Bitcoin is NOT the Future!
Bitcoin has been the most sought, discussed, and dominant cryptocurrency in the market. Most probably Bitcoin was the best investment in the last century or even decade, however Bitcoin is NOT the Future!
Bitcoin is the only cryptocurrency which has managed to breach the 1 trillion-dollar market CAP. Although the market CAP at the time of writing this article dropped to $800 billion dollar due to Elon’s Musk comments, Bitcoin still dwarfs all other projects.
For any other cryptocurrency exceeding Bitcoin’s market cap is going to be hard. Especially since Bitcoin has got the attention of Institutional investors.
However, this is only temporary and very soon Bitcoin will lose traction, people and institutions will realize that there are better projects which have better utility and better fundamentals than Bitcoin.
This will happen very soon - in the next few months.
Bitcoin is Unsustainable
As Bitcoin has the first mover advantage it is over hyped by the public. This is keeping its price stable for the time being until a massive shift of funds from Bitcoin to other utility coins will happen.
Bitcoin, was designed as a peer-to-peer payment system that does not rely on any single arbiter – like a bank or a financial intermediary – to validate payments between users.
Instead, it is underpinned by a decentralized swarm of computers collectively maintaining a historical log of payments – the Bitcoin blockchain – and updating it periodically via a process akin to voting to approve new transactions.
Owning Bitcoin during these times has its benefit especially as a hedge against inflation, however when looking closer it clear that Bitcoin in its current form can never be a global currency.
Currently, Bitcoin uses 0.7% of the global energy or more specifically 129 TwH out of the total 23,400 TwH that the world uses.
Banks use around 100 TwH/year of energy to serve 5 billion people, all things included, employees, commute, electricity.
So, if we have a closer look at these figures, Bitcoin currently has approximately 40 million users (according to the number of addresses).
If at any point in time the number of users will increase to 5 billion (as served by banks) that means that the 129 TwH energy currently used will multiply by 125 times, resulting in 16,125 TwH - which is approximately 70% of all the energy consumed worldwide.
The more adoption there will be the more the price of BTC will increase and hence more people will start mining. Bitcoin still operates on Proof of Work consensus which is not scalable in a myriad of ways. In fact, proof of work is becoming obsolete as all new projects are opting for proof of stake mechanism.
Climate change and energy consumption have been given a lot of importance in the last few years. Awareness has increased and this topic is on the agenda of all governments.
A lot of damage was inflicted already and to safeguard what is left hanging on a thread a lot of regulations are being imposed by the different states.
New products and technologies are being created as efficient as possible with least harm to the environment. Governments are incentivizing eco-friendly projects to ensure sustainability.
However, it is clear, Bitcoin is not one of them! Bitcoin has failed to serve it's main purpose!
It is not feasibly possible that Bitcoin will be allowed to grow so much, considering all the awareness that has been created and the harm it will do to the environment.
The only possible way that Bitcoin will be a long-term investment would be if there will be a change in its current form.
Otherwise, Bitcoin is only good as a short- or medium-term investment.
Better Alternative to Bitcoin
There are hundreds of projects which have a better technology than Bitcoin, however the first one that will surpass Bitcoin will definitely be Ethereum.
The bullish Case for Ethereum
For those not aware Ethereum has been criticized by the mass due to the excessive gas fees incurred by the users.
The ridiculous fees have put a lot of pressure on the price of Ether in the last few months, however MATIC has solved the issue temporarily which has boosted Ethereum's price for a while.
This issue is to be resolved once and for all by launching Ethereum 2.0. which is an upgrade to the Ethereum Network that improves speed, efficiency, and scalability.
Ethereum 2.0, or more commonly known as Eth2 or "Serenity," is the next upgrade to the Ethereum blockchain. The vision behind bringing Eth2 into the mainstream market is to make Ethereum more secure (against all forms of attack), scalable (to support 1000s of transactions per second), and sustainable (to use less computing power and energy for technology shortly).
What is the Difference between ETH1 and ETH2?
There are two main implementations in Eth 2.0 which do not exist in Eth1.0: Proof of Stake and Shard Chains.
Proof of Stake
Eth1.0 runs on a consensus mechanism called Proof of Work (PoW) which relies on electricity and physical computing power (miners) to build blocks of the blockchain. This process is secure but still struggles with scalability and accessibility issues.
Eth2.0 uses Proof of Stake (PoS) which is an upgrade of PoW and relies on deposits of ether and validators (virtual miners) to build blocks of the blockchain. In broad terms, validators maintain the agreed-upon state of the network and receive rewards for randomly selecting the next block of data.
Shard chains are a scalability mechanism that improves the throughput of the Ethereum blockchain. In Eth1, there is a single chain that is made up of consecutive blocks which makes information secure and easy to verify. However, it greatly affects the transaction process, especially in high main net activity.
Shard chains are a mechanism through which the Eth blockchain is split and divides the data processing responsibility among many nodes. This increases the transaction speed as the nodes are processed parallelly instead of consecutively.
In layman's terms, it is like going from a single lane to a multiple lane highway and consecutively adding new lanes on the multiple-lane highway. Parallel processing and more lanes lead to much higher throughput. Shard chains are expected to be rolled out in phase 1 of Eth2.0.
Phases of Ethereum 2.0
The roadmap of Ethereum 2.0 is to be rolled out in at least three phases: Phase 0,1, and 2. Phase 0 was released on December 1, 2020. Phase 1 and Phase 2 are to be released in the years 2021 and 2021-22 respectively.
In the first phase of Eth2.0, "Beacon Chain" is implemented. The Beacon Chain stores and manages the registry of validators and implements the PoS consensus mechanism for Eth 2.0. The Eth1 PoW chain continues to run alongside the new PoS chain to ensure data continuity is not affected by its release.
The second phase of Ethereum 2.0 is the integration of shard chains. Here, the Ethereum blockchain is "split" into 64 different chains. As these chains will be parallel to each other, it will allow for parallel storing, transaction, and processing of information.
Eth2.0 is predicted to be at least 64 times more throughput as compared to Ethereum 1.0, but it is designed to handle a hundred times more data than Eth 1.0.
The third phase is currently less defined than Phase 0 and Phase 1. However, with the successful implementation of the Beacon chain and shard chains, miners will no longer be needed as Ethereum will be secured by validators.
It is important to note that Ethereum is not in the spotlight of Institutional investors yet, but soon will be. There are a number of factors indicating this.
The term “whale” is used to describe an individual or organization that holds a large amount of a particular cryptocurrency. Recently, new addresses with 10,000 to 1,000,000 ETH joined the network. These high-net-worth individuals hold between $26.70 million and $2.7 billion in ETH.
The European Investment Bank (EIB) has issued a €100 million two-year bond using public blockchain technology
Goldman Sachs, Santander and Societe Generale acted as the main actors in this transaction, which is the market’s first multi‑dealer led, primary issuance of digitally native tokens using public blockchain technology Ethereum.
Visa partners with Ethereum
Visa is one of the world's most valuable companies and is the world's second-largest card payment organization which announced that it is connecting its global payments network of 60 million merchants to the U.S. Dollar Coin (USDC) developed by Circle Internet Financial on the Ethereum blockchain.
USDC was built on top of Ethereum, meaning tiny amounts of the cryptocurrency Ether are used as “gas” to pay for the transactions. Visa does around 1,700 transactions per second on average which is approximately 150 million transactions per day. Even If a small percentage of these transactions are done in the Ethereum network the demand for Ether will grow exponentially catapulting the price.
Decentralized Finance (DeFi)
DeFi applications are similar to applications we use on our mobiles, but they are built with smart contracts. Most of the DeFi contracts are run on the Ethereum blockchain.
The Ethereum DeFi ecosystem has already reached a record of 2 million users with a value of over than $65 billion locked in these smart contracts.
"The way Ethereum becomes money is not actually by being adopted by countries as a currency; the way it becomes money is actually by building his own economy," Ryan Watkins.
Decline in the amount of ETH held on exchanges.
Trader/investors keep cryptocurrency on exchanges to have it handy and prepared for selling on the market making profit. As there is drop in the amount held in exchanges it means that the owners of ETH believe in the long-term strategy of ETH and are not selling anytime soon.
Environmental Friendly and energy efficient.
Currently Ethereum is facing the same issue of Bitcoin. In fact, on one account conducting an NFT sale can result in the consumption of as much as 8.7 megawatt-hours of electricity, more than twice what an average British household consumes in one year.
On April 23rd, Vitalik gave a presentation at the Scaling Ethereum Summit on an ambitious three-to-five-year plan for subsequent upgrades and optimizations to Ethereum, even after the network has fully transitioned to an environmentally friendly and energy-efficient PoS protocol.
Vitalik has made it clear that improvements on the block chain will continue, the developments under way are just the beginning of a long list of changes on the network.
Better Return on Investment with Ethereum
Mostly important as investors is to make sure that our investments will generate good returns for the risk we are taking. Although all cryptocurrency involve a high level of risk including Ethereum, I can assure you that Ethereum is the safest cryptocurrency you can find on the market.
Ethereum's future looks bright, and it will continue to grow in the coming years.
Apart from the fact that Ethereum is poised for strong gains, people or institutions investing long term can stake the purchased Ethereum.
One of the main implementations we have explained is the shift from proof of work to proof of stake, this brings along an opportunity for Ethereum supporters.
As explained earlier proof of stake mechanism is an efficient way whereby the virtual miners can mine or validate block transactions according to how many coins he or she holds.
This means that the more Ethereum they own at the time of mining, the more mining power he or she has. This is were the crypto investors come into play.
Virtual miners are on the lookout for Ethereum holders to stake it, enhancing their mining power. For the Ethereum holders, staking involves holding the Ethereum in a cryptocurrency wallet to support the security and operations of a blockchain network.
Simply put, staking is the act of locking cryptocurrencies to receive rewards in return.
In most cases, you'll be able to stake your coins directly from your crypto wallet, so the Ethereum is safe and you don't need to send it to anyone.
The Ethereum owners are rewarded on a weekly basis and the received reward is variable between 5% to 17% yearly of the amount invested, the interest earned is based on the network rate.
Staking is primarily for long-term Ethereum holders as staked Ethereum cannot be unstaked and along with staking rewards, cannot be transferred for an unknown period of time.
This means that you should only stake ETH that they plan to hold long-term. It is a limitation on the Ethereum network itself.
How to Stake Ethereum?
We did our research to find where staking of ETH can be done in the most simple and safe way. Although a lot of crypto investors are interested in staking their coins, sometimes they are disheartened by the complications that are involved in the process.
Kraken is one of the best exchange whereby staking can be done in a few simple steps.
After buying Ethereum (from Kraken as well), there are only three steps that have to be conducted:
- First you will need ETH in your Kraken account
- Navigate to “Staking” > Select Ethereum
- Read and agree to the disclaimer, then select “Stake”
The amount staked can be of any value, so this opportunity is valid for both small and large investors. If you are not completely sure about staking, you can decide to stake a small amount at first and once you get more confident, then you can add a larger amount.
Other reputable exchanges such as Binance, Huobi and Coinbase offer similar services. So it really depends which exchange you prefer.
Although Bitcoin and Ethereum are different projects and cannot be compared in terms of utility. It is very clear that Ethereum has more potential surpassing Bitcoin in market CAP very soon.
Currently the underdog has a market cap of $378 billion which is approximately half that of Bitcoin. If the improvements mentioned are put in place this year we will see Ethereum as the premier cryptocurrency by end of 2021.
Bitcoin in a few years will only be history, it will soon be an old man trying to compete with younger, stronger and more innovative projects in a fast-paced environment.