Why Tesla Needs Ethereum
Original title: "Tesla really needs Ethereum"
Original source: Planet Daily
- On January 29, 2020, electric vehicle giant Tesla founder Elon Musk changed his Twitter signature to "#bitcoin", after which the price of Bitcoin soared by 20%;
- On February 9, 2020, Tesla "suddenly" announced that it had bought $1.5 billion worth of bitcoin was sold, causing the price of bitcoin to surge again by about 10%.
Now, cryptocurrency investors and even many senior market analysts predict that Bitcoin will break through $100,000 in the next step, because this "king of cryptocurrencies" ” has a limited supply and there will never be 21,000,001 Bitcoins in the world. Before Bitcoin, Elon Musk once "sent Dogecoin to the moon", but what many people don't know is that 22 months ago - on April 30, 2019, Elon Musk also "said the order "Ethereum:
Elon Musk then asked another question: What should be developed on Ethereum?
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Responding to this question, Larry Cermak, research director of blockchain media The Block, responded:
“I don’t know if ethereum is the right platform, but the Tesla micropayment economy could be an interesting ecological project attached to ethereum, such as paying for charging, parking, tolls, transportation Congestion charges, etc..”
Ethereum co-founder Vitalik Buterin then invited Elon Musk to participate in the Ethereum developer conference Devcon in October 2019.
Surprisingly, this series of actions by Elon Musk did not cause the price of ETH to skyrocket like Bitcoin, although most of the time Ethereum It is indeed "not as good as" Bitcoin, but it is also the second largest cryptocurrency by market value after all! In fact, we found that the two ecosystems are actually different. These two ecosystems should be:
1. One is Tesla + ETH tokens
2. One is the Tesla + Ethereum blockchain
The ETH generation Bitcoin is not the king of cryptocurrencies...
When Tesla spent $1.5 billion to buy Bitcoin, the purpose was actually very clear, namely: Use the current most inflation-resistant "currency" - Bitcoin - to increase its future cash reserves.
However, Tesla's real purpose is not to be a "king", but to create a "king".
In fact, ETH and BTC two cryptocurrencies are very different, ETH can be infinitely supplied. This is so because it was designed for a very different purpose than Bitcoin, which is generally not affected much by the volatility of traditional currency markets. Despite this, the market capitalization of ETH is still doing well, ranking second only to Bitcoin.
Here, we are not talking about the ETH token, but the Ethereum blockchain, so it can explain why ETH is not the "king of cryptocurrencies" , but far more powerful than "The King" - to understand this, we must review some history and related basics.
The web is littered with blockchain definitions these days, and for the sake of simplicity, this article only discusses ETH and Ethereum. Ethereum is a blockchain, and so is the Bitcoin network that mines BTC tokens. Although blockchains have historically been used to represent distributed ledgers (i.e., lists of transactions distributed across computer nodes), they are now The term blockchain is now also used to describe decentralized applications (DApps), where transactions are conducted on a blockchain network without any central actor calling the shots.
For example, in the traditional financial industry, if Party A pays $5 million to Party B, the transaction and its records will be stored in the bank server. But in the cryptocurrency world, if Party A pays Party B 5 BTC, the transaction happens on any one of the thousands of servers running the Bitcoin network, just like a movie is downloaded and uploaded on BitTorrent, any server in the server One can get a copy of this transaction.
More importantly: if a rule change is made to this, the owner of each computer (node) will at least be aware of the rule change, and A lot of times, they can vote on that too. In short, this is decentralized governance.
Compared to Bitcoin, Ethereum is a special blockchain capable of running P2P decentralized applications (DApps) on top of itself. We know that the word DApp has been introduced to describe the blockchain (transaction processor + ledger), but has now been given a broader definition, namely: any P2P decentralized application that runs on top of the blockchain Both can be called DApps. In 2017, an online game called Cryptokitties became popular. In fact, it is not only a game, but also a DApp running on the Ethereum network, and its back-end code is on the Ethereum node. Instead of relying on private servers or cloud servers like AWS/Azure/GCP - as of today, Cryptokitties are still running.
Ethereum provides a payment mechanism for application developers to pay node owners, and implements this mechanism through the following 2 steps:
1. End users pay application developers to use their applications: this needs to be done by purchasing encrypted tokens issued by application developers, In the Ethereum blockchain, DApp creators can issue ERC-20-compliant tokens, and users can use BTC, ETH or other legal tenders to purchase such tokens, and then exchange fixed/subscription fees, virtual Currency, or game credits.
2. DApp developers pay to the blockchain network (node owners in Ethereum) to execute running requests on behalf of end users. These transactions need to use ETH token based on gas fee.
Why did Elon Musk fail to "call out" Ethereum before?
In fact, even if Elon Musk decides to buy $5 billion worth of ETH, it is still very likely that he will not be able to change the price of ETH, because in general, there are only two ways to affect the price of ETH tokens:
Path 1: People might buy ETH tokens from a cryptocurrency exchange like Coinbase, which of course will push the ETH price higher, but also be sold by people. Unlike Bitcoin, there is no limit to the supply of ETH tokens (although a later upgrade to Ethereum 2.0 may reduce the supply), which means that large purchases will not cause the volatility that Bitcoin does. Even if Elon Musk decides to buy $5 billion in ETH, it will probably only change the price of the token by a few hundred dollars, because once the subsequent ETH tokens are issued, the market frenzy will subside.
Path 2: More DApps => App developers need more ETH tokens to pay for the Ethereum network => Market demand for ETH Will grow organically => drive ETH price growth. This growth will not be easily reversed as everyone invested and the ETH token creates tangible value for DApp end users (not just market speculators).
So, will Tesla buy ETH?
Of course it is possible and Tesla would certainly be better off investing its cash reserves in the same way they invest in Bitcoin. But the problem is that Tesla is not a financial institution, and the price of ETH is not likely to fluctuate as much as BTC, because the design principles of the two are different.
However, does Tesla need cryptocurrency?
Actually, Tesla really has crypto needs as they need a strong in-vehicle app ecosystem to grow their revenue/users and ongoing For vehicle upgrades, any technology giant cannot survive only on products and services, but needs to constantly find some "innovative business highlights" in order to continue to maintain a leading position in the industry.
Although it has been 20 years since its establishment, Tesla is still a "rookie" in the automotive industry, so they are very eager Add some "magic powder", and this "magic powder", we call it - the ecosystem.
Many technology giants started with a core product, but as their business continues to develop, they often build an ecosystem based on the core product. For example, the core product that made Apple's great success is the smartphone iPhone, but then they launched the app store APP Store around the iPhone, and gradually formed an ecosystem. Tesla will need a strong in-vehicle app ecosystem to grow its revenue/users in order to maintain its industry dominance after the future auto market is flooded with EVs.
20 years ago, no one would have thought that ordinary people would spend more than 6,000 yuan to own a smartphone, and in the automotive industry, what Tesla will have in the future The market size of Tesla may be larger, so it is necessary to continuously optimize products and build an ecosystem instead of reducing Tesla cars to one-off innovations.
Smart contracts (=DApps) can lead to a wider range of vehicle integration opportunities and an almost unlimited number of use cases. The in-vehicle software can pay for city parking, electricity at charging stations, shopping, carpooling, and even hitchhiking with others to earn money. If you are in a smart city, vehicles can also allow you to effectively avoid congested roads. During travel, smart contracts can complete all P2P transactions to obtain all these services. The experience is better than the centralized network.
Tesla could also use Ethereum's decentralized finance (DeFi) use case to build its own ecosystem and then launch a Tesla ERC-20 token , so that it can easily handle the "peripheral transactions" built around Tesla's electric vehicles.
Why should Tesla choose Ethereum?
Perhaps everyone forgets another identity of Elon Musk. No surprises. However, Ethereum is indeed a good option, especially when Ethereum is upgraded to version 2.0, transaction scalability will become better, and perhaps Elon Musk will not be able to reject Ethereum at that time.
However, as long as the throughput is less than 20 TPS, the cryptocurrency cannot play the role of "global currency".
According to relevant data disclosed in 2019, the network throughput of payment giant Visa is about 1700+ TPS (processing more than 1700 transactions per second). In contrast, transaction processing levels for many cryptocurrencies, including Bitcoin, are severely lagging. The figure below shows the transaction processing speed of various cryptocurrency blockchains (data source: cointelegraph):
( Star Jun o-daily Note: Ripple XRP is not a real decentralized cryptocurrency in a sense, because they have already stated that they are owned by banks.)
Different from Tesla’s investment in Bitcoin, Ethereum is designed to cover global transactions. By utilizing advanced technical solutions such as sharding, Ethereum 2.0 This is expected to be achieved. In simple terms, sharding works like this:
In current blockchains (including Bitcoin), every node validates every transaction, It feels like the popular vote in the US presidential election. But Ethereum 2.0 is different. Ethereum 2.0 will distribute transaction blocks among smaller sub-chains (that is, shards), and random notary validators in shards (one of the 32 ETH token pledgers) The blocks assigned to it will be verified, and all these verified block vote numbers will be verified by the Ethereum main blockchain, just like the states send representatives to the Senate and Congress during the US presidential election.
If the sharding design is ingenious and reasonable, it will eventually allow Ethereum to achieve three major goals: decentralization, security, and scalability.
Summary
In the cryptocurrency world, Bitcoin is regarded as "digital gold", but as the value of Bitcoin continues to increase, The challenges are becoming more and more severe. But just like gold has no transaction value, due to its own design limitations, Bitcoin is likely to no longer have transaction value in the future.
Given Bitcoin’s inflation-proof value, many large institutional investors are reluctant to make Bitcoin a truly “decentralized” asset Cryptocurrencies, perhaps only volatility can keep Bitcoin's value attractive.
For Ethereum, the past five years have made it more and more mature, and it has gained a large number of use cases, and many people who want to explore P2P transactions Everyone is willing to choose Ethereum.
For Tesla, it may or may not buy ETH. However, considering the development route of the ecosystem, it is very likely that Tesla will finally choose the Ethereum blockchain (note! It is the Ethereum blockchain, not ETH tokens), and build a Tesla-based blockchain based on Ethereum. ecosystem. There is news that Apple is likely to launch the smart electric car iCar in 2024. At that time, Tesla will definitely face tremendous pressure. Apple has a cash reserve of more than 200 billion US dollars, based on the fact that it can buy out the entire ETH market-in fact, Just buying 51% is enough.
For ordinary investors, what advice do you have? We have only one word: HODL!
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