Carbono Insights #58 | Let the games begin
Shanghai is about to happen. Expect some frenzy on Ethereum. Also, Arbitrum botches governance, Amazon might be about to launch an NFT store, and STAMPs anger bitcoiners.
It’s nice not to write (almost) about regulation or enforcement actions against crypto and focus on the nerd side. Tomorrow Ethereum will eliminate every remaining doubt around whether staked ETH can make it back to the hands of its owners safely. It’s not just one more brick added to the building; it’s the last of the Proof of Stake construction.
Staking is one of the most straightforward business models in crypto. People get paid for securing a blockchain by locking their assets. Now staking on Ethereum, a vital piece of the infrastructure, will be 100% operative.
In this newsletter, we wanted to remind you of the forest before we delve into the trees.
- Shanghai is here. What is going to happen, especially in the short term?
- Arbitrum’s governance clumsy baby steps
- Amazon might be preparing their NFT store
- Hardcore bitcoiners have a new problem: STAMPS are a new form of Bitcoin NFTs, and they’re growing.
- Switzerland pushes what the US fights: banking services linked to crypto
- Opensea fights back. After being flipped by Blur, they launched a trader-friendly platform.
Ethereum is about to burst in activity once Shanghai is deployed. So we asked Dall-E to make a vaporwave interpretation of the Shibuya crosswalk with Ethereum vibes.
Six Angles
1. Ethereum | Shanghai is happening. What now?
Shapella is about to happen, and everyone seems to agree it will be big. The combined upgrades of Shanghai and Capella will finally allow stakers to withdraw their assets. It’s been over two years since staking was first permitted in the first iterations of Ethereum’s PoS testnet, and things have changed enormously. Staking has become a whole investment category. There are 18M ETH currently staked (15% of the entire circulating supply). Lido, the leading liquid staking solution, is the number one DeFi protocol by TVL, with $11B, ahead of OGs like Maker, Aave, or Curve.
There will be many long-term implications to implementing unstaking on Ethereum, but here we’ll look at the short-term effects. Shanghai will affect many people, but as an ecosystem, there is one question in the air.
What will happen to ETH tomorrow?
In the two-and-something years since staking was available, ETH price has been on a rollercoaster. From the lows of December 2020 (down to even $400) to the heights of the peak bull market in November 2021 (when it surpassed $4600). During all this time, people have been saying goodbye to their assets indefinitely. They will be able to meet again soon, so the first question is how many people will take their ETH back from the hands of PoS and sell it right away, pushing ETH down.
Commons sense says that not too many people will do so:
- More than half of the stakers are underwater, so selling ETH would only realize losses for them
- The slow speed of the staking process is a defense mechanism per se. The queue will prevent many people from withdrawing and selling at once.
- And even if they do, massive withdrawals would bring the staking APR up, encouraging more holders to lock their ETH.
Shanghai will look less like an exodus and more like rush-hour Shibuya. Many investors and validators entered the staking arena in a context that is different from today. There’s a broader field of opportunity, with better APRs for stakers, optimized processes, and mechanisms for socializing rewards and penalties for validators. Many people will seek greener pastures for their ETH or validating software.
The second biggest question is where to put your funds to make a profit. Unfortunately, we can’t answer that for you: the liquid staking ecosystem is very (and increasingly) broad, and there are multiple options for all types of return expectations and risk profiles. What might help is a snapshot of the current state of affairs. Check out our Medium post for that.
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2. Governance | Arbitrum botches governance
Arbitrum launched its token on March 23rd. The token allowed Arbitrum to start walking the talk of decentralization.
On March 28th, they launched the first proposal that would inaugurate the age of ARB-fueled governance: AIP-1 was a miscellaneous proposal full of reasonable initiatives…and one more controversial one: the allocation of 750 million ARB tokens to the Arbitrum Foundation for making grants, reimbursing service providers, and covering its administrative and operational costs.
Some had an issue with the amount (750M ARB is roughly $1B) and the need for more decentralization in the grant process. But the main problem was that the team confirmed that 50M had already been sent to Binance to start operating before even proposing a vote.
Arbitrum’s explanation followed. The point of AIP-1 was to inform the community of all decisions made in advance. They wanted to hear voters say they were fine. Decentra-what govern-what?
Arbitrum’s team is in the process of making amends. They’ve agreed not to touch the remaining 700M until a more comprehensive roadmap is attached.
We do not question Arbitrum’s best intentions (if they were trying to cheat, they are awful cheaters). However, this reveals how much decentralized governance looks and behaves like a well-intentioned committee of toddlers.
3. NFTs | Amazon’s marketplace
Amazon’s NFT marketplace is only a rumor, but there are a surprising amount of details for something that so far is mostly speculation.
A date (April 24th) and an illustrious list of artists and collections are in the pipeline.
Current plans include a permissioned, closed blockchain. Not what degens would have chosen, but still good news in crypto’s long-term world-conquering mission.
4. Bitcoin | New headaches for bitcoiners: STAMPS
Ordinals made hardcore bitcoiners angry because they weren’t ok with the idea of blocks invaded by silly jpegs. In their minds, Ordinals interfered with Bitcoin’s destiny of disrupting the global financial system.
Well, things got worse. Now there’s a new protocol in town, and they are an improvement (or deterioration) of Ordinals in some ways.
Ordinals created pure NFTs: 100% on-chain digital assets secured by the strongest, most immutable blockchain. But they were designed in a way that they were prunable (prunable data is data miners can delete from the blockchain without affecting the integrity or security of the network). Stamps aren’t.
Stamps leverage functionalities from Counterparty, a primitive sort-of-L2 over Bitcoin of RarePepe fame, Minting Stamps is easier than minting Ordinals (thanks to Counterparty). Still, it’s also more expensive, which has limited their use to mostly pixel art. However, this hasn’t seemed to deter people from creating moar.
STAMPS are more annoying to Bitcoiners than Ordinals. Some point out that STAMPS are risking the Bitcoin blockchain by flooding it with useless information. STAMPS apes shrug and say that if a bunch of pixels can break the primordial blockchain, someone should do something about it.
5. Banking | Switzerland makes progress where the US wants to regress
PostFinance is partnering with Sygnum’s B2B banking platform to provide its customers with regulated cryptocurrency services, including buying, selling, and storing BTC, ETH, and staking. Post Finance is a Swiss government-owned bank with more than 2.5 million customers.
While US regulators continue with the witchhunt against crypto and crypto-friendly companies, other jurisdictions and institutions embrace it. “When one door closes, another one opens”; this is not just an instagrammable quote or a sign of naive unwavering optimism; it’s just the nature of crypto. It’s a fully digital phenomenon that doesn’t understand frontiers and will move where it wants.
6. NFT wars | OpenSea launches the anti-Blur
One year ago, OpenSea purchased NFT aggregator platform Gem. Maybe they planned to build a trader-friendly platform, but maybe they didn’t. But after Blur’s stellar appearance, they kinda had to do it. In the last months, Blur was able to flip OpenSea in sales thanks to its trader-first approach.
OpenSea has just launched OpenSea Pro, which will operate with 0% fees and pull listings across 170 marketplaces to provide the best deals for traders.
