How to respond to a tough referee report?
The main problem with this as a review is not the brevity or harshness (neither one of which is necessarily inappropriate) but failure to adequately explain/justify their objection to your work.

A good review should give objections/criticisms that stand on their own.  References should be used to support the reviewer's points, not given in lieu of any explanation.

In addition, it seems that it is also not obvious how the reference relates to your work.

Make the focus of your response not this reviewer is wrong but I don't understand this reviewer's point.  Explain why your work is different from that discussed in the reference and why you think the objections don't apply, and thus it is not clear to you why the reviewer objects.  

In addition, you ought to ask the editor what they have in mind by major revisions.  The "major revisions" response sounds like it was halfway between the responses of the two reviewers.  But that doesn't mean it is a coherent synthesis of their positions.  It doesn't seem there are any changes that would satisfy the second reviewer (indeed, they have pre-announced that).  So what does the editor expect you to do with this request?  I would seek clarification on this.  

It may well be that the difficult reviewer will not have their way in the end (the fact that the paper was not rejected by the editor as they requested suggests this).  So you may be able to simply add some more supporting text for your approach, have their inevitable reject decision overridden by the editor, and be fine.