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In the last ten months, Ethereum Classic (ETC) has been trading in a range between $4 and $8. In this article, Etherplan presents its updated thesis of why ETC will surge past $7,000 in the next ten years.
1. Few systems will win the blockchain format war
Only 3 or 4 chains will exist at the base layer [1] with market shares of more or less 50%, 25%, 12.5%, and 6.25% (all the rest perhaps the other 6.25%).
The blockchain industry is going on its 12th year of existence, and it is clearer that there are a few systems that are gaining the most clout. Bitcoin (BTC) and Ethereum’s (ETH) market capitalizations combined represent 82% of the total cryptocurrency value at the time of this writing [2], and their transaction and fee volumes are dominant [3].
In the next ten years this trend will likely continue, but ETH will migrate to proof of stake [4], which will open that position for ETC to occupy at the base layer.
2. Nakamoto Consensus is the most secure consensus mechanism
Proof of work based Nakamoto consensus [5] will be the base layer mechanism in the blockchain industry stack because it is orders of magnitude more secure than proof of stake [6] [7] and other consensus mechanisms.
Bitcoin and, currently, Ethereum are both Nakamoto Consensus blockchains. As said above, together they have a dominant position in the market with a total value of $733 billion combined at the time of this writing.
This shows the success and viability of proof of work to manage and conduct high value payments, settlements, and smart contracts at the base layer on a global scale.
3. Ethereum Classic will be the only top proof of work smart contracts blockchain
Aside from Ethereum, which will migrate to proof of stake, ETC is the only secure proof of work smart contracts blockchain [8] at the base layer.
There are no other top smart contracts platforms that use the proof of work based Nakamoto Consensus mechanism. This positions ETC in a unique and extremely valuable niche.
4. The network reorganization attacks have made it more resilient
ETC has never been hacked, and the historic 51% attacks on the network only show that it worked as designed [9] [10].
However, several upgrades have been implemented, and others will continue to be performed to make it much more stable [11]. Eventually, as the network grows, its security model will guarantee a very similar level of safety as Bitcoin [12] [13].
ETC Labs [14], the core developer team in charge of Core Geth [15], the primary node software client of the network, successfully implemented the Modified Exponential Subjective Scoring (MESS) [16] feature to practically eliminate reorganization attacks.
They also deployed the Thanos upgrade [17] to the network, which adjusted the proof of work algorithm so that a larger base of miners may participate building blocks for the network.
The ETC Cooperative [18]; funded by Grayscale, the largest cryptocurrency asset manager in the world, and managers of the Ethereum Classic Trust [19]; continues to promote ETC, producing important research on critical improvements [20] [21], and maintaining the Hyperledger Besu client [22], which was successfully updated to operate with the Thanos upgrade.
Most remarkably, IOHK [23], the company who is co-founder and the main supporter of the Cardano blockchain [24], has recommitted significant resources to the Ethereum Classic project [25].
In the last few months, the firm has updated their ETC Mantis node client [26] to make it fully operational and comply with the latest ETC upgrades; under the motto “Helping to create a thriving ecosystem”, launched the brand new ETC Mantis Wallet [27]; and has proposed a high security and simplicity focused [28] roadmap [29] for the Ethereum Classic ecosystem at large.
5. It has a capped supply
As Bitcoin, ETC has a mechanical, algorithmic, and capped, thus sound and trust minimized monetary policy [30].
As Bitcoin’s supply will never surpass 21 million BTC, Ethereum Classic’s supply will never surpass 210 million ETC. Both cryptocurrencies have the goal of mimicking gold to become digital gold [31].
6. Its positioning will make it complementary to Bitcoin at the base layer
Bitcoin will be the largest system at the base layer [32] with a 50% share and ETC will be second with 25% because of its high value as a general computing platform.
Due to its unique positioning in the proof of work, smart contracts, and fixed monetary policy niche [33]; its “Code Is Law” philosophy [34] [35]; and that Ethereum will migrate to a more performant, but less secure consensus mechanism [36] [37]; ETC has the opportunity to, and will likely become the preeminent base layer, highly secure smart contracts platform.
7. The base layer will be as valuable as gold
The base layer will be analogous to gold [38] which has about $9.8 trillion [39] in value today, and is projected to be worth around $12 trillion in ten years. The ten year price projection of gold assumes that gold will increase in price at the average projected inflation rate for the next ten years, which is 2.17% [40].
With the spurious money printing in the present and in recent years by central banks in North America, Europe, and elsewhere, which is likely to continue in the foreseeable future, it is likely this projection will prove conservative [41].
8. Therefore, ETC will likely rise past $7,000 in the next ten years
As seen in the table below, if the base layer only achieves 50% of the value of gold in ten years, then Bitcoin will be worth $3 trillion or around $143,000 per BTC, and Ethereum Classic $1.5 trillion or around $7,100 per ETC.
The projected values for BTC and ETC are on a fully diluted basis, meaning BTC is calculated with a 21 million supply and ETC with a 210 million supply.
Summary
As the market is showing, even though there are many speculative projects in the industry, very few are the ones that are and will eventually gain a dominant market share, especially at the base layer.
Due to its sound design, ETC is poised to become the most secure smart contacts platform.
The historical reorganization attacks have made it more resilient as not only it has never actually been hacked and has worked as designed, but the core teams have upgraded the network, integrating notable innovations, and greatly reinforced their commitment to the project and ecosystem.
As complementary base layer systems, Bitcoin and Ethereum Classic will work as digital gold. Given the level of maturity and success the blockchain industry has achieved in the last twelve years, the consistently accelerating cycles in new technologies and global platforms [42], it is reasonable to expect that Ethereum Classic will reach a value per ETC beyond $7,000 in the next ten years from the recent price range of between $4 and $8.
References and Notes
[1] Why There Will Only Be 3 or 4 Surviving Blockchains in the Future – by Donald McIntyre: https://etherplan.com/2019/05/17/why-there-will-only-be-3-or-4-surviving-blockchains-in-the-future/7603/
[2] CoinMarketCap: https://coinmarketcap.com/
[3] Bitcoin, Ethereum Transactions historical chart – Number of transactions in blockchain per day – by BitinfoCharts: https://bitinfocharts.com/comparison/transactions-btc-eth.html
[4] Upgrading Ethereum to radical new heights – by Ethereum Foundation: https://ethereum.org/en/eth2/
[5] Why Proof of Work Based Nakamoto Consensus Is Secure and Complete – by Donald McIntyre: https://etherplan.com/2020/03/21/why-proof-of-work-based-nakamoto-consensus-is-secure-and-complete/10509/
[6] Why Proof of Stake Is Less Secure Than Proof of Work – by Donald McIntyre: https://etherplan.com/2019/10/07/why-proof-of-stake-is-less-secure-than-proof-of-work/9077/
[7] Proof of Work Has Division of Power, Proof of Stake Does Not – by Donald McIntyre: https://etherplan.com/2019/05/18/proof-of-work-has-division-of-power-proof-of-stake-does-not/7619/
[8] What is Ethereum Classic? – by Donald McIntyre: https://etherplan.com/2019/07/02/what-is-ethereum-classic/8106/
[9] Why Is Ethereum Classic Still Viable After the 51% Attacks? – by Donald McIntyre: https://etherplan.com/2019/06/21/why-is-ethereum-classic-still-viable-after-the-51-attacks/7920/
[10] ETC Network Security Plan – by Bob Summerwill, Executive Director, ETC Cooperative, Afri Schoedon, ETC Core Team and Executive Director, Byzantine Fault, and Terry Culver, CEO, Ethereum Classic Labs: https://medium.com/ethereum-classic-labs/etc-network-security-plan-fed70402b727
[11] Ethereum Classic Protocol Compact 2020 – by Donald McIntyre: https://etherplan.com/2020/09/27/ethereum-classic-protocol-compact-2020/12822/
[12] The Ethereum Classic Security Model Explained – by Donald McIntyre: https://etherplan.com/2020/03/11/the-ethereum-classic-security-model-explained/10348/
[13] The Bitcoin Security Model Explained – by Donald McIntyre: https://etherplan.com/2020/04/05/the-bitcoin-security-model-explained/10862/
[14] Ethereum Classic Labs: https://etclabs.org/
[15] Core Geth – on ETC Labs Github repository: https://github.com/etclabscore/core-geth
[16] Ethereum Classic Stakeholders — Critical Security Release to Prevent 51% Attacks – by ETC Labs: https://medium.com/etc-core/ethereum-classic-stakeholders-critical-security-release-to-prevent-51-attacks-aa83596a0903
[17] Thanos Upgrade – ECIP 1099: Calibrate Epoch Duration – by Luke Williams: https://ecips.ethereumclassic.org/ECIPs/ecip-1099
[18] ETC Cooperative: https://etccooperative.org/
[19] Grayscale Ethereum Classic Trust: https://grayscale.co/ethereum-classic-trust/
[20] Why change the Ethereum Classic Proof of Work algorithm to Keccak-256 (Sha-3) – by Stevan Lohja – Director of Developer Relations, ETC Cooperative: https://etccooperative.org/posts/2020-12-03-why-keccak
[21] Why Ethereum Classic should adopt a treasury? – by Stevan Lohja – Director of Developer Relations, ETC Cooperative: https://medium.com/etccooperative/why-ethereum-classic-should-adopt-a-treasury-34e237fe8129
[22] Hyperledger Besu – on Github: https://github.com/hyperledger/besu
[23] IOHK: https://iohk.io/
[24] Cardano: https://cardano.org/
[25] The new Mantis: Bringing security and stability to the Ethereum Classic ecosystem – by Niamh Ahern, Technical Writer, IOHK: https://iohk.io/en/blog/posts/2020/12/09/the-new-mantis-bringing-security-and-stability-to-the-ethereum-classic-ecosystem-1/
[26] Welcome to Mantis:
“Mantis is the only client written natively for Ethereum Classic, built from the ground up to offer unrivalled levels of assurance, security & usability.”
Source: https://mantisclient.io/
[27] Mantis Wallet: https://docs.mantisclient.io/first-steps/wallet-quickstart
[28] Ethereum Classic Simplicity – by Donald McIntyre: https://etherplan.com/2020/08/19/ethereum-classic-simplicity/12470/
[29] IOHK – Ethereum Classic Roadmap: https://mantisclient.io/#roadmap
[30] The Ethereum Classic Monetary Policy Explained – by Donald McIntyre: https://etherplan.com/2020/02/25/the-ethereum-classic-monetary-policy-explained/10025/
[31] Why Does Ethereum Classic Have Value? – by Donald McIntyre:
“As Bitcoin is considered ‘digital gold’, and Ethereum Classic’s native currency has the same characteristics and benefits, but is also programmable, then ETC can be considered ‘programmable digital gold’. Ethereum Classic’s unique characteristics makes it an excellent environment for money, property, and agreements. In other words, ETC is the ultimate expression of all the properties of money, but trust minimized, programmable, and highly secure on a global scale.”
Source: https://etherplan.com/2020/04/09/why-does-ethereum-classic-have-value/10916/
[32] The Format War, Layering, and Systemic Risk Will Define the Future Landscape of the Blockchain Industry – by Donald McIntyre: https://etherplan.com/2019/06/15/the-format-war-layering-and-systemic-risk-will-define-the-future-landscape-of-the-blockchain-industry/7820/
[33] The Ethereum Classic Trinity Explained – by Donald McIntyre: https://etherplan.com/2020/02/04/the-ethereum-classic-trinity-explained/9845/
[34] Code Is Law And The Quest For Justice – by Arvicco – 2016: https://ethereumclassic.org/blog/2016-09-09-code-is-law
[35] Ethereum Classic Is Philosophically the Same as Bitcoin and Technically the Same as Ethereum – by Donald McIntyre: https://etherplan.com/2019/06/13/ethereum-classic-is-philosophically-the-same-as-bitcoin-and-technically-the-same-as-ethereum/7788/
[36] The Ethereum Classic vs Ethereum 1.x Dichotomy – by Donald McIntyre: https://etherplan.com/2019/09/18/the-ethereum-classic-vs-ethereum-1-x-dichotomy/8752/
[37] Ethereum Classic vs Ethereum 2.0, What Is the Difference? – by Donald McIntyre: https://etherplan.com/2019/07/23/ethereum-classic-vs-ethereum-2-0-what-is-the-difference/8425/
[38] Layer 1 Blockchains Compete With Gold, Layer 2 Systems Compete With Fiat – by Donald McIntyre: https://etherplan.com/2019/09/20/layer-1-blockchains-compete-with-gold-layer-2-systems-compete-with-fiat/8756/
[39] Value of all the gold in the world – by Golden Eagle Coins: https://www.goldeneaglecoin.com/Guide/value-of-all-the-gold-in-the-world
[40] The projected inflation in US dollars of 2.17% for the next ten years is the average US inflation rate of the last 20 years. Taking as a base the current value of gold of $9.8 trillion, and adjusting it by 2.17% per year for ten years results in a future value of gold of $12,146,747,662,189. A round number of $12 trillion is used for this article. Data source – Federal Reserve Bank of St. Louis: https://fred.stlouisfed.org/series/FPCPITOTLZGUSA
[41] Visualizing Global Monetary Expansion – by Mike Co:
“Since the 2008 Financial Crisis, global central banks have ‘printed’ extraordinary amounts of fiat money.”
Source: https://medium.com/currency-waves/visualizing-global-monetary-expansion-6ecf3db7a7ea
[42] The Rising Speed of Technological Adoption – by Jeff Desjardins:
“Technological progress is not the only thing rising at an exponential rate. The rate at which newly commercialized technologies get adopted by consumers is also getting faster, too. In the modern world, through increased connectivity, instant communication, and established infrastructure systems, new ideas and products can spread at speeds never seen before – and this enables a new product to get in the hands of consumers in the blink of an eye.”
Source: https://www.visualcapitalist.com/rising-speed-technological-adoption/
Code Is Law
