Ultra Sound Money - The Daily Gwei #288

If an ETH falls in a dark forest and no one is around to hear it, does it make an ultra sound?

‘Ultra sound money’ - it’s a term that was originally coined by Ethereum researcher Justin Drake and posits that if BTC is ‘sound money’ because of its supply cap, then ETH must be ‘ultra sound money’ because it will (potentially) have a decreasing supply after EIP-1559 and the eth1<>eth2 merge are implemented.

I wanted to start off this piece by setting one thing straight - the ‘ultra sound money’ term isn’t meant to be taken too seriously - it’s mostly a meme and personally I think the term ‘sound money’ is overused and has lost most of its meaning because of that. But still, I see many people taking these kinds of memes literally, getting upset over them and then calling them “cringe” or trying to tear them down. Though the funny thing is that the meme is doing exactly what it’s meant to be doing - spreading a message as far and wide as possible in any way that it can.

Alright, so why do we even want ETH to have a decreasing supply? Isn’t ETH meant to be a cryptocurrency aka something you can use as money? Well, while I’ve been a big advocate for the “ETH is money” meme in the past, I don’t think ETH is particular good money for the simple reason that it’s not very stable (even during the current “crab season” we are experiencing). I also don’t think ETH will ever be a good money - sure, people can and will use it as a medium of exchange (MoE), but I think that it’s much more likely that a stable money is built using purely ETH as collateral type (there are already projects like RAI that are attempting to do this).

So you may be wondering - what is ETH meant to be if it’s not meant to be good money? Well I think that ETH is the world’s best programmable and decentralized store of value collateral asset. Okay, okay - I know that reads like a buzzword sandwich, but there’s plenty of meaning behind those words. “Programmable” just refers to the fact that, on Ethereum, ETH as an asset can be coded up to do many things - from “transforming” into like-for-like assets such as WETH to being used as collateral in a money market. Of course, “decentralized” refers to ETH’s very special place on Ethereum - it is the only asset that is generated by the protocol itself; not a smart contract. “Store of value” refers to ETH’s monetary properties and the fact that people believe that ETH will appreciate against fiat over the long-term (aka hold its purchasing power value). And finally, by bringing all of the other properties together, we get ETHs use as a pristine “collateral asset” because ETH has very healthy liquidity (both on-chain and off-chain) as well as a large market cap (sometimes referred to as Ethereum’s “economic bandwidth”).

Taking memes too literally can lead to various misunderstandings and even lead to toxicity within communities. I think that memes are the most efficient “carriers” of information that we have on the internet and the best memes are usually very simple to understand. Though, this means that by definition memes lack nuance so not taking them seriously is usually the best course of action. After all, if you want nuance, there’s plenty of whitepapers you can read (kidding… sort of).

Have a great day everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.