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Can Ethereum Collapse?

A VC had an interesting question – Given that more than 80% of the top 100 projects are built upon Ethereum, what will happen to these projects, if for some reason, Ethereum collapses.

This is a very relevant question, especially as popular media is click-baiting mass audience into believing that this is indeed crypto armageddon. We believe however that the financial value of ETH the security and the value of ETH as a protocol, as a truly distributed, decentralized computer are at this point, separated from each other. Perhaps because there is no easy way to value protocols, and also perhaps because these are still early days, ETH ran up to almost $1400 between May 2017 and Jan 2018, purely based upon speculation and retail FOMO in the latter half. The market does overestimate in the short run and underestimate in the long run as Bill Gates once famously said. The market is now over correcting in a post-ICO world (at least as far as Gen 1 of this ICO revolution is concerned), and ETH prices are getting hammered. It is anyone’s guess how the real progress that is being made with Ethereum is being factored into price movements. It has an ecosystem of almost 250k developers, there are exciting developments around the corner in Sharding & Plasma, and the impending launch of Constantinople. Additionally, many of the protocols built on top of Ethereum are solving fundamental problems. ZRX (0x) for instance, is clearly the dominant DEX (Decentralized Exchange) platform. Augur (REP) is reimagining the way prediction markets and Oracles function. This leads us to state with a fair degree of confidence that price fluctuations in ETH, the base protocol, should not significantly affect development of level 2 protocols with good development histories that are solving key problems.

Many believe that Ethereum’s weakness is its malleability, and point to the now-infamous fork (ETH vs ETC), or its challenges with moving from POW to POS. We believe that this fluidity could be a key strength. We hope to explore this more later.

Meanwhile in Crypto Wonderland….

“CZ disagrees with Vitalik Buterin” Crypto rockstar and Binance CEO Changpeng Zhao refuted Vitalik’s claims that we may not see a 1000x growth again in crypto. CZ feels that the USD-denominated market cap alone in crypto will see a 1000x boost and the launch of derivatives could make it even bigger.

“Uber’s first CTO’s crypto trading platform launches institutional offerings” Voyager, the cryptocurrency platform created by Uber co-founder, is venturing into institutional crypto brokerage. The new institutional division will be headed by Glenn Barber, who previously co-headed the sales desk in New York. Voyager is set to rival Coinbase and Robinhood through the launch of zero trading-fee crypto trading platform for retail investors.

“Mike Novogratz says we have hit the bottom in crypto prices” CEO of Galaxy Digital Mike Novogratz said that the crypto prices have bottomed out in his tweet yesterday. Speaking at the Beyond Blocks conference in Korea, he said that institutional investors will inevitably enter the crypto industry in the next 2 to 3 years. However, the broader level mainstream adoption in crypto is still at least a five years away.

“BitGo receives regulatory clearances to launch crypto custody” Cryptocurrency custody service provider BitGo received the regulatory approval from South Dakota Division of Banking to operate as a qualified custodian for cryptocurrencies. Lack of readily available institutional-grade cryptocurrency solutions is precluding big money investors from entering the crypto asset class. Besides BitGo, Coinbase and Gemini are also working on developing custodial solutions for institutional investors.

“After Citi, it’s Morgan Stanley now” After Goldman’s CFO spoke about the company’s ongoing efforts to develop a Bitcoin derivative and Citi’s plans to launch a Digital Depository Receipt for trading digital assets, Morgan Stanley is following suit by reportedly working on Bitcoin swap trading solutions for clients. Traders interested in the product can go either long or short through price return swaps. Trading will being once the internal approvals have been processed and there is proven client demand, according to the report.

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