Given the recent rollercoaster in Ethereum prices, it’s time to consider what makes ETH more valuable than the 1,400 other cryptocurrencies on the market. I call this theory “trickle-down cryptonomics”—others call it “fat protocol theory.”
What am I talking about?
To put it simply, Ethereum’s greatest strength is that it serves as a launching pad for other cryptos. Namely, cryptos that operate as part of decentralized applications (DApps).
DApps are identical to regular apps, except for one small difference—they run on a blockchain as opposed to the Internet. This makes all the difference because money is distributed differently in each ecosystem.
On the Internet, money goes to companies like Google and Facebook (which are apps in this example). But it’s not like Google and Facebook are essential to the Internet. They’re not. The Internet runs on its unseen parts, like HTTP and other protocols.
However, money doesn’t flow to protocols where the Internet is concerned, it flows to apps. That’s one reason why Google and Facebook steer our economic destinies. They are the apps of the Internet.
But blockchain is exactly the opposite.
It favors nerdy protocols over flashy apps, even if those apps are decentralized on the blockchain. Why? Because blockchains build trust through consensus, which is more likely to happen on credible platforms than random tokens.
Value trickles down to the bottom layers of technology, rather than pushing to the top. As a result, Ethereum and other platforms are likely to accumulate most of the value created in this space.
Useful apps that run atop Ethereum—such as the “Basic Attention Token” (BAT) or “OmiseGo” (OMG)—might also succeed because they have a unique problem they’re trying to solve, but their upside is limited in scope.
Platforms are the biggest winners.
Ethereum Price Chart
Analyst Take
“Trickle-down cryptonomics” is one of the many reasons we will maintain our $1,500 Ethereum price forecast for 2018.
Also Read: How To Buy & Sell Ethereum (ETH) Easily?
Source: Price Confidential