Bitcoin vs Ethereum: Which is a Better Investment?

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bitcoin vs ethereum

Since Bitcoin and Ethereum are widely known as the top 2 coins in terms of market cap and mainstream acceptance, let’s look at a side-by-side comparison of these two superstar cryptocurrencies. So, before we dive in, here is a brief look at what you can expect from this article.

In Brief:

  • What is Bitcoin?
  • What is Ethereum?
  • Bitcoin vs Ethereum: Core Use Cases
  • Bitcoin vs Ethereum: Consensus Mechanism
  • There Really Is No Comparison.
  • Which One’s A Better Investment?

What is Bitcoin?

Satoshi Nakamoto is the pseudonym used by the person or persons who invented Bitcoin.  Nakamoto released the whitepaper in 2008 and introduced the world to both Bitcoin and blockchain technology. Over the next decade, Bitcoin has started gaining acceptance by institutions and even government authorities. The likes of MicroStrategy and Tesla have already made significant billion-dollar investments in BTC.

What is Ethereum?

Ethereum was launched in July 2015 and became the most established and largest open, decentralized software. Ethereum blockchain has fast become the developers’ preferred choice for building distributed apps (dApps) on the blockchain to provide trustless products and services.

Bitcoin vs Ethereum: Core Use Cases

The first thing that we should talk about is Bitcoin’s core use case. Bitcoin was initially built with one goal in mind – remove the need for a central banking system and enable people to transfer value from peer to peer or one source to another. However, over the last few years, Bitcoin has become an ideal store-of-value for two reasons. Firstly, it gives you complete control over your wealth. You no longer need to depend on banks to hold your money. Secondly, it has proven itself to be a powerful hedge against financial fluctuations.

Now, on the other hand, we have Ethereum. ETH is not just a payment platform, but it is the platform that is building the decentralized internet of the future. Developers from all over the world are creating one of the most diverse product suites in various fields. In fact, DeFi alone has blossomed to become a $75 billion dollar market, and NFTs have also taken the whole world by storm.

Bitcoin vs Ethereum: Consensus Algorithm

Both Bitcoin and Ethereum use the proof-of-work (PoW) consensus mechanism. As such, there are specialized nodes worldwide that use hardware like ASICs to solve cryptographically hard puzzles. Upon successful completion, the miner gets to add a block to the blockchain and earn block rewards. However, Ethereum plans to move on to proof-of-stake (PoS) eventually.

PoS makes the entire mining process virtual by making the stake that an individual node (aka validator) holds the deciding factor to successfully mining blocks rather than their hash power. Ethereum will be bringing in PoS through the Casper protocol, wherein validators who are not working in the system’s interest will be adequately punished by getting their stake slashed.

There Really Is No Comparison

It is human nature to compare the top two dogs in a particular space invariably, it may be a fool’s errand when it comes to Bitcoin and Ethereum. While it may be tempting to just label these two as “cryptocurrencies,” there is a lot more that’s going on behind the scenes.

Bitcoin maxis may hate this, but BTC really is a decentralized digital gold. You can store your wealth in the long term and passively grow your net worth. Fortune 500 companies have identified Bitcoin as a credible store-of-value that can help secure their wealth through financial fluctuations.

On the other hand, Ethereum is a lot more flexible and has seemingly endless use-cases. Obviously, in its current iteration, it definitely has several issues like lack of scalability and high gas prices. However, with Ethereum 2.0 coming in, the sheer amount of utility and overall throughput will be off the scale.

At the end of the day, it’s like comparing gold to the internet.

Which One’s A Better Investment?

It looks like the Bitcoin vs Ethereum debate will continue for a while. As our world transforms more into a digital marketplace and the acceptance rate of cryptocurrency grows, both the options (BTC & ETH) are well placed in the market to perform well over time. However, the investment decision narrows right down into the investor’s risk profile.

Between the two, Bitcoin is considered to be mainstream and more stable among investors. The long-term outlook for Bitcoin looks good, as per researchers and investors. According to Plan B’s Stock-to-Flow Model, the Bitcoin price will reach $288,000 in the next couple of years.

Ethereum’s long-term outlook is already very bullish. However, it is challenging to put in a proper price prediction due to its innate working model. Cameron Winklevoss puts it the best:

Ether broke $4,000 which begs the question: what’s the long-term price target? It’s a challenging question in as much as how do you put a bound on creativity? You can’t.”

Bitcoin vs Ethereum: An Overview

  Bitcoin Ethereum
Creation Satoshi Nakamoto in 2008 Vitalik Buterin and Ethereum Foundation in 2015
Role Store-of-value and payments. Smart contract ecosystem, store-of-value, and payments.
Upper Cap 21 million No defined limit
Consensus Mechanism PoW PoW (now). PoS (post-upgrade)
Block Time 10 mins 15 seconds
Throughput 7-10 transactions per second 15-25 transactions per second

Where Do I Buy BTC and ETH?

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If I were to build a DeFi app, which of the following will I use?

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