Although both projects are based on blockchain and their coins are used as cryptocurrencies, they are fundamentally different.
Bitcoin was initially created by a mysterious pseudonym Satoshi Nakamoto as an aspiring alternative to centrally-issued and managed fiat currencies. Its main selling point is that it is not backed by any central bank or other financial institution but by a decentralized network of computers and nodes who verify the rules of a secure, transparent, and immutable blockchain. These things make it possible for bitcoins to be safe to use, verify ownership and hold while avoiding common pitfalls when it comes to network attacks, currency debasement, and double-spending. Additionally, Bitcoin introduces a native privacy-friendly final settlement, payment, and store-of-value system to the internet, where users would otherwise have to use payment options that can identify and censor them immediately; this amount of privacy was heretofore seen only with the use of cash.
On the other hand, Ethereum goes beyond offering a currency option based on blockchain. The idea for Ethereum was born when Vitalik Buterin, one of its co-founders, realized the possibilities of Bitcoin if it was programmable.
Ethereum enables the deployment of smart contracts and decentralized applications (dapps) to be built and run without any interference from third parties. The basics upon which the trustworthiness of Bitcoin was founded are also used to lend significant credibility to the Ethereum network as well as competing blockchain platforms.
While ether, Ethereum’s native currency, can also be used as a store of value and a payment option, its primary use is powering the network. It is used to pay gas fees, deploy smart contracts, as a staking option, mint non-fungible tokens (NFTs), and much more.
In other words, the main differences between Bitcoin and Ethereum, as projects, can be summed up in the following points:
- Store of value: bitcoins are designed to be, primarily, a store of value, while ether is not.
- Programmability: Bitcoin is not a programmable platform; it can only do what it is designed to do, while Ethereum can host a myriad of projects as well as other blockchains.
- Block time: interestingly, Bitcoin—which is supposed to act as an alternative to traditional payment systems—is significantly slower than Ethereum, for security purposes.
- Market cap: at the time of writing (October 2021), bitcoin has a market cap of USD 1trn, while ether’s is USD 407bn—meaning bitcoin’s worth is more than double that of ether.