SIMON BROWN: I’m chatting now with Sean Sanders, founder of Revix.Sean, I appreciate the early morning time today.
I was digging around some of the cryptos and particularly the non-Bitcoins, because Bitcoin sort of dominates the space.Ethereum has a fairly large change happening effective today, August 5 – the Ethereum improvement protocol-1559 (EIP-1559).Not the sexiest title in the world.What is it? What’s the purpose? And should we be worried, or is this good news for Ethereum and therefore for Ethereum holders?
SEAN SANDERS: Good morning.
Thanks very much for having me.Ethereum is just like the rest of the cryptos – weird, right? I mean, EIP-1559 isn’t exactly the sexiest name.
It’s dubbed the ‘London hard fork’, and this is very similar to the ‘Bitcoin Cash hard fork’ that took place back in 2017.
What this is really looking to do is to improve the quality of life for Ethereum users.What I mean by that, really, is that there’s been this big fee problem with Ethereum as a blockchain, where the fees are unpredictable.It’s very costly to make transactions and that defeats the entire point of actually having a decentralised sort of network like Ethereum.
What they’re looking to do, and the main focus of this upgrade, is to make the fees that you’re going to be paying to send transactions from one party to another, more predictable; not necessarily lower, but more predictable.
This is part of a much bigger upgrade that’s happening with Ethereum, where Ethereum will be moving from a proof-of-work system, using expensive computers and loads of electricity, to a proof-of-stake system, whereby you can verify transactions based on actually holding cryptocurrency on the network.
So, instead of you actually using computational power – and this maybe sounds a bit weird and confusing – to verify transactions and to say, listen, “This transaction has actually occurred,” you would then be using your cryptocurrency holdings to say, “Listen, I’m willing to lose this if I’m verifying a falsified transaction”.That proof-of-stake system is really deemed to be Ethereum 2.0, and it’s the upgrade to this network that’s coming.
SIMON BROWN: Okay.
That’s quite interesting because, as you point out, at this point it’s massive computing power which involves a cost of electricity.I know that GPUs (graphics processing units) are difficult to get hold of because they are used for that computing power.
But if we shift to proof of ownership and I’m prepared to put my stake on the line, suddenly it removes that need for the computing part.One of the criticisms of crypto is the amount of energy it uses.This almost as a side effect is going to actually have a benefit in energy usage as well.
SEAN SANDERS: It could have a really big impact.If you start thinking about the likes of Tesla or MicroStrategy, Tesla recently received a lot of criticism because it has entered an asset as essentially this electric-vehicle manufacturer that arguably isn’t exactly that good for the environment.
The entire business is kind of premised on the idea that they’re going to take out these oil-guzzling machines, and now you’re investing in an asset that’s potentially harmful to the environment.This could actually interestingly probably be something that only happens early next year – but Ethereum could be an alternative investment opportunity for these bigger-name institutions that would result in perhaps Tesla moving from the likes of Bitcoin to Ethereum.
Elon Musk has said that he personally owns some Ethereum and – a little bit of inside information with Revix – we’ve got more Ethereum on our platform right now than Bitcoin.
That’s quite interesting.Part of that reason is if you look at the returns of Ethereum over the last year, two years, five years.Go and compare that to the likes of Bitcoin.Naturally, Ethereum is coming with a far smaller base.This is sort of the premise about what we offer because we say, you don’t really know what’s going to happen over the next six or 12 months like [with] Cardano, Polkadot, Tron and all these other cryptocurrencies [that] are up and coming.
The best bet in this market in my opinion is to diversify and buy a basket of the top cryptocurrencies.
SIMON BROWN: Yes, get that basket and maybe Ethereum becomes the green crypto.
I like that.You mentioned it’s like the Bitcoin Cash, when that fork happened.I had Independent on my exchange, I had then had Bitcoin and Bitcoin Cash.In other words, there were now two coins and, in fact, there’s a Bitcoin Gold as well.
Is Ethereum going to have a similar process? Will I then have Ethereum New and Old? Or is it not quite that sort of Bitcoin Cash fork?
SEAN SANDERS: No.It is a hard fork.So you will be left with the original Ethereum network and then you will have the new Ethereum … it’ll be the London network, essentially.That’s quite interesting.I don’t know if there are going to be a lot of miners who support the old network, which will result in it sort of dying out.I think the consensus really is that the new mechanism and the new network will be what everyone will move to.But again, time will tell.
This fork is happening at about five o’clock today South African time, which is quite interesting.
SIMON BROWN: In about 10 hours or so .
We’ll keep an eye on that.Sean Sanders is founder of Revix.
I’m particularly interested because maybe that Ethereum does become our green crypto because there certainly are challenges there.
On our social media profiles, LinkedIn and Twitter , what is your preferred crypto? Is it Bitcoin, is it Ethereum? Perhaps it is all of them – as Sean says, just keep it simple – or maybe it is none of them.
Listen to Thursday’s full MoneywebNOW podcast here.
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