$ETH Ethereum (ETH) and Bitcoin (BTC) are the two most important cryptocurrencies, but they have key differences in their purpose, technology, and functionality. Here are the main differences:
### 1. **Purpose and focus**
- **Bitcoin (BTC)**:
- Created as a **decentralized digital currency** and store of value ("digital gold").
- Focused on being a means of payment and store of value outside the traditional financial system.
- **Ethereum (ETH)**:
- Is a **smart contracts and decentralized applications (DApps)** platform.
- Focus on enabling developments like DeFi, NFTs, and custom tokens.
### 2. **Technology**
- **Bitcoin**:
- Uses a **Proof of Work (PoW)** consensus mechanism (although Ethereum also initially used it, but migrated to **Proof of Stake (PoS)** in 2022).
- Simpler blockchain, focused on financial transactions.
- **Ethereum**:
- **Smart contracts**: Allow the execution of programmable code on their blockchain.
- Has a **virtual machine (EVM)** to execute contracts.
- Higher speed in transactions (although with variable fees).
### 3. **Supply and issuance**
- **BTC**:
- Fixed maximum supply: **21 million BTC**.
- Issuance controlled by halvings (reduction of mining rewards every 4 years).
- **ETH**:
- **No strict maximum limit**, but the annual issuance is controlled by the protocol (currently <1% annually).
- Burning of ETH in each transaction (EIP-1559) reduces inflation.
### 4. **Fees and scalability**
- **Bitcoin**:
- High fees during congestion (block size limited to 1-4 MB per block).
- Solutions like Lightning Network improve scalability.
- **Ethereum**:
- Fees ("gas fees") vary according to demand (can be very high in DeFi/NFTs).
- Uses **Layer 2** solutions (Polygon, Optimism) and **sharding** to scale.
### 5. **Use cases**
- **BTC**:
- Store of value (similar to gold).
- P2P transactions without intermediaries.
- **ETH**:
- Platform for **DeFi** (loans, swaps), **NFTs**, **DAOs**, and tokens (ERC-20, ERC-721).
- Basis for complex blockchain projects.
### 6. **Community and governance**
- **Bitcoin**:
- Focus on **decentralization and security**. Slow changes (broad consensus required).
- **Ethereum**:
- More flexible, with frequent updates (e.g., Ethereum 2.0).
**Conclusion**: BTC is ideal as a store of value, while ETH is a programmable platform for blockchain innovation. Both are complementary in the crypto ecosystem.
