Economically, I think Ethereum is very much in place to achieve full value capture if its native coin is used as the reserved medium of exchange in facilitating worldwide trading of fractional ownership of assets. Anything less than that (i.e. allowing 3rd-party non-native coins to facilitate the trades) would undermine the structure itself as this may open wide the system to be gamed by various rogue agents.
I think the real challenge is not so much about potential value capture, but rather about how the blockchain trilemma (decentralization, security, and scalability) can be well resolved to achieve the desired value capture.
Nevertheless, I am still not aware of any Ethereum-based smart contract operation that does not need ETH to run or pay for gas. So far all the tx that I did involve certain amount of ETH primarily for gas. If there is really such a case possible whereby I do not need ETH for anything both directly and indirectly, then I would like to know what is the rationale for allowing such state to be possible. And what outcome is expected from this.
Rubin’s argument # (2) stated “There is no reason for ETH to be used to pay gas fees, as through economic abstraction any other currencies can be used.” sounds like if I travel to Europe, there is no reason to pay for things with EUR as I should/can use USD/YEN/INR for payment as well. As we know this is not practical.
In Rubin’s # (3) “Rational, independent and self-interested miners will choose to be paid in assets of their own choosing rather than in ETH.”, what exactly would be the reasons why miners would choose to accept non-ETH currencies? If a miner would choose Binance coin for example, in which the coin can be subject to insider manipulation, then how would such falsely inflated value going to affect the network’s trilemma? Did Rubin ever consider such conflict? If so, where is his explanation?
Why would Rubin argue that tokens should have greater value than the coin they are operating on top of? And why would he think that these myriads of tokens would not be less valuable than ETH? What logic is used to justify ETH being worthless while non-ETH tokens being worthy? Any factor that can be applied on ETH to make it worthless should equally be applicable on any token to make that token worthless too. Otherwise, this is obviously to me a case of arguing why the tail of a dog is worth more than the dog itself. Or is the protocol misaligned with economic incentives?
Update: James Kilroe’s “applications being the better investment” is valid (in my opinion) only if every dapp comes with its own ICOs and its own blockchain-agnostic token and you have a chance of encountering a killer-dapp amongst a bunch of them. Otherwise, Ethereum needs a bunch of Ethereum-exclusive dapps (thus not blockchain-agnostic) that accept only ETH for use, which I believe what Consensys is doing (correct me if I am wrong). Here, tokens would serve a totally different purpose. Today, we see most issuance of tokens from ICOs is for the purpose of fund raising. The tokens themselves are not needed at all for functions of the dapps. By right, the main function of issuing tokens is for keeping track of who owns which tokenized assets in a fractional ownership system, which I believe is where we are heading to, and much less or not at all about fund raising. In this world, Ethereum would receive full value capture. Additionally, if Ethereum blockchain can successfully resolve its trilemma, then most if not all blockchain-agnostic dapps would indirectly become Ethereum-exclusive dapps, in my opinion.
Yes, I agree that ETH price/market cap is directly related to its security, but I would love to know Vitalik’s feedback on this for confirmation or refutation. I commented about this in POS @ Low USD value of ETH? The price of ETH cannot be limited to the cost of paying for gas alone.