ETH ETFs almost here, Pectra fork recap and more - The Daily Gwei Refuel #796 - Ethereum Updates

Transcript

hello everyone welcome to another episode of the daway refuel W up the latest news in etherum ecosystem I'm your host Dan the 22nd of July 2024 all right everyone let's get into it so a big week this week with the eth ETFs going live and I'm going to dive into that in a sec but I didn't realize this till just before but Justin Drake put a tweet out saying that eth is 10 years old today now the ethereum network is not 10 years old etherum Network went live on July 30th 2015 but what Justin's talking about here is the eth Ico which went live or started on July 22nd 2014 and it's funny whenever this date comes up it reminds me of the fact that I think it was a couple months before that date I actually sold off the last of the

BTC that I had bought in 2013 and was ignore ignoring crypto for a couple of years from then so I missed the eth Ico because of that so it always kind of hurts to be reminded of that but Justin put together uh this tweet uh basically saying you know back then eth was sold on bitcoin at a rate of 2,000 eth per one BTC so you could buy 2,000 e for for just one BTC and I think the BTC price was around $5 or $600 at the time um and it was totally permissionless no VCS no vesting nothing it was just a normal kind of Ico probably the best Ico actually definitely the best Ico I think in history um and the first major one at that as well uh and it's kind of crazy because then Justin goes on to say that I know we've delivered all of these

things over the last 10 years so many different things um with regards to eth as an asset uh he says that eth is block space currency so 4.3 million eth have been burned to pay for gas since EIP 1559 went live about 2 years ago now or three years ago now actually um if I'm if I'm remembering correctly here no yes three years ago correctly I'm getting I always get things mixed up um and many more millions in eth we burned uh for blobs and then obviously go he talks about staking about how there's hundred billion do of Economic Security staked on on ethereum here uh and also he finishes off by saying that the E spot ETF start trading in the US tomorrow which is kind of funny right like 10 years on since the Ico we have the E spot ETS basically trading the day after

here so it doesn't feel like it's been 10 years it feels like it's been a lot longer I mean I haven't been around the whole time I've been around since 2017 but it feels a lot longer than that um but it we've achieved a lot in those in those 10 years here but I think the main reason I wanted to talk about this today as well is just to show you how crazy things have been over the years and how if you zoom out you you you kind of contextualize it because I know that Everyone likes to look at the prices of things on the day-to-day uh time frame and obviously eth is a lot bigger of an asset than it has been for most of its life as it exists today it's a $400 and something billion dollar asset most of its life existed below that uh but if

you translate this into dollar terms from the Ico I believe it was around 30 cents uh eth was around 30 cents at at at time of the Ico and then when it went live a year later the network went live and then the the token was live for trading it didn't trade much above that I think it went up to like a dollar but then came back down to like 60 or something like that so it was really cheap for quite a while there um but that 30 cents into $3,500 today that is one of the greatest Investments of all time and it was only like a 10-year investment from then until today like I know 10 years may sound like a long time but in the terms of I guess like an investment Horizon getting that kind of return over 10 years is absolutely

insane now of course I would suspect that there's very few people who have held their E from the Ico to today obviously people have taken profits along the way but I do personally know at least a couple of people who they've sold along the way but they still have a fairly big chunk of their original e that they bought at the Ico and they're just High hardcore di hard eth Believers ethereum Believers and yeah that's that's probably the best in investment they're ever going to make because these days there's pretty much like no way to get that kind of return unless you're pretty much going into sometimes with meme coins you can get a similar return um but you have to get in at like the very ground floor like when these things are maybe a couple hundred th000 market cap or something like like that because

these meme coins none of them have even gotten close to each market cap like if you look at the biggest meme coin on coin gecko today it's probably still Dogecoin actually its market cap is 20 billion as opposed to e ethereum's 420 billion right so it hasn't even come close to that um but yeah Dogecoin has also been obviously a good investment too if you held from when it first started to today but the problem is is when you are looking at different Investments um when you look at like meme coins like yes some of them can break out but most of them go to zero because of the fact fact that there's no like fundamental base there it's just pretty much like all speculation whereas at least with projects like ethereum and and Bitcoin and others out there there are fundamental bases there to hold the

value up to actually give people a reason to invest in these things for the long term rather than just speculate over them over on the short term here but anyway enough about the eth Ico it's it's old news moving on to I guess like the the new news that's going to be happening tomorrow is the eth ETFs are going to go live for trading finally I mean two months after they were approved many many many months after the um the speculation began about the ETFs I think the the eth ETF speculation began pretty much as soon as Black Rock filed for the BTC ETF back in June of last year so it's been a year pretty much since we've been speculating on all of this and obviously the BTC ETFs went live and now the eth ETFs are going live tomorrow and the next episode of the refie will be on

Wednesday so uh by that point there will be some flows to show you guys and actually there's this website that I tweeted out about which I'll link in the YouTube description below that will actually be tring the flows of the ETFs here now the number that I'm most interested in is the net inflows now what this number basically um represents is the flows minus uh the grayscale outflows essentially so obviously there are a lot of predictions around how many outflows are going to come from the grayscale eth e product but as I've said in the in the past I actually think that a only a small minority of those outflows will be net outflows as in they are going to exit eth altogether because there's going to be a lot of those people exiting eth but then going into another ETF and if in case you missed it

grayscale actually lowered their mini trust ETF fee all the way down to 0.15% which is the cheapest e e ETF on on the market well initially will be and they're also waving the fee for a period of time as well but they are keeping their e e fee at 2.5% which means that people are going to rotate out now there's probably going to be a you know a fair chunk I guess of like outflows from eth e but why I say the net inflows matter or the net flows generally matter is because I suspect a lot of those outflows are just going straight into another ETF because they obviously don't want to pay a two 2.5% fee when there's options between 0.15% and 0.25% like you're just not going to stay there if you were paying any sort of attention and then I put a tweet out basically

saying that with this strategy that grecale is employing here they're saying that they're trying to have their cake and eat it too because they're keeping the 2.5% fee on E and they will profit bigly off of the money that stays in E such as the passive investors right uh and they will capture as much of the e outflow as they can into their new Mini trust with their crazy low fee of 0.15% so they are really doing some kind of 5D chess moves here I think but obviously there's going to be a portion of people that feel burned by gra grayscale because maybe they felt trapped for a while given that the discount on the E a product was pretty steep I think it went up to like 60% or something like that during the bare market and if you were to exit eth at that point not only were

you down on maybe paper gains from the bull market to the bare Market on eth itself but then you would then then down massively on the e e product there but obviously if you bought back then and held till today you you you're you're doing handsomely like you made so much off not only eth going up in US dollars but also um making it off eth uh because you're basically buying eth at a 50% discount essentially you're buying 50% more eth essentially maybe that's not the exact math but you get what I'm saying here so I really do think that that's what gray scale is going for here they're having the cake and eat it to strategy which is which is quite good but that's again why I say that the net flows is what matters now obviously outside of the net flow question the the

the general question is kind of what's the percentage going to be compared to bitcoin is it going to be that 15 to 25% that a lot of people are speculating on is it going to be higher than that is it going to be lower than that I don't imagine it being lower than that like that would be very surprising to me but being higher than that wouldn't actually surprise me because people have to remember that not only does eth have all of this new money that uh that didn't want to buy eth before couldn't buy eth before coming into it but there was also going to be a bit of rot happening from the BTC ETF into the eth ETF because I'm sure there's a lot of crypto natives who are like well you know I only bought the BTC ETF because it was the only crypto

ETF that I had access to but I'd rather own eth so I'm going to go buy the eth ETF now so they're going to rotate through not sure what that's going to look like what the numbers are going to look like there it's anyone's guess at this point but I think the number one thing that everyone has to pay attention to is that net flow number because that net flow number is going to give us the most accurate picture of what the actual kind of outflows of E versus verus inflows into the the the ETFs generally uh looks like yeah and that's how it's been for the BTC ETFs as well I believe if you take out or I basically take it all together with the gbtc outflows but as well as the new inflows I think there's been what $17 billion worth of net inflows into BTC so we're looking at

that number and I'm sure the for eth as well I'm sure that the ETF analysts are going to be tweeting this out I'm definitely going to be tweeting this out but that's the main questions and we're finally here guys it's tomorrow like it's not very far away now where we're going to be seeing this things but as I've said before we're still going to want to wait you know at least a few weeks and and then a few months to see where it all settles down because gbtc outflows continued for at least a few weeks there so we're not going to know kind of where it's going to settle for a little bit of time but as I've said in the past I really don't imagine that there's that much net sell pressure left given that e has been trading at a less than 2% discount now for two months and

it's less than 1% for quite a while now and and a premium on some days so if anyone really really wanted to get out of e like net out of it and not going to um e or not going to another ETF product they've had ample opportunity to do that I don't imagine there's many people waiting around for that and I think I did mention the other day that some of the the net outflows would be in regards to taxes if even if they were going into another ETF from eth but I got that wrong cuz I'm not an expert on the way the US retirement accounts Works uh but it was explained to me in the dely way Discord channel that there's basically no taxes when you do that uh in your retirement account like obviously you can buy your ETFs in other accounts but

in the retirement account there's no taxes so that's pretty bullish as well I guess like that just makes me even more bullish so pretty cool to see that uh but yeah anyway you can go check out this dashboard for yourself it won't start populating until the eth ETF start trading which as I said is tomorrow uh on Tuesday but once it does you know this will be the place to to watch as well as the the regular kind of Twitter accounts the ATF analysts that you are all probably familiar with at this point there all right so moving on to some cev related update so this ethereum intern Twitter account put together a really great thread that I highly recommend you all go and read about the Petra hard Fork as you guys know Petra is the next ethereum hard Fork that is going live

hopefully the beginning of next year or q1 of next year here uh and you can see that in this thread from ethereum intern they go over everything that's going to or slated to be included in pectra and gives you gives you an explanation of what each of these things are so if you need a refresher cuz I've talked about this a lot on the reill before but if you need a refresher of what each of the things going in or Slater for inclusion are definitely go check this thread out now I do want to caveat this by saying that it seems like the uh eof related eips have become a little bit of a controversial Topic in core Dev world I don't know like I I said before that I've said in the past that basically people have been trying to get eof into the network for quite a while now but

there are objections from various core devs around this as far as I am aware that it's still going to be included in the Petra hard Fork but don't be surprised if it is removed because of those concerns there have been some real concerns raised especially around security uh and and potentially things breaking on the network which obviously you always want to be aware of but yeah that's one thing that I've seen lately on the core Dev front that I thought was um thought was worth kind of shouting out there and also in this thread ethereum in turn talks about pias I've spoken about it in the past I don't think pias is uh confirmed for inclusion in Petra yet I think it's still kind of in discussion right now but it would obviously be great to see that but of most of the things that ethereum in turn

talks about in this thread are definitely slated for inclusion you know the fan favorites like max effective balance increase um and also the account abstraction related EIP not the original 3074 the new I think it's like 77 something that valalik proposed recently but yeah anyway you can go check out this thread for yourself to get a recap of Petra still a little while away and as I said things are still evolving and changing there but we're getting closer by the day so it's always good to stay on top of it there all right so Tony has a new bit of research out today uh with regards to the anti-correlation penalties EIP so this is EIP 7716 I've talked about this before and about how essentially the ethereum researchers are looking into a way to

adjust the correlation penalties in staking to essentially be able to map where uh people are hosting their validators or where entities are hosting their validators so as a concrete kind of example here of what this looks like you you can imagine an entity like coinbase they're hosting all of their validators or most of their validators in a single spot right they're not spreading them out they're basically I guess like centralizing them for lack of a better word in a single spot here and you can actually correlate this on chain because you can actually see that whenever a bunch of validators Miss attestations or something or or miss a block proposal or something at the same time they're usually part of the same cluster which means they're usually controlled by the same entity now even

if they aren't controlled by the same entity you could say that some cloud provider goes down for a few hours you can actually correlate that with the validators on the ethereum network missing missing attestations and block proposals which then uh essentially you can uh up the punishments for them on chain provably trust trustless Le so essentially what would happen is that uh with this anti-correlation penalty EIP it would increase the penalties if you were if you were correlated with other entities or if you were just putting all of your validators on one instance of a of a cloud server or like one data center or something like that or in one location so the whole point of it the overall point of it at least from my understanding is that it's supposed to incentivize these operators to not or these node operators to not host all

their validators all their validating infrastructure in the same location to spread it out both geographically um but also spread it out even in the same kind of region like in the US for example don't have everything on the west side of the US have some in the west some in the East and then obviously uh expand that out as as you see fit there in order to not suffer from greater penalties for being in the same location here so a lot of really great research um happening around this and I highly recommend going and read reading Tony's post here because it gives much needed context and explanations on a bunch of these things here but I think this is something that can definitely make it into the network because it seems relatively uncontroversial to implement something that punishes uh people more harshly if they're centralizing the

network CU that's the whole point we're trying to make sure that the network is decentralized and as distribut as distributed as it can possibly be in geographically speaking and it's very difficult to do that because you can do it subjectively where you basically you know shame these operators and say hey you should you you know you shouldn't be hosting everything in this location you should be splitting it up just like we did with client diversity it was basically a shaming thing where we're like hey why are you running all gu you know you should be running half gu half never mind at least or something like that right so it's similar to that but the nice thing is that we can do this in protocol whenever we want to whenever we can do something in protocol we should that's the rule of thumb I think when it

comes to protocol level stuff but also we want to make sure that we can do it without introducing any kind of negative externalities to the network here which I don't think there seems to be any from from this but obviously there needs to be a lot of research done into this to make sure there isn't any uh and that's exactly what uh Tony has done here so you can go check this out I'll link it in the YouTube description below for you to do so all right so just a shout out here so Tim boo put out a tweet thread uh I think this was a couple of days ago where he said my team at the ethereum foundation protocol support is hiring someone for the first time in years to help us across all the things all of the things all devs the ethereum protocol

Fellowship summer of protocols and more I wouldn't even like I can't even begin to describe like how big of an opportunity this is honestly like I know this is probably going to be something that is going to require a lot of expertise across a lot of different domains here and it's going to probably be a very demanding role but I can't think of any other role in the ethereum ecosystem that would be better to work under or to work with and better set of people to work with than this role honestly like I kind of generally know what it's not what it's like to work in core protocol development but have like a bird's eye level view of how how it all works and what you get exposed to there's so much guys like it's so much

that you'll learn everything there is to learn about ethereum and still know nothing like that's the that's the beautiful thing about it because ethereum is an evolving Target right it's a moving Target it's not something that you can actually just learn and that's it hey you're done which is the most amazing thing about this job about this role because it'll keep you stimulated it'll keep you actively engaged it's not something that's going to bore you after a few weeks right it's not something that's going to be tedious after a few weeks it's going to keep you very very engaged here so if you are interested in a role like that you can go apply uh here uh in the in the Twitter thread here um Tim links where to apply I'll link it in the YouTube description below but you'll be working alongside some real heavy weights within

the ethereum Cor protocol kind of Arena here and as I said I couldn't think of any other better job uh you know if you wanted to be as close to ethereum as possible honestly I actually looked at this and I was like hm for a split second I was like hm maybe I should apply for this this sounds like something that I could do but then I'm like no I don't think so because uh like one I don't think I'm smart enough to do it and two I the way I work generally I'm not great working in a team and you definitely have to be a team player for this like that's like number one at I think at the top of the list you have to be good in a team to to work with this because it is a lot of um people uh a

lot of people work a lot of basically talking to people communicating with people relating to people organizing people and that's just not something I'm good at like that's the reason why I haven't started a company or business it's pretty much the primary reason why daily gay is the way it is where it's just me I'm just not someone who can work very well in a team I don't know why it is it's just the way I am and I think it's the way I've been for a very long time to be honest but if I was someone who was a team player I would definitely be applying for this honestly like I would go back into I guess like full-time work cuz as you guys know I work for myself I do daily gay I do independent stuff but this is a super tempting role just because of the fact

that I know exactly what it entails I know how exciting of a role it is but you guys go at it if you're interested in it definitely go apply obviously no guarantee you're going to get the job uh and obviously it does require a lot of prior knowledge to be good in the role but I think that if you've been listening to the refuel for a few years now you've been you know you've been very involved with the ethereum ecosystem uh I wouldn't sell you yourself short so definitely go check it out for yourself I'll link it in the YouTube description below for you to do so all right so I've left this episode relatively short on content because there is one topic that I wanted to discuss with you guys cuz I haven't had a discussion with you guys about this recently and I think that it is

important to revisit this topic sometime so I mean you probably guess what it is it's about the markets here now there's no like unique insights that I'm going to going to give here but what I will say is that I think that it's funny how quickly people tend to turn bearish given things like we know that the summer period in the crypto markets out the last 10 years nine times out of the last 10 years the summer period has been bearish like people will come up with all these sorts of convoluted reasons to be bearish you know politics or the macro or stocks are going to the bed or you know someone's going to die here or the you know the asteroids going to hit Earth aliens are going to invade you know people are going to come up with all these reasons when a lot of

the time if you just employ W's razar which is essentially like the simplest explanation is usually the one that's correct of well during the summer period crypto is right there is crypto is sideways crypto is is bearish uh and that's exactly what it was and now that we're getting I guess like deeper into into the summer period in the northern hemisphere where almost in August which is basically going towards the end of the summer period here uh or at least the bulk of the summer period things start to heat up again which is funny because Summer's you know summer's hot time but things start to heat up as we go into into Autumn here or fall I never called it fall for some reason everyone calls it fall we I always just call it Autumn anyway in in Australia it's the opposite way around so everything's just

opposite here but that's generally the reason I think that things had been bearish the last couple of months I don't think it had anything to do with anything else really like and I think that you know people went on about oh well eth pumped up the 4k on the eth ETF approval but then it went back to like 2.9k and it didn't hold that pump at all it's like okay well there are other reasons other than the summer period being generally bearish for crypto there were a couple other reasons that I threw out there as well as explanations but if you go back and look The Wider Market was generally bearish anyway if that approval had happened during maybe like the more bullish period let's say the November December January kind of February period there if it happened at

any time during that I would suspect that eth would have probably kept going but because of the timing was just like really shitty timing during the summer bearish period eth came down but now it's gone back up right it's at 3500 right now the all-time high is not far away at all I think like given that uh usually for Q3 and Q4 especially Q4 are very is very good for eth we have the ETFs going live tomorrow I do think that we're going to see some healthy inflows into that I do think it's going to surprise people with uh the inflows into into the E ETFs there but generally I think the you know the market going up the narrative follows the price and the narrative is just going to get better and it becomes a self-fulfilling thing from there so the whole point of why I'm

basically saying this is because I just see a lot of people tying themselves up into a million different knots in the delway Discord Channel especially in the prices Channel I see it on crypto Twitter but I don't really listen to crypto Twitter because it's a lot of noise but in the daily way Discord Channel like there is signal in there definitely and I tried to kind of counterbalance everyone tying themselves into knots because I look at it and it's just hilarious because it's it's just day-to-day movements I went over this the other day when I showed you guys my spreadsheet where I basically worked out that your odds of guessing the uh if the eth price is going to be higher tomorrow than it was today is a coin toss but as you zoom out more on the weekly monthly three monthly whatever time frames your

odds get better and better and the reason why this is because over shorter time frames investors aren't in control their fundamentals aren't at play here over shorter time frames it's essentially just Traders it's it's market makers it's it's people um you know playing scalping games it's not investors moving those short-term things investors fundamental investors it's a long-term play yeah um and that that gets reflected over over the long term as well so there's no point focusing on the short term but that's exactly what people do they get themselves into a million different knots over the short-term price action which leads people to make bad decisions which leads people to maybe you know sell too soon or buy when it's too high or wait for a cheaper entry and then never get it and then buy higher sort of thing that's the

that's trading right like that's not investing to me um and I think that if you tie yourselves into those kns too much it just becomes a habit and then that's a really bad habit to have when you're trying to invest and trying to make money from investing at least that's my general view here I try my hardest to stay away from this even though I do check the price of eth every day which I don't know why I do what I just do like it's there's no point checking it every day um because as I explained in my spreadsheet if you just checked it on the first day of every month you'd be a lot happier and you'd feel a lot more bullish than checking it on uh every day or even every week uh it doesn't make much sense to be doing that but that's what people do that's what

people argue over that's what people tie themselves in in knots over and hey if you're a Trader or trying to be a Trader then yeah you have to be doing that but I'm talking more about on the investment side of things on the investor side of things if you're a long-term eth investor and if you truly believe that you are a long-term eth investor and your time of horizon is years there is literally no point at all for you to check the eth price like on the day-to-day basis on the weekly basis even the monthly basis because if you say to yourself I'm going to buy eth now and then I in like 2 years I think that the the market will get hot again and in 3 years I will um will sell this eth for such and such profit then what's the point of checking the day-to-day

movements because nothing's really going to change on the day-to-day movements you're betting on the longer term here so it just it's a waste of time a waste of energy uh and it's borderline mental illness honestly like it's it's not something normal to be doing it's not something it's it's an addiction essentially and I think that if people avoided falling into this trap they'd not only be better investors but they'd also uh have a have a healthier mental model on uh investing generally and on the ecosystem generally as well because as I said narrative tends to follow price if eat's underperforming for a few weeks suddenly everyone's like a e the shitcoin ethereum's dead ethereum's broken no one wants to use the l2s they're all crap ethereum can't scale blah blah blah and then eth pumps and then everyone's like oh my God eth is the second coming of Christ holy

like eth's amazing whatever blah blah blah you know I love eth I'm I'm going Max long on eth and you see all these portfolio screenshots on Twitter and and whatever it is so like that's as I said like that's borderline mental illness guys like that's not normal so anyway I'm going to leave it at that I don't want to ramble too too much about that but yeah that's my general view on things there but anyway exciting times tomorrow e ef's launch I'll be back on Wednesday with the next episode and I'll be going over the flows and everything that happened um happened on uh happened tomorrow but yeah we're finally here guys I can't wait to see what it's all like and uh yeah I guess until Wednesday thanks everyone for listening and watching be sure to subscribe to the channel if you haven't yet give it a

thumbs up subcribe to newsletter join the Discord Channel and I'll catch you all on Wednesday thanks everyone