Bitcoin vs Ethereum: New Crypto Investors Guide in 2024
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The main difference between Bitcoin and Ethereum is that Bitcoin is used as a substitute for traditional currencies and as a medium of exchange, Ethereum has various applications and works at a more comprehensive level.
Although Ethereum was developed as a support to the Bitcoin network, the continuous surge in its popularity heated competition between Ethereum and other cryptocurrencies.
Bitcoin was the first cryptocurrency introduced, and with it, the idea of digital currencies came into existence. This digital money soon created a buzz and gained immense popularity. While Bitcoin still holds the leading position, now Ethereum enjoys the status of being the second-largest digital token having the second largest market capitalization.
As the trend and popularity of blockchain technology rise, crypto investors become more picky and competitive when choosing their crypto investments. To make things easier and less complicated, this review discusses some of the crucial differences between the two major cryptocurrencies: Bitcoin and Ethereum.
Bitcoin vs Ethereum: What is Bitcoin
Bitcoin is the most popular cryptocurrency having the largest market cap and is widely traded on the crypto market. It is a digital currency that avoids the interference of any intermediaries like the central bank and allows peer-to-peer payments through a bitcoin network. The network nodes then verify transactions through cryptography and record these on the public distributed ledgers called a blockchain. This method initiates the use of computational power for solving mathematical puzzles.
Bitcoin network is a decentralized platform. Decentralization refers to the distribution of authority rather than reliance on a single central authority such as a bank or other financial institution. The power is distributed equally among all the users of Bitcoin blockchain technology.
The lack of involvement of intermediaries saves you from the hassle of visiting banks as well as from exchange rate fluctuations. Furthermore, the bitcoin blockchain enables fast and secure transactions with lower transaction fees through methods like SWIFT and ACH networks.
Bitcoin allows you to avoid cross-border transaction requirements and foreign exchange payments. In a typical overseas transaction, payment is made to the Money Transfer Operator (MTO) and is received in the recipient country’s currency after the deduction of a fee by the operator. This process is expensive to users, especially those making smaller transactions. In addition, exchange costs are also added to the overall cost of the transaction.
Moreover, Bitcoin allows transparency of transactions and makes the information publicly available. Such transparency and accessibility mitigate the risk of fraudulent activities by enabling greater scrutiny. Further efforts are in process to enhance the privacy policies of the bitcoin blockchain.
What is Ethereum
Ethereum, also known as native cryptocurrency, is the second most popular cryptocurrency. It is also a blockchain technology that can be used to create smart contracts or any digital technology that is secure to use. Smart contracts are key tools used in decentralized applications such as decentralized finance (Defi).
The introduction of Ethereum takes blockchain technology beyond being a source of virtual payments and opens new streams for users. One such use would be its increasing applicability in the gaming industry.
Since its introduction, Ether has outranked every other cryptocurrency except for Bitcoin and has become one of the highly traded currencies. The Ethereum network operates in a similar manner as a Bitcoin.
The proof of work method is a consensus mechanism that enables network participants to confirm an encrypted number’s validity through software. This is known as mining, and the miner who validates the data first receives an ether as a reward.
Similarities Between Bitcoin vs Ethereum
Although competing against each other, the two significant cryptocurrencies have some similar aspects that one should keep in mind. The first evident and key similarity is that both Bitcoin and Ethereum are decentralized and digital cryptocurrencies.
These currencies work through a system of nodes that validate transactions by a proof of work consensus. The data validation process makes crypto investments safer. However, this process makes cryptocurrency exchanges slower than ordinary payment platforms on the offside.
Bitcoin and Ethereum are cryptocurrencies having similar programming and mining processes as well as mining power. They both enjoy leading positions among other cryptocurrencies with the highest and second-highest market value. Their demand has been on the rise ever since their introduction into the market.
Additionally, Bitcoin and Ethereum networks are open blockchain systems that allow access to all, and any individual can participate in or view the transactions. Tokens are needed to gain access to both Ethereum and Bitcoin transactions.
Differences Between Bitcoin vs Ethereum
We looked at the similarities between Bitcoin and Ethereum, and now we’ll discuss the key differences between these two digital assets. Having originated from similar blockchain technology, these crypto-assets differ from each other.
Smart contracts are the key feature that makes them distinct from one another. The Bitcoin blockchain was originally developed for the purpose of supporting the Bitcoin cryptocurrency. On the other hand, the Ethereum platform hosts several applications and is known as the top programmable blockchain.
An example is Decentraland, where items such as land, wearables, and buildings are secured through Ethereum blockchain as they are tokenized to create ownership. Non Fungible Tokens (NFTs) and Decentralized Autonomous Organizations (DAO) are two other creations of Ethereum that have been gaining significant popularity lately.
Bitcoin and Ethereum have different currency creation limits attached to their networks. While around 21 million bitcoins can be created in a single circulation, the amount of Ethereum created is unlimited and is only hindered because of the time constraint. Since the time taken for ETH processing is slightly greater than that of a BTC, Ethereum creation is limited by how much Ethereum can be produced in a year.
Furthermore, Bitcoin shines brighter than Ethereum in the crypto market. Bitcoin’s market cap exceeds that of Ethereum, with Bitcoin having a market capitalization of $737.5 Billion and Ethereum having a capitalization of $341.5 Billion as of May 2022.
The transaction fee of Ethereum is called ‘gas’. These gas fees typically range from $1.59 and $70 on a daily average. Whereas, the average daily transaction fee for the Bitcoin network ranges from $1.78 to $62. Ethereum provides you with an option to pay high-priority fees to get the transaction completed faster. Bitcoin, however, allows customization of fees to signal to the miners of your willingness to pay more for urgency.
Pros and Cons of Bitcoin
- Bitcoin network is decentralized and can be controlled by various willing parties through their consensus
- Bitcoin is a permissionless platform, and any individual can use it
- The Bitcoin transactions occur transparently through the protocol rules
- These digital assets are incentive-driven as miners compete to add new blocks to the blockchain and thus contribute resources to secure the network
- Less awareness and understanding of Bitcoin among users
- Inflation has no impact on Bitcoins
Pros and Cons of Ethereum
- Ethereum is a decentralized application and has no limit to its creation
- It has a smart contract functionality and is highly used in the gaming market
- The Ethereum network is aggressively expanding and gaining popularity
- Various venture capitalists back it
- The transaction fees have risen
- There is an increase in competition, and many new cryptocurrencies are emerging in the crypto space
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Conclusion: Bitcoin vs Ethereum
Bitcoin and Ethereum networks are both immensely popular and known to be the two giants of the crypto world. However, although Bitcoin is leading in the crypto market in terms of its higher market share and greater awareness among investors compared to Ethereum, it is a blockchain technology that is limited in its scope and may end up being boring and consistent.
Ethereum, on the other hand, is an emerging currency that has a broader scope of growth and offers numerous applications. Moreover, Ethereum is more non-monetary and thus opens greater doors of opportunities for investors and explores creativity such as in NFTs.
However, both these currencies are traded on a broader scale, and numerous investors are involved in the crypto market. Therefore, when considering which currency to invest in, you should assess your risk profile and the potential future that each holds.
Since both Bitcoin and Ethereum have different uses, they may not compete, yet Bitcoin may seem like a better option if you seek a long-term store of value. Moreover, you are likely to choose Ethereum if you are more interested in Defi solutions and ways to utilize your money on apps and chains by Ethereum.
Bitcoin vs Ethereum FAQs
Is Ethereum or Bitcoin better?
Bitcoin is the most well-known cryptocurrency since it was the first cryptocurrency that emerged. Bitcoins have a cap on the number of cryptocurrencies that will ever exist, thus serving as a store of value. However, Ether can be issued an unlimited number of times. This makes Bitcoin more valuable than Ethereum and is often referred to as digital gold.
In contrast, Ethereum, although being the second-largest cryptocurrency, has a wider scope and enters into non-monetary applications. It is being widely used in the gaming industry, and thus this network is expanding at a fast pace.
Moreover, it is expected that the upcoming transition to Ethereum 2.0 will be enhanced and mitigate the already existing weaknesses and limitations of Ethereum, thus may emerge as the top cryptocurrency.
Considering the above, it may be challenging to choose the right blockchain network for you. However, the choice largely depends on how much risk you are willing to take and the prospects of both these digital currencies. Nevertheless, it is to note that Bitcoin is still way ahead of Ethereum.
Can Bitcoin beat Ethereum?
Bitcoin is already leading the crypto market, holding the highest market share and the highest level of trading. While the Bitcoin network offers support to the Bitcoin currencies, the Ethereum network expands further, offering various applications such as Defi and other digital applications. In addition, the Ethereum network goes beyond monetary functions and is used for NFTs and other exchange platforms.
Although Ethereum currently lags behind Bitcoin, there is speculation that the upcoming Ethereum 2.0 version will boost its value and may beat Bitcoin in the future. Since the current Ethereum has seen some weaknesses, the future version has been developed to mitigate these shortcomings and emerge as the number one decentralized computing network.
The upcoming version will likely emphasize a low transaction cost and higher processing speed. However, even the current version is doing good in the market, especially with the introduction of NFTs and DApps. The emphasis on creativity opens limitless possibilities for users and currently, Ethereum is making quite the buzz.