Bitcoin vs Ethereum: A Beginner’s Guide to Crypto

Monday, January 31, 2022

Bitcoin and Ethereum are the two most popular cryptocurrencies available today and have both contributed to crypto’s growing popularity. The two share similarities, but they vary wildly in terms of how they are used. Many beginners to the world of cryptocurrency may be at a loss for which to invest in, so we’ve compiled a guide to highlight the main differences between these two cryptocurrency powerhouses.

Bitcoin vs Ethereum: A Beginner’s Guide

How do Bitcoin and Ethereum compare? Which one is better for you? Here we'll break down the key differences between these two cryptocurrencies. We'll also discuss some of the pros and cons of each one. By the end of this post, you should have a good understanding of which one is right for you. So let's get started!

Bitcoin Explained

Bitcoin (BTC) was first launched in 2009 by a pseudonymous creator called Satoshi Nakamoto. Since then, it has become the gold standard in cryptocurrency, due to its ability to offer a secure online currency that isn’t regulated by a central authority. It was the first cryptocurrency based on the blockchain, created to allow users to perform peer-to-peer transactions.

Any person can buy and sell BTC through cryptocurrency exchanges like Coinbase, and their balances exist in a cryptographically secured ledger. Since these ledgers are publicly available, malicious third parties cannot alter other users’ balances. This concept of a decentralized, virtual currency has gained a lot of popularity among users, and although it isn’t a formally recognized store of value, it has garnered acceptance from government bodies.

Ethereum Explained

Similar to Bitcoin, Ethereum (ETH) is a decentralized platform that allows users to perform peer-to-peer transactions without influence from a governing central authority. It was launched in 2015 and has since become the largest decentralized software platform. Referred to by many as a “decentralized computer,” its programming language enables developers to build secure decentralized applications known as DApps.

Applications built on Ethereum utilize smart contracts to carry out transactions. These contracts are created and run without any risk of fraud or interference from a third party. By leveraging this technology, ether and other cryptocurrency assets can be used in various ways such as trading, making payments, or as collateral for loans.

Key Differences of Bitcoin and Ethereum

While both Bitcoin and Ethereum are based on the concept of distributed ledgers and cryptography, they differ in many key aspects. Let’s consider the major differences between the two:


Bitcoin and Ethereum both allow peer-to-peer transactions. However, while Bitcoin simply acts as a replacement for standard fiat currencies, Ethereum goes a step further by providing a platform that allows users to exchange their crypto for money, real estate, shares, etc.


There are currently over 18 million BTC in existence and 118 million ETH. Around 260,000 Bitcoin transactions take place each day, compared to nearly 1.2 million Ethereum transactions. But while there is an infinite supply of Ethereum, Bitcoin has a finite supply and will be capped at 21 million BTC.

Consensus Mechanism

Both use a consensus mechanism called proof-of-work, which requires nodes to agree on the state of each network. Miners utilize their computational power to add a block to the blockchain, which has become a major concern for ecologically conscious users.

However, with Ethereum’s major upgrade this year, it will be moving to a different mechanism called proof-of-stake. This protocol will substitute major computational power with staking, which will make it significantly less energy-intensive than the proof-of-work system.


Ether is the driving force behind the computational power of Ethereum and must be paid for any transaction that takes place using this platform. With Bitcoin, transaction fees are optional. Miners may be paid to pay special attention to your transaction, but the transaction will go through whether you pay a fee or not.

Block Time

It takes about 10 minutes to add a new block to the Bitcoin blockchain. Ethereum, on the other hand, only takes about 15 seconds.

The Takeaway

If you’re wondering which cryptocurrency is best, it will entirely depend on your needs. Both are a good choice for beginners but determining which is the right one for you to invest in will require taking a close look at your investment goals.

Both BTC and ETH are a type of digital currency. But while Bitcoin is an effective peer-to-peer transaction system, Ethereum allows you to create and build decentralized applications and smart contracts. Some experts contend that, despite Bitcoin being a more established platform, the technology potential of Ethereum has it beat in terms of investment opportunities.

Why not invest in both? Many investors invest in both BTC and ETH to meet different goals. Knowing how these two types of platforms work can help you determine how much money you want to allocate to each, so check out the rest of our articles to learn more about investing in cryptocurrency today.

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