The Beginner’s Guide
In this article, we will examine the differences between Ethereum vs Bitcoin. You’ve probably heard about two giants in the cryptocurrency space, Bitcoin (BTC) and Ethereum (ETH).
However, while it is clear that these assets are wildly popular (and valuable). The differences between them, and which one is better, may not be immediately obvious to crypto beginners.
This is Ethereum vs Bitcoin comparison. It will break down everything you need to know about the difference between Ethereum and Bitcoin and whether Ethereum is better than Bitcoin (or vice versa).
Ethereum and Bitcoin Purpose
The first thing you need to know about Bitcoin and Ethereum is that they fulfill two very different purposes.
The original cryptocurrency, Bitcoin, was conceived as the first true peer-to-peer digital currency.
On the other hand, Ethereum takes things one step further. Ethereum can also be used for payments. It allows programmable transactions using what are known as smart contracts.
In simple English, smart contracts are self-executing contracts that you write in computer code. A simple example would be automatic flight insurance.
Imagine you have a flight to a far country, but the flight is delayed for hours, ruining your travel plans. Rather than making an insurance claim, the flight insurance smart contract includes some instructions to automatically pay you the insured amount if your flight is delayed for a certain period of time.
This of course saves a lot of time for both you and the insurance company. Thus, you can get rid of the hassle of calling the insurance company while on vacation and enjoy your life.
While this is just an example, the uses of such technology are limited only by the imagination.
Ethereum and Bitcoin Transaction Speed
When it comes to using technology (or anything), we’ve come to expect things to be fast, even instantaneous. Both Ethereum and Bitcoin were fast in their early days. But as both continued to gain popularity, they struggled with scalability or the ability to process many transactions simultaneously.
However, they are both directly tackling this issue. Bitcoin developers are working on solutions like the Lightning Network to make transactions fast and cost-effective again. While Ethereum developers are working on proposals like sharding.
However, Ethereum still has the advantage when it comes to transaction speed, as blocks (groups of transactions) are confirmed approximately every 15 seconds compared to Bitcoin’s confirmation time approximately every 10 minutes.
Ethereum and Bitcoin Transaction Fee
Transaction fees, not just transaction speeds, are a concern if Bitcoin and/or Ethereum are to achieve mainstream adoption.
After all, you don’t want to pay more than the cost of a cup of coffee in transaction fees to buy a cup of coffee. You also don’t want to own a flight insurance smart contract and pay more transaction fees than insurance payments.
Again, transaction fees were low for both platforms in their early days when both platforms were low in usage. However, with the rise in popularity of both Bitcoin and Ethereum, transaction fees have increased.
However, Ethereum still beats Bitcoin in this regard, as transaction fees for Bitcoin can be quite high.
Ethereum and Bitcoin Mining
Another important comparison to make between Ethereum and Bitcoin is their mining process. Mining is the process by which some users in a crypto network verify transactions using computer hardware such as processors, graphics cards, and ASICs (special mining devices).
As of now, both Ethereum and Bitcoin use what is known as “Proof of Work” (PoW) mining to verify network transactions. But one of the main criticisms of this approach is that it is too energy intensive. Bitcoin mining in particular uses as much energy as some smaller countries.
Due to this issue, Ethereum plans to migrate to a consensus model known as Proof of Stake (PoS) (how networks agree on or verify transactions). Proof of Stake is less energy intensive than Proof of Work.
If Ethereum successfully transitions to Proof of Stake. It would be a big win for the blockchain, at least in terms of energy consumption. As one of the most popular applications of blockchain technology, Ethereum will set a good example for other projects to follow.
The problem with PoS is that it has yet to be proven on a large scale. Bitcoin mining, on the other hand, has been running for over a decade without any major disruptions.
Ethereum vs Bitcoin Hash Rate
Regarding mining, it is a network’s hash rate, or the amount of mining “power” that secures a network and its transaction verification process.
The higher the hash rate a network has, the less chance it has to fall victim to a 51% attack where a malicious actor or group takes 51% (majority) control over the network’s hash rate. This allows them to stop certain transactions from going through, reverse transactions, and basically ruin a network and its credibility forever.
While neither Bitcoin nor Ethereum has been hit by a 51% attack so far, in terms of hashrate, Bitcoin is the clear winner. And for this reason it is considered one of the most secure crypto networks.
Ethereum and Bitcoin Price
Of course, the cryptocurrency discussion is not complete without a price. Cryptocurrency and blockchain technology as a whole are some of the breakthrough innovations in recent years. It made some people very rich.
Both Ethereum and Bitcoin especially rewarded early investors. Bitcoin is the best performing investment of the 2010s. In fact, it might even be up there as one of the best investments of all time.
That being said, Ethereum isn’t far behind.
While both are incredible investments, as history has shown, Bitcoin is in the lead for now. Also another thing to keep in mind is that Bitcoin has a fixed supply which makes it more scarce similar to other scarce and valuable assets like gold. Ethereum, on the other hand, has no limit on how many ETHs can be created.
Following the basic principles of supply and demand from economics, this means that even if Bitcoin and Ethereum have the same demand, an individual ETH will be worth less because the asset’s supply is higher and therefore less scarce.
Of course, this does not mean that ETH cannot grow more as a percentage. However, Bitcoin already has an image of a scarce and therefore valuable asset among investors.
Conclusion: Invest in Ethereum or Bitcoin?
I hope this comprehensive comparison of Bitcoin and Ethereum was able to tell you some of the key differences between ETH and BTC.
ETH ranks high when it comes to transaction fees and transaction fees. Mining (BTC mining is more proven than ETH’s upcoming Proof of Stake. Important when people’s money is at stake), hash rate and price, Bitcoin is a winner.
However, as stated, Bitcoin and Ethereum have two very different purposes. which makes a direct comparison difficult. A better comparison would be Bitcoin vs Bitcoin Cash (both payment protocols) or NEO vs Ethereum (both smart contract platforms).
Rather than directly comparing the two, it’s worth remembering that Bitcoin and Ethereum are both market leaders in the decentralized payments and decentralized applications (Dapps) niches.
For example, many influential investors and companies see Bitcoin as the main crypto asset worth investing in and building financial products around. Bakkt, an exchange, custody and payment platform, is a product of the Intercontinental Exchange (ICE), which owns exchanges, including the famous New York Stock Exchange.
Ethereum also has big names associated with it. Ethereum Enterprise Alliance can work well in companies and markets in Ethereum and a decentralized web world. It is an Ethereum industry body thus bringing together the build standards for Ethereum technology to the likes of Intel, JP Morgan, and Microsoft.
Simply put, Bitcoin and Ethereum are so big at this point that despite their differences, they are both cornerstones of the cryptocurrency industry. And it should probably be the main investments in anyone’s crypto portfolio. Make sure to use a Bitcoin wallet and Ethereum wallet that you control and not someone else, such as a centralized exchange, so that your investment stays intact.
We have come to the end of our Ethereum vs Bitcoin article.
Note: The information, comments and evaluations contained here are NOT in the Scope of Investment Consultancy. Keep following the SinceCoin.