Explained: How Are Bitcoin And Ethereum Blockchain Different – CNBCTV18


Bitcoin and Ether together command the lion’s share of the crypto market. Due to their massive market share, people often pit them against each other. However, they are both designed to perform different tasks and achieve different goals and even complement each other in many ways.

To understand the difference between the two, it is important to delve a bit deeper into the underlying technology for these digital currencies – the blockchain.

What is Blockchain Technology?

Bitcoin and Ethereum are both based on blockchain technology. This means that information is stored in blocks and connected through permanent chains. Each block contains information about a set of transactions within a specific period. As the time frame changes, the block changes, and a new one is added to the chain, each block reliant upon the preceding block. This is why it is called Blockchain.

Put simply, a blockchain is a large digital ledger. In blockchain technology, a network of independent computers scattered around the globe maintain a list of transactions, allowing them to be checked and validated.

Bitcoin Blockchain

The Bitcoin blockchain was created in 2008 as a P2P (peer-to-peer) electronic cash transaction system, which means all intermediaries were eliminated and there was no central governing body (as opposed to traditional currencies that are regulated by the respective nation’s central bank). This feature made the bitcoin blockchain a decentralised system and became the basis for the evolution of blockchain technology. Therefore, bitcoin is also called the first-generation blockchain.

Speed: Each block on the bitcoin blockchain is verified and created at an interval of 10 minutes.

Token supply: There is a strict cap of 21 million bitcoins that will ever be created. Miners are rewarded in BTC every time they mine 1 block. But the rewards given to bitcoin miners are halved after the addition of every 210,000 blocks to the blockchain, or roughly every four years. This reduces the rate at which new bitcoins are released into circulation by 50 percent. As fewer bitcoins are released into the system, the value of each bitcoin increases as it becomes scarcer.

Ethereum Blockchain

Launched in 2014, the Ethereum blockchain took it one step beyond just the documentation of transactions. It introduced a system of self-executing or ‘Smart Contracts.’ These smart contracts are self-managing in nature with actions triggered by conditions such as the passing of an expiration date, on reaching a particular price, etc.

These actions are executed by ‘decentralised apps’ (dApps) on the Ethereum network and each dApp performs a different function. Therefore, the Ethereum blockchain also needs its native currency for transactions – the ETH.

This eliminates the need for manual inputs and makes modifications on its own, thus leading to the coining of the term ‘Smart Contracts.’ This is also why Ethereum is commonly referred to as the second-generation blockchain.

Speed: Each block of information on the Ethereum blockchain is verified and created every 10-20 seconds. This makes Ethereum a much faster blockchain network than Bitcoin. This is a vital aspect considering the extensive network of dApps working in tandem to implement a multitude of tasks at the same time.

Token supply: Unlike bitcoin, there is no limit on the supply of ETH in the market. Developers are working on a system to ensure that ETH retains its value over time.

The creation of both blockchains has been instrumental in the evolution of Decentralised Finance (DeFi). The strengths of the bitcoin blockchain have been built into and improved upon in the Ethereum blockchain, thus adding speed and functionality. Both, Bitcoin and Ethereum, seem well poised to add value to financial processes in the future.

(Edited by : Yashi Gupta)

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