Bitcoin or Ethereum: Which Is the Better Buy? The Motley Fool

Each week, you’ll get a crash course on the biggest issues to make your next financial decision the right one. Definitely not as a beginner, according to the experts we’ve talked to. Altcoins are even more unpredictable than the already-volatile Bitcoin and Ethereum. Some believe Ethereum will eventually overtake Bitcoin, while others hold that Bitcoin will always be the king of the cryptos. The truth is that the two coins actually complement each other — it isn’t an either/or scenario. The system faces heavy network congestion and high fees, and is not currently scaling well to meet the huge demand.

  • Bitcoin’s widespread adoption and resistance to change is its main selling point.
  • Overall, Bitcoin and Ethereum are both likely to dominate the crypto landscape for some time to come.
  • Thousands of cryptocurrencies exist, and literally any number could be created using similar blockchain technology.
  • The original crypto is down by more than 50% since the start of the year, and has only recently rallied from its June low of $17,708.
  • At Bankrate we strive to help you make smarter financial decisions.
  • The former is the first cryptocurrency, designed as a store of value and medium of exchange—but today mostly employed as a speculative risk asset.
  • Bitcoin’s average transaction fee ranged approximately between 74 cents and $3.5 in the same time period.

Ethereum is an alternative cryptocurrency, with different goals and design features than Bitcoin. Ethereum is more accurately viewed as a platform for executing financial smart contracts. Bitcoin is a pure digital currency which has become popular as a store of value — something, like gold, meant to maintain its worth over time. It is the most-accepted digital currency for payment and consistently has the highest trading volume.

Smart contracts are tiny pieces of self-executing code that allow developers to build applications and other cryptocurrencies on Ethereum’s network. Smart contracts are crucial for, among other things, the DeFi industry. From a long-term perspective, Bitcoin is also attractive as a form of online payment. Amid all the talk about a “cashless society” and the introduction of new central bank digital currencies on a global basis, there’s clearly growing demand for digital currencies.

As the bitcoin market has grown, it has begun to compete with and integrate into traditional financial products. Bitcoin’s network effect has grown to compete with that of gold and fiat currency. Additionally, most new projects on Ethereum launch their own new token.

How Do We Calculate the Cryptocurrency Market Cap?

It remains anyone’s guess which cryptocurrency and blockchain will stand the test of time—perhaps they both will. But one thing is certain—both have induced much-needed discussions about financial systems worldwide. Over the years, the virtual, decentralized currency concept has gained acceptance among regulators and government bodies. Investments are subject to market risk, including the loss of principal. Ethereum is such a flexible platform that some people are actually starting to hold their Bitcoin on the Ethereum chain instead of on the Bitcoin blockchain. This is known as a “wrapped bitcoin.” Ether cannot be held on the Bitcoin blockchain.

Ethereum vs Bitcoin the two cryptocurrencies compared

Although the timing can vary depending on the network’s traffic, the average confirmation time is still significantly faster than Bitcoin. Litecoin’s proof-of-work system is similar to what Bitcoin uses, although it does require more memory from multiple people for it to function. The system means that people still need to be actively mining for the currency, however, the amount of power required won’t be as immense as Bitcoin. ProtocolsEthereum and Bitcoin operate on separate protocols and their processes are not related to one another. This means that some transactions that may be allowed on one platform may not be allowed on another.

Two cryptocurrencies with plenty of differences

Today, Ethereum’s market cap is around 10% of Bitcoin’s total market cap. Ethereum is the brainchild of Vitalik Buterin, who handled its initial development along with 3 other skilled developers. They were able to pick and choose ideas from the development of Bitcoin and altcoins and introduce new ideas of their own. Bitcoin has a codebase that benefits from 99 Core contributors and several alternative implementations. With ‘hundreds of billions in assets on the line, they take a conservative approach to development.

Let’s take a look at what makes these projects similar, different and ultimately great in their own respect. Fees for transactions are cheaper when transferring the cryptocurrency, and more expensive when transferring tokens. Because Ethereum is a distributed computing platform with finite computational resources, there must be a way to allocate and limit their use.

Ethereum, as noted above, was released in 2015 by a researcher and programmer named Vitalik Buterin. He used the concepts of blockchain and Bitcoin and improved upon the platform, providing a lot more functionality. Buterin created the Ethereum platform for distributed applications and smart contracts.

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Players have an opportunity to generate revenue by giving their time and playing these games. Ethereum’s proof-of-stake platform requires many miners to validate transactions and agree on the current state of the network. People will earn their stakes when they validate secure blocks and attest to the ones that currently exist. The practice allows equal opportunity for everyone to receive mining rewards. Litecoin and Ethereum are both popular for their short transaction times. Litecoin is designed to be somewhat similar to Bitcoin, while Ethereum is more focused on developing decentralized apps, or dApps for short.

Twitter is an example of a centralised app, with users relying on it as an intermediary to send and receive messages. As such, users play by the rules it enforces and the algorithm it uses to control content. Bitcoin and Ethereum are fundamentally different because the former was designed to enable decentralised finance while the latter was designed to also enable apps and contracts. Twitter is an example of a centralized app, with users relying on it as an intermediary to send and receive messages. As such, users play by the rules, it enforces and the algorithm it uses to control content. A smart contract is a digital agreement between two or more parties that will execute itself once certain conditions are met.


Despite the massive drop that both experienced recently, it can be said that the price of both has increased by a good percentage. At NextAdvisor we’re firm believers in transparency and editorial independence. Editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by our partners.

Each new block contains numerous state changes, which are synchronized across the nodes of the Ethereum network. Scalability determines the network’s capacity, including the number of nodes in the network, the number of transactions that the network can process, how fast the network can process and so on. The term scalability is sometimes confusing because Bitcoin’s blockchain is scalable upon new participants joining the network.

Decentralised payments vs. decentralised software

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Ethereum vs Bitcoin the two cryptocurrencies compared

However, by late August 2022, Bitcoin’s market share had declined to 39.6%. With Bitcoin, the idea of the cryptocurrency, or money without any ethereum vs bitcoin physical form, was born. Bitcoin is primarily a store of value and medium of exchange; Ethereum is seen as a general purpose blockchain.

Transfer Transactions vs Smart Contract Interaction Transactions

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. For example, EtherScan, Blocknative Gas Fee Estimator or Cryptoneur for ethereum transactions.

Ethereum vs Bitcoin the two cryptocurrencies compared

Removing the signature data for each transaction releases more space and capacity for more transactions to be contained in Bitcoin’s 1MB-storage blocks. We calculate the total cryptocurrency market capitalization as the sum of all cryptocurrencies listed on the site. The dApps created on the Ethereum blockchain use Ether tokens that come from the chain. While Ether tokens can also be used as a currency, their main focus is to power dApp creation. The proof-of-work mechanism in Litecoin uses a scrypt-based process that does not require as much computing power to manage. In addition, the scrypt function requires more memory from additional users, allowing the mining process to spread out among more people.

The time it takes to mine a block is different for each cryptocurrency. Bitcoin takes about 10 minutes, while others do it almost instantly. The key factor is the way in which blocks are verified by the network.

Segwit is a protocol upgrade for Bitcoin that changes the way and structure of how data is stored. The original intention of segwit was to solve the transaction malleability problem. The digital signature that verifies the ownership and availability of the sender’s funds takes up a lot of space in a transaction. Therefore, removing it would allow more transactions to be included in one block.