Ethereum versus bitcoin.Source:Adobe Stock / valentinakru The two cryptocurrencies with the largest market caps—Bitcoin (BTC) and Ethereum (ETH)—are also the two blockchain projects that enjoy the greatest level of popularity.Because of this, many people who are just starting out in the business aren't sure if they should speculate or invest long-term in ETH or BTC.
However, this kind of decision should take into account a lot more than just their respective growth charts.We will discuss the primary distinctions between ETH and BTC, as well as their respective roles as investment vehicles and values, in this guide.
Compared to Ethereum:Main Differences Despite the fact that both projects are based on blockchain technology and use cryptocurrencies for their coins, they are fundamentally distinct.
As an aspiring alternative to centrally issued and managed fiat currencies, Satoshi Nakamoto—who went by a mysterious pseudonym—created Bitcoin in the beginning.The fact that it is supported by a decentralized network of computers and nodes that verify the rules of a secure, transparent, and immutable blockchain rather than a central bank or other financial institution is its primary selling point.By doing these things, bitcoins can be used safely, ownership can be verified, and they can be held without running the risk of network attacks, currency debasement, or spending twice.In addition, Bitcoin provides users with a native privacy-friendly final settlement, payment, and store-of-value system for the internet, where they would otherwise have to use payment options that could immediately identify and censor them;This level of privacy was previously only available through the use of cash.
More details:The Difference Between Bitcoin and Conventional Currencies Ethereum, on the other hand, provides more than just a blockchain-based currency option.When one of Ethereum's co-founders, Vitalik Buterin, realized what Bitcoin could do if it were programmable, the idea for Ethereum was born.
Decentralized applications (dapps) and smart contracts can now be deployed and run without interference from outside parties thanks to Ethereum.The fundamentals on which Bitcoin's trustworthiness was built are also used to give the Ethereum network and other competing blockchain platforms a lot of credibility.
While ether, the native currency of Ethereum, can also be used as a payment method and a store of value, its primary function is to power the network.It is used to pay gas fees, deploy smart contracts, as a staking option, mint non-fungible tokens (NFTs), and much more.
In other words, the following points summarize the primary differences that exist between Bitcoin and Ethereum as projects:
Value storage:While ether is not, bitcoins are intended primarily as a value store.
Programmability:There is no programmable platform for Bitcoin;It can only do what it was made to do, whereas Ethereum is able to host a wide range of projects and other blockchains.
Time blocks:Interesting fact: Ethereum is much faster for security reasons than Bitcoin, which is supposed to be an alternative to traditional payment systems.
Market value:At the time of this writing (October 2021), bitcoin has a market cap of $1 trillion, while ether has a market cap of $407 billion. This means that bitcoin is worth more than twice as much as ether.
Despite the fact that this list is far from comprehensive, it provides a high-level overview of the two projects and their distinct objectives.
Why Ethereum and Bitcoin Are Very Different Investments Despite the aforementioned distinctions between the two projects, many non-technical people tend to think of ether as a potential replacement for bitcoin.Newcomers are more likely to misunderstand the relationship between Bitcoin and Ethereum as a result of this, which can add confusion to an already complicated field.
Bitcoin is sometimes called "digital gold."It is a scarce resource because there can only ever be a maximum of 21 million bitcoins in circulation (around 18.8 million BTC were in circulation at the time this article was written).As a result, its value rises over time, making it deflationary.The fact that some people, typically early adopters, will unavoidably lose their private keys, preventing them from ever having access to their BTC holdings, is another factor contributing to its deflationary nature.A deflationary currency, on the other hand, might theoretically become too expensive to use.However, this is also addressed by Bitcoin:Because it is infinitely divisible, smaller units like satoshis will be used to circumvent this.
Know more:Is Bitcoin Ever Going to Be Stable?
However, ether is not treated in the same way as a digital commodity because of its use case within its own ecosystem—that is, outside of being treated as a store of value like bitcoins.However, a new Ethereum upgrade has begun burning the coins that were used to pay fees in order to simplify the network's fee-paying process and improve its usability.Ethereum's inflation rate, which is currently around 4%, will fall as a result, possibly even becoming deflationary over time.However, Ethereum is not intended to be deflationary because it does not have a hard cap on its coins like Bitcoin does.
This indicates that ether's value does not lie here but rather in its usability and applicability, despite the fact that bitcoin's deflationary nature is a crucial component of its design that is intended to increase its value.The actual application of ether is more important than its use as a payment method and value store.It is essential to be able to distinguish these two by their distinct applications when choosing an investment.
Is Bitcoin worth more than Ethereum?
Even when the coins are flipped, this question comes up frequently.However, given that the two coins are frequently depicted as rivals, it is not surprising:BTC's biggest rival in the market is ETH, both in terms of price and market capitalization.The equivalences that are frequently made, on the other hand, tend to be false because our guide has demonstrated, up until this point, that the two are not necessarily comparable in every way.
As a result, the investor's perception of what is valuable determines each's value.In broad terms, BTC is worth more than twice as much as ETH due to its significantly higher market cap.
Intrinsic value is another frequent topic of discussion.This is a valuation of an asset based on intricate financial models and calculations, not on its current value.It is intended to be used for a variety of other purposes, including determining an asset's worth and whether it is over- or undervalued, which can provide some useful clues about the asset's future.
However, there is an important caveat here:Bitcoin and ether are two examples of currencies that lack any intrinsic value.They are not backed by any tangible assets, unlike fiat currencies, whose value is derived from the public's faith in their government and are instead backed by the state.As a result, self-described analysts who evaluate cryptocurrencies based on their perceived “intrinsic value” should not be trusted.
Finally, it comes down to what each asset stands for and what a potential investor values most.The following section will discuss this.
Vs. BitcoinEthereum:Which Is a Better Buy? Before making a decision about whether to invest in Bitcoin or Ethereum, the first thing you need to decide is which of the two options is more appealing to your values and beliefs.
Do you prefer a commodity that can be used as a store of value, a speculative investment, or all three at the same time?In this instance, buying bitcoin from a reputable online broker is your best option.You will be able to send your Bitcoin to other wallets, hold it, or spend it wherever it is accepted.
However, you do not need to buy BTC directly if your primary objective is to profit from cryptocurrency volatility.Numerous brokers now offer various BTC derivatives, depending on where you live.They let you wager on the price of bitcoin without actually holding the asset, which could slow you down when you need to make decisions in a split second. They are sometimes referred to as synthetic products.The first bitcoin futures exchange-traded fund (ETF) was recently approved by the Securities and Exchange Commission (SEC) of the United States. This means that investors in the United States now have the chance to get exposure to the price of bitcoin without having to buy and store the most popular cryptocurrency themselves.
However, unlike any other crypto derivative, bitcoin derivatives cannot be spent or sent off-chain.This means that you will still need to hold the actual asset if you want to use crypto to pay for something privately and securely.
More details:How to Buy Bitcoin?
The decision to purchase ether is based on the same decision.Would you rather invest in a coin with a real-world application within a rapidly expanding ecosystem that is the foundation for decentralized finance (DeFi)?This is especially important to keep in mind if you want to take part in any way in the vast, sprawling ecosystem of Ethereum.
When it comes to trading derivatives, Ether offers the same opportunities as Bitcoin.Despite the fact that a number of asset managers have filed for it, there are currently no ETH ETFs that have been approved for trading in the United States.Different kinds of derivatives can be traded in other countries; the only thing you need to do is make sure you know which ones are supported in your region and where they stand legally.Because certain kinds of derivatives are illegal in some places, you should always conduct your own research first.
Why Is Ethereum Rising Faster Than Bitcoin? Between August and September 2021, the prices of bitcoin and ether were both rising, but ether seemed to be growing at a much faster rate than bitcoin.Since then, that pattern has slowed down (as of October 2021).However, it must be noted that the price of bitcoin