Bitcoin and Ethereum #BTC #ETH

Bitcoin and Ether are the two largest cryptocurrencies in the world. Many people think they are similar, but in my view, their pricing logic is completely different.

Simply put, Bitcoin is a currency, and its price depends on people's recognition of digital cryptocurrencies. Ether is an external manifestation of the Ethereum ecosystem, and its price depends on the prosperity of the decentralized Ethereum ecosystem itself.

Specifically, the similarities are: both allow you to transfer money without a bank, both run on blockchain technology, and both are open to anyone. But that's where the similarities end.

Bitcoin itself has no intrinsic value; it is just a concept, like paper money. But behind Bitcoin is its ideological value—decentralization, fixed supply—people believe it is valuable, so it is valuable. The more people believe in it, the higher the single coin value.

Typically, Bitcoin is called digital gold, but I think Bitcoin is actually a combination of gold and paper money. The reason it’s like gold is because its total supply is fixed, with some new coins added each year, and it cannot be issued infinitely (this is different from currency). However, gold also has industrial properties (probably about 7% of total gold), so its price is determined not only by faith but also by supply and demand. Bitcoin’s only function is as a currency, enabling peer-to-peer payments. In this regard, Bitcoin is closer to money.

The risk of Bitcoin is not devaluation but going to zero: because its only purpose is as a currency, and currency is backed by trust. If everyone believes this thing will get better and better in the future, Bitcoin’s price will inevitably rise. Conversely, if everyone thinks Bitcoin is a scam, it will eventually become worthless. It’s either a bicycle turned into a sports car or walking barefoot—there’s no middle ground.

But for now, the concept of cryptocurrency is becoming more and more ingrained in people's minds, and more countries are recognizing Bitcoin. So basically, Bitcoin’s future is certain—if the total supply remains unchanged, the more people enter this space, the higher the price of Bitcoin. If 5% of global monetary reserves are held in Bitcoin, its price could reach about $500,000 to $800,000 per coin. You can ask AI for specific calculations.

The concept of Ether is quite different. Simply put, Ether is the currency of the Ethereum world, and Ethereum is a decentralized blockchain network and software development platform with the largest blockchain developer community in the world.

Ethereum’s goal is to build a world driven by blockchain technology, with its own independent applications (built through smart contracts), and multi-layer networks to host these applications.

Typically, Ether is called digital oil, which I think is quite fitting. After all, oil is an industrial product, and its price is mainly determined by supply and demand and market conditions. Similarly, the price of Ether depends on the prosperity of the Ethereum world (which directly affects trading volume; the larger the trading volume, the greater the demand for Ether) and the overall market environment for cryptocurrencies.

The risk of Ether is devaluation, not because of excessive issuance causing inflation, but because of the decline of the Ethereum ecosystem due to fierce competition among peers, with Solana being the most direct example.

Solana is also building its own ecosystem and has its own currency, SOL. From a macro perspective, Solana is essentially another Ethereum, doing almost the same things as Ethereum. But from a technical standpoint, Ethereum has a mesh structure, with a small Layer 1 core, expanded through Layer 2 solutions to balance security and efficiency. Solana, on the other hand, is an optimized single-chain model.

The advantage of Solana’s architecture is high transaction throughput (theoretical capacity up to 65,000 transactions per second), low costs (as low as 0.2‰ of RMB), making it very suitable for small, high-frequency trading. Ethereum, however, offers higher security (which is crucial for transactions).

To use an analogy, Ethereum is like a country with provinces, cities, and counties (Layer 2, AppChains). Its disadvantage is that command transmission can be slower, but its advantage is that even if a peripheral city riots, the central city remains unaffected. Solana is like a super city where everyone is in the same city. Its advantage is that everyone is close, making communication more efficient, but if a part of the city experiences a major problem, the entire city could be affected.

Currently, Ethereum’s developer ecosystem is the largest, but Solana is catching up rapidly. The future is uncertain—either one will dominate, or both ecosystems will coexist, each serving different application scenarios.

In summary: the valuation logic of Bitcoin and Ether is actually different. In the long run, Bitcoin has stronger growth certainty, while Ether carries risks. It’s very likely that the Ethereum ecosystem will stop or grow slowly after reaching a certain scale.