Bitcoin And Ethereum - Differences and Flippening

With recent developments the dominance of Bitcoin is declining. This decline brings a lot of discussions into the crypto community. One of these discussions is the so called “Flippening”. In this article I want to discuss what this flippening is supposed to be, what the main drivers for this event might be and whether or not it is important for the crypto market.

The Flippening

The Flippening is a term that is widely used in the crypto space. It defines the event in which Ethereum will overtake Bitcoin in market cap, making it the biggest crypto currency on the market. In general, the market cap is calculated by multiplying the price of a coin with the current supply of the coin. Currently, Bitcoin is number one and Ethereum number two. The difference between these two coins is roughly 400 billion, so a long way for Ethereum to catch up.

There are several arguments for this event to happen, which I want to mention. The first one being that the Bitcoin dominance is slowly declining. This means that more and more money that flows into the crypto market. Especially the last years the divergence started to get bigger which is an indication that Ethereum is catching up. Another argument for this to happen is that Ethereum gained popularity and the ecosystem of Ethereum is constantly evolving creating more and more demand for this coin.

Another very important aspect is the upcoming switch to ETH 2.0 and the included switch to an Proof of Stake consensus mechanism. This is important because institutional investors are operating with the ESG rules in mind. This means that every asset they put money in has to fulfill certain environmental, social and governance aspects. Here, Ethereum definitely has the upper hand as with the switch to PoS the environmental aspect will be covered. Furthermore, the governance aspect is very difficult to cover for Bitcoin as it does not have a CEO, while Ethereum has a founder which is more or less in control of future development of this project.

BTC vs ETH Differences

With some arguments for the flippening, lets take a look at the major differences between Bitcoin and Ethereum. The firs tone being the consensus mechanism. Like mentioned before, Bitcoin runs on a Proof of Work consensus mechanism, while Ethereum is merging to a Proof of Stake one. Furthermore, Bitcoin has a maximum amount of 21 million while Ethereum is produced and destroyed every block cycle. In public terms Bitcoin is often compared to digital gold and Ethereum to digital oil. Moreover, Bitcoin is considered the most decentralized asset while Ethereum is considered decentralized but not as close as the Bitcoin network. On the other hand, Bitcoin does not really have an ecosystem and does not have a lot of applications build on it while Ethereum has the biggest ecosystem out there with several different niches and the most developer activity thanks to the Ethereum Virtual Machine. Another big difference is that Bitcoin is more or less alone in its niche. Nobody else is trying to compete with Bitcoin while Ethereum has a lot of competition. Not only other blockchains are trying to compete with Ethereum but also Layer 2 solutions on the Ethereum blockchain are starting to get more attention.

With these differences explained, it is very hard to imagine a flippening happening. Ethereum’s competitors are gaining momentum and “stealing” duns from the Ethereum project. Furthermore, more and more users are switching to other blockchains because Ethereum’s transaction fees are getting higher and higher. The burning mechanism of the Ethereum coins makes the coin on some days a deflationary asset which means that more coins were burned than produced which would pump the price up but should not matter towards the market capitalization as the other variable in the equation is getting decreased. Moreover, it will be very interesting to see if the merge to a PoS mechanism will work without problems. In the end this will be one of the most deciding points in this whole question whether this event might happen. In my opinion Ethereum has only one shot to overtake Bitcoin and this is if the merge will happen flawlessly. On the other hand, if a Bitcoin spot ETF might be launched BTC might gain momentum again and run away.

Conclusion

Whether it will happen or not, is depended on a lot of variables. The main question is: What does this mean for the crypto space? I think it does mean nothing! Like mentioned above, Ethereum and Bitcoin are two different assets that have two different goals in mind. One of them is a decentralized asset that is supposed to separate money and state which is also a very good store of value. The other one is a piece of software that can revolutionize the future of finance, Internet and more. Both projects are very valuable and are not competing with each other. With that being said, what do you think about this whole topic? Can Ethereum flip Bitcoin and what would it mean to you?

Published by ga38jem on
LeoFinance | Steemit
On 30th January 2022

Posted Using LeoFinance ^Beta