I’m extremely bullish on ethereum and believe it will become a major world asset. On top of being a store of value, ether is the fuel for the world’s new programmable financial system, digital assets, and governance. I’m convinced that ethereum will hit $1-2 trillion in market cap (currently at $335b) within the next couple years, and exceed it beyond that time horizon. The only potential risk I see to this thesis is if other chains end up dominating and/or we go towards a more multichain world (eg. Cosmos, Polkadot), but at least right now that’s not how I see the future playing out. I believe that network effects will lead to one chain dominating, which ethereum is currently the lead contender for being the largest and most decentralized, and layer 2 rollups will be where most users transact.
Key milestones required for major ethereum adoption and price appreciation are:
- Ethereum 2.0 “merge” upgrade – This will make ethereum deflationary, and increase staking yields (at least temporarily)
- Layer 2s gaining parity with mainnet in terms of applications – currently layer 2s are still in infancy relative to mainnet
- Centralized Exchange (CEX) <-> Layer 2 onboarding – Bridging from layer 1 is expensive and a hassle. Being able to go directly to layer 2 from the CEX would be massive for layer 2 adoption. When layer 2s are fully mature, layer 1s will primarily only be used by rollup aggregators and bridges, not individuals
Once layer 2s are on par with mainnet and users can go directly from centralized exchanges to layer 2s without having to touch layer 1, there will be an explosion in usage with gas fees being mere pennies and transactions being fast. It is at this point that crypto will start to catapult towards real-world adoption, spurring even more building and starting the flywheel.
Currently gas fees are so high and transactions so slow that much activity is priced out and practical applications are very limited. It’s like the internet on dialup, and computing on mainframes before laptops and smartphones. Fast, cheap, and widely available internet coupled and fast, cheap computers and smartphones ushered in a whole new wave of innovation that was not possible on 56 kbps dialup on mainframe computers.
Right now ethereum gas fees make all but the simplest token transfers only accessible to whales. The irony is that as layer 2s finally enable cheap, fast transactions that make ethereum accessible to the layman with just $20, that’s when the institutions will finally “get it” and start dumping hoards of money in.
Blockchains are basically decentralized databases that can hold not just user funds, but digital assets (tokens, NFTs), and a Turing-complete programming language to program any interaction conceivable. The entire financial sector will be rewritten on smart contracts – including tokenization, lending/borrowing, derivatives, insurance, and anything that can be conceived – all without any middlemen, centralized custodians, or KYC laws.
I don’t want to sound like a complete shill, so I’ll admit that the number one risk I see to this is if we head instead towards a more multi-chain world where many different chains dominate, which is what “layer 0” blockchains like Cosmos and Polkadot are going for. Personally I see one chain and one rollup dominating due to the enormous network effects of all of this. Rollups function similarly to Cosmos sovereign chains and Polkadot parachains, but with security backed by the mainnet. Currently ethereum is dominating and I don’t see that changing, but I admit I’d like to learn more about Cosmos and the multi-chain idea to understand this alternative view a little better.
I could write another 10 pages on why I’m bullish ethereum, but I’ll leave it at that for now. While the price has been dipping (currently $2,781), I’ve been accumulating and staking. How far down it’ll go is anyone’s guess, but I’m convinced it’ll hit $10-25k within the next few years. Not financial advice though, do your own research.