A bit of background
In a recent article published to TechCrunch.com, author Jeremy Rubin proposed that the Ethereum network may outlast the token itself. Just for the sake of clarity, the Ethereum blockchain holds a wide range of tokens, which are collectively referred to as the Ethereum network. The stated principle of this network is to ‘Build Unstoppable Applications’, which run on the cloud of computers supporting the Ethereum blockchain. Investors have long presumed that the use of this network to run apps would be paid for exclusively with Ethereum. Despite this, the community has recently begun to see pressure from app creators to allow smart contracts, the building blocks for these apps, to be paid for with other tokens from the Ethereum network.
Why would the network adopt such an idea, especially with the potential to devalue the core token ETH? For starters, it just makes sense. Most of the apps launching on Ethereum have proposed marketplace or platform business models, which depend on access to reliable computing power at relatively fixed pricing. If app users hold sub-ETH tokens, but must pay in ETH, this introduces undue complications. In contrast, it’s been proposed that smart contract miners (read computers that want to sell processing power) could accept whichever tokens they want. If so – what would hold up the value of Ethereum?
A wider view
In a previous article, I outlined how spending could be the key to cryptocurrency valuation growth. The argument therein goes something like this:
“If more people are getting paid in crypto, and more people are spending it, more people will want to have some of it, because it will be more fungible”
This is a simplified argument, of course, but it helps to understand one of the core problems with cryptocurrencies as currency. No one wants to spend something that they consider a worthwhile investment. As a result, even if decentralized applications take off and find users, it remains to be seen whether those users will actually want to pay for that service using cryptocurrency rather than their typical fiat account. Even if smart contract miners are paid in cryptocurrency, wouldn’t that mean they’d need to sell it to cover their costs, and thereby put downwards pressure on the value?
Blockchain and distributed ledger technology are indisputably better technology. The only thing that is uncertain is how we get to that future if cryptocurrency continues to be seen as a sought-after investment property. Maybe the bubble needs to start bursting so that the blockchains can start turning?
Alex is a full-stack developer and digital rights activist. He also works with the content platform Blockchain.wtf and The Blockchain Institute to develop software solutions and elevate the discussion of how this technology can be used to build better products both online and offline.