Bitcoin and Ethereum have led the dash to make digital cash the global choice of currency for anyone with access to the internet for years – but if you want to invest in cryptocurrency, which should you pick?
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It’s a pay your money and make your choice scenario because everyone has different reasons for investing and their own threshold for how much pain their attitude to risk inflicts.
Read on for a low-down on the two competing cryptocurrencies and some thoughts from professional investors on Bitcoin and Ether.
Bitcoin and Ether – the crypto term for the token – are the two giants of the cryptocurrency world, but they are as different as chalk and cheese.
If you are an experienced crypto investor you will know that with the chance of scooping a big profit with Bitcoin and Ether comes with the risk that you could lose all your money.
Bitcoin And Ether – Digital Gold v Smart Contracts
Bitcoin and Ether are two different offerings that both come with their plus and minus points.
The main distinction between Bitcoin and Ether is intended use. Bitcoin is a totally digital currency that has gained popularity as a value store – similar to how gold retains value over time. It is the most commonly accepted form of crypto payment and has the biggest trade volume.
Additionally, Bitcoin has the advantage of scarcity and adoption rate over Ether. No more than 21 million Bitcoins will be mined. As the Bitcoin supply is limited, growing demand is all that is needed to increase each coin’s value.
In contrast, Ethereum’s smart contract capabilities enable a programmable blockchain platform to expand functionality
Ether’s value is not tied to scarcity or current applications. Investors who put their money into Ether do so in the hope that the technology will reach full potential.
DeFi Defines Ether’s Future
The key to the door is DeFi – decentralised finance – which bypasses traditional financial institutions by placing financial services on a blockchain.
Vitalik Buterin launched Ethereum in 2015. He was active in the blockchain space for a long time, but soon realized that Bitcoin was too limited. Comparing Bitcoin to a pocket calculator that does one thing well, Ethereum is like a smartphone that can run smart contracts and decentralized applications.
Smart contracts are small, self-executing bits of code that let developers create applications and other cryptocurrencies on the Ethereum network. Smart contracts are critical for a variety of industries, including DeFi business.
Ethereum currently supports over 200,000 ERC tokens, with several of them ranking among the top 100 largest cryptocurrencies. Numerous cryptocurrencies are present in the DeFi ecosystem built on the Ethereum blockchain.
Bitcoin is fighting back with the latest Taproot upgrade. Taproot adds smart contract functionality to the Bitcoin blockchain. It’s too soon to know how well Taproot will perform against Ethereum, but the finish line is still way off. Although developers are starting to design smart contracts for Bitcoin, Ethereum has swarms of developers already active and is years ahead in the race.
Since August 2020, the total value locked in DeFi has increased dramatically.
Decentralized finance appears to be a viable competitor to traditional centralized finance, with Ethereum playing a critical role in drawing investors and driving the price higher. As DeFi grows in size, the greater the demand for it, the more valuable it becomes, and the greater the increase in the price of Ethereum.
Ethereum Challenges
- Bitcoin Average Cost Per Transaction: 173.02 USD/tx
- Bitcoin Transactions Per Day: 301297.0
- Ethereum Average Transaction Fee: 4.719 USD/tx
- Ethereum Transactions Per Day: 1.248M
Compared to some newer crypto systems, Ethereum is a sluggish network. Although it is not as slow as Bitcoin, Ether miners earn less, by a large margin.
The average Ethereum user completes several transactions per day and sometimes several per hour.
The average Bitcoin user completes a couple per day.
This causes Ethereum transactions to take an inordinate amount of time, increases transaction fees, and results in lost transactions. This infuriates some users, who wish they could use a different smart contract solution.
Gas fees are another issue for Ethereum. Gas fees are the charge the Ethereum network makes to users to complete a transaction or execute a contract on the platform.
Due to Ethereum’s limited transaction capacity of 15 per second, gas fees increase if the network is congested. On November 9, the average network fee for a transaction reached USD$62.
To tackle this weak spot, Buterin has proposed a new Ethereum Improvement Proposal (EIP) that would address the network’s gas charge grumbling by imposing a limit on total transaction call data, hence lowering transaction gas costs.
According to BitMEX Research, a market research organization, the update might result in gas fees reducing fivefold.
The event the crypto world is waiting for is ETH 2.0, an update on the way which will increase Ethereum’s transaction rate to 100,000 a second.
What The Experts Say
Some pundits predict the release could trigger a massive surge in the value of Ether.
JP Morgan, America’s largest bank, believes Ethereum also tips the balance against Bitcoin should interest rates start to rise.
“Ethereum’s growing number of applications—peer-to-peer lending, non-fungible tokens (NFTs), gaming, and stablecoins—should help it sustain its value in an environment of rising interest rates,” said the bank.
However, Bitcoin’s role as a value store goes against the crypto when interest rates and bond yields float higher as investors have the option of taking low-risk returns rather than banking on the volatility of the crypto.
Goldman Sachs, another significant Ethereum investor, believes the crypto is growing faster than Bitcoin and predicts the price will double by year end, after rising more than 500 percent in 2021. Coinbase, the USA’s largest cryptocurrency exchange, is well-positioned to profit from an increase in Ethereum by charging a fee on each transaction passing through the exchange.
Coinbase trades numerous cryptocurrencies based on the Ethereum blockchain, which implies that betting on Coinbase is effectively betting on Ethereum. Their respective futures appear inextricably entwined.
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