Ethereum update: Why Ether is a better currency than Bitcoin
Why do I keep hearing people say that Ether is not a real currency and Bitcoin is much better because it is the only true “store of value”? The following is my take on it.
Ether is definitely both a currency and store of value. One of the biggest mistakes people make on currency theory is to assume that the big three characteristics of money (medium of exchange, unit of account, store of value) are independent of each other.
They are obviously very interconnected if you think about it for a moment.
As someone who wants to store value, you want the price of the currency you choose not to decrease. If it’s popular as a medium of exchange and unit of account, that creates demand for it. More demand equals higher price, all else being equal. Inversely, how can a currency stay high in price if no one is actually using it?
If you need a medium of exchange, what better choice than the currency everyone uses to record transactions and debt (unit of account), and the one everyone already have a stash of (store of value)?
As for unit of account, what better choice than what everyone already have (store of value) and use for trading (medium of exchange)?
For currencies, network effect and synergy is everything and the conclusion is simple; Currency which optimizes for a balance between all three characteristics will be much better in all characteristics, than a currency trying to optimize for any single characteristic.
That’s why Ether is a better currency than Bitcoin, even though (or perhaps exactly why) it is not its primary goal.
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.
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