Ethereum can’t be compared to Bitcoin as money: Tether CTO

Paulo Ardoino – Chief Technology Officer (CTO) at Bitfinex and Tether – recently commented on Ether’s usefulness as money, post-merger.

The CTO believes the cryptocurrency cannot compete with Bitcoin as a form of money, due to design choices that prioritized other goals.

Bitcoin is money; Ether is not

As the CTO told Crowfund Insider on Tuesday, Ethereum is “stuck between claims to be a form of money and claims to be a platform.”

As formulated in its white paper, Ethereum was designed as an “alternative protocol for building decentralized applications” that Bitcoin was not well suited to support. From smart contracts to stable coins, to non-fungible tokens (NFTs), every ecosystem transaction is powered by Ether – now the second largest cryptocurrency.

Recently, some have also taken to calling Ether “ultrasound money” because of what its tokenomic structure will look like after the merger. The transaction burning mechanism combined with a significant reduction in ETH per block will effectively make it one net deflationary currency.

This could theoretically put it in competition with Bitcoin – a cryptocurrency well known as long-term inflation protection because of its steady supply. However, Arduino believes there is more to the story:

“ETH cannot compete with Bitcoin on the money front because there is no fixed supply and it is not really a world computer yet because it has a shared global state and therefore too slow to be scalable,” he explained.

The CTO added that the merger will not fix Ethereum’s relatively high transaction fees (which Ethereum developers have confirmed), nor will it make Ethereum more decentralized.

In fact, concern is growing over the high concentration of Ethereum 2.0 shares in the hands of centralized stake providers. Lido, Coinbase, Binance and Kraken together control over 60% of the stake and are all OFAC compliant entities.

Some believe these circumstances could lead to the government forcing these entities to censor the Ethereum chain using their overwhelming ownership. That said, Coinbase’s CEO has denied that his company was likely to do such a thing.

Overall, Ardoino believes that the merger will not solve network congestion, and therefore will not make Ethereum more useful as a monetary network.

“The fact of the matter is that Bitcoin is the only asset out there that has a solid narrative, one that hasn’t changed,” he said. “Ethereum Still Doesn’t Match Bitcoin Because The Narrative Keeps Shifting.”

Too many goals

Former BitMEX CEO Arthur Hayes offered one similar take last week. He said that Ether cannot be money because it already acts as Ethereum’s gas token. In contrast, Bitcoin serves little relative purpose beyond transactions.

“That’s why it’s a good form of money,” he said, “because its value cannot be confused with the actual utility of other things.”

Hayes added that Ethereum may be forced to change Ether’s monetary policy in the future if deflation becomes “too severe”. In other words, the high transaction fees necessary for such deflation could drive away users seeking a cheap, usable network.

Shark Tank star Mark Cuban made same point during an interview about the merger last month. “If the utilization goes up, and the value of a token goes up, then the cost of doing something goes up,” he explained. “So you have these two competing interests.”