Bitcoin is without a doubt the market leader of cryptocurrencies having a valuation of the outstanding Bitcoin capped at $150 billion. While the total market capitalization for all cryptocurrencies is $230 billion, Ethereum comes as the second most valuable cryptocurrency with a market value capped at $18 billion.
Bitcoin and Ethereum are two of the most popular cryptocurrencies but the similarity ends there, they are two different products created for different purposes and have different internal dynamics. While in the long run, Bitcoin is a better investment but there’s so much development with Ethereum that you can’t ignore.
Before choosing one over the other it is important to have a good understanding of differences between the two to make a smart investment decision.
Advantages and Disadvantages of Bitcoin
Some of the advantages of Bitcoin are: It is fast and have lower transaction fees, Bitcoin has increasingly wider acceptance and it is independent of government and political influence.
While the disadvantages of Bitcoin also need to be talked about as it is highly volatile rendering it is unsuitable for long term investment. Bitcoin has immutability of transaction means nobody can reverse the transaction once done in Bitcoin. There is low widespread adoption of Bitcoin and it is without any regulation as there is obscurity over the stance that the governments around the world have over Bitcoin.
Advantages and Disadvantages of Ethereum
Ethereum was launched in 2015 by Vitalik Buterin. It is not a currency but a platform with its token Ether. It has an impressive record of holding its ground over other cryptocurrencies and maintaining its second position till now, though it still has a long way to go and age further for it to be time tested.
There are advantages with Ethereum such as it is backed by notable and influential backers and that its collaboration ranges from healthcare to the banking sector. It has a greater regulatory framework because the US Securities and Exchange Commission doesn’t consider it as secure. Ethereum uses the PoS (Proof of Stake) Consensus algorithm and the cryptography to make the system impermeable, thus keeping it safe from frauds and attacks, there is immutability in transactions where the blockchain data cannot be modified by third parties.
There are several disadvantages with Ethereum as well such as it is highly volatile. It has scalability issues such as the number of transactions per second. The popularity of Ethereum is dependent on the fame of the founder which means it can have an adverse effect on the development of Ethereum if anything happens to the founder. There is competition in the market with new and emerging cryptocurrencies who are learning lessons from the flaws of Ethereum.
Which is a better investment?
Though both are top cryptocurrencies, their purpose and scope differ. While Bitcoin was created to solve payments system problems, Ethereum was into legal contracts and its reputation lies in programmable blockchain. The answer to the question which one is better investment lies in the simplicity and less surface area for attack or fraud. Bitcoin is the safer bet due to its simplicity that is only meant to solve payment issues. Unlike Ethereum, you can’t build things on top of Bitcoin.
At the end of the day, they both have different markets and it is up to the investor to realize as to how much they would apportion their investment to Bitcoin and Ethereum. While Bitcoin has been around for 10 years, it is a more time tested investment compared to Ethereum. Another drawback with Ethereum is its larger surface area of attacks from frauds, bugs, and black swan events.
There are lessons learned too in the investment circle in these years of investment in cryptocurrencies. So, it can be said that if you seek higher returns with higher risks, you can invest in Ethereum where the things that you build on top of it are virtually endless. While it cannot be denied that both are good investment options with their own pros and cons. The only thing that is required is making an informed decision before investing between the two.