Bitcoin vs. Ethereum: How are they different?

Bitcoin vs. Ethereum: How are they different?

You may have heard of Ethereum. You’ve almost certainly heard of Bitcoin. You may even have heard of people making fortunes off of them.

What you may not have heard is what exactly these two projects are.

What Are Ethereum and Bitcoin?

Ethereum and Bitcoin are two different versions of the same underlying concept called a blockchain token. Each was invented to work as a virtual currency. To understand how these two projects work and differ, you first have to understand the concepts of blockchain and virtual currency.

What Is Blockchain?

Blockchain is a form of digital data storage. In a blockchain, data are recorded on a series of digital ledgers that everyone can see; it’s called, appropriately, the “public ledger.” Permission to write any data onto this ledger is controlled through cryptography. Only someone with the right key can unlock a ledger to make any changes.

To prevent misuse, the public ledger is actually a series of databases that all store identical information. Whenever a change is made to one database, it checks its information against all copies. If the data are not consistent, and if the change doesn’t come with the cryptographic key, that change is rejected.

Enough changes to this ledger are collected into a “block” of data that can no longer be altered, and these blocks are stored in a chronological chain in the database. Hence the term “blockchain.”

Think of it like a roomful of accountants, each watching each other, each keeping the same set of books. If someone makes a change to one book it’s easy to see the problem and correct it. Only an authorized user can come into the room and give all of those accountants the proper ID to make any changes. And each time a book fills up, it gets put on the shelf next to all the others.

The core concept of blockchain is to create unique digital ownership. If the blockchain says that I own file 123ABC, then I own it. I can make as many copies of that file as I want, but the blockchain will still say that there is only one file 123ABC and I own it.

A blockchain token, then, is a digital asset created using this system. A token is simply an entry on the blockchain that has a unique identification and an owner. The security that blockchain provides makes it (so far) impossible to duplicate the entry or change its owner.

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Source: Bitcoin vs. Ethereum: How Are They Different? – TheStreet