Author | Mu Mu Produced by | Vernacular Blockchain (ID: hellobtc)

In most fields, the "battle between the top and the second" is often extremely fierce. Bitcoin and Ethereum, which dominate the crypto field, have also begun to compete for "community consensus share". In the past two years, with a series of upgrades such as Ethereum's transition to PoS, the opening of pledge withdrawals, and the landing of Layer2, coupled with the prosperity of the ecosystem, all aspects have become more and more competitive, attracting many members of the Bitcoin community (including forked communities such as BCH and BSV) to join. Perhaps it is time to talk about the possibility of Ethereum's market value surpassing Bitcoin. As a former "copycat", Ethereum's surpassing Bitcoin is happening, not just a "dream". Mainstream funds have been paying attention to Bitcoin and Ethereum. Who will perform better in the next round of market conditions?

01  The main differences between Ethereum and Bitcoin

Bitcoin and Ethereum were not originally in a dead-end opposition relationship, including the community. However, the crypto community is not that large. The most important thing for Bitcoin is how to maintain the "consensus share", while for Ethereum, the community continues to "attract consensus". The comparison between the two is always talked about: 1. Different overall routes: one is digital gold, the other is digital oil. Bitcoin's goal is to be a decentralized medium of value exchange and value storage, while Ethereum's mission at birth was to become a smart contract platform to run decentralized applications. ETH is used to pay for the "gas" for contract execution, so BTC and ETH are also called digital gold and digital oil. 2. Different data storage models for recording transactions Bitcoin uses the UTXO model to record transactions, which is a major advantage of Bitcoin and one of the important technical solutions adopted. This method can keep the record "database" lightweight for a long time, and Bitcoin nodes can always quickly and efficiently verify transactions, which is the key to the long-term stable operation of the system. Ethereum uses the account model, perhaps to record the flexibility of account status, but this forces Ethereum to face the dilemma of "state explosion", which has not been resolved yet. In short, as time goes by, the account model will accumulate new state data and become a burden on the consensus nodes. The system will become more and more bloated, and finally limit the development of Ethereum. This may be solved in future upgrades. 3. Different consensus mechanisms After Ethereum switched to PoS, it parted ways with the PoW consensus mechanism. As for why the PoW consensus mechanism that made Bitcoin so powerful was abandoned, it is a long story, which will be discussed below. 4. More other differences Transaction speed: Bitcoin's block interval is 10 minutes, while Ethereum's block interval is 13 seconds. Usually a Bitcoin transaction takes tens of minutes to be confirmed, while Ethereum may be completed in minutes. Main transaction purposes: Bitcoin transactions are mainly transfers, while transactions on Ethereum can include contract execution in addition to transfers.

02 In what aspects has Ethereum surpassed Bitcoin?

Although the two have different routes and each has its own advantages, and their respective advantages in their respective fields are obvious and do not require too much comparison, in some important intersection angles, Ethereum has indeed begun to surpass Bitcoin.

1. Ecological infrastructure

The platform-based Ethereum ecosystem is prosperous. There is no need to compare this, but thanks to this, Ethereum's ecological infrastructure has surpassed Bitcoin. The diversification of Ethereum wallet clients, including the Little Fox Wallet and many hardware wallets, has become the direct user-oriented entrance to the Metaverse and Web3.0. The user habits of Ethereum wallet clients have been formed, which has also become the basis for the prosperity of the new EVM public chain. The addition of competitive new public chains has increased the prosperity of EVM-related developers and related cross-chain ecosystems, feeding back to the Ethereum ecosystem. In addition, careful friends will find that some market software will display the number of platforms on which encrypted assets are listed. The number of CEX platforms listed on Ethereum has always exceeded that of Bitcoin. If DEX, the future of encrypted asset exchange, is added, Ethereum is indeed relatively ahead. 2. On-chain transfer and settlement amount According to data from money-movers, Ethereum currently transfers and settles nearly 30 billion US dollars of assets on the chain, while Bitcoin's data is 40+ billion US dollars, which is an order of magnitude different.

If cross-chain is the future, then cross-chain liquidity data is also very important. From the CryptoFlows data chart, we can see that the total amount of funds entering and leaving the Ethereum cross-chain exceeds 10 billion US dollars, and the amount of funds entering and leaving the Bitcoin cross-chain is around 6 billion US dollars.

In general, Ethereum has already taken the lead among all public chain ecosystems in terms of on-chain fund transfer and settlement, and cross-chain fund inflow and outflow data.

3.Token Supply

Many people believe that the high value of Bitcoin is largely due to its supply rules, which are constant and halved every four years. Ethereum has entered a period of deflation, which gives it the capital to compete head-on with Bitcoin, a "digital gold" that is based on scarcity.

Screenshot from: Ultra sound money

Many people believe that Ethereum has now become a "super-robust currency" for the following reasons: a. Ethereum implemented the EIP-1559 upgrade in August 2021, reducing the circulating supply of ETH by burning a portion of the base fee for each transaction. b. Ethereum completed the merger from proof of work (PoW) to proof of stake (PoS) in December 2021. The staking reward (floating) under the POS mechanism is much smaller than the fixed block reward under the PoW mechanism. d. With the continuous prosperity of the ecosystem, the advancement of DeFi, NFT, Metaverse, Web3.0, and Layer2, the usage and demand of Ethereum are increasing, which increases the demand for ETH as a payment fee and collateral, thereby pushing up the transaction volume on Ethereum and the burning of EIP-1559. A few days ago, the 7-day annualized deflation rate of Ethereum was about 1%, which means a reduction of 1.2 million ETH per year. In summary, the claim that Ethereum is a super-robust currency is based on its decreasing supply and increasing demand, which makes Ethereum highly scarce and valuable, and also makes it deflationary and anti-inflationary.

4. Decentralization (controversial)

After the transition to PoS, the total number of Ethereum validators has exceeded 560,000 and continues to grow. In the past, the Ethereum community boasted that: - Ethereum 2.0 uses the Proof of Stake (PoS) consensus mechanism to reduce dependence on computing resources and energy, reduce the centralization and monopoly of mining pools, and improve the security and sustainability of the system. - The node distribution of Ethereum 2.0 is more extensive and decentralized than Bitcoin. - The future sharding solution of Ethereum 2.0 will improve the scalability and throughput of the system, while also reducing the burden and cost of a single validator node. In summary, the Ethereum community believes that Ethereum has made the system more decentralized through upgrades, with higher security, scalability and innovation.

03 Bitcoin is not a vegetarian

It is said that each has its own merits. Although Bitcoin is not as radical as Ethereum, it does not mean that the Bitcoin community will do nothing: 1. Bitcoin's safe-haven properties play a huge role. The recent banking crisis has made more people begin to re-examine Bitcoin's safe-haven properties. In the case of the collapse of traditional financial systemic risks, Bitcoin has begun to replace or even partially replace the function of gold, and may go further in the future. At present, the global market value of gold exceeds 8 trillion US dollars, while the market value of Bitcoin is currently only more than 500 billion US dollars. In other words, whether it is a partial replacement or the possibility of surpassing gold in the future, there is still "broad sea and sky". 2. Ecological explosion Ethereum has its own ecology, and the ecological development of Bitcoin has not stagnated. Based on the upper-level smart contract application ecology of Bitcoin, including Stacks, RIF, etc., BitcoinFi and BitcoinNFT are also quietly growing. The recent hot BRC20 has also attracted a lot of attention. Compared with the ERC20 of the Ethereum ecosystem, although BRC20 still has a certain threshold, it is early enough, and the "Bitcoin ecosystem" alone has enough gimmicks. At the same time, the unique distribution method with stronger decentralized attributes also brings a different new narrative. Of course, we should also pay attention to the risk of short-term heat loss. Directly engraving BRC20 Token on the Bitcoin mainnet is essentially old wine in a new bottle. BRC20's scalability, functions, performance, user habits, infrastructure, etc. are far inferior to ERC20, which runs counter to the "capacity expansion" that the crypto industry has been exploring for innovation. Without a sustainable direction, BRC20 will not last long.

Overview of exploration of Bitcoin functionality since 2012. Source: The Block Research

In terms of payment, the Lightning Network is making steady progress. According to 1ML data, the Lightning Network capacity exceeds 5,000 BTC, the current number of nodes is 16,367, and the number of channels is 74,178. At the same time, many leading platforms have begun to support the charging and withdrawal of the Lightning Network.

Image source: 1ML

04 Summary

Ethereum surpasses Bitcoin, from an impossible dream to a reality, which seems like an inspirational story. Bitcoin is as stable as a rock, and Ethereum is actively innovating. Perhaps the battle between Bitcoin and Ethereum will continue for a long time, but they both have a bright future. No matter success or failure, they will only compete for the top spot.

What do you think about the future of Bitcoin and Ethereum? Please leave your opinions in the comments section.

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