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People usually view cryptocurrency as synonymous with bitcoin more than Ethereum. While both bitcoin and Ethereum are popular crypto currencies, it is essential to understand the key differences between them and their contributions to the investment sector. Bitcoin and Ethereum have always been the core of cryptocurrencies for beginners. But what we need to understand is that, apart from both of these coins, there are about thousand plus crypto coins available and many of them are more valuable than both bitcoin and Ethereum.

The following article will introduce to you some of the core concepts of bitcoin and Ethereum and their key differences.

What is called bitcoin?

Launched in the year 2009, bitcoin has become a major factor that brought about a revolutionary change in the global financial system. What attracted investors to this novel idea of cryptocurrency especially bitcoin is its decentralized system of working. Decentralized, means that there is no involvement of a bank or other financial institutions as a third party. This absence of a centralized agency is the basic characteristic of crypto currency that separate it from government issued currencies. One thing is that bitcoin has got no physical forms. It exists only as a highly encrypted balance on a digital ledger of blockchain technology.

Bitcoin can be considered the predecessor of all crypto currencies. Bitcoin is the first officially successful crypto currency that paves the way for the formation of other cryptocurrencies like Ethereum. Its popularity remains unmatched by other digital currencies.

In the early stages itself, crypto currency especially bitcoin marked its success over another financial systems. Cryptocurrency even though considered a separate entity by the government, is successful in making a place of its own in the global financial system. This niche of digital currencies has witnessed considerable evolution and development over some time. The concept of digital currency though different from the government-issued currencies appeals to the interest of the government because digital currency is valued as a highly potential digital asset and the governmental regulations of many countries have positively influenced and triggered the growth of cryptocurrency in every form and aspect.

What is Ethereum?

Ethereum is the second most popular cryptocurrency after bitcoin. Launched in the year 2015, rather than a crypto currency, Ethereum is the largest and most well- established, open-ended decentralized software platform. Blockchain technology has been widely explored and used to develop applications and Ethereum is one such application that goes beyond more than just enabling digital coins. Ethereum is a network of cryptocurrencies and it is ether (ETH) Ethereum’s native crypto currency.

Building and enabling smart contracts, and decentralized applications are some of the major uses of Ethereum. The absence of downtime, fraud, and control or third party interference is the major characteristic of the Ethereum network that suits the interests of the users and investors. To enable these functions, Ethereum is complete in itself with its language of programming that works on blockchain technology.

The potential applications of Ethereum are powered by its native currency and that is ether. The presale of ether launched in 2014 was a successful venture that boosts the growth and demand of the Ethereum network and its crypto token ether.

The four main purposes of ether are;

  1. In exchanges, it is traded as a digital currency
  2. It has got investment value and can be held as an investment.
  3. It can be used to purchase goods and services.
  4. It can be used on the Ethereum network to pay transaction fees.

Key differences between Ethereum and bitcoin

  • Transactions in the Ethereum network contain executable code whereas the code in bitcoin is used only to record transaction information.
  • Block time of bitcoin will take a minute whereas it is only seconds in ETH.
  • The consensus algorithms for both of them are different. For bitcoin it is SHA-256 and for Ethereum, it is LMD Ghost.

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