Bitcoin vs. Ethereum Compared: A Crypto Investor’s Guide

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Bitcoin (BTC) or Ethereum (ETH)? This is a key question in the minds of many crypto investors who want to allocate their capital in the best way possible.

Understanding the technologies behind these cryptocurrencies and learning what makes them special is key to making sound investment decisions.

In this article, we talk about the key features, use cases, risks, and market outlook for BTC and ETH in 2025.

Key Takeaways

  • Bitcoin is a peer-to-peer payment network. Ethereum is a decentralized app store.
  • Bitcoin’s limited supply and halving features have given it a store-of-value status.
  • Ethereum is the birthplace of decentralized finance.
  • A bill to create a strategic Bitcoin reserve was introduced in the US Congress in 2024.
  • ETH has underperformed BTC and L1 rivals in 2024, but experts say ETH’s challenges are not “existential.”

Bitcoin vs. Ethereum Explained

Bitcoin: Peer-To-Peer Electronic Cash Payment

Bitcoin-BTC-Techopedia explains

Bitcoin is the most valuable cryptocurrency blockchain in the world, with a market capitalization of over $1.88 trillion as of November 2024.

It is designed to be a peer-to-peer electronic cash payment network that allows anyone to make online payments without going through a financial institution.

Bitcoin is powered by a decentralized network of miners who validate and facilitate transactions. This makes Bitcoin transactions permissionless, censorship-resistant, 24/7, and open to all.

Ethereum: Decentralized Platform for Applications

Ethereum-ETH-Techopedia explains

Ethereum, on the other hand, is the second most valuable public blockchain in the world, with a market capitalization of $436.4 billion as of November 2024.

While Bitcoin focuses on peer-to-peer payments, Ethereum is designed to be a decentralized global platform for applications. You can compare it to Apple’s App Store or Google’s Play Store.

Unlike corporate-controlled App Store and Play Store, Ethereum is permissionless, meaning that anyone can build and use decentralized applications (DApps) on Ethereum.

Ethereum pioneered the use of smart contracts, programmable code which is executed automatically when predetermined conditions are met, on blockchains.

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“While Bitcoin was the world’s first decentralized, peer-to-peer digital currency and is considered the world’s first digital gold, Ethereum was the first global computing platform analogous to an App store in a smartphone, allowing developers and entrepreneurs to launch decentralized internet services,” said crypto asset manager 21Shares in a research report.

What Are the Key Differences Between Bitcoin & Ethereum? Comparison Table

Bitcoin and Ethereum were created with different use cases. In the table below, you will find a summary of the key differences between Bitcoin and Ethereum.

Feature Bitcoin Ethereum
Purpose Peer-to-peer cash payment network, store-of-value asset Decentralized smart contract platform for applications
Genesis block January 2009 July 2015
Founders Satoshi Nakamoto (pseudonymous) Vitalik Buterin, Gavin Wood, Charles Hoskinson, Mihai Alisie, Jeffrey Wilcke, Anthony Di Iorio, Amir Chetrit and Joseph Lubin.
Consensus mechanism Proof-of-work Proof-of-stake
Max supply 21 million tokens No max supply cap
Block time 10 minutes 10 to 12 seconds
Smart contract support No Yes
Scalability Through blockchain upgrades and micropayment channels Through blockchain upgrades and layer two rollups
Use cases Payments, store-of-value Decentralized applications, real world asset tokenization
Competition in the crypto sector None Solana, BNB Chain and other L1s
Spot ETFs Approved in January 2024 Approved in July 2024
Digital asset commodity status Confirmed by CFTC and US SEC Chair Gary Gensler Confirmed only by CFTC
Energy consumption Bitcoin mining is energy-intensive Ethereum uses 99.9% less energy compared to Bitcoin
Token creation Yes, through inscriptions Yes, through smart contracts

BTC vs. ETH Use Cases & Features

In this section, we focus on how Ethereum is different from Bitcoin when it comes to utility and features.

An overview of the use cases of Bitcoin and Ethereum will help you understand the key properties of the two premier crypto blockchains.

What Is Bitcoin Used For?

1. Decentralized Peer-to-Peer Payments

Bitcoin offers its users an alternative to fiat currencies. Value can be transferred over the Bitcoin network without having to rely on commercial banks.

While fiat currency payments require the approval of banks to go through, Bitcoin transactions are permissionless. Users do not need to go through the lengthy process of creating bank accounts to use the Bitcoin network. All you need is to download a free-to-use crypto wallet to start making Bitcoin payments.

Most importantly, the Bitcoin payment network is global, censorship-resistant, and runs 24/7.

2. Cross-Border Payments

The global nature of cryptocurrencies makes Bitcoin a convenient asset to make cross-border payments.

The traditional finance system requires users to wait lengthy processing time, often prolonged by banking holidays and clearance. Add banking fees and foreign exchange conversion fees to it, and you have a system that is inferior to crypto networks when it comes to cross-border payments.

Bitcoin transactions are typically confirmed within 10 minutes. Users only need to pay gas fees to miners to send tokens from one wallet to another.

3. Digital Gold

Bitcoin is referred to as “digital gold” due to its inflation hedge property and store-of-value status.

Bitcoin derives this property due to its limited supply. Only 21 million BTC tokens can ever be mined.

We also have to talk about Bitcoin’s halving feature which reinforces its inflation hedge property. Halving refers to a rule coded into the Bitcoin blockchain which reduced the number of BTC tokens emitted by half roughly every four years.

For example, before April 2024, Bitcoin emitted 6.25 BTC tokens per block. After Bitcoin’s fourth halving event which occurred on April 19, 2024, Bitcoin emissions were reduced by 50% to 3.125 BTC tokens per block.

4. Diversification

Bitcoin is also used as an investment asset for investors who wish to diversify their portfolios beyond equities, debt, real estate, and gold.

It is seen as a unique asset that does not react to macroeconomic conditions the same way traditional finance assets may respond.

Over the last 12 months, as of November 28, 2024, the 30-day Pearson correlation of Bitcoin to US equity benchmark index S&P 500 has ranged between -0.86 to +0.86, data compiled by The Block showed.

What Is Ethereum Used For?

1. Decentralized Applications (Dapps) & Decentralized Finance (DeFi)

Ethereum’s biggest advantage over Bitcoin is its programmability, which allows it to host some of the most popular DApps in the world.

The world’s most valuable smart contract platform is the birthplace of DeFi, where iconic dApps such as Uniswap (UNI), MakerDAO (MKR) and Aave (AAVE) all started their journey.

On Ethereum, you can trade cryptocurrencies, stake tokens, participate in crypto lending and borrowing, create custom crypto tokens, buy non-fungible tokens (NFTs), and play blockchain games.

2. Real World Asset (RWA) Tokenization

The ability to create fungible and non-fungible tokens on Ethereum has allowed developers to represent real world assets such as government bonds, corporate bonds, real estate and art in the form of tokens on the Ethereum blockchain.

Tokenization of RWA allows investors from across the world to invest in assets that would otherwise be unavailable to them.

As of November 2024, Ethereum was the biggest RWA tokenization blockchain in the world, with tokenized assets (excluding stablecoins) worth over $3 billion, rwa.xyz data showed.

3. Stablecoins

Stablecoins are fiat-pegged cryptocurrencies on a blockchain. US dollar-pegged stablecoins like USDT and USDC are the most popular stablecoins in the world.

These tokens provide crypto investors with stability during volatile markets. Stablecoins have also proved to be useful assets for currency hedging and cross-border payments.

As of November 2024, 53.3% of the global stablecoin market cap was on Ethereum, data on DefiLlama showed.

4. Investment

Like Bitcoin, Ethereum is a popular investment asset among investors.

Following the approval of spot Bitcoin ETFs in January 2024, Ethereum’s ETH token also received the coveted spot ETH ETF in July 2024, opening up the gates for retail and institutional investors to invest in the crypto without worrying about self-custody and other technical requirements.

5. Staking

A key advantage of Ethereum over Bitcoin is the feature of staking.

Staking is the process of locking up ETH tokens in a smart contract to be eligible to validate transactions on Ethereum. In return, validators earn network rewards for their contributions.

Therefore, staking has made ETH a yield-bearing asset.

Bitcoin vs. Ethereum Overview: Which Is Right for You?

Is Bitcoin or Ethereum better? The answer to this question is subjective and depends on your investment outlook, risk appetite, and understanding of the technology.

In the section below, we have compiled a list of Bitcoin and Ethereum-specific risks that potential investors need to be aware of.

Bitcoin Investment Risks

Energy consumption
The Bitcoin mining industry’s high energy consumption is a key risk for investors. Over the years, Bitcoin has faced scrutiny from regulators and lawmakers due to its exorbitant annual energy consumption which was estimated to be more than countries such as Malaysia, Egypt and Poland by the Cambridge Centre for Alternative Finance.
Regulations
Regulations around cryptocurrencies are still being formed which has caused nervousness among investors due to the looming uncertainty. Several countries, including China, Nepal, Bangladesh, and Egypt have banned the use of Bitcoin.
From payments to digital gold
Bitcoin’s critics have disapproved how the narrative around Bitcoin changed from a decentralized payment network to its status as digital gold. Critics say that Bitcoin’s 10-minute block times and fluctuating gas fees make it unsuitable to become a global payment network to rival the likes of Visa and Mastercard.
Satoshi Nakamoto's holdings
According to blockchain researcher Sergio Demian Lerner’s analysis, Bitcoin’s pseudonymous founder Satoshi Nakamoto is said to have mined over 1.814 million BTC tokens between 2009 and 2010 of which 1.1488 million ($109.454 billion as of November 28, 2024) was estimated to be unused. Bitcoin prices would face intense downward pressure if these holdings are ever sold in the open market.
Quantum computing
Quantum computing poses a serious threat to cryptocurrencies. Technological advancements in quantum computing could potentially break Bitcoin’s proof-of-work cryptographic security system in the future.
Forking risks
Bitcoin’s developer community has seen disputes related to network upgrades in the past. The “Blocksize Wars” saw two factions split over the decision of increasing the block size of Bitcoin to handle more transactions. The dispute resulted in the fork of the original chain into Bitcoin and Bitcoin Cash (BCH) in 2017.

Ethereum Investment Risks

Competition
While Bitcoin is a unique cryptocurrency that does not have a counterpart, Ethereum has numerous competitors that provide similar smart contract features to developers. New layer one (L1) blockchains like Solana (SOL), Sui (SUI), and Aptos (APT) have exploited a gap in the L1 market to provide performance-focused blockchains that are eating away Ethereum’s market share.
Smart contract risks
Smart contracts on Ethereum can be hacked, resulting in loss of user funds. In 2016, Ethereum had to fork its chain after an attacker exploited a bug in the smart contract of a decentralized autonomous organization (DAO) to steal 3.6 million ETH tokens ($12.92 billion as of November 28, 2024).
Gas fees and network congestion
Ethereum is known for its notoriously high and volatile gas fees. The high transaction fees has made the Ethereum blockchain impractical for a number of use cases like blockchain gaming.
Rollup-centric scaling roadmap
Ethereum plans to find scale while preserving its decentralization and security with the help of layer two (L2) rollups. However, the success of this plan is uncertain.
Liquidity fragmentation
Ethereum’s plan to scale with the help of L2s has resulted in crypto liquidity being fragmented across numerous L2 chains that are not interoperable. This has led to poor user experience and capital inefficiencies.
Capital drain to L2s
The growing importance of L2 rollups has also seen DeFi activity and capital move away from Ethereum L1 to L2s like Arbitrum (ARB), Base, and Optimism (OP).
Regulatory risk
Ethereum faces a higher degree of regulatory scrutiny vs. Bitcoin as the cryptocurrency still faces questions over its status as a digital asset commodity.

Pros & Cons of Ethereum vs. Bitcoin Investment

Let’s summarize the pros and cons of Bitcoin and Ethereum:

Bitcoin

Pros
  • Unique asset of the crypto market
  • Digital asset commodity
  • Limited supply resulting in inflation-resistant properties
  • High degree of decentralization and security
  • Permissionless blockchain
  • Transparent ledger
  • Ongoing trend of government and corporate accumulation of Bitcoin
Cons
  • Highly energy-intensive mining process
  • Slow technological upgrades
  • Uncertainties related to Satoshi Nakamoto’s holdings
  • Limited scalability
  • Speculative value
  • Volatile price
  • Users need technical know-how
  • Crypto industry regulatory risks

Ethereum

Pros
  • Home of dApps and DeFi
  • Smart contract programmability
  • Yield-bearing asset
  • Staking is not energy-intensive
  • Decentralization and security
  • Permissionless blockchain
  • Transparent ledger
Cons
  • Highly competitive L1 sector
  • Smart contract risks
  • Volatile gas fees
  • Limited scalability
  • Uncertainties related to rollup-centric roadmap
  • Liquidity fragmentation due to L2s
  • Speculative value
  • Volatile price
  • Users need technical know-how
  • Crypto industry regulatory risks

ETH vs BTC: Market Outlook for 2025 & Beyond

Strategic Bitcoin Reserve Bill Will Send Bitcoin Prices Higher

If we compare the market performance of Bitcoin and Ethereum in 2024, we see a clear investor preference for the former due to its growing acceptance among institutional investors, corporations and governments.

The falling ETH/BTC ratio (-30% year-to-date as of November 28, 2024), increasing Bitcoin dominance (+13% year-to-date) and surging spot Bitcoin ETF asset under management are a testament to Bitcoin’s ever-increasing popularity.

Now, investors are keeping a keen eye on whether a bill to create a strategic Bitcoin reserve in the US sees the day of light in 2025.

ETH Is the Contrarian Bet, Expert Says

As for ETH (+56% year-to-date), the token underperformed Bitcoin (+125% year-to-date) and its L1 rivals, such as SOL (+131% year-to-date) and BNB Chain (+107%), due to uncertainties related to its rollup-centric scaling plans.

However, Ethereum continues to dominate the world of decentralized finance accounting for over 57% ($69.19 billion of $119.62 billion) of total value locked (TVL) across all smart contract blockchains, DefiLlama data showed.

Ethereum also remains the king when it comes to RWA tokenization. Traditional finance institutions have shown a preference for the reputed Ethereum blockchain’s high degree of decentralization and security when it comes to tokenizing assets.

According to rwa.xyz, Ethereum held a 76.4% market share in RWA tokenization with a total value of $3.07 billion tokenized assets (excluding stablecoins). Its closest rival Stellar tokenized assets worth $245.5 million (excluding stablecoins).

In September 2024, Matt Hougan, chief investment officer of Bitwise, called Ethereum a “potential contrarian bet” and said, “from my seat, none of Ethereum’s challenges seem existential.”

The Bottom Line: Should I Buy Bitcoin or Ethereum?

If you are thinking of investing in BTC or ETH, we would like to remind you that cryptocurrencies are highly risky and volatile assets. Always do your research before investing.

Bitcoin versus Ethereum analysis clearly shows that both cryptocurrencies hold their top positions due to numerous real world use cases and potential investment opportunities.

This article should not be taken as financial advice. It was written for informational purposes only.

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Mensholong Lepcha
Crypto Specialist
Mensholong Lepcha
Crypto Specialist

Mensholong is a experienced crypto and blockchain journalist, now a full-time writer at Techopedia. He has contributed with news coverage and in-depth market analysis to Capital.com, StockTwits, XBO, and other publications. He began his writing career at Reuters in 2017, covering global equity markets. In his spare time, Mensholong enjoys watching soccer, finding new music, and buying BTC and ETH for his crypto portfolio.