For a long time now, there has been a great rivalry and comparison between these two crypto giants – Bitcoin and Ethereum. Both of them are great names in the crypto space. While one was the first digital currency, the other was the first to ever bring the all-important smart contract to the table. By market capitalization, the two are top cryptocurrencies and are arguably the yardstick with which other cryptos are measured. Do wish to know how the two stacked up? Here is a comparison of the two coins.
The Basic Comparison between the Two
There are some basic differences between the two, and if we are going to look into the well, we can’t but just talk about them from the basics. So let’s see a quick roundup of their basic differences:
- Year of launch: This is the first parameter with which we can weigh the two coins to begin to see some differences. While Bitcoin was launched in 2009, Ethereum came to the market around 2015.
- Market capitalization: Presently, Bitcoin is the largest crypto based on market cap. Currently, it has a market cap of about $800 billion. And it is closely followed by Ethereum which is the second-largest crypto with a market cap of around $350 billion.
- Price growth in 2021: This year has been a wonderful year in the crypto industry. Virtually all coins experienced significant growth including Bitcoin and Ethereum. Bitcoin had a price growth of almost 50% and Ethereum grew by more than 300%.
- Consensus algorithm: This is the mechanism running the crypto platform. Bitcoin and Ethereum presently use Proof of Work, but in the recent upgrade of Ethereum, there is a plan to switch from Proof of Work to Proof of Stake which is more environmentally friendly and allows for easy scalability.
What Bitcoin and Ethereum Have In Common
There are quite a number of similarities between the two crypto giants. Both of them are cryptocurrencies built using blockchain technology and are both available on all major crypto apps and exchanges. Also, the two of them use the Poof of Work (PoW) algorithm to mine new coins and add new blocks to their blockchains. Mining is used to validate transactions on their networks.
This model of consensus algorithm is a challenge to both of them because of the amount of energy it consumes. Studies have shown that lots of energy are used for mining processes of the two coins – energy large enough to even power a whole country for months. In addition to that, the carbon footprint generated by the two cryptos in mining is also a thing of concern. While Ethereum generates about 34.58 metric tons of carbon dioxide annually, Bitcoin produces as much as 77.89.
The two coins are also slow in processing transactions. Although Ethereum seems to be a bit faster than Bitcoin, it can only process about 30 transactions per second. Compared to the likes of Solana and Cardano which are the fastest cryptos in the space, then we will understand that both Ethereum and Bitcoin are really slow. Solana presently processes at least 50, 000 transactions per second. You can read some posts comparing Ethereum, Cardano, and Solana to better understand how these cryptos compare.
What Sets Them Apart
Now that we know some of the similarities that exist between Bitcoin and Ethereum, let’s take a look at some of their differences. Chief among these differences is purpose. Yes, the two have a distinctive purpose. Bitcoin is purely a digital currency that has earned so much popularity as a store of value – think gold. Bitcoin is widely accepted as a payment method – more than every other crypto and has consistently had the highest trading volume.
On the other hand, Ethereum is not known to be accepted as a payment method but it is popular for its smart contract functionality, which makes it a highly programmable platform. Smart contract is the future of cryptocurrency and blockchain. It is presently opening up several amazing possibilities in the crypto space.
Smart contracts are tiny pieces of code that self-execute without the involvement of any third party. This unique feature of Ethereum allows developers to use the Ethereum platform to develop various applications and other cryptocurrencies. Smart contracts are presently the core of the decentralized finance (DeFi) industry.
While some new cryptos in the space are also coming up with their own smart contracts, they definitely can’t match up with what Ethereum offers. They just can’t compete with the dominance Ethereum has in the space.
Therefore, people refer to Bitcoin as the digital gold and Ethereum as the digital silver. But it will be more appropriate to liking Bitcoin to a bank vault, and Ethereum as the bank staff who go in and out to serve customers on daily basis. Ethereum is the engine that powers most decentralized applications today while Bitcoin reigns as a secure store of value.
A Glimpse into the Future
Just like the fiat currency industry is daily improving to make sure functionality and security are guaranteed, especially in online banking, there are developments also happening in the crypto space. Bitcoin and Ethereum are constantly developing. A recent study shows that crypto developers’ activity is increasing on both networks every year. As of 2020, Ethereum has a total number of 2,325 monthly active developers on its network, and Bitcoin has about 361.
Although the gap between the two may be significant, Bitcoin still comes as the second in terms of overall crypto development activity. There have been a couple of challenges facing Ethereum, but it is also working on a major upgrade – the Ethereum 2.0 upgrade to address these challenges.
With the upgrade, the Ethereum network will be better, faster, and will be able to meet the demands of more users. At the same time, there is going to be a decrease in transaction costs as it switches from proof of work algorithm to proof of stake, and does away with mining. However, this upgrade is still in progress and won’t be completed until 2022.
Bitcoin too is making some amazing developments, although it is not making a complete change to its system. The recent taproot upgrade promises to improve the scalability of the network and the coming Lightning Network promises to help the network achieve cheaper and faster transactions.
Will Ethereum Overtake Bitcoin?
Bitcoin is presently the king of the cryptos, and many people believe that Ethereum will eventually overtake it soon. Well, the truth is that both coins actually complement each other, so it is not a matter of who wins or who doesn’t. So whether you invest in Bitcoin or Ethereum will depend on your investment strategy and risk tolerance. So, do your research and know which of them better fits into your portfolio.