I’m a Bitcoin bull, but have been slowly seeing more benefits to Ethereum. When I mentioned this in an investment chat with friends, it was challenged and not without good reason.
There are many benefits to BTC and I still strongly believe in it and will keep the majority of my holdings in it, but my thoughts have been shifting more towards a world where both BTC and ETH have different roles to play.
This won’t be well structured, but I wanted to post my responses from the chat in case it helps someone see things the same way. Please do your own due diligence though, this is not investment advice, just a flow of thoughts.
If you Think BTC Will Survive, How Can There Be Space for ETH?
Don’t make the mistake of thinking that they’re competing in the exact same way. It’s like arguing that fiat is useless because Gold is a better store of value. You need to consider that both may have a function and exist.
ETH has smart contract functionality which allows it to facilitate transactions beyond a basic purchase.
But BTC is Sound Money and it Could Add Smart Contracts
There’s a reason almost all of the NFTs being sold are being done on ETH. While BTC could add smart contracts on its blockchain, it hasn’t and doing so would be a big change. One of the main things Bitcoin has going for it is that it doesn’t change much, which gives it stability. Adding smart contracts is possible, but it’s a huge change that undermines the stability that makes Bitcoin what it is.
Why Not Just Stick with BTC Though?
There are two significant arguments against BTC at the moment, the first is energy usage and the second is slow/expensive transactions. ETH will be solving both of these with 2.0 where it moves to a proof of stake concept and there’s sharding to process more transactions across multiple chains so it’s infinitely scale able. BTC is trying to do this in a sense with Lightning, which is basically a second-layer proof of stake network. Having lightning adopted is a bit tricky technologically though and will rely on a secondary network of nodes running lightning. ETH is forcing everyone to shift to proof of stake so it’ll happen quickly and they already have enough ETH staked to make it happen.
The Problem with HODLers
One of the things I really don’t like with crypto is when people have the ability to hodl a huge amount at the start and if the amount is fixed like BTC, then for all eternity they will hold that portion of the world’s wealth. If BTC is fully adopted it’ll get to $1m/coin. That would put Satoshi’s wealth at $1 trillion and others like Saylor and Winklevies will be the wealthiest people in the world. With ETH since its’ continuously produced, we won’t be stuck with these dynasties who have wealth for all time.
So Only ETH?
I still think BTC is a safer play so that’s where I’m keeping most of my crypto, and I think there can be a world with both BTC and ETH. A huge risk of ETH will be a full transition to proof of stake with 2.0. That could crash the value and they need to fall back to the existing proof of work, but if it’s successful, I could see it being even more revolutionary in terms of what it can handle than Bitcoin.
I thought the whole point of crypto was that it was finite, wouldn’t ethereum become valueless if it keeps getting ‘printed’ like the USD?
This is true, but there’s a proposed change to ETH that addresses that. They’re proposing that the network destroys a bit of the ETH taken as a transaction fee. This way it’s like a self-controlling monetary policy where when spending is low, the money supply will grow, but when there are a lot of transactions and spending increases, risking inflation, the amount of ETH in circulation will shrink.
Don’t get me wrong, I still really like BTC for a lot of reasons, but even if ETH is never accepted as a sound currency on its own, there are a lot of uses being found for it so I can see it being “the world’s computer” as it’s sometimes called. Thought better distributing my eggs in two baskets would be smarter. Once ETH 2.0 rolls out I may even move more that way.