcoin: two different objectives that make both cryptocurrency very interesting for investing
Finally the biggest difference between Bitcoin and Ethereum is its goal: Bitcoin has shown the way, creating a new unit of value ex-nihilo based on this innovative system that is the blockchain. Ethereum is a state-of-the-art technology that businesses and individuals can use as real management and transaction tools. A group, the Ethereum Alliance Company has also been created to democratize Ethereum blockchain technology - a project supported by many companies among the 500 richest on the planet. The interest for these firms is the ability to create highly complex and fully automated enterprise applications.

Tomorrow, these applications could even replace companies such as Uber for example: the network of VTC takes part of the race to make profits. A fully Ethereum VTC company could automate all operations so that "Uber" would not be really needed. Drivers could hope to pay less for their infrastructure and avoid any risk of abuse by their "employer". One can also imagine alternatives to Kickstarter where the amount of money is automatically unlocked reaching his goal.

We are already thinking of using it for the Internet of Things, food distribution, energy pricing and sports betting sites. And that's exactly what makes it worth investing in: the Ethereum is already doing all that bitcoin does, but it has its efficiency, the reduced cost of its transactions and its environmental record. As well as the ability to create intelligent contracts based on the blockchain. While Bitcoin has exploded in value for some time, Ethereum represents a cheaper alternative, and yet seems more promising.

Especially since it seems even further from its full potential than Bitcoin. Its relatively low price should not obscure the fact that today it represents a huge volume of transactions, and its multiple uses should not make the medium-term trend go away. And you, have you invested in Bitcoin and / or Ethereum?