Bitcoin vs Ethereum: Which is Better? A Comprehensive Guide
Ethereum vs Bitcoin: A Comparative Study photo
By: Natali

Ethereum vs Bitcoin: A Comparative Study

Table of Contents

Bitcoin and Ethereum are the two most popular cryptocurrencies with huge fan bases worldwide. And they are always in dispute, arguing about which coin is the best one. So we have decided to find out the distinctive features of every option and compare them in the Defiway comparative study. Also, I’ve gathered ways how you can work with both currencies to securely transfer your funds from one blockchain to another, and live your best crypto life. Check out this article and find a winner in the Bitcoin vs Ethereum race.

Bitcoin: The Pioneer of Cryptocurrencies

Bitcoin is the first digital currency in our world. It started its history back in 2009 and remains the most popular cryptocurrency. For the first 1,5 years, it was just some geek’s source of entertainment. But on 22, May 2010 Laslo Hanyesz brought two pizzas for 10 000 bitcoins. It was the first commercial usage of cryptocurrency in human history. This day is marked as one of the biggest holidays in the blockchain community. Bitcoin works on the Proof-of-Work consensus. As of today, cryptocurrencies run on multiple mechanisms. But up to 2015, it was only PoW. It’s very secure, but it’s also an energy-inefficient consensus with limited scalability.

There will only ever be 21 million Bitcoins created, which makes it a scarce asset. As of July 2023, there are already 19.4 million Bitcoins in the market. It becomes harder and harder to mine new Bitcoins, which makes each new coin an even more treasurable asset.

But as with anything in our world, Bitcoin has its own drawbacks. It has consumption up to 127 terawatt-hours (TWh) a year. This number is much higher than the yearly Norway or Sweden consumption. Like any other PoW network, it has scalability issues. Bitcoins capacity is only 7 transactions per second (TPS) ,which limits its future growth.

However, people are still using this currency for payroll, micropayments, sending money to relatives from other regions, as an investment asset, and more. The launch of Bitcoin ETFs in October 2021 made it easier for investors to buy Bitcoin. And it raises the digital currency adoption to an even broader audience.

Ethereum: Beyond Just a Cryptocurrency

Ethereum is the main Bitcoin rival created in 2015. Back in those days, it ran on the same PoW consensus. But after its hard fork in 2022, Ethereum runs on the eco-friendly PoS (Proof of Stake) consensus.

Generally speaking, it is a decentralized platform that runs self-executed smart contracts. That’s why you can see many tools and apps on an Ethereum basis. Simply because this is not a regular cryptocurrency, it’s more like a tokenized ecosystem that can expand.

Vitalik Buterin believed that Bitcoin could be more than just a digital currency. So, like Bender from Futurama animated series, he decided to build his own theme park with… a sense of freedom, of course :)

He wanted to create a platform that could run decentralized applications that are not controlled by any central authority. The Ethereum platform was launched in 2015. In 2016 we saw the first dApp, called "The DAO." It was a decentralized investment fund that was funded by Ethereum users. Unfortunately, it was hacked, and $50 million worth of Ethereum was stolen.

The main difference between Bitcoin and Ethereum is their purpose. Bitcoin can be used only the same way as fiat money: as a payment option, asset, or investment. But Ethereum acts as the tokenized base for many crypto services, applications, and decentralized organizations with a transparent anonymous voting system. The most common dApps are:

  1. Decentralized exchanges: Uniswap, SushiSwap, PancakeSwap, etc.
  2. Lending platforms: Aave, Compound, MakerDAO, etc
  3. Games: CryptoKitties, The Sandbox, Axie Infinity, etc
  4. Decentralized autonomous organizations (DAOs): MolochDAO, Colony, etc.

But is Ethereum better than Bitcoin? Speaking of advantages, Ethereum is still a highly secure decentralized platform , but far more scalable. Currently, the main Ethereum network can process up to 30 TPS. But if you are using layer-2 solutions or coins, the transaction speed can become even higher. Polygon (MATIC) can execute 5-6 thousand TPS, which makes it compatible with MasterCard.

However, the ETC vs BTC battle gets even more complex due to Ethereum’s level structure. It will take far more time to understand Ethereum.

Comparative Analysis: Bitcoin vs Ethereum

As you see, they are totally different cryptocurrencies. That’s why they have different fanbases. To ease the comparison, I decide to gather their distinctive features in one bullet list:

  • Transaction speed. In Bitcoin it is only 7 TPS, while Ethereum main net processes 30 TPS. Layer-2 solutions can work with 6000 TPS, similar to MasterCard speed.
  • Scalability. Bitcoin scalability is limited by its block size (1 Mb). The network can handle a certain number of transactions per block. Ethereum's scalability is not as limited, as its block size is dynamic. It can be increased if needed.
  • Fees. Bitcoin's fees are typically higher than Ethereum's, especially during high congestion periods. BTC miners need to be compensated for the resources they use to process transactions. Ethereum's fees are more volatile, as they can fluctuate.
  • Consensus mechanism. As of mid-2023, Bitcoin works on the PoW mechanism. It’s an energy-consuming process that could harm the environment. Ethereum works on the PoS consensus which is way more efficient.
  • Usage cases. Bitcoin can be used only in the form of digitalized money, while Ethereum is a whole platform for dApps.

Bitcoin is a more established cryptocurrency with a larger market capitalization, but it is more energy-intensive and has higher fees. And it may lead to a significant price drop in the next 3-5 years. On the other hand, Ethereum is a more versatile platform with a wider range of use cases. But it still is not as widely acceptable as Bitcoin.

Transfers between Bitcoin and Ethereum Blockchains

Unfortunately, it’s not possible to transfer BTC to ETH directly. These two blockchains use different protocols and consensus mechanisms, so they are not compatible with each other. But it is still possible to transfer money from one chain to another.

The easiest way is to use the exchange that supports both coins. Once you transfer BTC to that exchange, a few moments later you’ll get money in your ETH wallet. But choose the exchange wisely. There are many scammers even on trustworthy platforms.

Another way is to use a decentralized bridge. Let’s imagine that you want to send some money from your Bitcoin wallet to the Ethereum one. Deposit your BTC into the bridge's smart contract. The bridge will then mint a wrapped version of your BTC, which can be used on the Ethereum blockchain. You can then use the wrapped BTC to purchase ETH or other ERC-20 tokens.

Beware that you need to pay fees on both blockchains while sending BTC to ETH and vice versa. Also, your transaction needs to be confirmed by both blockchains, so it would take some time.

As you see, while you are using the bridge, you need to store some money on the bridge’s smart contract. But some hackers could steal your money due to the vulnerabilities of shared smart contracts. They could initiate an incoming transaction from you without an exchange transaction from them. Literally, they are stealing money from you.

So if you want to transfer money from ETH to BTC and vice versa, use new generation bridges , like the Defiway cross-chain bridge, that save you from possible hacking attacks while you transfer the money.

Introducing the Defiway Crypto Bridge

In most bridges you need to perform both Approve and Send transactions . And some bridges have critical vulnerabilities allowing hackers to steal money from wallets. While approving some transactions, you are signing the smart contract and providing another person partial access to your account. And if this person is a hacker, they could crack your account before and get access to it. It’s quite unpleasant to get to know that someone can hack you while you are just sending BTC to ETH.

Our smart bridge mitigates the associated risk by performing Send transactions without executing the approving one. It saves gas and lowers transaction fees (up to 70-80%). Also, you don’t need to sign an additional contract which may lead to the loss of the account access. Generally speaking, by removing the need for signatures, the possibility of someone gaining control over your wallet funds is entirely eliminated. The absence of the Approve transaction in Defiway's Cross-Chain Bridge enhances user experience and reduces transaction complexity. Users can enjoy a seamless and secure Send transaction process, knowing that their funds are safeguarded from potential vulnerabilities.

Expert Opinions

There is no winner in the ETH VS BTC battle. They both are great cryptocurrencies to start your crypto journey. They are the most acceptable digital coins, so you can use them almost on any crypto service. Even traditional businesses accept them as solid payment options. Yes, they are volatile assets. But they still have more predictable prices than most cryptocurrencies. It’s easy to predict BTC and ETH prices in the short run (2-3 days span), so you can easily sell them to get your money back.

Charlie Lee, former Director of Engineering at Coinbase says that Bitcoin is the most secure and decentralized cryptocurrency in existence. On the other hand, Tone Vays, a cryptocurrency analyst, said that Bitcoin is the first widely adopted cryptocurrency and has a strong track record of security and stability.

And I agree with them. It was the first cryptocurrency ever that gained its fanbase simply to the fact that it was the first fully digital payment option. So it remains its place as one of the main cryptocurrencies no matter what.

But what about Ethereum? It’s more than just a cryptocurrency. It’s already a base for hundreds of popular tools and dApps, so it won’t lose its appeal In the future too.

Ming Zhao, CEO of Matic Network says that Ethereum is the most promising platform for the development of decentralized applications and has the potential to revolutionize the way we interact with the internet.

And I fully agree with him too. That’s why I think that Ethereum won’t lose its appeal in many years to come. It has totally different purposes than Bitcoin, so they won’t conquer each other. They will coexist and supplement each other.

Investment Considerations

Cryptocurrency is still a volatile asset, even if it’s a common option on the market like Bitcoin or Ethereum. Investors who are not comfortable with this level of volatility usually reject crypto as an option. But if you are ready to take risks, you have great potential for high returns.

Beware that crypto is a new technology, so it doesn’t have the level of regulation as more traditional assets. This situation changes year by year, but still, there are many “blind spots” where no government or financial institution protects investors from the loss due to hacking attacks. And if you become a fraud victim, you mostly get no compensation.

But at the same time, Bitcoin and Ethereum are having a digital scarcity aka limited supply. And it will make them even more valuable in the future. It’s similar to the luxury brands like hand-made Lamborghini cars or Birkin bags. But the main difference between them and crypto is that anyone could start their crypto journey. Even if they have only $100 of spare money.

I recommend you to diversify your portfolio. Don’t put all eggs in a single basket. Use multiple currencies and store them in different wallets. So if even some of them fail, you’ll still have access to most of your assets.

Invest only in what you are not afraid to lose. It’s one of the most highly volatile assets in the world, so spend your money wisely. Let’s imagine that in July you can invest $500 in crypto, but in August you take a long vacation and have only $50 to invest.

Don’t judge yourself! Say to yourself that you’ve invested the maximum amount that you can do without altering your lifestyle. I highly recommend doing your own research before investing even $10. It’s still money. And you need to ensure that your decision to invest would bring you at least $11, so you will be in profit. Rebalance your portfolio from time to time, ensuring that it is still aligned with your risk appetite.

Wrapping Up

Is Ethereum better than Bitcoin? No, they are two different cryptocurrencies with different purposes and user fanbases. They are the two most well-known options on the market. However, they are not stablecoins, so their price is not pegged to the fiat currency or gold. They are still highly volatile assets.

Bitcoin is a cryptocurrency pioneer that shows our world the opportunities of digital currencies. But it can work only as an alternative to currencies in the digital world.

On the other hand, Ethereum is the “little engine that could”. But its destiny is far better than the train in the Major Payne movie. As of today, Ethereum is a decentralized platform that acts as a base for many dApps and layer-2 cryptocurrencies. But Bitcoin is a far more accessible option than Ethereum. Most non-crypto-related businesses have only Bitcoin as an alternative payment option. Ethereum still has a place to expand. If you want to transfer your ETH tokens to BTC in the safest and fastest possible way, use the Defiway Bridge solution.

In most bridges, you need to perform both Approve and Send transactions. And some bridges have critical vulnerabilities allowing hackers to steal money from wallets. Our smart bridge mitigates the associated risk by performing Send transactions without executing the approving one. By removing the need for signatures, you eliminate the chance of someone gaining control over your wallet. Want to keep up with the latest crypto updates? Add the Defiway blog to your bookmarks and subscribe to our Twitter to be aware of the latest blockchain-related news!