With Ethereum In Free Fall, Is R3’s $150 Million Valuation Sustainable?

by Tim Sloane 0

A CoinTelegraph article points out that Ethereum’s value, which is also the blockchain platform of choice for R3, has dropped almost 50% in value since October 2016:

“Ethereum has just entered free fall. The second most popular cryptocurrency plunged nearly 20 percent at the time of writing to trade at $5.88 to the ETH, compared with its position 24 hours earlier on the Poloniex exchange.

Ethereum has been constantly falling and as the chart below shows, the cryptocurrency has fallen from its previous level of $12 at the end of October 2016 to nearly half of that as of Dec. 6, 2016.”

The focus of R3 is to establish smart contracts that can manage business between banks and bank customers, but CoinTelegraph suggests that it is the smart contracts aspect of Ethereum that is a key contributor to the decline, along with too many unexpected hardforks:

“Ethereum has been plagued by disaster ever since it came into being. The cryptocurrency has undergone at least four hardforks, which have left investors impatient and exhausted. Readers would recall the infamous Dao incident, which was being hailed by many as the first application built on the smart contracts functionality that Ethereum offered.

The proverbial last straw seems to be November’s accidental hardfork, which resulted in Ethereum’s two main clients, Parity and Geth, losing consensus. Meanwhile, Ethereum Classic, a currency based on a former Ethereum Blockchain, which is a result of one of the hardforks, has been a gainer in today’s ETH bloodbath on the exchanges. The classic variant was up by 0.14 percent in 24 hours and trading at 0.7610000 levels.

As to why the currency is failing to keep its head up, it would appear that investors are wary of what’s going on with Ethereum and seem to be giving up. As Reddit poster theswapman put it:

‘Unnecessary hardfork splitting chain, multiple bugs, no apps except the notoriously failed DAO and notoriously delayed REP. The fundamentals are absolutely not stronger than ever.’ ”

R3 appears to be making a huge bet that it can implement smart contracts, which requires more than a stable blockchain, it also needs smart contracts that are reliable, trustworthy, and entirely comprehensible, which hasn’t yet been achieved and which will be hard to develop even if Corda proves stable.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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