Why Ether (ETH) is a Great Long Term Investment.
Hi investors, let's talk about the value proposition of Ether.
Before we dive in - What is Ether.
Ether (ETH) is the cryptocurrency that powers the Ethereum network.
Ether is used to pay for gas which measures the cost of a transaction or a computation in a smart contract.
The price of gas and Ether are decoupled so to shield the network against the volatility of Ether and to keep the cost of transacting on the network affordable.
If the price of gas shows relative stability, the price of Ether however has been subject to wild swings, losing almost 80% of its value from its January high of $1400.
This decline in price along with weakening demand from ICOs and the emergence of new "Ethereum killer" smart contract platforms like EOS, Cardano or Tezos has spurred a complete flip-flop in market sentiment towards the digital asset.
Ether is now criticized left and right and long gone seem the days when Ethereum was touted to take Bitcoin's thrown at the top of the crypto pyramid.
There is indeed a case to be made that the value of Ether could go to zero in the long term.
If Ether fails at becoming a store of value, then it's likely that token velocity will sand its price down to the marginal cost of a transaction.
In this scenario, the price of ETH becomes equal to the price of gas since ETH becomes exclusively used to pay for transactions on the network while value accrues at the dApp level.
Since the retail ICO market (the primary driver of demand for ETH) is dying a slow death at the hands of regulators, the only foreseeable case where the demand of Ether increases in the future lies in the asset becoming a store of value.
I'd like to plead the case why I think Ether can become a store of value in the long term.
The argument consists of two prongs.
First, the Ethereum community will use Ether as a store of value via staking (I).
Second, the marriage of gaming and blockchain will lead gamers to use Ether as a store of value (II).
I- The Ethereum community will use ETH as a store of value via staking.
Ethereum's main asset has always been its community.
It is the second biggest behind Bitcoin but the largest compared to other smart contract platforms and it's constantly growing.
If Ethereum can maintain the momentum and keep attracting new developers and enthusiasts to the project it's likely these people will eventually start using Ether to transact with each other and to store value.
I believe the incentive to store value in Ether will become even more obvious once Casper rolls out and makes staking affordable.
The Ethereum community is known for its attachment to the ideal of decentralization one aspect of which is running your own Ethereum node to help secure the network.
Under the current roadmap, 32 Ether will allow anyone to be able to stake and generate passive income. Stakers are likely to compound their gains which will result in more and more Ether being staked and taken out of the supply.
Once staking is implemented, it will likely generate its own momentum and drive many to keep their Ethereum in order to operate a node and feel "even more" part of the community.
II- Gamers will use Ethereum as a store of value.
Blockchain is a big deal for gaming.
For the first time in history blockchain offers the possibility to transfer digital assets from game to game and to create a global market for digital goods.
Already many projects are working to build the infrastructure to support such market on Ethereum.
0x have announced that it will soon be possible to trade crypto collectibles on 0x-powered decentralized exchanges
Enjin and DMarket are building specialized market places for digital goods
Loom Network is building an EOS-fast custom Ethereum chain to integrate blockchain into video games
Decentraland sells unique virtual plots of land.
As virtual reality starts taking more and more time in people's life (think: Ready Player One) it's likely that digital assets will become an integral part of people's portfolio of goods and, if Ethereum manages to scale, it's likely Ether will become the common currency into which those assets are traded.
So there you have it.
Disclaimer: F0x Society is long Ether.
FØx.
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Yup. I fully agree with you on this, and your standing on the Ether Blockchain. I have something that's relating to the Ethereum blockchain as well. Digitex.futures is built on the Ethereum blockchain and it's a futures markets that allows you carry out transactions with the DGTX tokens at a commission free rate. Excitingly! The exchange would be launched before the end of the year, I recommend you check it out as their token is already listed in the markets :)
Thanks for sharing your opinions @osigbhemeh.
I had a quick look at the exchange you linked, I am confused as what the token is for, it says there is no trading fees so I suppose the money is made on the spread. So what is the purpose of the token exactly? Do traders have to buy the token to being able to trade, like a bond?
@tradealert, thanks for going through. And yes, the DGTX token is created on the Ethereum blockchain for transaction on the platform. Yes, traders are to buy the tokens before being able to trade. Signing up gives you early access when the platform launches its exchange :)
so traders have to pay for tokens and pay a hidden fee on the spread, that doesn't seem like a very good deal. Am I missing something here?
Guess you're missing something. Trading activities will begin later this year after the launch, right now, they are running a campaign where people can earn free DGTX tokens once you register :)
Had a look at the token, it's most likely a scam, even if their "token for trading" system was legit that wouldn't make the exchange fee-less.
Stay away from that project.
Great article...
Thanks :)
Nice one. I couldn’t agree more. ETH should do very well longterm.
Thanks Workin!
Great perspective as I myself have been struggling to find reasons to hold Ether as the ICO market has quickly dried up. However, given the innovative process of raising capital given by the network, I still think it can continue to support ICOs as Security tokens which still have great potential given the evergrowing demand for raise capital by startups and even existing businesses. I had not considered staking but given current prices, it could be an attractive investment thesis for sure if it is only 32 ETH needed (I thought it was more but may be confused when I heard of this when it was at $1,000 per ETH). However, the largest risk continues to be its lack of scaling as high fees may become a burden for the second part of your argument. It seems that it will be a “chicken or the egg first” from here forward. Thanks for sharing!
Thanks @newageinv, here's the tweet from Vitalik about 32 ETH staking https://twitter.com/vitalikbuterin/status/1002914813578637312?lang=en
1,500 ETH staking was considered as an interim solution (Casper FFG) before POS (Casper) rolls out but apparently Casper FFG has been scrapped.
As for scaling, I think Ethereum will scale sometimes in the next 2 years which is fine since dapps aren't likely to go mainstream anytime soon. More than speed I think Ethereum needs to focus on security and features... but especially security.
Thanks for the information! That is why I remember it being more expensive (at 1,500 ETH)! 32 ETH is more reasonable and could help decentralize the network.
Yeah most definitely :)
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