For the last year alone, Ethereum's value has increased by 1200%. The development of the DeFi sector, which uses ether technology, determines that the value of this cryptocurrency will grow even more. Is the position of the undisputed market leader - Bitcoin - at risk?
Keeping money in bank deposits has long since lost its sense. The last year was a significant increase in the value of the cryptocurrency market. Analysts predict that this trend will not change significantly, but some experts predict a change in the leader in the cryptocurrency market. Will Bitcoin lose its position to Ethereum?
- I am happy that I have a lot of gold, silver, as well as Bitcoin and Ethereum. He doesn't get into a discussion about which is better. It is governments that pursue the wrong policies. The world is in debt, it is drowning in quicksand, and we have to argue about gold, Bitcoin or Ethereum? Invest in something, but remember that cash is garbage - convinces Robert Kiyosaki, an investor and author of the once sought-after book "Rich Dad, Poor Dad".
Let's leave traditional precious metal investments aside, but take a look at the dispute mentioned by Kiyosaki over the two most popular cryptocurrencies today. As a reminder, the value of both Bitcoin and Ethereum has climbed sharply in the last 12 months. Bitcoin soared by about 1000%, and its price increased from about $ 10 to nearly $ 000. Ethereum grew even more, even by 60%, and this translated into the fact that one ether token had to be paid around USD 0000, not around USD 1200 as before.
Both cryptocurrencies are based on blockchain technology, but otherwise their uses differ significantly from each other. You can trade bitcoins on the open market or lend your computer's computing power on the network and get a reward for it. It was assumed that a maximum of 21 million bitcoins could be mined.
Ethereum, on the other hand, is the most popular platform for building blockchain projects and creating decentralized applications. Importantly, there is no limit to the number of Aether that may appear on the market.
DeFi powers ether
- The growing popularity of Ethereum is evidenced not only by the significant increase in price. The blockchain launched in 2015 has already processed over a billion transactions. In May 2017, he broke 100 daily orders for the first time, to record an average of over a million transfers a day from mid-2020. This has to do with the growing trend of DeFi and the use of decentralized financial applications, and the strength of Ethereum is its computing capabilities necessary for DeFi applications - explains Marcin Wituś, CEO of Geco.one, an exchange platform for trading digital assets, which is part of the Polish-Estonian Chamber of Commerce.
The DeFi sector, i.e. decentralized finance, gives unlimited geographic access to financial services (e.g. loans, deposits, credits, decentralized exchanges) that are based on blockchain technology. The total value of Defi's projects is around $ 40 billion and compared to February 2019, this is about a 200-fold increase in value.
Ethereum is the main development platform for most projects in this sector, and although these innovative financial services have not yet shown their maximum potential, ether will certainly benefit from its further development.
- Today it is difficult to imagine that the Bitcoin infrastructure will become an alternative platform for DeFi projects. This would require changes to the protocol itself, and the cryptocurrency community itself would need to reach a consensus on such a decision - comments Marcin Wituś.
Ethereum will win the fight for trust?
Ryan Watkins, an analyst at cryptocurrency research firm Messari, argues that Ethereum could eventually outperform Bitcoin. If not in terms of price, then in terms of network security. - It's a fact that Bitcoin's blockchain is very secure and its monetary policy is very predictable. However, I think that the transition to Ethereum 2.0 or the use of the proof-of-stake algorithm will mean that ether in the near future may have a much greater security potential than Bitcoin Watkins said in an interview with Fintech Today.
Watkins explains that Bitcoin's work verification algorithms, which require "miners" to solve complex calculations to unlock new bitcoin and secure the network, have been criticized as "energy-intensive". However, proof-of-stake algorithms or the transition to Ethereum 2.0 can improve this process. However, it remains unknown whether they will be scaled sufficiently.
Big fees, but the solution is close
Ethereum, a project created by Vitalik Buterin, has one major drawback today. Using this service is expensive. - Growing interest in the DeFi market and Ethereum-based applications in general has led to network congestion. And so much so that the fees for sending ETH on the blockchain are very high - notes Wituś, CEO of Geco.one.
In 2021, the average cost of transactions in the Ethereum network has even tripled and is on average even $ 15.
The answer is to be "Optimism". A tool that will soon be available to investors. Optimism is a scaling solution built on Ethereum that allows you to "free" the Ethereum main network (i.e. the blockchain layer) from the large number of transactions that currently need to be processed. This should lead to lower transaction fees and eliminate any delay in transferring funds.
So who will win the fight for the soul of cryptocurrency investors? Ethereum is currently 65,6% as strong as Bitcoin, according to the Flippening Index published by the Blockchain Center. Lark Davies, a cryptocurrency analyst, argues that in the future, the value of Ether will even exceed 100. USD, which is more than you ever had to pay for bitcoins. According to Davies, this will be the trend, because Ethereum is starting to be interested in big players.
Andre Cronje, a freelance developer for DeFi and the founder of Yearn.finance, has a similar view to Kiyosaki, mentioned at the beginning. In his opinion, the two cryptocurrencies should not be compared at all. - Which is better? This is a rhetorical and purely hypothetical question. These are two different infrastructures and they are used for different purposes. It makes no sense to think about it - he says in cointelegraph.com