Opinion: ETH 2.0 will reduce the inflation rate of Ethereum, making ETH an asset scarcer than gold
Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc)Editor's Note: This article comes from
Babbitt Information (ID: bitcoin8btc)
, by Namrata Shukla, translated by Libert, published with permission.
Ethereum 2.0 is a protocol upgrade that aims to change the Ethereum consensus mechanism to Proof of Stake (PoS). Currently, discussions about it are in full swing. While the launch of the upgrade has been delayed multiple times, ethereum co-founder Vitalik Buterin recently claimed that development work on ethereum 2.0, originally scheduled to launch in July, is still ongoing. Renowned analyst and investor Alex Saunders has created a flow and stock-to-flow (S2F) chart of Ethereum assuming that Ethereum 2.0 will launch on schedule.
Sanders said that Ethereum’s S2F ratio in 2019 was 21.95, which is very close to the S2F value of 22 for precious metals such as silver. However, the 2020 section of this S2F chart shows that ETH may surpass silver in terms of scarcity. Saunders predicts that by the end of this year, ETH's S2F will reach 28.25 (white dot in the chart below).
Stock and flow charts for Bitcoin, Ethereum, and precious metals｜Source: Twitter
Saunders noted that with Ethereum 2.0 launching as expected, its S2F will jump 100% by 2021 (black dots). However, since these are implementations based on a protocol upgrade that has been delayed multiple times before, the community will have to wait for the final release of Ethereum 2.0, when staking will replace mining.
Saunders expects everyone to use ETH as collateral as the protocol changes. He predicts that by 2021, the flow-to-stock ratio of Ethereum will reach 57.2, and by 2022 it will be closer to 58.5. Gold's current stock-to-flow ratio is about 60, which means that Ethereum will likely become a more difficult asset to sell.
