A recent surge of negative blockchain publicity has coincided with a plunge in cryptocurrency’s total market capitalization, after having surpassed $800 billion in the first week of 2018. Is blockchain technology truly overhyped or is Ethereum on the path to busting the decentralized floodgates of mass adoption wide open?
Ethereum is the decentralized application platform that the majority of existing tokens are built on. With the creation of so many various tokens, Ethereum is providing regulators with a clear entry point to exercise their mandates in the cryptospace (via the ICO phenomena that surpassed traditional venture capital funding for blockchain-related startups in 2017).
But Ethereum’s influence is less about the $61 billion market capitalization of its cryptocurrency, Ether, than it is about what the platform represents relative to a longstanding concept that the internet could one day evolve into something called the semantic web, commonly known as “web 3.0.“
This is why Etherians champion the notion that, while Bitcoin enthusiasts can passively hold the speculative coin and hope for gains, developers of the Ethereum blockchain put their personal hopes, talents, and skills into actively building the future of the internet.
Ethereum is proof that you can talk tulips when it comes to cryptocurrencies, but the blockchain isn’t a bubble.
Cutting Through The FUD
Google the words “blockchain overhyped” and you’ll find a plethora of articles featuring fresh fear, uncertainty, and doubt (FUD) surrounding topics like “Blockchain’s Broken Promises.” It could be argued that this most recent FUD cycle is a social reaction to a harsh dip in cryptocurrency’s total market capitalization since its record $800 billion in January.
Criticisms of blockchain and distributed ledger technologies (and by association, the vision of the semantic web) discount the fundamental reality that decentralized technologies are where some of the largest companies on the planet are looking to create value in the twenty-first century.
For example, blockchains are being combined with artificial intelligence and machine learning at an unprecedented scale. This is because the fourth industrial revolution will be based on combining established technologies to create new value flows, indeed new possibilities, that are greater than their sum.
Skeptic economist Nouriel Roubini has argued:
As a contention, consider that Arizona’s state Senate is currently considering a bill that would allow residents to pay taxes in cryptocurrency. Arizona is a first mover in this regard, but other crypto-progressive states like Georgia and Illinois, which have similar pending bills, could help to broaden the trend sooner than later.
Moreover, you certainly have to pay federal taxes on your cryptocurrency, albeit in fiat. The IRS has provided clarification about how “virtual currencies” are classified under their definitions for taxable and nontaxable income. As far as the government is concerned, paying taxes on cryptocurrency contributes to its bottom line as much as paying taxes in cryptocurrency would.
While cryptocurrencies are surely riskier and possibly more overhyped than the blockchain technology that supports them, one would be remiss to call them a fad. Central banks may one day even issue their own fiat-backed digital currencies.
However, it’s important to do your homework before investing in any digital asset – even Vitalik Buterin believes that the values of most cryptocurrencies will eventually drop to zero.
Moreover, papers are occasionally published which use exotic academic methods to explain how cryptocurrency markets behave. This adds to the notion that cryptocurrency is just a hyper-complex version of the stock market, and may cause some to assume cryptocurrency fundamentals, whatever those may be, are the same as in traditional markets. This thought pattern is out of sync with reality since few cryptocurrency projects have delivered upon their products or services, and those that have still require the average user to trudge through layers of technical friction in order to use them.
There is no denying that blockchain technology must overcome several obstacles if systems that require hundreds of thousands of transactions per second are ever going to be built on it.
Additionally, many blockchain critics emphasize that protocols like TCP-IP or HTTP(S) don’t exist for blockchain. Many believe those types of protocol standards will eventually be built on blockchain technologies like Ethereum, which has somewhat started to move in that direction. One example is the creation of the Ethereum Name Service (ENS), which mimics the traditional internet’s domain name system (DNS). The DNS was built on the aforementioned base-level internet protocols but is more of a service that has grown out of coordinated underlying standards.
Whatever happens with cryptocurrency, it is important to remember that Satoshi Nakamoto didn’t create the blockchain for the sole purpose of making cryptographically secured digital money. The blockchain was a way to solve the double spending problem without employing a central authority or trusted intermediary.
While cryptocurrencies are continually being invented for a variety of use cases, many of which will fail or are simply cash-grabbing scams, Ether was originally created as a fuel for powering the network. Etherians hope that one day, this network will lead the internet into a decentralized future that achieves the dream of a semantic web.
Ethereum’s usefulness, while still relatively out of reach for many individuals due to technical constraints, is where the true value in Ethereum’s blockchain ecosystem can be found. There is no shortage of companies that are betting on the usefulness of blockchains to bring their operations into the 21st century. The best example of this is the Enterprise Ethereum Alliance, a consortium of hundreds of companies, with notable members such as Microsoft and J.P. Morgan.
EEA’s executive director, Ron Resnick, told ETHNews, “Components of Ethereum are now a critical part of enterprise products and service. At a macro level, this means every enterprise is looking to blockchain to provide value to their customers. As a result, EEA’s growth has accelerated to more than 400 members – companies and NGOs from every industry imaginable.”
He went on to say, “I speak personally to every new member. What they are most interested in is the EEA’s framework, which will be published this year, and our dedicated community for learning how to use Ethereum technology. I expect to see use cases focused on speeding up business transactions, building greater trust in entering into deals, and business models that impact commerce through their sheer efficiency and ability to lower costs. EEA members are already driving proof of concepts, pilots and early-stage production deployments this year. Add to all this momentum that the EEA supports multiple platform providers and has a community of over 30,000 developers and you can see how Ethereum is charging in the world of enterprise blockchain.”
Ethereum’s Underlying Value Will Persist
“Most of the value on Ethereum right now is invisible, under the radar,” says Alex Van de Sande, designer of the Mist browser and developer for the Ethereum Foundation. “It has been like that for a while, a lot of excited developers building weird new stuff, promising all sorts of changes, but I feel this slump is ending as the most exciting projects are maturing very quickly.”
Surely, some of these projects will fizzle with time, but those which survive to see mass adoption stand a chance at becoming decentralized versions of Uber, Apple, Google, Airbnb, Amazon, or Microsoft.
“There are more and more apps on the main net – apps that aren’t yet another Ethereum game – that deliver real value,” continued Van de Sande. “Dai stablecoin has survived a few wild swings, Bancor is running instant conversion of currencies, [and] there are multiple decentralized exchanges. Aragon and Gnosis have released tons of working code. ENS is adding more and more functionality and everyone is looking at scalability now.”
Still, those without the inclination to understand the broader decentralized revolution that Ethereum is predicated upon, or the willingness to research the multitude of projects being built on the platform, are left with little more than sensational headlines about speculative cryptocurrency valuations.
Source: Read Full Article