Community split between capped supply and deflationary model
Bitcoin (BTC) and Ether (ETH), the top two cryptocurrencies by market capitalization, have always been pitted against each other. With the start of the new year, the first debate has surfaced comparing BTC’s capped supply of 21 million to ETH’s deflationary supply, with disagreement over which of the two qualifies as sound money.
An Ethereum-focused Twitter user called ‘ultra sound money’ compared the supply issuance of both cryptocurrencies and suggested that “if capped-supply BTC is sound then decreasing-supply ETH is ultrasound.”
if capped-supply BTC is sound
decreasing-supply ETH is ultra sound pic.twitter.com/L2tsFzPQ7q
— ultra sound money (@ultrasoundmoney) January 15, 2023
The comparison between the two didn’t sit well with BTC proponents, who quickly pointed out that soundness comes from the credibility of the monetary policy and not an ever-changing one. Dan Held, a famous Bitcoin proponent, pointed out the flaw in the argument and noted that a constantly changing one has less credibility. He said:
“Time builds trust with humans, it’s not all about code. According to your logic, if we spun up another crypto with more deflation, that would be “sounder.”
Another Bitcoin proponent questioned the credibility of Ethereum’s monetary policy, reminding that the same monetary policy has “changed a least 11 times in its seven years of existence.” On the other hand, Bitcoin has not changed its monetary policy once.
Ether became deflationary in August 2021 with the introduction of Ethereum improvement proposal-1559 (EIP-1559). The upgrade introduced a burn mechanism that automatically burns a portion of the transaction fee, decreasing the overall circulating supply of ETH.
In response to Alex Gladstein’s argument that “admins” can arbitrarily change Ethereum’s monetary policy, independent Ethereum educator Anthony Sassano claimed that every change on the Ethereum network had been approved by the thousands of node operators run by community members.
The term “admins” implies that there is a small group with superuser powers that can change things on Ethereum which is completely false and has been proven false many times.
You can believe what you want about the sound money vs ultra sound money debate.
— sassal.eth (@sassal0x) January 16, 2023
Leo Glisic, the founder of the Maitri network, said that ETH had become sound money now, but BTC won’t hit its cap until the year 2140.
Bitcoin has faced similar monetary changes and tweaking of the original code in the past. The most notable one came during 2017 when there was a growing demand for increasing the Bitcoin block size to accommodate more transactions per block and make it more scalable.
Related: Bitcoin steps out of ‘fear’ for the first time in nine months
The majority of the Bitcoin community remained against making any changes to the original code of Satoshi Nakamoto. As a result, the Bitcoin network experienced a hard fork in 2017, leading to the formation of Bitcoin Cash (BCH), a cryptocurrency with a block size of 8 MB against BTC’s 1 MB. However, today, BCH has had very little on-chain development and is currently trading at a 97% price drop from its all-time high.