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The Idea That Ether Doesn’t Compete With Bitcoin Makes No Sense

 
The Idea That Ether Doesn’t Compete With Bitcoin Makes No Sense
Ethereum / Breaking News / Bitcoin

The Idea That Ether Doesn’t Compete with Bitcoin Makes No Sense

Ethereum is the only blockchain that has gained a level of success and notoriety that is anywhere near comparable to what Bitcoin has achieved over the past nine years. The Ethereum platform has attempted to differentiate itself from the other Bitcoin alternatives by focusing on its use as a protocol for smart contracts rather than a form of peer-to-peer electronic cash, and many individuals have gone as far as to say that Bitcoin and Ethereum don’t compete with each other at all.

Well, here’s why that makes no sense. ‘Ether is Something New and Different’ Ever since its inception, ether (the native token of the Ethereum blockchain) has been referred to as digital oil rather than digital gold, which is the analogy that has usually been made with bitcoin over the years. For this reason, many early Ethereum supporters argued that ether does not compete with bitcoin as a store of value because it is going after a completely different use case and market. The basic idea is that ether needs to be used to access the Ethereum network’s ability to process smart contracts on a “world computer.” This is the main use case of ether, as opposed to bitcoin’s use as a bearer ecash.

Of course, Ethereum was also essentially marketed as “Bitcoin but better” or “Bitcoin 2.0,” which led many new investors into the asset who initially missed out on the bitcoin boom. This eventually led to the rise of the “flippening” meme, which is a prediction that the ether market cap will ultimately rise to a size larger than bitcoin’s. https://twitter.com/kyletorpey/status/1054408029192503296 Ether is an Appcoin As reports have concluded in the past, the value of any crypto asset is mostly judged by the “hodlers of last resort.”

In other words, the assets that are faithfully held for long periods of time are the ones that will be the most successful in terms of storing value. With ether, the idea was that the digital asset would increase in value as more people decided to use Ethereum as a platform for smart contracts; however, as Daniel Krawisz pointed out back in 2014, there is a serious flaw with this line of thinking due to the fact that users are able to avoiding holding ether by simply switching into the asset for a very short period of time during their use of the platform for their smart contracts.

In other words, ether is unable to carve out its own niche in terms of creating a valuable digital asset because, at the end of the day, it’s still competing with the likes of bitcoin as a simple store of value more than anything else. The number of smart contracts being executed on Ethereum doesn’t affect the price of ether anywhere near as much as the hodlers (see more detail on this point here).

The network effects around bitcoin as a store of value have made the battle between these two major crypto assets a rather one-sided competition up to this point. It’s also important to note that acting as a viable store of value is critical to the long-term viability of a blockchain as a whole because a lower-valued native asset also means there is less of a financial incentive for miners to secure the network, which means the network is inherently less secure.

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