Crypto venture company Dragonfly Capital recently shared its assessment of ethereum, the world’s second-largest cryptocurrency in terms of market capitalization.
The company said while it is unlikely that the asset will become a popular currency, it can still compete with bitcoin in the long run.
Kevin Hu, Dragonfly Capital’s General Partner and Celia Wan, the company’s Junior Partner, said as “investors are investing in BTC as its store-of-value narrative begins to go mainstream, their understanding of Ethereum and ETH is convoluted.”
They added this becomes truer when decentralized finance (DeFi) and non-fungible tokens (NFTs) are added into the mix.
Unlikely to become popular
For an ethereum bull, an argument can be made for the case of the crypto becoming a popular currency if its network ends up becoming ubiquitous and the staggering gas fees stabilize.
However, the authors of the report said “that is highly unlikely and stablecoins are fundamentally much better at both functions,” adding that this will remain true even if Ethereum becomes a dominant platform.
Moreover, the duo also said that the altcoin will not succeed as a medium of exchange and a unit of account.
While ethereum has five times the market capitalization of ERC-20 stablecoins, there is a huge discrepancy in their total-on chain volume, where ETH losses out.
All is not lost for ethereum
Hu and Wan, however, acknowledged the fact that ethereum is being used as collateral in DeFi and as a non-sovereign store-of-value, it still has a lot of potential in taking some potential market share.
“In the long run, it is conceivable that ETH can even compete with bitcoin on the dimensions of scarcity, durability and unforgeability,” the duo noted.
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