That brings up a good point I should make explicit, which is that I think those two sources of value are separate but not necessarily mutually exclusive. I think you can consider them individually and then add them up. John Pfeffer makes this argument too, that the two sources of value likely don't affect each other too much, allowing you to consider them separately.

That makes some sense, but I think there's also significant friction in the conversion. If I'm a store owner getting paid in ETH (or whatever), and I can buy a lot of my supplies with ETH, then it makes sense to just keep the ETH and buy my supplies with it, instead of paying unnecessary exchange fees. And if people do that, you don't have super-high velocity anymore. You're just an everyday currency like dollars (which are also mostly digital these days).

In fact, if people were to contact an exchange for every transaction, it's hard to see how there'd be any advantage over just using legacy financial systems.

I used to put a lot of stock in velocity of money considerations but now I'm thinking it doesn't have that much predictive value. All it's really saying is that the GDP is defined as the number of transactions, times the nominal amount of those transactions, times the real-world value of the currency unit. The currency price could be anything and the equation still holds true. If you assume a maximum achievable velocity, you can work out the minimum currency price for a given GDP, but the price could also be arbitrarily higher than that.

It's a good point that the low market cap could lead people to try to buy a controlling supply. I explain in the other comment why I think it wouldn't be profitable on a pump-and-dump basis. On the basis of control and trust, maybe there still needs to be some assumption that at least 51% is being held by various parties, enough so that the market trusts the network to not manipulate. I need to think about that more. I'm really glad you brought it up.

As for network effects, I find that to be a super interesting question. Because you're right, there are definitely certain levels of trust that existing networks have earned, and there's a good argument for why that creates friction and earns those networks the ability to charge a premium. I personally don't think that extra friction is long lasting. I'd expect that if there were indeed a new solution that accomplished the same thing at half the price, it would get attention and the market would gravitate to it fairly quickly (maybe not within weeks or months, but years? maybe it depends on the timeframe you want to consider, and the level of improvement it provides). But it's a really good point, and something I think about a lot.

If you look at it from a utility perspective and discount the network effect, at a certain point, it becomes economically incentivized sharding.

"We accept any of the 2021 or prior World Bank approved ETH forks." Your multi-wallet client automatically chooses the one with the lowest transaction fees (also economically regulated).

That's a good point. The main reason for the low price is that velocity is so high — all of the coins are changing hands every 10 seconds in this scenario. So there is still a huge amount of demand for them. If you tried to buy a lot to drive up the price, I think all of that demand would be recalibrating the price so quickly that practically speaking it would be hard to sell them back fast enough at a price any higher than you paid. So I think it would be hard to manipulate the price in a profitable way.

But it's a good point — maybe there's some minimum level of holding that happens (could be high, 99%? 99.9%) that is solely about making it expensive for others to increase the price arbitrarily (even if they can't do so profitably), in order to maintain price stability. But that would be about paying for stability, not for the underlying utility. I need to think about that more.

I see what you mean about not being able to sell back into a different currency profitably. I need to think about this a little more myself.

On a slightly different note, another relatively minor but important thing to take into account when valuing from fundamentals is the percentage of permanently burned supply. ETH may have a supply of 100M in theory but in practice, maybe it's 70-90M due to private key loss or smart-contract lock.

Hi, I'm on the team at Medium that launched Charted today. No, Charted wasn't built to be used in blog posts. It was built as an internal tool to, among other things, share simple data query results and create ad-hoc dashboards (as part of the general data analysis our Product Science team does).