Ethereum co-founder reveals how radical upgrade can challenge Bitcoin through cryptographic pricing

Ethereum, the second largest cryptocurrency after bitcoin, soared last year, growing along with the price of bitcoin.

The price of bitcoin has eclipsed its late 2017 highs of around $ 20,000 per bitcoin, reaching almost $ 60,000 in recent weeks, while the price of ethereum ethereum has also entered new territory – up to 30% from the peak at the beginning 2018.

Now, a proposed update to the ethereum blockchain that will destroy (or “burn”) ether tokens could mean that ethereum becomes more “solid” than bitcoin, according to ethereum co-founder Vitalik Buterin.

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The Ethereum update, known as EIP-1559 and part of a broader move towards ethereum 2.0, will see the network’s current transaction fee system revised, with users sending a fee to the network itself instead of so-called miners that maintain the network. These fees will then be burned, reducing the overall supply of ether – something that is a controversial topic among the cryptocurrency community.

“If bitcoin and its fixed supply are solid money, then if you have a decreasing supply, it does [ethereum] ultrasound money, “asked Buterin, speaking on a recent episode of the Tim Ferriss Show podcast alongside technology investor Naval Ravikant.” Solid money “refers to the stability and usefulness of a currency as a store of value.

Although Buterin considered the issue a “joke”, he explained that there is a distinct possibility that the radical update of the ethereum network, approved by developers last week and expected to be rolled out in July, may result in a reduction in the supply of ethereum.

“If the demand for using ethereum is high enough, then there would be more [ether] being destroyed than being created, “said Buterin.” In fact, it is not even a far-fetched possibility. If you look at last month’s transaction fees, you will see that, in fact, they were in many days greater than the bloc’s rewards that day.

The recent extreme rise in the price of ethereum, which has seen ethereum rise 400% since the broader bitcoin and cryptocurrency market took off in October, comes amid an increase in interest in decentralized finance (DeFi) – using cryptocurrency technology to recreate traditional financial instruments like loans and interest.

With many of the biggest DeFi projects built on top of the ethereum blockchain, the token has skyrocketed as users flood the network. Meanwhile, the latest cryptocurrency craze for so-called non-fungible tokens (NFTs) has also resulted in heavy traffic on the underlying ethereum network.

When Ravikant warned that these apps built on top of ethereum could be victims of “hacks … invasions and failures”, Buterin named the controversial cryptocurrency rope, whose price is linked to the US dollar, as a “time bomb. [demon]”for bitcoin – highlighting the long competition between the two largest blockchain ecosystems.

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While most miners appear to be on board with the planned ethereum update, some – including the largest ethereum mining group SparkPool – have registered your opposition to it.

“I am concerned about a possible rebellion by the miners, which could undermine the credibility of the ethereum network,” said Richard Johnson, the chief executive of Texture Capital, speaking by email. Johnson added that he is “skeptical” whether the update will have a “significant” impact on ethereum rates, which have increased tenfold in the past 12 months.

Amid the race for ethereum, a number of ethereum rivals have emerged in recent months, claiming to offer similar decentralized platforms with faster transaction times and lower rates and looking to capitalize on ethereum problems.

“In the current crypto race, ethereum appears to be becoming a victim of its own success,” Antoni Trenchev, managing partner of digital asset manager Nexo, said in e-mail comments. “The huge flow of users, developers, decentralized applications, DeFi protocols, along with the growing NFT craze are invading the blockchain, making it highly congested.”

However, Trenchev added that he hopes “to catch a glimpse of the real bull run right after the launch of EIP-1559, with the real bull hammer falling with ethereum 2.0.”