The Clash of the Titans
Although both Ethereum and Bitcoin utilize blockchains in order to decentralize and validate every transaction of their cryptocurrency, they are very different. While Bitcoin’s primary use is a store of value and virtual currency, Ethereum has both these characteristics but its decentralized network enables it to create applications, utilize smart contracts and other transactions on the network. Bitcoin is unable to offer these other functions.
In addition, both serve very different purposes. Ethereum built their platform in order to free their users from centralized systems that have high regulations and potential of security breaches. In contrast, Bitcoin serves to remove the institutions that come between consumers and suppliers. This lowers transaction fees and introduces a new global currency and payment system.
Since Ethereum only has thousands of computers or nodes validating activity on their platform in contrast to the millions of nodes that are validated with every Bitcoin transaction. According to Gary DeWaal, chair of Katten’s Financial Markets and Regulation group, “New blocks are validated on the Bitcoin network once every 10 minutes while new blocks are validated on the Ethereum network once every 12 seconds”. This means Ethereum processes transactions quicker than Bitcoin with room to improve more in the future as well.
While Ethereum is the second largest cryptocurrency by market cap behind Bitcoin, it has evolved from the initial function of Bitcoin in multiple ways. As a bit of history, Bitcoin was the first blockchain-based cryptocurrency that came to fruition. It created a huge change to using a distributed decentralized ledger in order to record all financial transactions that occurred between all pseudonymous parties whilst being completely transparent. This served the purpose that users could trustlessly make a transaction with anyone in the world without the need for a third party financial institution like a bank to do so.
Ethereum was the first major blockchain that realized that they could achieve a lot more with the potential of the Blockchain. Instead of being used as means to store financial transactions, the blockchain could be used to store any kind of data. One of which is smart contracts. The Ethereum blockchain platform becomes a global decentralized platform that can be used by anyone.
When smart contracts are stored on the blockchain and anyone is able to interact with it, it can provide a global state machine for any state. For example, in the case of NFTs, its transactions, legal documents, or anything else in the field are all recorded. With this, anyone in the world has the ability to conduct transactions with anyone else. This is not limited to creating, selling and transferring NFTs. These transactions and records of whoever created, sold and bought these NFTs, are all publicly available and recorded for anyone globally to see at any given point of time.
Ethereum utilized the blockchain system and exceeded the functionalities that Bitcoin had used it for. Bitcoin primarily exists as a virtual currency and a store of value, while Ethereum offers this with the addition of providing a decentralized network that can run applications, smart contracts and transactions.