WILL ETHEREUM BEAT BITCOIN IN THE LONG RUN?
Millennial-fueled fad turned into the new standard? Will cryptocurrency reinvent the world economies and if so how stable are these cryptocurrencies?
In this blog post, we’ll be looking at the crypto market and its two major currencies. The cryptocurrency market has seen a surge to over $1.7 trillion after its major drop a couple of months ago to $1.4 trillion. This ‘fad’ has now garnered a larger market than most countries' economies. So let's get into it!
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The first question we're going to be answering is what cryptocurrency is and how it works. Crypto is a digital form of payment that takes place online and can be used to acquire certain products or services. However crypto is a decentralized currency meaning it has no central body or government regulating it. Instead crypto works on a blockchain principle. No centralized body oversees how money is made or moved. Blockchain emphasizes the security of its users by only keeping tight eyes on the currency and its transfer. It does not focus on the ownership details. High-powered computers are responsible for managing and recording transactions that take place within the blockchain world.
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So where does this ‘hypothetical money ‘come from?
Well, bitcoin and other cryptocurrencies are ‘mined’. Mining for bitcoin is a high-end tech process involving solving complex mathematical puzzles to generate a crypto block. Professional bitcoin miners use armies of servers in data centers to do this.
There is also the term crypto-token, often used interchangeably with cryptocurrency; But it is different. Crypto tokens share deep compatibility with cryptocurrencies, but they are a different digital asset class. For example, Ethereum is a blockchain and its native token is Ether (ETH). But there are several other tokens — DAI, LINK, or COMP — that also depend on the Ethereum platform. Like cryptocurrency, tokens can hold value and can be exchanged.
Bitcoin is the most acclaimed and well-known cryptocurrency currently present. However, there are many more crypto coins with higher profit potentials. Bitcoin has surged once more surpassing forty-three thousand dollars for the first time since its slump in May 2021.
Katie Stockton, the founder, and managing partner of Fairlead Strategies, LLC has stated :
“A confirmed breakout would require consecutive closes above $42,465, which could happen tomorrow as a bullish development,” she stated. Should the innovative digital asset keep rising in value, Stockton noted it will next encounter resistance close to fifty-one thousand dollars.
However, just this year, Bitcoin's market dominance has fallen this year from nearly seventy percent to about forty percent.Bitcoin is on the up and up again but it owes some of this success to ethereum, its largest competitor.
Ethereum is another cryptocurrency created in 2013. Being only eight years old in the market it has seen major gains in the cryptomarket. Ethereum network supports the development of and allows for the creation of new applications on its infrastructure, it’s potentially a more valuable resource in the long term. Hence garnering a more reliable reputation than bitcoin.
Ethereum has launched its hard fork update and is now a competitor to finally end Bitcoins reign as the largest cryptocurrency. What is this London hard fork update and why is it so important?
Well, a hard fork is a backward-incompatible upgrade in a decentralized system. This kind of upgrade requires all computers in the system to be upgraded at the same time. As of today (seventh of Aug) eighty percent of ethereum computers, also referred to as nodes, were ready to be upgraded and hence the ethereum blockchain did not face any chain split. A chain split is when users are running different versions of the same software. Because manufacturers and holders were able to predict and prepare for this update it has been smooth sailing for ethereum. With the successful update of ethereum, it is a currency to monitor closely. In the short run, the largest issue of chain splitting has been avoided. In the long run, analysts and coin holders are looking out for any technical bugs and the burning of ethereum. Burning is the destruction of a certain number of tokens, to make the currency more scarce. This upgrade has created better usability for ethereum. One of the difficulties of using ethereum for decentralized applications specifically for high-frequency trading was bidding for transaction fees. Waiting for a trade to enter the next block and be confirmed would just take too long.
Ethereum's London upgrade aims to help the blockchain scale and make surging transaction fees more manageable. The upgrade is part of ethereum's long-awaited move away from the energy-intensive proof-of-work model used by bitcoin to proof-of-stake—allowing users to generate new ether tokens via their existing holdings, known as ethereum 2.0. The entire upgrade isn't expected to be fully realized until well into 2022.
With EIP 1559 which is one of the 5 code changes included in London, there is more predictability with it and also the market has become more efficient. Recent bullish activity surrounding the Ethereum network upgrade contributed to ether’s outperformance relative to bitcoin, albeit with greater volatility.
Ethereum bulls point to the network recently overtaking bitcoin in several closely-watched metrics and its price performance relative to bitcoin over the last year as justification of their predictions. Ethereum has soared six hundred percent over the last twelve months, compared to bitcoin's two fifty percent increase. Could ethereum overtake bitcoin and its long reign?
Ethereum surpassed bitcoin in the total number of active daily addresses, and that momentum shows no signs of slowing as the network continues to power key DeFi and NFT trends.
Dan Morehead, the founder of the $2.8 billion crypto-focused investment fund Pantera Capital, reportedly predicted ethereum would eventually flip bitcoin—despite expecting the bitcoin price to hit a whopping $700,000 per bitcoin in just ten years.
In June, the chief investment officer at $100 million digital asset investment manager Two Prime, Nathan Cox forecast ethereum will eventually "flip" bitcoin.
Another reason for ethereum's boom is the rise of NFT’s and NFT trading. NFT’s are currently mostly only being traded using Ethereum. The trading volume of NFTs reached a record-breaking $171 million last month, up 338% from the equivalent week in the previous month, according to blockchain company OKLink.
With all these investors predicting ethereum to outshine bitcoin, we're betting on ethereum.
Though bitcoin has led the nascent cryptocurrency market since it was created nearly 14 years ago, the world's largest digital asset has fallen hard since April amid increased scrutiny over its environmental toll. Several provinces in China have banned mining as officials in Beijing crackdown on environmental regulations, and the nation's share of mining has plummeted from more than eighty percent to forty five percent last month. Tesla CEO Elon Musk also fueled the massive selloff in May, saying the electric-carmaker would halt vehicle purchases in bitcoin and stop investing in the cryptocurrency until a majority of mining occurs using renewable energy.
To wrap it up, Cryptocurrency is here to stay. Bitcoin in the near future is going to rise to up to fifty thousand dollars. Bitcoin is even estimated to reach a hundred thousand in the next few years, yet Ethereum is expected to overtake Bitcoin in the long run provided its more efficient and cleaner mining, new updates and reliability.
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