Crypto

Ethereum vs Bitcoin: Which is Better?

A look at the biggest cryptocurrencies

A lot of investors are weighing up their options when it comes to cryptocurrency in recent times, and the two biggest hitters in this industry are Ethereum and Bitcoin. So, you might be wondering which is the better choice for modern investors, but what you should be asking is, what are these cryptocurrencies and what do they represent?

The Ethereum network and its currency Ether (ETH) is the second-biggest cryptocurrency by market cap after Bitcoin, so it is only natural that investors would be interested in comparing them. 

Each of these cryptocurrency options is a digital currency, that is stored in many different types of cryptocurrency wallets and can be traded on online exchanges. They both use blockchain technology and are decentralized, which means that they are not regulated or issued by any bank or other authority. While they are similar, they are also very different in a number of ways, and that’s what has prompted us to take a deeper dive into the Ethereum vs Bitcoin comparison.

What is Ethereum?

Ethereum is the biggest, and most recognizable, open-ended decentralized software platform, and this is where it differs from Bitcoin the most. Ethereum shows that blockchain technology can be used for so much more than just creating a digital currency.

Launched in July 2015, it allows the building of decentralized applications (dApps) and smart contracts to be deployed, and allows them to run with no downtime, interference, or fraud control from any third party. Ethereum runs on its own programming language on the blockchain, which enables developers to run and build applications.

The applications of Ethereum are far and wide and are still only being explored now, and any application that does run on the Ethereum network will be powered by its currency Ether (ETH). ETH is commonly thought of as the fuel that runs all of the commands on the Ethereum platform. 

ETH is mainly used for two purposes, to run applications on the Ethereum network, and as a simple digital currency, like Bitcoin and other cryptocurrencies.

What is Bitcoin?

Launched all the way back in 2009, Bitcoin is by far the most recognized cryptocurrency. It started off as an idea set out by Satoshi Nakamoto and promised an online currency that is fully peer-to-peer and has no central authority, unlike every other currency in the world at the time. There is no physical coin for Bitcoin, just online balances that are kept track of on a public ledger.

Contrary to common belief, Bitcoin was not the first online currency that was created, but it was the first that enjoyed substantial success. This rise of Bitcoin brought the idea of cryptocurrency to the mass market, and because of that, it is seen by most as the predecessor to most modern cryptocurrencies. 

The concept of an unregulated, online currency has since become generally accepted among governing bodies and regulators. Despite practically no stores or other places that accept payment will accept Bitcoin, it has managed to create a niche for itself and continues to exist and gain popularity alongside the traditional financial system.

Ethereum vs Bitcon: the Differences

As touched on previously, both Ethereum and Bitcoin are both powered by blockchain technology and can be used as an online digital currency, but they are different in significant ways. For instance, Ethereum transactions can contain working code, whereas the data that Bitcoin transactions contain is typically used for keeping records. The algorithms with which they work (Ethash for Ethereum and SHA-256 for Bitcoin), and their confirmation times (ETH transactions are confirmed in a few seconds, whereas Bitcoin transactions can take up to a few minutes) are two more ways that the two cryptocurrency giants are quite different.

Both cryptocurrencies use a protocol called Proof of Work (PoW). This allows all of the nodes on each network to confirm the information that is kept on the blockchain. This is used to prevent specific attacks on the networks and for better security in general. Proof of Work has been criticized as it uses a very high amount of energy to operate, and proof of stake has been commonly used in its place. Proof of stake replaces miners with validators, which use much less energy, and those who stake their cryptocurrency will enable the ability to create new blocks. 

On a higher level, the overall aims of the Ethereum and Bitcoin networks are very different. Ethereum was created to act as a platform to enable programmatic contracts and applications to run via its own currency. Bitcoin was created simply as an alternative to traditional currency, whose primary function is the be a store of value and be traded.

Ethereum is in the number two spot behind Bitcoin in terms of market cap, but last year (2021) it gained an immense amount of ground and continues to do so. Developers are being drawn to the blockchain platform because of the functionality that it provides, and its support of SEO hubs, decentralized applications, and smart contracts for NFTs. 

Ethereum’s growth is set to keep rising, due to upcoming upgrades like Ethereum 2.0, which will make the cryptocurrency faster and cheaper than before. Everything that interests buyers and developers about the platform will remain, it will just become more efficient and affordable.

As for who will be more successful in the long run, it is hard to say as they are both competing with very different competition. Ethereum faces many other cryptocurrencies looking to create a similar platform to their own, and if another platform comes along that has better functionality than Ethereum, that could seriously harm their market cap. Bitcoin on the other hand, even though it is the clear frontrunner among cryptocurrencies, has to go through the arduous process of gaining the acceptance of governments, customers, banks, investment managers, and practically every other business or person that handles money. They have begun this process, but there is still a long road ahead for them.

Which cryptocurrency is your favorite? Do you own any cryptocurrency and what are your thoughts on the functionality of Ethereum, and the outright value of Bitcoin? If you are looking to further your knowledge in this new and exciting industry, you can check out our Nas Academy web3 community!