Ether Has ‘Much Higher than Bitcoin’ Economic Security, Creating Ultrasound Money & Global Internet Currency: Ethereum Foundation Researcher
Justin Drake says Bitcoin is not optimizing for long-term predictability, which could mean the largest network has to change something; Maybe move to PoS, Ethereum network, or maybe even remove the 21 million limit.
“Economic security on Ethereum is much much higher than bitcoin, and that contributes to (its) ultra-soundness,” said Justin Drake, a researcher at the Ethereum Foundation, in a conversation on the podcast ‘Bankless.’
Explaining Ethereum’s new narrative of being ultrasound money to Bitcoin’s sound money, Drake said it all started with a meme. It was a joke, a play on words, he said.
“The idea was that if bitcoin is sound money and it has cap supply, then if you have a decreasing supply, you must be ultrasound…Economic security on Ethereum is much much higher than bitcoin, and that contributes to this ultra-soundness, and that contributes towards Ethereum becoming the selling point of a global world internet currency.”
Earlier this month, Ethereum co-founder Vitalik Buterin said on The Tim Ferriss’ Show that EIP 1559 makes Ether ultrasound money by destroying more ETH than is being created.
According to Drake, the fee-burning proposal would further make Ether “an income-generating asset.”
Ethereum is in a really advantageous position where it can do multiple things at the same time, acting as a stock with a PE ratio and also being kind of a store value with this magic meme energy stored within it, he added.
The community, however, isn't really feeling Ethereum’s latest narrative changed from “oil to power dapps on world computers.”
"eth is oil" was a good narrative. could have just expanded on this to create some new type of deflationary digital oil but had to go ahead and create some "ultrasound money" bullshit.
— c=p (@ceterispar1bus) March 23, 2021
Talking about Ether’s issuance, which created a heated exchange between Eth and Bitcoin developers last summer, Drake said historically, there have only been two changes in Ethereum’s issuance.
The first one in Oct. 2017 when block reward was reduced from 5 ETH to 3 ETH per block, the second one in Feb. 2019 from 3 ETH to 2 ETH per block, and now it is in the process of doing another block reduction like a third policy change — removing proof of work (PoW) and going to proof of stake (PoW) that is roughly a 10x improvement, from 2 ETH to roughly 0.28 ETH per block.
As opposed to the Federal Reserve, Ethereum is going in one single direction of hardening, he added.
Ethereans want to maximize for long-term predictability, and so we've traded off the short-term predictability with initial experimentation, and “over the long term we're going to ossify, and we're not going to change,” said Drake.
He then goes on to say that, unlike Ethereum, Bitcoin, which talks about predictability, has skeletons in its closet, which is optimizing for short-term predictability but because it doesn't have sustainability relative to security, it's actually not optimizing for long-term predictability.
“So who knows what will happen in the future,” Drake feels in the next few decades, something has to change. He doesn't know what exactly, but maybe bitcoin will move to PoS, or the Ethereum network, or even maybe remove the 21 million cap, he said.