Deep Dive: Post-Merge Ethereum
White Star Capital Digital Asset Fund - newsletter #74
Quick Recap
Ethereum Merge is when the Beacon Chain (proof of stake) will merge with the current Ethereum Mainnet (proof of work). Currently, both chains run separately with Beacon Chain functioning as a staking/deposit and Mainnet as the consensus layer. Post-Merge the proof of stake Beacon Chain will function as the consensus layer.
Source: Bankless, Trent Vanepps
Our Thoughts
As we await the highly anticipated Merge, here are some important things worth noting:
There’s currently 10.5m ETH staked in the Beacon Chain, earning a respectable 4.8% ETH-denominated yield.
Once the 10.5m ETH merges with the PoW Ethereum chain, that yield will go from 4.8% to ~10-15%. That’s a 2-3x increase in returns:
A 2-3x increase in the incentive to hold ETH.
A 2-3x increase in the incentive to stake ETH.
Simultaneously, new ETH issuance will be reduced by 90%. This will most likely shift Ethereum to much lower inflationary tokenomics and potentially even push it deflationary, shrinking ETH token supply.
Currently, retail PoW miners are earning 12,000 ETH per day, and are forced to sell a significant percentage of that to cover expenses for their electricity consumption.
Post-merge, PoS validators will earn 1,280 ETH per day and have effectively no reason to sell ETH to cover operational costs. There will be an estimated 99.9% drop in Ethereum energy use!
We’re going from 12k to 1,280 ETH in daily issuance and thousands of ETH in daily sell pressure to 0.
How much more ETH will be staked as a result of the increase in yield? Where will that ETH come from, since a lot of regular selling pressure is going to dry up? What’s the price going to do as a result?
These answers are coming in ~3 months. The Merge is planned to ship on July 2022, many details will depend on the amount staked and activity on-chain. Nonetheless, this will be an extraordinary event to watch unfold that is many years in the making.
🔦 White Star & Portfolio Spotlight
Paraswap plans to partner with OlympusDAO
Paraswap is in the final stages of partnering with OlympusDAO for using their Olympus Pro service to secure protocol owned liquidity, which will reduce token inflation and boost liquidity.
Superfluid deploys to Arbitrum and Optimism
Superfluid deploys its protocol to Layer 2 scaling solutions.
Atlendis passes its smart contract audit
Atlendis completes its smart contract audit finishing a key step for launch.
🏦 Enterprises & Institutions
Payments Giant Stripe Launches Support for Crypto, NFTs
The global payments giant launched its crypto services, offering businesses the ability to use Stripe as a payment method for crypto and NFT transactions.
Music Sharing Service LimeWire Is Back - As an NFT Marketplace
The dormant peer-to-peer IP is being rebooted as a platform for music NFTs and other collectibles from musicians.
SoftBank's tech division set to launch NFT marketplace
Japan’s web3 space may soon get another major player as SoftBank’s tech arm looks to float an NFT marketplace in the spring.
Goldman Sachs Explores Offering New Options for Cryptocurrencies
Goldman Sachs Group Inc. is exploring offering over-the-counter bilateral crypto options, signaling the bank’s deepening participation in helping institutions trade digital-currency derivatives.
Warner Bros. is Creating 6 Million DC Comics Trading Cards With Redeemable NFTs
The “hybrid” card packs will be priced from $5 to $120, with buyers using an app called Hro to access their physical cards' NFTs.
PwC report calls NFTs 'the future of digital assets in sports'
The report names NFT collectibles, virtual access tokens and season ticket member NFTs as the top three trends.
Terraform Labs donates $1.1B for Luna Foundation Guard‘s reserves
Do Kwon, founder and CEO of Terraform Labs, which develops the blockchain ecosystem consisting of Terra Luna (LUNA) and the TerraUSD stablecoin (UST), announced that TFL had donated 12 million LUNA, or $1.1 billion at the time of publication to the Luna Foundation Guard (LFG).
⚖️ Government & Regulation
Standard Chartered’s crypto custodian to help clients earn yield on token holdings
Zodia is planning to launch new products to help institutional investors earn a yield on token holdings.
Binance receives green light to operate in the Kingdom of Bahrain
The crypto-asset service provider license marks Binance's first regulatory approval in the Middle East. It's reportedly looking to increase its operations in the region, including setting up a headquarters in neighboring Dubai, according to Bloomberg.
Ukraine Has Collected Millions in Crypto Donations. Here’s How It’s Being Spent
Alex Bornyakov, Deputy Minister of the Ministry of Digital Transformation, revealed details of the army supplies being purchased with crypto donations.
💰 Funding & Exits
Space Runners raises $10M to build a blockchain-backed fashion metaverse
The company will work with artists and brands to create items to bring into games. In some cases, these NFTs can be redeemed for real-life access to events or meet-and-greets with celebrities and athletes.
Ethereum Layer 2 developer StarkWare is raising funds at a $6B valuation
Ethereum Layer 2 developer StarkWare is reportedly raising at least $100 million at a valuation of $6 billion.
All three units of Sequoia join EthSign's $12M round in first such deal
EthSign has raised $12 million in a seed funding round and all three units of the Sequoia VC have backed the round.
Princeton alumni in crypto space fund $20M research project
Four Princeton alumni have pooled $20 million to fund a new research project on blockchain and the decentralization of power.
Hubble Exchange DAO has raised $3.3M to bring Perpetual Futures to Avalanche
Hubble Exchange, a decentralized platform for trading perpetual futures on Avalanche, has raised $3.3M in a strategic partnership led by Framework Ventures, an investment adviser in DeFi space.
Ramper Raises a $3M Pre-Seed Round, Led by Hashed
Ramper, the SDK/API provider for building frictionless user-onboarding solutions on web3, announced that it has raised $3M in Pre-Seed round of funding.
Katana raised $5M seed round led by Framework Ventures
The funds, raised after winning the Grand Prize at the Solana Ignition hackathon in November, will help Katana rapidly scale to become the de facto yield generation layer in DeFi.
Solana-based NFT marketplace Magic Eden raises $27M
Magic Eden, the largest NFT marketplace on the Solana blockchain, has raised $27 million in a Series A funding round. The raise was an equity funding round and will help Magic Eden focus on the blockchain gaming sector.
🚀 Project Launches & Updates
Griffin Gaming Partners Raises $750M Fund II To Invest In Game Sector
Venture capital firm Griffin Gaming Partners has raised its $750 million Fund II, focused on investing in the hot video game sector and adjacent sectors, especially in the emerging blockchain segment of the business.
Avalanche Foundation Launches Multiverse
The Avalanche Foundation has launched Avalanche Multiverse, an up to $290M (up to 4M AVAX) incentive program focused on accelerating the adoption and growth of its novel “subnet” functionality, which enables a rich ecosystem of scalable app-specific blockchains.
Venture firm Bessemer announces $250M fund for decentralized tech
The fund has a specific focus for individuals working in consumer crypto, web3 infrastructure and decentralized finance.
Okcoin, Stacks Launch $165M Pledge to Support Bitcoin-Related Projects
The Bitcoin Odyssey is a year-long pledge taken by VC firms to deploy money into solutions that accelerate the adoption of bitcoin.
🔥 Other Bits We're Excited About
Billionaire investors Alan Howard and Paul Tudor Jones are expanding their crypto bets, report says
Wall Street has been warming up to cryptocurrencies, with institutional investors trading $1.14 trillion worth of digital coins last year.
Bored Apes creator Yuga Labs acquires IP for CryptoPunks and Meebits
Yuga Labs announced that it has acquired the intellectual property rights of CryptoPunks and Meebits NFT collections from Larva Labs.
Yield Guild Games hits 20K Axie Infinity P2E scholarship milestone
Yield Guild Games now has more than 20,000 scholars earning from token farming in the Axie Infinity metaverse.