The case of the ETH Ultimate bear


This is not a clickbait title. The goal of this piece will be to demonstrate how and why the value of Ethereum will eventually fall into the proverbial "zero".

And to be clear, we do not mean "zero" in the literal sense, but more "zero" in the sense that it will have no real value or it will be considered a cryptographic asset worth holding, negotiating, planning, developing, and so on.

Essentially, a dead project.

This article will be divided into different parts in larger subtitles that are accompanied by Roman numerals. Each Roman numeral indicates another point that the author is making regarding the protocol and its vitality.

The aforementioned tweet, which refers to the recently published BitMex research report, reflects a bullish sentiment for Ethereum that many have also recently heard.

The report, of course, noted the massive sell-off of Ethereum funds over the past few weeks and months from the ICO portfolios that had been crammed by investors months before.

Specifically, the study said

"It is not clear what it means for the Ethereum price to go forward, however we believe we have shown that the" panic sell "thesis is false or will present itself only to a lesser extent than some expect."

This is something we are willing to agree on. The price of Ethereum, at this point, is probably no longer affected by the massive sell-off of ETH tokens that have been allocated to ICO funds through investors in 2017 and the first half of 2018.

However, this should be a sign of even worse things for investors in the near future.

As you can see in the picture above, the price of Ethereum has plummeted by 72.35% since May 5, 2018, which was about 151 days ago at the time of writing.

Now, the probable refutation to this fact would be to say: "Everything has lost value! What makes Ethereum different? & # 39;

This is a great question. One thing that makes Ethereum markedly different is the fact that it has depreciated more than Ripple, Bitcoin Cash, Litecoin, Bitcoin and Stellar (its main encrypted counterpart).

Below is a chart that compares the sharp fall of Ethereum in $ BTC, to give investors a better sense of abysmal price action on the Ethereum in recent times.

The chart above shows that the price of Ethereum has depreciated by 60% compared to Bitcoin since May 5. This is also greater than any of the aforementioned cryptocurrencies that we have compared with Ethereum when we examined its graph.

So what's going on?

This scalability problem is by far the biggest problem affecting the Ethereum protocol today. In general, there seems to be no solid consensus on how or if Ethereum will be able to scale.

Vitalik has elaborated a series of ideas that, on their own, can hardly resize the protocol effectively, while still retaining its decentralized properties.

There are some reasons for this:

  1. Modern Computing. There is only so much bandwidth that a network can hold, especially on a network like Etheruem, Bitcoin, Litecoin or even Bitcoin Cash. And this is mainly due to the fact that the nodes have to propagate the longest blockchain they have verified and they do it constantly. This means that the nodes must be able to keep the entire blockchain itself (which is more than 1 TB in the case of Ethereum at this time), and also manage the constant load of block downloads and propagating them on the network. This is something that downsizing can make this attempt absolutely imperative for someone using a normal computer. Therefore, the only two results that would solve this problem would be to accept a substantially reduced throughput from what would be its theoretical maximum or that would embrace a centralized network in which only a handful of nodes could be able to correctly execute the protocol.
  2. Centralization: This was mentioned slightly at point # 1, but to expose on this idea – centralization is not only inherent in the expansion of blockchain capabilities beyond the point where your "average" computer / laptop would be able to manage the load, but in switching of the consent algorithm as well. Months ago, Vitalik Buterin assured investors that it was Ethereum's long-term plan to ensure the scalability of Etheruem by creating a PoS chain. However, the problem with any type of staking protocol is that, at best, it ends up making the blockchain a democratic republic (where nodes are able to vote for other nodes that eventually make decisions about which blocks are placed where ). These networks tend to mirror consortia more closely than do decentralized and unlicensed networks such as the one Ethereum proposes to provide.
  3. Brain exhaust : The point is that there are not many "experts" in the blockchain technology, not to mention the Ethereum protocol. This is due to a few factors, but among the strongest of these factors is the idea of ​​"brain drain". This term refers to the exodus of intelligent people from a specific country. However, in this case, we are using it to refer to the exodus of highly intelligent individuals of a protocol. In particular, on Ethereum, there have been a number of individuals like Charles Hoskinson who have been invested in the development of the project who have now gone on to pursue other efforts. Moreover, the new projects that have arisen (ironically, some of the ICOs launched on Ethereum) have drastically reduced the field available Blockchain engineers and technicians with the intelligence and integrity needed to help develop and implement any effective scaling solution.
  4. In-Fighting / Disagreements:As noted by several observers now and in the past, disagreements and confrontations are what ultimately led to the divorce of the Bitcoin community in two separate factions that are; Bitcoin and Bitcoin Cash. Regardless of the "debate" side you are in, mostly everyone can agree that the communities would be substantially stronger together than they are separately In the same way, Ethereum has faced fights of all kinds. Ethereum Classic is and was the first example of such discord within the community and developers regarding the future direction and philosophy of the chain. This, ironically, was yet another example of brain drain that also affected Ethereum. Beyond this division, there has been intense fighting and discussion about appropriate methods of downsizing. Some are advocates of plasma, others prefer sharding, and some are opposed to any proposed method that has been presented so far. Now, while it is true that the internal struggle did not lead to yet another important fork like the one we saw last summer (& # 39; 17) between the Bitcoin and Bitcoin Cash communities, inherently threatens the progress of the chain in the near future.

Vitalik Buterin, the de facto "leader" of Ethereum, has been rather ambiguous in recent months, shifting from the bearish and pessimistic seeming at times to almost guaranteeing that the Ethereum protocol is downsized.

From the proposed roadmap that Ethereum has had for scalability compared to the proposals that Vitalik Buterin has made, it has been inconsistent on almost all issues concerning Ethereum. In fact, the only thing that has been consistent in Vitalik Buterin's statements is that they are consistently inconsistent.

While his intelligence and clear talent as a programmer and programmer at such a young age can not be denied, one can not help wondering if Vitalik has the talent to conquer what now appears to be an insurmountable task – creating a solution to effective scaling for Ethereum.

Despite being well known and respected in the community, Vitalik Buterin is relatively "untested" in terms of development and leadership skills. Of course, we will recognize that he was and is one of the major founders of Ethereum – we can not take him away from him. But we also know that there was a plan for creating Ethereum in many ways. The concept of blockchain already existed (in Bitcoin), the proposals had already been made in the blockchain community to create a complete chain of Turing, and the consensus algorithm of the PoW was something that had already been thought long before. ; beginning of Ethereum.

So, in many ways, we were able to witness Vitalik's ability to take information and concepts that already existed and bring them to fruition to produce a chain that was able to get capitalization number 2 in all cryptocurrency. , which is not a recent business.

However, we have never seen Vitalik Buterin conquer a task of this magnitude. As the de facto "head of Ethereum, he is considered to be responsible for an appropriate downsizing solution. At this point, Vitalik Buterin is under the greatest pressure, as a blockchain developer, who has ever faced in this industry and without a track record of cases where he has thrived in similar situations, investors are essentially taking a gamble on Vitalik Buterin as well.

Again, this does not mean that the man is not brilliant – he is. But one can not help thinking that it is possible that it does not possess the ability to actually scale Ethereum.

The prevalence e stay the above issues have reduced investor confidence considerably over time, especially in 2018. Perhaps because investors now realize that scalability is not a matter of desire for Ethereum, but more a mandate to ensure long-term survival.

Unlike Bitcoin, Ethereum is not a strictly payment-based protocol. Instead, it provided a platform that hosts and sponsors the development of smart contracts. As such, your project establishes that any execution of the intelligent contract code functions as a transaction on the protocol.

This smart contract feature has enabled a large number of projects to develop on the protocol and, at the time of writing, more than 1/3 of all cryptocurrencies are Ethereum, a fork / derivative Ethereum (like $ ETC) or an ERC20 token.

While this is surprising, it is also very disturbing when considering the inability of Ethereum to put together a coherent scalability plan that allows the network to maintain its decentralized features without compromising security and simultaneously for the success of many these ERC20 tokens depend on being built on a blockchain that meets this duty call.

Therefore, if Ethereum does not scale, it can not serve its purpose as cryptocurrency. If it can not serve its purpose, then how much is it?

And how long will it take before other investors and potential blockchain startups begin to adopt the same logic and looking for alternative means to launch their projects?

In many ways, it seems that projects have begun to adapt this line of thought, which leads us to our next point.

The number of projects that have focused on their road maps and decided to launch their own blockchain instead of remaining an ERC20 token has grown substantially over the course of the year.

Important projects (notable as those of the large market capitalization) that launched their blockchains (or announced that they are planning) include; Tron, EOS, Augur, VeChain, NULS, ICON, Wanchain, Aeternity, Zilliqa and many others.

Now, some of you who are reading this, have probably mentally noticed that there are a couple of projects we mentioned above that stated that they would move the project from the mainnet before they even launched their ICO. However, there is a considerable number of projects that have not done so.

What has changed?

Many theories hypothesize that the lack of trust in Ethereum's ability to scale the forced hand of these cryptocurrency projects. They knew that if Ethereum could not climb, their project / idea would be destined to fail.

Perhaps the mainnet swaps are all marketing plans and this does not say anything about Etheruem.

Regardless of the underlying reason, the exodus of projects from the blockchain It looks bad on Ethereum. This is because it substantially reduces the case of use of Ethereum. It reduces it from its promise to be the first decentralized "intelligent computer" in the world through blockchain technology and instead relegates it to being no more than a gofundme page for ICOs.

And if this is the case, then the long-term use case for Ethereum (downsizing or not) becomes bearish.

With such a presumptive article, we would be remiss if we did not mention at least some of the probable counter-arguments that Ethereum's believers and bulls can object to.

Counter Argument # 1 – Ethereum Will Scale

This topic is simple but powerful. Some argue that despite what experts like us believe, Ethereum is set to climb. Clear and simple.

Those who place this counter-argumentation believe that this certainty that Ethereum will logically fail to deny the certainty that Ethereum will increase in value again and perhaps even surpass Bitcoin's market capitalization someday.

Counter Argument # 2 – Vitalik Buterin and the developers of Ethereum have made progress

Another important argument that dissenters can say is that the developers of Vitalik Buterin and Ethereum have already taken giant steps towards creating an effective scaling solution and that this should be seen as proof that Ethereum is currently on the right track for resizing.

Counter Argument # 3 – No project is truly scaled

This is another commendable opposition to the statements made during the body of our argument above.

The fact is that this refutation is correct. While protocols like Bitcoin, Bitcoin Cash, Litecoin, Monero and others are currently functional and in use, most would agree that these projects are not at all close to their latest iterations in terms of technological capacity.

It seems that every project is working on a scaling solution that will help make the blockchain itself more efficient or usable by a wider audience. As stated previously, it was the unceasing struggle between developers and users on the Bitcoin protocol that led to the separation of two different entities known as Bitcoin and Bitcoin Cash.

So it would not be unfair to say that Ethereum is not too terribly different from any other project in the sphere when it comes to scalability.

Counter Argument # 4 – Etheruem still has the market cap number 2

Again, this is another umpteenth refutation to the points that have been made in the body of the main article here.

Beloved or hated, Ethereum has still managed to keep his rank number 2 (via the CMC designation, it is worth noting that $ XRP exceeded $ ETH in the rankings for a short time in September 2018).

So, it can not be said that investors have become too bearishor it would have at least dropped a little bit.

Ultimately, this article is only the opinion of the author. More than likely, there will probably be individuals who feel differently about Ethereum, and they are certainly invited to do so.

The author embraces the latent possibility of having erred in their prediction of the price of Ethereum and accepts that they will be duly reminded of it for months to come just as they were wrong if their opinion, in fact, turned out to be false.

According to the humble opinion of the author, there seem to be too many problems to clean up and solve within the protocol, as well as a general lack of clarity of direction for the protocol to this point forward. The statements of the leadership (Vitalik Buterin) in recent weeks have taken on a markedly darker tone than they have in the past months and it seems that the projects are looking for alternatives to launch their ICOs or ensure that they will not lose all their profits ICO Ethereum.

Disclaimer: as always, remember that this article is not a financial advice. The author is not a financial advisor and is currently sold by all cryptocurrencies at this time.

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