While bitcoin is still the world’s number one cryptocurrency by market capitalization, there are plenty of reasons to believe that other cryptocurrencies may eventually overtake it. Before the cryptocurrency market pulled back this year, the conventional wisdom was that bitcoin was a hedge against inflation and a long-term store of value. Some even called it “digital gold”. But these assumptions are now very much in question.
So what are the cryptocurrencies that could replace bitcoin at the top of the cryptocurrency hierarchy? Right now, the two best prospects are Ethereum and Solana. Both of these cryptos offer more utility than Bitcoin, and both are innovation leaders in the blockchain industry, with promising growth prospects.
Ethereum stands out as a leader in innovation. The most significant developments of recent years, including smart contracts, decentralized applications (dApps) and non-fungible tokens (NFTs), were born on the Ethereum blockchain.
By almost any standard, Ethereum is the dominant force in the blockchain industry. For example, Ethereum is the leading player in the NFT market, with an estimated 80% share. In areas such as decentralized finance (DeFi), blockchain gaming, and the metaverse, Ethereum dwarfs all other blockchains in the world.
And with The Merge, a massive system upgrade, Ethereum is only going from strength to strength. The current complaint about Ethereum is that it is too slow and too expensive. This is largely because it is based on a “proof-of-work” consensus mechanism. With The Merge, Ethereum is moving to a proof-of-stake consensus mechanism, which reduces transaction fees and increases transaction processing speed. Eventually, when Ethereum 2.0 is complete, it should be able to handle 100,000 transactions per second. In contrast, bitcoin can currently only process five to ten transactions per second.
The path to market dominance is more complicated for Solana, as it is a direct rival to Ethereum. Both are layer 1 blockchains offering users the same functionality and utility. Ethereum has smart contracts, and Solana has them too. Ethereum allows the creation of NFTs, just like Solana. The main selling point is that Solana can do everything Ethereum can, but faster and cheaper. Solana is already capable of processing 65,000 transactions per second, and transaction fees are close to zero.
While Ethereum has bogged down in all the technical steps needed to become a proof-of-stake blockchain, Solana is in the midst of innovation. Solana launched everything from a new payment network for merchants (Solana Pay) to a brand new mobile crypto platform (Solana Mobile). In 2023, Solana plans to launch Saga, the very first “crypto phone“.
At the same time, Solana is making serious inroads into blockchain gaming and Web3. More than any other crypto, Solana is taking steps to build a recognizable brand for early adopters of crypto. When you can layer that brand experience on top of super-fast, super-cheap blockchain, it’s a very powerful value proposition.
How soon could Ethereum or Solana dethrone Bitcoin?
It might be a loose analogy, but you can consider what’s happening in the cryptocurrency industry to be similar to what happened in the tech industry a generation ago. Until the 1980s, IBM was the biggest name in the tech industry, then Microsoft and Apple came along. The rest, as they say, is history.
In many ways bitcoin is the crypto IBM today, Ethereum is the new Microsoft and Solana is the new Apple. There is definitely room for all three to co-exist. The only real question is who will sit on top. Large institutional investors might prefer Bitcoin, while mainstream investors might prefer Ethereum and Solana.
Currently, Ethereum is about half the size of Bitcoin in terms of market capitalization and Solana is only 3%. So a lot would have to change for either to overtake Bitcoin. But again, look at what happened with IBM, Microsoft and Apple in the tech industry. Microsoft was launched in 1975, and it took almost two decades for Microsoft to overtake IBM in terms of market capitalization. Then, after that, it took almost another two decades for Apple to overtake Microsoft in terms of market capitalization. So obviously this is not going to happen overnight and there will be many twists and turns along the way.
But Ethereum and Solana now offer too much utility to ignore. And they are both leaders in innovation, which makes for long-term play if you believe in the future of the crypto industry. If you can handle the crypto volatility, you can put these two coins in your wallet and keep them forever.
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