What is ETH? A short question that provokes many answers. Felipe Gaúcho Pereira already reflected on this in the article Visions of Ether an analysis of different narratives loosely related to a similar consideration BTC oriented. Nevertheless: Especially in the case of ETH both critics and fans seem to have a problem, the actual task of ETH to really define. Long gone are the days ofbuild unstoppable applications”. Cynically speaking, the beacon surrounding the DAO exploit and the subsequent state change showed that unstoppable applications are many things – but not unstoppable. The problems surrounding flash loans also showed that such claims might not be effective either.
ETH is (good) money
In the wake of Decentralized Finance (DeFi) and in view of ETH 2.0, more and more saw ETH-Friends money as the main use case. What exactly is meant by that? Sure, for one, my supporter with that ether as means of payment can be used. Although the number of ETH-Acceptance points lower than with BTCbut in principle payments can be made in ETH be settled.
That alone would be a poor imitation of BTC. The possibilities offered by smart contracts would have been thrown to the wind. However, the supporters of the above thesis understand money to be more than that. You see They see ETH as a decentralized, worldwide economic system in which Ether can be used as a currency. The counterpart to the euro in the EU economic area for ETH would be ether.
That too falls short. In fact, you can ETH a asset see with multiple functions. Ryan Sean Adams has an article on this The Defiant more precisely:
- Ether is the base currency with which the gas, so the transaction costs in the ETH-Ecosystem to be paid. Ether is similar in that regard oil.
- Ether is characterized by limited supply and increasing demand gold very similar.
- Thanks to various DeFi platforms, you can already ETH staking – a use case that will only become more prevalent with ETH 2.0. In that respect, Ether resembles one bond. Stored ether can increase the liquidity of a decentralized exchange. After switching on Proof of Stake can over the storage of ether the entire ETH-Network to be secured. Interest or a share of the fees in Ether jump out for investors.
ETH is fiat money
You can already see here: Those who see ether as money have a very complex idea of money. It goes beyond the classic division into value stores, means of payment and unit of account.
Accordingly, not everyone is convinced of the thesis. Anthony Pompliano was very critical in his newsletter Off-the-chain. In this he says that ETH is money – but fiat money, i.e. the form of money that BTC just don’t want to be.
According to Anthony Pompliano, a fiat currency has three characteristics:
- A fiat currency has no finite supply
- The issue of money is inflationary
- A manageable group of people make monetary decisions
These points are in his opinion ETH given. He admits that the inflation rate has been falling so far. Unlike in the case of BTCwhose inflation rate in the BTCprotocol, these reductions were decisions of a central group of actors.
His reasoning is not a sweeping criticism ETH or to Decentralized Finance. In fact, he sees DAI and tBTC as approaches to overcoming this fiat problem. So, in his opinion, DAI and tBTC are (good) money, but Ether itself is not.
ETH is more
Now who is right? Somewhat unsatisfactory: all – and not a single one. ETH is more than what enthusiasts and critics see. The claim “build unstoppable applications” still applies, even after TheDAO or bZx. ETH is a platform on which developers can write different decentralized applications. The possibilities, as well as the use of ether, are not exhausted in the use cases mentioned above. To say that ether is money, or even fiat money, is as short-sighted as saying that cotton paper is money. Correct, cotton paper is the main component of modern euro banknotes, but other use cases are also possible.
ETH is not even ten years old. Perhaps it is still too early to make definitive statements like “ETH is money” to fell? It is said “New wine belongs in new bottles”. ETHas well as BTC, is not easy to squeeze into classical ideas and schemes. Disruptive technology always goes beyond classic terminology. A car was much more than a horse, the Internet much more than a knowledge database and artificial intelligence more than applied statistics. Finding out this “more” is the challenge and task of all users and developers.