The Ether Flippening BTC Explained

The 2008 emergence of blockchain technology heralded the birth of key innovations that have continued to shape the world. Developed by Satoshi Nakamoto, Bitcoin, launched in 2009, becomes the first technological innovation powered by the blockchain. It was an electronic cash system that seeks to create transactional dealings independent of human intervention and 20th-century financial infrastructure.

A few years later, Ethereum was birthed by the Russian Canadian programmer Vitalik Buterin, it extended the power of Bitcoin by allowing many innovations to be built upon it. Bitcoin and Ethereum are the most popular and valuable cryptocurrencies. Since its inception, Bitcoin has been sold at a far higher market price than Ethereum. However, there is a prediction that a time will come when the market cap of Ethereum will surpass that of bitcoin. This prediction is called Flippening.

In this article, we will take a look at Bitcoin, Ethereum, Flippening, why it may occur, and why it may not occur. Let’s get started

What is BTC

Launched in 2009 by an unknown developer Satoshi Nakamoto, BTC is the father of the emerging class of asset known as cryptocurrency upon which thousands of other cryptocurrencies have emanated. Transactions made on the Bitcoin network use cryptography and are hence irreversible once it has been confirmed by all parties on the network, this makes it the most secure crypto ever seen.

Unlike the FIAT currency that loses its value over time, BTC has emerged as a perfect store of value due to its scarcity and durability. Its first move advantage has also seen it lead the pack in terms of market value and market price.

Through mining, new bitcoins are generated. However, only 21 million bitcoins will ever be created with the last Bitcoin projected to be mined in 2140. Miners compete with one another to create bitcoins and when bitcoins are created, they are added to the Blockchain, and the victorious miner is rewarded with a portion of the bitcoin.

What is ETH?

The success of Bitcoin paved the way for the emergence of other cryptocurrencies. One such cryptocurrency is the ETH. Developed by Vitalik Buterin – a Russian Canadian Programmer in 2015, Ethereum built upon the vision of Bitcoin by going one step further. Ethereum goes from just enabling secure virtual payment to allowing developers to build innovations on the network. It uses computer codes which are called smart contracts to document and execute the agreement between parties when the contractual terms are met.

The emergence of Ethereum has been a great innovation shift with many innovations already built on top of it. 

Its inclusiveness allows for other cryptocurrencies to be built on the network. Through the ERC-20 token standard, many decentralized applications have also been developed. A decentralized application is like a software application that is used on a website or as a mobile app. However, the difference is that decentralized applications are more secure and use cryptography to provide security against fraud and attacks.

Ethereum has also been used to build several Decentralized Autonomous organizations (DAO) which are organizations that are open to everyone on the network. In centralized organizations, decisions are taken by a few people. However, through the decentralized network, decisions are made by every participating individual who has a stake in the organization.

What is Flippening?

Since its inception, Bitcoin has had the highest market capitalization of any cryptocurrency. Ethereum is the next highest. However, a moment is predicted to come where the Ethereum market capitalization will subdue that of Bitcoin. This hypothetical prediction is called  Flippening. As impossible as this might seem, it might eventually happen. 

Investors have predicted that the flippening might happen due to the rising popularity of Ethereum. The flexibility of Ethereum where it allows things to be built on it has been credited to be one of the factors that may see Ethereum flipping the Bitcoin.  However, for a market cap to flip, ETH/BTC has to coincide with a value of 0.177 or above which is possible if ETH maintains this momentum

Why Flippening May Happen?

For flippening to happen, we might have to see a rapid increase in the price of ETH which commensurates with a sharp decline in the price of BTC. When this happens, we might see the flippening. The flexibility of the Ethereum network which allows the development of different applications that have heralded many developments could potentially make this happen.  Different developments that happened on the network require the use of ether coins which may further push up the price.

Many people are using the Ethereum network because of the innovations that are built on it. With more users and people building remarkable innovations around it. This may also amplify the price.

Rarity which is a value that has helped Blockchain surge up the ladder may also result in its decline against ETH. Currently, the highest transaction that Blockchain can process is only seven per second, this is slower compared to ETH’s fifteen transactions per second. This slower transaction has further pushed users to ETH which has been projected to handle up to one hundred thousand transactions per second in the future.

Finally, the recent merge of Ethereum from the Proof of Work miner-based consensus algorithm used by Bitcoin to its own power-efficient Proof of Stake will also have a bigger impact on the flippening. The merge which will allow more users to participate in the network by staking ETH and earning from it is expected to push up the price of ETH. 

Why Flippening May Not Happen?

Supporters of decentralized networks say that it is only a matter of time before ETH dethrones BTC as the number one. However, that may not see the light of the day. One of the factors that may support that is the unending issue with ETH scalability. The scalability of the Ethereum Blockchain has been a pain in the neck of mainstream traders. As more dApps are built, the gas fees increase proportionately. Gas fees for simple tasks such as buying NFT at OpenSea could cost $200 upwards. Although the merge could potentially solve some of the issues like empowering more traders to be involved in the network, however, it will not quickly solve the contentious issue which is scalability.

In addition, if the flippening will eventually happen, it may only last for a short period. This is because the flippening which may be good for the small traders can be profited by the smart traders which can further drive down the price. Government’s quest to control the Ethereum Blockchain which opposes the foundation of cryptocurrency as a decentralized initiative may also affect the flippening. Overall, it remains to be seen whether the flippening will see the light of the day

Conclusion

Bitcoin has been at the forefront of market capitalization since its inception. However, a sharp decline in BTC coupled with a rapid increase in the ETH may change the status quo. While supporters of BTC argued that it will continue to flourish because of the rarity, ETH supporters are banking on the decentralized nature of the network to displace BTC. However, if at all the flippening will happen, it might take a long time before it could be achieved. 

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Written by:  Narender Charan

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