Years of cultural warfare established Bitcoin as the world’s first “permaware” – a decentralized digital monetary foundation that will never change on us. However, the network’s predilection for stability and simplicity had firmly excluded users who had a broader view of what Bitcoin could and should be.
Today we explore the biggest consequence of this design choice: “crypto” – a parallel world of digital assets for those who felt failed by the original chain.
The Birth Of Ethereum
Ethereum is the second-largest cryptocurrency after Bitcoin, and the first crypto network to gain major traction outside of Bitcoin. Its founder, Vitalik Buterin, began as a Bitcoiner.
When introducing and explaining his vision for the project at Bitcoin Miami 2014, Vitalik framed Ethereum as building upon the things that Bitcoin couldn’t do.
“Bitcoin is very good for transferring money, but it was not designed as a foundational layer for any kind of protocols to be built on top,” said Vitalik.
The founder explained that Ethereum would have a superior scripting language compared to Bitcoin, making it best equipped for a vast array of applications including decentralized exchange, lending markets, and new tokens. The latter, he noted, had already been tried out on Bitcoin through meta-protocols like “colored coins,” though they encountered immense technical limitations.
Ethereum would also help usher in new protocols that were non-financial, such as decentralized email and DAOs. Fundamentally, Ethereum was designed to optimize for the second of the two game-breaking technologies that Bitcoin ushered in: not just decentralized money, but a decentralized database powered by “distributed consensus.”
Finding A Market
In 2024, Bitcoin diehards have a lot to be happy about. BTC now has 59% dominance over the entire crypto market, with its market cap now more than quadruple that of its closest competitor, ETH.
However, while BTC the monetary asset reigns supreme, the Bitcoin network is far from king of when it comes to user activity. Ethereum, for example, generally yields far more fee revenue than Bitcoin does. According to the a16z 2024 State of Crypto Report, there are also 52 million monthly active crypto addresses across Ethereum and its various Layer 2 networks, versus just 11 million on Bitcoin.
It also looks bleak from a developer standpoint. Over 20% of crypto project founders surveyed said they were or had an interest in building on Ethereum, with additional interest in L2s like Arbitrum, Base, and Optimism. Bitcoin, however, had just 4.2% of founders’ interest.
It's not just Ethereum either: Solana has over 100 million monthly active addresses, and even smaller chains like Near and Tron surpass Bitcoin at 31 million and 14 million respectively.
In the case of Tron, much of its activity comes from its popularity as a payment rail for stablecoins – tokens pegged to fiat currency that are far more popular than BTC as a medium of exchange in developing economies.
As these newer blockchains and token projects developed over the past decade, several Bitcoiners contended that these were mere scams with no valuable use case. But the data speaks for itself: Ethereum and other blockchains have ushered in lasting digital economies securing hundreds of billions of dollars in assets, and trillions of dollars in settlement value.
The demand was always there. Bitcoin was simply unable and unwilling to serve it.
Money VS Features
Today’s divide between Bitcoin and crypto is essentially between decentralized money and its features.
The former is the pinnacle of stability, security, and predictability. It has no leaders, nor a development roadmap. Its native asset, BTC, has the greatest brand recognition among digital assets, and is programmatically guaranteed to never be debased. It is the apex digital property, and the overwhelming destination where investors want to park their money.
By contrast, crypto is where the on-chain action happens. It's home to a trillion-dollar ecosystem of stablecoin liquidity, tokenized securities, DAOs, and decentralized finance. Its the overwhelming target of venture capital and innovation over Bitcoin, where users are most active. Finally, thanks to staking, its the place where users can actually put their altcoin money to work and earn a yield.
This divide is unnatural. The world would do best if the best money were married to cutting edge financial products, but Bitcoin’s complicated history has forcibly split the digital asset landscape in two. After a decade of tension, the frustrations on both sides are palpable.
On the crypto side, investors are spiteful of Bitcoin’s favoritism by the market despite having seemingly outdated tech when compared to altcoins, even calling it the “special snowflake” of digital assets. Builders designing chains with genuine utility have no access to Bitcoin’s liquidity and investor base for anything longer than a single market cycle. Even for well established smart contract chains like Ethereum, liquidity is growing further divided within its L2 ecosystem, which now handles most Ethereum-based transactions in aggregate.
Meanwhile, pressure is mounting for Bitcoin to start adopting new technologies to accommodate the features of other chains, and to address long standing scaling difficulties as network adoption grows. As of 2024, several developers are championing a softfork of Bitcoin’s code to reimplement OP_CAT for additional functionality, among other ideas. Yet upgrading Bitcoin is notoriously difficult, and breaks its promise of permanence and reliability.
Can Bitcoin Be Saved?
Many of Bitcoin’s hopeful builders now feel that time is running out to find a suitable remedy – especially as the chain becomes more institutionalized, widely adopted, and prone to government oversight with time. This is recreating tensions last seen during the blocksize wars seven years ago.
“All the ideas for making bitcoin actually useful for transacting trend towards having some untrusted party in the flow of funds,” wrote Matt Corallo, one of Bitcoin Core’s most prolific contributors, in a May blog post. “With regulators cracking down and more and more participants in the bitcoin ecosystem only interested in a 21M coins limit and seeing any form of non-KYC payment rails as hostile to the value of their investment, these centralized parties are increasingly going to be targets.”
Turning Bitcoin into a highly functional decentralized network isn’t just healthy for the ecosystem. It's a breakthrough that the entire world’s digital freedom is depending on. But can it be done?
Thankfully, after a decade of turmoil, that breakthrough finally took place. BitcoinOS has discovered the technology that will bring peace and unity back to the crypto ecosystem: the ultimate upgrade to Bitcoin.
