Why the real Ethereum killer might just be Bitcoin

We are finally here. After eight years of talking about it, Ethereum 2.0 seems about ready to be realized.

Now that the Ethereum merger is almost here, we can start thinking about what the world will look like after the merger. Most people at this point believe that while Ethereum is still the 800-pound gorilla when it comes to smart contracts and composable Web 3.0 functionality, the future of blockchain-based connectivity will be based on multiple chains.

Of course, that leads to the next big question: specifically, which of these Ethereum Virtual Machine-based protocols represents the most secure, scalable substrate for Web3 applications? But the whole discussion surrounding Ethereum and these so-called Ethereum killers tends to leave out the oldest, most secure base layer ever created: Bitcoin.

There is actually a good reason why nobody is talking about Bitcoin. Simply put, there is nothing to talk about. There is no news about Bitcoin hack. No articles about centralized authorities hijacking the consensus process for nefarious purposes. None of the stories of hundreds of millions of dollars lost to exposed vulnerabilities in the architecture that have ensnared crypto trading so much.

Because none of these things happen with Bitcoin. Bitcoin just works. That’s why Bitcoin just might be the real Ethereum Killer.

To be clear, the absence of stories of successful attacks against Bitcoin does not mean that bad actors are not trying. Rather, it reflects the distinct advantages that Bitcoin has over its alternatives. For starters, with over 174 million Bitcoin addresses with economically relevant balances, and over 14,000 available nodes participating in consensus, Bitcoin is by far the most decentralized blockchain in existence. As a result, Bitcoin’s base layer of settlement provides the safest protection even in the face of externalities such as nation stack attacks, war, and hyperinflation.

Probably the biggest fundamental difference in the new Ethereum compared to the current version is the shift from a proof-of-work (PoW) consensus to proof-of-stake (PoS). It’s true, PoW has its drawbacks, which are well documented. The mining competition that validates each block is energy intensive with all miners doing the same work. Furthermore, as the arms race accelerates, Bitcoin mining is no longer the province of the proverbial lone wolves with their laptops, but reserved for large, even public, companies, with warehouses filled with specialized servers. Arguably, this concentrates network power and rewards among a few node operators. The most ardent opponents of PoW would even say that the end result of this concentration of power is a centralized network – the exact opposite of what blockchain strives for.

And PoS has some advantages. It’s probably better for the environment because miners aren’t wasting energy competing. Instead, in a PoS consensus, each potential miner sets aside or “pledges” some tokens as collateral. The network randomly selects stakers, and those who stake the most tokens have the highest chance of being selected – and earning the mining reward. There is no competition and no wasted energy. Unlike in BTC, when the mining reward happens at the same time as the miner creates the block, with PoS, the reward is delayed as the rest of the network validates the block – allowing the network to punish (or “cut”) bad actors by confiscating all or part of it of their inserted pieces.

But with all the enthusiasm among environmentalists for a more energy-efficient solution, perhaps the most important criteria for building a decentralized data structure are being lost. Switching from PoW to PoS adds considerable complexity. The rules that govern the process don’t just happen. For example, network management must decide what level of security is required to bet and what the cut penalties will be. Likewise, it must be determined how long the challenge period will be before a block is accepted. It is not always easy to make these decisions. Higher minimum requirements and penalties for bad blocks provide strong incentives for good behavior, but they also limit the field of participants, potentially leading to a more centralized and less secure structure. Conversely, lower requirements may also be of little use.

At the end of the day, the proof is in the pudding. Bitcoin’s PoW protocol has yet to be attacked. It represents a more than 10-year history of successfully running the state without corruption. A quick check of the news in recent weeks shows that this is not the case with PoS protocols.

Of course, Ethereum’s killer use case is not the same as we have seen traditionally for Bitcoin. Ethereum is seen as serving its greatest purpose as a decentralized base layer that manages state obligations for the next generation of network applications. But it reminds of the question we started with. If Bitcoin is the most secure of all base layers, why is it absent from this discussion? The answer is that the conversation is evolving.

With players pushing forward with EVM-enabled protocols that leverage the unmatched security of Bitcoin as a data layer for next-generation decentralized applications, the benefits of this approach are becoming clearer by the day. In the near future, we may find that the best solution to the Web3 problem has been with us all along in Bitcoin’s proven framework.