The “Ultrasonic Money” meme has been running in Ethereum-based circles for some time and gains momentum as the asset climbs and appreciates during this bull market. While viewed as a joke by many, like a multitude of memes, it hides a very complex set of factors that contribute to Ethereum’s newly discovered status. It is not without critics from the Bitcoin side, however.
The “ultrasound money” meme explained
If you’ve meddled with Ethereum’s inner cryptocurrency circles, you’ve likely heard the words “ultrasonic money” used as memes to explain what will become of the Ethereum network when it comes to proof-of-stake ( PoS). But memes as they are are a complete simplification of the subject and don’t describe the entire mechanism behind it. The purpose of the ultrasonic money meme is, for example, to ridicule Bitcoiners who refer to Bitcoin (BTC) as “solid” financial assets, which means that this does not lead to a sudden decrease in value.
The meme created by Justin Drake, an Ethereum Foundation researcher, surfaced on Twitter on September 10th last year. It compared the issuance of Bitcoin to the reissue of Ethereum under EIP1559 (an improvement in the taxation of transactions through the network) and the change to prove the stake consensus is activated on the Ethereum blockchain. The meme has gained momentum since then, which is widely referenced on social media. But what does it mean?
when BTC is solid money with limited supplies 📢
ETH with decreasing supply is ultrasound money 🦇 pic.twitter.com/Y9N8HBmHBr
– Justin Ðrake 🦇🔊 (@drakefjustin) September 10, 2020
On the surface, the meme only shows that Ethereum’s issuance is likely to be deflationary over time, but does not explain how this will be achieved or what elements will be set up.
EIP-1559: Ethereum (likely) is turning into deflationary
The first element to help create the ultrasonic money thesis is EIP-1559, a proposal to improve Ethereum that changes the payment of fees in full to miners and affects the issuance of ether over time. It works by standardizing the fee payments using a base fee that is calculated based on network demand to be burned. This means that if the network is heavily used, more ether will be burned in the future. Additionally, on top of this fee, a new element called Miner’s Tip is added that allows users to prioritize their transactions and compete for block space.
This proposal was not so popular with miners as they will see the value of its rewards affected by it. In fact, some miners even tried to signal against the proposal, but this protest did not find majority support. Drake believes this is an important step needed to prepare the network for the Ethereum 2.0 PoS upgrade by moving from a direct subsidy to a miners policy and achieving a possible increase in value for all ethers on the network through scarcity .
With EIP-1559, Ethereum issuance is likely to decrease over time. This will happen because with heavy network usage (as the Ethereum network experienced last year) the network burns more ether than the ether spent, creating a deflationary tendency.
Changing the Ethereum consensus increases efficiency and security
The other element in the Ultrasound Meme book has to do with changing the consensus algorithm to proof-of-stake, which will greatly improve the protocol in terms of efficiency and safety. While the upgrade will also have the downside of driving miners to other chains like ETC. According to Drake, the main improvement in demonstrating deployment is that it helps protect the network. His thesis is that PoS is really more efficient than PoW at securing the network. He believes this because it only takes the base asset to lose external factors like miners who also put pressure to sell on the underlying mined asset by paying for expenses and hardware upgrades over time.
He also criticizes the fact that Bitcoin (BTC) cannot secure the network without spending because it relies on fees only in the long term. If the value of Bitcoin gets too high and the value of the hashrate equipment securing the network continues to decline, the Bitcoin network becomes the target of attacks from governments and individuals who have the economic power to do so.
Ultrasound Money Meme Criticized
The ultrasound cash proposal has been criticized by Proof-of-Work (PoW) consensus advocates, arguing that it has two fundamental flaws: unpredictability and centralization. The former has to do with the inability to know exactly how many ethers are being spent in a given period of time due to its dependency on network usage. A currency with no predictable emission cannot be solid money, let alone ultrasonic money.
The latter describes these new measures that will allow the customized token issuance to be changed if necessary to meet other goals different from what Ethereum is trying to achieve today. Increasing or decreasing the emission would be trivial and would destroy the current proposal in a short time.
However, the ultrasound meme and its outlined deflationary proposal seem to have some validity: the price of ether has skyrocketed in the last month, hitting ATH levels of $ 4,100, and experts conclude it is likely to continue will grow.
What do you think of the ultrasound money meme and what it means? Let us know in the comments below.
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