Bitcoin and Ethereum are the two names most often compared in the crypto market. Both are public blockchains and have their own native coins, but their design goals, issuance rules, and uses differ greatly. This article compares them across several dimensions.

$BTC and $ETH are the native coins of Bitcoin and Ethereum, but they serve different purposes. Currently 81,724.21 (24h -0.51%).

■ Origins and positioning

Bitcoin launched in 2009, and the title of its white paper was “A Peer-to-Peer Electronic Cash System.” Bitcoin’s scripting functionality was deliberately designed to be very limited, with the core tasks of securely recording who owns how many bitcoins and transferring value.

Ethereum’s white paper was published by Vitalik Buterin in 2013, and its mainnet launched in July 2015. Ethereum aims to be a platform for running general-purpose smart contracts, which can be used to build applications such as tokens, DeFi, and NFTs.

■ Different issuance rules

Bitcoin has a maximum supply of about 21 million coins. The block reward is halved every 210,000 blocks. After the fourth halving in April 2024, the reward dropped to 3.125 BTC per block.

Ethereum has no fixed maximum supply. New ETH is issued as staking rewards to validators. At the same time, since the London upgrade (EIP-1559) in 2021, the base fee for each transaction has been burned. Whether the supply increases or decreases depends on which of these two forces is greater.

■ Consensus and accounting methods

Bitcoin has always used proof of work (PoW), with miners competing to produce blocks using computing power. A block is produced about every 10 minutes on average. In September 2022, Ethereum switched to proof of stake (PoS) through “The Merge.” Validators who stake ETH participate in producing blocks, with one block slot scheduled every 12 seconds.

Their accounting methods also differ: Bitcoin uses the UTXO model, a bit like having individual pieces of change in different denominations in your wallet. Ethereum uses the account model, more like a balance in a bank account.

■ Understanding the differences

Bitcoin upgrades very cautiously and prioritizes simple rules and network stability, which is why it is often compared to “digital gold.” Ethereum upgrades more frequently and prioritizes programmability and ecosystem growth, which is why it is often called the “world computer.”

These comparisons are just a way to understand what each is designed for; they don’t indicate anything about price. Also, when using different applications on Ethereum, remember that in addition to price volatility, you need to consider the risks posed by the smart contracts themselves.

■ Summary

Understanding the differences in their designs won’t tell you which one to choose, but it can help you make sense of news about upgrades, issuance, and transaction fees. Don’t laugh—I only learned this after making a costly mistake myself. Try to only invest money you can afford to lose without it affecting your life.

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For reference only. Proceed at your own risk.