Bitcoin rally surpassed by the second most expensive cryptocurrency – Ethereum
The price of Bitcoin has risen from less than $ 10,000 last year, to $ 61,000 per coin this year, while the price of Ethereum has risen by 1,200%, rising from just over $ 100 per Ether, to almost $ 2,000.
The Unstoppable Success of Ethereum
Despite Bitcoin’s recent success, some fear that central bank digital currencies (CBDCs) could be a tool to counter Bitcoin and similar cryptocurrencies. At the same time, Ethereum apps and updates are making an unprecedented breakthrough in the world of finance.
“Bitcoin is the most talked-about cryptocurrency, but Ethereum has more features, including more flexibility”, Bank of America analysts wrote in a report last week titled ” Bitcoin’s Dirty Little Secrets”.
“Bitcoin has also become correlated with risky assets, it is not linked to inflation, and remains exceptionally unstable, making it impractical as a means of saving or payment mechanism,” the researchers wrote.
The report goes on to call the CBDCs “the cryptonite for cryptocurrencies,” but says that the rise of decentralized finance (DeFi), designed to replace the role of banks with blockchain-based protocols that are mostly built on the Ethereum blockchain, is “intriguing”.
The European Central Bank (ECB) is currently weighing whether to create a digital euro, while US Federal Reserve Chairman Jerome Powell has said that 2021 will be a pivotal year for public consultation on the future of the digital dollar.
According to Bank of America analysts, DeFi is “potentially more disruptive than Bitcoin” and who found that the sector’s growth “shows the strength of Ethereum: its computing capabilities are vital for DeFi applications.”
Since many of the largest DeFi projects are built on the Ethereum blockchain, an influx of users is flooding the network, and over the past year has raised the price of Ethereum.
Switching from PoW to PoS will change a lot
Meanwhile, Ryan Watkins, an analyst at Messari, a cryptocurrency research firm, said he believes Ethereum could eventually surpass Bitcoin – if not in price, then in network security.
The price of Ethereum has increased by more than 1,200% over the past year.
“I think the move to Ethereum 2.0 and Proof-of-Stake means that Ethereum can be more secure than Bitcoin”, Watkins told Fintech Today.
Bitcoin’s proof-of-work algorithm, which requires miners to perform complex calculations to unlock a new BTC and secure the network, has been criticized as too power-intensive. Some think that proof – of-ownership algorithms that allow cryptocurrency holders to secure the blockchain can improve this, but it is not yet known whether proof-of-ownership algorithms will scale sufficiently.
As part of the transition to Ethereum 2.0, which began at the end of last year, in the July update, some Ether tokens will be destroyed (burned), while users will send a fee to the network itself instead of miners serving the network.
“The way to turn Ethereum into money is not really for countries to accept it as a currency. In fact, it becomes money by building its own economy”, Watkins added, pointing to the growing DeFi space.