In the very elaborate post, he tells a story of how the CEO of Three Arrows, Su Zhu, asked him about the probability of Ethereum flippening Bitcoin. Initially, Arthur Hayes responded with a 0% chance but updated this number to 30% after reading Raoul Pal’s May 2021 edition of the Global Macro Investor. Embedded in the latter document was a snippet that had an ETH prediction of $150k by January 2023.
Ethereum’s Mission is to Power The World’s Largest Decentralized Computer
Mr. Hayes goes on to explain that Ethereum’s sole purpose is to power the world’s largest decentralized computer. A snippet of his view of Ethereum in this regard can be found below.
The number one mission of Ether is to power the world’s largest decentralised computer. Ether is valuable because the Ethereum network is the most used smart contract protocol. It has the most developers, the most Dapps, and the largest Total Value Locked (TVL). Ether is the commodity that is spent to pay for gas so that you may use the Ethereum decentralised computer.
EIP1559 Fee Burn and How DeFi Could Propel Ethereum to New Heights
With respect to how Ethereum can flippen Bitcoin, Arthur Hayes points to the yet to be implemented EIP1559 that aims at solving the high gas costs on the network as well as introduce a fee burn.
According to Mr. Hayes, EIP1559 ‘will substantially alter the inflation schedule of Ether’ with an estimated 70% of the gas spent on each transaction being burnt. Compounding these transactions through DeFi will most likely be the most probable route of Ethereum flippening Bitcoin.
He explained this scenario as follows.
If we are underestimating the impact of DeFi on human economic interactions, there is a future where there isn’t enough Ether supply to allow the system to function…
A prime driver of the Flippening bull case is that the exponential rise of DeFi-necessitated on-chain transactions, which causes more fees to be spent then burned, lowering supply and pamping the price.