5 min read

Bitcoin vs Ethereum; Stop the Madness

Bitcoin maximalists are sending the wrong message when they dismiss Ethereum outright.
Bitcoin vs Ethereum; Stop the Madness

This blog post is in response to Dan Held's post regarding Bitcoin vs Ethereum posted here:

Bitcoin vs Ethereum
I often get asked “Why Bitcoin vs Ethereum.” This article sets out to define my thoughts on the difference between the two, and why I think Bitcoin represents a distinctly different risk/reward profile than Ethereum.

Foreward

Before reading this post you should know I have no dog in this fight.  I'm not shilling anything, I don't work in the crypto industry, I'm not pitching the purchase of $BTC or $ETH. I'm a sideline participant in crypto.  I own Bitcoin for all the "right" reasons.  And I own a few other digital currencies for different reasons. I'm a tech junkie with 30 years of tinkering under my belt.  I discovered Bitcoin in 2012 and fired up a full node then. I tried to mine Bitcoin in 2013 by purchasing Butterfly Labs mining equipment.  Remember them? My contribution to the community today is to introduce my friends to Bitcoin and write articles that help people understand the space.  

I'm sharing my thoughts in response to Dan's article so he can understand how the average, sideline participant thinks about Bitcoin maximalism and the endless debate about Bitcoin vs Ethereum.  

Bitcoin already won the store of value debate

The Bitcoin network is a cryptographic monetary network.  And Bitcoin the cryptocurrency is the digital currency that operates on that network. Bitcoin (the currency) won the store of value (SOV) war. No other cryptocurrency can or will compete with Bitcoin. It's abundantly clear for many reasons we don't need to debate.  Please, let's move on.  Debating this further is like debating with someone who believes the earth is flat.  More debate only fuels more debate.   It's pointless.

Bitcoin won the store of value war, let's move on and debate something more useful.  

Dan's article does a good job pointing out the haphazard origins of Ethereum. In all honesty, Ethereum looks like a science experiment. Satoshi's vision for the bitcoin network was methodical and deliberate while Vitalik's vision looks more like a meandering path to solve a problem on the fly. Check out the justification below.

Ethereum seems like a protocol that is built on a foundation that was conceived, designed and constructed while installing it, yet the protocol still has wide adoption.  As Dan points out, the culture of decentralization is different on Ethereum and its monetary policy is not stable, but it has the largest community of developers focusing on new applications.  

So let's refocus the debate from store of value to Layer 2 application where Bitcoin is competing with Ethereum.

Let's start debating Layer 2 applications on Ethereum vs Bitcoin

The Bitcoin maximalism community has a messaging problem. They need to stop dismissing Ethereum outright. While Bitcoin won the SOV war, Ethereum is winning the decentralized finance (defi) war.  And it feels like maxis know that and the only way they can fight back is to dismiss the protocol on grounds it's not a store of value or simply a scam with no justification.  

Have a look at Ethereum's growing defi community.  Defi today has a total value locked of $39.7 Billion. How can you dismiss that?  

The top 10 lending and DEX protocols all operating on Ethereum.  

Clearly, Ethereum has useful applications that allow swaps, derivatives, lending, insurance, and much more.  Bitcoin has great Layer 2 applications in the works, such as Bottle Pay and Strike. So why not move the debate from store of value, to Layer 2 applications?

How is the Bitcoin monetary network going to beat Ethereum?  Is Ethereum going to implode dues to high gas fees?  Is Ethereum 2.0 going to fail or never come to fruition?  Why is it going to fail?  Does Bitcoin lack development or interest around Layer 2 applications? Let's stop debating what we already know to be fact and focus on the real debate: How is Bitcoin Going to compete (and win) as a monetary network?

The road to success and mass adoption will be paved with failed blockchains and Layer 2 applications

Let's face it, the explosion of defi and countless blockchains feels like the internet 25+ years ago. Back then Compuserve, Prodigy and AOL (dial up) offered 300 baud (300 bits per second) connectivity to their bulletin board services. As broadband rolled out Comcast, AT&T and others destroyed them. Today dial up companies are nothing more than failed internet services providers of the past.

Some blockchains will win and some will lose, but one network will not take all. I believe blockchains will eventually specialize, much like TCP/IP, the internet protocol suite. TCP/IP is comprised of the application layer, transport layer, internet layer, and link layer. Each layer has protocols that focus on a specific use case. For example, we don't use HTTPS (Hypertext Transport Protocol Secure) to send mail.  Instead, we use SMTP (Secure Mail Transport Protocol).  And we don't use SSH (Secure Shell) to resolve domain names. Rather we use DNS (Domain Name System). Each protocol has its own use case given the circumstances.    

Bitcoin the monetary network will NOT sit behind every decentralized application of the future.  It will power Bitcoin the cryptocurrency and various Layer 2 monetary settlement protocols, but if TCP/IP is any indication of how blockchains will evolve, protocols like Polkadot, Ethereum, Cosmos, or others will adapt and thrive within a specific use case.  

In Conclusion

If you want to bash Ethereum, focus on how Bitcoin the monetary network will beat Ethereum at decentralized finance.  Or, argue that defi is a scam and will simply go away. But to dismiss Ethereum because it lost the store of value war is like Magnus Carlson calling Daniel Negreanu a shitty chess player.  They are "grand masters" at different games.

And for the record, I hate Ethereum and paying the outrageous fees. The transactions fail 20% of the time and swaps can cost up to $100.  And if you are not careful, slippage will pick your pocket many times over. I've sold all my $ETH and went all in on Bitcoin and a few other protocols that I think will evolve into useful specialized blockchains. I believe social media "influencers" that are peddling insane $ETH valuations have their head up their ass and probably never actually used the network.  

Let's get real, Ethereum has outgrown itself.  But developers are trying to solve that with Layer 2 scaling solutions (Loop Ring) and if Ethereum 2.0 is successful their defi ecosystem could become very useful.  

So stop dismissing Ethereum outright and let's get a real debate going. How is Bitcoin going to beat Ethereum at its own game, such as defi?