Why I’m Still (Almost) All In On Ethereum
-Layer 2 Scaling Is Here
-ETH2 Staking Update
-EIP1559 Implementation July 14, 2021 London Upgrade
-ETH1<>ETH2 Merge In 2021
-ETFs/ETPs/Institutions
Although the barriers to entry to the crypto casino are lower than ever, there is still no reason for a value investor to be anywhere but Ethereum. Sure Binance Smart Chain and Solana have higher throughput and cheaper transactions costs now, but Ethereum scaling is already here it just needs to be battle tested before the masses should feel comfortable using it. Layer 2 technologies such as Polygon (previously Matic) has attracted over $1B in value in part thanks to Aave in just a couple weeks alone. This means swaps, transfers, loan originations, and many more DeFi/Ethereum activities happen within seconds and cost less than a penny per transaction! This is a huge step up from $50 swaps on Uniswap on Layer 1 and $10 for simple ETH sends.
ETH2 Staking “The Beacon Chain” has been live since December 1, 2020 and is currently being “tested in production” while developers and researchers are able to fix/update while the ETH1 blockchain doesn’t rely on smooth sailing. At this point in time there is currently over 4 million ETH locked in depositcontract.eth with no way of getting out until the two-way bridge is implemented. Yield on the Internet’s first Digital Bond is at 7.7% APR slowly decreasing as more ETH is added to the contract. For reference, the APR will be 5% with 10 million ETH staked.
EIP1559 is currently slated to go live on Ethereum in mid July after the London upgrade. EIP1559 will do several things but one of the biggest talking points is how it will burn ETH from circulating supply. Introducing the BASEFEE, instead of 100% of transaction fees going to miners, only a small percent will go to miners and the rest will be burned. This will essentially make holding ETH more attractive to investors because they won’t have to buy more to keep from being diluted from new issuance.
According to Justin Drake and other lead ETH2 researchers/implementers, “The Merge” has now been prioritized over “sharding” and will effectively reduce annual issuance of new ETH to less than 1%. Yes you read that right, less than 1%. That is less than Bitcoin’s annual issuance for at least a couple more halvenings. So not only will there be less than 1.2M new ETH created every year but also every single transaction on Layer 1 of Ethereum will burn ETH from supply. It really doesn’t get any better than that!
Last but not least are the institutions and traditional investment products for people with brokerage accounts and 401k’s. In Canada alone there are already 4 ETH ETFs. Meanwhile a few public companies such as Ether Capital Corp and Meitu are already putting ETH on their balance sheets. Combine this with the 8 BTC ETF’s pending in the United States and several ETH ETF’s to follow suit, there is so much institutional and middle class demand coming to ETH that there will be a serious supply issue in the near future.
If you’ve gotten this far and are eager to learn more here are 3 reports of all different lengths to dive into. One being Ethereum’s Cash Flow model, one is Staked’s Staking Report, and the last is a 79 “institutionally framed” report on Ethereum. Enjoy!
https://drive.google.com/file/d/1bECqgijhgjdS782AB620gFjK5qx-vA99/view