The development of cryptocurrencies has changed the world in many ways. Many people in the world got the option to make some new investments. Some of them became millionaires while others were not that lucky. Yet, it seems that things are now going in the right direction.
Bitcoin, the most famous crypto in the world, has a turbulent past. Things are different a lot when we talk about ethereum. Still, both currencies made progress and that is the reason why we have many new miners. A lot of them recognized the opportunity to make some money.
Mining is not an easy task. You can’t become a cryptocurrency miner overnight. It is necessary to firstly focus on education and improvement of your skills. In the beginning, we recommend you visit crypto-profit.io and find out more about the entire industry.
In this article, we will focus directly on the mining of these two cryptocurrencies. There are many differences between them that you need to know. Before everything, keep in mind that these two cryptos were not developed with very different purposes in mind.
First of all, Bitcoin is a decentralized peer-to-peer electronic cash system. This is the description that we have from its owner Satoshi Nakamoto. This person is a complete mystery because no one knows who he exactly is. Many people say that a couple of people stand behind the development of BTC.
Anyway, the entire protocol works by utilizing a mathematical equation that adds blocks to a chain of transactions. That’s why we call these transactions “blockchain”. Each of those blocks uses a so-called hash code from the previous block to timestamp the new block. We hope that this doesn’t sound too complex.
One more thing that we need to say is that these blocks are added to the blockchain every 10 minutes. Logically, they are not added there by itself. Bitcoin miners are those who need to complete those tasks. They compete against each other to figure out a mathematical equation (so-called SHA-256).
If you plan to become a BTC miner, it is necessary to have high processing computer power. Despite that, your electrical bills will be high as well. Anyway, if you are the first miner to discover a solution, you will get a reward of 12 BTC.
Each miner on the blockchain works together. In that way, they want to ensure that the longest chain is a valid chain. If 51% of the nodes are “honest”, then the blockchain remains the same.
Bitcoin UTXO Blockchain
This currency utilizes the unspent transaction output scheme, so-called UTXO. Thanks to this scheme, miners track the database and eliminate the double spending on the network. Believe it or not, users do not send BTC during the transaction. They are sending the hash of the previous block. Despite that, they send digitally signed previous block and the public key of the new owner as well.
Let’s make things a bit more clear. There are three different rules of the protocol. First of all, each transaction’s sum of inputs has to be greater than the sum of its outputs. Despite that, each input needs to be valid. Finally, every input requires a signature that matches the owner of the input. We hope that things are now understandable.
Well, things are different when we talk about ethereum. Yet, we will start with one similarity. The primary functions behind mining are the same as BTC. Nodes compete to complete the mathematical equation. Logically, the fastest miner also gets a reward of 3.5 ETH (approximately). Still, there is a big difference when we talk about blockchain attachment. Each block is attached to the blockchain every 14-15 seconds.
There is also a difference when we talk about the algorithm. This crypto utilizes ethash mining rather than the SHA-256 algorithm. Yet, both algorithms work in the same way. They use proof-of-work systems. That is the reason why a lot of electricity is necessary for mining of both types of cryptocurrencies.
Ethereum “Account-Based” Protocol
There is one thing that is more simplistic and approachable when we talk about Ethereum. Miners of this crypto solve the problem of double-spending in a lot easier way. Their transaction tracking works the same as traditional bank accounts. Opposite from BTC, ETH users do not send only hash inputs; they also send their tokens. This means that each ETH account gets information and direct value transfers with each transaction.
BTC truly is the most popular crypto in the world. Yet, there are a couple of reasons why ETH’s protocol is much better. First of all, account-based protocols are only possible if the users have centralization. When an Ethereum user sends ETH, he has a token in his wallet before they send transaction request approval. This way of work makes the entire process a lot easier.
Despite that, the centralization also brings new opportunities to the developers. They can reverse, refund, and void the transaction in every moment. This especially counts when they start feeling that something is “wrong”. A good proof of that is decentralized autonomous organization hack. This accident happened in 2016 when developers refunded 50 MILLION stolen Ethereum.
Ethereum vs Bitcoin Mining: Profitability
We are sure that profitability is one of the things that you would want to know. Unfortunately, we can’t give you a precise answer. That depends on many things. Yet, there are some things that we can tell you directly. Both cryptocurrencies require a higher amount of money to invest and start. In the beginning, you will have to get the necessary equipment.
The value of BTC is a lot higher than the value of ETH. While you read this, the price of one BTC is around 9900 dollars. On the contrary, the price of one ETH is around 220 dollars. So, the reward that you will get from BTC is a lot more profitable. Yet, the competition is also tougher.
We already gave you one piece of advice. Even if you have millions of dollars to invest, do not do that until you educate yourself. Before everything, improve your knowledge about this industry.
When you feel that you are ready, start with some decent investments.