Since these two cryptocurrencies are competing against each other to become the global currency, you hear this question a lot of times.
First, let’s talk about the Bitcoin blockchain, it is a combination of three things:
1. A peer-to-peer payment system where you can do transactions in BTC without the need for a bank.
2. A decentralized system like the internet so that no one person can control it.
3. It has a store of value like gold, but easier to transact.
Vitalik Buterin made the Ethereum blockchain to overcome the limitations of Bitcoin Blockchain.
It uses nodes and allows users to send and receive cryptocurrency called Ether.
But it is more than a payment system, it was mainly created to deploy decentralized apps (dapps) and smart contracts.
Summarizing it, both Bitcoin and Ethereum are the decentralized peer-to-peer network that allows payments in the form of Bitcoin and Ether.
The difference is in the purpose and capability. While Bitcoin is a payment system and its blockchain is a database of all bitcoin transactions.
Whereas, Ethereum is more than a payment system and allows to built dapps and smart contracts which make it better than Bitcoin.