With the ever-evolving technology and internet, privacy and data security have been a prime concern for the users. Governing authorities and governments imposing censorships on the internet and big institutions are accused of selling user data and compromised security is a big issue.

To eliminate the central authority or a central server system peer-to-peer networking system was invented. In peer-to-peer computing, each participating party acts as a node and send/receive data. There is no central administration to block or hold transactions.

Bitcoin and Ethereum are two decentralized and peer-to-peer networking concepts based on cryptocurrency.

Blockchain is the distributed database system that acts as a public ledger and both Bitcoin and Ethereum are built upon it.

[Related blog: Insight into Blockchain]

Ethereum:

Ethereum is a computing network that runs smart contracts. Smart contracts are self-executing contracts that are agreed by buyer and seller and directly written into the lines of code.

The code is stored in a decentralized distributed database system called a blockchain. Ethereum’s vision is a censorship resistance and self-sustaining network of computers.

Ethereum software run on a network of computers and all data and smart contracts are replicated and processed without involving a central administration. 

Bitcoin:

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Bitcoin is a decentralized, peer-to-peer electronic cryptocurrency. There is no governing body or issuing authority for Bitcoin. Bitcoin network operates on cryptographic protocol and the public database is fault-tolerant and resistant to corruption.

Bitcoin network operates without a central repository or a centralized administration and the transactions directly take place between users. Bitcoin is currencies where Ethereum is a contract-based cryptocurrency. 

Blockchain:

Blockchain is a distributed database. In Bitcoin network Blockchain is a public ledger that records transactions. It is fault-tolerant and resistant to modifications that can corrupt the records.

All nodes share a copy of Blockchain, when a node joins the network it downloads all the blocks and verifies it. So modifying the Blockchain is nearly impossible, as everyone in the network has its copy and if someone modifies it, all other nodes will reject the modified block.

The blockchain contains all the transaction history that ever been happened in the network.

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Each block has a hash value referring to the previous block.

Ethereum:

A censorship resistance and self-sustaining network of computers
ETH
Ethereum’s built-in native cryptocurrency for paying smart contracts.
Ethereum virtual machine Decentralize computation platform for running smart contracts in computing nodes.
Swarm File storage system for Ethereum
Whisper Communication protocol for Ethereum
Solidity, serpent, and LLL Smart contract programming languages
Geth, eth, pyethapp Major Ethereum software. Geth in c++, pyethapp in python
Frontier, homestead, metropolis, serenity A major software release for Ethereum

Bitcoin:

A Decentralized peer to peer electronic payment system
BTC Bitcoin network’s main cryptocurrency
Bitcoin network The node of computers that make the payment network
SHA256 Hash generation algorithm
Hashcash
Algorithm for bitcoin transactions
Wallet Storing the bitcoins
Miners Volunteers who maintain and secure the network
Blocks Transaction data storage

Check out Bitcoin Interview Questions

Main Difference between Ethereum and bitcoin:

Bitcoin is a currency
Ethereum is a computing platform
Bitcoin is limited and there will be a total of 21 million
bitcoin in production
Ethereum supply is unlimited
Bitcoin is simple
Ethereum has a rich programming language
The bitcoin software is not Turing complete Ethereum is Turing complete
The bitcoin community is larger It has a smaller community.

What is Blockchain in Bitcoin and Ethereum?

Both bitcoin and Ethereum use Blockchain as a distributed database. However, bitcoin uses Blockchain to store transaction data while Ethereum uses Blockchain to execute code on it. 

Bitcoin Blockchain keeps records of payments while Ethereum Blockchain keeps records of a computer program.

[Related PageWorking of Blockchain Technology]

Bitcoin Blockchain has limited capacity but Ethereum Blockchain can do what we ask it to do by writing computer programs.

Use cases:

Bitcoin is used to pay for goods and services while Ethereum is used to pay for smart contracts and programs running on the Ethereum network.

Example use of Ethereum:

IBM and Samsung developed a proof of work concept using smart contracts and an Ethereum network where a washing machine can

* Order detergent itself when it runs out
* Call repairman when broke down
* Do the laundry when electricity is the cheapest.

Bitcoin decentralized the payment system and made it cheaper. Ethereum can decentralized computing networks and make them cheaper and reliable, as there will be no single server failure. All nodes are independent and have a copy of the Blockchain database.

  1. Bitcoin and Ethereum are not a competitor. 
  2. Bitcoin uses the hashcash algorithm and Ethereum use the ethash algorithm.
  3. The block time for bitcoin is 10 minutes and the block time for Ethereum is 12 to 14 seconds.
  4. Bitcoins can no longer mine using CPU but Ethereum can be mined using CPU.
  5. Bitcoin block size limit is 1mb where Ethereum block size is unlimited.
  6. Bitcoin can be sent anonymously but Ethereum is not anonymous.
  7. Bitcoin is a simple transaction where Ethereum is a conditional transaction.
  8. Blockchain is a distributed trusted storage system and smart contracts are distributed trusted calculations. 

For in-depth knowledge on Bitcoin, click on below: