Blobs, MSTR and more: This is Ethereum’s broadband moment

The internet turned 35 earlier this week, and it seems only fitting that Ethereum would undergo arguably its largest upgrade ever just one day later.

Ethereum’s Dencun hard fork went off mostly without a hitch on Wednesday. Its arrival delivered a bevy of nine improvement proposals, with the blob-centric EIP-4844 being by far the most memeable.

For more than a decade after Tim Bernes-Lee (himself a dabbler in NFTs) first conceived the World Wide Web, internet users languished inside a slow, cumbersome internet plagued by bandwidth bottlenecks. 

Dial-up modems could only handle up to about 50 kilobytes per second. The platforms we now take for granted — YouTube, Spotify, Twitch and TikTok — were as unfeasible back then as high-frequency trading on many layer-1 DEXs are today.

The arrival of broadband in the early 2000s immediately 10x’d consumer-grade internet to 512 kb/sec. Impossible ideas could now be realized into billion-dollar dot-com powerhouses, radically overhauling the dynamics of our culture and turning us all terminally online.

Now, two decades later, TV is all but dead, replaced by a gamut of streaming services. AR headsets backed by hyper-fast wireless blend our physical worlds with the same digital space that Bernes-Lee laid out in his 1989 paper outlining the web.

What broadband did for the internet, blobs are now doing for Ethereum.

Blobs give the raft of layer-2s their own space through which to post transactions to the Ethereum mainnet without clogging up the blockspace intended for other users.

They have their own fee market, which means regular folk and their protocols of choice won’t have to compete with rollups and sidechains for blockspace — leading to lower fees for all involved.

Dencun and its blobs have already massively reduced fees for the layer-2s that have adopted the new rules. For example, Optimism and Base fees are down to a fraction of an American penny per transaction compared to nearly $1 before the fork.

YouTube debuted in 2005, a half-decade after the rollout of the first consumer-grade broadband services. Justin.tv, the precursor to Twitch, came two years later.

It could be that layer-2 fees rise over time as more layer-2s compete for blobspace. The true impact of Ethereum’s successful push toward a cohesive and holistic multi-chain ecosystem, powered by “blobband,” probably won’t be felt for years to come.

But the groundwork has now been laid. Welcome to Ethereum’s blobband era.

— David Canellis

Data Digest

🙃 Solana has flipped Ethereum layer-2 Arbitrum for total value locked (TVL) to become the fourth largest DeFi ecosystem — a first since November 2021. 

🌊 A quarter of a billion dollars was liquidated on centralized exchanges over the past 24 hours, 60% longs.

🤪 Memecoin mania puts Solana number-one for DEX volume over the past day — $1.45 billion to BSC’s $1.14 billion

😴 All quiet on the crypto front as BTC hovers around $73,000 as ETH sits just below $4,000. 

✋No budge in the benchmarks: S&P and the Dow were flat during the pre-market trade. That’s no surprise, considering the VIX’s drop to 14 from its long-term average of 20. 

✅ Good news: A bull market with a high VIX tends to spell “bubble trouble” — so lower volatility with higher prices may be a boon for traders.

Is the SEC in the crypto market’s rear-view mirror?

The crypto pump is upon us. 

SOL is up 18% this week and almost 50% over the month. Binance’s BNB and Filecoin are each up more than 80% over the past 30 days. Wormhole’s Portal Bridge has facilitated more than $113 million in transfers from Ethereum to alt chains like Solana, Sui, and Arbitrum over the past week.

Has the market forgotten that in the eyes of the SEC, they are all securities? Probably. Or maybe traders are just confident that Coinbase and Binance will emerge victorious in their legal battles with the regulator. 

In June 2023, the SEC filed back-to-back lawsuits against Coinbase and Binance for allegedly selling unregistered securities, among other things. The regulator named 13 cryptocurrencies available on Coinbase and ten that trade on Binance securities — despite none of these issuers being named co-defendants in the cases.

The SEC has also not filed any individual lawsuits against these alleged security token issuers, opting to take a different approach than it did in 2020 when it sued Ripple over its XRP token — a suit that ultimately did not play out in the regulator’s favor.

Both cases are still playing out in the legal system, and you might remember the SEC was notably absent from the Department of Justice’s historic $4.3 billion settlement with Binance back in November.

But if you look at token prices, you’d think the SEC had dropped the cases.

Coinbase and Binance are both waiting for rulings in their motions to dismiss their respective cases. If the suits are not fully dismissed, the exchanges will move on to the discovery process. 

— Casey Wagner

Can’t stop, won’t stop?

After offering an oversubscribed round where MicroStrategy (MSTR) raised nearly $800 million in senior convertible notes — mind you, they initially sought to raise $600 million before upsizing to $700 million last week — the company has proposed another $500 million in convertible notes.

MSTR could, all-in-all, raise around $1.3 billion from its convertible notes offerings to fund its bitcoin purchases.

While this represents a new approach to the same tactic we’ve seen from MSTR in the past, Michael Saylor’s firm might have found a way to ensure that the stock remains more attractive than the bevy of bitcoin ETFs on the market today.

By the numbers: MSTR has about $48 million in cash on hand as of December, but it has roughly $15 billion worth of bitcoin at current prices.

It’s fair to note that while the company may spend that cash on hand, MicroStrategy appears to largely plan to add to its BTC hoard. The stock was around before the bitcoin ETFs, and so far, it looks like it won’t only stick around, but may even outperform. 

Compare IBIT and MSTR, for example. MSTR is outperforming BlackRock’s ETF even as the two go head-to-head over who holds the most bitcoin.

MSTR’s bitcoin buying spree has proven to be a win-win for them: Wall Street’s happy and, more importantly, the crypto crowd goes bonkers when the company announces a new buy. And, trust me, the company is always announcing new buys. This year alone, MSTR has bought nearly 16,000 bitcoin.

Adding to that, when bitcoin’s price rockets, so does the company’s stock. The company, at the end of 2023, was trading around $680. Now, the stock is getting close to $2,000 — up 200% in the last three months alone.

Suffice to say, Saylor and MSTR keep hodling. The company isn’t afraid to hit the buy button — even if it means raising some debt to do so — and the most recent debt offerings show that the company’s appetite remains ravenous.

— Katherine Ross

The Works

Welcome to The Works 👋 Your daily slice of crypto (and not-so-crypto) from around the Web. 🕸️

💸 Bakkt against the wall? The publicly-traded crypto company once owned by finance giant Intercontinental Exchange is facing an existential dilemma after receiving a notice from NYSE about its sub-$1 share price. 

Bakkt’s been below a buck since the end of February, but it’s pledging to “cure” the problem. Stay tuned. 

🧠 The crypto team at Franklin Templeton thinks “meme coins have a strong relationship with their native networks.” The top response on X? “[w]e need a memecoin ETF” — something we’re sure Gary Gensler would love. 

🐕Speaking of memecoins: X owner Elon Musk, visiting Tesla’s Berlin manufacturing plant, was asked when people can buy a car with dogecoin. 

Musk’s response, according to a video from X user @dogeofficialceo: “At some point, I think we should enable that.” He then talked up how people can buy merch with the dog-themed memecoin. 

🌱 A bitcoin ETF proposed last December would load up on 20% carbon credits, per a new regulatory filing. 

🤬 The CEO of Palantir, Alex Karp, is a bit, uh, steaming mad about short sellers. 

😕 Today’s why-is-this-a-crypto headline: “What the Kate Middleton story tells us about bitcoin”

The short answer, per the FT’s Bryce Elder: “[a]bsolutely nothing.” Okie doke. 

🚚 BitKey, Jack Dorsey’s bitcoin hardware wallet play, is (finally?) enroute to people’s mailboxes. Get excited.  

⚖️ Finders keepers: Australia’s finance regulator lost a legal fight against the Finder Wallet Pty Ltd, with a court saying the firm did not offer an unlicensed financial service. 

🔬 Researchers over at the Bank of International Settlements dug into DeFi borrower behavior in a new study. 

🤔Summing it up: Investor and AngelList co-founder Naval Ravikant believes that crypto is “adversarial venture capital.” Makes you think. 

— Michael McSweeney

The Morning Riff

Don’t miss the next big story – join our free daily newsletter.