Ethereum vs Bitcoin: Is One Cryptocurrency Better Than the Other?

Both Bitcoin and Ethereum have their advantages, and like most other cryptocurrencies, which one is right for you is very much dependent on your financial situation and what you want out of your investment. Part of the reason there are so many cryptocurrencies today is that many of them are built on Ethereum’s underlying technology, even relying on it entirely in some cases. While the specifics of that are beyond the scope of this guide, it’s all possible because of one key feature that Ethereum has that Bitcoin doesn’t — smart contracts. The proof of stake method relies on validators who stake—agree to not trade or sell—their cryptocurrency.

The specifics of it are rather complicated, but if you want to dig into them, some excellent breakdowns will let you dive as deep as you want to go. Both bitcoin and ethereum come with significant risk and price volatility. Bitcoin currently https://www.xcritical.in/ uses the operating protocol known as proof-of-work (PoW). The PoW method is resource intensive, meaning that bitcoin uses vast amounts of computing power and electricity to complete transactions and mint new cryptocurrency.

The Ethereum Virtual Machine (EVM) is a globally distributed computer that uses the Ethereum blockchain to store its state. It’s helpful to think of the EVM as a single computer composed of many nodes distributed worldwide. As of March 16, 2022, one BTC was worth $39,615 and one ETH was worth $2,679. Although BTC is worth more than ETH, the two cryptocurrencies follow a very similar price trajectory. As one of the largest cryptocurrencies and nearly as famous as Bitcoin, when Bitcoin goes up or down in value, Ethereum tends to follow.

A blockchain is a ledger, a database designed to be shared between the nodes of a distributed network, as we explained in What Is a Blockchain and How Does It Work? A blockchain ledger stores data in blocks composed of multiple records. Most of the digital currency exchanges, wallets, and other products surrounding cryptocurrencies support both Bitcoin and Ethereum. In comparing various financial products and services, we are unable to compare every provider in the market so our rankings do not constitute a comprehensive review of a particular sector. While we do go to great lengths to ensure our ranking criteria matches the concerns of consumers, we cannot guarantee that every relevant feature of a financial product will be reviewed.

Could the evolution of the Ethereum platform to a proof-of-stake system — sometimes called Ethereum 2.0 – shift its long-held position as the #2 crypto on the market? It’s hard to say, but something that investors and crypto analysts will be watching closely. No matter what the consensus mechanism, those who verify cryptocurrency transactions are rewarded for their effort by way of rewards and transaction fees. Transaction fees can fluctuate based on how congested the network is. There are multiple applications that you can use to estimate the fees.

Proof of stake

Besides the fact that Bitcoin and Ethereum are popular cryptocurrency blockchains, another key similarity between Bitcoin and Ethereum is network adoption. These networks have much more users than other cryptocurrencies, making them the 2 most valuable cryptocurrencies by market capitalization. While Bitcoin has more institutional adoption, Ethereum has a larger active user base and transacts far more volume than Bitcoin on a daily basis. Both cryptocurrencies have widespread adoption, so these networks should have strong staying power as the blockchain industry matures. Bitcoin and Ethereum are the 2 most widely adopted applications of blockchain technology in existence today. While many people think they are competitors, it isn’t quite that simple.

While Ethereum does enable payments using its internal ETH cryptocurrency, its scope is much broader than Bitcoin’s—by design. The potential applications of Ethereum are wide-ranging using its native cryptographic token, ether (commonly abbreviated as ETH). In 2014, Ethereum launched a presale for ether, which received an overwhelming response. At the start of the cryptocurrency boom in 2017, Bitcoin’s market value accounted for close to 87% of the total cryptocurrency market. By late August 2022, Bitcoin’s market share had declined to 39.6%, but by October 2023, it had rebounded to more than 51%.

What is the difference between a crypto exchange and a brokerage?

SoFi has no control over the content, products or services offered nor the security or privacy of information transmitted to others via their website. We recommend that you review the privacy policy of the site you are entering. SoFi does not guarantee or endorse the products, information or recommendations provided in any third party website. Where Bitcoin supports quite simple scripting (comparatively), Ethereum can handle much more complexity thanks to its smart contract system.

Both blockchains offer anonymous transactions, and neither is controlled by a central authority like a bank or government. Solidity is Ethereum’s programming language and used to create smart contracts that can be deployed on the blockchain. Developers chose to build their apps on Ethereum’s blockchain because it highly decentralized, and therefore highly resistant to censorship and other forms of centralized malice.

Differences Between Bitcoin and Ethereum

While the primary uses of Ethereum and Ether make it quite different from Bitcoin, the most significant arguable difference is in the underlying technology behind each and what that means for other cryptocurrencies. Technically, Ethereum isn’t a cryptocurrency at all, but a special kind of blockchain technology. This technology not only powers Ether transfers between people but can be used to create all types of other cryptocurrencies — and it has. Bitcoin is primarily designed to be an alternative to traditional currencies and hence a medium of exchange and store of value.

• Bitcoin’s transactions have been noted as being slow, while Ethereum has also run into problems with network congestion.
• Bitcoin price is attempting a fresh increase from the $35,600 zone against the US Dollar.
• As of late, though, Ethereum has undergone its “ETH 2.0” merge-update, and has transitioned to Proof-of-Stake – in other words, it can no longer be mined.
• This is more or less the major similarity between Bitcoin and Ethereum.
• This second layer solution opens bidirectional payment channels between Bitcoin wallet addresses, increasing transaction speeds and reducing costs.
• Ethereum has been taking a larger share of the market from Bitcoin over the past several years, though Bitcoin retains the industry’s largest market value.

Currently there is a limit of about 18 million ETH that can be mined each year, simply based on the amount of time it takes for miners to confirm transactions. Each Bitcoin is made up of 100 million Satoshis (named for Satoshi Nakamoto, a pseudonym that reflects the person or group of people who developed Bitcoin in 2009). To use Bitcoin for transactions, you’ll need to have a crypto wallet, which allows you to safely store your crypto. As a result, the Bitcoin blockchain can handle three to four transactions per second. The miners decide how many transactions are put into a block, and currently, it can handle about 15 transactions per second.

You could also invest in bitcoin by purchasing bitcoin futures exchange traded funds (ETFs) or buying stocks of companies such as Riot Blockchain, that are involved in bitcoin mining. Launched in 2014, Ethereum was created in order to connect people globally to a system of smart, self-executing contracts. Smart contracts facilitate the creation of decentralized applications (dApps), which range in function and all operate atop the Ethereum network using shared standards for interoperability. While both Bitcoin and Ethereum currently utilize a Proof-of-Work (PoW) consensus algorithm, Ethereum introduces the concept of smart contracts, which are automatically self-executing agreements used in creating dApps. Bitcoin and Ethereum are the two most well-known blockchain protocols, and their respective cryptocurrencies, BTC and ETH, are integral to the fast-expanding world of digital assets.

These dApps often give rise to their own native tokens that can be used in their functioning, governance, and value assessment or creation. Various people are of impression that Bit coin is better compared to all other currency platforms where they are token or digital asset. Bitcoin is one of the first major crypto currencies and has been around for nearly 9 years now. Ethereum is a very new currency platform that has been launched just a few years ago.

Bitcoin is up more than 600 percent over the last year, making it the most talked about coin – and likely the most talked about asset – amongst traders. Everyone acknowledges it as the number one digital currency by market cap, and it has recently crossed the $1 trillion threshold. At this stage, anyone who hasn’t ethereum vs bitcoin heard of bitcoin is likely living under a rock, but many analysts still believe that Ethereum could potentially overtake the asset as the number one coin in the crypto trading space. In layman’s terms, a cryptocurrency exchange is a place where you meet and exchange cryptocurrencies with another person.

All your finances.

After all the Bitcoins have been mined, miners will continue to receive transaction fees to incentivize them to keep the network running. Other types of cryptocurrencies use different methods to create coins and keep their blockchains running. At a very high level, Bitcoin (BTC) is a virtual or digital currency that is created and secured using advanced cryptography — essentially, in this case, the solving of complex mathematical problems.

We make every effort to provide accurate and up-to-date information. However, Forbes Advisor Australia cannot guarantee the accuracy, completeness or timeliness of this website. Bitcoin and Ethereum are two blockchains with their own cryptocurrencies, bitcoin and ether. Each was created with different purposes in mind to address separate issues, but they also have many similarities. Ethereum enables building and deploying smart contracts and decentralized applications (dApps) without downtime, fraud, control, or interference from a third party.