Thread by @PaoloRebuffo

The fundamental force of #ether price

TL;DR :
The fundamental underlying force behind the price of ether is its widespread use as a means of payment.

If you are interested in the full story read the thread below .🧵👇 0/15

The cryptocurrency market is still immature and poorly capitalised characterised by violent market phases, if we zoom in and take a closer look things get even more chaotic: 1/15

There are cryptos that appear out of nowhere and come to have capitalisations in the billions and just as quickly disappear into the abyss (who among you remembers @bitshares ?).
But some survive and remain at the top of market capitalisation. 2/15

Which are they? Those that have some monetary function, i.e. for cryptos:
1- store of value
2- means of payment
There would also be the price denomination function, but for this cryptos are still too volatile. We shall see in the future. 3/15

Of the two monetary functions, the second was initially more important for reasons also related to the reckless monetary inflation of fiat currencies over the past 15 years. (a phenomenon which has worsened precisely at the same time as the emergence of #Bitcoin ). 4/15

The second function (means of payment) has been emerging and gaining the upper hand in recent years, and this is to be expected. The power of a currency is always above all determined by its dominance in payments. 5/15

This rule if you think about it is the red thread that has determined the geopolitics of the last century, the American century in which almost every war has been waged to establish, attack and defend the dollar standard. 6/15

Now back to ethereum: it is a popular and common opinion that the strength of ethereum today is determined by its scarcity or rather by its being almost deflationary, it is a narrative that sells well but is false. 7/15

The little or no monetary inflation of ethereum or bitcoin are meaningless if they were not underpinned by the monetary functions of crypto. 8/15

#Ethereum in particular has far greater potential than bitcoin or any other crypto because of the extraordinary ecosystem it has been able to build around its transaction execution engine, the EVM. 9/15

Leaving aside the technical issues, the question is purely social, i.e. how useful is the cryptocurrency ether for as many people as possible as :
1- store of value
2- means of payment
This is the main question. 10/15

The increase of this utility function together with the maintenance of the axioms of decentralisation, resistance to censorship, lack of access barriers is the determinant of the price of ethereum. 11/15

If we look at the issue from this perspective alone (the market value of ether), we must pay attention to those upgrades that increase the user base, specifically:
12/15

1- upgrades that allow both L1 and L2 scalability (e.g. data blobs, .o0 EIP4844)
2- upgrades that improve the user interface and reduce user friction. (Account Abstraction)
13/15

Of the two monetary functions of ether, the issue of the store of value will be less and less relevant compared to the function as a means of payment, and thus more and more people and institutions will be able to use it.
14/15

In the final analysis, if the goal was or is also to increase the value (i.e. its price denominated in other currencies) of eth, the development of ethereum should increasingly take into account the requirements of scalability and ease of use of an ever-growing number of people.