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Ether, the cryptocurrency that runs on the Ethereum blockchain, hit a record high on Tuesday.

Though it is still second behind bitcoin in market value, there is growing excitement surrounding Ethereum and its capabilities.

According to billionaire investor Mark Cuban, "the number of transactions and the diversity of transaction types along with the development efforts in Ethereum dwarf bitcoin," he tells CNBC Make It. "The utilization of Ethereum is much higher."

First, the Ethereum blockchain consistently processes more transactions per second than bitcoin's, making payments faster and more productive.

Second, it can support the creation of applications. Ethereum is known for itssmart contracts, which power and build decentralized applications, likeDeFi (or decentralized finance)apps, andNFTs (nonfungible tokens).

"Right now, bitcoin is a more established store of value and there is no reason to think it won'tcontinue to be for a long time," Cuban says. "Ethereum, on the other hand, is booming with development that I think will create so many new applications."

Third, Cuban says that as an upgradeto the Ethereum blockchaincalled Ethereum 2.0, which launched in 2020, continues to roll out, "the impact of Ethereum could be greater than we currently imagine."

Investors agree that there are several benefits to Ethereum 2.0. First, it could make Ethereum even faster investors say the changes could allow several thousand more transactions per second on the blockchain,as CNBC reported. They also say it could be more secure, among other things, "all of which will be hugely positive as a whole for Ethereum," Cuban says.

The only "challenge with Ethereum as an investment" is that until its update is complete, it's difficult to predict which improvements will come to light and which will not, Cuban says, which can "create some confusion along the way."

Though he is overall bullish on both Ethereum and bitcoin, Cuban also notes that new entrants to the market can always disrupt the status quo.

"Just like all major tech companies are at risk of new technologies superseding them, there is always the risk of a better decentralized chain coming along to disrupt bitcoin and Ethereum," he says.

Billionaire investor Ray Dalio, founder of hedge fund Bridgewater Associates, said similar in a January posttitled "What I Think of Bitcoin."

"I presume that a better alternative will be invented and pass it by," Dalio wrote, "because that is the way the evolution of everything works."

In Cuban's opinion, it's "not likely. But always possible," he says.

Cuban has been at the forefront of the wave of interest in cryptocurrencies and the technology that surrounds it. He has a portfolio ofbitcoin, Ethereum and other digital coinshimself, and hasinvested in many companiesin the space.

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Mark Cuban: The 3 ways Ethereum 'dwarfs' bitcoin - CNBC