Ethereum trade volume has spiked over the past few weeks and surpassed Bitcoin as the most traded coin. In the month of August, approximately $185 billion worth of Ethereum coins were traded as compared to $180 billion in Bitcoin. Ethereum transfers also surpassed Bitcoin volumes in May this year, and the trend appears set to continue. The current course is a clear indication that Ethereum possesses the numbers to beat Bitcoin over the long term in key aspects.
The jump in Ethereum transactions is believed to have been triggered by the transition of the Ethereum network from a Proof of Work (PoW) protocol to Proof of Stake (PoS). The Ethereum network is moving to PoS to allow greater scalability and lower transaction costs.
The need to move to a more efficient system became clear last year after escalating network fees superseded those of Bitcoin by over three times.
How the New Proof of Stake Shift is Pushing ETH Demand
The new PoS Sybil deterrence mechanism enables users to earn passive network rewards through staking. By staking ETH, users are able to validate transactions and process new blocks on the blockchain. This contributes to the stability and security of the network.
The current annual percentage rate (APR) for staking on the Ethereum network is capped at 7.5 percent. The potential returns are among the main reasons why there is increased demand for ETH coins among investors.
The other key driver is the 32 ETH requirement needed to stake solo. It’s forcing independent investors to buy more digital coins to meet this requirement. That said, users with less holdings can join ETH staking pools, some of which are run by crypto exchanges.
Is Ethereum Going to Supplant Bitcoin as the Most Popular Cryptocurrency Among Traders?
One major advantage that Ethereum has over Bitcoin is that it can also be used to build decentralized applications and run smart contracts. ETH is what market analysts call programmable money. The ETH blockchain has a much wider range of use-cases as compared to Bitcoin.
Its network is currently being used by decentralized exchanges, gaming companies, financial institutions, and NFT projects. This contributes greatly to its stability and promotes ETH adoption.
The value gap is, of course, propagated by Bitcoin’s inbuilt deflationary feature, which reduces rewards by 50 percent after every 210,000 mined blocks. There is also a cap on the number of coins that can be mined. These factors will ultimately lead to a lower supply of mined coins and an increase BTC value due to demand driven by scarcity.
That said, increased capital inflows into ETH due to the shift to PoS are expected to increase demand for Ethereum coins and help the cryptocurrency get closer to Bitcoin’s value. This factor will also cause ETH transfer volume to rival that of Bitcoin consistently.