<h2>The Flippening: will Ethereum defeat Bitcoin?</h2>The word Flippening was invented in 2017 to refer to the prospect of the market capitalization of Ethereum (ETH) surpassing that of Bitcoin (BTC). As a result, the term refers to a hypothetical future event in which Ethereum surpasses Bitcoin in terms of market valuation.A cryptocurrency's market capitalization (market cap) is defined informally as its circulating supply multiplied by its current market price (though some measures exclude lost coins or tokens). Bitcoin now has the highest market capitalization, followed by Ethereum.Although BTC has always been the most valuable cryptocurrency in terms of market capitalization, its market share has declined dramatically in recent years. The drop was most noticeable in mid-2017 and early 2018. Many Ethereum enthusiasts were hoping for the Flippening to occur at those times. Speculators predicted that Ethereum's superior flexibility and capacity to build smart contracts would catapult it ahead of Bitcoin in those rankings, but the Flippening never happened.If this occurs, it will alter perceptions of cryptocurrency's fundamental use case as a store of value, digital money, or gold 2.0. Instead, it would demonstrate the significance of smart contracts and decentralized applications as blockchain-enabled advancements, at least psychologically. It would also confirm that, for the time being, the Ethereum "global computer" is the focal point of this activity.In terms of progress, Ethereum has a long way to go before it can overtake Bitcoin. As of August 27, Bitcoin has a market cap of $425.5b, while Ethereum has a market size of $183b, resulting in a $242.5b gap. However, several indicators and events in the past and future suggest that this gap may begin to decrease.<h2>The reasons why people believe Ethereum will flip Bitcoin</h2><h3>The Merge</h3><a href="https://www.builder.news/crypto-insights/the-merge-a-pivotal-event-for-ethereum" alt="The Merge: A pivotal event for Ethereum" title="The Merge: A pivotal event for Ethereum" target="_blank" rel="" class="">The Merge</a> and the shift to ETH 2.0 are two major driving forces in the discussions around the flippening. The Merge marks Ethereum's shift from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus. This essentially means that Ethereum nodes will be capable of reaching a consensus on the status of the Ethereum blockchain in a far more ecologically friendly manner.&gt;&gt; Maybe you're interested in:&nbsp;<a href="https://www.builder.news/crypto-insights/how-ethereum-proof-of-stake-affect-miners-swTcG" alt="How will Ethereum's Proof of Stake affect miners?" title="How will Ethereum's Proof of Stake affect miners?" target="_blank" rel="" class="">How will Ethereum's Proof of Stake affect miners?</a>This is possible because, unlike PoW blockchains, PoS blockchains do not rely on "mining" to achieve consensus. Mining is the process through which a decentralized network of computers operating the Ethereum code compete to solve a highly complex mathematical puzzle in order to ensure that transactions are genuine and added to the blockchain correctly. Switching to PoS will make Ethereum 99% less energy-consuming and more appealing to developers. Warehouses containing mining computers will be rendered obsolete. As will claims that Ethereum is harmful to the environment.Bitcoin, on the other hand, will continue to rely on a PoW consensus process. Despite the fact that Bitcoin may utilize green energy sources and even solve previously insurmountable environmental problems, it will always be more energy heavy than Ethereum.The switch to PoS has a significant impact on Ethereum's supply and demand patterns. Miners on PoW blockchains are rewarded with the network's native token. This serves as a financial inducement to miners. PoS blockchains do not have miners. Users stake their tokens, in this example Ethereum, to become validators.&nbsp; An attacker must control more than 51% of the staked Ethereum in order to corrupt Ethereum PoS. With almost 13 million Ethereum now staked, an attacker would require more than $9b.<img src="https://cdn.builder.news/news/11ed30071573f976a8e6023f659fee92.jpg" alt="ETH 2.0 Total Value Staked" title="ETH 2.0 Total Value Staked" width="600" height="337" class="lykafe0">ETH 2.0 Total Value Staked. Source: GlassnodeMiners will obtain Ethereum as an incentive with Ethereum PoW. Stakers, on the other hand, have no hardware requirements. The rewards do not have to be as large. As a result, the Merge is predicted to reduce Ethereum's issuance by 60-90%, resulting in a significant fall in Ethereum's rate of supply.The Merge represents the first step toward ETH 2.0. Another feature of ETH 2.0 that will improve Ethereum's environment is the implementation of sharding, which divides the Ethereum blockchain into several "sharded" chains. This will lead to increased transaction throughput and overall performance. Ethereum will be able to handle approximately 100,000 transactions per second once sharding is deployed. This is a huge increase above the current 15 TPS.The Merge will greatly improve Ethereum's usability. Gas fees are expected to fall as scalability improves. A reduction in costs will make Ethereum accessible to a much larger audience. Although fees are currently at a two-year low, Ethereum transactions can be extremely expensive at times.ETH 2.0 will essentially improve Ethereum's scalability. This gives Ethereum the ability to establish itself as a suitable backend for a broader range of high throughput use cases, such as GameFi, that are now hosted on other chains or Layer 2s.<h3>A shift to deflationary supply</h3>Another recent improvement to the Ethereum network that increases the likelihood of a flippening is Ethereum Improvement Proposal 1559, or EIP 1559. EIP1559 was noteworthy because it introduced the burning of a fraction of transaction fees, which changed Ethereum's monetary policy. Before EIP1559, Ethereum's monetary policy did not include any burning mechanisms.When Ethereum is burned, it is permanently taken out of circulation. This means that if network demand increases, Ethereum's burn rate also does so since gas prices rise. It follows that when the Ethereum network is active, it is conceivable for the asset to really become deflationary; its supply decreases. However, the same cannot be true about Ethereum's issuance rate. EIP1559 has already resulted in the burning of almost 1.8% of the total ETH supply since its launch in August 2021. According to the fundamental principles of supply and demand, this should increase the value of Ethereum and the Ethereum network.<h3>A prosperous Ecosystem</h3><h4>DeFi</h4><img src="https://cdn.builder.news/news/11ed300715741a81a8e6023f659fee92.jpg" alt="TVL all chains" title="TVL all chains" width="600" height="500" class="lykafe1">TVL of all chains. Source: DeFi LlamaEthereum still holds a 57.68% market share in terms of&nbsp; TVL in DeFi applications across various blockchains, despite the fact that its dominance has been declining. In addition, a number of contending alternative chains (Polygon, Optimism, and Arbitrum) are Ethereum layer 2s or follow Ethereum's EVM solidity smart contract technology (BSC, Avalanche C-Chain, Cronos).<h4>NFT</h4>Considering NFTs, 13 out of the 15 projects are on Ethereum if you look at the top 15 NFT collections by total trading volume.<img src="https://cdn.builder.news/news/11ed300715741e2ea8e6023f659fee92.jpg" alt="Top all-time NFT sale" title="Top all-time NFT sale" width="600" height="456" class="lykafe2">Top all-time NFT sale. Source: CryptoSlam.It might be argued that because Ethereum was the first blockchain to host NFTs, it simply has the highest overall trading volume. Analyzing more recent trade volume data reveals that Ethereum continues to be the platform of choice for the bulk of high-volume NFT projects. Here is data for the last 30 days (as of August 27).<img src="https://cdn.builder.news/news/11ed3007157421aba8e6023f659fee92.jpg" alt="30 days trading volume" title="30 days trading volume" width="600" height="456" class="lykafe3"><h2>Counter-arguments and some numbers</h2><h3>Bitcoin maximalists’ perspective</h3>The major objections to the flippening revolve around the latest Taproot upgrade, which adds the smart contract capability to Bitcoin. This enables the development of decentralized applications on the Bitcoin blockchain, which was previously restricted to payment transactions. And there's the Lightning Network, which acts as a second layer on top of Bitcoin, allowing for substantially higher efficiency and throughput. This could enable Bitcoin microtransactions that were previously impossible due to cost and time inefficiencies. This would support the argument that Bitcoin is a suitable means of exchange and an alternative to fiat currencies.While both of these improvements have the potential to greatly enhance the Bitcoin network, they are still in their infancy. Taproot enabled Bitcoin smart contracts and dApps.&nbsp; Building dApps from the close to beginning on a new network, on the other hand, takes time. There is no dApp running on the Bitcoin network at the time this article was written. As a result, it remains to be seen if Bitcoin can thrive as a smart-contract blockchain. The lack of a virtual machine could imply otherwise.The Lightning Network, on the other hand, has the potential to significantly increase Bitcoin's scalability. In comparison to Bitcoin's 7 TPS, the Lightning Network can handle 1,000,000 TPS. It also makes Bitcoin transactions much cheaper, facilitating microtransactions on the Bitcoin network, which could aid in the currency's adoption. In fact, the Lightning Network might theoretically outperform conventional payment infrastructure such as Visa, which can only process tens of thousands of transactions per second. However, while it improves Bitcoin's usability-a major barrier to adoption-and efficiency as a payments system, it has yet to be scaled up.<h3>Current numbers</h3><img src="https://cdn.builder.news/news/11ed3007157424fea8e6023f659fee92.jpg" alt="ETH market cap/ BTC market cap" title="ETH market cap/ BTC market cap" width="600" height="277" class="lykafe4">ETH market cap/ BTC market cap. Source: Blokchaincenter.Despite all of the optimistic reasons, Ethereum has a long way ahead of it before surpassing Bitcoin's market cap. Ethereum's market valuation is currently 46.7% that of Bitcoin. This is even the furthest it got on the way to flip Bitcoin.Since the beginning of July, the amount of Ethereum on centralized exchanges has decreased from 21.7 million to 20.6 million, confirming the market's belief that ETH will rise. This is because the withdrawal of Ethereum from exchanges indicates that investors are transitioning from the liquid on a CEX to illiquid in cold storage. This shows that buyers expect Ethereum's value to rise and are content with its illiquidity.<img src="https://cdn.builder.news/news/11ed3007157427fea8e6023f659fee92.jpg" alt="ETH on CEX" title="ETH on CEX" width="600" height="338" class="lykafe5">Since the beginning of July, the amount of Ethereum on centralized exchanges has decreased from 21.7 million to 20.6 million, confirming the market's belief that ETH will rise. This is because the withdrawal of Ethereum from exchanges indicates that investors are transitioning from liquid on a CEX to illiquid in cold storage. This shows that buyers expect Ethereum's value to rise and are content with its illiquidity.ConclusionThe Flippening appears to be on the verge of becoming a reality. Although Ethereum pioneered smart contract technology, several developers have decided to build on other blockchains, citing scalability and environmental issues as justifications. Following the Merge, several blockchains will no longer have these benefits over Ethereum, or will have them to a lesser extent. If the Merge occurs in September, which appears to be extremely likely, it will be one of the most notable events in crypto history.<div class="pr-block-special">Disclaimer: This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.</div>

After the Merge, can the flippening happen as Ethereum surpass Bitcoin in terms of market cap?

The Merge Is Near: Will Ethereum Flip Bitcoin?