As everybody starts to jump on the cryptocurrency bandwagon, many people are wondering which coins are the best to invest in.
For the purpose of this article, I will address the two biggest cryptocurrencies on the market, Bitcoin and Ethereum, who have market caps of $162,514,367,730 and $47,342,582,580 at the time of writing. There are several other altcoins or alternative coins that are worthy of more focus, but investing in them would be far riskier, albeit that some of them like Bitcoin Gold are rising at an ever-faster rate in terms of their value.
Bitcoin’s growth over the past nine years has been astronomical, to say the least. When Bitcoin came into existence in 2008 it was worth practically nothing. There were no exchanges or purchases and tokens were collected primarily for hobby uses. In March 2010 Bitcoin finally started to gain value with the now-defunct BitcoinMarket.com starting to operate, but was valued as a third of a US cent. In mid-November 2017, its value fluctuated roughly between $7600 and $8100. 2017, in particular, has been an incredible year for Bitcoin with its value this time last year only reaching as high as $760. A 1000% increase in 12 months is ridiculous, to say the least, and the beauty of Bitcoin is that its value isn’t determined by anything other than that the users deem it to be, with no centralized authority.
Ethereum, on the other hand, was initially released in July 2015 and is far less valuable than Bitcoin today and has fluctuated somewhere between $300 and $490 in the last month or so, but was valued at only roughly between $11 and $20 this time last year. That’s an increase of just less than 4500%, making its rise in value more than four times that of Bitcoin. The advantage that Ethereum has over Bitcoin is in its functionality. The first thing about Ethereum is that it is not just a digital currency. It is a blockchain-based platform with many aspects. It features smart contracts, the Ethereum Virtual Machine (EVM) and it uses its currency called ether for peer-to-peer contracts. Essentially, this means that other Blockchain platforms can run directly off of Ethereum, while Bitcoin only operates as a cryptocurrency.
Ethereum’s value is rising faster than Bitcoin’s and it serves as a multifunctional platform. However, Bitcoin has a huge advantage in that it is the dominant cryptocurrency, its value is far higher and it will only be a matter of time before it goes mainstream. Bitcoin has the potential to hold something akin to a natural monopoly in the market for digital currency because Ethereum still has many barriers to entry to overcome. With its value rising at a better rate, on the other hand, Ethereum may catch up in time to change this and serve as a direct competitor.
Another factor is security and what I like to call the ‘purity’ of a currency, where the protocols don’t become bastardized, destroying the vision of a decentralized currency that is impossible to corrupt in the same way that fiat currencies’ value are determined by the governments that control their supply. This falls under the umbrella of the cryptography and respective security of either currency. The Blockchain technology, the distributed ledger, is the fascinating thing about cryptocurrencies and is why they are unhackable. These are the strict protocols govern the verification of transactions.
It works in Bitcoin’s favor because of their protocols, specifically, the size of the blocks on the Blockchain was recently under a challenge. The Bitcoin Gold hard fork proposed a change to Segwit2x, which proposed doubling the block size. Which currency would be “the real Bitcoin” would be totally ambiguous and it seriously brought the credibility of Bitcoin under question. However, as the safeguard to protocol changes and post hoc transaction changes, what is known as the 51% attack (where over half of the Bitcoin users essentially agree to a hack) was avoided. Bitcoin came under threat and lived to tell the tale.
This change, also known as a “hard-fork” has partially happened with both coins, but they split into completely separate currencies, with no debate existing over which is the “real one”. Yet, Bitcoin’s battle with the Segwit2x hard fork has been the greatest test yet and it remains to be seen whether Ethereum can survive a similar “attack”.
At the end of the day, as an investor, you could be more attracted to Ethereum, because you can buy it at a low value and there are several pros and cons for each option, but Bitcoin can be viewed as a “safer” option, despite having to partway with far more money to buy it. The main thing is to hold (hodl) onto and not sell whatever you have and you’ll see enormous returns in the next couple of years, with many experts predicting the value of the respective cryptocurrencies to rise even faster than they are now as the demand for them rises in the mass market.