Ethereum: The Currency of the Internet
Ethereum newsletter purveyor Evan Van Ness recently tweeted the following:
Best case scenario for Ethereum is that it is the native value layer (currency) of the entire internet. Best case for Bitcoin is the internet version of gold (gold is less than 1% of total wealth).
Let’s talk about why this makes sense. But first, let’s reiterate what Robert wrote in a previous article:
There either will be a demand for this (Ethereum virtual) computer, and therefore a demand for gas, or there won’t.
Ethereum will always have a non zero value so long as there is demand for it.
Let’s look at how demand is growing.
Ðapps
Ethereum is a decentralized world wide computer that runs decentralized applications called Ðapps (note: the Ð is pronounced “ETH”). Ðapps are special because of their decentralized nature: they are able to be used by anyone with access to the internet, without a gatekeeper, and they can’t be shut down or censored.
Ðapps also have built in economic structures that provide incentives for people to ensure a particular network remains running. A prime example of this is the Livepeer network. Livepeer is a decentralized video streaming platform. Anyone can set up a web server and become a transcoder on Livepeer. Users can stream video content through the transcoder of their choosing (likely they will pick one that has a reasonable fee), bypassing YouTube, Facebook, and other “free” video streaming services that monetize their users’ streams.
Where Ethereum has a lot of value is the huge number of projects using it. Digix, Maker, Augur, 0x, Fun, and other projects all use the Ethereum virtual machine (or worldwide computer) to work, meaning these projects will all grow to have a certain amount of interactivity.
Currently, one pays for streaming services on Livepeer through either ETH or LPT, the Livepeer token. But as 0x grows, more opportunities will arise to simply plug in a 0x smart contract that autotrades and allows users to pay for their Livepeer by using Digix gold, or Maker Dai, or any other number of cryptocurrencies.
At the bottom of this base layer, every “on chain” transaction requires a tiny amount of Ethereum to be used to pay the miners (those who run the world computer). Most simple transactions currently cost less than 5 cents to execute, and many projects are beginning to stack a handful of “off chain” transactions into one “on chain” transaction, saving the resources of the world computer for other tasks.
Non Fungible Token Interactions
Ðapps like Cryptokitties continue to grow and evolve, with interactions between other non fungible tokens (NFTs) making the future of collecting and gaming a lot more exciting. Imagine if Starcraft and Super Mario Brothers both had collectible tokens on the blockchain, and anyone could create a game that mashed the two character groups into a unique game (feed mushrooms to zerglings to make super zerglings or give a battle rifle to Peach).
While established brands may be unwilling to cede control of their IP, some forward leaning brands will likely embrace tokens and allow for the creation of NFTs on the blockchain.
As NFTs gain from network effects, the interoperability of these virtual toys will make blockchain gaming the place for indie game developers.
Ethereum as Currency of the Internet
Both Ðapps and NFTs require resources to operate. These resources are provided, at the base level, by miners. Miners are paid with gas, which is a tiny, tiny amount of ETH.
Ether becomes, then, de facto, the most widely used currency as it holds all the qualities of money: it is durable, divisible, highly accepted, convenient, limited in quantity, and it has value in itself.
We’re not there yet…but no other blockchain comes closer. Ethereum has a very good chance of truly becoming the currency of the entire internet.
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