Why ETH is irreplaceable


Foreword: This article proposes that from the perspective of open financial development, not all economic bandwidth is of equal importance. Among them, ETH and BTC are economic bandwidths that do not need to be trusted at all. They have issuance without trust and settlement without trust. According to the two dimensions of issuance and trust, three other quadrants can also be distinguished: bearer trust assets, legal trust assets and national trust assets. But, in the end, the one that best matches open finance is completely untrusted assets, which is why ETH is irreplaceable. The authors are Ryan Sean Adams and Lucas Campbell, translated by “An” from the “Blue Fox Notes” community.

Economic bandwidth is the fuel that empowers open and decentralized financial applications. In ETH2, economic bandwidth is also used to ensure that Ethereum serves as a global settlement layer. The more economic bandwidth on the network, the greater the capacity of its financial applications, the higher the security of its network.

To promote a decentralized, license-free financial economy, Ethereum will require trillions of dollars in economic bandwidth. But where does it come from?

Yes, economic bandwidth comes from the total value of network assets. However, we need more specific refinement … because not all economic bandwidth is created equal.

Economic bandwidth without trust

Today Ethereum’s native token Ether (ETH) has become the main reserve asset, and it provides economic bandwidth for its currency protocols and financial applications.

Importantly, ETH provides the most valuable form of bandwidth—economic bandwidth without trust. ETH is a value that does not require trust. It provides economic bandwidth for Ethereum’s license-free currency agreement. In order to build an economy without trust, the value without trust is needed. Imagine that USDC is the main reserve asset of Ethereum. The entire system will be limited by the ideas of Coinbase, Silvergate and the Federal Reserve. Not decentralized, same as existing systems.

Only crypto native assets settled on the chain through complete decentralization (such as BTC and ETH without centralized support) can realize the value without trust.

The total liquidity value of the untrusted assets on the network is the untrusted economic bandwidth of the network. The total economic bandwidth of Ethereum in USD without trust is the liquid market value of its network without trust assets, which is the market value of ETH.

But can Ethereum tokens also be a source of economic bandwidth without trust?

Tokenized assets as economic bandwidth

Although tokenized assets on Ethereum provide economical bandwidth, it is not necessarily economical bandwidth without trust.


Synthetix is ​​a synthetic asset issuance agreement, it is built on Ethereum, it has a value accrued asset SNX. Although Synthetix introduced ETH-based collateral, this move will greatly increase the economic bandwidth of synthetic assets, but today, its synthetic assets are basically completely dependent on the economic bandwidth provided by SNX.

Can other DeFi protocols use SNX as economic bandwidth?

Yes, but they must trust Synthetix.

Even though SNX has proven itself as a form of economic bandwidth in the Synthetix ecosystem, when it comes to the broader economic bandwidth that does not require a licensed economy, it lacks the most important feature: it is not trustless. When SNX settles on the chain, the Synthetix team has sufficient control to supplement its offering.

SNX has settlement without trust because it is conducted on Ethereum, but its token issuance is not without trust because its supply may be manipulated by selfish third parties. SNX does not need to trust the ETH level.

There seems to be a variable range of trust between the axes of issuance and settlement. Can we apply it to a wider asset classification?

Trust quadrant


Let us define the level of trust associated with assets through the following two parts: issuance without trust and settlement without trust.

  • Trustless issuance means that the asset issuance policy does not depend on and cannot be manipulated by selfish third parties.
  • Trustless settlement means that the finality of asset transactions is not dependent on and cannot be manipulated by selfish third parties.

Having assets without trust issuance and settlement without trust is the best form of economic bandwidth for decentralized systems. Zero trust assets (asset-free assets) are assets in the upper right quadrant.

  • Zero trust assets (T0): no trust issuance & no trust settlement
  • Unregistered Trusted Assets (T1): Trusted Issuance & Trustless Settlement
  • Legal trust assets (T2): no trust issuance & trustworthy settlement
  • National Trust Assets (T3): Trustworthy Issuance & Trustworthy Settlement

In today’s world, ETH, BTC, and gold are the three most trustless forms of economic bandwidth. Unfortunately, because the trustlessness of gold is limited to its physical form, it has less available bandwidth in the Crypto native economy. This is how we map these assets:


Let us look at the reasoning process:

The first asset without trust:

  • BTC: A completely trustless asset settled on the Bitcoin network
  • ETH: Similar to BTC, but its issuance, settlement and trustlessness are slightly lower than BTC
  • DAI: Supported by ETH, but its prophecy machine & governance cause it to be less trustworthy than ETH
  • DAI (future): If the assets to be trusted are added to the collateral type of DAI, then DAI will move to the left

Unregistered trustworthy assets are about possession:

  • Cash fiat currency: settlement through ownership, but its issuance must trust the US government

Legal trust assets are usually neutral issuance assets wrapped in legal guarantees:

  • Tokenized gold: There is no way to manipulate the issuance of gold-but if the gold in the vault that supports PAXG disappears, then all you can do is recourse through the legal system
  • wBTC: Bitcoin vouchers hosted by legal entities, settled by the legal system

National trust assets contain almost everything else in our traditional financial system:

  • Stocks: issued by shareholders through voting and settlement through company law
  • USDC: In fact, it is not settled on Ethereum, but the dollar is settled in the banking system
  • Treasury bills, derivatives, bonds, CDs (Blue Fox notes: large transferable deposit certificates): all of these are national trust assets.

Maybe you will change the position of some of the assets in the picture, but do you see how the model works? The assets in the lower left quadrant require military and government support. Things in the upper right quadrant do not need the support of these coercive forces.

Why do gold bars need no trust at all? The issuance of gold is determined by physics. The increase in the supply of gold on the ground is very costly (unless gold mining in oceans or asteroids achieves a technological leap). There is no need to trust the settlement of gold. Only when one unit of gold is transferred from one person ’s physical possession to another person ’s physical possession can the finality be reached. Ownership is final.


ETH and BTC are the only two Crypto assets with billions of dollars in a completely untrusted quadrant. DAI, tBTC may become assets without trust only because of ETH and BTC. This is why cryptocurrencies are so important.

But Bitcoin also has problems.

BTC is settled in a trustless manner on its network, but if deposited into Coinbase, settlement depends on a third party. BTC has changed from no need to trust assets (zero trust assets) to trust assets (legal trust assets).

Because Bitcoin is subject to its network functions, it acts more as a peer-to-peer value transfer network rather than a programmable currency network. Most of the currency verbs of Bitcoin rely on trusted crypto banks.

This is why ETH is so important. The performance of Ethereum means that we can create a complete currency system in the zero trust quadrant.

This is why ETH is irreplaceable.

20200521153205XnCT(Above: Have you heard of Gartner’s Magic Quadrant? The upper right corner is the Magic Quadrant of the Crypto World.)

Ethereum’s economic bandwidth types

Count the numbers. Compared with other forms on Ethereum, what is the economic bandwidth available for Zero Trust (T0)?


Unsurprisingly, ETH’s largest provider of T0 economic bandwidth to date provides Ethereum with more than $ 24.6 billion in economic bandwidth. Other forms of trustless economic bandwidth include DAI and REP.

T1’s economic bandwidth forms a total usable bandwidth of $ 5.4 billion because it includes most token projects such as LINK, SNX, and BAT. These liquid assets have settlement without trust, but their issuance is trustworthy. Trusted issuances, because their respective teams have sufficient control over the agreement to change the issuance.

In other words, if these T1 tokens can minimize the influence of individual entities and institutions in the ecosystem, it is entirely possible that they will become untrusted economic bandwidth in the future. BTC has also stayed in the T1 quadrant! T2 and T3 provide economic bandwidth of more than US $ 1 billion and US $ 3.2 billion, respectively. Recall that T2 assets have trust-free issuance but trust-based settlement — wTBC and tokenized gold are examples.

T3 assets include USDC, TUSD, and USDT, which are stable currencies backed by fiat currencies, with trusted settlement and issuance, which makes them largely dependent on the success of the legal financial system. USDT provides the highest amount of T3 economic bandwidth, with more than 2.7 billion U.S. dollars, of which 4.3 billion U.S. dollars are in circulation on Ethereum.

Economic bandwidth consumed by DeFi

We also measure the economic bandwidth consumed by the DeFi protocol. Today, Ethereum’s DeFi consumes more than 3.27% of T0’s available economic bandwidth. This is the most decentralized DeFi event on Ethereum.


But, of course, DeFi protocols (such as Compound, Uniswap, Maker) are not strictly limited to economic bandwidth without trust. For example, Compound has a license-free lending market, which includes a range of Ethereum-based assets, as well as USDC.

Even USDC has a relatively high utilization rate in DeFi. Overall T3 economic bandwidth consumption is still low. This is because DeFi lacks Tether adoption. USDT is the largest T3 bandwidth provider in our data set.

In the end, it can be seen that Ethereum’s currency agreement not only consumes economic bandwidth without trust. It also makes it possible for mobile, non-trustless assets to serve as economic bandwidth for the wider ecosystem.

Focus on the ultimate goal

Although the DeFi protocol can use economic bandwidth in the form of trust to improve financial products, it is essential that we always focus on the mission of open finance: minimizing trust.

Economic bandwidth without trust is the fuel for minimizing trust in an open economy. Combining it with a currency agreement that does not require a license is an unstoppable force for money and finance.

Unless our goal is to simply reconstruct the same old financial system, we need economic bandwidth without trust. This is the most important thing we need to remember in pioneering this financial innovation.


The purpose of this article is to propose a classification method for economic bandwidth. By analyzing assets in the trust quadrant, we constructed a framework to understand the importance of trustless assets for decentralized finance.

The economic bandwidth without trust has two core components: (1) issuance without trust (2) settlement without trust. The assets (such as ETH) in the zero trust quadrant (completely without trust) have these two attributes and form the basis of the trust-minimized cryptocurrency system. They cannot be replaced with assets from other quadrants.

Of course, any tokenized asset can take advantage of the license-free, programmable and open attributes of the Ethereum financial system and benefit from Ethereum’s settlement. Tokenization is beneficial to both the crypto world and the real world. However, we should keep in mind that only the economic bandwidth of zero trust (no trust at all) can promote the decentralization and security of Ethereum.

An untrusted economy will require trillions of dollars of untrusted economic bandwidth.

ETH is an irreplaceable economic bandwidth.

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