Recently, Ryan Selkis from Messari provided useful insight that ETH is not money, compared to BTC, which apparently is money, so I would like to share few thoughts on his 10 arguments that ETH is not Money
It will be lined as per his thoughts, with red color comments from my side (I have shortened his arguments for clarity, but whole article could be found on the link
https://messari.io/article/eth-is-not-money)
bear in mind that both arguments are just thoughts and should not be taken as a financial advise in any way
1. History: Ryan compares BCH and BTC split, and the way that BTC outperformed BCH with the same from ETH, when ETH reached 50% BTC market capitalization at one moment, and BTC shake it off, eventually
would not compare ETH and BCH in case, and ETH is totally different asset from BTC, with different use case, BTC shall become global monetary network, but ETH will be the center for Computational networksWith the eth2 migration, BTC will be 95% dominant in the proof-of-work monies category, while ETH must compete with dozens of viable platforms to retain its 65% dominance; BTC has few substitutes; ETH may have many.
agree on this one, but one should note that total value in these will be highly different and that ETH 10% domination in platforms could be more than 95% in Store-of-Value market based on Proof-of-work 2. Reserve rotation: Demand for ETH during the last cycle was fueled in large part by its reserve currency status for ICOs. That demand was only partly replicated in this year’s DeFi boom as ERC-20 crypto dollars largely replaced the need to hold ETH, which is an important (40% of total locked value).
with transition to PoS and 2 million ETH already staked, this could also fuel new rise in price, but there is also a fact that ETH token is used within the network, and that is important feature, some competitor network have 80% tokens staked, which proves them totally useless for users, since only token usage is for staking, ETH has broad application and developer database3. Institutional Mirage: “Smart money” demand for ETH is overstated.
for the moment agree, but we will see what future holds, and I believe that institutional investor will start pouring money into ETH2.0 staking, it seems so good opportunity for large institutional investors to get into this for 3-4% yearly profit, when the network is established, which will take a year or so, but will come eventually4. Narrative Complexity: Memes work, and nothing kills a good meme like complexity.
BTC purpose is easier to explain to general population than ETH, and that is a fact, but I think that this is already priced-in, and there is a lot of education and explanation for both ETH and BTC5. Wrapped Assets: As total value locked in DeFi and on Ethereum continues to swell, so will interest in wrapping synthetic Bitcoin (and other assets) and leveraging them on Ethereum.
agree, but this is positive for both assets, and ETH shall be used to pay for gas6. Strong Hands: Bitcoin holders have always been Spartans to Ethereum’s Athenians. They eat meat, they’re mean, and they’re specialists at war. The Ethereum community has more diversity and social awareness, I think, which is great for a platform.
indeed, Bitcoiners are like-minded and they stick to their BTC, but is that the only advantage? ETH network has broad developer base, and we will have another topic from DeFi to speak of at the end of next year, which nobody at the moment does not know what is it, and that is a great base for future network development, broad range of ideas7. Sub-token Leakage: this is related to number of sub-chains on Ethereum network, after phase 1.5 and phase 2 for ETH2.0 release
seems that Ethereum network shards will lower gas for transactions, and that could influence ETH price as well, which is possible, but I do not think that ETH2.0 will introduce new tokens into Ethereum network8. Alt-token Leakage: I cannot overstate how risky it seems that eth1.5+roll-ups look
almost same point as number 7, that there is a lot of competition, and this is true, but this is at least 10x bigger market than Store-of-Value and competition should be widely expected, even be good for total economy, yeah competition is building bridges to Ethereum to leak some volume from it, but when you have all bridges to one island, seems that that island is becoming stronger and developers on the island have more options and opportunities, is not it?9. DeFi-token Leakage: value leakage to DeFi protocol tokens
seems just another way to see points 7 and 8, just leak to DeFi tokens, and indeed there will be value to leak to UNI or similar tokens, but two years ago that value leaked to BNB and similar tokens, and they formed smart contract protocols, but ETH is still number 2 on the list, with more advantage than two years ago10. Cumulative Demonetization: If Bitcoin is a prism that attracts different narrative seekers into the same base asset, ETH is the opposite: too many narratives, each of which can be better expressed by a more specialized protocol and token
interesting point, but it stay unclear how Bitcoin is attracting different narrative seekers, at the moment most Bitcoiners are here for Store-of-Value (me included) and ETH have broad utilities, and all specialized protocols will pick their niches, but main market will stay on Ethereum, just like Windows has major share in OS, and other OS's provide better value for particular operationsDisclaimer: this is not a financial advise
Disclosure: own some BTC and ETH funds
