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2 Nov 2021

Ethereum 2.0 — will it overtake Bitcoin?

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The news about the world’s second most valuable cryptocurrency Ethereum touching all-time highs in price has been making rounds. This news comes ahead of a major upgrade of its underlying platform, Ethereum.

A question that is often discussed among crypto enthusiasts is whether Ethereum could overtake Bitcoin in terms of dominance as well as market capitalization.

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So, the big question is could this upgrade be the final piece of the puzzle that will finally allow Ethereum to overtake bitcoin and become the number one cryptocurrency in the world?

Let’s take a look at how Ethereum works

Though Ether works similar to bitcoin, the two are different. Ethereum is a worldwide software platform with no host, on which developers are building thousands of blockchain-based applications. These applications can run without being controlled by a company. Also Read: What is EIP-1559 & Its effect on ETH Price

The heart of the platform is the idea of smart contracts. They are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. All transactions on the platform use ether, and the success of the platform is why ether has been the second-largest cryptocurrency after bitcoin for the past few years. The fact that ether fuels the platform gives it a utility and an intrinsic value that bitcoin does not have.

Why Ethereum 2.0?

Ethereum is very popular but it has some issues similar to that of bitcoin. Here are some problems with the current Ethereum:

The gas fees have become very expensive in the last couple of years. Gas fees are payments made by users to compensate for the computing energy required to process and validate transactions on the Ethereum blockchain.

With Ethereum gaining popularity, the amount of computational power used by validators has rocketed.
Ethereum 2.0 is the solution to these issues. It promises to reduce the platform’s power consumption by making it far more sustainable.

How are they going to do that?

Ethereum 2.0 will move the platform’s system of validation from “proof of work” to “proof of stake”.
Proof of work uses mining to verify new transactions, add them to the blockchain, and create new tokens. Bitcoin pioneered the proof of work and runs on it.

Whereas, Proof of stake (PoS) uses staking to achieve the same things and Ethereum is planning to employ PoS with Ethereum 2.0, which was always the plan.

About Ethereum 2.0

The transition to Ethereum 2.0 has dragged on for over two years but things are finally taking action. On October 27, 2021, Eth2 developer Preston Vanloon tweeted that the Altair upgrade had been “activated successfully.”

According to reports on CoinTelegraph, the Ethereum 2.0 Altair Beacon Chain update has gotten off to a successful start, with 98.7% of nodes already upgraded. Altair introduces numerous technical changes that are designed to keep validators honest and make the system more decentralized.

Altair is the first upgrade to the Beacon Chain and is likely the last before the merge with the Ethereum mainnet and the change to proof-of-stake (PoS).

What will it mean for bitcoin and other competitors?

With Ethereum 2.0 inching closer with the Beacon Chain’s Altair upgrade, and bitcoin hitting an all-time high, it is a very intense moment for the crypto market. Will Ethereum’s complete merger to 2.0 knock Bitcoin out of the crypto throne and get ahead of rivals like Cardano and Solana? It will be fascinating to find out but only time will tell.

Even though Ethereum is a competitor, Bitcoin is way ahead in market capitalization. As of September 2021, BTC’s market cap is at $929 billion whereas Ethereum’s is at $398 billion, barely half the size of Bitcoin.

As of April 2021, Ethereum hit an all-time high of $2,800, jumping 273% since the beginning of the year. Compare that to an 86% increase in Bitcoin’s price.

With all these new updates lined up for Ethereum, the future does look promising for the world’s second-largest cryptocurrency. But Bitcoin has been the top cryptocurrency for a reason, it is the crypto brand that investors are most comfortable investing their money in. So, the crypto king Bitcoin will not be easy to dethrone. Ethereum 2.0 might increase Ethereum’s market capitalization but it will take more than Ethereum 2.0 to overtake Bitcoin. Do you agree?

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