Ethereum and Bitcoin are the two most talked about cryptocurrencies in the media. They have both played a major role in the industry, drawing in the most trading volume on the crypto market. However, they operate differently from one another and were created with different purposes. In this brief guide, we’ll take a closer look at the differences and similarities between the two currencies.
Although the crypto market has since exploded — with thousands of different cryptocurrencies to choose from — Bitcoin and Ethereum are still the two market leaders. So it can be valuable to understand how they started, and Ethereum vs Bitcoin what these two crypto greats each bring to the table for investors. As a reminder, despite its lower market capitalization and less frequent media coverage, Ethereum had more transaction volume than Bitcoin in Q1 2021.
Bitcoin Vs Ethereum
We do not include the universe of companies or financial offers that may be available to you. Whereas the market cap of Ethereum is $135.3 Billion with a volume of $24.5 Million Ether. The reason behind the creation of Ethereum is to allow unlimited functions or transactions for small contracts. Both the assets display the ledger publicly that can be stored in digital wallets. As Bitcoin hit new heights in early 2021, Ethereum did the same before consolidating slightly. However, with the bull run showing no sign of slowing down anytime soon, all other altcoins, including ETH and ETC, have high chances to follow the bullish trend.
The performance of BTC and ETH often serves as a benchmark to gauge the overall health of the crypto market. Despite their dominance, these cryptos function very differently from one another. Hashing algorithms are how these systems can maintain their privacy and ensure security. As for the average amount of time it https://xcritical.com/ takes to add a block to the blockchain, in Bitcoin it takes 10 minutes. We all know that when we conduct a transaction through a bank, some amount of money or service charge is levied. However, with Bitcoin, this charge is very low, making it a more attractive alternative to conventional electronic transactions.
Before Bitcoin, the trouble with the digital currency concept is that they were all just strings of computer code and could be copied infinitely and spent twice—or countless times. Ethereum also enables payments, using its internal ETH cryptocurrency, but its scope is much broader than Bitcoin by design. Cointelegraph covers fintech, blockchain and Bitcoin bringing you the latest news and analyses on the future of money. The base Bitcoin and Ethereum networks both suffer from scalability issues. While Bitcoin handles on average seven transactions per second, the Ethereum network is able to handle around 30 transactions per second.
Ether can be used as a digital currency, but that is not its primary purpose. The Ethereum platform was built primarily to monetize operations of Ethereum smart contracts and dApps. Bitcoin is the largest cryptocurrency by market capitalization, Ethereum is the second largest.
Ether To Bitcoin Ratio
Miners on the Bitcoin blockchain generate and broadcast these blocks through a PoW process in which machines use vast amounts of computing power to engage in hashing functions. It remains anyone’s guess which cryptocurrency and blockchain will stand the test of time—perhaps they both will. But one thing is certain—both have induced much-needed discussions about financial systems worldwide. A major criticism of proof of work is that it is highly energy-intensive because of the computational power required. Bitcoin uses a consensus protocol called proof of work , which allows the network nodes to agree on the state of all information recorded and prevent certain types of attacks on the network.
The popular crypto network that runs Ether, the world’s second-most-valuable digital currency, could morph as early as Sept. 14 into a configuration that shakes up the entire crypto universe. This assumes a typical smart contract transaction is ~10x the size of a normal bitcoin transfer transaction. Smart contracts deal with assets of real financial value and security is of paramount importance. One of Bitcoin’s early followers was a computer developer by the name of Vitalik Buterin. In 2013, this advantageous individual decided to build a new cryptocurrency.
If money continues to flow into Bitcoin and demand rises, this fixed limit virtually ensures that the price will rise over time. While that may be good for traders, the volatility makes Bitcoin harder to use as a currency. While these currencies may be among the most popular for traders, Bitcoin is the one that’s emerged among the mainstream. It’s becoming easier to access Bitcoin, with multiple ways to purchase or store the currency that piggyback on existing apps such as PayPal or Robinhood. Of course, traders can also turn to popular apps to buy many cryptocurrencies, too. “However, retail investors and the broader DeFi world have found a lot of utility in ethereum and as such, it comes off as their go-to digital asset,” he said.
In 2017, an upgrade known as SegWit removed specific unnecessary data from the bitcoin blockchain to improve its speed. The Lightning Network is an additional solution for the bitcoin blockchain that could settle much smaller transactions at a faster rate. Bitcoin was designed as a decentralized currency and payment network. It’s used as an exchange medium for value by using it as a currency that’s meant to cross borders without the need for extra fees and foreign exchange requirements. In 2013, Vitalik Buterin, a bitcoin enthusiast and co-founder of the Bitcoin Magazine website, was the main author of a whitepaper describing the ethereum blockchain. Investing in a new asset like cryptocurrencies may feel exciting.
The Crypto Question Conundrum
These platforms include Webull and Robinhood which let their users invest in stocks as well as crypto. Other platforms such as CoinSwitch, WazirX, and CoinDCX are the crypto-dedicated platforms that give you the option to invest in Cryptocurrency only. However both Bitcoin and Ethereum are cryptocurrencies, but still, there are some differences between them.
Today, there are thousands of different cryptos and blockchain projects. However, most utilize some forms of smart contracts to streamline network activities. However, right now, both bitcoin and ethereum are highly volatile in price and are considered alternative investments.
Indeed, Ethereum has made it easier to launch new tokens and applications directly on the blockchain. For several reasons, this will not likely increase the long term value proposition for Ether. Nonetheless, Ether and the myriad of tokens issued on Ethereum are considered investments by some. Thus, investors often compare the two projects and the value of their respective tokens. Ethereum is designed explicitly for payments on the Ethereum network. At the outset, the original cryptocurrency’s designers wanted to help people to send and receive payments without an intermediary, such as a bank.
Cryptocurrencies allow the user to move money semi-anonymously, though the FBI and IRS are getting better at tracking transactions and freezing accounts. There’s a common reason for this question that bitcoin was the very first cryptocurrency that exceeded $1 trillion in market capitalization even if it has a limited supply. That’s the reason it was compared to digital gold where the market capitalization is much more than its supply. Ethereum, on the other hand, has different uses that allow it to integrate into different aspects of life, including creating games, NFTs, DeFi apps, and more. Additionally, many metaverse applications, like Decentraland, that act as virtual worlds, are built on the ethereum blockchain.
The Long Or Short Term Investment
Ethereum aims to be a distributed computing platform for all kinds of applications, including games, social media, and finance. Ethereum is an alternative cryptocurrency, with different goals and design features than Bitcoin. Ethereum is more accurately viewed as a platform for executing financial smart contracts.
- With the move to proof of stake, the ethereum network hopes to bring down its energy consumption by 99.95%.
- Because every Ethereum transaction consumes computational resources, transactions come with a cost.
- Bitcoin has also experienced change, introducing the Taproot upgrade to enable smart contracts.
- Currently, both Bitcoin and Ethereum have low transaction throughput.
- As one of the largest cryptocurrencies and nearly as famous as Bitcoin, when Bitcoin goes up or down in value, Ethereum tends to follow.
- Bitcoin remains true to its origins – it was working exactly as intended from the get go, more or less, although this is up for debate .
There are different mining rewards paid out to nodes on each network. Bitcoin miners receive a reward of 6.5 BTC if they are the node that completes the SHA-256 equation first and adds the next block to the blockchain. Comparingly, Ethereum miners receive a reward of 2 ETH for their participation in validating blocks of transactions. However, others wanted to remove the hack and restore ether to those who lost theirs. The latter group won, and the ethereum blockchain split — a process known as forking — and erased the hack to create the main blockchain for ethereum. The second blockchain, ethereum classic, maintained the record of the hack.
Comparing Bitcoin And Ethereum
A new block of bitcoins takes up to 10 minutes to become part of the blockchain. The number one coin by market cap, Bitcoin has held the top spot since its inception. As a digital currency, Bitcoin has no physical form and many tout it as an alternative to traditional fiat currencies. Bitcoin is viewed as a store of value while ether is a smart contract storing cryptocurrency helping to build Web3. Bitcoin is used to pay for goods and services while Ethereum is used to pay for smart contracts and programs running on the Ethereum network.
Bitcoin Scalability Vs Ethereum Scalability
Since then, Bitcoin’s adoption has been steadily growing over time. Bitcoin was created as a peer-to-peer electronic cash system, which means that transactions can be conducted without any central authority. If you’re considering trading cryptocurrencies, it’s valuable to understand that they’re not all created equal. Some features such as Bitcoin’s limited issuance may make a currency more attractive than others, at least over a longer period of time. But in the short term cryptocurrency is driven by sentiment, so even something created as a joke and with unlimited issuance may rally hard if a swell of interest sweeps in.
At Bankrate we strive to help you make smarter financial decisions. While we adhere to stricteditorial integrity, this post may contain references to products from our partners. If we look at our present situation, the crypto market has crashed by more than 15% within a single day and still going downside. According to some Crypto experts, some cryptos gained popularity among the major players – Bitcoin and Ethereum.
This staking can either be done by yourself, or through a third party . Bitcoin, on the other hand, will remain inflationary until all of its coins are mined, which won’t be until 2140. When the Merge is complete, Ethereum is positioned to be a deflationary asset. Aaron Samsonoff of InvestDEFY expects a 90 percent drop in new Ethereum token issuance post-merge.
Ethereum To Go Pos
We’d expect to see this given how often traders exchange other cryptocurrencies for stablecoins in order to store funds in a more stable asset. Because of these fundamental differences in the underlying design, Bitcoin and Ethereum do not compete with each other, and should be in fact viewed as complementary networks. Bitcoin is seeking to disrupt gold (a market worth $7.3 trillion) while Ethereum is trying to disrupt the financial services sector (worth $22.3 trillion). Bitcoin and Ethereum are the preferred quote currencies for most trading pairs outside of fiat and stable coins because they are so popular. So if you have Bitcoin or Ethereum you won’t have a hard time trading into any other cryptocurrencies on crypto exchanges like Liquid. The number of bitcoins will eventually top out at 21 million in the year 2140.
Ethereum will also introduce sharding sometime in 2023 to enhance its scalability. With time, people began to realize that one of the underlying innovations of Bitcoin, the blockchain, could be used for other purposes. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
If you invest in Bitcoin through an exchange , you may not have access to your private key. For this reason, it may not be a good idea to store large amounts of Bitcoin on exchanges, but you can decide based on which type of exchange or app you use to trade BTC. You can send and receive Bitcoins using your wallet, or your public and private addresses. Though trade intensity has ebbed and flowed over time, stablecoins have the highest trade intensity by far in most months.
As more investors began to think of Bitcoin as “digital gold,” it only made sense that people would want to hold BTC during any crisis or downturn. Bitcoin fell just like every other cryptocurrency and, in some cases, harder and faster. So some of the allure around Bitcoin as “digital gold” is starting to fade. When demand for block space exceeds what both networks can handle, transaction costs on both networks rise.