Ethereum vs Bitcoin: Which is the Better Investment?

Bitcoin and Ethereum are the two largest cryptocurrencies based on market capitalization. Both have become instruments for investment, trading, and even payment.

Ethereum and Bitcoin each have their own uses, advantages, and disadvantages, so investors need to understand which one is more suitable for them.

This article will discuss the differences between Ethereum and Bitcoin, how they work, their uses, as well as a comparison of Ethereum and Bitcoin for various needs. Know the differences between Ethereum and Bitcoin before buying!

Brief Summary:

1. Bitcoin is a cryptocurrency intended as an alternative digital payment method.
2. Ethereum is a blockchain that plays a role in the development of dApps. Ethereum's native token is Ether.
3. For beginners, Ethereum is more flexible and more widely used in DeFi. However, Bitcoin remains the most well-known name and is a must-know for beginner investors.

History of Ethereum and Bitcoin

Which came first, Ethereum or Bitcoin? The answer is Bitcoin, the world's first cryptocurrency. Here is a brief history of Bitcoin and Ethereum..

The History of Bitcoin

Bitcoin is a cryptocurrency used for transactions that are not controlled by any single party, unlike cash, which is managed by central banks. Bitcoin operates on its own blockchain, the Bitcoin blockchain.

1. 2008: A letter titled Bitcoin: A Peer-to-Peer Electronic Cash System, written by someone named Satoshi Nakamoto, was sent to a mailing list discussing cryptography. The identity of Satoshi Nakamoto remains unknown to this day.
2. 2009: The Bitcoin software was made available to the public, and Bitcoin mining began.
3. 2010: Bitcoin was sold for the first time. 10,000 BTC were exchanged for two pizzas.
4. 2011: Bitcoin's popularity increased, and other cryptocurrencies began to emerge.
5. 2017: The value of Bitcoin reached $10,000 and continues to rise today.

The History of Ethereum

Ethereum is a decentralized blockchain that utilizes the native token Ether, the second-largest cryptocurrency by market capitalization.

Ethereum was born from the vision of programmer Vitalik Buterin, who sought to expand the applications of blockchain technology. Bitcoin was created for financial purposes, but Ethereum serves as a platform for various dApps (Decentralized Apps). Here is a brief history of Ethereum.

1. 2013: Buterin published Ethereum’s whitepaper.
2. 2014: Ethereum was announced at The North American Bitcoin Conference in Miami, attracting many developers. At the end of the year, Ethereum held its first crowdfunding campaign.
3. 2015: The first version of Ethereum, Ethereum 1.0 (also known as Frontier), was launched. Its two basic functions were mining Ether and executing smart contracts.
4. 2016-2017: Ethereum developed infrastructure to address security issues.
5. 2017-2020: Ethereum’s expansion and growth phase.
6. 2020: The launch of Ethereum 2.0, or Serenity, which enhances the network's speed, efficiency, and scalability.

How Ethereum and Bitcoin Work

Although both are cryptocurrencies on the blockchain, the differences between Ethereum and Bitcoin can be seen in how they work.

How Ethereum Works

1. Blockchain: The Ethereum blockchain is decentralized and secured with a Proof-of-Stake consensus.
2. Staking: Locking a certain amount of Ether to participate in Proof-of-Stake consensus. Validators lock up a minimum of 32 ETH as collateral to the network and can earn additional rewards. They can also be penalized for malicious actions.
3. Smart contracts: Commands in the blockchain that are automatically executed when conditions are met.
4. Decentralized Finance: Ethereum is not just a blockchain for storing Ether as a currency. This blockchain is a platform for various DeFi applications and protocols.

How Bitcoin Works

1. Blockchain: The Bitcoin blockchain is a database distributed across various computers and systems (nodes) in the network. All Bitcoin transactions are recorded on the blockchain and secured with encryption and Proof-of-Work from miners.
2. Block: The blockchain is made up of files called blocks. They contain transaction data and data from previous blocks. The blockchain cannot be modified because each block is connected to the previous one.
3. Mining: The process of creating new blocks and validating transactions.
4. Halving: The concept of cutting mining rewards in half every four years.
5. Wallet: Wallets are used to store, manage, and transact using purchased Bitcoin. However, the Bitcoin itself is still stored on the blockchain. Wallets are simply platforms that allow users to use their Bitcoin.
6. Key: A public key is a transaction address for receiving Bitcoin, while a private key is used to access purchased Bitcoin.

Uses of Ethereum and Bitcoin

One of the main differences between Ethereum and Bitcoin is their use cases. Although both are cryptocurrencies, Ethereum and Bitcoin were created for different purposes.

Use Case of Ethereum

1. Payment Method: Ether can be used to pay gas fees or platform fees on exchanges or wallets on the Ethereum blockchain.
2. Decentralized Autonomous Organization (DAO): An organization without a central authority, where all decisions are made after voting and executed by smart contracts.
3. Decentralized Finance: Ethereum is a platform where various DeFi applications are built.
4. Digital Identity: Users can create decentralized digital identities. All information is stored on the Ethereum blockchain, which is secure, immutable, and cannot be accessed without authorization.
5. Tokenization: Real-world assets can be tokenized, making them easier to trade.

Use Cases of Bitcoin

1. Everyday Transactions: Various merchants are starting to accept Bitcoin as a payment method, such as for purchasing goods and services, paying subscription fees, buying gift cards, and even making donations.
2. Investment: Bitcoin is often dubbed digital gold due to its limited supply. Bitcoin can be held for long-term investment or used in trading to profit from price shifts.
3. International Money Transfers: Fiat currency transfers are slow and incur high fees, but Bitcoin can be used for fast and inexpensive international money transfers.
4. Financial Services: There are various DeFi platforms for lending and borrowing Bitcoin.
5. Wealth Preservation: Bitcoin can be a long-term investment option that is protected from inflation. Bitcoin can also be passed on to future generations.

Ethereum vs Bitcoin Performance Comparison

The table below summarizes the differences between Ethereum and Bitcoin.

Ethereum vs Bitcoin: Which is Better for Beginners?

The concept of Bitcoin as an alternative payment method is easier for beginners to understand, but Ethereum is more versatile for novice users because it is more widely used in modern crypto services.

Both are still suitable for beginners, but their purposes are different. Bitcoin is ideal for beginners who:

1. Are just starting to use crypto.
2. Are looking for a cryptocurrency that is accepted by various platforms.
3. Do not plan to use crypto for extensive interaction with blockchain or Web3 applications.

Meanwhile, Ethereum is better suited for beginners who:

1. Want to explore crypto-powered applications and tools.
2. Need fast transactions with lower fees.
3. Want to use crypto for more than just saving.

Conclusion

Bitcoin and Ethereum are the two cryptocurrencies with the largest market capitalization today. However, Bitcoin is created as a decentralized digital currency, while Ethereum facilitates the creation of various dApps in the Web3 ecosystem.

For beginners, Ethereum is a more versatile starting point because its payment fees are lower, transaction times are faster, and its usage is more widespread. However, Bitcoin remains the most well-known name and plays a significant role for anyone new to the world of cryptocurrency.

Before choosing Bitcoin or Ethereum for investment, it is important to conduct a thorough analysis of the tokens. Learn how through the article Crypto Analysis for Beginners: Fundamental vs Technical.