Yunbi.com Laomao: What is behind the madness of Ethereum?

On May 18, Yunbi.com COO Lao Mao (Weibo ID: @大白老猫) published a paid article two months ago to explain Ethereum in detail. At that time, the price was 19 yuan, and many people paid to read this article. Today, Lao Mao made this article public in WeChat Moments. After obtaining Lao Mao’s authorization, Yunbi.com will send this article to our readers. The following is Lao Mao’s original text:

--------------Dividing line advertisement: To buy and sell Ethereum, go to Yunbi.com (www.yunbi.com)-----------------

There are two reasons for writing this article: First, many of my Weibo fans say they don’t understand Ethereum. I want to try to explain what Ethereum is in a language that can be understood by anyone without a technical background. Second, I want to try charging for reading to see if anyone will accept it. My knowledge is valuable, but giving it away for free will make it cheap. If enough people pay to read, it will motivate me to work harder to share my knowledge. This article is not a guide to speculation, but my own understanding of Ethereum. I cannot guarantee that my views are all correct, but I can guarantee that these views are my cognition in the process of learning. I hope you have your own independent views, treat my views with caution, and even consider the possible errors caused by my lack of cognition. If you lose money by participating in speculation because of my views, please bear the responsibility yourself.

Has Ethereum made you money?

Starting from January 10 this year, Ethereum started at around RMB 6. When I started writing this article (March 6), the price of Yunbi Ethereum was RMB 79, which has risen by more than 13 times. However, if I ask whether Ethereum has made you money, many people will be embarrassed or even depressed. 99% of the people in the domestic Bitcoin circle missed this opportunity. It is not a mistake not to make money, but if you review why you did not make money, many people will answer like this:

• Not paying attention;

• I thought it was just an ordinary altcoin;

• I thought it was the same as bts.

Yes, for those who don’t pay attention, Ethereum is another world, just like you may know nothing about certain industries, but people in this industry are making a lot of money, which is just the inevitable result of “cognitive bias”. Do you remember why we invested in Bitcoin? Which real long-term investor didn’t understand the value of Bitcoin after studying its principles and became fascinated by it? It is precisely this group of people who are so dismissive of Ethereum, and even don’t know what Ethereum is, but add it to the contempt chain with a full sense of superiority. Similarly, many fiat currency supporters also despise Bitcoin, so they can only become an ordinary “user” at a high point in the future, rather than an early “investor”.

When you can't see this world, this world will abandon you!

This is why you don't make money from Ethereum.

Now do you want to know what Ethereum is?

Is Ethereum a coin?

No! Ethereum is an abstract summary of the underlying technology. By analogy, can I ask you, is an operating system an APP application? Of course not! Ethereum itself is not used as a currency, but as a blockchain infrastructure. I wrote this in my previous article "The Cleverness of Ethereum":

Ethereum can be imagined as a piece of land in a new world that has been leveled. All the infrastructure is ready. Anyone can build what they want on this land as long as it complies with the basic rules of this land. At the beginning, there was nothing on this land, but now there are many high-rise buildings under construction, and it is becoming increasingly prosperous. Even the world's eleven largest banks will build R3 buildings on this land. More large companies are asking how to move in. This land is becoming a prosperous new world, which is becoming possible day by day. Ethereum is just the currency of this new world. It can be used to pay water and electricity bills and purchase services. It is also the financial blood of the entire new world.

This article received only 4 comments, which is the article with the fewest comments I have ever written, and almost all of them were with contempt. When the above article was published, the price of Ethereum was about 15 yuan (if I knew the future, I would buy more at that time, tears!).

To get back to the point, as a blockchain infrastructure, Ethereum makes the development of blockchain applications simpler and more efficient, and also makes these applications more secure and reliable.

For example: if you want to issue a coin (sounds like BTS, I’m just starting with an example here), you don’t have to worry about mining, source code, performance, security and other issues. You just need to compile the rules and features, which can be done quickly and easily on Ethereum. With the help of Ethereum’s powerful programmability, this coin can almost realize the functions of any digital currency that has been issued so far.

Let's take another example: if you want to do a blockchain project for food safety tracking, you need to use the blockchain's timestamp method to track the path from planting to production to the final sale to the user, so as to achieve openness, transparency and traceability of production. If there is no Ethereum, you need to build a blockchain system yourself. The maintenance and management of this blockchain system itself is a huge workload. With Ethereum, you can do application programming directly on the Ethereum blockchain. Developers only need to write the actual application part, and the basic blockchain part can completely rely on Ethereum itself. This method will make the economy of blockchain development very high.

Through the above analogies and examples, you should be able to understand that Ethereum is a technology, a blockchain infrastructure, and an underlying platform that can be used to develop various blockchain-based and decentralized applications. Ether is the currency on this infrastructure. Its significance is to circulate value in the Ethereum system. It has no intention of becoming a member of the real-world monetary system. However, if there are enough holders and users of Ethereum, it will naturally form a corresponding value relationship with the currency in the real world.

Will Ethereum be the next BTS?

No! Let's first understand what BTS is. BTS can be understood as an enhanced version of Bitcoin, an application with built-in functions. The main functions of BTS are: issuing assets, built-in exchanges, anchoring currencies, and the "efficient" system after 2.0; We use application software as an analogy. Bitcoin is like a word processing software, which is mainly used for basic operations such as text editing, while BTS is an enhanced version of word processing software. In addition to text editing, it can also make tables, send emails, and run some simple macros. However, in essence, BTS is still an application. But Ethereum is basically an operating system. On this operating system, you can develop various applications, such as education, music, games, and storage applications. It is almost omnipotent. Therefore, in essence, Ethereum and BTS are completely different things. There is a rather ridiculous view in the industry: because @暴走恭亲王子 once supported BTS, and then BTS fell into a slump, and later, @暴走恭亲王子 also supported Ethereum, so Ethereum will also fall into a slump. What do you think is the difference between the above logic and the logic that the sky will be bright because the rooster crows, so the sky will be bright because the rooster crows? It is almost sad that a person who can invest in Bitcoin would have such a biased thinking mode. Another difference between Ethereum and BTS is the difference in application scale. BTS has not been working hard in the past two years, but most of its efforts have not produced any results. No decent institution has ever reached a substantive cooperation with BTS. But Ethereum has been favored by large institutions very early, from Samsung and IBM in the early days, to Wanxiang, Deloitte, Microsoft, and then to R3. The logic behind this is very simple. Researchers in large companies are not vegetarians. Their final recognition has essentially proved that Ethereum's technology is reliable and usable. Therefore, Ethereum and BTS are not at the same level at all. If someone thinks of BTS immediately when mentioning Ethereum, I can only say that his brain has been kicked by a donkey, and his only mission in the currency circle is to be a leek.

The real reason behind Ethereum's surge.

The value of underlying technology

As mentioned in the above paragraph, the favor of many large companies and institutions towards Ethereum has led to the discovery of the value of Ethereum's underlying technology. This discovery was first based on senior developers who could understand Ethereum, and then gradually spread to the surrounding population. Since using Ethereum as an infrastructure to develop applications is a common demand, the value of Ethereum was further discovered, and the price rose. The price increase brought about a chain reaction, resulting in a rigid demand to "stock up" some Ethereum to be used in the future due to development needs, which caused the price of Ethereum to rise;

Natural legitimacy

This is very, very, very important. The attitude of governments towards Bitcoin is not very friendly. This is because Bitcoin is essentially a substitute for legal currency. No matter how it is implicitly expressed, it cannot change its essence. In order to protect their own interests, governments and banks have imposed various restrictions and crackdowns on Bitcoin. This is almost a normal situation, which has inhibited the development of Bitcoin to some extent. On the contrary, blockchain technology itself is just a technology, without any position or preconceived views. For banks, it is a tool to optimize efficiency, and for governments, it is a way to reduce operating costs. This is also the reason why the concept of "blockchain" became popular in the second half of 2015. There used to be a ridiculous debate about whether the Bitcoin blockchain is the only legal blockchain, which is as ridiculous as whether the solar system is the only legal star system. The great discovery of the value of Ethereum this time also ended the wrong logic that blockchain technology and Bitcoin are inevitably bound.

Bitcoin leaves opportunities

Bitcoin has contributed to the rise of Ethereum. On the one hand, the largest trading market P.net uses Bitcoin and Ethereum for transactions. In this process, Bitcoin has become money. On the other hand, the controversy over Bitcoin's expansion and fork has actually caused some panic and risk aversion. After Ethereum's sharp rise, its market value has exceeded 10% of Bitcoin, which is enough to accommodate the inflow of some Bitcoin for risk aversion. This inflow of funds is similar to the expectation of a sharp depreciation of the RMB, when funds flow into the stock market to buy assets for risk aversion, causing the stock market to rise.

What is the intrinsic relationship between Ethereum and Bitcoin?

Ethereum is the underlying decentralized blockchain infrastructure built on the theoretical foundation of Bitcoin; Ethereum is the first digital asset that can be called an "asset" on Bitcoin; There is an obvious price seesaw effect between Bitcoin and Ethereum. Perhaps the relationship between Ethereum and Bitcoin can be viewed from the relationship between different legal currencies. For example, if the US dollar strengthens, it will cause the RMB to buy a large amount of US dollars, which will cause the RMB exchange rate to fall, and vice versa. In the absence of sufficient external capital inflows, the rise of Ethereum will cause a part of the flow of Bitcoin funds. Therefore, we can see a very obvious seesaw effect between the prices of Bitcoin and Ethereum: the stage of Ethereum's skyrocketing is the stage of Bitcoin's plummeting, and the stage of Bitcoin's impact on 3,000 yuan is the stage of Ethereum's low consolidation. I even observed that there is a seesaw effect in the hourly fluctuations. If you are interested, you may wish to install "Coin Watch" to observe. "Coin Watch" can already display the Ethereum prices of Yunbi and P Network in real time. Such a seesaw model can enable experienced investors to manage investments more efficiently, but it also places higher demands on investors' judgment.

How do you view investment and speculation?

Ethereum has both investment and speculation attributes. The actual value of Ethereum as a project will be very large in the future. There is no doubt about this. It is not an exaggeration to say that it will be a giant like Apple in the future. It is precisely because of such strong growth expectations that Ethereum has skyrocketed 13 times in a short period of time, but this process undoubtedly has a state of transfer from investment to speculation. I have no way to evaluate what price of Ethereum is reasonable now. Under the crazy speculative form, it is not uncommon for the price of Ethereum to be hyped in the short term, but as a new investor, whether you will accidentally take the last baton and then stand guard at a high position for several months or even longer, this is a risk that needs to be avoided. Buying in the range of 8-10 yuan can be regarded as an investment; buying at 80 yuan is still considered strong speculation. Maybe this price will not be a problem in a few years, but at present, the atmosphere of speculation is too strong, and it is time to pay attention to safety.

Why I bet Ethereum won’t drop to $30 in a month?

Friends on Weibo may have noticed that I made a bet with @BitcoinGoldAnalyst on Bitcoin. I bet that the price will not fall to 30 within a month. I am willing to make this bet for two reasons: 1. From a long-term perspective, the hype of Ethereum has not reached the stage of collapse, and it may fluctuate repeatedly between 40-80 for a long time. 2. If I lose the bet, Ethereum will enter the value investment area again, and I will get an excellent opportunity to increase my position. I am very much looking forward to losing the bet. April 4 is the last day of the bet. I believe that as an investor who wants to seize the opportunity, you hope that I lose this bet just like me. Let's wait and see.

How to evaluate the price of Ethereum in the short, medium and long term?

Short-term refers to the price within 1-2 months. At this stage, I personally think that there is a high possibility of wide fluctuations between 40-80. If Bitcoin strengthens, the price of Ethereum will approach the lower track. If Bitcoin weakens again, Ethereum may break through 80-100 in the short term. When I wrote this article, I still felt the strong speculative atmosphere in the Ethereum market, but how long this atmosphere can last is a suspense that can only be seen in the results.

The medium term refers to the price of 3-6 months. The price in this period is still volatile. The uncertainties in this period are as follows: 1. Will there be large domestic exchanges listing Ethereum? 2. Will the halving of Bitcoin be carried out as scheduled? 3. Will the expansion and fork of Bitcoin proceed smoothly? 4. Will Ethereum have another large company to join or cooperate with? 5. Have disruptive applications been developed on Ethereum? 6. Does Ethereum itself have any systemic problems? Each of these will cause the price of Ethereum to fluctuate. I am cautiously optimistic about the price at this stage. The possible price fluctuation range is between 50-150.

Long-term refers to the price range of 1-3 years. This kind of prediction is basically a gamble, but a rough assessment can be made based on market value. As the underlying infrastructure of a blockchain, Ethereum's market value can be expected to be based on the scale of a medium-sized global enterprise as long as there are no serious systemic problems. The expected market value we can see is 30-50 billion US dollars. According to the number of Ethereum coins issued, the maximum price is approximately between 250-400 US dollars. At the same time, the market value of Bitcoin should exceed that of Ethereum. It is conservatively estimated to be 100 billion US dollars, and the price of each Bitcoin should be around 5,000 US dollars. The above price predictions will be greatly biased, so please invest with caution.

How to trade Ethereum?

Currently, there are more than 20 major exchanges in the world that can trade Ethereum, and the following four exchanges have a daily trading volume of millions of US dollars. Among them, Yunbi.com is the largest trading platform in China, with two trading pairs, RMB and Bitcoin.

I personally tested the No. 1 Poloniex trading platform (hereinafter referred to as P-net). This platform is quite professional in trading and provides spot and futures trading methods. The main trading pair is between Bitcoin and Ethereum. However, P-net uses Google's intelligent security identification system, which is quite troublesome for users who have difficulty in climbing over the firewall. Yunbi is the most user-friendly trading platform for Chinese users. At present, the liquidity of Ethereum to RMB is also quite good. It is not difficult to buy and sell 10,000 to 20,000 Ethereum.

How to play Ethereum futures trading on P network?

Friends who like high-risk speculation can use leverage to trade on P.net. P.net provides 2.5 times leverage for trading. First, you must be able to register and log in after climbing over the firewall. There is a "MARGIN TRADING" in the upper left corner of the P.net title bar. Click this part to enter. Click "Quick Transfer" in the trading section, and the fund transfer window will appear.

The great thing is that BTC, BTS, DOGE, LTC, XRP, ETH, FCT and other trading products can all be transferred to futures accounts, which means that these assets can also be used as investment money. The subsequent trading part is simply buying and selling, and you can go long or short. Once again, please pay attention to the risks: all leveraged transactions face the possibility of losing all the principal due to liquidation.

In addition to Ethereum, what other trading products are worth paying attention to?

Let me briefly explain this. According to my observation, the popular coins with large trading volumes on P network include FCT, MAID, and XMR. However, if you want to invest, you need to do your own homework to find out what is behind these coins.

Ethereum’s vision of a new world in the future.

If Ethereum succeeds, what kind of new world will it bring us? First of all, blockchain technology will be everywhere on the earth, and any object, person, and person can establish a better trust relationship. Ethereum, the underlying technology, will be as ubiquitous as IP addresses, but you rarely feel its existence. Since Ethereum runs on a decentralized architecture, the entire blockchain network will be very solid and unbreakable. Even if Ethereum grows strong enough, it will be possible to absorb and implement all the functions of other digital currencies, and even Bitcoin will become a more useful "Ether Bitcoin" through the "coin burning" smart contract, thus solving all the problems left over from Bitcoin history once and for all. Many people are concerned about whether the security of Ethereum after switching to POS is the same as or even better than the current POW method. Please read the articles related to Casper. Here is a link to the first article. You can continue to read it on this website. It is a bit brain-burning. If you are not good at abstract thinking, it may be painful to read. If this mechanism can be truly implemented and verified, the safe operation mechanism that surpasses the Bitcoin POW method will open a new chapter in the blockchain revolution.

Supplement: Why has BTS been so depressed?

BTS is a product that I once had high hopes for. Before the emergence of Ethereum, some of its features gave people great imagination. So far, I still think that the "function" part of BTS is very excellent, but now it has irreversibly declined, and it has been in a long-term slump, and there is no possibility of developing in a better direction. I personally think that it is mainly caused by the following reasons: 1. Increased issuance, additional issuance, and additional issuance. Since the first increase in issuance, BTS has caused the dilution of value, and ultimately caused the community to distrust the core team. Losing trust is the first step towards the decline of BTS; 2. BM's centralized management method has made BTS face a serious centralization crisis. Digital currency started with Bitcoin, and decentralization is one of the core concepts. The de facto centralized management model of BTS makes its functions become useless no matter how awesome it is; 3. Unreasonable fee mechanism and chaotic community disputes. I won't expand on this part. I will just briefly say that transferring money on BTS makes people feel that they can't afford it. Issuing a new coin on Ethereum only requires one ether coin, and issuing a coin on BTS, forget it, I won't check it, it's very expensive anyway. 4. The 2.0 version of BTS, which has not been publicly tested, claims to have a data rate of millions of times per second. In fact, it is basically impossible to achieve this under the current global bandwidth and equipment, and there is no third-party public evaluation. This makes people doubt that the real purpose behind this 2.0 upgrade is more about the complete transfer of power. 5. The rise of Ethereum. Ethereum can perfectly realize all the functions that BTS wants to achieve in the form of applications, and even do better. This makes BTS very embarrassed. In terms of currency payment, Bitcoin is already the boss, and in the direction of blockchain, Ethereum is a mountain that cannot be bypassed, so BTS is caught in an awkward gap. In short, the core reason for the downturn of BTS is the loss of trust caused by centralization, and it has not found the real demand point in technology. For Ethereum, BTS may have a more important meaning in warning which pits are absolutely not to be stepped on.

Final Thoughts

Before going home yesterday, I went out to eat some udon noodles and salmon. I don’t know what went wrong, but I had vomiting and diarrhea. But I agreed to publish it today. It’s a promise, so I finished writing this article between the bathroom and the bed. I hope you think it’s worth your money.

Once again, thank you to all the friends who paid to read this article, love you!