Is Ethereum still viable as a future currency now that it's deflationary?

  1. This is the thing people don’t understand when they bring up “but deflation discourages spending”. Yes that’s historically been true, but the world has literally never seen an asset like ETH, so applying simple economic theory to it as if it’s just a currency to spend or save is insufficient.

  2. Ether's current design is intended to reach a supply equilibrium at some point down the road. Under PoS, I think that equilibrium point is around 10-15 Gwei.

  3. I think ERC-20 stablecoins make much more sense for exchange of value. ETH itself to pay the gas to run the network. For store of value I prefer something tied to the traditional productive economy like S&P 500 Index fund or a useful commodity which can be stockpiled.

  4. Indeed. If I'm putting prices on something in a storefront I want those prices to not have to change rapidly over time. That applies to both upward and downward directions.

  5. I am pretty sure that small payments like buying a coffee will not be done on the main chain, but on layer 2 when crypto goes mainstream.

  6. and then the coffee most likely won't be bought in ETH, it'll be bought in a less volatile token with tokenomics designed to encourage spending it. And that token will be overcollateralized by ETH, free to mint to anyone who just puts up ETH as collateral.

  7. Not to say that Ether would be good for buying coffee, but you can use Ether via a layer 2 solution too.

  8. What people always miss when they say "No one's gonna spend Ethereum if it's deflationary" is the causality: It becomes deflationary because people spend it. If no one spends it, burn rate goes down, issuance exceeds it, and look at that it's inflationary again.

  9. I think when most people talk about "spending Ether" it's more general than that, spending it on buying stuff online like Amazon and such. Thanks to EIP-1559 we know that people will have to spend Ether in order to make Ethereum transactions, that's a special case.

  10. ETH isn't trying to be a currency like the 💵 or the 💶. ETH is the currency that is used to by blockspace on Ethereum. If blockspace on Ethereum is valuable then ETH is valuable. This value can be traded for other currencies or used to back stablecoins that are more useful as a medium of exchange.

  11. ETH is not currently deflationary. It has days that are higher than others, but overall issuance still exceeds burn rate.

  12. Deflationary currency is bad garbage compared to one with an proper equilibrium. ETH devs intend to further adjust issuance down the road to make sure the ecosystem is appropriate.

  13. I don’t think ether will be a currency in the future but will be more as a smart contract network for enterprises, the benefit will be that people staking eth will be part of the network as sort of a “banking” entity for storing contracts and validating them

  14. I look at ETH the asset more as a commodity such as oil or gas. I never bought the whole ultra-sound money aspect and I do not think it is important for its value.

Leave a Reply

Your email address will not be published. Required fields are marked *