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
The difference is what cryptocurrency wanted, it means that we are gaining momentum and also gaining exposure and mainstrem. Competition is healthy for a project, like as I said it exposes the project to more ears.
Btc without an owner is doing well and fore sure Eth might do better because it has a head running it. For me with time Eth will catch up because of the numerous project running in it. Btc don't have anything like that to compete Eth. Eth has a lot and all this will push it to an apex height as we progress.
hello @ga38jem,
personally I think that soon a new coin will surpass both coins, many new projects that merge the best of all the other coins are appearing and that makes these projects have less followers every day, a good example is solana and etherium, when the price of the coins is stable the coins that will have more value will be the most useful.
Thanks for sharing your thoughts! It will be interesting to see if this happens. A lot of people are saying that but I think that it will be hard to do a Coin that is as decentralized as BTC. But only the future will tell! :)
Hello @ga38jem
This is the first time I hear this term, but it makes sense, that thing about market cap being calculated by multiplying the price of a currency by the current supply of the currency, from what I understand, Flippening is a kind of catapulting a financial asset to the top.
Best regards, be well.
Thank you for your comment! Yeah, when I first heard this term I was very interested in learning what it really meant :D
I don't think it is right to have a comparison between ethereum and Bitcoin because both have different ecosystem as well as very different market cap. Although both are ship to currencies and we can use it for our investment..
Yes you are completly right, that is what I tried to conclude in the article :)
The differences between BTC and ETH have always been marked, however the ones you explain in this post give us a better idea of their marked differences.
Greetings and thanks for your valuable contribution.
Thank you for your feedback! :)
Dear @ga38jem
I'm not sure if comparing BTC to ETH does make much sense. It's a bit like comparing Apple stocks to Tesla Stocks. Two such a different things. Having very little in common.
Even comparing market caps of both doesn't make sense. As it hardly make sense to compare market cap of BTC and ETH.
And let's face it. Bitcoin will exist 30 years from now. But Ethereum most likely will vanish by that time. As 99% of all companies that exist currently.
I never understood this insane comparison between those 2 assets. You hardly hear about anyone comparing GOLD to OIL. Why would we compare BTC to ETH? I don't get it lol
One question: I'm not very familiar with ETH. But I've heard over and over, that their tokeneconomics moved into deflationary environement. In which more tokens are being burned than issued. Is that true?
If that's the case, then ETH market cap will be slowly decreasing , since it's a multiply of price x amount of tokens in circulation.
Am I wrong somewhere?
Cheers, Piotr
Thank you for sharing your thoughts! :)
Yes, I tried to conclude in the article that the comparison is not making too much sense, hence people should not value "the flippening" too much.
I totally agrre with you! BTC seems to be much more resistant and has the highest probability of sticking around.
IRegarding your question: The thing with the deflationary envirnoment is just temporary, there are some days where more tokens are burned than produced but then there are other days where more coins are produced again. Your question is completly valid and you have a point. That is also what I tried to mention in the article. In my opinion it can not influence the market cap too much because one of these two variables (price or supply) will decrease making the market cap not going up.
Just read your reply.
Thanks for always being so responsive @ga38jem