BITCOIN VS ETHEREUM

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INTRODUCTION

One of the greatest innovations of the 21^st century has to be the blockchain technology. Not only has it introduced a new form of money since it first surfaced in 2008, it has also ushered in the era of trustless yet verifiable transactions.

Moreover, from the moment smart contracts were integrated with blockchain technology, the era of intermediaries and middlemen began to hit a decline. It remains to see how much of an impact this new innovation will leave after it has reached adulthood.

Lots of blockchain variants have been built based on the blockchain technology. In this post, I compare the most prominent duo, both pioneers in their own rights with the second being an offshoot of the first. These variants are, Bitcoin and Ethereum.

BITCOIN

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ORIGIN

Bitcoin first surfaced in 2008 courtesy of the pseudonymous Satoshi Nakamoto. It first appeared in black prints on a whitepaper titled - Bitcoin: A Peer-to-Peer Electronic Cash System. In January of 2009, the idea went mainstream and the first ever blockchain was live.

FEATURES

Bitcoin was unorthodox. It proffered a new way of making payment right from its introduction. It seemed to go against majors methods in finance especially with its anonymity-supporting facilities. Here are some of bitcoin's features.

Peer-to-Peer

Bitcoin came with guns blazing against intermediaries and middlemen interfering in payment systems. Bitcoin supports transactions between two parties without the use of an intermediary. These transactions are accurately verified.

Anonymity

On the bitcoin blockchain, there's no need for identification. Transactions go on anonymously and these transactions are all accurately verified.

Decentralized

Perhaps, bitcoin's main event. Decentralizing payments is one of the core features of bitcoin's block chain. It operates by miner nodes verifying transactions on the network for a worthy compensation. These miner nodes could well be anyone, including you if you're interested.

Limited currency

The currency of the bitcoin was not to be minted indefinitely. To ensure the value of the currency, the total number of bitcoins that will ever be is limited to 21 million. This is to be minted at a certain pace which reduces after every 4 years.

Mining

Mining is an important feature in bitcoin's blockchain. It is how bitcoins come into existence. Mining is the act of verifying transactions, adding them into a block, and adding the block to the chain. Once each block is verified and added to the chain, a fixed amount of bitcoins is created (literally out of nowhere) and allocated to the miner node who verified the block.

Consensus mechanism

This is how the blockchain carries out its operations. For bitcoin, the consensus mechanism is Proof-of-Work (PoW). In this consensus mechanism, miners have to accomplish heavy duty tasks to verify the transactions on the blockchain. They are rewarded with bitcoins if they are successful.

Halving

On bitcoin's blockchain, after every 4 years, the fixed number of bitcoins (block rewards) given to the miner nodes for verifying a block, reduces by half. It began with 50 in 2008, halved in 2012, 2016 and 2020, leaving the current amount of block rewards at 6.25 BTC as at the time of putting up this post (2021).

Transparency

Every transaction on bitcoin can be seen. The blockchain is transparent and can be accessed through blockchain.com/explorer.

Transaction only

The blockchain was designed to be a transaction processing chain alone. It is not programmable, just for processing transaction.

Block details

Block size - Usually 1 mb (Segwit can take it higher)
Time to complete each block - 10 minutes
Transaction speed - 7 transactions per second.

UTILITY

Bitcoin is mainly used for processing transactions though it's native coin BTC is more widely accepted as an asset rather than as a legal tender. BTC, however, is accepted by an increasing number of merchants today for good reasons.

ETHEREUM

A while after bitcoin launched, it began to gain acceptance. The idea was a hit. One problem though, bitcoin was shy or so some bitcoin community members taught. One man in particular named Vitalik Buterin, could not fathom how bitcoin was so obsessed with transaction processing that it never accepted to run computer programs on its blockchain. Needless to say, he is a programmer.

He tried to persuade the others but was greeted with dogged allegiance to the doctrines of Satoshi enshrined in that whitepaper.

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ORIGIN

In 2013, tired of bitcoin community's nonchalance to supporting programs, Buterin thought, "what the heck!" and did his own 'Satoshi'. He proposed Ethereum that year, promising the world a smart-contract-supporting blockchain that won't just be decentralized but programmable as well.

Well, what do they say about secret admirers again? Or was it bitcoin haters 😡 ?

Answer is, in 2014, the proposed Ethereum project was crowdfunded and while Germany was still celebrating her 4^th world cup triumph party style in 2015, Ethereum was launched.

FEATURES

To avoid redundancies, Ethereum also has the following features -

Peer-to-Peer

Anonymity

Decentralized

Mining

Transparency

Furthermore, Ethereum has the following features -

Consensus mechanism

Up until Ethereum 2.0, the blockchain had the same consensus mechanism with bitcoin. Ethereum then used Proof-of-Work. When Ethereum was upgraded to Ethereum 2.0, a shift in consensus mechanism was one of the two most notable changes. Ethereum moved from Proof-of-Work to Proof-of-Stake.

Block rewards

Ethereum has a complex block reward system where it compensates some kinds of block which didn't make it to the chain. The blocks are referred to a Uncle blocks and / or nephew block.

Unlimited currency

Ethereum doesn't exactly buy the idea of limited number of coins. There's however, an annual limit to the amount of ETH entering circulation. This limit is set at 18 million ETH per year.

Programmable

The world's first. Ethereum came to get things done. It offered a platform for decentralized applications and smart contracts running on a blockchain. Programmable is perhaps Ethereum blockchain's defining feature.

EVM

Ethereum has a runtime or programming environment known as the Ethereum Virtual Machine. Recall that ethereum is a programmable blockchain. The programming language used is Solidity.

Block size

Ethereum has gas limits in place of block size. This is not fixed but fluctuates according to the dictates of miners.

Transaction speed

Ethereum does 30 transaction per second but there's this hype around sharding, the second notable change in Ethereum 2.0, that it could do up to 10,000 transactions per second.

Block time

On Ethereum's blockchain each block takes about 13 seconds to be completed.

UTILITY

Ethereum provides a decentralized platform where decentralized applications can be developed and smart contracts can be deployed and run without the need for an intermediary.

MAJOR CHALLENGES OF BOTH BLOCKCHAINS

Bitcoin is slow and has low throughput. Though Segwit brought slight improvements but the shadows of non scalability still looms.

For Ethereum, no one can just tell us how many ETH is in circulation. The complex nature of Ethereum blockchain's block rewards makes calculating the total number of ETH rather inconclusive.

COMPARISON

GENERAL COMPARISON

BITCOIN	ETHEREUM
Pioneer of blockchain technology	Pioneer of programmable blockchains
Low throughput	Higher throughput than bitcoin especially with Ethereum 2.0
Transaction only blockchain	Programmable blockchain
Limited currency	Unlimited currency
Proof-of-Work consensus mechanism	Proof-of-Stake consensus mechanism with the Ethereum 2.0 upgrade.
Amount of data in a block denoted in block size	Amount of data in a block denoted in gas limit
Transaction speed of 7 tps	Ethereum has 30 tps, while Ethereum 2.0 will have up to 10000 tps
Average block time is 10 minutes	Average block time is 13 seconds
Unknown founder	Known founder
Accurate data on total BTC in circulation	speculative data on total ETH in circulation
Straight forward block reward system	Compensation-like block reward system
Most successful crypto project	Second most successful crypto project
Probably began with Satoshi mining the first few blocks	Began with crowfunding

STATISTICAL COMPARISON

According to coinmarketcap.com

PARAMETER	BITCOIN	ETHEREUM
Rank	1	2
Market cap.	$1,145,743,631,867.20	$277,755,499,567.42
Fully diluted market cap	$1,287,690,887,883.54	$277,755,499,567.42
Market dominance	51.30%	12.43%
Price	$60,973.69	$2,382.14
All time high	$64,863.10	$2,547.56
All time low	$65.53	$0.4209
ROI	45201.74%	84812.78%
Circulating supply	18,685,087 BTC	*115,511,132 ETH
Max supply	21,000,000 BTC	unlimited

*115,511,132ETH is coinmarketcap's estimation of the total supply of ETH.This varies with info from some sources. This is because there is no accurate means of estimating the total supply of ETH in circulation. This is due to the blockchain's complex block reward system and some ETH that might have been destryoed.

CONCLUSION

Both bitcoin and Ethereum are successful crypto projects and pioneers in their own rights. Bitcoin being the first blockchain while Ethereum is the first programmable blockchain. They are quite different in terms of utility as Bitcoin sticks to just payment processing while Ethereum is programmable as well as processes payments.

They both share features in common though as they are both decentralized, transparent, involve miners, support anonymity, and are peer-to-peer.

Thanks for reading.

Cc:
@alphafx