by Contributing Author
When thinking of cryptocurrencies, Ethereum and Bitcoin are the first to come to mind. And that’s because they have both contributed to the industry’s success. Bitcoin was the first digital asset to be introduced, being compared to digital gold, while Ethereum works as a decentralized computer, enabling the development of dApps.
For investors, one of the most challenging things when navigating the crypto market is deciding whether to buy Ethereum or Bitcoin. In terms of market capitalization, Ethereum and Bitcoin have been doing great over the years, so it can be difficult to determine which is better. The two cryptocurrencies share some similarities, but there are also some notable differences between them – some even argue that ETH and BTC are competitors. Let’s explore the two cryptos in more detail.
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Bitcoin – the king of cryptocurrency
Bitcoin was introduced in January 2009, bringing to the financial world a new concept that Nakamoto described in detail in a white paper. The digital currency promises security, eliminating the need for a central authority to complete the transactions. Although there were other attempts to create digital assets in the past, none succeeded until the creation of Bitcoin. Therefore, it has become a predecessor to the other cryptocurrencies launched in the following years.
Bitcoin was the first digital currency fueled by the blockchain, a technology that solves multiple issues, including the Byzantine Generals Problem, describing decentralized systems’ challenges in agreeing on one truth. Bitcoin overcomes this problem through PoW and blockchain, with miners (in the role of generals) solving the difficulty. The nodes on the network validate transactions similar to communications transmitted to generals.
While Bitcoin was initially a medium of exchange, enabling the purchase of services and goods, it also became a store of value (an asset which maintains its value over time).
Ethereum- the engine for dApps creation
While Bitcoin relies on the blockchain for monetary transactions, Ethereum uses the technology to create a decentralized computer. Ethereum was launched in 2015 and has since established itself as a popular open-ended platform that enables the development of dApps and smart contracts. Ethereum has different purposes: besides trading, it can also be used to buy services or goods. Moreover, investors can hold it or pay transaction fees on the Ethereum network.
Ethereum uses a unique programming language known as Solidity, which helps program smart contracts. Thanks to smart contracts, Ethereum provides wide-ranging applications – it is likely that we haven’t yet seen some of its best use cases.
Differences between Ethereum and Bitcoin
Ethereum and Bitcoin are both based on encryption; however, their technical specifications make them very different. For instance, an ETH transaction is validated in seconds, and a BTC transaction in minutes. The consensus algorithms of the two cryptos also differ: while Bitcoin utilizes SHA-256, Ethereum is based on LMDGhost.
Another notable difference between the two cryptos is that Bitcoin still uses PoW, while Ethereum switched to PoS last year in September, intending to make the crypto greener. Cryptocurrencies have long received criticism for being highly energy intensive, so from a sustainability perspective, it is safe to say that Ethereum is one step ahead.
Public wallet addresses differ on Ethereum and Bitcoin networks: on Bitcoin, they begin with a 1, a 3 or bc1, and on Ethereum, with 0x.
Due to its complex value proposition, Ethereum may not be ideal for beginner investors. So, to keep things simple, Bitcoin may be a better option – at least until you get the hang of the crypto game.
Which of the two cryptos is a better investment?
Bitcoin and Ethereum have both increased in value since their launch. They have unique features, and it’s hard to say that one is a better investment than the other because it all comes down to your goals and needs. If you want to opt for an alternative to fiat money, Bitcoin is a good choice as long as you are ready to weather the volatility in the market. On the other hand, Ethereum is a better option for those looking for more than just a digital asset, as the Ethereum network is a marketplace where users can buy and sell goods and dApps.
It’s important to remember that investing in cryptocurrencies involves some risks, so whether you choose Bitcoin or Ethereum, you must be prepared to navigate the challenges in the industry. Although cryptocurrencies can be a great addition to investors’ portfolios, allocating only a small part of it to digital assets is recommended – the more diversified the portfolio, the safer it is.
When investing in cryptocurrencies, people often make impulsive decisions due to FOMO. The reason this happens is that investors fear that they may miss out on potential gains in the future. However, impulsive buying often results in considerable losses, so avoiding FOMO is crucial. This can be done by adopting a long-term view of crypto investing and focusing on creating a solid portfolio with quality assets instead of going for short-term gains. Most successful investors are disciplined and don’t let emotions influence their trading decisions. They only invest as much as they can afford to lose and employ common sense during the entire crypto trading journey. So, if you want a positive experience with digital currencies, you should follow these rules, too.
Conclusion
Bitcoin has established itself as a solid medium of exchange and has powerful brand recognition. Besides, it is widely adopted not only by individuals but also by businesses operating in different industries. But Ethereum’s continuous improvement makes it a prominent player in the crypto sector, too. And thanks to the popularity of NFTs and decentralized finance, we can only expect it to grow further.
So, can we tell for sure which one will stand the test of time? Not really. After all, there is no certainty regarding the future, especially when it comes to crypto. Perhaps there will be a winner, or both cryptocurrencies will thrive. That remains to be seen. But one thing is clear: both Ethereum and Bitcoin have started a conversation about the financial system’s weaknesses, which will play a major role in the future of finance.
