A new report from the Royal Bank of Canada (NYSE:RY) says blockchain technologies could become a $10.0-trillion ecosystem, benefiting those “protocols” at the lower end of the infrastructure pyramid. (Source: “RBC Report: Crypto and Blockchain Could Unlock $10 Trillion Market,” CoinDesk, January 3, 2018.)
Allow me to translate that into plain English.
When it comes to the Internet, no one cares about the underlying technology that makes it all work. They care about Facebook and Google; the applications that run on top of the basic Internet protocols (like TCP/IP and HTTP).
As a result, the Internet is structured as an upside-down pyramid whereby Facebook and Google are at the top. They make money, accrue power, and shape the very fabric of the Internet, ultimately feeding into a cycle that helps them make more money and accrue more power.
Blockchain is the exact opposite—it is a normal pyramid shape.
Protocols like Ethereum, layered at the bottom of the pyramid, are the biggest and most important pieces of the puzzle. They will accrue money and power, not the applications running on top of them.
Daily Ethereum Chart
For example, the entire phenomenon of initial coin offerings (ICOs) accomplished very little except for giving ETH prices a major tailwind. What does that tell you? That providing the necessary protocol for ICOs made Ethereum all the more relevant and important.
Put another way, money flows up in the Internet, and down in blockchain.
I’m not the only one to notice this dynamic. Union Square Ventures has an excellent primer explaining the relationship between “fat protocols” and “thin applications.” (Source: “Fat Protocols,” Union Square Ventures, August 8, 2016.)
I suggest reading their blog post if you need to dive a little deeper. It is excellent.
But how does this relate to the RBC report? I’ll tell you.
Since money flows downwards in the blockchain ecosystem, it seems likely that core protocols will absorb most of the $10.0 trillion of value. And since Ethereum is one of these “core” protocols, investors are poised to make a killing on ETH.
Analyst Take
We maintain our $1,500 Ethereum price forecast for 2018, but with a strong possibility of raising that prediction should it prove overly conservative.
Also Read: Ethereum Price Prediction for 2018
Source: Price Confidential