Natasha Che, an entrepreneur investor in the ever-burgeoning world of blockchain and cryptocurrency, has recently speculated that Ethereum (ETH) will likely be the catalyst to bring about one of the biggest revolutions in the global financial market the world has ever seen.
According to her latest write-up, she asserts that proof-of-stake (PoS) assets, in this case, staked ETH, will replace United States Treasuries and government bonds as the benchmark of risk-free investments in every portfolio.
Read on below to find out what factors fuelled this bullish assertion!
What Is a Risk-Free Investment?
What is a risk-free investment, you ask?
In the world of investing, an asset is considered a risk-free investment after investors trust the issuer to have less uncertainty in their ability to repay their debt.
However, in the case of the United States government treasury, this trust comes from the fact that the country has the biggest and most robust economy alongside an income exponentially more profitable than any country across the globe.
Based on the fact that buying the United States Treasuries means purchasing a cut of its GDP and the success of its economy, which on average is generally healthy, investors have, so far, used it as the definitive risk-free asset to have in their portfolios.
According to investors like Natasha Che, however, this is all about to change.
Introducing Ethereum, a New Type of Risk-Free Investment
Ethereum, Ether, or ETH, for short, is open-source, public, and permissionless. These factors are said to continue playing a vital role in the inevitable takeover of United States treasuries as the de-facto risk-free investment choice.
For example, the ETH network charges fees for carrying out transactions on its respective network. The higher complexity of an operation being carried out, such as running a smart contract, for example, equates to the cost of these fees rising.
Theoretically, this is how the United States government, or any other government for that matter, and its respective taxes function.
Introducing Proof-of-Stake
Being a PoS, or proof-of-stake blockchain, ETH will have the edge over any nation-state government once it can begin facilitating economic activity – including settling real estate or import/export transactions since these are public and operating on a global scale.
The fact that the blockchain operates globally means that the fees collected will track the global value creation, making becoming a validator on the blockchain more rewarding than any bonds any government could ever issue.
However, the road to dominating the United States Treasuries as the risk-free investment of choice is unlikely to be met without resistance.
Final Thoughts
Current projections foresee the network with an inflation rate of about 1% annually after Ethereum becomes fully deflationary. However, this may be a barrier to its “risk-free asset” status going into the future.
To ultimately replace the United States Treasuries as the benchmark of risk-free investments, the network will need to manage its token economics, scaling, and fees to keep pace with the current global GDP growth – about 2 to 3% annually.
Simply put, the global economy will need the Ethereum network’s currency supply to initially grow faster than the global economy. With this in mind, in conclusion, it remains uncertain if staked Ethereum will replace the United States treasuries as the risk-free asset investment of choice.
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