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Ethereum's current valuation can be explained fully by its current use. With this I mean, if you take current demand for blockspace (i.e. demand to settle a tra

by pa7x1 4y ago

Ethereum's current valuation can be explained fully by its current use. With this I mean, if you take current demand for blockspace (i.e. demand to settle a transaction on Ethereum) in USD and issuance of ETH you get current prices. So Ethereum is not trading at any premium, nor any assumption of future growth cooked in. Ethereum is valued at the price that its current use justifies. Here is the very quick back of the envelope calculation: Current daily fee revenues: 2M USD (slightly above but let's round it) Current daily ETH issued through staking: 1800 ETH (again, rounded) 2M USD / 1800 ETH = 1100 USD/ETH In fact, if you plug-in 3 month moving average of blockspace demand and issuance you get the current 1200 USD it's trading at. HN needs to start waking up to the fact that ETH is a productive asset, there are cash-flows behind it and those accrue to token-holders.

simonw 4y ago
Where does that $2M/day come from? Is anyone spending money on anything that's not related to speculative investments yet?
- pa7x1 4y ago
  The fee revenues come from its users, they pay when they use an application built on Ethereum to settle the transaction. Most of the applications, specially the most successful ones, the ones that spend the most ETH, are financial in nature at the moment. I suspect this is likely always going to be the case, as blockspace is a scarce resource only the most added value applications can compete for it. Non-financial applications will exist in the multiple L2s that are being built on top, these involve various cryptographic proofs to settle batches of transactions onto the L1. So financial applications and L2 proof verifiers will likely dominate the use of Ethereum in the future.
- csomar 4y ago
  That’s money spent on fees to execute a transaction. It’s usually relatively small to the amount of value transacted. If we assume a 1% fee burden, then Ethereum transferred $200M that day in value. And that’s low-balling it, the actual amount is probably in the billions. What you fail to understand is that Crypto is huge. $1Bn is a shit-ton-lot of money and the current market cap is $795Bn. Stables tokens alone account for around $100Bn of that. And keep in mind, on a relative basis, this is the worst crypto winter ever. The bottom is probably in or close. I think we’ll see prices rise up again mid-2023.

by pa7x1 4y ago

simonw 4y ago

Where does that $2M/day come from? Is anyone spending money on anything that's not related to speculative investments yet?

pa7x1 4y ago
The fee revenues come from its users, they pay when they use an application built on Ethereum to settle the transaction. Most of the applications, specially the most successful ones, the ones that spend the most ETH, are financial in nature at the moment. I suspect this is likely always going to be the case, as blockspace is a scarce resource only the most added value applications can compete for it. Non-financial applications will exist in the multiple L2s that are being built on top, these involve various cryptographic proofs to settle batches of transactions onto the L1. So financial applications and L2 proof verifiers will likely dominate the use of Ethereum in the future.
csomar 4y ago
That’s money spent on fees to execute a transaction. It’s usually relatively small to the amount of value transacted. If we assume a 1% fee burden, then Ethereum transferred $200M that day in value. And that’s low-balling it, the actual amount is probably in the billions. What you fail to understand is that Crypto is huge. $1Bn is a shit-ton-lot of money and the current market cap is $795Bn. Stables tokens alone account for around $100Bn of that. And keep in mind, on a relative basis, this is the worst crypto winter ever. The bottom is probably in or close. I think we’ll see prices rise up again mid-2023.