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October 25, 2017, 11:32:23 PM |
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My two cents. Ethereum price is driven by a market like any other: offer and demand meet and form a price. In this case, it is a market with very small obstacles to the entry of producers (miners).
PoW Era
The demand for ethereum is driven, unfortunately, by speculation and news but not (at the moment) by real use as store of value, commerce vehicle /payment method nor per the utility to execute smart contracts. As anything speculative, DEMAND WILL MOVE BY NEWS (adoption, bans, projects, posibility to pay in stores, competing alternatives, expectations of increase in value...)
The offer of Ethereum is fixed at 3 EHT per block, that is whatever per minute.
As far as miners are concerned, they go in or out the market if the price makes operations profitable, but the supply does not change.
So price is just driven by DEMAND, mostly especulative.
PoS Era
We do not know yet if the supply is going to be fixed o variable (at least I don´t). Let us say it remains fixed to avoid inflation. Then the price will still be driven by demand, just as it was before.
However, from the miner (now staker) perspective, things change a lot because their production cost is a cost of opportunity (for those who don´t know, that is the cost of not using the money for alternative investments such as shares of companies or bonds) or if you borrow to buy ethereum the cost of your capital (interest rates).
The price of ethereum will be given by the ability of the network to produce profits for the stakers (interests) and that will be related to the real use of the network and ether as a coin for commerce and store of value.
As a share, prospective investors will compare risk and profit and that will determine the price. Also, keep in mind that it will have to compete with other crypto assets.
WILL THE PRICE RISE LONG TERM??? It will depend on the real applications in the long term, particularly if it goes mainstream or a few "unicorns" are built on the ETH network generating many transactions. Also, depends on the competing alternatives like NEO or NEM.
WHAT DOES THIS MEAN TO ME? That when PoS comes into effect you are efectively a shareholder of the Ethereum network. Help it grow, promote it and be active and we will all profit from it (think of Apple).
Does this make sense?
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