Naval Ravikant, a prominent venture capital investor and the CEO of AngelList, explains all Bitcoin has to do to become a premium store of value is to survive.
“All Bitcoin has to do to become the premier store of value is...survive,” said Ravikant.
Bitcoin vs. other coins
Since its launch in 2009, Bitcoin’s two greatest features and characteristics have been its decentralized nature and security. Although Bitcoin is not as flexible as other Blockchain networks such as Ethereum, as a store of value and settlement network, it prioritizes security.
Over the past two years, the rise of Ethereum has led to the emergence of various Blockchain projects and networks. With a unique vision and strategy, Blockchain projects such as Ripple, NEM and Ethereum Classic have gained massive popularity among cryptocurrency traders and investors, earning multi-billion dollar valuations.
Naturally, users, investors and traders have started to compare Bitcoin to other Blockchain networks that are more flexible and have lower fees. Bitcoin has often been compared to Ethereum, which offers a completely different platform and protocol than Bitcoin. It offers an infrastructure and network for decentralized applications (DApps) and unlike Bitcoin, its token Ether was designed to act as a gas or transaction fee for DApps.
Mainstream media outlets in major markets such as South Korea have printed highly inaccurate and rather biased narratives to criticize Bitcoin’s rising fees and its limited flexibility over other networks.
Some mainstream media outlets have characterized Bitcoin's high fees as a “service fee,” obfuscating the perception of Bitcoin from the general public.
Media outlets, traders, users and investors that criticize Bitcoin’s relatively high fees completely ignore the existence of tradeoffs between security and flexibility.
In late 2016, Ethereum had to run a total of four hard forks, three of which had to deal with internal bugs and memory errors. Bitcoin, in contrast, had one hard fork in its early days and has had no major bug exploitations since then.
Ethereum has also started to suffer from various scaling issues, including rising median fees and the cost of running smart contracts.
Although Vitalik Buterin has stated in the past that a lot of applications and smart contracts have been coded to run inefficiently, he mentioned that more tools are needed to lessen the size of smart contracts and lower fees and gas costs.
Any Blockchain network that reaches the stage of Bitcoin will be forced to deal with scaling issues. The Bitcoin network is a lot harder to scale because of its robust security measures and decentralized nature. Reaching consensus within an open network is significantly harder.
“Other tokens may get more usage, but they generally sacrifice some security for that usage. For a store of value, security is everything,” said Ravikant.
Security or flexibility?
However, Ethereum shouldn’t be compared to Bitcoin in the first place as it offers something Bitcoin doesn’t, which is a flexible and functional ecosystem for decentralized applications. Ethereum is providing an infrastructure for new markets such as the ICO market.
It is important for users, traders and investors to consider tradeoffs between security and flexibility. Bitcoin was designed from the start to operate as a store of value, settlement system and digital cash system. For a store of value, security always has to be the priority.