Who will become the future king in the big reversal of the encryption world?
Now, the voice of Ethereum is getting louder. Goldman Sachs stated in its Ethereum Research Report: The rapid development of DeFi and NFT sectors in the Ethereum ecosystem has opened up unlimited imagination for ETH. BitMEX CEO Arthur also predicted that there is a 30% probability that the market value of Ethereum will surpass Bitcoin in the future.
The enthusiasm of institutions for Ethereum has surged, but no one knows the intention behind it whether they understand Ethereum or simply call for orders.
Many people are comparing Ethereum and Bitcoin. The core question is: Bitcoin or Ethereum, who will be the king in the future?
Bitcoin, like the eternal gold, is heavy, not easy to carry, and has high transaction resistance (rigid technical framework, long confirmation time, low processing performance...), but the beautiful luster of gold is like Bitcoin "the first blockchain technology". An application" halo, still makes people put it down. The accumulation of time and the precipitation of consensus have made gold the altar of the king of hard currency, and brought more secure value storage network to Bitcoin.
Ethereum, World Computer, the main liquidation layer of encryption application ecology. In the mainstream encryption world, if the Ethereum protocol is the global central bank, then ETH is the global native legal currency. The main agreement coordinates the production relationship of various protocols in the domain, and ETH promotes the value transfer. If the infinite inflation of ETH is a problem, healthy economic growth needs to maintain 2% ± 1% inflation.
So are Bitcoin and Ethereum really comparable? From some dimensions, it is indeed possible to make a comparison. But who is the king of crypto assets? There may be no answer to this, they all have different missions.
This article is from Bankless analyst Lucas Campbell, who compared the Bitcoin network with the Ethereum network from the three dimensions of network settlement volume, transaction fees paid, and network settlement guarantees. Rhythm BlockBeats translated this article:
The inevitable reversal
Whether Ethereum can counter Bitcoin is one of the most controversial topics in the encryption world. For more than a decade, Bitcoin has been the king of cryptoassets by market capitalization. Whether Ethereum or other competitors can surpass Bitcoin has naturally sparked debate in the encryption industry.
It is often boasted that Bitcoin is by far the most "strong" and "sound" currency in the world. This may be true. In essence, digital assets cannot be copied, strictly follow the monetary policy of code programming, and have the blessing of social contracts.
However, many in the Ethereum community objected to this. Some people even think that the "counterattack" of Ethereum is inevitable.
Ethereum is a general-purpose, programmable settlement layer for any carrier of value, far beyond Bitcoin. Ethereum's upcoming ETH2.0 upgrade and EIP 1559 may turn ETH into a productive asset with potentially deflationary properties. While there are considerable execution risks associated with this shift, this combination of scalability and economic model upgrades cannot be underestimated.
While it is difficult for some to imagine Bitcoin ceding the throne, in fact, Ethereum has surpassed Bitcoin in many key public chain indicators.
These three indicators are:
Total Settlement: The total economic value settled on the chain.
Transaction fee paid: The transaction fee that people are willing to pay for settlement in this chain.
Settlement guarantee: the security of value settlement in this chain.
These three concepts largely encapsulate the core purpose of any blockchain: to provide a secure (preferably public) ledger that facilitates peer-to-peer exchange of value.
1. Total Settlement
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Ethereum is now surpassing Bitcoin in daily settlement value with a healthy marginal growth rate. (source:Money Movers）
Ethereum leads the pack on this metric. According to Money Movers, ethereum settles more than $52 billion in value daily, while bitcoin settles around $14 billion.
However, the Bitcoin community may be quick to emphasize that the two networks are not comparable because Ethereum's settlement layer can handle assets of any value, while the Bitcoin network basically only supports BTC, which means that Bitcoin's " Economic loans" are inherently limited to settling only one asset, not thousands of assets.
However, even if we only look at the value transfer of BTC and ETH, Ethereum was already in the lead at the beginning of May. Bitcoin settles $13.9 billion in BTC per day, while Ethereum settles over $20 billion in ETH per day.
Even though Ethereum’s “economic loans” are $400 billion higher than the Bitcoin network, Ethereum still outperforms the Bitcoin network in terms of settling its native assets. Ethereum now settles more “trustless value” per day than Bitcoin.
So does this mean that ETH is being used more as a currency and BTC is being used as a store of value?
Obviously BTC is not used every day. It was supposed to store its value over time. Both are fulfilling their mission.
2. Transaction fees paid
The business model of the public chain is to sell its block capacity. A good blockchain is full of various economic activities that people are willing to pay for. To me, this is one of the core metrics that determine the value of a blockchain, which means what people are willing to pay to use the ledger.
Ethereum once again crushes Bitcoin by this standard. Ethereum’s current seven-day average fee is $32 million per day. Compared to $4 million in Bitcoin transactions per day, the difference in transaction fees between Ethereum and Bitcoin is about 8 times. Why?
In short, Ethereum offers an irresistible ecosystem filled with opportunities for various economic and social activities.
If you can earn 20% APY in USD and have a $100,000 stake, you might be willing to pay a decent fee to get this deal off the ground. If you want to buy a Cryptopunk for millions of dollars and show it off in the Metaverse, then you're probably also willing to pay a hefty transaction fee to make sure your transaction goes through. If you find a "treasure" coin in Uniswap, and you think it may increase by 10 times, then you may not care how much transaction fees you pay. Do you understand now?
Bitcoin, on the other hand, is simply sending bitcoins from one address to another, perhaps transferring your bitcoins to a BlockFi account to earn interest. Regardless, there are fewer opportunities for economic activity on the Bitcoin network, so users don't want to pay higher transaction fees.
More and more people are scrambling to get the block space in Ethereum, waving the "gwei" they bid on, telling the miners: shut up, take your money, and put my transaction in the next block !
The numbers speak for themselves: people are willing to pay more to use the Ethereum network than the Bitcoin network.
3. Settlement Guarantee
The last metric we'll look at is settlement assurance. Nic Carter published a detailed paper on this in 2019. In his opinion, this is one of the most important issues to consider when evaluating any public chain. Because settlement assurance is directly related to the security of the blockchain.
Settlement guarantees represent your confidence that transactions will not be rolled back once they are verified on-chain. This really matters, especially for those cyberpunk idealists out there! The economic system in their minds is rollback-resistant and irreversible...
One way to measure settlement assurance is to count the number of block confirmations required for a transaction to be settled as it is on Bitcoin.
according to
according tohowmanyconfsFrom the calculation point of view, from the perspective of the number of confirmed blocks, the Ethereum network is not necessarily safer than Bitcoin. But just a few weeks ago, that changed, and for a while, Ethereum was actually going to be more secure than the Bitcoin network! This is an inflection point for the crypto ecosystem, as it is the first time in crypto history that there is another network that is more secure than Bitcoin in terms of settlement assurance.
But we can take this question a step further. In Nic Carter's post, he mentions how high the ledger costs are as one of the quantifiable measures of settlement assurance. So how do you measure ledger cost?
In short, ledger cost equals the total amount of fees paid to validators/transfer pickers per unit of time.
This means that the more you pay miners each year (the sum of transaction fees and block rewards), the less likely miners are to attack the network. In other words, due to the incentives in place for miners, they can guarantee that they will not do evil and keep the ledger safe.
After some elementary school math, we can arrive at the annual fee paid to miners:
Bitcoin pays miners ~$14.25 billion per year (based on 900 BTC per day block reward + $3.8 million in daily transaction fees when BTC price is $40,000)
Ethereum pays miners approximately $18.5 billion per year (based onBlock Reward and Block Time Metrics）
Yes, Ethereum currently pays miners more per unit of time than the Bitcoin network. The general ledger cost of the Ethereum network is higher than that of the Bitcoin network, which means that under this measurement dimension, Ethereum has a higher settlement guarantee.
What is stopping this "counterattack"
Ethereum is settling more value, people are willing to pay more for it, and the Ethereum network is (by some measures) more secure than the Bitcoin network.
So, what is preventing Ethereum from counterattacking Bitcoin?
For me, it boils down to one word: monetary premium.
Today, BTC is more widely known and understood than ETH, and this is a key element in generating a monetary premium. Decentralized currencies like BTC are built on collective consensus! People know more about Bitcoin. Its narrative is simple, it is digital gold. Retail investors understand this, and institutions are beginning to understand this. As the saying goes, the best thing about cryptocurrencies is being known.
People understand Bitcoin, but they don't understand Ethereum... investors have more than ten years to understand Bitcoin, but they only have half the time to understand Ethereum (and Ethereum is much more complicated than Bitcoin).
But make no mistake: when ETH2.0 and EIP 1559 are implemented separately, the ETH narrative will stabilize. All value generated in the Ethereum network will be deposited directly on ETH. Ethereum will explode in appeal to institutional investors, they just need time to learn this new industry. Once they get the hang of it, the ETH narrative will seep into the mainstream.
Ethereum settles more value, and these settled values are more secure on Ethereum, and people are willing to pay for these values compared to the Bitcoin network.
The data on the chain will not lie. Ethereum is the better settlement layer for the value of everything in the world.
When looking at the whole thing from this perspective, it seems that this reversal is inevitable.
