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My talk at @etherealsummit is now available on YouTube!
The article that this talk is based is now also on my Medium!
And all of this content is summarized in this thread
Ether: A New Model for Money
My talk at @etherealsummit is now available on YouTube!
The article that this talk is based is now also on my Medium!
And all of this content is summarized in this thread
Ether: A New Model for Money
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Ether, as an asset, is not well understood. The narrative around Ether, what it is and how it’s used, is constantly changing.
Ethereum is constantly changing as well, so this makes sense. This is an attempt to define Ether as an asset
Ether, as an asset, is not well understood. The narrative around Ether, what it is and how it’s used, is constantly changing.
Ethereum is constantly changing as well, so this makes sense. This is an attempt to define Ether as an asset
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First, we must define Ethereum, as Ether lives inside of Ethereum.
But in order to define Ethereum, we must define the Internet, as Ethereum lives inside the internet.
First, we must define Ethereum, as Ether lives inside of Ethereum.
But in order to define Ethereum, we must define the Internet, as Ethereum lives inside the internet.
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While we could define the Internet as a global network of computers, with a standardized communication protocol, this isn’t helpful.
This does not help illustrate the things on the internet that meaningfully impact our lives.
While we could define the Internet as a global network of computers, with a standardized communication protocol, this isn’t helpful.
This does not help illustrate the things on the internet that meaningfully impact our lives.
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Applications👏define👏the👏internet👏.
It is the products and services on top of the internet that define how the internet meaningfully impacts our lives. What the internet is is defined by the applications we go and use on it.
Applications👏define👏the👏internet👏.
It is the products and services on top of the internet that define how the internet meaningfully impacts our lives. What the internet is is defined by the applications we go and use on it.
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Ethereum exists as a new layer on the internet. It uses the communication protocols below it to create a new network that defines how digital value is managed.
Ethereum is the value-layer of the internet.
Ethereum exists as a new layer on the internet. It uses the communication protocols below it to create a new network that defines how digital value is managed.
Ethereum is the value-layer of the internet.
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Likewise, Ethereum will be defined by the applications that are found on top of it.
Ethereum’s value layer is a new fertile landscape for a new set of applications: applications that manage value rather than data.
Financial applications.
Likewise, Ethereum will be defined by the applications that are found on top of it.
Ethereum’s value layer is a new fertile landscape for a new set of applications: applications that manage value rather than data.
Financial applications.
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Open Finance on Ethereum has locked-in Ethereum as a global value settlement layer.
The open finance movement has erupted into what is perhaps Ethereum’s main purpose:
A network for permissionless financial applications and services.
Open Finance on Ethereum has locked-in Ethereum as a global value settlement layer.
The open finance movement has erupted into what is perhaps Ethereum’s main purpose:
A network for permissionless financial applications and services.
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Finance is inherently stratified, and money is always at the base of every finance system.
Gold is a great sound-money, except that it is capturable. Because of golds capturability, every company must ask permission to the system above it
Finance is inherently stratified, and money is always at the base of every finance system.
Gold is a great sound-money, except that it is capturable. Because of golds capturability, every company must ask permission to the system above it
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This should illustrates the value of a permissionless PROGRAMMABLE Store-of-Value money, at the bottom of a financial stack.
The programmability of the money is the mechanism that enables institutions that are designed to not-capture.
This should illustrates the value of a permissionless PROGRAMMABLE Store-of-Value money, at the bottom of a financial stack.
The programmability of the money is the mechanism that enables institutions that are designed to not-capture.
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Gold is permissionless, and so is Bitcoin, but if the systems aren’t permissionless, then over time they will capture the asset and generate a permissioned system, which results in rent-seeking, corrupt incentives, and systemic inequality.
Gold is permissionless, and so is Bitcoin, but if the systems aren’t permissionless, then over time they will capture the asset and generate a permissioned system, which results in rent-seeking, corrupt incentives, and systemic inequality.
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Here’s how I define Ethereum:
Ethereum is the internet of value. The internet-native global settlement layer for digital assets. A landscape of permissionless financial applications, which together support a permissionless economy.
Here’s how I define Ethereum:
Ethereum is the internet of value. The internet-native global settlement layer for digital assets. A landscape of permissionless financial applications, which together support a permissionless economy.
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Part 2: Defining Ether
But first, we must define asset classes
- Capital Assets
- Transformable/Consumable Assets
- Store-of-Value Assets
Part 2: Defining Ether
But first, we must define asset classes
- Capital Assets
- Transformable/Consumable Assets
- Store-of-Value Assets
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Capital Assets
- Assets that are productive
- Produce an ongoing source of value
- Generate value/money/cash-flow
Examples: equities, bonds, rentable real estate, or taxi medallions. Assets that, in some way, enable cash flow for the owner.
Capital Assets
- Assets that are productive
- Produce an ongoing source of value
- Generate value/money/cash-flow
Examples: equities, bonds, rentable real estate, or taxi medallions. Assets that, in some way, enable cash flow for the owner.
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Transformable/Consumable Assets
- You can consume/burn it — one time use
- You can transform it into another asset
- Its consumption produces economic yield
One-time use assets, as a means to an end.
Commodities, energy, metals, oil, electricity.
Transformable/Consumable Assets
- You can consume/burn it — one time use
- You can transform it into another asset
- Its consumption produces economic yield
One-time use assets, as a means to an end.
Commodities, energy, metals, oil, electricity.
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Store-of-Value Assets
- Cannot be consumed
- Value persists across time / space
- Scarce
Examples include gold, currencies, real estate, art, or bitcoins. These assets MUST be scarce, and ubiquitously desirable globally.
Store-of-Value Assets
- Cannot be consumed
- Value persists across time / space
- Scarce
Examples include gold, currencies, real estate, art, or bitcoins. These assets MUST be scarce, and ubiquitously desirable globally.
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You can blur the lines between these categories.
Real Estate is a good SoV, but also produces rent, making it a Capital Asset.
Gold is used in industry as a Consumable/Transformable, but it’s also a great SoV.
You can blur the lines between these categories.
Real Estate is a good SoV, but also produces rent, making it a Capital Asset.
Gold is used in industry as a Consumable/Transformable, but it’s also a great SoV.
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Ether is the first asset to transcend all three asset classes
- Ether is a Capital Asset (staking)
- Ether is a C/T Asset (Tx fees)
- Ether is a SoV Asset (Collateral in Applications)
Ether is the first asset to transcend all three asset classes
- Ether is a Capital Asset (staking)
- Ether is a C/T Asset (Tx fees)
- Ether is a SoV Asset (Collateral in Applications)
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Ether is a Capital Asset.
Ether is equity in Ethereum. Ethereum collects fees, and those fees are paid to Ether holders. If you want to work for Ethereum, and collect fees, you must hold Ether to do so.
Ether is a Capital Asset.
Ether is equity in Ethereum. Ethereum collects fees, and those fees are paid to Ether holders. If you want to work for Ethereum, and collect fees, you must hold Ether to do so.
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Ether is A Consumable-Transformable Asset
Ether is the Economic Substrate for the Internet.
Anytime
- An asset is moved
- A loan is generated
- An exchange is made
- A DAO is started
Ether is consumed to produce economic yield. Ether is internet energy.
Ether is A Consumable-Transformable Asset
Ether is the Economic Substrate for the Internet.
Anytime
- An asset is moved
- A loan is generated
- An exchange is made
- A DAO is started
Ether is consumed to produce economic yield. Ether is internet energy.
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Ether is a SoV Asset
Ether is the collateral behind other internet Assets. Assets that have Ether backing them borrow from Ether’s permissionlessness.
Ether is used as the programmable permissionless reserve currency for programmable permissionless financial applications.
Ether is a SoV Asset
Ether is the collateral behind other internet Assets. Assets that have Ether backing them borrow from Ether’s permissionlessness.
Ether is used as the programmable permissionless reserve currency for programmable permissionless financial applications.
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There are plenty of stablecoins on Ethereum, but there is only ONE permisionless one.
Dai is only native stablecoin on Ethereum and it achieves that nativity by being backed by the only trustless asset on Ethereum, Ether.
There are plenty of stablecoins on Ethereum, but there is only ONE permisionless one.
Dai is only native stablecoin on Ethereum and it achieves that nativity by being backed by the only trustless asset on Ethereum, Ether.
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Permissionless stability enables permissionless finance
Having a permissionless Stablecoin is really important. If you want the financial structures on Ethereum to be permissionless, the foundation needs to be permissionless.
Permissionless stability enables permissionless finance
Having a permissionless Stablecoin is really important. If you want the financial structures on Ethereum to be permissionless, the foundation needs to be permissionless.
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Ex. 1:
@Compound is trustless because of collateral.
In this chart, RED is the total value of all collateral locked in Compound, denominated in ETH. Purple, the total number of ETH locked as collateral.
Compound’s collateral is 80% ETH
Ex. 1:
@Compound is trustless because of collateral.
In this chart, RED is the total value of all collateral locked in Compound, denominated in ETH. Purple, the total number of ETH locked as collateral.
Compound’s collateral is 80% ETH
@Compound 25/
Ex. 2: @dydxprotocol
You can see that demand inside of dYdX is 94% Ether or Dai. And remember, Dai is just a token that represents collateralized Ether.
Store-of-Value Ether makes dYdX permissionless and trustless
Ex. 2: @dydxprotocol
You can see that demand inside of dYdX is 94% Ether or Dai. And remember, Dai is just a token that represents collateralized Ether.
Store-of-Value Ether makes dYdX permissionless and trustless
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Ex. 3: @Uniswap
All trading pairs on Uniswap are 1-part ETH, and 1-part any other token.
In V2 of Uniswap, this will change to AnyToken-AnyToken, and I’m willing to bet that the next most-used collateral will be Dai.
Ex. 3: @Uniswap
All trading pairs on Uniswap are 1-part ETH, and 1-part any other token.
In V2 of Uniswap, this will change to AnyToken-AnyToken, and I’m willing to bet that the next most-used collateral will be Dai.
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Ether is the Store of Value for Open Finance
In the Open Finance landscape, institutions are autonomous, humanless, contracts on Ethereum. And they use Ether as the underlying Store-of-Value asset for their application.
Ether is the Store of Value for Open Finance
In the Open Finance landscape, institutions are autonomous, humanless, contracts on Ethereum. And they use Ether as the underlying Store-of-Value asset for their application.
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Ether, the Triple-Point Asset
Depending on the context, Ether acts as any of the three major asset superclasses.
- Staked ETH = Capital Asset
- Consumed ETH = Consumable/Transformable Asset
- ETH Locked in DeFi = Store-of-Value ETH
Ether, the Triple-Point Asset
Depending on the context, Ether acts as any of the three major asset superclasses.
- Staked ETH = Capital Asset
- Consumed ETH = Consumable/Transformable Asset
- ETH Locked in DeFi = Store-of-Value ETH
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- Currency: The USD is a great SoV for the global financial system. Everyone wants dollars.
- US Treasury Bills: Enable to government access to financing to secure the United States economy
- IRS: Charges fees on economic activity to pay for security.
- Currency: The USD is a great SoV for the global financial system. Everyone wants dollars.
- US Treasury Bills: Enable to government access to financing to secure the United States economy
- IRS: Charges fees on economic activity to pay for security.
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Ether follows the same model.
- ETH in DeFi allows users to leverage the value of their ETH in the economy
- Staked ETH provides the security to the economy
- Gas paid goes to the stakers to pay for security.
Ether follows the same model.
- ETH in DeFi allows users to leverage the value of their ETH in the economy
- Staked ETH provides the security to the economy
- Gas paid goes to the stakers to pay for security.
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Now that we have this new economy, we need a new money to run inside of it.
The only trustless and permissionless asset in Ethereum is Ether.
Next, (and last!) we define Ether’s role in Ethereum
Now that we have this new economy, we need a new money to run inside of it.
The only trustless and permissionless asset in Ethereum is Ether.
Next, (and last!) we define Ether’s role in Ethereum
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Ether is bandwidth for Permissionlessness
@makerdao: Using 1.35% of all Ether
@compoundfinance : Using 0.43% of al Ether
@dydxprotocol: using 0.1% of all Ether
@UniswapExchange: Using .05% of all Ether
Total Ethereum DeFi: 2.1% of Permissionless bandwidth used.
Ether is bandwidth for Permissionlessness
@makerdao: Using 1.35% of all Ether
@compoundfinance : Using 0.43% of al Ether
@dydxprotocol: using 0.1% of all Ether
@UniswapExchange: Using .05% of all Ether
Total Ethereum DeFi: 2.1% of Permissionless bandwidth used.
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So we’re not using much of the Internet of Value’s bandwidth. There’s room for applications to grow capture ETH
- If we want more DAI
- more permissionless synthetic assets
- More liquidity inside Uniswap
They will need more USD-valued ETH
So we’re not using much of the Internet of Value’s bandwidth. There’s room for applications to grow capture ETH
- If we want more DAI
- more permissionless synthetic assets
- More liquidity inside Uniswap
They will need more USD-valued ETH
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Ethereum as an economy leaves much to be desired. If we want Ethereum to be
- The global financial platform for the internet
the internet of value
- The global settlement layer for all digital assets
then we need Ether to scale to larger numbers
Ethereum as an economy leaves much to be desired. If we want Ethereum to be
- The global financial platform for the internet
the internet of value
- The global settlement layer for all digital assets
then we need Ether to scale to larger numbers
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There are 1.7 Trillion USD in circulation. If we want
Ethereum to match that demand, the price of Ether will have to grow by 85x.
There are $73 T in stock market assets. If we want these, we will need ETH price to increase by 3650x.
There are 1.7 Trillion USD in circulation. If we want
Ethereum to match that demand, the price of Ether will have to grow by 85x.
There are $73 T in stock market assets. If we want these, we will need ETH price to increase by 3650x.
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How this will happen:
The Three-Way Tug-of-War
The ETH-Stake Rate and ETH 🔐in Open Finance compete to pull ETH inside of it.
BOTH pull on the USD price of ETH.
How this will happen:
The Three-Way Tug-of-War
The ETH-Stake Rate and ETH 🔐in Open Finance compete to pull ETH inside of it.
BOTH pull on the USD price of ETH.
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If we continue to build DeFi applications that lock-up ETH, then there’s less ETH staking, and therefore generating higher returns for stakers, pulling MORE ETH off the secondary market.
The U.S. Dollar price doesn’t stand a chance in this fight.
If we continue to build DeFi applications that lock-up ETH, then there’s less ETH staking, and therefore generating higher returns for stakers, pulling MORE ETH off the secondary market.
The U.S. Dollar price doesn’t stand a chance in this fight.
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Thanks for reading. If you’ve made it this far, you should probably just read the entire article:
medium.com/@TrustlessStat…
Thanks for reading. If you’ve made it this far, you should probably just read the entire article:
medium.com/@TrustlessStat…
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Or watch the youtube video:
Or watch the youtube video:
END!
