Bitcoin is not as “smart” as Ethereum… and that’s why I keep it
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The price of Bitcoin (CRYPTO: BTC) is heading near its lowest level in the last 12 months. After failing to continue its rally in August, demand for the weathered crypto-asset has slowed.
Today, Bitcoin is hovering around $18,780, down a whopping 73% from its 52-week high. The harrowing fall has coincided with monetary tightening by central banks around the world. As a result, the liquidity for this option has evaporated right before our eyes.
At the same time, greater scrutiny around proof-of-work (PoW) – Bitcoin’s consensus mechanism – has increased awareness of Ethereum (CRYPTO: ETH) and its recently adopted proof-of-stake (PoS) mechanism. The Ethereum network now uses about 99.95% less energy after merging.
But here’s why I keep holding Bitcoin…and no, I don’t hate the environment.
Why I still see value in Bitcoin
We’ve all seen them, the comparisons of Bitcoin’s network energy consumption versus entire countries.
According to estimates from the University of Cambridge, the network currently operates with an annual energy consumption of approximately 93 terawatt-hours (TWh). This will put the decentralized blockchain’s consumption roughly on par with all of Pakistan.
Although I personally don’t consider this a negative if there is something of equivalent value from it. In this case, the value proposition is a very secure, immutable and deflationary form of monetary exchange.
For context, YouTube claims around 244 TWh per year – image below – and no one bats an eye. Why is it like that? Because instant access to a library of content at your fingertips has value… huge value.
Likewise, I believe there is a huge need for a medium of exchange that is governed by a decentralized cohort, accessible globally, and eliminates the inequality-inducing economic problem of inflation.
But why not Ethereum? And I agree that Ethereum has great value in itself – bringing decentralization to all forms of economics. However, in the process of converting to PoS, I personally believe that the network removed an important tangible aspect.
To be fair, Ethereum has implemented some very sophisticated technology that should maintain network security. However, there is something to be said for a network – like Bitcoin’s – that relies on something that cannot be imitated, created or destroyed…real and tangible energy.
I am still in the process of understanding all the intricacies of Ethereum 2.0.
Simple and stable
Speaking of intricacies…another reason why I personally still hold Bitcoin is because of its relatively simple concept. As my engineering days taught me: The more parts, the more mistakes.
While Ethereum frankly needs to be complex to achieve its goal, a decentralized store of value doesn’t have to be. And quite frankly, if I’m keeping a large sum of money there, I don’t want it to be either.
Every time a protocol undergoes a change, it poses a risk. Fortunately, Ethereum completed ‘The Merge’ unscathed, but there were probably a few people sweating in the process.
In contrast, Bitcoin rarely makes significant changes to its basic code. Personally, this is another reason I like it as an alternative value store. It may not be as “smart” as Ethereum, but it sure is reliable.
