September 16, 2022       /       Unchained Daily       /       Laura Shin

Daily Bits✍✍✍

  • South Korean authorities seek to void Do Kwon’s passport.
  • Sam Bankman-Fried’s FTX is in the lead to acquire the assets of bankrupt crypto lender Voyager Digital.
  • Following the Merge, environmentalists are pressuring the BTC community to change its code and reduce carbon emissions.
  • Decentralized exchange aggregator 1inch (Disclosure: sponsor of Unchained) warned of a potential exploit related to Profanity-generated addresses.
  • The U.S. Treasury sanctioned addresses tied to a neo-Nazi Russian group.
  • Author Nassim Taleb called Bitcoin a “tumor” in an interview with CNBC.

Today in Crypto Adoption…

  • Guild of Guardians, a mobile game, will introduce playable NFT characters based on eight esports teams.

The $$$ Corner…

  • Ex-Citadel Securities executives raised $50 million for crypto market maker Portofino Technologies.
  • Binance Labs, the company’s VC arm, doubled down on Aptos investment ahead of its launch.
  • Token management platform Magna closed a $15 million funding round.

What Do You Meme?

What’s Poppin’?

The Merge Impact: Is ETH a Security? WTF Is EthereumFair?

by Juan Aranovich

 

Yesterday, Ethereum activated the Merge and successfully transitioned to the proof of stake consensus mechanism, which triggered a cascade of events within the industry.

First, SEC Chair Gary Gensler signaled that Ethereum’s change to proof of stake could make it a security. Even though he didn’t mention ether explicitly, he said that cryptos that allow users to stake the tokens might not pass the Howey test, which determines whether an investment is a security or not.

This might mean more compliance responsibilities for Ethereum and other proof of stake blockchains like Solana and Cosmos. For instance, issuers of securities have to register with the SEC, and exchanges that offer securities have to comply with rigorous rules which are supposedly designed to protect investors.

However, Gensler’s views may not prevail. During a hearing held by the Senate Banking Committee, Republican Senator Pat Toomey criticized Gensler for the SEC’s job on crypto, and said he disagrees that almost every token is a security. “Gary Gensler owes us much more clarity on how and why he intends to apply SEC regulations,” said Sen. Toomey.

The markets also reacted negatively to the Merge, with the price of ether plummeting as much as 11%, hitting a low of $1,463. “Alright I’ve got a solution to stop the dumping. We do eth3,” joked Anthony Sassano, host of the Daily Gwei.

Within hours after the Merge happened, the ETHPoW team released the Mainnet information of the fork, including the RPC, the ChainID, and the currency symbol (ETHW).

However, crypto exchange Poloniex decided to support a different fork of the chain: EthereumFair, which wasn’t even on the map 24 hours ago, but is supposedly supported by “the community’s majority.” On today’s show, Justin Drake warned users about the risks of using these forks.

In addition, in the following hours after the Merge, other proof of work coins like ETC and Ravencoin experienced a massive hash rate increase.

One of the main concerns about the transition to proof of stake was the issue of centralization. Martin Köppelmann, co-founder of infrastructure firm Gnosis, highlighted that, of the first 1,000 blocks, more than 40% of the network’s blocks were added by only two entities: Lido, with 27.5%, and Coinbase, with 14.5%. “No, dear Bitcoin fans, it is not better in Bitcoin. In fact you need only 4 entities to come to >72%,” added Köppelmann.

Recommended Reads

  1. A guide on the Merge by Dan Chen from Sequoia Capital
  2. korpi on ETH issuance and burn
  3. Peter Van Valkenburgh on the regulatory impact of the Merge

On The Pod…

Did the Merge Make Ethereum'the Most Secure Blockchain in the World'? - Ep. 397

Justin Drake, researcher at the Ethereum Foundation, talks about the Merge, how this transition affects Bitcoin, where Ethereum’s road map is going, and more. Show highlights:

  • how Justin was feeling prior to and during the Merge
  • whether the upgrade is complete or there are other things to watch out for
  • why Ethereum has slashing and why it is a better form of removing any attackers
  • the concern about centralization due to liquid staking derivatives providers, like Lido or Coinbase
  • how the Merge affects MEV and the long-term vision of proposer-builder separation
  • whether the Merge puts pressure on BTC to also transition to proof of stake
  • what impact ETH’s more deflationary nature will have on BTC’s narrative as digital gold
  • why Ethereum is the settlement layer for the internet of value
  • whether there is a winner take all dynamic in the blockchain industry
  • why Ethereum is more secure than Bitcoin, according to Justin
  • what Justin thinks about the ETHPoW fork and its team and the risks of interacting with it
  • the next steps in Ethereum’s roadmap

Book Update

My book, The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze, which is all about Ethereum and the 2017 ICO mania, is now available!

You can purchase it here: http://bit.ly/cryptopians