I'm not refuting it. And guarantee was a poor choice of words on my part, although the general sentiment still applies. To put it more accurately, there's a history in finance of people expecting above-market returns in a new endeavor simply by pledging their money, and the history of those scenarios usually doesn't end well. There's only so many money-for-nothing dollars to go around.

Sure, tons of things have failed and many things have succeeded as well. Rather than apply a blanket generality, why not discuss the details of this particular protocol change and why it may succeed or fail?

There are currently 119.13m ETH, this time last year there were 115m ETH. That's 4.13m created to pay miners. Those miners sold much of it to pay for electricity and maintenance. This is a 3.5% inflation rate in the last year. After the merger, since electricity will mostly no longer be used to validate transactions, the miners are out of the picture and transactions will be validated via proof of stake, issuance will be reduced to ~0.5m eth. If there was an increase in issuance, I can see your argument about sustainability and where the yield could be coming from. But in actuality, there is a huge reduction in supply, which should be much more sustainable.

And this is not money for nothing return. The return comes from holding a speculative asset in order to stake it, one which carries risks and could lose money long term.

really glad to have the kind of recent discussion we've had instead of just memes every time there's an up or downswing

I was speaking more broadly about the nature and history of investments in entirely speculative endeavors, ie those which have no connection to intrinsic value, productive assets, or real-world capital investment purpose. The factors that determine whether or not ETH's PoS is successful is, in my mind, no different than the multitude of factors that determine whether crypo investment itself will continue be profitable. To wit, when an entire investment class is based on the artifice of purported utility for a newly-imagined currency as an end to itself then who knows? It's entirely a faith and confidence-based investment schema. Trying to predict which imagined utility detail others will collectively delude themselves to believe is important to support the ongoing value of the system is like trying to predict what the next fat-finger flash crash will be.

Lol

I don't plan on selling the ETH. I plan on using it. For instance, starting more nodes, something that is impossible to do when it's locked up for 2+ more years. Not having access to ETH is strictly less value than having access to it. A case could potentially be made for BTC, but not for ETH. Not much use in beating this dead horse though because it's not like anything changes.

Randomly stumbled across this high level discussion about the merge by the UCC, Just watched the first, will watch the second one soon enough:


https://www.youtube.com/watch?v=zvODqTUAPN0


https://www.youtube.com/watch?v=8UPFwKyaQOE

Thanks for sharing.

General poll for ETH investors and crypto investors in general. What percentage of you have a software engineering background? How deeply do you understand both the cryptography fundamentals that underpin these currencies as well as the technical specifics of how each is implemented? And by understand I mean capable of whiteboarding an explanation to a software engineer well enough for him to get the gist of the implementation.

I do not have a software engineering background or understand the deep technical aspects of behind ethereum. I also do not know the engineering required to make a phone or the software background to make an app. Also no experience with the supply chain. Still feel comfortable investing in both Apple and ethereum.

Think eth dumping due to 7 block reorg on beacon chain yesterday, but haven't really been paying attention.

Thanks. I agree it's not essential, and in many respects it's as you say, not much different than not needing to understand the operational or tech intricacies of companies we invest in. How long did you research the general crypto concepts before you became comfortable in it as an investment? Akin to for example the time one might spend researching equity investments or macro ideas.

For bitcoin, I did very little research in 2013 and took a decent sized position simply because my roommate at the time was a high stakes crusher and very sharp. It dropped almost 50% in weeks and I just kept the position and didn’t look at it again for years.

In 2017, I actually spent a fair amount of time researching eth, maybe 20 hours total reading articles and watching podcasts. Again, I only had a general idea of the tech but was more enthralled with the narrative of what one day eth could be. I remember an example naval used about removing middle men, someone has excess energy stored via solar and someone else has enough solar to power during the day, but not enough at night. Rather than the guy with excess selling to the energy companies for pennies on the dollar who then sells it at huge mark ups to the guy in need. A smart contract could be used where the two parties never have to interact directly, but could meet each other’s needs in a mutually beneficial manner cutting out the middle men. It made sense to me intuitively and served a very practical need. Rather than concentrating all of the benefits to a small handful of people and companies, the benefits could be distributed more widely to common people cutting out the big guys from the picture.

Has this vision manifested into reality 5 years later? I’d say absolutely not, the main use cases so far have been ICOs, nfts and defi, which mostly were get rich quick schemes imo. Despite my views on these, I deem them critical as building blocks proving smart contracts do work and can one day transition to practical every day uses allowing the network to grow.

After my 2017 position, I added after the washout in 2018, simply because I had the same optimism and the price had been cut in half from my initial entry. I’m now actually taking a much larger position as a % of net worth as we approach the merger, as I am still optimistic long term that smart contracts will be useful for non speculation and as a result, demand for the network will grow over time. This coupled with removing of miners and energy demands, the fees can now be distributed to owners of eth, so owning eth is literally owning a % of the network and will be rewarded accordingly if the network does indeed grow.

I don’t feel the need to learn how to dig into the code on a technical level. Everything is open source and can be vetted by members of the community that do know. Additionally, weak projects and code will be exploited, so each day a project is running and doesn’t run into a bug or exploit, gives me more confidence the code is strong. There were initially millions, then tens of millions and now billions on the line for bad actors, so there has been an ongoing incentive to attack the code.

Is ETH the only position that you’re currently investing in?

Btc/eth/gold/oil and gas/uranium/long duration treasuries. Eth is the only position I’m currently adding to.

https://members.delphidigital.io/rep...de-to-ethereum

This is great. Hour long read

Fantastic and generous reply, really appreciate you taking the time to post it, thanks. I definitely see the value and utility of ETH's feature and technology. What I'm not sure about is how investing in the currency translates into an investment on the features and technology. What is the investment thesis on that? Is it simply because there's really no other vehicle to invest in the idea?

Developers build upon the ethereum platform. When users go to use these decentralized apps(so far think nft, defi), eth the coin is required to make transactions. As more is built upon the platform, more demand for eth driving up the price. Additionally, proof of stake makes eth the coin required to stake in nodes to validate transactions. The reward for buying eth the coin and staking will be fees generated from users transacting. So demand will come from these two sources, useful things built upon the platform and users needing eth to use it, coupled with eth being required to validate the transactions staked in nodes to earn yield.

We are in the days of early stage internet. If eth follows the same pattern, extremely useful things for people are built on it like Amazon, netflix etc are eventually built, the network will grow and demand will too. If it’s just garbage like the speculative get rich quick stuff like nft, the network will die and the demand for eth will too.

The way to bet on a fruitful ecosystem in 10 years will be either buying eth the coin to bet on the network or trying to find crypto’s equivalent of Amazon. I’m not opposed to the latter, but it will have to be something I would personally want to use or interact with on a day to day basis and I don’t think that’s been built yet. For that reason, the much simpler, but still very speculative bet, would be buying eth and validating network transactions and hoping the network grows and alongside it, demand.

Thanks again. Is there any concern that the expected ETH price appreciation from new uses/applications that expand demand for the platform will ultimately make it uneconomical to use it as a platform? The analog I can think of is if credit-card swipe fees were the investment vehicle for credit-card technology and those fees kept increasing as more people use them. That seems untenable to me but perhaps I'm missing something.

I don’t think so. Bitcoins demand has grown every year and fees are still very reasonable in usd terms. More transactions are made, less and less btc is rewarded per transaction, while remaining in a reasonable range in usd. So if eth demand grows and price 10x, I don’t expect it to be a hindrance. The staking rewards can still be maintained if adoption grows because more transactions are being made and fees will be much smaller in eth terms and either the same(and hopefully less) in usd terms.

I'll keep BTC separate since it's not really designed to scale for wide-spread adoption for transactions in its current form. What about the opposite potential issue for ETH, where smaller rewards from larger adoption/scale will make it less economical/profitable to run on an individual miner/pledger basis?

The yield is determined by supply and demand. The more eth staked, the lower the yield will be, when fewer eth are staked, the more the yield will be. For reference, when proof of stake first began being tested at the beginning of 2021, my staked eth was getting about .5 eth a week. The same amount over a year later, is now netting .23 a week, less than half the original amount because a lot more eth are staked now vs then. Once eth 2.0 is launched and operational, people will be able to unstake as well, so yields will be a lot more variable depending on #of eth staked at any given time.

There is virtually no cost, as electricity isn’t required to mine like under the current proof of work structure. There will be a 99.5% energy requirement reduction moving forward. Removing the energy requirement allows for less inflation(less rewards distributed to pay for electricity) which dilutes existing holders at a much slower pace and a small portion of the rewards previously going to miners now goes directly to those staking and validating transactions on the network.

if i'm lazy and i leave coins on an exchange when the merge happens and it forks into POW vs POS, you think they'll eventually show both coins on my account?

Only one coin will win, the other will be abandoned. This is not a contentious fork like btc/bch, there will only be one recognized chain with value.

My 1700 bid hit. 1600 and 1500 next bids.