Could Ether Ever Outpace Bitcoin?

Bitcoin versus Ethereum: the two market leaders couldn’t be more different. Bitcoin retains the highest market capitalization among cryptocurrencies, and in the latest bear market, has increased its lead against Ether, the Ethereum protocol’s cryptocurrency, as the main contender. Now accepted as a “status quo” — this is how most people see it. But how are these coins competing for investor dollars? Let’s have a look:

Bitcoin

Bitcoin was the first cryptocurrency and still got the first-mover advantage in this market. It is clearly the most well-known and highest valued coin. As of now its transaction speed is slower than Ethereum — but that could change if the so-called “Lightning Network” becomes a success. Today, Bitcoin has the image of a “real” currency more than any other cryptocurrency. Add to that a lightning-fast transaction speed and Bitcoin would actually become the “money” that Bitcoin extremists already claim that it is. Maybe they’re on to something?

Something that would challenge Ether even more is a successful implementation of the RSK project, bitcoin’s smart-contracts platform. RSK, which allows dApps — the various applications that sit atop blockchain protocols — to run, would enable Bitcoin to compete head to head with Ethereum on smart contracts. Way ahead on the adoption curve, a widescale deployment of RSK could potentially render Ether redundant. It could be the final nail in the coffin for Ether.

Ethereum

If you look at the blockchain industry strictly from a technology standpoint, Ethereum has the upper hand. While Bitcoin has to rely on a successful implementation of the RSK project, Ethereum already has the smart contract technology in place.

Ethereum is faster than Bitcoin but speed levels needs to improve significantly to become competitive to “real world” financial transaction speeds. Ethereum has its own scaling solution with Raiden Network, an an off-chain scaling solution that hopes to enable near-instant, low-fee, and scalable payment on the Ethereum blockchain. Will it  succeed relative to the Lighting Network? Only time will tell.

Because Ether’s cryptocurrency is more closely held by Consensys, the Ethereum Foundation and a number of blockchain companies that raised funds through an initial coin offering, much of its development so far has been streamlined, targeted, and strategic. Alliances with the corporate world will make it possible for Ethereum to gain faster technological acceptance in the market place. Here the Enterprise Ethereum Alliance (EEA) has an important role to play. In its own words: “the industry’s first global standards organization to deliver an open, standards-based architecture and specification to accelerate the adoption of Enterprise Ethereum.” Among the members in this alliance we find Microsoft, JP Morgan Chase & Co and British Petroleum — an ironic list, given the public comments from these companies’ heads about cryptocurrencies, including Ether.

One more thing to think about: Most of the Ethereum based Altcoins appear to be in the words of Bitcoin extremist, Jeff Wernick: “$hitcoins” that will “disappear very soon; probably within a year.” Because of the direct relationship between those companies and Ether, we anticipate damage to Ether’s reputation in the short-run.

But there will also be a few winners among these tokens. The question is how big the winners will become? The birth of a company like Amazon on an Ethereum-based token would — needless to say — be very important.

Today Ethereum looks like an underdog temporary leading on technical points. The two market leaders both have their strengths and weaknesses. Both of them will probably be around for a long time.

If you push me to predict the “winner” I would say it’s 60/40 to Bitcoin’s advantage. Because technology is always moving forward and an implementation of the Lighting Network appears around the corner, Bitcoin holds the competitive edge. The coin could then reap the full rewards of its first mover advantage.

First-mover advantage isn’t dispositive, however. If the roll out of the Lighting Network takes too long Ethereum might capitalize on its strategic alliances and eventually overtake Bitcoin as the dominant cryptocurrency.

What do you think? Share your thoughts in a comment below.

 

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Hans Norén is a staff writer for Block Telegraph. He covers cryptocurrencies mainly from an investment perspective. Norén has been an active investor in the stock market for over 25 years. He is also the author of several books and eBooks about investing.

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