Ethereum
World’s Largest Bank ICBC Welcomes Evolution of Bitcoin and Ethereum as Innovative Financial Assets
The world’s largest lender, the Industrial and Commercial Bank of China (ICBC), recently released an in-depth analysis highlighting the rapid evolution and growing diversity of digital currencies, in which it compared Bitcoin to gold and considers Ethereum to be “digital oil”.
The report emphasizes the human capacity for imaginative belief, as noted by historian Yuval Noah Harari, as the driving force behind the exponential growth of digital currency types and applications.
Matthew Sigel, head of digital assets research at VanEck, noted:
“Chinese state banks continue to write love letters to Bitcoin and Ethereum.”
The ICBC report outlines the divergent development paths of different digital currencies, each addressing unique needs within the financial ecosystem.
The love letter
According to the ICBC report, market demand has fueled innovation in the digital currency sector since the birth of Bitcoin (BTC) to Ethereum’s progress (ETH) and the exploration of central bank digital currencies (CBDC).
ICBC said Bitcoin has managed to maintain a scarcity similar to gold through its mathematical consensus mechanism. Flagship cryptography solved issues related to divisibility, authenticity verification, and portability. The report adds that despite Bitcoin’s diminishing monetary attributes, its status as an asset is solidifying.
Meanwhile, Ethereum provides “the technical power for the digital future” and establishes itself as a “digital oil” capable of powering myriad applications in the Web3 ecosystem.
Ethereum, distinct from Bitcoin, integrates Turing completeness through its proprietary programming language, Solidity, and its virtual machine, EVM.
This feature allows developers to create and manage complex smart contracts and applications, positioning Ethereum as a critical platform for DeFi and NFTs. The report also recognizes Ethereum’s potential to extend its influence to decentralized physical infrastructure networks (DePin).
Despite its potential, Ethereum faces several practical challenges, including security vulnerabilities, scalability issues due to high computing requirements, and significant energy consumption.
Ethereum developers are exploring various solutions to address these challenges. The introduction of Proof of Stake (POS) consensus mechanism and sharding technology in the Ethereum 2.0 upgrade aims to improve network throughput and sustainability. Additionally, developers are working on layer 2 solutions such as state channels, sidechains, and rollups to improve scalability.
Stablecoins and CBDCs
The report also highlighted the crucial role of stablecoins in bridging the gap between the digital currency market and the real world. Stablecoins, whose value is tied to traditional assets like fiat currencies, provide stability in the volatile crypto market.
ICBC said stablecoins facilitate seamless transactions and provide a reliable store of value, making them an essential tool for everyday financial activities and a bridge for the integration of digital currencies into the global financial system.
Additionally, CBDCs represent a significant innovation in the modern monetary system. By digitizing fiat currencies, central banks can improve the efficiency of payment systems, reduce transaction costs and strengthen the effectiveness of monetary policy.
According to the report, CBDCs can streamline cross-border transactions, reduce the reliance on intermediaries, and provide greater financial inclusion by providing access to digital financial services to unbanked populations.
The report notes that the development and implementation of CBDC infrastructure requires careful consideration of privacy, security and regulatory implications to ensure their success and widespread adoption.
The report concludes that while the development vision of each digital currency varies, all aim to improve financial inclusion, security and payment efficiency. As digital currencies continue to evolve, developers and policymakers must focus on balancing sustainability, security, and efficiency.