Will there be a battle between Bitcoin and Ethereum?

Chapter 0 Introduction

Ethereum has enjoyed a great success this year. There are three pieces of evidence that prove this. First, the price has increased by more than 20 times; second, a large number of large companies and institutions have cooperated with Ethereum; and third, a large number of venture capitals have invested in Ethereum and related startups.

Will Bitcoin and Ethereum fight each other? Is it an either-or war?

Chapter 1 What are Bitcoin and Ethereum?

In order to compare the two things, we should first clarify the concepts of these two things.

Bitcoin is a currency. This concept is the easiest to understand. Because Bitcoin can serve as a general equivalent. But this explanation is a projection of Bitcoin among our users. If we dig deeper, Bitcoin is a pile of data generated by a certain algorithm and data structure, and it will continue to be generated. As long as this pile of data stops increasing, we will think that Bitcoin is dead. This pile of data can be used for many things. Now we use it as currency, and we can also use it to do things like smart contracts.

We define Ethereum as a smart contract and decentralized application platform. Calling it a "platform" is also a projection among our users. The concept of platform is very interesting. For example, we say that Windows is a platform, WeChat is also a platform, for example, we say that a university is also a platform, and society is also a platform. The so-called platform is what we can do. And digging deep into Ethereum, it is actually the same as Bitcoin, which is also a pile of data generated by a certain algorithm and data structure. This pile of data is also continuing to increase and cannot stop increasing.

In essence, Bitcoin and Ethereum are a bunch of data generated by a certain algorithm and data structure, and they need to be generated continuously. It’s just that the algorithms and data structures of the two are different.

Chapter 2 The Growth Path of Bitcoin and Ethereum

At the beginning, Bitcoin was played by a very small number of geeks in the world. They used computers to run these data called Bitcoins, and then slowly other people fell in love with it, and the crowd gradually expanded. Then some people used Bitcoin technology and formed companies around it. So the development of Bitcoin has expanded from individual enthusiasts to institutional organizations.

Ethereum is just the opposite. Ethereum started out as a product of a certain company. The expansion of this product mainly attracted some companies and institutions to use the Ethereum technology. Then it attracted many individuals to play, invest or run the data called Ethereum. So the development of Ethereum is a process of expansion from institutions to individuals.

Chapter 3 What are the users of Bitcoin and Ethereum?

The main user groups of Bitcoin are divided into three groups. The first is the holders, that is, people who regard Bitcoin as currency, mainly for investment. The second is miners, who either become holders or sell coins for money after mining. The third is developers, who will write code for Bitcoin and make suggestions for improvement. Some of these users will form companies and become institutional or organizational users of Bitcoin, treating Bitcoin as a tool or doing secondary development, opening exchanges, making wallets, doing foreign exchange delivery, and even anchoring assets, etc.

Ethereum currently has four main users. The first is institutions or organizations, who do secondary development on the Ethereum platform and create some products to meet certain functions. The second is Ethereum developers, which are several core developers represented by the Ethereum boss. The third is miners. This is the same as Bitcoin miners. The fourth category is coin holders, including those who hold Ethereum itself and digital assets developed by the primary users. The main purpose of this type of users is of course to make money.

Chapter 4 The Creation Process of Bitcoin and Ethereum

What is meant here is not a pile of data, but something that can be circulated as a commodity.

Both Bitcoin and Ethereum are generated through mining programs. Whoever solves a problem first in a competition will receive the system's reward coins.

The difference between the two is that the problems they solve are different. Bitcoin takes 10 minutes to solve a solution, while Ethereum takes 12 seconds to solve a solution.

Chapter 5: Decentralization of Bitcoin and Ethereum

Bitcoin's decentralization is reflected in three aspects.

1. One is the decentralization of complete nodes.

2. The second is the decentralization of computing power.

3. The third is to develop decentralization.

Ethereum's decentralization is reflected in two aspects.

1. One is the decentralization of complete nodes.

2. The second is the decentralization of computing power.

The development of Ethereum is completely centralized, which greatly improves efficiency compared to Bitcoin.

Bitcoin's full node stores all Bitcoin data from block 0 to the latest height, including all Bitcoin ownership and transaction records. The decentralization of its full node ensures that the Bitcoin system is difficult to be effectively destroyed.

Ethereum's full nodes not only record the ownership and transaction records of all ether coins, but also the ownership and transaction records of all digital assets that are secondary developed on the Ethereum platform. Therefore, if Ethereum is widely used, the amount of data on its full nodes will be very large. However, it is said that Ethereum can have a technology called "slicing" to ensure the decentralization of full nodes.

The computing power and decentralization of Bitcoin development ensure that the rules of Bitcoin are stable and cannot be arbitrarily destroyed.

The rules of Ethereum are mainly based on the will of centralized developers. In order to ensure that computing power does not break the rules, Ethereum developers have the power to modify the algorithm at any time and change POW to POS to eliminate all computing power.

Chapter 6 The Source of Value of Bitcoin and Ethereum

The value of Bitcoin comes from its scarcity. The upper limit of 21 million coins is guaranteed by mathematical laws, while the decentralization of computing power and development ensures that it cannot be modified. This feature is designed to imitate gold. After accumulating enough users, Bitcoin is recognized as a currency. It can be used to store value and ensure that wealth is freely controlled by individuals.

The value of Ethereum comes from its usefulness. Although there is an upper limit to the number of Ethereum, that is, until its mining is changed from POW to POS, its upper limit can be finally confirmed. Because to develop programs on Ethereum, issue digital securities, etc., you need to consume one Ethereum, and the Ethereum is directly sent to the black hole address and destroyed. At the same time, moving any such digital assets requires a small amount of Ethereum as a mining fee. So Ethereum is useful if Ethereum develops well. Ethereum will have a price because of its usefulness and ultimate scarcity.

Chapter 7 What are the Achilles' heel of Bitcoin and Ethereum?

Bitcoin is considered to have currency attributes, and the government has the right to issue currency in today's world. The government naturally tends to protect its seigniorage. Therefore, the government has the motivation to eliminate Bitcoin. In order to avoid being eliminated, Bitcoin must be decentralized. At the same time, as an investment product that can be speculated, Bitcoin must not be manipulated and destroyed by people or organizations, and short-selling for profit, and it must also be decentralized. So at present, whether it can be decentralized is the Achilles' heel of Bitcoin.

Bitcoin is not afraid of being challenged by digital currencies with better performance. This is mainly due to Bitcoin's first-mover advantage and the fact that its ecosystem cannot be replicated. It can be said that Bitcoin's ecological viscosity is very high.

Ethereum is not defined as a currency, but as a platform for secondary development. This definition is naturally legitimate. It is difficult for the government to find a reason to eliminate Ethereum.

As an investment product that can be hyped, individuals or organizations also have the motivation to manipulate and destroy Ethereum and make profits by short selling. However, this is not feasible because short sellers cannot be anonymous. This is just like you cannot make profits by short selling a stock by blowing up the company.

Both of these are different from Bitcoin, and Ethereum is not afraid of this.

The biggest weakness of Ethereum is that its scarcity is questionable. Because the development rights are centralized, its scarcity must be guaranteed by the character of the developer. At the same time, the competitive pressure of supplying similar products in the market is much greater than the similar pressure faced by Bitcoin. The ecological viscosity of Ethereum is questionable.

Chapter 8 Will there be a battle between Bitcoin and Ethereum?

Many people in the community think that the two are not on the same path at all and will not compete with each other. In fact, I don't think so. As the spheres of influence of both sides expand, there will be a war. I will not describe the reasons first, but directly describe how the war happened.

Bitcoin’s attack on Ethereum will happen like this:

Bitcoin has a very high user stickiness, and organizations and institutions are fully motivated to compete for users on the Bitcoin traffic entrance. As the only data chain in the world, Bitcoin can be used to anchor assets. Bitcoin itself has a large number of users, and any institution that issues securities on it can gain the advantage of a large user base. Especially after the side chain technology is complete, issuing digital securities on the side chain is like reaching into the pocket of Ethereum.

Bitcoin's attack on Ethereum is to use its user stickiness and user habits as weapons.

Ethereum’s attack on Bitcoin will happen like this:

The three major properties of currency are scarcity, homogeneity and divisibility. The only thing that Ethereum lacks at present is scarcity. When Ethereum develops to a point where the ecological viscosity is large enough, that is, when enough institutions and organizations use Ethereum to develop enough digital securities, Ether itself will be enough to establish scarcity. Then, after attracting enough consensus, it can be used as currency. Moreover, its block packaging time is shorter and the transaction throughput is greater. It has a greater advantage than Bitcoin. This is Ethereum stealing things from Bitcoin.

Ethereum's attack on Bitcoin is to use the viscosity of its institutions and organizations as a weapon.

For example, Alibaba and Tencent. A few years ago, everyone thought they would never have anything to do with each other. What about now?

Alibaba first gained the support of various companies to conduct transactions on its platform, and then slowly expanded its users, but its tentacles extended to every individual.

Tencent, on the other hand, collects all personal information, then slowly acquires some applications and pushes them to these individuals, allowing these applications to gain traffic entry.

Tencent is attacking from individuals to institutions to gain the whole world. Alibaba is attacking from institutions to individuals to gain the whole world. Currently, these two companies are fighting desperately, and the war is raging everywhere. It is a world war.

If Bitcoin and Ethereum can avoid their respective weaknesses and grow stronger, there will eventually be a world-class war.