Bitcoin vs. Ethereum: What’s the Difference?

Bitcoin (BTC) is the world's largest cryptocurrency by market capitalization (market cap). Ethereum's native token, Ether (ETH), is the second.

So what's the difference between the two cryptocurrency assets? Should you own one and not the other?

In this quick and easy guide, we'll explain the main differences of Bitcoin vs. Ethereum so you can decide which one — or even both — belongs in your digital wallet.

What Is Bitcoin? The Basics

Although the idea of cryptocurrency has floated around for decades, Bitcoin was launched as the first successful crypto coin in January 2009. 

Bitcoin was introduced in a white paper published by an anonymous entity known as Satoshi Nakamoto.

Although there's plenty of speculation, nobody knows the true identity of Satoshi Nakamoto. We don't even know if it's one person or a group.

The point of Bitcoin as lined out as its introduction is as an online currency that is free of central authority. There are no banks or governments involved in issuing Bitcoin.

And there's no physical coin, either. Bitcoin exists on a blockchain, a cryptographically secured public ledger.

Bitcoin has grown in popularity. In fact, many early supporters believe the coin has gone too "mainstream" for their liking.

A handful of companies accept Bitcoin for payments, and the country of El Salvador actually named it a legal tender (for better or for worse).

As of this writing (February 7), Bitcoin was trading at nearly $44,000. 

But although Bitcoin is the largest and most valuable cryptocurrency, its market share has shrunk to roughly 40% of cryptos.

The culprit?

Ethereum.

What Is Ethereum? The Basics

Ethereum was launched in July 2015. Technically, it's not a cryptocurrency but a decentralized software platform that enables cryptocurrency transactions.

In other words, Ethereum doesn't exist on a blockchain; it is a blockchain.

Ether is the crypto token that facilitates transactions on the Ethereum network. 

Those who are really in the know about cryptocurrencies will point out that Ether technically isn't a cryptocurrency. But as a crypto beginner, you don't need to worry about that too much!

Ether isn't the only asset that relies on the Ethereum blockchain. Many non-fungible tokens (NFTs) are traded on the platform as well.

In 2021, Ether's share of the cryptocurrency market nearly doubled. Although Bitcoin still takes the top spot, Ether currently has about 20% of the market.

Currently, Ether trades for about $3,100.

Bitcoin vs. Ethereum: What's the Difference?

The biggest difference between the Bitcoin and Ethereum networks is their overall intentions.

Bitcoin was created to be an alternative to government-issued currencies. It's also a store of value and an investment.

On the other hand, Ether was created to be a platform for facilitating transactions and applications through its native currency, Ether.

Although Ether and Bitcoin are both digital currencies, Ether's original intention was to be the "fuel" that runs the Ethereum network, rather than an entirely new system of money.

However, recently, the popularity of cryptocurrencies has made Ether a traded asset in its own right.

Other than that, there are technical differences between the two. For one thing, Ether transactions are confirmed within seconds, while Bitcoin transactions can take minutes.

Ethereum is moving from the proof of work (PoW) protocol (which Bitcoin uses) to a proof of stake (PoS) system. This upgrade should make Ethereum even more secure and less energy-intensive.

Should You Buy Bitcoin or Ether?

Cryptocurrencies are so volatile that it's hard to predict where their prices will go.

However, some analysts are predicting Bitcoin will soar to $100,000 in 2022.

Meanwhile, although Ethereum's coming upgrade makes it look attractive, there have been indications that Ether is losing ground to other, younger cryptocurrencies.

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