2021 is a big year for Ethereum. With the traction gained by NFT and DeFi, the network has seen parabolic growth and increased interest from investors and institutions. So, what do you think? Will Ethereum 2.0 replace Bitcoin and change the world?
While the impact of Ethereum is indisputable, its flagship cryptocurrency, ether, is still in Bitcoin’s shadow. At the moment, BTC gets more press and endorsements from Morgan Stanley and Goldman Sachs and is the key store of value in crypto. Many exchanges offer ETH2 staking to the current Ethereum holders. Although, you can always convert our ETH or BTC to XRP if you wish to diversify your investment.
However, Bitcoin’s dominance is not set in stone. In April this year, BTC fell over 2% while Ethereum rose by 40%. Is it a momentary occurrence or a signal for future flipping? In this post, we will examine the reasons for Ethereum 2.0 to replace Bitcoin or halt network growth.
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The Case For Ethereum 2.0 As A Market Leader
Wide Range Of Applications
Unlike Bitcoin, designed primarily to replace gold as a store of value, Ethereum has a wide range of applications and an ambitious overarching goal — building a decentralized Internet.
The network supports smart contracts — decentralized agreements executed automatically (thus, no middlemen) as soon as predefined conditions are met.
Also, developers can use EVM to build decentralized apps. The range of applications for dApps is next to unlimited: here are a few notable use cases across major industries:
- Finance: DeFi
- Insurance agreements designed as smart contracts
- Accounting: decentralized auditing services.
- Digital art: NFTs
- Law: smart contracts that can replace lawyers
This is not a full list of Ethereum applications, but it gives a clear idea of how much the network can do.
See also: 8 Best Free Bitcoin Apps for Android in 2018
Lower Energy Consumption And Entry Barrier
The key to crypto expansion is universal adoption — in other words, bringing crypto to the masses. To that end, Ethereum is more feasible than Bitcoin, main thanks to its shift to Proof-of-Stake.
While Proof-of-Work (the consensus algorithm behind Bitcoin and Ethereum 2.0) is tested over time and is secure, PoS offers undeniable benefits:
- Reduced energy consumption
- No need to invest in hardware (thus, users can join the network via a laptop or a smartphone)
- Security is ensured by each user’s stake in the network.
See Also: How Long Does It Take to Mine 1 Ethereum?
Lastly, the Ethereum development team took a hands-on approach to fix one of the network’s key problems — congestion and high gas fees. At the moment, Ethereum has a low TPS rate (a network can process 15 transactions per second at best).
This will change when sharding (dividing the blockchain into smaller “sharded” chains) is deployed in 2022. These blockchains will process transactions in parallel (increasing TPS) and will be more lightweight (lower hardware requirements and better end-user experience).
See Also: How to Build a Crypto Mining Rig for Max Output
Bitcoin: The First-Mover Advantage And Poster Case Of Crypto
While Ethereum has a lot of potential, most of the general public is unaware of it. On the other hand, mainstream media regularly covers Bitcoin, and people with no crypto background have heard of it.
Bitcoin has become synonymous with “crypto” and “blockchain” as the most impactful use case of both. The first-mover advantage makes BTC hard to beat for the following reasons.
See also: Can You Still Mine Bitcoin, Or Should You Buy It?
Traditional financial institutions are increasingly getting on board with Bitcoin — JP Morgan, Goldman Sachs, and Morgan Stanley all have BTC funds.
Governments, too, recognize Bitcoin as a force to reckon with — El Salvador became the first country in the world to approve of Bitcoin as a legal tender.
See Also: Tokenomics: What is it And Why Should You Care I All You Need To Know.
While it is still up for debate, it’s a popular opinion in the crypto community that Proof of Work is more secure than Proof of Stake. The rationale is straightforward: in PoW, an external factor (energy) is involved.
On the other hand, in PoS, there’s no way to “anchor” the network to physical resources. I am making the blockchain more self-contained and open to attacks.
See also: How Is Ethereum Different From Bitcoin? | The Only Guide You Need
Track Record That Stands The Test Of Time
Since Bitcoin was developed earlier than ether was launched (2009 and 2015, respectively), it’s seen as a less risky investment. Also, Bitcoin is deflationary, so its value is set to increase over time.
On the other hand, Ethereum is not deflationary by design (although EIP-1559 comes with deflationary aspects); thus, it won’t become scarce (and more valuable) over time.
See also: Which Cryptocurrencies Will Survive? Check Our List
Ethereum, Bitcoin, Or Both?
When choosing between Ethereum and Bitcoin, remember that they serve different purposes. Bitcoin is, first and foremost, a store of value, while Ethereum is, at its core, a decentralized infrastructure.
As an investment, both tokens have benefits and drawbacks. Please do your research, observe the blockchain (you can use Bitcoin blockchain explorers or ETHScan for Ethereum), and choose whether you prefer Bitcoin, with its tested PoW and a reliable store of value, or are intrigued by the innovation Ethereum propels and want to bet on its potential.
As a third option, you can hold both and benefit from their future growth.
See also: Types Of Crypto Wallets And How To Choose The Best One For You.