Throughout a relatively short history, alternatives coins have not fared well in competition with Bitcoin. The number one digital coin has led the way in every category from brand recognition and network effects. Bitcoin has established itself as the gold standard of cryptocurrency and has faced little threat from competitors.
Last week, Ethereum was able to pass Bitcoin in a key category: Total transaction fees nominated in U.S. dollars. Miners of Ethereum were able to outpace miners of Bitcoin in fee collections on both Saturday and Sunday of last week. This information was provided by Coin Metrics.
In addition to this, while September has not been a good month for the value of Bitcoin, Ethereum experienced a slight rise in value for the month. Recently, the coin enjoyed one of its largest increase over a 24 hour period since its inception.
Cryptocurrency networks limit the throughput of transactions in an effort to preserve the coin’s decentralization. When too many transactions are processed per second, it limits the ability of users to ensure that no deceptive practices are being used.
Centralization is key to the blockchain process because it seeks to eliminate censorship and minimize trust issues.
The capacity limitations mean that higher fees are charged for transactions involving Ethereum and Bitcoin when networks are congested. This has happened with Ethereum over the last month and fees have risen to levels that have not been seen for over a year.
The current spike in fees for Ethereum is attributed by some to the game FairWin. The game has Ponzi type traits and possesses critical weaknesses in its contract with the blockchain associated with Ethereum. In recent weeks, FairWin is responsible for more than 30 percent of the activity with Ethereum.
Blockchain analysts have noted that FairWin has gained popularity at the same time the fees associated with the Ethereum network have been on the incline.
The amount of fees users are willing to pay for a cryptocurrency is believed to be a good indicator of its value to them. The theory goes that if a user is willing to pay higher fees to trade on a blockchain network, they are getting good use out of the activity.
Fees are also intended to become a better incentive for miners over new coin creation to provide security for the network. The approach is different for Ethereum, as they intend to issue tokens permanently.
Dil Bole Oberoi
