Community sharing between limited supply and the deflationary model
Bitcoin (BTC) and Ether (ETH), the top two cryptocurrencies by market cap, have always been pitted against each other. With the start of the new year, the first debate has emerged comparing BTC’s limited supply of 21 million to ETH’s deflationary supply, with disagreement over which of the two qualifies as good money.
Dubbed ‘ultrasound money’, an Ethereum-focused Twitter user compared the supply issuance of both cryptocurrencies and suggested that “if limited supply BTC is sound, then diminishing supply ETH is ultrasound.”
if the BTC supply is good
diminishing supply ETH is ultrasound pic.twitter.com/L2tsFzPQ7q
— ultrasound money (@ultrasoundmoney) 15 January 2023
The comparison between the two did not sit well with BTC supporters, who were quick to point out that soundness comes from the credibility of monetary policy and not an ever-changing one. Dan Held, a well-known Bitcoin supporter, tip pointed out the flaw in the argument and noted that a constantly changing one has less credibility. He said:
“Time builds trust in people, it’s not just about code. By your logic, if we spun up another crypto with more deflation, it would be “healthier.”
Another Bitcoin supporter asked the credibility of Ethereum’s monetary policy, recalling that the same monetary policy has “changed at least 11 times in the seven years of its existence.” On the other hand, Bitcoin has not changed monetary policy even once.
Ether became deflationary in August 2021 with the introduction of Ethereum Improvement Proposal-1559 (EIP-1559). The upgrade introduced a burning mechanism that automatically burns a portion of the transaction fee, reducing the total circulating supply of ETH.
In response to Alex Gladstein’s argument that “administrators” can arbitrarily change Ethereum’s monetary policy, independent Ethereum educator Anthony Sassano argued that every change on the Ethereum network had been approved by thousands of node operators run by community members.
The term “admins” implies that there is a small group with superuser powers that can change things on Ethereum which is completely false and has been proven false many times over.
You can believe what you want about the sound money vs ultrasound money debate.
— sassal.eth (@sassal0x) 16 January 2023
Leo Glisic, the founder of the Maitri network, so that ETH had become sound money by now, but BTC will not hit the ceiling until the year 2140.
Bitcoin has faced similar monetary changes and tweaks to its original code in the past. The most notable came during 2017 when there was a growing demand to increase the Bitcoin block size to accommodate more transactions per block and make it more scalable.
Related: Bitcoin exits “fear” for the first time in nine months
The majority of the Bitcoin community was still against making changes to the original code of Satoshi Nakamoto. As a result, the Bitcoin network experienced a hard fork in 2017, which led to the formation of Bitcoin Cash (BCH), a cryptocurrency with a block size of 8 MB versus BTC’s 1 MB. Today, however, BCH has seen very little on-chain development and is currently trading at a 97% price drop from its all-time high.
