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What if…Ethereum was first?

What if…Ethereum was first?

Bitcoin was the first blockchain and a pioneering solution to the double spend problem. As the original, Bitcoin has been responsible more than any other entity in the space in driving the perception and agenda of cryptoassets for nearly a decade now. But what if it had not been the original project? What if Ethereum, Bitcoin’s biggest rival by most metrics, had been the first blockchain? How would it have changed the sector?

Bitcoin was conceived as a ‘peer to peer electronic cash system’. Using Bitcoin as a replacement for money sits at the heart of Satoshi Nakamoto’s whitepaper. But Nakamoto’s vision was also inspired by a desire to remove financial institutions from the equation. As he wrote on P2P foundation, “The root problem with conventional currency is all the trust that's required to make it work”, going on to write that “the central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically…we have to trust them with our privacy…not to let identity thieves drain our accounts.” These sentiments inspired elements of Bitcoin’s design including the peer to peer nature and inflation rate amongst others.

Ethereum, however, aimed to build on Bitcoin through the concept of ‘smart contracts’. These would, as the Ethereum whitepaper concludes, allow the protocol to move “far beyond just currency” and allow the Ethereum blockchain to facilitate a wide range of projects and uses. In this sense it has been successful, as 85%+ of the 661 tokens running on top of the platforms are running on Ethereum.

Ethereum is also more palatable to corporations and government institutions. It is not a currency replacement in the same way that Bitcoin is, it lacks the privacy features of projects such as Monero but it does promise to introduce efficiency savings and productivity gains. In a world where most developed nations are seeing productivity stall or drop, where companies are for the most part locked in a race to the bottom and where real wages have already been slashed over the past 30-40 years, these are highly attractive.

Because it is not perceived as a currency, it also largely avoids the negative connotations that Bitcoin suffers. Bitcoin has been demonised as being the choice of:

  • Drug users
  • Assassins
  • Thieves
  • Terrorists
  • Paedophiles
  • Money launderers

For example, the usually objective BBC Panorama documentary series did a special on Bitcoin recently entitled ‘Who Wants to be a Bitcoin Millionaire”. It barely lasted two minutes before breaking into the currency’s uses for drugs and arm deals. Bitcoin was used as the currency of choice for online drug deals in its formative years and in this regard will likely be forever synonymous with the Silk Road, the former market leading illicit goods bazaar whose founder will be celebrating a 5th year in jail later this week.

As such, popular media coverage is heavily skewed in favour of Ethereum and against Bitcoin. The most frequently heard comment amongst bankers and country heads is Bitcoin bad, blockchain good. And when they say blockchain, for the most part they mean Ethereum and the associated projects.

However, the manner of Bitcoin’s portrayal can arguably be seen as a positive. One only has to look at the current state of Ethereum dApps to see that (despite the twin advantages of building on the community that was five years strong when it started and the benefit of seeing what had and hadn’t worked), the route to having a viable use case has been long and hard. There is barely a dApp in existence that has true day to day relevance at this moment in time. Half a decade is a long time for a community to wait for a use case. It is possible that the community may have died out, or remained much smaller for longer, had there not been pioneers in the space which had already proven that cryptoassets could be successful.

The simplicity of Bitcoin’s goal resonated strongly with many. This is partially owing to the unfolding Global Financial Crisis at the time and the accompanying anger against the banking industry and the governments that were judged to have facilitated them. This engendered a core support that were dogmatic in their belief about the use of Bitcoin and how it would one day be a viable currency replacement. As Erik Voorhees says, this support was vital in ensuring Bitcoin didn't disappear without a trace in the lonely early days. 

“I think that if bitcoin hadn’t had a strong ideological connection for a sufficiently large group of people in its early days, it probably would not have overcome the initial catch 22 that it doesn’t become useful until enough people are already using it.”
— Erik Voorhees

And Bitcoin was arguably more useful far sooner than Ethereum. Like it or not, a (somewhat) untraceable currency that could be used outside of the law for illegal purchases is an obvious driver for adoption. The cryptoasset scene now is vastly different to the early days. There is more information, greater means of communications and a huge community. The initial years of Bitcoin’s life saw it confined to a much smaller audience. There was no Coinbase, no easy onboarding of fiat. There were no exchanges. And yet the Silk Road became wildly popular within three-four years of Bitcoin’s existence. By contrast, the greatest use case thus far of Ethereum is primarily in it becoming a brilliant platform for fundraising and in the decentralised exchanges built on top of it.

There is no doubt that Bitcoin framed the debate of what cryptocurrencies are. For one, it led to the adoption of the term ‘cryptocurrency’ as opposed to something more befitting the sector as it currently stands (such as ‘cryptoasset’). But its genesis and initial underground movement also gave rise to a belief that blockchain could be used to remove the influence of third party institutions such as banks and payment providers. It led to a devoted developer movement, many of whom have branched out and are involved in leading the wide range of dApps that we currently have (Buterin himself was a co-founder of Bitcoin Magazine). It meant that decentralisation was perceived as important. And in this, it prevented the immediate co-opting of the space by corporations which may have drastically altered how blockchain was used.

It would be easy to envisage a world whereby blockchain had been created by IBM and the different path the sector would have taken. Ethereum is a far more attractive platform for corporations, governments and charities. It does not have the baggage of Bitcoin, it is developed for those uses and it does not have the same vocal libertarian crowd that originally flocked to Bitcoin (although there are clearly strong elements).

Bitcoin was revolutionary, but the idea was simple. Ethereum adds to the capabilities of blockchain, but in its versatility it lacks the simplicity of Bitcoin’s ambitions, a straightforwardness which meant that a community was able to form quickly with a narrow set of objectives and a shared ideal of what Bitcoin was and how it would change the world. I believe this simplicity is key to why Bitcoin captured the public imagination in a way that Ethereum may have struggled to. 

Odds and Ends

Odds and Ends

Part 2: Why DAGs don't scale without centralisation

Part 2: Why DAGs don't scale without centralisation