Bitcoin vs Ethereum: what is the difference?

Bitcoin and Ethereum are the two best-known cryptocurrency networks, but they were built to do different jobs. Bitcoin is designed to be a scarce digital money. Ethereum is designed to be a platform for running programs, with its own coin, ether, used to pay for them.

What is each one for?

Bitcoin launched in January 2009 with a narrow purpose: letting people hold and send value without a bank. Its supporters now mostly describe it as a store of value, sometimes called digital gold.

Ethereum launched in July 2015, based on a proposal by the programmer Vitalik Buterin. It took the blockchain idea and made it general purpose. Developers can deploy smart contracts, which are programs that run on the blockchain exactly as written. These power lending markets, stablecoins and NFTs.

How do they differ?

• Supply. Bitcoin has a hard cap of 21 million coins. Ether has no fixed cap. New ether is issued to those who secure the network, and since August 2021 part of every transaction fee has been destroyed, or "burned", which offsets some of that issuance.
• Consensus. Bitcoin uses proof of work, in which miners spend electricity competing to add blocks. Ethereum used the same method until September 2022, when it switched to proof of stake. There, validators lock up ether as collateral and are chosen to add blocks. The switch sharply reduced Ethereum's electricity use. The two methods are compared in proof of work vs proof of stake.
• Speed. Bitcoin produces a block about every 10 minutes. Ethereum produces one about every 12 seconds.
• Programmability. Bitcoin's scripting language is intentionally limited. Ethereum's is flexible enough to run complex applications.
• Fees. Bitcoin users pay fees in bitcoin to miners. Ethereum users pay gas fees in ether, which vary with the complexity of the operation.

What are the criticisms of each?

Bitcoin's critics focus on the electricity consumed by mining and on its limited functions.

Ethereum's critics focus on complexity. More features mean more code, and bugs in smart contracts have led to large thefts. Proof of stake draws objections too: those with the most ether staked have the most influence, and a few large staking services handle a big share of the total. Some bitcoin supporters argue that Ethereum's regular upgrades, steered by a visible group of developers, make it less decentralized.

Do they compete?

Partly. Both are held as investments, and their prices often move in the same direction. But they are mostly used for different things. Bitcoin is chiefly a monetary asset. Ether is closer to the fuel of a computing platform, and its nearest rivals are other smart contract networks.

Regulators have at times treated the two alike. In the United States, spot exchange-traded funds holding bitcoin began trading in January 2024, and funds holding ether followed in July 2024.