Ethereum is undergoing a metamorphosis that could lead to it supplanting Bitcoin. Ether, the world’s second most valuable cryptocurrency. It has also been trading at record highs ahead of a big upgrade to its underlying platform, Ethereum.
Ether is currently value at around US$500 billion (£363 billion) in total. This is still less than half the value of Bitcoin, the most popular cryptocurrency.
But could this improvement, which is a crucial step toward a much greener and speedier version of the present system. Propel Ethereum to the top of the internet and make ether the most valuable cryptocurrency?
To begin, it’s critical to comprehend the distinctions between Bitcoin and Ethereum. Bitcoin is a digital currency that enables people to send money without the use of banks. It is based on blockchain technology, which is an online ledger with transactions monitored. And also recorded by a decentralized network of computers called validators.
Validators are compensated for their efforts by obtaining newly created bitcoins, a process known as “mine.” To add to the appeal, bitcoin is relatively rare: there are only about 18 million coins in circulation. And the protocol states that there can never be more than 21 million.
Ethereum is Different
Ethereum is comparable to Bitcoin in that it functions in a similar fashion, but it is not the same. It’s an open-source software platform that developers are using. One way is to create thousands of blockchain-based applications all over the world.
This means that these applications can all run independently of a company’s control. Cryptocurrency exchanges, insurance systems, and new types of games are just a few examples.
Smart contracts are automated agreements that ensure that money and assets change hands when certain conditions are met. They are also at the heart of the platform. Ether is used in all transactions on the network, and the site’s success is why ether has been the second-largest cryptocurrency. After bitcoin for the past few years.
Because ether powers the platform and is even referred to as “gas costs.” It has a function and intrinsic worth that bitcoin lacks.
Why Ethereum 2.0?
However, Ethereum has a number of serious flaws. The first is that gas prices have skyrocketed in recent years as the network has grown in popularity. And has become increasingly crowded.
Validators give the highest priority to those who are ready to pay the most for their transactions. For example, the average transaction on crypto exchange Uniswap costs roughly US$44 in gas fees at the time of writing.
Bitcoin has similar congestion difficulties, which its developers are attempting to address by adding applications. Like adding Lightning to the mix, which offers speedier transaction speeds.
The second issue with Ethereum is undergoing that the network has grown in popularity. The amount of processing power utilized by validators has increased dramatically. It’s the same issue that has given bitcoin a lot of bad press because it consumes a lot of electricity.
Bitcoin presently consumes as much energy as the Philippines. While proponents maintain that much of this is energy that would otherwise be wasted. Such as natural gas used by oil rigs since it is not lucrative to sell. Proponents also point out that the network is gradually transitioning to using a lot more renewable energy.
The Eventual Creation of an Ethereum 2.0
In any case, creating a new Ethereum 2.0 will overcome these issues. Just like by switching the platform’s validation system from “proof of work” to “proof of stake.”
Without going into too much detail. Proof of work is a protocol in which all validators attempt to solve difficult equations. It is in order to prove the validity of each proposed transaction. Because the system chooses one validator at random to confirm each transaction. There’s no need for all validators to conduct this power-hungry task with proof of stake.
Many in the bitcoin community oppose proof of stake because it gives the most authority to the largest validators. Allowing them to possibly corrupt the validation system if they gain control of more than half of the network. Supporters of Ethereum argue that proof of stake includes built-in checks and balances. That would also prevent this from happening.
In any case, Ethereum is undergoing 2.0 transformation and expected to cut the platform’s power consumption by 99.9%. Making it significantly more sustainable. It should also address the issue of gas fees. By increasing the platform’s processing capacity from 30 to potentially 100,000 transactions per second. As well as allowing for more sophisticated smart contracts than before.
How it’s Going
Moving to Ethereum is undergoing 2.0 and has taken over two years due to technical concerns. The new proof-of-stake blockchain has been running in parallel with the existing system for several months. Allowing developers to prepare it for a 2022 merger.
The upcoming improvement is a prelude to the merger. Altair provides various technical enhancements to keep validators honest and decentralise the system. If everything goes according to plan, the merger will be followed by a “sharding” adjustment. That will greatly improve the system’s processing power.
Ether’s price was high before the Altair update. The recent rise in bitcoin has helped to boost the broader crypto sector. This is likely due to people wagering on the upgrade. As well as speculators switching from bitcoin and new money entering the space.
It will be fascinating to monitor the next blockchain merger. Which also affects ether’s price in respect to the so-called “eth killers.” Because of Ethereum’s fee issues, competitor platforms like Cardano and Solana have gained a lot of traction recently.
But ultimately, what does it mean for bitcoin? Bitcoiners will argue that their protocol is more decentralized. The proof of stake is that they are the crypto brand that investors trust the most.
The question is whether these benefits outweigh Ethereum 2.0’s greener credentials and increased transaction capacity. Currently, bitcoin is worth nearly twice as much as ether. But there is discussion of it “flipping.” Could it be 2022? It will be fascinating to see what happens.