Ethereum's Vision Remains Unchanged, But Why is the Price Lagging?

Ethereum's Vision Remains Unchanged, But Why is the Price Lagging?Bitcoin has been surging in this bull run, while Ethereum and some veteran "value projects" have been struggling. ETH/BTC has even reached its lowest point, leaving many seasoned crypto enthusiasts feeling disheartened

Ethereum's Vision Remains Unchanged, But Why is the Price Lagging?

Bitcoin has been surging in this bull run, while Ethereum and some veteran "value projects" have been struggling. ETH/BTC has even reached its lowest point, leaving many seasoned crypto enthusiasts feeling disheartened. Having weathered bull and bear markets, they still cannot reconcile themselves with Ethereum's sluggish performance, and the crypto community's dissatisfaction with Ethereum seems to have reached its peak.

Has Ethereum's Vision Changed?

While ETH and BTC have different paths and don't clash much directly, since the bear market, most long-term ETH holders have hoped for ETH to outperform BTC, meaning a good return on ETH/BTC. Based on previous bear market experiences, ETH has generally outperformed BTC.

Similar to the sentiment of Ethereum community token holders wanting to outperform BTC, Ethereum's initial vision was perhaps a differentiated development strategy, taking the road that the Bitcoin community hadn't taken and considered difficult: a blockchain-based smart contract application platform, with plans for blockchain expansion exploration to bring scalability and performance, developing decentralized applications beyond digital gold. Similar to some altcoin projects that emerged at the time, all aimed to improve Bitcoin a differentiated strategy, or perhaps becoming a more successful Bitcoin.

Ethereum Foundation's official website previously featured a slogan on its background image: "Blockchain application platform," which was the most accurate positioning for Ethereum at the time. The background image appeared to be a skyscraper rising from the ground, perhaps foreshadowing blockchain expansion and construction.

Ethereum's Transition to POS isn't a Mistaken Route

Now, some believe that Ethereum's vision has changed. Since the Ethereum consensus mechanism transitioned to POS, perhaps due to the stagnant price, some attribute the Ethereum's downturn to the POS consensus mechanism, believing that such a radical shift from POW to POS is a colossal error.

However, the truth is that Ethereum's transition to POS was already outlined in its earlier roadmap, not a spontaneous decision. It was a choice and plan made due to the need for blockchain expansion and extension for smart contract public chain platform account model.

Ethereum's Inflation Rate is Significantly Lower than Bitcoin's

Recently, a major Bitcoin influencer on social media shared a chart showing Ethereum's inflation rate trend since the merge, depicting a rapid rise in Ethereum's inflation over the past six months, attempting to highlight the flaw in Ethereum's merge. However, a swift rebuttal came from Ethereum community users who published the complete picture of this statistical trend chart, including a comparison with Bitcoin's annual inflation rate (the ratio of newly issued quantity to the circulating quantity), making the difference evident.

Initially, many scoffed at Ethereum's unlimited issuance, believing that Ethereum would invariably issue an infinite amount of tokens. However, the reality is that Ethereum, through the POS merge and EIP1559, not only maintains security but also controls inflation, keeping it significantly lower than Bitcoin's current inflation rate, and even surpasses other well-known POS public chains.

Ethereum Remains the Second-Largest Cryptocurrency

Ethereum has firmly secured its position as the second-largest cryptocurrency, and has become a "differentiation target" for a host of new public chain projects. Many projects aspire to become a better "Ethereum." It's safe to say that Ethereum's roadmap has remained largely unchanged, with only adjustments in implementation details, and its initial vision has been gradually realized.

Ethereum's Ecosystem Absorbs Bitcoin's Value Overflow

Recently, Vitalik responded to questions about the Foundation's selling activity on social media, including nine pieces of information related to ETH fundamentals.

Vitalik pointed out: The ETH Foundation is paying researchers and developers who are working on:

1. No longer losing 5 million ETH annually to Proof-of-Work (POW).

2. Current fees are low.

3. Your transactions will be [omitting specific information].

4. zk technology allows people to use ETH while maintaining privacy.

5. Account abstraction technology will enable everyday users to use ETH securely, without seed phrases or SBF-style central points of failure.

6. Local ETH events around the world, many of which barely mention the Foundation.

7. ETH has never shut down due to DoS attacks and consensus failures since 2016.

8. Various security efforts (internal development and grants) have prevented numerous financial losses.

9. Libraries (wallets, DeFi applications...) in various code you use.

From another perspective, the reason why Ethereum exists and carries a market cap of over $300 billion is not solely determined by its gas fee capture. It's more about its contribution to cryptocurrency expansion and innovation, continuously absorbing Bitcoin's value overflow.

Therefore, during the first two bull runs (2018 and 2021), the relatively high ETH/BTC ratio, which is one of the key underlying logics behind Ethereum's long-term outperformance.

Bitcoin's Own Troubles: An Opportunity for Ethereum?

Bitcoin's design is undoubtedly a "divine" work, but such a system is not without its flaws. After all, many project designs aim to encompass everything, leading to seeming perfection yet ultimately complex and riddled with vulnerabilities, hindering their rapid breakthroughs.

Satoshi Nakamoto left a few challenges or regrets for Bitcoin that are yet to be resolved, leaving it to future generations to refine and optimize.

For example, the conflict between the dwindling issuance volume and the ecosystem's development threatens the sustainability of the Bitcoin system. Simply put, as Bitcoin steadily reduces its issuance until it reaches its cap, the increasingly smaller inflation rate will bolster Bitcoin's scarcity as a favorable factor for price appreciation. However, this may not hold true for the Bitcoin system itself, as the reduction in issuance inevitably results in diminishing income for POW miners, which could dampen their enthusiasm, potentially impacting the system's security and stability.

The Bitcoin community has proposed a solution: developing the Bitcoin ecosystem. When future halvings lead to insufficient miner income, the prosperity of the Bitcoin ecosystem can compensate for the reduced system rewards, continuously incentivizing miners to provide robust system protection. This is also an experience learned from Ethereum's blockchain expansion roadmap.

However, the high price and transaction fees, along with the mainnet's inefficiency, pose significant challenges to the sustainable development of the Bitcoin ecosystem.

Bitcoin's issues remain "on the table," and currently, there's only one solution: let Bitcoin keep rising, and the issues will naturally disappear. However, this is obviously unrealistic. Therefore, when capital pushes Bitcoin near its bottleneck, value will overflow to other blockchains.

Currently, the only project with the scale to accommodate most of Bitcoin's value overflow is Ethereum, with no other contenders.

Bitcoin L2 and Ethereum L2 Are in the Same Boat

Bitcoin ecosystem development is currently in full swing, with numerous teams bringing forth various expansion solutions, particularly borrowing from Ethereum's Layer 2 solutions. It's fair to say that Ethereum's leading Layer 2 exploration has paved the way for these expansion solutions in Bitcoin Layer 2.

Bitcoin Layer 2 and Ethereum Layer 2 converge in their approach, and some even call Ethereum Bitcoin's largest testnet.

Of course, Bitcoin Layer 2 currently faces certain challenges, such as the difficulty of inheriting Bitcoin's security, and Bitcoin's own slow block speed, affecting the settlement efficiency of Layer 2 transactions. Therefore, for idle BTC to participate in DeFi, they often opt to bridge to the Ethereum chain for reliability and security.

According to CryptoFlows data, Bitcoin has sent about $3.8 billion in assets to Ethereum predominantly through stablecoin bridges, excluding Layer 2. The majority of this cross-chain outflow from Bitcoin flows into Ethereum's mainnet, demonstrating the chain's recognition by on-chain funds. As BitcoinFi continues to develop, Ethereum's ecosystem is bound to attract even more inflows.

Ethereum is Becoming Bitcoin's Largest Sidechain

Actually, from a different perspective, in the era of large-scale Web3 application deployment, multi-chain interconnection, and chain abstraction, where the larger crypto ecosystem is interconnected and seamlessly interoperable, isn't Ethereum currently on its way to becoming Bitcoin's largest sidechain or, in a broader sense, Layer 2?

The best DeFi protocols on Ethereum's ecosystem are helping to activate dormant Bitcoin funds.

Whether it's expansion solutions in the same boat or cross-chain fund flows, the future of Bitcoin and Ethereum seems to be increasingly intertwined.

Conclusion

At present, Ethereum's vision remains unchanged, and it has fulfilled its promises. What has changed is the "fickle" holders who can't resist temptation. Against the backdrop of dwindling liquidity in the broader market, crypto narratives have withered, and chasing memes is understandable (when times are tough, people gather at the village square to try their luck). However, the upcoming global easing cycle, leading to gradual liquidity release, could potentially bring about a shift.

Don't forget, the adoption of crypto assets and the value of Web3 application deployment will ultimately return.

As the top two crypto assets, the future of Bitcoin and Ethereum, bound together, isn't a relationship of conflict but a collaboration that transcends black and white. Regardless of which camp the crypto community stands in, it should cease internal strife and self-inflicted damage. Striding towards the next generation of the internet with widespread adoption is the right path.

Let's hope the next