Bitcoin, launched in 2009, is the world’s largest cryptocurrency by market capitalization.
Bitcoin is a decentralized digital currency that you can buy, sell and exchange directly, without intermediaries such as a bank. Bitcoin’s creator, Satoshi Nakamoto, originally described the need for “an electronic payment system based on cryptographic proof, not trust.”
How BTC works
Each bitcoin is essentially a computer file stored in a “digital wallet” app on a smartphone or computer.
People can send bitcoins (or a portion of one) to your digital wallet, and you can send bitcoins to other people.
Each transaction is recorded in a publicly accessible list called a blockchain, the blockchain.
This allows you to track bitcoin history so that people don’t spend coins they don’t own, copy or cancel transactions.
Benefits of BTC
- Private, secure transactions at all times – with lower potential fees.
- Potential for great growth. Bitcoin has a limited issuance of 21 million coins that can be mined. This makes bitcoin more attractive as an asset: theoretically, if demand grows and supply stays the same, its value will rise. Also, about every four years, the number of bitcoins that miners can earn online will halve, potentially increasing the price of the asset. Such an event is called a bitcoin halving (the last occurred in May 2020).
- The ability to avoid traditional banks or government intermediaries. In the wake of the financial crisis and the Great Recession, some investors are looking to use an alternative decentralized currency – one that is essentially outside the control of conventional banks, governments or other third parties.
Disadvantages of BTC
- Bitcoin is pseudo-anonymous. In practice, each user is identified by their wallet address, which can be used to track transactions. Law enforcement has also developed methods to identify users if necessary. Most exchanges are required by law to verify the identity of their customers before they are allowed to buy or sell bitcoins. This means that the wallet address assigned by the exchange is likely linked to a specific user.
- Since bitcoin is still in development, transaction speeds and fees tend to vary depending on the efficiency of the mining process and the load on the network.
- Bitcoin’s basic ideology is that it is created out of and against the most powerful institutions, governments, politicians, banks, regulators and censors and will probably meet great resistance before these players can accept and approve it.
Although bitcoin’s dominance has waned to some extent this year – bitcoin now accounts for about 46% of the total cryptocurrency market value, up from about 70% at the beginning of the year – it is still by far the largest coin.
Bitcoin is still the choice of large corporations. Tesla and MicroStrategy are buying the largest cryptocurrency, not ether. When American billionaire hedge fund managers Paul Tudor Jones and Ray Dalio talk about cryptocurrency, they talk about bitcoin.
This is also reflected in volatility. Cornerstone Macro strategists have been studying how bitcoin and ether are likely to perform in an economic downturn. According to Cornerstone Macro strategist Benson Durham, with the Bloomberg Galaxy Crypto Index down 20%, there is significantly more risk for ether than for bitcoin.
The second most capitalized cryptocurrency. The digital coin hit a record high of more than $4,000 on Monday, and is up more than 450% since the beginning of the year.
Unlike Bitcoin – and most other virtual currencies – Ethereum is designed to be more than just a medium of exchange or a means of savings. Instead, Ethereum calls itself a decentralized computing network built on blockchain technology.
How ETH works
Ethereum, launched in July 2015, is the largest and most well-established open-source decentralized software platform.
Like bitcoin, ETH is built on blockchain technology – essentially a distributed computer network that records all cryptocurrency transactions. But unlike bitcoin, people can create applications on top of Ethereum.
According to Buterin, Ethereum is “a blockchain with a built-in programming language” and “the most logical way to create a platform that can be used for many other types of applications.”
Advantages of ETH
Large existing network. Ethereum has a large and engaged global community and the largest ecosystem in blockchain and cryptocurrency.
Wide range of features. In addition to its use as digital currency, Ethereum can also be used to process other types of financial transactions, perform smart contracts, and store data for third-party applications.
Constant innovation. Ethereum’s large community of developers is constantly looking for new ways to improve the network and develop new applications.
Avoids middlemen. The decentralized Ethereum network promises to allow users to leave behind third-party middlemen, such as
- – lawyers who draft and interpret contracts
- – Banks that mediate financial transactions
- – Third-party web hosting services.
Disadvantages of ETH
Rising transaction costs. The growing popularity of Ethereum has led to an increase in transaction costs. Ethereum transaction fees, also known as “gas,” reached a record $23 per transaction in February 2021.
Crypto-inflation opportunity. While Ethereum has an annual issuance limit of 18 million ethers per year, there is no lifetime limit on the potential number of coins. This can mean that as an investment, Ethereum can run more like a dollar and may not appreciate as much as bitcoin, which has a strict limit on the number of coins.
The steep learning curve for developers. It can be difficult for developers to master Ethereum as they move from centralized processing to decentralized networks.
Unknown future. Ethereum continues to evolve and improve, and the ongoing development of Ethereum 2.0 promises new features and greater efficiency. However, this major update to the network creates uncertainty for applications and transactions currently in use.
Scalability is one of the biggest problems with the Ethereum network today. It currently operates using a proof-of-work protocol similar to bitcoin. However, with the Ethereum 2.0 update, crypto investors believe that the network will be able to work at scale, handle many more transactions at a faster pace, and support applications with millions of users.
Experts at U.S. bank JPMorgan cite three reasons why Ethereum is outperforming bitcoin and growing at a rapid pace. Analysts pointed out that altcoin has more stable liquidity, transaction speed, and less dependence on the derivatives market. In the case of altcoin, the long-term position is less dependent on leverage. This is due to the fact that Ethereum has a higher spot turnover than bitcoin.