So you survived the great crypto crash of 2021 - how did it feel? I’m sure some of you felt scared, anxious and not sure what was happening but chin up - the first time is always the hardest! On that note, let me cheer you up some more in today’s piece with a break down of all the fundamentals that are still intact for Ethereum and why I’m more bullish than ever.
First up is DeFi and oh boy is the explosive growth here not slowing down even though the gas fees are high. Decentralized exchange volumes are hitting record highs, protocols are generating record fees, new users are being on-boarded and DeFi as a whole has become incredibly resilient as it’s now able to withstand massive flash crashes without anything blowing up. This growth and resiliency will work to further strengthen the DeFi narrative and allow entities like institutions to feel much more comfortable entering the ecosystem. It will also work to bring much more legitimacy to DeFi and show users that putting their funds into battle-tested Ethereum-based DeFi protocols is not super risky!
Next up we have the continued rollout of Ethereum scaling solutions. I know I write about this a lot in this newsletter, but I still feel it’s important to reiterate what we have today and what’s coming. Loopring, DeversiFi, dYdX, zkSync, the entire Polygon ecosystem and much more are already live with Arbitrum, Optimism, zkPorter, StarkWare’s StarkEx and more going live shortly. We already have exchanges such as OKEx announcing support for Arbitrum and Coinbase has supported Optimism for a while now - the future is incredibly bright for all types of Ethereum scaling solutions - high gas fees will soon be a thing of the past for end-users!
We have the 2 most anticipated upgrades to the Ethereum network in its history - EIP-1559 and the eth1 <> eth2 merge. The former will hopefully be deployed to the Ethereum mainnet in less than 2 months and the latter is expected in Q4 2021 or Q1 2022. I still think many people are underestimating the insane impact both of these upgrades are going to have on the value of ETH (and I wrote about what the impact is going to be here). Though beyond the value drivers, EIP-1559 brings with it a host of UX benefits for end-users and the merge finally gets us off proof of work and fulfills the original proof of stake vision from all the way back in 2014.
NFTs have been in a bit of a bear market lately but that doesn’t mean they are dead - the NFT ecosystem still has plenty of builders creating innovative new products all over the place. On top of that, scaling solutions like Immutable X are already live and adding a tonne of value for users because no one wants to pay $50 in gas fees to trade a $10 item! I think the current bear market that the NFT space is experiencing is quite healthy because it will weed out a lot of the opportunists and the strong & dedicated teams can be allowed to grow and prosper.
Finally, we have so much innovation happening in the DAO space that it’s hard for even me to keep up these days. I did write about DeFi treasuries the other day which I consider to be a related topic to DAOs, but when I say innovation I mean at the governance layer itself. There are a few projects that I’m keeping an eye on lately like Orca Protocol but I’m also interested in projects like Fish.vote that are simple tools to make the overall governance process of existing protocols easier. I believe that the most impactful governance tools will be those that allow users to have an outsized voice without having to jump through complicated hoops.
As you can see, there’s plenty to be excited about in the Ethereum ecosystem that really doesn’t have much to do with the intra-day price movements of ETH or other crypto-assets. Builders across the ecosystem are well capitalized and funding is still flowing to new teams on a regular basis. So sit back, relax, enjoy the revolution and don’t blow yourself up in the markets!
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.