Gollum: The Quest for the Holy Grail 2.0 (Part 1)
Editor's Note: This article comes fromBihuEditor's Note: This article comes from
Bihu, Author: Gulu, reproduced by Odaily with authorization.This article is from October 2015"Why Invest in Blockchain""Finding the Holy Grail"
The continuation of Bitcoin at that time was $245 and $7,880 respectively, and today, on December 27, 2020, the price of Bitcoin was $26,964.
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forecast review
In the article "Looking for the Holy Grail", the author once made the following predictions:
1) Within 4 years, the total market value of encrypted assets will approach or exceed that of gold. The current total market value of gold is 8 trillion US dollars. 90% reliability.
2) Within 4 years, the total market value of the basic token of a single smart contract platform exceeds 1 trillion US dollars. 70% reliability.
3) Within 8 years, blockchain-based super applications will emerge, and the market value of a single project will exceed $1 trillion. 50% reliability.
Let's review them first.
The first, before July 28, 2022, the total market value of encrypted assets will approach or exceed that of gold, and the possibility of realization will be significantly reduced. The speculative logic in the original article has been falsified: "From June 2011 to December 2017, a total of 78 months, the geometric average of the monthly increase in Bitcoin price was 8.64%. If the future is calculated according to the historical increase, then In the next 4 years, it will be about 53 times. Today, the total circulation market value of Bitcoin is 140 billion US dollars, 140 billion * 53 = 7.42 trillion, which is 7.42 trillion US dollars." As of today, the price of Bitcoin is 3.4 times that of the original writing. The monthly geometric average increase was 4.33%, only half of the average monthly increase for the period from June 2011 to December 2017.
The average monthly compound growth rate of 4.33% is already very, very amazing, but it did not maintain the original price increase speed.
The prices of other digital assets have not been able to maintain the original increase, especially when the basic token of the smart contract platform is used as a token. The reason will be discussed later in this article.
Second, before July 28, 2022, the total market value of the basic token of a single smart contract platform will exceed 1 trillion US dollars, and the possibility of realizing it is very slim. After the attribution analysis, the author believes that the root cause is that the speed of technological progress is not as fast as expected, which will be discussed in this article.
The world is a complex system, and the future beyond a certain time span is unpredictable. Short-term general direction prediction is acceptable, but it is really difficult to predict the speed of development and evolution of things. That's right, the author is indeed looking for a step for the roughness of his prediction details. Although the timing for the realization of these three predictions needs to be greatly adjusted, the author is still highly optimistic about the achievability of the three predictions.
BTC vs. ETH
The first half of this article will review the past 29 months and future prospects of Bitcoin, as well as the development of smart contract platforms in the past 29 months.
The development of the two is actually reflected in the price comparison of ETH/BTC, as shown in the figure below. When the original article was published, the price of ETH/BTC was about 0.058, and the price has been far below this value since then until today. Today’s price ratio is only 0.023, which is less than half. In the period of about one year before the publication of the original article, the competition between ETH and BTC was stalemate. At that time, the development of ETH was improving. The community had successfully emerged from the quagmire of the hard fork caused by TheDAO incident. And due to the advanced nature of smart contract productivity, specifically, the ICO frenzy brought about by the ERC20 token standard has triggered a big bull market in the entire encrypted asset industry; in contrast to BTC at that time, the community has been in a potential hard fork In the atmosphere of possible consensus collapse, especially in January 2018, the ETH/BTC ratio reached 0.12, the total market value of ETH approached BTC, and the total market value of BTC accounted for 37.8% of the encrypted asset industry , while the proportion of ETH rose to 31.1%. At that time, a hot word in the community was often mentioned—Flippening (big reversal), that is, ETH replaced BTC to become the leader of the encryption industry. However, so far it has never happened. So, what happened in the past 29 months?
what happened?
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what happened?
The outside world happened:
A) The pandemic of the new crown virus has forced the world's major central banks to print a large amount of money at a very high speed. The figure below shows that the Fed’s balance sheet has grown from 4.3 trillion to 7.2 trillion in just 2.5 months, an increase of nearly 3 trillion US dollars. You must know that the quantitative easing in response to the 2008 financial crisis only printed 700 billion US dollars.
B) The polarization of wealth distribution accelerates. The flood of money quickly pushed up asset prices, greatly increasing the assets of the top 1% of high-net-worth individuals; in contrast, the bottom 50% of people not only did not hold assets, but also lost income due to unemployment. Such polarization between rich and poor exacerbates social dissatisfaction, making it easier for people to accept encrypted assets. After all, encrypted assets provide a new type of protection when the old order deteriorates.
What happened inside BTC:
Forehead. . . It seems that not much happened, no unexpected events, the most important thing is to implement the production halving in May 2020 as everyone expected. Bitcoin has not been aggressive on the road to productivity improvement, which is manifested in the fact that it has not adopted the large block proposal advocated by forked communities such as BCH, but has chosen to remain unchanged."The stability of Bitcoin brings stable expectations and is the biggest selling point, especially when the old order is collapsing. After the successful halving of Bitcoin in May 2020, the inflation rate will be about 1.8%, and after the halving in 2024, it will further drop to 0.8%, which is lower than the 2% inflation standard generally recognized by central banks; on the other hand, global central banks The Federal Reserve, the leader of the world, can issue an additional US$3 trillion in just three months, and the M0 money supply has risen by more than 70%, while the central banks of other countries have also adopted similar extreme expansionary monetary policies, plus The extreme expansionary fiscal policies adopted by governments around the world stand in stark contrast to Bitcoin’s expectations of stability.https://bihu.com/article/1019497。
In 2020, people's ideas have undergone a qualitative change, partly reflected in the fact that institutions have begun to buy a large number of bitcoins. From listed companies, to insurance companies, and to various funds, they have all disclosed the purchase of bitcoins. This actually reflects the top 1 % of people's ideas have changed, and we no longer see celebrities coming out to depreciate Bitcoin. On the other hand, the change in the concept of non-high-net-worth people can be seen from the proportion of the population holding currency. According to the "Cryptoasset Consumer Research 2020" report released by the Financial Conduct Authority (FCA) of the United Kingdom on June 30, 2020, as of 2019 At the end of 2020, the FCA estimated that the number of people who held encrypted assets in the UK accounted for 5.35% of the national adult population, compared with 3% in the previous year. If the growth rate remains unchanged, this value should be close to 10%. This is the situation in the United Kingdom, while the situation in the United States is that by the end of 2020, a number of financial applications for public users have opened up the encrypted asset investment business, including Paypal, Robinhood, Square, etc. Opened the door of convenience. Considering the similarities between the two countries, the author believes that the proportion of the currency holders in the United States should be close to that of the United Kingdom, that is, the current population of currency holders in the United States should be around 30 million. Specifically, we can learn from the prospectus of the upcoming Coinbase Look for confirmation. The U.K. and the U.S. on the “Crypto Assets” Adoption Curve
(Adoption Curve), in the late early adopter stage, is rapidly entering the stage of the early majority. Regarding the adoption curve, please refer to the original text of "Looking for the Holy Grail" for details.
All in all, Bitcoin is moving towards the mainstream and is being accepted by the mainstream. The deterioration of the external environment has exacerbated this process.
What happens inside ETH:
A) The fading of the ICO craze, the business model has basically proven to be unreliable, with a few exceptions;
B) The progress of ETH2.0 is slow, and the roadmap has been changed again and again;
C) A number of Layer 2 technologies that were expected to solve the core throughput problem proved to lack Product Market Fit;
D) The monetary policy has been reduced from 3 ETH to 2 ETH per block, but the current inflation rate is still 4.5%, and there is no clear expectation of the total cap;
F) DeFi has developed greatly, and the product-market fit has been proven.
In terms of business development, ETH has made significant progress. While ICOs proved not to be a widely desirable business model, DeFi later found product-market fit. In the business of value storage, ETH has made a little effort (the blockchain reward has been reduced from 3ETH to 2ETH), and there are many voices in the ETH community about this aspect, but the measures in this regard are obviously insufficient, and there is no such thing from the results. Obvious effect. Regarding value storage, the author has always believed that in terms of its own monetary policy, it is theoretically possible for a smart contract platform to achieve a total cap policy similar to that of BTC, and to compete with BTC in the future, but it is obviously not the case for all smart contract platforms The key direction of this point, the author fully agrees with it.
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Ideas vs. Productivity
As for the core bottleneck problem - throughput improvement, ETH obviously has not made any substantial progress. At present, the number of transactions processed by ETH per day is about 1.2 million. Assuming that a user sends a transaction every 3 days on average, then Ethereum can only serve 3.6 million users. The full load of ETH blocks has lasted for a long time, and the long-term high mining fees have greatly inhibited the development of applications on the platform. For a smart contract platform that takes the productivity route, it is a great failure. In the past 29 months, the progress of ETH2.0 has been far below the community's expectations; and the second-tier expansion solutions, such as Plasma, side chains, and Raiden Network, have not been accepted by the market and cannot solve the throughput bottleneck problem. In this case, Ethereum, as a productivity platform, can only exist as an asset settlement layer, but is unable to act as a global public infrastructure. If other platforms complete breakthroughs in the future, the status of Ethereum as an asset settlement layer will also be shaken.
The author is not here to say that the ETH community is not working hard. In fact, the difficulty of smart contract platforms to greatly increase throughput without sacrificing decentralization is determined by the nature of the matter. At present, it is indeed quite difficult. But it is not impossible. Some signs I have seen indicate that there is hope for a substantial breakthrough in 2021, which will be discussed in the second half of this article.
Looking back, we can probably come to the conclusion that it is "so obvious that it is common sense": the difficulty of smart contract platforms in improving productivity is far greater than BTC's lying, waiting, keeping still, and expecting the deterioration of the external environment. A little bit of luck.
Yes, looking back at history, the world always seems so simple.
Starting from the second half of this article, the author will replace the term "smart contract platform" with the term "productivity platform", because blockchain systems based on new architectures like Polkadot do not focus on smart contracts.
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