What is ‘Flippening’? Know in Detail

6 mins read
by Angel One

Cryptocurrency is a digital asset that works as a medium of exchange. With cryptocurrencies, the individual ownership of a coin is stored in a ledger. There are several cryptocurrencies that are available in the market. Bitcoin and Ethereum are two of the most common cryptocurrencies. Typically, Bitcoin fares at a higher rate in the market when compared to Ethereum. However, the hypothetical situation where the total market cap of Ethereum will be higher than the total market cap of Bitcoin is called the “Flippening”. In this article, we will have a look at Bitcoin, Ethereum, and the flippening meaning in detail.

What is Flippening?

The term flippening came up in the year 2017. Flippening essentially refers to the potential moment when Ethereum will fare above Bitcoins and become the world’s biggest cryptocurrency. As of now, Bitcoin was the first cryptocurrency to be invented. It has had the biggest market cap since the beginning. However, in early 2018, it took a hit and decreased by a few market points. This gave rise to the idea to many investors that the flippening might happen. One of the main reasons why many were expecting the flippening is because Ethereum is considered to be more flexible and also has several other advantages including the possibility to write smart contracts. Before we dive into the flippening, let us have a look into Bitcoins and Ethereum.

What is Bitcoin?

Bitcoin was created in January 2009 by Satoshi Nakamoto. Because of blockchain technology, the name and identity of the founder still remains a mystery. Essentially, Bitcoin is a type of cryptocurrency that is balanced on a public ledger. The transaction fees charged are very low and it is operated by a decentralized authority unlike other currencies that are issued by the government. It is one of the first few digital currencies to use peer-to-peer technology. This technology helps facilitate instant payments.

Typically, new Bitcoins are released to the miners. These new Bitcoins have a fixed rate but are periodically decreasing in value. Overall, there are 21 million Bitcoins that can be mined. Currently, there are 18 million Bitcoins that exist leaving 3 billion Bitcoins to be mined. Bitcoin mining is basically the process in which Bitcoins are mined and then released into circulation. The mining process adds as well as verifies transaction records across the Bitcoin network. After mining, the miners will be rewarded with Bitcoins. The reward is however halved every 210,000 blocks. In 2009, the block reward was 50 new Bitcoins.

What is Ethereum?

Ethereum was first brought into the market in the year 2013 by a programmer Vitalik Buterin. It is a decentralized cryptocurrency that has smart contract functionality. It is considered to have the second-largest market capitalization as Bitcoin ranks first. Ethereum can be used to receive as well as send value on a global level without the interference of a third-party. Ethereum draws inspiration from Bitcoin. Both of them are cryptocurrencies and they both use blockchain technology. While Bitcoin stores the value, Ethereum decentralizes services and applications.

Intermediaries are everywhere in the current times. For instance, Gmail helps send messages and banking applications help us send money to other people. This would essentially mean that our personal information as well as our financial data is stored on other people’s devices. Having data stored elsewhere can become problematic according to many. Decentralization is essential to avoid storing sensitive and important information elsewhere. Doing so would mean that users have less of a direct control and it also opens many doors for censorship. In such cases, the intermediary can prevent users from any action.

All About Flippening

In November 2019, a certain degree of flippening occurred. The number of transactions recorded for ERC-20 was more than the number of transactions for Ethereum itself. This is proof that both ether and Ethereum blockchain have been moving up in a rapid manner when it comes to crypto valuation as well as the other applications that are developed on this blockchain. In both 2020 and 2021, Ethereum had proved to have grabbed the interest of many investors. Currently, the rally of the ether prices have caught the attention of many and has resulted in many to shift to the Ethereum blockchain.

Ether and Ethereum are expected to be the next stage of blockchain implementation. There are some fundamental items that you have to understand that even the market has to assess for the flippening to happen. Let us have a look at it.

1. Applications Vs. Transactions

A crucial aspect that has to be considered about cryptocurrencies is whether they can be used in transactions or not. This has been an argument that drew the attention of many over the past years. If they cannot be used for transactions, they are just as good as speculative investments.  The taxation treatment in the United States will stay that all cryptocurrencies will be treated as property. Such considerations have high implications. Every crypto transaction can potentially carry a certain amount of tax liability. This is not great news for investors in Bitcoin. However, Ethereum has proved to be a solid foundation with non-fungible token and decentralized finance.

2. Diversification and Prices

There are several new iterations of cryptocurrencies that lack attributes that make crypto more interesting to investors. However, the market continues to expand. This proves that there is an ever-increasing number of crypto assets that can be considered as investment options. So, the flippening could possibly happen and new cryptocurrencies can take over older ones as the market continues to grow and evolve.

3. Platform Vs. Asset

Another crucial factor to be considered while comparing Ethereum and Bitcoin is their value in the marketplace. The crypto space experiences price volatility on a consistent basis and this volatility extends to every currency that trades on the crypto market. Considering this asset volatility, it is possible for one cryptocurrency to take over another in market cap and value.

Final Thoughts

Cryptocurrencies have been a popular investment choice over the years. While Bitcoin has had a larger market cap than Ethereum over the years, it is likely for Ethereum to take over soon. This flippening is expected to happen soon and has been a heated debate among many investors.