In his recent blog post Anthony Pompliano compared the world’s second-largest cryptocurrency with fiat currency and called them “two very identical assets.” Needless to say, it didn’t go down well with the crypto community.
Famous American entrepreneur and co-founder of the venture capital firm Morgan Creek Digital, Anthony Pompliano, popularly referred to as Pomp, remains one of the respected figures when it comes to investing in cryptocurrencies. Being a hardcore Bitcoin fanatic, he even went on to criticize Wall Street veteran Warren Buffett for his orthodox views on Bitcoin. This time, however, it was his turn to face the backlash.
Fiat currency and ETH are one and the same, Pomp
Pomp said in his recent blog post that Ethereum and fiat currency are almost identical. According to Pomp, fiat currency does not operate on a fixed supply basis, is susceptible to inflation, and its monetary framework is designed by a set group of individuals, and these aspects, Pomp continues, are present in the case of Ethereum as well.
Pomp says that Ethereum’s monetary framework is based on what is commonly referred to as the concept of minimum necessary issuance. It implies that the Ether community does not operate on a fixed amount of supply of the tokens, rather motivates miners and safeguards the network by using a continuous minimum issuance.
This unique feature, according to Pomp, makes it very similar to fiat currency, where the production of new money also varies from time to time, depending on the demand and supply.
With all that said, Pomp arrives at the conclusion that fiat currency can find better substitutes than Ethereum and that calling the latter a good alternative is incorrect. Currently, there are various exciting Defi projects available in the market that have the potential to transform the way people deal with financial services radically. They are mainly based around Bitcoin and other stablecoins, just not Ether, Pomp argued.
Voorhees takes on Pomp with more arguments
Soon after, Pomp’s comments on Ethereum were met with heavy criticism. Erik Voorhees, who is the founder of instant digital asset exchange ShapeShift, responded to the blog by stating that Ethereum and state-backed currencies are, in fact, two very contrasting concepts.
The value of fiat currency is decided by the decree of the State. However, cryptocurrencies like Bitcoin and Ethereum, as well as speculative assets like gold are traded in open markets. People decide their value. So, it doesn’t even come close to being called a fiat, explained Voorhees.
Voorhees also pointed out that fiat currency is a legal assertion, and placing restrictions on the supply of tokens doesn’t allow Ether to qualify as fiat money. Its value is not decided by the government, unlike fiat.
Voorhees called out the celebrated Bitcoin bull for citing incorrect facts in his post. Per Voorhees, although Ethereum’s inflation pattern widely varies from that of Bitcoin’s, that does not make it similar to USD’s. Indeed, fiat money is traded. However, it is not vulnerable to market demands the way ETH is, he concluded.
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