The main players in the cryptocurrency market are undoubtedly Bitcoin (BTC) and Ethereum (ETH). Of course, by looking Coinmarketrate.com we will see that there are weighty arguments in favor of many small cryptocurrencies, especially those that are doing well in areas where Bitcoin and Ethereum are not yet coping.
However, with a combined market capitalization of more than 1.3 trillion US dollars, the two largest denominations occupy more than half of the total valuation of the cryptocurrency market, amounting to 2.2 billion US dollars. In other words, if you put all the other cryptocurrencies in the market together, they won’t be as big as the Bitcoin-Ethereum combination.
Given such a strong growth story, it’s easy to see why volatility-resistant investors in the two largest cryptocurrencies have set their sights on the next major milestones. Based on the morning prices, it is expected that bitcoin will rise in price by 95% to $ 100,000, and Ethereum is at a distance of 144% from $ 10,000.
Bitcoin is getting closer to its next milestone, but that doesn’t mean it will reach it first. Let’s measure the playing field to see who has the best chance and which milestone will be reached first.
In defense of Bitcoin
The disadvantages of Bitcoin, compared to many other market banknotes, are quite well known. It is slowly developing its blockchain technology, as a result of which, in fact, it remains a store of value beyond the settlement of transactions where it is accepted. The recent Taproot update hopes to change this situation by giving it the flexibility to move into decentralized finance in general and smart contracts in particular. This is an area where Ethereum dominates, and many smaller and nimble altcoins have made a lot of noise.
The main advantage of Bitcoin should be highlighted that it is an industry standard for cryptocurrencies. Many investors who do not deal with the crypto space do not know that there are literally thousands of alternatives to Bitcoin. Many visionary and bright company executives, including Elon Musk, Jack Dorsey and Michael Saylor, have invested significant amounts of their companies’ spare cash in BTC.
You will not see such support for Ethereum, from company executives. In fact, Dorsey’s blockchain company restricts Square accounts interested in cryptocurrencies to Bitcoin trading only.
Landry’s, an operator of restaurants, hotels and casinos with several concepts, has recently updated its restaurant loyalty club. Now customers can link their bonus points to the Bitcoin price. It is difficult to imagine that any major operator would go down this path, with any other digital currency other than the BTC. Bitcoin has firmly entered the consciousness of people, and it matters.
In defense of Ethereum
The appeal of Ethereum is obvious to more experienced cryptocurrency traders. Although Ethereum accounts for about half of the market capitalization, in the second quarter Ethereum overtook Bitcoin in terms of trading volume on the world’s largest exchange. Ethereum, with its programmable blockchain technology, is already the heart of more than 3,000 decentralized applications (dApps).
Both Bitcoin and Ethereum have been criticized for depleting the energy needed to mine and move them, which creates gaps in the number of transactions that can be processed, as well as the associated costs. Ethereum’s transition from a proof-of-work (PoW) model to a proof-of-stake (PoS) model, which is expected to be completed in the first half of next year, will help alleviate many of these problems. If you think Ethereum is popular now, imagine what it will be like when it becomes more functional, as a faster and cheaper digital tool.
- Ethereum 2.0
Since its launch, the Ethereum blockchain has grown into one of the largest networks in the blockchain industry. With a market capitalization of almost 440 billion US dollars, ETH is second only to BTC.
Ethereum is now preparing to launch its fundamental Ethereum 2.0 update, which will thoroughly rebuild the network and solve problems such as scalability, high gas charges and network congestion.
Ethereum 2.0 is a major network upgrade consisting of successive stages, as a result of which the Proof-of-Work consensus mechanism will be transferred to Proof-of-Stake, which will make the network more scalable, secure and stable.
The transition to Ethereum 2.0 is not sudden. The idea of implementing the Proof-of-Stake mechanism has been around in the Ethereum community for many years. In fact, Ethereum is only catching up with many existing blockchains operating on the principle of share delegation. Cardano, Avalanche, Polkadot and Solana are among the largest blockchains with proof of market share capitalization.
The transition to Proof-of-Stake will reform many aspects of the POW consensus mechanism, significantly changing the economics of the confirmation structure, energy requirements and hardware for mining.
This consensus is a proven mechanism for adding new blocks to the blockchain. As part of this mechanism, miners solved complex computer puzzles to add blocks. However, this is a very energy-intensive process for miners. The Proof-of-Work mechanism has become an obvious problem due to the significant energy costs of miners to solve computer puzzles. Even the cost of the equipment needed by miners to solve complex mathematical puzzles was significant.
The proof-of-stake mechanism solves many of these problems, and makes the network more scalable and accessible. The ethereum network can only store a limited amount of data at any given time. If there are several transactions waiting on the network that cannot fit into this block, they must wait until a new block is added to the network. The implementation of sharding (a method of distributing data between several machines) in a proof-of-stake network solves the scalability problem.
Mining is necessary to create new blocks and maintain a decentralized registry. In the case of proof of work, the barrier to entry is high. Miners need powerful computing equipment to get significant results from the mining process. As the number of miners increases, the profitability of individual miners decreases. This encourages miners to create mining pools where they pool their resources to solve computational puzzles. This leads to the centralization of miners. One of the goals of proof of stake is to level the playing field for individual miners, which leads to significant revenue for individual miners.
Proof of stake replaces miners with validators who invest their coins in the network to maintain it. In the Ethereum 2.0 update, validators must delegate 32 ETH, the native currency of Ethereum, to the stake by depositing them on an official deposit contract.
Cryptocurrency staking, a process used to verify cryptocurrency transactions, involves the allocation of assets to support the blockchain network and confirm transactions. It also allows participants or validators to receive passive income on their assets.
Validators should stay online only to perform their share of computing functions. If they don’t stay online, their block reward will decrease moderately. This encourages validators to stay online.
Finally, the biggest reason to bet that Ethereum will reach $10,000 before Bitcoin reaches 100,000 is that momentum is on its side. Over the past year, Bitcoin has risen in price by 96% and, if it repeats this trend, it will reach a six-digit mark by the end of next year. However, over the past year, Ethereum has risen in price by 501%.
Obviously, the growth of the exchange rate in the past is not an indicator of how the future will develop, but the younger Ethereum is already more successful than Bitcoin in many ways, outside of the game with market value.
There is no harm in buying both, and investors today prefer to allocate a small part of their total portfolio to participate a little in the game with Bitcoin and Ethereum. They are still convinced that Ethereum will reach $10,000 before Bitcoin reaches $100,000, even if it takes several years.