I believe Ethereum is one of the most compelling assets in the world right now. However, its narrative is pretty obscure for what it is and what it will become. For starters, it is good to know that Ethereum is many things at once. Similar to how we wear different hats at various moments in our life, we’re simultaneously a child of our parents, a working adult, a friend, a colleague, a friendly nemesis, a beloved partner and at times a stubborn couch potato. We hold many identities and play a multitude of roles of which many of them inevitably overlap into each other. Likewise to Ethereum, we are complicated too. However, we don’t emphasize as much at our incongruencies especially in instances whereby we’re seen to be hostile towards friends (for good reasons I hope) and chummy towards strangers.
Let’s do the same for Ethereum. Let’s give it the benefit of doubt.
Ethereum, the blockchain, is a world computer, the backbone of a decentralized internet (web3) and the settlement layer for web3. Ether (ETH) which is its cryptocurrency (Yes, the one that is constantly changing in price) is an assortment of things too. It is Internet money. If you were to play a crypto game like Axie Infinity, you can’t purchase an Axie in USD with a credit card. You can only purchase it with Ethereum. Furthermore, Ether is also yield-generating and a store of value. More importantly, its potential lies in its on-chain activity, specifically the web3 future. Ethereum allows us to build apps and products with money baked into the code. You can actually mint a NFT with the pre-set condition that for every time it is resold, a percentage of the sale goes back to you. Aside from NFT, Ethereum is also used for Decentralised Finance (DeFi) and Decentralised Autonomous Organisation (DAOs). With the recent implementation of EIP 1559, Ethereum is becoming deflationary with the decrease in supply of ETH. Think of it this way — Ethereum is the Excel of blockchains and Ether is the energy fueling everything from security to identity to payments.
It is normal to be confused at what Ethereum is, as it is many things at once.
Let’s put it out there: Ethereum isn’t perfect. It is far from even being great. In terms of transactions per second, Visa wins. In terms of its transaction costs, especially when you’re sending small amounts of ETH, the gas fees seems ridiculously high. Not to mention, the gas fees are volatile in nature as well. It is based on auction and change all of the time based on demand which makes it difficult for us to transact with confidence. Given that a lot of electricity is being used for mining, it is easily considered to be environmentally unfriendly.
These are just some of the challenges that Ethereum face, so how legit is Ethereum?
At its core, Ethereum is a platform that highlights the Two-Sided Platform Network Effect. A simple way to understand this phenomenon is IOS. As the number of people who owns iPhones increase, the more likely developers are gonna prioritize iPhone apps, and the more iPhone apps there are, the more likely someone would buy an iPhone. Similarly, as more people owns Ethereum for their own usage, be it staking it for passive profits or delving into a crypto game and buying a piece of virtual land, the more likely developers are gonna build on the Ethereum platform as compared to other crypto platforms, and the more established Ethereum is, the more likely someone new to crypto would buy into Ethereum’s narrative. Many foundational pieces are already built on the Ethereum’s platform and plenty more exciting applications are well under way. For all that has been accomplished thus far, perhaps one of the most misunderstood narratives about ETH is that it is just yet another digital currency. It is, and more.