Bitcoin vs Ethereum: Key Differences Between BTC and ETH

Bottom line: BTC is a "store of value," ETH is a "base layer that runs things"

Bitcoin (BTC) and Ethereum (ETH) are often discussed side by side, but their purposes are fundamentally different. BTC is a currency that aims to be administrator-free payments and a store of value (digital gold); its consensus mechanism is the computational race of Proof of Work (PoW), and its supply is capped at 21 million coins. Ethereum, by contrast, is a platform that aims to be a "shared global computing base layer" for running apps (smart contracts); it switched to Proof of Stake (PoS) in the September 2022 "Merge," and it has no supply cap.

Understand it at a glance with a comparison table

For the basics of Bitcoin, see What is Bitcoin?, and for why it's compared to gold, see Bitcoin vs. gold for a detailed explanation.

Difference 1 — Purpose and concept

BTC aims to be "scarce, sendable money that doesn't depend on any country or bank." Its design prioritizes simplicity and robustness, keeping the attack surface small by not adding too many features. ETH is "a decentralized network that can run programs"; it automatically executes contracts (smart contracts), and all kinds of apps run on top of it. It's easy to picture if you think of BTC as the layer that carries "value" and ETH as the layer that runs "computation."

Difference 2 — Consensus mechanism (PoW vs PoS)

• BTC = Proof of Work: the participant who wins an enormous computation (mining) adds the block. In exchange for using electricity, the cost of tampering is extremely high.
• ETH = Proof of Stake: it moved from PoW to PoS in "The Merge" on 15 September 2022. Validators who have deposited (staked) ETH create blocks, and this is said to have cut power consumption dramatically.

Difference 3 — Issuance rules

BTC has an unchanging design of a 21-million-coin cap, and new issuance falls at the halving roughly every four years. ETH has no hard supply cap. After the Merge, new issuance dropped a great deal, but issuance continues as validator rewards. You can sum it up as: BTC if you most value "fixed scarcity," ETH if you value "features and extensibility."

Before the question "which should I choose?"

The two are less competitors than a division of roles, and neither one is "the right answer." First understand how they work, then clarify your own goal (do you want to store value, or use apps?). If you're considering buying, see How to buy Bitcoin for the basics of purchasing.

FAQ

Q. Bitcoin or Ethereum — which is better? A. Because their purposes differ, you can't rank one above the other. Think in terms of role: BTC if you prioritize storing value, ETH if you want a base layer for smart contracts.

Q. Does Ethereum also have a 21-million-coin cap? A. No. A supply cap is specific to Bitcoin. Ethereum has no hard cap.

Q. What is The Merge? A. It was Ethereum's major September 2022 upgrade that switched its consensus from PoW (mining) to PoS (staking).

Q. Can you use smart contracts on Bitcoin too? A. To a limited extent, yes, and upgrades like Taproot have broadened what's possible. But for a general-purpose application base layer, Ethereum is the main platform.