In an interview with Vitalik Poterin, co-founder of Ethereum, recently on the state of crypto markets, and the future of blockchain technology. Expect cryptocurrency market volatility to slow down to gold and stock volatility in the medium term – although it does not know the price.
The developer also talked about proof of business, proof of share, and bitcoin customers’ reluctance to embrace the latter.
Where will the encryption settle?
In an interview with blogger Noah Smith, Vitalik said he was surprised that the current bear encryption market did not take effect sooner than it did. While prices were high, he was sure they would eventually fall – he didn’t know exactly when.
“People seem to read a lot what ultimately are cyclical dynamics that encryption has always had and probably will last a long time,” he said.
Crypto has historically experienced four-year market cycles, in line with almost halving Bitcoin’s supply release rate for four years. While Bitcoin’s minimum price has risen steadily during each cycle, the percentage return of the asset has also increased in each boom.
As such, Smith asked Vitallic whether this meant that bitcoin followed the adoption curve, where the market eventually saturated and mimicked the stability of gold prices. The developer agreed.
“I certainly think that in the medium-term future, cryptocurrencies will stabilize and be as volatile as gold or the stock market,” he predicted.
While he doesn’t know where cryptocurrencies will saturate, Vitalik said the asset class answers more “existential questions” over time. In other words, while well-established use cases and market role are entrenched, certainty about potential cryptocurrency limits.
For example, Vitalik suggested that cryptocurrencies could replace gold as a store of value, and become “Linux Finance” by 2020, but probably not prevailing. This scenario reduces the chances that encryption will “disappear or completely dominate the world in 2042.”
In April, Vitalik said he did not expect cryptocurrencies to replace traditional currencies.
No integration for Bitcoiners
Ethereum is scheduled to conduct “consolidation” next month – its permanent transition to a consensus-building mechanism. Ethereum says the upgrade will make Ethereum more efficient, secure and scalable.
By contrast, bitcoin workers have historically defended the need to prove work to ensure that the network remains reliably neutral and decentralized.
According to VItalik, proof of work is harmful to the environment and less safe than proof of quota. Due to the energy required to defend the grid, miners must constantly be rewarded with new currencies to fund the grid’s safety.
In the case of Bitcoin, miners are almost entirely rewarded for their energy expenditure with the newly released Bitcoin. As Bitcoin’s collective support decreases over time, miners will become more reliant on transaction fees to support security.
However, Bitcoin has a much smaller fee market than Ethereum, meaning it may not be able to maintain the current energy security in the future without support. This can leave it open for attack.
“If Bitcoin is actually attacked, I expect the political will to turn out to be hybrid proof of quota at least, but I expect this to be a painful transition,” Vitalik concluded.