Bitcoin
Bitcoin is the first digital asset. It is a blockchain -based, decentralized digital currency powered by a network of users that makes financial transactions possible without trusting a central authority or intermediary. Bitcoin and other Digital Assets are an interesting alternative to fiatrisuits such as the US dollar and the euro, which are supported by governments and central banks.
Bitcoin is protected by cryptography, where transactions are verified by a process known as Mining , where Bitcoin miners compete to verify transactions by resolving complex mathematical puzzles with powerful computers. This verification method is known as proof-of-work , or POW (read more about proof-of-work here ). Bitcoin transactions are permanently recorded on a public ledger that cannot be changed or manipulated in any way.
If a Bitcoin miner successfully adds a block of verified transactions to the blockchain, they receive a reward from newly-mine Bitcoins. That reward is currently 3.125 BTC per block, this reward is halved every time 210,000 blocks are added to the blockchain; This halving of rewards is called Bitcoin halving, and the process usually takes place almost every four years. April 20, 2024, the fourth halving took place (read more about the Bitcoin Halving here ). In contrast to Fiatralutas, Bitcoin has a hard limit of 21 million BTC that can ever exist. This limit limits Bitcoin's range and prevents high inflation.
Ethereum
Ethereum is a blockchain platform that is made to support smart contracts The native currency of the Ethereum network is Ether. Smart Contracts are software that enables decentralized apps, or Dapps, to automatically run on a blockchain when a set of predetermined conditions is met.
The Ethereum network includes Dapps for, among other things, decentralized finances, known as Defi. Most non-bungible tokens , or NFTs, are also based on the Ethereum network. The Ethereum network is decentralized and works on a network of thousands of computers around the world. In 2022, the Ethereum network switched from an energy-intensive POW verification system to a proof-of-stake , or POS, model. Instead of competing to resolve mathematical puzzles, the POS system of Ethereum selects Validators via an algorithm. To be eligible as a possible validator, traders must "strike" some of their digital asset (ether in this case) as collateral. The more ether they use, the greater the chance that they will be chosen to validate a block and receive a reward.
Ether does not have a hard supply limit, but the offer is managed through a process known as combustion ( Burning ). Every time a transaction is completed on the Ethereum network, users must pay a transaction fee, or "gas" allowance. The Ethereum protocol stipulates that a fraction of each gas allowance will be burned, or in fact destroyed. That means that ether deflationar has been during the past year, because more ETH has been burned than has been created, and the total supply of ETH has decreased. When people debate about the virtues of Ethereum as an investment, they actually refer to the native currency of the network, Ether, although it is often still informally referred to as Ethereum.
Most important differences
Both Bitcoin and Ether are the most popular digital assets that operate on decentralized blockchain networks, but there are also few similarities between the two investments. Here are some of the many differences between Bitcoin and Ether:
- The Bitcoin network works on a POW verification system, while Ethereum uses a less energy-intensive POS consensus verification system
- As of today, Bitcoin is being seen more and more as Digital Gold and it can also be seen as an alternative for fiatraluits such as the US dollar and the euro. The primary goal of Ethereum is to serve as a platform to perform smart contracts native currency used to facilitate transactions.
- Bitcoin has a finite stock that is limited to 21 million, while Ether has theoretically an infinite stock. However, Ether has been deflation in recent months thanks to the destruction of part of the stock (via the transaction costs). If the Ethereum network remains popular and often used, the currency would remain deflatory.
- The future returns of Bitcoin are likely to depend on its adoption as a legitimate global currency and the popularity as an inflation protection and value storage. The future returns of Ether will probably depend more on the popularity of the Ethereum network and the growth of Dapps and Smart Contracts . However, it is important to note that both ecosystems are constantly developing, so we also see more and more activity within the Bitcoin ecosystem in the field of NFTs and other applications that are broader than the above.
Returns in recent years
Both Bitcoin and Ether have been exceptional investments. If we look at the past, it is difficult to choose a winner between Bitcoin and Ether because their relative returns fluctuate depending on the time frame. In the past year, the price of Bitcoin increased by 130% compared to an increase of 70% for Ether (at the time of writing).
If you look back over the past five years, the price of Bitcoin has risen by around 1,150%, while the price of Ether has risen by around 1,850%. It seems that Ether has been the better long-term investment, but last year that trend is reversed by increasing enthusiasm around the launch of spot Bitcoin Exchange-Traded Funds, or ETFs. However, there may also follow Ether ETFs later this year (read more about this in the following article: click here ).
This article was compiled by the BitStaeteInvestment Team. If you want to know more about the professional investing in Digital Assets, please contact us.
