Ethereum The New Hard Money?
January 19 2022 - 6:59PM
NEWSBTC
A debate arose about the possibility of Ethereum becoming hard
money and ended up highlighting more downsides to the digital asset
than anything else. The founder of a Bitcoin investments managing
platform, Charles Edwards, shared a chart that showed the
circulating supply activity of Ethereum and Bitcoin and argued that
“Ethereum has entered the hard money game. For the past 3 months,
Ethereum’s inflation rate has been lower than Bitcoin.” “Hard money
is not only about low inflation of supply, it is also about
immutability of inflation – oil is not suddely hard money even when
OPEC decides that supply rates are throttled.” -Twitter user
@alpha_authority Related Reading | Solo Ethereum Miner Hits
The Jackpot With 170 ETH For Mining A Block Hard Cash Or Hard Fees?
In the short history of the cryptocurrency boom, many have debated
the possibility for cryptocurrencies to surpass fiat currencies at
some point. It is a feasible future scenario for Bitcoin, but other
digital coins can only dream of it. As Investopedia explains, “Hard
money maintains a stable market value relative to real goods and
services and a strong exchange rate relative to foreign
currencies,” and its uses involve “lower transaction costs and
risks” In the case of cryptocurrencies, hard money would mean that
a certain coin could not be subject to arbitrary modification.
Opposite to Bitcoin, Ethereum’s rules can be –and have been–
changed. Its supply schedule has been modified more than once,
which indicates it can keep changing. The burnings of ETH make it
temporarily deflationary, seeking a higher market cap. But as the
protocol and issuance schedule of Ethereum are malleable, the chart
above does not prove that the digital coin can even get close to
being hard money. Furthermore, there are the inescapable high gas
fees, expected to lower significantly by 2023 with layer 2, but
most likely not low enough for consumer spending, commerce, and
mainstream adoption. The rates can incentivize holding ETH, but not
transacting, and other centralized blockchains like Cardano are
already proving to be more economical. Even though Ethereum shows a
lower inflation rate than Bitcoin, the supply also sets the digital
coin below Bitcoin’s standards. Bitcoin has a finite supply of 21
million BTC. 80% of all coins have already been mined, but it would
take the new supply of coins over 100 years to be exhausted. This
is said to create digital scarcity. On Ethereum’s end, the
circulating supply is unknown, it doesn’t have an overall cap. Some
users also believe that “a deflationary base asset is not good for
Ethereum apps” and that it will actually become a problem for its
growth in the future. Related Reading | TA: Ethereum
Topside Bias Vulnerable If It Continues To Struggle Below $3.2K
Ethereum In The DeFi Space Recently, Analysts at JPMorgan, who have
favored Ethereum over Bitcoin before, claimed that ETH is losing
its dominance in the Decentralized Finance (DeFi) space due to
emerging strong competitors like Terra, Avalanche, and Solana. Its
share of total value locked in DeFi lowered from almost 100% in
2021 to 70% by the end of it and could continue to drop. The
analysts from the Wall Street banking giant think the necessary
scaling of the network “might arrive too late,” Bloomberg reported.
“In other words, Ethereum is currently in an intense race to
maintain its dominance in the application space with the outcome of
that race far from given, in our opinion,” The experts think that
this loss of dominance could bring a downtrend for ETH’s price.
Ethereum Price Ethereum trades at $3120 at the time of writing,
down 1.75% in the last 24 hours.
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