Lions & Sharks
/If you’ve had the misfortune of being on Crypto Twitter any time over the last few years, you may have noticed that tribalism is alive and well in the crypto space. Some prominent groups include the “XRP Army,” “Eth Heads,” “Toxic Bitcoin Maximalists,” and the beloved “BSV Shills.”
As professional investors, much of the behavior and thinking of these factions can and should be written off. But that leaves certain key questions unanswered if one is to discount the opinions of the FinTwits. One such question involves the value proposition and relevance of Ethereum, as it relates to Bitcoin. After all, are both projects worthwhile? Is one better than the other? Has the market placed a permanent crown on the head of Satoshi? Or is Bitcoin nothing more than the Myspace of 2021, soon to be replaced?
Someone asked Andreas Antonopoulos this very question. I think his answer was the best I’ve heard. It was this, “Asking which is better, Bitcoin or Ethereum is a bit like asking who would win in a fight, a Lion or a Shark.” The question doesn’t make much sense if you think about it. Lions are the apex predators of the savannah while sharks are dominant in the ocean. The ocean and the savannah are two completely different ecosystems, and in nature the two creatures would never encounter one another.
Why is this particular answer so incisive, though? To me, it comes down to understanding both the value proposition and the trade-offs of each project. First, I think it’s meaningful to highlight a few key similarities.
Both Bitcoin and Ethereum:
Use an open source ledger to track their transactions
Make use of a blockchain
Are mined around the world
Have large participation from the crowd
Are widely accepted and highly liquid
Are free and permissionless
Are highly divisible
Have an increasing user base
Have a declining annual inflation rate
Source: Coinmetrics.io
Ethereum (which is just over five-years old) has an annual inflation rate that is lower now than Bitcoin’s was five years ago. But there are already about one million addresses holding one native unit of Eth. In fact, the adoption curve of Ethereum is similar to that of Bitcoin’s but with the million-user milestone happening in half the time.
That being said, I do not view Ethereum as a Bitcoin killer. In fact, thinking in these narrow terms is diminutive to the space as a whole. Ethereum is perhaps the first project at scale to show that acting as a currency and as a base layer for decentralized applications is not mutually exclusive. Ethereum has many technical challenges to overcome on its roadmap to Eth 2.0, but should it succeed (and I wouldn’t rule this out), it could open the floodgates to innovation that has yet to be imagined.
Some important features of Eth 2.0 are the increase in scaling by a factor of 64x, the ability to earn rewards from staking, and the sunsetting of Proof of Work.
During this time Bitcoin has seen the global macro situation turn in such a way that I almost fail to imagine a better set up to prove the BTC mantra. Endless fiscal and monetary stimulus by irresponsible governments around the world leading to increasing adoption, leading to the stampede of traditional investors during the rise of the millennials while 2/3 of the world lives under a dictatorship or is underbanked. Yes, that’s the world we live in.
At the same time Bitcoin’s Lightning Network is getting more robust and has the potential to make every economic textbook irrelevant as we bear witness to the birth of the first Store of Value that can compete as a Method of Exchange, delivering nearly instant transactions in complete privacy to anywhere in the world within range of a cell phone tower.
If even a fraction of the roadmap of Bitcoin and Ethereum is delivered, the world will never be the same. We can’t go back now to how it was, when all money and wealth was the true property of the government and we were only second-class citizens. We are now truly sovereign individuals.
Thank you.
