Ethereum is an Economic Nexus - The Daily Gwei #77
Everyone wants a piece of the most valuable crypto-network.
The Ethereum network achieved 2 new all time highs yesterday - it processed the most transactions ever and generated the most fees in its entire history. When you think about it, this isn’t really all too surprising given that everyone was trying to claim their free UNI airdrop (and sell it using Uniswap). Nonetheless, it was economic activity and Ethereum is a nexus for this activity.
I generally like to think of Ethereum as an economic nexus for the entire cryptocurrency space. It sits in the middle as a decentralized and ultra secure layer while there are spokes all around it that bridge in. These spokes can be other blockchains (“sidechains”), centralized services like exchanges, centralized databases that feed information to the Ethereum network and more. All of this activity increases Ethereum’s economic activity which in turn increases its fees which in turn, once EIP-1559 is implemented, creates an incredibly secure network with a monetary asset that has net negative issuance based on natural supply and demand forces.
The native asset of Ethereum, ETH, is an amazing asset that has incredible properties - the best of which are its non-custodial and censorship-resistant nature. Today, there is almost $3 billion (7.6 million ETH) locked up in DeFi powering many different decentralized economic machines (protocols). These machines are already better than their centralized counterparts with DEXs like Uniswap regularly doing more trading volume than Coinbase and protocols offering much better lending/borrowing rates than centralized services (even without the token subsidies). Not to mention that DeFi is just a much better experience in general (even with the high gas fees).
On top of this, foreign assets are clamoring to migrate to the Ethereum nexus with over $1.1 billion worth of BTC now tokenized on Ethereum. This tokenized BTC isn’t just sitting idle either - it’s being actively used within the various apps that are a part of the nexus. People are providing liquidity to Curve’s BTC pools to earn CRV + trading fees, they’re doing a similar thing in the WETH/WBTC pool to earn UNI + trading fees, they’re borrowing stablecoins against their WBTC in Compound and so much more.
This may come across as hyperbolic but I truly believe that, if we play our cards right, Ethereum will become the greatest economic nexus in history. It will absorb trillions of dollars of value into its liquidity vortex, power an entirely new global financial system built from the ground up, enable new coordination tools to build global communities (arguably it already has) and reinvent the way we do so many other things. We may not be anywhere close to that today, but it’s coming much faster than you may think.
Have a great weekend everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.
Good one Sir.