It’s odd to compare Bitcoin and Ethereum, because they’re so different. They are both blockchains, but that’s where the similarities end. It’s like comparing apples to oranges and asking ‘which is better?’. Or, like comparing gold to stocks; they may both be investable assets, but they’re completely different.

I’m going to explain the differences, how they drive investment returns, and explain why Ethereum has historically outperformed Bitcoin. I’ll also explain why this outperformance will continue, and eventually lead to Ethereum being the largest crypto asset.

BTC vs ETH

Bitcoin is a great store of value and digital gold, designed to be like a currency that doesn’t lose value over time. It derives value from people’s belief - backed by the hard-coded properties of the protocol - that it will continue to store value many years into the future. The value is ultimately derived from the certainty of its properties, and its ability to provide a fully trustworthy service of storing value. It’s a bit like gold - it sits there doing nothing, but that’s the point.

Ethereum is a computing platform, designed to host programs and applications that want to gain the properties of decentralisation. It derives value from applications paying fees in exchange for decentralised hosting; it makes revenue, by providing a valuable service. Some of those fees are permanently burned (removed from circulation), which is its profit. The value is ultimately derived from providing a service in exchange for money - much like a stock. And much like stock dividends and buybacks, the money flows to ETH holders, through its yield and burn. It’s a bit like a stock - it provides a service which grows over time.

Apples and oranges.

Gold vs stocks.

Which is better?

Well, better at what?

Bitcoin is better at storing value.

Ethereum is better at creating value.

Over time, stocks outperform gold because they are productive assets that create value. Gold beats inflation, but above that has 0% real returns.

Stocks are exponential. The value that decentralised applications create will grow exponentially as new value is created, and the new internet is hosted on Ethereum.

Whereas, the store-of-value use case is based on an adoption curve, not an exponential curve. After full adoption, it grows by 0% per year; it doesn’t do anything. Gold doesn't grow in real terms.

That is the reason why Ethereum outperforms Bitcoin.

Bitcoin doesn’t do anything. Ethereum provides a valuable service.

This outperformance has been happening for the last 9 years.

It will continue.

Should you buy BTC or ETH?

It doesn’t mean you should only own Ethereum and never Bitcoin, any more than it means you should only invest in stocks and never gold. People have wildly different investment goals, investment timeframes, investment purposes, and risk tolerances; I personally own some gold because it’s a fantastic portfolio diversifier. If you invest to have a safety net for when the world collapses, then gold fits the bill perfectly, and so does Bitcoin.

If you invest to grow your wealth, then you’d want to own productive assets; and that’s where Stocks and Ethereum shine.

It’s also worth mentioning that stocks also have more risk; they risk going bankrupt, or the industry changing. There are very few stocks that have survived 100 years. Ethereum inherits some of this risk too - in an apocalypse, I’d rather own Bitcoin. And, in any portfolio, you probably shouldn’t be all-in on one scenario - you can own both. Again, these are apples and oranges; over a short period of time, gold can outperform stocks drastically.

But over a long period of time, Ethereum outperforming Bitcoin is as certain as stocks outperforming gold.

It’s odd to compare Bitcoin and Ethereum, because they’re so different. They are both blockchains, but that’s where the similarities end. It’s like comparing apples to oranges and asking ‘which is better?’. Or, like comparing gold to stocks; they may both be investable assets, but they’re completely different.

I’m going to explain the differences, how they drive investment returns, and explain why Ethereum has historically outperformed Bitcoin. I’ll also explain why this outperformance will continue, and eventually lead to Ethereum being the largest crypto asset.

BTC vs ETH

Bitcoin is a great store of value and digital gold, designed to be like a currency that doesn’t lose value over time. It derives value from people’s belief - backed by the hard-coded properties of the protocol - that it will continue to store value many years into the future. The value is ultimately derived from the certainty of its properties, and its ability to provide a fully trustworthy service of storing value. It’s a bit like gold - it sits there doing nothing, but that’s the point.

Ethereum is a computing platform, designed to host programs and applications that want to gain the properties of decentralisation. It derives value from applications paying fees in exchange for decentralised hosting; it makes revenue, by providing a valuable service. Some of those fees are permanently burned (removed from circulation), which is its profit. The value is ultimately derived from providing a service in exchange for money - much like a stock. And much like stock dividends and buybacks, the money flows to ETH holders, through its yield and burn. It’s a bit like a stock - it provides a service which grows over time.

Apples and oranges.

Gold vs stocks.

Which is better?

Well, better at what?

Bitcoin is better at storing value.

Ethereum is better at creating value.

Over time, stocks outperform gold because they are productive assets that create value. Gold beats inflation, but above that has 0% real returns.

Stocks are exponential. The value that decentralised applications create will grow exponentially as new value is created, and the new internet is hosted on Ethereum.

Whereas, the store-of-value use case is based on an adoption curve, not an exponential curve. After full adoption, it grows by 0% per year; it doesn’t do anything. Gold doesn't grow in real terms.

That is the reason why Ethereum outperforms Bitcoin.

Bitcoin doesn’t do anything. Ethereum provides a valuable service.

This outperformance has been happening for the last 9 years.

It will continue.

Should you buy BTC or ETH?

It doesn’t mean you should only own Ethereum and never Bitcoin, any more than it means you should only invest in stocks and never gold. People have wildly different investment goals, investment timeframes, investment purposes, and risk tolerances; I personally own some gold because it’s a fantastic portfolio diversifier. If you invest to have a safety net for when the world collapses, then gold fits the bill perfectly, and so does Bitcoin.

If you invest to grow your wealth, then you’d want to own productive assets; and that’s where Stocks and Ethereum shine.

It’s also worth mentioning that stocks also have more risk; they risk going bankrupt, or the industry changing. There are very few stocks that have survived 100 years. Ethereum inherits some of this risk too - in an apocalypse, I’d rather own Bitcoin. And, in any portfolio, you probably shouldn’t be all-in on one scenario - you can own both. Again, these are apples and oranges; over a short period of time, gold can outperform stocks drastically.

But over a long period of time, Ethereum outperforming Bitcoin is as certain as stocks outperforming gold.