Bitcoin vs Ethereum: Differences Explained

It's the most common question in crypto: "Should I buy Bitcoin or Ethereum?" But the question itself is a bit misleading — because they're trying to do fundamentally different things. Let's break down the real differences.

If you're new, you might want to read our Bitcoin deep dive and Ethereum guide first. This article compares them head-to-head.

The One-Line Difference

Bitcoin is digital gold — a store of value and monetary network.
Ethereum is a programmable platform — a decentralized computer that runs applications.

Yes, both are blockchains. Yes, both have native currencies. But their purpose is fundamentally different, and that shapes everything else.

Origin Stories

Bitcoin was created by the pseudonymous Satoshi Nakamoto in 2009. The motivation was clear: build a peer-to-peer electronic cash system that doesn't need banks. It launched during the 2008 financial crisis — no coincidence.

Ethereum was proposed by Vitalik Buterin in 2013 (he was 19) and launched in 2015. Buterin saw Bitcoin's limited scripting language as a missed opportunity. His vision: a blockchain that could run any program, not just transfer coins.

Technology Comparison

Consensus Mechanism

Bitcoin uses Proof of Work — miners compete to solve mathematical puzzles, consuming significant energy to secure the network. This is unlikely to change; the Bitcoin community views PoW as essential to its security model.

Ethereum switched to Proof of Stake in September 2022 ("The Merge"). Validators stake ETH as collateral instead of running mining rigs. This reduced Ethereum's energy consumption by ~99.95%. Read more in our consensus mechanisms guide.

Transaction Speed & Fees

Bitcoin: ~7 transactions per second, 10-minute block times. Fees vary but typically $1–$30+.

Ethereum: ~15 transactions per second on the main chain (L1), 12-second block times. Fees are notoriously volatile — anywhere from $0.50 to $50+ during network congestion.

Both are building Layer 2 scaling solutions. Bitcoin has the Lightning Network for instant, near-free payments. Ethereum has rollups (Arbitrum, Optimism, Base) that process transactions off-chain and settle on Ethereum.

Supply & Monetary Policy

This is one of the biggest differences:

Bitcoin:
  Maximum supply: 21,000,000 BTC (forever)
  Current supply: ~19.6 million BTC
  New issuance:   Halves every 4 years
  Last BTC mined: ~2140

Ethereum:
  Maximum supply: No hard cap
  Current supply: ~120 million ETH
  New issuance:   ~0.5-1% per year (post-Merge)
  Burns:          EIP-1559 burns base fees
  Net effect:     Often deflationary (more burned than issued)

Bitcoin's fixed supply is its killer feature for the "digital gold" narrative. You can't inflate it. Ever. Ethereum doesn't have a hard cap, but since EIP-1559 and The Merge, it's frequently deflationary — more ETH is burned in fees than created.

Smart Contracts & Programmability

Bitcoin has extremely limited scripting — by design. It supports basic conditions (multi-sig, time-locks) but not general-purpose programming. Bitcoin maximalists consider this a feature: simplicity means fewer attack vectors.

Ethereum was built for programmability. Its Solidity language lets developers create arbitrary tokens, DeFi protocols, NFT marketplaces, DAOs, and applications limited only by imagination. The entire ecosystem of DeFi, NFTs, and Web3 runs primarily on Ethereum.

Investment Thesis: Why People Buy Each

The Bull Case for Bitcoin

• Digital gold / store of value — fixed supply, increasing demand, inflation hedge
• Institutional adoption — Bitcoin ETFs, corporate treasury allocations (MicroStrategy, Tesla)
• Network effect — most recognized, most liquid, most widely accepted
• Simplicity — does one thing well; no complex attack surface
• Regulatory clarity — most jurisdictions treat BTC as a commodity, not a security

The Bull Case for Ethereum

• Programmable money — the platform that DeFi, NFTs, and Web3 are built on
• Revenue-generating — ETH earns staking yield (~3-5%) and captures fees from all activity
• Deflationary dynamics — network usage burns ETH, potentially making it scarcer over time
• Developer ecosystem — largest smart contract developer community by far
• Layer 2 scaling — rollups solve the scalability problem while inheriting Ethereum's security

The Real Answer: They're Complementary

Serious crypto investors don't choose one or the other — they hold both. Bitcoin and Ethereum serve different roles in a portfolio:

• Bitcoin = conservative crypto allocation, store of value, "digital savings account"
• Ethereum = growth-oriented, exposure to the smart contract economy, "digital tech investment"

A common allocation for crypto-native investors is 60/40 BTC/ETH as a core portfolio, with smaller positions in other assets.

Which Should You Buy First?

If you're starting from zero:

1. Learn first — don't buy anything until you understand what you're buying (you're doing great by reading this)
2. Start with Bitcoin — it's simpler, more established, and less volatile relative to other cryptos
3. Add Ethereum — once you understand smart contracts and want exposure to the broader ecosystem
4. Dollar-cost average — buy small amounts regularly rather than trying to time the market
5. Secure your holdings — use a proper wallet and protect your seed phrase