Ethereum vs. Bitcoin: A Comparison of the Two Crypto Giants
Ethereum vs Bitcoin: Is one better than the other? And will Ethereum ever catch up to Bitcoin and become the most popular cryptocurrency?
Origins and purpose
Bitcoin (BTC), the first cryptocurrency, emerged in 2009 as a peer-to-peer electronic cash system. Its primary purpose is to function as a digital store of value and a medium of exchange, often dubbed “digital gold.”
Ethereum (ETH) launched in 2015 with a broader vision. While also a cryptocurrency, Ethereum is primarily a decentralised platform for building and running smart contracts and decentralised applications (dApps).
The Flippening
Ethereum has been dubbed “digital silver”, as opposed to Bitcoin’s “digital gold.” But this may change if the “Flippening” ever happens.
The “flippening” in the cryptocurrency world refers to a hypothetical event where Ethereum (ETH), the second-largest cryptocurrency by market capitalisation, surpasses Bitcoin (BTC) to become the largest.
This would happen if Ethereum’s market cap, which is the total value of all ETH in circulation, grows larger than Bitcoin’s. The market cap is calculated by multiplying the circulating supply of a cryptocurrency by its current price.
Whether or not the flippening will happen is a matter of ongoing debate among cryptocurrency enthusiasts and analysts.
Blockchain technology
Both Bitcoin and Ethereum use blockchain technology. This is a distributed ledger that records transactions across a network of computers. This ensures transparency, a level of protection, and immutability of data.
Consensus mechanism
Bitcoin and Ethereum initially both used the Proof of Work (PoW) consensus mechanism, where miners solve complex puzzles to validate transactions and earn rewards. However, Ethereum transitioned to Proof of Stake (PoS) with “The Merge” upgrade in 2022, which is more energy-efficient and scalable.
Monetary policy
Bitcoin and Ethereum work a little differently to each other. Bitcoin is designed to be a scarce digital asset, similar to gold. Its value is driven by its limited supply and increasing demand. Ethereum, on the other hand, is designed to be used on a versatile platform for various applications. Its supply is flexible and adapts to the needs of the network.
There will only ever be 21 million Bitcoin. No one can create more, making them inherently scarce. As more people desire these coins, their value increases due to the limited supply.
The limited supply contributes to its potential as a store of value. Increased demand and limited supply can drive the price up over time.
As for Ethereum, there’s no limit to how many tokens can be produced. However, there’s an algorithm at work that controls the rate at which new tokens are created. This program adjusts the creation of ETH based on the current demand for tokens.
Key differences in use cases
Bitcoin’s primary use case is as a store of value and a medium of exchange. Ethereum, on the other hand, enables the creation of a vast array of decentralised applications, including decentralised finance (DeFi) platforms, non-fungible tokens (NFTs),among others.
Asher Tan, CEO of CoinJar, believes both Bitcoin and Ethereum present compelling long-term investment opportunities, but for different reasons. “Bitcoin’s scarcity and growing adoption by institutional investors make it a potentially strong hedge against inflation and economic uncertainty.”
However Tan believes that Ethereum’s potential lies not only in its versatility and the growing demand for DeFi (decentralised finance) applications and NFTs (non-fungible tokens), but also in its applications in decentralised identity systems and the tokenisation of real-world assets (RWA).
“Diversification is a key principle of investing, and this applies to cryptocurrencies as well. Investing in both Bitcoin and Ethereum can help spread risk and potentially capture the benefits of both assets. Bitcoin offers store-of-value potential, while Ethereum provides exposure to the rapidly expanding world of decentralised applications and blockchain technology.”
Market dynamics and performance
Both Bitcoin and Ethereum have experienced price volatility since they were introduced. However, the general trajectory of their prices has been upward.
Bitcoin, launched in 2009, started with negligible value and saw its first major price surge in 2011. It has since experienced numerous booms and busts, reaching an all-time high of over US$73,700 in March of 2024. The price has fallen a little since then, true to its volatile nature.
Ethereum, launched in 2015, followed a similar pattern, starting with a lower value and experiencing significant price increases over time, reaching an all-time high of over $4,800 in 2021. Prices have since fallen somewhat, as per crypto’s volatile nature.
While both cryptocurrencies have seen substantial price drops, their overall trajectory from their inception to the present remains upward. But this is not a guarantee of how it will go in the future.
Common questions: Security and network
Many people might ask the question; “Are both networks considered secure?” Both are considered protected, in that there is a level of protection in place, however Bitcoin’s longer history and larger network might offer a slight edge.
The Ethereum blockchain itself has not been hacked in the traditional sense of an attacker gaining unauthorised access and manipulating the underlying code. However, there have been instances where smart contracts built on the Ethereum blockchain have been exploited due to vulnerabilities in their code.
The most notable example is the DAO hack in 2016, where a flaw in a smart contract led to the theft of millions of dollars worth of Ether.
The Bitcoin network itself, in terms of its underlying blockchain technology, has never been successfully hacked. Its robust cryptographic algorithms and decentralised structure make it highly resistant to attacks.
However, there have been Bitcoin hacks where vulnerabilities in services and platforms interacting with the Bitcoin network have been exploited
Future developments
Bitcoin’s development focuses on improving scalability and privacy features. Ethereum’s roadmap includes further upgrades to enhance scalability, protection, and sustainability.
When deciding between Ethereum vs. Bitcoin, you could ask yourself, “Why not both?” And so the next logical step is asking, “How do investors buy Bitcoin?”
The question of where can investors buy bitcoins is conveniently answered, as it’s available on cryptocurrency exchanges. It has been one of the most popular cryptocurrencies due to its performance over the years, attracting investors seeking the biggest crypto investment returns.
Not everyone has benefited, however, as the bitcoin price uk has shown volatility. However it remains as the most well-known cryptocurrency.
Ethereum: The innovator
Since the rise of Bitcoin, people have become interested in other cryptocurrencies. This has fuelled questions like “What is Ethereum?” and “Is Ethereum a good investment?”.
Some investors believe it could be one of the best cryptocurrency to invest in for the long term. But no one has a crystal ball to see the future. Monitoring the ethereum price UK can provide insights for potential investors looking to make informed decisions.
The verdict
There may be a more diverse way to think about the choice between Bitcoin and Ethereum. They are just two options among many. Exploring other good crypto to buy might also be worth your while.While people always want to know what the best crypto coin to buy is, diversifying your portfolio might be a good strategy.
The question of which crypto to buy today for long-term investment is a personal one, depending on your individual circumstances and risk tolerance.
Here is some homework for you to research before you buy.
Top crypto to invest in: Research and compare the performance of various cryptocurrencies to identify potential investment opportunities.
Is Ether a good investment?: Delve deeper into the potential of Ethereum and its native cryptocurrency, Ether.
Conclusion: Ethereum vs. Bitcoin
Bitcoin and Ethereum are two established cryptocurrencies, each with distinct strengths and purposes.
While Bitcoin serves primarily as a digital store of value, Ethereum’s versatile platform empowers a new wave of decentralised applications.
As the crypto landscape evolves, both networks will likely play a role in shaping the future of finance and technology.
Standard Risk Statement
The above article is not to be read as investment, legal or tax advice and it takes no account of particular personal or market circumstances; all readers should seek independent investment advice before investing in cryptocurrencies. The article is provided for general information and educational purposes only, no responsibility or liability is accepted for any errors of fact or omission expressed therein. Past performance is not a reliable indicator of future results.
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Cryptocurrency is currently not regulated in the UK. It’s vital to understand that once your money is in the crypto ecosystem, there are no rules to protect it, unlike with regular investments. You should not expect to be protected if something goes wrong. So, if you make any crypto-related investments, you’re unlikely to have recourse to the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS) if something goes wrong.
Remember:
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