Consensus 2021: 8 Questions for Ethereum’s Andrew Keys

Often called the “Ethereum oracle,” DARMA Capital’s Andrew Keys sat down with CoinDesk during Consensus 2021 for a brief interview covering his prediction rate for this year so far, and what’s next for ETH and DeFi now that everything seems to have hit its stride. 

What do you make of the second all-virtual Consensus? Is this a format you would hope to see continue even as the world returns to normal? Any thoughts on the metaverse replacing real life?

Call me old-fashioned, but I miss the human connection and look forward to attending in person next year. That said, it’s great that people have the ability to access the subject matter expertise that comes to Consensus, from anywhere in the world. 

Andrew Keys, co-founder of Darma Capital, is a speaker on “Ether for Institutions: The Next Frontier” at Consensus 2021. Register here.

There’s a lot of talk about ETH being “ultra-sound money.” Is this an idea you buy into – or is it just wishful thinking?

I absolutely agree with this concept. Ether is an asset unlike the world has ever seen. It has three core properties that make it valuable as: 

  • A capital asset: Owners of ETH own a piece of fees of world’s global settlement layer. 
  • A consumable asset: ETH is a fuel, a digital commodity. For every computational step in Ethereum, a certain amount of ETH is “burnt.” 
  • A storage of value asset: ETH can be freely traded or used as collateral to borrow against in digital economy. 

Two imminent catalysts to increasing the value of Ethereum include EIP 1559, wherein ether is burnt for every computational and storage transaction; and Transition to PoS, which reduces “sell pressure” associated with proof-of-work mining costs like electricity, hardware and real estate. Most miners have to sell 75% of what they mine to pay these monthly expenses. 

There’s a growing narrative that traditional finance folks understand Ethereum more than Bitcoin. Is this a replay of the “blockchain, not bitcoin” debates of the past?

Bitcoin addresses one simple use case. It’s digital gold with a total addressable market (TAM) of $10 trillion. With bitcoin, Alice can send Bob value peer-to-peer and it’s provably scarce. This is a non-trivial use case, and Bitcoin has been the patriarch of blockchain, but there’s much more we can do with next-generation blockchain databases. 

Ethereum is the substrate to the digital economy. Its TAM is $270 trillion, for its total economy. Ethereum can digitize all assets (commodities, fiat, stocks, derivatives, insurance policies and prescriptions) as well as financial instruments (loans, derivatives and exchanges) and legal agreements (employment, syndication, purchase orders and investments). 

What’s your investment thesis?

We’re witnessing the birth of the digital economy. Ethereum is the only blockchain on Earth capable of being the substrate of the digital economy. Ether is an asset unlike any asset we’ve ever seen before. We invest in ether and the picks and shovels around Ethereum (like layer 2 scaling solutions) to help increase adoption. 

You called Coinbase the AOL of Web 3.0. What’s next?

Ethereum will exceed Bitcoin’s market capitalization in 2022. 

Decentralized exchanges are growing rapidly, but there’s a genuine concern that they’re little more than ways to financialize token products. When will DEXs be able to support actual capital deployment and influence things in the physical world?

[Decentralized finance] has over $100 billion in [total value locked] with Ethereum settling $1.5 trillion of transactions in Q1 ‘21 … actual capital deployment is happening right now. Last month, [European Investment Bank], [Goldman Sachs] and [Société Générale] had to spend ether in order to issue a bond. Those entities needed ether for operating expenses. It’s happening right now. 

You’re known for your yearly Ethereum predictions. Have any been proven true so far?

I’ll defer to the fact-checkers, but in my view all of them have come true to some extent. One that I’m particularly proud of is 2021 being a breakthrough year for layer 2 solutions. What we’re seeing across the layer 2 landscape right now – particularly advancements in finality and security – makes me more confident than ever in the commercial viability of blockchain-based applications. 

Any predictions for when ETH 2.0 will go live?

By Jan. 31, 2022.

Consensus 2021: 8 Questions for Ethereum’s Andrew Keys