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Bill Ottman
Bill Ottman is the CEO and co-founder of Minds.com.
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.Secure Your Seat In 2021, Bitcoin and Ethereum accelerated further into the mainstream as the leading two blockchains on the planet, respectively.Both networks have deeply dedicated communities and developers working to protect and evolve the peer-to-peer technological innovations.
Crypto advocates enjoy both systems for their unique characteristics and economic principles.Bitcoin has an extremely strict monetary policy aiming to be the most sound, decentralized money on the planet.Ethereum is an ever-evolving general purpose blockchain, which, one can debate, has sound money attributes but with a less-predictable token issuance schedule.
Bill Ottman is the CEO and co-founder of Minds.com .
This article is part of Crypto 2023.
The majority of crypto users, investors and developers think multiple technologies can coexist.Some think bitcoin could be considered the hardest money known to humankind, while also acknowledging that Ethereum has creative capabilities in decentralized finance (DeFi) and notable smart contract composability.
However, there’s a massive, exhausting debate between so-called “maximalists” on both sides who are hypercritical of the other network.
Bitcoin maximalists dislike the term “crypto” itself because it conflates Bitcoin with scams and muddies the waters for new adopters.(Crypto derives from cryptography, the underlying security foundation that makes decentralized monetary networks possible.)
The practice of calling anything other than Bitcoin a scam (or, less artfully, a s**tcoin) is sometimes labeled “toxic maximalism.” Online bitcoiners who defend the network against detractors and attack “imitators” are what MicroStrategy’s former CEO Michael Saylor called a “cybernetic immune system.” Historically, maximalism isn’t rare in tech – though it often results in embarrassment for any outspoken critics of, say, cars, planes, phones and the internet.
Whatever the technological differences separate Bitcoin and Ethereum, it’s clear both networks also have a strong cultural and psychological divide.These different ecosystems and different aims have an impact on how the networks will progress.
For instance, non-technical bitcoiners often say that “Bitcoin can’t be changed,” but let’s take a look at the specifics of both governance models and how exactly they are, in fact, different.
Read more: End of the Monopoly: How Bitcoin Will Usher in a New Era of Governance in Crypto
This year, Ethereum transitioned from proof-of-work to proof-of-stake (consensus algorithms that determine how blocks of transactions are added to the chain).Last year, Bitcoin introduced Taproot, which reduced transaction fees, increased privacy and provided more wallet functionality.
It is likely that the next major change will be BIP-119 , which could provide additional benefits for the Lightning Network (Bitcoin’s scaling layer).
Not long ago I had the opportunity to interview former Bitcoin Core developer Samuel Dobson to learn how the governance and development process actually works in Bitcoin.Typically, there aren’t nearly enough technical details discussed when communities criticize the other’s governance processes.It’s doubtful that most critics have ever even spoken to a core developer on either side.
Shared ground Apart from the handful of tools common to most blockchain governance processes (like Git merge requests and comments, live chat and mailing lists), Bitcoin and Ethereum do have their similarities.
Both projects have relatively small groups of core developers (counted in the dozens).In the case of Bitcoin Core, only a few have commit access (aka maintainers, or those who can set updates to go live).
Both projects utilize “rough consensus,” have long periods to scrutinize proposals (i.e., BIPs and EIPs , or Bitcoin or Ethereum Improvement Proposals) and make minor changes quite regularly.In Bitcoin these changes are called “standardness rules,” which are not consensus critical and can be changed relatively often.
Both projects have also had rare bugs that have been dealt with in relatively centralized ways.
For Bitcoin: On Aug.15, 2010, a hacker created over 184 billion BTC due to a number overflow error.Bitcoin’s total supply is meant to be capped at 21 million, so clearly this wasn’t acceptable.Ninety minutes later, Jeff Garzik spotted the issue.Satoshi can be found discussing a fix here and then implementing it.He said, “Once more than 50% of the node power is upgraded and the good chain overtakes the bad, the 0.3.10 nodes will make it hard for any bad transactions to get any confirmations.”
For Ethereum: In 2016, shortly after The DAO launched and raised $150 million worth of ether (ETH) through a token sale, this first decentralized autonomous organization was hacked due to vulnerabilities in its code base.The Ethereum blockchain was eventually hard forked to restore the stolen funds.
Not all parties agreed with this decision, resulting in the network splitting into two distinct blockchains, Ethereum and Ethereum Classic.
What’s different? At the most basic level, Ethereum doesn’t work like Bitcoin in that it doesn’t have a single reference implementation.Each implementation has committers (e.g., Go-Ethereum, Nethermind, Besu, Erigon) but none of them is sufficient to change the entire protocol.
Bitcoiners typically resist “consensus changes” that are changes that could create a fork and change the fundamental rules of the peer-to-peer (P2P) networking protocol.“Standardness rules,” however, are more flexible due to not being consensus critical.Bitcoin resists hard forks but accepts soft forks, which are not consensus changes, but are a strict subset of the previous rules.
Ethereum co-founder Vitalik Buterin actually wrote about the issue .
Ethereum has a specification (spec) that multiple clients are based off (the aforementioned Geth, OpenEthereum, Besu, Nethermind, Erigon), while Bitcoin Core is what all Bitcoin clients are based on (Bitcoin Core, Knots, Rust BTC, BTCD).
Read more: 23 Blockchain Predictions for 2023
At the social level, Ethereum has the Ethereum Foundation (EF), which was founded to help direct development of the network and was funded through the sale of ETH.Bitcoin Core is not a legal entity, it is software.
In reality, both projects have numerous legal entities involved.
While the Ethereum ecosystem is definitely more reliant on a smaller set of entities (EF, ConsenSys), there is no one entity that is the central coordinator.If EF or Consensys disappeared tomorrow, Ethereum development could continue as there are many independent teams developing core clients and other components of the ecosystem.Considering the number of players involved in the Merge, it’s a ridiculous criticism to say Vitalik is essential to its continued existence.
Likewise, Satoshi Nakamoto actually disappeared.This left Bitcoin without a specific human to direct the network or target to take it down – a feature, not a bug.However, Bitcoin Core is still a loose organization, with owners of a Github account and reportedly a multisig wallet used for funding developer travel and accommodations at meetups.
This wallet is intentionally kept on a need-to-know basis.
Finally, generally speaking, Bitcoin favors soft forks and Ethereum favors hard forks.
A limited debate Too often the debate between Ethereum and Bitcoin about how to address protocol governance lacks perspectives from core developers.In reality, there’s a limited understanding of what’s actually happening on the ground for both networks.
There have been a couple of useful interviews to come out of the “What Bitcoin Did” podcast hosted by Peter McCormack where a former Ethereum core team member, Lane Rettig, expressed concerns about the centralization of control in Ethereum (though he admittedly still supports the project).What was frustrating about the podcast was the lack of technical specifics from the Bitcoin Core perspective.
In reaction to the interview, Tim Beiko of the Ethereum Foundation said, “FWIW, most people in the Ethereum community I’ve spoken to disagree with a lot of Lane’s criticism.It’s a [three-hour] interview, so it’s quite long to refute, but I wouldn’t paint it as the consensus Ethereum view.”
The “Bankless” podcast held a productive debate called “ BTC vs ETH: Which is Better Money? ” which covered some nuances of the process of both sides.But the conversation, like most conversations contrasting BTC and ETH, had more to do with economic policy than governance itself.
The humans involved and tools used to govern matter greatly.
The last podcast worth mentioning had Alex Gladstein debating Erik Voorhees on how the different blockchain technologies work and their varying levels of decentralization.The very concept of a “spectrum of decentralization” is positive – and shows how both Bitcoin and Ethereum have their own weaknesses and benefits.Voorhees argued both are overwhelmingly similar – though noted a clear difference in that Bitcoin’s economic policy sets it up as a long term sound money system.
Sounding off Both Bitcoin and Ethereum are fascinating networks whose differences help the world become more decentralized because they thrive in complementary areas.It’s also beneficial that certain people are interested solely in one or the other.
Decentralization applies to both computing power and governance, and both are essential in determining the holistic level of decentralization.
Samuel Dobson, the former Bitcoin core dev, expressed to me in our conversation that the difference is largely psychological with the participants.
Bitcoin’s purpose is for maximum predictability and security, while Ethereum is more focused on constant innovation and composability.
He said, “The Bitcoin community has a kind of in-built inertia.It’s really hard to change things because it is really hard for a lot of people with diverse interests to agree on the changes.A lack of ‘leadership’ is a feature not a bug in this world.
“Things moving slowly ensures that things are done safely with plenty of discussion, review and testing.We’ve seen first hand on certain forks of Bitcoin the impact of big changes being rushed through.
In this way, the psychology of the Bitcoin community is a big part of its decentralization.
Read more: Ethereum Developers Target March 2023 for Release of Staked Ether
“Ethereum, on the other hand, places a lot more trust in Vitalik and the others to decide on the direction of the protocol.That’s not to say they all follow blindly, of course – it is still an open-source project with review and discussion.But the endorsement of a relatively small group of individuals there allows much bigger changes to proceed much faster.
“Their leadership is very centralized compared to Bitcoin’s.I think that difference is more psychological than tangible: They’re willing to sacrifice decentralization of development in favor of the ability to move quickly and “experiment” with lots of new changes.”
In reaction, Ethereum’s Beiko noted Bitcoin has a few core devs with much more social capital and influence than the average contributor.Ethereum is similar in that regard – even if criticisms of Vitalik’s continued presense often feels like a strawman.By the numbers, Ethereum has many more people involved in its development.
“In many ways, our development process is more decentralized,” Beiko said.
No one person in Ethereum can “unilaterally force a change.”
In the end, both network’s continued existence – despite the perceived threats they present to the established order – show what decentralization really means..