The blockchain of Ethereum just had its inner flipping. Let’s look closer at this.
Research on Coin Metrics suggests that the Ethereum network had an internal “flipping” due to an increase in transactions on its blockchain. What does it mean?
Something has happened recently on Ethereum blockchain, which is often called tossing. According to Coin Metrics, the number of ERC-20 tokens transactions exceeded the number of ETH coins transactions themselves for the first time in cryptocurrency history. And they could be on the verge of giving way to the new class of non-fungible tokens, as common as those tokens are. And what does all this mean? Let’s start by talking about Ethereum blockchain’s basic things.
So what’s everyone this about this “flipping?”
“The Flippening” refers to the possible future event when Ethereum overtakes Bitcoin to become the most valuable cryptocurrency in terms of market capitalization.
How do transactions with Ethereum work?
An Ethereum transaction is an operation to send a member of the network (account) signed data. We mean sending a certain amount of ETH through the process, beginning the code (program) documented in the contract or creating a new contract.
Any transaction with Ethereum has a recipient, except those that create new contracts. It can be either an externally managed account (controlled by a private key) or an account contract (contains a transaction-activated code).
Typically, when discussing an Ethereum transaction, most members of the crypto community who have no in-depth knowledge of blockchain refer to transferring funds from one account to another.
Every transaction in Ethereum contains a standard set of data:
- Transaction Hash — a limited number of Latin alphabet numbers and letters used to identify;
- Number of the block in which the payment information is entered
- The address of the recipient’s account
- A digital signature confirming the transaction’s intention
- Value — the quantity sent by Ethereum (can be 0)
- Gas limit — the maximum quantity of gas used in the transaction
- Gas price — user price per gas unit
- Gas Used — the amount of gas used in transaction processing
- Transaction fee — transaction fee payment
- Data — an optional field where the recipient’s message can be specified.
The sender must pay a commission to the miners who confirm it and include it in blockchain for an Ethereum transaction. This payment is made in “gas” units.
Gas is a complex measure of how much blockchain computation during a transaction is performed. The Ethereum network’s internal currency is used to perform transactions. A comparison with the gas can also be made, which provides the flow of data packets within the ETH blockchain.
What is an ERC-20 token?
People quickly realized that it was necessary to make coins with certain standards. It’s like a credit card issuance. Each card on the back has a black stripe, and most modern cards have a chip as well. Common card standards are the card number, expiry date, and security code.
But imagine someone deciding to create a credit card with no other information than a QR code. This minimalism will look stylish, of course, but it is unlikely to be accepted in shops as it does not follow the traditional credit card design rules. ERC20 is a standard for Ethereum blockchain tokens development. It contains a list of rules to be followed by tokens.
Payments for Ethereum are easier
Ethereum is often seen by people as complicated technology. You indeed need to wrap your head around a confusing array of technologies and sub-projects to make full use of all its smart contract capabilities.
But all that stuff you don’t have to use, and where it counts, Ethereum payments are simple.
This is why.
There’s no Bitcoin like that. A Bitcoin transaction consists of actions against a payment that you earlier received: merging previous payments and breaking previous payments.
If I send you 10 Bitcoins, the result of an earlier payment I received from someone else of exactly 10 Bitcoins may simply be forwarded. But I’m more likely to combine several previous payments. And that hardly ever comes out exactly as much as I want to send, so I’m sending back another payment to myself as well.
This gives users a lot of control over how payments depending on one another are handled. But you see very little about UTXO when you look at a standard bitcoin wallet: unspent transaction performance.
This doesn’t have to happen in Ethereum. The identity of a client can be represented as an account. You can have a single balance, and how many payments it took to get you that balance does not matter. Wallets are easier to predict and explain, less surprising things happen, and fees are easier. All payments cost the same, irrespective of where they came from.
Security with Ethereum is easier
Smart contracts with yourself
Unless you can secure it, there’s no point in getting money, and it’s hard to secure private keys.
You can create a multi-sig address and put the keys in cold storage, in multi-continent bank vaults, but that makes spending difficult for you. You can have an access key on your phone, but it’s difficult for you to secure it.
Such cases often occur naturally in the way we like to use different devices. You may have a wallet for small amounts of change on your mobile, and another one for your life savings on a hardware device. But people often need the ability to move fairly large sums of money relatively quickly in practice. Now and then, a bitcoin exchange’s hot wallet gets hacked, and people keep sending money to it even after they have identified the theft. Because the scripting system for bitcoin is so limited, they don’t have any way to take back control.
There’s a lot we can do to make this process work better.
- You want to be able to rate regular transactions that are protected by a particular process so that not all of your money can vanish at once.
- If you use several keys and some are in cold storage, you should be able to replace one of them without removing all the others from cold storage.
- The way you secure the right to* stop* remove money from your wallet needs to be different from how you secure the ability to initiate one. The key that triggers “Stop spending this money on people” needs to be readily available, while the key that says “go forward and hand over my life savings” needs to be highly secure.
Smart contracts are usually discussed mainly as ways for different people to interact with each other, but they work just as well when we’re thinking about keys kept at different locations or funds that should only travel according to user-defined rules.
The study of Coin Metrics includes a term originally described in the scenario where Bitcoin’s position was taken over by any other cryptocurrency. This has never happened in the industry’s history so far, but it happened in the blockchain of the Ethereum itself.
Despite ICO’s boom and a huge number of useless-20 tokens appearing, many altcoins still brought network value. There were more than 181 000 ERC-20 coins on the Ethereum blockchain by April of this year.
All of them are divided into three categories by Coin Metrics analysts: utility tokens, tokens of exchange and stable coins. For example, because of the accumulation of BNB tokens, the former allows users to access a certain service to reduce trading fees on Binance exchange. As the cryptocurrency was made by the exchange itself, the BNB token can also be categorized as exchange tokens. Finally, stablecoins have a fixed price (from the word stable), most often used as a universal means of payment.
In other words, flipping enables us to judge the Ethereum blockchain’s healthy development.