Ethereum H2 tailwinds, The Burn research and more - The Daily Gwei Refuel #786 - Ethereum Updates

Transcript

hello everyone welcome to another episode of the refu where up the latest news in the eum Eos system I'm your host and this is 24th of June 2024 all right everyone let's get into it so kicking off today we have a little bit of e ETF news not too much here but basically Nate jassi here has said that all spot e ETF s-1 amendments are now in from all of the issuers here we've we only know the fees of two of the ETFs so far Franklin has a 0.19% fee and vanak at 0.2% and now we wait for the CC I'm fully expecting to get some news around this this week I'm not I'm not sure if they're going to launch this week or not I mean it's a coin toss at this points like 50/50 it could launch this week or next week or the week after right but from what I've read from a bunch of

other kind of ETF people and and try people as well is that there really isn't anything left to amend so the ball really is in the sec's court at this point and it's up to them to just approve these things and get trading started so it could happen as early as this week maybe it happens today I know but uh as I said like everything's pretty much set for them to to go live at this point doesn't seem like there's going to be many more amendments from here but the main question I think that's on everyone's mind right now or at least one of the main questions is what is the fees going to be what are the fees going to look like for the rest of these ETFs so far they've been pretty similar to the BTC ETFs but I think the big one is grayscale you know what is

grayscale's eth e fee going to drop down to because I believe right now it's at like 2.5% or something like that which is absolutely insane and would result in huge huge outflows if they kept it at 2.5% I believe uh but they also have an eth mini trust that they've uh that they're spinning up that basically is going to have a lower fee uh than their normal uh than the E conversion just like they did with the gbtc conversion and then had the mini gptc trust a mini sorry mini BTC ETF trust there but I it kind of begs the question then it's like okay well if they're doing a mini trust does that mean that they're not going to lower their fees of e down to be competitive with the other ETFs and I don't think so I think what they're probably counting on is that yeah okay

there'll be some outflows if they lower the fee to I don't know what they're going to lower it to right just at any point maybe 1% 1.5% or something like that maybe lower than that but it's probably going to be higher than the other ETFs so for them the calculus is okay well even if we lose half of our AUM uh and that goes to to goes elsewhere we can still keep what we have as you know whatever it is like $5 billion worth of of eth in there at that fee is still a lot of money and of course they'll have their mini trust which will probably have a competitive fee with the other ETFs which people can buy and funnel themselves into there but again that's an open question right now we don't know what their fee is going to look like as as I said that's the thing

that a lot of people are curious about because it really is going to determine how much outflows e EC's probably like as I've described before I I think that the E outflows aren't going to be as bad as gbtc not just because I think the the fee is probably going to start off lower than it did for gptc on conversion but also because the discount for E has been uh lower than 3 % since May 23rd I don't know what it is currently I think it went back to just over 3% because I don't know the Market's been volatile lately and people like to be dumb I guess because like you know that these things are going live within the next couple weeks so why would you trade away your ether at a discount here but no the discount has remained mostly under I think it dipped uh it went to just over

3% on June 14th but since May 23rd or even May 20th really actually no I'm looking at the thing here since May 24th it's been under 3% it's actually been under 2% for the majority of the time so if you're waiting to sell your eth like if you're desperate to get out of eth as I've described before desperate to get out of this product out of e you would expect people would have done that already and sold it at whatever discount it is 1 to 2% discount rather than waiting if they were desperate right if they really wanted to get out especially because eth went up to like 4K so if you had sold off the E uh and you know at the near fair value whatever it was maybe 2% off fair value and then sold that for cash like if you were one of those who wanted to do that you were

much better off doing that then than you are now where the price is now of course um but also rather than waiting for the conversion to happen as well because you can sell uh you just can't redeem it for actual eth but you can sell for cash so I don't know I again it's an open question it's something that a lot of people are pondering it there's both a Bull and Bear case to be made here I do expect there to be outflows from eth E of course don't know what the magnitude is going to be like it's going to be determined by the fees definitely but also by how people are actually still waiting to to get out because a lot of these outflows as I mentioned on one of the episodes I've done previously they could potentially not be true outflows in the sense that they're not net

outflows where people are selling their ethes product selling it for cash and then and then going uh going out of crypto they're not putting it back into eth whereas I suspect if the fees are too high a lot of people are just going to sell out of e convert that into another ETF and you'll see kind of a netting effect there between the two but we'll have to see we'll have to see how that all shakes out there but I'm sure we're going to get more news about this this week as I said there is a chance they start trading this week um but you know in the next one to two maybe even maybe three weeks is is when we're going to see it here as I said before early July was my kind of prediction July 2nd seems to be the date that people are coalescing around right now um but

there's no reason why it can't launch this week honestly it's just up to the SEC uh at this point here now one last thing I want to talk about with regards to the ETF it's a bit related here was that one of the ETF issu is bitwise uh their CIO has put together a tweet here where they said eth Tail wins in the second half of 2024 so bunch of Tailwinds here that I've spoken about before such as significant new demand uh from the ETF of course constraint Supply limited to zero net issuance uh uh you know yearly net issuance due to the burn I know the burn hasn't really been that high lately but generally uh over the long period of time it offsets the issuance right improved regulatory Clarity this is a big one that still the market is under pricing I believe where

essentially the ETF approval and and the SEC dropping its consensus lawsuit basically opens the floodgates to eth being properly regulated as a commodity and viewed as a commodity rather than a potential security so that is a huge thing there uh radically improved throughput Market is still under I guess pricing what layer 2os are doing for the ethereum ecosystem I mean that's nothing new to all of us the people still complaining about high gas fees on ethereum when even layer one gas is low right let alone the layer too so there's that um significantly improved ux I think you know Matt said here thank you I don't think it's just like the l2s it's also things like coinbase doing their smart wallet right improving the ux on the wallet front that's been that's been really big institutional adoption of course that's coming with the ETFs cycle timing uh he reckons as a classic altcoin cycle coming I mean I

wouldn't even consider e eth to be an altcoin and I don't know like what when the altcoin cycle is going to start again I mean I don't really speculate on that sort of stuff um but I do believe well I guess like I do agree with him in terms of cycle timing because as I mentioned I don't know which episode it was sometime last week how we're currently in this summer lull that I believe will uh will'll get out of maybe you know it could even happen in July but maybe in August or September or something like that and then the second half of 2024 should be quite nice uh should be quite bullish I think rather than crabby I know right now generally like Ethan BTC are kind of in a Range they're crabbing it's a it's a it's a bit of a wide range but they're there

whereas a lot of other stuff is just getting obliterated uh so people are like losing hope in the bull market of course because they are in this other stuff not in Ethan BTC but I do think we're in for a good second half of 2024 especially as we move into the colder months in the northern hemisphere because usually markets are good around that time uh macro conditions Matt mentions as well of course that's not something that I put a lot of stock in but definitely rate Cuts have an overall positive narrative effect so once we start seeing those roll in I think that's just going to add fuel to the fire and and it's an election year right uh I don't know what the election is going to look like I don't know who's going to win I don't really care to be honest because I'm not an American citizen and I have no effect on it at

all so I mean I can't vote right but also I have like no effect at all because I'm I'm I'm Australian as you guys know but I guess for what it means for crypto I don't know man like I listen to politicians of all sides make all kinds of promises and at the end of the day it's just promises it's just narratives until they actually implement it and I don't trust a lot of them to implement their promises no matter what side they fall on right left Center whatever you want to call it typically they're just saying things to get elected and I understand it's a game you got to play you got to say what you got to say to get elected and then You' got to try and Implement things but you're not a dictator in a democracy you've got to go around all these different

interests right whether they be interests uh special interest group groups that are lobbying or whether it's uh your fellow Cong Congress members stuff like that right or fellow members fellow poit politicians I should say I get that but I think when it comes to the election and and election years and stuff like that it's all about the The Narrative right so obviously Trump's in the US has been very proc crypto lately whether he's actually Pro crypto or not I think is rather irrelevant I think like it's relevant if you want to just call it out for what it is which is pandering because as I said all politicians do this but in terms of like a narrative I think it's a pretty good Tailwind for all of crypto uh and then of course the Democrats scrambling and Biden scrambling to be like oh yeah no we're pro crypto too donate to us blah

blah blah right again pandering but but if you look at it from a narrative point of view it's a pretty good narrative to have especially if price starts going up again or prices start going up again uh in the second half of this year that will translate into the narrative following the price and then of course the narrative will become more bullish as like this reflexive thing that we always see uh and that's basically all the the major cataly that that Matt highlighted here and I totally agree with him on on pretty much most of these some of these I have different opinions on of course but the biggest one is the ETF and the regulatory Clarity by far I believe I think that's the biggest especially specifically for eth I think btc's ETF trade at least over the short to medium-term played out and played out nicely I think E Trade hasn't played out

yet but the long-term implications of the ETFs for both BTC and eth still haven't played out at all I mean it hasn't BTC one hasn't been live for that long and eth isn't even live yet and that takes years to play out on top of the regulatory Clarity for eth as well still going to play out and then obviously the increased growth across the entire ecosystem so tldr very bullish I think second half of the year ahead of us I know right now it can feel quite bearish but guys it's literally just the same thing we see every year it's a summer L I think there's been like one year out of the last 10 during summer that or northern hemisphere summer that things have been relatively still up only and bullish usually it's a consolidation period SL sideways for the majors and then the rest of the things just get slaughtered as they usually do

when majors are go you know crabbing or going sideways and their narratives have run out you know obviously the mem coin stuff ran its course not to say it won't happen again but like a lot of these things ran out of juice because there wasn't that that new money coming in as I've discussed before but anyway I'm not going to rant about the markets again because I've ranted enough about that uh but yeah moving on to some tech stuff now all right first up here we've got a little bit of a post from Terren one of the core developers working on the prism client uh talking about the blob fee market so I mentioned last week that the blob fee market right now is not that great it needs tuning basically uh and Terren outlines I think three major points here that he's been thinking

about and some solutions I don't think there are any good Solutions just yet there was a reply here from Roberto that linked to a um a note that was put together by a couple of ethereum researchers I believe uh basically having uh basically stipulating an execution independent priority fee so essentially uh the description I guess the tldd Do Not refund the priority fee portion of the transaction fee for the unused gas after execution and I guess the logic behind this would be to essentially uh improve execution of blobs so inclusion sorry improve inclusion of blobs here and make it so that we have a better fee market for blobs overall but again this is more of a I guess like open kind of question right now of what this is going to look

like I don't think it's a pressing critical issue but I do think it's something that needs to be fixed because I think blobs are very close to actually just being over Target like pretty much every day now I mean as you guys know I've been monitoring this quite closely been showing it to you guys they're still straddling the target I think yeah so you can see here that it's still doing its kind of I guess like business hours over the target you know off business hours under Target and then over Target under Target over Target but you can kind of see that each time it's doing this there's like a lower high here where essentially it's getting closer and closer to Target even on its low points where eventually the low points will still be above Target so I think that that's going to persist for a while especially if we get that second

half of 2024 where it turns out to be really bullish blobs are definitely going to be above Target then so this is something that we need to be thinking about talking about improving the fee Market improving usage of blobs making sure that we're making the most efficient use of them uh and then you know I guess like waiting until things like Pia implemented early next year along with the Petra upgrade or if we don't Implement pias for whatever reason there would probably be like a blob count and size increase uh there as well if it was deemed safe to do so of course as I discussed last week there's a lot of things that go into that but that's the current I guess thinking so you can go read terrence's full uh tweet for yourself I'm I'm not going to go into the whole thing cuz it's quite long I'll link it in the YouTube description below

for for you to do so all right Peter from gu has teased a stateless uh execution that he's been uh building within G so as you guys know veral trees is a major road map item for ethereum that aims to be allow ethereum to do stateless execution which basically means that the ethereum node size would be bounded and you would be able to have uh sorry this would be coupled with State expiry it would mean that ethereum node size could be bounded but stateless execution and specifically would basically allow for light clients Right light clients to essentially operate within the ethereum within the ethereum network at least that's my understanding here now uh Peter is doing this on mainnet and he's not doing this with vericle trees because there is no

vericle trees on mainnet he's using the existing Merle Patricia tree structure to do this which got the some core developers pretty interested in what he was building on the core developers of other execution layer clients not not gu like nethermind DS were really interested in this because you can see in the thread here he someone asked you know this is stateless execution for ver and this Peter's like no this is live mayet MPT or Merk Patricia teresia and then centor one of uh one of the very active dewe Discord members shout out to him basically uh uh explained what what's actually happening here so he says you know you see the the witness size in the screenshot here uh this is the main issue with stateless execution with the current mle Patricia tree architecture a proof for for a 100 kilobyte block can easily get 50 to 100

times bigger than the block itself veral trees make the proof small enough that St stateless execution makes sense bandwidth wise so essentially in the current Paradigm of MPT we can't do stateless execution to the extent that we would want to do that that do it that's why we're doing veral trees in order to to compress this down uh and to essentially make the proof small enough so that we can do stess execution um and it makes sense bandwidth wise because bandwidth is a huge concern I think for ethereum nodes for validators generally uh on that run the ethereum network and every time we add something new uh like blobs for example it just UPS the bandwidth requirements so that's something that the core developers and researchers have been working on for a while to bring down and stateless clients and stateless execution generally and state expiring all that sorts of stuff that all plays a big part

into it definitely uh there but yeah just wanted to to shout that out there that there's some very interesting things being worked on in C devland all the time uh even things that you may not even realize are happening like this like doing status execution with with MPT but as I said there are major drawbacks here I mean as centor explained that are definitely going to be uh ironed out and definitely going to be rectified with veral trees which uh we'll see if it goes live next year maybe the year after um but as I've as I've explained before with veral trees we can we can increase the scalability of ethereum as well uh which is obviously the North Star for the ethereum ecosystem at this point all right so Mike Nea here has a new post titled issuance issues tertiary treaties so this is a weird title and I'm pretty

sure I'm reading this word wrong treat Tre ties or treates you guys know I suck at pronouncing words especially words that don't get used very often but the tldr of this is basically diping he he dived deep into how the burn AKA e559 affects the network ownership of stakers and non- stakers so if you are a e issuance or ethereum economics nerd like I am this would be uh this would be for you there is a proper tldr at the top of uh the pro but then his there is his Deep dive analysis if you just want the tldr again basically uh tell you what this what what it is so essentially um the the uh question was how is issuance too high if the net supply of eth is barely inflationary or even deflationary in the context of the issuance debate that's currently happening within the

community around whether we should reduce issuance or or not because some people are saying you know we shouldn't do that because of the fact that we have a net deflationary eth due to the burn so essentially what Mike says here is that this confused me for a long time so in this article we start slowly and use a lot of plots and numerical examples to build intuition we make our way to the key Insight that a higher burn increases the gap between staking and not staking hope and hope and and he says you know hopefully this article demonstrates this so essentially if you want to know how this works and how this all makes sense there this you can dive into this I'll link it in the YouTube description below and there's also a lot of related work that you can dive into that's also

linked in this post both uh blog posts and podcasts so you can go check those out as well they'll keep you pretty busy actually like this is some pretty uh lengthy posty and lengthy research and I believe that the researchers are putting in a lot of time and effort in order to make sure that they're covering all their bases with this so just a bit of a I guess like shout out to them for for doing this but also for everyone that has been following along with these discussions around issuance and around issuance reduction before making like before forming a strong opinion on it I would suggest reading the relevant work um and digesting it you don't have to read it all you don't have to digest it all and understand it all but making sure you're on top of it and making sure that you're getting your information from the source rather than repackage

stuff that you might see on crypto Twitter or even on the refu is very important you guys know I always tell you to go read The Source you know I've got my opinions I've got my takes on things my interpretations of it but you're going to have different uh interpretations and opinions so definitely go check that out I'll link it in the YouTube description below for you to do so all right so there's a new dashboard out that tracks the protocol Guild so there's been a bad narrative lately actually that I've seen perpetuated on um kryptoo which I thought was quite weird so there's a narrative that the apparently people think the protocol Guild currently has too much money and I I looked at that and I'm like what like do people understand that okay yeah the protocol Guild has right now tens of millions of dollars right but one that th that money is in the uh tokens that

they are in the treasury and those tokens are volatile for example the I guess tokens that are worth the most right now is 10 million eth figh tokens with the current value of $ 32.2 million but when they were donated to the protocol Guild they were worth $40 million right same with Tao's uh token here at initial value was 24.3 Million current value is 17.9 million so it doesn't matter what the initial value is what matters is the value at the time that these things are paid out but if we just take the value today so the current value of the amount of money in the protocol Guild today which is 51 million all up if we extrapolate that out and get get a medium a median yearly vesting for each member so there's 177 members sharing in $51 million not equally but

they have their own their own kind of percentage sharing here it means that over the next 12 months assuming the prices stay the same of these tokens each member gets $73,000 vesting out over the next year now that may seem like a good chunk of change but let me put into context who the people are that are receiving this it is the core developers and researchers it is the people executing on a road map for a $400 billion plus Network that is home to trillions of dollars worth of uh value that's transacted all the time like like over over months over years and that keeps growing and then he's home to and then he's becoming a settlement layer I should say to things like layer 2os which have their own ecosystems so these these 177 people are some of the most critically important people to the

future of ethereum they should be paid a lot more than this in my opinion because of the fact that they could could easily for as smart as they are they could easily go and work for another company and work work for another L1 for example and get like an allocation of early tokens there which would be worth much more than what they're getting out of this right so the whole point of the protocol Gill was to align incentive y was to stop people from bleeding into other ecosystems and stay within the ethereum ecosystem and work within it and still attract the smartest people because yes money is not everything but people should be a rewarded for their work and people that are doing very impactful work that adds hundreds of billions if not potentially trillions of dollars to e market cap should be rewarded for that and they should be

rewarded in uh you know eth of course and also the tokens of projects building on top of it but again you can't get around the volatility here so even though it's $73,000 based on current values each year for each member you keep in mind that that's a $51 million treasury that as I said can go down so if that halves so does the pay to all of these members uh for for you know each year obviously if it goes up you know it it's it's better for them as well but it's still not anywhere near what I think they deserve I think these people deserve millions of dollars honestly like for the work that they do the impact of the work that they do and the research that they do not everyone of them is equal in the amount of work they do don't get me

wrong right and that's actually waited as part of the protocol Guild not everyone's getting an equal share here but the protocol Guild I mean 177 members like there is a good chunk of those members that do that's all they do right they they just do ethereum research and development like the proper cord of developers the ones that are building this stuff uh are doing this and have a long kind of road ahead of them to execute the rest of the ethereum road map uh as well and uh yeah as I said like these people are at the heart and core of ethereum and if they are working for uh like I guess like big tech companies for example they would be the uh not maybe they wouldn't be the executives but they would be the highest up in like the engineering departments and the research and development department and they be paid potentially

millions of dollars for this in both uh salary and stock options right so to pay them 73,000 a year B and then I guess like on top of that their base sorry this is on top of their base salary which it obviously varies from company to company whatever companies these these teams are working for I highly doubt it's that much though because a lot of these companies don't have I mean they have Equity but they're not like they they're more building like public goods and they're more building things that are supplementing the work that they want to be doing on ethereum kind of core protocol and a lot of researchers are also independent too so yeah I I I don't know that that bad Narrative of protocol Guild has too much money is so stupid to me especially when it's not even in like it's not in stable coins guys it's in tokens right like as

I said ethi is currently 32 million of the value so over half of the value is in ethi tokens and then Tao is 17.9 million right so like you you can kind of look at this and go down the list here and see that uh a large chunk of that value is coming from just two tokens two very volatile tokens two tokens that have uh I guess like a pretty big Supply overhang because of the fact that they have unlocks coming too right so not to FUD the tokens I mean as you guys know I'm an adviser ethi I'm an investor in Tao so I'm kind of fighting my own bags here but we got to be realistic about this right and as for how much of of ether is there only 4.6 million of eth and in terms of stable coins there's not much I think D 121,000 usdc 334,000 so really there's

yeah there's not that much so when people say that and that n that I say that bad narrative I just think it's insane but anyway and enough on the The Narrative side of things you definitely go check out this dashboard for yourself because it's the update it's an updated protocol Guild dashboard uh and it's got all the relevant information that you need to to check out as well so yeah I'll link this in the YouTube uh description uh for you to check out uh and you can go do that yourself and check out all the fancy little graphs and charts here to show what the protocol Guild is up to all right last up here just wanted to give a PSA so uh over the weekend the mailing list provider that the ethereum foundation used for the updates ethereum.org address had been compromised so I think this got resolved

in the end got resolved pretty quickly but I figured I'd use this opportunity to give a PSA to everyone out there that there are a lot of fishing scams in crypto generally um and they don't just come from obviously the Hacked ethereum Foundation kind of account here they come from everywhere like I get a lot of fishing emails that make it through uh Gmail spam filters uh on my personal uh Gmail uh and they always like Lan layer airdrop or you know whatever's hot air drop ZK sync airdrop for example always fishing links to different things I would be extremely cautious about ever clicking a link in an email that claims to have an airdrop like that's just like a rule of thumb I think when it comes to these things what I usually do is I always go to the official Twitter page of the project if I'm looking to go to the airdrop claim page and I double

check and cross reference that with people on that I know that I trust that that that are also doing the airdrop stuff or in the daily way Discord Channel I cross reference it and I check it and I make absolute sure on on the actual website before I'm signing anything and then once I am signing things I make sure that I'm using a wallet like rabby for example that will simulate the transaction and tell me exactly what's happening with it and what I'm doing with it and play just playing very safe here and on top of that I'm only claiming with wallets that don't really have much funds in them they might have a bit of eth in there to pay for gas fees maybe some random tokens but I'm not using my cold storage wallet addresses to claim these drops es like obviously in some cases there's going to be well in a lot of cases

actually your cold storage addresses will need to be used to claim an airdrop right um but in that case as I said like there are steps you can take to make sure that you're not on a fishing website so yeah just a PSA there for you guys that be vigilant because the worst thing in the world is is getting fished honestly like as you guys know I've gone through it and I am very experienced with in crypto I've been around for a long time and I still got fished in the dumbest way possible it can happen to anyone do not think it can't happen to you you don't low yourself into a false sense of security make sure you're always on your guard when you're interacting with uh your wallet especially your cold wallets like that's the number one thing whenever you're interacting with your cold wallets your you know your big parts of your stack

make sure you're triple quadruple cheing things make sure you're using tools that are helping you to simulate transactions tell you exactly what you're doing and make sure there's no distractions around you to to make mistakes but anyway on that note I think that's going to be it for today so thank you everyone for listening and watching be sure to subscribe to the channel if you haven't yet give it a thumbs up newsletter join the Discord Channel and I'll catch you all tomorrow thanks everyone