The Flippening is an ongoing debate within the cryptocurrency industry regarding the two largest blockchains.
This is the expected day when the market capitalization of Ethereum overtakes that of Bitcoin.
Digital assets operate differently than most other asset classes such as stocks. The use of market capitalization as a value mechanism could be misleading. Certainly, both these coins warrant the spots they hold, at least as of this moment. However, that might not always be the case.
Is This The Right Metric?
Since the earliest days, market capitalization is something that people focused upon. This appears tied to the fact that most of the participants in cryptocurrency were concerned with speculation and market price as opposed to other factors.
As the industry matures, the question becomes is market cap even the proper metric to use?
If Ethereum does move ahead of Bitcoin, what does this tell us especially in the short-term? The answer is very little.
Blockchains are networks. At their core, they are distributed ledger technology that ends up providing the same functions as our existing monetary system. Factors such as number of wallets, users, transactions, and applications built are all important variables.
While it would stand to reason that market cap would encompass this, it is not guaranteed. Markets often operate based upon sentiment that might not be reflective of proper valuations.
Bitcoin
Bitcoin has the advantage of being the oldest blockchain along with being the best known. It is not uncommon for people to hear cryptocurrency is simply equate it to Bitcoin.
This was introduced by the pseudo-nonymous Satoshi Nakamoto. It was first sprung onto the world with the release of the Bitcoin White Paper. This sent in motion a movement that grew over the years.
With the mining of the first Bitcoin, a monetary system was put in place that was operating outside the control of any government or central bank. Satoshi looked at the destruction caused by the Great Financial Crisis, actions taken by the banks, and concluded there had to be a better way.
In terms of dollar volume, Bitcoin is the most active currency within cryptocurrency. This includes trading volume along with amounts being transferred. Due to the deflationary nature of the money, many feel this is the answers to the world's financial and economic woes.
All of this impacts Bitcoin's standing and places it at the head of the class when it comes to cryptocurrency. Also, due to the expansion of the miners, this network is truly decentralized. It does use the Proof-of-Work (PoW) consensus mechanism which makes the transaction times slow and, during certain period, expensive.
Taproot was an upgrade that promises to help with scaling and the cost of transaction fees.
Ethereum
This burst on the scene in 2015 and was an instant hit.
Ethereum is credited with bringing the idea of smart contracts to market, even though they were discussed a few decades earlier. With the advancement of this technology, the idea of decentralized finance (DeFi) took hold.
One of the biggest use cases for Ethereum, early on, was the creation of other tokens. This blockchain played a huge roll in the ICO craze that took place in 2016-2017. When that bubble burst, the network kept garnering attention for its ability to generate NFTs such as CryptoKitties and create liquidity pools.
Ethereum started as a Proof-of-Work chain, just like Bitcoin. This changed when it switched over the Proof-of-Stake (PoS) consensus. It is a move that was done to enable Ethereum to scale while also looking to address the transaction fees.
Since there was a pre-mine and many of the founders have large allocations, many question the viability of Ethereum as a PoS chain. Since block producers are now dependent upon staked coin voting, a few wallets appear to have enormous control over the network. This is a concern for many cryptocurrency fundamentalists who believe the path is always toward less centralization, not more.
Time will tell how this will play out.
One thing we do know, there were many blockchains that were touted as "Ethereum Killers" yet it is still standing as the second most valuable blockchain in terms of market cap. Projects like EOS got a lot of hype but, so far, failed to live up to the billing.
The Future
Both of these networks have their issues. As we see, both are trying to address both scaling and the cost of running the network. Neither has made a dent in this although they are working upon it.
The Flippening believes these will be the two top players going forward. So far, this is the case. However, technology revels there can often be surprises.
Few consider the view that perhaps the market caps of both these chains are surpassed by something else in the future. After all, this is new technology and we are seeing a move towards Web 3.0. The presumption is either Bitcoin or Ethereum will capture this.
But is this the case? It will depend, in part, how well each of these blockchains can solve the issues before them.
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