What`s the difference between Bitcoin and Ethereum?

The crypto market has grown tremendously in the past few years, so investors are naturally considering putting their money in digital coins. The market has over 7000 options for investors but Bitcoin and Ethereum are usually the most sought after. Bitcoin is not only the largest digital currency but has also exhibited the best performance in the past decade. Ethereum follows it closely and some people think it will be bigger than Bitcoin in the future. Vitalik Buterin came up with the Ethereum project to solve the scalability issues of Bitcoin and so the two coins have some similarities. From an investment perspective, understanding the unique aspects of these two coins can be useful when looking for one top cryptocurrency to buy. That’s why we brought you this article.

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Key Highlights

  • Bitcoin was launched in 2009 as the first successful cryptocurrency project. Ethereum came to light in 2013 with a key focus on smart contracts.
  • Ethereum’s transactions need less than 30 seconds for validation, unlike Bitcoin’s which can take upwards of 10 minutes.
  • Both Bitcoin and Ethereum are subject to government regulations
  • Bitcoin mining is more energy consuming than Ethereum’s. Unlike BTC, anyone with a computer and internet connection can easily and affordably mine ETH
  • Bitcoin’s all-time high stands at a $68,000 in November 2021 while Ethereum’s highest price was $4,800 in the same month

Bitcoin's Overview

What is Bitcoin? Bitcoin doesn’t need an introduction in the digital coin world anymore. It’s the largest and oldest cryptocurrency. It has a maximum supply of 21 million. Approximately 19 million coins have already been mined, meaning supply will soon be out, and if demand keeps going up, the price will rush skywards. The main concept behind the creation of Bitcoin was to come up with an alternative to the fiat system which proved unreliable during the 2008 recession. Bitcoin would solve that problem by using blockchain technology to secure transactions. Information in the blocks would be immutably verified and stored by millions of randomly distributed nodes. It would also facilitate transactions without the need for a central authority like the central bank, meaning its value would be controlled by market forces.

While investment was not emphasized as a use case during inception, speculators quickly found a gold mine. Many early investors became the first-ever crypto millionaires with this coin. Since then, the asset’s prices have been driven majorly by speculation, although other factors such as adoption have contributed too. The digital coin is perhaps one of the most accepted cryptocurrencies across all industries. Casinos, online and physical stores, restaurants, and different merchants now accept bitcoin as money. This has driven demand for virtual currency up staggeringly by more than 10,000% in just a few years. As of writing this, the price of Bitcoin has been on a bear run for almost three months. It’s currently ranging between $30,000 and $33,000. Although this is a 50% drop from its highest price of $68,000, it’s still a whopping 6000% difference from its $500 price in 2015. Analysts still see this as a normal pullback, and hence continue to bet that Bitcoin’s price will peak at not less than $100K by the end of the year. If that’s considerable, then Bitcoin is a good buy.

The digital asset has not had a smooth journey. China banned Bitcoin in 2017 and has since then instituted a series of crackdowns on Bitcoin mining rigs, and local exchanges. Before that, China recorded the highest hash rate for Bitcoin, indicating BTC mining. So the ban plummeted the price of this digital asset strongly. BTC has never recovered its former momentum. As other parts of the world, including the US, the rest of Asia, and Africa accept it, we are starting to see Bitcoin’s price becoming more resilient and promising to shoot higher than before. In terms of improvement, the Bitcoin source code cannot be changed as the platform is not programmable.

We’ve prepared a short Bitcoin casino guide for beginners as well as a list of the best Bitcoin Casinos, so make sure to take a look.

Ethereum's Overview

Ethereum is an open-source platform behind the second-largest crypto by market cap, Ether. Many people use ‘Ethereum’ and ‘Ether’ interchangeably but the two words mean different things. Ethereum is a blockchain network while Ether is its native coin. Just like Bitcoin, or Litecoin, Ether is useful for value transfer. The Ethereum ecosystem offers many attractive benefits. First, it supports complex transactions like decentralized banking, which includes peer-to-peer lending and investing. One can buy a house with Ethereum using its digital securitization features, commonly referred to as tokenization. Ethereum’s network can also be used to store data securely. For developers, the platform is programmable and allows them to create decentralized apps (dApps). This is why Ethereum is sometimes said to be the ‘world computer.’ Ethereum’s language is turing-complete, so you can’t tell the nature of transactions, whether they are simple or not. In the end, this keeps away network abusers as they can’t know which transactions to target based on their complexity.

Ethereum’s main challenge has been gas fees. It has failed to scale up like it should without making mining more expensive. This is a challenge that all PoW protocol coins including Bitcoin. The developers behind ETH are working on upgrading it to a 2.0 version running on Proof-of-Stake. The new version is expected to be faster and cheaper to transact. In terms of speed, we are talking of up to 100,000 transactions per second, from its current average of 30 transactions per second. Coinpedia predicts that the price of Ether will not be anywhere below $18,000 once these changes are implemented.

Check out our recommended list of ETH casinos.

Key Differences

  • Market cap: As of 9th May 2022, the market caps of these digital assets were $680 billion and $390 billion for bitcoin and Ethereum respectively.
  • Store of value: BTC is primarily meant to store value, while Ether powers dApps and smart contracts too
  • Improvement: Bitcoin is not a programmable platform, so its space for improvement is limited to what it was originally meant to accomplish. On the other hand, Ethereum runs on a flexible platform. Ethereum 2.0 will soon be out to solve the challenge of high gas fees and scalability.
  • Block time: Bitcoin is significantly slower than Ethereum. It takes about 40+ minutes to complete a transaction on the Bitcoin network, while Ethereum does so in just 5 to 10 minutes.

So, Which One is a Good Buy?

Even with a detailed analysis of both BTC and ETH, deciding which one to buy can be an uphill task if you have not defined your goals. Setting proper objectives that are in line with your investment beliefs is the easiest method you can use to pick the most appealing option out of these two leading digital currencies.

If you want to use crypto to make a transaction, consider the options supported by the receiving partner. In case they accept both BTC and ETH, check other factors such as the transaction costs for both ETH and BTC. Look at the network fee, sending charges, and any other costs applicable. As a store of value, both Bitcoin and Ethereum might disappoint you, depending on when you might want to cash out. They can occasionally whipsaw by as much as 20% in just a few weeks, or even days.

Looking at the growth potential, we have observed that Bitcoin and Ethereum have more than a 90% positive correlation in their price movements. It’s common to find them moving in the same direction. Of course, there are individual unique factors that may affect the future characteristics of these digital assets. For example, the next Ethereum update to Ethereum 2.0 will bring more attention to the virtual currency. Vitalik Buterin, Ethereum’s CEO, has promised a smooth transition to a more energy and cost-efficient Proof of Stake (PoS) protocol from the current Proof of Work (PoW). Given that products such as NFTs are also part of Ethereum.

Bitcoin’s future is not bleak either. Tesla recently raised its portfolio of BTC to a record $1.2 billion. El Salvador also topped up 500 extra BTCs during the first week of May 2022. From simple economics, it’s definite that such activities of increased demand will lead to a rise in prices. The effect of Tesla buying BTC is not just as simple as looks. Elon Musk is the richest man alive. A one-word tweet from him is enough to change the destiny of any crypto. So Tesla just created more speculation about the future of Bitcoin by buying more coins.

Investing in Ethereum may carry more upside benefits than Bitcoin. There are however no guarantees. To avoid missing out, we advise splitting your money into both Ethereum and Bitcoin. That way you’ll be cushioned in case one of them loses value, yet earn double profits if they both shoot up. All you need is a proper asset allocation technique to guide you in terms of how much money you should invest in crypto.

Conclusion

Both ETH and BTC are valuable cryptocurrencies with notable similarities, yet their differences are also profound. For example, both of them use the Proof-of-Work protocol. Ethereum is however working on a much-awaited update of Ethereum 2.0, which will be a Proof-of-Stake project. Ethereum is poised to keep improving and maybe in the future, it will be totally different from BTC. The latter is limited since it’s not programmable. We hope you found this article useful. Feel free to browse through our site to increase your knowledge of DeFi. We will always bring you information that matters.

Knowledge is Power

Although Bitcoin and Ethereum are the leading cryptos, many new currencies that popped up recently are giving them a run for their money. Click the link to learn more:

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Eugene Abungana
Written by Eugene Abungana verified symbol Investment Analyst, Financial Analyst, and Institutional Trader
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Eugene is an investment analyst, MQL developer, financial trader and an expert in blockchain technology. He is a graduate in economics and holds additional studies in sustainable retirement investments. In addition, he has a background in literary journalism and experience in private fund management, institutional trading, and online broker setup. Eugene is a specialist at breaking down complex finance and investment topics into a simple read for everyone.

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Reviewed and Fact Checked by Kevin O'Brien , Web3 & DeFi Writer