Interpretation of Economic Models: An Overview of Bitcoin and Ethereum Economic Models
First, let's take a look at the most successful bitcoins "out of the circle". Once upon a time, the emergence of Bitcoin made the world realize the magic of blockchain for the first time, and it also allowed countless people to realize their dreams through Bitcoin. But it must be explained that Bitcoin still has many original problems that cannot be solved today, and it is these problems that make Bitcoin what everyone calls "digital gold".
The block size of Bitcoin is limited to 1MB, and its poor performance greatly limits the transaction speed and number of transactions, resulting in only about 3,500 transactions per 10 minutes. Moreover, due to the longest chain rule adopted by Bitcoin, when two blocks are created at the same time, only one will eventually be packaged by the longest chain, and the other block can only wait for some blocks to be confirmed to be finally confirmed. In this case, it takes 10 minutes or even longer for the transactions on the Bitcoin chain to be packaged and confirmed. Isn’t WeChat Pay good?
In addition, the total number of bitcoins issued is limited to 21 million, using a deflationary economic model. When all blocks of Bitcoin have been dug out, miners' income can only depend on user transaction fees, and the economic model is not sustainable. The ultra-high fees and long transaction confirmation time have jointly made Bitcoin, a digital gold with the consensus of tens of millions of people. Although the price is high, there are insurmountable difficulties in both subsequent development and governance.
Following Bitcoin, the birth of Ethereum has taken the blockchain a big step forward. Turing's complete smart contracts have made it possible to develop DApps. With the vigorous development of the Ethereum ecosystem, more and more of people realize the value of blockchain technology and its great potential in the future.
Compared with Bitcoin, which has a constant total amount, Ethereum's native token ETH has no upper limit. Through the economic model of inflation, it provides continuous incentives for miners with a quantitative increase rate. At the same time, under the governance rules of Ethereum, the income of miners is more diversified. While receiving block rewards, they can also charge transfer fees. The more complex transactions and operations, the higher the rewards.
But unfortunately, Ethereum is also limited by the system throughput like Bitcoin: Although the performance has been qualitatively improved compared to Bitcoin, it can only achieve 15-17 transactions per second at the fastest, which is completely unable to meet reality Trading scenarios in real life. Not only that, Ethereum still has the problem of high fees, which limits the entry of developers and users. At the same time, users can store transaction data on the chain only by paying a one-time handling fee, while the full node on Ethereum needs to store all ledger states. The incentive model is not sustainable. Not only that, most of the state space of Ethereum is occupied by invalid smart contracts, which not only wastes storage space, but also slows down the system speed and causes network delays.
