Ethereum And Bitcoin Debate: Issuance And Security Concerns

According to Cointelegraph, Ethereum Foundation researcher Justin Drake has sparked a debate by suggesting that Ether (ETH) will soon become "ultra sound" money due to its decreasing issuance, while Bitcoin faces challenges as it nears its 21 million supply cap. Drake's comments have fueled discussions between the Ethereum and Bitcoin communities. Drake highlighted in a February 5 post on X that for Ether to achieve "ultra sound" status, either its issuance must decrease or the burn rate must increase. He expressed confidence that both scenarios will occur. Ethereum's issuance turned deflationary after the Merge in 2022 but began to rise again in April 2024 following the Dencun upgrade, which lowered fees for layer-2 networks and reduced the overall amount burned. Drake compared Ethereum's issuance with Bitcoin's, noting that since the Dencun upgrade, Bitcoin added 655,000 BTC to its supply, valued at approximately $63.5 billion, while Ethereum added 462,000 ETH, worth about $1.25 billion. He pointed out that Bitcoin's supply grows at 0.83% per year, 66% faster than Ethereum's. Drake raised concerns about Bitcoin's long-term security, citing its reliance on block rewards, which account for about 99% of miner revenue, compared to just 1% from network fees. He argued that Bitcoin is vulnerable to security risks due to the relatively low cost of attacking the network, estimating that a 51% attack could cost around $10 billion and require access to 10 gigawatts of power. Ethereum educator Anthony Sassano echoed these concerns, suggesting that Bitcoiners are overlooking potential security issues. In response, analyst James Check countered that critics of Bitcoin's sustainability overlook factors such as energy advancements, mining efficiency, and economic incentives. He argued that if Bitcoin achieves reserve status, high fees will be inevitable, similar to the costs institutions incur to securely store gold. Check also noted that the cost of ASIC mining rigs, which affects profitability, is often ignored. He explained that bankrupt miners selling rigs at lower prices allow new entrants to continue mining, thus maintaining network security. Check emphasized that advancements in energy sources, particularly nuclear power and wasted energy utilization, will reduce mining costs and stabilize energy grids through demand response. Meanwhile, Drake acknowledged that Ethereum faces its own challenges, such as the incentivization of excessive staking, which could displace ETH as "pristine" collateral. He also mentioned systemic risks associated with liquid staking platforms like Lido. To address these issues, Drake proposed a "Croissant Issuance" model, which involves a declining supply issuance that drops to zero when 50% has been staked, with a peak issuance capped at 1% per year to achieve market-driven equilibrium.