Ever since its debut as a virtual currency in early 2009, Bitcoin has dominated the cryptocurrency marketplace. Fast-forward to 2017, and with the prevalence of 24/7 news anywhere and everywhere, even people unfamiliar with cryptocurrencies have heard the word bitcoin.
That will happen when a digital currency makes millionaires in just a few months, and raises tens of millions of dollars for businesses in a single day, through an initial coin launch (ICO).
The same familiarity is not enjoyed by Ethereum.
If you are not familiar with the digital dollar marketplace, you may never have heard of Ethereum, a cryptocurrency which uses units of “ether” rather than bitcoins for trades and transactions. While Bitcoin and Ethereum are similar in many ways, they are also different.
Ethereum’s major departure from Bitcoin revolves around “smart contracts.” The website BlockGeeks.com is an excellent place to gather knowledge about cryptocurrencies. The good folks over at BlockGeeks have this to say about the major difference between Bitcoin and Ethereum.
“Smart contracts are the blockchain technology that will replace lawyers.”
Bitcoin runs on blockchain coding and algorithms, as does Ethereum, but smart contracts make this system of peer-to-peer, decentralized exchanges more versatile. They outline what rules, penalties and standards are going to govern a transaction between two parties. In other words, smart contracts do the same things that attorneys do, but they also do them automatically, at no charge, and there is no third-party or centralized authority required.
Smart contracts work because of computer code. If you make a purchase using ether (the digital currency of Ethereum), any obligations, agreements, laws, and standards agreed on by both parties are automatically enforced. The transaction is extremely safe because it operates on the blockchain, automatically updating the ledgers of anyone and everyone holding ether.
This means that not only is safety enhanced, but there is simply no need for expensive and time-consuming lawyers or arbitrators in this process. This is the major difference between Bitcoin and Ethereum.
Both products are digital currencies. They both operate without a centralized authority, banking system, government or other party which must okay and guarantee a transaction. Both these virtual currencies can be traded as commodities, and as of late 2017, neither falls under the regulatory power of government agencies in most countries.
The smart contract ability Ethereum, as opposed to Bitcoin, has made it extremely attractive to investors and forward-thinking business owners as a much more flexible and powerful digital coin with applications Bitcoin can’t handle.