The possibility that Ethereum could become hard money was the subject of a debate. However, it ended up being more about its downsides than the positives.
The founder of A. Bitcoin investmentCharles Edwards shared a chart that showed the circulating supply activity of Ethereum and Bitcoin and argued that “Ethereum has entered the hard money game. For the past 3 months, Ethereum’s inflation rate has been lower than Bitcoin.”
“Hard money is not only about low inflation of supply, it is also about immutability of inflation – oil is not suddely hard money even when OPEC decides that supply rates are throttled.”
Twitter user @alpha_authority
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Are you looking for hard cash or high fees?
Many have pondered the possibility that cryptocurrencies could eventually surpass fiat currencies in the relatively short history of cryptocurrency’s boom. Bitcoin has the potential to achieve this, although other digital currencies can only imagine it.
As Investopedia explains, “Hard money maintains a stable market value relative to real goods and services and a strong exchange rate relative to foreign currencies,” and its uses involve “lower transaction costs and risks”
With cryptocurrencies The hard moneyThis would guarantee that certain coins could not be modified in any way. Opposite to Bitcoin, Ethereum’s rules can be –and have been– changed. This indicates that it has had its supply schedule modified multiple times, and can continue to evolve.
The burnings make Ethereum temporarily deflationary and lead to a lower market cap. However, Ethereum’s protocol and issuance calendar are flexible. The chart does not show that digital coins can be considered hard money.
There are also the inevitable high gas fees. These will be reduced significantly with layer 2 in 2023, but they won’t be low enough to support consumer spending, commerce and mainstream adoption. While the rates may encourage ETH holding, they do not allow transacting. Cardano and other centralized Blockchains such as Cardano have already proven to be cheaper.
Even though Ethereum shows a lower inflation rate than Bitcoin, the supply also sets the digital coin below Bitcoin’s standards.
Bitcoin is limited to 21 million BTC. While 80% of the coins are already mined, it will take over 100 years for all remaining coins to run out. It is believed to cause digital scarcity. On Ethereum’s end, the circulating supply is unknown, it doesn’t have an overall cap.
Some users also believe that “a deflationary base asset is not good for Ethereum apps” and that it will actually become a problem for its growth in the future.
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Ethereum and the DeFi Space
JPMorgan Analysts, who had previously favored Ethereum, stated that ETH was losing its dominant position in Decentralized Financing (DeFi) due to the emergence of strong competitors like Terra and Avalanche.
This bank’s percentage of DeFi total value, which was almost 100% in 2021 and 70% in the year that followed it fell to 70% in 2017. It could drop further. The analysts from the Wall Street banking giant think the necessary scaling of the network “might arrive too late,” Bloomberg reported.
“In other words, Ethereum is currently in an intense race to maintain its dominance in the application space with the outcome of that race far from given, in our opinion,”
The experts think that this loss of dominance could bring a downtrend for ETH’s price.
Ethereum is trading at $3120, down 1.75 percent in the last 24hrs.