As an educated crypto investor it’s crucial you understand the differences between Bitcoin vs Ethereum. Both of these coins are titans in the market, albeit for different reasons. Both coins are vital for the market’s development at this point. Here’s what makes these coins so different but, yet so important in the market.
Bitcoin was the world’s first successful cryptocurrency. Satoshi Nakamoto changed the world when he introduced his revolutionary protocol. His goal was to create a “peer-to-peer electronic cash system” that was both censorship-resistant and decentralized.
He succeeded in his mission when he launched Bitcoin officially in 2009. Since that time, Bitcoin has seen tremendous growth both financially and technologically. However, at its core, it still remains accessible to anyone. Bitcoin changed the world forever and inspired a new industry. For these reasons, you can consider Bitcoin the first generation of cryptocurrencies.
Notably, Bitcoin is not stagnant and the protocol continually develops. However, it was built to serve its particular purpose. Consequently, it’s not the best option for features such as smart contracts or other next-gen blockchain functionalities. Notably, the introduction of second layer protocols such as the Lightning Network expands Bitcoins functionality considerably.
The Second Generation – Bitcoin vs Ethereum
Ethereum is a distributed, public blockchain. This decentralized network introduced the world to smart contract scripting functionality. These protocols allowed anyone to build decentralized applications and expand the use cases for cryptocurrencies. Today, there are thousands of different cryptos and blockchain projects. However, most utilize some forms of smart contracts to streamline network activities.
Not Exactly A Cryptocurrency
It’s important you understand that Ethereum isn’t a cryptocurrency. Ethereum is the platform that the cryptocurrency Ether functions within. This network functions as a programmable decentralized network for Dapp developers primarily. Additionally, Ether’s primary role is to compensate miners for performing EVM (Ethereum Virtual Machine) computations.
Ethereum was the first cryptocurrency network built specifically to support Dapp development. Dapps are applications designed to run on decentralized networks. The first Dapps ran on decentralized networks such as Tor networks. These networks are censorship-resistant due to their decentralized nature.
Dapps that run on blockchain networks are at the core of the blockchain revolution. In this way, Ethereum represented a fundamental shift in the development and functionality of cryptocurrencies moving forward. For these reasons, Ethereum is considered a second-generation cryptocurrency
To execute smart contracts, Ethereum introduces a unique protocol known as the EVM – the Ethereum Virtual Machine. Each full Ethereum node runs an instant of these virtual stacks. The main advantage of EVMs is that they improve on the process of building decentralized applications by improving the programmability and efficiency that the network executes contract byte code.
History of Ethereum
One of Bitcoin’s early followers was a computer developer by the name of Vitalik Buterin. In 2013, this advantageous individual decided to build a new cryptocurrency. This new project would share many technical characteristics with Bitcoin. For example, both coins utilize a Proof-of-Work (PoW) algorithm to validate the state of the network.
Bitcoin utilizes the SHA-256 algorithm. This mathematical equation requires miners to prove their work through advanced calculations. The network automatically adjusts its difficulty to ensure that blocks of transactions only get approved in ten-minute intervals. This approach ensures a predictive monetary issuance strategy until the last Bitcoin gets mined sometime in 2140.
Ethereum, like Bitcoin, currently uses a…