Ethereum digital bond – A fantasy or reality?

Ethereum digital bond A daydream or reality

An Ethereum digital bond looks like a fantasy to any ETH fan. However, ETH 2.0 brings staking to the famed network, and it will undoubtedly open up many new opportunities. Therefore, the convertible potential of the entire $26 Billion Ethereum wealth into yield-bearing assets is highly likely.

The concept of an Ethereum digital bond is similar to conventional bonds in many ways. Ether Capital president Stefan Coolican says that staking will eventually bring bond-like characteristics to the Ethereum blockchain with a similar utility potential. Suddenly, the entire Ethereum digital bond scenario seems possible.

Understanding the Ethereum digital bond possibilities

Coolican states that the introduction of staking would change Ether from a mere digital commodity into a financial asset capable of disbursing dividends to its users. The new-age ETH won’t carry the counterparty risks associated with a traditional bond because the stakes would be entrusted with the yield instead of a counterparty.

Staked ETH would most likely represent an intrinsic yield asset. Interestingly, the risks would be related to the ETH protocol. They would also guarantee dividends to the users, which in turn would support the store-of-value concept that the ETH community strongly believes in.

Going forward towards ETH 2.0

Furthermore, the proof-of-stake implementation would drastically reduce its inflation rate to near-zero. Consequently, a restricted ETH supply means it will inherit many features of real-world money.

However, an actual Ethereum digital bond may not be happening anytime soon. Theoretically, the smooth ETH journey will run into myriad troubles before complete Ether staking transformation. Critics, like Skale developer Konstantin Kladko, are warning about defects in ETH 2.0 shift. He warns that the actual shift towards staking can prove embarrassing for Ethereum since ETH lacks the capital for such a transformative phase.

Kladko further elaborates the ‘fatal flaw’ saying that uni-directional bridge means that users will demolish 32 ETH to achieve staking. He adds that ETH1 will always be more than ETH2. It remains to be seen how an Ethereum digital bond can emerge out of such challenging critiques.

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Gurpreet Thind

Written by Gurpreet Thind

Gurpreet Thind is pursuing Masters in Electrical Engineering at University of Ottawa. His scholarly interests include IT, computer languages and cryptocurrencies. With a special interest in blockchain powered architectures, he seeks to explore the societal impact of digital currencies as finance of the future. He is passionate about learning new languages, cultures and social media.