Repost the tombstone
Crazy talk: [After the Shanghai upgrade of Ethereum, the price will gradually drop to below $100 in the next three years]
In order to expand and reduce transaction fees, ETH will transition from POW to POS. After the transition, miners will no longer need to purchase constantly iterating mining machines, rent space, cool and reduce noise, maintain 24 hours a day, pay high electricity and bandwidth fees. They only need to stake 32 ETH to make money. This seems to be a great thing! It is really beneficial to the community of human destiny.
The ultimate goal of the ETH upgrade is to become a broad-spectrum application platform for blockchain. Therefore, as a platform that embraces everything, it must be large and low-cost. It cannot cost hundreds of dollars to deploy a contract, hundreds of dollars to make a call, and tens of dollars or even dozens of dollars to transfer an account.
If you want to reduce the gas fees for ETH applications, there are only two ways: 1. Reduce gas limit, 2. Reduce gas price. Currently, the framework of ETH limits the reduction of gas limit (maybe it can be achieved in future upgrades), so the only way is to reduce gas price, which means reducing the price of ETH. A rough estimate indicates that it needs to drop to below $100 to barely run applications on a large scale.
After transitioning to POS, the price of ETH should indeed be reduced because the rigid cost of ETH is gone… However! If the price of ETH drops, the so-called miners who stake 32 ETH and dream of making money out of thin air will lose their attractiveness, leading to continuous withdrawal of stakes, resulting in insufficient decentralization and even the inability to produce blocks.
The long-awaited Layer 2 network currently seems far from reaching the expected value. The TPS is not even as good as the main network of ETH, and there are many unknown vulnerabilities in both the OP mode and the ZK mode. Even the DeFi projects deployed on the main network of ETH have become accustomed to being stolen, with almost an incident every month. Therefore, the vulnerabilities of being stolen in the Layer 2 network will increase exponentially in the future.
If ETH insists on not lowering the price due to the so-called consensus, then ETH will be replaced by new public chains with "latecomer advantages," such as Sui, and so on.
The most questioned aspect brought by the previous crazy talk is "not considering the deflation mechanism of Ethereum." Let's analyze whether this deflation mechanism can support the price of ETH:
The purpose of deflation is to support the price of ETH, but this deflation is meaningless, and without its price coming down, it is difficult to have large-scale applications.
The total income of stakers on Ethereum is defined as M, and the total income of investors and traders participating in various XFI investments and transactions on Ethereum is defined as N. When M > N, it is destined that the applications on Ethereum will all be unprofitable.
This model only works when M is far less than N, and when M < N, it will make staking nodes' income unprofitable, forming a "stagflation" similar to traditional economics.
Therefore, the idea that deflation can support the price of ETH is self-hypnosis for people with "slightly less attention to economics."
Crazy talk: "DeFi is dead, where does ETH go from here?"
// Before 2019, ETH was similar to BTC, just a real encrypted digital currency. At that time, ICOs raised ETH, and even salaries were paid in ETH.
// The biggest contribution of ETH to the cryptocurrency circle is to make "issuing coins" (to be precise, issuing tokens) almost barrier-free. Before that, issuing coins usually involved deploying a so-called public chain with the source code of BTC, which was technically difficult and costly.
// After 2019, DeFi emerged, leading the cryptocurrency circle to have unlimited fantasies about "decentralized finance," to the point where the concept of blockchain could no longer contain it, and then deduced the divine concept of web3.
// Starting in 2019, old decentralized finance concept projects, after many years of obscure development, finally emerged, represented by:
MakerDAO project (the Fed of the blockchain world), in simple terms, MakerDAO allows users to pledge their mainstream digital assets through smart contracts, and based on the collateralization ratio, they can borrow the stablecoin Dai. DAI has become the fiat currency of the decentralized finance world.
Compound project (the bank or pawnshop of the blockchain world), for deposits, depositing on the Compound platform is very similar to depositing in a bank. Depositors deposit their encrypted assets into smart contracts and earn interest generated from it. In addition, depositors can withdraw their principal and interest from Compound at any time. For borrowing, borrowing from Compound requires the borrower to over-collateralize the supported tokens on the platform to obtain a loan amount and lend other tokens. Over-collateralization greatly reduces the risk of default by borrowers. When the borrower repays the loan and interest, they will automatically reclaim the locked collateral assets.
Compound can be said to be the main reason for the rise of DeFi, because many people with idle encrypted digital assets finally have a place to earn interest. For those who do not want to sell their assets temporarily but need money urgently, they can borrow money without selling their assets, greatly increasing the efficiency of capital use, and even earning high interest income through repeated borrowing and lending.
Curve project is mainly responsible for exchange, realizing the exchange between various stablecoins such as DAI, USDC, USDT, USDC, and more.
With the existence of the Fed, banks, exchange markets, decentralized exchanges naturally emerged, with the most successful being Uniswap. There is no need to explain Uni further, listing becomes simple, users do not need KYC, and anyone can provide liquidity as a market maker to make money.
// In fact, with the existence of central banks, banks, exchange markets, and exchanges, the system of decentralized finance is basically complete. With this, decentralized fund Yearn (aggregating investment income) emerged, and the token is the famous "big aunt." Various DeFi projects that followed are just variations of the above, changing the soup but not the medicine.
// Just as people had unlimited fantasies about DeFi, the inefficiency and high cost of ETH began to emerge. In the world of DeFi, it can be said to be a dark forest, with hidden dangers everywhere, and many experienced veterans frequently made mistakes in front of scientists. Incidents of high-profile projects being hacked are not uncommon.
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