Cryptocurrencies: “Ethereum can replace Bitcoin in the long run”

Posted September 13, 2022, 4:27 p.m

What is The Merge?

This is a major step forward in the Ethereum blockchain, whose token is ether. While the Bitcoin protocol is only meant to change slightly, the dynamic with Ethereum is more stable. At this time, we are talking about changing the engine while the plane is in the air.

Specifically, the blockchain will move from working with proof of work (Proof of Work) to proof of stake (Proof of Stake). The protocol will no longer rely on competing machines – miners – to protect the network. We are moving to something more economical.

Each approver [ordinateur chargé de faire fonctionner de la blockchain, NDLR] will need to block more than 32 ether or $55,000 at the current price to be eligible to participate. He will then be randomly selected to register a block of transactions and thus be compensated. If he ever tries to forge and is detected while executing the next block, he will lose some or all of his deposit tokens. This punishment is called “cutting” and is intended to prevent it.

Isn’t there a risk of concentration of verification power in a few hands?

There is a question about decentralization: it will be necessary to see how the dynamics will be after the update. However, the protocol requires more than two-thirds of the approval authority to attempt a coup. What does it mean for a cryptocurrency’s value to depend on the reliability of its network?

Bitcoin in particular is considered more ecological than proof of work, is it?

Energy will always be needed, but the Ethereum Foundation and experts estimate that needs will decrease by about 99%. Then we can’t really compare these methods because the dynamics are not the same.

The fact is that proof of stake is a good answer to CSR issues [Responsabilité Sociale et Environnementale] companies will have no reason to choose blockchains other than Ethereum for their projects tomorrow.

Does this pose a threat to proof-of-stake Solana, Tezos, or Cardano?

Merge hits out at these cryptocurrencies because they claimed to be more virtuous in terms of electricity consumption. With its history and community, Ethereum will look even stronger if the update goes well.

Other proof-of-concept protocols will certainly try to differentiate themselves at scale. [le passage à l’échelle]. Ethereum also features a token destruction process when there are too many transactions to keep transaction costs reasonable. This was the subject of the London update last year. By the way, with The Merge, token issuance will decrease tenfold compared to today, and ether may eventually become deflated. In my opinion, Ethereum is crushing its competitors, and I’m not too sure about Solana or Tezos.

Can Ethereum replace Bitcoin?

This is called “cheating”: it’s impossible, but it would be difficult to put forward a date. Personally, I think it is possible in the medium and long term. The total capitalization of ethers is still only 50% of bitcoins, so it still has a long way to go.

It is also known that Bitcoin may have moved slightly in 10 years, but it will still work. However, with Ethereum, the risk is very fast.

Several Ethereum miners want to fork the network to keep it running in parallel as it exists today. This will result in a new token, EthPoW (IOU), being distributed for free to current ether (ETH) holders, is there a future for this?

This will be the case for those with a private key such as a Metamask or cold wallet. However, the question will be whether it will be possible to find a buyer for this new token. When it is distributed, there will certainly be strong selling pressure, as speculators will see it as a way to grab some quick cash.

In addition, there is a risk of losing their tokens due to confusion when the networks split. Finally, EthPoW is of no interest because a token of a version of the Ethereum blockchain already exists as a proof of work from the previous fork Ethereum Classic. So it’s not a good investment in my opinion.

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