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Bitcoin vs Ethereum: The Good, Bad and Ugly

Every day, nearly 70% of the trading volume goes to Bitcoin and Ethereum. If you include their ecosystems, 80% to 90%. As for the rest, even unrelated projects are influenced by these market leaders.

If you’re looking for blue-chip cryptocurrencies, you buy Bitcoin and Ethereum.

Now, the million-dollar question: Should you invest in Bitcoin vs Ethereum?

It’s ironic how similar they look from the trading perspective. BTC and ETH make 60% of the average global market cap and a combined 60% of market dominance. But when it comes to fundamental analysis, other than both being blockchains one has little to do with the other.

How are such different projects close competitors? Could Ethereum flip Bitcoin? Could we see a new “Bitcoin” outperform both?

Let’s compare Bitcoin vs Ethereum to find out.

BTC Fundamentals

Bitcoin is the first popularized cryptocurrency, which is why it has the largest market capitalization and trading volume. The anonymous creator (known as Satoshi Nakamoto) designed this public-blockchain currency as an alternative payment system. A revolutionary achievement at the time that now means very little, given that 1000s of tokens have this feature.

Still, Bitcoin has the highest adoption by far. It’s also the most stable cryptocurrency (arguably more than under-collateralized stablecoins) because of its market size and secure technology. You can now use Bitcoin on exchanges, BTC ATMs, online stores, payment service providers, and even local businesses.

It’s the first successful use case of proof-of-work (PoW).

PoW is a consensus algorithm used to decide how and who should verify transaction blocks. The Bitcoin algorithm requires validators (computers) to solve a mathematical puzzle via trial and error. The first validator that gives an approximate solution wins the block and updates the official blockchain.

In PoW, we call this process Bitcoin mining. The winning validator earns rewards for every block (e.g., 12.5 BTC plus transaction fees), which adds to the circulating token supply. There are currently less than 21M Bitcoins, which is the maximum supply.

As we approach that number, mining becomes more expensive (just as it does for cyber-attackers). Bitcoin consumes +0.55% of the global electricity production. So while PoW is safer, it’s nowhere as efficient as Ethereum’s model.

ETH Fundamentals

If Bitcoin is the first blockchain payment system, Ethereum is the first utility token. Trading Bitcoin is sending money. Trading Ethereum is leveraging developer features.

Simply put, Ethereum helps to build other crypto projects. Developers no longer need to design all blockchain infrastructure. They can borrow features from the ETH blockchain by paying ETH (AKA gas fees). Vitalik Buterin launched Ethereum in 2015 and is the smart-contract pioneer.

Smart contracts are programs that integrate blockchain features (like payments) for any application. Because it’s autonomous code, smart contracts are faster, cheaper, and safer than traditional 3rd-parties. Not only developers can build on Ethereum but build Ethereum itself because of Proof-of-Stake (PoS).

The PoS is a probabilistic consensus algorithm based on token contribution (instead of processing power like PoW). It involves buying Ethereum and locking the amount for a time period (AKA staking). If you stake 50% of ETH’s total-value-locked (TVL), you get a ~50% chance of winning the block.

High TVLs make cyberattacks more expensive and unlikely, which is why users receive interest rewards when staking large amounts for months.

As a developer-focused blockchain, Ethereum has created the largest dApp marketplace (decentralized applications) to date. Ethereum isn’t popular because it’s especially useful, but because it has the most use cases: exchanges, DAOs, games, NFT marketplaces, and infrastructure extensions (better known as layer-2 solutions).

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