Cryptocurrencies, also known as digital currencies, have been all the rage in recent years. Coins like bitcoin have skyrocketed, and financial institutions are starting to get on board. Two of the largest and most popular coins are ethereum and bitcoin. This article explores ethereum vs. bitcoin and will help you understand the pros and cons of each, so you can determine which one might be right for you.
Ethereum vs. Bitcoin: The Basics
Ethereum and bitcoin are arguably the most popular cryptocurrencies on the market today. They certainly are the largest by market cap. Bitcoin’s market cap is over $512 billion, while ethereum’s market cap is around $217 billion.
Bitcoin was the first cryptocurrency, launched in 2009 by a crypto architect known pseudonymously as Satoshi Nakamoto. The idea for this digital currency was simple yet revolutionary. It promised an alternative to traditional currency, called fiat currency, via a decentralized and transparent financial system accessible to all.
Bitcoin works on a blockchain network. Transactions happen between bitcoin wallets using private keys, which provide a mathematical proof of their authenticity. Cryptography ensures both the integrity and the chronological order of transactions, and a distributed consensus system confirms pending transactions.
Bitcoin has capped the number of coins that can be minted at 21 million. Once that number has been reached, the coins can still be traded but no more can be introduced.
The following stats from CoinMarketCap are current as of May 24th, 2023:
|Bitcoin Price||Bitcoin Market Cap||Bitcoin Market Dominance|
Ethereum’s white paper was released in 2013, and the project officially launched in 2015. Ethereum is an open-source, community-driven project and has seen quite a bit of evolution since its inception.
Like Bitcoin, Ethereum is a decentralized, peer-to-peer network that snubs censorship and surveillance. The focus of the project is to enable access to financial services and commerce for everyone. It does this by allowing for the development of other cryptos, as well as the execution of smart contracts on its platform.
IBM describes smart contracts as programs stored on a blockchain that run automatically when predetermined conditions are met. These functionalities make Ethereum a more versatile platform than Bitcoin.
Unlike bitcoin, ethereum allows for an unlimited number of tokens.
The following stats from CoinMarketCap are current as of May 24th, 2023:
|Ethereum Price||Ethereum Market Cap||Ethereum Market Dominance|
A cryptocurrency is a secure, virtual currency that is nearly impossible to counterfeit. These digital coins are assets that exist on distributed networks. The networks’ decentralized nature means that governments and other central authorities can’t control them.
Cryptocurrencies are underpinned by blockchain technology, which is a technology based on a distributed ledger database. Cryptography and encryption techniques secure the network and prevent tampering. Every transaction is stored as a separate block on the chain, and those records are guaranteed to be accurate and immutable.
Is It Better To Buy Bitcoin or Ethereum?
Bitcoin is the most popular cryptocurrency and has the most support commercially. If you’re looking for a cryptocurrency alternative to fiat currency, bitcoin seems to be a good choice, as long as you’re prepared to weather the volatility.
Technically speaking, ethereum is more than a cryptocurrency. The Ethereum network acts as a marketplace for users to buy and sell goods and decentralized applications. If you’re interested in an option with more use cases than investing and existing as currency, ethereum might be a good choice for you.
Bitcoin and Ethereum: Pros and Cons
Bitcoin and Ethereum are both blockchains, but they serve different purposes, each with its own benefits and drawbacks.
Pros of Bitcoin
- Bitcoin was the first cryptocurrency on the market.
- The coin has the best brand recognition and most liquidity, which has made it the most widely accepted cryptocurrency.
- There’s still huge potential growth for bitcoin.
- Bitcoin uses blockchain technology designed to protect against fraud or identity theft.
- Its value is based on supply and demand, not political interference.
- Bitcoin has a faster transaction speed than fiat currency.
- The 21 million cap on bitcoins could drive prices higher by making the coin more scarce.
Cons of Bitcoin
- Bitcoin’s price is highly volatile.
- Bitcoin has limited functionality.
- Bitcoin uses an extreme amount of energy, which is bad for climate change.
- Bitcoin doesn’t provide 100% anonymity.
Pros of Ethereum
- Ethereum leverages blockchain technology for its decentralized, transparent system.
- The technology enables functionality beyond digital currency, such as decentralized applications and smart contracts.
- The developer community is one of the largest.
- The Ethereum platform processes transactions faster than Bitcoin.
- Ethereum recently completed an upgrade that reduced its carbon footprint by 99.95%.
Cons of Ethereum
- Ethereum is significantly smaller than bitcoin.
- Ethereum is slow compared to alternative platforms, referred to as “Ethereum killers,” like Solana, although the recent upgrade could improve Ethereum’s speed exponentially.
- Unlimited supply could dampen demand for ethereum tokens.
Know the Risks of Investing In Bitcoin and Ethereum
All cryptocurrency investments are speculative. The more aware you are of the risks, the better you can mitigate them if you decide to invest.
Hype and FOMO Risks
The fear of missing out is a powerful driver for people to buy cryptocurrencies. With bitcoin’s explosion in value over the past few years, it’s easy to get caught up in the hype — but bitcoin fell dramatically from its high and has yet to recover.
No one wants to lose out on the chance of getting rich from cryptocurrency, especially when it has already made many people extremely rich. However, regulators continue to warn the public that you could lose all your money in crypto.
Because cryptocurrencies are digital assets, they’re potentially vulnerable to hackers. The first month of 2022 saw several notable hacks. Hackers stole $80 million worth of crypto from Quibit, a decentralized platform. And the Crypto.com exchange reported the theft of about $35 million in cryptocurrency, most of which was ethereum and bitcoin.
Analysts also warn that quantum computers could hack crypto wallets, even though the technology isn’t mainstream yet.
The IRS wants to know about gains from crypto investments you’ve sold. There’s a tax question on Form 1040 specifically regarding cryptocurrencies. Failing to disclose this information could lead to stiff penalties or possible criminal investigations.
Government-imposed regulations could make cryptocurrency safer and more secure, but they might also affect your access, the ways you use it and how it’s taxed.
Both bitcoin and ethereum have increased in value by staggering percentages since their release. But they’re still experimental, and with innovation comes problems that the Consumer Financial Protection Bureau warns haven’t been resolved.
For example, the decentralized nature of blockchains means there’s no one to turn to if things go wrong. In addition, transactions can be much more expensive on a blockchain than through a bank or debit or credit card.
If you decide that investing in a blockchain is the way to go, it makes sense to consider the top two. Determining which one’s right for you depends on your needs and goals.
- Will ethereum be worth more than bitcoin?
- While it's not impossible, it is unlikely that ethereum will be worth more than bitcoin in the short term. Because bitcoin has a limit of 21 million total coins and ethereum has no such limits, bitcoin's limited supply could mean that it will remain worth more than ethereum.
- Does Ethereum have a future?
- Ethereum is programmable, which broadens its scope – it is not just a currency, but also a marketplace for financial services, games and apps. This means that Ethereum may have significant untapped potential for the future.
- Will ethereum ever reach $100,000?
- It can be difficult to make accurate predictions in the cryptocurrency market, but it is unlikely that a single ethereum token will be worth $100,000, and certainly not in the near future.
- If it were, ethereum's market cap would be at least $1 trillion. While this isn't impossible, it would mean that ethereum as a whole would be worth around the same amount as the current valuation of Amazon.
Data is accurate as of May 25, 2023, and subject to change.
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- CoinMarketCap. "Today's Cryptocurrency Prices by Market Cap."
- CoinMarketCap. "Global Cryptocurrency Charts."
- Yahoo Finance. 2022. "White House to enter crypto regulation fray, with eye on financial stability."
- IBM. "Smart contracts defined."
- Consensys. "Ethereum, Evolved."
- Google Finance. "Amazon.com, Inc."