The Tribal Dive Series #2
What’s up, Tribers? In our 2nd newsletter series, we will be covering the following topics
- DeFi
- Inflation
- Arthur Hayes’s take on the ETH merge
- Commentary from our Crypto Research Analyst Alexander Hernandez
Let’s Dive in
Imagine receiving an email saying the following “Funds are not immediately at risk, but this is a developing situation.” Scary right?! Compound a DeFi project, found a bug shortly after a protocol lending upgrade was executed. This bug reverted transactions for ETH suppliers and borrowers, leaving the platform with -$830 million cETH. Compound has a fully decentralized governance process that requires a proposal to be presented and passed in order to revert to the previous price feed. It’s a 7-day process, 2 days for proposal creation, 3 days of active voting, and 2 days of time lock. As of last week, the proposal to revert to the previous code was successfully passed.
As scary as it may be, a DeFi governance implementation in a protocol usually works out. In this case, it was a no-brainer for the Compound community to vote in favor of reverting. If you’re heavily involved in DeFi it may be worth learning how to read audit reports to fully understand the security risks before deploying cash into protocols. We’re happy to report that the Compound chain is SAFU as CZ from Binance would say. Learn more about this in the article below
Now, let’s talk about Inflation. It has been the main topic of discussion for 2022. It has impacted our lives in some way, shape, or form. Many experts believe that the worse is yet to come, and some believe that we’re near the peak of inflation. All I know is, the CPI report came out yesterday, and all markets collapsed. We’re seeing energy cost at an all-time high, the cost of food skyrocketing, and mortgage rates doubling from last year. Some experts are hinting at Hyperinflation being a potential in developed countries. Maybe not; in my opinion, I would expect drastic tax reforms to combat that before we see that in the developed nations. In addition, Central Banks are also increasing interest rates which should help to reduce inflation. It may be worthwhile understanding how Hyper Inflation works. Below are some new and old articles covering inflation and hyperinflation.
https://www.businessinsider.com/worst-hyperinflation-episodes-in-history-2013-9
https://www.weforum.org/agenda/2022/06/hyperinflation-inflation-interest-rate/
Arthur Hayes — founder of BitMex, believes that the “deflationary model” for ETH, post-merge is unnecessary from a macro perspective. In a recent interview, Arthur Hayes said that the network activity must be significant enough to impact price. Arthur also believes that the focus for the ETH Merge should be on reducing inflation instead. In his interview, he says that Ethereum is undervalued, and post Merge, he predicts 75% upwards from the current price. Arthur Hayes has a reputation for being pretty spot on with his prediction. Do you agree?
More details could be found here Source: https://beincrypto.com/arthur-hayes-ethereum-doesnt-need-deflationary-post-merge/
Lastly, I chatted with Alexander, our Crypto Research analyst, about the Ethereum Merge and this is what he had to say.
“The Ethereum merge will indeed accelerate the transaction time, as well as improve numerous aspects of the ecosystem, such as scalability, and processing speeds.. What I find concerning is the centralization methods that have been recently implemented by the Ethereum Validators. After some weeks of intense sanctions like the Tornado Cash case, protests in the crypto community erupted. This resulted in Ethereum validators indirectly cooperation with the US treasury. The principal benefit of the Merge will be to reduce the energy cost of the Ethereum network. Improvements to transaction speed will be very small: https://www.coindesk.com/tech/2022/09/07/ethereum-merge-what-you-need-to-know/. As a result, all the people that have participated directly or indirectly with the tornado cash network can be accused of evading the sanctions set by the U.S. Treasury. By giving validation power to ETH whales, the Ethereum merge could lead to more centralization. The censorship made by the Ethereum validators of the Tornado Cash protocol raised a red flag, in my opinion, and does not represent true decentralization. To prevent the censorship on the futures transaction on the Ethereum merge, It is essential to preserve the nature of decentralization in all aspects of Ethereum.”
That’s all that we have for the Dive this week! Until next time Tribers.
DISCLAIMER: The views and opinions expressed herein are those of the speakers and do not necessarily reflect the views or positions of any entities they represent. The information provided in this newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice, and you should not treat any of the newsletter’s content as such. Do conduct your due diligence and consult your financial advisor before making any investment decisions.
