Bitcoin Economy vs Ethereum Economy

As of the time of this writing, June 2025, the market cap of Ethereum sits at about $300 billion, while the market cap of Bitcoin sits at about $2 trillion.

There is a massive blue ocean of opportunity to build a decentralized economy on top of Bitcoin.

Yet if we look at the size of the economies built on top of these two ecosystems, we can see that Ethereum's is large and robust, while Bitcoin's is nearly non-existent.

Why is this?

Historically, Bitcoin's functionality has been very limited. You can't build robust decentralized apps with it. This is by design. A core ethos of Bitcoin has always been to be as secure and simple as possible.

One tradeoff with adding functionality is that it also adds complexity, which in turn adds potential points of failure.

Bitcoin's simplicity is its strength, but it also makes it difficult for developers to do cool things with it.

On top of that, the culture of Bitcoin has largely been one of buy and hold, so there wasn't much demand for a decentralized economy from hardcore Bitcoiners.

Ethereum has proven that the market is hungry for more use cases of cryptocurrency beyond just holding, and we are reaching a stage now where many Bitcoiners want to use their Bitcoin and make it productive, rather than just holding on to it and waiting for "number go up".

On top of this, Bitcoin is beginning to be used as a real tool for freedom for oppressed people across the world. For stories of how Bitcoin is being used in the real world to fight oppression, is good for the environment, resist big bank corruption, counter inflation, and help the poor and marginalized, we highly recommend the work of Alex Gladstein and C. Jason Maier.

If you're an Austrian economics buff, The Bitcoin Standard and The Fiat Standard are great places to start to see how Bitcoin can fix the broken and corrupt financial system that currently governs the world.

This is the ultimate goal of crypto/web3/Bitcoin: to create a better economic system that doesn't allow a small group of powerful elite to dictate the global economy.

But this vision requires builders to create the products that will compose this new economy. That vision is finding renewed traction in the Bitcoin world as we enter a renaissance of building on Bitcoin.

But it would take significant changes to Bitcoin's core protocol to enable the same kind of functionality as Ethereum, changes that come with compromises that many argue are not worth the cost.

However, new technologies are emerging that allow us to achieve the same functionality that we get with Ethereum, without modifying Bitcoin itself.

We'll talk about those later in the section, but for now, Ethereum does exist, so why build on Bitcoin?

To get us in the right frame of mind, we need to think about the whole purpose of blockchain technology: to create a completely decentralized, permissionless, trust-minimized form of money.

It is our opinion that Bitcoin is the superior technology for this purpose, and we'll explain why in this and the next few lessons. But it's important to not get caught up in the hype of the crypto industry and to remember the foundational reason why we are building these things.

The technology we use needs to align with this purpose, and if the technology itself creates incentive structures that don't align with this purpose, we shouldn't be using it for a global decentralized economy.

Much of this module will discuss one of the key differences between Bitcoin and Ethereum/most other chains: proof of work vs proof of stake.

The technological architecture blockchains are built with makes a huge difference in the behavior of the users of those chains, and it's crucial to build them in a way that incentivizes the behavior required to build the decentralized economy we are after.