Bitcoin vs Ethereum – You Won’t Believe How Simple It Is!

Bitcoin versus ethereum -- what's the difference between these two cryptocurrencies? This stuff can feel pretty complex so here, we're gonna break it all down and get a very clear and simple understanding of bitcoin versus ethereum.

Show Notes

Here are links and resources mentioned in today's video. Enjoy!

Transcription

Way back when I first began learning about bitcoin, I already had a solid understanding of the monetary system, and more specifically, gold. I knew what gold was, and I knew that out of all available assets, gold best fulfilled the five requirements for something to be money — durability, divisibility, portability, recognizability, and scarcity.

If you don't know, these are the five things that determine that some things are money, and others aren't -- or why some things work better as money while others don't...think of silver versus sea shells or paper notes versus gold.

Now I'm getting a bit off-track here, and I don't want to delve into exactly what these five characteristics are -- I'll tell you where you can learn more about this stuff shortly.

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For now though, at least for me, making the leap to understanding what bitcoin was and what it meant was fairly straightforward. So in my mind, bitcoin is digital gold.

When you really break it down and analyze it -- specifically as it fulfills those five characteristics of money -- bitcoin does everything gold does, and it does it better. In other words, bitcoin fulfills the five requirements to be money better than gold does.

Therefore, bitcoin is gold, perfected.

So how does Ethereum fit into all this? Well just like gold, bitcoin is kinda clunky. It’s blockchain network supports just a single cryptocurrency (BTC or bitcoin, of course) and this network really only does one thing — it functions as a currency and as a store of value with no intermediaries.

This clunkiness and simplicity is what makes bitcoin so beautiful. Like physical gold, it doesn’t need to do anything more than that. However, this simplicity means that bitcoin can't do a whole lot...and that's where Ethereum comes in.

After bitcoin, Ethereum is the second largest cryptocurrency and blockchain on the planet. But what is Ethereum, exactly? Well let's draw a comparison back to the real world for a sec.

Just like gold, silver also fulfills the five requirements for something to be money...but it doesn’t fulfill them quite as well as gold does. That said, silver’s better at being money than anything else on the planet (from sea shells to shiny rocks and everything in between).

So historically, after gold, the next best money we had was silver. But silver’s interesting because in addition to being money, it also has industrial uses. If you didn’t know, silver is used in solar panels, various medicines, electronics, and has many, many other applications.

This is because of silver’s unique properties and versatility. And wouldn’cha know, that’s exactly what Ethereum is, too. So in my mind, Ethereum is digital silver.

Just like silver, Ethereum has monetary properties...but it also has a huge range of uses and applications. With this in mind, here’s the best way to describe Ethereum: It’s a blockchain-based software platform with a monetary component.

Ethereum’s lead founders wanted to push what bitcoin and blockchain technology had done even further -- and that’s exactly what they did with Ethereum.

The result is a blockchain network that can be used to develop and run all sorts of different things, from software and games to smart contracts and can even be used as the foundation for other cryptocurrencies.

So while it does have monetary properties, Ethereum is really more of a platform for building things with. The Ethereum community encourages and supports innovation in ways we can’t even imagine yet.

So to pull it all together, both bitcoin and Ethereum use blockchain technology, but for different purposes.

Bitcoin is a decentralized digital monetary system -- that’s really all it does. Meanwhile, Ethereum has monetary properties but it’s also used to build things with.

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