Bitcoin vs. Ethereum: Which Is Better?

Written by Jason Simpkins
Posted September 18, 2017 at 9:27AM

Bitcoin vs. Ethereum: It’s a hot debate among cryptocurrency buyers?

So which is better?

Well, it really depends on what you’re looking for.

Bitcoin’s advantage is that it came first. It’s been around since 2009. It’s enjoyed the support of well-heeled backers, and come to be trusted by retailers. Bitcoin is now widely recognized and accepted.

Indeed, more than 100,000 businesses now accept Bitcoin as payment, including Amazon, CVS, Overstock, Subway, Tesla, Expedia, Whole Foods, Home Depot, Apple, Macy's, Sears, JCPenney, Gap, Microsoft, and Dell.

The run up in Bitcoin’s price reflects its newfound traction with investors and end users. It’s surged from $600 a year to nearly $5,000 . And many analysts believe the currency will eventually hit $10,000.

Ethereum, the Bitcoin rival, has experience a surge, as well. It’s up to $300-$400 now, compared to just $13 a year ago.

Ethereum is lesser know, and less widely accepted than Bitcoin, but it’s picking up steam.

It’s key advantage is in its increased versatility.

Bitcoin vs. Ethereum

You see, despite its advantages, Bitcoin has some flaws.

For one thing, it’s too rigid and limited. The Bitcoin network is capable of processing only seven transactions per second. That may work when there are only a few thousand users but not millions. For the sake of comparison, Visa processes thousands of transactions per second.

Furthermore, developers can’t build apps on Bitcoin. The system’s primary role is to safely transfer value — not to create software or add functions. This is intentional. Bitcoin was deliberately constrained to make it more secure.

Ether, which runs on the broader system called Ethereum, is more flexible.

In addition to creating and housing the cryptocurrency Ether, Ethereum also offers a way to create online markets and programmable transactions known as “smart contracts.”

Smart contracts function like software programs that use business logic. Meaning, rules about money transfers, stocks, interest payments, debt, and more. Ethereum also has a built-in programming language that lets anyone build apps.

Dozens of functioning applications have already been built on Ethereum, and hundreds more are in development.

One app lets farmers sell their produce directly to consumers. Another offers crop insurance that pays farmers if bad weather damages their harvests.

There’s an app for flight insurance. You send ether to a smart contract and if your flight is delayed, you receive an automatic payout in return. There are games and lotteries, as well. Sports fans can bet on competitions directly with ether automatically paid out to the winner as soon as the final score is reported.

There's an app that enables music distribution. And another that allows for a new kind of financial auditing.

Ethereum’s wide-open world of limitless possibilities has caught the attention of Fortune 500 companies like IBM, Microsoft, Wells Fargo, UBS, Samsung, and more.

And that’s just beginning.

Banks are interested in using blockchain technology to make trading and money transfers faster, safer, and more efficient.

They’re also exploring ways that they can use Ethereum to create, manage, and sell new financial products.

Bitcoin is simply Bitcoin. But Ethereum could accommodate a vast array of financial derivatives.

Eleven of the world’s biggest banks ran a financial services pilot program last year with Ethereum.

Tech companies are pushing forward with their own Ethereum initiatives, too. Microsoft is working on several projects that use Ethereum on its Azure computing cloud.

“Ethereum is a general platform where you can solve problems in many industries using a fairly elegant solution — the most elegant solution we have seen to date,” Marley Gray, a director of business development and strategy at Microsoft, tells The New York Times.

The improvements Ether has made over Bitcoin have already led to a huge trend reversal that many call “The Flippening” — a tidal shift of users from Bitcoin to Ether.

FlippeningBitcoin now accounts for just 39% of cryptocurrency market cap, down sharply from 87% just months ago. And Ethereum now makes up 31% of the total market cap, up from just 5%.

Since it started closing the gap, the big question has been: Will Ethereum overtake Bitcoin?

And right now, it looks like it will.

So which is better?

Well, Bitcoin is safer and more widely accepted. It has more utility for the time being.

But Ethereum is cheaper, and it has a much a higher ceiling considering its utility.

As with any investment it’s a judgment call. But personally, I’d take Ethereum in the Bitcoin vs. Ethereum dispute.

Fight on,

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Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of The Wealth Warrior, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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