Decoding Crypto: Bitcoin vs Ethereum vs Tether
Published on October 11th, 2023
In the vast galaxy of digital finance, three celestial bodies shine particularly bright: Bitcoin, Ethereum, and Tether. Each has its role in the crypto galaxy. Each has shifted the way we see money, contracts and value in the internet age.
For many, these names remain enigmatic, shrouded in jargon and tech-speak, often leading to more questions than answers. As there are thousands of cryptocurrencies, many often wonder the pros and cons about Bitcoin, Ethereum and Tether.
Bitcoin, Ethereum and Tether have many differentiating pros and cons:
Bitcoin stands as the pioneering store of value with unparalleled security, while Ethereum emerges as a versatile innovator, driving the decentralized application landscape. Tether, in contrast, offers remarkable price consistency but comes with centralization concerns and trust issues tied to its backing entity. As the crypto realm continues to evolve, understanding the intricacies of each coin becomes paramount for informed navigation in this digital age.
This article will become your telescope in understanding the pros and cons of the 3 celestial bodies in the galaxy of digital finance: Bitcoin, Ethereum and Tether.
After reading this article, it may become clearer how the 3 of these cryptocurrencies can benefit us in our journey within the crypto space. We will go over the pros and cons about Bitcoin, Ethereum and Tether as well.
Let’s get started, with an overview about Bitcoin , Ethereum and Tether!
In Another article we also summarized how another enigmatic cryptocurrency: XRP measures up to Bitcoin and Ethereum, if you want to read about it.
To understand the pros and cons of Bitcoin, Ethereum and tether; let’s first take a get to know these cryptocurrencies to the next level. Or if you’re already familiar, feel free to skip ahead.
In the landscape of digital finance, Bitcoin stands as a significant pillar, marking the dawn of a decentralized monetary era. Introduced in 2008 by the anonymous entity, Satoshi Nakamoto, Bitcoin was envisioned as an alternative to traditional financial systems.
It aimed to foster a platform where transactions could occur directly between users, eliminating the need for central intermediaries.
Nakamoto's foundational paper, "Bitcoin: A Peer-to-Peer Electronic Cash System," introduced a groundbreaking solution to the double-spending problem, employing a secure public ledger termed the blockchain.
Delving into Bitcoin's technical architecture, it operates on a robust, decentralized network of computers.
These nodes utilize cryptographic methods to validate and record transactions onto the immutable blockchain. Since its inception in 2009, marked by Nakamoto's initial transaction to Hal Finney, Bitcoin has navigated challenges, including skepticism and regulatory scrutiny.
Yet, its influence is undeniable, having paved the way for numerous other digital currencies. As we continue to explore the evolving domain of digital finance, Bitcoin remains emblematic of technological innovation and the redefinition of monetary value in the digital realm.
Many new applications, improvements and technologies have been created on top of Bitcoin, like Layer 2 networks, SegWit, and wallets. Wallets that are safe for beginners, intermediate and expert enthusiasts have been published on all devices currently available.
In the intricate tapestry of digital finance, Ethereum emerges as a groundbreaking platform, weaving together more than just monetary transactions.
Conceived in 2013 by a visionary named Vitalik Buterin, Ethereum expanded upon Bitcoin's original premise, envisioning not just a digital currency, but a fully-fledged platform capable of executing smart contracts and building decentralized applications.
Buterin's innovative blueprint for Ethereum introduced a world where traditional contractual obligations could be automated and self-executed, harnessing the power of blockchain technology to transcend beyond mere currency transfers.
At its core, Ethereum operates on a decentralized network, similar to Bitcoin, but it's the introduction of the "Ethereum Virtual Machine" (EVM) that sets it apart. This universal runtime environment enables the execution of complex contracts and applications, using a native programming language called Solidity.
Ethereum's fuel, known as "Ether," powers these operations, ensuring security and efficiency. Since its public release in 2015, Ethereum has faced its share of challenges, from scalability issues to divergent community visions leading to forks.
However, its foundational commitment to enabling decentralized platforms and fostering innovation in blockchain applications cements its pivotal role in the evolution of digital finance and technology.
In the ever-expanding cosmos of digital currencies, Tether shines as a unique satellite, serving as a bridge between traditional fiat currencies and the realm of cryptocurrencies.
Conceived in 2014 by Brock Pierce, Craig Sellars, and Reeve Collins, Tether was birthed with the intention of merging the stability of fiat currencies like the US dollar with the benefits of blockchain technology.
The primary vision was to create a token pegged 1:1 with major fiat currencies, thereby maintaining a consistent value unaffected by the volatile swings of the broader crypto market.
Tether's foundational blueprint introduced the concept of a "stablecoin," harnessing blockchain's transparency and security while offering a refuge from cryptocurrency market volatility.
Embarking further into Tether's astral construct, this stablecoin operates on multiple blockchains, leveraging the Omni Layer Protocol, Ethereum, Tron, and other blockchain frameworks to issue and manage its tokens.
These blockchains, acting as the cosmic pathways, ensure that every Tether token is backed by a reserve of its corresponding fiat, typically the US dollar, held in traditional bank accounts. Over its luminous journey, Tether has navigated through nebulous debates concerning its reserve holdings and regulatory inquiries.
However, its steadfast commitment to bridging the worlds of fiat and crypto remains unwavering. As we traverse the vast interstellar expanse of digital finance, Tether stands as a beacon of stability amidst the capricious meteor showers of cryptocurrency markets.
NOT FINANCIAL ADVICE
Cryptocurrencies were created to benefit humanity by preserving our rights and freedoms. Bitcoin, Ethereum and Tether can be beneficial to us, in certain ways. But it is important to understand their differences and how they help us differently.
In the table below, we illustrate ways in which Bitcoin, Ethereum and Tether help us differently.
|Bitcoin vs Ethereum vs Tether: Benefits|
|Price Stability||7 out of 10 stars||5 out of 10 stars||9 out of 10 stars (It deeps sometimes.)|
|Price appreciation||5 out of 10 stars||7 out of 10 stars||1 out of 10 stars (in times of volatility, Tether gets priced up 2-3% above 1$)|
|Decentralization||9 out of 10 stars||8 out of 10 stars (27% validators censor TXs for OPAC compliance + only well-off people can run validators - 32 ETH required.)||
|Barrier to entry(Network validation)||9 out of 10 stars||7 out of 10 stars||6 out of 10 stars|
|Usability||7 out of 10 stars||10 out of 10 stars||6 out of 10 stars|
|Worldwide ATMs Available||39,011||29,324||7,731|
|Security||10 out of 10 stars||9 out of 10 stars||7 out of 10 stars
(Backed by a company which has central security flaws)
|Global and Borderless||10 out of 10 stars||9 out of 10 stars||7 out of 10 stars
(Can be transferred anywhere, but can't be redeemed anywhere for real USD)
|Evolution||7 out of 10 stars
(New L2 technologies being built, but no improvements on BTC core.)
|8 out of 10 stars
(Updates take a bit of time to deploy.)
|5 out of 10 stars
(primary function is to be a stablecoin. It only expands to new blockchains)
|Available Liquidity||8 out of 10 stars||7 out of 10 stars||9 out of 10 stars|
The Pioneer: Bitcoin stands tall as the original cryptocurrency, often referred to as 'digital gold'. Its strength lies in its pioneering decentralization and high security.
While it has seen price appreciation over the years, it can be volatile. Its extensive ATM network worldwide and robust security measures make it a trusted choice among cryptocurrencies. However, it faces challenges in terms of usability due to transaction times and fees.
The Innovator: Ethereum, more than just a cryptocurrency, is a versatile platform for decentralized applications. Its shining feature is the ability to handle smart contracts, powering a myriad of projects. Ethereum has shown price growth, but like Bitcoin, it can be volatile.
The transition to Ethereum 2.0 highlights its commitment to evolution and scalability. However, the diversity of its projects can sometimes be a double-edged sword, leading to potential security concerns.
The Stabilizer: Tether's primary role is to provide stability in the often-turbulent crypto market. Pegged to the US dollar, it doesn't offer price appreciation but delivers unmatched price stability.
Its central management means it's less decentralized than its counterparts. Widely used within crypto exchanges, Tether serves as a bridge between traditional currencies and cryptocurrencies, offering high liquidity but limited use outside of the crypto ecosystem.
Having delved into a comparative analysis of Bitcoin, Ethereum, and Tether based on various traits, it's evident that each cryptocurrency brings its unique value to the table.
But as with any technological advancement, it's crucial to highlight the specific strengths that make them stand out in the crowded digital currency landscape.
In this section, we'll pivot our focus to spotlight the distinct advantages of each, allowing potential investors and users to understand why these three cryptocurrencies continue to dominate discussions and markets alike. Let's dive deeper into the noteworthy pros of Bitcoin, Ethereum, and Tether.
|The Pros: Bitcoin vs Ethereum vs Tether|
|Price Stability (short term Mayhem)||Stable vs. most altcoins, excl. stable coins||Stable vs. most altcoins, excl. stable coins & BTC||More stable than all cryptos|
|Price Stability (Long term)||Often dubbed 'digital gold' for its long storage of value||Great at storing value over longer periods of time.|
|Price Performance||Better than Traditional Finance||Better Price performance than Bitcoin and Trad. Fi|
|Decentralization||Most decentralized network in the world||Second most decentralized network in the world|
|Security||Most secure Blockchain network||Second most secure blockchains due to its vast network of Validators.|
|Supply||21 million Max BTC Supply|
|Inflation||Low inflation: 1.84% in 2023||Sub 1% inflation currently: 0.4%|
|Global Transfers||Best cryptocurrency for global transfers offering more than 30k ATMs||2nd best crypto for global transfers||Great for global transfers if not going to redeem for real USD|
|Smart Contracts||Global EVM for smart contracts and Applications|
|Active development||Development only on L2s and other applications||ETH 2.0 implemented, L2 networks being deployed and future roadmap||Deploying on new faster blockchain networks|
|Decentralized Applications||Hosts a vast array of projects and platforms beyond just currency.|
|Liquidity Rank||2nd Most Liquid Crypto||3rd Most Liquid Crypto||1st Most Liquid Crypto|
|Tokenomics: Overall||Better tokenomics than most cryptocurrencies (lower inflation)||Better Tokenomics than Bitcoin|
|Tokenomics: Use Cases||
In the table above, we can see that Bitcoin, Ethereum and Tether have different purposes. As we delve into the cryptocurrency realm, it's essential to grasp the unique strengths each one brings to the table.
Bitcoin (BTC) emerges as the steadfast pioneer, boasting superior short-term price stability, unparalleled decentralization, and robust security. Often heralded as 'digital gold', its long-term value proposition and vast ATM network set it apart.
Transitioning to Ethereum (ETH), we find a dynamic platform that's much more than just a cryptocurrency. Ethereum's versatility shines through its global smart contract capabilities, active development, and its role in powering a myriad of decentralized applications. Its robust security and notable price performance further accentuate its value in the crypto ecosystem.
On the other hand, Tether (USDT) offers a beacon of stability amidst the often-turbulent crypto waters. As a stablecoin, it provides unparalleled price consistency, making it a preferred choice for global transfers. Tether's proactive development approach and top-notch liquidity solidify its position in the market.
Looking at the pros doesn’t tell the whole story, for that we have to look into the cons of Bitcoin, Ethereum and USDT.
While the illuminating benefits of Bitcoin, Ethereum, and Tether anchor them as formidable players in the cryptocurrency arena, it's essential to sail deeper into the crypto waters.
Just as Tether stands as a beacon of stability, it's crucial to recognize that even the most robust lighthouses have their shadows. To paint a full picture and navigate the intricate tides of digital assets, we'll now steer our focus towards the challenges and limitations of these cryptocurrency behemoths.
In the table below we illustrate the cons of Bitcoin, Ethereum and Tether when it comes to certain categories. Some categories are important to us, like decentralization and stability. Others are less important but still considerable.
|The Cons: Bitcoin vs Ethereum vs Tether|
|Stability(short term)||Loses value precipitously during volatile moments||Loses value precipitously during volatile moments|
|Stability(long Term)||Is subject to inflation(loses value over the long term)|
|Price Performance||Minimal price Performance(only during deeps).|
|Decentralization||27% of validators censor transactions to stay OFAC Compliant||Centralized due to Tether being backed by collateralized assets through the company entity|
|Security||Uses large amounts of Electricity in securing the network through PoW||High barrier to entry when it comes to network security participation (32ETH for validator requirement)||Trust is required in the company that backs USDT up with collateral.|
|Supply||Infinite potential supply||Infinite potential supply|
|Inflation||Inflation is relative to the USD inflating|
|Global Transfers||Can’t redeem Tether for USD in some parts of the world. Tether can also freeze wallets.|
|Smart Contracts||Minimal Smart Contract use||N/A|
|Active development||Low development in BTC core|
|Decentralized Applications||Minimal number of DApps|
Bitcoin, while dominant, is not immune to market whims. Its value can drop sharply during volatile moments, causing short-term unpredictability.
Security doesn't come without cost. Bitcoin's reliance on the Proof-of-Work (PoW) consensus mechanism means massive energy consumption, sparking environmental debates.
Functionality and Development:
Bitcoin's core is relatively static. It sees minimal usage in smart contracts, and its core development pace doesn't match some newer cryptos. Plus, its ecosystem hosts a limited number of decentralized applications (DApps).
Stability and Supply:
Much like Bitcoin, Ethereum's price can plunge suddenly during market downturns. Additionally, its potential supply is theoretically infinite, causing some inflationary concerns.
Decentralization and Security:
Ethereum faces challenges in achieving complete decentralization. A significant percentage of its validators can censor transactions for compliance reasons. Securing the Ethereum network also requires significant stakes, with a high barrier due to the 32 ETH requirement for validators.
While Ethereum is at the forefront of decentralized applications and smart contracts, its expansive ecosystem can make it complex for newcomers.
Price and Centralization:
While Tether offers price stability, it does have minimal price performance dips. Its centralized nature, backed by collaterals and governed by a single entity, contradicts the decentralized ethos of many cryptos.
Trust and Liquidity:
The very foundation of Tether relies on trust in the backing company. Any shake in this trust can lead to significant repercussions. Additionally, while globally popular, USDT isn't universally redeemable; some regions don't permit conversion to USD. Tether also retains the authority to freeze wallets, causing potential liquidity concerns for holders.
Bitcoin, Ethereum and Tether have many similarities and differences. Retail cryptocurrency enthusiasts can use this knowledge to their advantage.
The unique traits and inherent challenges of Bitcoin, Ethereum, and Tether underscore the importance of understanding the nuances of each cryptocurrency, especially when they are set side by side.
Bitcoin, often celebrated as the pioneer, offers robust security, decentralization, and the allure of limited supply. It stands firm in its position as a store of value but is not without its challenges, notably its environmental concerns and limited core development.
Ethereum shines as an innovator, with its versatile platform heralding a new era of decentralized applications and smart contracts. It promises an expansive ecosystem, but this richness can sometimes make it complex and brings forth its own set of challenges, including scalability and complete decentralization.
Tether, the stabilizer of the trio, provides a unique offering with its unmatched price consistency. But, as with all things, it's essential to look beyond the calm surface. Centralization concerns, trust in the backing entity, and limited global redeemability highlight that even the steadiest ships can face storms.