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Bitcoin (with a big B) is a blockchain designed for a digital currency called bitcoin (small b). Ethereum is designed to be a decentralized platform for applications and assets, powered by its native cryptocurrency Ether.
Both use blockchain technology, are open-source, and are maintained by global communities, but their goals and features are distinct. In this guide, we will walk through what each network is, what they have in common, and how they differ across areas like technology, culture, and future outlook.
Bitcoin - a quick primer
Bitcoin is a decentralized digital currency network. It was created in 2009 by an anonymous developer using the name Satoshi Nakamoto, shortly after the 2008 financial crisis. The idea was for Bitcoin to be a peer-to-peer electronic cash system.
Bitcoin allows anyone to send and receive bitcoins over the internet without relying on a central authority like a bank. All transactions are recorded on a public ledger known as the blockchain.
Bitcoin introduced a concept known as proof of work to secure its network. In simple terms, computers around the world race to solve cryptographic puzzles that let them validate transactions and add new blocks. These specialized computers are called miners and they are rewarded with new bitcoin.
Bitcoin has a fixed supply of 21 million coins. This design choice is a key reason why Bitcoin is often referred to as digital gold.
Ethereum - a quick primer
Like Bitcoin, Ethereum is also a decentralized blockchain network, but it was designed to do more than just record payments. Launched in 2015 by a software developer called Vitalik Buterin and his co-founders, Ethereum was built to be a smart contract and decentralized application platform.
Ethereum lets anyone send and receive value like Bitcoin, but it also acts as a platform that anyone can use to run programs. Instead of this computer running on a single server, the Ethereum network runs across thousands of nodes and is not controlled by a single entity.
Anyone can create and deploy programs to this shared computer, and they will run exactly as written. These programs are called smart contracts, and they are Ethereum's core innovation.
Once triggered, the code runs automatically without human interference. This makes it possible to build apps for things like lending, trading, games, and digital collectibles that run all day, every day, for millions of users worldwide.
In the same way bitcoins are used to pay transaction fees on the Bitcoin network, Ethereum's native currency, Ether, is used to pay transaction fees, publish and use smart contracts, and secure the network. Ether acts both as fuel for running programs and as a store of value, so it is sometimes referred to as digital oil.
Learn more about Ethereum and how it works.
The key differences
Bitcoin and Ethereum use blockchain technology to maintain decentralized networks, but they differ in their design, purpose, and capabilities.
| Area | Bitcoin | Ethereum |
|---|---|---|
| Primary purpose | Peer-to-peer digital currency | Platform for apps and digital economies |
| Smart contracts | Not supported | Core functionality |
| Supply | Fixed at 21 million | Dynamic with a burn mechanism |
| Consensus mechanism | Proof-of-work | Proof-of-stake |
| Speed | Around 60 minutes to finality | Around 15 minutes to finality |
| Energy usage | High | Low |
| Governance | Conservative, slow-moving | Flexible, community-driven |
| Developer ecosystem | Smaller | Large and active |
| Upgrades | Rare and cautious | Frequent and iterative |
Purpose of Bitcoin vs Ethereum
Bitcoin was created in 2009 in the wake of the global financial crisis. Its goal was to offer a peer-to-peer form of money that operated without banks or governments. It's simple by design. The network aims to moves value from one person to another without a middleman. This narrow focus has helped it become widely known as a form of digital gold, a scarce and durable store of value that can also be used as a medium of exchange.
Ethereum launched in 2015 with a broader vision. Its creators wanted to take the security and decentralization of blockchain and make it programmable. Rather than limiting itself to payments, Ethereum allows anyone to write and publish self-executing programs called smart contracts. This opens the door to an entirely new category of applications, from decentralized finance (DeFi) and stablecoins to non-fungible tokens (NFTs), games and decentralized social media.
The technical designs reflect these purposes. Bitcoin's scripting language is limited, which reduces complexity and helps keep the network secure. Ethereum's programming language is more expressive, allowing it to store and manage more complex states and interactions between applications. This flexibility is a strength, but it also means the network evolves more quickly, with regular upgrades and new features.
Both play distinct roles in the wider digital economy. Bitcoin focuses on being a stable and decentralized store of value. Ethereum aims to be a global settlement layer for decentralized applications and programmable assets.
Use cases and adoption
Bitcoin is commonly used as a store of value. Many investors see it as a hedge against inflation or economic instability. In some countries, it is used as an alternative currency or as a way for people to save outside of the traditional banking system.
Ether serves as a store of value too, but its primary role is to power a broad ecosystem of applications and assets. Developers can use Ethereum to create new protocols, launch tokens, run decentralized exchanges, mint NFTs, build games, and develop social platforms that run without centralized control.
Ethereum supports thousands of decentralized applications (dapps) for new forms of finance, crowdfunding, and digital ownership. Some use cases even connect both networks. For example, Bitcoin can be “wrapped” and used on Ethereum for activities like lending, borrowing, and trading in DeFi.
Institutional adoption reflects these differences. Bitcoin the cryptocurrency is widely held as a long-term store of value, while Ethereum is seen as decentralized infrastructure. Its programmability appeals to fintech platforms and payment providers.
Learn more about what Ethereum is used for.
Monetary policy
Bitcoin's supply is capped at 21 million coins. This hard limit is enforced by the protocol and is one of the reasons Bitcoin is compared to gold. New bitcoins enter circulation through mining rewards, which are cut in half roughly every four years in an event called the halving. The reward started at 50 bitcoins per block in 2009, dropped to 25 in 2012, then 12.5 in 2016, and so on.
At this rate, the last bitcoin is expected to be mined around the year 2140.
Ethereum does not have a fixed supply cap. Instead, its issuance is determined by protocol rules, and recent upgrades have introduced mechanisms that can reduce supply over time. The most notable is the EIP-1559 upgrade, which burns a portion of transaction fees. When network activity is high, more ETH can be burned than issued, making the supply deflationary during those periods.
The two approaches reflect different priorities. Bitcoin's fixed supply appeals to those who want predictability and scarcity. Ethereum's more flexible model supports ongoing network incentives and development, while still introducing mechanisms to manage supply growth.
Developer ecosystem
Ethereum has one of the largest blockchain developer communities. Building on Ethereum gives you access to a wide range of tools, frameworks, grants, and hackathons. The Ethereum Virtual Machine (EVM) is Ethereum's runtime environment and has become a common standard, with many other blockchains using it to ensure compatibility.
Token standards like ERC-20 and ERC-721 have become the foundation for much of the broader blockchain economy. Many Layer 2 networks and other blockchains use the EVM so that apps, wallets, and smart contracts can code can be used across blockchains with minimal changes.
Bitcoin's developer community is smaller and more focused. Most activity centers on maintaining and improving the core protocol, as well as developing Layer 2 solutions like the Lightning Network for faster and cheaper payments.
Security and consensus
Bitcoin and Ethereum are both secured by large, distributed networks of independent nodes, but they use different methods to agree on the state of the network.
Bitcoin uses a system called proof-of-work. Computers called miners compete to solve cryptographic puzzles. The first to solve one gets to add the next block of transactions to the blockchain and earns a reward in bitcoins. This approach gives Bitcoin what is known as probabilistic finality, meaning a transaction is only considered highly secure after several more blocks are added on top of it. For Bitcoin, this is often around six confirmations, or about one hour.
Ethereum uses proof-of-stake. In this model, validators lock up, or stake, ETH for the chance to be selected to propose and confirm new blocks. The selection is random, but the probability of being chosen increases with the amount of ETH staked. Validators who act dishonestly risk losing their stake. This allows Ethereum to achieve economic finality, where finalized blocks are extremely difficult to reverse, often within about 15 minutes. Ethereum also uses checkpoints to mark blocks as irreversible once enough validators agree.
Underlying technology
Bitcoin uses what is known as the unspent transaction output model, or UTXO. In this system, the blockchain does not track account balances. Instead, it records outputs from previous transactions that have not yet been spent. When you spend bitcoin, you use these outputs as inputs for a new transaction, creating new outputs in the process.
You can think of this like using cash. If you have two five-dollar bills and want to spend seven dollars, you hand over both bills and receive three dollars in change. Bitcoin records the bills and the change, not your total balance.
Ethereum uses an account-based model. Instead of tracking individual outputs, it keeps a record of account balances like a bank account does. This approach makes it easier to manage smart contracts and complex logic, since accounts can store data and interact with one another like programs.
Each model has tradeoffs. UTXOs can offer greater privacy and make it easier to track individual coins. Account-based systems are more straightforward for building applications.
Decentralization
Bitcoin and Ethereum are both designed to be decentralized, but they measure and approach it in different ways.
Bitcoin's decentralization is supported by its simple technical design, long-term stability, and wide distribution of nodes. Its low-resource requirements make it easier for people to run full nodes at home, which helps preserve the network’s independence and censorship resistance.
Ethereum also has a large and growing node network. It places strong emphasis on client diversity, meaning multiple versions of the software are maintained by independent teams. This reduces reliance on any single client and helps protect against bugs or failures that could affect the network.
Ethereum has a broader number of participants involved in activities like staking, upgrades, and governance discussions, but both networks aim to remain open and resilient. Bitcoin keeps node requirements unchanged, relying on fewer software clients. Ethereum encourages different contributors, each bringing their own perspective.
Environmental impact
One of the most significant changes in Ethereum's history was the switch from proof-of-work to proof-of-stake in 2022. Known as the Merge, this transition reduced the network's energy consumption by more than 99 percent.
Under proof of stake, Ethereum no longer relies on energy-intensive mining. Instead, validators are selected at random, with the likelihood of selection increasing with the amount of ETH they have staked. This shift has made Ethereum one of the more energy-efficient blockchain networks.
Bitcoin continues to use proof-of-work, which requires large amounts of electricity as miners compete to solve cryptographic puzzles. Some of this energy comes from renewable sources, and there are ongoing discussions in the Bitcoin community about ways to improve sustainability.
The difference in energy use has become an important point of comparison between the two networks. Ethereum's lower energy footprint makes it more appealing in contexts where environmental impact is a priority.
What does the future look like
Bitcoin is increasingly being adopted as a store of value and reserve asset. It is unlikely to change significantly, and this stability is part of its appeal.
Ethereum is positioning itself as an application platform in the new digital economy. With the growth of Layer 2 networks and ongoing upgrades, it aims to support global-scale applications, infrastructure, and assets.
For many users, the two networks are not in direct competition. They serve different purposes and can complement each other in a diversified approach to digital assets.