More and more investors are considering adding cryptocurrencies such as Bitcoin or Ethereum to their financial portfolio. But which crypto is the best choice? Are you interested in investing in one, or indeed, multiple cryptocurrencies? Is there such a thing as a ‘best’ cryptocurrency?
Both cryptos are decentralised digital currencies. This means that they are not issued or regulated by banks or any other financial authorities.
What’s better – Bitcoin or Ethereum?
The first decentralised digital currency, Bitcoin was created in January 2009 by Satoshi Nakamoto (that is a pseudonym – no-one actually knows who Nakamoto is/was or, indeed, if he/she is one person or a collective). Bitcoin is known as ‘digital gold’. It exists on a ledger called a Blockchain. All Bitcoin transactions are verified by a process known as ‘mining’. Bitcoin is the world’s largest cryptocurrency by market capitalisation.
After a while, people realised that the Blockchain could be used for purposes, rather than simply cryptocurrencies.
Like Bitcoin, Ethereum also operates via Blockchain technology. It can be described as a software platform which lets developers build other apps on it (more on that in a minute). To use the platform, developers buy and pay fees to the network in Ethereum’s native digital currency, Ether.
Ethereum was conceived by Russian-born Canadian programmer and writer Vitalik Buterin (not a pseudonym) in 2013. It is the second-largest cryptocurrency by market value after Bitcoin. Ethereum supports a wide range of decentralised applications (dApps), including cryptocurrencies. dApps allow users to interact with smart contracts (self-executing contracts with the terms written into lines of code) implemented on the Blockchain. Most NFTs are part of the Ethereum Blockchain.
The choice is entirely up to you
Of course, it is possible (and some would say wise) to invest in both Bitcoin and Ethereum. However, if you have decided to choose between the two cryptos, you should remember one thing. The two cryptocurrencies offer totally different value propositions for you as an investor, as they serve very different purposes.
Bitcoin is predominantly a store of value and medium of exchange. Ethereum is regarded more as a ‘general purpose’ Blockchain, whose flexibility gives it more potential.
As an investor, having Bitcoin in your financial portfolio can be used as a means to preserve value and as a ‘safe haven’. Although the cryptocurrency is considered a volatile investment, it is still considered an asset whose value is expected to be maintained or even rise during market downturns.
On the other hand, Ethereum can be used to access decentralised financial (DeFi) services and for creating smart contracts. Its native coin, Ether can also be used as a store of value. Through dApps, it can be used in myriad ways. This includes using it as collateral for loans, or lent out to borrowers to earn interest.
Both use the ‘Proof-of-Work’ mechanism (a way to verify new transactions, add them to the Blockchain, and create new tokens). However, Ethereum will soon be moving to ‘Proof-of-Stake’ (which uses staking, which is more environmentally friendly, to achieve the same things.)
Are Bitcoin and Ethereum on the same Blockchain?
Earlier in the blog, we spoke about the Ethereum Blockchain being super-flexible. In fact, it is such a flexible platform, that some people actually store their Bitccoin on the Ethereum Blockchain instead of the Bitcoin one. This is known as a ‘wrapped Bitcoin’.
To take advantage of dApps, a tokenised version of Bitcoin was also created on Ethereum. This allows users to keep on holding Bitcoin while using decentralised applications. In this way, token holders can lend their Bitcoin to earn interest.
However, Ether cannot be held on the Bitcoin Blockchain.
Can Bitcoin be converted to Ethereum and vice-versa?
You can trade between the two coins directly by exchanging Ethereum for Bitcoin or vice-versa. The simplest, safest, and most user-friendly way to do this is by going through a cryptocurrency exchange.
With Wenlite, you can choose to trade one kind of cryptocurrency for another – such as converting Ethereum to Bitcoin or vice versa. You can also buy cryptocurrencies using regular currency.