Step Back, Elephant in the Room: it's time to talk about the price.
Here I present a bit of sentiment about the status of the Ethereum project and what is going on with the price. With 400$ Ether and 100 million dollar ICOs on the books, there is a lot to be said.
Ethereum is not a store of value.
Ethereum is not that decentralized.
Everyone is not using it as a "world super computer".
Ethereum is not scalable.
This is the Wild West.
Right now Ethereum is the ICO fabric.
This is why the price is booming. You know what I have said about riding Bitcoin bubbles. The same applies here: the momentum is far from over and it will almost certainly take prices that evoke similar emotions to 1000$ Bitcoin to bring anything to a stop.
Most of what Ethereum does today is moving Ether and ERC20 tokens. None of this smart contract magic in the front of everyone's minds. This is not the vision. The price is not relevant to the vision.
The Ethereum protocol is extremely immature, untested, and experimental. The Ethereum smart contract ecosystem is even more immature than the Ethereum protocol itself. If you are deploying smart contracts today, you should know this. There is no getting around the fact that this is amateur hour. There is a risk of the cart pulling ahead of the horse on this one; the core protocol level is unable to handle the businesses wanting to build their apps on Ethereum. Keep in mind, Ethereum can't even handle the current ICOs - its "killer app".
The tech behind Ethereum is extremely meaningful without the "token madness" entirely. If it was impossible to have tokens on Ethereum, there is still so much going on with the project that is increasingly meaningful. Given my comments on the state of the token economy - this should mean a lot.
No one is claiming ethereum is scaleable today. It is 20 tx/s on a good day. The development is transparent about their ambitions to move to solutions that can solve the scaling problems but as you will see in a bit, none of those are sure and tested. There are many contingencies that are hinging on unfinished and unknown problems.
If you want invest into Ethereum I think you should give this entire interview a watch. It is with Vlad Zamfir (Ethereum foundation researcher) who is incredibly levelheaded even with his position at the Ethereum foundation. Full of criticism this space is in dire need of.
On the ICOs
The state of ICOs today is something not many really saw coming; everyone knew how revolutionary ICOs would be but now that we are in the middle of ICO craze, the bubble has self inflated much faster than I had even imagined. This boom brings us to some of the problems with ICOs that I have outlined here and here.
I am really exited for what ICOs can do in the future. Everyone was exited to see the innovation these groundbreaking fundraisers carried. The problem is the ICOs are getting out of hand. Who is crazy enough to "essentially ask" for tens of millions for their whitepaper and some ICO code. No minimum viable product. There are reasons traditional venture capital happens in stages, with founders getting more money as they prove themselves as capable. This isn't necessarily happening with the multimillion dollar ICOs. But whatever, all the money is going into development on Ethereum. Their failures will teach the future innovators the hard way. Just as the failures of the dot com bubble allowed for the internet to form as we know it today. Just because some people will lose money doesn't mean it was a waste.
The price is going to go higher. It can go quite a bit higher indeed. We haven't seen the ranges that will almost certainly be triggered in the short term. Like I have said before, it will likely get to levels that trigger the same uncomfortable feelings 1000$ BTC brought in 2013. In the correction we will likely see a 60-80% loss in value like Bitcoin saw before, at least briefly. Who knows, apparently "the landscape is different today".
It will crash. Everything will, massively. It might be some bug or major hack, some regulatory scandals or even a network split; the correction from the insanity will come. All this said, markets can be irrational for a long time, much longer than you can remain solvent.
There is nothing that can be done to stop these bubbles, we simply must let them run their course and pop. The ugly truth.
The correction doesn't mean anything about a lack of innovation or utility of an industry - again, look at what happened with the internet bubble. The time is so soon, the execution is almost perfect. Once enough expensive lessons are learned, Ethereum and this technology as a whole will be ready for everyone. Finally.
Blame
Who is at fault for the chaos that is Ethereum and even crypto as a whole?
The problem with the point we are at right now is everyone is still making money. The investors who invest in scammy ICOs are ticket scalping their way to huge profits. You can't blame them. Everyone wants to be making money. I will admit it, I am somewhat of a capitalist. I don't blame investors for taking advantage of hype.
Some people (like the prominent community member @whalepanda) believe much of the responsibility for the crazy speculation and out-of-control ICO situation lies on the developers. To this I say: what developers? I think many of the developers launching these insane ICOs at the very beginning of their project are somewhat responsible. But it is not necessarily their responsibility to be setting low caps for their sales - this in fact could be a problem in its own right.
Now I would not necessarily describe the Ethereum Foundation or the developers in the same position as mister WhalePanda does in his recent post: I was wrong about Ethereum. The Ethereum Foundation, its members, and even Consensys are in a uniquely awkward position. I don't think it is fair to say they are promoting snake oil or anything of the like.
Is it the developers or prominent Foundation members duty to do anything? The crowd is funding, the crowd should be vetting thoroughly. Right now there is not the kind of self governance needed in the community.
Is it the place for individuals at the Ethereum foundation like Vitalik and Vlad to do more to emphasize the experimental nature of Ethereum at the present? Vlad has done a lot to try and tamper the enthusiasm - see some of his tweets and blog posts.
There might be something to "peddling the vision" that is nessacay to actually achieving the vision. The whole story is what could be, not what is possible today.
Vitalik (Ethereum Foundation; co-Founder) has been an advisor for many projects, although most projects haven't paid him a cent for the pleasure. There have certainly been many other projects that have listed him as an advisor but haven't even bothered to contact Vitalik in the first place. Vitalik showed his reason saying "in general best way for me to help everyone is to mostly focus on casper+sharding". Vitalik admitted his error eloquently saying it took "waaaay too long to properly internalize that advisorship is primarily about marketing, and not advising". He has socially committed to no longer being an advisor to any other ICO projects.
Rocks
To those who think Ethereum is going to replace Bitcoin, I think you are wrong. Like has been said before, Ethereum is not a store of value in the same way Bitcoin is - there is no cap. Whatever it is that Ethereum is going to replace or become is going to hinge on many things going right. There are a lot of rocks to beach the boat.
Ethereum is moving to PoS. This is uncharted waters. Nobody has done proof-of-stake before. Sure NXT and Peercoin call themselves proof-of-stake, well they fall to solve the nothing-at-stake problems and don't offer the same concepts of finality that are so desired in this industry. Casper is nothing like any of the previous implementation attempts. Additionally, Casper PoS is much different than a Larimerian DPoS structure. This is the first time any of this will be battle tested. The research is strong, certainly more so than any competition; this does not change the gravity of the problem at hand.
The transition to PoS, even with the technical challenges at hand, will be technically easy - not politically easy.
Sharding, the primary solution to scalability problems that everyone buzzes about on the forums and reddit suffers from the unavailability problem. Not something often referenced in those reddit discussions. Sharding is hard too.
Oh and by the way, sharding is not even going to be ready for another two years. Nothing to worry though, these things take time - just keep this in mind when thinking again about the price of ETH and how crazy markets can be.
The moral of the story is this is all of this HARD. This might not work. There are unanswered questions and unsolved problems. Nobody has been here before. We are doing the things that most industries and investors scoff at. That's how we know we are on to something truly disruptive.
Stay critical,
Kyle
Great perspective in this post. I agree that ICO madness is out of control and that there could be a massive bubble burst looming in the near future. I also think the price of ETH will continue to grow, despite periodic dips - Ethereum the fuel, the fabric, is stronger than any individual ICO.
Absolutely correct.
Very eloquent and balanced. I really appreciate the quality of your analysis and post.
Cheers!
Be sure to browse the links for loads of more information
@kyle.anderson Great writeup! I'm glad to see another HOKIE on Steemit!
You a HOKIE?!
Yeah man! Class of 2014. My girl @curiouser is a Hokie too!
One of my Tech related posts:
https://steemit.com/sports/@slickwilly/virginia-tech-vs-miami-lovin-me-some-college-football
Rocking! You stil in the area?
^^
Incredible article, my friend. Yours never disappoint. I agree with mostly everything you've said. Ethereum might not be a store of value, however it's market cap will surpass Bitcoin's. It's just a matter of time. Again, like I said in my video, I can't say what this will do to the market. It's hard to say. Keep up the great work. Resteemed.
I agree that the Ethereum platform could enjoy quite a hefty market cap indeed.
The future is fun!
This is a fantastic analysis @kyle.anderson. I share much of the same sentiment. After the Banco ico I became even more vigilant of this ico charade.
I feel kind of dirty for investing in that one lol!
lol. oh dear
Excellent post. I continue to maintain the position that we will see a divergence between coins with futures and those without, I imagine some will lose a lot of money when/if that happens.
While I do not think we are in a traditional "bubble" I do think we need to shed many of the speculative and scam coins before we can move to the next level of integration and adoption. but who knows....crypto is crazy.
What are your thoughts on Golem, I was asked about it recently and honestly said that I really do not know that much about it. I have been doing more research into the project and it seems to have potential. You seem to have a very strong grasp of ERC20.
I see what you mean about not being in a traditional bubble.
Who knows.
Golem is really cool, time will have to tell if it becomes the monopoly. Crypto is incredibly capitalistic.
That interview with Vlad is definitely a must-watch. When one of the core developers is trying to throw cold water on the hype, it's worth paying attention.
Now I think it is important to note that he is throwing so much cold water because he feels that no one else is doing any of it. He works for the Ethereum foundation for hecks sake. Certainly clarifying and IMO very encouraging.
True. I see what you're saying. It's certainly good to see someone on the inside recognize the cart is way out in front of the horse.
I just hope the horse (the underlying tech and adoption rates) can catch up quickly enough to avoid an extended bear market.
That's why we should all be keeping lots of USD right now to scoop up the best crypto assets when they're oversold in a couple years. That's my outlandish prediction at least. ;)
I think in a couple of years we will see a few crypto assets really rising to the top in price and awareness and many of the other just falling away. Would be a good time to buy now I feel and diversify as you may hit one which goes to the moon! As well as that fiat currency is looking doomed with the aount of debt especially in the US so people are looking to invest in other places.
Yes, fiat will eventually go away in its current form. But I've been reading that (and thinking it) for over a decade now. It's going to take time. Longer than you or I would like.
The crypto market still needs time to mature. This will include bear markets. During bear markets, even the best crypto assets (the ones that rise to the top as you accurately describe) will be undervalued. That value could be higher than where we are now for some, but also much lower for others.
Diversifying is great, but that should also mean keeping some USD ready for when your favorite crypto is cheap. That's just my friendly advice.
I wouldn't mind a bear market :P
We will just have to see
The price of Ether is far too high. But it can be explain as lots of people locked their ether on token sale and billions get injected by investors in cryptocurrencies every month since January. Investors don't need to understand much at the moment about the crypto space, they can just put money in the top 10 and get a pretty good profit at the end of the month.
It might not be "too high"
400$ might be what the ICO platform is worth. Can't wait to see what the world computer will be worth once there is a robust smart contract ecosystem.
Can't blame the people making money for the price.
Man!! you read my mind. I echo the same argument.The whole thing reminds me of netscape/yahoo days/pet.com days of late 90s...Donot know for sure who will win and who will fail.if we could predict woudn't be nice??..
One +ve thing for Ethereum is Buterin and company are innovating fast,breaking, trying and moving on..Thats the sign of a visionary.so I hope I would trust him and the ecosystem around it....
You nailed it in this article!!!!
Move fast. Break things. Scare investors out of the room.