Bitcoin and Ethereum are the most popular cryptocurrencies in the world, significantly more popular than other cryptocurrencies. Bitcoin and Ethereum trading volumes are also among the highest in the world. The healthy competition between Bitcoin and Ethereum in the crypto market cap ranking has created one question among many crypto enthusiasts. Yes, many crypto believers have been wondering, “Can Bitcoin and Ethereum live side by side?”
The History Of Bitcoin And Ethereum
Bitcoin, as we know, is the godfather of all cryptocurrencies. Ever since Satoshi Nakamoto introduced Bitcoin to the world, the concept of cryptocurrency slowly (but surely) became popular in the public’s eye. Bitcoin was often touted as the ultimate hedge against the failing fiat system.
Unlike fiat currencies where they embrace inflation openly, Bitcoin believes in the exact opposite. The halving mechanism (that happens approximately every four years) would make sure that Bitcoin’s increasing supply would be more limited as it gets more popular.
Before 2014, the majority of other cryptocurrencies were just trying to become the better-and-faster Bitcoin. But the creation of Ethereum changed all that. The vision of Ethereum is to be used as a “decentralized supercomputer” where you can natively build smart contracts and DApps (decentralized applications).
Ethereum itself rose to fame in 2016 and 2017, the era when Initial Coin Offerings (ICOs) became hugely popular in the crypto community. You might already know that ICOs were one of the main reasons why Ethereum could become the second most popular cryptocurrency in the world because almost all ICOs at the time chose to issue their pre-mainnet tokens on the Ethereum blockchain.
The two (Ethereum and Bitcoin) became rivals since then because they have been ranked first and second in the cryptocurrency ranking by market cap since a few years ago. Many Ethereum fans have been expecting for a “flippening”, an event where Bitcoin could finally be dethroned by Ethereum in the market cap valuation. That being said, until today, Bitcoin is still dominating the crypto space, with a much higher market cap than Ethereum itself.
The Purpose Of Bitcoin
So, what is the exact purpose of Bitcoin, and can Bitcoin and Ethereum live side by side? Well, Bitcoin’s main idea is to be used as a peer-to-peer electronic cash. A digital currency but borderless and decentralized. That being said, Bitcoin supporters have slowly changed their belief about Bitcoin. Nowadays, Bitcoin’s main purpose is not just to be used as a peer-to-peer electronic cash, but also to be used as a “store of value.” Many people in the Bitcoin community believe that Bitcoin is the perfect alternative to physical gold.
In 2020, Bitcoin is facing a huge test. With the ongoing global COVID-19 pandemic, many central banks started to print their own fiat currencies massively. The Federal Reserve, in particular, stated that they could print an unlimited amount of US Dollars to help the financial crisis caused by COVID-19.
If Bitcoin is favoured by many investors, that would be a huge win not just for the Bitcoin community but for the whole crypto space. Yes, if Bitcoin price can keep going up in the time of the worldwide pandemic, that means Bitcoin would fulfil its prophecy as the perfect hedge against fiat currencies. It would fulfil its purpose as a “store of value” and “digital gold”.
So, yes, the purpose of Bitcoin is to be used as digital gold and store of value. Whether it will become the perfect store of value when fiat currencies keep devaluing themselves, that is something we will find out after the end of the COVID-19 crisis.
The Purpose Of Ethereum
Different from Bitcoin, the main idea of Ethereum is to create DApps (decentralized applications) through the utilization of smart contracts. Ethereum’s smart contract can also be used for more specific purposes, such as for multi-signature wallets, the creation of DEX-es (decentralized exchanges), and others.
That does not mean that Ethereum cannot be used as a “store of value” or “peer-to-peer electronic cash.” So, yes, even though Ethereum is also a type of store of value and can be used to transport money across the border, the main purpose is to launch different types of DApps.
In recent years, the most popular DApps on Ethereum are DeFi (decentralized finance) applications. Platforms like MakerDao or Compound are offering typical finance platforms but directly built on top of Ethereum. Yes, nowadays, you can lend or borrow different crypto tokens through the direct utilization of Ethereum blockchain.
Beside DeFi, Ethereum blockchain can also be used for games’ transactions. Crypto-based games such as CryptoKitties used to be very popular, and they still have big potential to become more popular in the upcoming years.
At the end of the day, Ethereum has much wider purposes and use cases compared to Bitcoin. Ethereum can compete with Bitcoin for its “store of value” and “cross-border transaction” narratives but Ethereum can also be used to issue crypto tokens, for DeFi applications, and even games – something that Bitcoin is not able to do natively.
So, Can Bitcoin And Ethereum Live Side By Side?
Above, we have learned the purposes and functions of both Bitcoin and Ethereum. So, can Bitcoin and Ethereum live side by side? The answer is Yes. Just think of Bitcoin and Ethereum, like two different operating systems or two different currencies or two different smartphone brands. They can always co-exist with each other despite admittedly they are also direct competitors.
There are many Ethereum enthusiasts who believe that sooner or later, “flippening” would happen, especially when Ethereum 2.0 has been fully implemented. Nobody knows for sure. But even if flippening happens one day, Bitcoin would still exist and would still be preferred by some crypto enthusiasts. So, Bitcoin and Ethereum can co-exist with each other, and both of them can become more popular as the crypto world itself becomes more mainstream.