What’s the Difference Between Bitcoin and Ethereum?

Yes, Dogecoin, the cryptocurrency that started as a joke and is now worth $90 billion, merits attention. But for those just beginning to take the field seriously, the two big names in the $2.2 trillion cryptocurrency market remain Bitcoin and Ether, the coin that fuels the Ethereum network. Bitcoin, the pioneer, has been on a tear, its value up about 500% in the past year. Yet it’s Ether that has been showing its older brother a thing or two, with a price jump of around 1,500% over the same period. While the top two digital coins share some attributes, they are different in many ways. Here’s the breakdown.

1. What’s Bitcoin?

Bitcoin was the first digital currency to successfully create a way to transfer value between two people anywhere in the world. Many had previously tried — think DigiCash or Beenz. But the pseudonymous and still-unknown creator, or creators, of Bitcoin, Satoshi Nakamoto, made a crucial breakthrough by creating a digital, time-ordered ledger, called a blockchain, to record every Bitcoin transaction. This solved the “double-spend problem” — it ensured that people couldn’t send fake Bitcoin or Bitcoin that had already been sent to someone else. It also meant Bitcoin transactions take place independently from involvement — or interference by — typical financial intermediaries like governments, banks or corporations. Bitcoin was worth virtually nothing when it was first activated in January 2009. In April 2021, it reached a price of almost $65,000, its record at the time.

Bitcoin Booming? Ether Says Hold My Beer

Percentage change in price

2. What’s Ethereum?

Ethereum was invented by Vitalik Buterin, a Russian-Canadian teenager who released his white paper on the subject in late 2013. Buterin first fell in love with Bitcoin and the wild group of adherents it attracted, but soon became disaffected with its limits. Nineteen at the time, Buterin set out to craft a system that could do more than record static quantities. His vision was of a blockchain that could host what came to be known as smart contracts, self-executing agreements in which a chain of actions could flow from defined conditions and contingencies. The only limit to the transactions that can run on Ethereum is the imagination of the developers who build Ethereum applications.

3. What did Ethereum borrow from Bitcoin?

The idea of operating through a decentralized network of computers that shared an accumulating record of transactions — the blockchain. Both systems are publicly viewable and are built on open source software, so developers can jump in and try to make improvements. Both networks also rely on members known as miners who race to perform the complex calculations used to verify the transactions and are rewarded with newly issued digital currency. This kind of verification system is called proof of work, and it has come under increasing criticism for the energy it consumes and the pollution that energy creates. While comparisons are contentious, by one estimate the Bitcoin network uses more electricity than Sweden in a year.

4. How have they developed?