Main differences:
1. Purpose and philosophy (digital gold vs. global computer)
· Bitcoin (BTC): Designed to be an alternative decentralized electronic currency to the traditional financial system. Its primary goal is value storage and secure transfers (digital gold).
· Ethereum (ETH): Not just a currency, but a decentralized software platform. Its purpose is to run applications and smart contracts. ETH is the fuel (gas) that powers this network.
2. Consensus mechanism (proof of work vs proof of stake)
· BTC: Based on proof of work (PoW), where miners solve complex equations that consume a lot of electrical energy to secure the network.
· ETH: Recently transitioned to proof of stake (PoS), where validators freeze (stake) ETH coins as collateral to secure the network, reducing energy consumption by 99.9%.
3. Supply (limited vs unlimited)
· BTC: Limited to only 21 million coins. This scarcity makes it similar to gold and resistant to inflation.
· ETH: Theoretically has no maximum supply. But with the PoS update, the network sometimes reduces supply (burns coins) to be deflationary.
4. Programming language and flexibility
· BTC: A deliberately limited programming language; because security is the utmost priority.
· ETH: A Turing-complete language (like Solidity), allows programming anything regardless of complexity (loans, games, digital identities).
5. Block and transaction speed
· BTC: A new block every 10 minutes. Low processing speed (~7 transactions/second).
· ETH: A new block every 12 seconds. Higher speed (~30 transactions/second, and more with layer two solutions).
6. Use cases
· BTC: Buying goods, transferring money across borders, and long-term savings vehicle.
· ETH: The foundation for decentralized finance (DeFi), non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs).
In short:
BTC is digital gold (number 1 in the market, safe and slow to change).
ETH is the world computer (flexible and rapidly developing, akin to an operating system for the decentralized internet).
