Explaining Flippening
The term ‘Flippening’ describes a hypothetical situation when Ether will overtake Bitcoin in terms of total market capitalization. At the time this blog was written, two currencies were separated by a two-fold gap, so at least we can say Flippening isn’t going to happen in the nearest future. But what this debate is really about, is which of these two assets holds more fundamental value — hence, has more long-term growth potential. Let’s explore the nuances.
The main difference between Bitcoin and Ethereum is that the former provides an alternative monetary framework, while the latter aims to create a full-scale ecosystem. Putting it simply, Satoshi devised the blockchain technology — but Vitalik Buterin saw it could be way more than an accounting ledger. Today, Ethereum provides countless economic and social opportunities, many of which have already earned the somewhat annoying ‘revolutionary’ fame in the media.
Non-Fungible Tokens are revolutionizing the way we treat ownership, DeFi and stablecoins are disrupting finance and investments, DAOs are forever changing the way companies are managed… You see the trend here. In its turn, Ethereum provides the blockchain layer for all these digital breakthroughs — and I’m sure, this is just the beginning. What does Bitcoin offer? A way to send funds from one account to another.
The Battle of Values
This debate is closely related to another conceptual question: which of the two is more valued by the market, a means of transaction, or decentralized applications built on top of a ledger? Well, even though more countries are incorporating cryptocurrencies in their legal system, it seems unlikely they will replace fiat currencies anytime soon. Take the USA: US tax legislation, which classifies digital assets as property, presumes that every transaction in crypto must be taxed. Of course, up to this time, the government hasn’t gone to a full-scale war with crypto tax avoidance, but even such a possibility itself is a serious threat to crypto becoming a widely accepted means of payment.
Bitcoin, to be duly mentioned, still has a stronger brand, according to Goldman Sachs analytics. After all, it is the first cryptocurrency with an immaculate reputation — unlike Ether, if you remember the infamous DAO hack. However, even as a store of value, Bitcoin gradually starts to cede positions to Ether. The London hard fork, deflationary tokenomics, the anticipated transition to Ethereum 2.0 protocol with the Proof-of-Stake consensus algorithm at work — all of these actually make it a more lucrative investment asset.
Is the Flippening Happening?
Currently, Bitcoin holds the upper ground only in market cap, while Ether is already the first in average transaction fees and amount of value settled. But take my friendly reminder — it’s too early to make conclusions. The market witnessed a similar situation in late 2017 – early 2018 when the term ‘the Flippening’ itself was coined. So, is Flippening happening? Given all the above, it would seem so. Another question is, when will it happen? And I don’t have an answer to that yet.
