Ethereum's bright future threatens to end bitcoin's reign in cryptocurrencies

There is much and growing talk about the ethereum network and its effectiveness in implementing smart contracts, making loans or other 'self-fulfilling' transactions without the supervision of a third party. The usefulness of this network, in which the ether token is massively used as a medium of exchange, is the argument used by many analysts to predict that ether will overtake bitcoin in the future. Although this still seems a long way off, the truth is that we are beginning to see some palpable movements in that direction.

The latest of these has been a leak coming from the Bank of Israel. This monetary institute is working to test its own digital currency and the tests would be using the ethereum network as a platform or support, according to a source at the central bank in information leaked by the Bloomberg agency.

Ether is up more than 7% in the cryptocurrency market on Tuesday to over $2,150, while bitcoin bounces just over 3%. In the past seven days, ether is up nearly 15%, while bitcoin is up 12%. Experts often highlight the enormous usefulness of the ethereum network.

In May, the central bank published a report concluding that a new digital payment system could have a positive impact on the economy by simplifying payment processes and providing greater security for both parties in a transaction.

The Bank of Israel is not the only institute planning to bring out its own digital currency (CBDC). From Sweden to China are working on their own digital currencies as the drastic decline in the use of cash as a means of payment and the evolution of banknotes and coins themselves threatens to change radically.

In addition, the emergence of cryptocurrencies such as bitcoin has added to the pressure on central banks to ensure that they have a viable alternative before unregulated forms of payment gain market share.

A more efficient network
Another advantage often attributed to ether and its ethereum network is the more efficient operation of its network. The bitcoin network has a high electricity consumption, even higher than that of many countries. For now, something similar is happening to the ethereum network, but the forecasts for the future look very promising.

Ethereum is going to change its system to one called 'proof-of-stake', which will consume 99.5% less. "The main solution to reduce the energy consumption of cryptocurrencies is to invest and transition to more energy-efficient mining and consensus mechanisms," South Pole's head of business development, Mauro Accurso, told Europa Press.

Accurso pointed out that there are already several blockchain networks with a much lower environmental impact per transaction and argued that for those that continue to operate with traditional proof-of-work consensus and mining mechanisms, the long-term solution is to "make sure that the energy they use comes entirely from renewable sources".

This will not be the case for bitcoin
Eurocoinpay's advisor, Herminio Fernández, agrees with Accurso's statement, and told Europa Press that proof-of-stake mining does not consume so much electricity because "it does not need such powerful calculation units, they are almost normal computers".

However, although many tokens are adapting to this proof-of-work, Fernández does not believe that this will be the case with bitcoin. "The positive thing about this cryptocurrency is its extreme security and, for that, it needs a brutal computer network," he stressed.

Simon Peters, an expert cryptoasset analyst at eToro, explains in a commentary that this move is already underway on the ethereum network, which is currently undergoing an upgrade.

Peters notes that the average transaction fee on ethereum has dropped to $2.15, the lowest since December 2020. During the cryptoasset bull run in May, average commissions rose to nearly $70, but all have fallen after the market correction.

"As the network moves towards the 2.0 upgrade, it is possible that fees will fall further, despite taking years to fully implement. However, the upgrade will eventually make mining faster and cheaper, as well as improving ethereum's green credentials," assures this cryptocurrency expert.