After switching to POS, has Ethereum really begun to threaten Bitcoin's status?

Since the birth of Ethereum, people have been talking about "Ethereum surpassing Bitcoin" . As the ancestor of encryption and the king of encryption, Bitcoin has always had many challengers of all kinds, but all of these challengers have failed, with the exception of Ethereum. With the POS merger of Ethereum, this potential Ethereum milestone event may be one step closer to us.
There have been many different opinions on Ethereum's transition to POS (Proof of Stake) consensus mechanism. Today, we will conduct a comprehensive comparison of the relationship between Ethereum and Bitcoin before and after the transition to POS to see what kind of threat Ethereum after the transition to POS brings to Bitcoin...

POW Bitcoin VS POW Ethereum

Everything starts with the origin of Ethereum and its relationship with Bitcoin. According to the previous interview with Vitalik and his son by Fortune magazine, Vitalik, the founder of Ethereum, known as the "child prodigy", started learning programming at a very young age under the influence of his original family. Vitalik learned about Bitcoin from his engineer father when he was a teenager.

As he gained a deeper understanding, Vitalik contributed articles to a Bitcoin news website and later co -founded a magazine about Bitcoin with Bitcoin enthusiasts. He analyzed his learning results and unique thoughts through articles. It was not until Vitalik dropped out of school at the age of 19 that the Ethereum white paper was born.

At that time, this white paper was published in the Bitcoin community as a proposal to "design a new Bitcoin", which attracted a lot of attention, and of course also encountered a lot of doubts. In general, the mainstream of the Bitcoin community obviously looked down on the proposal of this young man. Later, Ethereum, a new project called "Bitcoin 2.0", was launched.

If we were to summarize the origin of Ethereum in one sentence, we could say that it was a new direction proposed by Bitcoin’s “little fanboy”.

In the following eight years, we have also seen Ethereum's tortuous progress. Of course, although many people have always called projects other than Bitcoin "copycats", POW Ethereum still shows a different side:

1. Different routes

From the perspective of value capture and application, Bitcoin has always been on the path of "digital gold" , and this consensus has long been deeply rooted in people's minds, needless to say. Ethereum, on the other hand, is compared to "digital oil". As a DApp platform, the purpose of Ethereum's Token ETH is to be used as the gas fee for smart contract calls to avoid resource abuse and attacks.

2. Ethereum in the eyes of the Bitcoin community

In the past, people always looked at Ethereum from the perspective of the Ethereum community. Today, we will look at this “little brother” from the perspective of the Bitcoin community:

1. Bitcoiners despise Ethereum’s unlimited issuance

The total amount cap and scarcity have always been the characteristics that Bitcoin is proud of, but Ethereum has gone the other way and has not set an upper limit. This has naturally attracted a lot of criticism, and some people believe that no upper limit is "air" that cannot guarantee value.
Of course, the original intention of Ethereum's unlimited total design is to serve as a public chain for DApp smart contracts. Considering that if the ecological scale is infinitely expanded if it is widely adopted, and the token inflation rate is too low, it will cause the gas fee to soar, and the cost of on-chain activities will become more and more expensive, which is not conducive to the sustainable development of the ecology.

2. Bitcoiners despise Ethereum for adopting a backward model

There has never been any Bitcoin, there has only been UTXO. I believe many people have heard of this sentence. UTXO (Unspent Transaction Output) is also one of the excellent solutions that Bitcoin is proud of. It greatly reduces the size of the database and can always maintain light and efficient processing. The traditional account model used by Ethereum is exactly the opposite. Regardless of whether the state data is valid or not, it will continue to accumulate, becoming more and more bloated until a single node cannot process transactions. This problem is "state explosion", one of the potential "problems" that Ethereum has not yet solved.

Simply put, Bitcoin's UTXO is a person who can never gain weight no matter how much he eats, while Ethereum's account model is a person who gains a pound of weight every pound he eats. If this problem is not solved, as time goes by, Bitcoin will remain young and active, while Ethereum will become fatter and fatter, until it is bedridden.

3. Bitcoiners despise Ethereum for its bells and whistles, “copycats” and “scams”

In fact, many Bicoiners have always believed that Ethereum is just like other "copycats" and has no value in the long run. Some even think it is a "complete scam". For example, some well-known "Bitcoin maximalists". Earlier, Blockstream CEO Adam Back listed Ethereum, Ripple and other projects (mainly other projects in the top 10 of market value besides Bitcoin) as scams.

Even the current boom in the Ethereum ecosystem has not changed these people’s views. Recently, MicroStrategy CEO Michael Saylor made a statement that “Ethereum is inherently immoral” and that ETH is “clearly a security.” ( V God and the Ethereum community quickly fought back, revealing that Michael Saylor was charged with securities fraud by the U.S. Securities and Exchange Commission as early as 2000, and later had to pay a fine to reach a settlement with the regulator.)

As a protocol layer, the Bitcoin community has always advocated minimalism, and simplicity means security. Ethereum itself cannot be as simple as Bitcoin in terms of characteristics and functions, which is also one of the complaints in the eyes of many Bitcoiners.

Under the proof-of-work mechanism, Ethereum was naturally not as good as Bitcoin in terms of computing power or number of nodes at the beginning.

POS Ethereum VS POW Bitcoin

Many years have passed, BTC is still the same BTC, and ETH is constantly seeking transformation. As the Ethereum POS merger is approaching , what new look will the POS version of Ethereum bring us?

1. Energy consumption: a radical change in narrative under the global “dual carbon” goal

Not long ago, Citibank released a research report specifically for the Ethereum POS merge upgrade, which stated that once Ethereum launches the upgrade, it may lead to a reduction in energy intensity, turning Ethereum into a deflationary asset, and may achieve a more scalable future roadmap through sharding. In general, Citi pointed out that after the merger, Ethereum can be considered an energy-saving and environmentally friendly cryptocurrency because energy consumption will be reduced by 99.95%. Once Ethereum becomes a deflationary asset, its status as a means of storing value will become more prominent.

In June 2021, the United Nations official website published an article titled "Is Cryptocurrency a Sustainable Solution or a Climate Disaster?", which raised the issue of high energy consumption caused by Bitcoin. The article pointed out that it is estimated that the Bitcoin network consumes more energy than countries such as Kazakhstan and the Netherlands. Moreover, since fossil fuel power plants still occupy a major part of the global energy structure, Bitcoin mining can be said to be part of the cause of greenhouse gas production and climate change. Compared with traditional credit card transactions, the energy consumed by each Bitcoin transaction is also huge. For example, each Mastercard transaction uses only about 0.0006 kWh of energy, while each Bitcoin transaction consumes 980 kWh. Some market analysts say that this energy consumption can power an average Canadian household for more than three weeks.

At the same time, the article on the UN official website also recognized the crypto industry's search for low-energy solutions, and used the Ethereum to POS mechanism as a positive example . The article mentioned that the organization behind Ethereum, the Ethereum Foundation, is studying a new method of verifying transactions, namely the Proof of Stake consensus (PoS), which can reduce the energy cost of each transaction by 99.95%. At the same time, many blockchain industry participants also hope to ensure that the entire industry can eventually achieve complete carbon neutrality.

In general, top institutions have also noticed that the Ethereum POS solution is not only in line with the alternative solution to reduce energy consumption under the background of the global "dual carbon" goal, but also strengthens the status of Ethereum as a means of storing value.

2. Views that were once despised by the Bitcoin community have been eliminated one by one

In recent years, the Ethereum ecosystem has continued to attract the attention of the Bitcoin community. We can observe that some members of the BCH and BSV communities, the two largest branches (forks) of the Bitcoin community, have begun to turn to Ethereum, indicating that this once "despised" "little fan" is changing people's (especially the Bitcoin community's) views.

1. Reduce inflation, or even deflation

There is still no upper limit on issuance, but the vibrant Ethereum ecosystem, coupled with EIP1559 and the switch to POS, has greatly reduced inflation and may even lead to deflation in some cases. This huge change has led many people to believe that Ethereum will become an important "means of value storage" in the future, which is exactly the "iron rice bowl" of Bitcoin.

2. Capacity expansion and other solutions are gradually introduced

As Layer2 and future sharding solutions are launched one after another, solutions to the problem of state explosion are also proposed. The Ethereum ecosystem will provide reliable infrastructure for large-scale Web3 and the Metaverse. Although it is more complex than Bitcoin as a protocol layer, its ecological progress over the years is worthy of this complexity and has proved its security and reliability. Through the development of Web3 applications such as DeFi, GameFi, and the Metaverse, we can also see the sustainable application landing value of Ethereum that is not a "Ponzi".

summary

The former "little fanboy" has now begun to show off his strength in front of Bitcoin. Regardless of whether it is a "copycat" or not, we should be less prejudiced against new things and new solutions. Even though many projects have failed, their ultimate goal is to surpass the original one someday. It is undeniable that Ethereum is becoming more and more competitive. Let's wait and see in the next decade!