Justin Drake: Ethereum will return to deflation soon! Interpretation of the security risks of Bitcoin

Ethereum Foundation researcher Justin Drake recently predicts that Ethereum will soon return to the Ultra Sound Money state, while Bitcoin is at risk. This remark has sparked widespread discussion.

After the merger, Ethereum's consensus mechanism was transformed into PoS, and the daily issuance volume was greatly reduced, and it was deflated for a time. It was called "supersonic currency" by the community, in contrast to Bitcoin's concept of "solid currency". Drake believes that to make Ethereum deflation again, it requires reducing circulation or increasing destruction, and he believes both will happen.

Security risks of Bitcoin?

Drake compared the issuance of Ethereum and Bitcoin and found that Ethereum is more scarce than Bitcoin. He pointed out that the supply cap of 21 million Bitcoins may bring long-term security risks, because miners' income mainly relies on block rewards, and the proportion of fee income is extremely low. He believes that the low cost of attack puts Bitcoin at a risk of 51% attacks, and national institutions are fully capable of launching such attacks.

Drake also mentioned that any short-sellable tool associated with Bitcoin mining will exacerbate the risk of a 51% attack and analyzes potential market risks.

However, this article believes that Drake's view is too pessimistic. The profitability of miners is dynamically changing. Even if Bitcoin issuance stopped in 2140, it does not mean that miners will give up mining, and it is difficult to give up the long-term ecosystem.

Comparison chart of Ethereum issuance and Bitcoin issuance

Suggestions on Ethereum's "Croissant Distribution Model"

In response to the current problems of over-staking and systemic risks of liquid staking platforms, Drake proposed the "Croissant Issuance Model": When 50% of Ethereum is pledged, the issuance volume drops to zero, and the maximum issuance volume does not exceed 1% per year. He believes that improving data availability (DA) is the key to achieving large-scale ETH destruction. Although EIP-4844 temporarily reduces the amount of destruction, as demand grows, the amount of destruction will rebound.

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