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Two of the most popular coins in the crypto landscape are Bitcoin (BTC) and Ether (ETH). As of September 15, 2018, with a market cap of about $380 billion, BTC trades at around $19,700. With a typical 24-hour trading volume in the tens of billions of dollars. Ethereum Trading has a market cap of about $180 billion. It trades right around $1,500 with a typical 24-hour trading capacity.
The number of coins in circulation influences the price, too. For example, Ethereum has 122.4 million coins in circulation, while Bitcoin has only 19.2 million. If you have less of something available, it will likely cost more.
For many investors, the question of which is the better buy, Bitcoin or Ethereum, remains. Bryan Routledge, associate professor of finance at Carnegie Mellon University’s Tepper School of Business, says both have similar uses as currency. Still, their main difference is how they are used. “Bitcoin is mostly known as a store of value,” he says. “Ethereum supports smart contracts and secure financial transactions.”
Matt Hougan, chief investment officer at crypto ETF and index fund provider Bitwise Asset Management, explains that Bitcoin can be considered a store of value or a non-sovereign currency.
According to Thomas Perfumo, the head of business operations and strategy for crypto exchange Kraken, Bitcoin derives value from an incredibly measured approach toward decentralization and security through proof-of-work mining.
When it comes to cryptocurrencies, “proof-of-work is an important concept for investors to understand,” says Routledge. “It’s crucial that a decentralized blockchain system doesn’t depend on one person creating all the blocks.” “This makes the market competitive. The process is similar to a lottery—we randomly pick one person to add a block.” For Bitcoin, “the proof-of-work runs this lottery,” he says.
Mauricio Di Bartolomeo, chief strategy officer and co-founder of crypto lender Ledn Inc. says that Bitcoin is a tool for the money. The protocol has to be very stable, robust, and predictable because that’s what is expected of a monetary instrument, he says.
Unlike Bitcoin, Ethereum aims to function as a “decentralized world computer” platform developers use to build applications. Merav Ozair, blockchain expert and fintech professor at Rutgers Business School, likens the Ethereum network to iOS or Android—a way for businesses to reach customers directly without needing a mediator.
Speaking to CoinDesk, Di Bartolomeo said that Ethereum is trying not to be just a currency but rather the world’s cloud computer. Developers can use Ethereum for building self-executing contracts and decentralized apps (dApps), stablecoins, NFTs, and even Defi protocols.
Hougan believes many things built on Ethereum, such as NFTs, decentralized financial instruments, and stablecoins, did well during crypto’s last bull cycle because the platform allows people to create what they want using the protocol. Ozair also believes that Ethereum could transform into a decentralized operating system where anyone who understands the platform can build their things.
How Are Bitcoin and Ethereum Different?
The most significant difference between Bitcoin and Ethereum has arisen after the completion of Ethereum’s long-awaited “Merge” on September 15. Previously, both cryptocurrencies used the proof-of-work, or PoW, to validate transactions and secure the blockchain. However, BTC USDT still uses PoW, while ETH’s move to PoS will likely occur.
Following the shift to Proof of Stake (PoS) consensus, Ethereum is expected to use 99% less energy than before. One of the biggest criticisms of cryptocurrency has been its carbon footprint and high energy demand, an issue ETH has now directly addressed and Bitcoin has not managed.
How Ethereum’s ‘Merge’ Feature Will Improve the Cryptocurrency’s Digital Currency
In mid-September 2022, Ethereum completed its “Merge,” shifting from a proof-of-work to a proof-of-stake protocol.
In the proof-of-work system, computing power is used to finalize the blockchain. But Ethereum is moving to proof-of-stake, which means that developers must have a certain amount of Ether coin for their block to be approved. “Proof-of-work has been successful and got Bitcoin off the ground, but now that crypto is a billion-dollar industry, it needs to do better,” Routledge says.
Ozair tells investors that moving from one legacy system to another is a difficult transition, and she expects a few hiccups along the way. “Hopefully, nothing that will cost people a lot of money,” she says, but nobody can know for sure at this point.
Hougan says that three things will happen as a result of the switch: The Merge will reduce the amount of new Ether produced every year by about 70% to 75%, it will cut Ethereum’s carbon emissions by 99% or more, and the crypto will become more appealing to investors who are sensitive to environmental, social, and governance factors (or ESG).
Although ETH price fell in the hours after the Ethereum hard fork on September 15, there’s little reason to think that the switch to proof-of-stake will be a long-term negative for ETH prices.
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Ozair likes Bitcoin because it was the first cryptocurrency, and she believes it will always hold value. She also thinks Ethereum has a lot of room for growth in the future.
Hougan has high hopes for Ethereum. The cryptocurrency, created in 2015, is expected to undergo several upgrades to make it faster and more efficient than it is today.
In addition, he expects that Ethereum will evolve in the coming years and that it will increase transactions by a thousand-fold.