The Rise of Ethereum Economy: Why it could outperform Bitcoin in the long run

by James · March 13, 2023

The crypto ecosystem is noisy. Between the jargon, different coins, tokens, protocols, smart contracts, etc., etc., it’s easy to understand how someone could get lost or even lose interest. And if you’ve ever ventured into the horror program that is crypto Twitter, you know what I’m talking about.

Therefore, I want to offer you a new framework for thinking about the crypto ecosystem. Let’s put aside all the terminology and think about this from a macro perspective.

The crypto market boils down to a number of networks. As you’ve probably heard me say before, these networks are actually closer to digital nation states than they are to traditional technology. Why? It’s simple – networks produce internal and external value. Consider Bitcoin or Ethereum: what lies at the center of these ecosystems? Money and value.

I want you to think of the Bitcoins and Ethereum of the world, not as assets, but as economies. When you do this, everything will become clearer and the space will be much easier to navigate.

So let’s get started.

The Bitcoin economy is founded on one basic narrative: governments have destroyed the value of our currencies and Bitcoin is the hard, independent money that will finally set us all free. It is strongly protective of the integrity of the protocol (how the community works) and as a result it avoids innovation in the name of purity. Think of the Bitcoin economy as the Catholic Church back in the Dark Ages or the gold rush society. There can only be one God or one possession. When it comes to the Bitcoin economy, the only asset that exists is Bitcoin. So if you want to allocate capital to this economy, your only choice is to HODL Bitcoin.

Now let’s take a look at the Ethereum economy. By the end of this piece, you will understand why ETH is likely to be much larger than the Bitcoin economy in the long term.

The Ethereum economy is similar in many ways to the US economy. In this system, you can start by buying ETH which has a deflationary supply, meaning there will be less of it as time goes on. Because of this, its “central bank” (the stake) follows a responsible monetary policy designed to ensure that its value is maintained and not degraded.

That alone is a pretty good reason to own ETH, but there is more…

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