Is Ethereum a better blockchain than Bitcoin long-term?

Do you guys think that Etherium will be a better blockchain for the rest of this Century? Will we need BTC the asset to migrate to Etherium blockchain, because the Bitcoin blockchain will become ossified and more vulnerable to attacks by rich governments?

After listening to the Bankless podcast, I am convinced that Etherium is ultra-sound money. But maybe that view is incorrect. Let me know if you agree or disagree with the above statements :slight_smile:

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Interesting question. I am curious to know if people think ETH is going to be diluted over time due to interest payments for those that stake ETH.


Good observation

Well, there is an Ethereum update that will take place on July 14th, called EIP-1559. This update will make the current transaction fees that are being paid to miners, instead be burned(sent to an address that ETH could not be retrieved from).

So, yes there will be new issuance of ETH that will be paid to stakers, but the current model says that more ETH will be burned than issued. Hypothetically, there could be 1000 new ETH that is newly issued in a year, but due to EIP-1559, there will be 1100 ETH that is burned that year. So, ultimately ETH becomes deflationary. It will become more concentrated instead of diluted.

Bitcoin does have a supply cap of 21 million, but ETH doesn’t have a supply floor so it can go as low as the community allows it. One of the Ethereum researchers Justin Drake projected that the supply of ETH will go from 120 million to 100 million in about 10-12 years.

This is why the ETH is going up in price, institutions are buying! This is why ETH is ultra sound money :slight_smile:


I like your explanation. The point you make about Bitcoin having a supply cap of 21 million appears to make it harder money than ETH due to the fact of that there is so much more in circulation and easier to make. As the number of staked ETH rises so will the number of ETH mined to pay rewards. Even though there is some burning.

The way I understand it - the individuals or corporations that have the most ETH staked gets the most rewards for little to no business risk. Whereas BTC miners have hardware and energy investments to make with no guarantee of receiving any rewards. Due to these factors ETH will be softer money than BTC even if ETH’s market cap surpasses BTC in the future.

I like ETH. But, I don’t believe it can be everything and especially not hard money due to it’s inflationary monetary policy.

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I definitely agree that bitcoin is hard money, probably the hardest money we have had in the history of mankind. Bitcoin like Ethereum needs security and this security comes from miners that are incentivized by fees. Right now there are two types of fees: issuance and transaction fees. Currently, we see that the majority of fees on the Bitcoin blockchain come from issuance of new BTC since the majority of people are HODLing it and not transacting with it. On Ethereum we see that twice as many fees are generated from transactions, then from issuance. Although, issuance is considered a better source of fees because it is more predictable.

But I see a disadvantage with the 21 million supply cap. Due to the fact that the vast majority of BTC has already been mined, issuance will decrease with every halving and after about 10-15 years those issuance rewards might not incentivize miners to do the work, especially if there is a bear market. And once we mine all the BTC, there wouldn’t be any issuance rewards, only transaction fees. So I am not sure if this will be a security threat to Bitcoin the blockchain.

As far as ETHs supply goes, you are right that there is always more to be made, but this also means that issuance rewards will continue forever. As far as ETH being easy to make, I guess that is true. But how much ETH is made per year is capped, because the reward per block is fixed and the block time is 13 seconds, I think. So you can’t increase or decrease issuance rewards unless the community votes for a change in issuance reward, which I think is also the case for Bitcoin.

So basically, we know how much ETH will be created in a given year, but we don’t know how high the burning rate will get. The more the network is used the more ETH is being burned. But also we have to think about the ETH that is being staked is pretty much frozen and it is taken out of the circulating supply and we also have to consider ETH locked in DeFi because that is also not part of the circulating supply.

So we have 3 things that limit ETH supply:

  1. More ETH being frozen in staking because companies are chasing rewards

  2. More ETH being locked up as collateral because more people will be taking
    out loans for various reasons

  3. This will increase the amount of transactions and with every single transaction
    ETH is burned. Busier the network = higher the fees = supply decreases

I think these three forces will make ETH deflationary over time, but maybe I am wrong because I am still learning and I will be happy to see all perspectives on this

You make some good points. My grandma always told me that when something is too complicated or convoluted to understand it is usually a sign of duplicity. You even pointed out the negative and positive risks when it comes to ETH. Even then there are many uncertainties. “As far as ETHs supply goes, you are right that there is always more to be made, but this also means that issuance rewards will continue forever. As far as ETH being easy to make, I guess that is true. But how much ETH is made per year is capped, because the reward per block is fixed and the block time is 13 seconds, I think.”

What happens to supply when staking is un-frozen? Again, I like ETH, but if the narrative is going to be that ETH is sound money then I want to understand it’s monetary policy. It should be clear and easy to understand like BTC’s. There are currently no internal metrics to show what is the current ETH supply nor how much ETH will be burned. See this short video

Also see this short clip about whether ETH is harder money that BTC.

After seeing this, I question how different is ETH’s monetary policy to that of our current Central Bank (CB) policies toward fiat currency. They (CB & ETH) appear to have many similarities of money dilution where those best positioned get the most rewards such as bailouts, stimulus, or first dibs to coins during pre-launch win. It continues the practice of unsound money principles.

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