Summary
The use of cryptocurrencies has risen significantly, with Bitcoin and Ethereum the two most popular. Since each cryptocurrency has its own benefits and drawbacks, it can be challenging for investors to choose which one is best for their portfolio. Bitcoin, which has a finite supply of 21 million coins, is seen as a store of value and digital gold. The development of decentralized applications and smart contracts is made possible by the decentralized Ethereum platform. Compared to Bitcoin, Ethereum processes a greater number of transactions, and traditionally, because of its strong demand, its transaction fees have been higher. However, “The Merge,” which Ethereum completed in September 2022, has resulted in lower fees and less energy being used by the network. Investors can utilize a cryptocurrency exchange like Bitinvestor to buy Bitcoin or Ethereum.
Introduction
In the past few years, cryptocurrency has become more and more popular. Bitcoin and Ethereum are two of the best-known and most widely used cryptocurrencies.
Both cryptocurrencies have their own advantages and disadvantages, which makes it hard for investors to decide which one is better for their portfolio.
Investor interest in cryptocurrencies is not a surprise. 2009 saw the beginning of trading in Bitcoin (BTC). The new digital token could be purchased at that time for less than a penny. Prices increased gradually over the years, although with some volatility, and in November 2021 BTC reached an all-time high of $68,990. Ether(ETH) token of the Ethereum network made its debut in 2015 at $2.83 and eventually rose to its own record high of $4,865 in November 2021.
What is Bitcoin?
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- Bitcoin was the first decentralized cryptocurrency, created in 2009 by an unknown person or group of people using the pseudonym Satoshi Nakamoto. Bitcoin was first described in its Whitepaper published in 2008.
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- Bitcoin operates on a decentralized ledger called the blockchain and allows for peer-to-peer transactions without the need for intermediaries like banks.
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- Bitcoin is widely considered to be a store of value and digital gold, with a limited supply of 21 million coins that can never be increased.
What is Ethereum?
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- Ethereum is a decentralized, open-source blockchain platform that enables the creation of decentralized applications (dApps) and smart contracts.
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- Ethereum was launched in 2015 and has since become the 2nd largest cryptocurrency by market capitalization.
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- Unlike Bitcoin, Ethereum’s supply is not limited and new coins are created through a process called Proof of Stake instead of Bitcoin’s Proof of Work.
Comparison in numbers
Transaction count ETH vs BTC
Ethereum sees a much larger number of transactions. Based on the most recent data, 241.05% more transactions are made on the Ethereum network than on the Bitcoin blockchain.
This was not always the case with the Bitcoin Blockchain, which had the highest number of transactions between 2009 and 2017. However, in 2017, with the rise of DeFi, which added tokens like USDT and USDC to the Ethereum network, the transaction count rapidly rose above Bitcoin’s figures. The Ethereum network hasn’t looked back, and Bitcoin hasn’t been close to catching onto Ethereum’s transaction numbers.
All Time High (ATH) transaction count ETH: 1,660,000 transactions on May 13th, 2021
All Time High (ATH) transaction count BTC: 595,110 transactions on September 20th, 2023
Transaction fees ETH vs BTC
The difference in fees between Bitcoin (BTC) and Ethereum (ETH) is largely caused because of the way the 2 blockchains operate but also based on the demand for their use.
Because the block size for Bitcoin is capped at 1 MB, there is a maximum number of transactions that may be executed simultaneously on the network. Due to the restricted capacity, users may compete with one another to have their transactions added to the following block, which raises costs. As the number of transactions has increased and the amount of accessible block space has shrunk, the fees on the Bitcoin network have historically been high during bull markets where transaction volumes have been high. This has resulted in transaction fees of $53.86 in March 2021. Once this happened, we shortly thereafter also saw a crash in the Bitcoin price due to retail investors being unwilling to transact and buy Bitcoin.
Efforts have since been made to reduce transaction fees and the Bitcoin “Lightning Network” has seen higher adaption since. A network protocol that allows for Bitcoin transactions to be made more anonymously and with transaction fee costs of just a few pennies.
In contrast, Ethereum’s block size restriction is dynamic, meaning it can change depending on the state of the network. This enables a more adaptable method of controlling the volume of transactions handled by the network. However, Ethereum transaction fees have been significantly higher than the transaction fees of Bitcoin. This has largely been due to the large demand due to DeFi’s popularity and ERC-20 tokens being transacted on the Ethereum network.
This culminated in transaction fees of $53.14 at its peak in November 2021, which also resulted in retail investors being hesitant to buy Ethereum.
This came under a lot of scrutiny from the public both due to the very high fees but also the underlying technology facilitating these transactions, Proof of Work. Proof of Work is an energy-intensive task where computers must solve mathematical tasks in order to validate and complete transactions.
This resulted in Ethereum completing “The Merge” on September 15th, 2022 which has since resulted in lower fees and a 99.95% reduction in energy expenditure used on the Ethereum network.
It’s important to note that there have been times of both high and low transaction fees throughout the history of cryptocurrencies, depending on the health of the network and the level of demand for its use. For instance, as demand for both the Bitcoin and Ethereum networks soared during the crypto bubble of late 2017 and early 2018, transaction fees on both networks hit all-time high levels.
Market Capitalization
In the case of cryptocurrencies, market capitalization describes the market cap of a given cryptocurrency vs the total market cap of all listed cryptocurrencies.
Of all cryptocurrencies, Bitcoin (BTC) has the highest market capitalization as of December 2023, followed by Ethereum (ETH).
Source: https://coinmarketcap.com/charts/
The phrase “The Flippening” refers to a situation in which Ethereum overtakes Bitcoin in market capitalization and becomes the most popular cryptocurrency. Since Ethereum has grown so much in recent years because of its smart contracts and the rise of decentralized finance (DeFi) on its blockchain, cryptocurrency fans have been talking about this for a long time.
When Ethereum’s market capitalization reached 31.93% on August 13th, 2017 compared to Bitcoin’s 40.39%, it was the closest Ethereum has ever been to “flipping” Bitcoin. Since then, Bitcoin’s market value has stayed continuously higher, but the difference has been shrinking as Ethereum gains acceptance and popularity.
All things considered, the market capitalizations of both Bitcoin and Ethereum are extremely volatile and vulnerable to changes depending on a variety of variables like investor emotion, governmental events, and technological progress.
Key similarities and differences between Bitcoin and Ethereum
| Feature | Bitcoin (BTC) | Ethereum (ETH) |
|---|---|---|
| Purpose of the blockchain | Digital Cash | Smart Contracts Platform |
| Maximum Supply | 21 million | Unlimited |
| Block time | 10 minutes | 15 seconds |
| Use of the Blockchain | Peer-to-peer transactions and store of value | Decentralized applications, token creation and peer-to-peer transactions |
| Smart Contract Functionality | Not possible | Advanced |
| Governance | Decentralized | Decentralized |
| Launch Date | January 2009 | July 2015 |
| Block size limit | 1 MB | No hard limit (Dynamic block size) |
| Founder(s) | Satoshi Nakamoto | Vitalik Buterin, Gavin Wood, Joseph Lubin |
| Consensus Mechanism | PoW (Proof-of-Work) | PoS (Proof-of-Stake) |
Similarities between Bitcoin and Ethereum
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- Both Bitcoin and Ethereum use blockchain technology to secure transactions and maintain the integrity of their respective networks.
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- Both cryptocurrencies offer a high level of security and privacy, allowing users to make anonymous transactions.
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- Both Bitcoin and Ethereum can be bought and sold on cryptocurrency exchanges and used to pay for goods and services.
Differences between Bitcoin and Ethereum
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- Purpose: The primary purpose of Bitcoin is to serve as a store of value and digital currency, while Ethereum was designed to serve as a platform for decentralized applications and smart contracts.
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- Supply: As mentioned, Bitcoin has a limited supply of 21 million coins, while Ethereum has no fixed supply and new coins are created through mining.
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- Transaction Speed: Bitcoin processes transactions slower than Ethereum, with an average confirmation time of 10 minutes compared to Ethereum’s 15 seconds.
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- Scalability: Ethereum has the potential to scale to accommodate more transactions than Bitcoin due to its more advanced technology and its use of sharding.
Advantages of Bitcoin
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- Store of Value: Bitcoin is widely considered a store of value, with a limited supply and growing demand leading to an increase in price.
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- Liquidity: Bitcoin is the most widely recognized and widely traded cryptocurrency, making it easier to buy, sell, and convert to fiat currency.
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- Security: Bitcoin’s decentralized nature and use of cryptography make it a secure investment option for those looking to protect their assets.
Advantages of Ethereum
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- Dapps and Smart Contracts: Ethereum’s platform enables the creation of decentralized applications and smart contracts, providing a wide range of potential use cases and investment opportunities.
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- Scalability: As mentioned, Ethereum has the potential to scale to accommodate more transactions, making it a more flexible investment option.
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- Community: Ethereum has a large and active developer community working to improve the platform, making it a more secure and reliable investment option in the long run.
Conclusion
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- When it comes to investing in cryptocurrency, both Bitcoin and Ethereum offer unique benefits and drawbacks.
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- Bitcoin is well-established as a store of value, with a limited supply and strong demand. On the other hand, Ethereum provides the opportunity for decentralized applications and smart contracts, making it a more flexible investment option.
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- Ultimately, the decision between Bitcoin and Ethereum comes down to an investor’s individual goals and risk tolerance. Some may prefer the stability and security offered by Bitcoin, while others may see greater potential for growth and innovation in Ethereum.
Regardless of which cryptocurrency an investor chooses, it’s important to do plenty of research and consider all factors before making a decision. This includes considering market trends, adoption rates, and the overall stability and security of the network.
It’s also crucial to diversify your investment portfolio and not to put all of your eggs in one basket. This means considering other cryptocurrencies and traditional investment options as well, rather than relying solely on cryptocurrency.
In conclusion, both Bitcoin and Ethereum have a lot to offer, and each has its strengths and weaknesses. When deciding which cryptocurrency is right for you, it’s essential to consider your individual investment goals, risk tolerance, and to do your due diligence in researching the market and technology. Whether you’re looking to buy Bitcoin or buy Ethereum, make sure you’re making an informed decision and invest wisely.
Get started with crypto by using Bitinvestor
We hope you’ve gained a bit more knowledge on Bitcoin and Ethereum from the article above! Once you’re ready and have created a crypto wallet, you can Buy Bitcoin or Buy Ethereum through Bitinvestor. We offer a variety of payment methods to make it easy, simple and fast to buy Bitcoin.
