Original Title: Finding the Holy Grail 2.0 (Part 1)
This article is a continuation of "Why Invest in Blockchain" in October 2015 (https://bihu.com/article/653976) and "Finding the Holy Grail" in July 2018 (https://bihu.com/article/1019497) At that time, the price of Bitcoin was US$245 and US$7,880. Today, on December 27, 2020, the price of Bitcoin is US$26,964.
Forecast review:
In the article "Finding the Holy Grail", the author made the following predictions:
1) Within 4 years, the total market value of encrypted assets is approaching or surpassing that of gold, and the total market value of gold is currently US$8 trillion. The credibility is 90%.
2) In 4 years, the total market value of the basic token of a single smart contract platform exceeded USD 1 trillion. The reliability is 70%.
3) Within 8 years, super applications based on blockchain have emerged, and the market value of a single project has exceeded 1 trillion US dollars. The reliability is 50%.
Let's review them one by one first.
The first is that the total market value of encrypted assets approaches or exceeds that of gold before July 28, 2022, and the possibility of realization is significantly reduced. The speculative logic in the original text has been falsified: "From June 2011 to December 2017, for a total of 78 months, the geometric average monthly increase of the Bitcoin price was 8.64%. If we calculate the future based on the historical increase, then In the next 4 years, it will be about 53 times . The total circulating market value of Bitcoin today is 140 billion U.S. dollars, 140 billion * 53 = 7,420 billion, or 7.42 trillion U.S. dollars." As of today, the price of Bitcoin is 3.4 times that of when the original text was written. The geometric average monthly increase was 4.33%, which was only half of the average monthly increase during the period from June 2011 to December 2017.
The monthly average monthly compound increase of 4.33% is already very, very amazing, but it does not maintain the original price increase rate.
The price of other digital assets has not been able to maintain the original increase, especially the basic token of the smart contract platform as the token. The reason will be discussed later in this article.
Second, the total market value of the basic token of a single smart contract platform will exceed $1 trillion before July 28, 2022, and the possibility of realization is very slim. After the attribution analysis, the author believes that the root cause is that the speed of technological progress is not as fast as expected , and the details will be discussed in this article.
The third is the prediction that was considered low credibility at the time, but it is most likely to be realized, and the time is likely to be greatly advanced: before July 28, 2026, the market value of a single project of blockchain-based super applications exceeds 1 Trillions of dollars. The original text lists 3 potential super applications: a) algorithm-based stablecoin, b) bitcoin, c) cryptography-based identity system . The market value of Bitcoin today is US$501.1 billion, which is only one time increase from US$1 trillion.
The world is a complex system, and the future beyond a certain time span is unpredictable. Short-term general direction prediction is acceptable, but it is really difficult to predict the speed of development and evolution of things. That's right, the author is indeed looking for a step for the roughness of the details. Although the time for the realization of these three forecasts must be adjusted substantially, the author is still highly optimistic about the feasibility of the three forecasts.
The first half of this article will review the past 29 months and future prospects of Bitcoin, as well as the development of the smart contract platform in the past 29 months.
01
BTC vs. ETH
In the past 29 months, between the publication of "Searching for the Holy Grail" and today, Bitcoin has developed faster than smart contract platforms.
The "development" mentioned here not only includes the development of productivity caused by the improvement of actual utility, but also refers to the increase of attractiveness only due to changes in people's ideas . The focus of smart contract platforms is obviously the former, while Bitcoin belongs to the latter. That is to say, the technological progress of smart contract platforms represented by Ethereum is slower than that of Bitcoin, only because of the extended duration The speed at which people’s perceptions have changed. This is the basic point of the first half of this article.
The development of the two is actually reflected in the price comparison of ETH/BTC, as shown in the figure below.
At the time of the original publication, the price of ETH/BTC was about 0.058 , and since then , the price has been far below this value until today . Today's price ratio is only 0.023 , which is less than half.
In the one-year period before the original publication, the competition between ETH and BTC was in a stalemate.
At that time, the development of ETH was improving. The community had successfully emerged from the hard fork quagmire caused by the TheDAO incident, and due to the advanced nature of smart contract productivity, specifically because of the ERC20 token standard. The 1CO frenzy has triggered a big bull market in the entire crypto asset industry.
In contrast to BTC at that time, the community has been in an atmosphere of consensus collapse caused by a potential hard fork, especially when the time came to January 2018, the ETH/BTC ratio reached 0.12 , and the total market value of ETH was approaching BTC. The total market value of BTC accounted for 37.8% of the crypto asset industry , while the share of ETH rose to 31.1% . At that time, there was a hot word often mentioned in the community-Flippening, that is, ETH replaced BTC as the leader of the crypto industry. However, it has never happened so far. So, what happened in the past 29 months?
02What
happened?
The outside world happened:
A) The pandemic of the new crown virus has forced major central banks around the world to print money at high speed. The chart below shows that the Fed's balance sheet has grown from 4.3 trillion to 7.2 trillion in just 2.5 months, an increase of nearly 3 trillion US dollars. It is necessary to know that the quantitative easing in response to the 2008 financial crisis only printed 700 billion US dollars.
B) Wealth distribution accelerates polarization . The money release quickly pushed up asset prices and greatly increased the assets of the top 1% of high-net-worth individuals. In contrast, the bottom 50% not only did not hold assets, but also reduced their income due to unemployment. This polarization between the rich and the poor has aggravated social dissatisfaction and made it easier for people to accept encrypted assets. After all, when the old order deteriorates, encrypted assets provide a new type of protection.
03
What happened inside BTC?
It seems that not much has happened. There are no unexpected major events. The most important thing is to implement the halving of production in May 2020 according to everyone's expectations. Bitcoin has not been aggressive on the road to productivity improvement. It has not adopted the large block scheme advocated by the forked community such as BCH, but chose to remain unchanged.
Bitcoin's unchanging has brought expectations of stability and is the biggest selling point , especially when the old order is collapsing. After Bitcoin's successful halving in May 2020, the inflation rate is about 1.8% , and after the halving in 2024, it will further drop to 0.8% , which is lower than the 2% inflation standard generally recognized by central banks;
On the other hand, the Federal Reserve, the leader of the global central bank, can issue an additional US$3 trillion in just three months, the M0 money supply has risen by more than 70%, and the central banks of other countries have adopted similar extremely expansionary currencies. Policies, coupled with the extreme expansionary fiscal policies adopted by governments around the world, are in sharp contrast to Bitcoin's stability expectations.
In 2020, people’s perceptions have undergone a qualitative change . Part of this is reflected in the fact that institutions have begun to buy bitcoin in large quantities. From listed companies, insurance companies, and various funds have disclosed the purchase of bitcoin. This actually reflects the top 1 The concept of% of people has changed , and we no longer see celebrities come out to scorn Bitcoin.
On the other hand, changes in the perceptions of non-high net worth individuals can be seen from the proportion of the currency holding population. According to the “Cryptoasset Consumer Research 2020” report released by the British Financial Conduct Authority (FCA) on June 30, 2020, as of 2019 At the end of the year, the FCA estimated that the number of people who have held crypto assets in the UK accounted for 5.35% of the national adult population, compared with 3% in the previous year. If the growth rate remains unchanged, this value should be close to the end of 2020. 10% .
This is the situation in the United Kingdom, while the situation in the United States is that by the end of 2020, many financial applications for mass users have opened up crypto asset investment business , including Paypal, Robinhood, Square, etc., which is for ordinary people to hold Bitcoin Opened the door of convenience.
Taking into account the similarities between the two countries, the author believes that the proportion of the U.S. currency holding population should be close to that of the United Kingdom, that is, the U.S. current currency holding population should be around 30 million. Specifically, we can find it in the prospectus of the upcoming Coinbase. Look for confirmation. The United Kingdom and the United States are in the late stage of early adopters on the "Adoption Curve" of encrypted assets, and are rapidly entering the early majority stage. For details on the adoption curve, please refer to the original text of "Finding the Holy Grail", https://bihu.com/article/1019497.
All in all, Bitcoin is moving towards mainstream people and is also being accepted by mainstream ideas. The deterioration of the external environment has intensified this process.
04
What happened inside ETH?
A) With the disappearance of the 1CO boom, this business model has basically proven to be unreliable, with a few exceptions;
B) The progress of ETH2.0 is slow, and the roadmap is changed again and again;
C) Many second-tier technologies that are expected to solve the core throughput problem have proved to lack "Product Market Fit";
D) The monetary policy has been reduced from 3 ETH per block to 2 ETH, but the inflation rate is still 4.5%, and there is no expectation of a clear upper limit;
E) "Ethereum Killers" fall one by one;
F) DeFi has developed greatly, and the product market fit has been proven.
In terms of business development, ETH has made significant progress . Although 1CO proved not to be a widely desirable business model, later DeFi found a product market fit. In the value storage business, ETH has made a slight effort (blockchain reward dropped from 3ETH to 2ETH). There are also many enterprising voices in the ETH community, but the measures in this area are obviously insufficient, and there is no result from the results. Obvious effect. Regarding the storage of value, the author has always believed that the smart contract platform is theoretically possible to achieve a total cap policy similar to BTC in its own monetary policy, and compete with BTC in the future, but it is obviously not all smart contract platforms at present The author fully agrees with the key direction of this.
05
Concept vs. Productivity
Regarding the core bottleneck problem-throughput improvement, ETH has obviously not made any substantial progress . Currently, the number of transactions processed by ETH per day is approximately 1.2 million. Assuming that a user sends a transaction in an average of 3 days, Ethereum can only serve 3.6 million users.
The full load of ETH blocks has been going on for a long time, and the long-term state of high miner fees has greatly inhibited the development of applications on the platform. For the smart contract platform that takes the productivity route, it is a great failure. In the past 29 months, the progress of ETH2.0 has been far below the community's expectations ; and the second-tier expansion solutions, such as Plasma, sidechain, and Raiden network, have not been accepted by the market and cannot solve the throughput bottleneck problem. In this case , Ethereum, as a productivity platform, can only exist as an asset settlement layer, and is unable to act as a mass infrastructure on a global scale . If in the future, other platforms complete a breakthrough, Ethereum's status as the asset settlement layer will also be shaken. ,
The author is not here to say that the ETH community is not working hard. In fact, the smart contract platform can greatly increase throughput without sacrificing decentralization. The difficulty is determined by the nature of the matter. It seems that the difficulty is quite large at present. But it is not impossible. The author has seen some signs that it is hoped to achieve a substantial breakthrough in 2021, which will be discussed in the second half of this article.
Looking back, we can probably get the conclusion "so obvious that it is common sense": the difficulty of improving productivity for smart contract platforms is much greater than BTC's lying, waiting, and keeping still, and expecting the deterioration of the external environment to bring it again A little bit of luck. ,
Yes, looking back at history, the world always seems so simple.
"Bitcoin is useless" has always been the biggest obstacle to people's recognition of the value of BTC. People always ask: " Why is Bitcoin worth ?" At present, the concept of Bitcoin as a "digital gold" has become more and more popular. As an asset, gold is actually "useless". Some people have calculated that the price of gold based on the practical value of industrial utility and decoration is about US$50 per ounce. Today, the price of gold is US$1867 per ounce. Then the remaining The price of $1,817 per ounce comes from people's consensus based on ideas.
BTC is an asset based on consensus; while the smart contract system is a productivity platform, which is born to prove itself.
Starting from the second half of this article, the author will replace the "smart contract platform" with the term "productivity platform", because a blockchain system based on a new architecture like Polkadot does not focus on smart contracts.
06
Summary
The first half of this article focuses on the recent 29-month history of Bitcoin and the smart contract platform Ethereum, and discusses that BTC, as an asset based on consensus and concepts, due to its own certainty and the great uncertainty of the surge in the external world, As a digital gold, Bitcoin can well meet people's needs. People use their feet to prove that the market fit of BTC's products has exploded.
The author further inferred that Bitcoin will most likely become the first holy grail with a market value of US$1 trillion. Ethereum, as a representative of the productivity platform, as well as other productivity platforms, still needs to prove its own strength.
The second half of this article will focus on the future and try to make some predictions and analysis, including breakthroughs in productivity platforms, stable coins, identity systems, etc. Stay tuned.
——End——
"Disclaimer: This article is the author's independent point of view, and does not represent the vernacular blockchain position. This content is only for the popular science learning and exchanges of encryption enthusiasts, and does not constitute investment opinions or suggestions. Please treat it rationally, establish a correct concept, and increase risk awareness. The copyright of the article and the final interpretation right belong to the vernacular blockchain. 』
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