Anyone who has heard the term Crypto must have heard about “ Bitcoin(BTC)” and “Ethereum(ETH)”. It is almost impossible to not think about these two coins when we think about Crypto. Both coins are the most widely bought investment options in the Crypto Market. Their applications have been path-breaking and are often considered the aces of the Crypto Industry. They have changed the way we think about money, computing, and decentralisation.
Bitcoin and Ethereum have a combined market share of greater than 50% at the time of writing. Today, let us pit them against each other and discuss which Crypto could be a better option for you as an Investor.
What is Bitcoin(BTC)
Bitcoin was invented in 2009 by Satoshi Nakamoto. It is the first Crypto to be ever launched. The 2008 Global Financial Crisis is said to be the catalyst for the invention of Bitcoin. The downtrend of several economies in the wake of the 2008 crisis called for a decentralised solution to money.
Bitcoin was created as an alternative to Fiat currencies. It was proposed as a medium of exchange and a store of wealth. Fiat currencies are not backed by a commodity and this allows governments to print money at will, thereby devaluing the same. A currency that is finite, valuable, and non-corruptible is what Bitcoin is. No centralised entity can devalue Bitcoin, and its price is controlled by the supply-demand dynamics of the market.
Bitcoin runs on an open source ledger known as the Bitcoin Blockchain. All transactions on the Bitcoin Blockchain can be viewed by anyone around the world. Once the transactions are recorded, they can never be erased. The Blockchain is shared across the globe by various mining centres known as nodes. Every transaction on the Blockchain is verified by the miners, and hence the system is free from corruption.
What is Ethereum(ETH)
Ether(ETH) is the most famous Altcoin founded by Vitalik Buterin in 2014. It received widespread fame in a short period, thanks to its game-changing applications. It currently ranks 2nd in terms of Market capitalization next to Bitcoin. Ether runs on the Ethereum blockchain which has applications beyond just being a form of currency. While there are few products and services which can be purchased using Ether, it was invented to enable Smart Contract agreements.
Smart contracts are code-enabled agreements that do not require third-party verification. The contracts operate based on predefined rules agreed upon by participants in the transaction. Applications of Ethereum are wide-ranging. Decentralised Finance, Web 3.0, and NFT minting are some of the widely known applications of Ethereum ( ETH)
Several famous platforms such as Open sea and Metamask use the Ethereum Blockchain network for transactions. Ethereum has been in the news lately because of its newest upgrade known as the Ethereum Merge, which is said to make the Blockchain hyper-efficient by transitioning from a Proof Of Work to a Proof of Stake consensus model.
Read more: Proof of Work vs Proof of Stake
Difference between Bitcoin (BTC) and Ethereum(ETH)
Circulating Volume
The maximum circulating BTC volume is 21 million coins. Currently, 19 million BTC are in circulation. The last Bitcoin is going to be mined in the year 2140. ETH on the other hand does not have a cap for its circulating supply. Currently, ETH volume is 121 million. This makes BTC a scarcity-driven store of wealth similar to gold, whereas ETH is an application-oriented Crypto coin.
Market Capitalization
At the time of writing BTC has a total market capitalization of $ 454 billion and ETH has a market capitalization of $229 billion. They currently rank 1st and 2nd respectively in the Crypto market.
Mining process
BTC is mined through a process known as Proof of Work ( POW). ETH also works on a Proof of Work model at the time of writing. ETH is soon set to move to a Proof of Stake ( POS) model. This event is known as the Ethereum Merge. It is one of the most anticipated events in the Crypto industry for 2022.
Transaction Fee
This fee shouldn’t be confused with the transaction fee which Crypto exchanges charge. In this context, a transaction fee is paid to miners as a reward for mining Cryptos. It is an essential component of the network as it is the incentive for miners to verify transactions. Transaction fees also act as a firewall to avoid spammers on the Blockchain networks.
Transaction fees are subject to the Block size, transaction throughput, and network congestion. As of August 16th, Bitcoin transaction fee is $1.103 and Ethereum transaction fee is $ 0.7633.
Purpose of Invention
The primary purpose of Bitcoin is to be an alternative source of money. The idea is rooted in the belief that decentralised networks work better as opposed to centralised monetary systems. Ethereum ( ETH) on the other hand is not seen as an alternative source of money. Rather, it facilitates smart contracts and Decentralised applications ( D-Apps).
Applications
BTC’s main purpose is to be an alternative currency. Its blockchain protocols do not allow applications to be run on it. Rather, its blockchain stores the Bitcoin transaction details that have occurred. Ethereum on the other hand has plenty of applications. ETH is arguably the most widely applicable blockchain in the Crypto industry at the moment. Some of the applications which use the Ethereum blockchain are :
Metamask – A web extension that connects you to the Ethereum Network
Brave Browser – A new-age Web browser that gives high priority to user privacy and blocks all third-party applications
Ethereum Name Service – ENS Helps users create a personalised ETH wallet address
Rarible – A community-owned NFT marketplace
The above-mentioned are a few of the 1000s of applications that run on the Ethereum Blockchain.
Final thoughts
It is surely tough to take a call between Bitcoin and Ethereum. If you are someone who believes that BTC is the future of money, then Bitcoin could be a better choice to invest in. BTC applications could range from everyday transactions to simplifying the Forex markets. Ethereum on the other hand is a clear winner in terms of building new ecosystems. If you are bullish about Web 3.0, and Decentralised finance apps ETH could be more suited. With Ethereum Merge right around the corner, the entire Crypto world is hoping that it turns out well. As investors, it is important to note that a thorough understanding of the coins is needed before you take a buy or sell decision.
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