Ever since the world of cryptocurrency has been established, Bitcoin has been (and still is, for the time being) the leader of the e-coin market. But Ethereum is another cryptocurrency project that has amassed a considerable amount of interest due to its unique qualities.

Ethereum is a blockchain-based platform that uses peer-to-peer contracts for its currency, called Ether. The blockchain stored applications used in Ethereums smart contracts offer a decentralized way of verifying and enforcing said contracts, making it very hard for any potential fraud and censorship to occur.

These smart contracts applications run on Ether, which quickly became the worlds second most valuable digital coins. Much like Bitcoin and its Bitcoin Wallet, ether is kept in the Ethereum Wallet.

Its important to understand that Ether differs from Bitcoin, thus they have different uses and overall a different impact on the market.

A first difference between the two blockchain-based projects would be their average block time (which is the time necessary for a new token to be issued). This is 10 minutes for Bitcoin, while Ethereums block time ranges from 10 to 20 seconds with an average of 12 seconds. This time gap is due to Ethereums GHOST protocol.

The monetary supply concerning the two cryptocurrencies is also different. Bitcoins supply style is of deflationary nature (a finite number of Bitcoins exist/will be made), while Ethereums is the opposite, meaning more ether tokens will be made over time. The current number of mined Bitcoins is 16 million (most of them belonging to early miners). There is no supply cap for ether, which is why its monetary supply is considered of inflationary nature.

In Ethereum, the costing of transactions is dependent on storage needs, the use of bandwidth and the smart contracts complexity. These transactions in the Bitcoin network are limited only by the blocks size.

Mining for ether is easier, with 5 tokens given for each block, in contrast to Bitcoins half a token at 210.000 blocks (that means 12.5 tokens at every 4 years). Ethereum uses a proof-of-work memory hard hashing algorithm called Ethash, attracting users looking for a decentralized way of mining, rather than using ASICs to mine, as is the case with Bitcoins.

The usage of Bitcoins can range from purchasing goods and services, to storing value (much like precious metals). Ethereum can be used for making decentralized applications on its blockchain that represent virtual shares, assets, proof membership etc.

Although they are both considered cryptocurrencies and its normal to want to compare how the technologies differ from one another, one must keep in mind with what purpose each project was created. Bitcoin was made to be a new currency to compete against existing money, aiming to be a globally stable digital currency, while Ethereum makes use of its smart contracts to make digital agreements and transactions.

More here:

Ethereum vs Bitcoin: The Battle for the Crypto Throne - Coindoo