AB Moonletter🚀 #4💎

...a newsletter from the moon...

Apr 28, 2023

The AB Newsletter is for informational purposes only. Do not construe any of the following as investment, financial, or other advice. You make your own decisions.

The AB Moonletter🚀 is a culmination of research & perspectives from the diverse minds of the AB Team. Ultimately our focus & mission is financial freedom. Letter #4💎 includes:

Highlights:

Ethereum Update - Technology & Development Highlights
NFTs as a Feature, Not the Product
Traditional Finance (TradFi): Macro & Regulations
Altcoins: Buys & Watchlist

1. Ethereum Update: Technology & Development Highlights

Key metrics on Ethereum / ETH staking withdrawals post Shapella:

18.9M+ ETH locked (including rewards)
650K+ ETH waiting to withdraw
Kraken is the largest withdraw entity (Followed by Lido, Coinbase, Binance)
Lido continues to grow market share on LSD (Liquid Staking Derivative) Market
5M+ staked ETH realized value (last moved on chain) between $1.5K–$2K
Uniswap, XEN Torrent, ETH Transfers, Tether USDT, and Arbitrum are top Gas Guzzlers
- 100K+ ETH burned since The Merge
Ethereum Mastering MVRV ratio (report and video explainer on MVRV) from the brilliant minds at Glassnode
- Our Takeaway - buy in blue/green, accumulate in yellow, sell in orange/red

Above chart & below description from GlassnodeStudio

“MVRV is short for Market Value (MV) to Realized Value (RV), and is the ratio between Price, and the Realized Price. Since the Realized Price is the average price at which every coin last moved on-chain, MVRV can be thought of as a measure of 'Unrealized Profit' held within the supply.

A MVRV of 2.2 means - Price is 2.2x the Realized Price (120% Profit)
A MVRV of 1.0 means - Price is equal to the Realized (Break-Even)
A MVRV of 0.8 means - Price is 0.8x the Realized Price (-20% Loss)
High MVRV Values (> 2.4) ↗️ indicate the market holds large unrealized profits
Low MVRV Values (< 1.0) ↘️ indicate the market holds unrealized losses”

Glassnode Dashbord requires a paid subscription to view their full data dashboards. Free however is their awesome youtube, which frequently showcases their private research. We find both extremely valuable. Thanks Glassnode.

Ethereum Scalability and Application (Client) Diversity

Our friends at a16z announced Magi, a rollup client for Optimism. This brings us to the important subject scalability and decentralization. Just as Ethereum has numerous client implementations, it is important for scaling solutions (like rollups, L2s) to have diverse client implementations as well.

What is an Ethereum client? Great question.

“Ethereum is a distributed network of computers (known as nodes) running software that can verify blocks and transaction data. The software application, known as a client, must be run on your computer to turn it into an Ethereum node.” - Ethereum Foundation.

For the Boomers - If email is the technology, AOL was the first major client.
For the Zoomers - If viral video distribution is the technology, TikTok has become an extremely powerful client.
For the Doom & Gloomers - Look out . . . the sky is falling! Gotcha 😹

Due of the growing importance of client diversity, we asked our AB Cyborg (AB+ChatGPT) to provide a concise explainer. Yes… we feed him oil.

Author: AB Cyborg

Having multiple client implementations for blockchains, including Layer 1 (L1) and Layer 2 (L2) solutions, offers several benefits:

Decentralization and Security: Multiple client implementations enhance the decentralization of the network by reducing the reliance on a single implementation. This distributes power and control among different development teams and mitigates the risks associated with a single point of failure. It also improves the overall security of the blockchain network, as vulnerabilities or bugs specific to one implementation are less likely to affect the entire network.
Robustness and Resilience: If one client implementation encounters issues or experiences downtime, having alternative implementations ensures the continuity of the blockchain network's operation. This redundancy makes the network more robust and resilient, minimizing the impact of software bugs, security breaches, or other technical difficulties.
Innovation and Competition: Multiple client implementations foster innovation and healthy competition within the ecosystem. Different development teams can explore diverse approaches, experiment with new features, and propose optimizations specific to their implementation. This competitive environment encourages constant improvement and drives the evolution of blockchain technology.
Choice and Flexibility: Having multiple client implementations provides users, developers, and businesses with more choices and flexibility. It allows them to select the implementation that best suits their specific needs, taking into consideration factors such as performance, feature sets, security models, and developer support. This freedom of choice empowers participants to align their strategies with their unique requirements.
Interoperability: Multiple client implementations facilitate interoperability across different systems and applications. By adhering to standardized protocols and specifications, different implementations can communicate and interact seamlessly, enabling a wider range of use cases and facilitating the integration of blockchain technology into various domains.

For Ethereum and Optimism's Layer 2 solution specifically, having multiple client implementations promotes a more decentralized and secure ecosystem, ensures the continuity of operations in the event of issues, drives innovation and competition, offers flexibility for users and developers, and facilitates interoperability with other Ethereum-based systems.”

2. NFTs as a Feature, Not the Product

Author: UEV God (User Extractable Value)

I recently minted a Fini after seeing a tweet thread by the team over at Rainbow Wallet. This isn’t the first NFT series for the Rainbow Team, not too long ago they were able to attract 100K+ wallets on their first NFT (Rainbow Zorb). The idea is with every NFT you mint using your account on Rainbow Wallet, the more features you can unlock. So the Zorb NFT gives users the ability to change the app icon on your phone, while the Fini NFT comes with a fun little animated figure in your app with emotions based on how high/low the Ethereum gas fee is.

I believe this type of implementation of feature-based NFTs will catch on through mainstream developers/adopters. The idea of minting/owning the NFT isn’t necessarily a speculative play but rather a utility play to enhance the experience for the given product/service. This is similar to companies or foundations creating an NFT series to benefit a certain cause giving the donor the ability to get something in return which can be used online to show support, like the recent Coinbase Shield NFT.

3. Traditional Finance (TradFi): Macro + Regulations

Authors: 8Ball, Digital Duke

Just when the Federal Reserve, FDIC, and Treasury believed they were in the clear, new cracks in the banking system began to emerge. First Republic Bank's (FRB) stock is currently plummeting due to news of deposit outflows and the bank's need to sell assets to cover deposits.

As FRB's stock started plummeting, Bitcoin's value began to rise. This event has further solidified Bitcoin's position as an alternative to the traditional financial system. Given the current state of the banking sector, it appears that the need for this alternative is more urgent than ever.

Famed macro trader Steve Druckenmiller recently announced that he is shorting the USD. His rationale is based on the belief that the Federal Reserve will initiate easing measures to support the faltering economy. Additionally, Druckenmiller noted that other countries are reducing their reliance on the US dollar for trade, which could further weaken its value. The combination of the Fed's easing and reduced demand for the USD is bullish for Bitcoin, as it offers an alternative store of value.

Regulatory Happenings

The fight between the Blockchain Industry and US regulators continues to intensify as the leading US crypto exchange Coinbase ($COIN) took legal action against the SEC this week. Coinbase argued that the SEC has failed to respond to their July 2022 petition in which the company asked the SEC to “propose and adopt rules to govern the regulation of securities that are offered and traded via digitally native methods.” The move comes several weeks after the SEC had issued Coinbase with a Wells Notice, a letter sent by a securities regulator to a prospective respondent, notifying them of the substance of charges that the regulator intends to bring against the respondent, and affording the respondent the opportunity to submit a written statement to the ultimate decision-maker.

Coinbase CEO Brian Armstrong has continually argued that without a clear regulatory framework, the SEC has no ground to stand on in its actions against the industry. As fellow crypto pioneers, we appreciate Brian & Coinbase’s efforts to defend the space against overreaching uneducated government entities. To be clear, we have no problem with regulation of our industry. Our problem is with uneducated regulation that happens when govt. entities try to apply older archaic frameworks (like securities laws) to paradigm shifting revolutionary technology (like blockchain). This is why AB works to educate the masses (regulators included) on blockchain technology.

Another famed tech investor and entrepreneur Chamath Palihapitiya weighed in on the clash this week, saying “Crypto is dead in America. I mean, now you have Gensler even blaming the banking crisis on crypto—so the United States authorities have firmly pointed their guns at crypto.” US regulators have continued to dig in their heels on their staunch anti-crypto stance, but it remains to be seen if they have the legal precedent to truly dismantle the industry.

Analogously, SEC Gary Gensler has come under immense scrutiny from industry leaders and government officials for his seemingly contradictory comments on the regulatory treatment of numerous crypto assets. Republican congressman and member of the House Financial Services Committee, Warren Davis (R-OH), has gone as far as saying he plans to introduce legislation to have Gensler removed from his position. Coinbase CEO Brian also fired shots at Gensler’s conflicting stance on crypto assets on Twitter, highlighting a video of Gensler in 2018 saying that “the majority of crypto assets actually aren’t securities” – a key posture he’s since gone back on.

4. Altcoins: Buys & Watchlist

Disclaimer: Our buys & watchlist should not be takin as financial advice nor investment suggestion. We share this information in the nature of education & transparency. We value the ability for our network to be aware of new projects and ecosystems we are actively researching/participating in. Always invest responsibly. And remember…Fundamentals over Pumpamentals!

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