1/ Ethernomics 101

Beyond the technical, most people don’t know what Ethereum really is or the fundamental reasons why Ether is valuable

A thread...

2/ What is Ethereum?

Right now, the world's economic networks are mostly nation states. We talk of the US economy or the European economy or the Chinese economy

But crypto allows the separation of economy from nation state

Ethereum is an economy without a nation state

3/ What is Ether?

Like the US, Ethereum is an economic network

And just as USD is the reserve currency of the US, Ether is the reserve currency of the Ethereum economy

4/ Ether is three types of asset in one:

First, when deposited into a staking contract Ether acts as a capital asset, like USD in a T-Bill—staked Ether generates a return denominated in Ether which secures the Ethereum economy

5/ Second, Ether is the required currency to pay for gas in the Ethereum economy, just as USD is required to pay taxes for the security & infrastructure of the US economy—as the Ethereum economy grows the demand for Ether grows

6/ Third, when locked in a collateralized loan or lent out for interest or stored in a savings account, Ether acts as a money like USD—as the Ethereum economy increases in size & influence and as Ether is increasingly used as a money, Ether’s monetary premium increases

7/ Note: while the first and second uses of Ether outlined above drive demand, it’s likely the third will be most significant value driver for Ether by far, just as the use of USD as a money is the primary reason USD is valuable relative to other currencies

8/ Bonus: What is Dai?

As a speculative asset in an emerging global economy, Ether is volatile. Poor for day-to-day transactions. FOrtunately, the Ethereum economy has an embedded volatility-killer, a secondary stablecoin called DAI

DAI is tethered to USD so that 1 DAI = 1 USD

9/ DAI is governed by a decentralized central bank in the Ethereum economy called Maker. Every DAI is backed by an overcollateralized amount of Ether, so DAI is essentially a synthetic version of Ether, only...stable!

10/ Ether & DAI are symbiotic reserve currencies of the Ethereum economy, Ether is the store-of-value money for holding, while DAI is the day-to-day money for spending

11/ Why is this magical?

More than a non-sovereign currency, Ethereum is a non-sovereign economy

It's permissionless like the internet, censorship-resistant like BitTorrent, a public good like TCP/IP

A decentralized financial system for the world

And it’s just getting started