With digital currencies gaining more popularity among individual and organizational investors, many people are becoming more interested in this alternative form of making a profit. Since Bitcoin was released in 2009, it has completely changed the world of finance and turned into investors’ favorite form of investment. Bitcoin has always had a main competitor, Ethereum, the only cryptocurrency that brings more benefits to investors than Bitcoin, and which often makes people wonder if they should purchase the altcoin instead of the oldest digital currency.
If you research the crypto sector, you’ll quickly figure out that two cryptocurrencies are the most traded, Bitcoin and Ethereum. Bitcoin is the first digital currency created on blockchain technology, and Ethereum is the first to introduce the notion of smart contracts. Even if Ethereum was launched six years later than Bitcoin, it caught up by offering holders a more comprehensive range of advantages.
What is Bitcoin?
If you want to pick just one cryptocurrency to invest in, then it’s essential to research the biggest digital currencies by market cap and learn how they could serve your needs. An anonymous developer using the name Satoshi Nakamoto launched Bitcoin in 2009 as a peer-to-peer blockchain-based currency. It was created as a response to the financial crisis of 2008 to prevent governments from manipulating financial institutions.
Bitcoin was developed to serve as a global currency people can use to pay for services and products and transfer money. However, its increased volatility attracted investors looking for assets to diversify their portfolios. The same volatility earned it the name digital gold because it’s widely used as a store of value.
The Bitcoin blockchain has a native cryptocurrency, also called Bitcoin and operates a Proof-of-Work algorithm that requires a pool of miners to solve cryptographic calculations to verify transactions and add new blocks to the chain.
Bitcoin is considered a store of value because it has a limited supply; according to its White Paper, there will only be 21 million Bitcoins mined. Its value has increased steadily over the last few years because the number of mined coins is halving every four years, and as the coin creation drops, the demand is going up.
What is Ethereum?
Is Ethereum different from Bitcoin? Crypto enthusiasts are aware that there are several differences and similarities between the two. The Ethereum blockchain has Ether as a native cryptocurrency and uses a Proof-of-Stake protocol to validate and create new blocks. It was launched in 2015 by Vitalik Buterin, together with a group of developers, as an application development platform enabling users to run transactions and operations. Since its launch, thousands of crypto-based projects have been deployed.
Ethereum has numerous use cases because it can store and execute smart contracts, allow developers to create decentralized applications, and facilitates the creation and trading of NFTs. Even if other platforms also offer smart contracts and enable the creation of blockchain assets, Ethereum has gained prominence in the sector and remained the most popular one.
Why do crypto specialists think Ethereum remains Bitcoin’s strongest competitor?
It’s easy to figure it out. Ethereum offers numerous benefits Bitcoin doesn’t. Ethereum functions as a digital currency, but it has many other utility cases like digital apps and smart contracts. Ethereum is as secure as Bitcoin because they’re both based on blockchain technology. Therefore, they both enable secure and transparent transactions. No one can interfere with the transactions completed on the blockchain, and there’s no risk of fraud or theft.
Which cryptocurrency should you add to your portfolio?
If you’re a beginner investor trying to decide whether to purchase Ethereum or Bitcoin, you must evaluate your risk tolerance and personal goals. The two digital currencies are portrayed as competitors, but they have different purposes and features, so you must determine which meets your needs better. As mentioned earlier, Satoshi Nakamoto created Bitcoin as a global digital currency, so it’s similar to gold which is used as a store of value. On the other hand, Vitalik Buterin created Ethereum as a dApp development platform, so it serves different purposes.
Crypto specialists recommend investing in both cryptocurrencies if you’re looking for a way to diversify your portfolio and want to limit the risk.
Ethereum seems to have a stronger presence on the market than Bitcoin after it completed the Merge. Crypto enthusiasts state that Ethereum has a more accommodating macro backdrop, so it solidified its position by showing resilience during turbulent market moments. The ambitious transition to the Proof-of-Stake consensus has transformed it into an institutional-grade asset, and both individual and institutional investors are turning their attention toward it when looking for alternative assets to add to their portfolios.
The statistics show that Ethereum has recovered strongly over the few couples of months, indicating that its price could bounce back once the bear market ends. It registers double the number of non-zero balance addresses and 113% more active addresses than three years ago. At the same time, Bitcoin’s active addresses dropped by 30% over the same time span.
Ethereum is believed to become one of the most prominent digital assets in the crypto sector due to its utility, which makes it essential for social and economic activity. It has enabled the emergence of popular digital assets like DeFi, stablecoins, and NFTs.
The latest Ethereum upgrades could help it surpass Bitcoin
The latest upgrades helped Ethereum grow in popularity, and Ether’s price has spiked over the last months since the market has shown signs of recovering from the crypto winter. Specialists predict that its price will continue to rise in the following years, but the chances to overtake Bitcoin remain small as Bitcoin and Ethereum’s values are connected, and they follow the same path.
However, if there is a digital currency to surpass Bitcoin at a certain point in the future, that would be Bitcoin because it’s a programmable blockchain that allows holders with technological skills to use it to trade native tokens and digital assets.
Before the latest upgrades, Bitcoin had a couple of advantages over Ethereum, but now the second largest cryptocurrency by market cap has gained more traction.