Blockchain is known as a distributed data storage system that enables tracking transactions among network participants. However, blockchain networks vary in their functions and parameters. Despite transactions in all blockchains being immutable and transparent, they have differences and unique features.

These distinctions depend on various factors, including:

• Consensus algorithm — the method used to achieve agreement among transactions in the network (Bitcoin uses proof-of-work, while Ethereum uses proof-of-stake).
• Functionality — blockchain networks may have different features, such as smart contracts, cross-chain bridges (essentially smart contracts), mixers, etc. These functions can impact transaction costs and network load.

In this article, we’ll explore the differences in blockchain networks concerning transactions.

Bitcoin, the original and widely embraced blockchain network with its associated cryptocurrency (ticker: BTC or XBT in some instances), boasts straightforward and easily comprehensible transactions. These transactions include the following components:

• Sender — the address of the transaction sender.
• Receiver — the address of the transaction recipient.
• Amount — the quantity of 'coins' being transferred in the transaction.
• Fee — the payment to miners for processing the transaction.

Transactions in the Bitcoin network are verified by miners who leverage the computational power of their computers to solve complex mathematical problems.

The first miner to solve the problem earns the right to add a block to the blockchain, which includes the transaction. Bitcoin transactions are public and transparent but pseudonymous. This means that the recipient and sender cannot be identified solely based on the network’s data.

Ethereum, the second most popular blockchain network featuring its own cryptocurrency, ether (ticker: ETH), presents transactions that differ slightly from Bitcoin. These transactions include additional fields:

• Sender — the address of the transaction sender.
• Receiver — the address of the transaction recipient.
• Amount — the quantity of 'coins' being transferred in the transaction.
• Fee — the payment to miners for processing the transaction.
• Data — a unique field where any additional information in text form can be inserted. While Bitcoin transactions also have a data field, not all explorers display this value.

Up until 2022, Ethereum transactions were verified by miners using a proof-of-work algorithm. However, in 2022, the network shifted to a proof-of-stake consensus, removing the financial incentive for miners to secure the network.

Today, Ethereum transactions are verified by validators. In simpler terms, validators are participants in the network who earn the status of 'miner' by staking a specific amount of ETH.

• As of writing this, becoming a validator on the Ethereum network requires staking 32 ETH (around $65,000).

If validators break network rules, the algorithm penalizes them by seizing the staked cryptocurrency. Those with insufficient cryptocurrency for block verification join groups similar to mining pools.

A key difference between Ethereum and Bitcoin lies in Ethereum’s support for smart contracts. With Ethereum, users can deploy their decentralized applications, create non-fungible tokens, and introduce new altcoins.

Efforts have been made to develop a tool for Bitcoin to deploy smart contracts. The proposed solution for scalability is the Lightning Network, aspiring to be Ethereum 2.0. However, this payment solution is yet to gain full support from the crypto community.

Beyond Bitcoin and Ethereum, there are various other blockchain networks, each with its unique transaction characteristics.

For example, in blockchain networks utilizing the proof-of-authority consensus algorithm, becoming a validator is a more selective process compared to Ethereum. Validators must undergo stringent identity verification.

In the XRP Ledger network, which hosts XRP tokens, there are no miners. Transaction verification relies on the Ripple Protocol Consensus Algorithm, involving validators. Cardano, too, employs its algorithm named Ouroboros, mostly based on the existing proof-of-stake concept.