Big talk about Ethereum: Vitalik is the Washington of Ethereum
Author | Qin Xiaofeng
Editor | Lu Xiaoming
Produced | Odaily
Author | Qin Xiaofeng
Editor | Lu Xiaoming
Produced | Odaily
From last year's high of $1,400 to less than $200 today, the price of Ethereum has fallen by more than 80%.
Even in this year's bull market, the performance of Ethereum is far inferior to other mainstream currencies. What is the reason behind it?
On August 16, Yang Mindao, founder of dForce and Blockpower, and Bowen, co-founder of DDEX and Hydro, visited the Odaily Chaohua community to explain in detail "Where is the road to Ethereum".
Yang Mindao believes that an important reason for the sluggish price of Ethereum is that the supply side increases while the demand side decreases. "Ethereum is also superimposed with the pressure of shipments from project parties that raised funds in the early stage, and the substitution effect of new project parties using stablecoins instead of ETH to raise funds."
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Yang Min said:The following is the community Q&A session
Q1: First of all, our questions focus on the secondary market. Compared with Bitcoin and mainstream currencies, the price trend of Ethereum is not good this year. Can a few guests analyze the reasons?
Yang Min said:
Bowen：The trend of other currencies other than Bitcoin is not good this year. I feel that this bull market is a one-man show for Bitcoin.
Ethereum is also superimposed with the pressure of shipments from project parties that raised funds with Ethereum in the early stage, and the substitution effect of new project parties using stablecoins instead of ETH to raise funds. The supply side increases while the demand side decreases, which should put pressure on Ethereum the main reason.
However, this situation began to ease in the second half of 2018. The rise of DeFi in the past six months has begun to offset some of the impact of reduced demand on the price of Ethereum, which I will explain later.
Agree with Mr. Mindao, some project parties did not keep up with the growth rate of sales and landing projects last year, which caused the price of ETH/BTC to hit a 24-month low.
Bowen：Much of the focus is now on next year’s Bitcoin halving, grabbing traders’ attention.
Q2: Just now the two teachers mentioned that ICO project parties sold ETH. Is this the main reason for the long-term downturn in ETH prices? Can you explain in detail?
Yang Min said:At least 1100ETH was sold by project parties last year. 10% of the total amount of ETH has been changed hands. At the same time, ETH has been in a downward trend for 18 years, and stampede happens from time to time.
With the continuous completion of handovers, price bottoming, and the popularity of DeFi, the market in the second half of the year is still worth looking forward to.
Yang Min said:
This is part of the reason, but as Bowen said, in fact, this factor has basically eased in the second half of 2018, and almost all the things that should be sold have been sold, or they have all been replaced with stable coins.
I personally think that another factor that affects the price of Ethereum may be more important, that is, the replacement of stablecoins in fundraising for new projects. In addition, as cross-border capital flows, it used to be mainly Bitcoin and Ethereum, but now most of them are stablecoins. There is a great demand for cross-border capital arbitrage, especially for cross-border capital arbitrage. Now it is dominated by stablecoins. In this regard, stablecoins can replace Bitcoin and Ethereum.
You can take a look at the bitcoin dominance index. The lowest market share of bitcoin fell to about 34%. That wave was when Ethereum rose, and finally bitcoin returned to 68% after a long rebound. high position.
Let's take a look at the terrible growth curve of USDT above. USDT has experienced rapid development (the amount of coinage has increased 10 times from September 2017 to now), and has replaced the core functions of most public chain projects: payment and fundraising functions. The impact of this replacement is comprehensive. Any non-stablecoin native token (such as Ripple, etc.) that focuses on payment has been completely falsified.
Yang Min said:Over-the-counter transactions, currency pairs, and payment networks must be dominated by stablecoins. I personally think that this is also the reason why the actual impact on the price of Ethereum has been more important in the past year or so. However, this part of the decrease in demand is offset by the increase in mortgage demand brought about by the recent rise of DeFi protocols. I will explain in detail later.
Q3: According to your observation, what is the status of Ethereum in the hearts of investors?
Yang Min said:
First of all, let me state that I am a participant in the Ethereum ICO, so my views cannot be neutral.Lendf.MeI think Ethereum is the strongest in terms of positioning adjustment (from world computer to value settlement network), developer community, asset accumulation (especially off-chain asset accumulation, such as stable coins), and scalability (layer 2/layer 3) Finally, everyone found that the most criticized tps problem seems to have little impact on Ethereum itself.
To be a value settlement network, the current tps has little impact on the core DeFi protocol.
For example, those who participate in the minting of our stablecoin USDx, generally speaking, the amount of minting is relatively large, and the gas fee of 0.1-0.5 US dollars has little impact on the protocol itself. Similarly, loans on DeFi (such as Maker’s CDP or to dForce community
Agreement lending) the single amount is relatively large, and gas fees and network congestion do not seem to have much impact on this type of agreement.
I have always felt that, apart from Bitcoin, Ethereum is already the public chain that can best prove its value, and it proves its value through practical applications rather than simple and crude beliefs.
Bowen：A recent example is the big move of USDT. At the beginning of the year, the ERC20 USDT issued on Ethereum accounted for less than 5%. Now, the total issuance of ERC20-based stablecoins has surpassed the number of USDT based on the Omni protocol on Bitcoin. This is entirely the result of market competition (confirmation speed, network fees, DeFi protocol expansion, etc. considerations).
Going back to the other factor I mentioned earlier that affects the price of Ethereum, it is the lock-up of Ethereum involved in various DeFi protocols. Due to the demand for mortgages, the amount of lock-up in Ethereum continues to increase. This is virtually like doing staking. It will absorb a large amount of ether circulating in the market and provide relatively large support for the price.
As can be seen from the figure below, more than 80% of DeFi locked-up assets are ether (PETH+ETH), and the growth momentum is obvious.
From the new low of the BTC/ETH ratio in 24 months, it can be seen that the market is more inclined to the market dominated by Bitcoin.
Now there are two different opinions in the market. One side believes that after POS, a large amount of ETH will be staked in ETH 2.0, resulting in a decrease in the total amount of ETH 1.0. Under the same demand, the price also has an upward trend.
Yang Min said:The anti-investment perspective believes that POS loses the price support of POW computing power and power consumption costs, which will make the price of ETH more unpredictable.
Q4: What will be the next resistance and pressure level of Ethereum, and when will the price recover?
Yang Min said:
I'm not an expert on resistance and resistance levels. However, I can analyze the fundamental market dynamics. These factors are beneficial to the price of Ethereum in the medium and long term. The main points are:
First of all, most of the new public chains have been quickly falsified, coupled with a large amount of capital consumption, the best period for ecological establishment has been lost. In the current market, there is no public chain that has a comprehensive advantage over Ethereum, even if it is more than twice as improved. Ethereum can’t find a competitor with astronomical glasses.
Second, the judgment of the vitality of the public chain mainly depends on the amount of assets deposited under the chain (such as stable currency deposits), and which public chain is deployed on which important DeFi protocols are deployed. From this point of view, Ethereum is the undoubted overlord. Those public chains that use the DAU data of games or some DAPPs to prove their competitiveness are confusing the understanding of tps in different scenarios. To put it simply, a single transaction of a DeFi protocol may cost tens of thousands of dollars (such as using USDx to generate interest), which is not comparable to the tx of games.
Third, as mentioned in the meeting, the fundraising ICO of the project party basically should be issued or should be converted into legal currency. Most new projects use stable coins, so the new selling pressure from the project party will increase. Getting smaller and smaller.
Ethereum’s PoS Casper 2.0 has a high probability of being deployed early next year. Although it will be a hybrid model of PoW+PoS, referring to the pledge rate of Cosmos and Tezos in the market (basically 70%), there will be more obvious liquidity in the medium and long term Impact, I think this impact will start to appear in the second half of 2020.
Yang Min said:I personally think that for chains other than Bitcoin, the bear market is still going on. In this wave of market, it is the various model coins and exchange platform coins that are really rising. However, the public chain projects during the peak period of ICO will not survive the bear market. The longer the bear market lasts, the better it is for Ethereum, because competitors have no money to survive the cold winter.
Q5: Previously, an important application scenario of Ethereum was ICO. Why don’t you use ETH for fundraising instead of using stablecoins and fiat currencies?
Yang Min said:
This is a very natural choice. In the past two years, the project party used Ethereum or Bitcoin to raise funds, and continued to retain digital assets. In fact, they were betting on digital assets in a long direction.
Bowen：As an entrepreneurial project and team, most of the cost is anchored to fiat currency. If you do not exchange for fiat currency and keep the digital assets of non-stable currency, you are actually using the money given by investors to go to the casino to open long positions.
As for the consequences, everyone has seen that the project parties holding Ethereum and various digital currency assets have experienced a decline of more than 90%.
We have seen that stablecoins and fiat currencies have been used in fundraising for several large-scale projects recently. I think this will be a major trend in the future. This is also the reason why we are doing stablecoin projects. Market competition accelerates the implementation of applications.
The earliest start of ETH ICO financing is because ETH is transferred to the ICO contract, and tokens can be automatically distributed. At the beginning of 2017, when financing started at a block height, everyone was on the same starting line, first come, first served, fair, just and open.
Since 2019, the fundraising activities have been more concentrated on exchanges and public chain projects.
For public chain projects, there is no business model in itself, stable cash flow supports the development of public chains, and a huge organizational structure requires daily expenses. Therefore, it is a reasonable way to finance with stable currency and arrange expenditure reasonably.
Bowen：The IEO of the exchange mainly raises funds through the platform currency and USDT, because in the bull market user currency standard calculation, the bear market user fiat currency standard is more in line with the needs of market transaction calculation costs.
Q6: After the collapse of ICO, what should be the way out for Ethereum?
On-chain transaction scenarios dominated by DeFi will be a foreseeable growth point. At present, a total of 3% of the total ETH exists in the lending market dominated by MakerDao, Compound, and DyDx.
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Mining farms and mining pools are operating service providers for ETH, like the existence of China Mobile's China Unicom version. For ETH, DeFi is a commercial bank, margin financing and securities lending, and an interest-earning service provider, such as Alipay and a stock trading platform.
With the Federal Reserve cutting interest rates, the 10-year U.S. treasury bond's 3-year record low <1.5%, and the 2-year and 10-year treasury bond interest rates being inverted, these are indicators of a potential new round of U.S. economic recession. DeFi products can still provide an annualized interest of about 10% on USDC and DAI, which has product advantages in return ratio.
Yang Min said:As the carrier of the world's computing platform, ETH's own financial attributes allow Ethereum smart contracts to make stable currency casting, interest generation, and margin transactions transparent and open. Everyone can deposit and withdraw at any time, 7x24 hours service, 100% margin, everyone can Check balance and mortgage rate.
This is my most optimistic ETH usage scenario in 2019.
Yang Min said:
The way out for Ethereum is to abandon Casper 2.0 and go directly to a Polkadot parachain. Of course, this is a joke.
Ethereum continues to improve layer1 through Capser 2.0, and all subsequent function extensions should be placed in layer2/3 and the application layer.
Yang Min said:Most of the DeFi protocols are on Ethereum. The prosperity of open finance on Ethereum will accelerate the consolidation of their network effects. Ethereum has acquired enough asset stickiness and its status is unshakable. It is the least worrying about the way out.
Q7: We have observed that the number of DAPPs on Ethereum is twice as much as the sum of EOS and TRON, but the transaction volume of ETH DApps is far lower than the latter two. Why is there such a strange phenomenon?
Yang Min said:
This phenomenon is very normal, and it is a selective bias when each public chain PR.
I always think that when you look at these traffic data, you must understand that tx are not created equal (different types of transactions are inherently different).
As a value settlement network, Ethereum carries various financial transactions such as otc transactions, exchange settlements, and cross-border arbitrage. A tx may contain transactions worth millions of dollars.
Bowen：The public chain already has its own market competition. For example, if you want to choose a safe and reliable public chain (the public chain will still exist within 3-5 years), Ethereum is an undisputed choice. For example, we USDx chooses Ethereum as the main Network deployment is based on this consideration; and if your dapp has relatively high requirements on tps, such as games, other chains may be an option.ddex.ioHowever, in fact, Ethereum also has solutions in terms of high performance. For example, you can choose the high-performance Ethereum layer 2, such as DAI, which released xDAI through the POA network as an extension of small and micro payments.tron.ddex.ioThe evolution ability of Ethereum itself is beyond the imagination of many people. For a public chain, layer1 must be simple and abstract enough, and all the dirty work is left to the application or layer2/3/4 to solve. This is the correct solution.
We also deployed ETH (
) and TRON (
) decentralized exchange on the network.
Our observations are as follows: ETH users have low frequency, high unit price, and high handling fee; TRX users have high frequency, low unit price, and free or low handling fee.
The games on EOS and TRX are mainly in the nature of gambling, and at the same time, it comes with the function of trading and mining, so many transactions on the chain become arbitrage behaviors. Early miners are rewarded more, so the more they dig, the more they earn. This also indirectly led to a large short-term trading volume.
Bowen：It is difficult to do transaction mining on the ETH network, because it requires higher miner fees to use the resources on ETH, so some invalid transactions can also be indirectly eliminated.
Therefore, it is incomplete to measure the public chain with a single transaction volume as a single indicator, because the account generation cost and transfer cost of each public chain are different.
Q8: DApp this year is not as good as last year in terms of capital and growth rate. Some developers who are chasing hot spots even give up DApp to pursue Staking. Will this affect the implementation of the public chain?
The development of Dapp and Staking has specialization in the industry, both to lower the threshold for more users to use the blockchain.
Yang Min said:The Solidity development team, which focuses on the existing Dapp development, and the Staking development team have more different technical divisions of labor.
The two development teams specialize in the implementation of the public chain. One is to maintain the security and stability of the POS network, and the other is to develop for the production and economics of the chain to create undiscovered needs.
Yang Min said:
The public chain is also looking for its own suitable posture, and dapp is looking in the wrong direction.
Dapp is more like the concept of the Internet era. In fact, dapp is not transferred to staking, but to the financial agreement of deFi/open finance.
App is still relatively heavy, focusing on user front-end experience and efficiency. This should be a problem to be solved at the layer 3 level, and centralization has great advantages in this regard.
Decentralization should focus on lower-level protocols rather than the application of the interaction layer.
A major trend this year is the development of DeFi protocols. In fact, these protocols (such as our index synthetic stable currency protocol USDx, or Compound’s currency protocol) are not a dapp, but more like a flexible and abstract protocol and infrastructure , it is a little far from the c-side, and it should be regarded as the infrastructure provided to the b-side.
Yang Min said:This infrastructure is only now beginning to be built on a large scale, and there are a lot of opportunities. Creating a highly modular, detachable, and interoperable general protocol is the correct posture for the public chain to land at this stage.
Q9: Defi is one of the important directions for Ethereum developers today. Projects such as Veil and Dharma have been shut down or data plummeted. Some people commented that it is the self-help concept of Ethereum after the failure of DApps. It seems that they are not optimistic. What do the guests think? DeFi market? What conditions does it need to expand or rise?
Yang Min said:
Most people who hold this view are either diehard Bitcoin or have never used the deFi protocol at all.
We also chatted with the Dharma team, they are not running away, they are just optimizing their products.
Veil and Dharma are very normal in the trial and error and pivot process of entrepreneurial projects. In the traditional VC field, such as ofo, is there still less trial and error?
I think the market should give these projects enough patience, not to mention the two projects Veil and Dharma have not yet used tokens to raise funds in the market, and some projects that call for orders every day, I think they are already decent enough.
The DeFi market is further expanding, and there is an urgent need to increase the assets on the chain.
Bowen：At present, the only valuable mortgageable asset on Ethereum is Ether, which is far from enough.
I am more optimistic about the attempt to issue Bitcoin in the form of ERC20 on the Ethereum mainnet. This is not only to solve the cross-chain circulation of assets, but also bring dozens of times the scale of mortgage assets to the DeFi ecosystem on Ethereum. In addition, it is easy to be highly standardized I am also more optimistic about the on-chain assets, such as gold, government bonds and stocks.
Judging from the current development, asset on-chain is likely to be a relatively centralized process (refer to the minting process of various fiat currencies and stable coins), and the main foothold in DeFi is various programability after the tokenization of these assets transformation.
Both Veil and Dharma are shifting directions, not off.
Defi’s attempt is the same as that of a startup company. If it finds that the direction is wrong and there is no data growth, quickly change direction. Dharma used to do P2P lending before, but found that the order efficiency was too low, so it stopped the lending business, and recently transformed the fund pool lending method. Veil found that Augur's user experience was too poor, so forked Augur and looked in other directions.
I agree with Mr. Mindao’s point of view that more high-quality assets are on the chain. Before DDEX cooperated with Bitgo and Kyber to map WBTC to the Ethereum network in a third-party custody method, including possible WXRP and WZCASH in the future. In addition, there is a method of fiat currency deposit. DDEX also cooperates with Wyre in the United States to help users participate in DeFi loans and earn interest directly from debit cards.
Bowen：The essence of DeFi is financing and lending plus leverage, that is, commercial banks that are now within reach of everyone. How can we better serve users. Allow currency holders to hold currency to earn interest, allow trading users to conduct margin financing and securities lending at low cost, and allow miners to expand production capacity at low cost. These are all questions that DeFi service providers have to think about.
Q10: What do the two guests think is the biggest problem in the Ethereum 1.0 phase? Why is it causing these problems? How to crack it?
Yang Min said:ETH 1.0 has had many big problems: DAO fork in 2016, Parity multi-signature wallet Suicide in 2018... As a public chain with a history of 4 years, any problems that do not completely kill Ethereum will only make Ethereum more sound.
Many attempts have no precedent, including some low-level loopholes. Now more and more code bases like OpenZeppelin allow developers to avoid some of the previous pitfalls.
Yang Min said:
I have personally experienced all the important stages of the Ethereum 1.0 phase, including investing in THE DAO, and the big fork that followed.
Looking back now, I think it is actually a blessing that Ethereum had these problems in its early days.
The DAO event can be regarded as the Zunyi meeting of Ethereum, which gathered a hard-core consensus, accelerated the evolution of the system and the community, and made the community feel awe of the fork. ETC basically separated the opponents of btc in the Ethereum camp. .
The challenge that 1.0 did not consider is that everyone did not expect that it would be so difficult to convert PoW to PoS, and they were worried that they would miss industry opportunities because of this. However, these problems are growing pains, problems that every growing public chain will face.
Leaving aside technical issues, Casper is more complicated because it involves a game involving a large vested interest group. In fact, the design of a difficulty bomb is not enough to force participants to form a consensus.
Personally, I think the biggest challenge for Ethereum is how to build a sufficiently abstract and general layer 1 architecture, and make as few changes as possible on layer 1. Similar to the US Constitution, the main constitution has not changed much for more than 200 years, and most of the revisions Supplement and extend explanations through amendments (layer2, layer3).
Yang Min said:From this point of view, I think Ethereum 1.0 is already doing very well. The 2015-2017 update iteration is very fast, and later it will start to consider expansion to layer 2 and above. In terms of the overall design of the system, I think that Ethereum is also the best. It does not gossip about hot spots, has a long-term vision, and lays a solid foundation.
Q11: In the opinion of the two guests, what is the biggest advantage of Ethereum at present? Is it still the king of the public chain? Will it be replaced by other public chains?
Yang Min said:
Bowen：The biggest advantage of Ethereum is that it has a strong technology-driven community, the development environment, the network effect of applications, and a Vitalik who is very ambitious but does not show the desire for power. Vitalik is the Washington of Ethereum.
The biggest problem of the public chain is often not technology, but ecology, consensus and culture. As an open source system, any good technology will be absorbed quickly, and it is difficult for technology to establish barriers to the public chain. It is not yet possible to see any public chain that can replace Ethereum.
The survival of most of the current public chains is a problem. There are no public chains worth more than 100 million US dollars in hand, and it is a bit impossible to talk about replacing them.
Compared with other smart contract public chains that have been launched or will be launched soon, Ethereum has development support tools such as Truffle, Infura, and OpenZeppelin for developers. Developers can get started relatively easily, and there are examples to follow.
The second is interactivity. A public chain is like a small island. On a highly developed small island, everyone will have an independent division of labor. One person mines silver, one refines it, and one makes silver coins.
The advantage of Ethereum is also that developers have an independent division of labor, stable currency team, lending team, liquidity team, different teams perform their duties, there is competition and cooperation.
Bowen：Rome was not built in a day. We have also seen public chain developers promoted with short-term funds, but a truly benign community depends on time to precipitate.
Q12: What is the current development progress of Ethereum 2.0? What kind of problems arise and what are the development goals for 2.0? How do the guests view Ethereum 2.0?
Yang Min said:The testnet for Prysmatic Labs ETH 2.0 has been released in May. For the Dapp development team, the more concerned issue is when the functions related to smart contracts and EVM will be launched.
Phase 0's PoW main chain and Beacon Chain coexist, and what the result of the one-way staking function will be, and how much the mortgage rate will be on the Beacon Chain (PoS), we will wait and see.
Yang Min said:
As Bowen said, the technical and economic model design and parameters of Ethereum 2.0 have basically been finalized, and it is expected to be launched early next year.
If 2.0 is fully realized, judging from the current technical parameters, the performance should be improved by more than 100 times.
Compared with performance improvement, I am more interested in the change of the incentive mechanism caused by the change of the consensus mechanism, which is relatively difficult to predict.
Yang Min said:The performance improvement of 2.0 will provide space and choices for more applications; while the greater significance of Casper lies in the evolution of consensus and incentive mechanisms. If it succeeds, it will be no less than a peaceful public chain political revolution, and it will be the most A historic moment worth looking forward to.
Bowen：Q13: Finally, I would like to ask the guests, what is the proportion of Ethereum in your assets? What is your investment strategy?
Yang Min said:
The current market value of Ethereum (in assets) accounts for 7.6%, and it reached 31% at the highest point. I think it should return to the 30% level.I am an advocate of regular investment strategy, regular investment in ETH and BTC, to earn income from passive investment. We also have a weekly fixed investment ETH product within the company, and you can choose how much salary to invest in ETH.）
