Read the entire thread below on Ethereum, exactly my views.
Below are some graphs as food for thought:
1) Bitcoin / USD price graph since 2014. It's a log graph (not linear) so price change is in percentage terms.
2) Ethereum / Bitcoin log price graph.
3) Dogecoin / Bitcoin log price graph.
Spot the asset which is consistently growing over the long term and is not subject to short term speculation.
20th April 2021
I limit myself to talk about and give advice about Bitcoin only. I understand that because I talk about Bitcoin with so much passion, it can seem to be dogmatism. However, it is not dogmatism. It is a financial decision with passion in the mix. I chose to limit myself to Bitcoin only from a time, effort optimisation matrix. Spending time on other coins gives me a lower return.
In every Bitcoin price cycle, there are other cryptocurrencies which start doing well and some seem to be doing better than Bitcoin. So it's obvious that during these times, as someone who represents the crypto industry, I get asked about other coins. Recently, its been Dogecoin. Since years, I have always been asked about Ethereum (Eth).
Disclaimer: I have spent time researching Ethereum (about 4 months in 2017). I do spend time every once in a while to check if there is any change in my original opinion about Eth. I spend massive amount of time on Bitcoin and very little on everything else. So I am comfortable to say that I am a Bitcoin expert and though I doubt 😉 , I could be wrong about other coins, in the long run.
The way I look at my investments is that I only invest in things which I do not intend to sell. I do not make speculative investments in the flavour of the month or the year.
So although I could be wrong in the short term, I am confident of my opinions in the long term. And its based on research and simple logic.
Ethereum is a far riskier investment than Bitcoin in every way.
- Complexity: Ethereum has a massive surface attack compared to Bitcoin. Because it is designed to do many things, it is technically complex at the base layer. Ideally, networks and computing should be built in layers. They should be very simple at the base layer and the complexity should increase in layers. That's the way the Internet and operating system softwares are built. The base TCP/IP layer is very simple. On top there are additional layers with increasing complexity like http, ftp and so on. On http, there are more layers for more powerful websites. Same with programming languages. Machine level languages can only process 0s and 1s. More and more complex programming languages are built on top.
- Decentralization: Ethereum is highly centralized.
- Most updates are directed by the Ethereum foundation.
- Very few Ethereum full nodes exist which is critical for a decentralized network.
And I have not even gone in some fundamental risks of Ethereum in the long term, their move from the Proof of Work to the untested Proof of Stake and so many more factors which is beyond the scope of this article.
In a nutshell, Ethereum is far riskier than Bitcoin.
Now lets look at the return. Below is a graph of Ethereum's price in Bitcoin (not in USD). Ethereum's return in Bitcoin in the long term is basically flat.
So far more risk for arguably the same return.
Dogecoin started as a joke. Below is the price of Dogecoin in Bitcoin (and not in USD).
Dogecoin is on fire right now. It does not have any unique value propositions for a long term investment. It is just in a speculative bubble due to tweets by Elon Musk. Musk has been a great addition to the Bitcoin community but his jokes on Dogecoin means that Bitcoiners like us have to keep cleaning the mess 🙂. Which is fine, we'd still rather have him on board. Just remember that he has bought $1.5 billion of bitcoin, not Dogecoin.
When you look at investments in other cryptos vs Bitcoin, below are the top 2 criteria to consider:
1) Check the prices of the altcoin in Bitcoin and not in USD. With every altcoin, you take far higher risk than Bitcoin. So the returns should be a magnitude higher and for years, not just in speculative bubbles, to justify the investment.
2) How decentralized is the project. The only and only characteristic of cryptocurrencies which distinguishes itself from other financial assets is that it is decentralized and cannot be controlled by a single person, entity or organization.
Investing in cryptocurrencies is not like investing in the stock market. Its like buying the Internet. Bitcoin is the Internet.