Who will be the final winner in the blockchain protocol war? Bitcoin or ETH?

Note: The author Tuur Demeester is an independent investor and editor-in-chief of Adamant Research.

The recent growth in ETH prices (ETH’s market cap has reached nearly $5 billion, 30% of Bitcoin’s market cap) has made me re-evaluate my thoughts: At some point in the future, can ETH replace Bitcoin as the dominant cryptocurrency market?

I have a "totalitarian" view of cryptocurrency due to various network effects. I believe that only one protocol will eventually win more than 80% of the market share. Based on this idea, I currently have a dual view on the development of the ecosystem: either Bitcoin wins or ETH wins.

Here are my assumptions about the ETH blockchain, compared to Bitcoin:

- "Turing vulnerable", which means that the possibility of attack is high
- Weak backward compatibility
- Moving towards a centralized future
- Uncertainty of transaction completion (vulnerable to tampering)
- PoS algorithm is less efficient than PoW
- The ETH blockchain is more likely to swell than Bitcoin, ultimately leading to riskier deployment routes, such as sharding

Based on these ideas, I continue to believe that Bitcoin will continue to dominate the development of the cryptocurrency market.

However, recent events have shaken me:

- The establishment of the Enterprise Ethereum Alliance (EEA) has achieved unexpected results, and the credibility of the ETH project in the financial field has also been enhanced
- Bitcoin is facing a bottleneck in expansion, which is difficult to completely solve in the short term
- ETH's current on-chain transaction fees are much lower than Bitcoin
- ETH's flexibility has attracted a large number of developers
- Some projects have already moved to the ETH platform or are already creating ETH applications: Brave, Storj, Shapeshift
- The New York Department of Financial Services (DFS) has officially authorized Coinbase to launch ETH trading

I still have my doubts about the long-term value preservation capabilities of the ETH blockchain (and its staying power), but I’m starting to seriously consider the following questions:

- What if the ETH network attack can be effectively controlled, or the market is more inclined to accept hard fork intervention?
- What if the majority of the market wants a cryptocurrency in a centralized governance model?
- What if the ETH developer community starts to gain the upper hand while Bitcoin is facing a stalemate?
- What if ETH solves the scaling problem through payment channels? According to the Raiden (ETH version of the Lightning Network) team, the software is not far from being officially released.
- What if ETH successfully runs the PoS mechanism and convinces people that PoW is a waste of resources?

Simply put, what if ETH successfully transforms into a perfect cryptocurrency and ultimately wins the protocol war?

To give another simple example, Betamax has clearer picture quality than VHS (both are tape formats), but VHS has a better marketing strategy and the tape playback time is longer, which just meets market demand.

Therefore, I see another side of ETH:

- Bitcoin has always been an immutable ledger (suitable for long-term preservation of value), while ETH's transaction history is modifiable
- Bitcoin developer activity outperforms ETH
- Bitcoin has 100 core developers, how many does ETH have???
- Core developer Vlad Zamfir: ETH is not a currency, is not safe, and has low scalability
- Legal issues of ICOs, ETH and ETC, and SEC aftermath
- Buterin and Zamfir have different ideas on scaling (Casper)
- Future expansion issues, such as "the authenticity of PoS blockchain transaction history is difficult to determine without other sources of trust" and sharding...
- Inflation rate is unknown (money supply is not limited)
- No definitive value proposition

Bitcoin also has several hidden trump cards:

- Segregated Witness (Segwit) can be activated via UASF, bypassing miners directly and instantly activating alpha Lightning payments (even if this fails, Lightning can be deployed without activating SW).
- Rootstock’s technology enables the transfer of ETH to Bitcoin.
- Sidechains are coming soon, a technology that allows testing of additional features without the need for SW activation (anyone can get low-cost block space on a sidechain).
If only one cryptocurrency can dominate and become an "Internet asset" in the future, then most capital investment will be at risk. Therefore, it is particularly important to answer this question: Who is the winner of this protocol war, Bitcoin or ETH?

To find the answer to this question, first answer the following questions:

- What are the challenges of deploying payment channels (Lightning Network and Raiden) in Bitcoin and ETH respectively?
- Are there any non-speculative use cases for ETH currently? (What do people use ETH for?) And what are the companies that are making money through ETH smart contracts?
- Is there a way to quantify the security model of ETH and Bitcoin?
- How to evaluate the quantity and quality of Bitcoin and ETH core development work?
- Have similar wars of agreement been fought in history?
- What security analyses have been done on blockchain expansion and sharding?

Thanks for reading this article, I would love to hear your comments and thoughts.

Currently I hold Bitcoin but no ETH.