Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of Mars Finance
Disclaimer: This article aims to convey more market information and does not constitute any investment advice. The article only represents the author's viewpoint and does not represent the official stance of Mars Finance.
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Source: Unitimes
Original title: Viewpoint | ETH's value is doubly underestimated
Author: Ryan SeanAdams, Founder of Bankless
Original title: ETH's value is doubly underestimated
This is not 2017. We are not in a bull market.
But the usage rate of Ethereum has reached a historic high.
Image above: Trends in Ethereum's daily gas usage. Every transaction on the Ethereum network requires the use of Gas, including sending ETH, sending tokens, or storing funds on the Compound. Therefore, the daily gas consumption of the Ethereum network has reached a historic high, which means that the network is being used more than ever before.
So why hasn't ETH's price reached a historic high?
It should be remembered that native assets are not the network itself. The demand for Ethereum blockspace is different from the demand for ETH assets. These are two different products:
- ETH asset: a scarce commodity currency with a current circulation of approximately 110 million pieces, issued by algorithms executed by smart contracts;
- Ethereum Block: A scarce commodity produced by the Ethereum network that serves as the most transaction settlement space, producing approximately 6000 blocks per day. Calculated by gas, each block currently contains nearly 10 million gwei.
Although the Ethereum block does need to pay gas fees through ETH (which is the same as using US dollars for tax purposes in the United States), in addition to the relatively small ETH demand pressure caused by block space demand, there are other larger sources of ETH demand (just as the large demand for US dollars is not primarily from tax demand). That's why there are differences between the two.
In the past 30 days, the demand for Ethereum blocks has mainly come from:
- Tokens (such as USDT consuming gas fees worth $1.6 million);
- DeFi (for example, dYdX, Kyber, IDEX, Uniswap, and 0x have accumulated gas fees worth over $500000)
- Ponzi scheme (such as a Russian Ponzi scheme where MMM consumed gas fees worth over $500000)
In the past 30 days, the demand for ETH assets mainly came from:
- Speculation using it as a means of storing value (such as buying and holding ETH as a non sovereign currency)
- As collateral assets (such as using ETH as collateral for DAI)
- Liquidity trading pairs (such as using ETH trading pairs in Uniswap)
- Transaction medium (such as using ETH to purchase GU game cards)
- Used to pay gas fees (using ETH to pay gas transaction fees)
The ETH used to pay gas fees per day is only worth approximately $200000.
Okay But is there a correlation between ETH prices and block fees?
Nevertheless, there is a strong historical correlation between the price of ETH assets and the price of Ethereum blocks (i.e. block gas fees). In addition, we seem to be in one of the few periods when block fees are rising faster than ETH prices. As shown in the figure below:
Figure above: The solid line represents the historical price trend of ETH; The light purple area represents the trend of changes in Ethereum block space costs. It can be seen that there is a high correlation between the two.
In the current period, if correlation is to return to the mean, either the price of ETH must rise or the cost of blockspace must decrease.
That's half the reason I posted this tweet:
I expect the high usage of the Ethereum network to drive up ETH prices in the medium term. This is what has happened in history. This is the design approach for ETH value and scarcity mechanisms, where the practicality of Ethereum networks drives the growth of ETH value.
But this is only half of the story.
I will further elaborate.
I expect the growth in ETH demand not only to catch up with the demand for Ethereum blockspace, but also to surpass the latter, as ETH will become a recognized value reserve asset in the coming years.
Figure above: The historical price of BTC (red line) and the trend of changes in Bitcoin blockspace costs (red area).
We have witnessed Bitcoin taking this path (see above). In the past five years, the story of Bitcoin has transformed from a point-to-point practical payment network to a value storage network for BTC's reserve assets. You can see this from the premium of BTC price compared to blockspace cost in the above figure.
We have not yet seen the same transformation in Ethereum, but I believe this transformation is on the way - ETH has been seen as a commodity and economic bandwidth, ETH has been locked in DeFi, ETH staging (pledge) mechanism will be activated, and ETH's issuance policy will be solidified.
Do you feel the vibration brought about by this change?
Today's narrative is about Ethereum as a practical network; And tomorrow's narrative will be Ethereum as a practical network and ETH as a non sovereign value storage method. As shown in the figure below:
People who think this cannot happen will remind me of those who once said that Bitcoin is a scam (by the way, those who said this are now providing banking services for Coinbase)
If I am right, then it means ETH is doubly underestimated.
Firstly, the value of ETH as a practical network has been underestimated.
Secondly, the value of ETH as a non sovereign value storage tool has been underestimated.
It feels like we're back in 2016 again.
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