Long BTC, short the world or long ETH, short the Banks?
Monetary freedom and contractual freedom.
I just saw an interesting poll, and I have time to write a short article.
I. The poll results revealed an interesting fact that the blockchain industry has an excellent user experience, an industry where you don’t want to leave once getting involved. Why? Because the blockchain industry is not only a production industry (making the cake), it is also an industry related to the relation of production (distributing the cake) that a regular person has access to.
II. Originally, only those who command violence were qualified to distribute the cake, but blockchain technology allows regular people to have fairly high immunity to violence through decentralization(the technology cannot be eliminated by striking the centralized party), for example, Russia can bypass the sanctions implied by Europe and the United States via a non-freezable cryptocurrency, which is called immunity to violence, the other similar examples are, immunity from being charged Inflation tax (minting tax).
III. BTC is immune to violence in terms of currency (monetary freedom), ETH is immune to violence in terms of contracts (contractual freedom) in addition to monetary freedom, e.g. freedom to issue tokens to raise capital (equity freedom), freedom to set deposit/borrow interest rates (financial freedom), freedom to issue/trade artwork (NFT), etc.
The benefits of distributing the cake (or freedom from having your cake distributed), far outweigh the benefits of creating a cake, which generates the trillion-dollar market cap of the blockchain — it’s an industry of production relation.
IV. Long Bitcoin, Short the world is more like a delusion, after all, if the world economy enters a period of chaos, everyone would use gold and silver as currency (plus bottle caps at most:), but they will never use Bitcoin.
What about Long Bitcoin, Short the Banks? Bank replied that the Bitcoin cannot provide the basic services such as deposits and loans, not to mention to mint stablecoin, how can you Short me? The existence of Bitcoin is nothing more than adding another form of foreign currency to the existing banking system.
V, However, Long ETH, Short the Banks can really be implemented, banks, securities, trust, insurance, and funds are industries that control a significant amount of capital, if we break them down, they are the combination of currency and contract. Since that Ethereum represents monetary freedom and contractual freedom, it will provide better banking, securities, trust, insurance and funds services.
For example, a smart contract deposit and loan agreement where the market is free to generate interest rates is far sexier and more in line with market demand than a non-market-based bank deposit and loan rate that is restricted by the central bank and will attract more users.
VI. BTC’s competitor, ETH, has grown to a maximum of 83% of BTC’s total market cap because ETH has one more contractual freedom layer than BTC. And ETH’s competitors haven’t emerged yet, and it’s hard to appear, after all on top of monetary freedom and contractual freedom, it’s impossible to find any new freedom layer that blockchain can provide (freedom of information is limited by internet hardware bandwidth, it will take at least 10 more years, and the online storage industry is quite small, unlike the giant financial industry)
All the cryptocurrencies without a smart contract layer can be classified as the first generation token (only provide monetary freedom), BTC is a representative of the first generation token, scale effect plays an important role in the monetary industry, and no one likes to trade with multiple currencies, so the powerful is always powerful(Matthew effect), BTC eventually accounted for more than 97% of the total market cap of the first generation tokens.
Therefore, all public chains that are similar to ETH and offer smart contracts are second-generation tokens and are not competitors of ETH. Once ETH increases its transaction capacity (TPS) through block expansion, second layer network/sidechain, sharding and other technologies, ETH will eventually, like BTC, account for the vast majority of the total market cap of second-generation tokens.
Assuming you are a user who needs to take a collateralized loan, after excluding the long-term Ponzi scheme like Luna/UST, you would choose a collateralized lending protocol with the highest TVL and best liquidity.
VII. So the ceiling of the total Bitcoin market cap is the gold and the ceiling of the total ETH market cap will be: the sum of the total market value of banks, securities, trusts, insurance and funds across the globe.
We don’t know if now is the macro bottom, or at the end of 2022, or 2023, and we don’t rule out the possibility of ETH falling to $1500, $1000, or even $500 in the short term.
But in the long run, ETH will go up 1000 times more, ETH coin standard is the ultimate winner.