By now, it's a worldwide news story: the frantic rise of cryptocurrencies is capturing the attention of everyone from middle-class individuals to the most famous international banks. In particular, the eye falls on the remarkable price increase that the two most famous digital currencies ever have achieved: Bitcoin (BTC) and the Ethereum (ETH). Will Ethereum be able to surpass the cryptocurrency king, Bitcoin?
- Ethereum: the new dominant currency?
- BTC fee and ETH fee: the difference in brief
- BTC vs ETH: who will win the challenge?
Introduction
BTC recently touched an ATH of over $40,000, while ETH has managed, with a rise of over 500% in the last year, to reach a share of over $1,000, almost approaching its ATH reached in January 2018. It would seem obvious to say that Bitcoin is the strongest currency ever, but some aspects foreshadow an overtaking by Ethereum that could surprise millions of users within the crypto sector.
Ethereum: the new dominant currency?
Taking a look at this data, it immediately jumps out at how the revenue from ETH fees is significantly higher than that collected from BTC.
We are talking about a difference of over 8 million dollars for a currency that is worth about 30 or 40 times less than Bitcoin. This phenomenon occurs because the payment of fees for BTC transactions is done quite differently from those of ETH.
BTC and ETH fees: the difference in a nutshell
To understand how such a phenomenon is possible, it is important to know the difference in fees paid for BTC transactions, and those paid for ETH.
BTC Fees
The commissions that are paid for BTC are used to confirm a higher number of transactions, as in the absence of fees a maximum of about 2500 transactions could be executed every 10 minutes, a very small number if you think about the number of users in the world. Depending on the power of the network, miners, who contribute to the confirmation of the various blocks of transactions, receive a "block reward", which is our famous commission. Being the second form of profit for the miners, they themselves will decide which transactions to prioritize, based on the amount of the fee paid. A large influx of traffic will result in the creation of a sort of "auction" where the one who pays the highest commission will execute the transaction first.
ETH Fees
ETH fees, on the other hand, work a bit differently. While initially there was an auction system very similar to that of BTC, with the introduction of the Ethereum 2.0 network, a new protocol based on BASE FEE was also implanted. Basically, there is a base fee that increases if the average usage is above 10 million, and decreases if the usage is below 10 million. Thus, it is no longer the miners who decide which transaction to prioritize, but the system itself regulates everything.
The update, together with the strong rise of ETH, made the coin more than double the revenue on average fees paid by users.
BTC vs ETH: the epic battle
According to a tweet published by @OPFbluesky the current situation, which sees Bitcoin with a significantly higher value than Ethereum, could literally turn around, a bit like what happened in the battle between Facebook and Myspace.
The author showed this graph that reminds us how, although Facebook was very young compared to Myspace, it had an exponential growth between 2008 and 2012, reaching the point we know today.
Conclusions
The world of cryptocurrencies is unpredictable and is subject to very high volatility compared to many assets in the financial sector. Every prediction can be possible: Bitcoin could touch very important values, even over 100,000$, Ethereum could exceed it with an unexpected rise thanks to the new protocol and the new fee system that makes it even more sustainable. Anything can happen, the important thing is not to get left behind and try to amortize any losses due to the bull market that there has been in recent weeks. You can always keep up to date with our insights that you find below!
*This article was translated manually and with translator software from my original post on theledger.it, so I'll attach the link to my article here
If you want to improve your Italian and learn more about crypto arguments, just check out our blog by clicking on the link below :)
Discover more
- https://theledger.it/analisi-report/analisi-mercato-ethereum-11-gennaio-2021/
- https://theledger.it/recensioni/1inch-token-di-governance-1inch-exchange/
Bibliography
- https://cryptonomist.ch/2020/02/02/come-funzionano-le-fee-di-bitcoin/
- http://www.10bitcoin.it/le-fee-bitcoin/#:~:text=Le%20fee%20(o%20commissioni)%20su,ordine%20anche%20senza%20pagare%20nulla%3F
- https://cryptofees.info/
- https://etherevolution.eu/basefee-eip1559/
- Tweet from @OPFbluesky
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