The so-called crypto winter that wiped around 50% off the value of bitcoin and around 70% off the value of ETH since the start of the year has also affected Ethereum’s competition. The upcoming merge of the two Ethereum blockchains moves Ethereum from being in competition with bitcoin and its proof of work consensus mechanism to being in competition with other altcoins that use proof of stake as a consensus mechanism, such as Cardano (ADA) and Solana (SOL). As such, they’re not directly comparable. While bitcoin was designed to only facilitate payments, Ethereum was designed to also facilitate dApps and smart contracts. CompetitionĪs the second largest cryptocurrency by market capitalisation, Ethereum is often pitted against the number one cryptocurrency, bitcoin. However, the number of active addresses has remained relatively flat since last summer, according to Glassnode data. There were around 445,000 active addresses as of 20 June, down from a peak of around 800,000 on 9 May last year. Rewards for adding a block to the Ethereum blockchain will be more than 90% lower than they were under proof of work.Īs you need an active Ethereum address to trade in ETH, the number of daily active addresses can also give us an indication of demand. Under Ethereum 2.0, supply could decline by 2% annually - according to Ethereum tracker Ultra Sound Money. Insead, it will instead be mined by those with the greater probability of being chosen as a validator as a result of the amount of ETH they’ve staked for the opportunity. In practical terms, this means ETH will no longer be mined by those with the computational horsepower to guess a 64-character alphanumeric string from trillions of possible combinations. However, an upcoming change to Ethereum’s infrastructure could reduce supply and increase prices.Įthereum is changing its consensus mechanism from proof of work to proof of stake. Assuming there’s no immediate surge in demand for ETH, supply rates should remain relatively constant. While bitcoin’s value is derived, in part, from its scarcity, Ethereum’s supply doesn’t currently have a bearing on its value. Since only one can be added to the blockchain, the creators of blocks that aren’t added (Uncle Blocks) are compensated with between 0.06ETH and 1.75ETH. An Uncle Block is created when two or more miners create blocks at the same time. Miners are also rewarded for creating so-called ‘Uncle Blocks’.
While new blocks are added to Bitcoin’s blockchain every 10 minutes, Ethereum blocks are added every 13-15 seconds. Miners are currently rewarded with 2 ETH for each block added to the Ethereum blockchain. However, there is an annual cap of 18,000,000. Unlike bitcoin, there’s no upper limit to how much ETH can be mined.
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