Ethereum is processing more daily transactions than all other blockchains combined. We’re not far from 2X Bitcoin’s transaction volumes. It’s likely that Ethereum will be “the www” of blockchains. Unlike the web, however, you and I can own a piece of this next internet. Pretty cool. As a private investor, with ETH’s valuation at only 25% of Bitcoin’s, Ether is my pick for “most undervalued liquid asset” going into 2018. In this post, I’ll explain why it is that ETH is undervalued and what needs to happen before that changes.

ETH vs BTC over 12 months. At today’s all-time high, ETH has still lost 62% vs BTC since the ratio peaked in June. Source: Coingecko

Why is ETH undervalued?

ETH is misunderstood by crypto-currency traders, speculators and investors (i.e. everyone with BTC.) Why? The team behind Ethereum are brilliant technologists but have a blind-spot in marketing (outside of tech industry evangelism.) ETH’s narrative is the problem. It goes back to Ethereum’s launch — to the story that was told to explain Ethereum’s power over Bitcoin.

To differentiate ETH from BTC, on launching Ethereum, Vitalik repeatedly explained;

“The Ethereum blockchain is not a crypto-currency.”

While not untrue, in trying to create awareness for the power of smart contracts, Vitalik has down-played crypto’s primary use case. Too much. Ethereum’s low valuation is a result of successfully differentiating smart contracts from cryptocurrency. Wall Street simply took note of Ethereum’s positioning and assigned their capital accordingly — to the blockchain that ‘specialised’ in being (nothing but) a currency.

So what? Currency is a boring/capitalist/nationalist construct. Smart contracts == a corporation-free future filled with unicorns & Lambo’s.

The primary use case in new technology is almost always boring. Do you think Bezos loves selling books? How profitable would Facebook be if it only served students? What if Yelp never expanded beyond San Fran’s restaurants? AirBnB never got off the couch? What is more potentially boring than a blank page with a single search box? I could go on.

Bottom line; if you don’t dominate the primary use case, you seldom get to dominate the cool stuff that follows. Ethereum must win at cryptocurrency to also fully realise the potential value for the smart contract platform. While BTC is the dominant cryptocurrency, the platform value of Ethereum’s smart contracts are in question and we wait for the first killer dapps. If they aren’t commercially oriented, ETH could be permanently relegated to a low-value utility, despite its massive growth in transaction throughput.

Say what you will about Wall Street’s self-interest, it makes for predictability and money will always follow the money. Always. If Ethereum is going to attract high-value commercial processes to smart contracts, it will also need to attract (the lion’s share) of crypto-currency value.

So far this year, it is not going as well as many of us had hoped.

It’s not going to fix itself. What Ethereum can learn from Zillow.

If you visit ethereum.org, way down, in the footer’s final column, you will find a link to “What is Ether? Read our FAQ.” It’s under “Developer Resources”, just above “Browse our source code on GitHub.” As good as Ethereum is at everything else they do, their positioning of ETH is flawed, almost apologetic.

You have to have empathy for the communication challenge. Ethereum doesn’t want to be a cryptocurrency. It isn’t. Or, is it? Maybe it is, just that, and much more. The distinction is important. $100 Bn important.

At Zillow, we faced a similar challenge explaining the controversial Zestimate. Z-branding worked like a charm until were asked to explain, rather formally, if a Zestimate was also an “estimate of value”. It was a trap of course; “estimate of value” had all sorts of connotations, liability and compliance baggage — we had anticipated this — hence; “Zestimate” but still, an explanation was required. Two words set Zillow on its course of Real Estate dominance.

“The Zestimate is the starting point for finding the value of your home.

The full genius of Zillow’s marketing team is too extensive for a blog post but trust me, they kick ass. At Zillow, the product’s message is tightly managed. Every word matters. The “starting point” explanation is powerful. It avoided any whiff of being a formal estimate while simultaneously creating a new category of invaluable information. Before the Zestimate, there was no “starting point.” There were many “data points”, sure but no “starting point.” Home buyers loved it and flocked to the only site that offered them a place to start a search for their next home. Zillow immediately owned the top of the Real Estate funnel and the rest is unicorn history.

The Ethereum communication challenge is a lot like the Zillow’s Zestimate challenge. There is something that both brands never want to say;

Zillow never wants to say: “The Zestimate is an estimate of value”

Ethereum never wants to say: “Ethereum is a cryptocurrency”

There is however huge value to both brands to leveraging the legacy language. It’s a communications conundrum.

Zillow could have told the plain truth i.e. that the Zestimate is the output of an automated valuation model. It may have been the world’s best automated valuation model but Zillow would not have become a verb. The Zestimate had to be the “starting point”; something that home buyers and sellers and the real estate industry could easily and immediately understand and value.

Tell your customer what you do for them, then tell them how you do it. By concentrating on smart contracts (i.e. the “how”), Ethereum is not focused on communicating “what” their value is. This is a complex challenge and not uncommon when trying to position a platform. Because the “what” comes from the users, a platform will often sound wishy-washy in explaining itself. In Ethereum’s case, however, the solution is simple.

It’s an easy fix: JUST insert a four letter word.

Vitalik says:

“The Ethereum blockchain is NOT a crypto-currency.”

Now, insert the four letter word:

“The Ethereum blockchain is NOT JUST a crypto-currency.”

And with that simple change, you get the following:

Differentiation from Bitcoin and anything else that is “just” a crypto-currency is intact but Suddenly, ETH is worth at least as much as BTC because, now, it is, finally understood as (at least) as valuable as a cryptocurrency and Most importantly, “not just” begs the question; “what else?” And so you’ve created a segue for introducing the new shiny thing i.e. smart contracts.

This is just ETH’s starting point.

ETH needs better positioning. There’s obviously more to it than just adding “just.” That’s the starting point. ETH needs to be given its proper place in the Ethereum ecosystem. ETH could be significantly better positioned as a “smart currency.” I’ll leave that for another day in the interest of getting this posted.

The team has amazing spokespeople. Vitalik is one the most credible leaders on earth today. The story just needs to be tweaked.