Ethereum doesn't have any fundamentals, as it's not a claim on productive assets, so its entire value to date has been as a medium for gambling.
While gambling is an extremely obvious one (secure and trust-less escrow certainly appeals to the black-market), you _must_ be being disingenuous to posit "Ethereum doesn't have any fundamentals".
The US Dollar is also no longer a "claim on a productive asset" - in your mind, do only stocks count as a claim on a productive asset? Because stocks (as well as mortgages and physical assets) can, have, and will continue to be represented by Ethereum contracts...
The same cannot be said for cryptocurrencies. Demand for them is speculative, and fickle.
Asset transfer is a better case, but why not use quite literally any other cryptocurrency for that, instead?
Commodity money still has worth from what it's made from (e.g. gold) even if it's no longer used as money.
I'm not sure what Ethereum is.
I, and the rest of the world have pretty good faith that this will happen in April 2019, and pretty good faith that it will also happen in April 2020. I have pretty good faith that if it will not happen in April 2021, I'm more likely to be scavenging for bottle caps, canned beans, and ammunition[1], then I am to be be using eth.
[1] Actually, it's more likely I'd be dead, but the point would still stand.
Hmmm... I wonder what would happen if everyone tried to pay their taxes with Ethereum?
The government would, quickly, and decisively increase punishments for non-compliance, print or borrow a wagon-full of money to make payroll, and send the police, and army in.
For Ethereum, what do you propose? It is a way to buy incredibly inefficient computation. What are the killer smart contracts? How does the price reflect the price of computation? Has someone made a more efficient EVM? A less efficient one?
The US dollar is the currency that you need to use in order to participate in the largest world economy. No one claims it has a market cap. No one claims it is going to the moon. No one tries to analyze it's fundamentals. No one is pretending it's a stock.
From what I can tell in the report 16% is account liquidity. The rest is actually transfers and maintenance
I don't know very much about Etherium, but I don't know of any fundamental reason why anyone must buy Etherium. At best it's an option among others. At worst it's simply a market based on speculation. This says nothing about the potential of Etherium or any other cyptocurrency. It's just saying that the current markets are completely speculative and it's not really an "investment" to buy it -- it's more of a bet.
Security tokens (i.e. actual equities that happen to exist according to a blockchain rather than according to several stock exchanges, but which are still managed by government regulatory agencies, just through the regulator's presence as another smart contract on the same blockchain) seem fundamentally sound. Even governments are getting behind them.
Also, non-fungible asset tokens. Better known as "deeds." (Right now they're mostly used for virtual collectibles, but fundamentally they're the same "possession of X is ownership of the thing X represents" objects that fit the government's model for e.g. real-estate law. They're just digital instead of paper.)
> How does the price reflect the price of computation?
Nobody's claiming it does, I don't think. The price is definitely mostly speculative value.
What I would assert is that it's not 100% speculative value. Even with every single speculator out of the system, the value of ETH would not crash to zero; it would crash to some very small nonzero amount.
And that would be just fine, as long as the value stabilized there, since you can still use an ETH that's worth pennies in USD—but is stable there—as a medium of exchange for buying and selling these other digital financial instruments. (And, in fact, an ETH that's worth only pennies is much better from the perspective of actually being able to deploy and run novel smart contracts.)
> Has someone made a more efficient EVM? A less efficient one?
There are quite a few such projects. Pretty much everyone building "a new blockchain" these days is doing so by forking the Ethereum codebase and adding their own features (e.g. Hyperledger Burrow), or by building something that's "heavily inspired" by Ethereum (e.g. Neo.)
There are also Ethereum side-chains aiming to optimize Ethereum computation by moving most of the non-trust-requiring parts of a computation to infrastructure that's not quite so decentralized—Golem (https://golem.network/), for example, which is something you interact with on the Ethereum blockchain itself, but where the resulting computations from this interaction happen partially off of Ethereum, and therefore are cheaper than an entirely on-chain transaction.
Of course, most people don't really need that inversion; they just build their product so most of it happens centralized anyway, and only the part that needs to be mass-auditable and not under single-party control gets put on Ethereum. This is, for example, how CryptoKitties is built: it's a regular web-app, where the only thing about it that's on a blockchain is the record of what user owns what kitty-UUID. Every fact about that UUID is just on CryptoKitties' servers, but those facts aren't really under contention—only the ownership is. That's the idiomatic way to build an app that stores data on a blockchain at this point.
The key advantage of them over the current model is that they make it much easier for an accredited investor (probably a partner at a PE or VC firm) to invest in a private company.
But, let's ignore that distinction and talk about "security tokens" generally, because they theoretically can be used as an equivalent of public-issue stock certificates (even if nobody really cares or is excited about using them this way, right now.)
I compared security tokens to "equities", and that word has a set meaning in finance: the equity class of investments—i.e. shares of companies. But really, there is no precise concept that is a 1:1 mapping for the thing that a security token translates to, which is probably why you're upset about my description of "how equities work."
You can loosely compare a security token ledger-entry account balance to a physical stock certificate held by a person. But when you want to be precise, you have to get into the fact that security tokens are multi-jurisdictional—since they represent the cap table of a company or SPV directly, and because regulators of security tokens require full KYC to apply, both domestic and foreign investors must appear directly on the table, without proxy representation.
Which is to say, if you want to sell your security token in the foreign market (i.e. on a securities exchange that operates under foreign regulation), then you must list the very same security token, rather than creating a jurisdictional proxy token, as one would if they wanted to list e.g. a public American company on the Canadian TSX.
From this perspective, the concept of "how is equity ownership currently tracked" looks a lot less like a centralized regulatory scheme per equity, and a lot more like a distributed system where {exchange, regulator} pairs reach eventual consensus over ownership.
(And this distributed paradigm has real consequences, both today and historically, despite law using the simpler single-regulatory-regime-per-equity model. For example, multinational corporations have shareholder meetings where they vote on things. How are these votes counted? Well, mostly, you have to let the state of the trades keep on marching on a bit after the vote, and then look at the historical ownership according to each exchange at the moment of the vote, and use that to weight each vote. The "preliminary" results of a shareholder vote can—and sometimes have been!—"rolled back" because the eventual consensus of the exchanges as to the ownership-at-point-of-vote was different than what the company thought it was when running the vote.)
I don't believe one would want physical assets, especially real estate, to be managed on the blockchain -- I certainly won't. Hackers steal private keys, courts can transfer ownership or invalidate the sale. So one need government backdoor to asset database. And if you have a backdoor, you might as well use centralized system -- it is cheaper, faster and more reliable.
(And if you want to ensure there are no hidden, retroactive changes, you may want to use systems like certificate transparency [0] which provide log proofs without all the mining overhead)
Yes, just as they can steal bearer bonds or cash (or deeds, back when deeds were bearer instruments) from the safe in your house. That's why you don't (usually) keep physical deeds in personal safes, but rather give them over to a custodian, e.g. a bank, who will secure access to them much more effectively than you can. A "Custodian"-role smart-contract, likely maintained by a company like a bank, is a part of the proposed model for both security tokens and NFTs.
> courts can transfer ownership or invalidate the sale
A "Regulator" contract [likely maintained by an actual government agency like the SEC, or a subcontractor thereof] that can both force and prevent transfers, is also part of the model of security tokens.
> And if you have a backdoor, you might as well use centralized system -- it is cheaper, faster and more reliable.
No. The point of having the blockchain here is that everything—including the actions of the regulator itself—is auditable. In a centralized system, you can't detect regulatory capture. If the logic the regulator used to determine the validity of a transfer is built into an (immutable, versioned) smart contract, however, then it's very simple to detect when that logic has any special cases.
The point of creating these financial instruments as Ethereum-substrate token contracts, isn't just to prove what transactions happened; if that were all you wanted, you could indeed just use log proofs. Ethereum is used here because you don't just want to prove what each agent did, you want to be able to audit exactly the logic they used to do it. You want a verifiable why, not just a verifiable what.
A plain-old "blockchain" (or a distributed log-proof store) is like a video of a poker game where you can see everyone's hands and decks. Add smart-contracts, and you've instead got a video of a poker game where the players are 1960s robots and the video has captured all the movements of their computational relays and valves.
Here is a sample house contract: https://www.forsalebyowner.com/pdf/agrmttosell.pdf
Notice that many of these clauses are not representable on blockchain at all (for example clauses 9, which allows buyer to adjust price down if the house has any defects), and some could only be represented if entire industries are 100% on block (7, 8, 10, 14, 15, 16, probably many others). Since this is unlikely to happen, at least initially, they are not representable either.
As a result, the smart contract cannot be more complex than "start with this amount, adjust price either way if both parties agree, accept if both parties and regulator agree, regulator can override anything"
The smart contract won't make seller publicly explain why she want to decrease the amount by $12,345. There will be no explanation why both parties or regulator decided to cancel contract either. All of these decision happen off-blockchain, in the courtrooms, lawyer's offices, or just in private conversations.
Also, since there is a "Custodian" maintaining your smart contract, and "Regulator" approving the deals, you won't be able to avoid regulatory capture either. If you try to go against government's interests, then your private keys would get "accidentally" revoked, your smart contract would get "accidentally" invalidated and so on.
And of course, there are lots of other reasons. What if of one of the parties committed fraud, but this was not discovered until after contract completed? What if Ethereum community decides to fork again? And so on.
As for fundamentals, it is obviously a technological product, with people working on improving it and building services based on it.
It's also trying to solve a rather hard problem, as it turns out. It's possible that it simply isn't good enough at solving that problem yet (too many bugs or whatever).
Saying it doesn't have any real uses sounds like the IBM guy who estimated the demand for computers to be about two or three globally.
You seem to trust the government. Are you a Trump fan? Not saying it would be a bad thing. Just pointing out that governments aren't perfect.
And you're correct: I do have it all figured out! Thanks for noticing.
The only problem here is that they may have taken upon too much complexity, making it again hard to verify. It might still be better than closed systems with no option to appeal.
That would be a valid opinion (imo) - saying they failed to deliver. But accusing them of being scammers is off the mark.
The implementors of Ethereum are not the scammers. You can have scammers with every product. A salesman can sell you a used car that is broken. That doesn't imply cars are scams.
If somebody sells you Ethereum for 1 Million Dollars, they might be a scammer. That doesn't imply Ethereum is a scam.
So note that there's not a hint of anger when I point out that the fundamental use case of Ethereum is and has always been speculation.
Or perhaps you also invest for reasons not entirely based on making money?
Stocks, bonds, land, housing, etc are all productive assets. Even if you hold these via a contract, that has precisely zero impact on the price of Ether and does not mean that holding Ether is a good investment.
Perhaps you're referring to the USD no longer being redeemable for gold? Ironic considering I cannot eat gold or use it for shelter.
Any portfolio manager of stocks and bonds will tell you cash is a powerful asset because of its general state of constant value.
Stocks and mortgages are not represented by the blockchain, their legal ownership is represented by titles given to their owners by government institutions.
Your response would be more adequate if you disproved the previous comment by actually listing a fundamental of Ethereum instead of claiming vitriol.
Dollar was originally backed by gold. BitCoin was originally backed by Heroin.
btc, eth and xmr are all predominantly used on dnms
On the black market Tor sites, a lot of the forum transcripts you read insinuate that, while initial contacts may be made on these markets, some people were and are moving very large quantities of drugs through outside agreements. I've seen forum threads describing transactions between two parties that grew up to the $100k range, but of course, the side that money was transferred to vanished immediately.
That means the black market sites and escrow systems are basically mandatory for these transactions to take place reliably, and thus, the market for them is out in the open, with visible pricing.
In the end, the one thing that was lacking in this market was the BitCoin. High demand, low supply. Thus, the market cap of BitCoin quickly rose toward being an equivalent for the entire black market worldwide, but a better proxy for that, with a steadier definition and a fairly tight correlation to the whole shebang that is illegal commerce, is heroin.
So while black market transactions in general are what really made BitCoin what it was, heroin was the only real commodity being traded that could be considered to be something similar to gold, oil, or pork bellies: more traditional goods for which the market has steady demand.
I capitalized for emphasis. I consider Heroin to be sort of a synecdoche for the pricing of the black market. Heroin is the S&P 500 of the black market.
The best i could find is this: https://www.economist.com/international/2016/07/16/shedding-... which pretty much reflects my own impression. I've been curiously following this stuff since early on and the first markets were even primarly focused on stuff like psychodelics and weed.
It surely had an impact but putting it like you did sounds like stretch as well.
Personally i dont think that drugs alone backed Bitcoin. From a outside perspective there seems to be a lot more money in speculation than drugs. In fact its likely that "drug bitcoin" rather fast got turned into $ again, so bringing the actual bitcoins back to investors/platforms/the next buyer/whatever.
Plus a lot of bigger drug trade these days is professional on a level where Bitcoin isnt even necessary. I mean you basically can order all you need for XTC from Alibaba and pay with your credit card, cheap, clean & legal pre-processor products.
https://www.nature.com/articles/s41558-018-0321-8
https://www.npr.org/sections/thetwo-way/2018/04/18/602995137...
As far as I'm concerned, the vitriol is more than justified. If I had my way, PoW cryptocurrencies would be illegal.
Just admit bitcoin and all other crypto’s waste energy by design. You can’t argue any other way and have people take you serious.
I never really saw bitcoin as a "currency" as it was designed to appreciate and consequently become an asset.
USD also backed by fiat, so you don't have to trust it, just that the US Government will be solvent by the time you divest of the currency.
Betting against the USD is betting against human civilization itself.
IMO, there is nothing emotional about stating the fact that ether&bitcoin have no fundamental value. It's as anry as "Autumn is rainy" statement.
And I get that bitcoin could be the best way for me to send 10K to, say, China. I don't even dispute it. I just want to note that I can do it with bitcoin or ether priced at $10K, $1K, $1 or $0.1. It's just bits and bytes.
Because people are losing immense amounts of money to these scams. It's causing real harm.
A million currencies per day popping up essentially kills the supply limit which causes rapid, catastrophic inflation.
It’s exactly the same thing as printing money with a whole lot of people trying their hardest to convince that it’s not.
I first read their wp when it already got hype and thought I misunderstood that part. Nope - it’s actually that bad.