In terms of technology and ecology, Ethereum is much better than Bitcoin. Technically, Bitcoin has basically not undergone any major changes since its birth. It has always used the proof-of-work consensus algorithm that consumes huge amounts of energy, and basically only supports a single behavior, that is, transfer transactions. Even the newly born inscription ecology is mostly hype and has no real application. On the other hand, Ethereum not only has higher performance than Bitcoin, but also supports smart contracts. The ecological application is very rich, basically covering all application areas on the blockchain, including decentralized finance, traceability, decentralized games, etc. In addition to the high handling fees that Ethereum has been criticized for, it feels that Ethereum is stronger than Bitcoin in all aspects. But as of April 16, 2024, the price of Bitcoin is around $63,000, and the market value has reached $1.33 trillion; while the price of Ethereum remains around $3,100, with a market value of $370 billion. The difference in market value between the two is not a little bit, but a gap of nearly 3 times. Why is the market value of Ethereum so different from that of Bitcoin? I think from the following aspects:
1 Different positioning
Objectively speaking, the financial sector is the most important and core application area of blockchain. Blockchain was born to solve the problem of currency devaluation caused by the excessive issuance of fiat currency. The positioning and core function of Bitcoin is value storage, similar to gold, hence the term 'digital gold.' Because Bitcoin's core function is solely value storage, it does not pursue excessive functionalities; transactions are the main function needed for value storage. Whether it supports smart contracts is just an embellishment. Ethereum's positioning is to develop ecological applications for blockchain, and its value storage function is significantly weaker compared to Bitcoin.
2 Different total amount expectation management
The total amount of Bitcoin is fixed at 21 million. Some may think that 21 million is a small amount. However, we must understand that Bitcoin supports 8 decimal places, meaning one Bitcoin can be divided into 100 million parts, each part being one Satoshi. Therefore, in terms of Satoshis, the total amount of Bitcoin is 21 trillion Satoshis, which is actually not small. Nevertheless, because Bitcoin's total amount is fixed, it greatly enhances Bitcoin's value storage function. Although technically it is possible to increase the supply of Bitcoin, the miners will not make such a foolish move. If the amount of Bitcoin changes, it will alter the recognition and trust that people have built up over the long term, which could lead to a collapse in Bitcoin's value. The Bitcoins that miners have worked hard to mine would significantly depreciate.
The total amount of Ethereum is not fixed; it is currently around 120 million, and although it grows very slowly, the total amount is not fixed, which greatly weakens its value storage function.
3 Different consensus
I believe that the success or failure of a blockchain project is influenced by many factors. However, the more important factors, in my opinion, include the following: 1 Technology 2 Ecosystem 3 Consensus
The above three points are closely related and complementary, not independent of each other. Among these three points, I believe the most important but also the most difficult is the third point: consensus. Consensus means people's recognition and trust. Establishing consensus on a digital currency involves enormous costs in terms of both technology and time.
The genesis block of Bitcoin was created on January 3, 2009, while Ethereum's genesis block was created on July 30, 2015. Bitcoin, as the ancestor of blockchain, appeared 6 and a half years earlier than Ethereum, giving it a first-mover advantage. This is similar to Tencent's QQ and WeChat; for latecomers, breaking Tencent's monopoly in instant messaging is very difficult. This is not only a technical aspect but also influenced by users' habits with the products. Moreover, the development of anything requires a process and cannot be achieved overnight. Bitcoin has also gone through more than a decade of development, facing many life-and-death challenges. Even when governments worldwide tried to suppress it, people found that Bitcoin was not defeated, leading to its gradual recognition. Particularly, the U.S. government and Wall Street initially resisted Bitcoin but later realized they could not suppress it, choosing coexistence instead. Especially this January, the U.S. SEC approved Bitcoin spot ETFs from dozens of issuers, represented by BlackRock. Therefore, in terms of consensus, Bitcoin is far ahead of Ethereum. Additionally, for consensus, one can refer to the number of followers on Twitter. In April 2024, Bitcoin had 6.5 million followers on Twitter, while Ethereum had 3.3 million, a difference of 1.5 times.
By the way, Bitcoin has many forks, such as LTC and Bitcoin Gold, but their market values are far less than Bitcoin. Why? Because the consensus is different. The consensus of Bitcoin forks is low, and thus their prices are low. Ethereum also has a market value far higher than that of its fork Ethereum Classic, and the reasoning is the same.
