People in the crypto space often compare the differences between Bitcoin vs Ethereum. The fact that Bitcoin conquers the crypto space by market cap and Ethereum is the runner up have created an inevitable competition between the two. Most people have been arguing about the same thing over and over again regarding whether Ethereum is Better than Bitcoin. Let’s just make a conclusive comparison so we won’t get into the same repetitive debate!
Round 1: Utility
Let’s start with the most obvious and fundamental comparison – utility. Yes, cryptocurrencies are often judged by the outside world for its utility and adoption.
For Bitcoin, its utility is very clear. It is the peer-to-peer electronic cash. You can use Bitcoin to transfer the money across the border. Unlike the fiat system where you have to spend a lot of fees to move a large amount of dollars across the border, Bitcoin transaction fees can be as low as cents when the network is not clogged. Not only for cross-border transactions, Bitcoin is also used as a store of value. Many people have compared Bitcoin to physical gold and they often see it as a long-term alternative investment due to Bitcoin’s finite supply mechanism.
As for Ethereum, the utility is wider. It can be used for cross-border transactions (just like Bitcoin), and it can also be used for a store of value as the alternative to physical gold. Thing is, Ethereum utility can go beyond these two simple use cases. Ethereum is also used to create and power smart contracts inside the Ethereum Virtual Machine (EVM). Yes, there are plenty of DApps that run on top of Ethereum blockchain, and they all operate with the help of Ethereum’s native cryptocurrency (ETH) to pay for gas fees as well as to execute each smart contract operation.
For round 1, Ethereum is clearly the winner. Apart from the two utilities of Bitcoin mentioned above, ETH can also be used to pay for gas fees and smart contract operations.
Round 2: Trading Volume And Liquidity
For the second round, we will judge both platforms from the liquidity and trading volume aspect. Why? Because these aspects have been deemed extremely important for the adoption rate of cryptocurrency. The simple analogy is like this “If nobody buys or sells a large amount of X currency, why would I buy X currency?” It is also the reason why USD is very popular in the world of fiat, because everybody (including central banks) store USD. So, how about in the world of crypto?
Bitcoin has an enormous amount of trading volume. For over a decade, Bitcoin has been dominating the crypto scene with its massive trading volume and liquidity across all exchanges. In the past year, however, its trading volume has been surpassed by the controversial stablecoin, Tether (USDT). That being said, many people accuse Tether’s trading volume of being fake, due to the ongoing debate about Tether’s non-existent fiat reserve behind each USDT token.
But either way, nobody can deny the fact that BTC is still everybody’s number one choice when it comes to decentralized crypto. The daily trading volume can be as big as $45 billion of dollars (data: CoinMarketCap, 16 April 2020). Compare it with Ethereum with about $22 billion of dollars worth of daily trading volume (data: CoinMarketCap, 16 April 2020).
And for most of the time, Bitcoin’s liquidity and trading volume across all exchanges have always been significantly higher than Ethereum (ETH). This fact, unfortunately, won’t change anytime soon – although nobody knows what will happen in the long-term.
So, for round 2, we must give the acknowledgement to Bitcoin. For trading volume and liquidity, Bitcoin wins.
Round 3 – Future Potential And Flexibility
Of course, another important aspect of a cryptocurrency is its technological aspect in welcoming the future. Most crypto long-term investors chose to invest in a specific crypto because they believe in its potential in the future, after all.
So, how good Ethereum is compared to Bitcoin in terms of potential and its flexibility for the future? In this case, Ethereum is actually ahead of Bitcoin. Ethereum core developers have been developing what they call Ethereum 2.0 with massive improvements over the current network.
It is believed that Ethereum 2.0 would finally migrate Ethereum’s consensus algorithm from Proof-of-Work (PoW) to Proof-of-Stake (PoS). It is claimed that Ethereum would become much more worthy to HODL, due to the staking mechanism that is needed to verify transactions inside the blockchain.
The fact that Ethereum could easily migrate from PoW to PoS (among other improvement proposals) has made Ethereum to potentially be the better platform than Bitcoin. Bitcoin is widely respected in the crypto community but it is very reluctant to change – and in this modern era, we need to always be cautious with future challenges.
And in this regard, Ethereum wins over Bitcoin. Its willingness to adapt to PoS and other improvement proposals (such as sharding) would be quite useful for the future of Ethereum in terms of adoption and overcoming its challenges and bottlenecks.
From all the three aspects mentioned above, it is clear that Ethereum wins two rounds while Bitcoin wins just one round. Of course, at the end of the day, everybody in the crypto space could have different opinions (and that’s okay). But in the categories that truly matter, Ethereum has proven itself to be the better platform.