Assignment # 1

Dr Wazir Zada Khan

Blockchain Technology
M Farzeen Qaiser
UW-19-CS-BS-075
22-March-2023
Wednesday
 1. Bitcoin vs. Ethereum: What’s the Difference?

Bitcoin
Bitcoin was the first cryptocurrency to be launched that functions independently
of any central authority. The first block of data on its blockchain, known as the
genesis block, was mined in January 2009 by its pseudonymous creator Satoshi
Nakamoto. Since then, Bitcoin’s adoption has been steadily growing over time.
Bitcoin was created as a peer-to-peer (P2P) electronic cash system, which means
that transactions can be conducted without any central authority.

Ethereum
Ethereum is a decentralized open-source and distributed blockchain network
powered by its native cryptocurrency, Ether (ETH), used to make transactions and
interact with applications built on top of the Ethereum network. Ethereum’s
white paper was published in 2013 by its co-founder Vitalik Buterin, detailing the
use of smart contracts, which are self-executing agreements written in code. The
smart contracts allow for the creation of decentralized applications which are
applications that work without a central entity behind them.

Bitcoin vs Ethereum: Key Differences

1. Bitcoin vs Ethereum Market Cap

Bitcoin was created in 2009 and Ethereum in 2015. Both have been incredibly
popular, with Bitcoin reaching a market cap of over $100 billion and Ethereum
reaching a market cap of over $25 billion.
2. Consensus Mechanism
Bitcoin and Ethereum differ in their consensus mechanisms. Bitcoin uses the
Nakamoto consensus, a proof-of-work system, to confirm transactions and add
new blocks to the blockchain. Ethereum uses a proof-of-stake system, which is a
more energy-efficient way of ensuring transactions and adding new blocks to the
blockchain.
3. Decentralized Payments vs Decentralized Software
Bitcoin is a decentralized payment system, which means that there is no central
authority controlling the currency. Ethereum is a decentralized software
platform, which means that there is no central authority controlling the code.
4. Bitcoin vs Ethereum Mining
Bitcoin and Ethereum use different algorithms for mining. Bitcoin uses the SHA-
256 algorithm, while Ethereum uses the Ethash algorithm. The most significant
difference between Bitcoin and Ethereum is that the Ethash algorithm is memory
intensive while the SHA-256 algorithm is not, which means that Ethereum miners
need more memory than Bitcoin miners.

5. Market Cap
Bitcoin and Ethereum have a large market capacity, with Bitcoin having a slightly
larger one. Bitcoin is mainly used as a digital currency, while Ethereum is used for
its smart contracts feature.

6. Bitcoin vs Ethereum Hash Rate

Bitcoin and Ethereum use different hashing algorithms, meaning their hash rates
are not directly comparable. However, Ethereum's hash rate is generally much
higher than Bitcoin's, meaning that Ethereum is much more secure against 51%
attacks.
7. Transaction Fee
Ethereum transaction fees are based on the gas price, which is a measure of the
computational resources required to execute a transaction. On the other hand,
Bitcoin has a static transaction fee independent of the amount of data being
sent.
8. Time Required to Add a Block
Bitcoin and Ethereum use a proof-of-work algorithm to add new blocks to the
blockchain. Bitcoin miners need to find a SHA-256 hash that is less than or equal
to the target hash, and Ethereum miners also need to find a hash that is less than
or equal to the target hash. The average time taken to find a block is 10 minutes
for Bitcoin and 12 seconds for Ethereum.
9. Bitcoin vs Ethereum Price Volatility
Bitcoin and Ethereum prices are both highly volatile. In the case of Bitcoin, this is
partly because it is still a relatively new asset, and there is still a lot of speculation
and uncertainty surrounding it. On the other hand, Ethereum is a bit more
established but still faces similar volatility since it is often used as a platform for
launching new ICOs (Initial Coin Offerings). These ICOs can be highly speculative,
and their success or failure can have a significant impact on the price of
Ethereum.

2. What Is Double-Spending?

Double-spending is the risk that a cryptocurrency can be used twice or more.

Transaction information within a blockchain can be altered if specific conditions
are met. The conditions allow modified blocks to enter the blockchain; if this
happens, the person that initiated the alteration can reclaim spent coins.

Understanding Double Spending

To understand double-spending, it helps to review how the blockchain works
first. When a block is created, it receives a hash—or encrypted number—that
includes a timestamp, information from the previous block, and transaction data.
This information is encrypted using a security protocol like the SHA-256 algorithm
used by Bitcoin.
Once that block's information is verified by miners (in proof-of-work consensus),
it is closed, and a new one is created with the timestamp, transaction
information, and previous block's hash. A Bitcoin is awarded to the miner whose
machine verified the hash.
For someone to double spend, a secret block has to be mined that outpaces the
creation of the real blockchain. They would then need to introduce that chain to
the network before it caught up—if this happened, then the network would
recognize it as the latest set of blocks and add it to the chain. The person that did
this could then give themselves back any cryptocurrency they had spent and use
it again.
Preventing Double Spending
Double spending remains a risk; however, it is minimized by the blockchain. The
likelihood of a secret block being inserted into the blockchain is very slim because
it has to be accepted and verified by the network of miners.
The only chance a miner with illicit intentions has of inserting an altered block is
to attempt to get another user to accept a transaction using their secret block
and cryptocurrency. Even then, the likelihood that the modified block will be
accepted is very slim. The blockchain and consensus mechanism move so quickly
that the modified block would be outdated before it was accepted. Even if it was
accepted, the network would still have passed up the information in the block
and would reject it.

References
1. https://www.investopedia.com/articles/investing/031416/bitcoin-vs-
ethereum-driven-different-purposes.asp
2. https://www.knowledgehut.com/blog/blockchain/bitcoin-vs-ethereum
3. https://cointelegraph.com/
4. https://www.bitstamp.net/learn/crypto-101/what-is-block-size/

The End.