Should I invest in Ethereum or Bitcoin?

Although Bitcoin and Ethereum are both cryptocurrencies they have very different platforms and uses

So, let’s start with the word ‘invest’. It’s a word typically associated with moving value from one asset class to another with a view of generating a return on investment (ROI) over an expected time.

If your goal is only to make more money, then you are looking to pick the project that you think will go up in value the most. In very simple terms if the demand outgrows the supply of people willing to sell over a given time then you can expect your investment to be profitable.

So, both Ethereum and Bitcoin are crypto assets. They both have different aspects of supply and use cases (demand). Let’s begin by looking at the supply side:

Supply Comparison

Bitcoin (BTC) Ethereum (ETH)
Circulating Supply 17.3 Million BTC 102 Million ETH
Max Supply 21 Million BTC Unknown
Supply Inflation rate per year (Current Rate 2018) 3.8% (Inflation rate halves every 4 year with next one in 2020) 12.8% (future inflation rate not clear)

 

As you can see in the above table, there are some unknowns with the Ethereum maximum supply and inflation rate. The short reason why is because the central development team and other network participants have not yet decided.  On the other hand, the supply side of Bitcoin is crystal clear.

Platform Comparison

Although Bitcoin and Ethereum are both cryptocurrencies they have very different platforms and use cases.

Let’s start with Bitcoin…

The base Bitcoin platform has a very simple use case – send Bitcoins between participants in a very secure, reliable and censorship-resistant way. The secure part comes from a robust blockchain of mining hardware (around $1.3 Billion value) and nodes (10,000 publicly reachable).

The reliable aspect comes from the fact that the network has been running smoothly 99.992% of the time since inception. The censorship resistance comes from the fact that if you broadcast a transaction with a sufficiently high fee attached (currently around 10 cents) it is near enough impossible to stop the transaction being accepted by the network. These characteristics give it a great ‘store of value’ use case as a platform.

Ethereum, on the other hand, was focused on being a smart contracts platform. It also has mining hardware, nodes, reliability and censorship resistance but no way near as much as the Bitcoin network. Ethereum is instead built to be a Smart Contract platform with many projects and dApps (decentralised applications) being run on the network. The dApp and smart contract use case is growing each day with more and more contracts being created and users transacting volume through this network. You can monitor this for yourself with websites like stateofthedapps.com.

The bottom line

In summary, it’s hard to pick what the better investment would be between Bitcoin or Ethereum if you are only doing it to make more money. There are unknowns about the supply of Ethereum, the platforms have very different use cases and the demand for each of them (Store of Value vs Smart Contract Platform) is changing each day.

Both assets have shown to be extremely volatile in price over the last few years and, for that reason, both should be considered as being in the high-risk investment category.

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