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The crypto ecosystem is noisy. Between the jargon, different coins, tokens, protocols, smart contracts, etc., etc., it’s easy to understand how someone can get lost or even lose interest. And, if you’ve ever ventured into the horror show that is crypto Twitter, you know what I am talking about.
That’s why I want to offer you a new framework for thinking about the crypto ecosystem. Let’s set aside all the terminology and think about this from a macro perspective.
The crypto market boils down to a series of networks. As you’ve probably heard me say before, these networks are actually closer to digital nation-states than they are to traditional technology. Why? It’s simple – networks produce intrinsic and extrinsic value. Think about Bitcoin or Ethereum: what lies at the center of these ecosystems? Money and value.
I want you to think about the Bitcoins and Ethereum of the world not as assets, but as economies. Once you do this, everything will become clearer, and the space becomes far easier to navigate.
So, let’s get started.
The Bitcoin economy is founded on one basic narrative: governments have destroyed the value of our currencies and Bitcoin is the hard, independent money that will finally free us all. It is fiercely protective of the integrity of its protocol (how its society functions) and as a result, shuns innovation in the name of purity. Think of the Bitcoin economy as the catholic church back in the dark ages or the gold bug community. There can only be one God or one asset. In the case of the Bitcoin economy, the only asset that exists is Bitcoin. So, if you wish to allocate capital to this economy, your only choice is to HODL Bitcoin.
Now, let’s have a look at the Ethereum economy. By the end of this piece, you will understand why ETH is likely to become much larger than the Bitcoin economy over the long term.
The Ethereum economy is in many ways similar to the US economy. In this system, you can start out by buying ETH which has a deflationary supply, meaning there will be less of it as time goes by. Because of this, its “central bank” (the staking) adheres to a responsible monetary policy designed to ensure that value is upheld and not debased.
That alone is a pretty good reason to own ETH but there is more…
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