โSelf-help is the best help.โ
– aesop
Q: Should SOL be more valuable than ETH?
For the first time this week, Solana surpassed Ethereum in total daily economic value (TEV), which is the sum of fees and MEV (aka frontrunning) generated by the blockchain. It feels like an important milestone to me.
However, that doesn't stop you from considering this metric. All financial metrics have to be invented at some point, and when a new metric becomes popular, it becomes more than just a way of looking at valuations, it can change valuations themselves.
For example, the entire US cable industry is arguably a product of John Malone's success in popularizing EBITDA as a way to value companies.
Mr. Malone would never have been able to raise the huge investment capital needed to build a national cable network if investors had only invested based on traditional metrics such as price-to-earnings ratios and price-to-book ratios. Dew.
Cable was a different kind of business that required a different kind of financial metrics, and blockchain is an even different kind of business.
If TEV becomes the new valuation metric for layer 1 blockchains, I predict that investors will increasingly question why ETH is worth 4x more than SOL.
Q: Why is ETH worth 4 times more than SOL?
But there are many possible explanations. Ethereum comes first, has more developers, more TVL, more mindshare, more institutional adoption, more battle tested code. And modular can be better than monolithic and has more profitability…and much more.For other clarifications, we will politely inform you after this email.
Q: Are fundamentals important in cryptocurrencies as well?
People say it's outdated, but I think so.
In the rare cases where a protocol earns revenue, it may seem like this is not the case, as there appears to be no correlation between revenue and valuation. It seems that increasing profits does not necessarily lead to higher valuations.
But that's not the case with TradFi.
The most profitable companies don't always command the highest valuation multiples. Valuation multiples are often the lowest (just ask any struggling value investor).
But even there, no Correlation between revenue and price, valuation metrics are still useful information. At least it's a way to background engineer what the market thinks about a stock (or token).
For example, the conclusion I draw from Dan's TVE indicator is that the market is undervaluing current returns and therefore ETH is likely to become money in the L2 ecosystem aligned with Ethereum.
While there are no fundamental indicators that can help determine whether ETH's monetary nature is fully priced in, indicators like TVE indicate that investors should have an opinion on it ( I think so).
Q: What exactly is L2?
L2 is described as โinheriting securityโ from Ethereum and โextendingโ Ethereumโs block space, but this appears to be primarily for marketing purposes. This is a story that benefits both Ethereumโs mainnet (how it scales) and L2 (how it attracts users).
If I understand correctly, the current thinking is that L2 will not inherit Ethereum's security until Sequencer is decentralized (which seems a long way off) and Sequencer truly extends Ethereum's blockspace. It does not mean. Ethereum anytime.
However, L2 extends the asset ETH (as opposed to the blockchain Ethereum).
A typical L2 that uses ETH for transaction fees but is not immutably linked to the Ethereum blockchain (I don't think there is such a thing) is similar to Panama's adoption of the US dollar. Although it creates demand for the US currency, Panama still adopts the dollar. A sovereign country that can switch to another currency at any time.
Your opinion on ETH as an investment should primarily be about how much demand L2 creates for ETH and how likely they are to stick around (I think so). Masu).
Q: Why do VCs keep throwing overpriced tokens at us?
I see a lot of complaints about market makers artificially inflating the price of new tokens so that VCs can sell to retailers before the price inevitably collapses. However, there is a simple solution to this. Don't buy at inflated prices.
The problem seems to be that people want to buy tokens of their favorite protocols without thinking too much about the price they will pay.
This kind of thing works in the stock market, where there are industries where analysts, investment bankers, and hedge funds keep prices somewhat fair.
For example, if you think more people will start wearing Crocs, you can buy them without worrying too much about the valuation multiple you're paying.
That is, you should You might be worried, but in the case of stocks, it doesn't really matter. The market is arguably efficient enough that subsequent performance is primarily a function of the company's performance, not whether the multiple goes up or down.
However, in the case of virtual currencies, valuation work is done on a DIY basis. There is no one to check if the price is half reasonable for you.
Rather, market makers, VCs, and cutting-edge bot armies are doing their best to deliver the price you pay. united nationsrational.
But there are two sides to every transaction. They can't sell to us at prices we refuse to pay.
Q: Is frontrunning allowed in cryptocurrencies?
Unless you are leading the front runners โ that is not allowed.
That seems to be the case, as yesterday morning the Department of Justice indicted two brothers for allegedly “stealing” $25 million from the MEV bot. Perhaps he thinks MEV bots are meant to steal from others.
TLDR looks like the attacker inserted himself in the middle of a sandwich attack, which seems like fair play to me. Aren't MEV bots always inserting themselves in the middle of other people's transactions?
The theft (rather than allowing front-running) is due to the attacker “exploiting a vulnerability” in the victim's code and inserting a “fake signature” into the victim's transactions. think.
Even if you believe that exploiting software vulnerabilities is illegal and frontrunning is also theft, stealing from thieves is still illegal.
It is unusual for a victim thief to report a crime to law enforcement.
I think I would have reported it as well, since $25 million is a lot of money, but it's probably not the best look for a cryptocurrency. With permissionless technology, there should be no need for the Department of Justice to adjudicate between participants.
Just like cryptocurrency investors, cryptocurrency developers also have to do their jobs.
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Senate passes resolution overturning SAB 121 โ read
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Pump.fun suspends trading following apparent flash loan attack โ read
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How do advisors use Bitcoin ETFs in client portfolios? It depends. โ read
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Department of Justice indicts two brothers involved in $25 million attack on MEV bot last year โ read
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TRON DAO adds Google Cloud as super representative candidate for TRON blockchain [Sponsored] โ read
In this week's interview, Hasu from Flashbots and Vasiliy from Lido DAO discuss the current state of Ethereum issuance and staking dynamics post-merger.
1/ The U.S. Senate just voted 60-38 to overturn SAB 121.
This is a big deal!
This is the first virtual currency bill to be delivered to the president.
also send a message to @SECGov that they're extreme up
What is SAB121?
Why is this vote important?
How did banks help crypto win?!๐ x.com/i/web/status/1โฆ
โ Avichal – Electric ฯ Capital (@avichal)
May 16, 2024
Consider it important to be aware of the following:
– Top venture companies have historically made 3x more profits (and that's in a record low interest rate environment!)
– Historically, crypto VC has significantly outperformed traditional VC (liquid venture + nascent asset class growing from less than $10 billion to $2.5 trillion)… x.com/i/web/status/1โฆ
โ Santiago R. Santos | #9159 (@Santiago Roel)
May 16, 2024