There’s a lot of excitement these days about building decentralized apps, and for good reason—there’s a tremendous opportunity to bypass the inefficiencies and censorship that inherent to centralized platforms.
In my current line of thinking, there are three significant potential benefits of decentralized apps: user friendliness, security, and a tangible value proposition. I’ll explain these benefits, and then I’ll show how Bitcoin provides an unmatched platform for decentralized apps. Finally, I’ll provide a brief summary of why I believe Ethereum is an elaborate Rube Goldberg machine designed to take bitcoin from gullible people.
Please read: Your DApp Doesn’t Need a Token, and Ether And Bitcoin Are Not The Same and if you’re still not convinced, just keep reading…
Advantages of Bitcoin
Below are some reasons why Bitcoin is a revolutionary technology for distributed apps.
Bitcoin user friendliness
The centralized services we use and rely on tend to be quite user UN-friendly. Some examples: Facebook is designed to keep you on the app so that you click on ads, PayPal can freeze your funds, and social justice warriors are hell bent on deplatforming those who dare to share a controversial opinion.
Bitcoin’s simple architecture provides a solid foundation for building user friendly decentralized applications.
Bitcoin security
There are three aspects to security: confidentiality, integrity, and availability. Centralized platforms fail on all three of these aspects - online communication is no longer confidential as these platforms are surveilled by the government working lockstep with big brother. Integrity is really important in decentralized systems because you can’t call the customer service number and have someone fix your account. And finally, if you can’t use the app, it’s worthless, so availability is an important part of security.
The bitcoin blockchain provides the highest possible assurances of security.
Bitcoin is a tangible value proposition
There’s two sides to this: If an app doesn’t do something valuable for users, they won’t use it. On the other hand, a decentralized app must have the means to exchange something of value or else you don’t really have a new innovation.
Judging by market cap, longevity, full node count, development activity, or countless other metrics, Bitcoin is the largest, most demanded, and most widely trusted cryptocurrency.
What about Ethereum?
By now you might be thinking, “why not build decentralized apps on Ethereum? Surely it can be made user friendly, secure, and provide a valuable means of exchange?”
Ethereum user friendliness
Ethereum is in fact highly centralized and extremely complex. Being user friendly is more than just the end-user consumer experience, also consider what’s easy for the developers and non-technical folks, and the vision and development. It is so difficult and expensive to run a full Ethereum node that very few individuals do so, whereas I run a full bitcoin node on a RaspberryPi. The fundamentals of bitcoin can be understood by a layperson in a single podcast or book, but even Vitalik can’t describe what Ethereum really (listen starting at 00:14:19) is and he is by far the most prominent leader in the project.
Ethereum security
The security record of Ethereum is abysmal. Let’s start with the infamous DAO hack. Someone exploited a loophole in Ethereum in order to transfer funds to their own wallet in a way that the Ethereum developers did not envision. This wasn’t theft however, since the transactions complied with the Ethereum protocol. The Ethereum organization however, decided to fork the blockchain because of this situation. This is a severe breach of integrity in my book.
The recent DeFi craze has resulted in numerous instances where funds were lost due (here’s the YAM token) to exploits in Ethereum contracts.
There was recently a critical consensus bug that was improperly disclosed, and remained unfixed. This resulted in a major outage of the Ethereum blockchain because there are so few full Ethereum nodes.
Additionally, a majority of Ethereum nodes are running on AWS, which presents several additional centralization problems.
Ethereum Staking
Staking deserves a special call out, as this is an essential part of the Ethereum 2 narrative. The basic idea with staking is that if you hold Ethereum, you get to vote on the rules for the entire network. This is literally fiat crypto.
As you know, bitcoin uses Proof of Work to organize and secure the blockchain. Bitcoin derives its value from the same mechanism as gold—whether you’re mining for bitcoin or gold, it’s capital intensive and consumes a lot of energy.
I don’t want to reinvent fiat currency in digital form, even if it’s on a blockchain known for ponies.
Ethereum network value
The most important aspect of money is that it is valuable. This may sound obvious, but some people have tried to create a medium of exchange without first considering there must be value in the first place before it can be exchanged.
The fact that Wrapped BTC exists proves that Ethereum needs Bitcoin, and not the other way around.
Ethereum is inherently unscalable and even if Ethereum 2 fixes this, it’s several years away. When the network is congested:
- fees skyrocket (user unfriendly)
- transactions are delayed (not secure)
- the value of Ethereum decreases (not useful for exchange)
Bitcoin has faced its own scaling challenges and these same consequences. The two most important solutions: SegWit, and the Lightning Network that it enabled, took years of research and planning. The reality today is that you can scan a QR code to securely transact bitcoin through the lightning network in mere seconds.
Bitcoin is a platform
Bitcoin is not just digital gold that you store in an electronic wallet. It’s also an internet protocol, and in the same way that you might be reading this over a webpage that was served via a number of internet protocols like IP, TCP, HTTP, TLS, etc. bitcoin development has advanced to where applications can be built on top of bitcoin itself. I’ve been really excited about this for quite a while, and I would be thrilled to make this dream a reality.
The bitcoin ecosystem is gradually expanding with higher level protocols that facilitate many new use cases. For example, RSK is a turing-complete smart contract network running on top of Bitcoin. Same capabilities as Ethereum, without the BS. Another example, BISQ is a decentralized bitcoin exchange and it even has its own token in the form of a “colored coin” which runs on the Bitcoin blockchain itself.
Bitcoin is intentionally simple. Security is the friend of simplicity.
Bitcoin is in demand
Due to the current macroeconomic situation, I predict demand for bitcoin will go viral all around the world. People will be desperate to acquire bitcoin as fiat currencies around the world are beginning an epic devaluation and governments will shill their own shitcoins—called CBDC (Central Bank Digital Currency). People will use a decentralized app just to earn scarce bitcoin.
In due time, people will use decentralized apps as a means to acquire bitcoin. “Number go up” is powerful marketing. :)
Since decentralized applications inherently involve an exchange-of-value, it makes sense to use the most-demanded medium of exchange. Furthermore, since cryptocurrencies can be easily traded on exchanges, anyone who realizes they’re holding a shitcoin will exchange it for bitcoin, the most trusted of all cryptocurrencies.
Bitcoin is user friendly
As cryptocurrencies (bitcoin, anyway) enter the mainstream and at the same time, nearly every daily routine and countless jobs are being eliminated drastically changed, there’s a tremendous opportunity for new users of decentralized applications. The most user-friendly applications will use the most user-friendly cryptocurrency, and that is bitcoin.
The typical Karen has heard about bitcoin, but does she know about SushiSwap and Yam coin?
Bitcoin is a reserve asset
In a business, the owner’s equity is capital that is saved for a rainy day or future investment. Entrepreneurs want to hold hard money for the same reasons that individuals want to hold money—mainly that it maintains (or even increases) its value over time. As a decentralized app entrepreneur, it makes sense to build an app that helps you earn more bitcoin over time.
Quote from Vitalik: “I definitely did not initiate the whole Ether is money thing, the Ethereum Foundation did not initiate it. That’s something that really did come from the outside.”
Developer talent
When building a large, sophisticated system, it makes sense to consider the talents of those who will do the day to day coding. My own impression of the Ethereum developer community is that there are many individuals who do not have a deep understanding of economics, game theory, or software engineering. Many seem attracted to the complexity of Ethereum, live in their mother’s basement, and treat the project as a fun playground.
The centralized aspect of Ethereum may in some cases give the false impression that it’s easier to develop on Ethereum, and the glut of adult script kiddies may give the appearance of a deep talent bench. Buyer beware.
Ethereum is a Rube Goldberg system designed to take your Bitcoin
This is getting long so I’ll wrap it up with my thoughts on what Ethereum is really all about.
This project was started as a way for some individuals to get rich quick off of that new magic internet money called bitcoin.
There are a few people who know the project will never be successful, so they introduce complexity upon complexity and delay upon delay as a means to postpone the inevitable collapse of the fiat shitcoin. These vaporous promises have convinced many to invest (me too, for a while) and build on this blockchain, but the Ethereum 2.0 that is promised to fix the scaling issues is still a long ways off according to the official roadmap.