General market talk, Index Coop $GMI index and more - The Daily Gwei Refuel #288 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daily gray refuel where recap the latest news in the ethereum ecosystem i'm your host anthony sosano and today's the 7th of january 2022 all right everyone let's get into it so i think we're drew for a bit of market talk i haven't done one of these proper kind of like talks in a little while so maybe spend the next ten ish minutes talking about what's going on in the markets and why i think that if you're paying attention to what people are saying on crypto twitter it's probably not the best way to go about it maybe generally is probably not the best way to go about it but right now i'm just seeing like a lot of narratives being pushed by by certain people and yeah i think it's just not very healthy but anyway what's going on in the markets

well the price of eighth is not doing too well right it's at around 3200 it went down to 3 100. don't know what it's going to be by the time you watch this video but at time of recording that's what it's at and you know why is this happening well i think it's got to do with the macro environment the macroeconomic environment and you may you may have heard this you know a bunch of times already from other people and what exactly does this mean well the kind of like main narrative right now that um you know a lot of people are pushing a lot of people kind of like talking about is this kind of like uh fed raising the interest rate so the interest rates have been kind of like at rock bottom for a very long time now uh because of all the

you know the cobot stuff happening they they kind of lowered rates there they print the us printed a lot of money and now uh they want to kind of get the economy you know boosting again or boost it again so they're thinking about raising rates between march and june so essentially what speculators are doing is that they're pricing this in to the markets now interest rates going up are usually kind of like a bearish thing for risk on assets because why buy risk on assets when you can buy kind of like uh you know risk off bonds and things like that that are paying out a decent yield uh and you know generally if you benchmark against the spx or the s p 500 that returns eight to ten percent a year and you've got a bond that returns you know a decent amount not probably not that much like you know

but for less risk then you go that way but it also has on flow effects where if interest rates go up then people's kind of like interest um sorry interest payable and their debt goes up as well so they have less disposable money to invest in other things and this isn't just for people this is for companies and businesses that borrow money all that sort of stuff so it has a massive on-flow effect in the economy and that's why you're seeing what you're seeing play out now i'm not an expert on the macro environment or kind of like traditional finance at all like i i definitely am not an authority on it so take with take what i'm saying uh kind of like just as general knowledge uh this is from my understanding of it um but i don't actually think that anyone really has

like a solid grasp on the macroeconomic environment because it's very hard to have a solid grasp on it there are so many moving parts to it you're not just talking about one one sector like you are with crypto you're talking about like the global economy right not just one economy all of them are you talking about the on-flow effects you're talking about big economies like the us and the and the usd and things like that so anyone who says that they you know they can kind of like predict what's going to happen they're they're lying i don't think anyone can predict what's going to happen here so why is this affecting crypto well i think it's affecting crypto because crypto is so big now that if you drew a venn diagram and had like crypto investor in the middle the uh left and right would be um

you know native crypto investors and traditional finance investors like there's just such an overlap now between these groups that uh these things kind of trade together right because um this isn't kind of like the same pool of money around but also crypto already had like a really incredible run you know when you think about it and look at crypto in the context of just general markets i mean eth was 80 bucks march 2020 right we're coming up in march 2022 hasn't even been two years and ether is still at 3 200 which means it's done over a 30 x right so if you look at it from that perspective uh it's still doing extremely well now obviously if you look at it from a different perspective it depends on the time you know time frame that you choose if you look at a few months ago when it was

almost five thousand dollars and then you look at today well yes 8th is down it's not doing too hot but over the longer term ethy's doing incredibly well and obviously you know going into the future i expect to continue to do incredibly well but if you're looking short to medium term it's it's kind of like a different picture but it also depends on the asset you look at like there's plenty of um crypto assets out there that that performed really well in the second half of 2021 uh and you know a lot of the um alt l1s and feel the d5 2.0 projects things like that it performed really well but then there's a bunch of them that performed really poorly and have gone down a lot in value so if you just take kind of like um maybe an index of the of the top

10 cryptos it would probably be down because they're the majors right but if you took an index of like the top 10 d5 2.0 projects that that will probably be up over the same time frame there so different sectors have kind of like different um things going on but one thing i've noticed is that it's really just the same money sloshing around and that's why not everything's going up together because people that are kind of like chasing the alt l1 trade they're just rotating between the different ones there's not really a substantial amount of new money coming in and it's just the same kind of like people playing the the same game of musical chairs essentially whereas before the may crash in 2021 there was a ton of new money coming in right uh but like i think since then any of the big amount of new money that has come in

has actually gone into the private rounds so you've seen all these kind of like funds raising massive uh kind of like rounds like 2 billion or 2.5 billion whatever it was for a16z paradigm had billion dollar fund there was a bunch of others out there i would say that if you took all the funds and all the vcs and kind of like aggregated how much uh money that they raised and have to deploy it's probably over 10 billion dollars um so you know instead of that money money going into the public markets it is going into the private markets which is a whole different beast and obviously with the private markets and with kind of like tokens that come out and when projects tokenize there's a pretty big issue these days where the tokens get released but they have a very low float and a very high fully diluted

market cap so for example you may have a project that has a 10 billion dollar fully diluted market cap but they've only released five percent of their tokens so far which means they've only got a 500 million dollar market cap now one of two things needs to happen either the project is so amazing it's generating so much revenue that it can actually hold that valuation in the face of constant token emission or that fully diluted valuation is going to come down pretty pretty brutally and the only people winning in that investment are going to be the the insiders right the vcs the funds the angels all that sort of stuff there and the losers are kind of like the retail investors this has happened a lot of times i mean it's particularly prevalent in the solana ecosystem where a lot of the projects were very heavily funded by

insiders had a really high fully diluted market cap and then anyone who bought them when they went you know bought these tokens on public markets has been destroyed because as the investors get their tokens they're sitting on like a massive multiple and they sell right they sell into this kind of like exit liquidity um and and it's happened with ethereum too but i think just i'm using celina as an example because it's happened for like the majority of the projects on that chain which is which is crazy and i'm not the only one kind of pointing this out there's plenty of people putting this out so that's another kind of thing there where there's so much new capital that needs to come into this ecosystem to sustain those valuations as well and it's just not happening like as i said i don't think there's actually been much new

money coming into the public crypto markets it's pretty much all gone to the private markets and that's simply because we haven't really retaken all-time high probably properly for like bitcoin and eth right they they went to kind of new all-time highs but very very briefly i mean i think it only lasts not even a week that's not not enough time they need to go into proper price discovery before we see you know a large amount of new money coming into these things but on the contrary you can argue that a lot of new money is actually going into things like nfts right where there's a lot of people coming into the crypto ecosystem but are only interested in nfts they don't care about buying btc or eth or d5 or anything like that they just want to buy nfts they just want to buy cute profile pictures or whatever

they just want to kind of like buy art and i i think that you know that argument is pretty sound i think there's definitely a lot of money heading into that as well but there's also a lot of existing money that rotates out of things and into that too so it's gonna it's impossible to get like an accurate measure of this you can't kind of like account for every dollar within the ecosystem and where it's going but i i strongly believe that we just haven't had a massive new amount of money coming in to the public markets and it's just all being the rotators and that's why we've seen you know basically everything kind of like down trending except a few things that kind of pump based on a narrative and then they just end up downtrending as well i mean look at what happened like a few months ago uh you

know there was solana avalanche and and terra were having like you know what like the the thing everyone was talking about right now having like really nice price movements and everything um but now these days no one's really talking about them people are calling them boomer coins and they're pumping cosmos and near like it's just there's so much of these rotations going on because people want to find alpha somewhere they want to make money somewhere but it's really hard to make money on anything if there's no new money coming in and there's no kind of like new investors um you know making the price go up so if it's just people rotating in and out of things then really your job as an as an investor if you're trying to find alpha and trying to make money is to be ahead of the pack and find that new kind of

like game that's being played that new meta game i know kobe a crypto cobain or kobe wrote a blog post about this recently but essentially it's finding that game before someone else does in and then kind of all for before like the majority does getting in and just like sitting it out and waiting that is not a great sustainable long-term thing you need new capital to come into the ecosystem you need the pro the projects to actually be getting use and generating revenues i mean i i would argue ethereum still has that and like gas prices haven't gone down if you're the ethereum network is still generating a lot of fee revenue um and obviously burning a lot of eighth because of it layer twos are growing really nicely i noticed arbitrary is actually upticking lately due to a um really popular nft project on there

called i think it's called magic or treasure treasure dot lol and they've got a token called magic so there's a lot of growth happening but but i think like just overall uh the the the new money's just going to the private market so there's that aspect too but i really do think right now it's it's dependent on the macro environment uh crypto is still a very risk on environment very risk on asset class so if people are feeling bearish on stocks and bearish um because fed's going to raise rates all this sort of stuff there then the first thing they're going to probably sell off is their crypto assets rather than something like a like a stock or or real estate or anything like that so we'll see you know it's only the first week or so of 2022 here so i'm not gonna you know i

don't think 2022 is a write-off or anything like that or that it's not going to be a bullish year but i do think we're going to keep seeing this trend play out of like sub categories kind of like having their own uh little mini bull markets bull and bear markets in between them but i do think we we need you know fresh capital coming into the public markets to sustain the valuations of a lot of these things and i really hope that this trend of high fully diluted market cap coins slows down because it's really really bad like it's especially bad for retail investors who have no idea what they're buying into they get absolutely fleeced on these things i would actually go as far to say is that these highly diluted market cap coins are a cancer on this industry and we should really all be

kind of like rallying against them because at the end of the day if all that happens is the insiders are taking all the money from uh the new entrants that keep coming in while the newer entrants run out of money and then they just go away and they don't you know they don't keep investing in this ecosystem they don't spend time in it and this is i don't know if i was talking about this on the refill i was talking about it somewhere else where this is what happened in the professional poker scene where the the um the professional poker players the more experienced ones they kept fleecing noobs right they kept taking all the money from noobs they they uh because they were just easy pickings and then when that ended up happening is that all the noobs ran out and it was just like the the professionals against

the professionals and the alpha was gone and they all got bored with it that will happen in crypto eventually but i think group does a much bigger game so it'll take longer but i think these fully diluted coins where only the insiders make it out alive is is is a cancer on the space and we really need to do more to kind of like curb that and i think as individuals it's kind of like very hard we the best we can do is um signal uh two teams that you know this is a really shitty practice and kind of like call it out uh but at the end of the day like i think it's uh it's up to vcs funds investors to also kind of like talk to these teams be like hey let's structure your token in such a way that you the community participates in

the upside as well as kind of like the earlier investors so we'll see you know i mean i i'm an early investor in projects as well obviously as you guys know as an angel investor and i see a lot of this stuff going on i see a lot of the different kind of like tokenomic designs and stuff and some of them i look at and i'm just like this is so bad like this is not going to uh be able to kind of like get a community going because the goal of a project it should be to make the community rich and uh from from the token if the project does well and if the early community uh helps the project from early on not make the community poor because if you make them poor then they're not going to care about your project anymore then it

doesn't matter how good it is we've seen this play out plenty of times with a bunch of projects um and and we'll probably continue to see it play out in the future but uh yeah anyway i'm going to leave it there for the market talk for today that's generally just my outlook right now as i said still bullish but kind of like cautiously optimistic around what's happening in the macro environment no one can really predict what's going to happen there if the fed does raise rates a little bit i don't know if that's like uber uber bearish for everything i think like um there's only so much wiggle room they have as well just given like how uh weird that environment is especially with all the money that they printed over the last 18 24 months uh but we'll have to see we'll have to see what

happens there um and definitely there are more informed macro people out there you can seek them out i don't have any names on top of my head but uh you should definitely give you know read them and and see what they're talking about as well and just kind of like do your own research on all that too but anyway leaving it at that moving on so ben edgington uh said that there's no new what's new in 8th 2 this week unfortunately but he has a different trait from us so here is the first cut of the chapter on incentives for ben's upgrading uh ethereum book the working title is carrots and sticks and sudden death so if you want kind of like read a sneak peek into this upgrading ethereum book for uh essentially the first cut of the incentive chapter you can check this out

but there's also a bunch of others here as well i mean you can this is the incentive chapter and then you can kind of like click into staking balances issuance rewards penalties all the other kind of like things about um ethereum here this this book is is mainly about like ethereum 2.0 and kind of like um the the beacon chain and stuff like that and and and things going further than that so you can definitely check this out for information on that there's also annotated specifications here too if you're interested in that and he's gonna obviously fill out the book with more things to read as time goes on too so i'm very much looking forward to this book being completed and giving it a read and the thing is i think there's going to be a lot of cool alpha in here and a lot of cool

kind of like um information that you may not have come across uh before there so yeah definitely go check this out so superfiz uh reminds us all today that after the merge you will be required to run a local execution aka eth1 client and you will no longer be a successful staker using services like infuria and alchemy so it might be best to prepare for this now so essentially what this means is that today eth2 stakers can set up their beacon node their validator and then talk to an ether one node that isn't theirs right they can talk to infuria or alchemy or any other eth1 node that is publicly accessible and they don't have to run their own after the merge happens you can no longer do this you have to run your own eth1 node

as well so if you are an eth2 staker today you should prepare for this and really the best way to prepare for this is make sure you have enough solid-state drive space that's really the biggest requirement for running in an eth1 node um it's not too demanding in terms of like uh for of a pc your staking box that you have already your existing staking box should be able to handle it unless it's something like a raspberry pi i know that there's been some eighth one um full node clients run on raspberry pi's but i don't know how it would fare running kind of like both but yeah if you have like kind of a normal dedicated pc it should be fine you're just going to make sure you have enough solid-state drive space for everything and you know solid state drives are super cheap these

days like i i'm actually i've got a little bit of an addiction to buying both hard drives and solid state drives uh i i have like home servers that i that i have all my stuff on um so yeah i know how cheap they are these days and there's always deals on them so it shouldn't be too much to get like a few terabytes worth of solid state drives just to future proof yourself you know way into the future but yeah definitely something for you to consider uh go check out this blog post on reddit for more information about this too so a bit down announced today there a new proposal for the the mata labs aka zk sync and uh marana here which is a venture firm called the zk endowment so this proposal creates and funds a community owned zk sync ecosystem accelerator with 200 million dollars

that helps bootstrap the zk sync ecosystem empowers builders and enables the fractal growth of bitdow and all doubt so this is really cool and they are kind of getting involved in building out an ecosystem here with a 200 million dollar um proposal zk's i mean zk sync the other l2s everything like that they're going to need to do this as i've been discussing before about how to bootstrap these l2 ecosystems they can do liquidity mining that's all well and good but they also need to not you know maybe with their tokens maybe you know without their tokens but they need to incentivize people to build on them as well because if people don't build on them then there's really nothing for the the kind of like people to come and use and there's no point having liquidity mining on there if

there's not much for people to do so i think that the if when these l2s do tokens i actually think the best thing they can do is you know create these kind of massive um uh endowments or massive kind of like uh funding pools that builders can tap into and this is something that polygons done very well with their kind of like massive pool that they've they're paying out to builders in kind of like matic tokens and i think that the same could be done for every l2 so this is just kind of like the start here with the 200 million dollars from from bit down here for zk sync i'm sure there's gonna be billions of dollars thrown at these l2s over the years thrown at the builders thrown at liquidity mining just anything to kind of like get this uh this adoption going

because as i've said before you need to be able to kind of like bootstrap the ecosystem to a point where you've got like a solid kind of like sticky liquidity sticky user base and then they can kind of like perpetuate from there but it's kind of like a chicken and egg problem at the start but i think that uh the um you know uh token incentives or just like in monetary incentives in general are the best way to do it i mean i think that the only way to do it to be honest like even if it comes from the application layer like as i mentioned before there's a new project on a newer project not not brand new on arbitrary nft marketplace um called treasure.lol and and it's um it's got a native token magic and it's got i think it did more volume than any

other marketplace except open c and that's on it's on arbitram right like and you can go check out the stats you can go check out everything that's really really cool so i think more of that is how we get like the mass adoption of these l2s and it doesn't require much it just requires kind of like a bit of product market fit bit of incentives and a bit of marketing around it and some and some kind of like nice uh nice funds around it and we should be able to get that all bootstrapped there but yeah really really cool to see this from bitdow so the index co-op has a new project so they've announced the bankless d5 innovation index uh with the ticker gmi or gonna make it i'm i'm assuming so that's really cool so gmi as they described it here gives everyone a

chance to invest in default innovation on a rolling basis initially including 12 fantastic protocols built on set protocol contracts so the protocols that are in this index include tribe uh flx or i should say tokens tribe flx alcx toke rbn mpl dpx dydx spell gm perp and cvx so this is distinctly different to the um the dpi led if i pulse index because the dpi has a lot of the bigger d5 kind of like tokens in them a lot of the probably like old school or d5 1.0 whatever you want to call them whereas the gmi has a lot of the kind of like d5 2.0 or d gen kind of i guess like um tokens in it so as i mentioned that the names just there before which is really

cool because when it comes to like these index products it needs to be a kind of decision because i know there's a lot of people who don't really want to hold things like mkr and comp and and you know and kind of like maybe even uni and stuff like that and but they want to hold like the new age defy um they fight tokens and this gives them the choice to do that and you know i'm kind of like on the fence about this because i really do think that the d5 1.0 tokens are like you know a few of them are severely undervalued given how much kind of like cash flow they generate given how much growth prospects they still have given how long they've been around for and how secure they are and how you know trusted they are uh and how and you know and the

fact that they've still got product market fit after all this time not to say that all the projects in this um this index this gma index are bad or anything but a lot of them still have to prove out their their product market fit over the longer term a lot of them are a lot riskier a lot of them don't have as much growth but because they have kind of like the marketing the narrative the memes behind them people purchase them instead of the other ones and i'm not saying this because i have kind of exposure to the default 1.0 tokens i actually really don't to be honest um i don't really hold much default tokens these days but i think when you kind of look at it from that perspective i think it's a it's a good way of seeing kind of like what the participants are in the default

markets and i think it's still very retail driven um but uh in you know in that case having a index products like this for them to choose from is very very healthy so you can go check out the gmi index in this thread i'll link it in the youtube description and you can watch this teaser video here which i thought was really cool it's got a bunch of the faces of these protocols kind of like photoshopped onto some people riding a roller coaster here which i which i thought was quite funny so speaking of default 1.0 protocols uh i guess unisop still falls into that bucket even though uni swap is kind of like the biggest d5 protocol out there at least one of the biggest um hayden put out this tweet uh i think it was a couple days ago now actually where he

said in 2021 uniswop lps made 1.6 billion dollars in revenue that's more than any dap dry protocol l1 network or l2 network aside from ethereum the king uh and six other projects on this list are direct v2 forks so you can see this list here like how far ahead ethereum is in terms of like total revenue made for um for for kind of like 2021 uh ethereum is at 10 billion dollars and unisop is at 1.6 billion in second place but then you can kind of like go down the list and see a bunch of other networks here and a bunch of other applications actually infinity had a big year 1.3 billion openc 1.2 bitcoin 1 billion um and then you know you just go down the longer kind of like a list here of of protocols i wrote the daily grade

newsletter about this today and the kind of like theme that i kind of touched on was the fact that there are so many protocols that have insanely cheap price to earnings ratios um because of the fact that the market is still so immature and it trades basically based on like marketing and narratives and memes instead of kind of like fundamentals i still think eighth trades like this which is ridiculous to me i mean if you think about if the ethereum network as a perpetual buyer of eighth because of the eat that it gets burned um and you kind of like look at the the pe ratio of eighth which i've argued before that the p e ratio of um native tokens especially money is uh is kind of like not the greatest measure but when you

look at it for eighth it's like super discounted uh and and the fact that like we i mean we didn't burn 10 billion dollars worth of eighth we've burned i think over five billion dollars at this point uh worth of eats so far and you look at that and you look at the fact that no matter if uh if the market is bullish or bearish the ethereum network still processes you know uh you know tens of millions of dollars worth of fear of revenue every day and it's going directly to eath holders i i don't know like i just the market is so dumb guys like i i'm actually so surprised that eighth is is um not doing better to be honest like i think that the market overall is just so dumb because it's based on narratives and memes so many people are chasing these alt-l ones

instead of kind of like keeping their money in each which is fine i mean i get it people want to trade speculate but i don't think it's going to last like that forever i do think that one day there's just going to be a reckoning and kind of like people are going to try and pile into eath and there's just going to be not much e for them to buy because of the fact that there's this burn once the merge happens there's going to be that triple harvesting you know all the stuff that i always talk about i don't know when i when i kind of look at this sort of stuff i'm just like until and i believe until eighth is worth like much more than these other l1 based on kind of like its fundamentals and its usage the market is still incredibly

inefficient and incredibly dumb to be honest um and especially when it comes to other things i mean looking at kind of like other protocols in the money that they're making that's a lot of them have low price to earnings ratios too and a lot of them have like very very high price to earnings ratios for the amount of money that they earn i mean there are a lot of l1s out there that earn hardly any in terms of fee revenue and even if they have a fee burn and they're worth like a lot and obviously that's a speculative premium markets are forward-looking but it's a lot to do with marketing narratives and memes rather than fundamentals but uh yeah anyway cool to see unisop doing so well obviously this uh revenue doesn't go to uni holders it only goes to liquidity providers and this is the difference

between protocol revenue and kind of like um and and sorry sales and earnings so the protocol isn't earning anything um but like the unisop lps are so that's kind of like the main difference there uh and i think when you look at that you can kind of like understand why the the you know a lot of people don't want to buy the uni token it's still worth a lot right but like the fees going to kind of like the um the token holders can be activated sometime in the future and that's what kind of like it's trading based on as well i don't know if that's going to happen or not but it could happen there but anyway interesting tweet from hayden here last couple of things to get through a screenshot here from this person called chelsea showing basically what it looked like to

log in with web one you had a username password web two was like signing with google signing with facebook signing with twitter web3 is connect wallet or signing with ethereum as we've kind of like seen before i think this is kind of like what i'm most excited about when it comes to web 3 because when connecting with kind of like a wallet as i've said before you retain kind of like full ownership of your credentials right just your private care you sign into a platform with your wallet and then you get to kind of like connect and bring your data with you and bring your financial stuff with you i mean the the the kind of like um the the uh the use cases here are endless uh there's things with with sismo with deciding with ethereum effort with ens it's just it's we've only really

scratched the surface of what connect wallet or signing with ethereum can look like and i'm really really excited to see what other kind of like use cases can come to the forefront here because i think that it's just such a better experience than signing with google or signing with facebook because you get to keep your own data you get to take it with you you're not beholden to any centralized entity uh and it's not just your kind of like um personal data but it's also kind of like your financial data and also allows you to kind of like have everything in one place as well so that's super exciting and i just thought this was a really cool kind of little visual visualization here and the last thing to talk about was this um github repo from miguel who's who introduced what's called little web 3

which is simple intentionally limited but fully tested versions of with three protocols and apps so there's little protocols for ens open c fractional juice box a flash loan no cess and more coming soon so if you're a developer definitely go check this out fork the code play around with it this is really cool i've got a lot of a got a lot of engagement here so i think the developers are pretty happy with this and think it's really really cool and miguel says he's a 19 year old maker here that is really really cool i love when i see like super young developers getting involved within crypto because you just know they're going to kill it they're just so driven and and so excited to kind of like build on this stuff and build really cool things so definitely really really cool to see that so as i said if you're

a developer definitely go check this out but 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 the video a thumbs up subscribe to the newsletter join the discord channel and i'll catch you all next week thanks everyone