When you enter the world of cryptocurrencies, you learn that every coin has its market cap. But does Ethereum have a cap, and what is the difference between ETH cap and BTC hard cap? We will try to explain how does ETH works and is this better or worse than BTC.
Does Ethereum have a cap? ETH doesn’t have a max supply or hard cap. Instead, it has a yearly cap of 18 million, which means the number of tokens in circulation increases each year.
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Still, with a new update on the Ethereum network, each transaction will burn a small number of coins, leading to days where more coins are destroyed than minted. But let’s explain more about ETH and how does this coin work.
What Is Ethereum, and Does Ethereum Have a Cap?
An Ethereum is a decentralized, open-source platform powered by blockchain technology with smart contracts functionality. The native coin of the network is called ether or Ethereum ETH. And as we mentioned, ETH does not have a hard cap like Bitcoin. For example, by March 2022, over 119 million Ethereum tokens were released.
The hard cap is the maximum supply of the coin that will ever be in circulation. To be precise, the max supply of BTC is limited to 21 million BTC. On the other hand, ETH, in theory, can have an unlimited amount of coins in circulation. Nevertheless, the time needed to mine one ETH limits how much Ether can be released each year. Take a look at the differences between BTC and ETH.
| BTC | ETH | |
| Price | $39,146.03 | $2,581 |
| Blockchain | Proof of work | Proof of work |
| Blocks time | 10 minutes | 15 seconds |
| Max supply | 21 million | No max supply |
| Block reward | 12 BTC | 2 ETH |
| Purpose | Digital currency | Digital currency that runs on smart contracts |
What is ETH Inflation?
Contrary to BTC, with a max supply of coins, ETH doesn’t have a hard cap. The rate of ETH release each year was determined in 2014, during the cryptocurrency’s pre-sale, where yearly issuance was limited to 18,000,000 per year. A fixed amount of ETH each year means relative inflation decreases every year. Also, each transaction will destroy one coin, which is meant to keep the balanced market.
What is the ETH Inflation Rate?
Many people speculate that ETH is a deflationary currency. Creators of ETH argue that due to the constant loss of the coins, the total ETH supply in circulation will eventually stabilize and reach an equilibrium. So how is this calculated? For example, let’s imagine there is 75,000,000 existing ETH – with a yearly addition of 18,000,000, supply will increase by 24%. But in reality, you will have 93,000,000 ETH, which is 19.35% higher, which means that yearly growth decreases over time. That’s making many people believe ETH will become the first deflationary currency.
How Does Ethereum Make Money?
ETH is a decentralized platform that makes coins by mining and proof of work protocol, just like BTC. Miners and validators participating in the network will get rewarded once each coin is minted. Whenever the block is mined, the miner will get a reward of three ETH. Also, miners can get something called an uncle/aunt reward, which is sent to a miner who was able to resolve a puzzle but without their block being included – that reward is between 0.625–2.625 ETH.
How Can I Buy Ethereum?
The current price of ETH is $2,581, and if you are interested in buying one, you can do so on most cryptocurrency exchange platforms. Since it is the second most popular coin with the most value after BTC, most wallets and platforms support ETH. Also, ETH runs on a smart contract platform that runs decentralized applications and tokens like NFTs. Nowadays, you can also buy ETH through mainstream brokerage platforms like Robinhood or PayPal. Here are some of the best platforms where you can buy ETH:
- Coinbase,
- Gemini,
- Kraken,
- Binance,
- eToro.
No matter which platform you choose to use, the process is similar. First, you need to create an account on the platform. Most of the platforms will ask for validation of the account with your personal documents. Second, you need to deposit money into your account. This can simply be done with a transaction from your credit card, bank account, or PayPal. There is no minimum amount for trading cryptocurrency to deposit as much as you think. The next step is to start trading, go on a search bar on a platform, type ETH, type on a coin you want to buy, and click trade.
What is the Future of Ethereum?
The creators of ETH have announced the launch of the new ETH 2, a transition to a proof of stake protocol. This will allow miners and validators to validate transactions and mint new ETH with their ether holdings. The transition is expected to happen in June 2022, announcing the 2022 year of Ethereum. Many believe that this new upgrade will help with Ethereum congestion problems, and it will be able to support its growth.
Also, the network is supposed to be faster and cheaper and, most importantly, more environmentally friendly. Many excerpts believe these new upgrades will lead to a price increase of almost 400%. Still, it remains to be seen how good this new Ethereum solution will be and will it be possible to beat growing competition and demands on the market.