Step Back, Elephant in the Room: it's time to talk about the price.

in ethereum •  last year

Here I present a bit of sentiment about the status of the Ethereum project and what is going on with the price. With 400$ Ether and 100 million dollar ICOs on the books, there is a lot to be said.





Ethereum is not a store of value.
Ethereum is not that decentralized.
Everyone is not using it as a "world super computer".
Ethereum is not scalable.
This is the Wild West.



Right now Ethereum is the ICO fabric.

This is why the price is booming. You know what I have said about riding Bitcoin bubbles. The same applies here: the momentum is far from over and it will almost certainly take prices that evoke similar emotions to 1000$ Bitcoin to bring anything to a stop.

Most of what Ethereum does today is moving Ether and ERC20 tokens. None of this smart contract magic in the front of everyone's minds. This is not the vision. The price is not relevant to the vision.

The Ethereum protocol is extremely immature, untested, and experimental. The Ethereum smart contract ecosystem is even more immature than the Ethereum protocol itself. If you are deploying smart contracts today, you should know this. There is no getting around the fact that this is amateur hour. There is a risk of the cart pulling ahead of the horse on this one; the core protocol level is unable to handle the businesses wanting to build their apps on Ethereum. Keep in mind, Ethereum can't even handle the current ICOs - its "killer app".

The tech behind Ethereum is extremely meaningful without the "token madness" entirely. If it was impossible to have tokens on Ethereum, there is still so much going on with the project that is increasingly meaningful. Given my comments on the state of the token economy - this should mean a lot.

No one is claiming ethereum is scaleable today. It is 20 tx/s on a good day. The development is transparent about their ambitions to move to solutions that can solve the scaling problems but as you will see in a bit, none of those are sure and tested. There are many contingencies that are hinging on unfinished and unknown problems.

If you want invest into Ethereum I think you should give this entire interview a watch. It is with Vlad Zamfir (Ethereum foundation researcher) who is incredibly levelheaded even with his position at the Ethereum foundation. Full of criticism this space is in dire need of.

On the ICOs

The state of ICOs today is something not many really saw coming; everyone knew how revolutionary ICOs would be but now that we are in the middle of ICO craze, the bubble has self inflated much faster than I had even imagined. This boom brings us to some of the problems with ICOs that I have outlined here and here.

I am really exited for what ICOs can do in the future. Everyone was exited to see the innovation these groundbreaking fundraisers carried. The problem is the ICOs are getting out of hand. Who is crazy enough to "essentially ask" for tens of millions for their whitepaper and some ICO code. No minimum viable product. There are reasons traditional venture capital happens in stages, with founders getting more money as they prove themselves as capable. This isn't necessarily happening with the multimillion dollar ICOs. But whatever, all the money is going into development on Ethereum. Their failures will teach the future innovators the hard way. Just as the failures of the dot com bubble allowed for the internet to form as we know it today. Just because some people will lose money doesn't mean it was a waste.



The price is going to go higher. It can go quite a bit higher indeed. We haven't seen the ranges that will almost certainly be triggered in the short term. Like I have said before, it will likely get to levels that trigger the same uncomfortable feelings 1000$ BTC brought in 2013. In the correction we will likely see a 60-80% loss in value like Bitcoin saw before, at least briefly. Who knows, apparently "the landscape is different today".

It will crash. Everything will, massively. It might be some bug or major hack, some regulatory scandals or even a network split; the correction from the insanity will come. All this said, markets can be irrational for a long time, much longer than you can remain solvent.

There is nothing that can be done to stop these bubbles, we simply must let them run their course and pop. The ugly truth.

The correction doesn't mean anything about a lack of innovation or utility of an industry - again, look at what happened with the internet bubble. The time is so soon, the execution is almost perfect. Once enough expensive lessons are learned, Ethereum and this technology as a whole will be ready for everyone. Finally.

Blame

Who is at fault for the chaos that is Ethereum and even crypto as a whole?

The problem with the point we are at right now is everyone is still making money. The investors who invest in scammy ICOs are ticket scalping their way to huge profits. You can't blame them. Everyone wants to be making money. I will admit it, I am somewhat of a capitalist. I don't blame investors for taking advantage of hype.

Some people (like the prominent community member @whalepanda) believe much of the responsibility for the crazy speculation and out-of-control ICO situation lies on the developers. To this I say: what developers? I think many of the developers launching these insane ICOs at the very beginning of their project are somewhat responsible. But it is not necessarily their responsibility to be setting low caps for their sales - this in fact could be a problem in its own right.

Now I would not necessarily describe the Ethereum Foundation or the developers in the same position as mister WhalePanda does in his recent post: I was wrong about Ethereum. The Ethereum Foundation, its members, and even Consensys are in a uniquely awkward position. I don't think it is fair to say they are promoting snake oil or anything of the like.

Is it the developers or prominent Foundation members duty to do anything? The crowd is funding, the crowd should be vetting thoroughly. Right now there is not the kind of self governance needed in the community.

Is it the place for individuals at the Ethereum foundation like Vitalik and Vlad to do more to emphasize the experimental nature of Ethereum at the present? Vlad has done a lot to try and tamper the enthusiasm - see some of his tweets and blog posts.

There might be something to "peddling the vision" that is nessacay to actually achieving the vision. The whole story is what could be, not what is possible today.

Vitalik (Ethereum Foundation; co-Founder) has been an advisor for many projects, although most projects haven't paid him a cent for the pleasure. There have certainly been many other projects that have listed him as an advisor but haven't even bothered to contact Vitalik in the first place. Vitalik showed his reason saying "in general best way for me to help everyone is to mostly focus on casper+sharding". Vitalik admitted his error eloquently saying it took "waaaay too long to properly internalize that advisorship is primarily about marketing, and not advising". He has socially committed to no longer being an advisor to any other ICO projects.

Rocks

To those who think Ethereum is going to replace Bitcoin, I think you are wrong. Like has been said before, Ethereum is not a store of value in the same way Bitcoin is - there is no cap. Whatever it is that Ethereum is going to replace or become is going to hinge on many things going right. There are a lot of rocks to beach the boat.

Ethereum is moving to PoS. This is uncharted waters. Nobody has done proof-of-stake before. Sure NXT and Peercoin call themselves proof-of-stake, well they fall to solve the nothing-at-stake problems and don't offer the same concepts of finality that are so desired in this industry. Casper is nothing like any of the previous implementation attempts. Additionally, Casper PoS is much different than a Larimerian DPoS structure. This is the first time any of this will be battle tested. The research is strong, certainly more so than any competition; this does not change the gravity of the problem at hand.

The transition to PoS, even with the technical challenges at hand, will be technically easy - not politically easy.

Sharding, the primary solution to scalability problems that everyone buzzes about on the forums and reddit suffers from the unavailability problem. Not something often referenced in those reddit discussions. Sharding is hard too.

Oh and by the way, sharding is not even going to be ready for another two years. Nothing to worry though, these things take time - just keep this in mind when thinking again about the price of ETH and how crazy markets can be.


The moral of the story is this is all of this HARD. This might not work. There are unanswered questions and unsolved problems. Nobody has been here before. We are doing the things that most industries and investors scoff at. That's how we know we are on to something truly disruptive.

Stay critical,
Kyle

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Great perspective in this post. I agree that ICO madness is out of control and that there could be a massive bubble burst looming in the near future. I also think the price of ETH will continue to grow, despite periodic dips - Ethereum the fuel, the fabric, is stronger than any individual ICO.

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Absolutely correct.

Very eloquent and balanced. I really appreciate the quality of your analysis and post.

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Cheers!

Be sure to browse the links for loads of more information

@kyle.anderson Great writeup! I'm glad to see another HOKIE on Steemit!

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You a HOKIE?!

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Yeah man! Class of 2014. My girl @curiouser is a Hokie too!
One of my Tech related posts:
https://steemit.com/sports/@slickwilly/virginia-tech-vs-miami-lovin-me-some-college-football

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Rocking! You stil in the area?

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^^

Incredible article, my friend. Yours never disappoint. I agree with mostly everything you've said. Ethereum might not be a store of value, however it's market cap will surpass Bitcoin's. It's just a matter of time. Again, like I said in my video, I can't say what this will do to the market. It's hard to say. Keep up the great work. Resteemed.

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I agree that the Ethereum platform could enjoy quite a hefty market cap indeed.

The future is fun!

This is a fantastic analysis @kyle.anderson. I share much of the same sentiment. After the Banco ico I became even more vigilant of this ico charade.

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I feel kind of dirty for investing in that one lol!

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lol. oh dear

Excellent post. I continue to maintain the position that we will see a divergence between coins with futures and those without, I imagine some will lose a lot of money when/if that happens.
While I do not think we are in a traditional "bubble" I do think we need to shed many of the speculative and scam coins before we can move to the next level of integration and adoption. but who knows....crypto is crazy.
What are your thoughts on Golem, I was asked about it recently and honestly said that I really do not know that much about it. I have been doing more research into the project and it seems to have potential. You seem to have a very strong grasp of ERC20.

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I see what you mean about not being in a traditional bubble.

Who knows.

Golem is really cool, time will have to tell if it becomes the monopoly. Crypto is incredibly capitalistic.

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That interview with Vlad is definitely a must-watch. When one of the core developers is trying to throw cold water on the hype, it's worth paying attention.

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Now I think it is important to note that he is throwing so much cold water because he feels that no one else is doing any of it. He works for the Ethereum foundation for hecks sake. Certainly clarifying and IMO very encouraging.

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True. I see what you're saying. It's certainly good to see someone on the inside recognize the cart is way out in front of the horse.

I just hope the horse (the underlying tech and adoption rates) can catch up quickly enough to avoid an extended bear market.

That's why we should all be keeping lots of USD right now to scoop up the best crypto assets when they're oversold in a couple years. That's my outlandish prediction at least. ;)

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I think in a couple of years we will see a few crypto assets really rising to the top in price and awareness and many of the other just falling away. Would be a good time to buy now I feel and diversify as you may hit one which goes to the moon! As well as that fiat currency is looking doomed with the aount of debt especially in the US so people are looking to invest in other places.

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Yes, fiat will eventually go away in its current form. But I've been reading that (and thinking it) for over a decade now. It's going to take time. Longer than you or I would like.

The crypto market still needs time to mature. This will include bear markets. During bear markets, even the best crypto assets (the ones that rise to the top as you accurately describe) will be undervalued. That value could be higher than where we are now for some, but also much lower for others.

Diversifying is great, but that should also mean keeping some USD ready for when your favorite crypto is cheap. That's just my friendly advice.

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I wouldn't mind a bear market :P

We will just have to see

The price of Ether is far too high. But it can be explain as lots of people locked their ether on token sale and billions get injected by investors in cryptocurrencies every month since January. Investors don't need to understand much at the moment about the crypto space, they can just put money in the top 10 and get a pretty good profit at the end of the month.

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It might not be "too high"

400$ might be what the ICO platform is worth. Can't wait to see what the world computer will be worth once there is a robust smart contract ecosystem.

Can't blame the people making money for the price.

Man!! you read my mind. I echo the same argument.The whole thing reminds me of netscape/yahoo days/pet.com days of late 90s...Donot know for sure who will win and who will fail.if we could predict woudn't be nice??..
One +ve thing for Ethereum is Buterin and company are innovating fast,breaking, trying and moving on..Thats the sign of a visionary.so I hope I would trust him and the ecosystem around it....
You nailed it in this article!!!!

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Move fast. Break things. Scare investors out of the room.

A lot of persons are less informed about this technology and the need for enormous investment for its research and development .

We also currently have limited number of resource support persons and the ethereum project is quite larger than the ethereum team.

There are more theoretical application than tested pragmatic application, and the ethereum team is also having more pressure than they can handle.

Businesses have this craze to be ahead and catch in at the early stages of something new hence the pace for adoption of the new wave of technology even at its infancy stages.

Given the media hype it is inevitable the Ethereum price would go up. Like you said the correction factor will set in over time.

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It's all a game of memes. You'd really have to thank Youtubers for hyping up the coin to no end. Maybe the current ICO setup is suboptimal. Which is why i'm excited for Steem's community tokens. Not very directly related, but I wonder how that kind of setup would work out.

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I can't wait for more tokens. It totally is a game of memes at this point. Everything is so experimental and so much in its infancy that people are going to be looking back and laughing - even just 5 years in the future.

Like I said elsewhere in these comments; maybe an ICO fabric really is worth 350$ USD. But I am not sure it is - certainly the future vision will be worth more than the current "ICO fabric"

Community tokens will sure be really neat.

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What do you think about teams using the Steem blockchain to communicate / work on projects openly?

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Humm that is interesting - something like a slack or more like Microsoft's collaboration suites?

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Well, not sure. But point is to have everything open and get people involved. I think i'd trust such a team more if they're doing it openly.

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Thank you for the useful article, @kyle.anderson.
I agree with what you said. I only want to add that I think the bubble will take a little bit longer to burst. The reason for that is many of the new projects need about 2 years to really produce real products, and until then they can not be really tested.

On the other hand, there are some projects with a real product that is being used now. Examples of that include: Storj, Siacoin and Factom. So, I suggest if you are intoxicated with the high profits, at least put your money in such projects.

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Yeah I see what you are saying. I think the bubble can take much longer to pop than some certainly think. We haven't seen the top yet.

Not a store of value?
Tell tens of BILLIONS of dollars that. Its a store if value if people use it as such. Maybe a better argument is that it isn't as good a store of value as say X.
Not scaleable? Why not? Just because Bitcoin can't?

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You are confusing might be a store of value and store of value.

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Please then elaborate. What is a store of value?

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I don't know. What is a store of value?

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Anything that 2 or more people use, shells, tulip bulbs, gold, paper money.

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And no, today neither is scalable. Because why? Nobody has solved blockchain scaling.

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Having not been solved isn't equivalent to being unsolvable.
What is your definition of scaling? It seems there are multiple solutions to increasing TPS, albeit modest but increases none the less.

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My definition of scaling is millions of transactions per second. I hope scaling can be solved. We won't know until we try our hardest.

It is an unsolved problem.

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I would be happy with a few hundred tps right now for eth or btc.

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Well when demand comes time will tell.

i believe ethereum will replace btc, atleast in the short run, right now there's difference of just 8 billion

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Well the thing about ETH replacing BTC is they do completely different things. ETH is not a store of value - Bitcoin is.

The market cap could certainly catch-up very quickly.

Honestly I don't like eth at all for many of these reasons.

I was so excited when I heard about it...

Then I used an eth app.

Felt like I was trapped inside of Windows XP.

There's a lot of "dumb" money out there right now.

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Haha well it is not "dumb money" when they are making money.

No one is losing out so no one understands where the dumb money is.

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I mean you're right but I imagine this scenario:

Person invests in crypto without understanding.

Slight correction hits so everyone actually checks out what they bought.

Panic sell because it's a turd/they don't understand it.

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Yep. Cold hands happen.

Great, it's now almost illegal to question ethereum. My issue came with both BAT and Bancor first, those persons/pools had to have been buying eth for awhile to snap such a huge percentage in those ICO's, another one is TenX, huge ICO pre-sale, all in Eth. I have followed Ivan Tech on youtube and now here, and all the issues he points out, they will need to spend them someday to pay for their operations. Now even Litecoin is controlled by a pool 55+%, all this in my mind is NOT decentralized.

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Exactly.

If you build it they will come...

ETH Has proven to be great for ICOs but I do believe that is a large backing of the system at the moment for the massive price increase.

Is that a bad thing?

I don't think so make some profit! If people want it they will pay for it and I learned long ago stop trying to tell people what they should want and instead just give them what they want it is much more profitable.

That being said we have a number of ICOs rolling out this weekend that i know of and sure many more that I do not know of. I seem ETH price jumping again here as people buy into more ICOs for now.

Thank you for the in depth analysis. Unfortunately, some of it is still going over my head but at least I have more questions to research.

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Be sure to comment any!

The links should bring you to lots of information as well. I always use lots of links.

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Oh yeah, you made my reading list quite a bit larger than it was before I came across your post... ;)

Thanks Kyle, I have been reluctant on Etherium, investing very conservatively in it because it is not a true store of value. It is a currency, but not money, and there is an important difference.

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Yep!

People can build a money on Ethereum - can't wait to see something like that.

This post received a 4% upvote from @randowhale thanks to @kyle.anderson! For more information, click here!

great post! hold what you're willing to lose

Still hard to purchase outside US and europe

Thank you for being the voice of reason I just can't take the hype any more.

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I do my best.

Don't let my slight pessimism move your mind away from the innovation too much.

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Not at all I love everything that is happening with Ethereum network in the technical sense, but the price pump and the amounts of money being thrown on ICOs are just ludicrous.

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Yeah we will just have to wait and see

Sounds exactly like the article i read on cointelegraph yesterday making Ethereum sound like shit. You are right about the ICO's and just asking millions for basically a printed out PowerPoint presentation about what they are planning on doing. I just made a similar comment before reading your article. Back to Ethereum: if companies use Ethereum to sell their tokens I do see value in that. A lot of the companies behind many crypto's out there will not survive the next few years but I think Ethereum will. Their team is one of the best no matter what people might say and big companies are using and are interested in using Ethereum. Besides that the last few days have seem to be an Ethereum witch hunt. Maybe due to the fact that Ethereum will take over #1 position soon.

Great work! I congratulate you!

Wow! You tell out the truth, but everyone will not listen the truth.
It was a sad fact.
By the way,I have upvoted your post, can you upvote my post,thanks.
https://steemit.com/money/@wallsnow/introducing-randowhale-get-whale-power-by-sending-steem-stemm-dollar

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Clearly. This is like one of the worst paying posts I've written in a while.

VitalikButerin Vitalik Buterin tweeted @ 13 Jun 2017 - 07:00 UTC

  1. This is me socially precommitting that I will not be an advisor for future ICO projects.

VitalikButerin Vitalik Buterin tweeted @ 13 Jun 2017 - 07:09 UTC

  1. Doesn't apply strictly to non-ICO stuff; however, in general best way for me to help everyone is to mostly focus on casper+sharding

VitalikButerin Vitalik Buterin tweeted @ 13 Jun 2017 - 03:21 UTC

@ChiefApricot Because that just invites huge economic deadweight losses and chain spam. See arguments in vitalik.ca/general/2017/0…

VitalikButerin Vitalik Buterin tweeted @ 13 Jun 2017 - 07:36 UTC

  1. I'll admit to the error of taking waaaay too long to properly internalize that advisorship is primarily about marketing, and not advising

VitalikButerin Vitalik Buterin tweeted @ 13 Jun 2017 - 07:35 UTC

  1. Most existing projects that listed me as an advisor never paid me a cent for it.
Disclaimer: I am just a bot trying to be helpful.