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Since the launch of cryptocurrencies about 10 years ago, Bitcoin (BTC) has been the undisputed market leader followed closely by Ethereum.
Both in terms of popularity and value. It has been and still is used as the standard unit when evaluating other cryptocurrencies. The price of bitcoin has grown my times over gaining a market valuation of over $1 trillion at some point.
At a far distance in the second place is Ethereum (ETH). We could refer to it as the best performing altcoin. A position that has been a battleground as several altcoins have occupied at specific times.
However, Ethereum seems to be strongly owning it. That been said, some believe that Ethereum could ultimately take over the leading position from bitcoin. But will it happen?
To help understand this reasoning, we need to compare these two cryptocurrencies on both the foundation and value proposition.
Being the pioneer cryptocurrency, there is no doubt it is the blue-chip of them all. It enjoys market leader benefits, it is popular and it is rare.
So far, these factors have worked for bitcoin but will this remain so in the long term? The only way to answer this question is by digging deeper to understand what bitcoin is all about.
Bitcoin was created as a peer-to-peer transactional currency to enable the movement of value between two parties without using traditional financial systems.
This process is referred to as decentralization. The founders created a cryptocurrency that would compete directly with the government-controlled fiat money.
This concept of decentralization (Moving funds without control of anyone or any central authority) exited investors. In return, they put in their money both in the purchase of bitcoin and investment in the support infrastructure.
However, over the years what made bitcoin dominate is threatening to pull it down. The promise to bypass government control systems has placed bitcoin on a warpath with the authorities.
Competing with the existing global monetary system will not be easy for Bitcoin and could cause its downfall.
The reality that Bitcoin has only one use makes it very vulnerable if that use fails. This is the biggest threat to the success of Bitcoin in the long term.
Today, the majority of bitcoin investors use it as an investment asset. In finance, an asset without any underlying value is deemed to fail in the long term.
There could only be 21 million bitcoins in circulation. This is the limit set at creation. Today, close to 19 million bitcoins have been mined leaving only very few millions to go.
Low supply and huge demand factors have also made it gain value due to increased demand. Being a transactional currency, 21 million coins are not adequate to supply the global demand of a 7 billion population.
A successful peer-to-peer currency must be readily available and inclusive. A characteristic bitcoin lacks hence limiting further its chances of succeeding in the long term.
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Transaction speed and costs
Transacting in Bitcoin is not only expensive but also slow in comparison with the competitors. Costs discourage users and push them towards affordable options.
This is largely due to the low infrastructure investments in the supporting ecosystems. it takes an average of 10 minutes to process a Bitcoin transaction making it unrealistic for use at the retail level.
The average transactional cost averages $50. A very high figure for the common users. These challenges in speed and costs are limit mass acceptability and use of Bitcoin.
Ethereum’s founder wanted to do more than just create a peer-to-peer currency. To achieve this, he created a blockchain network with the capability of supporting more functionalities within the blockchain space.
Ethereum blockchain has gotten a lot of uses currently. These include;
Creation of Ether cryptocurrency that is used to facilitate peer-to-peer transactions. This is similar to what bitcoin does.
Ethereum’s concept of smart contracts has enabled the creation of Non-Fungible Tokens. NFT facilitates the buying and selling of digital assets including art, music, and videos. This concept is gaining popularity as more content creators embrace the platform.
By positioning itself as a technological platform, Ethereum allows developers to ride on its platform for the creation of assorted blockchain products. An example is a creation of a competing cryptocurrency Shiba Inu.
Shiba Inu is a meme crypto that has been fully created on the Ethereum blockchain. This positioning has offered Ethereum more value proposition that could propel it into the future as more industries embrace blockchain.
Ethereum cryptocurrency has a higher supply threshold compared to Bitcoin. During its release in 2014, around 69 Million coins were introduced into the market.
Currently, there is no known supply cap for the currency. A huge supply works both ways. It could be a big hindrance to currency price growth. However, it is more inclusive and easily accessible by the users.
Transaction cost and speed
Ethereum has a higher transactional speed compare to Bitcoin. By 2017, Ethereum could support up to 26 transactions per second. This was way higher than Bitcoins 1 transaction in 10 minutes.
This being said, it is still slower compared to the traditional channels. The average transaction cost for Ethereum is $3.5. Still a high cost for retail users but lower than that of Bitcoin.
From the above breakdown, the two cryptocurrencies still have a long way to go to become universally accepted as payment choices by retail users.
Issues of scalability and transactional costs are persistent and common in both and need to be handled before it happens
This is different from Bitcoin. It is only created for one use and if that fails, the crypto will also fail in totality.
For any cryptocurrency to succeed in the future, it will need government support at some point. Bitcoin has already positioned itself as a competitor to the government systems.
There is a high chance that a war between the two would result in to complete slaughter of bitcoin.
On the other hand, Ethereum seems to be friendlier and more acceptable by governments. Some of its uses like Non-fungible Tokens are revolutionary and offer value in the creative market.
Governments are also starting to embrace blockchain. To achieve this, some could rely on the Ethereum network for developing their solutions.
Based on these considerations, Ethereum seems to offer more value than Bitcoin. In the long term, these value propositions could see it outperform bitcoin to become the world-leading cryptocurrency.