BR #28: Ethereum - The Ticking Time Bomb 💣

(2-minute read)

Early 2023 I decided to focus 100% of my energy and time on Bitcoin.

I did so because I see it as the invention that can literally change human society at the root level.

There are many other crypto assets and crypto networks built by very smart people, but all of them have one and the same problem.

They are all controllable by an individual or at best by small groups of people.

This makes them corruptible and capture-able by the strong and powerful elites.

I could write a book "Weaknesses of the top 100 crypto assets."

Instead, I will focus my attention solely on the second largest asset: Ether and the Ethereum network.

Ether is attractive to investors and crypto enthusiasts for multiple reasons:

1. It has an active developer community building DeFi (DcentralizedFinance) apps on top of it;
2. It has a big investor community investing in apps on top of it;
3. Ethereum is often upgraded by its developers to become "better";
4. One such upgrade made Ether a deflationary asset;
5. Many got excited that "Ether is more scarce than Bitcoin. Bitcoin might be sound money, but Ether is ultra sound money";
6. Another such feature switched Ether from using electricity (like Bitcoin) to using no electricity whatsoever. What a green environmentally friendly upgrade, right?

The above 6 points (and countless more) make Ethereum look intriguing.

They make it look like it may have a big future.

I could write a second book "Debunking Ethereum Myths".

Instead, I will just nail down three key points as to why I lost long-term interest in Ethereum:

1. The CIA, FBI can force Ethereum's founder and team to do anything.
   
   The founder Vitalik Buterin is a well-known public figure.
   He is a cute guy who travels around in this rainbow-like unicorn t-shirt.
   And he casually talks about growing ETH into a new form of global money.
   
   Question: what do you think is the chance that intelligence services are not holding Vitalik by the balls?
   I place this chance at exactly 0%.
   Vitalik and all key Ethereum team members are 100% at the mercy of the strong and powerful of the day. Period.
   
2. US regulators can crash all DeFi apps and ETH's price anytime.
   
   The heralded Ethereum DeFi ecosystem is running +95% on top of stablecoins.
   Stabecoins are crypto assets such as USDT and USDC, which are fully backed by USD held in bank accounts.
   The market cap of USDT and USDC is ~$110 billion as I write this.
   Meanwhile, ETH's market cap is ~$187 billion.
   
   Question: do you realize regulators can freeze, confiscate the USD held in USDT's and USDC's bank vaults?
   They can also coordinate various "accidents" which bankrupt the two companies behind USDT and USDC.
   Arguably, they already did that with USDC in March this year, when Silicon Valley Bank went bankrupt and part of USDC's dollars were held at Sillicon Valley Bank.
   
   And so if the US government has the tools to destroy stablecoins and thus demolish the whole DeFi ecosystem, then be sure: they are or will be using this power in one way or another.
   
   
3. Ethereum makes the rich richer (thus recreating the fiat model and many of its flaws).
   
   In short, if you already have ETH and you "stake it" you get newly printed ETH.
   In long, I will write a separate newsletter about this as it is a separate topic.
   
   

To sum up:

There is a reason Satoshi disappeared.

There is a reason Bitcoin is using electricity.

There is a reason why Bitcoin is not easily upgradable.

Everything Satoshi did was with the goal of building an asset and a network that are:

• Truly neutral
• Uncontrollable
• Independent of any one person or group of people

I showed you how far Ethereum is very from that vision.

All other crypto assets have the same or worse flaws.

That is why all of them have zero chance of becoming global money.

But of course, in shorter time frames, crypto assets can present speculative investments :)

That is a whole different conversation

I just advise you to remember that price-wise most crypto assets are ticking time bombs.

They go up and then they go down (sometimes very fast).

At some point, I believe Ethereum will go down very low and pretty fast too.

See you next Saturday!