In today’s session on Ethereum and Bitcoin, we take a comparative look at the functioning and a comparative study of both cryptocurrencies while taking into consideration their similarities and differences.
Ethereum and Bitcoin - Similarities
Ethereum Has an Inbuilt Cryptocurrency. Ethereum’s token is called Ether, shortened to ETH. This is a cryptocurrency that can be traded for other cryptocurrencies or other sovereign currencies, just like BTC. ETH ownership is tracked on the Ethereum blockchain, just like BTC ownership is tracked on Bitcoin’s blockchain.
Ethereum and Bitcoin - Blockchains
Comparing Ethereum and Bitcoin, Ethereum has a blockchain, which contains blocks of data (Pure ETH payments as well as smart contracts). The blocks are mined by some participants and distributed to other participants who validate them. You can explore this blockchain on etherscan.io. Like Bitcoin, Ethereum blocks form a chain by referring to the hash of the previous block.
Ethereum and Bitcoin – Going permissionless
While matching Ethereum and Bitcoin, the main Ethereum network is a public, permissionless network. Anyone can download or write some software to connect to the network and start creating transactions and smart contracts, validating them, and mining blocks without needing to log in or sign up with any other organization. When people talk about Ethereum they usually mean the main public permissionless version of the network.
However, like Bitcoin, you can take Ethereum software, modify it slightly, and create private networks that are not connected to the main public network. The private tokens that are not connected to the main public network. The private tokens and smart contracts won’t be compatible with the public tokens though, just like private Bitcoin networks.
Ethereum and Bitcoin - Proof-of-Work (PoW) Mining
Like Bitcoin, mining participants create valid blocks by spending electricity to find solutions to a mathematical challenge. Ethereum’s PoW maths challenge, called Ethash, works slightly differently from Bitcoin’s and allows more common hardware to be used. It is deliberately designed to reduce the efficiency edge of specialized chips called ASICs, which are common in Bitcoin mining. Commodity hardware is allowed to compete efficiently, and this allows for greater decentralization of miners. In practice though, specialized hardware has been created and so most blocks in Ethereum are created by one of a small group of miners
In Ethereum and Bitcoin, Ethereum’s roadmap there is a plan to move from electricity-expensive, proof-of-work mining, to a more energy-efficient, proof-of-stake mining protocol called Casper in a future release of the Ethereum software called Serenity. Proof-of-stake is a mining protocol in which your chance of creating a valid block is proportional to the number of coins (ETH) in your mining wallet—contrast this to proof-of-work, where coins (ETH) in your mining wallet—contrast this to proof-of-work, where your chance of creating a valid block is proportional to the number of computational cycles your hardware can crunch through.
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