There is an interesting conversation that is taking place regarding Ethereum.
Nobody can deny the blockchain is on fire. The popularity of a number of DeFi applications has sent the number 2 blockchain on a tear. The price is moving off the charts, now pushing the $400 level. At the same time, there are more Ethereum wallets out there than any other blockchain. The development on Ethereum keeps forging ahead with more developers programming there than anywhere else.
Each day I see a couple posts by individuals expressing how Ethereum is one of their core holdings. It seems with the falloff of EOS, the number of "Ethereum Killers" is dwindling. EOS and Tron both were touted as a threat to Ethereum yet this does not seem to be the case.
In other words, Ethereum appears to have weathered the storm and keeps on plugging along.
The latest attacks come from the fact that the supply of Ethereum is unknown. This is something that started to get a bit of attention at the end of last week.
Of course, this becomes a major issue when we look at how blockchains are valued. With so many putting emphasis on the market cap rankings, knowing how many tokens are outstanding is vital. We now are to the point where it is unknown exactly how many Ethereum are out there.
Even Vitalik Buterin admitted that it is impossible to know precisely what was created.
Another area this factors is in with the inflation rate. Since the supply cannot accurately be assessed, it is not possible to determine the true inflation rate. The new Ethereum being printed is not compared to the existing amount outstanding since it is an unknown.
There is a theory that the inflation rate will scare away investors. Perhaps some look at it this way yet it obviously has not applied to Ethereum. That is one of the most popular blockchains for investors and remains so. After this news broke, the token did NOT experience a massive sell-off. If this was the case, investors would head for the hills.
So why are people standing in there?
To start, we do have some idea of a range of the number of Ethereum that exist. So it is not as if there are 10x the number of tokens outstanding.
However, more importantly, Ethereum is the shining example in cryptocurrency of what really matters: growth.
I do not believe there is a blockchain that experienced more growth on a steady basis over the past few years. Yes there were some ups and downs, starting with the ICO craze and now the mania surrounding DeFi. Nevertheless, the more than 1,000 developers keep pumping out code that enhances the entire platform. The ERC-20 protocol is still the most widely used one for token creation, providing a market for ETH.
We also see other industry innovations pop up on Ethereum. Simply by being there means it stands a good chance of getting a lot of attention.
For example, NFTs are legitimately getting a lot of attention and have a bright future. Guess where a lot of them are located? Ethereum, once again, comes out ahead.
Please bear in mind I am not attempting to turn this into a Ethereum is great article. Personally, Ethereum is a very small part of my portfolio. That said, I think it does provide a terrific example for Hive and the path to success.
We all know there are drawbacks to Ethereum, issues that might be resolved with the switch to PoS. However, for now, high transaction costs and a slow network make the user experience difficult.
Hive has none of these issues. For this reason, Hive can excel simply by growing. Many feel that the blockchain is held back by the high inflation rate. To this I disagree. Ethereum is showing that investors do not really care about the inflation rate if a blockchain is growing. That is something that Hive has lacked.
The other day I mentioned the idea of looking up a token ranked in the 550 range based upon market cap. Do you think that token would spring higher based upon a halving of its inflation rate? Would it really make a different if it did a massive token burn?
I have no idea what is ranked number 550 and perhaps it is a terrific project. That said, it is likely there is very little taking place with that platform and financial maneuvering would have little effect.
HIVE would be priced much higher if there were millions of transactions taking place each day in the amounts of hundreds or thousands of dollars. Occasionally we see more than a billion dollars sent in one transaction over the Bitcoin network. I wonder what the largest transaction was ever sent on Hive? Have we even had a million dollar transaction?
We also could look at the use cases. Splinterlands is a very popular game. Imagine how HIVE would be priced if there were 10 Spliterlands tied to Hive. How much different would things be if there were 500,000 accounts active on a daily basis compared to 10K-15K.
The danger with token burns is the same as stock buybacks. Yes, the people presently owning the token benefits since the supply is decreased. So we burn a great many token to offset the inflation rate, then what?
Wall Street and the Fed were blasted for using this exact approach. Many articles are out there attacking the concept of supporting these zombie companies. They have no growth and falling revenues but what comes in is leveraged up through debt at low rates to buy back stock, which increases the share price providing a greater payout to the shareholders, thus earning executives their massive bonuses.
Yet, in the end, it is a dead company.
One important point I think is missed is that money is nothing more than a tool for collaboration. Hence, the more money out there, the more collaboration that can take place. Of course, for this to occur there needs to be pathways to collaborate.
Here is where development takes place. Without the use cases, people are not going to do a great deal of interacting. Growth will be stalled by the idea, which then causes problem with the money floating around. Of course, it is one thing for the U.S. economy to have that issue, it is another matter when looking at the Hive economy. The first would marvel at a 10% growth rate. Hive does that and it is not even noticed. This is where size does matter.
So what does Hive need? The simple answer is more.
There needs to be more development. We need to see more applications rolling out. More users are sorely needed to conduct more transactions. These transactions have to amount to more HIVE moving around. Through this process, more people will want/need HIVE which will stimulate interacting with the token. In the end, more wallets will be holding some of the token, spreading out the distribution.
All this leads to a higher growth rate.
Let us be honest, Hive growing at 10% a year for the next ten years will be a failure. The ecosystem needs to see annual growth rates in triple digits. When dealing with such small numbers to start, it is vital that the growth rate explode.
Thus far, Hive onboarding is like pulling teeth. It is a very slow process which is actually seen throughout the entire industry. We really cannot make the case that cryptocurrency, and the associated applications, have been well received by the general public. This is still a very fringe industry when we look at the overall picture.
For this reason, I maintain that Hive is not doing so bad. If everything else was exploding around it, then there would be an issue. But when we look at something like EOS, which is a top 15 token, crashing like it is, we know the immaturity of the industry still is with us.
Any business owner will tell you the most important aspect of his or her business is to keep it growing. Customers (clients) leave for a variety of reasons. Unless one has a business that is being wound down, these people need to be replaced. Of course, a one for one swap does not grow a business. Thus, owners focus upon how they can grow their revenues on a yearly basis.
Why is the same mindset not applied to cryptocurrency? How come DApps are not talking about their growth rate and focusing upon that? Why all the talk of token burns as opposed to taking actions that will increase adoption? Some are starting to move in that direction such as Splinterlands providing data on the number of games played over specific periods of time. This shows the mindset is shifting.
Of course, that is a game. How about the other DApps we see? Are those project teams doing all they can to grow their use cases? After all, a DApp is really nothing more than a website (or a mobile download). What is being done to bring more traffic to the website or get more people to download the app? If the cryptocurrency part of the equation is removed, isn't that what companies (owners) would be focused upon?
My point is that basic business principles do not go out the window simply because something is tokenized. Perhaps the entire cryptocurrency industry would be better served if project teams applied this to their model.
It is time that growth become the main focus. This will do more to push the prices of token than anything else. Ethereum is showing us what is possible.
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Posted Using LeoFinance