Known for being open source and decentralized, Ethereum is the blockchain platform that lays the foundation for many different cryptocurrencies. Therefore, Ethereum is more than just a cryptocurrency, it is an economic infrastructure built in the digital world. The unit of the blockchain that accompanies many different systems is the cryptocurrency called “Ether (ETH).
What is Ethereum? How does it work? How is it different from Bitcoin?
In terms of price, Ethereum is one of the cryptocurrencies closest to Bitcoin today. Naturally, the similarities and differences between Bitcoin and Ethereum have begun to be among the topics of curiosity. The main factor that distinguishes the two digital currencies is the establishment purposes of the platforms. Bitcoin was designed as a digital currency; It aims to offer a fast, cheap and global payment system. Ethereum differs from BTC because it is designed as a smart contract platform.
What is Ethereum?
The system created by computers working under the “Ethereum Protocol” all over the world is called Ethereum. The main purpose of the network is to enable everyone to create applications and organizations freely. In this respect, Ethereum forms the basis of decentralized economy infrastructures.
Ether, referred to as the cryptocurrency of Ethereum, has offered many different advantages in addition to the purchase of goods and services. Ethereum, which allows creating applications within the network just like computer software, helps take practical action in complex financial transactions. In addition, it also contributes to the transfer and storage process of personal data within the possibilities offered by the applications.
Going beyond the traditional economy, including classical payment and investment instruments, Ethereum is seen as the key to decentralized infrastructure. The main reason for this situation is that all data on the platform is stored by everyone in the network and verified within the transactions. All transfers, purchases and sales processed are stored by computers participating in the network.
Ethereum History
Ethereum, one of the largest cryptocurrencies in the world, emerged with the efforts of Vitalik Buterin and the rest of the team. Although the team had many different members, Vitalik Buterin was the one who published the first whitepaper on the system. After this study was published in November 2013, team members started to take steps. Thus, progress is made towards the implementation of the project.
At a Bitcoin conference held in Florida in early 2014, Ethereum was made public thanks to Buterin’s blockchain explanations. In the last months of the year, it is seen that the project receives large amounts of funds and sells ETH. Thanks to these steps, which are very important in the development process of the project, the rise of Ethereum begins.
While sales began in 2014, the blockchain was published and became operational on July 30, 2015. Immediately after this time period, when new steps were taken on the development of the system, Ethereum became operational. As the interest in cryptocurrencies and blockchain systems increases year by year, the ETH unit has also continued to increase.
Ethereum in terms of function and operation
The way Ethereum works is basically pretty simple. Data without being tied to a single host machine; It is stored by different computers within the network. This system, called “Peer to Peer”, supports networking and data flow between peers. There are computers from all over the world in Ethereum’s chain that contribute to the processing of transactions. The advantages offered by the decentralized structure are independent economy and secure infrastructure against attacks.
Ethereum, which forms the basis of many different cryptocurrencies through the ERC-20 code system, is structurally open source. A transparent and secure experience is provided thanks to the system where everyone in the blockchain can keep records and contribute to the verification of data during the transaction process. In addition, it is possible to carry out financial transactions faster and more practically with the application infrastructures developed by the platform.
The process of generating new Ethers is carried out by the computers of the users within the network. These users, who follow the data flow and perform confirmation transactions, are called cryptocurrency miners. New blocks are produced periodically within the blockchain system. The resulting blocks are systematically distributed among miners in return for the transactions made.
What is Bitcoin and its systematics?
Bitcoin, which was at the peak of the enlightenment of cryptocurrencies and later on, emerged in 2009. The developer or group, going by the pseudonym Satoshi Nakamoto, introduced the project to the public for the first time. The system, which created its first block at the beginning of its release year, took many years for people to understand and use it.
The development of the system called BTC continued over the years. This unit, which is decentralized just like Ethereum and other cryptocurrencies, has grown day by day and started to be traded on various exchanges. Thanks to its popularity and stock market transactions, it has reached the top as the largest cryptocurrency in the world. It also increased the public’s trust in crypto systems and blockchains.
Key differences between Bitcoin and Ethereum
Bitcoin and Ethereum, which are at the top among crypto money systems, stand out with their high transaction volumes along with their functional structures. However, there are points where the two systems differ from each other. The main differences between the two systems, both in terms of their structural characteristics and their social development, are as follows:
- While Bitcoin was introduced to the public anonymously, Ethereum’s development team contacted the public directly. However, due to the use of decentralized infrastructure, there is no major impact caused by this difference.
- In terms of development, Bitcoin is designed to provide an alternative to physical or fiat currencies. The purpose of Ethereum is to develop decentralized applications and introduce smart contracts.
- The PoW system, which ensures protection of the integrity of information and security against attacks, is actively used in the Bitcoin infrastructure. While Ethereum has also used this method in the past, it switched to the more sustainable and secure PoS system in September 2022.
- Ethereum is faster in terms of creating blocks. 1 block is produced every 14-15 seconds within the system. On the other hand, for BTC this interval is around 10 minutes.
- While Ethereum became operational in 2015, Bitcoin became operational at the beginning of 2009. The difference between periods has an impact on the way they were developed.
- Bitcoin uses the Omni layer, which is a platform for creating and trading currencies on-chain. The emergence of stable cryptocurrencies depends on this layer. On the other hand, there are various and different standards for Ethereum tokens.
- In terms of speed, Ethereum processes an average of 30 transactions per second, while this number is 7 for Bitcoin. In addition, there is a scalability problem in both systems. Physical and centralized services such as VISA, which is the payment infrastructure, can process an average of 1500-2000 transactions per second.
Considering all these differences, it can be seen that the two systems are technically different from each other while advocating cryptography and decentralization. The main reason for this situation is that the periods in which they were developed and the purposes of their emergence are clear differences.
Ethereum and Bitcoin buying/selling process
Since they are at the top of the stock market, both Bitcoin and Ethereum have high values in terms of price. Therefore, both units are actively used as payment and investment instruments. Wallet applications and exchange infrastructures can be used to use cryptocurrencies and be involved in the process. At this point, it would be beneficial to become familiar with the systems and applications.
Crypto wallets are digital interfaces that allow a person to view and manage the amount they own and store. Just like e-mail infrastructures, wallet applications also have an address and shipping system.
However, the crypto amount owned is not stored in the wallet. There is a key that acts as a password for each Ether belonging to the person. The wallet helps access money and make transactions through the interface with the help of these keys.
In addition to wallet applications, Bitcoin and Ethereum are actively bought/sold through digital stock market infrastructures. It is possible to transfer the money held in the stock market account to bank accounts by clearing it to the relevant units. At this point, choosing the right application is very important in terms of performing transactions safely.