Mark Cuban has been speaking about Bitcoin (CRYPTO:BTC) and crypto loads currently. Whereas the billionaire investor and entrepreneur was initially dismissive of bitcoin as a helpful digital foreign money, claiming he would slightly 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 at all times been constructive.
Lately, Cuban has praised crypto as a expertise slightly than Bitcoin itself. He is excited by Ethereum (CRYPTO:ETH) and varied functions within the decentralized finance (DeFi) house, claiming the final growth occurring with Ethereum dwarfs Bitcoin in the case of utilization.
Nonetheless, the case Cuban has made for Ethereum, and extra particularly the ETH cryptocurrency, would not maintain up.
What does Mark Cuban like about Ethereum?
Cuban is clearly excited in regards to the kinds of decentralized functions that may be constructed on high of the Ethereum community. For instance, he has offered and traded a lot of non-fungible tokens (NFTs) that had been issued on Ethereum and even based an NFT gallery platform known 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 normal 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 will not be 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 achieve 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 needs to be the foreign money of NFTs. Even in conditions the place NFTs are issued on Ethereum, stablecoins are more and more changing into the foreign money of alternative on that community as a result of their short-term value stability. Many notable NFT platforms, similar to NBA High Shot, aren’t constructed on Ethereum. Actually, NBA High Shot recommends shopping for new packs with a bank card as a substitute of ETH or another 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 circumstances as effectively. 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 circumstances, the necessity to use a very decentralized, pricey blockchain is much less clear.
That is the important thing level that Cuban misses and highlights why these use circumstances 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 circumstances 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 assume critically about investing and make selections that assist us turn into smarter, happier, and richer.