It’s no secret that since the dawn of cryptocurrencies, Bitcoin (BTC) has been the poster child for this new type of money. However, Ethereum (ETH) hasn’t been too far behind, sitting steadily in second place.
In the past few years, ETH has made some serious strides in price movements and innovations. The majority of the top Decentralized Finance (DeFi) protocols, decentralized applications (dApps), and Non-Fungible Tokens (NFTs) are even operating on top of the Ethereum blockchain. Recently, this has caused the price of Ether to appreciate even faster than BTC. With ETH price predictions going wild, alongside the growing attention from significant institutions, excitement for ETH 2.0, and the full migration to a Proof-of-Stake (PoS) system, the coin seems to be well-positioned for the future.
This then begs the question: will Ethereum be worth more than Bitcoin?
The critical differences between ETH and BTC
Before we dive into the main question at hand, let’s talk about the differences between the two leading cryptocurrencies.
One of the most significant differences between the two is the intent with which each crypto was created. As revolutionary as it was when it came out, Bitcoin has a much more limited range of use cases. According to Satoshi Nakamoto, BTC’s mysterious creator, Bitcoin was designed to be a “peer-to-peer electronic cash system”—and with the growing number of adopters and merchants embracing it as a new kind of money, we can say that it has achieved that to some level.
Despite being a shocking paradigm shift from fiat currencies, if you think about it, it works pretty similarly to dollars and pounds. It sits in our accounts, but in itself, we can’t really do much with it other than spend it.
On the other hand, Ethereum is far from just a cryptocurrency. By supporting the use of smart contracts—programs running on the blockchain that can self-execute when conditions are met—the developers of Ethereum have created more advanced functionality than just sending and receiving cryptocurrency. The network allows for the hosting of DeFi projects and the creation of dApps.
Some DeFi projects have permitted the creation of stablecoins, crypto loans, and advanced investment strategies. One particularly fun example of a dApp that runs on the Ethereum blockchain is Crypto Kitties, where users can collect, breed, and sell digital cats. Another emerging example is NBA Top Shot, a blockchain-based platform that allows you to spend money to collect digital moments of your favorite NBA players by opening digital packs. You then have the choice to keep these moments in your collection or sell them on the marketplace. These distinct examples highlight the innovation of the Ethereum blockchain and are partially the reason why people are getting excited about what this crypto can offer.
Another big difference between the two cryptos is their consensus mechanisms. Although Ethereum is currently migrating to a PoS system from a Proof-of-Work (PoW) mechanism, the two leading cryptocurrencies use the latter at the time of writing.
As we all know by now, PoW was a revolutionary consensus mechanism that came alongside the introduction of BTC in 2009. This is what keeps the distributed ledger, a central component of blockchain technology, secure. Using miners and computational energy in the form of electricity, the PoW mechanism verifies blocks, adds them to the blockchain, and ensures that the entire network agrees with the contents of the distributed ledger.
Proof-of-Stake, which is coming to Ethereum 2.0, aims to improve upon PoW even more by lowering the barriers to entry, making mining more decentralized, and upgrading the network for improved scalability. However, up until ETH 2.0’s release, there’s no way to find out how efficient this new mechanism can really be.
To put it simply, they’re two entirely different types of cryptocurrencies: BTC was made to transact with, and although ETH can do the same, it was also built as a computing platform that provides a scripting language for smart contracts.
Ethereum: beyond cryptocurrency
The thing that many people don’t realize is that Ethereum is a colossal computing network. Suppose a business decided that it needed a blockchain solution. In that case, they could employ a programmer to build something on top of the platform.
This means that although the Ether side of things could be treated as a cryptocurrency, there’s this whole other side of the platform with its own set of uses. For example, a specific government was thinking of putting restrictions on cryptocurrencies due to their growing concern that its citizens are speculating on something they don’t understand. They could ban the use of Ether, the native token on the Ethereum blockchain, but there’s nothing they could do to the people that use the ETH as a computing network. People would still be able to use the Ethereum platform for things like payment services and creating dApps.
Why can’t we be friends?
There’s no doubt that there’s been a lot of excitement behind ETH lately, especially with the Ethereum price hitting all-time highs. However, up until ETH 2.0 comes out, there’s no way to tell how it will perform in the future. Currently, there are still doubts about its ability to meet the already significant need for bandwidth to support transactions, so we’ll have to wait and see if it can do so.
In terms of price, it’s totally possible that ETH will continue to outperform BTC, despite it not fully realizing the benefits of the growing popularity of DeFi apps and NFTs. But where does that leave Ethereum in the race against Bitcoin? Well, looking at their combined market cap, it’s still way lower than some of the world’s biggest companies. Basically, this means that there’s room for both of them, and for the foreseeable future, it’s unlikely that Ethereum will overtake the cryptocurrency with the highest market cap.
With all that being said, we need to think about why we’re even comparing the two. We get it; it’s entirely natural to compare the top two of anything—whether in sports, movies, and, yes, cryptocurrency. It’s just that up until now, Bitcoin has been considered to be the king of all cryptocurrencies. However, ETH’s value has been hard to ignore.
The vital thing to know is that these two are different kinds of cryptocurrencies. Think of Bitcoin as a “currency token” and Ether as a “utility token.” They’re two very different heads of the same animal. It’s also worth noting that when the price of one crypto rises, the other may follow. This is because when the price of one increases, the public and investor confidence in cryptocurrencies could increase as well—so maybe you could take this into account when you’re looking at an ETH price prediction.
People can invest and trade both and still get what they need. So, at this time, maybe the question shouldn’t be: “Is Ethereum better than Bitcoin?” Instead, we can ask ourselves: “Which one makes more sense to me as an investor or trader?”
*Disclaimer: The content of this article is for informational purposes only. The opinions expressed here are not meant to be taken as financial, investment, or any other advice, nor do they express the opinion of Paxful.