The Upcoming Ethereum Merge

Ethereum developers have announced that they are deploying the Ethereum Merge on its blockchain on September 19, 2022 (based on transcript from a conference call). The news has been received positively by the market, which led to a rally in ETH market price. This has been a long awaited event, which will consolidate the beacon chain with the main network to transition Ethereum’s blockchain from PoW (Proof-of-Work) to PoS (Proof-of-Stake).

There have been doubts about the merge since it was first delayed in the summer of 2022. Ethereum has a known history of delaying projects, with market panic when the developers cannot deliver on time. The expectations are sometimes too high for even what the developers can accomplish. When the deliverables do arrive, it usually turns sentiment back to bullish as was the case with EIP1559.

Before the merge can become a success, there are still some hurdles to clear. Tests are underway on testnets (e.g. Ropsten) to make sure that the protocols work properly. There are still major tests that will be conducted on the Sepolia and Goerli test networks. Once these chains have been transitioned successfully without much issues to PoS, then the next step is the Ethereum mainnet. This aims to improve the network to scale the number of transactions and lower fees for users.

Although a date has been set for the merge, it is not final. If there are problems during testing that are serious enough to address, then this could lead to further delays. The hope from ETH HODLers and investors alike is for a successful merge to occur in order to increase Ethereum’s value.

Disclaimer: The information provided is for reference and educational purposes only, and is not financial advice. Always DYOR to verify information.

Ethereum Reaches A New Milestone As It Prepares For ETH 2.0

There have been plenty of great developments in the Ethereum blockchain. This has been good for its native currency ETH (Ether) and has restored confidence in holders toward the end of the first quarter of 2022. This has led to a rally in ETH price to above the $3K level, starting in March 22. Some analysts take this as an ominous sign that ETH has turned bullish once again, but what is really the motivation behind it?

Toward the end of 2021, Ethereum developers released the Kintsugi Merge test network. This is a more realistic approach to testing how the Ethereum network will be like post-merge (i.e. when the Beacon Chain merges with the mainnet). This allows developers to test the features of the network in an environment that supports PoS (Proof-of-Stake). This is where smart contracts can be tested without any additional costs to developers.

Ethereum developers have also released the Kiln public test network in March of 2022. This is the final test network before the transition to PoS. This is where developers can test their applications and tools before deploying on the mainnet. Node operators and stakers can also test on Kiln, to evaluate the performance on a simulated blockchain.

Toward the end of March 2022, the number of ETH 2.0 validators has reached 300,000+ with over $28 Billion TVL (Total Value Locked). That is based on the valuation of ETH (~$2900-$3,000 circa March 1, 2022). The total amount of ETH locked (requires 32 per validator) has reached 9.6 Million ETH. At the price of ETH in March 28, 2022 at $3,300.62 (10:46 PM EST), the total value locked would be $31.6 Billion. The value of ETH increases with the market, and any surge also brings up the TVL for the validators.

Ethereum is receiving not just retail support, but institutional as well. Macro guru Raoul Pal has become more bullish on his outlook of Ethereum. He believes it is on track to outperform Bitcoin based on its performance. Pal is looking at long term metrics that show that the market Ethereum is capturing covers a much larger base than Bitcoin. This includes the derivatives and money markets, where billions of dollars are sitting. Should even a small percentage of the money flow into the DeFi space, where ETH is a major currency, it can create network effects that can further drive ETH value higher.

Other reports are coming that banks are positive on Ethereum. It seems banks like JP Morgan had at one time been very critical of cryptocurrency. The sentiment has changed, and they now invest in projects that involve cryptocurrency like Ethereum. Perhaps the recent developments in how Ethereum will become more energy efficient and how it is a platform that facilitates a decentralized financial system opens opportunity for capital investments.

The transition to a new consensus mechanism can greatly impact Ethereum network performance. A faster and more energy efficient system gives it a positive outlook compared to Bitcoin and other energy intensive cryptocurrency that use PoW (Proof-of-Work). The more important matter that investors are keeping an eye on is how the move to ETH 2.0 will improve the network’s overall performance. This attempts to solve the problems of scaling, which Ethereum competitors (e.g. Solana, Harmony, Avalanche) have already been addressing. A more stable network with the capability to process more transactions will be huge for Ethereum, and can establish it as a dominant platform for years to come.

Crypto Takes The Spotlight At Super Bowl LVI

The Super Bowl is perhaps the most watched American sporting event. It is the championship game between the two best teams in the NFL (National Football League), a professional football sports organization. In 2022 it was the Los Angeles Rams against the Cincinatti Bengals, played at the SoFi Stadium in Inglewood (a Los Angeles suburb). This gave the Rams a home turf advantage in a stadium with a capacity of 70,000 but expandable to 100,240 for events like the Super Bowl. The viewership projection for the Super Bowl in 2022 comes from data analytics firm PredictHQ. They estimate that the event will attract 117 million viewers on NBC’s network. If the international market is included that could bring figures between 125 -150 million viewers.

That is great exposure for ads, and that is the reason why many are shown during the game’s broadcast. Getting to a large target market and demographic helps keep brands relevant, and does well for marketing to new consumers. With that as a reason for advertising, the crypto (i.e. cryptocurrency) industry took the spotlight with ads for more exposure to a mainstream audience in 2022.

In Super Bowl LVI, crypto-related fintech companies like FTX, Crypto.com, Coinbase and EToro used this opportunity to release their commercials. The market is not entirely in a boom phase quite yet. The market still has plenty of room to grow and we are at the early stages of adoption. Commercials that reach out to so many people, who actually watch them during the Super Bowl, is one way to get the message across. That is especially true for attracting new customers and crypto users. What is significant is that these companies are an important on-ramp to crypto.

The thing is, commercials for the Super Bowl need to be creative and engaging. This is probably the only time an audience will actually watch commercials because of the entertainment value it also brings during the event. Brands have learned that making their ads the most entertaining and engaging for the Super Bowl is how to capture their target market among the audience. For example we see the usual beer commercials and junk food items. Only this time with popular celebrities and public figures doing the endorsement since this adds more value and reputation to the brand. It is all about brilliant marketing with the theatrics of Hollywood.

How did the crypto ads do? I think they got the message across, but let’s be honest. Probably most of the audience have never before heard about crypto or simply do not understand or care about it. The commercials this year have become more engaging to try to make the target audience more curious and interested, at the very least. In one of their ads, FTX features Super Bowl champion QB Tom Brady (“Tom Brady Wants A Trade“). They feature a familiar face using a not so familiar app for crypto trading. Likewise, Crypto.com had their “Big Game Preview with LeBron James” commercial, as part of their “Fortune Favors The Brave” campaign.

These would be very expensive spots for even a few seconds, but perhaps it will be worth it. NBC was selling 2022 Super Bowl ads for record deals, closing at $6.5 million per 30-second commercial. Companies like FTX and Crypto.com will have no problem paying that amount. These are successful crypto exchanges earning billions in revenues who are willing to advertise. Advertising is a tried and tested formula for capturing new markets. For crypto it can help to bring in more adoption.

Spider-Man NFTs … From AMC

AMC Entertainment, the company that operates the AMC Theaters chain, has entered the NFT (Non-Fungible Token) market. In a collaboration with Sony Pictures, they will be giving away 86,000 NFTs for the December 16 release of the movie “Spider-Man: No Way Home.” This giveaway is open to members of AMC Stubs Premiere, AMC Stubs A-List and AMC Investor Connect with advance purchase of tickets.

According to AMC CEO Adam Aron (via Twitter):

“This idea came from YOU! Partnering with @SonyPictures for #AMCFirstEverNFT. More than 100 unique Spider-Man NFTs, given FREE to the first 86,000 online buyers of U.S. AMC December 16 tickets for Spider-Man No Way Home. Only for Stubs Premiere, A-List & Investor Connect members.”

— Adam Aron (@CEOAdam) November 28, 2021

This is not the first time AMC has ventured into cryptocurrency. They are already accepting payments in cryptocurrency like Bitcoin (BTC) for movie tickets. NFTs are like the next step in their journey to the blockchain and metaverse. Spider-Man is a popular Marvel Comics superhero, so an NFT would be a valuable digital collectible. This has future value for trading in the NFT marketplace among collectors. The NFT will be minted on the WAX blockchain.

This is probably part of AMCs strategy to catch up to the trends among millennials and Gen Zers. Crypto is popular among the younger generation and this is a better way to promote your brand. AMC needs to rebound after the pandemic lockdowns, so this is also a way to entice moviegoers to return to theaters with some added benefits to go along with the soda and pop-corn.

IGOs – Crypto, Metaverse, DeFi and Gaming

Launchpads to crypto gaming platforms are gaining traction. The method they use for funding is called an IGO (Initital Game Offering) that are like the ICOs (Initital Coin Offerings) in crypto and an IPO (Initial Public Offering) in traditional finance. IGOs are based on cryptocurrency like NFTs (Non-Fungible Tokens), which are issued to represent unique digital assets. NFTs can represent content like art and collectibles, which encompasses the gaming industry. NFTs issued in gaming can be in-game rewards, loot boxes, prizes and game characters. These have unique traits that determines their value. NFTs also establish ownership of a digital asset via a blockchain.

IGOs help to fund new gaming projects using launchpads like Enjinstarter. One of the big reasons IGOs are becoming popular is the rise of the metaverse. This is not the same ‘metaverse’ that Big Tech companies like Facebook (i.e. Meta) are building. Though they intersect in some aspects like with shared virtual worlds (e.g. VR, AR), the crypto metaverse is decentralized and open. Big Tech’s metaverse are like silos with their own ecosystems, but they may connect to the crypto metaverse with regards to NFTs. Other than that, there are still differences with respect to their purpose.

The use of NFTs in the metaverse is a big factor in crypto gaming projects. Developers are not just building fancy virtual world games. They are adding value to it using cryptocurrency in the form of NFTs and gaming tokens. The NFTs are the unique items users collect from playing games. Their value is based on their uniqueness, and this adds value. This can be a unique armor or weapon that gives a gamer advantages or they can be special powers. In traditional gaming these objects are also available but not tokenized like NFTs. When it is in the form of an NFT, it can be traded or sold by the gamer.

Tokens are also another feature of crypto games. Using a Play-To-Earn model (e.g. Axie Infinity), players earn the tokens from playing the game. For example, if the player wins a round, they can earn tokens as a reward for their victory. These tokens can then be put to work in DeFi protocols to earn money. This brings another aspect that is not found in traditional games, so these are enticing users to try something new.

IGOs are for investors who want to jump into a project from the start. It is an opportunity to get into what might become the next big thing in gaming. These have the potential for huge ROI (Return On Investments), depending on the amount invested. There are risks involved since the project might fail, so potential investors should do their research before participating in an IGO. A good project is one that has a great idea, but also make sure that it has a credible team and reasonable tokenomics.

It is also important to check if the project follows regulatory compliance, otherwise there could be problems in the future. This is true if the launchpad is not fully decentralized, since regulators can come after the platform’s owners.

IGOs may only be relevant until new techniques for funding replace them. For example, ICOs were eventually replaced by STOs (Security Token Offerings) and IDOs (Initial DEX Offerings) due to regulatory concerns. Those who get in early are usually the ones who benefit the most from these projects. An IGO is a great opportunity worth exploring for investors interested in earning from the next generation of gaming.

Disclaimer: This is not financial advice. The information provided is for reference or educational purposes only. Please do your own research always to verify facts.

(Photo Banner Credit: JÉSHOOTS)

The Ethereum Altair Upgrade – Merging PoS With The Beacon Chain

The Ethereum Altair upgrade was completed on October 28, 2021. This is part of the transition to ETH 2.0, as PoS (Proof-of-Stake) consensus mechanism merges with the Beacon Chain.

The upgrade implements the following:

light-client support to the core consensus.
Setup of beacon state incentive accounting.
Fixes validator incentives issue.
Penalties for offline or inactive validator nodes per EIP 2982.

Over 95% of the network participated at the time of the upgrade’s first epoch. This is the first upgrade to the Beacon Chain since going online in December 2020 and could also be the last before the merge with PoS on the Ethereum mainnet.

According to IntoTheBlock researcher Lucas Outumuro:

“Through the Altair upgrade, Ethereum sets the base for this vision, enabling the upcoming merge of the proof-of-work chain and the Beacon Chain. Finally, these are expected to benefit Ether holders and stakers by making it deflationary while offering higher returns to validators.”

The recent London Hard Fork had introduced a base fee as part of EIP 1559 with a coin burning mechanism that adds a deflationary feature to Ethereum. During the first 48 hours of that upgrade, $30 million in ETH were burned from the network’s circulation. As of 10/30/21, 681,030 ETH have been burned that is valued at $3,013,073,269. This puts pressure on supply as it decreases and drives the price of ETH higher due to market demand.

With ETH 2.0 set for deployment in 2022, Altair is part of the preparation. Altair is a hard fork, which means that the 250,000+ validator nodes who didn’t upgrade are now considered offline. Their ETH will then slowly diminish at about 10% per year. This was included in Altair as a sort of way to push for moving towards the upgrade. This not only benefits the validators, but the network as a whole as it comes to an agreement to pave the way for Ethereum’s next phase.

VISA Gets Into NFT With CryptoPunks

VISA has announced the purchase of a CryptoPunk NFT (Non-Fungible Token) worth approximately $165,000 (~50 ETH this August 18, 2021). Perhaps the most unlikely thing you would expect VISA (the financial credit company) to invest in. VISA is apparently bullish on NFTs, or could this just be another signal to show they are “in the know” or “part of the gang”? CryptoPunk NFTs are original digital artwork made by Larva Labs. These are unique collectible characters that have verified ownership on the Ethereum blockchain. They are not physical objects at all, but purely digital. They look just like icons or emojis, not at all like the works of art you would see in a gallery.

This shows that VISA is getting in on the DeFi (Decentralized Finance) market with NFTs. According to their recent tweet:

“Over the last 60 years, Visa has built a collection of historic commerce artefacts—from early paper credit cards to the zip-zap machine. Today, as we enter a new era of NFT-commerce, Visa welcomes CryptoPunk #7610 to our collection”

NFTs like CryptoPunks, despite looking like mediocre art, hold plenty of value. A typical CryptoPunk can bid over $20,000 while the more in demand will bid in the millions of dollars. That shows that there is a big market for these collectibles and the buyers have plenty of money to spend. This is not your basic retail market where items cost a few dollars. This is a big money market, and it has attracted VISA’s attention.

What makes CryptoPunks desirable as a collectible is their uniqueness. A CryptoPunk character (i.e. Punks) is algorithmically generated by computer, not manually created by a human artist. There are also different types like Apes, Zombies and Aliens. Each CryptoPunk character has their own set of attributes and their metadata are recorded on the Ethereum blockchain. That also includes the proof of ownership to the holder of the NFT.

It seems like VISA will hold this NFT for the collection purposes. It will hold the CryptoPunk for historical records, perhaps to document a time when NFTs first emerged. This will surely be valuable in the future, whether NFT continue to become successful or not. Just owning a piece of history is valuable in itself, so VISA is going to look back on this as having a memento to that timeline. Overall the NFT market continues to grow. According to Forbes, the NFT market grew 1,785% In 2021. It is now the fastest growing sector in DeFi that is also gaining pop culture adoption and VISA is jumping on board.

Moving forward, it looks like VISA is also on the horizon ready to enter new partnerships and projects related to NFTs. As a payment processor, VISA can help bridge the traditional finance market with the DeFi space. That opens a world of opportunities for buyers, sellers and developers.

London Hard Fork Brings The Burn To Ethereum

The Ethereum network has activated the London Hard Fork successfully (12:34 UTC, Block# 12,965,000, 8/5/2021). In the first two days, $30 Million of ETH (Ether) were burned. That amount of ETH burned, removes approximately 3,000+ ETH from circulation. This is part of the EIP 1559 specification in which a certain portion of the transaction fee is burned per transaction. The hard fork also makes transaction fees on the Ethereum blockchain more predictable. This creates lower gas fees that can bring the costs of transactions down since there is now a base fee.

The introduction of a base fee addresses the volatility in transactions. This is regarding the cost of gas prices during times of network congestion. When the network is at its busiest, the cost of gas can suddenly increase which is why recent transaction costs on the Ethereum network has been high. With a base fee, this can prevent gas prices from suddenly shooting up to levels where it makes more sense to send large transactions than lower ones.

Since Ethereum uses an inflationary currency model, the burning introduces a deflationary system for the first time. This puts a check on the amount of ETH in circulation, which can affect prices to the upside. This has become controversial since it affects miner rewards, but the Ethereum network is moving away from mining (Proof-of-Work) consensus. A protocol difficulty bomb is part of the design for Ethereum 2.0 (ETH2.0) that will make mining more difficult, encouraging validators to move towards staking (Proof-of-Stake) consensus. The London Hard Fork will delay this at the moment to allow time for transition.

In a nutshell the London Hard Fork has enabled the following features:

Establish a base fee for transactions
Provide more transparency and predictability to transaction fees
Make ETH a more deflationary asset with a burning mechanism

Here are other EIPs activated during the London Hard Fork:

EIP 3554 delays the “difficulty bomb”.

EIP 3529 reduces gas refunds. Gas tokens (e.g. Chi) will become obsolete.

EIP 3198 allows users to return the base fee opcode.

EIP 3541 enables future upgrades to the Ethereum Virtual Machine (EVM)

Overall this introduces steps that will bring Ethereum closer to a minerless future. This gives time for miners to transition to staking, but once the difficulty bomb is activated it begins the “Ice Age” for mining. The new structure for transaction fees is also a positive development in light of the skyrocketing costs to run a transaction on the Ethereum blockchain. It doesn’t exactly lower gas prices, but makes it more manageable with a base fee. At least users will not have to deal with sudden increases when all they want to do is transfer ETH to another wallet or swap tokens. ETH will also be headed towards a more deflationary asset as well, with the burning of portions of its transaction fees. All of this creates positive market signals that drives further utility on the Ethereum blockchain.

(Photo Credit by Chris Schippers)

Meme Coins – Opportunity Or Stupidity?

I am convinced that the rise of Meme Coins in the cryptospace is nothing innovative like DeFi (Decentralized Finance), but more a distraction. If the pumps going into these coins were instead going to legitimate projects, perhaps the market would be better off. Perhaps I am wrong, but when you think about it, why do coins like Dogecoin (DOGE) have a market cap of $40+ Billion (as of June 15, 2021)? I feel the same way about hard forks that could have injected more liquidity into the original coin, but instead are diverting funds away to an offshoot. There is plenty of hype behind it, and it can be fueled by public figures who have influence (e.g. Elon Musk for Dogecoin).

After the Dogecoin hype, the Meme coin mania continues with Shiba Inu (SHIB), Safemoon (SAFEMOON), Cumrocket (CUMMIES) and more dog themed coins. At first glance many would think there is no particular utility for these coins. SHIB actually wants to help protect the Shiba Inu dog breed, so it has a specific cause. Other than that it seems like a pump and dump scheme. CUMMIES offers a crypto for adult themed entertainment. SAFEMOON claims to be a DeFi token despite its classification by some exchanges like Coinmarketcap as a Meme Coin.

Critics say that these coins lack fundamentals when it comes to money supply. If you look at Dogecoin, it has no supply limit which means that it is highly inflated. Others implement a sort of burn mechanism to deflate the supply, but the total circulating supply is already very high (in the billions). It doesn’t seem to make much sense that the circulating supply is so high, but you can buy them cheaply because they are barely 1 cent in value. Buying at such low prices appears to be a bargain but with no limit to money supply, prices just don’t really increase unless there is some scarcity or deflation.

Meme Coins do not really have any ground breaking purpose other than transfer value on a blockchain. The coins target specific use cases like causes and communities for the purpose of the coin. That already gives it a use case, but it is not like other projects that have a more serious purpose. Instead, developers of Meme Coins are doing it more for fun. They were meant to be a joke for good humor. It surely does not seem like a wise long term investment or even for storing value. It can all be lost when a big bag holder dumps the market. Then you have to wait for more people to come in with their money, but there are no guarantees that will happen.

For starters, most of these coins were copied from existing projects. Since many of the top crypto are based on open source code, it is easy to copy them and create a new crypto. Dogecoin was copied from both Bitcoin and Litecoin. Another path for Meme Coin developers is the issuance of a token using a standard like ERC-20 on the Ethereum blockchain (e.g. SHIB) or a BEP-20 token issued on Binance Smart Chain (BSC). The reason they are called a meme is because they don’t offer any specific purpose other than “going to the moon”, which is the term for making money in the cryptospace. Some Meme Coin developers offer their rationale behind their coin, but many of these talking points do not have solid proof or evidence behind the theory.

The main concern is that when these coins pump, they can as easily dump. That would leave the newcomers as the bag holders until new money pumps. It is a sort of Ponzi scheme since liquidity is determined not by utility, but from hype. Those who came late give their money to those who came early during a dump, leaving newcomers rekt (i.e. losers). The system will not be sustainable unless you have new people who put money in the coins. So far, it seems to be working and there is a reason why.

First there is a community driven market that is keeping these coins alive. Without the network effect, there would be no further liquidity in these markets. There are evangelists and shillers of each coin who propagate the benefits of putting money. These groups are all over the Internet on social media sites like Instagram, messaging apps like Telegram and video streamers on YouTube. The power of the network is exponential, and this is what has led to market caps that are in the billions. There is a belief system around most crypto, including Bitcoin, and this also helps to drive Meme Coins. A lot of the enthusiasm with DOGE was led in part by tweets from Elon Musk. Entrepreneur Mark Cuban also added to the hype by accepting DOGE as payment for his Dallas Maverick’s sports merchandise.

Second motivation is the money. Obviously, there is plenty of money to be made just by looking at the market cap of the top Meme Coins. It gives many the belief that there is a chance to become rich, and that has already happened to some people. There are reports that a Goldman Sachs executive quit their job after striking it rich with Dogecoin. There are people who will get rich, but others will lose a lot of money. Those who are mortgaging their homes or selling their cars just to get into Meme Coins should be aware of the risks from price volatility in the cryptospace. There are no guarantees with Meme Coins. It is like gambling when you place your life savings in a coin with the hopes that it will increase in future value. Always put no more than what you are willing to lose, as the saying goes.

Meme coins add a new dimension to the cryptospace. I call it distraction because of the amount of capital it has taken away from the rest of the market. There is approximately $48+ Billion (based on Coinmarketcap data in June 2021) total value in Meme Coins. Some would say that money would have been better off going into Bitcoin or Ethereum. It can be an opportunity for the wise when used as a way to earn quick money from a small amount invested. You can have a million of some of these Meme Coins for less than $20 initial investment. It does become stupidity when you decide to invest all your money into one Meme Coin. There are other coins where that money could have been yielding higher profits and earning from DeFi protocols.

In seems you cannot stop people who are motivated by community and money. Greed backed by a strong support system will keep the belief in Meme Coins alive. Some jurisdictions are taking a harsh stance on Meme Coins. Regulators may determine the momentum moving forward. The SEC in the US has the power to restrict trading in Meme Coins if they deem it to be more harm than good for investors. What could be good news is if some of these Meme Coins actually do succeed not just from new users, but in accomplishing a purpose. Dogecoin is seeing some form of development in the works. In any case, be very careful with Meme Coins. Anything is possible, but it can go either way. Do plenty of research and understand the risks involved. There is just no way of knowing what will happen.

Disclaimer: This is not financial or investment advice. The information is an opinion piece for reference purposes only. Always do your own research.

Ethereum Berlin Is Here, Next Stop Is London

The Ethereum blockchain has implemented the Berlin hard fork at block 12,244,000 this past Thursday (April 15, 2021). This was not the anticipated Optimism Rollout yet, but instead are a set of improvement proposals to help the network with gas costs and security.

Berlin was supposed to implemented in 2020, but as with most Ethereum projects it got pushed back. There were centralization concerns around the Geth client on which most Ethereum nodes operate. An important feature of Berlin is the live swapping of Ethereum from a proof-of-work to a proof-of-stake blockchain.

Other important features of Berlin are optimizations for smart contracts including gas efficiency, updates to EVM code and protection against DDOS attacks.

The upgrade implements the following:

EIP-2565, reduces gas cost for a specific transaction type that uses modular exponentiation.
EIP-2718, makes all transaction types “backwards compatible” using so-called “envelope transactions,” which allows the addition of new transaction logic into Ethereum.
EIP-2929, increases gas costs for “op code” transactions, a pain point for denial of service attacks on Ethereum in the past.
EIP-2930, a new transaction type (made possible by EIP-2718’s envelope transactions) which allows its users to create templates for future, complex transactions in a bid to lower gas costs.

The upgrades are in line with the bigger upgrade that will introduce EIP 1559 called London.