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Bitcoin vs Ethereum: Differences, Use Cases, and Which is Best?

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Alexander Reed

Last updated on: 22 November 2024

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Bitcoin vs Ethereum has been a hot topic for years, as these two cryptocurrencies represent the pillars of the blockchain industry. Both have unique purposes and use cases, leaving investors and enthusiasts asking: Which is better: Bitcoin or Ethereum? This guide will break down the differences between Bitcoin and Ethereum to help you decide which suits your goals best.

Bitcoin vs Ethereum: Summary

Bitcoin and Ethereum are both prominent cryptocurrencies in the Web3 space. They are similar in many ways: they are traded online through centralized and decentralized crypto exchanges and are stored in a crypto wallet. 

However, Bitcoin and Ethereum both serve two different purposes: Bitcoin is considered an alternative to fiat currency, while Ethereum can be dubbed a ‘Do It Yourself’ platform for decentralized programs. In simple words, Ethereum is a platform that enables other developers to build dApps. DApps often don’t require an intermediary to facilitate transactions or manage an application.

Throughout these years, Bitcoin has proved to be a better store of value, while Ether, Ethereum’s native currency, has been a relatively faster payment method.

What is Bitcoin?

In 2008, when the world was grappling with a financial crisis, an anonymous genius (or group of geniuses) named Satoshi Nakamoto dropped the Bitcoin white paper. The paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” circumvented centralization of any government or bank. It was revolutionary—a digital currency that didn’t need an intermediary. Instead, it relied on a transparent, decentralized ledger called the blockchain. Bitcoin launched with the main goal being an alternative to traditional fiat currencies (USD, EUR, etc.).

All Bitcoin transactions are documented on a virtual ledger called the blockchain, which is accessible for everyone to see.

Don’t like reading? We have also broken down the basics of Bitcoin for you in this video:

Bitcoin Key Purpose

Bitcoin serves as a digital alternative to traditional currencies, focusing on:

• Store of Value: Bitcoin’s fixed supply makes it a hedge against inflation. Experts also call it digital gold.
• Decentralized Transactions: Enables borderless, permissionless, and censorship-resistant payments.

In 2009, Satoshi Nakamoto mined Bitcoin genesis block as a commentary to the government’s bailout of failing banks. Then came the first commercial transaction in 2010. In the year, someone bought two pizzas for 10,000 Bitcoin in Florida. Today, those pizzas are worth hundreds of millions. Moral of the story? Pizza is priceless—or maybe just HODL your Bitcoin.

Technology Behind Bitcoin

Bitcoin runs on a Proof of Work (PoW) system. Miners solve complex puzzles to add transactions to the blockchain. While this makes it secure, it’s also energy-hungry.

Bitcoin’s scripting language is intentionally limited to transactional processing, known as Turing Incomplete. In other words, it’s a simple language that knows only how to do one thing – Facilitate transaction or rather to send money from A to B. The image below explains the flow of Bitcoin Transaction.

Its simplicity is its strength. Bitcoin’s scripting language is intentionally limited, making it nearly impossible to hack.

Since 2009, Bitcoin has evolved beyond just being a store of value. It is all thanks to upgrades like Taproot or SegWit and standards like BRC-20. It might be a lot of technical words but all you need to understand is Bitcoin’s developers are like wise old monks—methodical and cautious.

Over the years, various upgrades have modified the Bitcoin protocol to add more functionalities while standards leverage existing infrastructure to innovate over the main layer. For example, the Taproot upgrade improved privacy and efficiency by simplifying how transactions appear on the blockchain.

BRC-20 tokens enable token creation and transfer while Layer-2 solutions like Lightning Network are also expanding Bitcoin’s capabilities without any fundamental upgrade. Bitcoin has a codebase that benefits from 99 Core contributors and several alternative implementations. With hundreds of billions in assets on the line, they take a conservative approach to development.

All proposed improvements must undergo peer review and rigorous testing prior to being merged. Well, the perceived slow pace of this process, at least in terms of scaling, led to a heated block size debate and the creation of Bitcoin Cash.

Is Bitcoin Scalable?

Bitcoin’s scalability has been a topic of debate due to its base layer’s limitations, which process approximately 7 transactions per second (TPS). This low throughput stems from Bitcoin’s focus on security and decentralization, relying on a small block size and the Proof-of-Work (PoW) consensus mechanism.

To address these constraints, Layer-2 solutions like the Lightning Network have been developed. The Lightning Network operates off-chain, enabling users to create payment channels for faster and cheaper transactions. By batching transactions and settling them on the Bitcoin mainnet only when necessary, this solution dramatically enhances scalability.

Bitcoin Total Supply

One key difference between Bitcoin and Ether lies in their supply. Bitcoin has a fixed supply of 21 million coins, meaning no more will ever be created. This scarcity contributes to its value proposition as a store of value, similar to gold. As of 2024, over 19 million Bitcoins have been mined.

Layer 2 solutions on Bitcoin and Bitcoin Ordinals are making it easier for developers to scale Bitcoin and increase its utility.

Bitcoin Future

Bitcoin’s future remains a topic of interest and debate among investors, skeptics and analysts. Since its inception in 2009 to 2024, Bitcoin has demonstrated remarkable resilience, overcoming multiple market crashes, regulatory challenges, and skepticism from traditional financial institutions.

Historical Performance

Bitcoin’s price history reflects its somewhat cyclical nature. Often divided into 4-year cycles, each cycle is characterized by bull runs followed by periods of consolidation or correction.

• • 2013-2017: Bitcoin surged from under $200 to nearly $20,000 during this period, fueled by growing interest in cryptocurrencies and institutional adoption.
  • 2018-2021: After a major correction in 2018, Bitcoin reached an all-time high of $69,000 in 2021, driven by institutional interest, the rise of decentralized finance (DeFi), and its growing reputation as a store of value in the post covid era. 
  • 2022-2024: Post pandemic recovery, multiple new peaks after Trump’s election victory, foray into ETF markets, etc. added to Bitcoin inflows in this period. 

• 
• Bitcoin
  (BTC)
• Price
  $100,862.00
• Market Cap
  $1.99 T

Looking at the continuous surge in prices and the increasing trust in the digital currency, BTC is expected to have a promising future.

Invetsment firm VanEck predicts Bitcoin’s 2050 price could range from $130,314 (worst case) to $2,910,345 (base case) and $52,386,207 (best case), based on adoption scenarios. These projections assume different levels of Bitcoin integration into global trade and reserves.

Bitcoin Pros and Cons

What is Ethereum?

Fast forward to 2013, when a young programmer named Vitalik Buterin thought, “What if blockchain could do more than just transfer money?” The answer was Ethereum, a blockchain that introduced smart contracts, or self-executing agreements coded directly into the blockchain.

Buterin reportedly read about Bitcoin in his teen years. He published “A Next Generation Smart Contract and Decentralized Application Platform” white paper in 2013 before being joined by other prominent co-founders—.Gavin Wood, Joseph Lubin, Charles Hoskinson, Mihai Alisie, Anthony Di Iorio, and Amir Chetrit. However, Hoskinson departed from the project in 2014 due to a disagreement over Ethereum’s direction. Today, Ethereum has become the largest network to build decentralized applications, kickstarting a new era. 

While Bitcoin aims to decentralize money, Ethereum allows the decentralization of every ledger-based record, such as voting rights, house registration, medical records, and so on.

Ether (ETH) is the Ethereum network’s currency, and it is used as a native for running the dapps. When people compare Bitcoin to Ethereum, they are usually referring to the currency Ether. 

• 
• Ethereum
  (ETH)
• Price
  $3,811.12
• Market Cap
  $458.13 B

Ethereum Key Purpose

Ethereum’s focus is to serve as a platform for:

• DeFi: Helps developers create and manage Defi platforms like Uniswap and Aave without a central entity.
• NFTs: From Beeple’s $69M digital art to virtual sneakers, Ethereum has been at the core of the NFT development.
• DAOs: Ethereum supports decentralized autonomous organizations (DAOs), which operate based on code.
• Metaverse: Ethereum powers virtual worlds like Decentraland, where people can buy digital real estate.

Ethereum Tokenomics

Unlike Bitcoin Ethereum has an uncapped supply but introduced mechanisms like EIP-1559 to burn a portion of transaction fees, effectively reducing inflation over time. Ethereum’s tokenomics has three elements: uncapped supply, EIP-1559’s fee burning and validator rewards.

While the initial supply was set, Ethereum’s network can adjust the supply through mechanisms like burning and minting, making it more flexible but potentially less predictable in terms of long-term value. Additionally, the Ethereum Foundation holds around 0.26% of the total supply as of late 2024—making its role crucial in Ethereum’s price action. 

Technology Behind Ethereum

Ethereum started with PoW but now has transitioned to Proof of Stake (PoS) with Ethereum 2.0. PoS replaces miners with validators, slashing energy consumption by 99%.

At the core of Ethereum is the Ethereum Virtual Machine (EVM), which allows developers to create smart contracts. Imagine it as a global computer that runs programs you can’t shut down.

Ethereum’s primary innovation was to expand on Bitcoin’s basic instructions into a fully-featured programming language (also known as Turing-complete). Ethereum is a much more sophisticated language, which some argue also leaves more room for error. Ethereum’s programming language, Solidity, executes computations or logic once resources are fed into the smart contract. This allows developers to create complex decentralized applications (dApps) and smart contracts on the Ethereum blockchain.

Is Ethereum Scalable?

Ethereum’s scalability has significantly improved with the transition to Ethereum 2.0 and the introduction of the Proof-of-Stake (PoS) consensus mechanism. This upgrade laid the groundwork for enhanced transaction throughput and reduced energy consumption, addressing long-standing scalability concerns.

A key component of Ethereum’s scalability roadmap is shard chains, expected to roll out fully in future updates. Shard chains will divide the Ethereum network into smaller segments, or “shards,” allowing the blockchain to process multiple transactions simultaneously rather than sequentially. This design aims to enable Ethereum to handle up to 100,000 transactions per second (TPS) compared to the current throughput of about 15-30 TPS.

Additionally, Layer-2 scaling solutions like Arbitrum, Optimism, and Polygon are already operational. These technologies operate atop the Ethereum mainnet, batching transactions and processing them off-chain before finalizing them on-chain, significantly improving speed and reducing costs.

These advancements position Ethereum as a leading platform for scalability and innovation.

Ethereum Development Activity

Ethereum’s devs are constantly innovating. From scaling solutions like Layer 2 rollups (Optimism, Arbitrum) to new dApp frameworks, they keep Ethereum at the cutting edge.

Unlike Bitcoin, literally anyone can code a smart contract that runs on top of Ethereum. Herein lays both opportunity and danger. Certain estimates put the number of bugs per line of contract code at 1 in 10.

As seen with the draining of The DAO and numerous minor incidents, investing in such contracts without proper code review can lead to serious loss. More work is required to secure smart contracts before they can reliably underwrite new ways of doing business.

Ethereum Pros and Cons

Bitcoin vs Ethereum: The table below summarizes the key differentiating factors of Bitcoin and Ethereum:

Bitcoin vs Ethereum: Like Comparing Gold to the Internet

Bitcoin is bit of a minimalist. It wants to be one thing: a store of value. Like gold, it’s rare (only 21 million coins will ever exist) and resistant to inflation. In that sense, Bitcoin’s motto is probably “I’m here to stay. No experiments. Just value.” But Bitcoin is big on one thing: immutability. The principle of immutability is quite a strict one and says that once transactions are recorded on the blockchain, it won’t be changed or reversed.

Ethereum? It’s all about programmability, enabling developers to build decentralized applications (dApps) that revolutionize industries ranging from finance to gaming. Now Ethereum is a bit trendy, and its motto could be: “Why just store value when you can program the future?” In contrast to Bitcoin’s immutability principle, Ethereum is focused on innovation through the decentralized community and somewhat a centralized non-profit called The Ethereum Foundation. Ethereum isn’t just playing the game—it’s rewriting the rules.

This also explains that Bitcoin and Ethereum aren’t competitors in the traditional sense as they fulfil entirely different purposes. It’s like asking what’s better, gold or the internet? They aren’t directly comparable despite Bitcoin slowly exploring new possibilities with Layer 2 solutions. Considering Ethereum has already established itself as the world computer, running the infrastructure of Web3.

So, for a newbie, the choice isn’t about which is “better.” It’s about understanding what you want: a secure and unchanging store of value (Bitcoin) or a dynamic and programmable platform for building the future (Ethereum). Why not both? After all, gold and the internet work just fine together in the real world.

Bitcoin vs Ethereum: Will Ethereum Overtake Bitcoin?

Many Ethereum proponents believe Ethereum’s market cap will surpass Bitcoin’s market cap. This event is known as the flippening since the #1 and #2 spots of the cryptocurrency chart “flip”.

The conversation around Ethereum vs Bitcoin always strikes curiosity among the community. Here are some of the conversations over Reddit about the potential flippening. 

Back in June 2017 Ethereum’s market cap indeed reached over 80% of Bitcoin’s market cap. This was mainly due to the ICO hype which was funded through Ether, increasing its demand. At the time of writing, Ethereum’s market cap was around 10% of Bitcoin’s total market cap.

In the past, results of a Polymarket bet proposed that ‘Flippening’ is not possible. Contrarily, projections by Ultrasound Money predict that the hypothetical scenario will occur in 2028.   

Conclusion: Bitcoin vs Ethereum

Bitcoin and Ethereum aren’t competitors—they’re collaborators shaping the future of blockchain. Both have something unique to offer.

Think of Bitcoin and Ethereum as the Batman and Iron Man of the crypto world—both legends but with vastly different strengths and gadgets. They both have been occupying first and second place since the beginning in terms of market capitalization and prices in the crypto economy. 

While Bitcoin excels as a store of value, Ethereum shines as a platform for innovation. 

Choosing between the two depends on your goals: Bitcoin for security and simplicity, or Ethereum for growth and versatility. Many investors find diversification across both assets the ideal strategy.

As the crypto space evolves, one thing’s for sure, both blockchains have promising futures. So, are you Team Bitcoin, Team Ethereum, or Team Why Not Both?

See Also:

• Top Decentralized Exchanges to Buy Bitcoin and Ethereum
• Best Wallets to Secure Your Bitcoin and Ethereum Holdings

Frequently Asked Questions

References

• Nakamoto, Satoshi. “Bitcoin: A Peer-to-Peer Electronic Cash System.” Bitcoin.org, 2008, https://bitcoin.org/bitcoin.pdf.
• Buterin, Vitalik. “Ethereum Whitepaper.” Ethereum.org, 2014, https://ethereum.org/en/whitepaper/.
• Ethereum Foundation Report 2024. Ethereum Foundation, 2024, https://ethereum.foundation/report-2024.pdf.
• Flippening.” Ultrasound Money, https://ultrasound.money/#flippening.

Alexander Reed

Having delved into futures trading in the past, my intrigue in financial, economic, and political affairs eventually led me to a striking realization: the current debt-based fiat system is fundamentally flawed. This revelation prompted me to explore alternative avenues, including... Read More

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