The fact that something is scarce doesn't make it a store of value. Scarce simply means is in short supply, but prices aren't determined by supply alone, they are determined by supply and demand. Moreover, if an asset is in fixed supply, then its price is determined entirely by the demand. This means such an asset will only be a store of value if the demand for the asset remains strong over a long period of time, which is something the asset issuer/producer has zero influence on.
The money behind big tech has mastered manipulating demand and that is exactly what you are seeing in the Ethereum/NFT ecosystem.
It is one giant fraud bankrolled by unlimited capital that can artificially increase prices at which point there becomes demand from people in fear of missing out, once the early capital has the suckers locked in the prices plateau at first as the capital stops buying and driving the price up, and then begins a steep crash as they cash out and lock in the gains, this only causes fear and panic among the late entries that made investments at the peak which they couldn't afford to lose...rinse and repeat.
The NFTs may be even more blatant and egregious than the ERC20 coins in terms of fake sales driving up interest, media and demand for shit no regular investor will ever flip. A lot of it is just transparent fraud and money laundering, with the people involved not even shying away from it but openly justifying it on the basis they feel the stock market and art collectors have always engaged in the same misconduct.
Take Elon Musk, openly pumping Doge...I'm not judging, I get the humor in it, but a lot of people have been crushed over the years in the crypto bubbles, yesterday was a prime example where Elon was likely the sole cause of Doge exploding in value (maybe 5x in a few days and 100x over a month) and as the big money way slowly cashing out these massive media campaigns were behind a marketing scam of "DogeDay" essentially making their killing on the backs of the poor uneducated late investors. One would hope his Tweets shined a bright light on the dystopia of it all, but it seems everyone is either so greedy or in such bad positions financially they would rather take part.
My guess is now that they have reaped their profits at the expense of the little guy, they will buy back in with the profits and we should see another pump following the -25% DogeDay scam.
I struggle to have any sympathy for "the little guy".
Noone's lying to them, noone's defrauding them, noone's stealing anything or embezzling from them.
It's just greed, plain and simple. If you pile into a get-rich-quick scheme but end up holding the bag in, then more fool you.
I still think it should probably be regulated to prevent idiots from losing their life savings. But I won't pretend the losers are ethically any different from the winners. No matter whether you're early or late to the party, you're all just hucksters looking for a quick buck from a pump-and-dump.
There are people who have been bankrupted by rugpulls and sharp selloffs. All of this is just going to invite more regulation and completely strangle the industry.
As usual, the greediest have to ruin it all for the rest of us.
100% agree. ERC20 have matured to the point where some valuable projects actually exists. There is probably some shady business around NTFs today and the non-shady business portion of the market is very small.
imho, NFTs have lots of potential to facilitate purchase and sell of real world items (buy a car with a USDC transaction to a smart contract). This is the NFT "killer app" to me
Exactly, Ethereum is a better Store of Value than Bitcoin, not only because it is scarce, but because it provides utility, which creates demand.
People need ETH for:
* Paying transaction fees to use the network. For example, Visa is now settling payments with card issuers using USDC on Ethereum, so Visa needs to pay these fees with ETH.
* Collateral in financial applications: Over 11 million ETH (over $24 billion) have been locked as collateral in various financial protocols
* Staking & validating: In the same way that Bitcoin miners must purchase mining hardware to earn money, Eth2 validators must purchase ETH to earn staking rewards
Imo ETH is not a better store of value than bitcoin today because of hashpower supremacy and therefore security btc enjoys. Even when ethereum goes full on PoS, it will still be dependant on bitcoin.
The greatest motivation for Crypto success are hatred and fear.
BTC is succeeding because people hate/fear Central Banks printing money , so people love BTC and hate Central Banks.
Ethereum doesn't put itself up against the printing of money but against companies instead. Google, Apple, Spotify etc. People don't hate those companies and to the extent that they do....they manifest their hate by asking Government to tax them more, not migrating to a super hard to use and super costly decentralized platform to undercut their power. The consumer doesn't think in those terms.
You are correct, but only in theory: this requires the precondition that people are rational economic actors.
In practice, people are weird, and the scarcity of supply creates a demand.
There is therefore a weird feedback loop between the supply and the demand, and scarcity alone is enough to create "value".
Examples:
- Beanie babies
- Magic the gathering cards
- Pokemon cards
- Baseball cards
- DaVinci paintings (where anyone can have an 8k x 8k exact reproduction, but the original is worth a fortune)
- etc...
Scarcity alone is definitely not enough to create value. The one piece of artwork I've made in my life is a scarce resource, but that doesn't mean I have people buying it up like its an NFT.
The point is that customers are already paying a lot of fees in Ethereum for financial services on the blockchain. Right now that money goes to run a lot of powerplants and gpu farms but will sometime in the future go to Ethereum staker. PoS coins are a combination of money, store of value and investment in a financial service "cloud".
It will actually not be going to the Ethereum staker, the "base-fee" is going to be burned (removed from supply) and no one gets it, that's what EIP-1559 does (expected to arrive in the July London hard-fork)
To add to this, the overall issuance of ETH yearly is going to reduce from about ~ 4+ Million ETH in the PoW model to about ~ 1.x Million ETH in the PoS model, because the PoS security does not require as much issuance.
Scarcity is also not something that you want from a currency, fundamentally. A currency needs to be abundant when needed, and scarce when oversupplied. That's the point of controlling the money supply based on economic growth rates, and the entire reason we have a Fed.
I believe strongly that cryptocurrencies have a strong future, but what is really needed is a crypto that automatically manages its money supply.
In the same way a car engine uses an oil pump to automatically ensure engine oil pressure is consistent when the car is revving vs when it is idle.
I also think there are better ways to incentivize mining rather than fixed crypto rewards. A better way would be a multi-year bond instrument that would pay coin dividends well into the future so that miners are vested in the future success of the coin, and not just the immediate pump & dump.
> "prices aren't determined by supply alone, they are determined by supply and demand"
What we saw with the ICOs in 2017 and early 2018 is that there was a surge in demand for Ethereum to participate in the ICOs, which in turn sent the price shooting up. However, when new ICOs started to dry up in mid-2018 the demand also dried up, and when the companies that received all the Ethereum started to cash out the supply shot up, sending the prices right down. We could see something similar with NFTs.
> Scarce simply means is in short supply, but prices aren't determined by supply alone, they are determined by supply and demand
You can't predict demand, nobody can. So all things being equal (demand being unpredictable) you are better off holding something which is in low supply.
People are absulutely scared to death about inflation. It's deeply rooted in our brain and rightfully so. The first governments would dilute their citizen by adding lead to coins and reduce the silver %.
The same thing has been going on for millennia.
This is the reason why people hate inflation and have a strong preference for deflation.
What mostly excites me about Ethereum ist the very vibrant ecosystem of developers and builders around it. You can think of NFTs and DeFi whatever you want, the sheer amount of new applications and innovative ideas on the ethereum blockchain has been mind-boggling.
My personal favorite is Sorare, which combines NFT collectibles with fantasy soccer. And sure, right now everything suffers from high gas prices but it looks like that might be solved over the next 12 months
Ethereum is quite exciting in that regard, but my feeling is that most eth enthusiasts don't actually care about that. They only care about the value and thus it has become another crypto pyramid scheme for now.
The only crypto community who has shown any genuine effort in creating a "currency" is Dogecoin. And that is mainly because they are more aware that their coin has no value without real adoption. But sadly, even that has been infested with the pyramid scheme HODLers after the recent surge in value.
Another problem with Eth is that regular folk are thrown off when they hear things like "smart contracts", "NFT" etc.. So, in terms of a realistic crypto "currency" having widespread adoption, it seems hard to justify any of them at the moment.
I love using crypto for payments as it can be incredibly simple when done right. I really hope to see a crypto that works toward distributing wealth and opportunity though rather than the toxic crypto culture of HODlers we see today!
Everything is a pyramid scheme these days including the entire stock market (especially big tech).
But the modern monetary system is designed to sustain such pyramid schemes. It can keep them going forever. No matter how much net value they destroy; it will offload the costs to fiat salary earners who accept fiat currencies.
TBH I'm confused how the world economy is able to keep running at all with all these extreme inefficiencies everywhere.
> very vibrant ecosystem of developers and builders
Whenever I see someone say something like this for some blockchain, I wonder what exactly is exciting for them? Most dapps is about money and more money, I played with Ethereum before (like stress testing nodes), and would really like to know really innovating dapp these days -- I mean tech that solve existing real-world problems, not create new subjects to collect.
The most innovation is happening in financial products. There's no way for a developer or entrepreneur to experiment building in traditional finance without the support from large financial institutions. But in DeFi, there are financial applications built by teams in India, Africa, SE Asia, etc.
If you want an example of one innovation, look at flash loans. Flash loans provide the ability to atomicly borrow infinite money for the duration of a transaction, with no collateral or credit. This money can be used for arbitraging or just to provide working capital for a complex operation. If the loan isn't repaid by the end of the transaction, the whole transaction is cancelled.
You won't find any. I searched as well. Once you try to make your dapp interact with the real world you run into so many problems that it is very unclear whether it could ever be competitive compared to traditional legal/financial structures.
Ethereum may be a distributed virtual machine but currently it lacks access to data from the outside world. Naturally this places constraints on the applications that can be built: they always concern Ethereum itself.
People invented Chainlink to solve this problem: provide real world data such as "package has arrived to its destination" to smart contract software. I don't think it has delivered on its promise yet.
Time I'm investing in developing Ethereum led me to work on state of the art cryptography, acquire advanced peer-to-peer fault tolerant computing concept, exposed me to formal verification techniques, writing code expecting an hostile environment, thinking about economic incentives and game theory.
Social networks, banking and cloud companies would love to hire for those skills.
Also central banks now want to do CBDC (Central Bank Digital Currencies), so skills acquired as dev/builders are and will stay in very high demand for the foreseeable future.
I'd say that is a positive aspect. It means a lot of things are being tested. Most fail but at some point they might create something awesome that sticks.
Do you consider earning interest to be speculation?
I can put stablecoins (crypto dollars) in a lending protocol like Aave and earn ~10% APY. Compare that to my savings account, which pays out 0.25% APY.
Or how about the stablecoins themselves? MakerDAO creates the Dai stablecoin, backed by crypto-native assets like ETH & BTC.
I have a number of friends in Argentina who are surviving hyper-inflation by keeping their wealth in stablecoins.
Well - money laundering, drug dealing, ICO scams...
On the positive side I think there's something like creating wealth through the power of imagination.
I mean 20 years ago there were no crypto currencies. Now on paper they are worth $2trn ($260 a head for the world's population). And lots of people can feel wealthy because they have $100k in bitcoin of whatever. And it can retain actual value in the sense that you can swap it for US$ as long as everyone doesn't sell at the same time. And where has the value come from - basically human imagination thinking the 0s and 1s are worth something. Which may be more sustainable than it sounds. Where does the value of fiat currency come from or the value of a painting in excess of the cost of making a copy of it?
I foresee a future where everyone is a crypto millionaire through the power of imagination. (Which would imply a 10000x form here?!)
This is where Ethereum gets my interest as well. The value in anything comes from a combination of scarcity AND liquidity (being able to sell it to people willing to buy it).
It seems to me that with ETH set to be the backbone behind the entire crypto-ecosystem (especially with news like Visa), it will have guaranteed liquidity built into it due to that system.
With any other cryptocurrency, the value seems to only exist from constantly trying to convince people to buy more of it, like a global pump and dump scheme. Bitcoin has such a high price because of brand recognition in that regard.
But branding is the only thing really powering it long term.
Is there any material that explains NFT what it is for? I have a general idea, but to me it makes no sense e.g. what is the advantage over an invoice for something you bought.
You are asking the wrong question. "What is NFT for" question has a million convoluted and opaque answers with zero practical information.
Better question would be - "what is NFT". And the answer is JSON file with a hyperlink inside. That is all, literally nothing else is in NFT and no existing legal artifacts are any way related to selling/buying of NFTs.
>right now everything suffers from high gas prices but it looks like that might be solved over the next 12 months
High gas prices are solved, its just no one really seems to understand or care about the technology.
Just as example, it might cost somewhere between $50-$80 in gas to use OpenSea's "free" NFT minting smart contract. But instead you can already use an L2 solution like Polygon(Matic). I minted 1,000,000 NFTs on Polygon(Matic) just to experiment and the total gas for all 1,000,000 NFTs was less the $0.01 (I think it was $0.00018xxx) and this has the double benefit of buyers normally having to pay the same $50-80 gas fees for an NFT on Ethereum Mainnet to only pay fractions of a cent. OpenSea even has a Polygon(Matic) Beta Marketplace, but funny story maybe after 1hour after my 1,000,000 NFTs were minted I listed them for sale and OpenSea took down the Beta for maintenance for a few hours and when it went back up they removed my NFT and listing entirely from the Marketplace lol.
Enjin is another interesting platform, which I'll begin to experiment with as well because it has built in staking and burning features, but until they adopt a side chain I think it will suffer from the same high gas fees.
Point is the actual tech is there, but it really seems all about the money not the tech, and that's why people are paying high gas fees.
All those things will never break among the common folk.
The common folk wants ease of use above anything else. It has to be as easy as sending money via paypal.
No doubt ETH can be the base of that technically, but the model which has ETH holders make money off the appreciation of the ETH token in the process is flawed.
Fortune500 and even startups who'd use the open source ETH blockchain technology to bring many services to the common folk won't ever accept to pay a huge cut to parasitic behavior such as to those hodling or staking.
Also nobody ever mentions how the ETH blockchain is opensource. If a startup of a fortune500 wants to do something about it they have a big chuck of the development cost eliminated just by forking off the ETH blockchain. This is great! But just like Android doesn't owe Linus anything, so those companies will owe nothing to the stakers and the ETH holders.
So to summarize, if you want to build something go to Zug, find Vitalik and give him a big kiss because he saved you a lot of money, at the same time show the middle finger to hodlers and stakers on your way out.
On the other hand...if you want to have a shot at getting rich without doing any work...buy deflationary crypto such as king BTC and watch it appreciate vs the dollar....and it will because people are scared as hell about inflation (regardless of the merit of such scare), and everybody is scared about it...from the common person at the supermarket to Stanley Druckenmiller
> All those things will never break among the common folk.
To be fair, when I was a 10 year old kid in the nineties, I'd never ever suspect that everyone and their grandma* would be so internet savvy as they are.
* Obviously not all grandparents ;-) But I've seen quite a few grandparents of whom I'd never suspect to use internet services like WhatsApp.
"All those things will never break among the common folk."
Just like normal folk will never use TCP/IP, know HTML etc?
Nobody needs to know that something runs on a blockchain or how NFTs work. Yes you need to know now but in 10 years my mum will use these things without having any idea what they are. Same as she's using an ipad now without knowing objective C or any underlying protocols and tech.
A regular centralized company wouldn't want to necessarily use the ETH blockchain. They would use a private blockchain for internal auditing or supply chain partnerships, and would probably build it on something like HyperLedger https://www.hyperledger.org/use/fabric (What?! The Linux Foundation??).
Binance did fork ETH and has built out the Binance Smart Chain. Problem is that is still centralized. The unresolved debate is whether its the code or the network effects that matter.
I don't believe Ether is a great store of value as OP claims because it has uncertain scarcity. OP neglected to mention that supply of Ether is unlimited and tends to change readily with scaling updates and is hence unpredictable.
Currently, the argument for scarcity looks good with EIP1559 where the gas fee will consist of a burned base fee and a tip to the miner resulting in overall lower fees causing a potentially deflationary supply. But Ethereum's scarcity is to a larger extends a moving target than say Bitcoin or Monero.
The other reasons for investing OP mentioned were enough for me to go deep a year ago: cash flow, network effects and developer tooling/adoption like no other L1 chain. I looked at other smart contract chain's developer resources for dapp dev and no other's come close to Ethereum. I have been learning Solidity dapp development in my free time since and can recommend the experience.
I don't think scarcity is a realistic point in the investment thesis.
To be fair, I don't think you can really compare many others to Monero, which is the only major cryto with the property of fungibility. Personally I consider that property so important that if a crypto doesn't consider it a first class citizen, I don't buy much or any of the crypto.
I agree (an unknown amount of Monero is also a fair bit of my portfolio) but more for ideological reasons: privacy is a requirement for individual financial sovereignty. Fungibility follows privacy of course. I also think it's interesting to wait and see how the fixed tail emission supply works out.
Ethereum doesn’t know what it is. The rules are always changing, running a full node is practically impossible, and issuance is always changing. It’s not even clear that the features claimed in this paper will be true one year from now.
Multiple consensus failures (most recently this last month) and constant design changes do not provide a secure foundation for sound money.
I found it super easy to setup a full (non-mining) ETH1 node on an Intel NUC running Ubuntu. And on the same NUC I’m running two validator nodes on the ETH2 mainnet, which together have earned about 3 ETH in rewards so far. The NUC is hooked to a cable Internet connection at home, nothing fancy.
The above comment is based on a disproven conspiracy theory that claims no one knows the true number of ETH in existence, and misinformation that a single client (of many) failing to sync for ~6 hours after an upgrade was a problem with Ethereum.
If I’m going to stick my savings in a cryptocurrency, I want the network to be stable for the foreseeable future (and be private, but that’s another story).
>The purpose of this memo is not to denounce Bitcoin. Bitcoin enjoys a growing institutional spotlight, a compelling narrative as digital gold, and a portfolio allocation as an inflation hedge.
However, institutional allocation into the Ethereum ecosystem is currently low...
You can denounce bitcoin for the CO2 emissions though.
At least etherium is trying to go proof of stake. If institutions pile into bitcoin the price and emissions will 10x which I'm not sure is on. Governments can't control bitcoin but they can control institutions.
Put another way, if institutions pile into bitcoin, the value of produced energy will rise, and green energy infrastructure projects which were previously marginal would become profitable and thus executed.
Uh... Also tons of coal will be burned. BTW "green" energy products are not 100% sustainable. Lots of rare earth metals and other mined materials go into solar panels. We can't recycle solar panels right now, neither wind turbine blades. Hydro destroys riparian ecosystems.
Useless uses of energy cannot be construed as good for the world.
A domain where its default home page is a PDF? That's a new one...
ps. And I'm not buying the "environmentally friendly" argument until proof-of-stake is actually live and completely displaces PoW in mainline production.
If the issue is whether PoS will work is troubling you: other PoS chains like Algorand have been successfully running for well over a year. Seems in no doubt.
Maybe so, but that still doesn't change that PoS on Ethereum itself has been "coming soon" forever. Until the switch actually happens in full, it's still a power-guzzling PoW chain.
Algorand has a handful of validator nodes which are chosen by the creators. You can't participate in validating even if you want to. It's completely centralized, which as far as I'm concerned defeats the purpose of cryptocurrency. Why do you think, despite the hype, it hasn't taken off in price like others, despite "appearing" technically superior? Massive sell pressure from these behemoth validator node holders, who receive the lion's share of the stake rewards for... running a vps
Did Etherium actually switch to proof of stake? That's been talked up for years, but has been delayed several times. The original date was January 2020, but as of now, I can't find a firm date. One Etherium page intended to get people to lock up ETH to stake the system says "Withdrawals won't be live right away.
You won't be able to withdraw your stake until future upgrades are deployed. Withdrawals should be available once mainnet has docked with the Beacon Chain system."
It's always a bad sign in the cryptocurrency world when withdrawals are delayed.
The paper is written as if the change to proof of stake has happened.
I was looking this up recently. There's a 3 phase plan to switch to proof of stake, the first phase of launching a new chain is complete, but it could take years to complete this migration.
Readit News
It is one giant fraud bankrolled by unlimited capital that can artificially increase prices at which point there becomes demand from people in fear of missing out, once the early capital has the suckers locked in the prices plateau at first as the capital stops buying and driving the price up, and then begins a steep crash as they cash out and lock in the gains, this only causes fear and panic among the late entries that made investments at the peak which they couldn't afford to lose...rinse and repeat.
The NFTs may be even more blatant and egregious than the ERC20 coins in terms of fake sales driving up interest, media and demand for shit no regular investor will ever flip. A lot of it is just transparent fraud and money laundering, with the people involved not even shying away from it but openly justifying it on the basis they feel the stock market and art collectors have always engaged in the same misconduct.
Take Elon Musk, openly pumping Doge...I'm not judging, I get the humor in it, but a lot of people have been crushed over the years in the crypto bubbles, yesterday was a prime example where Elon was likely the sole cause of Doge exploding in value (maybe 5x in a few days and 100x over a month) and as the big money way slowly cashing out these massive media campaigns were behind a marketing scam of "DogeDay" essentially making their killing on the backs of the poor uneducated late investors. One would hope his Tweets shined a bright light on the dystopia of it all, but it seems everyone is either so greedy or in such bad positions financially they would rather take part.
My guess is now that they have reaped their profits at the expense of the little guy, they will buy back in with the profits and we should see another pump following the -25% DogeDay scam.
Noone's lying to them, noone's defrauding them, noone's stealing anything or embezzling from them.
It's just greed, plain and simple. If you pile into a get-rich-quick scheme but end up holding the bag in, then more fool you.
I still think it should probably be regulated to prevent idiots from losing their life savings. But I won't pretend the losers are ethically any different from the winners. No matter whether you're early or late to the party, you're all just hucksters looking for a quick buck from a pump-and-dump.
As usual, the greediest have to ruin it all for the rest of us.
imho, NFTs have lots of potential to facilitate purchase and sell of real world items (buy a car with a USDC transaction to a smart contract). This is the NFT "killer app" to me
Ethereum has always had demand (due to the growing ecosystem of DeFi, NFT, etc) but the supply was arbitrary.
What's coming with EIP-1559 fixes this by directly linking the supply (or rather burning of tokens) to the demand of the network.
People need ETH for:
* Paying transaction fees to use the network. For example, Visa is now settling payments with card issuers using USDC on Ethereum, so Visa needs to pay these fees with ETH.
* Collateral in financial applications: Over 11 million ETH (over $24 billion) have been locked as collateral in various financial protocols
* Staking & validating: In the same way that Bitcoin miners must purchase mining hardware to earn money, Eth2 validators must purchase ETH to earn staking rewards
The greatest motivation for Crypto success are hatred and fear.
BTC is succeeding because people hate/fear Central Banks printing money , so people love BTC and hate Central Banks.
Ethereum doesn't put itself up against the printing of money but against companies instead. Google, Apple, Spotify etc. People don't hate those companies and to the extent that they do....they manifest their hate by asking Government to tax them more, not migrating to a super hard to use and super costly decentralized platform to undercut their power. The consumer doesn't think in those terms.
You are correct, but only in theory: this requires the precondition that people are rational economic actors.
In practice, people are weird, and the scarcity of supply creates a demand.
There is therefore a weird feedback loop between the supply and the demand, and scarcity alone is enough to create "value".
Examples:
Yes. Temporarily. And a much less weird feedback loop is enough to annihilate all of this “value” at some later point in time (the “crash”).
Each one of my paintings is completely unique and there are very few. Nobody cares and wouldn’t pay any premium for them.
And there's the demand -- money laundering and smuggling ill-gotten gains (nazis had a lot of paintings)
To add to this, the overall issuance of ETH yearly is going to reduce from about ~ 4+ Million ETH in the PoW model to about ~ 1.x Million ETH in the PoS model, because the PoS security does not require as much issuance.
Demand is what creates value, not scarcity, although scarcity has an amplifying effect
I believe strongly that cryptocurrencies have a strong future, but what is really needed is a crypto that automatically manages its money supply.
In the same way a car engine uses an oil pump to automatically ensure engine oil pressure is consistent when the car is revving vs when it is idle.
I also think there are better ways to incentivize mining rather than fixed crypto rewards. A better way would be a multi-year bond instrument that would pay coin dividends well into the future so that miners are vested in the future success of the coin, and not just the immediate pump & dump.
What we saw with the ICOs in 2017 and early 2018 is that there was a surge in demand for Ethereum to participate in the ICOs, which in turn sent the price shooting up. However, when new ICOs started to dry up in mid-2018 the demand also dried up, and when the companies that received all the Ethereum started to cash out the supply shot up, sending the prices right down. We could see something similar with NFTs.
You can't predict demand, nobody can. So all things being equal (demand being unpredictable) you are better off holding something which is in low supply.
People are absulutely scared to death about inflation. It's deeply rooted in our brain and rightfully so. The first governments would dilute their citizen by adding lead to coins and reduce the silver %.
The same thing has been going on for millennia.
This is the reason why people hate inflation and have a strong preference for deflation.
You can't predict demand perfectly, but you absolutely can predict demand. In fact that's exactly what everyone is doing when they speculate.
There are also processes that help you predict floors to demand - e.g. that you must pay US taxes in US dollars.
My personal favorite is Sorare, which combines NFT collectibles with fantasy soccer. And sure, right now everything suffers from high gas prices but it looks like that might be solved over the next 12 months
The only crypto community who has shown any genuine effort in creating a "currency" is Dogecoin. And that is mainly because they are more aware that their coin has no value without real adoption. But sadly, even that has been infested with the pyramid scheme HODLers after the recent surge in value.
Another problem with Eth is that regular folk are thrown off when they hear things like "smart contracts", "NFT" etc.. So, in terms of a realistic crypto "currency" having widespread adoption, it seems hard to justify any of them at the moment.
I love using crypto for payments as it can be incredibly simple when done right. I really hope to see a crypto that works toward distributing wealth and opportunity though rather than the toxic crypto culture of HODlers we see today!
Everything is a pyramid scheme these days including the entire stock market (especially big tech).
But the modern monetary system is designed to sustain such pyramid schemes. It can keep them going forever. No matter how much net value they destroy; it will offload the costs to fiat salary earners who accept fiat currencies.
TBH I'm confused how the world economy is able to keep running at all with all these extreme inefficiencies everywhere.
Whenever I see someone say something like this for some blockchain, I wonder what exactly is exciting for them? Most dapps is about money and more money, I played with Ethereum before (like stress testing nodes), and would really like to know really innovating dapp these days -- I mean tech that solve existing real-world problems, not create new subjects to collect.
If you want an example of one innovation, look at flash loans. Flash loans provide the ability to atomicly borrow infinite money for the duration of a transaction, with no collateral or credit. This money can be used for arbitraging or just to provide working capital for a complex operation. If the loan isn't repaid by the end of the transaction, the whole transaction is cancelled.
Better explanation:
https://www.youtube.com/watch?v=mCJUhnXQ76s
People invented Chainlink to solve this problem: provide real world data such as "package has arrived to its destination" to smart contract software. I don't think it has delivered on its promise yet.
Look back at Ethereum's history and the vast vast majority of historical projects are dead. People who invested time or money into them have lost out.
What makes it different now?
Social networks, banking and cloud companies would love to hire for those skills.
Also central banks now want to do CBDC (Central Bank Digital Currencies), so skills acquired as dev/builders are and will stay in very high demand for the foreseeable future.
I can put stablecoins (crypto dollars) in a lending protocol like Aave and earn ~10% APY. Compare that to my savings account, which pays out 0.25% APY.
Or how about the stablecoins themselves? MakerDAO creates the Dai stablecoin, backed by crypto-native assets like ETH & BTC.
I have a number of friends in Argentina who are surviving hyper-inflation by keeping their wealth in stablecoins.
https://xtz.news/nft-news/tezos-based-nft-music-streaming-an...
On the positive side I think there's something like creating wealth through the power of imagination.
I mean 20 years ago there were no crypto currencies. Now on paper they are worth $2trn ($260 a head for the world's population). And lots of people can feel wealthy because they have $100k in bitcoin of whatever. And it can retain actual value in the sense that you can swap it for US$ as long as everyone doesn't sell at the same time. And where has the value come from - basically human imagination thinking the 0s and 1s are worth something. Which may be more sustainable than it sounds. Where does the value of fiat currency come from or the value of a painting in excess of the cost of making a copy of it?
I foresee a future where everyone is a crypto millionaire through the power of imagination. (Which would imply a 10000x form here?!)
Don't even need to pay any fees: https://opentimestamps.org/
It seems to me that with ETH set to be the backbone behind the entire crypto-ecosystem (especially with news like Visa), it will have guaranteed liquidity built into it due to that system.
With any other cryptocurrency, the value seems to only exist from constantly trying to convince people to buy more of it, like a global pump and dump scheme. Bitcoin has such a high price because of brand recognition in that regard.
But branding is the only thing really powering it long term.
Better question would be - "what is NFT". And the answer is JSON file with a hyperlink inside. That is all, literally nothing else is in NFT and no existing legal artifacts are any way related to selling/buying of NFTs.
High gas prices are solved, its just no one really seems to understand or care about the technology.
Just as example, it might cost somewhere between $50-$80 in gas to use OpenSea's "free" NFT minting smart contract. But instead you can already use an L2 solution like Polygon(Matic). I minted 1,000,000 NFTs on Polygon(Matic) just to experiment and the total gas for all 1,000,000 NFTs was less the $0.01 (I think it was $0.00018xxx) and this has the double benefit of buyers normally having to pay the same $50-80 gas fees for an NFT on Ethereum Mainnet to only pay fractions of a cent. OpenSea even has a Polygon(Matic) Beta Marketplace, but funny story maybe after 1hour after my 1,000,000 NFTs were minted I listed them for sale and OpenSea took down the Beta for maintenance for a few hours and when it went back up they removed my NFT and listing entirely from the Marketplace lol.
Enjin is another interesting platform, which I'll begin to experiment with as well because it has built in staking and burning features, but until they adopt a side chain I think it will suffer from the same high gas fees.
Point is the actual tech is there, but it really seems all about the money not the tech, and that's why people are paying high gas fees.
The common folk wants ease of use above anything else. It has to be as easy as sending money via paypal.
No doubt ETH can be the base of that technically, but the model which has ETH holders make money off the appreciation of the ETH token in the process is flawed.
Fortune500 and even startups who'd use the open source ETH blockchain technology to bring many services to the common folk won't ever accept to pay a huge cut to parasitic behavior such as to those hodling or staking.
Also nobody ever mentions how the ETH blockchain is opensource. If a startup of a fortune500 wants to do something about it they have a big chuck of the development cost eliminated just by forking off the ETH blockchain. This is great! But just like Android doesn't owe Linus anything, so those companies will owe nothing to the stakers and the ETH holders.
So to summarize, if you want to build something go to Zug, find Vitalik and give him a big kiss because he saved you a lot of money, at the same time show the middle finger to hodlers and stakers on your way out.
On the other hand...if you want to have a shot at getting rich without doing any work...buy deflationary crypto such as king BTC and watch it appreciate vs the dollar....and it will because people are scared as hell about inflation (regardless of the merit of such scare), and everybody is scared about it...from the common person at the supermarket to Stanley Druckenmiller
To be fair, when I was a 10 year old kid in the nineties, I'd never ever suspect that everyone and their grandma* would be so internet savvy as they are.
* Obviously not all grandparents ;-) But I've seen quite a few grandparents of whom I'd never suspect to use internet services like WhatsApp.
Just like normal folk will never use TCP/IP, know HTML etc?
Nobody needs to know that something runs on a blockchain or how NFTs work. Yes you need to know now but in 10 years my mum will use these things without having any idea what they are. Same as she's using an ipad now without knowing objective C or any underlying protocols and tech.
Binance did fork ETH and has built out the Binance Smart Chain. Problem is that is still centralized. The unresolved debate is whether its the code or the network effects that matter.
Oh by the way: Bitcoin is open sourced too. Here's the link! https://github.com/bitcoin
In my experience the common folk want number go up above anything else.
You should google "NFT".
Currently, the argument for scarcity looks good with EIP1559 where the gas fee will consist of a burned base fee and a tip to the miner resulting in overall lower fees causing a potentially deflationary supply. But Ethereum's scarcity is to a larger extends a moving target than say Bitcoin or Monero.
The other reasons for investing OP mentioned were enough for me to go deep a year ago: cash flow, network effects and developer tooling/adoption like no other L1 chain. I looked at other smart contract chain's developer resources for dapp dev and no other's come close to Ethereum. I have been learning Solidity dapp development in my free time since and can recommend the experience.
I don't think scarcity is a realistic point in the investment thesis.
Yes agreed.
Both Bitcoins and ETH tokens can be "tainted" and that taint takes for ever to "diffuse" in the chain.
This makes some Bitcoins/ETH less valuable than others.
For example, most valuable Bitcoins are newly mined coins (they have no history), whereas a - say - Bifinex hacked Bitcoin carries a pungent smell.
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Ethereum doesn’t know what it is. The rules are always changing, running a full node is practically impossible, and issuance is always changing. It’s not even clear that the features claimed in this paper will be true one year from now.
Multiple consensus failures (most recently this last month) and constant design changes do not provide a secure foundation for sound money.
Can you elaborate?
I found it super easy to setup a full (non-mining) ETH1 node on an Intel NUC running Ubuntu. And on the same NUC I’m running two validator nodes on the ETH2 mainnet, which together have earned about 3 ETH in rewards so far. The NUC is hooked to a cable Internet connection at home, nothing fancy.
https://ethereum.org/en/what-is-ethereum/
I mean Ethereum isn't perfect but not much else is either.
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>The purpose of this memo is not to denounce Bitcoin. Bitcoin enjoys a growing institutional spotlight, a compelling narrative as digital gold, and a portfolio allocation as an inflation hedge. However, institutional allocation into the Ethereum ecosystem is currently low...
You can denounce bitcoin for the CO2 emissions though.
At least etherium is trying to go proof of stake. If institutions pile into bitcoin the price and emissions will 10x which I'm not sure is on. Governments can't control bitcoin but they can control institutions.
Useless uses of energy cannot be construed as good for the world.
ps. And I'm not buying the "environmentally friendly" argument until proof-of-stake is actually live and completely displaces PoW in mainline production.
And the financial motivation to do this is much greater for ETH since it's around 100 times more liquid than ALGO.
It's always a bad sign in the cryptocurrency world when withdrawals are delayed.
The paper is written as if the change to proof of stake has happened.
https://twitter.com/drakefjustin/status/1379052831982956547