A high price of ETH as an asset creates a higher security level for Ethereum the blockchain. The ecosystem of projects, apps, protocols, organizations, etc on Ethereum is healthier when the blockchain is guaranteed secure and stable for everyone to use. It's a benefit to everyone.
People are never going to be using ETH as a currency. They would use stablecoins like DAI pegged to USD or a basket of assets.
A high price of ETH as an asset creates a higher security level for Ethereum the blockchain. The ecosystem of projects, apps, protocols, organizations, etc on Ethereum is healthier when the blockchain is guaranteed secure and stable for everyone to use.
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
The underlying technology here is far superior to that of bitcoin (for those who don't know, ethereum is a blockchain with a turing-complete programming language built on top of it and enables decentralized code execution) and the development ecosystem is much more vibrant and promising.
I spent the weekend researching Ethereum and speculating on why people are investing in Ethereum (as opposed to other altcoins). I've come to the conclusion that there are two major reasons:
1) Momentum. Ethereum is (by many measures) the top performing alt coin. It's the most likely to be accepted on random websites, companies are investing in it and it looks like it has interesting potential.
People see that and jump on, hoping the momentum will continue.
2) Stability. Crypto-nerds like you and me look at DAO and shake our heads, "reverting transactions goes against the whole concept". But to investors it looks like stability, which is attractive to them. There is now the implication that the developers will step in and fix any major mistakes. It's not just ill-defined smart contracts, theoretically the developers could intervene in cases of stolen ETH from wallets of major exchanges, or anything really which could threaten the stability of the currency as a whole.
Just chiming in here, but I would say the high mining hash rate makes it the most secure chain (secure like people can't go back in time and change the chain's history because it would be prohibitively expensive to do so).
Ultimately I think Ethereum's market cap will come close to challenging BTC's in the next 10 years and when that happens we will see a rapid transfer of capital from the BTC chain to the ETH chain.
Improving the store of value functionality of the Ethereum base currency will drive more demand for it, which increases its market cap and thus improves Ethereum's Proof of Stake security, makes more capital available to the DeFi system, where ETH is the primary form of collateral, and allows more inflationary currency that's backed by ETH, like DAI, to be issued.
Also, most Ethereum based projects depend on ETH reserves to fund their operations, so ETH appreciation provides more resources to develop Ethereum applications.
Thankful for the in-depth analysis. I'm still bullish on ETH because the entire blockchain economy is very speculative. Trying to fault Ethereum because it's not as stable or secure as BTC doesn't seem very fair.
The fact they're sending a stable coin over Ethereum lends more credit to blockchain. They've pegged a fiat asset and it's way easier to use, granted on Ethereum gas prices are prohibitively high but that will change soon enough and there are other EVM chains with much cheaper gas and the same end experience.
At a high level, reduced transaction costs (paradoxically, given Ethereum's reputation for high fees), an inherently global market, and state-of-the-art financial services and property rights management, especially because of the rapid pace of permissionless innovation.
Ethereum is a platform for decentralised applications, it has far more pratical use than a simple blockchain like Bitcoin, but far more risks as well. Give it a chance, it's just starting, there is a lot more development to do, don't throw it away the first bad thing that happens. Can you imagine if the early internet architects thought this way? "Oh this computer in the network got hacked, lets give up on this whole internet thing, it's a fundamentally bad idea".
There will be ups and downs. IMO, right now Ethereum is the best chance we got at a truly decentralised web.
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