The great cryptocurrency flip: can Ethereum surpass Bitcoin?

“Ethereum’s ascent to the top of the crypto world seems unstoppable,” Nigel Green announced in mid-August, It’s not hard to see why deVere CEO thinks so. DeFi is breaking down, NFT is booming, Ethereum (Ethereum) Is still more scalable than Bitcoin (Bitcoin) And it also provides more uses, including smart contracts. In addition, Ethereum will soon switch to a Proof of Stake (PoS) consensus algorithm, which looks more environmentally friendly than Bitcoin’s energy-intensive Proof of Work (PoW) protocol.

“Except for price and fame, Ethereum is years ahead of Bitcoin in all aspects,” Green said earlier this year, adding: “It really feels like 2021 is the year of Ethereum. It’s time.” But is it really a foregone conclusion that the world’s first, largest and most well-known cryptocurrency is ready to abandon its market value laurels? Maybe not.

“If you look at the CoinMarketCap homepage for the past five years, Ethereum is usually ranked second, just below Bitcoin-and it hasn’t moved up from the second place in any permanent way since its launch. Open,” Molly Jane Zuckerman, CoinMarketCap’s head of content, told Cointelegraph, adding: “History tells us that there is only one cryptocurrency that can claim the title of’King of Cryptocurrencies.'”

So, is there a chance for a reversal-this term is usually used to describe the reversal of ETH and BTC? Do altcoins still benefit from the light shining on Bitcoin, or do they go out and become popular on their own? In the end, the two can even be compared because they are seen as serving different purposes in cryptocurrencies and the wider financial sector?

Unfinished transaction

Eswar Prasad, professor of economics at Cornell University and author of the forthcoming book, commented: “It is not certain that Ethereum will eventually dominate.”The future of money. “He told Cointelegraph that Ethereum’s switch to the PoS consensus protocol may bring technical complications. “DeFi products have many attack risks, which may undermine confidence in these products and Ethereum itself. ”

Nonetheless, Prasad added that Bitcoin has not proven itself as an effective medium of exchange, and compared to Ethereum, its blockchain has only “limited functions”, especially in decentralized finance (DeFi) Aspect: “Ethereum provides more flexibility, especially for DeFi products and services. It has the potential to become a viable and efficient medium of exchange with low latency and high transaction throughput.”

Lee Smales, associate professor of finance at the University of Western Australia, suggests that maybe Green has gone too far.After all, “inevitable” is a strong word, he told Cointelegraph, “However, I think this is very likely to happen-although the recent rebound of Bitcoin has surpassed Ethereum, and it may be delayed a little bit. I Will doubt [flippening] Occurs in the next two to three years. “

So, how long?

Many people seem to be betting on Ethereum, and the question is often: not if, but when? In the next few years, Ether may surpass Bitcoin and become the top store of value in the cryptocurrency world. Said Goldman Sachs analysts in July, and deVere’s Green believes that this shift “may be within five years.”

Justin Hartzman, CEO and co-founder of Canadian cryptocurrency exchange CoinSmart, told Cointelegraph: “I think it is difficult for ETH to flip Bitcoin in a short period of time.” “Next [BTC] The halving is in 2024, which will inevitably push up prices. Also, remember that “Ethereum killers” like Cardano and Tezos are coming. If they succeed, they can draw a lot of potential market value from Ethereum’s kittens. “If a local transaction does happen, “I think it might happen in five to six years.” “

“I don’t believe that the market value and overall valuation of Ethereum will surpass Bitcoin,” Banz Capital CEO John Iadeluc told Cointelegraph, adding: “Bitcoin is the global’introduction’ of cryptocurrency, at least for the foreseeable future . For example, I have not seen anything in which the SEC approved the Ethereum ETF before it approved the Bitcoin ETF.”

Jason Peckham, an analyst at investment management company Invictus Capital, told Cointelegraph: “I disagree that this is inevitable. In fact, for an outsider, five years are enough to flip ETH and BTC at the same time.” He added, to a large extent It depends on how these two crypto communities respond to their regulatory challenges, as well as internal factors, such as “the speed at which ETH is destroyed after EIP-1559”, which should reduce inflation and may be more attractive to investors. He added:

“If I had to fix it on one thing, I would say that ETH needs the super cycle/double bubble argument to work. This should allow its various sectors to continue to prosper in ways that are impossible in a bear market, as we have in history As you can see, this may be bearish for ETH relative to BTC.”

Environmental factors must also be considered. Bitcoin mining’s huge use of electricity has long been known, but when Elon Musk attracted widespread attention earlier this year, the price of BTC plummeted.Although Bitcoin has been rising since then, “energy [issue] Continue to attract attention,” Smales said, and this situation will only intensify. “Therefore, Ethereum’s transition to PoS creates an additional advantage that may lead to earlier rollovers. “

What will derail Ethereum?

Green recalled that ETH had risen by 300% in 2021, while BTC was only 55%, and it performed better than all other assets in the first half of this year. Is there anything that can stop its momentum?

In order to continue to compete for BTC, Ethereum needs to maintain its position as the largest smart contract platform. However, some new competitors continue to emerge. “So far, POS has not been fully proven,” Smales said. It may evolve into a market dominated by a few very large players-essentially centralized-causing market friction and possibly even higher transactions. cost.

The EIP-1559 upgrade was supposed to make the Ethereum gas fee more manageable, but according to YCharts, the average gas fee has been arrive Set a three-month high. In view of the continuous pressure that gas costs have put on the availability of the network, upgrading to Ethereum 2.0 or Eth2 is not fast enough.

In addition, technically, Bitcoin has not stagnated. “The planned Taproot upgrade can significantly improve Bitcoin’s efficiency, privacy, and the functionality of its blockchain,” Prasad said.

Bitcoin also enjoys a “first mover” advantage, which is vital to the network. “BTC’s dominance comes down to its remarkable Lindy effect,” Peckham told Cointelegraph, referring to a concept promoted by Nicholas Taleb that believes that the older the technology, the longer its life expectancy. Peckham added: “At the same time, this is a long-term trend where powerful market participants hold the majority of Bitcoin, while the rest of the world continues to be attracted to hold their shares in Toutiao cryptocurrency.”

However, Ethereum seems to have momentum now. “Since the outbreak of DeFi summer, the trend in the crypto market has indeed shifted to Ethereum, and then NFT continues to be popular,” Zuckerman said, as Peckham added:

“For DeFi and NFT, a large number of users have been attracted to Ethereum. In contrast, Bitcoin has a limited range of uses. Encryption natives like me are now excited about encryption. Most of the content is either built on Ethereum. On the market, it is either a competitor of Ethereum.”

Ethereum has the richest ecosystem in the crypto field. Despite the economic downturn in the early summer and asserting that DeFi is just a bubble with no intrinsic value, DeFi, which mainly exists on Ethereum, still holds a large amount of locked-in total value today.

“DeFi has conducted the most rigorous test to date and passed with excellent results. With the daily increase in utilities and use cases, the number of DeFi users has exceeded 3.25 million,” Hartzman said, adding: “As more applications With the addition of programs and users, Ethereum can take advantage of Metcalfe’s law and increase its overall network value exponentially.”

Are Bitcoin and Ethereum really comparable?

But, after further thinking, does it make sense to compare Bitcoin to Ethereum? One is a (hypothetical) form of currency, and the other is a platform, a new type of supercomputer that supports Web 3.0, on which it can be said that people can build new technologies.

Currently, these two platforms perform different tasks. Once the impact of the Taproot upgrade surfaced and developers began to build a DeFi ecosystem around the Bitcoin network, this may become a whole new debate. However, for now, Bitcoin is mainly a store of value, while Ethereum is a decentralized application platform. “This is not a’Coca-Cola vs. Pepsi’ debate. This is a’gold and the Internet’ debate,” Harzman said.

Iadeluc added: “Ethereum and Bitcoin are both cryptocurrencies, but from a long-term perspective, they pursue two very different goals. I don’t think Bitcoin and Ethereum compete with each other; on the contrary, I believe that their respective growth is Complement each other.”

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“From a technical point of view, they are fundamentally different,” Peckham said, but from an investor’s point of view, it does make sense to compare them.

“Bitcoin is unique as a store of value,” Hartzman said. “There’s really nothing like Bitcoin, and there won’t be anything similar in the short term. However, having said that, it’s impossible to bet on due to its incredible network value, rich community, and pace of innovation. Ethereum.”

Peckham told Cointelegraph: “As a trader, I am more optimistic about the price trend of Ethereum. I think in a bull market, it will continue to provide Bitcoin with superior upside.”

Rather than picking winners, however, “a more realistic prospect,” Prasad told Cointelegraph, is “in the next few years, Bitcoin and Ethereum will consolidate their joint dominance in the crypto space, while their followers wire between The competition is in the two innovation ecosystems.”