Currently, transactions on crypto platforms are much slower and much more expensive than traditional financial platforms. While the “merger” and the available yield make the platform more attractive to green institutions, individual investors and developers of applications for the network, it still does not change the fundamental lack of competitiveness of crypto platforms with traditional bridge financing.
Unlike Bitcoin, Ethereum is not a pure cryptocurrency. Its platform and currency are central to “smart” contracts (programs that can execute transactions without the need for an intermediary), decentralized finance, and non-fungible tokens. If it significantly shortens transaction times and lowers transaction costs significantly, Ethereum could perhaps represent a credible alternative to traditional finance, although the ambitions of the platform’s co-founder, Vitalik Buterin, appear to be more in using it to create some kind of Ethereum pursue social utopia than in the transformation of the financial world.
Despite the hype leading up to the “merger” and some optimism that it would result in a major reassessment of the platform’s value, its success certainly had little impact. Its value is actually lower today than it was before the merger.
The bigger problem for Ethereum and cryptocurrencies and assets more broadly is that the environmental impact – and even the cost and processing times – are not the main barriers to mainstream adoption.
Arguably, the scams, the manipulations, the complexity, the lack of regulation and investor safety, and the sheer volatility of crypto assets are major obstacles.
The collapse of crypto assets – their total market cap has fallen to about $950 billion ($1.4 trillion) from $2.8 trillion ($4.2 trillion) last November – has shown that Cryptos offer no diversification benefits and are in fact the riskiest end of the risky asset spectrum.
They have no real functional use — they’re not an efficient or popular medium of exchange, and the craze for digital monkeys seems to have come to a bad end — and the dominant currency, bitcoin (which has no plans to move to proof-of-stake), is primarily one Vehicle for pure speculation.
They also face an increasing threat of regulatory intervention and costs. The US Securities and Exchange Commission and the Commodity Futures Trading Commission are locked in a court battle to see which agency should be the primary regulator. The SEC considers the crypto assets to be securities while the CFTC considers them to be commodities. That there will be some form of regulation seems inevitable, and if it’s the SEC that prevails, that regulation will likely be very intrusive.
That might be positive for some in the crypto community — it could give them more credibility and give investors more reassurance — but it would increase costs and timeframe, and is at odds with the free-wheeling anti-establishment spirit leading to the creation of the sector has contributed .
What Ethereum has accomplished is a marvelous piece of engineering – it has been likened to rebuilding the foundations of a skyscraper while the building is still standing – but like its competitors, the platform has yet to find an obvious and compelling purpose for the clever technology architecture that it brings underlying.
Cryptos and the blockchain ledgers that underlie them are more fascinating for what they could enable in the future than for what they offer today. It’s concepts and technologies that are still looking for a killer application. The Merge may excite tech fans, but it doesn’t address that gap just yet.
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