Bitcoin vs Ethereum, Do We Have A Winner?

We are so tribal. Even in this highly analytical, technological, and rational world of cryptocurrencies, we have a strong urge to pick sides. Mine is bigger, better, and stronger and all that.

On one team, you get the Bitcoin maximalists, on the other the Ethereum bulls. Who is right? Who will win? Are these even competing with each other?

Bitcoin was created by Satoshi Nakamoto as the first digital decentralized currency. It is immutable, scarce, transparent, and censorship-resistant.

It uses a cryptographic hash, the blockchain, a peer-to-peer network, and a public ledger to maintain its integrity.

It has the first-mover advantage, the brand name, and most of the institutional support.

Bitcoin is pure digital gold.

Ethereum was the second coin to arrive in the crypto scene and its creator, Vitalik Buterin, tried to make an improved version of Bitcoin.

Since he was reinventing the wheel, he thought it would be a good idea to go a step further and create a whole ecosystem where people and machines could interact with each other in a decentralized way.

This gave way to Smart contracts, Decentralized apps, Defi, and NFTs. Ethereum provides a platform with new uses and applications that can be built on top of the ethereum protocol.

Ethereum is a giant world computer.

These are some of the similarities and differences between the two projects.

BTC is very decentralized. It is based on a peer-to-peer network of nodes and miners with no single point of failure. This makes it almost indestructible, there is no way to turn it off even if we try.

Even its inventor, Nakamoto (whoever he is) is out of the way. The whole system is run by a consensus mechanism, a network of nodes, and the mining infrastructure.

On paper, BTC is the most decentralized currency. In reality, the fact that most miners are huge conglomerates that have a lot of power and can manipulate the price makes it less decentralized than we would like to admit, at least for now.

Bitcoin has been accused of concentrating too many miners in China and while that it’s true, it could move somewhere else within days should the need arise. Right now, China is threatening to ban mining, which is clearly a bluff, but even if they did, there are plenty of countries willing to take up the slack. Decentralization is not just about the current state of affairs but about the potential to shift resources rapidly to alternative locations.

Ether is the second most decentralized currency. There are many arguments in the community about how decentralized really is. It has the second-largest blockchain and the largest developer activity.

The problem with ethereum is that it relies heavily on third-party infrastructure like Infura and Amazon Web Services making it dependent on external entities.

In order to solve this and other problems, Ethereum is moving from Proof of Work (PoW) to Proof of Stake (PoS) which will change the way new Ether is created and transacted. They are doing away with mining and choosing a consensus mechanism in order to validate transactions.

Bitcoin has been criticized for consuming large amounts of energy. Mining BTC requires powerful specialized computer equipment (ASICS) and this requires lots of electricity.

But then again, compared to what? BTC consumes only a fraction of the energy used to mine gold, banking, or boiling water to make tea. It could be argued that these are necessary uses but so is Bitcoin. Electricity is the price to pay to secure a network that stores $1 Trillion of value in a tamper-proof and efficient way.

The good news is that solar energy is by far the cheapest source of electricity and that’s exactly what miners need. China is greener than we give them credit for, they have the fastest-growing solar industry on the planet and will soon abandon fossil fuels. Unfortunately, they still burn carbon, and that is a shame, but they are quickly moving to cleaner sources.

Ethereum is also using miners and Proof of Work (PoW) but not for long. By the end of 2021, ETH 2.0 will move to a Proof of Stake (PoS) system which saves a ton of energy.

So, it could be argued that ETH will be greener than BTC but also let’s keep in mind that BTC is promoting the use of renewables by encouraging companies to invest in green projects.

Hard to tell which one is greener, let’s call it a draw.

Bitcoin was created as a medium of exchange but the market has decided to use it as a store of value instead. It keeps appreciating 200% a year and it is competing directly with gold for this purpose.

Of all the uses of money, storing value is arguably the most important. You don’t want to keep your wealth in a currency that depreciates rapidly like the Argentinian peso or the Zimbabwean dollar. Right now we are entering a period of high inflation, and most experts agree that we’ll see double figures for the next ten years in the developed world.

Bitcoin only does one thing well — storing value — but it nails it. Nothing preserves wealth better than Bitcoin, not gold, not property, and not cash.

Ether can be used as a currency and as a store of value but it also has many other uses. It provides a platform for developing new applications, smart contracts, Defi services, etc. Many projects and tokens are built on top of the ethereum protocol — Chainlink, AAVE, Uniswap, MakerDao, and more.

NFTs, Defi, and Dapps give the ethereum network a lot of power and possibilities. The potential for growth is huge. Even if the market doesn’t fall in love with Ether, it will be used for many other applications that bring value to the network.

BTC only has one use (albeit the best) and ETH has plenty of use cases, making the whole platform a sea of possibilities.

BTC is a finished product from the beginning, it needs no tinkering, no adding functions, and no development. If ain’t broke, don’t fix it as the saying goes. It does very little but what it does, it does it perfectly.

ETH, on the other hand, keeps improving, adding value, correcting mistakes, and creating new uses every year.

Nakamoto is dead but Buterin is still alive.

Proponents of BTC and ETH are happy with the current state of things. Nakamoto is dead therefore he won’t interfere with a flawless system. Buterin is alive and keeps developing the project and making it better.

For this reason, BTC is more stable but has less potential while ETH is riskier but with more upside.

Bitcoin has been limited to 21 million coins total, this makes it very scarce. Keeping in mind that there are millions of wealthy individuals, organizations, and institutions that want to invest in it, the potential for growth is infinite.

The asymmetric distribution between supply and demand can make the price increase exponentially. It wouldn’t be surprising to see bitcoin reaching $1 million, $5 million, or even a higher price in the not-so-distant future.

Ethereum is not so scarce. In theory, it has an unlimited supply, although with the release of ETH 2.0 some argue it has been capped at 100 million coins.

One thing going for the ETH scarcity is the burning. With the advent of EIP1559 and ETH2.0, a percentage of coins will be burned every year to keep the nodes running. This could reduce the total supply making it deflationary like Bitcoin and this will increase its value.

Both are great projects with lots of potential that will transform the financial world as we know it.

Bitcoin will probably become the most valuable asset in the world overtaking gold as a store of value.

Ethereum will create a new ecosystem of tokens, Decentralized Autonomous Organizations, smart contracts, Defi and Dapps. New projects will be built on top of the ethereum infrastructure and will create new forms of wealth, information, and value.

This year it was the NFTs, next year it will be something else. The possibilities are endless.

So, which one is better? Do we have a clear winner?

I think it’s a draw, they don’t really compete with each other but rather complement one another. If you are thinking about participating in this new ecosystem, probably splitting your money 50/50 is the best decision and the least risky.

It would be like picking a winner between Tesla and Amazon. Both are going to win.

The world is getting very complex and making the right decision is harder. But one thing is clear, you don’t want to miss out on this new technology and its endless possibilities. It would be like missing out on the internet in the 90s.

It’s not too late, in fact, it is still very early. Do your research and make a rational decision that will change your life forever. Don’t be a nocoiner or you’ll regret it later.

Failing to take action could prove to be very risky indeed.

Disclaimer: Not financial advice, edutainment purposes only, do your homework and invest safely.

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Source: https://medium.com/coinmonks/bitcoin-vs-ethereum-do-we-have-a-winner-9c1f772910e9?source=rss——-8—————–cryptocurrency