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Bitcoin vs Ethereum: Which one is better?

Bhumika Dutta
Mar 02, 2022

There's no doubting that cryptocurrencies have a sizable market, and investors are enthralled by the many currencies on offer. Everyone is seeking the finest cryptocurrency that will provide the most profit while also being the least dangerous.

Let us talk about two of the most popular cryptocurrencies: Bitcoin and Ethereum. After Bitcoin (BTC), Ether (ETH), the Ethereum network's cryptocurrency, is the second most popular digital token.

Although these two are often compared as competitors, it isn't that easy to say which is better. As Benzinga says, Ethereum is a digital universe, while Bitcoin is digital gold.

Blockchain technology is used by both cryptocurrencies to establish a value layer for the internet, although Bitcoin's technology is confined to payments and scarcity. Ethereum advances blockchain technology by incorporating a computer into the value layer, replacing traditional financial processes like lending and trade with code.

Let us first learn the basics of both the currencies before learning the differences.

Bitcoin:

In January 2009, Satoshi Nakamoto, an enigmatic person, put into action a concept he had sketched forth in a white paper — a peer-to-peer electronic payment system that could function safely without the need for a central authority. The concept of cryptocurrency, or money without a physical form, was founded with Bitcoin.

Bitcoin was not the first time that a decentralized, nonphysical form of money was proposed, but it was the first time that the concept was effectively realized. Over time, authorities and political agencies have come to recognize the notion of a virtual, decentralized currency.

Despite being routinely analyzed and disputed, bitcoin has managed to carve out a place for itself and continues to co-exist with the financial system despite not being a formally recognized method of payment or store of value.

Bitcoin's market capitalization reached approximately $1.2 trillion on October 20, 2021. Experts believe that only Ethereum has the potential to surpass bitcoin's massive market capitalization. But, before we go into it, let's review the fundamentals of ethereum.

Also Read | Everything About Bitcoin Futures ETFs

Ethereum:

Ethereum is the largest and most well-known open-ended decentralized software platform, having been launched in July 2015. Ethereum is a worldwide computer network that runs on the Ether cryptocurrency (ETH). The demand for ETH will rise in unison with the demand for computing power on the Ethereum network.

Ethereum's programming language, Solidity, is used to build smart contracts that may be implemented on the blockchain.

Developers picked Ethereum's blockchain to construct their apps because it is extremely decentralized and hence immune to censorship and other types of centralized malice.

Decentralized apps (dApps) on Ethereum are peer-to-peer programs capable of offering trustless products and services. ETH is the native currency on the Ethereum platform, and it is required to operate dApps on the Ethereum blockchain, which acts as a global computer.

Ether is primarily used for two purposes: it is exchanged as a digital currency on exchanges in the same way that other cryptocurrencies are, and it is utilized to operate apps on the Ethereum network.

How is Ethereum different from Bitcoin?

Bitcoin was designed to accomplish one thing well: allow individuals to send money to one another without the use of a central bank. Ethereum was created as a general-purpose blockchain that can perform a wide range of operations thanks to its smart contracts.

As a result, rather than functioning exclusively as a store of wealth, Ethereum can do a lot of things effectively. Although Ether may be used as digital money, it is not its primary function. As previously stated, the Ethereum platform was created largely to monetize the activities of Ethereum smart contracts and decentralized applications (dApps).

Here are the main differences between them both in terms of:

Market Capitalization:

BTC's market capitalization is at $800 billion, or nearly 40% of the $2 trillion asset class. Ethereum, on the other hand, makes up less than 20% of the asset class and has a market capitalization of more than $380 billion. In 2022, no other currency is worth more than $100 billion.

Key working concept:

Peer-to-peer transactions are possible using Bitcoin. It functions as a substitute for fiat currencies, but without the drawbacks that come with them. You won't have to pay large transaction fees, and you won't have to deal with a centralized body that controls how bitcoins operate.

Ethereum not only allows for peer-to-peer transactions, but it also serves as a framework for developing smart contracts and distributed applications. Users may exchange just about anything of value using a smart contract, including shares, money, real estate, and so on.

Mining:

Miners can use the proof of work (PoW) mechanism to validate transactions in Bitcoin and perform blockchain mining. The same is true for Ethereum. With proof of work, miners all around the globe compete to be the first to add a block to the blockchain by solving a difficult mathematical challenge.

Ethereum, on the other hand, is pursuing proof of stake as a method of transaction confirmation. A user can mine or validate transactions in a block based on how many coins he owns with proof of stake. The more a person's mining power, the more coins he owns.

When a miner contributes a block to the network in Bitcoin, he is paid with 6.25 bitcoins, a rate that was fixed in November 2021. When a block is added to the blockchain in Ethereum, a miner, or validator, earns 3 ether as a reward, which will never be halved. Simplilearn talks about it all.

Aim:

In terms of their general goals, the Bitcoin and Ethereum networks are distinct. While bitcoin was founded as a substitute for national currencies and so seeks to be a means of exchange and a store of value, Ethereum was designed as a platform for immutable, programmable contracts and applications using its own currency.

Although BTC and ETH are both digital currencies, the fundamental goal of Ether is to facilitate and monetize the Ethereum smart contract and dApp platform rather than to establish itself as an alternative monetary system.

Fees:

Bitcoin transaction costs are completely optional. Anyone can give the miner more money to have him pay more attention to the transaction; but, if you don't pay a charge, the transaction will still go through.

On the other side, for your Ethereum transaction to be successful, you must give some ether. The ether will be turned into a unit known as gas. This gas fuels the processing required to add any transaction on the blockchain.

Hashing algorithms:

These systems can keep their privacy and security by using hashing methods. SHA-256 is the hashing algorithm used by Bitcoin. Ethash is a cryptographic algorithm used by Ethereum.

Also Read | What is Britcoin? Everything You need to know

Conclusion: Which one of them is better?

There's one feature that sets Bitcoin apart from Ethereum and other up-and-coming cryptocurrencies. It's difficult to measure yet it is a critical attribute of any currency. The amount of individuals, businesses, and even governments who have co-signed Bitcoin's permanence, while impossible to calculate, demonstrates this conviction in Bitcoin as an enduring digital asset.

Ethereum's main advantage is its real-world utility. Its blockchain, he continued, offers smart contracts that may be utilized in a variety of applications. Improvements to Ethereum's network may catalyze attracting further money. Despite all of the criticism about its speed and cost, Ethereum, which is not as well-known as Bitcoin, has provided excellent returns in the previous year. It is less than 50% away from overtaking Bitcoin as the most popular cryptocurrency.

But, if you're wondering which is superior, the answer is dependent on your needs. While Bitcoin is better for peer-to-peer transactions, Ethereum is better for creating and building distributed applications and smart contracts, as detailed in this blog. Choosing a winner between Bitcoin and Ethereum is totally up to you.

Next read | Litecoin vs Bitcoin

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Bitcoin vs Ethereum: Which one is better?

Bitcoin:

Ethereum:

How is Ethereum different from Bitcoin?

Market Capitalization:

Key working concept:

Mining:

Aim:

Fees:

Hashing algorithms: