Which is the best investment? – Cryptopolite
What is the first thing that comes to mind when you think of cryptocurrency? That would be Bitcoin, unsurprisingly. It is seen by many as the quintessential digital currency and shaped what the general public recognizes as crypto. Bitcoin is not alone, however, as Ethereum is another popular cryptocurrency that has risen through the ranks to be a constant subject of comparison with Bitcoin.
The best way to describe the relationship between these two is that Bitcoin is the Coca-Cola of the market, and Ethereum is the Pepsi. Some people will favor one over the other. So, Bitcoin vs Ethereum? How do you vote?
The question that is often raised is which of these cryptos is the best investment. It would be easy to answer this by simply looking up current Bitcoin and Ethereum prices, but cryptocurrency is notoriously volatile. Knowing the prices is not enough; there are several factors to take into account.
Bitcoin and Ethereum are among the most popular cryptocurrencies with a large market capitalization. Despite relying on blockchain technology, there are some stark differences between them in terms of their application, consensus mechanism, future prospects, and more.
In this article, we will explore the key differences between Bitcoin and Ethereum and what makes each unique. We aim to help you decide which currency is best for you.
What is Bitcoin?
Bitcoin was the first cryptocurrency to gain mainstream recognition, and to this day it remains the most valuable cryptocurrency in the world by market capitalization. It was created in 2009 by an unidentified man with the alias Satoshi Nakamoto. Since it is a digital currency backed by blockchain technology, all Bitcoin transactions are verified on a public ledger.
One of the key features of Bitcoin is its limited supply. Bitcoin’s maximum supply is limited to 21 million, a number hardcoded into the protocol. As of February 2023, around 18.7 million bitcoins have been mined. Therefore, only a little over 2 million can still be mined on the Bitcoin network. This limited supply is one of the reasons why Bitcoin is often seen as a store of value, similar to gold.
To validate transactions and create new blocks on the Bitcoin blockchain, Bitcoin uses a process called proof-of-work (PoW). This requires miners to solve complex mathematical problems to add new blocks to the chain and is rewarded with newly created bitcoins. However, the PoW mechanism is very energy-intensive, which has led to criticism of Bitcoin’s environmental impact.
What is Ethereum?
Ethereum, on the other hand, was created in 2015 by programmer Vitalik Buterin. Like Bitcoin, Ethereum operates on a decentralized Ethereum network using blockchain technology.
However, the Ethereum network is designed to be more flexible and programmable than Bitcoin, allowing developers to build decentralized applications (dApps) on top of the network using smart contracts. These self-executing contracts depend on a pre-encoded agreement between a buyer and a seller.
Since Ethereum’s smart contracts are stored on the blockchain, it is virtually impossible to tamper with them. This allows dApps to be built on top of the Ethereum blockchain, allowing automation in various industries, especially in fine technology and supply chain management.
Future applications of Ethereum’s smart contracts include verifying real estate purchases, vehicle purchases, and other forms of ownership verification.
Another important difference between the Ethereum blockchain and Bitcoin is the consensus mechanism used to validate transactions. While Bitcoin uses PoW, Ethereum uses another mechanism called proof-of-stake (PoS). With PoS, validators unlock a certain amount of cryptocurrency as collateral to validate transactions and create new blocks. The more cryptocurrency a validator has, the greater the chances of being chosen to validate the next block. PoS is considered less energy-intensive than PoW and is seen as a more environmentally friendly alternative.
Key Differences Between Bitcoin vs Ethereum
Bitcoin and Ether (Ethereum’s cryptocurrency) share quite a few similarities, with the obvious being that they are both digital currencies. They can be traded through online exchanges and can be stored in a variety of crypto wallets. Both tokens are decentralized, meaning a central bank or other authority does not issue or regulate them, and they often use blockchain technology.
But for all their similarities, there are many differences between the two that make them separate entities. Bitcoin is a peer-to-peer electronic cash system that works securely without the involvement of a central authority. It wasn’t the first time the concept of a decentralized form of money had been thought of, but it was the first time the idea gained some steam. The value of all other cryptos – like Ether – usually moves in step with Bitcoin, and Bitcoin is still traded much more than any other coin.
The main purpose of Bitcoin was to establish itself as a worthy alternative to country-backed fiat currencies. In other words, traditional currency. First and foremost, it is a medium of exchange and a store of value.
As insinuated earlier, Ethereum is not technically a cryptocurrency. In reality, Ether is the cryptocurrency, and Ethereum is simply the platform on which Ether is based; it’s a common misconception. The purpose of Ethereum’s launch in 2015 was to serve as an upgrade to the weaknesses of Bitcoin. The use cases give developers more opportunities to build new applications, and in doing so, it became its own thing and a formidable rival to boot.
To summarize the differences, Bitcoin is a cryptocurrency and Ethereum is a platform, with Ether being the actual cryptocurrency. Bitcoin transactions are mostly monetary, while Ethereum transactions are usually executable code. Transactions on the Ethereum network are significantly faster than on Bitcoin. For the most part, Bitcoin functions as a store of value and medium of exchange; Ethereum does not. Its creation was out of a desire to create a supplement to Bitcoin, but ironically it went on to become a competitor.
Which should you choose: Bitcoin or Ethereum?
One of the biggest differences between Bitcoin and Ethereum is their intended use cases. Bitcoin is seen primarily as a store of value and medium of exchange, while Ethereum is designed to be a platform for decentralized applications. This means that Bitcoin is focused on being a currency, while Ethereum is more focused on the technology that underpins it.
Another important difference is the level of decentralization on each network. While Bitcoin and Ethereum operate on decentralized networks, Bitcoin is often seen as more decentralized because it has a greater number of independent nodes. This is because the PoW mechanism used by Bitcoin allows anyone with a computer and an internet connection to participate in the network. In contrast, the PoS mechanism used by Ethereum requires validators to hold a certain amount of cryptocurrency, which can make it more difficult for smaller players to participate.
In terms of transaction speed and fees, Ethereum has an advantage over Bitcoin. While Bitcoin can only process a limited number of transactions per second, Ethereum is designed to be more scalable and can handle a much larger volume of transactions.
If an investor wants a cryptocurrency that they can buy and forget, Bitcoin would be the better option, as it has proven to be a reliable store of value. However, if the intention is to acquire crypto that investors are likely to use, Ethereum is the best choice.
Ethereum has the potential to bring greater gains. While Ethereum will end the year with significantly less than Bitcoin, investors would quadruple their investment if it returned to its all-time high. In the case of Bitcoin, if it reached its all-time high, investors would not even double their money.
Which is the better choice overall?
Most investors agree that Bitcoin is here to stay since this currency was a pioneer of all mainstream digital currencies that we know of today. But when it comes to applications and use cases, Ethereum takes the lead.
Unfortunately, high gas fees on the Ethereum network are seen as a major drawback and could potentially limit its use. So which currency is better overall? It is a never-ending debate. While some investors prefer to invest in Bitcoin as it is seen as more future-proof, others prefer Ethereum due to its widespread use cases in DeFi applications and NFTs.
Finally, there is consensus among the more knowledgeable crypto investors, entrepreneurs, and experts on the subject. They believe that Bitcoin is a better buy than Ethereum. That being said, there are many Ethereum supporters who argue that even though it is not as sought after as Bitcoin, Ethereum can perform just as well in the long run.
The decision is ultimately up to the investor. Pros and cons are there; it is up to them to decide what is best for them.
