Could Bitcoin Challenge Ethereum?

I know it sounds like a silly question but one that may be asked increasingly if certain things fall into place.  When it comes to challengers, most of the time we hear of Ethereum killers like EOS, Stellar NEO or IOTA, to name a few.  The key selling point to each is scalability.  By building their own platforms they can engineer around some of the speed limitations that, so far, have held Ethereum speeds to the pace of an analog snail.

Even with these limitations the Ethereum platform remains highly popular with developers. They are the king of ICOs.  According to data through the end of September from ICO Watch, Ethereum is the choice of 82.6% of ICOs. The next closest is NEO at 0.29% followed by EOS at 0.15%.  You can quibble with the numbers but one thing is clear, Ethereum is in command.

ICOs Adjusting to Change

The character of ICOs is not the same these days.  That is not so much because the volume has dried up.  So far through the first nine months of 2018 over $6 billion has been raised.  That is nearly 75% higher than was raised all of last year.

Most of this can be explained by a little more than $5 billion that is accounted for by EOS, Telegram and tZero.  That still leaves plenty of room for the sheer number of ICOs to increase by year end.  

Those who specialize in ICOs will point out that the market is maturing and note the average size is far larger today than last year.  These days there is a far higher number that have advanced well beyond the whitepaper stage to have a project in beta stage.

But the facts are, ICOs have not been the driving force they were last year at this time. In fact, one theory holds that as the price of Ether began its near year long tumble, ICOs were some of the biggest sellers of ETH as they over spent their largess on development while watching its value diminish.

Say what you will about the number of bad actors who have created ICO scams, the format remains the most attractive way of raising capital.  It surely beats giving away equity that venture capital investors traditionally demand. As the crypto world continues to evolve it only follows that ICOs should account for an ever increasing share of new capital raised both for startups as well as more seasoned companies.

How Could Bitcoin Fit?

Supporting this notion is the opinion of Scott Yoon who heads up Temco. His company is creating RSK Bitcoin blockchain to develop a supply chain platform.  RSK is described as a sidechain tied to the Bitcoin network. This spells far greater scalability although with some sacrifice of security.

It is still early in the RSK story but not too early for some bravado. According to Scott Yoon, the biggest difference between RSK and Ethereum is scalability.  He claims the Ethereum won’t ever be able to support the mass adoption of real world products. That maybe a lot of noise considering how early it is in the RSK evolution.  Nevertheless, their focus on supply chain management is spot on.

Blockchain applications for supply chain management offer promising potential for just about everyone.  Issues like KYC and AML are irrelevant, thus negating any push back from government regulators.

ICOs Still Have Big Upside

And Yoon is no less optimistic about the outlook for capital raising through the use of ICO, predicting that 40% of capital will come from this source. Of course, why else waste the time developing a platform to chase a dead market?  If this projection is even close to accurate, we are talking about a market that is easily ten times the size of the current $6 billion level.

So the real question under these conditions is not whether Bitcoin will overtake Ethereum but how much investors will make owing either one.   

Featured image courtesy of Shutterstock. 

James Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.