Mark Cuban has been speaking about Bitcoin (CRYPTO:BTC) and crypto loads recently. Whereas the billionaire investor and entrepreneur was initially dismissive of bitcoin as a helpful digital foreign money, claiming he would reasonably personal bananas than bitcoin in 2019, he has additionally been constant together with his comparability of the crypto asset to gold, however that comparability has not all the time been constructive.
Not too long ago, Cuban has praised crypto as a expertise reasonably than Bitcoin itself. He is occupied with Ethereum (CRYPTO:ETH) and varied purposes within the decentralized finance (DeFi) house, claiming the overall improvement taking place with Ethereum dwarfs Bitcoin in the case of utilization.
Nonetheless, the case Cuban has made for Ethereum, and extra particularly the ETH cryptocurrency, does not maintain up.
What does Mark Cuban like about Ethereum?
Cuban is clearly excited in regards to the types of decentralized purposes that may be constructed on high of the Ethereum community. For instance, he has bought and traded a lot of non-fungible tokens (NFTs) that have been issued on Ethereum and even based an NFT gallery platform referred to as Lazy. He sees Ethereum good contracts as a approach to enhance the economic system round digital items and he additionally believes it makes ETH a viable foreign money. He is additionally espoused the advantages of DeFi platforms constructed on Ethereum over the standard banking system.
However NFTs don’t get their worth from the Ethereum blockchain. The worth of an NFT is derived from the NFT’s creator. The worth is just not intrinsic to the token on the blockchain itself. Ideas much like NFTs have existed in additional centralized kinds for a few years, and there is not a lot to realize from issuing them on a public blockchain, because the possession of an NFT is as much as the creator, not a decentralized ledger.
Moreover, there is no such thing as a motive to imagine that ETH ought to be the foreign money of NFTs. Even in conditions the place NFTs are issued on Ethereum, stablecoins are more and more turning into the foreign money of alternative on that community resulting from their short-term worth stability. Many notable NFT platforms, comparable to NBA Prime Shot, aren’t constructed on Ethereum. In actual fact, NBA Prime Shot recommends shopping for new packs with a bank card as a substitute of ETH or every other cryptocurrency as a result of, once more, robust decentralization is not wanted right here.
The necessity for decentralization
Whereas Cuban nonetheless sees bitcoin as an enchancment over gold, he is stated that ETH has benefits over bitcoin as a retailer of worth. However the use case as comparatively restricted.
It is clear that Cuban is extra enthusiastic about issues like NFTs and DeFi than bitcoin’s utility as a retailer of worth. However Bitcoin is constructing out these use instances as nicely. Bitcoin was designed particularly to function as digital money as a result of it makes use of a public blockchain that doesn’t contain third events. When reintroducing counterparty danger in additional advanced use instances, the necessity to use a totally decentralized, expensive blockchain is much less clear.
That is the important thing level that Cuban misses and highlights why these use instances are discovered on upper-layer networks within the Bitcoin ecosystem. It is true that there are trade-offs made with these secondary community layers, however they’re greater than price it when the effectivity good points are thought-about for these sorts of use instances that don’t require a excessive diploma of decentralization.
This text represents the opinion of the author, who could disagree with the “official” advice place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even considered one of our personal — helps us all suppose critically about investing and make choices that assist us change into smarter, happier, and richer.
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