So said Joseph Lubin of ConsenSys, ethereum’s powerhouse that has spurred many start-ups and tools, like MetaMask, in a “leaked” letter to the staff, adding:
“In ConsenSys 1.0, we built a laboratory instrumented to prove the moon existed, using complex engineering and math and creative philosophical arguments.
Now we need a streamlined rocket ship to get us there, since the actual proof, ultimately, is in the landing.”
The full letter isn’t published, but we can assume the message simply put is that projects need to show results, need to show revenue, and/or need to show user growth.
Some of them have not been able to partly because of ethereum’s limited capacity. While its price has fallen by now more than 90%, it transaction volumes have remained stable at about 500,000 a day for months.
The ethereum network can currently handle double that amount or perhaps triple at 1.5 million, meaning that it can accommodate only some use cases which are in the people’s self interest in an obvious manner – like DAI or Compound.
Where it is more say a game that is about to go viral, the capacity is not there so the project can’t grow and thus the revenue can’t be there.
That will change soon-ish, perhaps even by summer. There will be sharding and PoS and rent and pruning and a reasonable plan for a world scale decentralized public blockchain that can last for generations.
We’re not there, so the crypto space is currently at a stage where demand for eth to use it on a dapp or whatever can’t grow beyond 1.5 million transactions unless fees grow correspondingly.
As always there are exceptions. Where there’s money to be made say in arbitrage or say in borrowing from DAI at 2% to lend on Compund at 10% all in a trustless manner, then fees don’t really matter.
Then there’s the somewhat reasonable argument of a store of value, but that argument has a somewhat long term horizon because bitcoin and eth currently have a fairly reasonably high level of inflation.
That will change, starting next month for eth with the Metropolis upgrade that will nearly halve new supply, and starting in 2020 for bitcoin in the halvening.
Once they do get to zero inflation, then the store of value argument if made in a reasonable manner would be to say that supply will no longer increase, but a new one is born everyday and some of them may want btc so demand may grow if for nothing else than as diversification for savings.
For ethereum the same argument can be made, and in addition a bet on eth right now would be based on the probabilities of whether capacity will grow, and thus demand for eth, and if it will by how much, and what are the chances this will really reach world scale capacity and if it does whether it will have world scale usage.
That’s a complex equation with many unknown parameters, but there’s a lot going on, even with this very limited capacity. You’d think a lot more would be going on with even more capacity, and if that capacity is world scale, then we’d see the full potential and we’d see crypto businesses with revenue, and profits and user growth as they find the use cases.
Most are old enough to remember when they talked about Facebook or Google having people interested and having user growth, but no revenue, no way to make a profit. Eventually, of course, they found the way and became hugely profitable.
That came after the dotcom crash when some pretty good ideas folded as investors effectively became irrational both in the way up and in the way down.
Had many of those businesses that folded found a way to weather the storm, or had they found a bit more luck in different timing, then they might have been hugely successful. Plenty of those same ideas that folded, almost to the dot, were again launched latter and now make up the internet as we know it.
Plenty innovative ideas launched after all this. Facebook, Twitter, and other household brands for example launched during the crash or shortly after.
Meaning that, if foresight has any say, this is not the end but just the beginning of a new phase in the invention and adoption of this very new technology, where public blockchains and ethereum dapps show use cases. The trillion dollar question is of course which one will have the biggest or the best use case. The answer to that, time will say.