Source: VanEck; compiled by AIMan @ Golden Finance
Digital asset treasuries are rapidly evolving, with BTC and ETH being the most common choices. Initially, entities chose BTC because of its strong value storage attributes created by monetary policy. The key to this policy structure lies in BTC's predictable issuance, which leads to a limited total supply of BTC. Recently, DATs (Digital Asset Treasuries) focused on Ethereum have emerged. These new DATs view ETH as a better choice for operating a digital asset treasury, as savvy companies can engage in novel financial activities to accumulate ETH faster than BTC.
The BTC treasury can increase BTC by purchasing additional assets through financing, implementing complex options strategies, or lending out BTC, while the ETH treasury enjoys greater flexibility. ETH DAT can replicate the financial strategies of BTC DAT and stake its ETH to earn Ethereum network rewards and inflation issuance. Additionally, they can participate in DeFi for extra income. However, the discussion often overlooks the fundamental differences in principles between Ethereum and Bitcoin. Ethereum may develop an economic system more favorable to its token holders than BTC.
Ethereum will celebrate its 10th birthday on July 30, 2025. Ethereum's initial inflation rate was significantly higher than Bitcoin's, at 14.4% versus 9.3%. However, Ethereum subsequently made two major economic policy adjustments that brought its inflation rate below Bitcoin's.
The first adjustment was EIP 1559, which was implemented in August 2021 and triggered the 'burning' of the base transaction fees for ETH. The consequence of this change is that the increase in Ethereum activity led to a reduction in the total supply of ETH.
The second major policy change is Ethereum's transition from Proof of Work (PoW) to Proof of Stake (PoS). This transition, known as 'The Merge,' took place in September 2022. The Merge reduced Ethereum's inflation issuance from approximately 13,000 ETH per day to about 1,700 ETH per day, as it no longer needed to compensate miners for maintaining its network.
As a result, since March 8, 2023, Ethereum's inflation rate has been lower than BTC's. Since then, ETH's supply has only increased by 0.2%, while BTC's supply has grown by 3%. In fact, the combination of these two upgrades has temporarily reduced Ethereum's ETH supply.
Between October 7, 2022, and April 4, 2024, the total supply of ETH decreased from approximately 120.6 million to about 120.1 million, achieving an annualized inflation rate of -0.25%. Subsequently, due to improved TPS from Ethereum, the amount of ETH burned decreased, and the Ethereum network accumulated an additional 0.5% supply. Meanwhile, BTC's supply increased by 1.1% during the same period.
As of March 8, 2023, the ETH inflation rate is lower than the BTC inflation rate.
Data source: Glassnode, as of July 31, 2025.
However, the superiority of ETH's inflation policy may not last long. Bitcoin's halving in April 2024 has predictably reduced its inflation rate by 50%. Currently, ETH's annual inflation rate over the past year is 0.38%, while BTC's inflation rate is 0.84%. In the upcoming halvings, BTC's inflation rate will approach 0%. In contrast, Ethereum's inflation rate is difficult to predict, potentially reaching 0.5% or even being negative. Even if ETH's current inflation trajectory remains unchanged, BTC's inflation rate will not fall below ETH's until 2028.
One severely underestimated dynamic is the Bitcoin security budget issue. Bitcoin maintains inflation issuance as an incentive for miners; without inflation issuance, it must rely on network transaction fees. Last year, miners profited $278 million from transaction fees and $14.64 billion from network inflation. Clearly, if miners must rely solely on transaction fees, their economic situation would have to undergo a complete adjustment. With the halving, BTC's price must rise to compensate for the reduced network inflation to maintain miners' economic viability. If this price trajectory does not materialize, network security may have to adopt a different economic model. There are many potential solutions to this issue; any changes will not ultimately impact Bitcoin. However, adjustments to monetary policy will inevitably have winners and losers.
For example, one option to resolve the security budget dilemma is for Bitcoin to introduce inflation through a hard fork. Regardless of its specific implementation, it would undermine one of the core criticisms of Ethereum: that its economic policy is too flexible. More importantly, it would place the burden of taxation favorable to miners on Bitcoin holders. These political economic decisions are not zero-sum games, and the miner-centric Bitcoin system tends to favor miners' interests over token holders' interests. In a Proof of Stake (PoS) system like Ethereum, token ownership determines which fork validators will follow, as stakes will shift to validators who choose the preferred fork. In contrast, Bitcoin's fork selection rules are ultimately determined by the miners and nodes maintaining network security. There is a significant conflict of interest favoring those who wish to sell Bitcoin to fund their operations. Ethereum, employing a PoS mechanism, lacks this dynamic.
While each system has inherent economic trade-offs, ETH's series of trade-offs is advantageous for ETH holders, as they ultimately determine the direction of the network's development. While BTC holders do have influence over the Bitcoin network, their impact on network development is far less than that of ETH holders on Ethereum. Thus, ETH may ultimately prove to be a better asset than BTC.