This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
For long-haul investors, trust is everything. Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) offer exactly that. Let's explore the reasons why these "blue chip" cryptocurrencies can keep ahead of the competition with their strong brands and active development teams.
1. Ethereum
Ethereum was the first public blockchain to enable decentralized applications (dApps), which are programs that use self-executing smart contracts to provide services on the blockchain. The platform's first-mover advantage and respected development team can help it create long-term value for investors.
With a market cap of $320 billion, Ethereum is the second-largest cryptocurrency behind Bitcoin. And it attracts the vast majority of dApp development with roughly 3,000 of the 4,000 total projects -- a big driver of user demand. But Ethereum isn't without challenges.
According to data from Coinbase, Ethereum's transaction capacity of 15 per second is far below rivals like Solana, which can handle 50,000 per second. And this means the platform struggles to handle its massive volume. But Ethereum's developers plan to solve this problem through an upgrade called the Consensus Layer, which will change its proof-of-work (PoW) verification system to a proof-of-stake (PoS) system.
In Ethereum's current PoW system, miners solve computational problems to verify transactions, which is expensive because it consumes real-world resources. PoS will allow miners to verify transactions using tokens they already own to hopefully speed up the process. It is unclear when Ethereum's changes will go live, but the developers have a track record of successfully upgrading the network.
2. Bitcoin
Launched in 2009 by anonymous developer Satoshi Nakamoto, Bitcoin is the cryptocurrency that started it all. The hugely popular digital asset can maintain its dominant position through its widespread mainstream acceptance and decentralized investment community.
With a market cap of $790 billion, Bitcoin accounts for a whopping 43% of the entire cryptocurrency market. This scale gives it some advantages. According to fintech company Fundera, over 15,000 businesses worldwide accept Bitcoin as payment (the report doesn't provide data for other cryptos). The asset also has significant institutional adoption. For example, the derivatives marketplace CME Group offers Bitcoin futures, which helps add liquidity to the Bitcoin market while boosting its reputation compared to newer cryptocurrencies that may lack institutional support.
Bitcoin's ownership is also less centralized than newer rivals. According to data from coinmarketcap.com, its top 100 stakeholders control only 14% of the coins in circulation, compared to meme coins such as Dogecoin and Shiba Inu, where the top holders control 65% and 81% of available coins, respectively (data for Ethereum ownership is not available). Bitcoin's decentralized ownership structure makes it harder for large holders to tank the price by unloading their positions, which is great news for investors who value stability.
The first-mover advantage
Bitcoin and Ethereum both enjoy first-mover advantages in their respective niches, giving them a lasting advantage in the cryptocurrency market. As the oldest public cryptocurrency, Bitcoin likely boasts the best brand recognition. But Ethereum is also a top choice because of its expanded functionality and active development team.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
