Ethereum: A Store of Value with Cash Flow [pdf]

The fact that something is scarce doesn&#x27;t make it a store of value. Scarce simply means is in short supply, but prices aren&#x27;t determined by supply alone, they are determined by supply <i>and</i> demand. Moreover, if an asset is in fixed supply, then its price is determined entirely by the demand. This means such an asset will only be a store of value if the demand for the asset remains strong over a long period of time, which is something the asset issuer&#x2F;producer has zero influence on.

What mostly excites me about Ethereum ist the very vibrant ecosystem of developers and builders around it. You can think of NFTs and DeFi whatever you want, the sheer amount of new applications and innovative ideas on the ethereum blockchain has been mind-boggling.<p>My personal favorite is Sorare, which combines NFT collectibles with fantasy soccer. And sure, right now everything suffers from high gas prices but it looks like that might be solved over the next 12 months

I don&#x27;t believe Ether is a great store of value as OP claims because it has uncertain scarcity. OP neglected to mention that supply of Ether is unlimited and tends to change readily with scaling updates and is hence unpredictable.<p>Currently, the argument for scarcity looks good with EIP1559 where the gas fee will consist of a burned base fee and a tip to the miner resulting in overall lower fees causing a potentially deflationary supply. But Ethereum&#x27;s scarcity is to a larger extends a moving target than say Bitcoin or Monero.<p>The other reasons for investing OP mentioned were enough for me to go deep a year ago: cash flow, network effects and developer tooling&#x2F;adoption like no other L1 chain. I looked at other smart contract chain&#x27;s developer resources for dapp dev and no other&#x27;s come close to Ethereum. I have been learning Solidity dapp development in my free time since and can recommend the experience.<p>I don&#x27;t think scarcity is a realistic point in the investment thesis.

Cash flow is for businesses.<p>Ethereum doesn’t know what it is. The rules are always changing, running a full node is practically impossible, and issuance is always changing. It’s not even clear that the features claimed in this paper will be true one year from now.<p>Multiple consensus failures (most recently this last month) and constant design changes do not provide a secure foundation for sound money.

The start of the document:<p>&gt;The purpose of this memo is not to denounce Bitcoin. Bitcoin enjoys a growing institutional spotlight, a compelling narrative as digital gold, and a portfolio allocation as an inflation hedge. However, institutional allocation into the Ethereum ecosystem is currently low...<p>You can denounce bitcoin for the CO2 emissions though.<p>At least etherium is trying to go proof of stake. If institutions pile into bitcoin the price and emissions will 10x which I&#x27;m not sure is on. Governments can&#x27;t control bitcoin but they can control institutions.

A domain where its default home page is a PDF? That&#x27;s a new one...<p>ps. And I&#x27;m not buying the &quot;environmentally friendly&quot; argument until proof-of-stake is actually live and completely displaces PoW in mainline production.

Did Etherium actually switch to proof of stake? That&#x27;s been talked up for years, but has been delayed several times. The original date was January 2020, but as of now, I can&#x27;t find a firm date. One Etherium page intended to get people to lock up ETH to stake the system says &quot;Withdrawals won&#x27;t be live right away. You won&#x27;t be able to withdraw your stake until future upgrades are deployed. Withdrawals should be available once mainnet has docked with the Beacon Chain system.&quot;<p>It&#x27;s always a bad sign in the cryptocurrency world when withdrawals are delayed.<p>The paper is written as if the change to proof of stake has happened.

Ethereum is passé. Dogecoin is far superior and much wow better suited for the current meme era. Which is reflected in the share price.

The digital scarcity argument made in the paper is weak.<p>And that&#x27;s assuming the ETH crowd doesn&#x27;t change the supply formula (which no one currently understands) on a whim.

You said high cash flow due to transaction fees but it&#x27;s planned a reduction in transaction fees. So in next 6 years the cash flow will be lower, right?

Ethereum is easy to change (hard forks often) and so cannot be expected to preserve any key characteristics like emission curve or even the permissionless nature.<p>In fact, Ethereum&#x27;s monetary policy did change in the past.

Personally, I&#x27;ve moved all of my funds from other currencies into Ethereum. Not that I think it will make lots of money, but because Ethereum actually could have utility, and has a solution to the climate change impacts of Bitcoin.<p>So really, if I&#x27;m going to hold any cryptocurrencies, that&#x27;s where I want them

It will be interesting to see if interest rates in government controlled currencies and crypto currencies will stay diverged in the long run.<p>Without the distorting action of governments printing money, interest rates might be set by market forces in &quot;crypto land&quot;.<p>This might lead to a long term situation where artificially low interest rates are paid in government controlled currencies, but market prices are paid in crypto currencies.<p>Or will cheap interest rates in government controlled currencies somehow bring down the interest rates in crypto currencies?<p>The 10 year yield of bonds in Europe is at 0%. While US bonds are currently at 1.5%. This might be an indicator, that rates in one currency will not completely control rates in other currencies.

I am one of the implementers of Ethereum Proof of Stake (<a href="https:&#x2F;&#x2F;github.com&#x2F;prysmaticlabs&#x2F;prysm" rel="nofollow">https:&#x2F;&#x2F;github.com&#x2F;prysmaticlabs&#x2F;prysm</a>) and I would like to clarify a lot of misconceptions around Ethereum and why we find this technology so exciting:<p>- Proof of stake has serious flaws if done from scratch, as you are trying to secure a network using value created out of thin air. Ethereum is <i>migrating</i> to proof of stake <i>from</i> proof of work, and has already built up a security pool of over $200bn USD market cap and a significant amount of activity. ETH as the native asset required for proof of stake has enough security pool to allow the migration to make sense.<p>- &quot;You have been talking about proof of stake for years, wake me up when it happens&quot;. We launched proof of stake on December 1st, 2020 <a href="https:&#x2F;&#x2F;www.coindesk.com&#x2F;valid-points-ether-staked-eth-2-0-q1" rel="nofollow">https:&#x2F;&#x2F;www.coindesk.com&#x2F;valid-points-ether-staked-eth-2-0-q...</a>. This runs as a parallel chain that users deposit ETH into to participate in consensus via a bridge contract. The next step is to <i>merge</i> the current Ethereum chain to use this new chain&#x27;s consensus, and we are working on this to happen late this year.<p>- &quot;There is a vibrant developer community, but for what? All speculation?&quot; Yes, speculation was and is ever present in this new technology given how <i>permissionless</i> it is. This means anyone around the world can interact with the blockchain without a gatekeeper. However, there is an incredible amount of financial innovation happening on Ethereum that didn&#x27;t even exist back in 2017. Really well-thought out stablecoins, flash loans (which are a blockchain native concept), automated market makers such as Uniswap which had more trading volume than <i>Coinbase</i> <a href="https:&#x2F;&#x2F;www.theblockcrypto.com&#x2F;linked&#x2F;79775&#x2F;uniswap-coinbase-monthly-volume-september" rel="nofollow">https:&#x2F;&#x2F;www.theblockcrypto.com&#x2F;linked&#x2F;79775&#x2F;uniswap-coinbase...</a>. We have privacy technologies such as Aztec Protocol or Tornado Cash. We have zero-knowledge proof <i>games</i> such as DarkForest. What makes me personally excited is that Ethereum is like this global, shared computer where every application deployed immediately opens a composable API for others to interact with by design, creating infinite possibilities.<p>- Ethereum&#x27;s development is far more decentralized today than it was years ago. Ethereum proof of stake was developed by 4 independent teams, unaffiliated with the Ethereum Foundation, and had a successful launch this past December 1st, 2020, and no, Vitalik cannot roll back the chain.<p>- &quot;Some other blockchain already had proof of stake and have been running for years&quot;. What makes Ethereum proof of stake special is it takes no compromises between decentralization, security, and scalability. At the base layer of the blockchain, Ethereum uses really neat cryptography known as BLS signatures (<a href="https:&#x2F;&#x2F;medium.com&#x2F;cryptoadvance&#x2F;bls-signatures-better-than-schnorr-5a7fe30ea716" rel="nofollow">https:&#x2F;&#x2F;medium.com&#x2F;cryptoadvance&#x2F;bls-signatures-better-than-...</a>), which allow for signature aggregation at scale. This means there can hundreds of thousands or millions of consensus participants with minimal network overhead, compared to other chains which have a permissioned set of &lt; 100 consensus participants. Moreover, Ethereum is fully permissionless at the consensus. Anyone can run a validator at home easily on a consumer laptop. You don&#x27;t need to buy ASICs, live in a country where electricity is cheap, or anything of that nature.<p>I urge everyone here to look deeper into Ethereum for what it offers and look at the depth of innovation happening in this ecosystem. Happy to answer any questions, as there seems to be a lot of misinformation.

ah. Learning what ethereum is by looking into a random pdf by an unknown twitter user. Never change your pseudointellectuallity hn, never change

It&#x27;s disturbing how tribalism is allowing people to completely ignore reality.<p>Ethereum&#x27;s blockchain uses up over 1 terrabyte of space. Because Ethereum nodes do not provide any search feature natively, most third-party software integrations end up being implemented via the use of centralized services (which defeats the whole purpose of Ethereum).<p>As for Bitcoin using the same amount of electricity as an entire country to perform 2 transactions per second, that is also shocking.<p>But modern fiat money-printing allows all pyramid schemes to thrive. I&#x27;m convinced that if Bernie Madoff had managed to keep his ponzi scheme going just one more decade, he would never have been caught.

If there is a promise of future cash flows from transaction fees that is dependent on new holders, doesn’t that make it a pyramid, ponzi or MLM scheme?

Proof of work cryptocurrency mining is a wasteful industry that proof of stake gets rid of. Rejoice.

A planned upgrade of 6 years? How would that be in the future? How long does it take to fix a minor issue? Tezos for example is able to evolve every 3-4 months without forking and is PoS since 2017. Also they&#x27;re doing a better job on security. <a href="https:&#x2F;&#x2F;tezos.com&#x2F;" rel="nofollow">https:&#x2F;&#x2F;tezos.com&#x2F;</a>

What is crypto replacing really? I’ve yet to read even a fair explanation without mental gymnastics. And I’ve been waiting to the last ten years.

i like it

I know most of us technical people here dismiss Ethereum as being just another new fangled pyramid scheme like Bitcoin and the others, but you&#x27;ve got to hand it to them, it is very well-disguised with plausible deniability (DApps, DeFi, etc.), and they keep on coming up with new ways to make it self-sustaining (ICOs, NFTs, etc.).

Get your pyramid Ponzi out of here: <a href="https:&#x2F;&#x2F;www.cynicusrex.com&#x2F;file&#x2F;cryptocultscience.html" rel="nofollow">https:&#x2F;&#x2F;www.cynicusrex.com&#x2F;file&#x2F;cryptocultscience.html</a>.