And other things (what are we getting staking rewards for)
So it happened. Mainnet went live! Protein folding on Monday, Ethereum 2.0 on Tuesday, Wednesday saw researchers announcing hydrogen-producing living droplets, paving the way for alternative energy sources, Thursday was feeling the pressure …
Lift Off Successful
We watched lift off and were delighted to see in the first few hours our customers’ nodes on beaconch.in and beaconscan attesting and earning enough money to buy a Mars bar and a pack of Hula Hoops (crisps/potato chips popular in the UK).
More hyperbole about how amazing and what a big deal it was is not useful, so I will move on. However, to all of you who participated in it – Well done, your kids will be proud of you.
(What are we getting staking rewards for)
This is a question that does not get much attention, beyond a stock response of, “securing the network” and “validating = updating everyone’s copy of the blockchain”. Why? Because as the new “miners”, why do we care, we put on hats and dig the new digital coal.
I care, I care a lot about what Ethereum ends up being used for, and the positive global change that can drive. This is why decentralised finance is so interesting. DeFi in the form of Compound and Aave and others have essentially brought synthetic financial instruments to the consumer. Previously a money market was something that only a specialist team at a bank would use or have direct experience of. Through decentralised finance, Unilever, my dry cleaner and possibly my kids with their grandma’s birthday money can use a money market to generate a variable return.
I know it’s not cool to ask, but what is the societal value of synthetic instruments and layer upon layer of financial abstractions that Ethereum is making possible for the masses? Is it to do what structured credit desks did in 2005-2008, effectively managing risk by slicing and dicing it and distributing it accordingly? Oh no, wait, that turned out to be bullshit!
By democratising these tools and instruments, the value to society we hope to create is a debate we need to engage in. Is a quick buck through some new NFT as a reward for securitisation just cool and a new way to make money / seek rents. Or actually is the progress that there is no structured credit desk any more and that boys, girls and gender neutral human life can make some money from Lagos to Basingstoke, and that is enough? I do not know, but not asking the question would be a missed opportunity to improve our world.
What Lies Ahead?
My view was that Ethereum as an economically incentivised network now creates an incentive for utility platforms like social networks, email and cloud based data storage, to move away from Gmail and Facebook, or for these platforms to pay us for data and our time.
ETH2.0 means the new iterations of these platforms can find a way to pay users hard digital cash in the form of ETH2.0 through complex 3rd order staking derivatives or just a straightup Facebook token that you get for every hour you spend on the platform.
However, as we learnt previously, I am often wrong and I prefer design to be emergent rather than done big and upfront. So what actually happens is likely to be far less linear than simply a Facebook token that pays you for your eyeball time, or a migration of the swaps market onto Ethereum.
Price ≠ Value
Ethereum is a massive driver for economic and political change, I am not equipped to describe exactly how that looks, but to those of you staking today, keep scouring the news for the next thing that moves to Ethereum (Visa, Finality and all the others). Understand that this is where our returns come from, and why the price of Ethereum whilst variable, is likely to rise. Mark Carney, the former governor of the Bank of England reminded me this week that the price of something is not its value. 563 USD per unit is the price of Ethereum as I type, but it is not the value of what we did last week.