Nouriel Roubini, a widely recognized economist and a professor at Stern School, has said that the decline in the value of Ethereum was expected due to its lack of active decentralized applications (dApps).
He said:
“No wonder Ethereum is collapsing. 75% of DApps are crypto-kitties, scammy Ponzi pyramid schemes & Casino games. The other 25% are DEX that no one uses as 99% of transactions are on centralized exchanges. & 99% of crypto-currencies have already lost 99% of their value.”
Counter Argument
In the early days of the Internet and the web, the vast majority of platforms and websites extremely simple applications like email and data settlement services that couldn’t achieve anything significant.
As decades passed and infrastructure supporting the web including the hardware of computers, cloud computing, and software drastically improved, the web evolved into the base protocol for data sharing, powering virtually everything ranging from video streaming to financial services.
Cryptocurrencies as an asset class and the Ethereum protocol as a decentralized computing network are still at their infancy. Ethereum is only able to process about 10 to 12 transactions per seconds on its mainnet and as such, the type of services dApps could provide is limited.
Improvements on the protocol-level are being implemented at an exponential rate. Vitalik Buterin, the co-creator of Ethereum, has said that the implementation of second-layer solutions Sharding and Plasma could potentially increase the transaction capacity of Ethereum to a million transactions per second, which will be able to support IoT and financial networks.
Currently, dApps with simple concepts like CryptoKitties dominate the space and decentralized cryptocurrency exchanges are nowhere close to competing against centralized platforms.
However, decentralized computing ecosystems and smart contracts protocols based on public blockchains like Ethereum, Cardano, and EOS are less than three years old.
Already, dApps like the Brave Browser, which compensates publishers with a digital currency called BAT based on their traffic, has more than three million users.
The improvement of the base protocol of Ethereum has allowed ETH, its native cryptocurrency, to operate as a store of value, along with Bitcoin, the most dominant cryptocurrency in the market.
Given that Brave Browser and a handful of dApps have seen rapid growth in the past year despite the limitations of Ethereum in relation to scalability, as the base protocol improves, dApps will continue to see an increase in efficiency in processing information.
The argument of Roubini on the long-term decline of Ethereum is built on an assumption that dApps will stagnate and decentralized systems will not appeal to the mainstream.
Yet, a survey revealed half of American millennials are interested in utilizing cryptocurrencies exclusively, which would be only sensible given the decline in trust towards legacy financial systems by millennials.
LINE, and Kakao, the two largest Internet companies in Asia alongside Tencent, have created their own cryptocurrency exchanges with the intent of commercializing blockchain technology and dApps.
What Happens if dApps Gain Popularity?
If dApps started to reach the number of active users Brave Browser has garnered in the past 12 months, and if the adoption of dApps increase in the years to come, then the argument of Roubini and other economists on the usability of cryptocurrencies become meritless.
Featured image from Shutterstock.
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