ETH is Dead?

Has the world's second largest blockchain by volume run its course?

Is ETH dead for real?

Lot of negative talk out there about ETH this market cycle. Is it legit, or just another premature obituary for the world's second largest blockchain token? Lets dive in.

What's Good With ETH? (The Bull Case):

Ethereum is the first mover in its space

Ethereum 1.0 released over nine years ago and revolutionized the blockchain industry. As the first chain to offer smart contracts Ethereum promised an overall better user experience than Bitcoin. It delivered on that promise. With faster and cheaper transactions than Bitcoin, plus the addition of DeFi capabilities, ETH (native token of Ethereum) took the space by storm.

Ethereum offered solutions to all kinds of problems that Bitcoin did not. Things like:

• PAYMENTS & STABLECOINS:

  • Direct payments; nearly free and instant (across borders) available 24/7/365

• DeFi LENDING:

  • DeFi lending platforms help people borrow and lend funds which allow the crypto holders to earn income, without having to go to a bank

• DIGITAL IDENTITY:

  • Control and ownership of your digital identity and personal information

• TOKENIZATION:

  • Cheaper and transparent trading of securities, bonds, and commodities. Provides access for regular people to investments normally reserved for high net worth individuals and organizations

• STAKING:

  • Staking rewards can be compared to dividend payments and share buybacks in traditional markets

Huge Ecosystem

ETH still boasts the largest developer community in blockchain. Think of Ethereum as a computer operating system...take Windows for example. Windows is great, but apps like Microsoft Office had to be built on top of it in order to make Windows a more functional tool for consumers. Same goes with smart contract blockchains. What's being built on top of it is equally if not more important. Ethereum has a large advantage in this area over other chains, partially because of its first mover status and partially because there are a lot of developers who truly believe in it.

Should benefit from changing regulatory landscape

The new administration in the White House has already shown that they are looking to foster innovation in blockchain. A far cry from the previous administration's war on crypto, America seems poised to move forward as a leader in the space. The SEC has already dropped several large cases against crypto companies, and appears ready to drop the much lauded Ripple/XRP case. This bodes well for ETH as several ETFs have already been approved making adoption much easier for regular investors. CBOR actually just applied for a staking based ETH ETF. You can buy through an ETF and lock up your tokens for a 3% return. Should this ETF be approved, it's possible that investors are bullish on the idea of receiving a dividend at the end of the year, making ETH more desirable to ETF investors.

What's Bad With ETH? (The Bear Case):

What's the mission?

Bitcoin has a clear goal of being digital gold and a store of value. While that may not have been Satoshi's vision early on, that's where the Bitcoin community is now. Solana has a clear goal of making transactions super fast and cheap. So what's Ethereum's goal? Is it trying to become sound money? A programmable internet layer? A super computer? The short answer is yes. Ethereum lacks a clear vision as to what it is attempting to be. By tackling multiple use cases all at one time, ETH tends to get mired in the mud. Developers are all going in different directions which makes it very difficult to compete with newer chains with clear stated missions and more specialized use cases.

ETH is old

Ethereum is a dinosaur when it comes to blockchains. What gives it its first mover advantage is also its biggest disadvantage. Ethereum is slow and expensive. There are newer chains like Solana that offer smart contracts for faster and cheaper. In Ethereum's defense, they had to pave the way like a first born child. Other newer chains have had the advantage of using the blueprint for ETH and improving upon it at the base layer. Ethereum has also worked to improve its congestion and tps, but has had to do it though layer 2's.

Layer 2

Ethereum made a full shift towards scalability in 2020. Since the base layer of Ethereum cannot reach the same levels of newer layer 1 blockchains, ETH is attempting to scale via layer 2s. While this has proven to work to a degree, it's a bit more complicated than that. A layer 2 builds on top of a layer 1 and in turn it receives security and assets from the foundation layer. In return, they provide scalability and speed (TPS). This is all well and good, but what if the layer 2 decides that there's a faster and cheaper option out there. The most popular layer 2 currently on Ethereum is Base, a Coinbase product. Coinbase is publicly traded and is responsible to shareholders. Sooner or later someone is going to question why they are sticking with ETH. I'm not sure this is a sustainable model.

My Case:

I don't think ETH is dead, but the fat lady is clearing her throat. Much like Facebook (MySpace) and Netflix (Blockbuster), the first entrants into a space don't usually wind up the long term winners. Vitalik saw Satoshi's brilliance and he improved upon it in some regards. In the same spirit, others have done the same to Vitalik. While Ethereum was the first smart contract platform, and should be applauded for that, it is no longer the best tech available.

Take what you will of this, and it's certainly not financial advice, I am not buying ETH. It's overpromised and underperformed time and time again. While not dead, its certainly on life support which has reflected in the market. Maybe there's a trade to be made down the road, but my long term prognosis on ETH is bearish. See you at the bottom.