Blockchain 101: Bitcoin vs Ethereum

A deep dive into blockchain's biggest powerhouses. What are they, what problem do they solve, and how are they different?

SMooTH

Posted on Apr 2, 2025

So far in our Blockchain 101 series, we’ve covered what blockchain is and how it actually works.

We learned it’s basically a digital ledger — one that records transactions in a way that’s transparent, secure, and hard to tamper with.

We also talked about validators (Proof of Stake) and miners (Proof of Work).

Now it’s time to leave theory the basics behind and meet the two biggest blockchain applications out there:

On the left: Bitcoin, the OG — born after the 2008 crash, and the reason blockchain exists.

On the right: Ethereum, the ambitious prodigy — the “world computer” that brought smart contracts and magic internet money.

Both are huge. Both are still dominant. But they play very different roles.

This isn’t a showdown. No winners, no losers — just a side-by-side to help you understand what each one does best.

We’ll break it all down in 6 snack-sized chapters. At the end of each: a simple comparison.

Ready for your third blockchain lesson, friend?

Let’s dive in. 🫡

1️⃣ Founding Vision & Purpose

aka: why it exists

What were Bitcoin and Ethereum actually created for? To understand how they work, we need to rewind to their origin stories — and the problems each one set out to solve.

🪙 Bitcoin

Bitcoin was born in 2008, created by the mysterious Satoshi Nakamoto. The goal? To be digital cash — simple, peer-to-peer (=person to person) payments without banks or middlemen. Secure, decentralized, and capped at 21 million coins.

Over time, it became more than just money. Today, it’s seen as digital gold — a hedge against inflation and a long-term store of value.

💻 Ethereum

Ethereum showed up in 2015 when Vitalik Buterin and friends looked at Bitcoin and thought: “What if blockchains could do more than just send money?” .

Instead of just tracking transactions, Ethereum could run programs — like apps, games, lending protocols, even digital art marketplaces. The goal? Build a decentralized internet powered by smart contracts.

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TL;DR

Bitcoin is better for simple, secure value transfer. Ethereum is better for building stuff on top.

2️⃣ Network Architecture

aka: how it’s built

Bitcoin and Ethereum are both blockchains, sure — but they’re built on very different blueprints. This chapter breaks down how each network actually works behind the scenes.

🪙 Bitcoin

Think of Bitcoin as a giant digital notebook — every transaction is recorded line by line, using something called the UTXO model (Unspent Transaction Output). Instead of just saying “you have 2 BTC,” it keeps track of all the little bits and pieces that add up to 2 BTC.

Its coding language is purposefully limited — no fancy apps or logic loops. Just clean, minimal, and secure.

It’s like a calculator: solid, dependable, but don’t expect it to do more than simple math.

💻 Ethereum

Ethereum works more like a bank account — it uses an account-based model that just updates your balance after each transaction. Simple to follow.

But here’s the big leap: Ethereum includes a virtual brain called the EVM (Ethereum Virtual Machine). It turns the blockchain into a global computer where developers can write and run code — aka smart contracts. These are little programs that follow specific rules, like “send X if Y happens.”

Kind of like an app store for decentralized apps (= dApps) — but without Apple or Google in the middle.

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TL;DR

Bitcoin is optimized for rock-solid simplicity. Ethereum is built for Lego-level creativity.

3️⃣ Consensus Mechanisms

aka: how they agree on “the truth”

Blockchains are shared ledgers, so how do all the computers agree on what’s true? That’s where consensus mechanisms come in. Let’s look at how Bitcoin and Ethereum reach agreement and keep their networks secure.

🪙 Bitcoin

Bitcoin uses Proof of Work (PoW). Miners burn energy solving puzzles to secure the network and earn BTC. It’s battle-tested, decentralized, and… not exactly eco-friendly.

💻 Ethereum

Ethereum started with PoW too, but in 2022 it switched to Proof of Stake (PoS) — a huge move called The Merge (sounds like a Hollywood blockbuster, doesn’t it?). Now, validators stake ETH and take turns proposing blocks. It’s greener, faster, and enables future scaling.

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PoW & PoS?

We’ve explained both in plain English in our previous tutorial! Go check it out if you need a quick reminder. 🙂

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TL;DR

Bitcoin sticks with old-school mining. Ethereum’s gone green and lean.

4️⃣ Monetary Policy

aka: how money flows

Every crypto has its own money rules — how new coins are created, and how many can ever exist. Unlike your local government (who can print fiat zhenever they so please), Bitcoin and Ethereum follow transparent, coded policies. Let’s break down how they manage supply — and what that means for long-term value.

🪙 Bitcoin

Bitcoin’s supply is hard-capped at 21 million coins. That makes it scarce — like digital gold. New BTC are created as rewards for the miners who help run the network.

But there’s a twist. Every 4 years, the rewards gets cut in half. This is called “the halving”.

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Fun fact

As of early 2025, there are approximately 19.6 million bitcoins already in circulation out of the total 21 million that will ever exist.

That’s >93% of all BTC already mined.

The remaining few million will be released very slowly over the next 100+ years, thanks to the halving system. The final bitcoin is expected to be mined around the year 2140.

As Bitcoin grows in popularity, it becomes increasingly scarce — like any sought-after limited edition collectible.

💻 Ethereum

Unlike Bitcoin, Ethereum doesn’t have a fixed supply limit. Thanks to upgrades like EIP-1559 (which burns some of the fees users pay) and the move to Proof of Stake, ETH issuance has slowed way down. In fact, ETH can even become deflationary during high usage. Because of this, some folks now call it “ultrasound money”.

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TL;DR

Bitcoin is like a rare collectible with a fixed max supply. Ethereum is more flexible — but smarter with its supply than it used to be.

5️⃣ Use Cases & Functionality

aka: what you can actually do with them

Bitcoin and Ethereum aren’t just fancy internet coins — they serve different real-world purposes. We look at what each is used for, from saving money to building apps.

🪙 Bitcoin

Bitcoin is digital money. People use it to store value, send money across borders, or make payments — especially where traditional banking is limited. For everyday stuff, the Lightning Network helps make Bitcoin fast and cheap to use.

💻 Ethereum

Ethereum is an entire ecosystem. People use it to build and use things like online banks (DeFi), digital collectibles (NFTs), games, and community-run projects (DAOs). The main currency, ETH, is used to pay for stuff and help run the network. It also hosts thousands of other tokens as well as new blockchains (Layer 1s and Layer 2s) that plug into the Ethereum universe.

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TL;DR

Bitcoin is a better piggy bank. Ethereum is a better sandbox.

6️⃣ Speed, Fees & Scalability

aka: how flexible they are

How fast, cheap, and smooth it is to use Bitcoin or Ethereum — and what’s being done to improve it (=make it suck less).

🪙 Bitcoin

Bitcoin processes one block every 10 minutes (remember what blocks are?). Its main network handles around 7 transactions per second (TPS), which is.. not ideal for speed.

We mentioned the Lightning Network previously; it was created as a solution (a Layer 2) to this problem. With the Lightning Network, you can now send tiny payments instantly, for almost nothing.

It’s basically QR payments for Bitcoin — but decentralized and global.

💻 Ethereum

Ethereum is faster out of the box: blocks come every 12 seconds and L1 handles around 15–20 TPS. But during high activity (DeFi summer, NFT mania), fees can get spicy.

That’s where Layer 2 rollups like Arbitrum and Optimism come in — they batch up transactions off-chain and post the results to Ethereum, making things cheaper and faster.

It’s like express checkout for your on-chain errands.

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TL;DR

Bitcoin = slow but steady. Ethereum = fast-ish but sometimes spicy on gas. However, Layer 2’s on both blockchains effectively solve any problems of transaction speed (or cost) they once had.

Conclusion

Congratulations! 🎉 You’ve made it through another level of Blockchain 101. Soon you won’t even need ChatGPT to answer your blockchain questions! 😏

Let’s quickly recap the main differences between blockchain’s 2 big powerhouses:

Category	Bitcoin	Ethereum
Launched	2009	2015
Created by	Satoshi Nakamoto (anonymous)	Vitalik Buterin
Purpose	Digital money & store of value	Decentralized platform for dApps
Ledger model	UTXO (like cash)	Account-based
Design goal	Stability & security	Programmability & flexibility
Complexity	Simple	Complex
Consensus	Proof of Work	Proof of Stake (since 2022)
Energy use	High	Low (-99% after Merge)
Security model	Using hardware & electricity (mining)	Economic stake & slashing
Max supply	21 million	No hard cap
Inflation rate	Shrinking	Low + burns
Dynamics	Fixed	Adaptive
Block time	~10 minutes	~12 seconds
Fees (L1)	Low to moderate	ㅤ
L2 scaling	Lightning Network	Rollups (Arbitrum, zkSync, etc.)
Primary use	Payments, savings, reserves	DeFi, NFTs, tokens, gaming, dApps

At the end of the day, Bitcoin and Ethereum serve different missions.

Bitcoin is digital gold — a simple, sturdy tool for saving, transacting, and protecting wealth.

Ethereum, meanwhile, is the app store of Web3 — a programmable playground powering everything from DeFi to NFTs. It's dynamic, creative, and constantly evolving.

You don’t need to pick sides. In fact, understanding both is how you level up from crypto tourist to crypto wizard. 🧙‍♂️

Let’s keep learning, one block at a time. 💡

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Blockchain 101 Series