Could Ethereum overtake Bitcoin to become #1?
Does Ethereum have the qualities to one day overtake Bitcoin to become the number one cryptocurrency in terms of market capitalization and user adoption? Let’s check it out!
Bitcoin was the first cryptocurrency to emerge and is still number 1 in the market. However, Ethereum is starting to gain traction and many experts believe it could surpass Bitcoin in the coming years. In this article, we will see why Ethereum has so much potential and how it can dethrone Bitcoin.
Bitcoin (BTC) ushered in a new era of decentralized technology and modern cryptography. However, the cryptocurrency king lags behind as technology rapidly advances.
ETH2 Status: Ethereum Network Update
The Merge (Ethereum The Merge) is the final result of a process that began on December 1, 2020 with the introduction of the Beacon Chain. Beacon Chain is part of Ethereum 2.0 (Eth2) and its original goal was to increase the number of transactions per second from 15 to potentially tens of thousands.
From the beginning, Beacon Chain had an interesting feature: instead of being verified by a Proof-of-work system that uses cryptographic solutions, it is verified by a Proof-of-stake method that is used by a limited number of people. owns certain ETH confirmation transactions.
The Merge update occurred in two phases, and the execution date of each phase depends on reaching a certain hash difficulty called Total Terminal Difficulty (TTD). The first phase of this major update, codenamed Bellatrix, took place on September 5, 2022.
The final phase, codenamed Paris, was supposed to be triggered when TTD reached 58 quadrillion, according to the Ethereum blog – which will happen between September 10 and 20, 2022. However, the update actually happened on Thursday, September 15 at 8:42:42 AM.
Since The Merge, the price of Ethereum has lost more than 30% of its value. The rest of the market is also red. Since the merger enabled proof-of-stake on the Ethereum network, the price of ETH has fallen by more than 30% and is currently trading around $1,150, the lowest level since July.
Impact of migration: new technology
The merger comes with a number of changes. Most important is the introduction of a new technology called Sharding, which will be used to process transactions faster and more efficiently. It works by dividing the Ethereum blockchain into several pieces that are linked together like puzzle pieces. This will ensure faster transaction processing, better scalability and increased security.
Additionally, Ethereum’s move to a proof-of-work system makes it more energy efficient than Bitcoin. In fact, the Ethereum network currently uses about one-sixth of the energy that Bitcoin uses on average. This could lead to lower operating costs in the future and reduce its environmental footprint.
Interest from institutional and retail traders
Institutional investors can be attracted by high rate premiums that can reach 15% per annum. In comparison, US Treasuries offer investors a lower yield of 3.5%.
The report noted that institutional investors—portfolios investing more than $1 million in ETH—have grown more than 5-fold in the past year. According to the report, the number of institutional investors increased from less than 250 in January 2021 to 1100 in August 2022.
When a blockchain uses a proof-of-work consensus like bitcoin, the block verification process becomes more complex. A validator’s “stake” refers to the computing power and energy used to perform these calculations. New blocks of data are verified and approved for inclusion in the shared ledger of stake adopted by Ethereum, based on “validators”.
When a validator blocks this amount of ether, it shows that it is interested in keeping the network running smoothly. In exchange for their help in validating blocks, they earn ethers each time they contribute (proportionate to the number of ethers contributed). Validators are randomly selected for each validation. If the validator behaves dishonestly, the blocked amount can be seized. In this system, an honest validator who exposes another dishonest behavior also earns ethers. The aim is to prevent the formation of cartels.
Users who come together to pool their ethers to reach or exceed the 32 ether threshold required to validate blocks are called “sting pools” to increase their chances of being selected. If successful, they share the rewards. With $30 billion worth of ether held on the new blockchain, these gains will remain unavailable for 6-12 months, according to Ethereum Foundation updates.
Benefits for institutional and retail traders include the ability to subscribe to and support securely stored digital assets. It is an attractive option for institutional investors who want access to a wide range of digital assets without having to worry about security or liquidity issues. Traders will benefit from lower transaction fees, higher liquidity and better scale.
SEE ALSO: What are the lesser-known cryptocurrencies with high potential?
Current and ongoing use cases
Current and ongoing use cases for Ethereum range from financial applications to prediction markets, gaming, digital asset aggregating, and more. The network is also used for distributed computing capabilities that allow users to host decentralized applications (DApps). Ethereum’s flexibility makes it well suited for a variety of other uses. Developers are actively working on new ideas and applications for this technology.
Decentralized financial applications, called “DeFi,” are one of the most potential real-world uses for Ethereum.
DeFi includes smart contracts, stablecoin generation, and lending supported by decentralized exchanges. One notable project in this group is MakerDAO, which uses complex Ethereum smart contracts to develop a stablecoin (DAI) backed by Ether and with a fixed value of $1.
Non-fungible tokens (NFTs) are digital assets that are non-fungible and therefore have unique properties. These include collectibles, artwork, concert tickets, and in-game items such as weapons or characters. Ethereum provides infrastructure for the creation of token standards such as ERC-721, which allows developers to create their own custom NFTs on the platform.
Large amounts of data are stored on server farms by companies such as Dropbox and Microsoft. A data storage facility with hundreds of servers is known as a server farm. The problem with server farms is that a company concentrates a significant portion of its storage capacity in one place. Therefore, if it is destroyed as a result of a natural disaster or an act of terrorism, it can cause serious damage to the society.
The solution is a decentralized storage repository. In this case, the data is not stored in a few server farms in the United States, but in hundreds (or even thousands!) of data centers around the world. Until now, this has not been possible because building a network that securely connects all these servers and allows for fast data transfer is a huge technological challenge.
However, Ethereum is highly likely to solve this problem, as its Blockchain technology can be used to transport data quickly and securely between millions of servers while encrypting it.
Indeed, Ethereum has come a long way since its inception in 2015. From an experimental project to one of the most popular cryptocurrencies, Ethereum is poised to revolutionize the world of finance as we know it. With its flexibility and scalability, it gives developers unprecedented freedom when it comes to application creation and use cases. In addition, its low power consumption could potentially further increase institutional adoption. It remains to be seen whether Ethereum will be able to overtake Bitcoin, but given its current trajectory, it could be possible in the coming years.