This article compares the cryptocurrencies ETH and BTC, looking at their differences, pros and cons, and if they constitute good investments.
Ethereum (ETH) vs. Bitcoin (BTC)
Ethereum and Bitcoin are the two most widely-used cryptocurrencies globally. They’re programmed differently, e.g., Ethereum uses the proof-of-stake consensus mechanism, while Bitcoin uses proof-of-work. This article will help you understand the differences between them.
ETH vs. BTC Chart
|Creator||Vitalik Buterin and Gavin Wood||Satoshi Nakamoto|
|Launch date||July 30, 2015||January 3, 2009|
|Market capitalization||$148 billion||$317 billion|
|Supply||122 million tokens||19 million tokens|
|Hash Rate||None (doesn’t rely on mining)||255MH/s|
|Fees||Varying gas fees||Varying gas fees|
|Block time||10 to 19 seconds||10 minutes|
|Future token issuance||Maximum of 18 million new tokens every year||Maximum supply of 21 million tokens|
What is Bitcoin?Expand to learn more
Bitcoin is a decentralized digital currency operating on a blockchain. The blockchain is a public ledger that records all transactions on the Bitcoin network. Anyone with a Bitcoin wallet address can send tokens to another address or receive tokens from another address.
Bitcoin was conceptualized and created by Satoshi Nakamoto, a pseudonym for a person whose real identity remains unknown. The first block for Bitcoin was created in January 2009, and the first reported real-world financial transaction using Bitcoin took place in May 2010 when a Florida man paid 10,000 BTC for two boxes of pizzas.
As of its first reported transaction, one Bitcoin was worth roughly a fourth of a cent. A few years after, millions of people began adopting the token, and demand shot up, driving the price of a single Bitcoin to an all-time high of over $67,000 in 2021. However, the 2022 crypto market crash has seen the price of Bitcoin slump to just over $16,000.
Pros and Cons of Investing in Bitcoin
- Decentralized – no single point of failure
- Highly liquid market
- Faster transactions
- High transaction fees if there’s too much demand on the network
- Requires a lot of electrical energy to mine
- Very volatile
What is Ethereum?Expand to learn more
ETH is a decentralized token that operates using smart contracts. You can use it to pay for goods and services or send and receive tokens between different wallet addresses.
Ethereum was conceived in 2013 by a computer programmer named Vitalik Buterin. He teamed up with some other programmers to develop the project, and in 2015, the Ethereum network went live. The blockchain was originally based on the proof-of-work consensus mechanism but transitioned to proof-of-stake in September 2022 in a widely-anticipated event known as "The Merge".
In 2021, ETH hit an all-time high price of $4,811 for one token. As of November 2022, it trades at about $1,200, with a market capitalization of $148 billion.
Pros and Cons of Investing in Ethereum
- Supports global transactions with fast speeds
- Zero network downtime over the past few years
- Decentralized digital currency
- Highly volatile
- Transaction fees can be high depending on network demand
- No maximum supply, so there’s a high risk of inflation
ETH vs. BTC: Similarities and Differences
- Both tokens have high demand and a very liquid market.
- Both are decentralized tokens operating on a public ledger (blockchain).
- Both tokens have millions of users globally.
- Both use alphanumeric strings as wallet addresses and are tradable on crypto exchanges.
- ETH uses the proof-of-stake consensus mechanism, while BTC uses proof-of-work.
- BTC has a maximum supply, while ETH doesn’t.
- BTC relies on mining, while ETH doesn’t.
- The Ethereum blockchain processes transactions significantly faster than the Bitcoin blockchain.
ETH vs. BTC Price
BTC has historically had a much higher market capitalization than Ethereum. Both cryptocurrencies peaked in 2021, a bubbly year for digital assets, but in 2022 have plunged from their all-time highs.
Bitcoin vs. Ethereum Fees
Every Bitcoin transaction includes a gas fee paid to the miners on the network validating the transaction. Likewise, every Ethereum transaction includes gas fees paid to the network’s validators. These fees are separate from what exchanges and brokerages charge to facilitate transactions.
|Gas fee: The minimum number of tokens necessary to execute a transaction, and it varies based on network demand. You can offer additional tips so that validators will prioritize your transaction.||Gas fee: The amount paid to the blockchain to execute a transaction. It varies based on network demand.|
Bitcoin vs. Ethereum Privacy
Using a decentralized exchange, you can purchase Bitcoin or Ethereum without giving up your identity. In contrast, centralized exchanges have know-your-customer (KYC) requirements, so users must provide some form of identity. Yet, even when you use a decentralized exchange, both Ethereum and Bitcoin aren’t fully anonymous, as someone may be able to tie your wallet address to your real-world identity via a platform you transact with.
What is Proof of Work (POW) vs. Proof-of-Stake (POS)?Expand to learn more
Proof of Work and Proof of Stake are the most popular mechanisms for validating transactions on a blockchain, but they work differently.
Proof of Work Proof of Stake Relies on miners whose capacity depends on computational power Relies on stakers whose validating capacity depends on the amount of tokens they stake Miners receive block rewards Stakers receive transaction fees as rewards Requires expensive mining equipment and high energy usage Doesn’t require expensive equipment or high energy usage
The proof-of-work mechanism uses a competitive validation method (solving complex mathematical puzzles) to confirm transactions and add new blocks to the blockchain, while proof of stake uses validators selected at random to confirm transactions and add new blocks.
Bitcoin operates on the proof-of-work mechanism, while Ethereum operates on the proof-of-stake mechanism.
BTC vs. ETH Use Cases
You can use BTC and ETH for different types of transactions or as a store of value.
Top BTC Use Cases
- Store of value: You can use BTC as an alternative currency to store your assets.
- Online Payment: Many online merchants now accept BTC for payment.
- Trading: You can swap BTC for other types of cryptocurrencies on an exchange.
- Dapps: You can use BTC to transact on various decentralized apps, e.g., games and gambling apps.
Top ETH Use Cases
- Store of value: You can also use ETH as a store of value and a hedge against inflation from your local currency, but a stablecoin better fits this purpose.
- Staking: You can stake your ETH on the Ethereum blockchain to earn a percentage of transaction fees paid to the network.
- NFTs: You can use ETH to buy non-fungible tokens (ETH) on various platforms.
- Lending: You can lend your ETH to other users and earn interest via a lending protocol.
ETH vs. BTC Long-Term: Which is a Better Investment?
ETH and BTC can be good long-term investments that’ll yield profits. Yet, be sure to perform your own due diligence before investing in any cryptocurrency. This article isn’t investment advice.
A Case for Investing in ETH
ETH is one of the most traded cryptocurrencies globally. Anyone getting into the crypto markets as a newbie has likely heard of ETH, so may be compelled to buy it. The Ethereum network offers very fast transaction processing speeds compared to many other cryptocurrencies. It’s volatile but not as volatile as most altcoins. The token’s recent shift from the proof-of-work mechanism to proof of stake has attracted more users and increased its demand.
As of late 2022, the crypto market is experiencing a widespread rout that has the value of many tokens to plunge, including ETH. If you believe the market is headed for recovery, it’ll be a smart decision to invest in ETH.
- The token is vulnerable to massive price swings.
- Transaction fees can be very high when there’s significant demand on the network.
- Many smart contract platforms are emerging to compete with Ethereum, so its appeal might fade.
- Crypto wallets and exchanges where you hold ETH are vulnerable to hacking attacks.
A Case for Investing in BTC
BTC is the cryptocurrency with the highest market capitalization. The demand for BTC is enormous across the globe, so there’s always the chance of it increasing in value. Lately, institutional investors have set their sights on the cryptocurrency markets, and BTC is the asset most of them buy. BTC is already huge, yet there’s significant potential for growth in its demand, meaning it could be a good long-term investment.
- BTC is significantly volatile.
- BTC is vulnerable to a 51% attack — a group of miners controlling more than 50% of the network's mining power can connive to disrupt it.
- There’s no central authority to retrieve your BTC if you fall victim to hacking.
- Governments may decide to ban or restrict the use of Bitcoin if it’s affecting their national currencies.
Remember that investing comes with risks. Hence, it's wise to only invest money that you can forfeit without losing much sleep. Always do your own research before investing, and remember that this article doesn't constitute investment advice.
Best Cryptocurrency Exchanges to Buy ETH
1. Coinbase: Best for Ease of Use
Why we picked it: Coinbase makes it easy for residents of the US and many other countries to sign up and trade cryptocurrencies. It’s also a publicly-traded company subject to regulations from the US Securities and Exchange Commission, so the chances of losing your funds due to misuse are lower.
2. Binance: Best for Low Fees
Why we picked it: Binance lets you trade ETH or any other cryptocurrency for much lower fees than competing platforms. It charges a standard fee of 0.1% for crypto trades.
3. Uniswap: Best for DeFi users
Why we picked it: Uniswap is a decentralized exchange where you can trade assets directly with other users and keep full control of your private keys. There’s no central intermediary that can tamper with your ETH tokens when you use Uniswap.
Best Cryptocurrency Exchanges to Buy BTC
1. Crypto.com: Best for Mobile app
Why we picked it: Crypto.com offers an intuitive mobile app that enables users to trade BTC with ease.
2. Kraken: Best for Ease of Use
Why we picked it: Kraken offers an intuitive interface that’s suitable for both newbies and advanced traders.
3. Binance: Best for Low Fees
Why we picked it: Binance lets users trade cryptocurrencies for relatively low fees of 0.1% per trade.
To Sum it Up
BTC and ETH are two of the most popular cryptocurrencies worldwide. They have core differences and similarities, which we’ve outlined for you. We’ve also mentioned the advantages and disadvantages of each token over the other. Both digital assets can be good long-term investments if the crypto market recovers from the 2022 crash, and you can easily buy them using a crypto exchange.
Frequently Asked Questions
What is the main difference in application between Ethereum and Bitcoin?Expand to learn more
BTC is primarily used as a store of value, while ETH is mainly used to transact with applications built on the Ethereum blockchain.
What are some of the similarities between Bitcoin and Ethereum?Expand to learn more
They are both decentralized tokens operating on a transparent public ledger.
Which is better: ETH or BTC?Expand to learn more
There’s no objectively “better” token; they each have their pros and cons. For example, ETH offers much faster transaction speeds, while BTC offers better privacy.
What’s the difference between Ethereum and Bitcoin?Expand to learn more
Ethereum operates on the proof-of-stake consensus mechanism, while BTC operates on the proof-of-work mechanism.
ETH vs. BTC mining: What’s the difference?Expand to learn more
Bitcoin relies on mining, i.e., using computers to solve complex mathematical equations, but Ethereum no longer relies on mining following The Merge in September 2022.