Insights

Bitcoin Vs Ethereum: The Key Differences Between These Coins?

Bitcoin vs Ethereum is one of the biggest questions asked in the crypto industry.

Bitcoin and Ethereum are the two biggest forms of cryptocurrency currently in circulation.

These currencies have laid the foundation for the modern crypto markets and are largely responsible for the huge growth both in terms of base value and functional implementation that digital currencies have experienced in recent years.

With that in mind, it’s crucial to understand these two currencies.

In this article, we’ll be taking a look at the key differences between Bitcoin vs Ethereum, as well as the advantages and disadvantages that each of these currencies has.

If you’d like to check out more of our educational pieces, be sure to check out the BCB Group Insights page, where you can find all of our latest articles, guides, and reactions to breaking industry news.

To learn more about the benefits of becoming a BCB Group Business Account holder, head over to our dedicated page or contact a member of our expert team today!

What is Bitcoin?

Bitcoin was the first cryptocurrency to be released that is decentralised and not controlled by a central body. Satoshi Nakamoto, the pseudonymous developer of Bitcoin, mined the first block of data on the blockchain, known as the genesis block, in January 2009. Bitcoin’s adoption has been gradually increasing since then. Bitcoin was designed as a peer-to-peer (P2P) electronic cash system, meaning that transactions can be carried out without the involvement of a central authority.

In 2008, Nakamoto published a white paper that sparked the establishment of the Bitcoin blockchain. Bitcoin empowers consumers to control their own money, independent of any government, bank, or financial institution. Instead, it relies on a decentralised network of users that use the Bitcoin blockchain software and agree to a set of rules. The software determines how transactions function, the time it takes for transactions to settle, the supply cap of 21 million BTC, and more.

Bitcoin was the first cryptocurrency to use the blockchain, a type of decentralised ledger technology. The Byzantine Generals Problem, which explains the difficulty decentralised systems have in agreeing on a single truth, was overcome by blockchain technology. Bitcoin uses a proof-of-work (Pow) technique and a blockchain to solve the Byzantine Generals Problem. The challenge is solved by the many miners, each of whom serves as a general. Each node makes an effort to verify transactions that are identical to general communications.

The Bitcoin blockchain is open to the public and stores the history of every transaction ever made on it. It is dispersed across multiple nodes to avoid tampering. Tampering occurs when a different version of the blockchain is detected and rejected by other network participants.

Tampering is detected via hashes, which are long strings of integers that must be identical for each node. The SHA-256 hash function, which processes data to transform it into extremely long strings of numbers, is used by the Bitcoin network to process sets of data and turn them into hashes. When a valid hash is discovered, it is broadcast to the network and recorded in a new block.

Miners on the Bitcoin blockchain use a PoW mechanism to construct and broadcast these blocks, in which machines use massive amounts of computational power to perform hashing functions. Participants in the network establish an agreement through proof-of-work.

Malicious actors entities cannot change other users’ balances or spend their assets twice thanks to Bitcoin’s mining and consensus mechanisms, which keep the network up and operating with very little downtime. Bitcoin’s popularity has grown thanks to its positioning as a tamper-proof cryptocurrency that may be traded at any moment without the intervention of intermediaries or central banks.

While Bitcoin began as a platform for exchange, allowing for the purchase of goods and services, it has since evolved into a store of wealth and a very lucrative field of investment.

What is Ethereum?

While Bitcoin employs blockchain technology for monetary transactions, allowing nodes and messages to be attached to each transaction, Ethereum looks to take this principle to another level.

Ethereum is a decentralised open-source and distributed blockchain network backed by its own cryptocurrency, Ether (ETH). This currency is used to make transactions and interact with Ethereum-based apps. Vitalik Buterin, Ethereum’s co-founder, presented a white paper in 2013 outlining the usage of smart contracts, which are code-based self-executing agreements; this has become one of the major uses for Ethereum in the mainstream.

Smart contracts enable the creation of decentralised applications, or DApps, which operate without the involvement of a central authority. Buterin and the other Ethereum co-founders sold Ether in 2014 to raise funding for the project’s development.

Buterin, Gavin Wood, Jeffrey Wilcke, Charles Hoskinson, Mihai Alisie, Anthony Di Iorio, and Amir Chetrit are among Ethereum’s recognised co-founders. The Ethereum Foundation, a non-profit organisation dedicated to promoting the Ethereum network, was also founded by the co-founders in Switzerland.

The Ethereum network, one of the most ambitious initiatives in the crypto realm, was founded in July 2015 with the objective of decentralising everything on the internet. Ethereum, like Bitcoin, is a decentralised platform with no central authority that uses PoW to prevent malevolent entities from tampering with the data that’s stored within the blockchain.

Solidity, Ethereum’s own programming language, is used to create smart contracts that operate on the blockchain. Due to the usage of smart contracts, Ethereum’s potential applications are almost limitless. Despite the clear benefits of both Ethereum and smart contracts, the primary use cases for the cryptocurrency are still in their early days of being discovered. On the Ethereum network, innovation is exploding, with decentralised applications providing financial services and smart contracts allowing developers to generate non-fungible tokens (NFTs), which have been one of the most common use cases for crypto so far.

Unlike Bitcoin, which is intended as a medium of exchange and a store of value, Ether is used to connect with Ethereum network apps. Users must pay fees in Ether to pay for transactions, create smart contracts, and use DApps. As Ether’s value increased, it began to be utilised as a store of value.

What are the differences in the Bitcoin vs Ethereum comparison?

So, what are the key differences between BTC and ETH?

To make this as clear as possible, we’ve split out the differences into subsections, explaining how each currency operates in relation to this category.

Launch date

Bitcoin has been established for much longer than Ethereum, with BTC launching in the early months of 2009 and ETH being released far more recently in July 2015.

Functions as a currency

Bitcoin is designed to be an alternative to traditional fiat currencies; essentially, Bitcoin’s intended use is as a medium of exchange and payment first and foremost, with other functionality acting as a side-benefit.

On the other hand, exchange is not the primary function intended for ETH. Ethereum is designed to be a holistic platform and ecosystem filled with apps, contracts, and programmes that can be utilised by the user in a plethora of different ways, all rooted to the core Ether currency.

Level of supply

This is an area where there is a key difference between Bitcoin vs Ethereum.

One of Bitcoin’s defining features is its limited supply of 21 million which was set by Satoshi. This finite amount of units allowed to be minted promotes scarcity and like gold can help to hold its value. Once the upper supply limit has been achieved miners will look to revenue streams such as transaction fees once block rewards cease to become available.

Alternatively, Ethereum has no limits on its total amount but caps the yearly supply. While Buterin has hinted at introducing an overall limit, the network controls supply by ‘burning’ Ether to prevent miners gaming the system and to attempt to keep the currency deflationary over time.

This appears to solve some of the limitation issues that Bitcoin could face, but also means that the currency’s value could become more volatile as a result.

Which type of consensus algorithm is utilised?

Bitcoin utilises a proof-of-work algorithm to verify transactions, whereas Ethereum is looking to move away from this and instead utilise a proof-of-stake algorithm instead.

Proof of work is a mechanism aimed at preventing cyber-attacks such as a distributed denial-of-service attack (DDoS), which aims to deplete a computer system’s resources by sending repeated bogus requests.

Instead of miners, validators are used in POS. As a stake in the ecosystem, the validators store some of their Ether in the blockchain. The validators then wager on the blocks they believe will be added to the chain next. Validators receive a block reward according to their stake when the block is added The stake required to become a validator of 32 Ether can be taken away as a penalty in the event of intentional malpractice.

Access crypto-friendly banking and payments services with BCB Group

If you’re ready explore how we can provide a 1 stop shop for all your payment needs; trade & source liquidity, run both your B2C & B2B accounts with the power of BLINC settlements, it’s time to get in touch with the BCB Group team.

Our industry experts are on hand around the clock to give you the support you need in making the best trading decisions safely and securely, and with our industry-leading BLINC settlement network we can help you to settle your transactions in the blink of an eye.

For more information regarding the crypto industry or to learn more about the basics of the industry, head over to our Insights page!


BCB Group comprises BCB Prime Services Ltd (UK), BCB Payments Ltd (UK), BCB Digital Ltd (UK) and BCB Prime Services (Switzerland) LLC. BCB Payments Ltd is regulated by the Financial Conduct Authority, no. 807377, under the Payment Services Regulations 2017 as an Authorised Payment Institution. BCB Prime Services (Switzerland) LLC, a company incorporated under the laws of the Swiss Confederation in the canton of Neuchâtel with business identification number CHE-415.135.958, is an SRO member of VQF, an officially recognized self-regulatory organization (SRO) according to the Swiss Anti-Money Laundering Act. This update: 14 Oct 2020.

The information contained in this document should not be relied upon by investors or any other persons to make financial decisions. It is gathered from various sources and should not be construed as guidance. The information contained herein is for informational purposes only and should not be construed as an offer, solicitation of an offer, or an inducement to buy or sell digital assets or any equivalents or any security or investment product of any kind either generally or in any jurisdiction where the offer or sale is not permitted. The views expressed in this document about the markets, market participants and/or digital assets accurately reflect the views of BCB Group. While opinions stated are honestly held, they are not guarantees, should not be relied on and are subject to change. The information or opinions provided should not be taken as specific advice on the merits of any investment decision. This document may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, new legislation and regulatory actions, competitive and general economic factors and conditions and the occurrence of unexpected events. Past performance of the digital asset markets or markets in their derivative instruments is not a viable indication of future performance with actual results possibly differing materially from those stated herein. We will not be responsible for any losses incurred by a client as a result of decisions made based on any information provided.

  • crypto banking partner
  • crypto banking services
  • crypto friendly banking
  • crypto friendly banking services
  • institutional crypto adoption
  • institutional crypto banking
  • institutional crypto interest

This site uses cookies

We use cookies to improve user experience and analyse website traffic. By clicking “Accept“, you agree to our website’s cookie use as described in our Cookie Policy

Accept