The second most valuable cryptocurrency in the world, ether, reached historical highs in price before the major modernization of its base platform, etherereum. Ether is currently only shy $ 500 billion (GBP 363 billion). This is still just under half of the largest cryptocurrency bitcoin.
But could this upgrade, which is a crucial step towards a much greener and faster version of the current system, put ethereum on the path to becoming the dominant platform on the Internet and make ether the number one?
First of all, it is important to understand the difference between bitcoin and ether. Bitcoin is a system that allows people to send values to each other without the need for banks. It is based on a technology known as blockchains, which are online ledgers whose transactions are checked and recorded by a decentralized network of computers known as validators.
These validators are motivated for their work by receiving newly mined bitcoins as rewards, which is known as “mining”. To make it more attractive, bitcoin is relatively rare: there are only about 18 million coins and the protocol is such that there can never be more than 21 million.
Ether vs bitcoin by total value (market capitalization)
Ether works similarly to bitcoin, but ether is different. It’s a worldwide software platform without a host, on which developers build thousands of blockchain-based applications.
This means that all of these applications can run without being controlled by the company. Examples include cryptocurrency exchanges, insurance systems and new types of games.
At the heart of the platform is the idea of smart contracts, which are automated agreements that ensure that money and assets change hands when certain conditions are met. All transactions on the platform ultimately use ether, and the success of the platform is why ether has been the second largest cryptocurrency after bitcoin in recent years. The fact that the ether drives the platform – it is even talked about gas charges – gives it a usefulness and intrinsic value that bitcoin does not have.
Why ethereum 2.0
However, Ethereum has several major problems. The first is that they have gas charges become very expensive in the last few years, because the network has become so popular and therefore is very congested.
Validators prefer users who are willing to pay the highest fees for their transactions. For example, the average transaction at the time of writing on the Uniswap cryptobourse is worth it about 44 USD in gas charges.
Bitcoin has comparable overload problems that its developers try to solve by building applications such as Lightning bolt which boast higher transaction speeds.
The second problem for ethereum is that as it has become more popular, the amount of computational power used by validators has skyrocketed. It’s the same problem that has brought a lot negative advertising on bitcoin because it consumes a lot of electricity.
Bitcoin is currently using as much force as the entire Philippines, though its supporters argue by much of it is energy that would otherwise be missed – for example, oil rigs burning natural gas, because it is not advantageous to sell it. Proponents also point out that over time, the grid is shifting towards the use of much more renewable energy.
In any case, the possible creation of ethereum 2.0 will solve these problems by moving the platform authentication system from “proof of work “To” proof of deposit “. Without getting inside too much detail, proof of work is a protocol in which all validators try to solve complex equations to prove that each proposed transaction is valid. With proof of deposit, it is not necessary for all the validators to perform this demanding work, as the system randomly selects one to confirm each transaction.
Many in the bitcoin community are against evidence of a strike, as it provides the most power to the largest verifiers, potentially allowing them to damage the authentication system if they can gain control of more than half of the network. Etherea supporters argue that the proof of deposit has built-in checks and balances to prevent this.
Either way, ethereum 2.0 promises reduce the platform’s energy consumption by 99.9%, making it much more sustainable. Increasing the platforms should also solve the problem of gas charges processing ability from 30 transactions per second to a potential 100,000 as well as enabling more sophisticated smart contracts as before.
How it is going
The transition to ethereum 2.0 was slow, full of technical problems that dragged on more than two years. For the past few months, the new proof-of-stake blockchain has run in a test format in parallel with the existing system, allowing developers to prepare it for merging in 2022.
The upcoming update is essentially a preparation for this merger. Known as Altair, introduces a number of technical changes that are designed to make verifiers fair and to make the system more decentralized. Assuming it goes according to plan, all eyes will be on merging and later on another change known as “sharding”, which will significantly increase the processing capacity of the system.
Prior to Altair’s modernization, the price of ether was certainly strong. The recent rise of bitcoin to historical highs is helping to elevate the entire crypt market. But some price movements on the air probably reflect that people are betting that the upgrade will be successful, while the rest is from speculators moving from bitcoin and new money moving into space.
Ether vs. “Eth killers” by total value
In the period before the merger of the two ether blockchains, it will be interesting to see how all this will affect the price of ether in relation to the so-calledeth killers“. These are competing platforms such as cardano and solana, which have been very popular in recent months, partly due to etherea charging problems.
Ultimately, however, the question is what this will mean for bitcoin. Bitcoineri will continue to argue that their protocol is more decentralized than proof of deposit and have the advantage of being crypto tag with which investors risk their money most comfortably.
The question is whether these benefits outweigh the greener credentials of Ethernet 2.0 and the fact that it can handle more transactions. Bitcoin currently has a value of about double ether, but there is still talk of a “rollover” where the ether overtakes it. Could this happen in 2022? When bitcoin hegemony is at stake, it will be fascinating to find out.