On September 15, 2022, Ethereum’s long-awaited Merge was executed, marking the network’s transition from a Proof of Work (PoW) to Proof of Stake (PoS) consensus mechanism. As this content was written pre-Merge, any mentions of Ethereum using PoW are in reference to the network’s previous consensus mechanism, not its current one.
Although it's anyone's guess when it comes to short-term movements, cryptocurrencies as an asset class are only just beginning. Pioneering the exposure and adoption of cryptocurrencies, Bitcoin was merely known as a joke currency which was exchanged exclusively by 'tech geeks' and 'internet nerds' back in 2011.
Now, Bitcoin trades just below $10,000 (USD). The digital behemoth's functionality as decentralised tender and computerized gold appealed to many over the years, and when briefly exposed to the general public, saw heights of $20,000 (USD).You may hear a lot of diehard cryptocurrency investors criticize banks at any given chance, they'll also tell you how great Bitcoin is. Yes, Bitcoin is great, but there probably is, and definitely will be something better.
Blockchain technology is too innovative to only be applied to payments.What makes blockchain technology so valuable is the concept of decentralisation. Currently, most if not all of the applications we use are centralised. This means that there is a central governing body which approves what we want to do, and effectively grants us the permission to do so. For example, when we send money to each other through bank transfer, we're relying on the bank to honour this transaction. This also applies to other processes such as sending emails; we're relying on our email provider to firstly have a working service, and secondly not to access our personal emails.
Blockchain technology can replace all of these applications through the use of smart contracts. Smart contracts effectively allow the processes previously entrusted to central entities to be operated by code. This concept offers security because the code that the process is built on will be publicly available, so that you know what exactly is happening.Ethereum (ETH) is spearheading this movement.
Released in 2015, Ethereum arguably fuelled the intense cryptocurrency bull market of 2017. Many people viewed it as the next Bitcoin from an investment standpoint, with expectations that it would gradually overtake Bitcoin's number one position.Unfortunately, as a result of this profit-driven mentality, Ethereum's technological aspects were forgotten and all that seemed to matter was how high the price could go.The repercussions of this mania were very evident when the whole cryptocurrency market took a sharp decline at the beginning of 2018. Similar to Bitcoin, Ethereum also experiences large volatility, and is currently sitting at $850 (USD) after peaking at $1400 (USD) earlier in 2018.
This is nothing to be worried about as since the inception of cryptocurrencies, boom and bust cycles are completely normal; think of any asset cycle but compressed into a smaller time frame. So, the question is, in preparation for the next cryptocurrency bull market, should you be holding Bitcoin or Ethereum? There's no right or wrong answer here, but the following are some historical events and future predictions based on fundamentals:
- Cryptocurrency bull markets have traditionally started with Bitcoin increasing in price
- When Bitcoin increases (or decreases) in price rapidly, investors sell off their other investments into Bitcoin to benefit from the increased exposure
- Ethereum has greater potential than Bitcoin, it is like comparing a supercomputer to internet currency
- The Dot Com bubble birthed the world's current tech-giants: Google and Amazon
- When Ethereum has increased exposure to the general public, the mania surrounding the asset is expected to exceed that of Bitcoin's
