The endless debates between Bitcoin maximalists and Ethereum maximalists are mostly boring. But within these parasitic noises sometimes emerge innovative concepts, such as that of “ultrasound” money. A theory of those whose reach goes deeper than a simple contest to see who has the smallest supply. Because it is a fact, in the cryptocurrency environment, the smaller its size, the greater the potential to rise. A debate so far as unlimited as the amount of ETH available. But recently, its version presented as deflationary throws a stone in the pond. To the point of raising this question: Would Ethereum become “healthier” than Bitcoin.
This article is not recommended for sensitive maximalists.
The often contentious comparison between Bitcoin and Ethereum doesn’t really make sense. But the mere mention of it gets articles read and streams of fiery tweets written on Twitter. Yet on the one hand there is a digital currency developed in order to escape all control. And on the other a Money Lego whose destination is to be used to build (almost) everything on it. A fairly simple distinction to understand. But immediately much less, when Jack Dorsey talks about developing a DeFi on the Bitcoin network. Or that ETH announces becoming deflationary following the addition of its EIP-1559.
A scramble of the cards which has just relaunched the debate on the contest of strength of these two cryptocurrencies. This is to find out if it would not be possible that the new decreasing version of Ethereum could outperform Bitcoin. To the point of replacing it for good, becoming the main financial layer of the Internet. A platform for development, a store of value, a tool for peer-to-peer transactions and multi-billion dollar operations. A postulate developed by Justin Drake at the end of 2020, which is based on a simple hypothesis. If it is possible to say that BTC is a “sound” currency, would it not be logical to say that ETH has become “ultra-sound” (ultrasound)? But what does that mean?
Bitcoin – A “sound money”?
In the cryptocurrency sector, Bitcoin remains the perfect example of what a “sound” type of digital currency can be. sound money. A somewhat paradoxical assertion due to its inability to resonate on a hard surface as a coin would. Because that’s where the concept came from. The possibility of making the sound of its value heard, represented by the precious metal that corresponds to it. But it’s actually much more than that.
” Sound money embodies a clear message recognized for centuries throughout the world. It describes the music of the metal ring of a gold, silver or copper coin dropped on any hard surface.”
Sound Money Defense
A concept in total opposition to the current functioning of fiduciary currencies, subject to an inevitable depreciation over time against a backdrop of galloping inflation. That is to say a loss of correlation with a value that has become impossible to redeem against gold. And an unlimited quantity whose printing is left to the goodwill of the central banks of this global Monopoly. This was also the case for Ethereum, until this year 2021 and the integration of its EIP-1559.
Because conversely, the number of BTC is limited to a fixed quantity of 21 million units. A stock that makes it comparable to gold or any other precious metal. And a fixed supply asset on which it therefore seems possible to base an economy. All this under the assumption of a value that is currently very volatile, but destined to stabilize as it approaches and exceeds the market cap of gold ($11.5 trillion currently). In any case, this is the theory of the defenders of this monetary philosophy applied to Bitcoin.
Ethereum – An “ultrasound” currency?
But this vision applied to Bitcoin had unintended consequences, as the starting point of the “ultra-sound” money principle (ultrasound) applied to Ethereum. A theory first posed in September 2020 by Ethereum researcher and maximalist Justin Drake. And whose supporters have since identified themselves on Twitter using a bat emoticon paired with that of a loudspeaker. With at the center of his demonstration, a paralleling of the capped supply of BTC to the now decreasing tokenomics of ETH. And this observation posed as obvious: if the first is “sound money” the second can only be “ultrasound money”. End of the demo…
But not everything is so simple. Because to support this thesis, ETH must prove that it is more “sound” than Bitcoin. And nothing better for that than its supposedly deflationary character recently triggered by the launch of this EIP-1559. However, this reality for the moment effective is directly linked to the activity of the Ethereum network and the transaction fees it generates. Probably the only real reason to rejoice in their current amounts. And a fact that could well be reversed, in the case of a significant flight of its users to less greedy networks, or simple layers 2.
With the second point to this argument, the number of ETH deposited in staking in order to secure the network. A new reason to see its quantity in circulation decrease. Mainly because the validators of its Proof of Stake (PoS) version will not need to resell it in order to buy or upgrade their machines to mine. This allows some to estimate that thanks to this, the number of ETH in circulation could stabilize at 120 million units. This is a good opportunity to affirm that the latter is now part of “sound” money in the same way as Bitcoin. But with that small but not insignificant deflationary addition to the origin of the definition of this new aspect of “ultra-sound” money. »
Ethereum stronger than Bitcoin?
A fairly logical demonstration, even if it relies on some potentially unstable aspects. But in the end a real legitimate question on the place that ETH could occupy against a BTC for the moment all-powerful. Especially considering that Ethereum has largely outperformed Bitcoin for several years already.
Because a simple X2 of its price in a next altseason would almost already allow it to exceed the marketcap of the current number 1 for the very first time. The latter respectively placed at 401.4 billion and 829.4 billion dollars at the time of writing this article. And for once a flippening that is really not impossible!