Opinion | If Defi develops well in the long term, the value of Ethereum's industry will reach $ 1 trillion

According to AMBcrypto reported on February 26, for new investors who have just entered the digital asset market and do not know any industry information, they may be more inclined to buy Ethereum. Because by 2020, the value of the world's second largest cryptocurrency asset has increased by 106.44%, surpassing other currencies such as Bitcoin. Although the price of Ethereum has fallen sharply in the past two weeks, its overall popularity remains optimistic.


Source: Trading View

Recently, Nick Cannon, the founder of EthereumPrice.org, discussed the long-term vision of Ethereum's transformation from a $ 1 billion market industry to $ 1 trillion.

When talking about DeFi (Decentralized Financial) applications supported by Ethereum, Cannon uses the term "economic bandwidth". Cannon said that in order to ensure the long-term success of DeFi, Ethereum's current loan process requires 1.5 times the "guaranteed ratio"; this means that, according to Ethereum's current market value of about $ 30 billion, if each Ethereum is used With mortgage guarantees, the network would allow up to $ 20 billion in loans.

As of press time, the total amount of Ethereum used for mortgages and other financial applications is approximately $ 2.8 million, which is slightly less than 2% of the total amount of 109 million Ethereum in circulation.

Cannon believes that based on the expected supply inflation rate of Ethereum, assuming that the total number of Ethereum will not exceed 120 million, 10% of its total supply will provide economic bandwidth for the $ 1 trillion derivative market. According to calculations, the price of each 12 million Ethereum tokens needs to reach $ 80,000.

80,000 Ethereum may make the most optimistic people feel untrustworthy. In this regard, Cannon said:

There is still much to be done to grow the financial ecosystem around Ethereum from US $ 1 billion to US $ 1 trillion. According to the current valuation of Ethereum, it is difficult to realize this vision.

In addition to this overly optimistic assumption, it is also important that DeFi is not yet a reliable loan agreement.

The recent bZx attack caught the attention of industry insiders as Ethereum, valued at more than $ 1.2 million, was stolen in two carefully planned plans. Although Cannon believes that such attacks will continue to some extent, this is still a major issue to consider before pinning all hope on the Ethereum's DeFi protocol.

From an optimistic perspective, Cannon has high expectations for the Ethereum breakthrough of the $ 5,000 mark by the end of 2020, but there are still many things to do to make Ethereum develop smoothly. However, some investors have pinned their hopes on rising currency prices.


Image source: Skew

The figure above shows that there are currently 400 Ethereum option contracts that are bullish on Ethereum, and the price of Ethereum before the contract expires at the end of September will exceed $ 800.