The One True Internet Money?
Amid all of the booms, busts, exploits, Ponzis, and legal drama, we may have lost sight of the original promise of crypto: Creating internet-native money.
That was Satoshi's intention with Bitcoin and measured by price, it's been a grand success.
But measured by usage? Not so much: 15 years after the white paper, the US dollar (via stablecoins) is the unit of account and medium of exchange for most crypto activity.
That ironic outcome is presumably not crypto's endpoint: To become a true alternative to traditional finance, crypto needs to fully embrace its own native currency — or currencies.
In the analog world, we have hundreds of currencies. But that's only because we have hundreds of governments.
In the blissfully anarchic digital world, there may only be room for one.
With no governments to impose their national currencies on us, it makes sense there could be one big winner in the race to be the currency of the internet.
The fact that the race is still being run is perhaps an indictment of Bitcon's ability to win it: "Digital gold" has failed to catch on as internet-native money.
Could ETH do better?
Gud money
In many ways, ether is already more money-like than bitcoin: It's used to pay gas fees on Ethereum (where most crypto activity still occurs), it's the unit of account and medium of exchange for NFTs (perhaps no great prize), and its staking yield is the risk-free rate for DeFi (like T-bills are for TradFi).
Ethereum also has a more sustainable monetary policy than Bitcoin — although not because it's "ultrasound."
Just the opposite: ETH is better suited to be money because it can issue new tokens in perpetuity.
As money, that's a distinct advantage: Once Bitcoin hits the canonical issuance cap of 21 million coins, its security will be dependent on fees generated by usage of the network.
That means Bitcoin will need to find the utility that Ethereum already has — while ETH, ironically, could do just fine without it.
Better still: The new tokens that Ethereum issues stay within the network by being issued to ETH stakers — whereas new bitcoin leaves the network by being issued to miners.
This seems like a more easily sustained model: For as long as Bitcoin is issuing new coins, maintaining the price of BTC will require attracting new buyers.
Ethereum's security budget, in contrast, can be financed by existing holders: People who use ETH as money create the yield for people who hold ETH as a staked asset.
And that yield is cleverly self-regulating: As the yield on ETH increases, more of it will be staked, resulting in less of it circulating as money.
That makes the yield on staked ETH something close to the yield on Treasury bills — but with a self-regulating, automatic monetary policy that only Milton Friedman could previously have dreamed of.
A risk-free yield, paid from users to stakers, with automatic stabilizers?
That sounds like good money!
Claiming the meme
To compete, Bitcoin may best be advised to drop its hard cap: A perpetual inflation rate of 1% or 2% would make "digital gold" more sustainable, more useful as money, and more like real gold.
This could still be the path it chooses, but, in contrast to flighty Ethereum with its never-ending roadmap, Bitcoin does not change paths lightly and certainly not quickly.
And that's perhaps the bear case for ETH as money: Its complexity.
Do we have to understand the monetary policy implications of arcane things like multidimensional EIP 1559 to confidently adopt ETH as money?
If so, not many people will.
The bull case of Bitcoin as money is its simplicity: Everyone can understand its two-word elevator pitch (digital gold), its consistent branding as hard money, and its issuance cap of 21 million coins.
But to maintain its monetary policy, Bitcoin will need to find some of Etheruem's utility, whereas ETH could lose its utility and simply become "proof-of-stake Bitcoin."
But Bitcoin with better monetary policy: ETH's ability to be mildly but permanently inflationary may give it the better claim on the meme of "digital gold."
If so, it could prove to be the one true internet money.
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