Ethereum Vs. Bitcoin: Is Ethereum a Better Investment than Bitcoin?
Ethereum Vs Bitcoin: Which Is the Better Buy?
Ethereum and Bitcoin May Already Be in Your Portfolio. But Which Has the Better Investment Going Forward?
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Ethereum and Bitcoin, two of the best cryptocurrencies, have been mainstays of many investors’ portfolios. Even the lay investor knows about them, which is why they’re perhaps the two Cryptocurrencies our trading-community friends and students most frequently ask us about. Specifically, what they ask are: What is the main difference between Ethereum and Bitcoin? Is Ethereum a better investment than Bitcoin? Which is the best investment going forward? With that in mind, we thought it might be useful to break it down with Ethereum vs. Bitcoin tale of the tape.
There are more than 6.000 cryptocurrencies in circulation, with a total market cap of $337billion. But despite the huge range of choice for investors, two coins dominate the market: Bitcoin and Ethereum.
Ethereum vs Bitcoin: Critical Differences Between The Two
With a $117.81 billion market cap, Bitcoin is the biggest crypto on the block. Ethereum is in second place. But with a market cap of $45.96billion, it won't be stealing the top spot any time soon.
Early-stage investors in Bitcoin and Ethereum made huge profits and both coins are still popular choices for first-time speculators. But now that the initial gold rush is over, knowing what your investing in is more important than ever.
So is Ethereum a better investment than Bitcoin? Is it too late to invest in Bitcoin? Should you invest in Bitcoin and Ethereum at the same time?
And, perhaps most importantly, what is the difference between Bitcoin and Ethereum?
Find it out in our detailed Ethereum vs Bitcoin comparison guide.
What is Bitcoin?
Bitcoin is a decentralised digital currency that can be sent between users without a third-party intermediary. Bitcoin is not an application or technology. It is, quite literally, money in digital form. The very first transaction occurred in 2010 when a computer developer called Laszlo Hanyecz bought two Papa John pizzas for 10,000 Bitcoins. At the current valuation, those 10,000 Bitcoins are worth around £90milllion!
Bitcoin was created in 2008 by a person (or group of persons) using the pseudonym Satoshi Nakamoto. Satoshi wanted to create a 'trustless' currency that was 100% independent. In a sense, Bitcoin was an attempt to democratise money, and it's no coincidence that the first coin came out in 2009, just a year after the credit crunch. The 2008 financial crisis led to accusations that the banks had severely mismanaged people's money, committed widespread fraud, and were then protected by governments. People felt disillusioned; many still do. Bitcoin offers an alternative form of finance that cannot be controlled or manipulated by a central power.
Unlike fiat currencies such as the pound or dollar, Bitcoin is not issued by a central bank. Instead, they're created and released as a reward for a process called mining. Miners are the people who process the transactions on the blockchain, creating a permanent and 100% secure record of every Bitcoin transaction. Think about miners as administrators or a decentralised authority that helps enforce the credibility of the Bitcoin network. Put simply, Bitcoin's blockchain network is a system that ensures one coin always equals another coin, no matter where it's sent or how many times.
Miners receive Bitcoin at a fixed, yet declining rate. This is because the Bitcoin algorithm was pre-programmed to limit the supply of coins to 21million. Around 18.4millin Bitcoins have been mined in the last ten years. But because mining becomes increasingly difficult after every new coin, experts think it will take another 120 years to dig up the remaining 2.6million.
Should You Invest In Bitcoin?
What is Ethereum?
Ethereum is more than just digital money. It's also an open-source blockchain for conducting transactions, referred to as decentralised digital applications (dapps) or smart contracts.
Smart contracts are 100% secure, require no third-party intermediary, and can codify, decentralise, and trade just about anything. All of this requires power and energy. So to cover the cost, the Ethereum network creates tokens called Ether; this is the fuel that powers smart contracts. Ether is also the cryptocurrency that you can buy, sell, or trade.
A smart contract could be as simple as selling a second-hand bicycle or setting up a fundraising initiative without going through a crowdfunding site. Alternatively, smart contacts could facilitate complex financial agreements, including credit approvals, property purchases, insurance premiums, and much more. In other words, "smart contracts" could automate extremely complex transactions in a way that is fast, secure, and completely transparent. Agreements that now take days and week to finalise could happen in a matter of minutes, or maybe even instantaneously.
And this is only the tip of the iceberg. Ethereum's secure blockchain technology could make online voting a real possibility, ushering in a new age of democratic engagement and representation. It could also revolutionise the healthcare and legal industries, logistics, telecommunications, streaming services, education, social media, and e-commerce.
Ethereum's biggest fans think this blockchain technology will form the basis of an entirely new internet, or what experts are calling Web 3.0. In theory, the new web would be completely decentralised, giving users a chance to take back control of their information and create an organic online identity.
This user-centric approach would incentivise the creation of networks where people and companies develop products and services that benefit everyone. It would also put an end to some of the more problematic big-tech practices we see today, including data mining, censoring particular political views, and manipulating user experience to create more addictive platforms. To look at this another way, web 2.0 treats users as consumers or units; Web 3.0 would enable users to be individuals.
As you can see, much of Ethereum's value comes from its future applications. But will all this potential turn into a reality? Well, many people certainly think so. Ethereum has received public backing from some major players in the financial and tech spheres.
The Enterprise Ethereum Alliance (EEA) is a global community of more than 140 blockchain leaders, adopters, innovators, developers, and businesses from around the globe. Some of its most prestigious members include investment giant JP Morgan, Santander Bank, and British Petroleum (BP), as well as tech-giants Microsoft and Intel. The EEA helps promote the benefits of blockchain technology. It’s also working on building business-ready versions of the Ethereum software.
Should You Invest In Ethereum?
Ethereum vs Bitcoin: What Is the Difference Between Both?
While Ethereum and Bitcoin share many similarities, they were designed for entirely different purposes. And understanding how (and why) they differ is something you'll need to know before you can make a sound investment choice.
So here's a breakdown of the main difference between Bitcoin and Ethereum and what they mean for you as an investor.
Ethereum is unlimited. The supply is continuous, although it will slow down as more coins are produced. Bitcoins are limited to 21million. Over time, this finite supply will increase demand, pushing up the value of each coin.
Bitcoin is digital money that can be exchanged at any time. It's also a digital asset with a store of value. That means it can be saved, retrieved, and traded at a later date. This is why many investors see Bitcoin as digital gold.
Ethereum is different. It's currency, Ether, is linked to smart contracts, and can only be traded after a set of predetermined conditions have been met.
For example, a Bitcoin transaction would look something like this: person X sends 10 BTC (Bitcoins) to person Y.
A smart contract could be written in this way: send 10 ETH (Ether) to person Y from person X if X’s balance is 10 ETH or more and the date is 01/01/2021.
Broadly speaking, Bitcoin is money, whereas Ether is a fuel that powers the Ethereum network. In fact, it's often referred to as gas.
Ethereum can verify transactions (or blocks) within 20 seconds. It takes Bitcoin around 10 minutes to process each block.
Bitcoin is over 10-years old. It's the one cryptocurrency that most people have heard about. Bitcoin has an established reputation and is now accepted by major retailers, including Microsoft, Starbucks, and BMW. So if (or more likely when) crypto goes mainstream, Bitcoin has a strong chance of becoming the currency of choice.
At the time of writing, Bitcoin is trading at around $12,000 per coin. Ethereum is hovering at the $385 mark. So for first-time investors with a more limited bankroll, Ethereum is probably more attractive option.
The Bitcoin and Ethereum blockchains are always being updated. But experts tend to agree that the Ethereum technology is more advanced and robust. It's faster and the transaction fees are cheaper than Bitcoin's. Moreover, programmers are currently working on a major upgrade, known as Ethereum 2.0.
The new platform will simplify Ethereum's blockchain, increase user security and transaction speed, and reduce barriers to entry, making the network accessible to anyone with a standard laptop. There's no official release as of yet. But advanced testing is already underway, and programmers are optimistic that the platform will be fully operational by the end of 2020.
Adam Cochran is a crypto analyst and former marketing director of Dogecoin. He thinks a fully functional 2.0 platform will create a huge bull run on Ethereum. According to Cochran, this could send Etheruem's price 'to the moon.' So if you're thinking about taking a punt on Ethereum, now might be a good time.
Is Ethereum A Better Investment Than Bitcoin?
At the moment, it's hard to say if Ethereum is a better investment than Bitcoin. Both have very different purposes. Whether one is better than the other largely depends on what you're looking for, as well as a range of other personal factors. These include the size of your bankroll, whether you're excited about short or long-term gains, and your aversion to risk.
Bitcoin is still the most dominant asset in the crypto space, and by quite a distance. It's well established and was designed to gain value over time. Bitcoin might not promise big returns in the immediate future, but it's the kind of investment that you'd still want in your portfolio in 10 or maybe 20 years.
For many investors, Ethereum's real value is not tied to its scarcity or its current applications. Instead, Ethereum's present (and future) value is intrinsically linked to its potential to revolutionise the digital space and the way we do business. Ethereum smart contracts could change everything from mortgage transfers to the way we create and consume online content. Moreover, the most exciting future applications of Ethereum will probably be the ones that we haven't even though of yet.
Investors who put their money into Ethereum do so in the hope that the technology will reach its full potential. And there are many indications that it could happen. As well as big-time backers like Microsoft and JP Morgan, many other investors are impressed by Ethereum’s technology.
Gil Penchina is an American business manager and angel investor. He's helped more than 100 tech start-ups get off the ground, including PayPal and LinkedIn. Here's what he has to say about the Ethereum platform: "It's clear to me now that Ethereum is the new currency of the Internet. It's way ahead of where Paypal was in its day, and it's much more exciting to its customers than Paypal ever was."
Tale of the Tape: Ethereum vs. Bitcoin
Launch Year: Ethereum 2015, Bitcoin 2009
Market Cap: Ethereum 43.1b, Bitcoin 210.3b
Available Coins: Ethereum 112.4M, Bitcoin 18.5M
52- Week Growth: Ethereum 107%, Bitcoin 12%
2-Years Growth: Ethereum 40%, Bitcoin 70%
3-Years Growth: Ethereum 1%, Bitcoin 140%
5-Years Growth: Ethereum N/A, Bitcoin 4880%
Should I Invest in Ethereum or Bitcoin?
If you still can't decide between investing in Ethereum or Bitcoin, then here's some good news; you don't have to!.
As you've probably figured out, Ethereum was never intended to replace Bitcoin. So rather than seeing Bitcoin and Ethereum as direct competitors, it's worth thinking about these technologies as complementary platforms with the potential to underpin very different aspects of a digitised financial economy. In other words, the future of crypto is not a winner takes all game; Bitcoin and Ethereum can both 'win.'
Splitting your funds between different assets is called diversification. Diversification is a common practice for all types of investors, including billion-dollar hedge fund managers. It's a way of minimising risks, creating more opportunities for return, and safeguarding your assets from adverse market cycles.
How you diversify your portfolio is up to you. One option is to split the funds 50/50. But if you're more excited by Bitcoin, you could go for a 70/30 split or vice versa if you think the future belongs to Ethereum.
Ethereum vs. Bitcoin Conclusion: Is Ethereum A Better Investment Than Bitcoin?
So is Ethereum a better investment than Bitcoin?
Ethereum has many benefits over Bitcoin. It's more versatile, has better technology, and has far more real-world applications.
Compared to Bitcoin, it's also relatively cheap, making it much more accessible to investors with a smaller bankroll At the current valuations, you could buy around 30 Ethereum for the price of a single Bitcoin. And given the technology's potential and impressive list of backers, investing in Ethereum now is a chance to buy low and sell high in the future.
But Bitcoin is here to stay. And although it (probably) won't revolutionise the digital space in the same way as Ethereum could, Bitcoin's established 'brand' and increasing scarcity makes it an appealing proposition for more cautious investors with an eye on the long-term.
In the end, the final decision comes down to you. What kind of investor do you want to be? Which technology excites you more? And which is currently the most undervalued?
Figure out the answer to that question, you’ll definitely know if Ethereum is a better investment than Bitcoin!
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Ethereum Vs Bitcoin: Infographic
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