Ethereum, it’s getting the BIG looks from here, they’re basically everywhere as the protocol transitions into a new horizon with parallel blockchain architecture.
So are you ready to dive into my parallel universe to break it all down? Well, you don’t have a choice, cuz it’s time for Chico Crypto! Ethereum parallel chains? Well, one a proof of stake beacon chain & the other is the main for now proof of work chain.
And that means Ether, the asset used to secure both of those chains, is getting double the looks on all sides too.
Retail, Institutional, and even genius developers outside of crypto. So Retail? Just look at google trends charts compared with bitcoin. The first bitcoin during this recent 20k test, BTC got to just 19 percent of its search hype during the last peak December 2017 Ethereum on the other hand, got to 30 percent that level that same week.
Ethereum hype is getting hotter faster with people around the globe. How about institutional? Well Raoul Pal, legendary hedge fund investor tweeted this. My hunch is BTC is a perfect collateral layer but ETH might be bigger in market cap terms in 10 years for the reasons above.
Money and collateral is just the base layer. Everything builds on top. The store of value is collateral, the trust layer and exchange of value is bigger. Some pretty big words, but if you look deep enough, it’s a common theme, so deep let’s Go.
Ethereum, is known & has been worked on by some pretty legendary developers George Hotz? Who is he and what happened? Well, he is a coding prodigy, 2007 first person to remove SIMLOCK, and jailbreaking the iPhone and then in 2009 doing the same to the ps3 online network.
And now he is competing with none other than Elon Musk, in AI and self-driving tech with the company comma.ai and actually, in 2016, Hotz and Musk met together, with Hotz reporting Musk offered him a pretty lucrative job heading the development task of automated driving at Tesla.
Well George, he actually helped the Optimism team with their OVM compiler and not even that long ago, back in July as seen from his Github commits in July and this might lead to another article about Ethereum scaling but, obviously, he’s bullish if he’s helping with L2. Like I said common theme and crazy bullish. So Ether, what are options right now with stacks sitting in wallets? Stake or DeFi?
How do you get more and what’s the most efficient way? Stake or Mine? Well, hopefully, I can provide some insight into those questions.
Well, you go to beacon chain and to the staking leaderboard validator incomes, and since the beacon chain began on December 1st and we don’t have data for a year or even a month, so we will just use the most recent data, 1 day.
Taking the average of the top-earning validator of the past 1 day & the bottom earning .0149 plus .0181 and divided by two.
We get an average of .0165 that multiplied by 365 days in a year, we get just over about 6.02 Ethereum turning the staked stack to 38.02 Ethereum, an 18.8 percent ROI for just setting that Ethereum away to stake.
Now, I know, that number will decline as more speakers come online..that is early numbers, remember I said early birds get the worm? But still, projections are pretty damn good a year out.
Ethereum price.org’s eth 2 calculator, puts at 1 year if you hold your stake, growth will be about 4.04 ETH, increasing the stack to 36.04, a yearly ROI of 12.63%. So can DeFi provide better options than staking?
Well with things on the surface not so much right now going to something like compound, popular well-known lending and borrowing DeFi tool compound is there, and as we can the supply APY is only .06 percent borrow is 2.30 percent.
Shoot, if the staking rewards on the beacon chain were unlocked, there would be a huge borrowing opportunity on compound, to go stake and earn that higher ROI. But those rewards are tied up for now.
But going to Defirate and their nice little tool, we can see that nothing is beating Ethereum’s staking right now, providing better returns, even something fully centralized like BlockFi. So to get better returns, you would have to get pretty damn DeFi creative if you would like to see above 10 percent APY on your Ethereum
And it’s possible, with some of the yield farming opportunities out there a good tool for this is the good ole coingecko and as we can see, with pools with wrapped ETH, there are actually many providing higher APYs mostly from that crap sushiswap, but there are some from harvest finance, index cooperative, and Ampleforth too that use ETH as collateral.
But here is the thing with these pools, you need to also have an equal amount of the other token in the pool per example index’s cooperative wrapped eth, DPI pool, which is providing over 28 percent APY right now you need equal part Ethereum, equal parts DPI for that pool to enter it and earn.
Which means, depending on your circumstance you have to sell some Ethereum you already have, risking your “safety” asset to get the DPI or you have to buy DPI with CASH.
So depending on how the markets turn this could be a bad thing. Markets go down, turn bearish. DeFi always gets rekted harder than Ethereum joining this pool might not be the best idea, compared with just Staking in those circumstances.
And, the Ethereum beacon chain has been in the works for a long time and had code review after code review. Many of these DeFi protocols haven’t and there may be bugs, just waiting to be exploited.
The risk with yield farming is MUCH higher than solo staking especially with inexperienced teams working with code forks. Be careful if that is the path you choose. Now, finally, let’s talk about the creation of new ether as we have only been discussing what to do with the stack of already created Ethereum sitting in people’s wallets.
Prior to the launch of staking and the beacon chain, the only way to get the precious new Ether was through proof of work mining.
The beacon chain offers you the option to use your ether collateral to get new emission, but the proof of work chain will be running in parallel to the beacon chain, running all smart contracts, thus getting all transaction fees until the beacon chain is ready when that will happen??? Does no one know So the question is?
What’s more profitable? Ethereum Staking or Ethereum proof of work mining? Early staking is providing over 18 percent APY with some estimates putting it above 12 even as more come online? So what’s does mining look like? Well, as everybody knows new GPUs hit the scenes here recently from the big players, and I guarantee PC gamers are hating miners right now as they are swooping them up.
Nvidia and AMD released their next-generation models Nvidia the RTX 3000 series and AMD the Radeon RX 6000 series and they are both beasts for PC gaming applications and MINING.
The most powerful for Nvidia is the 3090, which clocks out at 153 megahashes per second and only uses 350 watts of power. AMD’s most powerful is the RX 6900 XT and this uses less power only 300 watts, but can only pump out a max hash rate of 72 megashes and Nice hash already has a calculator comparing the two and using an average electricity rate of 12 cents per kilowatt-hour we can see that Nvidia 3090 is providing more a better return per day, of 4.23 cents.
Not bad, that’s over 1500 dollars per year but, you have to think about the initial investment into the GPUs for mining and the 3090xt has a hefty price tag of 1500 dollars. So 1 year into mining, there would be no profit, and you would only “break” even. Now the same goes with staking, you do have to “invest” into 32 Ethereum to begin even solo staking.
And that’s a seriously hefty price tag of nearly 19000 dollars so if all things stayed the same, Ether price, and the current staking rewards, etcetera it would take 2600 days to get that investment back, or over 7 years.
But, here’s the difference between Ethereum staking and GPU mining. Ether, as a validator can be thought as a GPU miner for a proof of stake network it’s the hardware that secures the network and gets the rewards the difference is Ether is an appreciating asset, while GPUs are a depreciating asset.
GPUS lose value over time you always have to sell them for less than what you bought them for and the fate of Ethereum as proof of work only has 2 years at max and Ether has proved since it’s birth, to gain value things do not stay the same.
But I do have to mention this, there still may be a way to make money in the next 1 to2 years with proof of work Ethereum mining..with specialized machines made for the Ethash algorithm.
Going to ASISminervalue.com we can see there are 8 machines with 4 from innosilicon providing between 25 to 15 dollars per day. Tasty but how expensive are the machines? Well, the top machine, a10 pro + isn’t out for consumers yet but the a10 pro is and it provides a whopping 500 megahashes per second, at 750 watts which means profits of $17.83 cents per day.
That’s over 6500 dollars per year so how much does it cost? About 4400 with shipping, So that means, all things stay the same break even is under a year, after about 8 months and then you’re into the profit over 2100 for an entire year considering the machine still a valuable asset, you can get rid of, sell to someone for let’s say 3700 after a year, that’s still an APY of over 31 percent.
But, the time is running out for these machines they’re specialized for the ETHhash algo, and when Ethereum moves fully to proof of stake, sometimes between a year to 2 years you don’t wanna be stuck having to mine only Ethereum classic do ya or do ya? Cheers I’ll see you next time!