Bitcoin vs Ethereum - the difference and why deals are built on Ethereum

Bitcoin and Ethereum are often mentioned together, but they were conceived for different things. Bitcoin is "digital gold" and a way to transfer value. Ethereum is a "world computer" that runs programs. Understanding this difference explains why our service is built on Ethereum and its networks.

Bitcoin: transferring value

Bitcoin appeared in 2009 after a paper (2008) signed with the pseudonym Satoshi Nakamoto. Its goal is electronic money that can be passed directly, without a bank.

Main properties:

• A limited supply: no more than 21 million coins.
• Proof of work: miners solve a computational puzzle and earn the right to add a block. Attacking the network requires enormous spending on hardware and electricity.
• A new block about every 10 minutes: the network is deliberately slow and conservative.
• A limited scripting language: simple conditions are possible (for example "signatures of two out of three"), but not arbitrary programs.
• The UTXO model: a balance is a set of "unspent outputs" of earlier transactions, like a set of banknotes in a pocket.

Ethereum: programmable money

Ethereum was proposed by Vitalik Buterin and launched in 2015. The idea: instead of a fixed set of operations, give a full programming language in which anyone can write rules for money. Such a program is a smart contract.

Main properties:

• The EVM virtual machine, which executes code identically on all nodes (how it works).
• The account model: an address has a balance and an operation counter (details), like a bank account.
• Proof of stake since September 2022: instead of miners, blocks are checked by validators who put up a deposit (consensus and finality).
• A new block every 12 seconds and a fee that depends on load (the fee market).
• A huge ecosystem: tokens, DeFi, stablecoins and second-layer networks (L2).

Comparison

Why guarantor deals are built on Ethereum

Escrow is rules: "the money lies here until this happens, and then goes there". Such rules must be written as a program and opened to everyone for checking. That needs a programming language and a shared execution environment - which Bitcoin lacks by design and Ethereum has.

That is why the Coin-Trust contract runs on Ethereum and compatible networks: Base, Polygon and BNB Chain use the same virtual machine, so the same code is deployed at one address on all four. How to choose a network for your deal is in the article how to choose a network.

How to choose between them in practice

The question "which is better" is wrong: the networks solve different tasks.

Example. Maria keeps part of her savings in Bitcoin: she wants simplicity and the reputation of "digital gold". But to buy a used laptop from a stranger she uses USDC on the Base network and a deal with a guarantor: that way the money sits in a smart contract, not with the seller. One does not exclude the other.

It also matters that the networks have different technical assumptions. In Bitcoin security rests on miners' computational work, in Ethereum on validators' deposits (Proof of Stake). This affects confirmation speed, fees and attack scenarios, but for an ordinary user the main thing is to understand what exactly you are doing and on which network.

What to read next

To understand how coins are protected, read about hash functions and public-key cryptography.