Ethereum vs. Bitcoin: Which Crypto Is the Better Buy?

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Ethereum and bitcoin are arguably the most popular cryptocurrencies on the market today. They certainly are the largest by market cap. As of this writing, bitcoin’s market cap is over $1.72 trillion, while ethereum’s market cap is around $256 billion.

Bitcoin Basics

Bitcoin was the first cryptocurrency, launched in 2009 by a crypto architect known pseudonymously as Satoshi Nakamoto. 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.

Ethereum Basics

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. 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.

How Do Bitcoin and Ethereum Work?

One of the main differences between bitcoin and ethereum is the validation system they use. Bitcoin uses proof-of-work. Ethereum started with that system, but moved to proof-of-stake in 2022. 

Although proof-of-stake is considered a faster, more energy efficient and secure system, it hasn’t hurt bitcoin so far.

Speed

Ethereum has a faster network that can process transactions in a few seconds, while bitcoin can take as long as 10 minutes. 

Costs

Both coins have slightly different fee structures. Bitcoin fees are based on the amount in the transaction and are voluntary. However, the fee is considered an incentive to make your transaction happen. Ethereum fees have a base fee on top of the incentive tip. As a result, ethereum tends to have higher fees than bitcoin.

Both coins charge higher fees when the servers are especially busy.

Security

Both coins have security and encryption to protect their networks. According to crypto.com, the size of bitcoin’s energy uses make it difficult to attack. Ethereum’s point of stake requires users to put their own shares of the coin up to secure the network. 

What Can You Do With Bitcoin and Ethereum?

Both coins can be used to send money. However, bitcoin has become more of an investment asset. Ethereum hosts other assets like NFTs.

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.

Final Take

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.

Daria Uhlig and Chris Ozarowski contributed to the reporting for this article.

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