This article was published as a part of the Data Science Blogathon.
Introduction
In this article, we will see the two main cryptocurrencies, Bitcoin and Ethereum. Let us learn about them. What differences do they have and which coin is best for investment and what makes that particular coin better. Nowadays cryptocurrencies are quite popular. It is important to learn about them.
Nowadays data science and blockchain are interrelated. Data scientists are using this blockchain technology for authentication purposes and also for tracking the data. Trading with cryptocurrency involves blockchain technology. In the future, this cryptocurrency will change our world and will become part of our life. There is no risk of fraud by using cryptocurrency. It makes transactions super safe. It gives full control to people over their money.
Let’s get started.
Cryptocurrency
We basically use normal currencies like Rupee, Dollar, Pound, Won, and all. Cryptocurrency is also similar to that normal currency. It is a virtual currency. There is no physical currency here. Normal currency is controlled by the central authority. They are centralized whereas cryptocurrency is decentralized. It does not have any central authority. No third parties are involved in this.
For any transaction using cryptocurrency, that particular transaction is done only after a majority of people using the cryptocurrency agreed to it. It is a digital currency that acts as a medium of exchange just like normal currency. Cryptocurrencies use high standards of cryptography for secure transactions. Cryptocurrency uses blockchain technology. As we know, a blockchain is a chain of blocks and a block has a set of records.
Bitcoin
Bitcoin is one of the cryptocurrencies and also a leading cryptocurrency among all that uses strong encryption techniques to send and receive money in a secured manner. Bitcoin uses the SHA256 algorithm which makes it more secure. It is a decentralized cryptocurrency. That means no Government or bank will control the working of bitcoin.
Major advantages of bitcoin cryptocurrency are
1. Payments done are secured by strong cryptography
2. Identities of the sender and the receiver are kept anonymous.
3. The transaction fee is also low and affordable.
Source: CNBC
Ethereum
Ethereum is also known as Ether in short. This Ether cryptocurrency is created in 2015. Ethereum provides Ether tokens to the users and these Ether tokens are used to build and deploy decentralized applications. Ethereum is used to pay for the services and transaction fees. Here the services include the computational power that is required before a block is added to the blockchain. Ethereum is also used for peer-to-peer payments just like bitcoin.
Source: CoinDesk
Bitcoin Vs Ethereum
Bitcoin was the first cryptocurrency that was created and the bitcoin was released in 2009. Bitcoin was created by an unknown person and his name is Satoshi Nakamoto. This technology came into the concept of a blockchain that is very popular nowadays.
On the other side, Ethereum was released recently in 2015. Ethereum was created by Vitalik Buterin who is a researcher and a programmer. In the creation of Ethereum, Vitalik Buterin used the concepts of bitcoin and blockchain and improved them. He provided many more functionalities by creating the Ethereum platform for distributed applications and smart contracts. These smart contracts work in such a way that when a certain set of predefined rules are satisfied then only that particular output takes place. Ether can be used to create these kinds of smart contracts.
Comparison between Uses of Bitcoin and Ethereum
As we know bitcoin enables peer-to-peer transactions. Here bitcoin just acts like normal currency like how we use our normal currency when we need to buy anything from the supermarket. similarly, when any transaction is to be done, bitcoin is used for the transaction between the peers.
On the other side, Ethereum also provides peer-to-peer transactions and along with it, ether also provides the users to create and execute smart contracts on Blockchain We had already discussed smart contracts. Smart contracts allow the users to exchange anything of value like some kind of contracts, shares, money, real estate, and many more.
Validation Process
In bitcoin, transactions are validated by using something known as proof of work. Similarly, Ethereum transactions are also validated by using proof of work. In blockchain transactions are validated by miners. This proof of work involves miners around the world trying to solve a complicated mathematical puzzle to be the first one to add a block to the blockchain. Soon the Ethereum may switch to something known as proof of stake. What exactly proof of stake is, in proof of stake the validator can validate the transactions in the block based on how many coins the person owns. More the number of coins then more the mining power.
Source: Coincu News
Transactions
When it comes to the rewards for miners, the reward for mining in the case of bitcoin is 12.5 BTC per block. And this reward will become half the original for every 210,000 blocks. When it comes to Ethereum, the miner will get 3 ether every time hen the block is added to the blockchain.
For the bitcoin transaction, the transaction fee is very low and also it is optional. You can pay how much you want in order to get more attention from miners towards your transaction. But in the case of Ethereum, it is not optional. You have to pay 3 ether every time when the block is added to the blockchain. Later this transaction fee is converted into the gas. And then this converted gas will drive the computation that allows your transaction to be added to the blockchain.
To add a block to the blockchain, bitcoin takes about 10 minutes. But in the case of Ethereum, it takes on an average of 12 to 15 seconds only.
These cryptocurrencies use strong hashing algorithms to make them more secure. Bitcoin uses the SHA256 hashing algorithm. Whereas Ethereum uses the Ethash algorithm.
In the market, there are about 17 million bitcoins and 101 million ether coins. Bitcoin has a market capitalization of 110 Billion USD whereas Ethereum’s market capitalization is 28 Billion USD. Even though there are more ether coins than bitcoins, the market value of ether cannot reach the market value of bitcoin. On average, there will be around 219,345 bitcoin transactions every day and 659,051 ether transactions every day. The block size of bitcoin is 628.286 KB whereas the block size of ether is 25.134 KB.
Which one is better?
The major question that arises is between bitcoin and Ethereum which cryptocurrency is better. So far we have discussed two main uses called peer-to-peer transactions and smart contracts. Here the better cryptocurrency is decided based on the user’s requirements. When the user requirement is peer-to-peer transaction then bitcoin is best but when the user requirement is smart contracts then definitely Ethereum is the best option.
Conclusion
That’s all about bitcoin and Ethereum which are two leading cryptocurrencies in the market nowadays. These transactions are very secure in that these algorithms are strongly encrypted cryptographic algorithms.
Overall in this article, we have seen about cryptocurrency, and some cryptocurrencies bitcoin, and Ethereum which use blockchain technology. And then we have compared these two coins in several aspects. Finally concluded by understanding which coin is better.
Hope you found this article useful.
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This is Amrutha, I am pursuing B.Tech in the Computer science Department. I am interested in developing ML Models with python and Data Analysis. And also I have an interest in Web Development. I hope my articles in Analytics Vidhya help you to learn better. Thank you!!
