No.1 Cryptocurrency: Can Ethereum beat Bitcoin in future?
The recent decline in Bitcoin price has put the spotlight back on the second biggest cryptocurrency, Ethereum, which, some say, has the potential to replace it as the number one digital currency in market share. Bitcoin has seen a major fluctuation in price in the past couple of months. It rose to the all-time high of $65,000, only to fall 50 per cent to $30,000. Its market share also went down to 42 per cent ($1.6 trillion) from 70 per cent before the start of 2020, CoinGecko data shows.
The month of May saw the biggest fall in Bitcoin price, thanks to the tightening of cryptocurrency laws by China and Tesla chief executive Elon Musk changing his stance on Bitcoin.
When compared to the market share, Bitcoin is still way ahead compared to Ethereum. The May rout helped Ethereum narrow this gap by about $350 billion. While Ether dropped by around 11 per cent in May, Bitcoin suffered a much worse route at 37 per cent. On year-on-year growth too, Ethereum seems to be beating Bitcoin. While Ethereum grew over 900 per cent over the past year, Bitcoin saw a 275 per cent jump.
Ethereum investors and its fans say there are two big reasons for a strong momentum – popularity for blockchain-based financial services and digital collectables and a major upgrade in its technology, which is underway and will bring a tectonic shift in the way Ethereum works.
Also read: Big change coming in Ethereum! To give huge advantage against Bitcoin
As countries become more open towards cryptos, interest in digital currencies have expanded beyond Bitcoin. Experts say Bitcoin will eventually lose its title as the number one crypto as another digital currency with better technology and tech agility will become more popular among crypto investors, and Ethereum seems to be offering just that.
“(Ethereum) will likely exceed Bitcoin at some point in the future, as Ethereum will be superior when it comes to innovation and developer interest,” said Tegan Kline, co-founder of blockchain software company Edge & Node, reported Bloomberg. Some also believe that replacing Bitcoin won’t be an easy game for Ethereum as it still has many advantages over Ethereum. “Bitcoin will still remain king of the cryptos,” Edward Moya, senior market analyst at Oanda Corp told the news platform.
Also read: Bitcoin price recovers to $38,403 after Elon Musk’s meeting with miners
Ethereum is also working on a major shift that will help save up to 99.5 per cent of the energy it currently consumes. Given the stiff opposition cryptos like Bitcoin are facing over climate change issues, it’s possible that more investors get drawn towards Ethereum in future.
Ethereum already uses lower energy than the most popular cryptocurrency Bitcoin. It will soon be completing the transition to Proof-of-Stake (PoS) from the Proof-of-Work (PoW) system, according to Carl Beekhuizen, an Ethereum Foundation researcher. The technological shift will mean Ethereum will consume even less energy than Bitcoin.
Meanwhile, in the past 24 hours, Bitcoin has seen 0.18 per cent growth in its price to $36,291.92, while Ether grew 3.79 per cent to $2,589.5.
Also read: Cryptocurrency market crashes! Is it time to sell Bitcoin?
Are Non-Fungible Tokens Breaking Ethereum?
Periodic booms in cryptocurrency valuations come and go. In March of this year, Bitcoin hit an all-time high of $60,000 per coin, making the previous “boom” of 2017 pale in comparison.
Increases in the valuation of Bitcoin generally result in a corresponding rise in the values of other cryptocurrencies and a consequent increase in the interest in blockchain technologies. As the value of Bitcoin rises, so do the values of all other cryptocurrencies such as Ethereum (ETH). It’s easy to think of Ethereum as being the “silver” to Bitcoin’s “gold.” But in reality while the Bitcoin blockchain is used for virtually nothing but trading Bitcoin, the Ethereum blockchain is also a platform for executing program logic on the blockchain (smart contracts). These smart contracts power an increasingly diverse family of distributed applications. Moreover, while the core technologies underpinning Bitcoin are fairly static, the Ethereum network is poised to undergo several major technological shifts.
Proof of Work
The Ethereum and Bitcoin blockchains originally shared the same core algorithm for securing transactions— the Proof of Work protocol. This protocol is what makes public blockchains immune from hacking—one would have to apply computing power equivalent to the entire distributed network of blockchain nodes to falsify a transaction. Proof of Work is a truly unique innovation allowing a distributed system to guarantee the integrity of its data records. However, Proof of Work is computationally and environmentally very expensive and limits the transactional throughput that can be supported by the network.
The limits of Proof of Work on Ethereum were seen in 2017 during the “CryptoKitties” boom. CryptoKitties started as a game on Ethereum, which allowed players to breed “digital cats.” Each cat’s unique identity was stored on the blockchain, and each cat had a unique genetic makeup. Some “Kitties” became immensely valuable and intensely traded, but the delays in processing Ethereum transactions during peak processing brought the Ethereum network to its knees.
NFTs
Recently, we’ve seen a similar boom in another category of mostly Ethereum-mediated digital assets. Non-fungible tokens (NFTs) are Ethereum-based identifiers that are associated with real-world assets. Normal Ethereum tokens are “fungible”—my ETH coin can be exchanged for your ETH coin. However, an NFT is tied to a specific asset in the real world and cannot be converted into anything else. NFTs have been created that represent the ownership of artwork, in-game items, or collectibles.
Part of the NFT concept makes a lot of sense—a blockchain-based token can indeed be used to transfer ownership of an associated real-world item without the need for third-party mediation. However, a lot of NFTs have been created that appear to be associated with intangible or easily copied digital artifacts. For instance, Twitter co-founder Jack Dorsey’s first tweet was “sold” as an NFT for 1630 ETH ($2.9 million)!
Ethereum Enhancements
Whatever you think about NFTs, the increase in load on the Ethereum network has created another scalability crisis. Ethereum transaction fees are going through the roof, and delays on the network are increasing. If Ethereum is going to compete successfully against up-and-coming alternative chains such as Hedera Hashgraph, something has to be done to improve the throughput of the network. Luckily, we are on the verge of several big paradigm shifts in Ethereum with ETH 2.0, which may pave the way for greater throughput.
Firstly, the Ethereum “Beacon Chain” has introduced an alternative to Proof of Work for confirming transactions. Proof of Work is replaced with “Proof of Stake,” in which validators stake an amount of Ethereum as a guarantee of integrity. While with Proof of Work, you would have to assemble an unreasonable amount of computing power to falsify a transaction, with Proof of Stake, you would need to assemble an unreasonable amount of Ethereum currency. Secondly, “shard chains” will allow the Ethereum network to be partitioned into multiple blockchains that can operate in parallel, increasing throughput proportionally. Both enhancements are due in 2021.
Given the already intense activity on the Ethereum network and the rapidly rising capitalization of Ethereum it’s likely that these changes will result in a substantial uptick in Ethereum utilization. The increase in value of the Ethereum currency is already outpacing Bitcoin’s meteoric rise. It is not inconceivable that following the introduction of ETH 2.0, Ethereum will compete with Bitcoin as the dominant blockchain.
Why YouTuber TechLead is ‘selling all my Ethereum’
Patrick Shyu, a former tech lead at both Google and Facebook, as well as a popular YouTuber with over 1 million subscribers, recently announced that he is selling all of his Ethereum.
Why? He says it’s because Ethereum is an over-engineered project that does not scale, and that Vitalik Buterin has recently taken some marketing missteps that could damage the project long-term.
“There’s so much hype around Ethereum, but I think few people actually understand how ridiculous it truly is,” said Shyu. “So I wanted to make this quick video exposing Ethereum as the over-engineered project it truly is because as an ex-google, ex-Facebook tech lead, I can actually understand some of this stuff.”
Where Ethereum goes wrong
Admittedly, Ethereum has a respectable mission, but the way it tried to accomplish that mission made it bound for disaster. What could have been a system that infinitely scaled from launch day, is now a system that requires complex engineering and updates that nobody really understands for it to scale.
Shyu says this is the main problem that he has with Ethereum, and in his recent video, “SELLING ALL MY ETHEREUM – My Problem With Ethereum (as a millionaire),” Shyu takes a deep dive into a recent blog post by Vitalik Buterin titled, “The Limits to Blockchain Scalability.”
“Vitalik goes on a rampage creating this blog post, elegantly titled, “The Limits to Blockchain Scalability,” [it’s really just] a wall of text, technobabble, techno-jargon in which you can’t understand a single thing that he’s talking about here. He talks about database internal storage having structures like a tree and that it’s in RAM and you have to do multiple disk lookups, and then he goes on to talk about sharding and how Ethereum is using quadratic sharding and he maybe can even look into cubic sharding or exponential sharding. He goes on about shard chains, beacon layers, coordination layers, and all of this is meant to bedazzle and bewonder you into submission,” said Shyu. “This is the core of the problem that I have with Vitalik Buterin, not to mention, by the way, this whole essay is pretty much an admission of defeat that ethereum is not scalable.”
What Shyu says about techno-babble and techno-jargon that the masses cannot understand is nothing new. It reminds me of when I sat in on an Ethereum 2.0 presentation in 2019. At that point in time, ETH 2.0 had allegedly been in development for several months if not at least a year at the point, but regardless, all the presenter could do was talk about scalability theories, they did not even have a demo that they could show, just a PowerPoint with graphs, elaborate pictures, and techno-speak that the masses could not identify with or even have an idea of whether that kind of solution works or not.
This is a problem that has plagued Ethereum scalability for a long time—it is so complex, that only a select few engineers can really understand what Vitalik is trying to build while the rest of the world has to trust that his idea will eventually be created—which is highly questionable—and that it will work.
Ethereum 2.0 has been in production for several years now, yet, we still have not seen any tangible evidence of it.
Vitalik Buterin vs. Elon Musk
Shyu goes on to talk about how Elon Musk saw Vitalik’s blog post and responded by saying that Vitalik fears Dogecoin and the upgrades that Musk has proposed for it.
He fears the … pic.twitter.com/78WzM5ICjA — Elon Musk (@elonmusk) May 24, 2021
Shyu saw this as a sign that Elon Musk is opposed to Ethereum and is more interested in making Doge an Ethereum competitor that is superior to the Ethereum network or ETH 2.0—which he sees as a big problem. From a marketing perspective, it would have been advantageous to have Elon Musk on their team, but now, Musk has made it very clear that he has no interest in Ethereum’s future.
“We needed this guy on our team,” says Shyu, “And to make matters worse, the other Ethereum co-founder left the project to go build Cardano, so now we have all these little sub-factions of people working against each other trying to make their coin the best instead of trying to create a single unified global currency that is going to change the face of money.”
Many people share Patrick Shyu’s views on Ethereum. It isn’t until you actually try to build on the protocol that you realize that the Ethereum blockchain’s functionality is lackluster and that for it to be fixed would require upgrades that are difficult to create and implement. As Shyu says in his video, the path forward for Ethereum is full of obstacles, and the chance that Ethereum can overcome these obstacles does not look great.
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