The Battle for the Throne between Bitcoin and Ethereum What are the determining factors for victory?

Bitcoin vs Ethereum Factors for Victory in the Battle for the Throne
(Harvesters in the Wheatfield, Van Gogh)

In the difficult years of 2018/19 for Bitcoin and Ethereum, Blue Fox Notes translated or wrote some articles related to Bitcoin and Ethereum, and has always been optimistic about the development of Bitcoin and Ethereum.

It is difficult to say which one is better because they originally took completely different paths. Bitcoin is heading towards the most valuable position in the digital age as the most native digital asset and the most primitive OG asset of the future digital age, with an irreplaceable consensus position. Ethereum is following the path of the digital asset ecosystem, exploring the application scenarios of defi, nft, games, and other applications on Ethereum, and promoting the mass adoption of the encryption field.

If we talk about market value simply, who will have a higher market value in the future? There are two key factors.

1. Who will reach the singularity moment faster?

Bitcoin is getting closer to its singularity moment, perhaps three to five years later, when its user base will reach a certain scale and undergo a mutation, entering a phase of rapid improvement. BTC currently relies to some extent on external forces such as traditional institutions to attract a large number of users.

Furthermore, it is worth noting that since this year, Bitcoin has seen some active community forces based on the ordinals protocol. Based on Bitcoin, it is possible to develop a second-layer ecosystem that is different from Ethereum L2. If this develops, some unexpected things may emerge. This is a potential advantage for Bitcoin in the future. It is still unclear how far it will evolve, but it is worth continuous attention. If a second-layer ecosystem emerges, it will compete with Ethereum to some extent.

Ethereum’s singularity moment relies on the large-scale adoption of defi, nft, web3 games, and web3 social. However, this singularity moment requires infrastructure support. Currently, smart contract wallets based on L2 and scaling based on Rollup are under construction, and it may take three to five years to complete the overall infrastructure construction. Once the infrastructure is built, it will greatly promote the arrival of the singularity moment.

Overall, the breakthrough logic of Bitcoin and Ethereum is different. As the overall economic value on the Ethereum network increases, Ethereum, as the underlying asset and security provider, will continue to increase its market value. Currently, a small portion of tokenized USD (about $100 billion) has been tokenized on Ethereum and applied in the defi ecosystem. If a larger range of tokenization of US bonds and stocks on Ethereum occurs in the future, the scale of Ethereum defi will increase to a considerable extent.

Once Ethereum carries trillions or even hundreds of trillions of dollars in assets, the market value of Ethereum itself will increase, otherwise it cannot provide sufficient underlying security. Of course, it will take a long time and there will be many variables in order to reach that day. For example, the sudden emergence of some breakthrough technology.

2. Who is the creator of native stablecoins?

In one scenario, Bitcoin has the opportunity to remain stronger than Ethereum by building its own payment network ecosystem and having a native stablecoin within this network. From this perspective, the victory or defeat of the battle between Bitcoin and Ethereum depends on the stablecoin war.

For now, there is a greater probability that it will be built on the Ethereum network, which is also an important reason why some people believe that Ethereum will eventually surpass Bitcoin. As for how it will evolve in the future, there is currently no consensus.

There is also a possibility that with the progress of RWAs, traditional US dollars and US bond tokenization may squeeze the early demand for native stablecoins (after all, people find it easier to understand stablecoins in the fiat world), which means that the demand for native stablecoins may be niche in the next 5 to 10 years. Niche demand may create early bottlenecks for the development of native stablecoins. And major breakthroughs may take more than ten years or even decades. If this happens, native stablecoins will not have the upper hand in the battle for the iron throne in the next five to ten years. Chains that carry traditional world stablecoin assets may gain a first-mover advantage, and in this regard, the probability of Ethereum is slightly higher than Bitcoin.

Who will ultimately ascend to the iron throne?

Overall, in terms of the strength of native cryptographic power, decentralization, and social consensus, Bitcoin currently has the advantage. In terms of security, flexibility, and the level of ecological prosperity, Ethereum has the advantage.

When there are factors such as banking crises and geopolitics, there is an opportunity for the Bitcoin narrative to rise and it is expected to achieve a certain breakthrough in terms of user scale. However, due to the complexity of management for ordinary users, it needs to rely on traditional institutions to achieve large-scale adoption.

If in the next five years, Bitcoin enters the singularity moment faster than Ethereum, then Bitcoin may have a leading advantage in the path to the iron throne due to its social consensus power.

If in the next three to five years, Ethereum completes its infrastructure construction (completing rollup-centered scalability + L2-based smart contract wallets, etc.), and during this period, Bitcoin does not enter the singularity moment, then Ethereum may accelerate its entry into the singularity moment after 3-5 years, which means it may enter the stage of large-scale adoption faster than Bitcoin.

Once the infrastructure construction is completed, Ethereum based on L2 multi-chain or L3 can achieve an interactive experience close to traditional web2, which will remove the barriers for a large number of users to enter. The exploration of NFTs, DeFi, web3 games, and web3 social aspects will be greatly accelerated. If RWAs enter the Ethereum DeFi field, it may drive a substantial increase in its TVL and enter a new level of composability exploration.

Bitcoin has a time window of about five years. If the singularity moment is achieved within these five years, under the promotion of traditional institutions and communities, it will not be easy for Ethereum to catch up.

However, if the singularity moment is not reached within five years, then after five years, due to the large amount of digital assets it carries, Ethereum’s security will need to be greatly improved. It is possible that a super underlying chain with a value of trillions or even tens of trillions of dollars will emerge in about 10 years.

Based on the current situation, it is difficult to conclude who will eventually take the iron throne between Bitcoin and Ethereum. Everything depends on the evolution of the next five years. The construction of the two in the next five years will basically determine their position as the leader in the encrypted world for the next several decades. Before the two reach their peak, any rise or fall is temporary. Everything is evolving, and no one has a crystal ball. Everyone will have their own preferred logical assumptions. Just believe in what you believe in.

If we must talk about a probability, currently, in my personal opinion, Ethereum has a slightly better probability of winning. But this is just one person’s opinion, and this probability will be constantly adjusted as time changes. Let’s see who can win after five years. These five years are the most critical construction phase, and we can basically see some clues about the pattern.

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