It’s in the Ether

A very good Thursday morning to you.

I hope you’ve been boning up on crypto.  It looks like ETH is coming all the way back from its torrid sell-off soon.

Someone jumped in hard yesterday, and it’s continued into today.

Before we begin, a disclosure: I’m long ETH and have been for months.

Why ETH Instead of BTC?

As I’ve mentioned many times before, I wasn’t an early adopter of crypto.  Two of my friends have amassed an enormous amount of wealth by buying BTC early.  One has a private jet, and another has a palazzo on the Amalfi Coast.

Being correct, bold, and early has its benefits.

But I know one of them has already converted most of his wealth from BTC into ETH.  Luckily, I listened to him this time.

ETH has broken out of what technical analysts would call a consolidation zone.  And broke out hard, it did.

ETH now trades for about $3,800, up over 18% in two days.  It’s up over 100% since its trough on July 20th.

Where are you going to get these kinds of returns in the stock market?  Maybe tech stocks for a little longer.

That’s why Raoul Pal cleaned out his stock portfolio and went all-in on crypto.  Stocks weren’t worth his time anymore.

Before you think this is just another coin, let me explain to you why ETH is my favorite coin so far.

How Smart Contracts Finally Made Me Get It

October 1999.  London, England.

I had just arrived at 1-5 Cabot Square, one of Credit Suisse’s offices in Canary Wharf.  My transfer from our Eleven Madison Avenue office in New York City was complete.

I was thrilled to be there.

As I was working in trader operations, my job was to input and enrich trades.

That is, I’d take the tickets from the traders, input them into our system, and add the details in the comments section.

This was to make sure we’d execute any early terminations, payments, or other corporate actions as required.

It was an unbelievably tedious job, but I learned a lot about how banks actually run.  That’s something most traders have no idea about.

Then one day, not long after, my boss gave me a scanner.

You know, like a sophisticated HP printer where everyone on earth today can scan in a paper.

But then, it was a miracle of modern machinery.

Now, all I had to do was take the ticket, scan it in, and then the machine would populate all the entries I used to have to input manually.

I wish I took a selfie.

Besides the birth of my son or the Rangers winning the Stanley Cup in 1994, I’m not sure I’ve ever been happier.

With the machine doing the processing work, I could take my time and think about my job more.  Get more strategic.  Understand more.

That worked so well, I was soon on the trading desk.

The reason I tell you this story is because Ethereum eliminates all that.  In fact, if Ethereum had been around in 1999, I probably wouldn’t even have had that job.

All the trades would go directly on the Ethereum blockchain.  There’s no need for a middle office per se, though the prevailing thought is blockchain analysts would replace these people.

So “getting” Ethereum was much easier for me than Bitcoin because I could see how Ethereum worked and its actual use-value.

Let’s Take It From the Top

Ethereum’s web page is full of nuggets to learn from.

Let me parse and summarize it.

As we know, a “Point of Difference” is essential when marketing a product.  Literally, how is this product different from another.

Ethereum is different from Bitcoin in that it’s a programmable blockchain.

That means you can also use it for many digital assets, including Bitcoin!

This also means Ethereum is for more than currency and payments. It’s an entire ecosystem of financial services, games, and apps.

For example, you can’t buy NFTs on OpenSea without Ethereum.

Ethereum Features

Banking

Much of the world is unbanked.  Ethereum solves this problem because all you need is an internet connection.  Now, you won’t have your account canceled like General Flynn’s wife, only for Chase to backtrack after the court of public opinion ruled in Flynn’s favor.

And that’s if you can open up an account at all, which much of the world still can’t do.  Just here in the Philippines, 51.2 million people don’t have bank accounts.  That’s over 70% of the adult population.

In contrast, the USA has 14.1 million unbanked adults or 14.1% of the adult population.  

Worldwide, the number stands at roughly 1.7 billion adults.

This is why DeFi, or decentralized finance, is all the rage.  Comparing DeFi to traditional finance, here’s a table:

DeFi Traditional finance
You hold your money. Companies hold your money.
You control where your money goes and how it’s spent. You have to trust companies not to mismanage your money, like lending to risky borrowers.
Transfers of funds happen in minutes. Payments can take days due to manual processes.
Transaction activity is pseudonymous. Financial activity is tightly coupled with your identity.
DeFi is open to anyone. You must apply to use financial services.
The markets are always open. Markets close because employees need breaks.
It’s built on transparency – anyone can look at a product’s data and inspect how the system works. Financial institutions are closed books: you can’t ask to see their loan history, a record of their managed assets, and so on.

Privacy

According to Ethereum.org, you don’t need to provide all your personal information to gain access to its blockchain.

Peer-to-Peer

Intermediary companies, like banks, are eliminated.  That’s not to say they won’t exist.  They’ll just exist in a different capacity.

Censorship Resistance

Like Bitcoin, the decentralized nature of the blockchain disallows governments from controlling Ethereum.  This means PayPal can’t cut off your payment mechanism if they disagree with your politics.

Commerce Guarantees

Funds get moved if and if only the goods or services are provided.  You don’t need to be a big company to get things done correctly.

Compatibility

Companies that use Ethereum for apps will find all their apps are compatible with everyone else’s Ethereum apps.  This should lead to more significant innovation as we go along.

A New DAO For the Future

We’ve already talked about ETH as a cryptocurrency and NFTs as a use case.  But what are these DAOs?

A DAO is a decentralized autonomous organization.  DAOs don’t need to trust anyone else in the group.  You can just trust the DAO’s code, which is 100% transparent and verifiable by anyone.

This opens up new opportunities for global collaboration and coordination

Ethereum, like Bitcoin before it, actually expands that elusive but critical element required to build a harmonious society: trust.

Ethereum.org lists examples of how DAOs can work:

    • A charity – you can accept membership and donations from anyone globally, and the group can decide how to spend donations.
    • You could create a freelancer network of contractors who pool their funds for office spaces and software subscriptions.
    • Ventures and grants – you could create a venture fund that pools investment capital and votes on ventures to back. Repaid money could later be redistributed among DAO members.

This is all terribly exciting and brings crypto and blockchain to life.

If you haven’t started yet, it’s not too late. But start learning about this now.

Until tomorrow, all the best,

Sean

You May Also Be Interested In:

What’s Stopping You From Commodities Investing?

When I began to study the relationship between the cycles of the stock market and the cycles of the commodities market while a student on board the ships during my sea year. One of the things I learned was that when stocks are high, start moving out of the market and begin looking for the next market. The lesson is, markets move on as time marches on. Investing for the long term, buying, holding, and praying, is ridiculous advice when the market is changing directions or changing cycles, such as the cycle change from stocks to commodities.

Sean Ring

Around the World in 22 Years with Sean Ring

Okay, let's take it from the top.

Joisey!

For something I did in a past life, I was born in New Jersey. I haven’t figured out what that was yet. Joking aside, I loved growing up in Hasbrouck Heights. It was a fun town.

I was...

View More By Sean Ring