Anthony Pompaliano, a renowned American entrepreneur and the co-founder of Morgan Creek Digital, recently wrote a blog post in which he compared Ethereum to fiat currencies. In his blog post, he claimed that the two were “very identical.” However, the crypto community has not taken his comparison kindly.
Pompliano is a respected investor and a knowledgeable person when it comes to crypto investments. He is considered a Bitcoin fanatic, who has in the past called out Warren Buffet for his views on crypto. However, this time he is the one on the receiving end of the criticism.
Fiat and ETH are the same -Pomp
In his blog post, Pompaliano said that Ehereum and fiat currencies were almost the same. He noted that fiat currencies do not operate on a fixed supply basis. Besides that, they were prone to inflation and a group of people created their monetary policies. According to him, this is the same for Ethereum.
Pomp claimed that ETH operates on a framework known as the concept of minimum necessary issuance. This implies that the ETH community does not work based on a fixed supply amount of the tokens. Rather, the community motivates miners and implements safeguards using continuous minimum issuance. According to Pomp, this makes ETH very similar to fiat. This is because the issuance of fiat varies over time and depends on the laws of demand and supply.
He concluded that fiat currencies could find better alternatives than ETH and thus, ETH was not a good alternative. Currently, various DeFi projects are being created that could transform how the financial service sector operates. Most of them are based on BTC and stablecoins. However, none of them are based on ETH, according to Pomp.
The Counter Arguments
Soon after Pomp made his blog post, Voorhees, the founder of the ShapeShift exchange responded to him with a counter-argument. He said that fiat currencies issued by states and Ethereum were completely different. Voorhees said that while the value of fiat currencies was determined by a decree from the state, cryptocurrencies had their value determined by the open market. As a result, since the people determine the value of crypto such as BTC, the two were not the same.
Voorhees also noted that fiat currencies were merely a legal assertion. As a result, the restrictions placed on ETH did not make it the same as fiat. He noted that unlike fiat, its value is independent of any government action.
Voorhees claimed that Pomp had made some incorrect assertions in his blog post. For instance, he noted that while the inflation pattern for ETH was different from that of BTC, it did not mean it was the same as that of the US dollar. He noted that while fiat money was tradable, its value was not susceptible to the forces of market demand and supply like ETH.
For Bitcoin purists, Pomp has a point. However, this debate is unlikely to go away anytime soon. Those who believe in ETH, the second largest coin by market cap, are unlikely to let this slight go unchallenged.
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