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Ethereum VS Bitcoin for Beginners (Differences Explained in 3 mins)

#Cryptocurrency
2025-11-04 20:2610 min read

Content Introduction
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The video explains the differences between Bitcoin and Ethereum, the two largest cryptocurrencies. Bitcoin, launched in 2009, serves primarily as a digital currency and store of value, designed for simple transactions without intermediaries. In contrast, Ethereum, introduced in 2015, enables programmable transactions through smart contracts, facilitating decentralized applications. The video details their security mechanisms: Bitcoin uses a proof-of-work system, while Ethereum transitioned to proof-of-stake in 2022. It also discusses their transaction speeds, supply limits, and scaling solutions. Bitcoin has a capped supply of 21 million coins, while Ethereum's supply is variable, with some ETH burned with each transaction, causing potential deflation. Both networks utilize different strategies for scalability, with Bitcoin using the Lightning Network and Ethereum employing layer 2 solutions. Ultimately, the video emphasizes that while both cryptocurrencies have unique features and uses, neither is inherently superior, as they cater to different needs within the crypto ecosystem.

Key Information

  • Bitcoin and Ethereum are the two largest cryptocurrencies, but they serve different purposes.
  • Bitcoin, launched in 2009, was designed as a payment network and digital money that operates without banks or governments, evolving into a store of value.
  • Ethereum, launched in 2015, was designed to support programmability through smart contracts, which facilitate decentralized applications.
  • Bitcoin operates on a proof of work system, where miners validate transactions by solving cryptographic puzzles and earn new Bitcoin as a reward.
  • Ethereum switched to a proof of stake system in 2022, allowing users to stake ETH to secure the network while earning more ETH.
  • There is a fixed supply of 21 million Bitcoin, while Ethereum does not have a fixed supply, with part of the ETH being burnt with transactions, making Ethereum potentially deflationary.
  • Bitcoin processes about 7 transactions per second, while Ethereum can handle 15 to 30 transactions per second.
  • Bitcoin uses the Lightning Network to facilitate faster transactions, while Ethereum uses layer 2 solutions like Arbitrum and Optimism.
  • Bitcoin is known for its simplicity and security, while Ethereum is more flexible and faster at adopting new features, but also has more bugs and risks associated with smart contracts.
  • Both cryptocurrencies cater to different needs and preferences in the cryptocurrency space.

Timeline Analysis

Content Keywords

Bitcoin

Launched in 2009 after the global financial crisis, Bitcoin was created by Satoshi Nakamoto as a digital payment network and a form of money that operates without banks or governments. It has evolved to be more of a store of value, known for its simplicity, security, and limited functionality.

Ethereum

Created in 2015, Ethereum takes the concept of digital money and makes it programmable. Its native currency, Ether (ETH), serves as money while enabling smart contracts that support decentralized applications, including decentralized finance and NFTs.

Differences between Bitcoin and Ethereum

Bitcoin acts as a public record of transactions, whereas Ethereum functions as a public cloud computer allowing anyone to build on it. Both cryptocurrencies have different security methods; Bitcoin uses proof of work, while Ethereum has transitioned to proof of stake.

Supply

Bitcoin has a hard cap of 21 million coins, making it scarce, while Ethereum doesn't have a fixed supply and a portion of ETH is burnt with each transaction. This leads to the potential for Ethereum to become deflationary.

Transaction Speed

Bitcoin processes about seven transactions per second, while Ethereum manages between 15 to 30 transactions per second, making Ethereum more scalable through layer 2 solutions like Arbitrum and Optimism.

Mining and Security

Bitcoin's security relies on a massive amount of mining power, making it very secure but also energy-intensive. On the other hand, Ethereum's proof of stake model encourages honesty by threatening to destroy one's stake for dishonest actions.

Network Scaling

Bitcoin utilizes the Lightning Network for instant transactions and lower fees, while Ethereum uses layer 2 blockchains to handle a higher volume of transactions before settling back on the main network.

Protocol Changes

Bitcoin is conservative with infrequent changes to its protocol, while Ethereum is more flexible and fast-moving, which allows for more features but also exposes it to bugs and smart contract risks.

Related questions&answers

What is the difference between Bitcoin and Ethereum?

Bitcoin and Ethereum are the two largest cryptocurrencies, but they serve different purposes. Bitcoin was designed as a payment network and digital currency that works without banks, while Ethereum allows for programmable transactions through smart contracts.

When was Bitcoin launched?

Bitcoin was launched in 2009, shortly after the global financial crisis.

Who created Bitcoin?

Bitcoin was created by a mysterious figure known as Satoshi Nakamoto.

What was Bitcoin designed to do?

Bitcoin was designed to be a simple, secure payment network and a form of digital money.

What is Ethereum's purpose?

Ethereum was created to support smart contracts, allowing the development of decentralized applications, and it's considered a public cloud computer.

How does Bitcoin maintain security?

Bitcoin uses a proof of work mechanism where miners compete to solve cryptographic puzzles to add new transactions to the blockchain.

What is the main difference in supply between Bitcoin and Ethereum?

Bitcoin has a capped supply of 21 million coins, while Ethereum does not have a fixed supply but has mechanisms for burning ETH during transactions.

How fast can Bitcoin and Ethereum process transactions?

Bitcoin processes about 7 transactions per second, while Ethereum manages around 15 to 30 transactions per second, though this can vary.

What are the scaling solutions for Bitcoin and Ethereum?

Bitcoin utilizes the Lightning Network to scale transactions, while Ethereum employs layer 2 solutions like Arbitrum and Optimism.

What is proof of stake?

Proof of stake is a consensus mechanism used by Ethereum (since 2022) where validators stake their ETH to secure the network and can earn more ETH in return. Dishonest actions risk losing their stake.

What are the security features of Bitcoin compared to Ethereum?

Bitcoin is seen as extremely secure due to its simplicity and significant mining power, making it conservative and less prone to frequent changes. Ethereum, while flexible and feature-rich, may have more risks associated with smart contracts.

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