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A high price of ETH as an asset creates a higher security level for Ethereum the blockchain. The ecosystem of projects, apps, protocols, organizations, etc on E

by Sargos 6y ago

A high price of ETH as an asset creates a higher security level for Ethereum the blockchain. The ecosystem of projects, apps, protocols, organizations, etc on Ethereum is healthier when the blockchain is guaranteed secure and stable for everyone to use. It's a benefit to everyone.

wizzwizz4 6y ago
Except people who want to use ETH as a currency, rather than an asset. If we're going to have inflation or deflation, pick inflation; that way, you can actually spend the stuff without FOMO.
- Sargos 6y ago
  ETH is money but it's not currency. It's not meant to be used to buy everyday goods and services.
  - ntr-- 6y ago
    It is meant to be spent as gas in order to compensate for the energy costs of the computations in its smart-contracts. Why expend some amount of ETH building and executing products when you can just HODL and wait for the price to go up? Additionally, ease of spending drives up adoption which is a clear benefit to any currency.
    - Sargos 6y ago
      >Why expend some amount of ETH building and executing products when you can just HODL and wait for the price to go up? Most people aren't going to have a choice. ETH is required to be spent when making transactions and using dapps, NFTs, etc. Even L2s like Optimism, zkSync, etc will be spending ETH when writing to the L1 even if the end users are shielded from that. There is a built in economy that burns ETH so demand won't be a problem.
      - FeepingCreature 6y ago
        Yes, but that's exactly the problem. With any currency, spending happens when you see something that is worth more to you in sum over the future than the value of the currency. So when the value of the currency gets lower, you are eager to jump on opportunities; conversely, when the value of the currency gets higher, you are reluctant to jump on opportunities. To a first approximation, you spend inflationary money as early as you can, but deflationary money as late as you can. And that's the Ethereum blockchain ecosystem you get with a deflationary ETH - an ecosystem where everybody spends as late as they can. Does that sound like it will lead to a vibrant offering of services to you, cause it doesn't to me. This is also why I never got into Bitcoin. Why would I ever spend a bitcoin? As a currency it's near worthless, ironically; people who spend it will in the long run always be outcompeted by people who buy and hold. (Before the bubble bursts, anyways.) The medium of transaction should not be an investment vehicle; those purposes are directly opposed.
        deleted 6y ago
        [deleted]
    - yokem55 6y ago
      Because while the fee burn does act as a deflationary force on the eth economy, there is still the inflationary force of the staking rewards. If transaction volume falls too much, then the staking rewards will outpace the fees burned and the eth economy will see overall inflation. At some point (insert hand-waivium here) an equilibrium will be reached between transaction demand, eth asset price, and staking demand (as more eth is staked, individual staking returns will fall, but overall inflation goes up).
- jcfrei 6y ago
  I don't think anybody who's informed about crypto economics (especially coin supply) will honestly claim that BTC or ETH should ever be used as a currency rather than a store of value or a utility token.
tom_mellior 6y ago
If one wants higher security, one shouldn't be pissing off the miners who provide that security.
- wmf 6y ago
  The point of this proposal is that Ethereum no longer needs miners and they know it, so there's kind of a race between the miners trying to take Ethereum hostage and the developers kicking miners off the island before they can do it.
AaronFriel 6y ago
That has been repeated many times but is not true, the price of an arbitrary unit of currency or crypto has no relationship to its security. That price going up or down has no relationship on the "security level" of the blockchain.
- Sargos 6y ago
  Look up Proof of Stake which is what Ethereum is moving to later this year. In Proof of Stake validators put up an ETH bond in order to randomly get picked to help create blocks in the network. The higher the price of ETH the more expensive it becomes to attack the network.
  - AaronFriel 6y ago
    They could just require a higher stake, the price of eth is irrelevant. Let's say hypothetically one eth was worth about a Satoshi, 0.05 cents or so. So they could just require 1,000,000 eth as a stake. Or ten times that. Or a hundred times that. It's irrelevant what the price is, the choice of the stake amount is. If eth was inflationary, they could inflate the stake proportionally.
    - jtsiskin 6y ago
      That’s not true, those are two different things. Requiring 100x the total number of possible stakers is 100x lower. Versus if the price increases 100x, that means the same number of possible stakers is possible, but it’s now 100x more expensive to do a 51% (or whatever the PoS % needed is) attack.
      - deleted 6y ago
        [deleted]
      - AaronFriel 6y ago
        The ethereum protocol can choose whatever stake amount (in equivalent USD when they decide the bond to stake) they want. The currency being deflationary or not is irrelevant - the stake could be adjusted. The currency going up in down in value relative to ETH could be adjusted. They could choose to require one gwei, one ETH, or one million ETH. That's your protection. The exchange rate from USD to ETH is irrelevant.
wmf 6y ago
A higher market cap can be more secure in a PoS system but burning ETH doesn't increase the market cap. Like stock buybacks, burning coins increases the price without necessarily creating new overall value.

by Sargos 6y ago

wizzwizz4 6y ago

Except people who want to use ETH as a currency, rather than an asset. If we're going to have inflation or deflation, pick inflation; that way, you can actually spend the stuff without FOMO.

Sargos 6y ago
ETH is money but it's not currency. It's not meant to be used to buy everyday goods and services.
- ntr-- 6y ago
  It is meant to be spent as gas in order to compensate for the energy costs of the computations in its smart-contracts. Why expend some amount of ETH building and executing products when you can just HODL and wait for the price to go up? Additionally, ease of spending drives up adoption which is a clear benefit to any currency.
  - Sargos 6y ago
    >Why expend some amount of ETH building and executing products when you can just HODL and wait for the price to go up? Most people aren't going to have a choice. ETH is required to be spent when making transactions and using dapps, NFTs, etc. Even L2s like Optimism, zkSync, etc will be spending ETH when writing to the L1 even if the end users are shielded from that. There is a built in economy that burns ETH so demand won't be a problem.
    - FeepingCreature 6y ago
      Yes, but that's exactly the problem. With any currency, spending happens when you see something that is worth more to you in sum over the future than the value of the currency. So when the value of the currency gets lower, you are eager to jump on opportunities; conversely, when the value of the currency gets higher, you are reluctant to jump on opportunities. To a first approximation, you spend inflationary money as early as you can, but deflationary money as late as you can. And that's the Ethereum blockchain ecosystem you get with a deflationary ETH - an ecosystem where everybody spends as late as they can. Does that sound like it will lead to a vibrant offering of services to you, cause it doesn't to me. This is also why I never got into Bitcoin. Why would I ever spend a bitcoin? As a currency it's near worthless, ironically; people who spend it will in the long run always be outcompeted by people who buy and hold. (Before the bubble bursts, anyways.) The medium of transaction should not be an investment vehicle; those purposes are directly opposed.
      - deleted 6y ago
        [deleted]
  - yokem55 6y ago
    Because while the fee burn does act as a deflationary force on the eth economy, there is still the inflationary force of the staking rewards. If transaction volume falls too much, then the staking rewards will outpace the fees burned and the eth economy will see overall inflation. At some point (insert hand-waivium here) an equilibrium will be reached between transaction demand, eth asset price, and staking demand (as more eth is staked, individual staking returns will fall, but overall inflation goes up).
jcfrei 6y ago
I don't think anybody who's informed about crypto economics (especially coin supply) will honestly claim that BTC or ETH should ever be used as a currency rather than a store of value or a utility token.

tom_mellior 6y ago

If one wants higher security, one shouldn't be pissing off the miners who provide that security.

wmf 6y ago
The point of this proposal is that Ethereum no longer needs miners and they know it, so there's kind of a race between the miners trying to take Ethereum hostage and the developers kicking miners off the island before they can do it.

AaronFriel 6y ago

That has been repeated many times but is not true, the price of an arbitrary unit of currency or crypto has no relationship to its security. That price going up or down has no relationship on the "security level" of the blockchain.

Sargos 6y ago
Look up Proof of Stake which is what Ethereum is moving to later this year. In Proof of Stake validators put up an ETH bond in order to randomly get picked to help create blocks in the network. The higher the price of ETH the more expensive it becomes to attack the network.
- AaronFriel 6y ago
  They could just require a higher stake, the price of eth is irrelevant. Let's say hypothetically one eth was worth about a Satoshi, 0.05 cents or so. So they could just require 1,000,000 eth as a stake. Or ten times that. Or a hundred times that. It's irrelevant what the price is, the choice of the stake amount is. If eth was inflationary, they could inflate the stake proportionally.
  - jtsiskin 6y ago
    That’s not true, those are two different things. Requiring 100x the total number of possible stakers is 100x lower. Versus if the price increases 100x, that means the same number of possible stakers is possible, but it’s now 100x more expensive to do a 51% (or whatever the PoS % needed is) attack.
    - deleted 6y ago
      [deleted]
    - AaronFriel 6y ago
      The ethereum protocol can choose whatever stake amount (in equivalent USD when they decide the bond to stake) they want. The currency being deflationary or not is irrelevant - the stake could be adjusted. The currency going up in down in value relative to ETH could be adjusted. They could choose to require one gwei, one ETH, or one million ETH. That's your protection. The exchange rate from USD to ETH is irrelevant.

wmf 6y ago

A higher market cap can be more secure in a PoS system but burning ETH doesn't increase the market cap. Like stock buybacks, burning coins increases the price without necessarily creating new overall value.