Bitcoin Trillion Dollar Special, Binance vs Ethereum, Attack of the Clones

When Bitcoin forked in a major way for the first time there was a lot of speculation if Bitcoin Cash aka was going to flip Bitcoin Core (a derogatory term the Bitcoin Cash side came up with to give them space to take over Bitcoin).

The same style of flip is happening now between Ethereum and Binance Smart Chain. There are a few key differences this time though worth pointing out.

First let’s focus on why Bitcoin crushed Bitcoin Cash. Decentralization. Increasing the block size to 8mb (later 16mb) vs 1mb would have kept transaction fees low but killed many people’s ability to host a node due to the increased hardware requirements. Bitcoin development might be at a snail’s pace but Bitcoin research is traveling at lightspeed and they are well aware of the tradeoffs.

Bitcoin’s killer app is store of value which requires trust and trust comes from optimization and decentralization, but there are other use cases that require more CPU power like smart contracts. Ethereum was invented as a blockchain as a service platform and hit success with their ERC20 token feature allowing anyone and their dog to launch a token usually to raise money in the form of an ICO. But that was 2017, let’s fast forward to today.

Ethereum’s source code is open source and keeping it decentralized has become more of a burden than an advantage. People who believe in faster and cheaper “payment systems” and “logistics and identity” don’t care about decentralization, they care about performance. Funny because they already have plenty of technology that can do that much faster and cheaper (called databases) but these people are easily distracted by the next big thing, it’s like a new Harry Potter book and they want to believe in magic.

Because Ethereum’s source code is open source and heavily developed that creates opportunity for competition, but if they are not competing for store of value like Bitcoin what are they competing for? To be the “global computer”… basically instead of having a big megacorp like Facebook say “hey, spend all your ad dollars on pages, you will get a tonne of promotion” only to have Facebook realize they don’t want to give all these groups promotion anymore and drastically alter their algorithm to no longer favor pages, with Ethereum smart contracts the rules of the game are defined at the beginning and it’s Ethereum’s servers who enforce those rules.

But just like Bitcoin’s Amazon Bubble in 2014 and Ethereum’s Cryptokitties in 2017 the networks just can not handle the activity forcing transaction prices to record highs. Many project focused on Transactions Per Second (TPS) sprung up like mushrooms raising billions (often as ERC20 tokens) trying to be the Ethereum killer but now a new breed has arrived on center stage, the modified Ethereum Virtual Machine (EVM) compatible clones!

They sacrifice decentralization for cheaper transaction (gas) fees but because you can copy + paste the smart contract and it just works, making them so easy (and cheap) to migrate. This is often for a developer a worst like a bonus payment and at best the oxygen they need for their project to survive.

If ETH2 is good as they speculate a developer migration should be just as easy. If it’s a bust, no harm no foul. The only loser in this seems to be Ethereum.

We haven’t talked about the killer app of ethereum yet, is it ERC20 tokens? is it ERC721 non-fungible tokens? kinda, its DeFi.

DeFi is booming, and what does DeFi need? just like shopping at Amazon, low transaction fees. So if you can take the same code and run in on a newer, faster, cheaper computer and it dramatically reduces the operating cost, without having to rewrite the code for the new platform, it’s a no brainer. Sure you lose some decentralization but you keep enough to sleep well at night.

This is shifting the balance of power in the altcoin space. I personally think they will compete themselves to irrelevance as multi-platform ways of writing smart contracts get invented but for now this is having a big impact and you know what they say, competition is for losers.

Personally I don’t care much about any of that stuff, it’s just interesting to follow. What is happening in Bitcoin is far more interesting, but it gives me peace of mind not having to care about the clone wars attacking my store of value because they are “a better payment system, with basically no fees” because they will never gain the trust Bitcoin has earned and it’s doing just fine with high fees, just sayin.

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