Lately, there’s been a lot of talk around The Flippening – the hypothetical moment when Ether will take over or “flip” Bitcoin to become the leading cryptocurrency. So what do the differences between Ether and Bitcoin mean for the future of blockchain and applications in the crypto space?
Ever since blockchain and crypto crept their way into the financial markets, Bitcoin has held its place as the Goliath of the crypto world.
With a market capitalisation of more than $1 trillion, notable companies like Tesla making massive purchases, and the fact that Bitcoin crypto payments are becoming accepted by major payment organisations, it makes sense to draw the conclusion that Bitcoin’s supremacy will stand firm.
Meanwhile, Ether has become the world’s 2nd-largest cryptocurrency, and the Ethereum blockchain has advanced at an alarming rate – over the past 12 months, Ether has rocketed 1,612% compared to Bitcoin’s 418% gain. Ethereum’s progress has been seen both in the value of the Ether cryptocurrency and the other applications that can be developed on this blockchain.
So what are some of the reasons Ether is being touted as the cryptocurrency that could flip Bitcoin?
Bitcoin and many other digital-native assets stand out from legacy digital payment methods, such as those run by Visa and PayPal, in that they remove all middlemen from transactions. When you pay with a credit card for coffee at a cafe, a financial institution sits between you and the business, with control over the transaction, retaining the authority to stop or pause it and record it in its private ledger. With Bitcoin, those institutions are cut out of the picture.
Unlike Bitcoin, Ethereum does a lot more than just enable peer-to-peer transactions. Think of Bitcoin as digital gold, and Ether as digital oil – one is used as a payment method or a way to store wealth (Bitcoin) while the other was created to function like digital oil that helps to power and enable the applications (similar to the ones you have on your phone) that run on the Ethereum network (Ether).
Ethereum’s blockchain enables developers to create more sophisticated programs on top of its blockchain when compared to Bitcoin’s blockchain. These programs, in their basic form, are known as “smart contracts”. A smart contract is a term for a set of rules that say when one thing happens, this will then trigger something else to happen automatically. One example is a debit order – so when it’s the last day of the month, a smart contract could be used to transfer a certain amount from Janine to Bob, provided that Bob has performed a task (like delivering a parcel).
Smart contracts can help exchange money, shares, property, or anything valuable in a transparent, conflict-free and peer-to-peer way to avoid needing the services of a middleman.
Basically, think of a smart contract like a vending machine. Usually, you’d go to a lawyer (for example), pay them, and wait to receive a legal document. With smart contracts, you just pop a cryptocurrency into the vending machine (i.e. the blockchain ledger), and then your legal contract, driver’s license, or whatever drops into your account. Smart contracts don’t just define the rules and penalties around an agreement as laid out by a traditional contract – they automatically enforce them from the get-go.
The reason the above distinction between the two cryptocurrencies is important is because the Ethereum network has so many uses compared to Bitcoin – it’s able to host thousands of blockchain-based solutions, including most decentralised apps (also known as Dapps).
Simply put, Ethereum is distinct because it expands the use of blockchain from simple value transfer (like Bitcoin) to more complex use cases.
Apart from the use of cryptocurrencies used for payments mentioned above, there are plenty of other uses for the Ethereum blockchain, like creating and hosting of NFTs (non-fungible tokens like digital artworks) or open-source lending, borrowing, insurance and trading through DeFi (short for decentralised finance). This area is also known as “open-finance” and sits at the white-hot centre of the recent crypto bull run.
DeFi is crypto’s big thing at the moment, a little like how Initial Coin Offerings (ICOs) were all the rage back in 2017. Back in June 2020, just $1 billion was locked up in DeFi smart contracts. By April 2021, users had poured over $69 billion worth of cryptocurrencies into DeFi smart contracts.
The DeFi movement refers to a brand new monetary system which is built on public blockchains. Financial applications such as loans, insurance, savings accounts, crowdfunding, derivatives, betting, and more all have middlemen, like banks or brokers, that take a cut from every transaction you perform. DeFi directly cuts out these middlemen and automates the entire end-to-end system using software and behavioural incentives and rewards.
With the endless possibilities Ether has to offer, it’s no wonder that investors and analysts alike are predicting that when it comes to the Flippening, it’s a question of when and not if.
Bitcoin may have been the fastest asset in history to get a total value of more than $1 trillion in just under 12 years; however, valued at 38% of Bitcoin’s value (from 19% last year), Ethereum may get there in less than 8 years.
With all the hype surrounding it right now, maybe you’re considering adding Ether to your portfolio. A good way to get in on the growth of Ether and other smart contract-focused cryptocurrencies – without the guesswork – is to diversify your investment with a crypto Bundle from Revix.
Revix has created an ultra-simple investment platform that allows you to own Bitcoin or Ethereum as standalone cryptocurrencies, or you can buy a diversified basket, or as they call it, ‘Bundle’ of the world’s top cryptocurrencies for as little as R150 with a single investment. What sets Bundles apart from traditional investments? There are no lock-up periods meaning you can sell out of your Bundle and withdraw your funds at any time.
Revix’s Bundles are ready-made investments that give you direct exposure to the underlying cryptocurrencies within each Bundle through one investment purchase. This way, you don’t have to guess which cryptocurrencies to buy into and don’t have to go through the hassle of managing all the individual cryptocurrencies yourself.
Consistent with our dedication to maintaining open and transparent discussions about the evolving situation with Haru Invest ("Haru"), we have prepared a detailed update on the measures we've taken and expect to take in the future.