Ethereum is gradually asserting its position as a strong competitor to Bitcoin in the race to become the leading store of value asset, according to analysts at VanEck.
This trend is driven by the rapid increase in digital asset treasuries (DATs) – a form of digital asset management that is increasingly favored by global corporations. Among them, Ethereum and Bitcoin are the top choices, with Ethereum gradually gaining an edge.
From Bitcoin's monopoly to the shift towards Ethereum
Previously, Bitcoin was the default choice for digital asset treasuries due to its fixed supply and widely recognized stability. However, changes in the regulatory environment – especially in the United States – have highlighted the demand for stablecoins and tokenization, two important pillars in the Ethereum ecosystem.
This has expanded the range of applications for Ethereum, moving beyond its original role as a smart contract platform. Currently, many major exchanges and brokerage firms have implemented the issuance of stocks in the form of tokens (tokenized equities) on the Ethereum blockchain.
Advantage in flexibility and financial strategy
Experts at VanEck emphasize that Ethereum offers more complex financial strategy options compared to Bitcoin, allowing institutions to optimize asset accumulation. Notably, with the staking capability, treasuries can earn additional profits by participating in the validation of the Ethereum network – something Bitcoin cannot provide in a similar manner.
Comparing the inflation policies between ETH and BTC
Ethereum's transition from a Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) mechanism has had a significant impact on the supply growth rate of ETH. According to VanEck, the total supply of ETH has decreased from 120.6 million in October 2022 to 120.1 million in April 2024, equivalent to a negative inflation rate of -0.25%.
Meanwhile, Bitcoin recorded a supply increase of 1.1% during the same period, making Ethereum's inflation policy more attractive to long-term investors.
Although Bitcoin has a halving mechanism that reduces block rewards every 4 years, making its inflation rate more predictable, it also poses long-term challenges for the network's security model. Bitcoin still largely relies on inflation rewards to sustain miner operations – amounting to over $14 billion last year.
As rewards diminish, Bitcoin will have to rely on transaction fees or price increases to maintain network security – an economic puzzle that's not easy to solve.
Governance model: advantage leans towards Ethereum
Ethereum currently provides token holders with more control over network governance and economic policy planning, thanks to the PoS mechanism. This is in stark contrast to Bitcoin's miner-centric model, where decisions are often influenced by the economic interests of mining pools.
With a more flexible governance structure, VanEck analysts believe that Ethereum is gradually establishing itself as a superior long-term store of value asset compared to Bitcoin.
