To some people, Bitcoin is an experiment that can end in one of two ways: it will either fulfill its promise to become the “Internet of Money” or it will die a fiery death at the hands of regulators.
But what about a third option, in which a rival like Ethereum overtakes Bitcoin?
The rise and rise of Ether
Ether, the native coin of Ethereum, has risen more than 5,000 percent in 2017. It peaked at $396.40. Investors first attributed the surge in the Ethereum price to its faster platform, which processes transactions more quickly than Bitcoin’s. But it turns out that transaction times are just the tip of the iceberg.
Smart contracts, initial coin offerings (ICOs), variable block sizes - the evidence is overwhelmingly in Ethereum’s corner, regardless of what you might hear from so-called purists within the Bitcoin community. Even major institutions are siding with Ethereum. For instance, the Central Bank of Russia is currently testing an Ethereum fork for its own monetary system. This will effectively create the world’s first national cryptocurrency, a service that Bitcoin is incapable of providing.
Some in the community argue this unchangeability is precisely what protects Bitcoin price. To them, Blockchain technology only exists in service to Bitcoin to the singular vision of a decentralized currency.
Can Bitcoin emerge as a global digital currency?
This question is hotly contested, even by futurists like Ray Kurzweil. The famous head of Google’s engineering lab recently said that Bitcoin’s instability is a serious threat to its monetary ambitions.
“Currencies like the dollar have provided reasonable stability,” said Kurzweil. “Bitcoin has not. And it’s not clear to me that the whole mining paradigm can provide that type of stability.”
When he talks about stability, Kurzweil is referring to the kind of short-term volatility that is associated with risky investments. Currencies are not supposed to follow these roller coaster-like patterns. They are not supposed to lose 10 percent of their value in a day, as Bitcoin has done on a regular basis. They should, instead, keep fairly steady for a long while. Put another way, today’s price should be tomorrow’s.
That is how currencies establish credibility and secure buy-in from the population at large. If the general public believes that tomorrow’s price is going to be drastically different, it can lose faith in the currency and that would be disastrous.
Whatever existential criticisms that might exist of the US dollar, few people would argue that tomorrow is a concern for the Greenback. Bitcoin cannot boast similar reliability. Its price is an open question from one day to the next.
Ethereum casts a wider net than just money
What happens if we shelve this idea of a global digital currency? Does Blockchain technology become irrelevant? Of course not. It actually becomes far more relevant.
Take, for instance, a study from the Energy Web Foundation (EWF) in partnership with a Blockchain startup called Grid Singularity. The study shows 200 use cases for Blockchain technology in the energy sector, including ones for renewable energy certificates, peer-to-peer energy sharing networks and customer billing.
10 major energy firms have joined the EWF in order to take advantage of these applications. However, none of them can be executed on Bitcoin’s platform. The EWF had to turn to Ethereum’s smart contracts for these particular services, which speaks to my earlier point: Ethereum casts a wider net than Bitcoin.
It fulfills the true potential of Blockchain technology by expanding beyond money, beyond Bitcoin, into everything else. More and more innovators will be drawn to Ethereum’s smart contracts, ICOs and faster transaction speeds. As a natural result, they have to use Ether tokens on the platform, suggesting that ETH prices will continue to skyrocket.
By Gaurav S. Iyer.
Disclaimer: This guest post was written by Gaurav S. Iyer, security analyst for Profit Confidential. He advocates for common sense and buy-and-hold investing.
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