Bitcoin vs. Ethereum: Battle of the Cryptos
In 1999, America was sitting at the height of the dot-com bubble.
There were two companies leading the pack: eBay and Amazon.
Both sported market caps of $25 billion. Each had a surging customer base.
Amazon and eBay were literally the poster boys of the dot-com era, as you can see on this BusinessWeek cover:
At first glance, you might think these companies were neck-and-neck.
But there was one point in eBay’s favor: It was profitable.
In 1999, Amazon lost a whopping $124.5 million, while eBay raked in $2.4 million.
But the next 23 years couldn’t have turned out any differently.
Today, eBay has the same market cap, while Amazon is up almost 50X.
I’m telling you this because there’s a similar story playing out right now in the crypto markets.
Just as Amazon and eBay duked it out for the title of “king of e-commerce” in 1999, now bitcoin and Ethereum are battling for market dominance.
And I expect the results to be very similar to what happened between Amazon and eBay.
How Amazon Left eBay in the Dust
When it comes to companies or cryptos surviving or thriving, it all comes down to one thing: innovation.
If you focused on how much money Amazon was losing in the ‘90s, you missed out on the bigger picture: the reinvention of global commerce.
EBay was content to stay where it was. And as a result, it became a stagnant marketplace for collectibles and used goods.
Amazon, however, was ambitious. So it strove to think outside the box.
Its business plan has always been: “If you build it, they will come.”
And that’s exactly what happened.
So over the last two decades, the world’s largest e-commerce site rolled out free two-day delivery, a marketplace for merchants and its own media platform.
Amazon even launched its own cloud services business that now amounts to 16% of total revenue.
All that’s led to more than 300 million active customer accounts. (Compare that to eBay’s current 159 million users.)
Amazon left eBay in the dust by innovating.
And that’s exactly what Ethereum is set to do with bitcoin.
Bitcoin Is Far From Perfect
Bitcoin, the world’s first cryptocurrency, launched on January 3, 2009. That’s when Satoshi Nakamoto mined the genesis block.
To “mine” the block, he used a high-powered computer to solve an algorithmic puzzle.
This is called proof-of-work, and the computer is called a miner.
In simple terms, the blockchain keeps track of who owns what.
Proof-of-work is still used today, but it’s far from perfect.
You see, when bitcoin first started, it had no value — so the energy required to mine was negligible.
However, bitcoin has grown from only a few users to over 100 million wallets. That’s a lot of transactions to track!
Because the network requires millions of miners now, those computers use an incredible amount of energy.
It’s estimated that the bitcoin network uses as much energy as the entire country of Norway on an annual basis.
This isn’t sustainable, especially in a world where energy is becoming a scarce resource.
Ethereum Continues to Innovate
This is one area where Ethereum is leading.
Its network is undergoing a transition from proof-of-work to proof-of-stake.
With its new way to validate and secure transactions, Ethereum will cut energy usage by over 99%!
That’s because proof-of-stake doesn’t require the same type of high-powered computers like bitcoin’s proof-of-work.
Instead, proof-of-stake requires token holders to stake their holdings in the network.
In doing so, stakers are randomly chosen to validate a series of transactions and earn rewards.
According to recent estimates, stakers could earn upward of 10% just by pledging their tokens to secure the network.
For the Ethereum network, the minimum stake size is 32 ETH, or around $64,000 at current market value.
However, there are ways to pool your ETH with other users to secure the network and earn rewards.
That way, you won’t have to own tens of thousands of dollars of ETH to earn the same rewards.
This is just one way that Ethereum continues to innovate. It’s also why I believe the token could be worth 20 times as much as bitcoin in the future.
And it reminds me of the Amazon vs. eBay debate of 20 years ago.
Editor, Strategic Fortunes
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My career on Wall Street started while I was in college. I spent a summer interning for Merrill Lynch in the middle of the ‘90s bull market. I was fascinated with trading, and as a result, after college, I joined Salomon Brothers in the famed mortgage bond trading department. Later, I spent time at Citigroup working with credit derivatives. Eventually, I needed to walk away from the excess of Wall Street. That’s when I joined Banyan Hill in 2017. Now I help readers get ahead of the market and build their retirements.