Ethereum vs. Bitcoin: How Do ETH and BTC Compare?

Two cryptocurrencies with plenty of differences

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Updated on September 15, 2022

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Two cryptocurrencies stand out as clear market leaders—bitcoin and ethereum. These digital currencies rank first and second by market capitalization and are both based on blockchain technology. But as cryptocurrencies, bitcoin and ethereum have some noteworthy differences.

Here’s a closer look at Ethereum vs. Bitcoin. Find out the objectives of each cryptocurrency, and the specifics of each digital asset that can inform you as an investor.

Key Takeaways

Bitcoin was the first cryptocurrency and is the largest cryptocurrency by market capitalization
Ether, the native cryptocurrency of the ethereum network, is the second largest cryptocurrency by market capitalization
Bitcoin uses energy intensive proof of work mechanism to verify transactions, ethereum moved from its original proof of work to proof of stake consensus in 2022
Ethereum boasts of faster transaction times and more applications compared to bitcoin, but can have very high transaction fees

What’s the Difference Between Ethereum and Bitcoin?

Ethereum and bitcoin are both digital currencies that use open-source software, meaning that anyone can view the code and contribute. Both use blockchain technology, which can create electronic ledgers that prevent a digital currency from being double spent.

Note

The native cryptocurrency of the ethereum network is called ether (ETH) but in common parlance, the word ethereum is often used to describe both the network and the currency.

Bitcoin (BTC) is older than ethereum and generally slower at processing transactions.

These are some of the primary differences between ethereum and bitcoin:

	Ethereum (ETH)	Bitcoin (BTC)
Inception	2013	2008
Consensus Mechanism	Proof of stake	Proof of work
Transaction Cost Range (March-Sept. 2022)	$1.6 to $196	74 cents to $3.5
Average Transaction Time	5 minutes	40 minutes
Special Feature	Blockchain platform	Limited supply, scarcity

Consensus Mechanism

Bitcoin currently uses the operating protocol known as proof-of-work (PoW). The PoW method is resource intensive, meaning that bitcoin uses vast amounts of computing power and electricity to complete transactions and mint new cryptocurrency.

Note

Ethereum began as a proof of work platform but converted to a proof of stake platform with an upgrade call the merge in Sept. 2022.

The proof of stake method relies on validators who stake—agree to not trade or sell—their cryptocurrency. Proof-of-stake validators can operate and maintain the blockchain without the need for extensive energy or computing resources.

With the move to proof of stake, the ethereum network hopes to bring down its energy consumption by 99.95%.

Average Transaction Cost

Both ethereum and bitcoin charge fees in their own currency—ETH or BTC—to process transactions. Those transaction processing fees, paid to the blockchain’s network operators, vary based on network congestion.

The average transaction cost on the ethereum platform is higher and more variable than Bitcoin’s transaction processing fees. In the six months between March and Sept. 2022, the cost of a basiceEthereum transaction ranged from about $1.6 to more than $196. Bitcoin’s average transaction fee ranged approximately between 74 cents and $3.5 in the same time period.

Average Transaction Time

The Ethereum platform can process a transaction in about 5 minutes, whereas 40 minutes is the time typically required to process a Bitcoin transaction. If you’re sending funds to family abroad, then waiting 40 minutes may not be problematic. But you probably don’t want to wait even 5 minutes when checking out at the grocery store or buying lunch at a sandwich shop.

Note

For both Bitcoin and Ethereum, you may be able to reduce the processing time for a transaction by paying a higher fee. One option is to use a specialized cryptocurrency wallet like ZenGo.

Special Feature

Bitcoin will always hold the distinction of being the first digital currency. In many ways, bitcoin is structured to resemble digital gold. Bitcoin is electronically “mined” by expending computing resources and electricity to put new coins into circulation, and has a limited supply just like a precious metal.

Ethereum distinguishes itself by being a major blockchain platform that supports the development of its own and many other blockchain projects. Whereas bitcoin is a closed blockchain that supports only one currency, the ethereum blockchain—using smart contracts—supports an ecosystem that includes its native currency Ether and many other cryptocurrencies and projects.

Is Bitcoin or Ethereum Right For You?

You may be considering investing in bitcoin, ethereum, or both. How might you react to sharp price changes, since the prices of both bitcoin and ethereum can be notoriously volatile? You can prepare by first learning about how cryptocurrencies work before investing any money.

Note

Both bitcoin and ethereum come with significant risk and price volatility. Many consider it risky to invest in any cryptocurrency.

Once you’re ready, you may find that it’s easy to get started with crypto investing. Both ethereum and bitcoin are widely supported, including by major cryptocurrency exchanges. After establishing an account with an exchange, you can buy and sell digital currencies much like stock traders buy and sell stocks.

The Bottom Line

Ethereum and bitcoin are the two most valuable cryptocurrencies. But beyond their use of blockchain technology, bitcoin and ethereum have many fundamental differences. Investors should learn about the risks of cryptocurrency and how bitcoin and ethereum differ before making any digital asset purchases.

Frequently Asked Questions (FAQs)

How do you check bitcoin or ethereum transfer fees?

No matter what the consensus mechanism, those who verify cryptocurrency transactions are rewarded for their effort by way of rewards and transaction fees. Transaction fees can fluctuate based on how congested the network is. There are multiple applications that you can use to estimate the fees. For example, EtherScan, Blocknative Gas Fee Estimator or Cryptoneur for ethereum transactions. And Bitcoiner, BTC Network for bitcoin transactions.

How do you invest in bitcoin versus ethereum?

Bitcoin and ethereum (ether) are cryptocurrencies that can be purchased directly on a cryptocurrency exchange. You could also invest in both via investment trusts, such as those offered by Grayscale, but they have stiff fees and minimum investment requirements. Another way to invest is through derivatives such as bitcoin or ether futures and options. You could also invest in bitcoin by purchasing bitcoin futures exchange traded funds (ETFs) or buying stocks of companies such as Riot Blockchain, that are involved in bitcoin mining.

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

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