Bitcoin Vs. Ethereum

It’s at this point you’re probabily saying to yourself “Well Bitcoin’s worth the most so clearly it’s the best and I should buy that right?”

Not necessarily. It’s worth the most, but if you’ve ever spoken with me you know that I’m a very big fan of Ethereum, with a very strong distaste for Bitcoin. This is not an unfounded opinion. I don’t know what’s going to happen to Bitcoin. It could go up to $100k each, or a million, or it could go to zero. I choose to invest my money in Ethereum because from a technical perspective, I believe it is the superior Cryptocurrency. It is the most likely to see widespread adoption, and has the largest growth potential. This comes from two sources: Bitcoin’s Scalability problem and the ubiquity of smart contracts.

Scalability Issues

“Bitcoin doesn’t scale?”

No it doesn’t. If you ask me or most people in the ethereum community, they’ll tell you that the bitcoin maximalists are willfully ignorant of this problem. The bitcoin blockchain was revolutionary for its time, literally creating the concept of the blockchain. It’s not the best though. The first mover advantage can only get you so far, if you don’t innovate to keep your lead, and the Bitcoin community has no plans to improve.

In its simplest terms, bitcoin blocks are created and processed at fixed intervals with fixed size. As more people try to use it to make transfers, the fees will become exorbitantly high, and speed incredibly slow. This is because transactions work on the auction model. Higher transaction fees incentivize miners to include it in the block, with the transactions with the highest fees being picked up first.

At the time of writing this, the average transaction fee per bitcoin transaction is $26.5 and takes around 10 minutes. If you’re moving millions of dollars around, it’s quite a bargain. For the average consumer buying coffee, that’s an outrageous price to pay. On Ethereum that value is currently around $2.61 and 1-3 minutes.

Now those values will go up as more people try to use the currencies, and vary based on your ethereum transaction, but you can already tell Ethereum is light years ahead of Bitcoin. Ethereum is currently going through their own set of upgrades, and a community working very hard to bring those costs down, but Bitcoin’s community has no plans to solve this issue. This is often why you may hear about Bitcoin being used as “a store of value” against inflation. This may or may not be true, but it certainly shows that it’s limited in its capabilities and not usable as an electronic currency for everyday purchases.

Smart Contracts are Key

Bitcoin’s only use is the ability to send Bitcoin from one person to another. It’s very limited. The creation of smart contracts however, has nearly unlimited use cases. In order to use these applications, you have to pay a transaction fee ONLY in the native currency of that blockchain.

If you’re using the ethereum blockchain to send a token from one person to another, you still have to pay a transaction fee in Ether. If you’re exchanging Ether for a USD-Backed stablecoin, you’re still paying that transaction cost in Ether. This means that the value of ether is derived not only from its use as a currency, but because it gives you access to interacting with thousands of Decentralized Applications. The more goods and services you can spend your ether on, the more value it has.

Think about it like gift cards vs. dollars. Gift cards are only good at one place, but a dollar bill is accepted everywhere. If you could pick between the two, you would pick the dollar every time. This is because its possibilities are greater than the gift card. You can’t invest a gift card in the bank and earn interest on it.

Growth Potential

In terms of Numbers alone, it’s growth potential is outstanding. It currently has a market cap of $311 Billion, at a price of $2,700/Ether. At a price of $60k/Bitcoin, and a market cap of 1.25 Trillion, Ethereum could grow by literally 4x and still be smaller than Bitcoin by market cap. It’s not unreasonable to think it would grow by 3x and still be less than a Trillion dollars. The combined value of its thousands of tokens and applications give it infinitely more growth potential than bitcoin. In terms of value, its definitely within the realm of possibility that it will be worth $1T, or even $2T or $3 or more. For reference, the total value of the US Stock market is currently $49T. The total world Stock Value is around $95T.