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ETH vs. BTC — Which One Is More Profitable For Your Portfolio? I Notum

By Notum

Apr 18, 202312 min read



Due to the significant growth of interest in cryptocurrencies, more and more people in 2023 are looking for information about the most profitable coins and starting their research with two of the most famous cryptocurrencies in the world - Bitcoin and Ethereum. The Internet is full of such requests as the difference between Bitcoin and Ethereum, BTC or ETH, and which one is worth investing in. Most often, users cannot choose between them since their knowledge is limited to the fact that both cryptocurrencies are decentralized and based on blockchain technology. Of course, these cryptocurrencies are similar in many ways, since each of them is a digital currency traded through online exchanges and stored in different types of wallets.

However, ETH and BTC were created for different purposes, which is important to understand before acquiring them. While the main purpose of Bitcoin is to be recognized as a real form of money, the so-called digital currency, Ethereum is programmable money and is designed for smart contracts and decentralized applications. Today we will talk about both cryptocurrencies and make a comparison of Ethereum or Bitcoin, as well as help you understand the difference and decide what to buy for your portfolio.

Ethereum VS Bitcoin

Bitcoin and Ethereum are digital systems based on blockchain technology. As you already know, cryptocurrencies are Bitcoin (BTC) and Ethereum (ETH). Both currencies are considered an alternative to traditional currencies (such as the dollar or any other fiat), and are decentralized, which means they are not dependent on or managed by banks, companies, or organizations. In addition, both cryptocurrencies are asset classes that can be traded and exchanged for profit. Let's take a closer look at each of them and talk about the main features of BTC and ETH.

  • Bitcoin

Bitcoin is the first launched and functioning decentralized cryptocurrency, which was born in 2009 when the first block of data was mined in its blockchain. Thus, Bitcoin was created as a peer-to-peer electronic cash system and an online currency that is protected from any authority. Although Bitcoin was not the first attempt to create this type of currency, it was the most successful and became the forerunner of all cryptocurrencies that have appeared in recent times.

Since Bitcoin allows users to manage the currency without a government or a bank, it relies on a decentralized network that uses the Bitcoin blockchain software. Thus, Bitcoin is the first blockchain-based cryptocurrency. The rules of this network determine how transactions work, the Bitcoin limit, the time required for the settlement of transactions, and so on. “The Bitcoin blockchain is publicly available and is associated with the history of every transaction ever conducted on it while being distributed among several nodes to prevent tampering.” - Coin Telegraph.

In recent years, the virtual decentralized currency has gained acceptance from people around the world and continues to exist alongside the existing financial system. Summing up, it is worth saying that Bitcoin is a secure cryptocurrency that allows users to make transactions at any time without using centralized systems as intermediaries, which made it popular around the world.

  • Ethereum

Ethereum is the largest open-source decentralized software platform that was launched in July 2015. Ethereum can also be described as a blockchain network that has its own cryptocurrency (ETH). Moreover, it is it that is used to complete transactions and interact with applications created on the Ethereum network. Thus, like Bitcoin, Ethereum is not controlled by a central authority and uses PoS to prevent attackers from changing blockchain data.

However, while Bitcoin uses the blockchain for monetary transactions, Ethereum uses this technology to create a decentralized computer. Ethereum has taken the blockchain beyond the use of digital currency, as it allows the creation of decentralized applications and smart contracts (also without the control and intervention of intermediaries). Moreover, to make this possible, Ethereum has its own programming language, Solidity, running on the blockchain.

Now, Ether is not only sold as a digital currency but also used as an investment. Moreover, Ether users use it to purchase goods and services, as well as pay transaction fees on the Ethereum network. “While Bitcoin is used as a medium of exchange and store of value, Ether is used to interact with applications on the Ethereum network. As the value of Ether went up, it also started being used as a store of value.” - Coin Telegraph.

Main Difference Between Bitcoin and Ethereum

The decentralized system and the cryptocurrencies based on it are important points where Bitcoin and Ethereum are similar. However, a closer look at BTC and ETH reveals some differences. Now, with the growing interest in cryptocurrency, more and more people want to know what to choose - Bitcoin or Ethereum. Let's look at their main differences.

  • System

Bitcoin is based on a decentralized architecture. Bitcoins can be stored, and transactions can be carried out using blockchain technology. Using the computing power of their computers, Manners solve complex arithmetic problems, which allows the production of bitcoins and verification of transactions around the world. Ethereum is also based on blockchain technology, but it is different from Bitcoin. Ethereum users can create dApps that are used to execute smart contracts where no third party is needed.

  • Consensus algorithm

Both Bitcoin and Ethereum have relied on proof-of-work (PoW), however, Ethereum decided to switch to a proof-of-stake (PoS) algorithm in September 2022. PoW allows the network nodes to prevent attacks on the network and agree on the state of all recorded information in networks. The main disadvantage of this algorithm is that it is energy intensive and requires a lot of computing power. PoS, in contrast, replaces this power with staking, which makes it less energy intensive. With PoS, cryptocurrencies now require a lower level of processing power, which also makes the Ethereum network more scalable and means that transactions within the network can be processed without problems and delays. However, with the PoS method, Ethereum is no longer as highly decentralized as PoW. Moreover, after switching to PoS, Ethereum must prove whether the algorithm is resistant to hacker attacks.

  • Currency

As you know, ETH is the second largest cryptocurrency after BTC, and both coins have high volatility. Fluctuations in the exchange rate of both currencies speak of investment risks, which means that neither of them is stable. Also, the main difference between these cryptocurrencies is that Bitcoin already has a limit set in the protocol, namely 21 million BTC, which is good for storing value due to the limited supply. With Ether, the number of coins is not fixed (since new ones are constantly being created) and there are currently around 13 billion ETH coins in circulation. However, ETH, as programmable money, does not seek stabilization as its purpose is to add value and usability.

  • Network Utility

Bitcoin and Ethereum are difficult to compare due to the difference in their functions, but the bottom line is that Bitcoin has no use other than being used as a store of value or investment. Ethereum, in contrast, represents limitless possibilities, such as the issuance of other cryptocurrencies on its network, NFT trading on the platform, as well as the universal ability to create Smart contracts.

  • Transaction speed

You probably also know that Bitcoin and Ethereum transactions differ in speed and automation. Speaking of Bitcoin, transactions are done manually and take a few minutes. In contrast, Ethereum transactions are automatic and take only a few seconds, as they are programmable using smart contracts. Thus, Ethereum can process significantly more transactions compared to Bitcoin.

  • Global functionality

Simply put, Bitcoin as a currency is accepted in more places than ETH. Not only small and medium enterprises but also large companies such as Microsoft accept and accept BTC, while only a few places accept ETH payments. However, this does not mean at all that Bitcoin is a more valuable currency, because, as already mentioned, they perform completely different functions. ETH, unlike BTC, offers exchange automation without third parties, and that's why many people think that Ethereum is better than Bitcoin. “Its smart contracts allow two parties to make a deal, such as buying a house or renting a taxi. ETH reduces intermediaries, thereby limiting bureaucracy, waiting times, and fees. It also strengthens security by ensuring that every exchange is automatic, irreversible, and transparent.” - CoinLabs.


Ethereum VS Bitcoin Investment

Should I buy Bitcoin or Ethereum? This is the question that thousands of people who start their journey in cryptocurrency ask themselves. There is no answer to Should I invest in Ethereum or Bitcoin. While Bitcoin has a smaller supply of coins (and therefore is more liquid), Ethereum has more advanced technology and provides more applications. However, Ethereum started later than Bitcoin, so it will have a difficult road before (or if) it will eclipse Bitcoin. Despite the steady growth and great applicability of ETH, one cannot be completely sure of its future.

Even though both coins portend further growth, both ETH and BTC have their benefits and risks. Ethereum's environmental friendliness can significantly increase its value, but BTC does have a chance to become legal tender. It should also be noted that Bitcoin has been on the market longer than ETH, which makes it less risky, but Ethereum's greater risk leads to greater rewards. In any case, what to invest in is up to you.

Final Word

As of 2023, Bitcoin is still the most famous cryptocurrency. Moreover, it is thanks to Bitcoin that interest in cryptocurrency has grown so much around the world. However, one cannot fail to mention the growing popularity of Ethereum, which, like Bitcoin, can be traded on crypto exchanges. Moreover, the Ethereum system also has the potential for development in the long term. The proof of this is that even Microsoft supports the further development of Ethereum.

The current lead and popularity of Bitcoin indicate that Ethereum will not surpass it in terms of market capitalization, awareness, and market volume any time soon. However, due to large fluctuations in currencies, it cannot be ruled out that Ethereum may become stronger than Bitcoin at some point. After studying the main differences and investment predictions, it is up to you to decide what suits your portfolio better - ETH or BTC.

Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.