Bitcoin Blockchain VS Ethereum

Bitcoin and Ethereum are two of the most well-known blockchain platforms, let us take a look at the difference between them

Bitcoin and Ethereum are two of the most well-known blockchain platforms that have gained widespread attention in the world. While both are based on blockchain technology, they differ in their purpose, design, and functionality. In this blog, we will compare and contrast Bitcoin and Ethereum, exploring their similarities and differences, and finally how they have each contributed to the blockchain ecosystem.

Purpose:

Bitcoin was the first blockchain platform, created in 2008 by the pseudonymous developer Satoshi Nakamoto. Its primary purpose was to be a decentralized digital currency that could be used to make secure, peer-to-peer transactions without the need for intermediaries like banks or payment processors. Bitcoin’s blockchain is designed to allow only the transfer of its own cryptocurrency, Bitcoin (BTC), from one user to another.

Ethereum was launched in 2015 by Vitalik Buterin, and its primary purpose was to be a platform for building decentralized applications (Dapps) on top of its blockchain. The Ethereum blockchain has its own cryptocurrency, Ether (ETH), which is used to pay transaction fees and incentivize nodes to validate transactions

Blockchain Type: Transaction-based VS Account-based

The Bitcoin blockchain is a transaction-based blockchain, meaning that transactions are grouped into blocks and added to the blockchain in a linear, chronological sequence. Each block contains a set of transactions that have been validated by the network’s nodes, in order to know how many bitcoins are left for a particular address, the system has to sum all the transactions that this address was involved, with UTXO(Unspent Transaction Output) model, there are many public blogs that talks about this, I highly recommend this video by Gary Gensler, I have another blog that explains UTXOs in Bitcoin Blockchain.

Ethereum’s blockchain is account-based, means every address has a balance of ETH, which can be transferred to other accounts on the network. it provides a simpler and more intuitive model for users to understand. users can easily track their balances and transactions by checking their account balances, similar to how they would do with a traditional bank account. additionally, account-based blockchains are well-suited for implementing complex financial applications, such as decentralized exchanges, lending platforms, and other financial services. here is an example transaction of Ethereum.

{
  "from": "0x1234567890123456789012345678901234567890",
  "to": "0x0987654321098765432109876543210987654321",
  "gas": "0x76c0", // The gas limit for the transaction
  "gasPrice": "0x9184e72a000", // The price of gas in Wei
  "value": "0x9184e72a", // The amount of Ether being transferred in Wei
  "nonce": "0x1", // A unique identifier for the transaction
  "data": "0x1234567890" // Optional data payload for the transaction
}

Consensus Algorithm

The Bitcoin blockchain uses a proof-of-work consensus algorithm, which most of people might already understand, in short, miners compete to solve a complex mathematical puzzle, the first miner to solve the puzzle is rewarded with a block reward(BTC in this case). As the network grows, the difficulty of the puzzle increases, more computational power is required. and the less number of Bitcoins as reward. this results in higher electricity consumption and carbon emissions. critics argue that this high energy consumption is unsustainable and not environmentally friendly.

The Ethereum blockchain uses a proof-of-work consensus algorithm at the beginning, then switched to proof-of-state after September 15, 2022, which is expected to be more energy-efficient. there is no “miner” in the PoS world, validators, AKA stakers, are chosen based on the amount of cryptocurrency they hold and are willing to stake, but it’s less secure and more centralized.

there are also other types of consensus algorithm, such as Proof of History, the consensus algorithm can be a big topic to discuss, I’ll put another blog if necessary.

Smart Contracts:

Ethereum allows for the creation and execution of smart contracts, which are self-executing agreements that can trigger transactions automatically. Solidity is the programming language behind that, so far tons of smart contract have been deployed on Ethereum, they are the essential of DApp, NFT, GameFi, and ERC-20 tokens such as SHIB, SAND, its programmability gives itself huge potential.

Bitcoin, on the other hand, does not have native support for smart contracts, although there are some projects attempting to add this functionality to the Bitcoin blockchain.

Transaction Speed and Cost:

The transaction speed on the Ethereum blockchain is generally faster than on the Bitcoin blockchain, and transaction fees on Ethereum are usually lower. However, both platforms have experienced congestion and high fees during periods of high network activity. the amount of the transaction fee can vary depending on several factors, such as the size of the transaction in bytes, the level of network congestion, and the speed with which the user wants the transaction to be processed. generally, the larger the size of the transaction and the faster the user wants it to be processed, the higher the transaction fee will be.

Conclusion:

Bitcoin’s primary focus is on being a decentralized digital currency, while Ethereum’s focus is on being a platform for building decentralized applications. both platforms have their strengths and weaknesses, and both have contributed significantly to the blockchain ecosystem. when we are talking about the value of cryptos, we mostly refer to Bitcoin; when we are talking about functionalities, Ethereum is the topic.