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Magnify #2 — The Burning Ethereum

Mohak Agarwal
• 3 min read
The Burning Ethereum - Magnify #2

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The Long-Short

The London Hard Fork went live a few hours ago, and already over 4000 ETH has been burnt. Uniswap (both v2 and v3) is one of the leading players and has burned over 360 ETH so far. At this pace, Uniswap alone could burn over a billion dollars worth of ETH in one year.

If we examine EIP 1559, the burn mechanism negatively incentivizes the miners. But why are people not talking about it? Because the long-term effect of ETH being a deflationary asset outperforms the immediate gains. Post “The merge,” ETH will truly be ultrasound money. If you’re looking to learn more about EIP-1559, here’s a thread I wrote some time ago.

Not everyone is happy about EIP 1559, though. In particular, US senator Elizabeth Warren called it out with her POV, “The Ethereum network is now burning ether. Such reckless disregard for climate change needs to be stopped.” It’s not the first anti-crypto comment from the senator. In fact, she is the originator of the famous Shadowy SuperCoder meme. BTW, we’re looking for shadowy super coders- know anyone?

Regulation is in the air.

While some countries like China are tightening their noose around crypto, others like Uraguay look to adopting it as legal tender. At the moment, all eyes are on the USA, which has been looking at the industry through a magnifying glass. Look at the infrastructure bill, for example. The original draft sought to collect ~$28 billion by taxing “any person who (for consideration) is responsible for and regularly provides and services effectuating transfers of digital assets.”

But over the past few days, the bill has been continuously amended. On Wednesday, Senators expected PoW, crypto validators, devs, and wallet creators. However, on Thursday, rival Senators proposed an exemption to PoW miners and hardware/software wallets. The final vote is to go on Saturday, and we can only hope the bill does not cripple PoS and attack DeFi. Isn’t the ambiguity of all this unsettling? Hold that thought because there’s more.

Crypto users hinged their hopes about a better world for crypto on the savvy professor turned SEC chairman, Gary Gensler. However, in a recent interview with CNBC, his remarks about cryptocurrencies have left many confused. Before becoming the SEC chairman, his stance on the industry was never overtly pro or against.

But, that has become clearer now as he starts unpacking his ideas, such as — classifying cryptocurrencies as unregulated securities and exposing their role in facilitating crime. His praise for bitcoin’s role in shaping a “new form of money” is noteworthy, but so is his underlying emphasis on the need to protect consumers from fraud and manipulation. He has also highlighted that stablecoins have the potential to “sidestep” national security goals.

The stance taken by the regulatory authorities in the US is exceedingly confusing, to say the least. While the ambiguous regulatory clouds over the ecosystem have always been there, we are yet to see a clear direction from the authorities. Does the future look good? I’m a bit sceptical.

In other news…umm…I’m a bit nervous about calling it “other news” because of the surrounding frenzy around NFTs. If you look at ETH burn, you’ll see that in the last 24 hours, 3 out of the top 5 ETH burning platforms are NFT related products. The space has drawn the attention of various types of investors. On the one hand, we have crypto natives like Three Arrows Capital that are on a shopping spree, raising floor prices for CryptoPunks, Auto Glyphs, and Art Blocks. On the other hand, we have enthusiasts like Gary Vee, who are bidding on punks.

Do you think this frenzy is short-lived? Or the demand for NFTs will have a cyclic effect and pump the prices (and popularity) even further? Let me know.

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