A recent report by the Industrial and Commercial Bank of China (ICBC) praised Bitcoin and Ethereum as innovative financial assets. The bank’s analysis report emphasized the rapid development and increasing diversification of digital currencies, comparing Bitcoin to gold and viewing Ethereum as “digital oil.”
The ICBC report highlighted that, as historian Yuval Noah Harari pointed out, human imagination is the driving force behind the exponential growth of digital currency types and applications.
“Chinese state-owned banks continue to write love letters to Bitcoin and Ethereum,” said Matthew Sigel, head of digital asset research at VanEck. The ICBC report outlined the different development paths of various digital currencies, each meeting unique needs within the financial ecosystem.
The report mentioned that from the birth of Bitcoin to the progress of Ethereum and the exploration of Central Bank Digital Currencies (CBDCs), market demand has driven innovation in the digital currency space.
The ICBC stated that Bitcoin has successfully maintained scarcity similar to gold through its mathematical consensus mechanism. The flagship cryptocurrency has addressed issues related to divisibility, authenticity verification, and portability. The report added that while Bitcoin’s monetary attributes are weakening, its status as an asset is consolidating.
Meanwhile, Ethereum provides the “technical power of a digital future” and positions itself as the “digital oil” powering numerous applications in the entire Web3 ecosystem. Unlike Bitcoin, Ethereum combines Turing completeness through its proprietary programming language Solidity and its Ethereum Virtual Machine (EVM).
This feature allows developers to build and manage complex smart contracts and applications, positioning Ethereum as a key platform for decentralized finance (DeFi) and non-fungible tokens (NFTs). The report also acknowledges Ethereum’s potential to extend its influence to decentralized physical infrastructure networks (DePIN).
Despite its potential, Ethereum still faces practical challenges, including security vulnerabilities, scalability issues due to high computational demands, and significant energy consumption. Ethereum developers are exploring various solutions to address these challenges.
The Ethereum 2.0 upgrade introduces a Proof of Stake (PoS) consensus mechanism and sharding technology to increase network throughput and sustainability. Additionally, developers are researching second-layer (Layer 2) solutions such as state channels, sidechains, and rollups to improve scalability.
The report also emphasized the crucial role stablecoins play in bridging the gap between the digital currency market and the real world. Stablecoins peg their value to traditional assets like fiat currency, providing stability in the volatile cryptocurrency market.
The ICBC stated that stablecoins can facilitate seamless transactions and provide reliable value storage, making them essential tools for daily financial activities and integrating digital currencies into the global financial system.
Furthermore, Central Bank Digital Currencies (CBDCs) represent a significant innovation in modern monetary systems. Digitizing fiat currency allows central banks to improve payment system efficiency, reduce transaction costs, and enhance the effectiveness of monetary policy.
The report mentioned that CBDCs can simplify cross-border transactions, reduce reliance on intermediaries, and provide digital financial services to populations without bank accounts, increasing financial inclusion.
Developing and implementing CBDC infrastructure requires careful consideration of privacy, security, and regulatory impacts to ensure successful adoption.
In conclusion, while the development visions of each digital currency may differ, they all aim to enhance financial inclusion, security, and payment efficiency. As digital currencies continue to evolve, developers and policymakers need to focus on balancing sustainability, security, and efficiency.
Forbes wrote in a headline earlier this week, “A very big opportunity, after Bitcoin, Ethereum, and Ripple (XRP) prices skyrocketed, the cryptocurrency suddenly prepares for a massive earthquake in China.”
The report stated that in recent months, Bitcoin’s price has surpassed previous all-time highs, reaching over $70,000 at one point, helping Ethereum’s price double and Ripple’s price rise by nearly 50% since its 2022 low.
Now, as the US Federal Reserve quietly acknowledges gold replacing the dollar, Brock Pierce, a Bitcoin and cryptocurrency investor, said that China reopening the digital door to cryptocurrencies after the impact of the 2021 crackdown that caused Bitcoin prices to plummet is just a matter of time.
Pierce, who co-founded the largest USD stablecoin issuer Tether in Hong Kong ten years ago, said he is “passionate about what’s happening in Hong Kong.” Hong Kong, a special administrative region of China, recently followed in Wall Street’s footsteps by approving some Bitcoin and Ethereum spot ETFs.
Last month, attendees at the Hong Kong Bitcoin conference sparked speculation that the highly touted Hong Kong Bitcoin spot ETF could eventually be opened to mainland Chinese investors.