ETH Bullet Point Thesis
- Dominant smart contract platform. Ethereum is to smart contracts in 2022 as iPhone was to smart phones in 2010. There's honest debate about whether a cheaper alternative will take share, but Ethereum has already won in 2022 for the same reason the iPhone had already won in 2010 even though we didn't know it yet: all the developers are building on Ethereum just like all the developers were building on iOS. Ecosystem escape velocity.
- Smart contract platforms are valuable because they are the base settlement layer for all internet-native economic activity: DeFi, NFT-based commerce, tokenization of everything, and TBD. They provide: security, trust. They receive: cut of all economic activity on the platform. Perpetual tax on the crypto economy.
- Triple-point asset thesis (h/t @banklesshq): ETH is the first asset that is simultaneously a capital asset (like a stock or bond), a consumable asset (like oil) and a store-of-value asset (like gold or fiat). In this way, it is arguably the best "money" ever invented. For it's role as the native currency to the Ethereum ecosystem, it has a chance at being one of the few global assets to earn a monetary premium.
- Triple-halving thesis (h/t @squishchaos): EIP-1559 (already implemented - burn mechanism) + Eth 2.0 upgrade (shift to Proof-of-Stake) = 90% reduction in issuance, equivalent to 3 bitcoin halvings. Additionally, steady rise in % of ETH staked as we approach PoS (Q3 2022 est) takes circulating supply off the market. Contracting supply + growing demand = number go up.
- Adoption: crypto is the fastest adopted new technology in history, faster than the internet (h/t @raoulgmi). The growth in total wallets continues unabated despite the recent price action. Historical correlation to Metcalfe's Law suggests current support for a $600 billion market cap (+85% from current levels), rising exponentially.
- Non-demanding valuation for exponential asset at 42x network fees (comparable to revenue), which grew 47% YoY in Q122 and 49x annualized ETH burned (comparable to earnings).
- Price target: $20,000/ETH (~$2-2.5 trillion market cap) within 18 months of Eth 2.0 upgrade (expected mid-2022, so $20k ETH price by year-end 2024).
Great memo! My only concern with Ethereum is that their hesitancy to connecting with other blockchains (or even with Layer-0 chains like Cosmos and Polkadot) are why I see innovation on the Ethereum platform being hindered in the long run. Many developers are going on other platforms because the coding language isn't as complicated as Ethereum's Solidity.