Cryptocurrencies are a popular investment strategy and although they are quite volatile, you can make some significant profits. Bitcoin was the first cryptocurrency that people started investing heavily in, but as it gained popularity, more new currencies were created, offering more opportunities for investors.
Image Source – Pixabay CCO License
Ethereum is a relatively new cryptocurrency and for a lot of people, it could be a better alternative to Bitcoin. However, it all depends on your own financial situation and your investment goals, so it’s important to understand the difference between the two. Here’s everything you need to know about Bitcoin and Ethereum.
Transactions vs Smart Contracts
The way that Bitcoin and Etherum works differs quite a lot. Bitcoin works in the same way that money does. It holds value and can be traded in exchange for goods and services. Etherum, on the other hand, is a different system that works using smart contracts and the currency, known as Ether, is used to power those contracts. This means that Etherum allows you to program contracts and payments that happen automatically, while Bitcoin transactions must be made manually. The manual transactions take minutes while the smart contracts take a matter of seconds.
Etherum is built using much newer technology and the smart contract system means that it has many more potential uses than Bitcoin, which can only be used for simple transactions. That technology is constantly being upgraded too, most recently with the release of Ethereum 2.0 (this article on what is Ethereum 2.0 has more information). Although Bitcoin does have its benefits, the technology is quite outdated compared to a lot of the more modern cryptocurrencies.
The Blockchain
The thing that makes Bitcoin so attractive in the first place is that it is decentralized and hosted on the blockchain. If you aren’t familiar with the terms, check out these answers to the basic cryptocurrency questions that people have. The blockchain allows for decentralized hosting, meaning that there is not a single location that can be hacked. The good news is, both Ethereum and Bitcoin use blockchain technology.
Coin Supply
The relative value of cryptocurrencies changes depending on a lot of factors, but coin supply has a part to play. Bitcoin is limited to 21,000,000 coins, which creates supply and demand. From an investment point of view, this is a good thing because it generates value.
Ehterum, on the other hand, is not technically limited and more Ether can be generated indefinitely. However, it is expected that the production of new coins will slow down eventually. Although there is no limit on Ethereum, that doesn’t mean that it isn’t a good investment choice. It has more functionality than Bitcoin, which means that the value is likely to increase as more people use it to create automatic transactions.
When it comes to investing, the process is the same for Bitcoin and Ethereum. However, as an investment choice, Ethereum is usually the better option because it has more potential uses, which improves the value, and it’s built using more modern technology.
Cryptocurrencies are a popular investment strategy and although they are quite volatile, you can make some significant profits. Bitcoin was the first cryptocurrency that people started investing heavily in, but as it gained popularity, more new currencies were created, offering more opportunities for investors.
Image Source – Pixabay CCO License
Ethereum is a relatively new cryptocurrency and for a lot of people, it could be a better alternative to Bitcoin. However, it all depends on your own financial situation and your investment goals, so it’s important to understand the difference between the two. Here’s everything you need to know about Bitcoin and Ethereum.
Transactions vs Smart Contracts
The way that Bitcoin and Etherum works differs quite a lot. Bitcoin works in the same way that money does. It holds value and can be traded in exchange for goods and services. Etherum, on the other hand, is a different system that works using smart contracts and the currency, known as Ether, is used to power those contracts. This means that Etherum allows you to program contracts and payments that happen automatically, while Bitcoin transactions must be made manually. The manual transactions take minutes while the smart contracts take a matter of seconds.
Etherum is built using much newer technology and the smart contract system means that it has many more potential uses than Bitcoin, which can only be used for simple transactions. That technology is constantly being upgraded too, most recently with the release of Ethereum 2.0 (this article on what is Ethereum 2.0 has more information). Although Bitcoin does have its benefits, the technology is quite outdated compared to a lot of the more modern cryptocurrencies.
The Blockchain
The thing that makes Bitcoin so attractive in the first place is that it is decentralized and hosted on the blockchain. If you aren’t familiar with the terms, check out these answers to the basic cryptocurrency questions that people have. The blockchain allows for decentralized hosting, meaning that there is not a single location that can be hacked. The good news is, both Ethereum and Bitcoin use blockchain technology.
Coin Supply
The relative value of cryptocurrencies changes depending on a lot of factors, but coin supply has a part to play. Bitcoin is limited to 21,000,000 coins, which creates supply and demand. From an investment point of view, this is a good thing because it generates value.
Ehterum, on the other hand, is not technically limited and more Ether can be generated indefinitely. However, it is expected that the production of new coins will slow down eventually. Although there is no limit on Ethereum, that doesn’t mean that it isn’t a good investment choice. It has more functionality than Bitcoin, which means that the value is likely to increase as more people use it to create automatic transactions.
When it comes to investing, the process is the same for Bitcoin and Ethereum. However, as an investment choice, Ethereum is usually the better option because it has more potential uses, which improves the value, and it’s built using more modern technology.
