Ethereum

System

This discussion was created from comments split from: BITCOIN.

aaj123

Those who are more comfortable with a yield bearing asset should also take a look at ETH, particularly with the last remaining friction in the yield process set to be removed in April.

https://finance.yahoo.com/news/ethereum-shanghai-hard-fork-now-141746406.html

Yield is already available though it involved locking up your ETH. With the above upgrade, staked ETH can be unstaked and withdrawn which will make this yield more attractive to many market participants. On top of this, despite the protocol issuing this yield, ETH as a whole has a contracting supply due to fee burn:

https://ultrasound.money/

And be aware that ETH via its PoS mechanism has minimal environmental impact so may be considered as an ESG asset. All cryptos are not the same, this is to point out that.

Frequentlyhere

Whilst I don't invest in it, I do like the sound of ETH far more than BTC because of the willingness/ability to transfer from PoW to PoS. It's now at least not as bad for the environment, and it's more plausible that further changes could take place to enhance utility, whereas BTC seems frozen in kryptonite.

Re: yield, I looked at the site but couldn't see further information. Where does the yield come from?  How much is it? Who would you be handing your investment over to earn it?

aaj123

Frequentlyhere said:

Whilst I don't invest in it, I do like the sound of ETH far more than BTC because of the willingness/ability to transfer from PoW to PoS. It's now at least not as bad for the environment, and it's more plausible that further changes could take place to enhance utility, whereas BTC seems frozen in kryptonite.

Re: yield, I looked at the site but couldn't see further information. Where does the yield come from?  How much is it? Who would you be handing your investment over to earn it?

It is a rather new concept to anyone unfamiliar with it but you can find info here:
https://ethereum.org/en/staking/

In its purest form, it is NOT lending your funds to anyone (hence no such thing as cpty risk). Staking is the act of putting up your funds in the protocol and accepting responsibility of validating and voting for transactions. You are rewarded by the network (via new issuance) for doing this correctly and there are penalties from the network for not doing so. For malicious behavior, there is even harsher penalties called slashing. There are multiple ways to stake - each with their pros and cons which the above link will explain. Right now, its easy to get a yield of around 4.5 to 5.5% using fairly convenient and non-technical procedures.

The interesting thing about ETH which cannot just be copied by any other coin is that gas fees that are involved in transactions on the network get burnt i.e removed permanently from the supply. It is only because ETH has gained sufficient traction that this burn is substantial enough to offset the newly issued staking rewards and thus causing overall supply to be in a downtrend.

aaj123

Let's pick up ETH in particular now. Crypto skeptics like to often use the 'negative sum game' and 'no revenue' argument to say why coins should have no fundamental value. While there are several arguments against these fallacies which are part of the debate on the Bitcoin thread, these points fall apart even more explicitly for ETH.

1. ETH does have gas fees being paid by users of the network that is more than a magnitude in fiat value than that paid on the Bitcoin network and these fees are burnt (meaning this supply removed from circulation). In effect, this means this revenue is accruing to holders of ETH by making their holding further scarce. So there are 'paying customers' akin to how customers in a restaurant pay for food.

2. On the ETH network, the supply burnt in above manner is greater than the new issuance that is created for paying stakrs (who secure the network via validators). So you could then say revenue exceeds cost and hence ETH supply has a downward tend.

3. ETH is almost negligible in environmental footprint due to using a Proof of Stake mechanism as opposed to PoW. None of the emissions criticism applies.

4. As an ETH holder, if you stake your coins (a process involving zero cpty risk - though see my earlier post above), you can get an annual yield of around 4 to 5% and that's not counting the supply decrease that makes the real yield about 0.3% higher.

Now what are the crypto skeptic arguments against ETH in light of the above?

All data to support above can be seen at https://ultrasound.money/

Fees burnt in last 24 hours = 3178 ETH ~ $5.5 million
This is 1.7x the new issuance of ETH created in last 24 hours

Malthusian

1. If I take a slice of punters' money in, relabel it "transaction fees" or "gas" and distribute it to other punters, punters' money in > punters' money out. Words are magic.

Not only that, but the more they pay for the privilege of shuffling their tokens around (which accrues proportionally to the biggest existing holders of ETH, i.e. early entrants), the more of a positive sum game it is, apparently. 

2. Suppose I take £1,000 from poker players and convert them into £1,000 of poker chips, which are put on the gaming table. The £1,000 in GBP is kept in the bank to pay players out. Every 100 poker chips buys £100 of GBP. Now imagine I take 100 of the poker chips and set them on fire. What happens? "Nothing, because the reduced number of chips is still chasing the same amount of money. Once everyone has stood up, the players still have £1,000 in total minus any tournament fees." Wrong! Now every 100 poker chips buys £111 of GBP. So value has been created out of nowhere. Few understand.

3. Also, my oven works on renewable energy, so not only have I created an 11% ROI out of absolutely nothing, this absolutely nothing is environmentally friendly.

4. An annual yield in funbucks a whole percentage point higher than I can get actually risk-free in real money? Shut up and take my poker chips.

DannyCarey

Ethereum is a pyramid scheme benefitting only those at the top, such as Vitalik and his VC backers. It is a mess.

It is also not actually decentralised
The SEC have also hinted they are about to deem it and almost all other "alt coins" as an illegal security. 

The only one that has any chance is Bitcoin.

- No head changing rules on a whim (and forcing others to comply or else they lose their "staking payouts" - LOL)
- Bitcoin is actually decentralised
- ETH is decentralised in name only - most of it is ran off AWS

aaj123

Malthusian said:

1. If I take a slice of punters' money in, relabel it "transaction fees" or "gas" and distribute it to other punters, punters' money in > punters' money out. Words are magic.

Not only that, but the more they pay for the privilege of shuffling their tokens around (which accrues proportionally to the biggest existing holders of ETH, i.e. early entrants), the more of a positive sum game it is, apparently. 

2. Suppose I take £1,000 from poker players and convert them into £1,000 of poker chips, which are put on the gaming table. The £1,000 in GBP is kept in the bank to pay players out. Every 100 poker chips buys £100 of GBP. Now imagine I take 100 of the poker chips and set them on fire. What happens? "Nothing, because the reduced number of chips is still chasing the same amount of money. Once everyone has stood up, the players still have £1,000 in total minus any tournament fees." Wrong! Now every 100 poker chips buys £111 of GBP. So value has been created out of nowhere. Few understand.

3. Also, my oven works on renewable energy, so not only have I created an 11% ROI out of absolutely nothing, this absolutely nothing is environmentally friendly.

4. An annual yield in funbucks a whole percentage point higher than I can get actually risk-free in real money? Shut up and take my poker chips.

I guess all the above demonstrates the coping mechanism that crypto skeptics employ. When original arguments don't work as-is, just change the satirical words to come with something that retains abilities to cope. Few indeed understand. 

Also 'Real money' that you refer to is paper where the BoE guarantees to pay you the same value of paper. Lol. So real indeed.

Lets also pick your point 2. Your say 'Imagine I take 100 poker chips and burn them'. Now I imagined this and also saw that your punters gave you a thorough tongue lashing for stealing their chips and promised never to use your casino again. Why wouldn't they if you can just willy-nilly take their chips and burn them. Now if only you could come up with some benefit to the holders of the chips that make them willing to burn some chips off their own accord. Wait..that's what ETH does through value add. But again 'Few understand'.

aaj123

DannyCarey said:

Ethereum is a pyramid scheme benefitting only those at the top, such as Vitalik and his VC backers. It is a mess.

It is also not actually decentralised
The SEC have also hinted they are about to deem it and almost all other "alt coins" as an illegal security. 

The only one that has any chance is Bitcoin.

- No head changing rules on a whim (and forcing others to comply or else they lose their "staking payouts" - LOL)
- Bitcoin is actually decentralised
- ETH is decentralised in name only - most of it is ran off AWS

I did have that view pre-Merge but not so sure now so I am spread into both, though about 3:1 in favour of bitcoin. They both are Schelling points to different degrees. Yield, supply downtrend and esg in favour of eth. Centralisation you are right. 

Frequentlyhere

aaj123 said:

Malthusian said:

1. If I take a slice of punters' money in, relabel it "transaction fees" or "gas" and distribute it to other punters, punters' money in > punters' money out. Words are magic.

Not only that, but the more they pay for the privilege of shuffling their tokens around (which accrues proportionally to the biggest existing holders of ETH, i.e. early entrants), the more of a positive sum game it is, apparently. .

I guess all the above demonstrates the coping mechanism that crypto skeptics employ. When original arguments don't work as-is, just change the satirical words to come with something that retains abilities to cope. Few indeed understand. 

Also 'Real money' that you refer to is paper where the BoE guarantees to pay you the same value of paper. Lol. So real indeed.

You say that, but genuinely what did he actually say that he was wrong?

Can you explain how it's anything other than fundamentally 'punters money goes in and punters money comes out again (albeit quite possibly to different punters)?'

aaj123

Frequentlyhere said:

aaj123 said:

Malthusian said:

1. If I take a slice of punters' money in, relabel it "transaction fees" or "gas" and distribute it to other punters, punters' money in > punters' money out. Words are magic.

Not only that, but the more they pay for the privilege of shuffling their tokens around (which accrues proportionally to the biggest existing holders of ETH, i.e. early entrants), the more of a positive sum game it is, apparently. .

I guess all the above demonstrates the coping mechanism that crypto skeptics employ. When original arguments don't work as-is, just change the satirical words to come with something that retains abilities to cope. Few indeed understand. 

Also 'Real money' that you refer to is paper where the BoE guarantees to pay you the same value of paper. Lol. So real indeed.

You say that, but genuinely what did he actually say that he was wrong?

Can you explain how it's anything other than fundamentally 'punters money goes in and punters money comes out again (albeit quite possibly to different punters)?'

Do you consider gold to be in the same category or do you see it different only because of the jewellery and electronics use cases? Do you know that these use cases alone wouldn't justify even 10% of the overall value of gold as it stands. So do you describe the gold market too as 'punters money in and out'?

Most gold just sits idle in safes and vaults (a lot of them are ones owned by central banks). And all this valuation despite the drawback of the cost of storing gold and the inability to transact in physical gold (I mean sure you can transact in paper gold but that is then trusting third parties and paper gold cannot even assure you of true supply.).