Thread by @muneeb

How does the recent interest in Ethereum impact the crypto industry?

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1/ Bitcoin found product-market fit as digital gold (store of value) with no real competition in that category for years.

Ethereum's upcoming change in token economics with reduced supply has increased interest in the asset.

2/ Ethereum aims to be both (a) gas for smart contracts and (b) "ultra sound" money, i.e., compete with Bitcoin as a store of value.

Challenging Bitcoin's position as a store of value and the #1 crypto asset will undoubtedly result in tribal arguments.

3/ Ethereum fans will tell you that "flippening is imminent" and point to developer and smart contract traction.

On the other side, Bitcoin hardliners will say that Ethereum is broken/centralized/over-hyped.

In my view, the reality is not at either extreme. Let's explore.

4/ Ethereum is riding a very different wave from Bitcoin; they just both happen to be crypto assets. ETH is gas for contracts; BTC is digital gold.

In my view, the recent interest in Ethereum is a validation of the size of the smart contract market more than anything else.

5/ Smart contracts are a powerful force, and Ethereum is riding a wave of smart contract adoption as the current dominant player.

The competition from other layer-1 protocols (Solana, BSC, Avalanche, etc.) is also gaining momentum, pointing to a large market for smart contracts.

6/ Ethereum as a store of value is a relatively new argument with proposed reduction in supply.

Ethereum is more experimental in nature; it evolves and changes. That property makes it a less desirable candidate for a reserve currency; you want the reserve currency to be durable.

7/ Bitcoin community will point to the DAO hack (reversing transactions), high requirements for running (archive) nodes, the uncertainty of future designs (e.g., PoS switch), etc., to argue why ETH can never be money.

Bitcoin is simple, durable, and extremely hard to change.

8/ However, Ethereum has survived the twists and turns over the years. The current market rotation from BTC into ETH is real.

With all its flaws, Ethereum is the largest network by active developers and deployed smart contracts. These are facts that you can't ignore.

9/ Most people don't realize that you can directly build apps & smart contracts in the Bitcoin ecosystem: BTC as programmable money.

The competition from Ethereum can accelerate the adoption of smart contracts for Bitcoin.

10/ Smart contracts for Bitcoin can change the nature of the Bitcoin vs. Ethereum debate.

It's no longer about the durable store of value vs. smart contracts. You can bring smart contracts to the durable store of value (Bitcoin) instead of taking BTC to smart contract platforms.

11/ The market for smart contracts might be larger than we all think. An increased interest in Ethereum means an increased interest in smart contract platforms, including for Bitcoin.

The pie expanding for everyone is a healthy thing for the industry.