It looks like ethereum has come back to life and appears tempted to take the show from bitcoin, crossing $200 today (up 5%) while BTC is not moving.
This reversal of fortunes – at least for now – is not that unexpected. Calls for an Altcoin Season have been on-going now for weeks, if not months.
But is there something more than traders shuffling from crypto to crypto, is there actually a reason for eth specifically to rise?
That question can have no other answer than speculative, but if it does rise, there are plenty of explanations for it.
The primary one is perhaps that the two years long bear market has depleted reserves of eth related businesses and perhaps miners.
Miners in particular are probably struggling considerably. One of them last year said it costs $150 to mine one eth. That was before issuance was reduced by 1/3rd.
It was also before the hashrate nearly halved, but that halving was probably because some miners went out of business.
Those left likely had to operate in fiat so as to not lower eth’s price further, but some of them perhaps run out of fiat reserves and had to sell whatever eth they had left. We do not know, but it may be the case those particular miners now perhaps have no more eth to sell as this crunch situation has been going on for now a year.
Likewise for businesses who were booming during the good years, but had to survive at least partially on reserves during the bear. They may perhaps have no more eth left to sell for a year is a very long time.
Plenty of them will go under, while others will just about survive or may even start thriving if they have taken the opportunity during the crunch to sort out their revenue model.
The brutality of this process is unmatched in crypto, but the necessity of it is undeniable. Just as arguably the necessity of the bull market is undeniable for ultimately trial and error is in many cases the only way we can learn especially when it comes to a new innovation.
So the public flooded this space with money, to give every dream a chance. Now, they’ve had enough of dreams for the vast majority of the low hanging fruits have been laid out. Now they want to see who can climb the mountain for words are easy, yet action is something else entirely.
That makes this time arguably the best of times for the field remains still pretty flat, the limits and opportunities are gaining some clarity, the public is not quite ready to play so there’s plenty of space for refinement, and there are many openings for a potential breakthrough especially in ethereum.
And we say ethereum because they do have plans to increase capacity to the point a dapp or service can go mainstream in usage.
Such dapp may be a gimmicky thing, but in this quiet time there is probably quite a lot of thinking going on about just what ethereum can do either for businesses or individuals.
The results of such thinking might start being revealed in the next two years, especially once sharding, with plenty of ideas that may have sounded pretty stupid, and perhaps still sound stupid, perhaps finding the right execution and the right time to be smart.
Looked from the present it is easy to see ethereum itself as stupid or useless. Many dapps are turning out to be just apps that use ethereum as cloud storage or execution. Paying 20% to borrow from yourself at the opportunity cost of 200% collateral, logically maybe doesn’t make too much sense. The DAO was indeed DOA. Tokenized assets happen to be nothing more than some fiduciary paper certificate. Sharding, by some views, is nothing more than increasing the blocksize. Kitties happen to be not quite tokens, just an ID, with the graphics elsewhere, thus arguably not provably rare.
Yet that we can see these things is progress because now we know. And since we know, there are opportunities to improve it, to make it better, to refine it, or better said, it opens the way for second generation services.
A DAO, for example, needs not necessarily be for public participation. It could just be a way a company’s treasury is managed. The unique ID maybe is not so useful for a Kitten, but it can be useful as an actual ID. Sharding in extremes can be seen as just increasing the blocksize, but it can also be seeing as giving you the option of just how much cost you want to bare or as a very clever striking of balance between tradeoffs. That you can borrow at all with a few clicks on your computer without requiring authorization might not be useful for someone on a living wage, but it is clearly useful to plenty of traders.
Far more importantly, that’s just one idea that has been copied and expanded. There are arguably ways of changing the fundamental structure of it through timelocks and other potential if/thens.
And finally in regards to tokenization, it’s arguably not the concept itself that’s at fault, but the execution.
It is quite understandable, for example, that Santander would not want to go beyond just replacing a paper certificate that they or the broker holds with a token that they or the broker holds. Understandable because this is still very early days and such first step is prudent. But a start-up could take Santander out of the picture completely with a proper execution.
In other aspects one can also say that while ethereum might appear decentralized, and largely it is, there are influential points which can have decisive say in the absence of efforts to counteract them.
Yet as miners have now increased the blocksize a bit, the fear they might just want to keep fees high has perhaps lowered slightly.
Taken as a whole this creates a picture of an innovation in the very early days that has great potential but no one knows quite fully just what that potential is as it remains very much still in that period where there is a spur of growth.
A child, for example, first learns how to walk and ethereum arguably has done so. Then there’s a period of great fast development as everything is learned about. This may be where ethereum is currently. Then there’s maturity, somewhat in the 20s, with refinement, execution, and crispness in the 30s.
As we are children where ethereum is concerned, obviously we can’t comprehend what the 20s or 30s will be like, or even if there will be such 20s or 30s if for example sharding isn’t cracked to a satisfactory level.
So making this period one of risk and potential both for individuals and businesses with the price thus reflecting the potential, so rising, but also reflecting the risk, so rising slowly.
This all of course was what bitcoin went through, almost to the dot, with it dismissed by some because it did not live up to certain expectations, but embraced by some others who found an actual use case.
An OTC bitcoiner, for example, said the biggest demand for his service was by businesses or individuals from China or Brazil that wanted to pay suppliers in the other country.
You can of course do this through the banking system, but getting money in and out of China is not too easy.
Now this is a use case that was always seen, the complain of course was that some other use cases were limited, yet it wasn’t clear just how big this international transfers use case would be.
So from here to look at what seven billion people in the world will want to do with ethereum is of course not easy at all. It is far easier to see where it falls short than where it might actually be useful. Yet it may be precisely in those sort of situations where risks and rewards are somewhat easier to analyze.
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