Ethereum To Possibly Overtake Bitcoin as Best Crypto Store of Value

Recent research by several universities including Sydney and Macquarie argues that Ethereum monetary policy has made it a more valuable store of value than Bitcoin. This is due to the deflationary effects that the EIP-1559 proposal caused in the issuance.

Ethereum may be able to flip Bitcoin

A paper published by Australian university students last month focuses on Ethereum and its potential future as a store value. “Better than Bitcoin?” is the title of the paper. Ester Felez Vinas of the University of Technology, Sydney, and other academics wrote the paper titled “Better than Bitcoin?”. They compare the issuance of Bitcoin to the new Ethereum issuance model, which is making the currency more deflationary.

According to the paper:

We show that following the recent change in its transactions protocol, the digital currency Ethereum displays a significantly lower net issuance rate of tokens than Bitcoin, achieved by destroying the fees
associated with each transaction.

It has to do the activation EIP-1559 which proposes to burn Ethereum proportionally to its usage. Although this proposal was met with opposition from miners and mining pool, it now contributes to the appreciation of Ethereum as a possible deflationary currency.

Fees

EIP-1559 was implemented, which has led to significant ETH fees being burned. After just three months, more than one million ETH were taken out of circulation. The study concludes that this is the case.

In many cases the amount of Ethereum burned outpaces the network’s creation of new tokens, resulting in Ethereum potentially becoming the world’s first deflationary currency. We argue that this provides better inflationary hedging properties than Bitcoin, and Ether may therefore offer a superior long-term value storage than Bitcoin.

Similar schemes are being used by other cryptocurrency projects in an attempt to replicate the effect. Binance coin has recently updated its network to include fee burning. Binance coin is fundamentally different from ETH. It also has no limit on the amount of its issuance while Binance coin has a hard cap.