Misplaced Faith on Ethereum?

Recently, the price of Ether has slumped below $200, reaching the lowest price in 2018.

As a cryptocurrency with second highest market cap in the world, Ether is definitely the must-have for both crypto newbies and veterans. Yet seeing the price falling straight down on the price chart without climbing back up, it makes everyone wonder: What makes Ether price drop so drastically?

In the beginning, everyone believed in the prosperous future of Ethereum and thought the future development of smart contract platform would have unlimited potential. The platform of smart contract could possibly bring in transformation in several realms by helping users not only transferring values, but also representing the ownership of assets. Yet even with the faith from the majority of investors, why does Ether price still hitting the ground? what’s going on with Ethereum that results in the dropping Ether price?

News had speculated that Ether price may dropped to zero is splashed across different media platforms. This comment, as a matter of fact, derives from a research published by a Stellar researcher, Jeremy Rubin. The research predominantly discusses the design mechanism of Ethereum and mentions the phrase “Economic Abstraction”. It is an alternative of paying gas fee through tokens but not Ether, resulting Ether becomes worthless and pointless to keep.

Although Jeremy Rubin’s prediction can be actualize theoretically, there are still many issues to overcome before implementation in reality. In addition, deploying smart contracts, future POS (Proof of Stake) mechanism and some DApps are all designed to use Ether as payments. So this prdeiction is not likely to come true. If you are intrigued with this point of view and hope to discover more of this argument, you can refer to Rubin’s original research and read the reply from Vitalik Buterin.

The price of cryptocurrency is determined by market mechanisms and the short-term price change is influenced by many aspects. For example:

• Investors exit cryptocurrency market in a panic of Ether price dropping to zero after being bombarded by such news
• Overall bear market creates pessimistic emotions from investors
• Terrified project realizes its Ether raised in ICO out of fear that its assets’ value might shrink in bear market
• US FED (Federal Reserve) initiates interest rate hike to collect excess of funds from around the world, forcing hot money to extract from high risk assets

If we look at it with a long-term perspective, the future of Ethereum essentially lies on the future development and the application potential of the project.

This opinion complements with Buterin’s reply on twitter. Buterin mentioned in his recent interview with Bloomberg, that cryptocurrency industry would not be able to recreate the high growth in 2017 and the media created a frenzy over it. Buterin clarifies his statement later by saying that since majority of people have heard about cryptocurrency before, the key of further cryptocurrency development is more on applications in practice.

When it comes to applications, it’s hard to find any blockchain that can compete with Ethereum. On DappRadar, a total number of 861 DApps can be found, including CryptoKitties and FOMO 3D which became popular DApps in 2017 and 2018. Besides, the 2 USD-pegged stablecoins launched recently by trust company Paxos and Winklevoss twins are also ERC20 tokens on Ethereum.

However, the network congestion caused by the popular DApps highlighted the issue that Ethereum’s speed of processing transactions is not fast enough. Hence, it becomes the focus problem in the upgrade of Ethereum 2.0. The problem must be solved in order to achieve wide-scale usage.

In the upgrade plan of Ethereum 2.0, Sharding and Plasma are the projects that can enable Ethereum network to process more transactions in every second. Besides, there are other great projects like Casper and eWASM to enhance the performance of Ethereum. From these, you can discover that many there are many talented researchers trying to make Ethereum better.

From developers perspective, there are great options of development tools on Ethereum to help them build these applications. Moreover, there are also many tutorial resources for Ethereum on the Internet. So if any engineer wants to develop an application on blockchain, he is likely to start with Ethereum’s smart contracts. Therefore, the community of developers is expected to grow and the amount of applications will increase.

Vitalik replied to the concerns of the falling Ether price at a summit in Hong Kong. He kept being uninterested in the discussion about price and said that the random change of price is just gambling between the billionaires on the market. Then he moved his focus to the future development of Ethereum.

Maybe some people feel worried about their Ether due to Vitalik’s unconcerned attitude towards the price drop. But from another perspective, it’s not easy to find many projects that is able to dedicate themselves to the technical development from Vitalik’s invention. If Ethereum successfully upgrades to version 2.0 and gradually realizes wide-scale usage, it will become the biggest bullish sign for Ether.

Article by Jacky, JOYSO