Opinion: Will Ethereum 2.0 Surpass Bitcoin?

Author: Tim Denning, Translator: Jeremy

Ethereum is cool. But the problem is that it's very complicated.

I got involved in Ethereum in 2016. It was one of the best decisions I ever made. Not only has it brought me great profits, it has also given my career a huge advantage. Being able to explain Ethereum in simple terms is a superpower. I want you to grasp this power so you can use it for good.

Bitcoin is easy to understand: slow-moving digital gold. When people say Bitcoin is a currency, or that it's not for shopping, they don't understand. Bitcoin is a long-term savings account that relies on scarcity (there are only 21 million Bitcoins) and code to protect it from inflation. That's it.

Ethereum is much harder to understand. It has thousands of use cases. That's why if you start learning Ethereum and what it does, you can do it very well. Every day I learn something new about Ethereum. It's a beast.

Why should you care about Ethereum?

1. It is the second largest cryptocurrency and it was launched in 2015.

2. Ethereum’s network effects are impressive. Network effects helped the last generation of tech companies make a lot of money. The next generation of tech will be blockchain-driven, decentralized technologies like Ethereum.

Some experts even say Ethereum will surpass Bitcoin in both size and price. Here’s why you need to keep an eye on Ethereum.

• What is Ethereum? (For regular people)

• Ethereum is a global computer platform that powers decentralized applications.

• Ethereum is becoming more of a transaction and settlement layer.

• Ethereum introduced programmable money through smart contracts.

• Vincent Tabora

These are the three things Ethereum is famous for. It can do a lot of things. Many cryptocurrencies are built on Ethereum, further increasing its utility and value. Ethereum helped make DeFi (decentralized finance) possible.

DeFi is also easy to understand. DeFi removes the middlemen from the existing financial products we already use, thereby reducing costs.

Trust on the internet has been destroyed.

Ethereum is a way to fix ownership, using code to do the verification, rather than people profiting from exploiting the existing trust system.

Imagine a world where banks, stock exchanges, credit card companies (Visa, Mastercard, Amex) are replaced. This is what Ethereum has slowly begun to achieve. The trust issue is a much bigger problem than storing value and protecting it from inflation. This is why Ethereum has the potential to be worth a lot more than Bitcoin in the long run.

This is a signal that will determine whether Ethereum price will surpass Bitcoin

Raoul Pal is a financial legend who recently switched from investing most of his money in Bitcoin to investing some of his money in Ethereum.

Raoul came up with a simple way to measure the potential future price of Bitcoin and Ethereum. Both cryptocurrencies have a concept called an address. An address is like a user's account.

Raoul has shown that as the number of user accounts increases — just like Facebook, Twitter, Uber, Netflix, etc. — the price per coin and the total value of the network will rise as well. (I say networks because Ethereum and Bitcoin are not companies — another cool feature of both technologies. Ethereum was built by thousands of developers around the world who dedicated their time and combined their resources to the project.)

This phenomenon is called Metcalfe's Law. The financial world has used Metcalfe's Law for many years. What you need to know is that the law helps explain how a network grows, and it helps you value a network like Ethereum.

Screenshot obtained by the author from GMI/Raoul Pal via Twitter

From Raoul’s analysis, it can be seen that Ethereum is “more viral than Bitcoin.”

BTC = ETH. In fact. Different assets, different ecosystems, same applications, same behavioral economics = same but different... - Raoul Pal

Ethereum 2.0 increases opportunities

Ethereum was already getting exciting. Then the Ethereum developers decided to announce Ethereum 2.0. This change is not easy to understand, especially if you don’t work in the technology field.

Essentially, Ethereum 2.0 makes it more like Bitcoin. This should blow your mind. What makes Bitcoin amazing is its scarcity and deflation. Ethereum 2.0 introduces the following:

1. Staking

Anyone can verify Ethereum transactions. Most of you reading this story won’t be doing that. Transactions need to be verified by the Ethereum network to create trust. By using the Ethereum network to create trust, you don’t need a middleman to do this.

The old method of verifying Ethereum transactions is called "proof of work" (PoW). Human-owned computers solve math problems and consume electricity in the process (similar to how Bitcoin works). With climate change becoming a hot topic, wasting electricity is seen as a bad thing.

With staking, if you want to validate transactions, all you need to do is deposit and lock up 32 ETH. When you help validate Ethereum transactions, you earn Ethereum. What does this matter?

Staking means that those who validate and secure the network must have skin in the game. Skin in the game makes the people connected to the network, and the network itself, more valuable.

Staking means there will be less Ethereum available, as part of the supply will be locked up by those who choose to stake. Less Ethereum means more scarcity. Scarcity is a feature that makes Bitcoin so valuable. Over time, it will have a similar effect on Ethereum.

2. Sharding

Sharding in Ethereum 2.0 is coming. For us normal people, this means that the Ethereum network will be split into 18 small parts. This will help increase the speed of the network. Sharding will allow the network to process more transactions per second.

A faster Ethereum network would further increase its value.

3. The magic of ‘Token destruction’ on Ethereum price

Transaction fees on Ethereum have been high for some time. Ethereum 2.0 makes a fundamental shift. Previously, those who validated transactions could set the transaction fee price. This made greed and overcharging possible.

With the advent of Ethereum 2.0, the price of verifying a transaction is set by the network and adjusted based on network activity. This change prevents greedy people from taking advantage of these normal people.

Pay close attention to the next section. This update also enables token burning. Token burning is when a percentage of transaction fees paid to those validating the network is destroyed. This will reduce the overall supply of Ethereum over time, further achieving glorious scarcity similar to Bitcoin.

Simply put: as network usage increases, the supply of ETH decreases.

This means that as Ethereum is adopted by more and more people, the amount of Ethereum will decrease. When the amount of Ethereum decreases and the demand increases, the price per Ethereum will increase.

Token destruction is deflation, the opposite of inflation. The value of a dollar decreases over time as more dollars are created out of thin air. Ethereum is programmed to be deflationary - meaning the value goes up instead of down like the dollar.

Ethereum 2.0 Summary

• Faster speed.

• Cheaper Ethereum transactions.

• More secure.

• Ability to host more use cases where technology solutions (apps/software) need to solve trust issues (someone fix social media).

• Easier to understand and use.

• Providing skin in the game to those who choose to validate Ethereum transactions.

• Providing a better way for people to earn money from building and working on Ethereum.

• Big change: Ethereum becomes increasingly scarce over time.

Should You Invest in Ethereum?

Only you can answer this question based on your own situation. Stocks don’t feel right to me right now. I don’t like buying at all-time highs. So I’m definitely going to buy more Ethereum. I use an 80/20 allocation rule for Bitcoin and Ethereum. If I invest $1,000, $800 goes into Bitcoin and $200 goes into Ethereum.

There is no doubt that Ethereum will play a huge role in our lives. I think it is worth investing a small amount, but only if you have the money you are prepared to take the risk.

Ethereum is quietly changing the world

The current version of the internet is broken. It is centralized, yet open and susceptible to manipulation, as we have seen over the past two years with companies like Facebook abusing our trust.

The future of the Internet will not be owned by a few large technology companies, but by users again. Users will own their own data and destiny.

Web 2.0 is a read-write platform.

Web 3.0 is a read, write, own platform.

Ethereum realizes Web 3.0, so it has value and will grow rapidly after Bitcoin. Ethereum has the potential to become the pipeline for all future applications.

In the war against early search engines, Google was the sleeping lion. In the war against re-establishing traditional finance, Ethereum looks to be the sleeping lion. Bitcoin is a brilliant idea that solved the problem of value storage and gave rise to digital gold.

Bitcoin is 12 years old and Ethereum is 5.5 years old. Ethereum still has a long way to go and is just getting started. Bitcoin is huge. Ethereum has greater potential. Let me tell you why in one sentence:

Ethereum has the power to reshape the global financial system, become the platform for all future decentralized applications, and solve the ownership problem once and for all.

These three points are why Ethereum has become a sleeping lion and why it has grown rapidly after Bitcoin. Ethereum 2.0 will make Ethereum more scarce and bring simplified new features to mimic some of the positive factors of Bitcoin.

You can benefit from the Ethereum revolution through your own research and incredible patience. The future is being built on Ethereum right in front of you. Dare to pay attention to it.