You have to use phrases like “Ethereum Is Going To The Moon” because we are after all talking about cryptocurrency, the bad boy of the financial world.
I’ve never been a fan of Ethereum because it is a “bag ‘o nails as far as I can see. Ethereum is a wonderful mess and when you think about it, how could it be otherwise? Ethereum is a global decentralized computer powered by its own currency. It’s an idea and software project so cool, I get frostbite every time I think about it.
In my dinosaur brain, Bitcoin is Microsoft and Ethereum is Apple or if you want to use a metaphor where everyone lost, Bitcoin is the Atari ST and Ethereum is the Amiga.
I like POW (proof of work) crypto currencies where the system is ruled on the basis of how much computing power you can apply to maintaining the system. I’ve steered clear of Ethereum because it is heading towards POS (proof of stake,) a system where oligarch-sized owners of the coin get to call the shots and likely do what oligarchs do best, poop on the little people and fight to the death amongst themselves. Crypto is politics in software form, so to me the political framework of cryptocurrencies is all important. The POS future for Ethereum is a killer for me long term, but right now it is not that “in the long term we are all dead” that is the key, it is that visibility of the long term itself is all but dead.
The “ultimate depression,” is on the way and I’m coining that phrase here and now. As such we can look no further than the midterm. In the midterm Ethereum is looking incredibly exciting. I’m buying.
Why? Is it my inflation terror driving me on? No. Ethereum is onto a new crypto winning phenomena. DeFi (decentralized finance). Well, that’s what it’s called, but most DeFi is dull and almost pointless, the exciting bit is the crypto lending part where you can stash your cryptocash in a blockchain system and get paid interest on it in a “risk free” way.
This part of DeFi feels like a new form of market. Anyone can join and everyone is invited. It has no KYC/AML (know your customer/anti-money laundering) hurdles and lags, and if it looks like a duck, waddles like a duck and quacks like a duck, that duck is a shiny tech casino. Of course all markets are casinos but if you can come up with a new form of market and it’s fun, exciting, instant and can be used sensibly or in insanely risky, win big/lose big ways, you are going have a winner. And they do. And it’s all powered by Ethereum.
The original Ethereum value driver was the ICO (initial coin offering), another casino on Meth. The regulators did what they do well and snuffed it out but crypto at its base is a way of creating value outside of the maw of fiat monopolies and you can’t keep that at bay indefinitely. So snuffing out ICOs didn’t snuff out Ethereum, it just left it ticking over until the distributed computer got another hit app. Here it is.
Two of these DeFi platforms are AAVE and Compound and you should zip over and take a look. I had some Ethereum sploshing about so I popped $23 worth in and in seconds I was watching the value tick up 79 billionth of a dollar every second or so. I’m going to have to wait a year to make a $1 but that’s not the point. I just opened a deposit account in one minute, transferred money into it in seconds and now I’m watching it grow instantaneously and that purely from landing on the beach of a new continent of financial services that can spin off from this.
But let’s forget the buzzword and the excitement.
This is going to drive the value of Ethereum. It is going to drive it through the cost of transaction. A chronic rise in transaction costs in dollars drives the long-term value of the coin up in dollars. That is because the transaction cost is pushed by a rising utility of the coin which must then push up its value in ‘fiat.’
So here is the recent history of Ethereum transaction costs.
DeFi is on the move and Ethereum transaction fees are on the move and block size is jumping to new all time highs.
In summary for crypto, use case equals value and this new hit use case for Ethereum is going to drive its value and price up. At least in the short to medium term and for now those are the key timeframes we should be trading in.
Chambers won Journalist of the Year in the Business Market Commentary category in the State Street UK Institutional Press Awards in 2018.