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- This month, according to IntoTheBlock, a blockchain analytics firm, will be a turning moment in Bitcoin and Ethereum battle for dominance of the crypto markets
- The new monetary system that EIP-1559 intends to bring to Ethereum, according to IntoTheBlock, increases the likelihood of a flippening, or an overtaking of Bitcoin’s market cap
- Despite Bitcoin’s advantage in terms of core functionality, this is an indication of significant network effects on Ethereum, according to IntoTheBlock
IntoTheBlock, a blockchain analytics startup, predicts that this month will be a watershed point in Bitcoin and Ethereum’s struggle for control of the crypto markets. With a market value of $722.7 billion, Bitcoin is the world’s most valuable cryptocurrency, while Ethereum is in second place with $292.7 billion. According to analysts at IntoTheBlock, Ethereum’s EIP-1559 upgrade, which is set to go live on August 5th, might improve ETH’s tokenomics to the point that it becomes more of a store of wealth for investors. Changes to Ethereum’s fee structure are included in EIP-1559, which is part of the London Hard Fork update, including a mechanism that burns or destroys ETH instead of distributing it to miners and others on the network as incentives.
As the basic fee is burned, increased Ethereum demand might lead to a decrease in supply. As a result, spending ETH in the near term is disincentivized, enabling fees to cool and supply to grow to equilibrium. EIP-1559 creates a dynamic monetary policy in this way. Although not as predictable as Bitcoin’s set supply schedule, this shift in issuance allows Ether investors to more clearly benefit from demand for the fees it generates. EIP-1559, which is part of the London Hard Fork update, includes changes to Ethereum’s fee structure, including a mechanism that burns or destroys ETH instead of distributing it to miners and others on the network as incentives. The new monetary system that EIP-1559 intends to bring to Ethereum, according to IntoTheBlock, increases the likelihood of a flippening, or an overtaking of Bitcoin’s market cap.
Given that this is the first step in lowering Ether’s inflation, it’s reasonable to expect that more investors will begin to appreciate its potential as a store of value. Finally, this would have an impact on the way Ethereum is valued, increasing the odds of the flippening.
The research firm also points out that the number of Ethereum users has overtaken the number of Bitcoin users. Despite Bitcoin’s advantage in terms of core functionality, this is an indication of significant network effects on Ethereum, according to IntoTheBlock. Since the number of Bitcoin and Ethereum users rises, so does the value of their networks, as there are more possible methods for users to transact or interact with one another. In the end, Ethereum has also surpassed Bitcoin. This is likely to be the case since Ethereum has a wider range of applications than Bitcoin. Ethereum’s network effects have been enhanced because of ecosystems centered on NFTs and DeFi. However, Bitcoin continues to outperform Ethereum in terms of fundamental functionality.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
