Ethereum is not a blockchain. It’s not even a cryptocurrency! It is actually a protocol (a set of rules or procedures). When you browse the Internet, you may have noticed that website URLs begin with either HTTP or HTTPS. That’s Hypertext Transfer Protocol. Emails use the Simple Mail Transfer Protocol, the post office protocol. All the best technical stuff runs on protocol.
Ethereum There is a protocol. And many independent blockchains run on it – the most popular being Mainnet, Gorley, Kovan, Rinkeby and Ropsten. These blockchains do not talk to each other.
When most people talk about Ethereum, they are talking about the mainnet – the primary public Ethereum production blockchain. This is where transactions of real value take place on the blockchain. The core of this ethereum is crypto Ether (ETH). Price at the time of writing 1ETH $3,577 . Is or approximately Rs. 2,77,750. Let’s stick to this definition for the sake of this post.
And then there is Ethereum Classic, the original version, with its native crypto ETC. The moral of the story so far is – there is more to Ethereum than meets the eye. Let’s dive
1. What I Hate About Ethereum
I hate that Ethereum is neither “immutable” nor “censorship-resistant”. to wonder? Let’s go back to 2016.
With the concept of Decentralized Autonomous Organizations (DAOs) came a group of really smart people. It is like a co-operative society – think of co-operative banks or even the Amul Milk Co-operative Society. The difference is that a DAO only exists on a blockchain and its rules are coded in “smart contracts”. Well, smart contracts are neither smart nor contracts. But that is a rant for another day.
So anyway, this DAO raised around 150 million USD worth of Ether (ETH) through a token sale. But a really smart hacker took advantage of a bug in a “smart contract” and siphoned off all the money! Now, logically nothing should have been done about it. Blockchains are “immutable” and “censorship-resistant”, aren’t they? Then, that’s a rant for another day.
But a group of people proved that Ethereum is neither “immutable” nor “censorship-resistant”. They applied a “hard fork” and retraced the history of Ethereum prior to the hack. This reallocated the hacked ether into a separate “smart contract” and allowed investors to withdraw their funds.
The purists hated it and this is why Ethereum split into 2 blockchains: Ethereum and Ethereum Classic.
did you know?
- ETH, the native crypto of Ethereum, is rising at $3500 with a market cap of over $400 billion.
- ETC, the native crypto of Ethereum Classic, stands at $50 with a market cap of $7 billion.
2. What I like about Ethereum
Ethereum pioneered decentralized finance (DeFi).
An amazing multi-billion dollar ecosystem has developed around it:
- $100+ billion fiat pegged and algorithmic stablecoins
- Innovative projects like Uniswap, Chainlink, Aave, Unstoppable Domains, Basic Attention Token, Polygon and OpenSea
- Asset-backed crypto like tokenized stocks
3. What am I afraid of about Ethereum
High price of ETH will kill Ethereum. As a blockchain, Ethereum is only valuable if startups, DAOs, and developers continue to build and use it.
Investors, on the other hand, don’t give a rat a** for blockchain. They only want ETH to “moon” and “lambo”. So as ETH climbs, it becomes no longer possible for Ethereum users. Imagine – it costs $160 to transfer $100 worth of tokens! Yes, what a ridiculous thing this has become.
It is leading startups, DAOs, and developers to migrate to “Ethereum-killers” such as Cardano and Solana.
Let us take an example to understand how foolish this situation has become.
In the traditional world, we need fuel (petrol, diesel, coal, electricity, etc.) to power the transportation sector (trains, planes, trucks, etc.). Now suppose the price of fuel skyrockets. This will have an impact on the entire global economy. Everything will be very expensive. The transport sector will then be forced to switch to alternative energy such as solar energy.
This is what ETH value is doing for the cost of doing business in the world of decentralized finance (DeFi). ETH is the fuel for DeFi. Raise its price and you destroy DeFi.
The second thing that scares me is the sudden creation of a huge amount of ETH. Unlike bitcoin, which has a cap of 21 million coins, there is no limit to how much ETH can be created. So, if a rogue group suddenly created a huge amount of ETH, it could be worth almost zero!
The third thing that scares me is taking advantage of a major flaw or bug. Ethereum is undergoing a lot of technological upgrades to improve transaction speed, reduce gas fees, and migrate from Proof-of-Work to Proof-of-Stake. A major bug and ETH could lose its value and crash to zero.
Rohas Nagpal is the author of the Future Money Playbook and Chief Blockchain Architect at the Wrapped Asset Project. He is also an amateur boxer and a retired hacker. you can follow him on linkedin.
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