Ethereum has won the most frequently used cryptocurrency in the market, not just the hardest money.
One of the most important questions that new capital entering the crypto ecosystem has to ask is where to bet their money, as the two largest cryptocurrencies with over 50% market cap, the relative question of Bitcoin vs Ethereum may be a desire to outperform the asset class The most important questions asked by institutions and high net worth individuals.
Bitcoin is a consistently number one crypto asset target, and has dominated the crypto asset class since the first cryptocurrency was created 13 years ago.
The OG (Old Rank) cryptocurrency is currently worth $420 billion, or about 38% of all cryptocurrency market capitalization. Bitcoin has the highest brand recognition, with about 3 times the search volume than the second-ranked Ethereum. It also received the most institutional investment. Bitcoin is the only cryptocurrency in which both a public company, MicroStrategy, and a country, El Salvador, are fully invested.
Bitcoin’s rise from nothing to a $1 trillion-plus asset in a little over 10 years is perhaps the most incredible technology story ever. However, despite Bitcoin’s high status today, it is likely to lose its dominance over time. It is even possible that Bitcoin will become irrelevant in the not too distant future, and it is not enough to be the “hardest currency”, the most decentralized and the most secure.
These are all desirable attributes of an internet native currency, but they are unlikely to define a successful internet currency, which ultimately will be the most used currency.
From this most important metric, Ethereum as the number one and most durable cryptocurrency in the future is the best bet.
The most used cryptocurrency will succeed
Fiat currency is a monetary tool that cryptocurrencies are trying to disrupt, especially the king of fiat currencies, the U.S. dollar (USD), is a prime example of how it has been adopted, rather than other possible “definitions” that make cryptocurrencies successful.
In terms of assets alone, the dollar is seriously flawed. A core property of the dollar is that it will depreciate forever. The dollar has lost more than 96% of its value over the past century. Economist Amus estimates that the annual currency depreciation could be as high as 8%.
Furthermore, the dollar is used as a tool of aggression by its creator, the US government. The U.S. dollar’s status as the global reserve currency enables the United States to finance ongoing wars, forcing other countries to succumb to U.S. policies under the threat of sanctions and even aggression and violence.
The dollar’s defining properties as a financing vehicle for devaluation and hostile hegemony, which are not ideal for its users – US citizens or US trading partners – are not the point.
Despite accumulating a trade deficit of over $10 trillion and a recent attempt to wipe a country from the global financial system, 59% of global foreign exchange transactions are conducted in dollars. The second and third most common currencies are the euro, with 21%, and a basket of “other” currencies with 10%, dominated by the dollar.
Why is this? Because the US dollar is the most common currency. The United States of America has the largest economy and military in the world. After decades of growing trade and military power, the dollar has become the most used currency in the world. As the largest consumer market and military power, the United States dictates terms of trade that far exceed its 24% share of global GDP.
Although the dollar is depreciating every year, and the United States has a history of foreign aggression. In other words, it is not the attributes of the dollar that determine the success of the dollar, but its acceptance.
Bitcoin unlikely to be the most used cryptocurrency
Compared to Bitcoin, Ethereum has a significant advantage in terms of potential widespread adoption. This advantage spans two pervasive and interconnected domains – technology and culture. Ethereum’s technology and culture foster innovation and encourage adoption, Bitcoin’s does not.
A key feature of Bitcoin is its immutability, and of all cryptocurrencies, Bitcoin is the least immune to change. The final upper limit is always only 21 million, “the hardest money in the world”. Since Bitcoin is the most immune to change, it is touted as the ultimate store of value (SoV).
To its credit, the SoV MEME (Ultimate Store of Value Meme) opened the first $1 trillion+ use case for cryptocurrency. However, Bitcoin’s core SoV use case presents several underappreciated issues for the #1 cryptocurrency.
What exactly are you using the store of value for? Holding it, accumulating it, hoarding it for consumption at some indeterminate point in the future, in other words, not much.
This value proposition sounds a lot like the other existing store of value, namely gold. While gold remains the world’s largest asset by market value at around $11 trillion, the yellow metal’s share of global assets is shrinking.
Gold has little utility and no yield (i.e. cash flow). On the other hand, competing stores of value such as stocks, bonds, and real estate pay those who hold them through earnings. Additionally, stocks and real estate typically appreciate at a faster rate than gold and provide increasing yields on an investor’s cost basis through growing cash flows.
More capital appreciation coupled with growing cash flow? What’s the point of holding gold for savers? That’s a good question, and it’s getting better as Ethereum and other yield-generating cryptoassets get better understanding, this question may be more relevant to Bitcoin.
While Bitcoin improves some of gold’s weaknesses, such as transportability and divisibility, the greatest value proposition of a static technology is that it does virtually nothing, and in a competitive marketplace, Bitcoin may be outclassed by superior competitors Substitute, like gold is losing to yield-generating assets. Again, this has not been taken seriously enough by the Bitcoin community, with Bitcoin’s value proposition as a “snap-and-tumble” asset, arguing for turning its growing influence into a future store of value.
Bitcoin’s long-term security model depends on a strong fee market called “mining rewards”, which today account for 98% of Bitcoin’s security budget (about $18 million compared to $300,000 in daily fees), with mining rewards decreasing every four years. Half. Bitcoin’s halving reward determines that Bitcoin’s reward is rapidly decaying and needs to be replaced by strong fee generation in the near future.
The use cases for the store of value are not aligned with a large number of activities, and thus fees are not aligned. From cycle to cycle, the fees generated by the Bitcoin network have dropped by more than 60% in Bitcoin terms:
This problem may get worse over time. Uncertainty about whether Bitcoin can generate enough fees to support the network long-term has raised doubts about the cryptocurrency’s appeal as a store of value asset.
In other words, can Bitcoin really be a store of value if users can’t say with 100% certainty whether the Bitcoin network will exist in 100, 50, or maybe even 20 years from now?
Ethereum encourages adoption and innovation
In contrast, Ethereum encourages adoption in a fundamentally different way than Bitcoin. The most important feature of Ethereum is the smart contract function, which realizes a virtuous cycle of development and user acquisition that Bitcoin does not have.
Being able to develop applications on Ethereum, issuing tokens for developers and early adopters to benefit from their work at critical times is probably the most important difference between the two chains.
Throughout most of its history, and even today, the United States has provided coveted resources such as cheap land, education, and strong property rights to encourage entrepreneurs to build companies, fuel American economic growth, and continually improve citizens’ standard of living.
Likewise, ether offers developers the opportunity to build innovative applications that unlock tremendous value for users who are brave enough to explore the frontiers of cryptocurrencies and public blockchains.
The first breakthrough application was the initial coin offering (ICO) in 2017. The second is decentralized finance (DeFi) applications in 2020, such as Uniswap and Aave, and the most recent breakthrough application is the non-fungible token-NFT in 2021.
All of these applications have attracted new users to Ethereum and encouraged the use of the blockchain. In fact, Ethereum has attracted twice as many users as Bitcoin, measured by addresses with a balance greater than $0 (86M Ethereum / 43M Bitcoin) and generated 47x more fees over the past 12 months (Ethereum $9 billion / Bitcoin $200 million), even though Ethereum is 6 years younger than Bitcoin.
Ethereum has made thousands of individuals rich beyond just holding Ethereum, and the cumulative value of applications built on Ethereum is in the tens of billions of dollars.
As long as it is possible to build new applications and reap the rewards for taking risks, Ethereum will continue to attract talented developers and early adopters to create the next frontier of applications, thereby attracting Ethereum’s next billion users .
This technology reflects the culture of Ethereum. Bitcoin culture is extremely conservative and resistant to change, whereas Ethereum culture is open, self-aware, and risk-seeking.
The most prominent example of Ethereum’s culture of innovation is Ethereum’s merger, consolidation, and transition from Proof of Work (PoW) to Proof of Stake (PoS) consensus, a highly risky move for an already highly successful chain. However, the merger undoubtedly makes Ethereum stronger, providing more security at less cost and energy consumption.
Perhaps most importantly, the merger provides Ethereum token holders with an opportunity to earn money. Depending on the staking rate and percentage of activity on Ethereum, Ethereum stakers can earn between 5-10%.
With bitcoin unable to generate raw yields, a merged ethereum could gradually attract more capital, just as gold’s share of global assets continues to be displaced by yield-generating alternatives such as stocks, bonds and real estate.
But the merger is just one part of a longer development roadmap that will follow the Ethereum merger over the next decade:
- The Surge (introducing sharding, enabling massive scaling of the Ethereum blockchain).
- The Verge (introduces Verkle trees and extends further).
- The Purge (streamlined storage and bad debt).
- The Splurge (a series of smaller upgrades to keep Ethereum running smoothly).
A strong fee market will be critical for any cryptocurrency that aspires to be No. 1 for the long term. For Ethereum, you know there is a strong fee market today, and developers will likely continue to be strongly incentivized to develop on the chain and attract more users to grow the fee market for decades to come.
With every dollar invested in crypto assets, new investors keep asking themselves, why risk betting on Bitcoin when Ethereum has surpassed Bitcoin? They will figure this out.
It’s all about adoption, and Ethereum encourages innovation and adoption
all in all:
- Adoption and ubiquity determine the success of existing currencies (such as the dollar), rather than currency properties such as “soundness.”
- Compared to Bitcoin, Ethereum has built a superior system to encourage adoption. A strong application ecosystem and revenue-generating properties may attract more and more users and capital than Bitcoin without applications and revenue.
- Cryptocurrencies cannot prosper in the long term without a vibrant fee market. The Ethereum model maximizes the likelihood of strong fees in the future. The Bitcoin model is not.
Just as gold was overtaken by fiat currencies and yield-generating store-of-value assets, bitcoin is likely to be overtaken by technologies like Ethereum with stronger value propositions.
The ethereum community’s ability to foster innovation and chart a compelling path to building an increasingly robust public blockchain over the next few decades suggests that ethereum is more likely to become the most adopted, scaled largest cryptocurrency. Additionally, Ethereum’s culture of risk-taking and innovation suggests that Ethereum has a low risk of being overtaken by alternative technologies in the future.
Therefore, Ethereum is the best option.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/why-is-ethereum-the-best-choice/
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