Bitcoin vs. ethereumWhat is the difference between bitcoin and ethereum?

Bitcoin is digital money, ethereum is a platform for applications. That is the big difference in one sentence. We set out six important differences, from founder to maximum supply:

1. Age, bitcoin has been running since 2009, ethereum since 2015.
2. Purpose, bitcoin is a payment network, ethereum is a platform for decentralised applications.
3. Founder, bitcoin was created by Satoshi Nakamoto (a pseudonym); ethereum by Vitalik Buterin.
4. Price formation, with bitcoin it is mainly scarcity, supply and demand; with ethereum, network usage comes on top of that.
5. Maximum supply, bitcoin is capped at 21 million coins; ethereum has no fixed limit (for now).
6. Role of the coin, bitcoin (BTC) is digital money; ether (ETH) is the "fuel" that runs transactions and applications on the Ethereum network.

Below we explain each point briefly, so you understand what it means in practice.

Bitcoin was set down on paper as a concept in 2008. That year, someone using the pseudonym Satoshi Nakamoto published a whitepaper describing the idea for a decentralised payment network. Not coincidentally, that was also the year of the credit crisis, with banks collapsing and trust in central institutions falling. In a sense, bitcoin is an answer to that. In early 2009 the very first bitcoin transaction took place: Nakamoto sent 50 bitcoin to developer Hal Finney.

Ethereum came later. In 2013, the then 19-year-old Vitalik Buterin, at the time a co-founder of Bitcoin Magazine, published a plan for a new blockchain platform. In his view bitcoin was too limited to build other applications on. The Ethereum network went live on 30 July 2015. Its coin, ether, was worth about 30 dollar cents at the time.

Bitcoin is meant to be digital money. For the first time, people could send value directly to one another, worldwide, without a bank or payment provider in between. Whoever manages their own private key genuinely owns their money, and that is the core idea.

Ethereum is not a payment network but a platform. Developers can build decentralised applications (dapps) on it, with rules laid down in smart contracts. Examples: lending and savings protocols (Aave, Compound), marketplaces for digital art (OpenSea), and games such as Cryptokitties. On the Ethereum network you can also simply send ether from person to person, just like with bitcoin, but that is a by-product rather than the main point.

Bitcoin has an unknown founder. Satoshi Nakamoto published the whitepaper Bitcoin: A Peer-to-Peer Electronic Cash System in 2008, stayed active on forums for a few more years, and disappeared around 2011. To this day nobody knows who Nakamoto is; it could be one person or a group. Many see that mystery as valuable in itself: bitcoin has no "leader", anyone can contribute and nobody can walk away and take the project with them.

Ethereum has a face. Vitalik Buterin wrote the plan and is a co-founder, together with Joseph Lubin and Charles Hoskinson among others. Buterin is still closely involved in the direction of the network and regularly shares his views on social media. For some that is an advantage (a clear course), for others a drawback (a more central figure).

For both coins, supply and demand set the price. But the underlying factors differ.

With bitcoin, scarcity is the biggest lever. The maximum of 21 million coins is written firmly into the code. Every four years the amount of new bitcoin added per block is halved, a mechanism known as the halving. If demand rises while supply tapers off, the price usually goes up.

With ether, scarcity plays a smaller role. Here markets also look at how the network is used: how many decentralised applications are running, how much ether is locked in DeFi protocols, how busy the network is. Since 2022 part of the fee is burned with every transaction, which shrinks the net supply slightly, a new variable that bitcoin does not have.

Bitcoin has a fixed limit of 21 million coins. That cap is written into the code and cannot be changed in practice. Every bitcoin can be divided down to eight decimal places; the smallest unit is called a satoshi (one bitcoin equals 100,000,000 satoshi). If the bitcoin price keeps climbing, the satoshi may yet become the common unit of account in daily use.

Ether has no fixed maximum. The issuance schedule did change in 2022, though: because of the fee burn, net issuance is often around zero or even slightly negative. In practice that makes ethereum less inflationary than before, even without a hard cap.

• What is bitcoin?
• What is ethereum?
• What is a smart contract?
• What is Proof-of-Stake?
• What is the bitcoin halving?