Ethereum vs Bitcoin: Is Ethereum a Better Bitcoin Alternative?

As you enter the new and exciting world of crypto, one of the first things you will likely ask yourself will be about the differences between Ethereum VS Bitcoin. It’s quite overwhelming, right?

You may think of Bitcoin and Ethereum, as a lot of us do, as the Apple and Microsoft of crypto. However, unlike Apple and Microsoft, they are completely different from one another. Both have very different objectives and goals.

In fact, other cryptocurrencies compare a lot closer to Bitcoin and Ethereum than Bitcoin and Ethereum compare to each other. For example, Litecoin is a lot more like Bitcoin than Ethereum is, and NEO is a lot more like Ethereum than Bitcoin is.

The same is true when trading cryptos, too - using the best exchanges (i.e. Kraken, Binance, or KuCoin), you'll see that the prices differ significantly, too. I’ll get to that in another article, though.

For now, let’s focus on Ethereum VS Bitcoin.

Note: when storing Bitcoin, Ethereum, or any other cryptocurrency, make sure to choose a reliable wallet. The most recommended options include Ledger Nano X, Binance and Trezor Model T.

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Comparing the Cryptocurrencies

When you look at Ethereum VS Bitcoin, you can see that their goals are largely different. Looking at their market statistics, the difference is pretty self-evident, as well — as of late 2022, Bitcoin’s market capitalization is $361.2b, while Ethereum’s market capitalization is $158.5b.

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Note: market capitalization (often referred to as “market cap”) is the total value of all coins in existence. For example, Bitcoin’s $361.2b market cap means the value of all Bitcoins together is $361.2b.

So, besides statistics, how exactly do Bitcoin and Ethereum match up?

Many beginners in cryptocurrency believe that Ethereum is only as a financial currency, like Bitcoin. This is wrong for many reasons; let’s look at the basics.

Ethereum VS Bitcoin: The Basics

Here, I will look at some of the features and facts of Bitcoin and Ethereum.

Bitcoin

  • Launched in 2009, Bitcoin was the first cryptocurrency and the first use of blockchain technology;
  • Bitcoin is a digital currency;
  • It aims to fix the problems in global finance, is often referred to as the “bank of the people”;
  • Bitcoin does not require a third party, such as PayPal or a bank;
  • Created as an alternative to regular / fiat currencies (i.e. USD, EUR, JPY, etc.);
  • Used for manual transactions, like purchasing goods / services or receiving money;
  • It is highly liquid, which means you can easily convert Bitcoin into cash;
  • It takes minutes to complete Bitcoin transactions.

Ethereum VS Bitcoin: get started with Bitcoin.

Ethereum

  • Launched in 2015, Ethereum’s blockchain is often called “Blockchain 2.0”;
  • Smart contracts program the transactions (which I will explain later in this guide);
  • Its smart contracts eliminate the need for third parties in many systems, not just financial ones;
  • It provides a platform to build smart-contract apps (known as dApps);
  • It provides a programming language, called Solidity, to build the dApps with;
  • Ether is its currency, it powers transactions on the Ethereum blockchain;
  • Ether is highly liquid;
  • Ethereum’s transactions take seconds to complete.

Ethereum VS Bitcoin: what is Ethereum?

Key Differences

Let’s look at the main differences between Ethereum VS Bitcoin, some of which you can see by comparing the basics I just mentioned!

Their Concepts

When you think of Bitcoin, think “digital money”. When you think Ethereum, think “smart contracts”. This is the easiest way to understand and remember the primary difference between Bitcoin and Ethereum!

Their Purposes

Bitcoin is a store of value and a way to send money to someone. Ethereum is also a way to send money to someone, but only when certain things happen.

Ethereum also differs by serving as a building platform for dApps / smart contracts, which allow it to send tokens that represent values. These values can be things other than digital currencies, making it different from Bitcoin.

Their Transactions

Bitcoin’s transactions look like this:

Jade sends 10 BTC (Bitcoins) to Pete.

Ethereum’s transactions run on smart contracts, and look like this:

Send 10 ETH (Ether) from Jade to Pete if Jade’s balance is 15 ETH and the date is 12.01.2020.

So, Bitcoin’s transactions are manual, and Ethereum’s transactions are automatic / programmable!

The Speed of the Transactions

Ethereum’s block time (transaction speed) is just seconds. Bitcoin’s block time, however, is minutes.

The Currencies: Ether VS Bitcoin

  • Ether is designed to fuel the Ethereum network and power transactions — think of it as gas.
  • Bitcoin is used to be the value of real-world transactions — think of it as money.

Their Coin Supply

Bitcoin is limited to 21,000,000 coins. This creates supply and demand, which is healthy for a store of value.

Ethereum, however, is not limited. The production of Ether is continuous. The supply of Ether will slow down a lot over time, though.

Vitalik Buterin, the founder of Ethereum, stated that the total number of coins will not reach more than 100,000,000 ETH in the “foreseeable future”.

Their Ages

Ethereum is 6 years newer than Bitcoin, and is further advanced.

Ethereum VS Bitcoin: Breaking it Down

It’s difficult to make sense of the differences between Bitcoin and Ethereum if you aren’t familiar with all the fancy, technical words that crypto geeks use.

Let’s break down some of the jargon, shall we?

Decentralized

Both of the cryptocurrencies in this Ethereum VS Bitcoin comparison are decentralized. If something is decentralized, it is not in one central position (duh). Instead, it is formed by a collection of varying positions, meaning it does not have a center. That’s where the word “decentralized” comes from!

To apply this to a network, think about Facebook’s servers for a moment. They run via Facebook and Facebook only. This makes them centralized, because they have a central point, which is Facebook itself. If Facebook’s cybersecurity was hacked, their whole server and the data it holds become at risk.

Ethereum VS Bitcoin: Bitcoin homepage.

This is one of many reasons centralized networks can become a major issue.

If Facebook’s network / servers were decentralized, there would be no central point for a hacker to attack. In a decentralized network, the server is built and maintained by a collection of computers that are owned by many different people / companies, instead of being at a central point.

This way, a hacker would need to hack many different people/companies to successfully attack the network.

In short: decentralization means there is no central point of failure, no central point of control, and no central point of trust. This is why many agree that decentralized networks are the future!

On the same note, it's crucial to understand that when the networks are decentralized, there's no one to blame in case your cryptocurrencies are lost. That's why you should make sure to keep your coins safe and choose secure wallets, such as Ledger Nano X, Binance, and Trezor Model T.

Blockchain

Even if you’re brand new to crypto, I'm going to take a guess you’ve already heard about blockchain technology. It’s a bit of a trending topic.

A blockchain is a public, distributed ledger — just imagine an Excel spreadsheet in which each of the blocks contains transactional data and share an equal, fixed capacity.

The ledger continues to grow and grow as more blocks add. The blocks add up chronologically by using cryptographic techniques that ensure these same blocks cannot reverse. Sorry hackers.

In a blockchain, the ledger is “distributed”.  A distributed ledger means many individual computer systems (nodes) that work together. The nodes process the data in the ledger and verify it, working as one big team.

Ethereum VS Bitcoin: an open internet with Ethereum.

This way, it is impossible for a fake transaction to be verified, as it would need the consensus (the group agreement) of the blockchain. So, the more nodes / computers, the more secure the blockchain is!

Distributed ledger stores verified blocks. It is shareable and downloadable by all other nodes on the network. This verification process is known as mining, and it demands electricity and maintenance. Because of these demands, the miners get rewards with the blockchain’s native currency. This is the foundation of a typical cryptocurrency ecosystem.

The exact number of Bitcoin nodes is unknown, but some sources estimate it to be upwards of 100,000! Imagine trying to hack half of that!

For more on blockchain technology, check out our "Blockchain Explained" guide.

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Smart Contracts

Smart contracts are a decentralized tool. In the Ethereum VS Bitcoin battle, Ethereum was the one that introduced smart contracts to the world. With smart contracts, you can set conditions that trigger a transaction when they happen.

As the smart contracts on Ethereum are powered by the blockchain, developers can create applications that never go offline and cannot be edited by third parties.

Imagine if we had this power with the regular contracts we currently use as part of our everyday lives! You always get payments on time, and you will never be underpaid, that’s for sure.

These are just two of the countless available examples, though.

Ethereum VS Bitcoin: Bitcoin as the innovation in payment systems.

A good way to think of smart contracts is to imagine purchasing a house. Usually, this process requires third parties, such as a lawyer and a broker. With a smart contract, the ownership of the house is sent automatically, once the conditions are met.

It looks something like this: John transfers 200 ETH. The payment gets verified, and he gets the ownership of the house.

This is applicable to many different scenarios. Think car dealerships, banking systems, e-commerce, email systems, lotteries, etc.

This is why the possibilities of building on Ethereum are endless.

Ethereum VS Bitcoin: Summing Up

Bitcoin and Ethereum have very different purposes!

Ethereum’s purpose is to offer and run decentralized smart-contract applications, powered by blockchain technology, that do not go offline and cannot be altered. It provides users with a platform and programming language to build the applications on.

Bitcoin’s purpose, however, is largely different. It serves as a decentralized store of value — a peer-to-peer digital currency, used for financial transactions. It eliminates the need for third parties in payment technology.

In conclusion, the primary differences that separate Ethereum VS Bitcoin are their purposes and their concepts. Also, Ethereum’s blockchain runs smart contracts - Bitcoin doesn’t, and instead, it only focuses on manual payment technology.

Is Ethereum Better Than Bitcoin?

It’s clear that there are benefits to using both Bitcoin and Ethereum. Bitcoin has a lower coin supply and is more liquid than Ethereum, but Ethereum has better technology and provides more uses than Bitcoin does.

Based on the fact Ethereum has more use cases than Bitcoin — and, therefore, serves a bigger purpose — I can say that it is indeed an overall better Bitcoin alternative.

Ethereum VS Bitcoin: a fairer financial system with Ethereum.

It perhaps isn’t the best Bitcoin alternative, though, as there are other cryptocurrencies that have the same purpose as Bitcoin, and run on newer technology and protocols.

That’s not to say that these other alternatives are better than Ethereum. It just means that, because they are more similar to Bitcoin, one of them may be the best Bitcoin alternative. It doesn’t necessarily mean they’re a better Ethereum alternative!

Which Has the Better Technology?

Blockchain technology is still in its early years. That's why Ethereum and Bitcoin get continuous updates. However, Ethereum is currently the clear winner. Here’s why:

  • Ethereum uses smart contracts. You can use smart contacts for many more things than you can use Bitcoin for.
  • The Ethereum blockchain was released in 2015. It's 6 years newer and further developed compared to the Bitcoin blockchain (released in 2009).
  • Ethereum’s blockchain is a further advanced version of Bitcoin’s blockchain. It fixes some of its issues and introduces new features such as smart contracts.
  • As I stated earlier, transactions on Ethereum are much quicker.

Can Bitcoin and Ethereum Live Side-by-Side?

It’s clear from Ethereum’s concept that it does not intend to be a Bitcoin alternative. Instead, it runs alongside it as it pursues a different objective.

With all this said, it is important to remember that, even though Ether is not intended to be a store of value, it has certainly become one. Here are some examples of everyday life:

  • Tradable, just as all other cryptocurrencies are.
  • Up until the Ethereum Merge, mining Ethereum VS Bitcoin had become a much closer competition. Ether was mined by more and more miners each day, meaning, it is a highly-desired asset.
  • Businesses are using it to pay their staff.
  • Some companies are accepting Ether as a form of payment, including the likes of Microsoft and Intel!

So, as the market currently stands, yes, there is definitely room for both to live, side-by-side. Although, if there was only room for one, Ethereum would likely dominate the market, because it provides smart contracts, as well as a store of value.

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So, Which One? Bitcoin or Ethereum?

In Ethereum VS Bitcoin battle, if I had to choose one, it’d be Ethereum! This is because it has unlimited use cases, whereas Bitcoin only tackles payment and banking issues. Bitcoin may have a better position in the market, but Ethereum has better technology and bigger potential.

If you're looking to trade either one of the aforementioned cryptocurrencies, though, make sure that you do so via a reliable and trustworthy exchange - KuCoin, Kraken, or Binance are some of the better options.

Also, if you don't want to keep your cryptocurrencies in an exchange, choose reliable wallets instead. Ledger Nano X and Trezor Model T are among the most recommended ones.

What do you think? Let us know!

A fun fact and an additional (although minor) Ethereum VS Bitcoin difference:

Bitcoin’s founder remains anonymous to this day. Instead of using a real name, the founder used the pseudonym “Satoshi Nakamoto” when founding the project, so that’s how the crypto community refers to the Bitcoin founder. It’s also how the term “Satoshi” (a denomination of Bitcoin) came to be.

Ethereum’s founder, however, is the 26-year-old “crypto-prodigy”, Vitalik Buterin, whom you can read more about here.

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FAQ

Which of the two cryptos in the "Ethereum VS Bitcoin" comparison is the better one?

All things considered, Ethereum is often viewed as the better alternative to Bitcoin. That's mostly because Bitcoin's purposes are quite limited - frankly, it's mostly used as a decentralized form of currency. Ethereum, on the other hand, has introduced such things as "smart contracts" into the crypto world - their use cases are almost unlimited!

Which of the two cryptocurrencies are more worth mining?

At one point, more and more miners appeared to have focused on Ethereum for all of their mining wants and needs. Admittedly, it was much easier to mine Ether, and as the popularity of this crypto asset grew, it was only natural that there was also an increase of attention towards its "extraction" processes, too. As of late, though, Ethereum has undergone its "ETH 2.0" merge-update, and has transitioned to Proof-of-Stake - in other words, it can no longer be mined.

How to pick the best crypto exchange for yourself?

Picking out the best crypto exchange for yourself, you should always focus on maintaining a balance between the essential features that all top crypto exchanges should have, and those that are important to you, personally. For example, all of the best exchanges should possess top-tier security features, but if you’re looking to trade only the main cryptocurrencies, you probably don’t really care too much about the variety of coins available on the exchange. It’s all a case-by-case scenario!

Which cryptocurrency exchange is best for beginners?

Reading through various best crypto exchange reviews online, you’re bound to notice that one of the things that most of these exchanges have in common is that they are very simple to use. While some are more straightforward and beginner-friendly than others, you shouldn’t encounter any difficulties with either of the top-rated exchanges. That said, many users believe that KuCoin is one of the simpler exchanges on the current market.

What is the difference between a crypto exchange and a brokerage?

In layman’s terms, a cryptocurrency exchange is a place where you meet and exchange cryptocurrencies with another person. The exchange platform (i.e. Binance) acts as a middleman - it connects you (your offer or request) with that other person (the seller or the buyer). With a brokerage, however, there is no “other person” - you come and exchange your crypto coins or fiat money with the platform in question, without the interference of any third party. When considering cryptocurrency exchange rankings, though, both of these types of businesses (exchanges and brokerages) are usually just thrown under the umbrella term - exchange. This is done for the sake of simplicity.

Are all the top cryptocurrency exchanges based in the United States?

No, definitely not! While some of the top cryptocurrency exchanges are, indeed, based in the United States (i.e. KuCoin or Kraken), there are other very well-known industry leaders that are located all over the world. For example, Binance is based in Tokyo, Japan, while Bittrex is located in Liechtenstein. While there are many reasons for why an exchange would prefer to be based in one location over another, most of them boil down to business intricacies, and usually have no effect on the user of the platform.