Unless you’ve been living under a rock this year, you’ll have likely heard about Bitcoin. The first-mover in the cryptocurrency space has been making dramatic headlines throughout 2017. The latest, of course, is that the digital currency asset has exploded into the world of mainstream investing with a futures market being offered by several large groups. These include the CME and CBOE.
Bitcoin isn’t the only exciting opportunity in the space, however. The next largest cryptocurrency, Ether, is also having an amazing year. The Ethereum price has rocketed from just shy of $8 on January 1st to around $950 at the time of writing (December, 19). With more and more mainstream media outlets reporting on the substantial gains early investors are making in both leading digital currencies, it’s understandable that folks who are less knowledgeable about blockchain-based assets want to get in on the action. But which is better to buy at the end of 2017: Bitcoin or Ethereum’s Ether token?
The Case for Bitcoin
Current Bitcoin price – $20,740.
Bitcoin is the big name in the space. It has the advantage when it comes to brand recognition, and underlying infrastructure. It has better exchange hook-ups and ATMs dotted around the planet, which makes it very easy to enter the space using traditional currency. Thanks to this first-mover advantage, the wallet software and security is arguably much better and more developed than with other cryptocurrencies.
Perhaps most important to its success as a store of value is Bitcoin’s censorship resistance. There is no authority that can easily convince the whole community to make changes to its design. During the last nine years Bitcoin has proved itself as a protocol that is resilient to attack on every vector that has so far presented itself. Those wishing to change it have failed. It’s only when the entire community’s incentives align that any alteration gets made. When they don’t, hard forks occur. This was the case this summer with Bitcoin Cash. It’s then up to the market to decide which is the more successful version of Bitcoin.
Another factor to consider is how difficult it would be to shut down the Bitcoin network at all. There is no single entity that could be jailed for its creation, because no one knows who was behind it. The only real opportunity to attack Bitcoin comes at the exchange level or by ending the internet on a global scale. The rapid evolution of decentralized exchanges is seeking to nullify the former weakness, and if the internet was entirely switched off one day (not sure how over 200 national governments would come to such a consensus in the first place), you’d have a global revolution before the end of the first day.
Bitcoin’s critics point to the fact that it’s no longer a reasonable medium of exchange. The popularity of Bitcoin has meant that users must increase their fees to get the network to process their transactions quickly. The rising price of sending funds renders it unsuitable for sending small transactions and the fact that a simple transfer can take several hours instead of minutes is also an issue which many people highlight as a shortcoming of Bitcoin.
These criticism is fair if Bitcoin is to become a replacement for all currencies. However, they are irrelevant to its use as a store of value. There are many who argue that the robust, unbreakable security model of Bitcoin is worth paying high transaction costs. Bitcoin is the first form of money that is impossible to confiscate. If stored correctly, the necessary keys to access funds can be kept in one person’s head. How does a person or government take that from you? Well, they can’t.
The Case for Ether
Current Ethereum price – $950.
Whereas Bitcoin is evolving into a sort of digital gold, the Ethereum network’s native token, Ether, is a different beast entirely. It’s potential for growth lies in the fact that it’s a platform for decentralised applications to run on. This could be enormous. However, it also might not work at all. The hope is that by using the additional functionality of Ether, developers can make programs which run atop the network, providing additional value to it. Ideas like Golem and Gnosis aim to decentralize existing services, providing a more transparent product which will hopefully create greater fairness with less reliance on middlemen across a range of industries. However for now, this is very much in the drawing-board phase of development.
If Ethereum succeeds in its ambitions to decentralise everything, the price will presumably end up many times greater than its current level. However, it faces much greater challenges along the way. Firstly, there’s the issue of scalability. This is consistent with all blockchains, and successfully creating one that is truly decentralised and can cater for billions of simultaneous users is the golden ticket in the space. The recent example of CryptoKittie and the chaos that ensued from the summer of ICOs highlight how far we are from the ambitious plans of Ethereum’s global supercomputer. The network freezes up and becomes unusable at the slightest hint of increased traffic. This isn’t too bad when you’re using it for “digital cats.” However, if you’re running enterprise level software for the planet’s largest companies, you’re going to need far greater consistency of service.
Another issue faced by Ethereum is competition. Platforms like WAVES, NEO, and STRATIS are all seeking to achieve very similar ends as the Ethereum network. If one of these develops the necessary scalability before Ethereum, it’s going to be game over for Ether holders. The primary use case of building decentralized applications on a blockchain will be better served elsewhere, so developers will migrate to more advanced platforms.
Can’t Decide? Diversify!
Both Ethereum and Bitcoin are projects that are in a state of evolution. Neither is finished per se. Bitcoin hopes to bring a user-experience more akin to that which it offered in its early days when transactions were virtually free and instantaneous but still enjoyed an unprecedented level of security. Meanwhile, Ethereum also seeks a scaling solution. For their token to reach the dizzying heights which Bitcoin has, scaling is vital. People using Bitcoin for its current primary use case don’t mind paying a one-off fee to secure usually a large amount of funds in “gold 2.0.” They are also unlikely to mind too much that their funds take a while to reach their long-term home. However, for Ethereum to grow massively, it needs successful decentralised applications on it and millions using them.
If you’re dead-set on making an investment, don’t go all in. It’s always better to diversify. That way, you’re hedged against possible risks. Nowadays, it is not a simple matter to find the exchange that offers wide range of opportunities for investing in both cryptocurrencies. Some are lacking security, others have a limited number of trading pairs, still others do not work in the country you are in. CEX.IO is a large cryptocurrency exchange that covers 99% countries and ensures utmost security for each user that opts for the platform. CEX.IO is an officially registered business entity which is legally compliant with all regulations imposed on a money services business. As a customer, you will have a chance to make your deposits using a credit card or through a bank transfer and buy Bitcoin or Ether with any appropriate currency like USD, EUR or GBP. CEX.IO is already trusted by over 1,000,000 customers, and the number of the users is growing day by day.