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Ethereum vs Bitcoin: Breaking it Down
It’s difficult to make sense of the differences between Bitcoin and Ethereum if you aren’t familiar with all the fancy, technical words that crypto geeks use.

Let’s break down some of the jargon, shall we?

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Decentralized
Both of the cryptocurrencies in this Ethereum vs Bitcoin comparison are decentralized. If something is decentralized, it is not in one central position (duh). Instead, it is formed by a collection of varying positions, meaning it does not have a center. That’s where the word “decentralized” comes from!

To apply this to a network, think about Facebook’s servers for a moment. They run via Facebook and Facebook only. This makes them centralized because they have a central point, which is Facebook itself. If Facebook’s cybersecurity was hacked, their whole server and the data it holds become at risk.

Ethereum VS Bitcoin: Bitcoin balances.

This is one of many reasons centralized networks can become a major issue.

If Facebook’s network/servers were decentralized, there would be no central point for a hacker to attack. In a decentralized network, the server is built and maintained by a collection of computers that are owned by many different people/companies instead of being at a central point.

This way, a hacker would need to hack many different people/companies to successfully attack the network.

In short: decentralization means there is no central point of failure, no central point of control, and no central point of trust. This is why many agree that decentralized networks are the future!

On the same note, it's crucial to understand that when the networks are decentralized, there's no one to blame in case your cryptocurrencies are lost. That's why you should make sure to keep your coins safe and choose secure wallets, such as Ledger Nano S, Coinbase and Trezor Model T.

Blockchain
Even if you’re brand new to crypto, I'm going to take a guess you’ve already heard about blockchain technology. It’s a bit of a trending topic.

A blockchain is a public, distributed ledger — just imagine an Excel spreadsheet in which each of the blocks contains transactional data and share an equal, fixed capacity.

The ledger continues to grow and grow as more blocks add. The blocks add up chronologically by using cryptographic techniques. Cryptographic techniques that ensure that blocks cannot reverse. Sorry hackers.

In a blockchain, the ledger is “distributed”. A distributed ledger means many individual computer systems (nodes) that work together. The nodes process the data in the ledger and verify it, working as one big team.

Ethereum VS Bitcoin: about ETH.

This way, it is impossible for a fake transaction to be verified, as it would need the consensus (the group agreement) of the blockchain. So, the more nodes/computers, the more secure the blockchain is!

Distributed ledger stores the verified blocks. It is shareable and downloadable by all other nodes on the network. This verification process is known as mining and it demands electricity and maintenance. Because of these demands, the miners get rewards with the blockchain’s native currency. This is the foundation of a typical cryptocurrency ecosystem.

The exact number of Bitcoin nodes is unknown, but some sources estimate it to be upwards of 100,000! Imagine trying to hack half of that!

For more on blockchain technology, check out our "Blockchain Explained" guide.

Smart Contracts
Smart contracts are a decentralized tool. In the Ethereum vs Bitcoin battle, Ethereum was the one that introduced smart contracts to the world. With smart contracts, you can set conditions that trigger a transaction when they happen.

As the smart contracts on Ethereum are powered by the blockchain, developers can create applications that never go offline and cannot be edited by third parties.

Imagine if we had this power with the regular contracts we currently use as part of our everyday lives! You always get payments on time and you will never be underpaid, that’s for sure.

These are just two of countless examples, though.

Ethereum VS Bitcoin: about Bitcoin.

A good way to think of smart contracts is to imagine purchasing a house. Usually, this process requires third parties, such as a lawyer and a broker. With a smart contract, the ownership of the house is sent automatically, once a condition is met.

It looks something like this: John transfers 200 ETH. The payment gets verified and he gets the ownership of the house.

This is applicable to many different scenarios. Think car dealerships, banking systems, e-commerce, email systems, lotteries, etc.

This is why the possibilities with building on Ethereum are endless.

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Ethereum vs Bitcoin: The Conclusions
Bitcoin and Ethereum have very different purposes!

Ethereum’s purpose is to offer and run decentralized smart-contract applications powered by blockchain technology that do not go offline and cannot be altered. It provides users with a platform and programming language to build the applications on.

Bitcoin’s purpose, however, is largely different. It serves as a decentralized store of value — a peer-to-peer digital currency, used for financial transactions. It eliminates the need for third parties in payment technology.

In conclusion, the primary differences that separate Ethereum vs Bitcoin are their purposes and their concepts. Also, Ethereum’s blockchain runs smart contracts Bitcoin doesn’t and instead only focuses on manual payment technology.

Is Ethereum Better than Bitcoin?
It’s clear that there are benefits to using both Bitcoin and Ethereum. Bitcoin has a lower coin supply and is more liquid than Ethereum, but Ethereum has better technology and provides more uses than Bitcoin does.

Based on the fact Ethereum has more use cases than Bitcoin — and, therefore, serves a bigger purpose — I can say that it is indeed an overall better Bitcoin alternative.

Ethereum VS Bitcoin: ETH foundation.

It perhaps isn’t the best Bitcoin alternative, though, as there are other cryptocurrencies that have the same purpose as Bitcoin and run on newer technology and protocols.

That’s not to say that these other alternatives are better than Ethereum. It just means that, because they are more similar to Bitcoin, one of them may be the best Bitcoin alternative. It doesn’t necessarily mean they’re a better Ethereum alternative!

Which has the Better Technology?
Blockchain technology is still in its early years. That's why Ethereum and Bitcoin get continuous updates. However, Ethereum is currently the clear winner. Here’s why:

Ethereum uses smart contracts. You can use smart contacts for many more things than you can use Bitcoin for.
The Ethereum’s blockchain was released in 2015. It is 6 years newer and further developed compared to the Bitcoin blockchain (released in 2009).
Ethereum’s blockchain is a further advanced version of Bitcoin’s blockchain. It fixes some of its issues and introduces new features such as smart contracts.
Ethereum’s transaction fees are cheaper than Bitcoin’s transaction fees.
Not only do the transactions cost less, but as I stated earlier, they’re much quicker, too.
Can Bitcoin and Ethereum Live Side by Side?
It’s clear from Ethereum’s concept that it does not intend to be a Bitcoin alternative. Instead, it runs alongside it as it pursues a different objective.

With all this said, it is important to remember that, even though Ether is not intended to be a store of value, it has certainly become one. Here are some examples of everyday life:

Tradable just as all other cryptocurrencies are.
Mining Ethereum vs Bitcoin has become a much closer competition. Ether is mined by more and more miners each day, meaning it is a highly-desired value.
Businesses are using it to pay their staff.
Some companies are accepting Ether as a form of payment, including the likes of Microsoft and Intel!
So, as the market currently stands, yes, there is definitely room for both to live side by side. Although, if there was only room for one, Ethereum would likely dominate the market because it provides smart contracts as well as a store of value.

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So, Which One? Bitcoin or Ethereum?
In Ethereum vs Bitcoin battle, if I had to choose one, it’d be Ethereum! This is because it has unlimited use cases, whereas Bitcoin only tackles payment and banking issues. Bitcoin may have a better position in the market, but Ethereum has better technology and bigger potential.

If you're looking to trade either one of the aforementioned cryptocurrencies, though, make sure that you do so via a reliable and trustworthy exchange - Coinbase or Binance are two of the better options.

Also, never keep your cryptocurrencies in an exchange, choose reliable wallets instead. Ledger Nano S and Trezor Model T are among the most recommended ones.

What do you think? Let us know!

A fun fact and an additional (although minor) Ethereum vs Bitcoin difference:

Bitcoin’s founder remains anonymous to this day. Instead of using a real name, the founder used the pseudonym “Satoshi Nakamoto” when founding the project, so that’s how the crypto community refers to the Bitcoin founder. It’s also how the term “Satoshi” (a denomination of Bitcoin) came to be.