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Monolith Reflects: a prediction on the Ethereum economy in 2031

The Ethereum ecosystem is growing at a staggering rate. Now six years into its lifetime, today the network is best described as an Internet-based financial system. It’s currently the world’s most used blockchain, processing around 1.5 million transactions daily. Thanks to Ethereum’s smart contract functionality, the DeFi and NFT spaces have started to flourish, signalling a changing world headed for decentralisation. Ethereum is already well on its way to creating that world, but how will things look ten years from now? In this piece, we attempt to answer that question.

DeFi will hit 1 billion users, the equivalent of around 10% of the world’s population. Decentralised protocols will give regular people access to a monetary experience that vastly improves on the traditional finance system, offering more attractive returns and the ability to exchange value in any form across the Internet at marginal cost. DeFi grew from under 100,000 users to over 1 million in 2020 alone, and adoption has shown no sign of slowing. As the world starts to discover the power of decentralised finance, we’ll see the same snowball effect that played out with the growth of the Internet. There’ll be thousands of tokens for different purposes, and we’ll have new variants on interest-bearing assets like aDAI and cDAI that leverage DeFi’s composability. Every major bank and credit card company will adopt stablecoins, and cash will be considered an antiquated payment system in most major cities around the world. People will become accustomed to earning yield in real time; they’ll be able to watch their money grow when they use DeFi through an accessible interface. DeFi natives will leverage the composability of the ecosystem to multiply their wealth. They’ll use yield optimisation strategies across protocols to make their money work for them, and their savings will stay almost entirely on-chain. Every major business will use Ethereum for instant payments. DeFi’s leading teams will develop fiat onramps, further cementing the growth of the ecosystem. Banks will be forced to act as custodians for crypto protocols, but many will become all-but-obsolete when they fail to move fast enough. They’ll still be used by older generations but will eventually meet the same fate as the printed press industry.

Stablecoins will account for trillions of dollars of value on the Ethereum network. They’ll be widely used for payments, saving, lending, borrowing, and other activities that don’t exist yet as Ethereum fulfils its goal to bring decentralised finance to the world. There are already $30 billion worth of stablecoins on Ethereum with DeFi only a couple a years old, and their usage will grow as adoption of the network does. Ethereum will become the de facto settlement layer for exchanging value on the Internet. Major websites will accept crypto alongside services like PayPal. The world we refer to as Web3 will encompass global payments and eight-figure business transactions through to micropayments for unlocking exclusive content (creators in all disciplines will rely on crypto to earn revenue for their work). Ethereum will be secured by validators that collectively stake millions of ETH, each of them earning interest for contributing to the network. With Ethereum 2.0 complete, most Layer 1 transactions will run on one of the 64 shard chains the network is composed of. Gas prices will be much more affordable than they are today thanks to the upgrade. ETH will become a deflationary asset following the EIP-1559 “ETH buyback” proposal that was introduced in the summer of 2021, challenging Bitcoin’s widely-discussed “sound money” narrative. Layer 2 will also be the standard framework that most protocols run on, and it will make DeFi usable with negligible fees. Rollups, sidechains, and plasma will allow for near instant transactions for most users, helping Ethereum scale to hundreds of thousands of transactions per second. Other Layer 1 chains will facilitate cross-chain interoperability, and new interfaces will make it easy to move tokens from cross-chain in an instant. Any other dominant Layer 1 protocols will act as sidechains to Ethereum, ultimately adding to its value as the world’s most used settlement layer. Each will have its own advantages, though Ethereum will be the hub for the majority of all activity in Web3.

Decentralisation will turbocharge what’s currently known as “the creator economy”. What started on YouTube, TikTok and Substack will move on-chain, and anyone with an Ethereum address will be able to participate. NFTs will revolutionise the creative arts, and they’ll be used across every medium of expression imaginable. The world’s biggest musicians will use them to sell the rights to their work, replacing today’s broken royalty distribution model. Some musicians will only exist in the ether. Beeple will cement his reputation as a pioneer of the NFT space. An NFT by Beeple or another artist will sell for $1 billion. Other digital artists will see their work featured at Christie’s and Sotheby’s. The Metaverse will have its own equivalents of Christie’s and Sotheby’s. Smaller artists will gain exposure when their work is featured in them. NFTs will also be used for identification purposes; they’ll start to replace physical membership cards. Social networks will explode on Layer 2, and users will earn tokens just for visiting them. Ethereum addresses will also be used as a form of identity, and many of us will disguise ourselves behind pseudonyms. NFTs will also form a key part of virtual gaming worlds, the games integrating tokens as incentivisation mechanisms. Other industries like gambling will also migrate to Web3, their payment systems vastly improved thanks to high-speed, low-cost trustless transactions. A competitor to YouTube will emerge for streaming videos on Ethereum, paying uploaders tokens as their videos accrue views. And Web3 will create thousands more jobs we can’t yet imagine.

Though many of DeFi’s early users will be able to retire once the tech goes mainstream, they’ll stay to build new systems that make the world a better place. Many will start DAOS dedicated to philanthropic ventures. They’ll leverage Ethereum to redistribute the world’s wealth. DeFi will find wider use outside of the Western World, helping those in countries suffering from economic troubles. Stablecoins will continue to fight hyperinflation, just as they have been in Venezuela recently. New projects dedicated to this cause will find success. Supply chains will also be transformed by tokenisation.

World leaders will spend years looking for solutions to the climate crisis. They’ll end up settling agreements with other countries on Ethereum, as by this point it will be recognised as the world’s most neutral, immutable settlement layer. Meanwhile, carbon offsetters will receive rewards in the form of tokens. Those tokens will run on Ethereum too.

At least one major attack will hit the DeFi space, creating Ethereum’s most significant hurdle since the DAO hacks of 2016. Billions of dollars will be wiped out in an instant. But day by day, the network will grow stronger, resisting attacks from competitors, economists, bankers, legacy institutions and other skeptics. The doubters will go on to adopt Ethereum for themselves, learning that they were wrong once they start to benefit from the upside. Millions of people will use Ethereum in their daily lives, many of them without realising it. But we’ll see its impact everywhere, knowing that our society has been improved in a profound way. It’s already happening now, and the best part is the journey has only just begun.

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