Is Ethereum Ready For Mainstream Adoption? #27
Market Meditations | October 14, 2020
Rejoice, volatility has returned to the cryptocurrency markets. As expressed in our overview yesterday, our bias remains bullish. Chainlink has shown early signs of reversing it’s downtrend, Bitcoin has reclaimed key levels and Ethereum is somewhat tagging along.
Our main piece today looks at Ethereum 2.0, an exciting upgrade that needs to be on every trader/investor’s radar.
Earlier this week we tested a new format where we send emails more often, feedback suggests that people prefer our original more select and curated emails that include Market Updates, Technical Analysis, Podcast releases and education.
Now let’s stay one with the markets in as little as 10 minutes in this guided meditation.
Ethereum 2.0: Is Ethereum Ready For Mainstream Adoption?
Government Agencies Help Chainalysis Double Its Recurring Revenue in Q3.
Bank of Russia Considers Issuing Digital Ruble, Starts Public Consultations.
$10 Billion Money Manager Parks $100 Million of Treasury Into Bitcoin.
Sahil Bloom: Financial Education, Success Mindset, Trading & Investing
Zoom to Cash in on Pandemic Success with Apps and Events.
Ant Group and Fintech Come of Age.
A New Frontier of AI Trickery: Fake Faces.
To Do Lists Curbing Productivity.
Ethereum 2.0: Is Ethereum Ready For Mainstream Adoption?
Ethereum 2.0 or Eth2 in short is the long-awaited upgrade to the Ethereum network, improving speed, efficiency and scalability in order to ‘serve all of humanity’ and become a transparent and open network for decentralized applications. With the successful rollout of the Zinken testnet on Monday, it looks like the initial release is closer than ever and those familiar with the subject are optimistic that a 2020 launch may be forthcoming. We decided to take a look at the literature to inform our readers of the most important changes that will be introduced by Eth2. We look at the two key features of Eth2, sharding and staking, and how they could increase the network’s capacity by approximately 100x. Let’s dive in!
Roadmap and Different Phases
Due to the sheer magnitude of the upgrade, Eth2 will launch over 3-4 different phases in the next few years. Developers and engineers are currently going through the final tests before the official release of the first phase, appropriately called phase 0. If everything goes as planned, Eth2 will boost network speeds from the current 15 transactions per second (TPS) to 100,000 TPS, according to Ethereum creator Vitalik Buterin.
Phase 0 will be the first part of Eth2 to ship and includes the ‘beacon chain’. This is a new blockchain at the core of Eth2 that will make sure that the whole network is in sync with the same data. This becomes exponentially more difficult in Eth2 because rather than Etherum being one single blockchain, it will consist of many chains all running in parallel, which is technically called sharding. If no flaws or bugs are discovered during the latest security audits, phase 0 is expected to be released in November this year and will give users the option to stake a portion of their ETH and gain rewards in the process. Although Phase 0 comes with a new token that is received by depositing ETH into a smart contract in order to stake, the current Ethereum blockchain will remain functional and migration will be optional until a much later date.
Phase 1 is reserved for actually implementing the different shard chains and is expected to be released in 2021, allowing Ethereum to finally scale massively. At launch, it is expected that phase 1 will have 64 different shards, essentially splitting the Ethereum blockchain into 64 chains working in parallel where each chain will be delegated a portion of Ethereum’s transactions and account data. Up until Phase 1.5, Ethereum continues as a proof-of-work blockchain and transactions will continue to be processed by miners. Once Phase 1.5 goes live, mainnet will officially become a shard and transition to proof-of-stake as well.
Phase 2 is expected in late 2021 or 2022 and is the last big upgrade finalizing Eth2. Shards will have become fully functional chains, compatible with smart contracts and they’ll also be able to communicate with each other more freely. It is important to note that Phase 2 is still in a research phase and subject to change depending on the progress until then.
Proof of Work -> Proof of Stake
A change in Ethereum’s consensus mechanism is one of the things that will allow for much higher throughput (transactions per second). Similar to Bitcoin, Ethereum currently runs on a proof-of-work consensus mechanism which has proven to be energy-intensive and thus likely less sustainable in the long-term.
Eth2 introduces Ethereum to a proof-of-stake mechanism, which will allow ETH holders with a minimum of 32 ETH to stake their holdings and earn rewards and become validators in the network. Validators will gradually earn rewards on their stake in the form of an annual percentage return (APR) in ETH, which is expected to ~20% at the launch. There will also be opportunities to offer a smaller stake by joining staking pools. Through staking, Ethereum will have thousands of validations that will keep the network secure by processing transactions with the necessary software and hardware.
Once the beacon chain is live (phase 0), users will be able to stake real ETH. That said, it is important to know that staking in this phase is a one-way transaction. It will not be possible to withdraw your ETH until the current chain becomes a shard of Eth2, expected somewhere in 2021 during phase 1.5.
What Happens Next?
The highly anticipated launch is expected to have little to no impact on users and decentralized applications (dapps) currently running on the Ethereum blockchain. Once the Eth2 launch is finalized, developers expect the upgrade to ‘radically improve network performance and security’ , improving efficiency and speed while reducing costs of transaction fees in the process.
With this kind of throughput, Ethereum becomes a next-generation blockchain that will allow innovation like this year’s decentralized finance ecosystem to flourish without congesting the network and massively increasing transaction costs. With a decent amount of ETH expected to be staked in order to earn rewards, supply on the market could decrease substantially which could have a positive impact on the price in the long run.The technical community is incredibly excited for this major update and blockchain innovation to go live. If everything transitions smoothly, we could see other cryptocurrency projects follow Ethereum’s playbook and address one of blockchain’s most important pain points: making blockchains scalable without sacrificing security and decentralization.
Government Agencies Help Chainalysis Double Its Recurring Revenue in Q3. Blockchain analytics firm Chainanalysis reported that its recurring revenue grew 100% year over year in the third quarter of 2020. In a report, Chainanalysis claimed that “increased demand for investigative blockchain technology from public sector agencies largely drove this growth, while recent positive regulatory actions across the United States and internationally have set the stage for further private sector expansion”, adding that “Chainalysis solutions were used in several recent high-profile law enforcement cases, highlighting the increasingly sophisticated money laundering techniques bad actors employ using cryptocurrency, and the ability of government agencies to trace the funds if armed with the proper tools.” The firm’s customers grew 65% in the third quarter and in addition to releasing new numbers, it also announced several new hires in order to successfully expand their efforts in both publicly and privately. Read more.
Bank of Russia Considers Issuing Digital Ruble, Starts Public Consultations. The Bank of Russia, the country’s central bank, said it’s exploring ways of issuing the central bank digital currency (CBDC), a digital ruble. With this move, Russia joins a growing list of central banks actively thinking about launching a CBDC. In a report, the Russian central bank sees the digital Ruble as a supplement rather than a replacement for cash or non-cash rubles. The central bank said it hasn’t yet decided whether to issue a CBDC but will hold a public consultation period on the matter and is open to feedback on the idea until December 31st. The report apparently also underscores the value of smart contracts, which were pioneered on the Ethereum blockchain. Read more.
$10 Billion Money Manager Parks $100 Million of Treasury Into Bitcoin. Yetanother big firm took the leap and purchased bitcoin to add it on their balance sheet. The latest addition is the $10 billion asset manager Stone Ridge Holdings Group, which announced Tuesday that bitcoin would serve as its primary treasury reserve asset.The firm said that it bought more than 10,000 bitcoin “as part of their treasury research strategy”. Earlier this week, Jack Dorsey’s internet payments company Square announced that they had bought $50 million worth of bitcoin, allocating 1% of their balance sheet to the oldest cryptocurrency. Read more.
Zoom to Cash in on Pandemic Success with Apps and Events. Zoom is bringing apps and paid for events to its video meetings service, in a bid to consolidate its grip on the huge new audience that flocked to its platform during the pandemic. The move marks the San Francisco-based company’s first attempt to turn the online meeting habits developed by hundreds of millions of people this year into a more central part of their lives, while laying foundations for a wider business with interactive video at its core. Zoom on Wednesday launched a US test of a marketplace called OnZoom, where anyone can promote and sell virtual events, with a full commercial service scheduled for next year. For organisers, the new features include the tools needed to create, market, host and charge for events, and a marketplace where consumers can sort through classes, concerts and other events, or fund fundraisers to support. The bid to become a platform is a key strategic move for Zoom. If it works as planned, it could make the company one of the handful of giant software companies, such as Microsoft and Oracle, that have put themselves at the centre of the digital world. Read more.
Ant Group and Fintech Come of Age. China’s pre-eminence in digital money is likely to be on display in the next few weeks with the monster listing of Ant Group, its largest fintech firm, in Hong Kong and Shanghai. Measured by cash raised, it will probably be the biggest initial public offering in history, beating Saudi Aramco’s last year. Once listed, Ant, which was formed in 2004, could have a similar value to JPMorgan Chase, the world’s biggest bank, which traces its roots to 1799. Ant’s rise worries hawks in the White House and enthralls global investors. It portends a bigger transformation of how the financial system works – not just in China but around the world. Read more.
A New Frontier of AI Trickery: Fake Faces. AI generated faces are created using a technology known as GANs, or generative adversarial networks. One network generates content, while another compares it to human faces, forcing it to improve until it cannot distinguish the synthetic image from a real face. Digital renderings of fictional humans have had a growing presence online in recent years, with stars such as the virtual popstar, model and activist Miquela drawing in vast followings on Instagram and Twitter. But what sets GAN generated faces apart is their photorealism – the level of detail that gives a strange lifelikeness to the characters. Already, fake faces have been identified in bot campaigns from China and Russia, as well as in rightwing online media outlers and purportedly legitimate businesses. Their proliferation has led to concerns that the technology could represent a more ubiquitous and pressing threat than deepfakes, as online platforms grapple with a rising tide of misinformation ahead of the US election. Read more.
Sahil Bloom: Financial Education, Success Mindset, Trading & Investing
Today’s episode features Sahil Bloom
Sahil received an M.A. in Public Policy and a B.A. in Economics and Sociology from Stanford University where he also played as a professional baseball player. After university, Sahil started a career in finance and he is now the Vice President of Altamont Capital Partners. Sahil’s Twitter account recently blew up because of his educational threads on different finance concepts, which frequently get retweeted by industry veterans all over Twitter.
In the episode we talk about his baseball and academic background as a student at Stanford university. We discuss the issues with current financial education and how Sahil would love to help and potentially solve that problem. We talk mindset, the importance of working hard, making your own luck and why most people should be investing instead of trading. Sahil also recommends some of his favorite books and how he sees his future as a financial educator.
I hope you enjoy this episode!
To Do Lists Curbing Productivity
How you make use of your day is essential. Time is a finite resource and for many of us, there is a lot we hope to achieve in a day. I find it surprising how many people rely on ‘To Do’ lists to structure their day. Countless people view it as the Holy Grail of productivity. Today, I would like to discuss why I think this approach is really quite unproductive. Not to mention, it limits our creativity.
The thing is, when people wake up, get ready for work, and survey their To Do list, they tend to bypass important or complicated tasks in favour of what’s easier to do or more urgent. And what happens next? Well, by ignoring complex tasks, you’re ultimately setting yourself up for failure and disappointment and at the same time, destroying your self image. You end up reinforcing the self image of someone who doesn’t do what they say they’re going to do.
There is also the issue of how To Do lists encroach on your personal time. Incomplete tasks will play on your mind and this will stop you from enjoying yourself outside of work. That a measure of your success is somehow the number of tasks you ticked off a list you scribbled together in the morning is absurd.
Many times throughout the day, we have new ideas and this following of a To Do list pushes those ideas out the way. We end up believing we must follow the set actions we set up in the morning. This is why I believe it interrupts the creative process.
There are many alternatives that I strongly believe are favourable to a To Do list. One method is to maintain a ‘done list’. Writing down every single task that was completed successfully in your day. This helps reinforce your self image as someone who is productive and diligent at work.
Another method is the calendar method. To block out hours in your day and assign them to tasks. This helps you change how you think about tasks and time. We also perform better under time constraints.
Finally, for those who want to optimise creativity, I would suggest starting the day with a blank piece of paper and a pen. Then, begin to draw out a mind map. See what ideas you come up with in terms of how to use your days. This is by no means a To Do list but of course you might come up with actions you would like to take off the back of your ideas.
We can make very much or very little of our days and our framework and approach are essential. Try out a few of these methods and see what works for you. Particularly if you can relate with some of the grievances regarding To Do lists.
Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. I am not a financial advisor. Every investment and trading move involves risk. Do your own research when making a decision.