The title of top cryptocurrency between Bitcoin and Ethereum has been a hot debate for the past years. If we look at the market cap – Bitcoin has been the leader since the beginning. However, ETH has advanced further as a blockchain with its multi-purpose platform that allows for more use cases, such as smart contracts and decentralized applications, when compared to Bitcoin’s ledger. Additionally, there have been moments during the past year when Ethereum`s capitalization has approached Bitcoin`s. Therefore, the battle in terms of capitalization is still active, and we might see Ethereum as the top cryptocurrency one day.
Operation of Bitcoin vs Ethereum
Bitcoin uses a proof of work algorithm, while Ethereum is migrating to proof of stake (POS). We will cover this more in-depth later on in the article so stay reading. Overall, this means that the Ethereum blockchain technology allows for less resource-intensive use of blockchain networks. Furthermore, the use of POS reduces costs. For this reason, ETH is frequently chosen as the crypto for transfers between exchanges.
Let’s dive deeper into the history of Ethereum and Bitcoin and what are further differences between these two coins.
Brief Overview/History of Ethereum vs Bitcoin
Bitcoin came into the world in 2008 and began to function in 2009 after it was released as the first publicly known public distributed ledger – also called a blockchain. Its founder was an unknown developer, who operated under the pseudonym, Satoshi Nakamoto.
On the other hand, the Ethereum network came into existence much later – on 30th July 2015 after several years of development by founder Vitalik Buterkin and his team. Ethereum tokens were first distributed with a process called pre-mine and later on sparked massive interest from miners around the world. Later on, the process of mining created massive outrage in microchip production as well as sparked debates about the massive power usage that blockchain network maintenance creates. Now cryptocurrencies were attractive not only for trading purposes but also for mining.
Ethereum has developed faster over the years
Ever since the Ethereum network has developed faster than Bitcoin, several new features have been introduced. The main one being the ability to develop decentralized apps that later sparked a massive boom in the form of Initial Coin Offerings or ICO`s for short. The creation of decentralized application technology created massive interest around the world from investors and financial experts. Smart contract was the new buzzword, and ether was the way to go.
Now, not only trading and mining was interesting for cryptocurrency enthusiasts around the world. ICO`s created a massive industry with millions upon millions raised for projects that were in their initial stages – often without any real proof of concept. Anyone could participate in the next major project by usually transferring their cryptocurrencies to a specific ICO address that kept records on Ethereum`s blockchain to track investments.
Hard fork for Ethereum created Ethereum Classic
The phenomenon of ICO`s and a large-scale hack of the chain caused a split in consensus for Ethereum miners and supporters. Ethereum founder Vitalik Buterin wanted to develop DAPP functionality further, while other supporters had a different opinion. This caused a split in Ethereum coin – Ethereum and Ethereum Classic (ETC) was created in a process called a hard fork. Now anyone with Ethereum in their wallet had two coins for the price of one. Additionally, miners could now be tuned to switch to mine the blockchain that offered the best reward at the time.
Ethereum still the leader of altcoins
Since the split, the original Ethereum speed has continued to develop further, while ETC remains a proof of work blockchain with limited transaction speed in comparison. Therefore, the original Ethereum platform is still the king, as we can see in the total market cap and sentiment.
Both ETH and ETC can still be traded on practically every cryptocurrency exchange. Initially, some of the exchanges did not recognize this split. This caused some debates in the ecosystem for the need to create a decentralized exchange that allowed for free trading of any digital asset possible.
A split of Bitcoin created Bitcoin Cash (BCH)
A similar disagreement between the development community as with Ethereum caused a split of the Bitcoin network. Some of the developers wanted increased transaction speed, while others were more concerned for the safety of each Bitcoin transaction.
Therefore, BCH was created as a spin-off of Bitcoin that allowed for faster block times and an increase in their block size limit, which resulted in reduced fees from one wallet or crypto exchange account to another. The increase in speed and decrease in transaction fees did drive a lot of money towards BTC Cash.
Bitcoin Cash – nice idea, but Bitcoin is still the king
Some of the Bitcoin miner power was switched to the BCH blockchain platform as it offered a better reward to any miner initially. Over time, the investors did choose the original Bitcoin network as the go-to option. This was further reflected in Bitcoin price over the following years as it is still the king of the market when looking at the total market cap.
As we can see today, Bitcoin is still the top virtual currency, while BCH is just another digital asset that was received as a bonus for holding Bitcoin and waiting for the Bitcoin price to increase.
Overall, the price did react bullishly to this event as everyone now had an additional coin on their exchange of choice. This caused even more interest in the technology and drove more fiat currency into the ecosystem.
Exchanges to push Altcoin dominance further?
Later on, exchanges joined the ICO game and became an intermediary to increase security. Smart contracts were created to keep a store on what was invested. Further, ICO`s saw their market cap grow exponentially and further increased interest in digital currency. However, many ICO`s turned to be nothing more than pump and dump schemes. This caused distrust for the cryptocurrency world, and many started to debate whether blockchain is even needed. ETH network saw its first major crisis – applications that promised to solve a lot turned out to let their investors down by not delivering promised features or even the platform itself.
Which was first – Bitcoin vs Ethereum?
Bitcoin was the first cryptocurrency created. To this day the cryptocurrency has remained the largest blockchain network by market capitalization. For now, BTC remains the leader and is the most traded crypto across almost every exchange as measure by the publicly available data across exchanges. Almost anyone across the world has heard or seen the famous slogan “Buy Bitcoin”.
What Is Ethereum?
Ethereum (ETH), which is the digital coin that runs on the Ethereum platform is one of today’s best-known decentralized blockchain technology solutions that offers smart contracts functionality with the use of ETH tokens. At first, it used a proof-of-work algorithm to sustain and validate its blockchain, however, that is slowly changing. Ethereum is transitioning into the staking algorithm.
Additionally, a process called sharding allows ETH blockchain to run several parallel cryptocurrency chains at once, increasing network throughput and speed. Therefore, Ethereum is set to increase in price over the upcoming years as the ecosystem rewards projects that bring extra significance to the ecosystem.
Features of Ethereum
- Proof of stake algorithm
- Decentralized apps
- Sharding
- Less volatile than other altcoins
What Is Bitcoin?
Bitcoin is the first known public blockchain invented. It uses a public ledger, also called blockchain, to secure, validate and maintain its network. It allows anyone to send value without the need of banks or other payment processors.
Since its inception in 2009, it has grown to a market capitalization of over $1 trillion and is “the” decentralized blockchain that can be traded on any exchange. Bitcoins’ popularity continues to increase as it has a very solid run in terms of performance over the past years, sparking interest from the conventional financial world.
Features of Bitcoin
- Proof of work algorithm
- Store of value
- Best-known cryptocurrency
- Most stable in terms of price fluctuations
BTC and ETH together are increasingly making news as an alternative to central control on the money. Instead of central servers that store records, Ethereum and Bitcoin allow the transaction processing to be distributed. This means that instead of one single central authority like a Central Bank, Ethereum and Bitcoin are not controlled by a single power based in one location.
Now, let`s take a look at the advantages and disadvantages of Bitcoin vs Ethereum.
Ethereum advantages over Bitcoin
When comparing Bitcoin vs Ethereum, there are two main points that bring Ether in the lead. First, Ether is the first to power a massive list of decentralized applications by the use of smart contracts. Second, Ether has now transitioned to a proof of stake algorithm, which increases platform throughput and speed. Another power of the Ether platform is based on the transaction costs per block. This reduces transaction costs for both traders and exchanges, creating huge differences in trading and transaction fees.
Another strength for the token is that Ethereum miners are easily built. This drew a lot of money and interest to the space couple of years ago. However, since the move to staking mechanism, investors have mainly continued to build Bitcoin miner solutions as they offer the chance to acquire the digital coin at a reduced price and more stable return for money invested.
Smart contracts – Ethereum`s main advantage?
As mentioned, Ether is the first to use smart contracts. The use of Ether to invest in other projects raising funds through a process called Initial Coin Offering, sparked massive popularity in the digital ecosystem. Now anyone could participate in the hottest new crypto project by purchasing Ether and transferring it to a specific wallet.
Store of value – Bitcoin`s main advantage?
Both have increased in their value over the past years. However, Bitcoin is still considered to be the coin to choose when looking to invest for the long-term. For the past years, Bitcoin has been the go-to option when looking for the best crypto, similar to gold in the conventional financial system. Therefore, this is the main advantage for Bitcoin. The large total capitalization of Bitcoin simply creates more interest and stability when compared to any other blockchain platform.
An additional advantage for virtual currency is Bitcoin mining. It offers a more predictable return of money when compared to Ethereum mining as it is larger and less volatile. However, these days only an institutional investor can afford to set up the infrastructure necessary for a decent-sized mining farm.
Ethereum disadvantages over Bitcoin
Too many platforms – Ethereum`s disadvantage?
Ethereum’s main advantage might also be its disadvantage as there are simply too many applications all running at once and competing for space on each block mined. As there are so many coins that use ethereum’s data block, it creates congestion on ethereum’s network, reducing the speed of transactions and increasing Ethereum transaction costs. This is likely to be solved by sharding. This works in a similar way as building and running the Ethereum blockchains at once. Therefore, many experts think that this will allow the second-largest cryptocurrency – Ether, to continue its dominance that was seen over the last years.
Slow speed – Bitcoin`s main disadvantage?
The point is that the difference between Bitcoins and Ethereums network operation lies in the way they operate. Bitcoin only produces a new block every 10 minutes. This reduces the speed at which Bitcoin can process transactions. Additionally, when any of the cryptos gets large price movements, this creates large inflows of transactions on exchange accounts, creating congestion of currencies network during times when it is needed the most.
Where to buy Ethereum (ETH) and Bitcoin (BTC)
Bitcoin and Ethereum can both be purchased on any exchange. Both of these cryptocurrencies have been the leaders for a long time. Therefore, the demand for them is simply too high for any digital currency exchange to ignore them.
The fact is, that most people around the world have only heard or read about Ethereum and Bitcoin. There is a lot more way to go before other cryptocurrencies gain similar popularity in the currency ecosystem. The data constantly shows ETH and BTC are the most traded cryptocurrencies with the most transactions per day as of right now, and that is unlikely to change soon. As long as Bitcoin’s dominance continues, we are sure that every major exchange will offer to purchase BTC.
Ethereum vs Bitcoin: Which one should you choose?
ETH and BTC performance has varied over time. There are periods when BTC outperforms ETH and vice-versa. Therefore, it is important to read the latest news and think what is the phase right now. The best traders do keep both currencies and either increase or decrease the ratio between ETH and BTC or some other Altcoin to maximize their gains.
Overall, if you are looking for stability, look for Bitcoin as it is currently the least volatile. However, if you are looking for growth, then Ether is the currency for you. If you are looking to use blockchain applications, then Ether and other currencies are the option to choose from.
Conclusion: Choose based on your risk appetite
The point is, nobody knows which will be the leader in several years. There might be another crypto that takes Bitcoin’s place as the leader after several years.
Therefore, choose the crypto you feel comfortable with as all of them are likely to increase in value substantially over the following years. As of the time of writing, Bitcoin has breached the long-awaited $60,000 mark and has a market cap of over $1 trillion. It continues to be the top investment for anyone on the look to convert their fiat currency into the cryptocurrency market.
This is likely to continue over the upcoming years as more institutional investor interest in the coin continues to develop as they seek to increase their returns of investment in times of low Central Bank rates.
Also, when trading or investing in cryptocurrencies, always stay updated with the last news. Therefore, see our news section or read our various long-term guides on various cryptocurrencies such as Bitcoin and Ripple.