😵 Is Ethereum dying?

Ethereum is losing market share and Exodus is buying back its shares!

Author

Jonah Schulman
November 15, 2021

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Before we get liquid a huge shoutout is in order for my dear friend and loyal Ravenite, Leon Texas for being my 1000th follower! He is a true gem in this space who is always driving the adoption of Ravencoin and the blockchain industry as a whole.

Thank you Leon for being you! 🚀

Gooood morning, Rainmakers!

As always, I have two captivating topics for you to dive into:

1️⃣ Is Ethereum dying?: Ethereum's insane gas fees are forcing issuers to move their assets to layer 2 solutions. Is this sustainable?

2️⃣ Exodus is buying back its shares: Due to the sudden drop of price in the Exodus token, Exodus has committed to injecting $2M of liquidity into the market to help stabilize the price at more attractive levels.

Without further ado, it's time to…

Get liquid 💧

😵 Is Ethereum dying?

It was only about 6 years ago that the Ethereum main net launched.

It was the first blockchain platform that enabled programmable smart contracts.

Since then, Ethereum has skyrocketed in value, with millions of people around the world developing applications on the network.

However, I don't think the Ethereum team anticipated reaching critical mass of this magnitude at this rate.

In fact, Ethereum's blockchain is only able to handle up to 15 transactions/second.

With 7B+ people in the world, this is NOWHERE near the technology required for sustainable scalability.

Hence the exorbitant gas fees everyone has been forced to pay just for using Ethereum-based applications.

Just the other day, I was looking to sell an ETH-based token and it was $400+ in fees to sell it.

The act of selling/buying is not a % based fee like on Coinbase - meaning if you wanted to buy or sell a cryptocurrency with $20, you would still be required to pay the $400+ in fees.

This is due to the extreme congestion of the network and inferior technology to handle the demand.

That’s why we have seen the recent rise of Layer 2 solutions.

Let’s get basic on Layer 2 solutions: 

Layer 2 solutions and sometimes called side chains are used to either solve for an inefficiency that’s present on layer 1 or upgrade certain aspects.

For example, Polygon and xDai chain are layer 2 solutions for the Ethereum blockchain to remove congestion from the network.

Layer 2 solutions are still connected to layer 1, but the transactions are settled on the side chain and then added to the layer 1 chain later.

If you haven’t noticed, Ethereum is in the process of upgrading its consensus mechanism from PoW to PoS with the hope it will have more throughput to settle more transactions and reduce the gas fees.

The thing is the upgrade is on a variable timetable and usually always takes longer than anticipated, with no guarantee it will even succeed.

With that being said, we are seeing security tokens that were tokenized on the Ethereum blockchain moving their assets to side chains to avoid the astronomical fees.

In the past couple of weeks, there were two issuers who decided to leverage layer 2 solutions:

These two examples are more evidence Ethereum is currently not a sustainable scalable solution and if not solved soon, more and more people are going to become fed up and utilize other chains.

One of the core reasons that Ethereum is still leading the charge is they have already positioned itself as the leader with an extremely strong brand to back it up.

The intangible brand value is what is going to be the hardest to overcome if another blockchain is going to take over the reins.

But, if the fees continue and the upgrade to ETH 2.0 fails, it looks to me that Ethereum is dead.

🤝 Exodus is buying back its shares

Exodus, one of the most prolific names in crypto, tokenized its shares and raised $75M earlier this year via a Reg A+ offering that enables retail investors to participate.

Those shares commenced trading on the tZERO platform a couple of months ago!

At first, it seemed that the liquidity premium of private assets was in full effect, as it skyrocketed from $27.42 to $75+ on the first day of trading!

Then, reality set in…

The Exodus token dropped to as low as $9!

This sounded the alarms for the Exodus team, as well as across the security token ecosystem.

This trading price was not representative of the company’s performance at all.

Instead of sitting around and twiddling their thumbs, Exodus decided to do something about it.

They have announced a buy-back program of their shares.

Exodus said it intends to execute share repurchases beginning on November 18, 2021, and the program will last through December 2022 or until $2 million of shares have been purchased and retired.

But, is this just a bandaid for a temporary fix, or will this solve the liquidity issue for Exodus? 

Or is there a deeper liquidity problem that Exodus has exploited?

It’s no lie that the ecosystem has experienced little liquidity when compared to the public markets, but that’s expected.

I believe one of the core issues Exodus is experiencing has been the lack of awareness.

They reportedly had 6,800 investors invest and were oversubscribed.

My question is... where are these investors? Are they all hodling or are they simply unaware of the fact they can trade their shares on tZERO?

The question remains uncertain, but I am glad Exodus is attempting to solve the liquidity issue - hopefully, awareness grows by the time the buy-back program ends.

💦 What else is Drippin’

✍️ 📹 Content from the team 

This past week, Tron Black of Ravencoin defeated John Nahas of Avalanche in our first ever Battle of the Blockchains debate! There were 100s of people from each community who watched and voted!

Thanks for tuning in! Keep an eye out each Monday for the next security token adventure 🧗‍♀️

Everything in this report is for informational and entertainment purposes only. Nothing in this report should be taken as financial advice or as an inducement to purchase or sell any security. Nothing in this market report should be used as legal advice. Always do your own research before making any decisions regarding financial transactions of securities.

Disclosures:

• No money or other consideration is being solicited, and if sent in response, will not be accepted; 

• No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed and only through the platform of an intermediary (funding portal or broker-dealer); and 

• A person’s indication of interest includes no obligation or commitment of any kind.