Valid Points: Ethereum emerges from Bitcoin’s shadow

This article originally appeared in Valid Points, CoinDesk’s weekly newsletter that breaks down Ethereum 2.0 and its profound impact on crypto markets. Subscribe to valid points here.

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The following is an overview of network activity on the Ethereum 2.0 Beacon Chain over the past week.

For more information about the metrics in this section, go to our 101 explanation of Eth 2.0 stats.

Related: Bitcoin Miners Hold On To Rigs, Bet The Bull Run Continues

Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choice once transfers are enabled on the network.

New frontiers: Ethereum is coming of age

One of the first articles I wrote about Ethereum for CoinDesk had the headline “Unstoppable scams? Ethereum’s Gambling Problem Is Only Getting Worse.”

Back then, in the late summer of 2018, Ethereum’s most popular decentralized applications (dapps), surpassing even the established CryptoKitties gaming dapp, were gambling dapps that closely resembled Ponzi schemes. LastWinner, a clone of another infamous gambling dapp called FOMO 3D, had raised more than $7 million in ETH within a week of users and ate a third of Ethereum’s total computing power, also known as hashrate.

In the meantime, the biggest news about Bitcoin were the pending decisions of the US Securities and Exchange Commission (SEC) on two bitcoin exchange-traded fund (ETF) applications submitted by ProShares.

Related: Goldman Sachs Increases Chances of Fed Taper in November

As Ethereum attracted retail users and scammers looking to make a quick buck, it seemed that the majority of investors and traders who were serious about adopting cryptocurrencies in front of a large audience were focused on Bitcoin.

In many ways, the market infrastructure for and regulatory awareness of bitcoin has paved the way for cryptocurrencies like ether to follow.

For example, the classification of a commodity rather than safety in the eyes of the SEC was first assigned to bitcoin in 2018 and then to ether. in 2019. Canada’s Exchange-Traded Funds (ETFs) Were First Approved for Bitcoin than for ether. Crypto custodian bank Anchorage Digital started its lending service with bitcoin-backed loans and only recently expanded its offering to include ether-backed loans through an FDIC-insured bank this summer.

However, trends are changing and there is mounting evidence to suggest that Ethereum has finally overtaken or surpassed Bitcoin on some key metrics, even as other smart contract blockchains like Cardano and Solana show promising signs of real adoption and value.

Key Statistics

For starters, Ethereum surpasses Bitcoin in total value transferred on-chain. Using Coin StatisticsAdjusted transaction volume estimates, $185 billion in ETH has moved to Ethereum so far in August, while only $180 billion in BTC has gotten hold of Bitcoin. The last time Ethereum passed Bitcoin in monthly transfer volume was in May 2021.

Since June 2020, users pay more in fees every month to send transactions on Ethereum than Bitcoin. In 2021 alone, the total dollar cost on Ethereum was four times that of Bitcoin, suggesting that the demand for block space on Ethereum is outpacing the demand for block space on Bitcoin.

Aside from on-chain metrics, spot market metrics such as the Puell Multiple have historically been used to measure the relative value of new coins mined on a proof of work blockchain, suggests that the opportunities to make a profit for investors holding ETH have been nearly constant for investors holding BTC for the past 15 months.

As a result, trading activity for ETH-USD pairs has surpassed or nearly surpassed that of BTC-USD pairs. For the first time ever, the aggregated monthly trading volume in the ETH spot markets surpassed that of the BTC spot markets in May; so far in August, trading volumes for ETH are about 90% of the volumes seen for BTC. This suggests that the market interest in ETH is as high as BTC.

There are also telltale signs in the cryptocurrency derivatives market of a shift in market sentiment putting Ethereum in the same ranking as, if not more bullish than, Bitcoin. According to Alexander Blum, director of digital asset investment fund Two Prime, the technical and fundamental measures he uses to evaluate digital assets are beginning to show him that ether is a more promising investment than bitcoin.

“How many people are willing to pay for bitcoin or ether one or three months into the future is a good idea of ​​the market sentiment around where things are headed,” Blum said in an interview. with CoinDesk. The “future premium you pay for ether is close to 10%, while for bitcoin it is now about 7% to 8% and the number of calls that will be bought out in the future is more skewed on ether than bitcoin.”

Institutions and professional investors that got involved in the crypto industry because of their interest in bitcoin are also starting to get serious about their interest in ether, and more importantly, they are beginning to value ether as a unique investment separate from bitcoin.

Ethereum’s Main Competitors

While Ethereum has the advantage of being the world’s first general-purpose smart contract blockchain, there are a number of emerging competitors that are gaining user adoption and market value.

Binance Smart Chain, Cardano and Solana are just some of the platforms that have made headlines this year for very popular decentralized applications (dapps) or bizarre token returns from more than 1,000% in some cases until now.

Just as important as measuring these competing networks for their potential is by evaluating their developer teams, whitepapers and roadmaps, it is equally important to put their performance and current progress in perspective with the metrics used to identify the best cryptocurrencies. of the industry to evaluate.

From August 24, 2021, 24-hour trading volume for the Cardano’s native tokens (THERE IS), Binance Smart Chain (BSC), and Solana (SOL) blockchains combined barely exceed half of the daily trading volume for ETH. Public data on the total value transferred on-chain for these three networks is scarce and regulated derivative products for ADA, BSC and SOL are almost non-existent.

Other key metrics specific to evaluating the performance of smart contract blockchains include the number of dapps, the total value locked in dapps, and the number of active dapp users. For some networks, such as Cardano, the smart contract functionality to support the development of dapps has yet to be launched. For others, such as Binance Smart Chain and Solana that do have smart contract functionality, the total value locked in dapps is multiples lower than the value locked in Ethereum dapps.

As bitcoin in many ways paved the way for the institutional adoption and awareness of cryptocurrencies in general, increasing awareness of the use case and design of ether is raising the profiles of competing assets and spurring investment in their continued development.

This in turn drives innovation through market competition in smart contract blockchain technology, providing opportunities for alternative networks for Ethereum to shine and steal market share even as Ethereum continues to evolve.

In an industry like crypto where little is established and much is fueled by speculation, the rise of Ethereum over the past six years is an example of how quickly user adoption and institutional interest can catch fire, challenging the status quo.

Validated takes

  • Ethereum’s most popular software client, Geth, has released a hotfix to a very serious security flaw in their code. BACKGROUND: All users were encouraged to immediately upgrade to the latest version of Geth, v.1.10.8. The last time a fix for a bug in Geth code was released to users, it caused a temporary chain split on Ethereum due to a lack of communication between Geth developers and users about the urgency of the upgrade.

  • Crypto Investment Firm Paradigm Helped Mitigate a potential $350 million bug in SushiSwap’s decentralized exchange launchpad code. BACKGROUND: Paradigm is a well-known investor in Uniswap, the original exchange that inspired the creation of SushiSwap. Paradigm Research Partner Sam Sun identified a vulnerability in SushiSwap code that allowed hackers to tap users’ funds from the exchange. Sun shared his findings with the SushiSwap team and conducted one of the largest crypto industry whitehat rescues ever.

  • Visa announced that it bought a CryptoPunk NFT on Monday and spent about $150,000 on the digital artwork. BACKGROUND: Visa’s head of crypto, Cuy Sheffield, said in a blog post that the main purpose behind the purchase was to learn more about the growing non-fungible token market. “We believe NFTs will play an important role in the future of retail, social media, entertainment and commerce,” Sheffield wrote.

  • $1.5 million has been promised to Ethereum software client teams such as Besu, Erigon, Geth, Nethermind, and Nimbus. BACKGROUND: These client teams build the software that allows users and businesses to connect to the Ethereum network. The grant money was donated by Compound Grants, Kraken, Lido, Synthetix, The Graph and Uniswap Grants.

  • Decentralized Exchange Volume (DEX) is projected to reach around $80 billion in the month of August. BACKGROUND: June and July showed slowing trading volume, but August is on track to become the second best month in DEX history. EIP 1559, a resurgence of governance tokens and an emerging multi-chain ecosystem this month helped bring positive sentiment back into the decentralized financial market.

  • Ether price and active shipping addresses have started to diverge last week in a way that suggests bearish price trends will follow. BACKGROUND: The number of active addresses on Ethereum is usually a leading indicator of ETH price. While prices have increased by 4.87% in the past seven days, the number of active addresses has fallen by 5.50% in the same period.

Teddy Oosterbaan

Fact of the week

Open communication

Valid Points incorporates information and data about CoinDesk’s proprietary Eth 2.0 validator into weekly analytics. All winnings made from this stake will be donated to a charity of our choice once the transfers are enabled on the network. For a complete overview of the project, see our announcement post.

You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is:

0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb.

Search for it on an Eth 2.0 block explorer site.

New episodes of “Mapping Eth 2.0.featuring Christine Kim and Consensys’ Ben Edgington airs every Thursday. Listen and subscribe via the CoinDesk podcast feed to Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, cast box, stitcher, RadioPublica, IHeartRadio or RSS.

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