Many crypto investors are wondering how probable it is for Ethereum to overtake Bitcoin in market share.
The event when Ethereum passes Bitcoin is dubbed by ETH enthusiasts as “the flippening.” And by the looks of it, it wouldn’t be easy.
Just to give you some perspective, Bitcoin accounts for more than 60% of the entire crypto market. That’s nothing to scoff at.
There are over 5,000 coins yet one single cryptocurrency owns nearly two-thirds of their total value. Yet Ethereum still has a fighting chance.
In this guide, I’m going to show you why Ethereum could overtake Bitcoin and when this will likely occur.
NOTE: This article does not imply in any way that Ethereum is superior to Bitcoin or vice versa. But if you want a proper comparison between the two cryptocurrencies, check out our Bitcoin VS Ethereum article.
Bitcoin’s Development Is Somewhat Slow
Over the years, the Bitcoin Core developers and community members have submitted and worked on various Bitcoin Improvement Proposals (BIP). They’ve made some significant progress over the last decade for sure.
However, many have noticed that the Bitcoin dev community does not implement nearly as much upgrades on the protocol as the Ethereum community. And this is partly because Bitcoin as a system is designed to sort of resist change.
It is purported as a decentralized immutable protocol more than anything else, besides being a store of value and a currency. This aspect of Bitcoin might not significantly threaten its claim as “sound money” or a “hard currency”.
However, it will likely cause it to lose out on the “hype” of other cryptocurrencies in the short term. As everybody in crypto knows that the industry partly thrives on buzz and hype, as much innovative project development.
And with Bitcoin being quiet most of the time, there is an immense opportunity for other fast-paced projects to shine.
Please note that this does not mean that Bitcoin will lose out in the long run. If we talk about the crypto space in a span of a decade, Bitcoin is still the most likely to remain dominant. But for the next 1-3 years, we might see the flippening occur.
Ethereum Moves Fast
Unlike Bitcoin, Ethereum undergoes upgrades every few months and a few protocol changes almost every month or so. Just look at its fork history.
And in the last year, the Ethereum community has made great strides in the right direction. There are some delays here and there, but that’s true for most projects. One thing is certain, the Ethereum developers have been very productive.
Ethereum 2.0
Ethereum 2.0, which is the forthcoming upgrade that could scale Ethereum to 100,000 transactions per second (tps), will be released in multiple phases. Phase 0 has undergone multi-client testnets and should be released sometime in 2020.
Once Phase 0 is released, many are expecting the altcoin to pump hard. But it is highly unlikely that Ethereum could overtake Bitcoin just yet. After all, it would take time before Eth 2.0 could actually scale the network to 100,000 tps.
Optimistic Rollup
On a positive note, there is another way for Ethereum to scale without the upgrade, and that is through rollups. The so-called Optimistic Rollup is a layer 2 solution that will allow Ethereum to scale to thousands of transactions per second.
Its functionality is similar to how the Lightning Network allows Bitcoin to scale to near-instant transactions at near-zero fees. And the best part is that it works with Ethereum’s current implementation.
Optimistic Rollup will enable Ethereum to scale to around 2,000-3,000 tps. That’s not bad at all considering Ethereum’s current throughput which is a measly 15 tps.
Will it be enough for ETH to overtake BTC? Probably. And the next section will answer that.
DeFi and Other DApps Drive Ethereum Forward
DeFi and Tether (USDT) are pushing the Ethereum blockchain to its limit. In fact, the network has experienced congestion in June while gas fees have surged. This even led miners to increase the maximum gas allowed per block.
What does this mean?
It means that Ethereum is being adopted. It’s being used in the real world to power DApps, payments, DEXs. It’s not just about hype anymore.
Two years ago Ethereum-powered decentralized exchanges like Etherdelta were severely underutilized. Therefore, the value of Ethereum was a little flimsy then. But now, thanks to DeFi, DEXs are starting to compete with centralized exchanges.
With that being said, they are not on par with large trading platforms like Binance yet. But they are improving fast in terms of liquidity and speed. Once could argue that DEXs are actually more convenient because they don’t require you to create an account.
As Ethereum’s rollups scale the blockchain to around 2,000 tps, the network could easily support more of these incredible DApps with ease.
We can only expect these applications to become better over time, which will result in more user adoption. And more user adoption results in higher valuation. The network effect.
Can Ethereum Overtake Bitcoin?
Yes, Ethereum can overtake Bitcoin once it has scaled its layer two solutions, but it won’t happen right away.
Besides Optimistic Rollups, there are several layer 2 solutions available today. But DeFi protocols and other DApps would need about a year’s time to build better systems; one that can support second-layer solutions.
That way, they can fully take advantage of Ethereum’s new transaction capacity.
Then when?
It would highly depend on when Optimistic Rollups and other layer 2 solutions get adopted. But we have enough reason to believe that it’s gonna happen either end of 2020 or early 2021. By then, most DeFi protocols would have matured enough.
That’s when the flippening will happen.
But what if it doesn’t?
Well, that’s still a possibility. No protocol has taken the crown off Bitcoin for more than a decade of its existence, after all. But there’s still another chance. The flippening might happen a few months after Phase 2 of Ethereum 2.0 is launched.
As stated before, once enough iterations of Ethereum 2.0 is released, it will allow the network to scale to 100,000 tps. This is expected to occur sometime between 2023-2025. If you want to know how I hypothesized the release of ETH 2.0’s full implementation, I created a post to explain it.
The faster it arrives the more likely Ethereum can overtake Bitcoin.
That’s because Bitcoin would be able to scale better by then. Actually, Bitcoin’s lightning network already scales the network to near-instant payments. The only reason it hasn’t been as broadly adopted as it should is that they have placed a $1,500 limit per channel.
It’s too early for people to own massive channels in lightning’s early years. But it’s sort of a deal-breaker for merchants and exchanges. But once that limit is removed and Lightning is globally adopted, it would be hard for ETH to catch up to BTC.
Conclusion
Ethereum has ramped up its development in 2020 with several testnet launches for Phase 0 of ETH 2.0. In the next few months, we can expect Ethereum-based products and protocols to proliferate. Its existing applications would also improve and provide better services to users.
The next bull run will likely be led by either an Ethereum-based DeFi coin or more likely than not, Ethereum itself. Bull runs in the crypto space have always kicked off in 6-12 months after every Bitcoin halving. And second layer solutions would likely be adopted in meaningful ways by then.
The timing couldn’t have been more perfect. Of course, we can’t expect Bitcoin to be too far behind.
In fact, it is even more likely that Bitcoin will be able to overtake Ethereum eventually once it can scale without limits.
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