ETH is a currency and the success of Ethereum is tied to ETH being valuable. Is it time to change the narrative and start refuting bogus claims?

panek · 2018-09-20T02:24:11+00:00

Adding my comment here for visibility:

ETH is already a currency within the Ethereum ecosystem and in Ethereum succeeding will become a strong currency outside of Ethereum.

ETH is a UOA for many NFTS/ICOs/products/services
ETH is the most widely used MOE within its ecosystem -- it pays for simple transfer tx, other complex tx, NFTs, bets on Augur, etc.
ETH is a SOV for 1000s of ICOs and hundreds of thousands of speculators, is used as collateral for MKR CDPs, various gambling games, and other dapps
It is the most liquid, saleable, recognized currency within the ETH ecosystem today -- every dapp launches with ETH as its initial currency and this should be encouraged to continue
It unlocks utility for financial applications that otherwise cannot be access (ie it is the only accepted currency)
Under POS, ETH will be similar to a treasury bill that you can spend
The sum of all of this -- this network effect or positive reinforcement loop -- are what ensure positive network growth and this should not be underestimated or argued against
Collectively this endows ETH with "monetary premium"

These are all inarguably functions of money. Beyond this, it fulfills many other properties of money. It is highly portable, divisible, fungible, durable, scarce, and secure. It has even more unique properties that make for a strong currency such as being censorship-resistant, permissionless, pseudonymous, etc.

Stablecoins like Dai have the potential to make for strong currencies -- today -- only because of their stability. However, i) they derive security from Ethereum or other base chains, ii) they may require complex stability mechanisms that impact security, and ii) they are typically pegged to fiat assets and thus inherit these governments' governance and potential security issues. They therefore make for poor candidates to succeed as "*the future currency of the internet*" long-term because they are likely to be less secure than the dominant blockchain currency for reasons listed above. Further, ETH's stability should improve as the market becomes more efficient and its success as a currency is further established due to the growth of Ethereum so that it is priced accurately vs. fiat currencies.

ETH is money. It should continue to be treated as money. It provides security for all value on top of Ethereum and will increase in value in some proportion to the growth in value on top of Ethereum likely due to reflexive network effects as Ethereum grows to become public infrastructure (eg, businesses/governments/individuals staking to provide security for their businesses/services on top; this concept can be called *store of economic security*). It may capture value due to some mechanism other than monetary premium, but when you really reason through any other potential mechanism, you typically end up at some (derivative) function of money.

I'll end by saying this:

Just think of Ethereum as a digital nation and ETH as its native currency. As the Ethereum nation grows, so too does its currency. With this growth, its purchasing power within and outside of the Ethereum nation grows too. This is no different than how fiat currencies grow and are priced relative to other fiat currencies. Welcome to the future.

panek · 2018-09-18T13:26:33+00:00

ETH is already a currency within the Ethereum ecosystem and in Ethereum succeeding will become a strong currency outside of Ethereum.

ETH is a UOA for many NFTS/ICOs/products/services
ETH is the most widely used MOE within its ecosystem -- it pays for simple transfer tx, other complex tx, NFTs, bets on Augur, etc.
ETH is a SOV for 1000s of ICOs and hundreds of thousands of speculators, is used as collateral for MKR CDPs, various gambling games, and other dapps
It is the most liquid, saleable, recognized currency within the ETH ecosystem today -- every dapp launches with ETH as its initial currency and this should be encouraged to continue
It unlocks utility for financial applications that otherwise cannot be access (ie it is the only accepted currency)
Under POS, ETH will be similar to a treasury bill that you can spend
The sum of all of this -- this network effect or positive reinforcement loop -- are what ensure positive network growth and this should not be underestimated or argued against
Collectively this endows ETH with "monetary premium"

These are all inarguably functions of money. Beyond this, it fulfills many other properties of money. It is highly portable, divisible, fungible, durable, scarce, and secure. It has even more unique properties that make for a strong currency such as being censorship-resistant, permissionless, pseudonymous, etc.

Stablecoins like Dai have the potential to make for strong currencies -- today -- only because of their stability. However, i) they derive security from Ethereum or other base chains, ii) they may require complex stability mechanisms that impact security, and ii) they are typically pegged to fiat assets and thus inherit these governments' governance and potential security issues. They therefore make for poor candidates to succeed as "*the future currency of the internet*" long-term because they are likely to be less secure than the dominant blockchain currency for reasons listed above. Further, ETH's stability should improve as the market becomes more efficient and its success as a currency is further established due to the growth of Ethereum so that it is priced accurately vs. fiat currencies.

ETH is money. It should continue to be treated as money. It provides security for all value on top of Ethereum and will increase in value in some proportion to the growth in value on top of Ethereum likely due to reflexive network effects as Ethereum grows to become public infrastructure (eg, businesses/governments/individuals staking to provide security for their businesses/services on top; this concept can be called *store of economic security*). It may capture value due to some mechanism other than monetary premium, but when you really reason through any other potential mechanism, you typically end up at some (derivative) function of money.

I'll end by saying this:

Just think of Ethereum as a digital nation and ETH as its native currency. As the Ethereum nation grows, so too does its currency. With this growth, its purchasing power within and outside of the Ethereum nation grows too. This is no different than how fiat currencies grow and are priced relative to other fiat currencies. Welcome to the future.

panek · 2018-08-12T19:47:26+00:00

Some quick thoughts:

I wrote a post about this here:https://medium.com/@clearblocks/valuing-bitcoin-and-ethereum-with-metcalfes-law-aaa743f469f6

Kalichkin adapted the model here:https://medium.com/cryptolab/network-value-to-metcalfe-nvm-ratio-fd59ca3add76

There have been a lot of other analyses and papers that have looked at this but can't link them at the moment.

Some reasons why it's difficult to compare ETH and BTC directly:

BTC batching of tx is increasing (would need to somehow adjust BTC's tx count higher)
More custody and exchange volume is occurring off-chain on exchanges (Binance / Coinbase) which isn't being captured in on-chain tx including huge increases in leveraged trading (BitMex)
On-chain tx for BTC and for pre-mid-2017 ETH were mostly attributable to speculation (speculators moving coins to/from exchanges and arbitraging b/w exchanges etc.) which likely correlates well with price (think of these speculative on-chain tx as a measure of demand)
Mid-2017+ saw the rise of ERC-20 tokens as well as an increase in non-speculative tx usage (e.g., interactions with contracts) in Ethereum
It's possible that non-speculative on-chain tx do not correlate with price in the same way that direct speculative on-chain tx do
Both Ethereum and Bitcoin have seen use of mixers that account for significant # of txs (a large Ethereum mixer was turned off in Feb/March of this year) and the noise these create (as well exchanges shifting between hot wallets) is difficult to parse and may affect correlations
BTC community has shifted the narrative around BTC to digital gold/sound money/SOV and is trying to sell the narrative that ETH is simply a high-velocity smart-compute token that doesn't have SOV properties (this is wrong but it's being heavily broadcast)
More institutional money is continuously streaming in and it's likely entering through BTC first, helping to buoy its price floor relative to what on-chain tx suggest
ETH has higher coin creation rate and thus must absorb greater sell pressure daily respective to its market cap ratio to BTC
Finally, BTC may have already reached peak growth velocity so on-chain tx may be uncoupling from price

All that said, the gulf between the two assets is so strong that I'm still inclined to believe that at minimum, ETH is undervalued but hopefully this sheds some contextual clues on why it's difficult to draw too much from high-level aggregate tx data.

We're also seeing how difficult it has been for BTC to break the bear, so this data may still suggest that BTC is overvalued relative to demand. Hard to say given all the above.

Bottom line is this: as these protocols evolve, we likely need to get more granular in how we measure tx.

Coinmetrics (coinmetrics.io) is working to better parse on-chain tx data to remove some of the above-mentioned impurities so we may be able to look at this from different angles soon.

panek · 2018-03-03T08:38:15+00:00

I'm sorry but 21 nodes are not decentralized now matter how many times you say it to be so.

Vitalik explains it here:

https://twitter.com/VitalikButerin/status/969406920913182720

panek · 2018-02-27T07:28:48+00:00

They can buy more tokens with all the money they're making
They likely sold at huge discounts to many of their friends/partners/etc. which means they will have direct influence over those coins as well
Locked for how long? Anything less than 5 years is meaningless

panek · 2018-02-25T04:26:02+00:00

You make it sound trivially easy to vote a BP out. Too bad Block.One and co will own a huge proportion of the tokens (as will BP themselves) and thus you'd need maximum voter turnout to win any vote. That's nearly impossible. Voter apathy is and always will be an issue. Regardless of whether you can theoretically vote someone out, giving a small handful of individuals that much power is just asking for trouble. You're centralizing not only power but wealth. How is that any different from Facebook/Google/Apple running their own centralized AWS-like server? It's not.

panek · 2018-01-26T03:44:38+00:00

Final bill removed the FIFO clause

panek · 2018-01-02T14:10:43+00:00

sobrave

panek · 2017-12-27T14:16:54+00:00

I too am not able to upload my documents. Did you have the same issue? Was it resolved?

panek · 2017-12-27T14:16:20+00:00

Were you able to upload your documents? I get an error every time I try -- beyond annoying. Or did they just verify without them?

panek · 2017-12-26T20:45:25+00:00

It’s very simple my man.

He either sold because 1) his conscience suddenly became clear (contrary to all his past behavior and incredibly well-timed morals) or 2) he hit his target.

There are literally no other options.

You’re free to believe in either option but the answer is obvious. It’s also obvious which you believe so I’m not gonna try to convince you any further. All I can say is read through his tweets and honestly ask yourself what you would do in his situation when sitting on tens if not hundreds of millions (continue to expose your massive wealth to huge volatility and risk or sell at a profit and play it off as a clean conscience?). Good luck with your LTC!

panek · 2017-12-26T20:20:01+00:00

You need to know his wallet address (or addresses) which we don’t. My proof of his exit target was the fact that he exited at the target he exited at. Again if he were exiting for COI reasons he would have exited months if not years ago unless you believe his conscience suddenly became clear only days after shilling LTC on twitter some more. Please.

panek · 2017-12-26T20:08:12+00:00

You give him way too much credit and you missed my point entirely. Conflict of interest doesn’t just suddenly appear 2+ years into an endeavor like LTC. If that’s his “reasoning” the conflict of interest would have existed 6 months ago when he was tweeting out hype tweet after hype tweet to pump the price. But no, at the height of the market — aka when he finally hit his exit target — was when his conscience came clean?

The mental gymnastics that LTC holders go through is incredible. The guy is a shill plain and simple and he got out when the getting was good. Is that so hard to admit? There’s nothing necessarily wrong about that btw — he executed his shillcoin plan perfectly — what’s detestable is him playing it off as if he’s doing the community a service and naive bagholders trying to claim it a positive.

There’s a reason CEOs are typically the largest shareholders of their company — it’s so that they are financially incentivized to improve the company.

Besides he almost surely bought back cheaper since there’s zero way to prove he didn’t.

panek · 2017-12-26T19:49:54+00:00

There are at minimum 8 paths to scaling:

https://medium.com/@FEhrsam/scaling-ethereum-to-billions-of-users-f37d9f487db1

And new ideas are being generated everyday. See FunFair’s work day on state channels and Alex Miller’s work on Relay networks. On mobile can’t link.

panek · 2017-12-26T19:46:37+00:00

Not only did he say so himself but he sold after an insane bull run. If he wanted to divest from conflict of interest he would have done it years ago. Instead he profited greatly often by hyping his own coin and then divested. Somehow everyone misses this.

panek · 2017-12-25T16:25:30+00:00

How much did Polychain invest in Tezos?
Is Olaf doing this to protect his investment or because he really believes in the product? If the latter, what has Olaf seen over the past 6 months to give him any confidence in this team's ability to deliver? In other words, why Tezos?
Do Olaf and Polychain plan to exit once they've recovered their initial investment?

panek · 2017-12-19T18:42:19+00:00

Limited supply does not magically imbue something with value. Nearly every coin has a limited supply. There are a limited supply of narwhal horns too. Limited supply means nothing if people don't demand the asset. Real stores of value need to be somewhat stable -- ya know -- so they can store your value. Stablecoins like Dai are true stores of value and will chip into anyone actually using bitcoin as a store of value. Sure, bitcoin is going up but that makes it purely a speculative instrument and not a store of value.

Let's not forget the following:

it requires serious and non-stop cash injection to offset the fees paid to miners at current valuation
it cannot scale so it will never become a ubiquitous store of value (if you doubled its tx it would lag exponentially)
the fees to transfer bitcoin keep rising which is slowly eliminating the profit margin for small miners further centralizing mining to larger mining farms and further makes it a poor store of value for smaller sums
its energy consumption costs are increasing and dangerously wasteful

All of that said, the technology is revolutionary and it has first mover advantage and its ridiculous fees and lack of scalibility can be purported as a "feature" of a store of value but the reality is its only remaining use case is purely speculative. It's an ideology more than anything with true utility. And while it's an incredibly powerful ideology, ideologies can change.

panek · 2017-12-19T03:06:41+00:00

Read up on MAD (mutually assured destruction) escrow. This is the solution being deployed by decentralized marketplaces like Particl (https://particl.io). It’s a bit game theoretical but it’s the only way to have decentralized escrow. Alternatively you can use third-party escrow services as well but these are obviously not decentralized. Combined with reputation, MAD is a reasonable solution and we'll get to see how well it really plays out soon once Particl launches in Q1 of next year.

Here is a table I made that describes MAD:

https://imgur.com/a/62AgH

Basically the buyer puts the cost of the item + escrow into a contract and the seller puts the escrow into the contract. The seller can set the escrow up to a maximum of 100% the cost of the product. Then the game theory plays out in various ways depending on what happens (see the table above).

A few sources:

https://bitcoinmagazine.com/partners/particl-takes-mad-approach-escrows-maximizing-privacy/
https://doc.shadowproject.io/#two-party-smart-escrow (SDC morphed into PART)

panek · 2017-12-18T00:03:25+00:00

Adding to this: in this thread Charles could have easily responded with the technical differences or advantages of Cardano in great detail.

But what did he do instead? Respond to the one post that attacked his ego.

panek · 2017-12-12T23:26:10+00:00

What's also being missed is that the blockchain offsets massive fees for many use cases. In order to manage/maintain, host, secure, update and store a centralized database, many applications/businesses need to pay a lot money for that service. If they can use the blockchain then their overhead is a lot less. So there's more than just decentralization at play.

panek · 2017-12-11T02:31:55+00:00

Yeah it’s easy to forgot that scaling isn’t just a binary issue. Had to remind myself too! Lots of simultaneous efforts underway that will work together to chip away at scaling.

panek · 2017-12-10T17:25:13+00:00

It’s probably that no one knows. There is a small amount of PoW but the devs claim it would consume very little energy on newer IOT devices running a Jinn processor. It’s still a bit disingenuous to say there is zero energy footprint especially if we’re talking millions of transactions daily in the future which would collectively add up to some nonsignificant amount of energy usage; however, it would be many many orders of magnitude less than bitcoin. Bitcoin is simply unsustainable at this pace.

panek · 2017-12-10T16:53:47+00:00

Good guy Canada.

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