Bitcoin or Ethereum in 2022: Which to Choose?

Take a look at the two top cryptocurrencies to determine which might be a better bet for crypto investors this year.

2021 was a fantastic year for cryptocurrencies. With many Canadians learning how to start investing during the pandemic, the cryptocurrency industry also saw a significant influx of money from retail and institutional investors, driving the speculative industry to greater heights. Many of the top cryptocurrencies posted impressive growth due to the rising interest in this space.

The choice between Bitcoin (CRYPTO:BTC) or Ethereum (CRYPTO:ETH) has been one of the biggest debates in the crypto industry for several years. Bitcoin has remained at the top in the industry, being the first cryptocurrency and the asset that paved the way for thousands of cryptocurrencies over the years. Ethereum is the second-largest cryptocurrency after Bitcoin, and it has plenty of room to cover before it can catch up with Bitcoin.

The second-largest cryptocurrency has to see considerable growth to surpass the world’s top cryptocurrency. It might seem impossible for Ethereum to beat Bitcoin to those bullish on Bitcoin, but ETH’s growth rate has outpaced that of BTC in recent years. Today, I will discuss why Ethereum could oust Bitcoin as the top crypto soon.

Energy-efficient blockchain network

One of the most significant challenges plaguing Bitcoin and the broader cryptocurrency industry is the energy-intensive proof-of-work protocol that maintains the blockchain network and validates transactions. Ethereum also began operating with the same protocol, but the blockchain network will soon shift to another more energy-efficient approach.

Expected to come into play by mid-2022, Ethereum 2.0 will update the current blockchain network and move it to the proof-of-stake mining protocol. How does this impact Ethereum’s chances of beating Bitcoin? Let’s go for a simpler way to understand this.

Traditional mining through the proof-of-work protocol relies on a lot more processing power to maintain the blockchain network. The proof-of-stake protocol uses staking existing cryptocurrency tokens, allowing individuals to contribute to mining in a more energy-efficient, less cost-intensive, and quicker manner.

Shifting to a more eco-friendly mining protocol will be the biggest reason for Ethereum’s potential rise to the top amid rising concerns about climate change and global warming.

Much faster blockchain after the update

Cryptocurrencies are notorious for the long time required to validate transactions and maintain the blockchain network. The speed and cost improvements through the proof-of-stake protocol will be quite dramatic compared to the current system. Ethereum is not the fastest blockchain network right now, and transaction costs are too high.

Improving the transaction speeds and reducing transaction times will encourage more developer growth on the network and increase the overall utility of the Ethereum blockchain network. The massive size of the Ethereum blockchain network remains one of its biggest strengths. Combined with better speed and efficiency, Ethereum’s popularity could significantly decrease the gap between Bitcoin and itself.

Foolish takeaway

At writing, Bitcoin boasts a market capitalization of $819 billion, and Ethereum boasts a market capitalization of $342.42 billion. While Ethereum may have a long way to go to catch up with Blockchain, the Ethereum 2.0 update could significantly boost its chances of ousting Bitcoin as the top cryptocurrency.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin and Ethereum.

More on Investing

ETF stands for Exchange Traded Fund
Investing

2 High-Yield Dividend ETFs to Buy to Generate Passive Income

Both of these Hamilton ETFs sport double-digit yields with monthly payouts.

Read more »

engineer at wind farm
Energy Stocks

1 Canadian Utility Stock to Buy for Big Total Returns

Let's dive into why Fortis (TSX:FTS) remains a top utility stock long-term investors may want to consider right now.

Read more »

man in suit looks at a computer with an anxious expression
Tech Stocks

Short-Selling on the TSX: The Stocks Investors Are Betting Against

High-risk investors engage in short-selling, betting against some TSX stocks for bigger profits.

Read more »

woman retiree on computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

This TSX stock has given investors a dividend increase every year for decades.

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Stocks for Beginners

How to Grow Your TFSA Well Past the Average

Need to catch up quick with your TFSA? Consider some regular contributions to this top bank stock, as well as…

Read more »

dividend growth for passive income
Investing

Key Canadian Stocks for a Wealth-Building 2025

These three Canadian stocks could outperform next year, given their solid underlying businesses and healthy growth prospects.

Read more »

Tractor spraying a field of wheat
Metals and Mining Stocks

Where Will Nutrien Stock Be in 1 Year?

Nutrien stock has had a rough few years, and this next year may not be easy. But long-term investors may…

Read more »

Canadian dollars in a magnifying glass
Energy Stocks

The Smartest Energy Stocks to Buy With $200 Right Now

The market is full of great growth and income stocks. Here's a look at two of the smartest energy stocks…

Read more »