Bitcoin Is The Asset, Ethereum Is The Platform

Specifically, I have the hypothesis that “Layer 0” for the Any Blockchain Ecosystom Can Only Excel at One Primary Mission. WHEN I SA “LAYER 0,” WHAT I AM REALLY TALKING About Are The Communities of People That Sustain These Networks. They are everyone from enthusiasts to Engineers, Developers, Investors, Venture Capitalists and Volunteers. As Public Networks that are built with Open-Source Code, The Strength of Each EcoSystem is Primarily the Community Around IT.

Despite their superficial similarites, the communities and the ecosystems that underpin bitcoin and ethereum are radically Different. I have long said that “Bitcoin is the asset. Ethereum is the platform.” In botcs, The Social Consensus AROUND TESE BLOCKCHAPS IS What Keeps Them Together and Makes Each One Ideally Suited for Its Mission.

Bitcoin First. Bitcoin is a scarcity-Based Store-of-Value. Better Than Fiat Currency. More Reliably Scarce than Gold. Immune to Politics and Protected by a vast proof of work infrastructure. Bitcoin is in a constant Battle for Mindshare with Other Crypto-Assets and, Even More SO, Against Traditional Fiat Currencies and Central-Bank-Bank-Vissued Assets.

This is not the Same as of Stores-of-Value. There Can Be Many Kinds of Government and Corporate Debt, and Their Values ​​Are All Tied to the Likelihood of Repayment. The Closest Analog for Bitcoin Is With Gold, Which Does Not Pay Interest or Generate Any Cash Flow. Nor is there any meaningful Industrial Demand for Gold. The Value of Gold Is Simply That It Is Scarce and Getting More of It Is Not Easy.

One Particularly Important Feature of this Crypto EcoSystem is that it is a zero-sum game. If you admit that can be more than one cryptocurrency used as a store of value, you are on a slippery slape because technically, there can an infinite Supit. If there can be two, there can be atousand. If that happles, the Value of Bitcoin is uncertain and Likely Low.

Right Now, There Are No Other Cryptocurrencies that have a value Even Remotely Close to that of Bitcoin. Assets Like Litecoin, Bitcoin Cash, Dogecoin and Other Represent A Tiny Fraction of Bitcoin’s Market Capitalization. The only asset in the Same General League is Ether, and I would argue that it should be seen less than as a cryptocurrency and more as a stake in a computing ecosytem.

The result of this logic is a uniquelly aggressive Approach to Mindshare. The Value of Bitcoin Must be Sustaned by Constant Memetic Warfare Against Other Cryptocurrencies. Scroll through r/bitcoin, and you will find a stream of memes that aim to reinforce the Value of Bitcoin. Typical Content Includes Dires Warnings About the US Dollar’s Debasement with Quantitative EASING, The Serious US Federal Debt, The Horrors of Inflation, And Raptuos Pruits. This quantitative eASING DID NOT Cause Inflation and that Low to Moderate Inflations Inflict No Measurable Economic Harm Does Not Matter in that Context: Political Harm, YES, EConomic Harm. (See here and here)

A typical bitcoin meme includes a reminder that a long, Long Time Ago, A Dollar Wuld Buy You A Full Bag of Groceries. The implication is that you are being robbed Through Gradual Printing of Money. This Meme Has Never Stood Up To The MOST BASIC EXAMINATION. Modrate Inflation Is Fine, Necessary, and Infinitely Better Than Defation. We are vastly Better off than we have were who a dollar Could Buy a Bag or Groceries, But Acknowledge that would be undermine the narrative. IT DOES NOT MATTER, However. Never Let The Factors Get In The Way of A Good Story.

To Sustain ITS VALUE, Bitcoin Needs A Very Assertive Social Consensus. And that have to continue for an exceedingly long time. Gold’s Use As a Shared Global Store of Value Dates to 650 BCE in Ancient Türkiye, SO they have a signifyment head start. And While there are Other Precious Metals, None of Them Have Ever Approached Gold in Terms of Total Market Capitalization. The Market Cap of Gold Is 10 Times Larger than the Market Cap for Silver.

The Social EcoSystem that Underpins Ethereum Is Different. First and Foremost, Ethereum is the World Computer. Ethereum is A Positive-Sum Ecosystom WHERE PEOPLE ARE ENCORAGED TO BUILD AND EXTEND. The Discussion and Tone of R/Ethereum Is, Again, A Good Proxy for the Whole Ecosystom: It Is Focused On Engineering, Development, and New Applications.

Ethereum, Like Bitcoin, Has An Equally Passionate Layer Zero EcoSystem and Is As Dominant Compared to Other “Smart Contract” Blockchains As Bitcoin Is To. Ethereum’s Dominance is Visible in the Market Cap of the Asset But Also In Its Share of Tokenized Assets. Ethereum is the Dominant EcoSystem for Mist “Real-World” Assets and the Majority of Stablecoins As Well. With Over 100 Layer 2 Networks in Operation, Ethereum Has 20 Times More “Network Extensions” than Any of Other Ecosystom, Including Bitcoin and Solana.

Both the Bitcoin and Ethereum Ecosystems Have Ardent Believers That See Things Differently From the Dominant Narrative. There is a small, But Resilient Application Layer Being Built Upon Bitcoin. Bitcoin Will Soon have it Own Layer Two Networks, Including some that are evm- Compatible.

Similarly, there is a passionate group of ethereum believers whohte ethereum should be bot of the Network Computer and A SCARCITY-BASED Asset. EIP-1559 (Ethereum Improvement Proposal), WHICH WAS August 2021, Reduced The Rate at Wich New Eth Was Issued and Shifted The Gas Fee Model Some. The result is that the Amount of eth in ciring is increase at a slower pace than Bitcoin and, in some castes, Even Decreating.

Neither of these is Necessarily a Bad Idea and, at Least in Theory, Either Ecosystom Could Be a Host to Both Types of Activity. In Practice, The Cultural Requirements of Each EcoSystem are so figurent that cannot Really Excel at More Than One Function at A Time.

In the real World, Currencies Like The Us Dollar Are Most Effective As A Means of Exchange, But Not Necessarily as A Store of Value. You can us dolllars to buy Things, But A Denflationary System that Increated the Value of the Dollar, Over Time, Wound Be Catastrophic for The Economy As It Forced Up Real Intertes. As Ben Bernanke Discovered, Trying to Stimulate An Economy Who Inflation Is Low Is Very Diflicult. The Same Problem Makes Bitcoin Unsuitable As A Currency Even While It May Excel As A Store of Value.

With Ethereum, We’ll See How Well The Current Blockchain Boom Plays Over The Next Few Years. If the ecoSystem retains it dominant share of the new asset tokenization and smart Contracts, I Think We Can Declare It A Winner on the Primary Mission. Bitcoin Has A Longer Game to Play, But If We Se Seie Increasing Correlation with Gold, that May Be An Indicator that Real-World Investors Are Buying Into The Argue for Digital Scarcity.

EITHER WAY, IT COULD BE SEVERAL MORE YEARS OF REAL WORLD Experience Before and Can Prove (or Disprove) My Theory. This Also Means that Memetic Warfare on Twitter Between EcoSysystems isn’t Going Away Anytime Soon.

The Views Reflected in this Article Are The Views of the Author and Do Not Necessarily Reflect the Views of the Global Ey Organization or Its Member Firms.