Bitcoin and Ethereum are both cryptocurrencies that are built on blockchains, but they have some very significant differences. Bitcoin has been around since 2009, while Ethereum was only recently introduced in 2013, so it’s no surprise that Bitcoin is the king of cryptocurrency when I look at market capitalization.
However, the ever-increasing popularity of Ethereum means that its future growth cannot be ruled out.
Ethereum is seen as a better investment because transactions are faster than with Bitcoin. Bitcoin is mostly a store of value and medium of exchange, whereas Ethereum is thought of as a versatile blockchain. In 2021, Ethereum outperformed Bitcoin sevenfold.
In this article, I’ll explain a few of the advantages of Ethereum over Bitcoin and explain how each works, their advantages and disadvantages when compared, and their future potential.
I’ll expand a bit further on what the future may hold for these two cryptocurrencies, and what you can expect if you’ve invested in either of them!
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What Makes Ethereum a Better Investment Than Bitcoin?
Though the current valuation of each cryptocurrency is much different, with Bitcoin around $40,000 and Ethereum at around $3,300, Ethereum has some distinct advantages over Bitcoin that make it a preferred choice for investors looking to diversify their cryptocurrency portfolio.
Ethereum is a better investment than Bitcoin because of its main features to act as a system that can execute peer-to-peer contracts. This makes it possible for developers to build applications on top of the blockchain, enabling the creation of cryptocurrencies and crowdfunding platforms.
While Bitcoin is currently worth more, Ethereum has increased in price over a shorter period of time and has been tipped to overtake bitcoin in 2022.
Although Bitcoin and Ethereum are both built on blockchain technology, their designs are very different. The former is purely a public ledger system that records payments without the interference of a central authority, while Ethereum is more complex as it allows for smart contracts – agreements written in code that execute automatically when prearranged conditions are met.
This makes Ethereum potentially more useful than Bitcoin.
Advantages of Ethereum
Ethereum is a platform for running decentralized blockchain applications using smart contracts. These programs operate under the direct control of their own code, and users can interact with or depend on them directly.
The main advantages of Ethereum are that it provides value for its users in the form of innovation and access to blockchain technology. It is also considered more versatile than Bitcoin because it acts as a platform for smart contracts and applications (dApps).
Other benefits include:
- Security: Ether is not as vulnerable to attacks as Bitcoin because of Ethereum’s PoW algorithm, Dagger. This means that brute force and mining monopolization are less likely.
- Exchange usage: Users can buy and sell cryptocurrencies using typical exchange services. There are also peer-to-peer exchanges that provide a marketplace for direct trades between two individuals. These P2P marketplaces offer several benefits over centralized exchanges, including lower fees.
- Scalability: the number of transactions that can be processed by the network at any time, and speed of transaction execution
- Flexibility: Ethereum also enables peer-to-peer transactions, but it also allows for the development of smart contracts and distributed applications. Users can exchange practically anything of value using a smart contract, including shares, cash, real estate, and so on.
Ethereum’s decentralized platform is much more secure than traditional servers. The blockchain technology used by Ethereum ensures transparency all the time, so each transaction is traceable.
Unlike Bitcoin transactions where users are pseudonymous, Ethereum enables anyone to view its entire transaction history.
Advantages of Bitcoin Over Ethereum
All cryptocurrencies are subject to changes in demand, but since there are only about 21 million Bitcoins available (of which roughly 80% have already been mined), their value will inherently be more stable than currencies like Ether that could potentially see millions or even billions created overnight should they become particularly desirable.
Furthermore, Bitcoin has a higher market capitalization which means that it is more likely to be accepted when purchasing goods and services. This, in turn, could make it more likely for someone who holds Bitcoins to sell their coins in the future when they need fiat currency (government-issued) for everyday expenses.
Ether’s circulating supply currently stands at 119.2 million compared to Bitcoin’s 21 million. There are only so many bitcoins available (with a max of 21 million), and they will level off at that number around 2140-2160 or earlier with all mining efforts ceasing then.
This means that once all coins are mined (and no new ones can ever be made), users of Bitcoin should expect their value – relative to goods, services, etc. – to stay relatively constant over time, barring any significant economic upheavals in society.
Ether also faces uncertain regulatory and tax implications due to its decentralized nature. Bitcoin has no international laws for regulation, but in most developed countries, it falls neatly into existing frameworks and is likely to remain legal.
Will Ethereum Overtake Bitcoin?
Ethereum is the second most popular cryptocurrency in the world, and for a good reason. While Bitcoin pioneered much of the blockchain technology that makes cryptocurrencies possible, its scripting language is fairly limited, allowing for only a handful of applications to run on top of its blockchain.
Ethereum is likely to overtake Bitcoin because its utilization of NFTs and DeFi has prompted a wave of venture investment in Ethereum. Some industry experts predict that by the end of 2023, Ethereum will be the top cryptocurrency.
Although Bitcoin was the first blockchain network, its scripting language has become relatively limited over time, whereas the Ethereum network is quickly gaining new functionality, as evidenced by the numerous tokens built on top of it.
So while Bitcoin paved some ground-breaking new ground in terms of decentralization and distribution, it may not represent the future of the crypto world.
Bitcoin was the first blockchain network to function, but after eight years, it has limited utility beyond simple payment processing. While Bitcoin still leads over other cryptocurrencies based on market cap, maybe that’s not what you should be looking for in a cryptocurrency anyway.
Ethereum has quickly gained traction as a “world computer” that allows developers to program their own decentralized apps and smart contracts with its Turing-complete programming language, which is turning heads from venture capitalists all around the world.