Are you ready to play Who Wants to Be a Millionaire? You’ve probably heard the rumors that investing in digital currency is an excellent way to get rich quick. After all, isn’t Bitcoin the gold of our modern era? If you’re looking for answers, there’s no need to find a financial advisor fluent in cryptocurrency because Career Karma is here to break it all down.
Follow along as we debunk a few myths, weigh the pros and cons, and sort through the advantages and disadvantages of using Ethereum and Bitcoin, two of the most exciting cryptocurrencies of our time.
What Is Ethereum?
Ethereum is an open-sourced blockchain technology created by Vitalik Buterin. The intended use of Ethereum’s decentralized applications, or dapps, is to make agreements and conduct transactions with others to buy, sell, and even trade goods and services. The unit of currency for the Ethereum network is called ether (ETH).
Unlike fiat currency, the Ethereum platform is decentralized, meaning there is no centralized authority or interference from a third party. Ethereum was initially intended to complement Bitcoin, but it has since emerged as a competitor. Coinbase is one of the most popular places to buy Ethereum.
What Is Bitcoin?
In 2009, Bitcoin (BTC) became the first cryptocurrency. It was created pseudonymously by Satoshi Nakamoto, who could be one person or a group of people. Bitcoin is commonly used as a medium of exchange, but it is also popular among investors, who try to get rich by trading Bitcoin on currency markets.
Bitcoin blockchain technology allows the currency to operate without a central authority, which means lower transaction fees than other currencies. Additionally, Bitcoin currently has the highest market cap of all cryptocurrencies, and the Bitcoin supply is capped at 21 million. Like Ethereum, you can buy Bitcoin from Coinbase.
Ethereum vs Bitcoin: The Most Important Differences and Similarities
While both BTC and ETH are among the leading cryptocurrencies, there are of course similarities and differences between the two. It’s important to consider these when deciding which one to invest in.
Ethereum and Bitcoin were created with different aims in mind. Bitcoin was created to be a medium of exchange. By contrast, Ethereum was intended to be a platform for contracts and applications that utilizes its own currency.
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Ethereum and Bitcoin use two different forms of digital coins. There are actually two different categories of digital coins, cryptocurrencies and tokens. Bitcoin uses cryptocurrency, along with Litecoin, Zcash, and Monero. Etherum is on the token system, just like Filecoin, Storj, and Blockstack.
Difference: Money vs Contracts
While Bitcoin works like money, Ethereum works like both money and contracts. You can own Bitcoin just like any global currency. Ethereum smart contracts are similar, but they’re more like digital agreements. Basically, the contract is used to exchange anything of value, including shares, real estate, money, and more.
Similarity: Blockchain Technology
Both Ethereum and Bitcoin use the distributed ledger technology, also known as blockchain. Ethereum uses blockchain to produce and run dapps, whereas Bitcoin stores bitcoins in a digital wallet where they can be sent to others. Each transaction is then stored in a public list or blockchain. The blockchain allows cryptocurrency exchanges to be done without a centralized authority, reducing transaction fees.
Similarity: Online Trading
Another similarity between the two is that they are both traded online as digital currencies. Both Bitcoin and Ethereum are written in the programming language C++ and stored in a type of cryptocurrency wallet, which contributes to their decentralized status and obviates the need for a bank.
Similarity: Mining Method
Another similarity between Ethereum and Bitcoin is that they both use the same POW, or Proof of Work. POW is a mining method, which is how a miner adds a block to the blockchain. Since not all coins can use the same method, the mining method for a particular cryptocurrency is the process by which a transaction on the blockchain is validated.
Ethereum vs Bitcoin: Pros and Cons
Neither Ethereum nor Bitcoin is perfect, and each comes with its own pros and cons. It’s essential to weigh these when deciding which cryptocurrency is right for you. Once you’ve considered all the factors, you can choose whether Ethereum or Bitcoin is better for your specific situation.
- Backed by an amazing team. Ethereum is founded and run by a team focused on building a successful business instead of just getting rich quick. The team has proved itself by keeping promises and resolving problems efficiently and quickly.
- High traffic. Nobody loves traffic, but in this case, it’s a good thing. Ethereum has drawn more traffic than even Bitcoin in some years. This proves that users are active on the site.
- Secure. There have been no serious security breaches, and Ethereum has been able to respond to and fix the minor ones. Others in the cryptocurrency business have not been so lucky.
- Slow transaction speed. Tight security has come at the cost of slow transaction speeds. Additionally, network updates have been slow to roll out.
- Scaling problems. Ethereum is dealing with scaling problems due to its multifunctionality. Offering more than one service has led to some bugs, breakdowns, and occasional hacks.
- Risky business. Investing in Ethereum can be risky since the market is always fluctuating. Users can and should expect occasional losses.
- Wide acceptance as a payment method. One of the significant pros of Bitcoin is that it is accepted by merchants everywhere. You can buy a variety of products using bitcoin units. Major companies such as Overstock, Home Depot, Microsoft, and even Starbucks accept Bitcoin.
- Easier international transactions. Since Bitcoin enjoys worldwide popularity, Bitcoin is one of the easiest currencies to use for international transactions. There are no foreign transaction fees, unlike credit cards, cash, or other currency.
- Lower transaction fees. In fact, Bitcoin has lower transaction fees across the board than many of its counterparts. Fees are usually no more than one percent, whereas other currencies have fees in the neighborhood of two to three percent.
- Exposure to scams and fraud. Being the most popular cryptocurrency in the world also comes with its drawbacks. Namely, criminals are more likely to prey on Bitcoin for scams, attacks, and fraudulent transactions.
- No refunds. Bitcoin doesn’t offer refunds or chargebacks. So if you run into transaction fraud, don’t expect to get your money back like you would with other currencies.
- Vulnerability to competition. Being the leading cryptocurrency means that competitors are coming for that number one spot. If this ever happens, Bitcoin’s value will decrease, leaving your investment in worse shape.
Should You Use Ethereum or Bitcoin?
Deciding between Ethereum or Bitcoin can be challenging. Since your money is on the line, it’s necessary to make an informed and educated choice on which cryptocurrency to use. The decision might come down to what you intend to use it for.
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Advantages of Choosing Ethereum
Ethereum has the advantage of not only being a place to transfer currency and make purchases but a vehicle for creating smart contracts. In addition, Ethereum has been praised for being one of the most secure networks.
Ethereum also has the largest developer community, larger than even Bitcoin, which means that the public is bound to adopt it en masse. It should be noted, however, that Ethereum is still only the second most popular cryptocurrency in the world, behind Bitcoin.
Advantages of Choosing Bitcoin
If you are purely looking to exchange, transfer, or make purchases, Bitcoin is probably your go-to network. Other advantages include more anonymity, lower transaction rates, and wider acceptance than other currencies. By and large, cryptocurrency investors still tend to favor Bitcoin over Ethereum.
But don’t let the conventional wisdom be the deciding factor. All things considered, your decision should be based on how you weigh the pros and cons of Ethereum and Bitcoin after you’ve assessed your reasons for breaking into cryptocurrency.
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