On Monday, Techcrunch published an article, labeled ‘The collapse of ETH is inevitable’. Authored by crypto expert Jeremy Rubin, who currently serves as technical advisor to Stellar, the piece forecasts that the value of ETH (the digital currency, not the actual Ethereum network) will gradually decrease until becomes worthless due to the fact that ETH tokens will not be needed for the network to function.
Expectedly, the article was met with severe discontent from the Ethereum community, who jumped in defense of ETH. According to the author, the price collapse is inevitable due to scalability and real-world adaptability issues, as well as smart contract security problems.
Mr. Rubin uses a gas metaphor to elaborate on the supposedly unavoidable ETH collapse. He claims that “The Ethereum network is like a shared car. When a contract wants to be driven by the shared car, the car uses up fuel, which you have to pay the driver for. How much gas money you owe depends on how far you had to be driven, and how much trash you left in the car.“
This leads to “economic abstraction”, a phrase which stands for the payment of transaction or smart contract fees (gas), in a token that is not ETH. Instead of paying for gas in ethereum, the users would use a token native to their contract, likely built on the ERC-20 standard. Ergo, if most of the smart contract owners would use ERC-20 tokens to pay for gas, it would make ETH superfluous and would drastically reduce its value.
Vitalik Buterin, founder, developer, and CEO of Ethereum, personally took to Reddit to reply to Mr. Rubin. He admitted that ethereum needs to evolve in order to remain relevant, as “In Ethereum as it presently exists, this is absolutely true […] if Ethereum were not to change, all parts of the author’s argument […] would be correct.“
However, Buterin has revealed that “Community is strongly considering two proposals, both of which have the property that they enshrine the need to pay ETH at the protocol level.“ This means that ETH would be compulsory to “pay for gas”, which would result in ETH either retaining or increasing its value. Implementation of such measures would create a structure where “the value of ETH […] is very much non-zero.”
Even though it has been a torrid year for all virtual currencies so far, ethereum has suffered particularly suffered. After breaching the $1300 threshold in January, ETH has since plummeted by over 80 percent, more than most other altcoins. After hovering around the $300 mark for a couple of weeks, ETH has taken another plunge in what appears to be another decline of the whole crypto market. It currently trades at around $260.
Image Source: “Flickr”
I have been following the crypto markets since mid 2017, just in time to witness the incredible surge of the digital asset industry. Fascinated by the potential of blockchain technology I’ve started to dig deeper and that’s how I ended up meeting the Toshi Times team. I hold a Political Science degree, therefore the crypto regulation development is particularly interesting for me. I’m also heavily involved with music, running my own label, a YouTube channel and working with distribution. People call blockchain the ‘Fourth Industrial Revolution’ and I believe it will change our daily lives in the coming years and we will have the front row seats to witness it.