Bitcoin and Ethereum are the two best-known cryptocurrencies in the crypto world.

They each use blockchain technology; however, the reason for their existence is vastly different.

This article discusses the key differences between these cryptocurrencies in simple language. They include purpose, technology, availability, and common applications. A section of the article touches on some factors that may matter to Australians while they learn about them.

At cryptocurrency trading platforms like Swyftx, based in Australia, people can learn about both cryptocurrencies before making an AUD purchase. Swyftx allows people to buy Bitcoin or Ethereum when they are ready. All the information presented here is purely educational material. It is not professional financial advice, and no price projections are included in it.

Bitcoin in a Nutshell

Bitcoin is a decentralised currency, which means that payments are done peer-to-peer. That means there is no bank involved in the transaction, and the money goes directly from one user to another. Transactions are saved in the blockchain. Blockchain is a public register stored on many computers around the world.

For many users, Bitcoin is a store of value. A store of value is any asset that is used for keeping wealth for a long period of time. The limited amount of 21 million coins justifies that statement. After reaching the limit, the software stops issuing any more Bitcoin.

Blockchain is based on proof-of-work. Miners compete with each other in solving complex mathematical problems. The first miner who solves the problem gets rewarded with new Bitcoin blocks.

Ethereum in a Nutshell

Ethereum is a programmable blockchain. Programmers upload code onto the platform through smart contracts. Smart contracts are simple programs that execute their clauses upon reaching certain criteria. Full applications can be built through the use of smart contracts.

The native coin for Ethereum is called Ether, abbreviated as ETH. Every transaction and smart contract execution requires payment of a fee in ETH. Some portion of every fee is burnt. Thus, those coins are taken out of circulation forever.

Ethereum is based on the proof-of-stake mechanism. Validating nodes stake their own ETH in order to gain the privilege of validating new blocks. There is no predetermined supply cap on Ethereum. New ETH comes into circulation through validator rewards. Fees being burnt take some amount out of circulation.

Key Differences at a Glance

Real-World Uses

Bitcoin generally plays a number of well-defined roles. There are those who choose to hold it as a store of value on a long term basis. For some, it is used as a means of making payments, since the crypto can be transferred from one country to another without the intervention of a bank. Holding bitcoin on a long term basis is another role which involves buying a small amount of it and keeping it for many years.

Ethereum allows for the use of a wide range of services. There are decentralised applications which do not have a central authority. In addition to that, there are stablecoins whose value remains constant when compared to fiat money. Most stablecoins are built on the Ethereum network. Apart from stablecoins, other tokens and non-fungible tokens are hosted by Ethereum. A non-fungible token is a unique digital asset that is owned on the blockchain.

It is this role differentiation that accounts for the fact that most investors evaluate the two coins separately.

Risks Both Share

Each network has its own design, yet several risks apply to each one in much the same way. Four deserve attention from any Australian investor.

• Prices for Bitcoin or Ethereum can rise or fall sharply within hours, so the value of a holding may drop well below the amount paid.
• Scams in crypto include fake websites or messages from people who pose as support staff. Strong passwords with two-factor login help keep an account safer.
• The Australian Taxation Office treats crypto as an asset, so capital gains tax may apply when coins are sold or swapped. Rules for crypto platforms continue to change, which makes regular checks with a registered tax agent worthwhile.
• No crypto investment comes with a guaranteed return. Past price moves give no assurance about future results.

Learning and Buying Both on Swyftx

Australians who want to hold Bitcoin or Ethereum can buy each coin with AUD on Swyftx. The Quick Buy option keeps the process short. A buyer picks the coin plus an amount in Australian dollars. A final step confirms the order.

Auto invest is for those who enjoy routines. This feature arranges your purchases within a definite schedule, which results in an investment being spread throughout time. With this method, the anxiety of having to time one’s purchase might be eliminated.

It is important to gain background information prior to purchasing. At Swyftx Learn, one can access beginner guides for Bitcoin and Ethereum, where all lessons are written in easy-to-understand language. Additionally, one gets Demo Mode, which provides a demo account with fake currency. Here, a beginner can get used to buying cryptocurrency.

How to Decide What to Learn Next

A clear goal makes the next step easier to choose. Someone who plans a long-term holding may start with Bitcoin basics. A person curious about apps or tokens may begin with Ethereum. Time horizon matters too, since crypto prices can swing hard over short periods.

Budget deserves the same care. Only money a person can afford to lose belongs in a crypto purchase. Funds set aside for rent, bills or emergencies should stay separate.

Each network also deserves some study before any money goes in. A short course on how blocks get confirmed or how fees work may help a beginner avoid costly mistakes.

Conclusion

There are distinct issues which Bitcoin and Ethereum seek to address. Bitcoin focuses on digital money which has an immutable nature, while Ethereum is for smart contracts and dApps. With proper knowledge of these distinctions, Australians will be able to make their decisions more informed.

A simple and effective way for newcomers to get started is through platforms like Swyftx, with features like purchasing with AUD, Auto Invest, Demo Mode, and the Swyftx Learn courses. It is worth noting that this article gives general information only.