Title: The Clash of Beliefs: Bitcoin vs Ethereum
Introduction:
Bitcoin and Ethereum, both driving forces behind the adoption of cryptocurrency and blockchain technology, have historically been at odds with each other due to the “L1 Wars” and their active network supporters. While some may see this competition as a mere cultural battle within the crypto community, it actually reflects fundamentally different beliefs that have led to divisions.
Exploring the Fundamental Beliefs:
Bitcoin: The Beacon of Decentralization (and Liquidity)
Bitcoin’s design aims to challenge traditional financial systems by providing an alternative without intermediaries. Supporters resonate with this goal and prioritize decentralization as their primary criterion.
An example of this commitment is the block size war that occurred between 2015 and 2017. Small block supporters prioritized decentralization over scalability. They staunchly refused to compromise Bitcoin’s decentralized nature, even if it meant limiting its scalability. On the other hand, proponents of increasing the block size believed it would help scale the network, lower transaction fees, and improve Bitcoin’s capacity to process more transactions per second. Ultimately, the block size did not increase through a hard fork but rather implemented Segregated Witness through a soft fork, which improved transaction capacity but did not allow for a permanent increase in block size. The result was a currency system without central control.
Bitcoin continues to be the largest single cryptocurrency by market capitalization, valued at around $1.3 trillion, representing approximately 50% of the overall cryptocurrency liquidity. Due to its high stock-to-flow ratio, Bitcoin’s asset hardness is second only to gold. Its increasingly prominent position in the global market has sparked discussions about positioning Bitcoin as a reserve currency, one of the main factors eroding the dominance of the US dollar. With its characteristics and form factor, Bitcoin will continue to play an important role in the cryptocurrency space, with its liquidity further potentialized beyond being just a unit of value.
Ethereum: The Vanguard of Practicality
“The EVM is now becoming the enterprise standard and the bridge between blockchains, even the harshest critics of the EVM are now investing in compatibility.” – Nitin Kumar (industry OG)
While Ethereum shares the broad spirit of cryptocurrency, it places a stronger emphasis on practicality. Its supporters argue that the intrinsic value of a currency is closely related to its actual applications, a concept reinforced by Ethereum’s extensive lineup of decentralized applications (dApps). These dApps play a crucial role in the Ethereum ecosystem by providing various functionalities and services that contribute to the overall practicality of the Ethereum platform. The foundation of dApps and smart contract functionality is the Ethereum Virtual Machine (EVM), where all Ethereum accounts exist.
Recently, more and more people believe in the “inevitability of the EVM” due to improved interoperability, security, and developer efficiency. With a vast Ethereum developer community supporting a merged EVM standard, more protocols are migrating to the Ethereum ecosystem and building bridging mechanisms to facilitate interoperability. Therefore, real-world applications need to focus on EVM compatibility to fully leverage the largest developer community.
Beyond Bitcoin and Ethereum: A Diverse Cryptocurrency Landscape
However, the world of cryptocurrency is far more complex than these two roles. The broader ecosystem encompasses various beliefs and preferences. For example, Monero provides a haven for those seeking privacy, offering one of the most discreet transaction systems. On the other hand, the Solana blockchain excels in fast transaction times and scalability, appealing to those for whom transaction speed is crucial.
All these ideological factions have their merits and do not necessarily conflict with each other.
Layer 2: Bridging the Gap
“However, the more cross-link bridges and applications there are, the more severe the problems become… Cross-chain activities have anti-network effects: they are quite secure when there is little activity, but the risks increase as the activity grows.” – Vitalik Buterin, Ethereum Foundation
In our current multi-chain cryptocurrency ecosystem, market solutions utilize the compatibility of the EVM through connecting mechanisms. However, cross-chain connections can compound security issues and centralization risks. Assets held in bridges become vulnerable to attacks, and increased interconnectivity can lead to system contagion. In comparison, adopting a layered approach can maintain the security integrity of each layer while minimizing interconnectivity.
The Fusion of Visions
Despite ideological differences, Bitcoin and Ethereum are increasingly likely to come together. Ethereum’s EVM is responsible for driving decentralized applications and can coexist in the Bitcoin realm by introducing decentralized EVM sidechains through initiatives like Botanix. This could create a space where both parties can thrive.
