Bitcoin is a “cryptocurrency.” Bitcoin and other cryptocurrencies are competing against existing money (and gold) to replace them with a truly global currency.
The promise of Bitcoin is that it is:
- A global currency which allows individuals to own their own money (without having to rely on national banks).
- Lower fees for transferring money across geographic borders.
- Financial stability for people who live in countries with unstable currencies. (e.g. In 2016, the Venezuela’s currency hit an inflation rate of 800%). In addition, two-thirds of the current global population has no access to banking, or limited access — Bitcoin is changing that.
Ethereum is a “token.” What Bitcoin does for money, Ethereum does for contracts. Ethereum’s innovation is that is allows you to write Smart Contracts: basically any digital agreement where you can say “if this” happens, “then something else happens.” For example:
- If I vote for the President, then my vote is official and no one else can vote as me.
- If I sign my name on this document, then I own the car, and you no longer own the car.
- Up until now we’ve carried out these agreements with a signature at the bottom of a paper document. Ethereum dramatically improves this model because it is digital, and proof of the transaction can never be deleted.
Comparison chart: Bitcoin vs. Ether
|Bitcoin (BTC)||Ether (ETH)|
|What is it?||A currency||A token|
|Inventor||Satoshi Nakamoto||Vitalik Buterin; Other co-founders include Gavin Wood and Joseph Lubin|
|Went alive||January 2009||July 2015|
|Supply Style||Deflationary (a finite # of bitcoin will be made)||Inflationary (much like fiat currency, where more tokens can be made over time)|
|Supply Cap||21 million in total||18 million every year|
|Smallest Unit||1 Satoshi = 0.00000001 BTC||1 Wei = 0.000000000000000001 ETH|
|New token issuance time||Every 10 minutes approximately||Every 10 to 20 seconds|
|Amount of new token at issuance||12.5 at the moment. Half at every 210,000 blocks||5 per every new block|
|Utility||Used for purchasing goods and services, as well as storing value (much like how we currently use gold).||Used for making dApps (decentralized apps) on the Ethereum blockchain.|
|Price||Around $17,500 at the moment||Around $800 at the moment|
|Purpose||A new currency created to compete against the gold standard and fiat currencies||A token capable of facilitating Smart Contracts (For example: a lawyer’s contract, an exchange of ownership of property, and voting)|
Ethereum vs. ether
Let’s go a step further:
Bitcoin itself is two things: (1) it’s a digital currency known bitcoin (lowercase, also referred to as BTC) and Bitcoin is a technology (also known more generally as blockchain). Both are called the same thing which admittedly can be confusing for newbies.
- Bitcoin = The name of the Bitcoin network
- bitcoin = The currency (or BTC)
With Ethereum it’s similar, but slightly different: the token is called ether (or ETH) and the network is Ethereum.
- Ethereum = The Ethereum network
- ether = The token (of ETH)