Bitcoin vs Ethereum: Which is Right for You?

In the thriving cryptocurrency marketplace, two currencies stand above the rest in terms of popularity and market cap. While you’ve undoubtedly heard of Bitcoin (BTC) and Ethereum (ETH), you may be unsure exactly what they are, how they differ, and, most importantly, which option is right for you.

You’re certainly not alone. Queries like “Ethereum v. Bitcoin'' and “Is Ethereum better than Bitcoin'' are constantly trending in the world of crypto collecting, as new collectors are eager to learn more about the difference between Bitcoin and Ethereum.

This comparison of Bitcoin vs. Ethereum will highlight the key differences between these crypto coins so you can decide which option is best for you.

What Is Bitcoin (BTC)?

Launched in 2009, Bitcoin is one of the original (and by far the most successful) forms of digital currency. Bitcoins aren’t tangible currency but digital assets stored on cryptographically secured public ledgers. Like virtually every other cryptocurrency, Bitcoin is stored on the blockchain, which creates immutable records of every transaction.

What’s the difference between Bitcoin and cryptocurrency in general? Simple: Bitcoin is a cryptocurrency, but not all cryptocurrencies are Bitcoin. The same concept applies to Ethereum.

There are dozens of other cryptocurrencies, in addition to Bitcoin and Ethereum. Some have a notable market share, while others are fringe collectibles worth less than a penny each.

What Is Ethereum (ETH)?

Ethereum was launched six years after Bitcoin. When ETH hit the scene in 2015, it rapidly gained traction worldwide among collectors, investors, and business leaders. However, Ethereum is more than just a cryptocurrency — it’s the world’s largest open-ended, decentralized software platform.

The Ethereum blockchain can be used for various applications, from deploying smart contracts to creating and managing decentralized applications. As the most well-established decentralized software platform, Ethereum has its own cryptocurrency and infrastructure and a unique programming language.

The currency is often called “ether” to differentiate it from the Ethereum platform and coding language.

Bitcoin vs. Ethereum: Key Differences

Both ether and Bitcoin networks are founded on the principle of decentralized digital currencies and distributed ledgers. However, there are numerous technical differences between the two cryptocurrencies.

For instance, Bitcoin network transactions only record transaction data, while executable code can be attached to dealings on the Ethereum network.

Another relatively minor difference is their use of “block time..)” The Bitcoin network takes several minutes to confirm transactions; ETH, on the other hand, can guarantee a transaction in seconds.

The consensus algorithms each coin uses are also different. Ether uses an algorithm known as LMDGhost, whereas Bitcoin uses SHA-256.

While high-level traders must be aware of these subtle differences, the average collector doesn’t. That said, there are some more significant BTC vs. ETH distinctions you do need to know about, including the following:

Purpose

The reasons behind Bitcoin vs. Ethereum’s existence are quite different.

Bitcoin was created by Satoshi Nakamoto, the mysterious figure who wrote a white paper about a decentralized online currency in the early 2000s. Nakamoto is also credited with designing Bitcoin to bring his vision to life, though his true identity is unknown.

Bitcoin was established as an alternative to fiat currency, which a national government traditionally backs. Since Bitcoin isn’t supported or regulated by any nation, it offers users the freedom and flexibility to easily engage in international transactions.

Ethereum was devised for a much different purpose. Its founders created Ether to support various blockchain solutions, such as dApps and smart contracts. Ether was designed as the de facto currency used on the Ethereum platform. While it’s undoubtedly used for these purposes, many collectors also buy and sell ether as an appreciable asset.

Although many crypto collectors treat Ethereum and Bitcoin similarly, you should be mindful of the unique purpose of each coin as you determine which option is right for you.

Technology

Both Bitcoin and Ethereum rely on blockchain technology. However, not all blockchain is the same. The blockchains Ethereum and Bitcoin rely on are quite different from one another.

Bitcoin uses Proof-of-Work (PoW), a blockchain mechanism that requires miners to solve complex mathematical problems to validate transactions. Once a miner validates a transaction, it’s added to the blockchain and becomes part of an immutable record. This process, while effective, consumes a significant amount of computational energy.

Like Bitcoin, Ethereum once used PoW mechanisms. However, it now uses an alternative method known as Proof-of-Stake (PoS).

Under this framework, validators are selected to create new blocks for the blockchain infrastructure. Validators are chosen based on two criteria: how much cryptocurrency they hold and how much of it they’re willing to put up or “stake” as collateral.

The PoS method is more energy-efficient than the PoW approach. It’s also less labor-intensive for validators, although the proposition of staking their crypto collection can discourage some traders from participating in the validation process.

Scalability

If there’s any major grievance against ether and Bitcoin, both suffer from scalability issues. The same applies to many other cryptocurrencies, as most crypto infrastructure relies on the PoS or PoW mining mechanisms.

That said, Bitcoin has some of the most significant scalability issues due to several factors, including its Proof-of-Work mechanism and the overall demand for the currency. Due to its infrastructure, the Bitcoin network can only handle seven transactions per second. As a result, the network experiences latency and delays when collectors engage in frequent trades.

Comparatively, ether is far more scalable. The Ethereum network can process up to 30 transactions per second, nearly 4.5 times as many as the Bitcoin infrastructure. This difference in scalability is due primarily to Ethereum’s use of the PoS consensus mechanism.

Thus far, Bitcoin has done little to address its scalability issues. Ethereum has taken a more proactive approach, announcing plans for future upgrades to enhance scalability.

Supply

In the Bitcoin vs. Ethereum comparison, the term “supply” refers to the number of coins that have been or can be created.

Some cryptocurrencies, including Bitcoin, have a finite or “capped” supply. In the case of Bitcoin, the supply cap is 21 million coins, which means there can never be any new coins minted after that threshold is reached.

Ethereum has no coin cap, meaning a virtually limitless amount of ether can be minted. However, due to the fundamental laws of supply and demand, significantly increasing supply would drive down the value of ether. For this reason, built-in incentives discourage miners from overproducing ether.

As a prospective collector, it’s essential to familiarize yourself with these supply differences, as they can impact both cryptocurrency's current and long-term value. If you aim to purchase a currency, hold it for a few months or years, and eventually sell it to make a profit, purchasing a capped asset like Bitcoin may be beneficial.

Use Cases

The primary use case for Bitcoin is digital money. Many collectors view Bitcoin as digital gold — in other words, it stores value and can help protect holders from financial volatility. When used as a store of value, Bitcoin is a tool for diversifying a portfolio and protecting wealth.

Ethereum is far more dynamic than Bitcoin in terms of use cases. While it can be used as a digital currency and investment tool, it also has a unique smart contract functionality. Smart contracts are computer programs that store data and run on decentralized networks like the Ethereum blockchain.

Ethereum is also the go-to platform for non-fungible tokens (NFTs). An NFT is a unique digital asset representing ownership of digital or physical goods, such as art, music, or virtual real estate.

Price

Like most other crypto assets, the prices of both ether and Bitcoin have fluctuated dramatically over the years.

Due to its huge market cap and popularity, Bitcoin has often functioned as a driver of the crypto market. When Bitcoin prices rise, the values of many other cryptocurrencies typically increase alongside it; when its value dips, other cryptos, including ether, often face a drop as well.

The price of Bitcoin is impacted by a wide variety of factors, including:

• Fluctuations in supply and demand
• Market sentiment
• Regulatory news
• Economic events

While shifts in Bitcoin’s value often impact Ethereum’s price, there are also other factors at play. A few of the conditions that can affect the price of ether include:

• Demand for blockspace
• Usage in decentralized finance
• Platform updates

Fluctuations in ether can also influence the value of smaller crypto assets. Those like DeFi, NFT, and DAO projects experience the most significant impacts, as they rely on Ethereum’s blockspace.

Ethereum vs. Bitcoin: Which Should You Choose?

As evidenced by the Bitcoin vs. Ethereum comparison, there are some significant differences between these two crypto giants. From the reasons they were created to the factors and circumstances that impact their value, it’s essential to familiarize yourself with these nuances to identify which asset is better for your cryptocurrency collection.

At the end of the day, it all boils down to a straightforward question: what are your goals as a collector?

Are you interested in amassing diverse digital assets, including NFTs and cryptocurrency? If so, Ethereum will likely be a better fit for your portfolio.

Ethereum has many more potential use cases than Bitcoin, and it’s built on a well-established blockchain network, meaning it’s likely here to stay. Additionally, Ethereum constantly looks for ways to upgrade its platform, which is always a good sign for collectors.

Conversely, Bitcoin is the oldest and best-known cryptocurrency and has demonstrated tremendous staying power for over a decade. It also has the largest market cap and a limited number of coins, which bode well for its long-term value.

With these things in mind, you might consider adding Bitcoin to your collection if you want to store value and potentially earn a healthy profit in the process.

Get Started With FreeNFT

Choosing between Bitcoin and Ethereum depends on your investment goals and risk appetite. Bitcoin, the pioneering cryptocurrency, offers stability and a store of value, appealing to conservative investors. Ethereum, with its smart contract capabilities, attracts those interested in decentralized applications and potentially higher returns. Assess your risk tolerance and investment horizon to make an informed decision that aligns with your financial objectives.

While the ETH vs. BTC debate will probably never be definitively settled, you now hopefully know enough about each cryptocurrency to get more involved in the crypto market and start collecting coins. However, it’s important to note that the prices of ETH and BTC remain quite high.

The good news is there are many ways to get involved in Bitcoin and Ethereum collecting without spending hundreds of dollars. For instance, you can sign up for FreeNFT and start collecting Bitcoin Ordinals.

But that’s not the only perk of joining FreeNFT. Once you create your account, you can also collect Crypto Airdrops, art NFTs, and more. Join today and take a deep dive into the exciting world of NFTs.