The Difference Between Ethereum and Bitcoin

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The program director at Blockchain Semantics, Abhishek Singh, answers the question on Quora:

How is the Ethereum blockchain different than the Bitcoin blockchain?

First up, thank you for asking a question that will make people understand how bitcoin is different from blockchain. But let’s start with some of the similarities between bitcoin and ethereum blockchain. There are many similarities between bitcoin blockchain and ethereum blockchain like both are public blockchain, uses Proof-of-Work for consensus and both have a cryptocurrency.

But they differences as well and these difference make ethereum blockchain completely different from bitcoin blockchain. Let’s checkout the differences

1.Blocks:

In Bitcoin, the maximum block size is specified in bytes (currently 1 MB) whereas Ethereum’s block size is based on complexity of contracts being run –known as Block Gas limit (BGL). BGL can vary slightly from block to block.

Data-wise currently most Ethereum blocks are under 2 KB in size.

2.Block Time:

In Ethereum, the time between generation of new blocks is around 15 seconds, compared with Bitcoin’s ~10 minutes. This means that an Ethereum transaction would be recorded into Ethereum’s blockchain much faster compared to Bitcoin transaction getting into Bitcoin’s blockchain.

3.Scripting Environment:

Compared with Bitcoin’s primitive scripting language, Ethereum is much more advanced because computer programs called Smart Contracts can be run on.

Also Ethereum is turing complete i.e., it can be programmed to solve any kind of computational problem. In contrast, Bitcoin does not have this capability. It is just limited to secure transfer of digital currency between peers.

4.Transaction Costs:

Bitcoin transactions compete equally with each other. But Ethereum has a different method for costing transactions depending on their computational complexity and storage needs. This computational cost is called Gas in Ethereum.

5.Mining Rewards:

Mining is the process of creating new blocks in blockchain. Since mining involves a lot of computational power and time, rewards are given for each newblock mined.

Currently each block created in Bitcoin creates 12.5 new BTC. This reward will be halved for every 210000 blocks created. In addition to the block reward, miner receives fees from all the transactions included in the block.

Whereas in Ethereum, the miner of a block receives

  • 5 new ETH per block plus,
  • transaction costs from contracts that were run during the block creation.

In Ethereum, this block reward is constant.

6.Orphan and Uncle Blocks:

When two valid blocks are mined at approximately at the same time, they both point to the same parent but some of the miners see one and the rest see other. Thus the network will be parted in two and would be working on two different blockchains. This conflict is resolved using ‘Longest Chain Rule’ both in Bitcoin and Ethereum. But there is an important difference between the two.

The blocks which do not form part of main chain are called ‘orphans’ in Bitcoin and are entirely discarded. Whereas in Ethereum they are called ‘uncles’ and can be referenced by later blocks. Indeed, Ethereum even rewards the miners for creating and referencing ‘Uncle Blocks’.

In Ethereum, each uncle block created is rewarded with 4.375 ETH (7/8th of the full 5 ETH reward). This is called the uncle reward. Currently around 500 uncles are created per day, adding an additional 2,000 ETH into circulation per day.

Also 0.15625 ETH is rewarded for referencing up to 2 recent uncle blocks (1/32 of a block reward ie 1/32 x 5 ETH = 0.15625 new ETH per uncle).

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