No stranger to strange milestones, the cryptocurrency sector may soon see a historic first, one that could upend long-held perceptions of its market.
Branded 'The Flippening' by market observers, this new hypothetical is defined loosely as the point at which a competing blockchain network could replace bitcoin as the largest and best capitalized blockchain. Sparked by increasing inflows in cryptographic assets, the concept has already seen a dedicated hashtag and website.
Given that bitcoin invented and popularized blockchain systems, the development could herald a time of new diversity and experimentation for the nascent sector that, until recently, was largely defined in context of bitcoin.
At earlier points in 2017, bitcoin accounted for more than 80% of the total cryptocurrency market share, though this figure has been higher than 90% at times.
However, so-called alternative cryptocurrencies have drawn robust inflows this year, causing their total market cap to reach a record high of roughly $117bn today, a more than 500% year-to-date increase, according to CoinMarketCap.
So, will the event come to pass? And if so, what will it mean?
Analysts queried by CoinDesk largely believe ethereum's ether token is most likely to spur the change, given it has increased 3,000% this year with no signs of slowing.
Indeed, ether's market cap has been drawing steadily close to bitcoin's amid a broader uptick in interest for so-called 'tokens' based on the platform, with the two cryptocurrencies worth $35.9bn and $43.7bn at the time of report.
Bitcoin's governance problems
Still, while some analysts focused on the promise of the ethereum network, others emphasized the perceived difficulties bitcoin has encountered of late as the reason this development could be likely.
Developers and entrepreneurs building on bitcoin are still trying to figure out the best way to resolve its ongoing scaling dilemma, a matter which some allege is limiting the cryptocurrency's use as a medium of exchange. (Though, perhaps benefitting its use as a store of value).
Currently, blocks in bitcoin's blockchain can only include up to 1 MB of transaction date, meaning that they can only process a fixed number of exchanges. Thus far, proposals to increase the block size have failed, and efforts to implement Segregated Witness – a solution that would reduce the total size of each individual transaction and allow more of these to fit into blocks – have failed to gain the needed support.
"Bitcoin is still stuck at [the] scaling dilemma," said Marius Rupsys, cryptocurrency trader and co-founder of fintech startup InvoicePool. "If some kind of agreement were achieved, [bitcoin] could regain much of its dominance."
However, the bitcoin community has not yet found a solution, so ether is benefiting from the situation, he said. As markets respond to these developments, Rupsys expects ether's market capitalization, or the total value of its available token supply, to surpass bitcoin's.
Bitcoin, the first cryptocurrency to scale, has to an extent become "a victim of its own success," said Tim Enneking, managing director of the cryptocurrency hedge fund Crypto Asset Fund.
He also noted that ether has benefited from coming into existence after bitcoin, telling CoinDesk:
"Ether has learned and has fewer problems – as well as a comprehensive, coherent (more or less) roadmap going forward. It also has leadership. Bitcoin has none of that. And first-mover advantages dissipate if one doesn't continue to innovate."
Charles Hayter, co-founder and CEO of cryptocurrency exchange service CryptoCompare, was also optimistic that ethereum could become the dominant blockchain.
"Ether has a strong chance of surpassing bitcoin due to its strong network effect and ability to negate the governance issues that bitcoin has been subject to," he said.
Some market observers emphasized the key role played by token sales (or ICOs) when explaining why ether's market cap might surpass that of bitcoin's.
As these offerings allow participants to exchange bitcoin and ether for digital 'tokens' that grant exposure to new ventures, investors purchasing these tokens (contracts on the ethereum network) frequently use ether because they don't want to miss out.
Further, the concentration of ether in the hands of a smaller set of startups is creating new economic pressures on the network.
"This keeps many ethers locked up in new projects and [fewer] ethers are available for trading," Rupsys noted.
Bitcoin entrepreneur Charlie Shrem offered a similar sentiment, noting: "Right now, an immense supply of ETH gets locked up due to [ICOs]." This "severely reduces supply," and with each offering, more tokens are "locked up", he explained.
Still, projects using this method of fundraising are going to sell some of the ether tokens they raise to pay for development, he said, meaning sell pressure could increase should this begin in earnest.
Bubbles and potentials
While many analysts provided optimistic assessments of ether's future, some expressed concerns that the cryptocurrency is in bubble territory.
Petar Zivkovski, COO of leveraged cryptocurrency platform Whaleclub, asserted that ether's price is tied heavily to the ICOs that use the alternative asset protocol.
"I personally think ether price is incredibly overpriced, and that many of the ICOs funded will not deliver on all their promises. When that unravels, it's likely to cause a substantial crash in the ether price," he said.
However, he did leave open the possibility that ether's market cap could surpass bitcoin's, depending on how much success ether-based ICOs produce.
Still, analysts also emphasized the influence both networks could have on the world.
While bitcoin could revolutionize the world of currency, ether could have more a wide-ranging influence through its use of smart contracts.
Mati Greenspan, senior markets analyst at asset trading platform eToro, spoke to this potential.
He added that, given its expansive goals, it might be likely for ether to surpass bitcoin in terms of market cap, though it may not have the largest network effect by other means.
"The development of both bitcoin and ethereum have far-reaching implications for our future world. Respectively, bitcoin and ethereum represent the future of money and the future of the internet."
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