Understanding Bitcoin and Ethereum: Differences, Mining, and Applications

Bitcoin is the best‑known and oldest independent digital means of payment that is created (mined) electronically; it is not physically printed, is generated by many users worldwide using computers, and is stored in digital wallets.

Cryptographic currencies enable digital payment transactions without central administration. Unlike normal money, no single entity such as a bank or government can accelerate or manipulate the production of currency units, which effectively eliminates inflation; the development process also differs.

Because cryptocurrencies exist only digitally and are not printed, their creation process is called mining.

Ethereum is a newer cryptocurrency that, together with Bitcoin, is among the three most valuable and highest‑market‑capitalization currencies. As of May 2017 its market cap was about $8 billion, and its unit is called Ether. Like Bitcoin, Ethereum is based on blockchain technology.

Ethereum is a decentralized platform that executes smart contracts: applications run exactly as programmed without downtime, censorship, fraud, or third‑party interference, on a custom blockchain that provides a powerful shared global network infrastructure.

At the end of November 2017, Ethereum’s market capitalization exceeded $43 billion and its price was around $450.

Compared with Bitcoin, Ethereum is not a pure cryptocurrency but a platform for applications consisting of smart contracts. Its goal is to decentralize data using blockchain technology, and its transactions can include complete programs that run decentrally.

Ethereum decentralizes data. Imagine sending a message via WhatsApp, which relies on a central server; if that server fails or is compromised, the message is unsafe. In Ethereum’s decentralized network, a message is split into small pieces and sent to a worldwide distributed network of individual computers, each receiving only a fragment.

The fragments are reassembled on the recipient’s device, and each participating computer receives a small reward in Ether for providing service or computing power.

Companies such as Porsche, IBM, Bosch, and Cisco are developing their own Ethereum‑based blockchain projects, and the United Nations has used the Ethereum blockchain to issue food vouchers in refugee camps. Ethereum offers enormous potential to simplify processes, increase efficiency, and automate tasks, which could change, revolutionize, or even disrupt entire industries. Unlike Bitcoin, which is a pure digital payment method, Ethereum enjoys broad industry popularity.

The Ethereum Alliance is a global association of companies, industry experts, and scientists dedicated to further developing and disseminating Ethereum, supporting other Ethereum projects and assisting companies.

As demand for Ether grows, its value increases; compared with Bitcoin, Ether remains relatively inexpensive.