Kiln, and Financial Weapons of Mass destruction


On the cusp of Kiln going live we saw the 10M staked line being crossed this past week.

At the time of writing headline data points for staking ETH looks like this

10,543,433 ETH Total ETH Staked

Total validators


Current APR


Just for fun and to respect the persistence of numbers I predict the number of validators will double by the end of next year. Interest rate rises and world war 3 mean an Ethereum price below $2k is possible even if Kiln leads happily to a fully merged Ethereum consensus layer. The contradiction of us all being Ukranian now and being predisposed to look on the good side, I see this as an opportunity for more people to participate and stake and own ETH, before the inexorable rise past $10k per ETH post-merge. I hope you are enjoying my reckless use of numbers that will be rubbed in my face like face pies in 12 months when they turn out to be wrong. I also feel I can promise you that in the long run as you have experienced in the short run, as customers you are most likely going to make a boatload of money staking ETH notwithstanding nuclear strikes that mean you will find it harder to spend it.

Ethereum’s merge is a further brick in a new financial order, as that brick is about to be laid, it is worth considering some financial history.

(FWMD) Financial weapons of mass destruction

In 1998 the collapse of a hedge fund called Long term capital management was meshed with a financial crash in emerging markets, requiring the hedge fund to be bailed out by the Fed due to the systemic risk it presented. It might or might not be fair to argue that this is how the financial markets, specifically the banks realized the best way to ensure you can’t lose is to be so big the consequence of your failure = system failure. Less controversially the “flight to quality or safety” lesson was learned by emerging markets who never wanted to be left with their pants down again and who then started building dollar/euro reserves so that a run on their economies was harder by the time we got round to 2008 where the fraud that is hyper financialised capitalism was exposed and Bitcoin was born.

At the other end of history, paper bills were first used by the Chinese, who started carrying folding money during the Tang Dynasty (A.D. 618-907) — mostly in the form of privately issued bills of credit or exchange notes — and used it for more than 500 years before the practice began to catch on in Europe in the 17th century. While it took another century or two for paper money to spread to the rest of the world, China was already going through a fairly advanced financial crisis: the production of paper notes had grown until their value plummeted, prompting inflation to soar. As a result, China eliminated paper money entirely in 1455 and wouldn’t adopt it again for several hundred years. Another not-so-well-known fact: the word cash was originally used to describe the type of round bronze coins with square holes commonly used in the Tang Dynasty, called kai-yuans.

So what is my point? Simply that money in both instances is a weapon. Almost bio-logical in nature in the way that individuals holding it in order to maintain value wreak unintended destruction, I would go on to argue that the virus gets realized in the context of a political framework that tolerates even thrives under its persistence.

Illegally invading Ukraine and murdering its civilian population for no reason, needs a response. To be clear it requires all the responses we can muster whilst avoiding an escalation that starts WW3. But Lional Barber’s recent spectator article warns us to not pretend or delude ourselves and to that end maybe we need to accept WW3 has started and we need to stop it not prevent it from happening.

Crypto theory which I broadly subscribe to is that “a technology innovation in the form of a shared database allows a new reality where one can have a monetary system that is not as easily manipulated by nation-states and that has end to end transparency through transaction history,” does not provide the functionality of violence that is needed to resist Russia’s invasion. So while Kraken and Binance might be used by both sides of this fight, it is not credible for their CEOs to say that crypto’s innovation is in jeopardy by them freezing Russian Oligarchs accounts, this is a unique and rare fight, between good and bad, they need to take a stand not simply promise to be there after the nuclear winter finishes, citing modern monetary crypto theory.

On Wednesday Russia needs to cough up repayments on $38.5bn of foreign-currency bonds, of which roughly $20bn are owned by overseas investors. The history of the virus called money whose delivery mechanism is finance is littered with examples of how unexpected second-order effects from widely anticipated events still ended up causing broader calamities. . That we have not mitigated the calamity that is the destruction of Ukraine shames us all.

Happy Staking!

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