Bitcoin, the world’s No. 1 crypto and the genesis of the current revolution in digital assets may one day bow down to a new king of the sector, speculates a researcher.
“Ethereum will continue to outperform Bitcoin in 2021 and will, ultimately, exceed its rival’s value,” wrote Nigel Green, chief executive and founder of deVere Group, a large financial advisory firm and asset manager, in a Wednesday note.
Green makes the case that bitcoin which was launched in a white paper in 2008 may cede its dominance to Ethereum’s Ether which is viewed by some as boasting a clearer use case than bitcoin which is considered by some as digital gold.
Bitcoin’s value in 2021 is up 57%, while Ether’s has risen 318%, at last check on CoinDesk.
By comparison, traditional assets have seen far more mundane returns. The S&P 500 index SPX has gained more than 18% in the year to date, the Dow Jones Industrial Average DJIA is up 15% thus far in 2021, the Nasdaq Composite Index COMP has risen almost 14% and gold futuresGC00 are down almost 6%, FactSet data show.
Bitcoin’s major marketing point has been its claim by enthusiasts to be a store of value and as a currency to a lesser extent, but Ethereum’s network is viewed by many as a powerful, open-source, decentralized backbone off which a number of applications can be based.
Ether, launched in 2015 by a team including Vitarik Buterin, Charles Hoskinson, and Gavin Wood, allows software developers to write bespoke programs atop its network. Sometimes these applications are referred to as smart contracts.
Ether bulls make the case that the world’s No. 2 crypto by market cap is the most in-demand development platform, thereby highlighting the Ethereum network’s “value not only as a platform for developers but as a worldwide financial utility,” wrote Green.
Ethereum also serves as the backbone of a number of popular and groundbreaking platforms, including decentralized finance networks, or DeFi, nonfungible tokens, or NFTs, and DAOs, or decentralized autonomous organizations.
Those growing uses have gummed up Ether’s works but that is seen changing in coming months.
A key upgrade to the Ether network, which includes a phased shift from a proof-of-work protocol to a proof-of-stake and increased storage capacity and processing power for smart contracts, is under way.
Put simply, a proof-of-work network requires tremendous amounts of computing power to verify the distributed-ledger network, which is the foundation of traditional crypto, while a proof-of-stake requires proof of ownership and is considered more environmentally friendly because it reduces the carbon footprint of verifying transactions on the blockchain and paying out rewards to those “miners” who underpin the network.
The process of investors staking their Ether in preparation for the upgrade to Ethereum also has been credited in buoying prices of the digital asset.
“These upgrades represent a major boost not just for Ethereum but for blockchain technology itself,” writes Green. “Ultimately, this will mean that its value will exceed that of Bitcoin—probably within five years,” he predicts.
Green is hardly the first to speculate that Ether will supplant Ether one day. Industry enthusiasts even have a name for it: the flippening. The flippening is the day that Ethereum overtakes bitcoin in market value.
Still, bitcoin remains the dominant player, representing 44% of the nearly $1.96 trillion in crypto market value compared with Ether’s nearly 19%, according to CoinMarketCap.com.
To be sure, it is impossible to know which, if any, crypto will survive much less become the most dominant. Scrutiny of the sector is intensifying as regulators look to put up guardrails to protect would-be investors and central banks contemplate the use of central bank digital currencies and stablecoins, which could also pose existential threats to the extant array of crypto assets.