Bitcoin v Ethereum

If you have been following our recent articles about NFTs and cryptocurrency, you will have seen that two blockchain networks have been mentioned more that any other: Bitcoin and Ethereum. These are currently the two highest valued blockchains in the crypto world, but what are the differences between them?

Bitcoin was the first blockchain, and its purpose was straightforward: to provide a digital currency and a ledger of transactions, which would allow a secure way for people to exchange money without an intermediary such as a bank. Ethereum was created a few years later, and while its technology was inspired by Bitcoin, its intended purpose was more ambitious. In addition to providing its own cryptocurrency (called ether) its blockchain allowed developers to programme applications (known as DApps) and smart contracts, which have various uses, including the minting of NFTs (more detail can be found in our article on blockchain).

Violin, Bitcoin and Grapes is an NFT from Trevor’s Crypto Cubism collection. The collection draws parallels between the artistic innovations of Picasso and the projects being built on blockchain technology.

Also discussed in the blockchain article was the system of consensus that is used to validate transactions on a blockchain: each computer in a blockchain’s network analyses the transactions in each block, and upon agreement that they are valid the block is added to the chain. There are actually two different approaches toward this system of consensus. These are known as ‘proof of work’ and ‘proof of stake’.

Bitcoin uses proof of work. In this system the computers in the Bitcoin network validate transactions by solving complex mathematical puzzles. The fastest one to solve each puzzle gets to add a new block to the chain and receives a financial payment taken from gas fees.

Ethereum originally used proof of work too, but it switched to a proof of stake system in 2022. In this system potential validators put in an amount – that is the stake – of their own cryptocurrency. The size of their stake and the length of their validation experience are factors in deciding whether they may validate blocks to add to the chain. After validating a block the validator receives payment along with the return of their stake.

The third chapter of Trevor and Alotta Money’s ongoing EthBoy project is titled ‘THE MERGE‘. This is a reference to the 2022 event where Ethereum changed its consensus system from proof of work to proof of stake.

Despite the limitations of Bitcoin discussed above, work has been undertaken to expand the uses of the first blockchain. Resulting from this has been the creation of ordinals – the Bitcoin version of NFTs. These can now be minted on the Bitcoin blockchain in a similar way to NFTs on Ethereum or other blockchains. And later in 2024 Trevor will be launching his own first ordinal collection – stay tuned!

A reminder of some of the terms used in this article:

  • Bitcoin – the cryptocurrency of the first blockchain
  • Blockchain – a decentralised online record of transactions in cryptocurrency
  • Cryptocurrency – a decentralised digital currency
  • DApp (decentralised application) – a software application created on a blockchain
  • Decentralised – not administered by an individual, bank, or government
  • Ether – the cryptocurrency of Ethereum
  • Ethereum – the most common blockchain with which NFTs are created
  • Gas fee – a small charge for a blockchain transaction, such as trading cryptocurrency or minting an NFT
  • Minting – the process of creating an NFT on a blockchain
  • NFT (non-fungible token) – a technology that allows people to own and trade digital items, such as digital art
  • Ordinal – a type of NFT minted on the Bitcoin blockchain
  • Proof of stake – a method by which some blockchains, including Ethereum, validate transactions
  • Proof of work – a method by which some blockchains, including Bitcoin, validate transactions
  • Smart contract – a computer programme stored on a blockchain which automatically operates when certain conditions are met

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