Bitcoin (BTC) has been dominating the digital currency space since 2009, but another player is rising fast. Launched in 2015, Ethereum took blockchain technology beyond digital currency and opened it up to a wide range of applications. Ethereum’s token, ether (ETH), has been steadily rising in value as a result.
When choosing between buying bitcoin or buying ethereum, it helps to understand the differences between the two.
BITCOIN VS ETHEREUM: WHAT’S THE DIFFERENCE?
What They Are
Ethereum inevitably gets compared to bitcoin, which makes it easy for beginners to understand. Without getting into too much technical detail, both Ethereum and Bitcoin are distributed public blockchain networks. Miners power each network by validating transactions, and earn bitcoin (for Bitcoin) or ether (for Ethereum) in the process.
Generally speaking, BTC and ETH run different versions of blockchain technology for different purposes. Bitcoin is a peer-to-peer payment network and a store of value. Ethereum, on the other hand, is a platform that facilitates applications and smart contracts, powered by its internal “currency”, ETH.
A Quick Note About Smart Contracts
“Smart contracts” are a digital version of a traditional contract. They allow you to exchange money, property, or any valuable item through the blockchain, without a middleman or third party. In other words, a smart contract allows you to say, “if this happens, then this other thing happens.”
A BTC transaction is one example of a smart contract. On the Bitcoin network, you can send or receive money without going through a bank. For example, if I send you BTC, then I no longer have the bitcoin in my wallet, and you own the BTC.
On the Ethereum network, however, smart contracts have uses beyond exchanging money. You can actually use a smart contract to buy and sell a house, track your health, and more. (Example: if I sign my name here, then I own the house, and you no longer own it).
ORIGINS AND USES OF BITCOIN AND ETHEREUM
As the first cryptocurrency, BTC shares some similarities with government-backed currencies. It can be used to pay for things electronically, and to store or transfer value. The idea behind BTC is to send payments without having to go through a central authority like a bank.
Unlike bitcoin, the primary purpose of ETH isn’t to become an alternative to money or payments. Rather, its purpose is to pay for smart contracts, transaction fees, and other services on the Ethereum network.
In other words, if you want to execute a smart contract through a decentralized application (DAPP) on the Ethereum network, you need to pay with ETH. You can check out State of the Dapps for a list of decentralized apps built on Ethereum, for which you can use your ETH.
WHICH IS BETTER: BITCOIN OR ETHEREUM?
Both BTC and ETH are designed to serve different purposes. Which one you want to buy depends entirely on your goals.
On one hand, it makes sense to have BTC if you want to make peer-to-peer transactions, use it as a store of value, or use an alternative currency. Buying ETH, however, is the better choice if you’re more interested in interacting with the applications on the Ethereum platform than using a cryptocurrency.
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