- Justin Drake outlined ways to restore deflation in the Ethereum network.
- Bitcoin will face security challenges as it nears the 21m BTC supply cap.
- Advances in energy, mining efficiency and economic incentives could mitigate the headwinds for the first cryptocurrency.
As issuance shrinks, Ethereum will gain the status of “ultrasound” money, while Bitcoin will be “cooked” once the 21m BTC cap is reached, developer Justin Drake said.
My bat signal ?? will return when ETH is ultra sound again, soon enough™.
ETH supply currently grows 0.5%/year. That’s 1%/year of issuance minus 0.5%/year of burn. To become ultra sound again, either issuance has to decrease or the burn has to increase. I believe both will… pic.twitter.com/5TsAowD2jA
— Justin.eth Drake (@drakefjustin) February 5, 2025
To restore deflation in the second-largest cryptocurrency, he suggested considering both lower issuance and a higher fee-burn rate. In his view, both are likely.
After The Merge in September 2022, ETH supply started to decline. The Dencun hard fork broke that trend — within a month of the upgrade, inflation turned positive again.
In early February, circulating supply returned to levels last seen two and a half years ago.
Comparing Ethereum and Bitcoin issuance, Drake noted that since Dencun, 657,000 BTC have been created on the first cryptocurrency’s network, versus 469,000 ETH on Ethereum. In value terms, that equates to $63.4 billion and $1.23 billion, respectively.
“Today, Bitcoin’s supply is growing at 0.83% per year, which is 66% faster than ETH,” the specialist explained.
In his view, the 21m BTC cap could heighten long-term security risks because roughly 99% of miners’ revenue comes from block subsidies.
“The Bitcoin blockchain is already ‘cooked’. To continuously perform a 51% attack would require roughly $10 [billion] and access to 10 [GW]. For states, that’s peanuts,” he explained.
Ethereum researcher Anthony Sassano agreed with Drake.
It’s utterly insane to me that Bitcoiners still don’t see the obvious catastrophe headed their way
Or they do see it and choose to bury their heads in the sand — something that they’re extremely good at doing, to be fair
— sassal.eth/acc ?? (@sassal0x) February 5, 2025
“It is utterly insane to me that Bitcoiners still do not perceive the obvious looming catastrophe,” he noted.
Ethereum’s problems
Drake acknowledged the issue of staking incentives, which crowds out ETH as “pure” collateral. He also highlighted systemic risks stemming from the dominance of LST platforms such as Lido.
The expert proposed a “croissant issuance” model. Issuance would slow toward zero as the share of ETH staked approaches 50%. At the peak, to maintain market equilibrium, annual issuance should not exceed 1%.
Reaction from Bitcoin maximalists
In a conversation with Cointelegraph, analyst James Check said critics of Bitcoin’s sustainability ignore factors such as advances in energy, mining efficiency and economic incentives.
According to him, if Bitcoin attains reserve-asset status, high fees will inevitably emerge, akin to what institutions pay for secure gold storage.
The cost of ASIC machines is also overlooked. Bankrupt miners sell hardware at lower prices, allowing new entrants to keep mining and secure the network.
Over time, fees will cover operating expenses, while block rewards will cover capital expenditures, Check added.
He also stressed that developments in energy — especially nuclear — will lower the cost of mining.
Mining helps stabilise power grids by responding to demand, reducing operators’ operating costs. Some will ultimately view it as an economically sensible use of surplus resources, Check said.
“It is a multidimensional problem. In the long run, I am constructive on it,” Check explained.
Earlier, JPMorgan analysts discussed competitive pressure on Ethereum.
In late 2024, Drake questioned direct competition and the threat from Solana to the network of the second-largest cryptocurrency.