The Evolution of Ether: The New Capitalism and the Triality Asset

Can ethereum outperform bitcoin?

The Evolution of Ether: The New Capitalism and the Triality Asset

Can ethereum surpass bitcoin?

Once ridiculed as much as “Can EOS overtake ethereum?”, this question is no longer a joke as ethereum continues to soar against bitcoin and ETH 2.0 is approaching.

For example, Ryan Watkins, senior research analyst at Messari, believes that once Eth 2.0 and PoS are complete, Ether could replace Bitcoin as the largest crypto asset.

Today, let’s talk about the evolution of Ether, why we are bullish on its aftermath and the geometry of the possibility of challenging Bitcoin.

The New Capitalism

When it comes to capitalism, you probably think of capitalist empires like the United Kingdom and the United States, but one country has to be mentioned, the Netherlands.

In the 17th century, the most powerful country in Europe was neither Spain nor Portugal, nor England, but the Netherlands, known as the “coachman of the sea”.

On the one hand, the power of the Netherlands came from the advanced shipbuilding industry, the Netherlands reached its heyday, the tonnage of Dutch merchant ships accounted for 3/4 of the total tonnage of Europe at that time, the sea trade was basically monopolized by the Netherlands.

On the other hand, it came from the developed commercial trade. It can be said that Holland invented capitalism and capitalism shaped Holland.

In 1602, the world’s first joint-stock company, the Dutch East India Union Company, was established.

In 1606, the world’s first stock exchange with a focus on financial stocks was established in Amsterdam, the Netherlands, a century before the London Stock Exchange.

In 1609, the world’s first bank of modern significance was born in Amsterdam. The Bank of Amsterdam took on the attributes of a central bank, embodying the credit of the state, unified the management of the currency and credit system, and became the bank of currency issuance.

When the Netherlands established the first well-functioning lending system, a system that made it easier to create debt, capitalism took root in the Netherlands and went global, hence the name “first capitalist country” in the world.

Hundreds of years later, a new capitalist system began to be built, the new Holland of the digital world, Ether.

What is transformative about Ether is that it creates a new application layer, a value layer, on the Internet.

The Web 2.0 Internet, the Internet of centralized databases and centralized data, with Facebook, Google, Amazon and their products representing the pinnacle of the application layer of Web 2.0.

Ether offers another option to transfer value directly through the Internet, one of the major innovations being the integration of the “Ether Virtual Machine (EVM)” into its blockchain.

In other words, with the EVM, Ether can run software, software that can handle digital assets on its blockchain, and thus with the application layer on Ether, a new debt ecology, a new stock trading system …… a whole set of ecological mechanisms of capitalism can be set up and run quickly and inexpensively.

The old capitalist system, which can be described as “meatspace + digital (material world + digital)”, in the “meatspace+digital” economy, each asset category has its own exchange, custodian and marketplace, so there are capital and time costs associated with transferring value across markets.

All asset types on Ether (stocks, bonds, assets, real estate, virtual land, etc.) are developed in the same language, so each asset can be traded frictionlessly with each other.

In the “meatspace+digital” system, an individual user would have to wait days or even weeks to transfer shares from one custodian to another, but on Ether it takes only minutes.

Thus, the most imaginable aspect of Ether is to become the global clearing layer of the future, creating a complete capitalist ecosystem on Ether.

Triality assets

Ether 2.0, will be an evolution of Ether.

In the opinion of David Houman, COO of RealT, after Ether 2.0, ETH will be the first asset in history to have the properties of all three asset classes at the same time: capital assets, expendable assets, and stores of value.

In 1997, American economist Robert J. Greer, in his paper “What is an asset class? in which he divided asset classes into three categories.

  1. capital assets

A capital asset is any asset that can generate future cash flows.

Examples include stocks that generate cash flows in the form of dividends and bonds that generate cash flows in the form of coupons, and rentable real estate, whose fundamental characteristic is that it can be valued by discounting the cash flows that may be generated in the future.

  1. Consumable/Convertible Assets

These are assets that can be consumed or converted into another asset, but cannot generate future cash flows by themselves.

For example, oil, wheat, coffee, for example, in other words, these assets are physical commodities.

The difference between convertible assets and capital assets is that these assets cannot be valued by discounting future cash flows.

  1. Store-of-Value Assets

These are assets that cannot generate income or be consumed, but have economic value, and the value of these assets lies in their recognition by investors. Currencies and collectibles are typical examples of stored value assets.

Examples include gold, art or bitcoin.

In 2019, David Houman throws out the idea that “ETH is the best cryptocurrency model in the world when it evolves into a “triple asset” that is economically triple effective and meets all the needs of the new economy at the same time.”

Ether is a capital asset

  1. Share in the Ethernet network

Equivalent to “shares” in the Ethernet network, the PoS pledge mechanism of ETH 2.0 turns ETH itself into a productive asset that can generate income through pledging, which allows it to capture the value of system growth.

  1. Ether’s claim

It is the right to claim the costs of the Ethernet network. In this respect, it behaves similarly to a bond. Ether is a bond issuer, and Stakers are bondholders and receive a corresponding return.

The difference with traditional bonds is that Stakers can redeem Ether “on instruction” (without maturity), similar to the embedded option of a bond. In particular, ETH gains the qualities of a sovereign bond, as the platform is designed to be solvent without the risk of default.

  1. The right to produce for Ether

Having ETH gives you the power to work for Ether and the power to collect fees.

ETH is also a mechanism to ensure incentive alignment between the Ether network and its workers, and all workers must have ETH in order to work for Ether. If you want to be an employee of the Ether network, or pay for related services, then you must have ETH and be aligned with that network.

ETH is an expendable asset

ETH can be understood as a consumable energy source, with which our world can function, and energy is the economic foundation that powers the world economy.

Every transaction in the Ethernet network (sending tokens or interacting with smart contracts) costs Gas and is priced in Gwei.

With the introduction of EIP – 1559 (scheduled for July 2021), these costs will be “burned” and just like traditional natural gas or oil, Ether will become a consumable/convertible asset (commodity) that is continuously consumed.

ETH is a store of value

If you follow DeFi, then you should know that ETH acts as a store of value in the DeFi ecosystem, and when ETH is locked, it often means that ETH becomes the underlying collateral.

With a fixed supply of 21 million and declining inflation, Bitcoin is also known as “digital gold”. In contrast, Ether has no fixed supply, but inflation will continue to decline in the future.

After ETH 2.0 is fully converted to PoS, the network-wide incremental issuance of ETH will drop sharply, bringing the inflation rate from the current 4.54% to 1.58%, which is not only lower than the expected global currency inflation rate in 2021 (3.29%), but also lower than Bitcoin’s inflation rate (1.8%).

In addition, the EIP-1559 proposal has been approved for implementation in the Ether London hard fork upgrade in the middle of this year, officially linking the growth of the Ether economy to the scarcity of ETH assets.

Ether’s cryptocurrency policy has always been “minimum necessary issuance,” meaning that the amount of new ETH issued by the Ether protocol is “small enough” to ensure the security of the Ether network.

EIP-1559 will destroy ETH as transaction fees, i.e., this part of ETH will be removed from the total circulation, and the destruction of ETH means that the scarcity of ETH increases.

The POS mechanism of ETH 2.0 and EIP-1559 will give Ether more value storage properties.

Finally, back to the original question, can Ether surpass Bitcoin?

My personal opinion is that Ether will get more value recognition and achieve value addition in the future, but it still cannot shake Bitcoin’s position in this cycle, and there is a theoretical possibility in the next cycle.

In terms of funding sources, bitcoin as well as dogcoin are both absorbing the big flood from the fiat world directly, while ethereum’s inflow is still more bitcoin’s funding spillover.

On a competitive level, Bitcoin has no rivals within the circuit, while Ether faces more challenges.

Just as Ether wants to challenge Bitcoin, other old and new public chains are also challenging Ether. Exchange side chains such as BSCHECO and new public chains such as SolanaNearAvalanche are absorbing Ether’s money and users.

Ether needs to work very hard to beat the competition first, while Bitcoin, on the other hand, just needs to lie back and welcome the collapsing fiat world to actively embrace it.

Ether’s success comes from being proactive, Bitcoin’s success comes from being reactive, which requires Ether to keep improving and not make fatal mistakes.

But I still look forward to the day when Ether goes head-to-head with Bitcoin and directly wrenches its hand, so I will not sell ETH until at least 2024.

What is the difference between a coin without a dream, and a salted fish? Only then, the blockchain world is more exciting, isn’t it?


Staking, everything you need to know: part III

Ether: A New Model for Money

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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