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Evaluating Smart Contract Platforms

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Thoughts around the value of smart contracts platform tokens - specifically Ether.

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Evaluating Smart Contract Platforms

  1. 1. Valuing Smart Contract Platforms Assigning a value to smart contract platform tokens using a discounted cash flow methodology.
  2. 2. Ether has value because it is needed to pay miners for transaction fees.
  3. 3. Ether has value because it is needed to pay miners for transaction fees.
  4. 4. Transactions on Ethereum are a valuable and scarce resource and only Ether holder will have the ability to sell them
  5. 5. In 2018 users have payed $148,000,000 for the right to include a transaction they care about into the Ethereum blockchain.
  6. 6. For what are users spending $148m?
  7. 7. Disclaimer - the following slide is meant to show an example calculation and not an evaluation of Ether - different input parameters can lead to very different results
  8. 8. Sanity check - Are those numbers somewhat realistic given the scaling roadmap Without scaling (current ~5tx/sec) an avg. tx fee of $11.5 per tx is needed
  9. 9. With the current sharding plan Ethereum will roughly increase its capacity by a factor 1000 by simply deploying Ethereum on 1024 shards and allowing cross-shard communication.
  10. 10. Will sharding and eventually unlimited scalability kill the fee market?
  11. 11. Scalability is achieved by introducing concurrency and thus giving up “atomic state transitions” Atomic state transitions will always be a scarce resource.
  12. 12. Atomic arbitrage transaction (1/2)
  13. 13. Atomic arbitrage transaction (2/2)
  14. 14. Different shards will have independent fee markets.
 
 Shards will likely have up to 100x different fees.
 Shards with DEXs with most liquidity will be among the most expensive
  15. 15. Store of Value/ Monetary Premium?
  16. 16. Observations that would confirms the presented model/assumptions 1)Transaction fees would start to raise again 2)Gas prices would decouple from ETH price - potentially be payed in other tokens (DAI)
  17. 17. 3) Average value of transactions would
 increase (~$1000 +) 4) Gas prices would decouple from ETH
 price - potentially be payed in other
 tokens (DAI)
  18. 18. Data from: https://bloxy.info https://messari.io/onchainfx https://coinmetrics.io/ Thank you!

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