Binance or Ethereum - which cryptocurrency should you invest in?

Binance or Ethereum - which cryptocurrency should you invest in?

Osgar Turnbulle
Osgar Turnbulle

With the ongoing buzz around the cryptocurrency, the world is eager to invest in some crypto currency for themselves, but the main confusion comes in selecting the right Crypto to go with.

Increased attention has been devoted to Binance Smart Chain, a high-performance smart contract ecosystem, as a result of the continuing Binance Coin (BNB) surge and tremendous enthusiasm surrounding all Binance products. While Ethereum (ETH) costs are once again skyrocketing, isn't it time to let go of the term "decentralization"?

The ‘golden' set of criteria to consider when choosing a platform for hosting decentralized apps (dApps) often comprises performance (bandwidth, block time), transaction fees, and developer experience. Here's how a business network can outperform the 'global computer.'

Where it all began

In 2013, Ethereum was first proposed, and it became operational in 2015. It has the most widespread adoption of all smart contract systems, as well as a significant first-mover advantage as the first method of deploying advanced smart contracts on a blockchain, which works in its favor.

While Bitcoin was the first cryptocurrency, Ethereum might be considered the true first mass-market application of blockchain technology.

Consensys founder Joseph Lubin, Polkadot founder and Solidity programming language pioneer Dr Gavin Wood, Cardano founder Charles Hoskinson, Decentral CEO Anthony Di Iorio, and Ethereum's current frontman Vitalik Buterin were among the all-star lineup.

The strength we described comes from Ethereum's functionality and utility. Other programmes may boast theoretical speed increases, but they are pointless without a huge user base to turn theory into practice.

With each new Neo, Cosmos, or Tezos that arises, promising better smart contract capabilities, quicker speeds, or reduced fees, Ethereum tends to shrug off these imposters and keep climbing confidently.

Binance Smart Chain (BSC) and Ethereum appear to be extremely similar at first glance. The Ethereum Virtual Machine is compatible with BSC-based dApps and coins (EVM). You may have observed that your public wallet addresses on both blockchains are the same. There are even projects that function on both networks that are cross-chained. Despite this, there are several notable differences between the two chains. It's vital to know and grasp the distinctions if you're unsure which one to utilize.

But first, let's talk about the basics:

What is Binance?

binance.com

Binance Smart Chain (BSC) is a blockchain network that allows smart contract-based applications to be executed. BSC works in tandem with Binance's native Binance Chain (BC), giving customers the best of both worlds: BC's huge transaction volume and BSC's smart contract functionality.

Furthermore, the Ethereum Virtual Machine (EVM) is implemented by Binance Smart Chain, allowing it to run Ethereum-based apps such as MetaMask.

The platform's goal is to make it easier for developers to create decentralized applications (dApps) and for consumers to manage their digital assets across several blockchains with low latency and high capacity.

Because of Ethereum's congestion and gas tax difficulties, which have forced developers and stake investors to explore for other choices, Binance Smart Chain has gained a lot of popularity in early 2021. To counter Binance Coin (BNBextraordinary)'s price spike to over $300 in February, the BSC community reduced the network's gas tax from 15 Gwei to 10 Gwei, making it even more enticing to new users as a cost-effective and stable alternative.

Binance Coin (BNB)

BNB is the Binance ecosystem’s native utility crypto currency, which can be used both for BSC and BC. BNB is mainly used to pay for transaction fees on the BC and Binance DEX platform, staking and asset transfers. BNB can also be used to run smart contracts on BSC.

For those who want to participate in network security or earn additional BNB rewards, BNB can be staked on a smart contract. And should users wish to, they can delegate their stake to a BSC validator of their choice and earn proportional rewards.

Furthermore, validators have the power to decide how much of the BNB they collected from gas fees gets to be redistributed to their delegators.

Advantages of BSC

One of the best utility crypto currency is Binance Coin:

In 2021, BNB is regarded as one of the top utility crypto currencies. While the crypto currency can be used to trade and pay fees on the Binance exchange, it should be noted that BNB can also be used for payment methods outside of the Binance ecosystem, such as credit crypto card bills, online purchases, travel, entertainment, and transfers. Some apps, for instance, allow users to share costs and pay pals using BNB.

Binance Coin has a one-of-a-kind burndown policy:

Burning is a necessary component of BNB to sustain its growth and stability, as previously stated. Binance will invest 20% of their revenues in BNB crypto currencies, which will be burned to lower the total supply to 100 million coins (or 50 percent of the total supply). It's worth noting that this deflationary strategy may result in higher prices over time, which will aid investors in making price predictions.

Binance Coin functions as a coupon:

Binance users receive savings when paying fees on the exchange, which is one of the key benefits of investing in BNB. This incentive - fee reductions - is a great method to build a growing network of supporters while simultaneously acting as a facilitating force for day-to-day trading.

Binance is a well-known cryptocurrency:

Because of Binance's popularity, BNB has maintained a constant position among the best cryptos on Coin Market Cap. Binance is a fast-growing startup and one of the world's largest cryptocurrency exchanges. It's no surprise that the crypto currency has attracted backing from a variety of organizations, including Uplive, one of the most popular social video entertainment sites. Furthermore, despite previous security breaches, Binance takes security very seriously, which gives another degree of trust to the coin and helps adoption.

Binance offers reduced costs and quick transactions:

Binance has rapid transactions and one of the lowest costs in the market, with all traders paying a charge of 0.1 percent. Binance is capable of processing 1.4 million transactions per second. Furthermore, Binance offers regular traders the opportunity to win prizes.

Disadvantages of BSC

While the benefits of BNB are clear, investing in the cryptocurrency is a hazardous proposition with a number of cons. Knowing the disadvantages of investing in BNB is critical in determining whether or not this cryptocurrency is suited for you.

Discounts are continuing to fall:

Despite the fact that Binance offers discounts to traders who transact using Binance Coin on the exchange, the discounts are decreasing, which can be discouraging. According to their whitepaper, the discount would be lowered to 6.75 percent in the fourth year, which is expected to happen in 2021.

Regulations may have an impact on the holding and trading of BNB:

The regulatory snafu in Binance's native nation of China is only one of the issues that could have a long-term impact on the cryptocurrency. With more than 15% of the website's traffic formerly coming from the United States, the connection with Binance US is especially problematic and may hurt US passport holders. It's worth noting that Binance has launched a specialized US exchange to address legal concerns.

Binance only recently began accepting fiat payments and withdrawals:

Binance did not used to accept fiat deposits or withdrawals, unlike other platforms that offer standard payment methods such as bank transfers and PayPal. This makes it difficult for newcomers to begin trading cryptos.

BNB is only available on the Binance exchange:

BNB is extremely reliant on the Binance exchange's reputation, which means it may be unable to take off on its own. Furthermore, several consumers have expressed varied feelings about Binance's customer support services (sometimes marked by long delays and no phone support).

For computer criminals, Binance is an enticing target. After an unsuccessful attempt to overrun and hack the system in March 2018, Binance launched its hacker bounty program. For information on the hackers, Binance paid $250,000. Unfortunately, another incident occurred in May 2019, resulting in a $40 million loss. Though the Binance team takes security seriously, certain dangers may deter some investors.

Smart contracts are not supported by Binance Chain:

As previously noted, BNB was initially established on the Ethereum blockchain before being relocated to its own network. However, unlike Ethereum, Binance Chain does not support smart contracts, which is one of the disadvantages of investing in BNB. Smart contracts and decentralized applications, as we all know, have enormous potential benefits for businesses and investors.

What Is Ethereum?

ethereum.org

Ethereum is a blockchain platform that has its own money, Ether (ETH), as well as its own programming language, Solidity.

Ethereum is a decentralized public ledger for validating and recording transactions as a blockchain network. Users of the network can create, publish, monetize, and use applications on the platform, and they can pay with Ether, the network's cryptocurrency. Insiders refer to the network's decentralized applications as "dApps."

Ethereum is the second most valuable cryptocurrency after Bitcoin.

Ethereum was intended to allow developers to write and publish smart contracts and distributed applications (dApps) without the danger of downtime, fraud, or third-party interference.

"The world's programmable blockchain," according to Ethereum. It differs from Bitcoin in that it is a programmable network that acts as a marketplace for financial services, games, and apps that can all be purchased using Ether money and are free of fraud, theft, and censorship.

Ethereum's Founders

Ethereum was created by a small group of blockchain enthusiasts in July 2015. Joe Lubin, the creator of ConsenSys, a blockchain application developer based on the Ethereum network, was among them. Vitalik Buterin, another co-founder, who was born in 1994 and is credited with inventing the Ethereum concept and is currently the company's CEO and public face. Buterin has been dubbed "the world's youngest crypto millionaire" by some.

The founders of Ethereum were among the first to consider the potential of blockchain technology for uses beyond the secure trading of virtual currency. Its ETH cryptocurrency was created primarily as a medium of payment for apps built on its platform.

The Ether coin was inspired by the Ethereum network. Ether is currently accepted as a means of payment by some shops and service providers, comparable to Bitcoin. Several online retailers, including Overstock, Shopify, and CheapAir, accept Ether.

The Industry of Ethereum

According to Gartner Research, Ethereum's primary competitors for corporations investing in a blockchain software platform include Bitcoin, Ripple, IBM, IOTA, Microsoft, Blockstream, JP Morgan, and NEO.

$2,667 is the market value of one ETH at the end of June 2021.

Ether, on the other hand, is a contender in the unpredictable cryptocurrency market.

According to Analytics Insight, its market valuation is $500 billion, compared to $1.080 trillion for Bitcoin.

(Binance Coin, Dogecoin, Cardano, Tether, XRP, Internet Computer, Polkadot, and Bitcoin Cash are the other eight coins on Analytics Insight's Top 10 list.)

Ethereum-Based Projects

"Codify, decentralize, secure, and trade just about anything," according to the Ethereum platform.

To put the concept to the test, a number of projects are in the works.

Advanced Micro Devices (AMD) and ConsenSys announced a partnership in 2020 to build a network of data centers based on Ethereum's infrastructure.

Advantages of Ethereum

Ethereum's Continuing Evolution

Advanced Micro Devices (AMD) and ConsenSys announced a cooperation in 2020 to develop a network of data centers based on Ethereum's infrastructure because of its invulnerability to hackers and other snoopers. From medical records to voting systems, private information is collected. Because of its dependency on cryptocurrency, programmers were able to construct and advertise games and business apps on the network.

The Hard Fork

It's not for lack of effort that a blockchain is impenetrable to cyber attacks. A malicious actor stole more than $50 million in Ether from a project dubbed The DAO, a set of smart contracts written by a third party and originating from Ethereum's software platform, in 2016. A third-party developer was blamed for the raid's success.

The Ethereum community chose to reverse the theft by performing a "hard fork," which invalidates the existing Ethereum blockchain and creates a new one. Ethereum Classic is the original version.

Large, existing network:

“The benefits of Ethereum are a tried-and-true network that has been tested through years of operation and billions of value trading hands,” says Fromm. “It has a large and committed global community and the largest ecosystem in blockchain and cryptocurrency.”

Constant innovation.

A large community of Ethereum developers is constantly looking for new ways to improve the network and develop new applications. “Because of Ethereum’s popularity, it tends to be the preferred blockchain network for new and exciting (and sometimes risky) decentralized applications,” says Avital.

Wide range of functions.

Besides being used as a digital currency, Ethereum can also be used to process other types of financial transactions, execute smart contracts and store data for third-party applications.

Avoids intermediaries.

Ethereum’s decentralized network promises to let users leave behind third-party intermediaries, like lawyers who write and interpret contracts, banks that are intermediaries in financial transactions or third-party web hosting services.

Ethereum 2.0

Ethereum was the second-largest virtual currency on the market in May 2021, after only Bitcoin. In 2018, the total amount of ETHs in circulation surpassed 100 million.

There is no limit to the number of ETHs that can be created, unlike Bitcoin.

Ethereum is now undergoing a long-awaited upgrade known as Ethereum 2.0, which is designed to allow the network to scale while addressing congestion issues that have previously slowed it down.

(In 2017, a game called CryptoKitties was solely responsible for the platform's slowdown.)

Ethereum's objectives are much broader than Bitcoin's. It aspires to be a platform for all types of applications that can securely store data.

Criticisms of Ethereum

Ethereum faces the same criticisms that all cryptocurrency platforms face:

  • Cryptocurrencies may or may not be a bubble about to burst (again). This debate has been going on since at least 2017, a year during which Bitcoin's value seesawed between about $20,000 and about $3,000.
  • Each of these networks is eating up a vast amount of energy. Cryptocurrency miners, in particular, are devoting a huge amount of computing power to the process of validating transactions. One of China's reasons for cracking down on cryptocurrency there is the fossil fuel energy drain caused by large-scale crypto coin mining operations.

Ethereum also has faced criticism over its fees. That may change with the introduction of Ethereum 2.0.

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Ethereum’s Disadvantages

Rising transaction costs.

Ethereum’s growing popularity has led to higher transaction costs. Ethereum transaction fees, also known as “gas,” hit a record $23 per transaction in February 2021, which is great if you’re earning money as a miner but less so if you’re trying to use the network. This is because unlike Bitcoin, where the network itself rewards transaction verifiers, Ethereum requires those participating in the transaction to cover the fee.

Potential for crypto inflation.

While Ethereum has an annual limit of releasing 18 million Ether per year, there’s no lifetime limit on the potential number of coins. This could mean that as an investment, Ethereum might function more like dollars and may not appreciate as much as Bitcoin, which has a strict lifetime limit on the number of coins.

Steep learning curve for developers.

Ethereum can be difficult for developers to pick up as they migrate from centralized processing to decentralized networks.

Unknown future.

Ethereum continues to evolve and improve, and the ongoing development of Ethereum 2.0 holds out the promise of new functions and greater efficiency. This major update to the network, however, is creating uncertainty for apps and deals currently in use. “Many new validators will be required for Ethereum 2.0 to function,” says DeWaal. “The question is will the migration work? There are a lot of new elements that have to fall into place!”

Consensus

At press time, Ethereum (ETH) utilizes Proof-of-Work consensus secured by the Ethash mining algorithm. It means that its transactions are appended to the blockchain by decentralized computations of Ethereum miners. Now Ethereum (ETH) miners calculate more than 423 billion hashes per second: Ethereum has never been so secure.

article image

Image by EtherScan

Ethereum 2.0, the next edition of the Ethereum protocol, began rolling out in December 2020. It will implement sharded Proof-of-Stake consensus, in which the entire network will be divided into a web of interconnected shards, with transactions authenticated by ETH stakers rather than miners.

Binance Smart Chain uses Proof-of-Staked-Authority (or PoSA), a version of Proof-of-Stake consensus where participants stake BNB to become validators. If they propose a valid block, they’ll receive transaction fees for the transactions included in it. Critics of Binance Smart Chain reiterate that all BSC validators are controlled by Binance itself.

You don’t achieve record-busting status without a steely-eyed determination and a healthy dose of the ruthless.

And it seems Binance is the one which is focused on its goal.

Fees

The issue of excessive fees is an obvious thorn in Ethereum's side. Despite recent price increases in Ether, the average Ethereum (ETH) transaction costs $20. A ‘normal' Ethereum (ETH) transfer, with the exception of microtransactions, required $100-$150 to be included in the blockchain.

article image

Image by BitInfoCharts

Binance Smart Chain fees are nearly non-existent, seldom exceeding $0.1 per transaction. Some are accusing Binance of subsidizing them in order to promote Binance Smart Chain and attract developers, however the truth is that using BSC for your dApp is now very affordable.

Conclusion

Bottom Line

In reality, the decision between Ethereum (ETH) and Binance Smart Chain (BSC) is a philosophical one. You can't avoid clear ‘corporate chain' trade-offs with BSC: centralization, a shady validation process, suspiciously cheap fees, and so on. Ethereum (ETH) is the most decentralized and secure programmed blockchain ever created, but it has grown too costly and slow to use.

As a result, Binance Smart Chain appears to be the platform of choice for early-stage enterprises who are unwilling to pay a high price for decentralization.

Should You Buy Binance Coin?

The Binance Smart Chain is a low-cost and quick DApp platform for cryptocurrency consumers. It's no surprise that the number of daily unique active wallets reached 50,000 on February 9, 2021, and that the total transaction volume reached $15 billion in January 2021.

Because of the aforementioned qualities, Binance Coin is an excellent cryptocurrency investment opportunity. There are, however, some issues that must be addressed. The most important is that the DeFi market has the ability to eat into the Binance Exchange's market share. Binance is “trying to maintain its leading role in digital-asset exchanges while upstart DeFi projects like Uniswap, Curve, Balancer, and SushiSwap earn a higher percentage of industry trade volumes,” according to Muyao Shen of CoinDesk.

Should You Buy Ether?

According to DeWaal, there are several reasons to consider investing in the Ethereum network. “First, it has value and is used as a virtual currency; second, it may become more desirable when the Ethereum blockchain migrates to the new protocol; and third, as more people use Ethereum distributed apps, demand for ETH may rise,” he says.

Aside from buying Ether directly, you may try investing in companies that are developing Ethereum-based apps. You may also invest in a professional investment fund like the Bitwise Ethereum Fund or Grayscale Ethereum Trust if you want help managing your money, albeit these are presently only available to accredited investors.

Consider speaking with a financial advisor about the hazards of investing in Ether or other cryptocurrencies before making any large investments. Even if you believe in Ethereum's promise, make sure it's money you can afford to lose, given the extreme risk and volatility in this market.

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