Bitcoin Vs Ethereum: Which Is The Better Investment?

Bitcoin Vs Ethereum: Which Is The Better Investment?

Written by Sophie Robertson, In Blockchain, Published On
July 27, 2022
Last modified on January 18th, 2023

The crypto winter of 2018 is well and truly behind us and the crypto market is witnessing massive gains once again. As a result, investors are once again considering investing in cryptocurrencies, and Bitcoin Vs Ethereum is the top dog in the market.

While March 2022 saw Bitcoin’s price rise by 16% to $45,000 Ether in the same month outperformed Bitcoin and rose 29% in its price to reach $3,400.

There are thousands of other cryptocurrencies that are currently circulating in the market but since Bitcoin and Ether are the market leaders in this space, most investors want to put their money in either of the two cryptocurrencies if not both.

What is Bitcoin?

The market crash of 2008 was an eye-opener for the world. The idea that your savings and investments could be wiped out through no fault of your own made the world feel the need for a decentralized system of money transactions.

In 2009, a person or group of individuals with the pseudonym Satoshi Nakamoto took the world by storm. Satoshi Nakamoto wasn’t the first one who thought of a decentralized, nonphysical form of money, but he was the first who executed this idea in a white paper.

He promised the world a electronic peer-to-peer monetary transaction system and could work securely without being governed by a central authority such as big banks. This is how Bitcoin was born.

The idea behind Bitcoin is a simple one, though ambitious. Bitcoin wants to establish itself as a viable alternative to fiat currencies circulating the globe. Bitcoin transactions are recorded in its public ledger called a blockchain.

Since Bitcoin is the market leader in cryptocurrencies, the value of all cryptocurrencies moves up and down tailing Bitcoin. Because Bitcoin is finite in supply and not more than 21 million Bitcoins will ever be issued, Bitcoins are generally referred to as digital gold.

What is Ethereum?

Ethereum in its true essence is a decentralized, open-ended software platform. Ethereum was launched in July 2015 by a group of computer programmers spearheaded by Vitalik Buterin.

Ethereum allows the deployment of smart contracts and digital applications on its blockchain. These smart contracts and dApps run on the Ethereum blockchain without any interference from a third party and fear from hackers.

The native programming language of Ethereum is Solidity and its native currency token is called Ether or ETH. The idea behind creating Ethereum was to create a blockchain that would allow limitless functions through its smart contracts and dApps.

Similarities between Bitcoin And Ethereum

While the idea behind the creation of Bitcoin and Ethereum was different there are many similarities between the two. Like Bitcoin, Ethereum’s crypto token Ether too is used to make transactions. Ethereum and Bitcoin both run on their blockchains and both use the Proof-Of-Work consensus as of now.

Both Bitcoin and Ethereum need a 51% consensus among their network nodes to make a transaction valid and permanently uploaded on the network’s blockchain.

Both Bitcoin and Ether have a limited supply. While Bitcoin is finite and only 21 million Bitcoins will ever be mined, Ether has an inflation rate of 4% and with Ethereum 2.0 on the horizon, the issuance rate of Ether will decrease to 0.5%.

Differences between Bitcoin and Ethereum

The biggest difference between Bitcoin and Ethereum is that they were both created for different purposes. While Bitcoin was created to become an alternative for fiat currencies, Ethereum was built as a platform that would enable a flourishing dApp ecosystem and smart contracts.

Hence Bitcoin is used only as a digital currency and a store of value while Ether can be used as a digital currency, and Etherium still serves its purpose as a decentralized platform for developers to deploy their dApps and smart contracts.

Another key difference between Bitcoin and Ether is the transaction speed. Bitcoin transactions take much more time to complete and it can sometimes take many minutes while transactions on the Ethereum blockchain are carried out within seconds.

While both Bitcoin and Ethereum currently use the Proof-Of-Work consensus model, this is a highly energy-intensive model and thus Ethereum 2.0 is set to be launched in 2022. Ethereum 2.0 will work on a Proof-Of-Stake model which will reduce its energy consumption by 99% and also make the Ethereum blockchain more scalable.

As of now, Bitcoin has been the preferred investment destination of mammoth companies such as Tesla and MicroStrategy Inc. MicroStrategy was the first public company to buy Bitcoins and uses Bitcoin as its primary treasury reserve asset.

According to its SEC filing, MicroStrategy’s holding in Bitcoins was $3.78 billion as of January 2022. Tesla on the other hand has Bitcoin holdings of $1.99 billion according to its SEC finings. Ethereum has not seen such big buyers for its cryptocurrency as of now.

Which one to buy from the two?

While looking for investment, you should consider the risks and rewards of investing in either of the two cryptocurrencies. While both have given huge returns to their investors over the past years, they have both been fairly volatile and have risks associated with them.

Bitcoin and Ethereum are the two biggest players in the crypto space and most investors like to keep both in their portfolios because they have a longer track record when compared to other cryptocurrencies circulating in the market.

That being said it is important to understand first and foremost that Bitcoin and Ethereum are not competitors of each other. Bitcoin and Ethereum both are offsprings of blockchain technology and this technology has the potential to improve a lot of aspects of our daily lives.

Blockchain technology helps us create trustless systems so now you don’t need to provide others with your priceless data to make transactions.

What is important to know here is that both Ethereum and Bitcoin are here to stay and will have a big role to play in the future. While in the short run, one may give better returns than the other, in the longer run, they will both be hugely influential in deciding what the future world looks like.


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