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The two most popular cryptocurrencies accessible today are Bitcoin and Ethereum. We hear more and more about both of them in the news every day. And there’s a good explanation behind it: Bitcoin has a market capitalization of nearly $1 Trillion, whereas Ethereum has a market capitalization of $230 Billion. But, what are the distinctions between the two? Is one superior to the other? I’m happy you inquired because that is the topic of today’s article. Continue reading to find out more about Bitcoin vs. Ethereum!

Before we go into the distinctions between Bitcoin and Ethereum, it’s important to understand both cryptocurrencies.

What Is Bitcoin

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Bitcoin is decentralized digital money, which means it is not real and is not linked to or controlled by any governments or organizations. Bitcoin is created by mining, which configures a computer to solve progressively difficult equations, thereby becoming a “node” in the Bitcoin network that validates transactions.

When a computer (owned by a miner) solves the equation, they are rewarded in Bitcoin when the Bitcoin ledger validates the block they solved. This is one of the factors that contribute to Bitcoin’s security. The entire network is powered by the digital currency BTC (Bitcoin). This is critical to remember afterward.

Now that Bitcoin has been mined, it can be found in a wallet. There are several sorts of wallets, but it is vital to emphasize that crypto is always digital. It is a string of characters that includes a passcode required to access the Bitcoin linked with that wallet.

From there, Bitcoin can be exchanged into cash, transmitted to other wallets throughout the world without using a bank or HODL as a store of value. As more merchants accept Bitcoin as a form of payment, it may replace your fiat currency in some cases. There is much more to Bitcoin than this, which we explored in detail in our full guide.

Uses of Bitcoin

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As briefly indicated above, Bitcoin has two key applications: a store of value and a peer-to-peer currency that can be easily transferred.

Store of Value

Right now, the most prevalent application for Bitcoin is as a store of value. This is why Bitcoin has been dubbed “digital gold.” Because of its finite supply and rising difficulty to mine, the amount of Bitcoin in circulation is automatically constrained, making it a limited asset similar to gold.

Bitcoin’s value has risen due to increased demand for ownership and a limited number in circulation. This was particularly evident during Bitcoin’s spectacular ascent to a gigantic all-time high in 2020. Everyone was vying for a piece of the restricted quantity of “digital gold,” driving the price up by more than 100 percent. Like gold, investors are flocking to Bitcoin during market instability, particularly when concerns about the US dollar’s inflation rise.

Peer-to-Peer (P2P) Digital Money Transfers

Bitcoin’s other key application is as a peer-to-peer currency transfer system. It is really simple to send Bitcoin to anyone. You’ll only need their wallet, your wallet, and the keys. There is no red tape or excessive fees that the regular banking system imposes. If you want to have actual cash, it can also be converted into cash utilizing exchanges or Bitcoin ATMs. Transactions on the Bitcoin network are typically completed in less than 30 minutes, making it an appealing choice for those wishing to shift currency quickly without being bogged down by institutions.

What is Ethereum

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Now that we’ve given you a quick overview of Bitcoin let’s move on to Ethereum. What is it exactly? Ethereum, on the other hand, is the name of a blockchain network, namely the Ethereum Network. Ether, a cryptocurrency, fuels this network. So, much as BTC powers the Bitcoin network, the Ethereum network is powered by ETH (Ether). This network functions similarly to Bitcoin, except it is more advanced and considerably faster.

Ether is still mined in the same way as Bitcoin is, with transactions validated and rewarded with new currency. The distinction is that, unlike Bitcoin, there is no limit to how much Ether may be mined. After mining, this Ether can be used to fuel smart contracts and decentralized applications. That all seems very technical, but we’ll go over it in more detail later.

Uses of Ethereum

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The easiest approach to understanding the Ethereum network is to look at it in action. As previously said, Ethereum has two key applications: Smart Contracts and Decentralized Applications.

Smart Contracts

Have you ever wished to pay someone for a job but not until you were certain the work was completed? Or have you ever been concerned that once you do a project for someone, they will withhold the payment they promised you? This is where the Ethereum blockchain network comes into play. It is designed so that a transaction can take place only when certain predefined requirements are met.

Let’s have a look at an example:

Assume you wanted Bob to prepare you a burger but only paid after you received it. The burger costs $5, thus if you don’t have $5, Bob shouldn’t cook you one at all. You’d create a smart contract that said something like this: IF you have $5, you can ask Bob to make you a burger. YOU PAY BOB $5 AFTER THE BURGERS ARE MADE.

A contract cannot be altered once it has been created. So, with Ethereum, you don’t have to trust the individual; instead, both parties must trust the network!

Decentralized Applications

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Decentralized Applications are Ethereum’s other key application (dApps). These apps use the smart contract framework to deliver decentralized versions of some of the apps you already know and love. Here are a couple of examples of this in action.

Google Stadia is a new way for everyone to play games that Google powers. Users join up and use Google’s computational power to run the game, which is then streamed to their local device. Similarly, Golem, a dApp, allows you to join a network of individuals who rent out their excess computing power on their local PCs to you. The same technique is employed (but not for gaming), but no single hub like Google controls all processing power.

You can send money to others using Venmo. Venmo, on the other hand, operates as a go-between for both individuals’ banks. Tornado Cash, a dApp, works similarly, allowing you to transmit anonymous peer-to-peer payments.

Instead of moving money, this application instructs the Ethereum blockchain on what to do with your smart contract based on what you say. No developers or Tornado employees can edit your contracts, and no one organization is certifying the transactions. Instead, the entire network confirms the transactions.

To put it simply, dApps provide consumers with an experience similar to that of multiple popular apps already available but without the sole source of verification/power.

Ethereum vs. Bitcoin

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Now that we know how Bitcoin and Ethereum work and what they are great at, we can look at the key distinctions between the two. The most significant differences between these cryptos are in how they are formed, how they are utilized, and the prospects for each of them as the crypto business evolves.

How they are made

The first significant distinction arises with the creation of each cryptocurrency. To begin, Bitcoin can only be created via mining, which is solving equations and adding the solutions to the Bitcoin blockchain. There is a finite amount of Bitcoin, and the only way to obtain one if you do not mine is to buy it used.

Let’s have a look at the Ethereum network. Ether can be generated in the same way as Bitcoin, however, there is an infinite quantity of Ether. Furthermore, Ethereum is transitioning to a Proof of Stake (PoS) paradigm, in which random users with large amounts of Ether in their accounts would confirm transactions rather than Ether miners.

What they are used for

The most significant distinction between Ethereum and Bitcoin is in how they are used. As previously stated, Bitcoin is most directly related to security. It is nearly impossible to hack, and its value is rising because of a limited supply and demand. The disadvantage of Bitcoin is that transactions take a long time to complete on the network (about 30 minutes). These factors make it most helpful to keep or utilize for transactions/transfers regularly.

Ethereum, on the other side, confirms transactions in seconds. As a result, the Ethereum network functions more like a database or utility. Ether’s purpose is not to be the be-all and end-all. The fundamental purpose of Ether is to fuel a network that can serve as an infrastructure for other firms to build on, which Bitcoin does not allow as easily. The Bitcoin network lacks the Smart Contracts capability, thus the speed is significantly slower.

Opportunities for the future

Bitcoin vs. Ethereum: Which crypto is the better 2021 investment?

As we wrap up our study of Bitcoin vs. Ethereum and the contrasts between the two, let’s take a look at the differences in futures for both currencies.

Bitcoin

Bitcoin is maturing, and it is becoming more widely regarded as a store of value. Several prominent financial institutions have begun to allow their investors to begin investing in Bitcoin through them in the last year. Furthermore, more merchants are adopting Bitcoin as a form of payment.

Bitcoin will continue to pave the path for increased crypto usage while also serving as a legal form of currency and a store of value.

Ethereum

Ethereum is maturing and catching up to where Bitcoin left off. The Ethereum network, which will operate in the shadow of Bitcoin, will usher in a new era of cryptocurrency. Ethereum, with its speedier transaction times, dApps, and smart contracts, has the potential to be a major backbone of the crypto industry’s future. It has the potential to change the way contracts are produced and finished in a variety of businesses.

Finally, many people may think, “Should I invest in Bitcoin or Ethereum?” While each investor must make their judgment, we hope this essay clarifies the value of both currencies and the future they may both provide.

We should not consider Bitcoin or Ethereum to be superior or competitors. In fact, they perform quite different functions. Bitcoin ushered in the crypto era and will remain an extremely secure store of value. Ethereum has the potential to expand on what Bitcoin started and take it to a whole new level. In the future, we may see both cryptocurrencies working together to assist the entire crypto sector in developing significantly. In that instance, who wins? Everyone has a stake in either Bitcoin or Ethereum.

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