2017 to Today: Ethereum Predictions Are Aging (But Not Well)

by Admin
10 minutes
2017 to Today: Ethereum Predictions Are Aging (But Not Well)

Eighteen months ago, CoinDesk sent a survey to its readers posing for their opinions on the present state of the crypto ecosystem. The results were analyzed and published within the State of Blockchain Q1 2017. during this piece, the first author reflects on a number of the core findings.

The most striking survey response was also the foremost straightforward to understand: sentiment round the ‘overall state’ of bitcoin and ethereum.

Less than 5 percent of these surveyed in Q1 2017 felt even slightly negative about the general state of ethereum. The sentiment and optimism could have hardly been any higher.

Network Data: Then and Now

At the time, the amount of transactions on the ethereum network was rising.

Transactions on the bitcoin network were rising also , but the magnitude of growth was less dramatic, and bitcoin blocks had began to average over 90 percent capacity.

Demand for bitcoin block space lead transaction fees to average north of $1 for the primary time ever while ethereum’s fees averaged but $0.05.

It was clear that transaction fees were an outsized component of the negativity that survey participants felt when asked about bitcoin.

In the 18 months since, we’ve seen the rollout and initial usage of both SegWit and Lightning Network to assist address bitcoin scaling, but the block limit kept the on-chain transaction count bounded under about 400,000 per day. Without an equivalent limitations, we saw ethereum’s transactional count exceed 1m per day in late 2017.

During that period, we saw ethereum’s average transaction fee exceed $1, but also watched bitcoin’s pass $50.

When block space is abundant and transaction fees are low, high transaction counts are easy to realize , useful or not (similar to concerns around trading volumes on zero-fee exchanges).

Analysis has now been done that claims that one mixing system comprised over 60 percent of all ETH transaction volume between February 2017 and February 2018.

Dapps and ICOs

Ethereum had the most important ICO so far in July 2014 and therefore the genesis block was created a year later in July 2015.

In the year between the ICO and mainnet launch, many projects were experimenting with creating early dapps, including Augur, launching a sensible contract on the ethereum test net in April 2015.

Many within the community loved the thought of a decentralized prediction market, and in late 2015, Augur used the ICO model to boost $5 million to still build out their platform. The Augur ICO was for REP, a token which allows holders to act as oracles to settle markets after the very fact in exchange for a percentage of the entire amount bet.

Users don't need to own REP and may bet in ETH, a more interesting token design for REP in my opinion than an approach some dapps have taken by introducing a replacement required currency within their ecosystem.

By Q1 2017, many dapp ideas and token mechanisms that are irrefutably worse had been funded, and shortly venture capitalists had been replaced by the worldwide retail public via ICOs because the preferred and dominant sort of early stage fundraising in crypto.

The community was clearly enthusiastic and willing to fund any new decentralized, tokenized plan to compete with existing industries and corporations .

Not only were participants optimistic about the longer term of Ethereum and its dapp ecosystem, but they also claimed to very positive about their current state.

I believe Augur is great example of the chasm that has become more clear between expectations and reality. As stated, Augur launched an early, test version of their product before Ethereum actually launched. Augur’s actual launch just happened just 3 months ago in July 2018, over 3 years later. within the last 24 hours, Augur has had but 50 users, 106 transactions, and about $10,000 in volume.

At dapp number 48 out of 970 when ranked by users, Augur’s minimal usage metrics aren't an outlier among ethereum dapps. the highest used Ethereum dapps remain decentralized exchanges and games and no dapps had over 2,000 users or 10,000 transactions within the last 24 hours.

Despite new dapps launching, global dapp activity has remained relatively flat over the last year, never exceeding 50,000 users.

When comparing the usage of dapps across platforms, you'll quickly find alternative ecosystems like EOS that are currently displaying more usage than ethereum. The weaknesses in comparing dapp metrics across platforms like ethereum and EOS have many parallels to the comparisons made earlier between transaction counts across bitcoin and ethereum.

Casper and Ethereum’s Move to Proof of Stake

Since inception, one among the foremost critical, protocol level events on the Ethereum roadmap has been the shift from a symbol of labor consensus and security model to Proof of Stake. In June 2016, Vitalik predicted this shift would occur in early 2017.

Data source

In Q1 2017, Casper wasn't live, but the community was quite optimistic it might a minimum of be live by today.

Eighty-three percent were wrong, it’s now Q4 2018 and proof-of-stake isn't survive Ethereum. Casper research remains ongoing.

Scaling with Layer-two Networks

Bitcoin, ethereum, and nearly every blockchain project is researching scaling the network through layer-two networks. In Q1 2017, 87 percent of the community thought that Raiden would be survive ethereum by the top of 2018, while 69% thought Lightning would be survive bitcoin.

Bitcoin now has over 10,000 Lightning channels, while Raiden isn't survive Eehereum’s main net (and now features a token, RDN, which had an ICO). Ethereum dapps including Funfair and Spankchain have however built dapp-specific scaling solutions and research on generalized state channels is ongoing by several parties.

Public Attention and Growth

In many of the simplest ways to live however, participants were largely right to be bullish.

After the worth of ETH spent much of 2016 above $10, the worth of ether was back under $10 in Q1 2017 and global Google search interest was down following the chaos of The DAO and ETC.

In March 2017, ETH’s price set an ATH of $50.

In June 2017, search interest exploded and ETH’s price hit $400.

In January 2018, search interest surged once more , and at the height of the market , ETH hit $1,400.

If you had bought ETH (with dollars) at any point between the ICO and mid-January 2018, you'd have had a profitable trade (if you sold at the top). If you purchased within the ICO (at $0.31), you'd have returned 451,500 percent (better than equity in Coinbase today at a $8 billion valuation compared to its $4 million seed round, and ETH with public market liquidity).

ETH has undoubtedly been a historic investment opportunity. Compared to several traditional and even crypto asset alternatives, it's often outperformed.

On many time scales however, including in 2018’s market (2014’s which it wasn’t around to experience), it's actually severely underperformed.

Both holding $ (as many ICO treasuries now realize they ought to have done) or maybe BTC would are vastly superior strategies in 2018.

In conclusion

Ethereum has clearly fallen in need of technical expectations over the last 18 months.

In all reality, the bar of expectations was simply set far too high by un-savvy retail investors with dollars and tokens in their eyes. The Q2 2017 survey article alluding to the inevitable pop that Spongebob saw coming from stupid inflated tokens was also simply sure to happen.

Perhaps we should always be thankful it happened quickly within the last 18 months and now we will enter a period like 2014 and 2015 where there's more specialise in building than trading (or at a minimum it can help filter the great traders from those that good lucky with ‘diversified exposure’ during a bull market).

Much like bitcoin companies benefited from the building heavy period of 2014 and 2015, hopefully ethereum and its dapps can benefit heavily within the coming years from the tech inbuilt 2018’s market . Hopefully the worth depreciation and forthcoming ICO regulatory actions will further help shape the planning of subsequent wave of projects, fundraisers, and token mechanisms.

To see the contrast between Q1 2017 sentiment and today, help CoinDesk Research by taking the Q3 2018 sentiment survey.

Disclaimer: The author has short exposure to ether, with rationale described during this thesis. Disclaimer.

Rusty ether image via Shutterstock