In 2021, the Ethereum cryptocurrency retained the second place among all digital assets in terms of market capitalization (total network value). BTC became less dominant over ETH in terms of the value of all coins. This fact has generated an opinion in the cryptocurrency community that soon etherium will overtake bitcoin in terms of capitalization and popularity among traders and investors. To describe this possible situation, they even invented a separate term – flippin’. But before buying an ETH coin, it is worth considering not only optimistic forecasts, but also the risk of Ethereum’s declining popularity.
Advantages and prospects of etherium
The digital project Ethereum was created by Vitalik Buterin in 2015. Its main goal is to develop a decentralized ecosystem with high transaction processing speed. Unlike Bitcoin, not only native coins, but also other cryptocurrencies(tokens) circulate in the Ethereum blockchain. In particular, many stablecoins (fixed-rate digital assets) are issued according to the ERC-20 standard. This means that the code of such a token is prescribed taking into account the requirements of the Ethereum network.
In early 2023, users can effectively create decentralized applications (dApps) based on smart contracts (digital contracts) inside the blockchain. Even basic skills are sufficient for this. To create dApps on the Ethereum blockchain, a user only needs basic code knowledge.
The Etherium digital project allows participants in the system to utilize more features than in Bitcoin. Bitcoin is the first successful cryptocurrency network based on blockchain technology. When creating the Bitcoin payment system, such disadvantages of fiat money were taken into account:
- Lack of anonymity.
- Centralization.
- Inflation of traditional currencies.
Ethereum was the first successful ecosystem with smart contracts. They allow you to do many things, such as managing processes within projects based on the ERC-20 protocol.
Smart contracts also provided the ability to quickly develop dApps within the crypto network.
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The possible emergence of the etherium coin at the top of the digital currency rankings is often tied to the completion date of Eth2 updates. The main goals of the improvements are:
- Increasing the number of transactions processed within the cryptocurrency network.
- Reduction of commissions.
- The emergence of validators.
Disadvantages of Bitcoin
Bitcoin has 3 main problems. They are summarized below.
| Problem | Description |
|---|---|
| Low anonymity | The Bitcoin blockchain has low privacy of user data. Low anonymity manifests itself in the ability to track transactions of participants in the cryptocurrency network. |
| Low speed of operation | During the day on January 8, 2022, the Bitcoin blockchain processed 224 thousand transactions, which is 2.5 transfers per second. With the high popularity of bitcoins, this figure is very low. In comparison, on January 8, 2022, the Ethereum blockchain processed 1.18 million transactions with the ETH cryptocurrency, which is an average of 13.7 transfers per second. |
| Attack Threat 51% | At the beginning of 2022, the 5 most powerful mining pools (services for mining cryptocurrency) provided 66.5% of the hash rate (total computation speed within a digital network) of the Bitcoin blockchain. Together, they could gain the ability to control the Bitcoin blockchain. |
Ethereum Roadmap
Vitalik Buterin published a post on his personal website on December 6, 2021. The post describes the current development plan for the Ethereum digital project:
- Adding a second tier of stakes. Needed to reduce the computing power requirements of validators when checking decentralized blocks.
- Implementing fraud proof or zero-disclosure consensus (ZK-SNARK). The first option is considered simpler. Implementing proof-of-fraud in the ETH coin blockchain will make it easier to communicate invalid transactions. The ZK-SNARK option is more complex. However, it will allow validators to validate blocks directly.
- Implementing data availability sampling. Users of the Efirium cryptocurrency network will be able to quickly verify the publication of new links in the blockchain by downloading only a few random pieces of the digital chain.
- Adding secondary transaction channels. This technology will avoid censorship in the cryptocurrency network. Developers plan to allow secondary validators to send lists of transactions to be included in the next block of the main digital chain.
Users believe that after the roadmap is fully implemented, etherium will overtake bitcoin, because the updated cryptocurrency network will become more practical.
ETH is growing faster than BTC
The rate of issuance of new Ethereum coins and Bitcoin cryptocurrency are not equal. The issuance of ETH exceeds the generation of BTC. However, the price of ethereum is growing faster than Bitcoin. It is worth comparing the data for the beginning of 2023 in the table below.
| Parameter | BTC | ETH |
|---|---|---|
| Number of coins | ||
| Opening price 2021 | ||
| Closing price 2021 | ||
| Percentage of growth for 2021 | ||
| Price as of January 9, 2022 |
Ethereum 2.0.
The new cryptocurrency Beacon Chain began operations on December 1, 2020. It operates in a single ecosystem and is being developed in parallel to the main blockchain.
Beacon Chain uses the Proof-of-Stake (PoS) consensus algorithm. This mechanism does not require a large amount of computing power. In the new blockchain, validators steak from 32 ETH to qualify to operate in Beacon Chain. As of January 9, 2022, the deposit smart contract has raised $28.73 billion or 8.98 million Ethereum coins.
Beacon Chain plans to add sharding – splitting the main blockchain into so-called “shards”. In fact, they will work as separate chains, but will be linked together using special cryptographic protocols.
In January-June 2022, users of the digital asset ETH expect the merger of the Efirium network versions 1.0 and 2.0. At that time, the ecosystem will fully transition to Proof-of-Stake and problems with high fees and slow transaction processing speeds will be solved.
Ryan Watkins, senior analyst at Messari, is confident that thanks to the protocol update, etherium will overtake bitcoin in the future. However, it is too early in 2022 to make predictions.
Is it possible that etherium will overtake bitcoin in the future?
The project’s programming team has previously proven its competence in software development and crypto networks based on blockchain technology. For this reason, ETH users believe that the roadmap presented by Vitalik Buterin in a post dated December 6, 2021 will be implemented successfully. Thanks to their faith in the blockchain ecosystem, Etherium does have a chance to overtake the Bitcoin digital blockchain in terms of economic performance.
As long as the trend of increasing demand for the ETH cryptocurrency continues in the digital asset market, its price will grow along with the market capitalization of the project.
Frequently Asked Questions
❓ What is Serenity?
It is the common name of the Eth2 update set.
❌ Vitalik Buterin was the first to implement smart contracts?
This is an incorrect statement. The developer only distributed smart contracts after creating a decentralized ecosystem.
✅ How does Ethereum address the 51% attack problem?
The risks of such an attack are high in networks with Proof-of-Work consensus algorithm. However, in blockchains with a Proof-of-Stake mechanism, a 51% attack is much harder to pull off. Ethereum 2.0 plans to use PoS.
❕ Why can the ETH cryptocurrency overtake the BTC coin?
The main prerequisite is the Serenity hardfork (global update). As a result of all the improvements, scalability will be increased, data security and privacy will be improved, as well as the speed of processing new cryptocurrency transactions.
📈 How has the London update affected the rise in the price of ETH?
The hardfork replaced traditional fees with 2 types of fees: basic and priority. The first category began to be burned in the blockchain to increase the scarcity of the cryptocurrency, which gave a boost to its price.
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Author: Saifedean Ammous, an expert in cryptocurrency economics.
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