Why I’m Long ETH, Ethereum to $5,000? Ethereum 2.0 Game Changer

  • Ethereum is more than a cryptocurrency, it’s also a tool and platform.
  • ETH supports smart contracts and decentralized applications.
  • ETH continues to improve and evolve, ETH 2.0 could be a game changer which makes the crypto more efficient and decrease gas costs.
  • Proof-of-stake is a new concept to facilitate blockchain transactions and it could reignite interest in the second-largest cryptocurrency Ethereum.
  • Blockchain migration to ETH 2.0 will make transactions safer and increase the appeal of ETH as a digital currency.
  • Will ETH rise to BTC levels of value? I think it is possible given the utility of ETH.
From Grayscale:
  • Ethereum is a global, open-source blockchain platform for decentralized applications (DApps), powered by smart contracts and embedded with a native digital currency, ether (ETH)1. Launched in 2015, the network was designed to expand upon Bitcoin’s primary function as a peer-to-peer (P2P) digital currency by incorporating a platform capable of deploying smart contracts and more complex structures, such as DApps and decentralized autonomous organizations (DAOs).2
    On Ethereum, code can be written to control the transmission of digital value based on programmable conditions. Ether, its native currency, serves three main purposes:
    1. To store value in ETH
    1. To settle transactions by allowing users to send or receive payments in ETH
    1. To settle transactions by allowing users to send or receive payments in ETH
    Ethereum initiated the second wave of innovation in blockchain technology, expanding upon the use cases afforded by Bitcoin and solidifying its own unique role in the digital currency ecosystem. In its final form, Ethereum seeks to be the leading smart contract-compatible digital currency platform.
With Bitcoin shooting up over the last 6 months and then suddenly slumping, many are diving into the universe of cryptocurrencies. Many folks may not even know there are literally thousands of cryptocurrencies swirling about beyond Bitcoin. Some are serious endeavors designed to solve problems while others are simply jokes named after someone’s dog. In this post we discuss the second most popular crypto: Ethereum We have owned some Ethereum off and on for several years now. In fact, at one point the price rose so high that Jerry paid off his car. But what is this Ethereum? How is it similar and different from Bitcoin? And can it rise to Bitcoin levels of value?

What is Ethereum

The Ethereum network describes ETH as simply “The foundation for our digital future.” And in many ways I am inclined to agree. For someone like me that works in the world of contracts, there seems to be great potential for real world use cases using Ethereum. When investing in anything, I always like to ask the question: What value does this add? What is the value proposition for people? What problem does it solve?

Here is a synopsis from the Ethereum foundation:
  • Ethereum is open to everyone. All you need is a wallet to take part.
  • Ethereum is open access to digital money and data-friendly services for everyone – no matter your background or location. It’s a community-built technology behind the cryptocurrency ether (ETH) and thousands of applications you can use today.
  • Banking for everyone Not everyone has access to financial services. But all you need to access Ethereum and its lending, borrowing and savings products is an internet connection.
  • A more private internet You don’t need to provide all your personal details to use an Ethereum app. Ethereum is building an economy based on value, not surveillance.
  • A peer-to-peer network Ethereum allows you to move money, or make agreements, directly with someone else. You don’t need to go through intermediary companies.
  • Censorship-resistant No government or company has control over Ethereum. This decentralization makes it nearly impossible for anyone to stop you from receiving payments or using services on Ethereum.
  • Commerce guarantees Ethereum creates a more level playing field. Customers have a secure, built-in guarantee that funds will only change hands if you provide what was agreed. You don’t need large company clout to do business.
  • Compatibility for the win

    Better products and experiences are being built all the time because Ethereum products are compatible by default. Companies can build on each other’s success.

ETH 2.0

Ethereum 2.0 is the next catalyst to make the crypto currency increase in value. Ethereum 2.0 will involve sharding to drastically increase network bandwidth and reduce gas costs, making it cheaper to send Ethereum, tokens, and interact with smart contracts. There will be fundamental economic changes too, Ethereum 2.0 will allow supports to staking nodes and earn Ethereum as passive income. In other words a faster, more efficient and more lucrative platform. From Coindesk:

Staking is becoming an increasingly lucrative service for cryptocurrency exchanges to run. Even Coinbase, the largest publicly traded North America based crypto exchange, is investing heavily into its staking services as evidenced by its recent acquisition of staking startup Bison Trails.

“Staking’s popularity is the natural outcome of an asset class growing in maturity,” Jeremy Welch, Kraken’s vice president of product, said in an interview with CoinDesk. “Whereas three years ago holders were mainly interested in securing short-term gains, many are now confident locking up tokens to earn passive income. Why? Conviction is growing in the longevity of crypto assets as a respectable new asset class.”

Staking-as-a-service platform Staked reported in April that over Q1 2021 the total market capitalization of proof-of-stake (PoS) blockchains grew 151%. As of the end of March, PoS blockchains made up one-fifth of the entire market capitalization of the crypto industry.

Projected earnings across these PoS networks including Eth 2.0 are expected to be close to $19 billion by the end of this year. Speaking to growth of the staking industry, Staked Q2 2021 report said,

“In every case, staking provided better returns than simply holding the asset: Stakers earned an additional yield of between roughly 4% and 34% in one quarter.”

These rates compete directly with the interest crypto holders are also able to earn on centralized and decentralized lending markets. In a world of rock-bottom interest rates in the traditional finance industry, could cryptocurrencies be the alternative that investors turn to for higher yields?

Potentially. Although as we’ll discuss in New Frontiers, the world of crypto assets is nascent and still very much in the process of development.

New frontiers: Hacking the future of Web 3

Unlike the Scaling Ethereum hackathon, which centered on the tools and technologies for building the next iteration of Ethereum, the Web 3 hackathon, which took place virtually this past weekend, focused on products and services for the next generation of the internet.

Bitcoin is a cryptocurrency, Ethereum is both a crypto and platform

Bitcoin has a basic use proposal: It is considered a store of value that is finite. That is what gives it the reputation as “digital gold”. Gold is just a rock and bitcoin is just lines of code. They have value because humans have decided to give them value and in theory the supply is limited, making it more valuable. Paper money is just a piece of paper, but critics say the problem is that it can be printed many times when Governments want more money and do not want to raise taxes. Remember basic economics, supply and demand make something valuable. Only 21 million Bitcoin will ever be mined, therefore a central bank or Government cannot devalue it by “printing more”. That is what they often do with dollars. Ethereum on the other hand is used as both a currency and a platform. The platform is meant to handle contracts and transactions. Transactions on the Ethereum network are much faster than Bitcoin. Bitcoin transactions are primarily monetary; Ethereum transactions may be executable code.

Elements of Bitcoin

  • Bitcoin seems to defy the common logic of assets and currencies. It is and isn’t an investment, asset, currency, etc. It could be a store of value, a new technology expression and a new way of trading value.
  • Bitcoin is in the eye of the beholder. It is worth what the whole network of trades believe it is worth.
  • There may be winners and losers, like a pyramid scheme. So keep an eye out for how the traditional fiat money is transferred.
  • Major institutions are taking positions and anyone can access Bitcoin via the CashApp. (SEE RELATED: Robinhood Vs. CashApp)
  • One big draw of Bitcoin is that it is not manipulated by Governments. It is like the currency of the people of the world that believe in it and use it. in other words, there is a finite supply and more cannot be printed. Only 21 million can be “made.”
  • But can it be manipulated by “whales” or foreign government actors? The lack of transparency makes this hard to predict.
  • A historical example of perceived value was the great Tulip bulb craze of the 1600’s. At the peak of the mania, one Tulip (Hopefully quite perfect) sold for about the price of a house. This means that Bitcoin may have further to go. but a key difference is that in theory Bitcoin could be a store of value, whereas the Tulip was a thing of nature that eventually wilts away.

Ethereum Superior?

At it’s core, Ethereum is a programming language and a decentralized software platform. Developers build decentralized apps (dApps) and smart contracts on top of the platform using the language. As the native currency on the Ethereum platform, ether is the fuel that is used to power the platform. Ethereum was launched in 2015 as an upgrade to perceived weaknesses in Bitcoin. Its value proposition provided more opportunities for developers to create new apps, so it eventually became a separate and competitive entity in its own right. Developers cannot create smart contracts or apps on top of the Bitcoin network, therefore this could be considered a weakness of Bitcoin. On the other hand perhaps it is better for Bitcoin to be used for one use only as a transfer and store of value, again akin to gold.

Both cryptos use blockchain technology which is basically a way to codify and ledger transfers in unbreakable code.

Bitcoin was built to do one thing: Enable people to anonymously transfer value from one to another without a central banker. Ethereum built on the idea of using blockchain technology more than it copied Bitcoin as a currency. As a result, Ethereum is able to do many things well instead of just serve as a platform to provide a store of value.

Supply: 21 million vs. 100 million and counting

Basics of economics, when there is a small supply and huge demand, the value of said thing goes up. So it goes with cryptocurrencies. Bitcoin is capped at 21 million. There will never be any more made, which makes the supply limited. Ethereum on the other hand does not have a supply cap and currently sits at about 100 million. So clearly, in terms of pure value per coin, bitcoin has the upper hand here.

1-2% of net worth, Dabbling but not going crazy

Our personal approach to crypto is to dabble but not lose our minds. Yes, this means holding some Bitcoin and Etheruem as speculation. There is really no other use for them at the moment. With the exception of the CashApp, which to me has made Bitcoin a bit more useable.

Free Lunch?

I have been playing a little game to get free meals using Bitcoin and CashApp. So I buy some Bitcoin on CashApp. Watch it go up and take the profits. It makes me like $30 so I can go buy my family lunch or dinner. Then I use a CashApp boost as well for a little extra savings. Ok, I know that is silly, but just trying to give a sense of how I am using crypto at this point.

Predictions

Predictions can be scary, but I believe there will be a future use for both cryptos. Perhaps one is the “gold” and other “silver”. Both do seem to offer value and solve human problems. That is the key characteristic I look for in any kind of investment: what is the value proposition? What human problem is being solved? It seems since both coins are here to stay. But one great advantage of ETH is it continually improved and evolves over time, nothing survives without evolution. I think that would add even more to the value they can provide the world. Both coins are now being acquired by institutional investment firms, therefore increasing demand and lowering supply. Perhaps we will see a day when ETH rises to very high levels like Bitcoin. If the platform is used more and goes mainstream, then I would predict the value of Ethereum going parabolic.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: