Ethereum – Things I Hate, Love, and Fear about Cryptocurrency

By October 10, 2021DeFi
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Ethereum is NOT a blockchain. It is NOT a cryptocurrency either! It is in fact a protocol (a set of rules or procedures). While browsing the internet, you may have noticed that website URLs begin with HTTP or HTTPS. This is the hypertext transfer protocol. The emails use a simple mail transfer protocol, a post office protocol. All the coolest tech stuff runs on protocols.

Ethereum is a protocol. And there are several independent blockchains running on it – the most popular being Mainnet, Görli, Kovan, Rinkeby and Ropsten. These blockchains do NOT talk to each other.

When most people talk about Ethereum, they mean Mainnet – the main public production blockchain for Ethereum. This is where real value transactions occur on the blockchain. The native crypto of this Ethereum is Ether (ETH). At the time of writing, the price of 1ETH is $ 3,577 or around Rs. 2.77,750. Let’s stick to that definition for this article.

And then there’s Ethereum Classic, the original version, with its native crypto ETC. The moral of the story so far is – There’s more to Ethereum than it looks. Let’s dive into it.

1. What I hate about Ethereum

I hate that Ethereum is neither “immutable” nor “censorship resistant”. Surprised? Let’s go back to 2016.

A group of really smart people came up with the concept of Decentralized Autonomous Organizations (DAO). It’s a bit like a cooperative society – think cooperative banks or even the Amul dairy cooperative. The difference being that a DAO only exists on a blockchain and its rules are encoded in “smart contracts”. By the way, smart contracts are neither smart nor contracts. But it’s a rant for another day.

So anyway, this DAO raised around $ 150 million in Ether (ETH) through a token sale. But a really smart hacker exploited a bug in the “smart contract” and siphoned off all the money! Now, logically, nothing should have been done about it. Blockchains are “immutable” and “censorship resistant”, right? Once again, it’s a rant for another day.

But a bunch of people have proven that Ethereum is neither “immutable” nor “censorship resistant”. They set up a “hard fork” and brought back the history of Ethereum before the hack. This reallocated the hacked ether to another “smart contract” and allowed investors to withdraw their funds.

The purists hated this and this is what led to the split of Ethereum into 2 blockchains: Ethereum and Ethereum Classic.

Did you know?

  • ETH, the native Ethereum crypto is skyrocketing to $ 3,500 with a market cap of over $ 400 billion.
  • ETC, the native Ethereum Classic crypto languishes at $ 50 with a market cap of $ 7 billion.

2. What I like about Ethereum

Ethereum was the pioneer of decentralized finance (DeFi).

An incredible ecosystem of several billion dollars has developed around him:

  • Over $ 100 billion in pegged and algorithmic fiat stablecoins
  • Innovative projects like Uniswap, Chainlink, Aave, Unstoppable Domains, Basic Attention Token, Polygon and OpenSea
  • Asset-backed cryptos like tokenized stocks

3. What I fear about Ethereum

The high price of ETH will kill Ethereum. As a blockchain, Ethereum is only of value if startups, DAOs, and developers continue to build on and use it.

Investors, on the other hand, don’t give a damn about blockchain. They only want ETH “moon” and “lambo”. As ETH skyrockets, Ethereum becomes infeasible for users. Imagine this: it costs $ 160 to transfer $ 100 of tokens! Yep, that’s how things got ridiculous.

This is leading startups, DAOs and developers to migrate to “Ethereum killers” like Cardano and Solana.

Let’s take an example to understand how stupid this situation has become.

In the conventional world, we need fuel (gasoline, diesel, coal, electricity, etc.) to power the transportation sector (trains, planes, trucks, etc.). Now suppose that the price of fuel skyrockets. This would have an impact on the entire world economy. Everything would become very expensive. The transport sector would then be forced to turn to alternative energies such as solar.

This is what the price of ETH does to the cost of doing business in the world of decentralized finance (DeFi). ETH is the fuel of DeFi. Increase its price and you destroy DeFi.

The second thing I fear is the sudden creation of a large number of ETHs. Unlike Bitcoin which has a cap of 21 million coins, there is no limit on the amount of ETH that can be created. So, if a group of thugs suddenly created a huge amount of ETH, its price could drop to close to zero!

The third thing I fear is a major flaw or an exploited bug. Ethereum is undergoing numerous technology upgrades to improve transaction speeds, reduce gasoline costs, and migrate from proof of work to proof of stake. A major bug and ETH could lose its value and drop to zero.

Rohas Nagpal is the author of the Future Money Playbook and the chief blockchain architect at the Wrapped Asset Project. He is also a retired amateur boxer and hacker. You can follow him on LinkedIn.

Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting Founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.

Cryptocurrency is unregulated digital currency, not legal tender and subject to market risk. The information provided in the article is not intended to be and does not constitute financial advice, business advice or any other advice or recommendation of any kind offered or endorsed by The Bharat Express News. The Bharat Express News will not be liable for any loss resulting from any investment based on a perceived recommendation, forecast or any other information contained in the article.

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