A lot of arguments are made around flippening these days in the crypto world. When we apply logical reasoning and look for clear evidence, it is not hard to see the actual trends.

1. Why ETH is on track to flip BTC:

The answer is very simple: smart contracts. Bitcoin was created as a Peer-to-Peer payment system and the whole chain only does one thing: BTC transactions. It is like the first generation of phones, having a single purpose and utility — making phone calls. The idea of “smart contract” proposed by Vitalik Buterin is a game changer. It essentially made the leap from a “phone” to a “smart phone” as the Ethereum blockchain is no longer just a payment system like many other copies of Bitcoin such as Litecoin or BSV etc., but a world computer that supports all kinds of applications and industries. When you look at your smart phone, it is no longer a phone, in fact, the “phone” use case is a very small portion of the value it brings. It is indeed a mobile computer that runs all kinds of applications including video/music streaming, banking/investment, email, social media, shopping, gaming and so on. In the same way how smart phones replaced phones, we will see smart blockchains replace the old blockchains. The valuation of Bitcoin is from two things: store of value and payments. The valuation of Ethereum is from many aspects: store of value, payments, Decentralized Finance, NFTs, gaming, Metaverse, social tokens, prediction markets, enterprise applications, supply chains etc. It is obvious that Ethereum has a much larger value capture than Bitcoin. And just like the phone 1.0 to phone 2.0(smart phone) upgrade, we are seeing blockchain 1.0 to blockchain 2.0 leap.

2. Why Solana is unlikely to flip Ethereum:

Solana is growing extremely fast in its user base, developer activity and valuation for the past year. Its main selling point is scalability as it is the most scalable blockchain with high TPS (Transaction per Second). And more importantly, it got the backing of SBF (Sam Bankman-Fried), CEO of FTX and Alameda research, who is highly influential in the crypto space. There are also other key players such as Multicoin Capital who has been very dedicated to advancing Solana.

Despite its stellar success, Solana is not a replacement but an alternative to Ethereum.

Because it is another smart contract blockchain, the value proposition or the target market of Solana is not different from Ethereum. If you think Ethereum is like the iphone or Apple, Solana is another smart phone company, say, Samsung or Huawei. Or if Ethereum is Tesla, then Solana is NIO or Rivian. Or if Ethereum is YouTube, then Solana is TikTok. Although these alternatives are highly successful in terms of both market share and stock valuation, they don’t make the dominant player obsolete. Instead, they create healthy competition that help accelerate overall adoption and fuels innovation, which in turn benefit the dominant player.

One narrative the Solana proponents make is that developer activity is picking up much faster on Solana, therefore Solana will attract more developers and users and outgrow Ethereum. However, as Web 3.0 is mostly open-source, so you can even copy and paste to make an app, so this low barrier of entry makes it very easy for an app to go to another chain. And for serious developers, there is no reason not to launch multi-chain. Otherwise, there will always be some copycats filling the void for you. This is the same way of content creators, if you made a video and published it on TikTok and it became a massive hit, why wouldn’t you upload it on YouTube as well to reach more people and capture more value? And if you don’t do, surely there will be someone copying you and do it for you. Consequently, the developer activity metric is likely to be a public good for all blockchains. Measuring this on one chain is pointless.

Like developers, users will also go multi-chain especially new users. The OGs or whales are much more likely to stay with Ethereum for security and reliability issues. And while Ethereum has priced out most ordinary people due to its high transaction costs, it also creates a prestige and status symbol for the rich who can afford it. And ironically, the human psychology is very conflicting as we want cheaper things but desire luxury lifestyle. We will criticize the expensive Ethereum of its high cost of living, but at the same time desire and dream about getting into that wealthy class. Just like most people hate the price of luxury goods, they also attribute a lot of prestige to them. Once they become wealthy enough, they buy them. Combine this factor with the massive wealth creation ability of crypto and Web 3.0, it is quite logical to see the cheaper chains as gateway drugs to Ethereum.

Finally, Ethereum is also working on its scalability and making progress. And it is doing so without trading off other metrics such as decentralization and security. And it is doing it with modular design (Layer1 — Layer2s). Most chains adopt this modular approach because it is the optimal design to maximize scalability while preserving decentralization and security. Eventually, if Solana becomes very successful, it will experience congestion and will also need to have Layer 2s to achieve unlimited scalability. When that happens, its main differentiator or competitive advantage of having one scalable chain that does not break composability will no longer exist.

All in all, looking at other industries such as social media, electric vehicle, smart phones etc., we rarely see alternatives becoming dominant perhaps because of first mover advantage and network effects. And the most important criteria to determine if a new player can dethrone the dominant player is whether it has significant differentiation that offers much greater value and that will make the rival obsolete.

A lot of arguments are made around flippening these days in the crypto world. When we apply logical reasoning and look for clear evidence, it is not hard to see the actual trends.

1. Why ETH is on track to flip BTC:

The answer is very simple: smart contracts. Bitcoin was created as a Peer-to-Peer payment system and the whole chain only does one thing: BTC transactions. It is like the first generation of phones, having a single purpose and utility — making phone calls. The idea of “smart contract” proposed by Vitalik Buterin is a game changer. It essentially made the leap from a “phone” to a “smart phone” as the Ethereum blockchain is no longer just a payment system like many other copies of Bitcoin such as Litecoin or BSV etc., but a world computer that supports all kinds of applications and industries. When you look at your smart phone, it is no longer a phone, in fact, the “phone” use case is a very small portion of the value it brings. It is indeed a mobile computer that runs all kinds of applications including video/music streaming, banking/investment, email, social media, shopping, gaming and so on. In the same way how smart phones replaced phones, we will see smart blockchains replace the old blockchains. The valuation of Bitcoin is from two things: store of value and payments. The valuation of Ethereum is from many aspects: store of value, payments, Decentralized Finance, NFTs, gaming, Metaverse, social tokens, prediction markets, enterprise applications, supply chains etc. It is obvious that Ethereum has a much larger value capture than Bitcoin. And just like the phone 1.0 to phone 2.0(smart phone) upgrade, we are seeing blockchain 1.0 to blockchain 2.0 leap.

2. Why Solana is unlikely to flip Ethereum:

Solana is growing extremely fast in its user base, developer activity and valuation for the past year. Its main selling point is scalability as it is the most scalable blockchain with high TPS (Transaction per Second). And more importantly, it got the backing of SBF (Sam Bankman-Fried), CEO of FTX and Alameda research, who is highly influential in the crypto space. There are also other key players such as Multicoin Capital who has been very dedicated to advancing Solana.

Despite its stellar success, Solana is not a replacement but an alternative to Ethereum.

Because it is another smart contract blockchain, the value proposition or the target market of Solana is not different from Ethereum. If you think Ethereum is like the iphone or Apple, Solana is another smart phone company, say, Samsung or Huawei. Or if Ethereum is Tesla, then Solana is NIO or Rivian. Or if Ethereum is YouTube, then Solana is TikTok. Although these alternatives are highly successful in terms of both market share and stock valuation, they don’t make the dominant player obsolete. Instead, they create healthy competition that help accelerate overall adoption and fuels innovation, which in turn benefit the dominant player.

One narrative the Solana proponents make is that developer activity is picking up much faster on Solana, therefore Solana will attract more developers and users and outgrow Ethereum. However, as Web 3.0 is mostly open-source, so you can even copy and paste to make an app, so this low barrier of entry makes it very easy for an app to go to another chain. And for serious developers, there is no reason not to launch multi-chain. Otherwise, there will always be some copycats filling the void for you. This is the same way of content creators, if you made a video and published it on TikTok and it became a massive hit, why wouldn’t you upload it on YouTube as well to reach more people and capture more value? And if you don’t do, surely there will be someone copying you and do it for you. Consequently, the developer activity metric is likely to be a public good for all blockchains. Measuring this on one chain is pointless.

Like developers, users will also go multi-chain especially new users. The OGs or whales are much more likely to stay with Ethereum for security and reliability issues. And while Ethereum has priced out most ordinary people due to its high transaction costs, it also creates a prestige and status symbol for the rich who can afford it. And ironically, the human psychology is very conflicting as we want cheaper things but desire luxury lifestyle. We will criticize the expensive Ethereum of its high cost of living, but at the same time desire and dream about getting into that wealthy class. Just like most people hate the price of luxury goods, they also attribute a lot of prestige to them. Once they become wealthy enough, they buy them. Combine this factor with the massive wealth creation ability of crypto and Web 3.0, it is quite logical to see the cheaper chains as gateway drugs to Ethereum.

Finally, Ethereum is also working on its scalability and making progress. And it is doing so without trading off other metrics such as decentralization and security. And it is doing it with modular design (Layer1 — Layer2s). Most chains adopt this modular approach because it is the optimal design to maximize scalability while preserving decentralization and security. Eventually, if Solana becomes very successful, it will experience congestion and will also need to have Layer 2s to achieve unlimited scalability. When that happens, its main differentiator or competitive advantage of having one scalable chain that does not break composability will no longer exist.

All in all, looking at other industries such as social media, electric vehicle, smart phones etc., we rarely see alternatives becoming dominant perhaps because of first mover advantage and network effects. And the most important criteria to determine if a new player can dethrone the dominant player is whether it has significant differentiation that offers much greater value and that will make the rival obsolete.