CRYPTO MOVERS AND PRICES
Crypto prices are higher this morning with bitcoin back above $9,000. The balance of the Top 10 is up in the range of 2-3%.
CRYPTO STORY OF THE DAY
Ethereum (ETH) gas usage per day reached a new all-time high in the past week, prompting network proponents to suggest the metric as evidence Of ETH’s increased adoption. This increase, however, is once again associated with stablecoin transfer, a use far removed from the network’s initial pitch as, “The world’s computer.”
Gas on the ETH network represents the computational power needed to perform a specific activity. Gas is priced in gwei, a ETH subunit (like satoshis to bitcoin). The more complex an activity, ie sending ETH vs. executing a smart contract, the more gas is required for its completion. Visually, gas used per day has anecdotal correlation with ETH prices. That's intuitively logical as increasing prices drive the movement of ETH-based assets to and from exchanges, thus increasing the use of gas.
While all-time-highs in gas usage does reflect increased use of the ETH network, it's the question of how the network is being used that reveals the significance of this metric. ETH’s whitepaper describes the network as “the ultimate abstract foundational layer…” which would allow “anyone to write smart contracts and decentralized applications…” Years into the network’s existence, the all-time-highs in gas can largely be attributed to the rising use of stablecoins, namely Tether. That asset has increased its market cap from about $4 billion equivalent at the beginning of the year to a current $8.8 billion. According to ETH Gas Station network, Tether is the absolute leader in gas usage on the network. Furthermore, when examining the applications described in the ETH whitepaper, of which stablecoins are only one, it’s evident that assets like Tether hardly capture the broader ambition of ETH.
As such, rising gas usage is bittersweet given that it’s a reflection of the network’s increasingly obvious inability to gain practical use beyond acting as a stablecoin rails. Bullish thesis built around such data should note that these metrics reflect usage largely divorced from the original intentions of the network.