🎁 Revealed: The Merge Rewards

Sab badiya dost?

This is the doodhwala here to give you the meetha + theeka of the crypto market in 1 pani poori!

Speaking of meetha and theeka, we’ve got a flavourful interview for you today.

And it’s all about the BIG THANG this week!

No, it’s not the launch of Brahmāstra.

But BIGGER.

We talkin' bout the ETHEREUM MERGE!

So, get ready for a wild ride 🚎

The A-Z about the Ethereum Merge!

Today’s Wednesday. And not just any Wednesday, it’s THE DAY before the ETHEREUM MERGE!

We’ll be honest, we don’t really know everything about the Merge. 🥲

But we spoke to someone who does for today’s Desi Degen Dost! 😲

This dude is hella smart, and works at a baller company.

(basically, he’s the opposite of us)

And he’s given us some sweet sweet alpha, beta, gamma, and the rest of the Greek alphabets about The Merge.

We spoke with Kunal Goel, research analyst, vibes maximalist, and kaala coffee connoisseur about:

• staking

• PoW → PoS

• boiling doodh

• ETH flipping BTC

• the right way to fix phata doodh

• other dope blockchains beyond Ethereum

Honestly, this talk was hella interesting!

We’ll be putting up video clips on our socials, so head here to check it out!

Let’s dive in.

🍼 Real talk — what could you compare the Merge to in a way the avg Indian understands? And will the Merge actually happen and what’s the price effect gonna be like?

Think about the Merge like the Bangalore or the Mumbai Metro. 🚝

It’s sort of like a good event everyone’s looking forward to because it’ll reduce pollution. But it’s been in the pipeline forever and it keeps getting delayed.

That’s basically The MERGE.

It will also do a lot to reduce inflation because currently under PoW, Ethereum gives about 12,500 ETH to miners every day to secure the network.

But unlike our metros, the Merge will happen successfully this week. (burn! 🔥)

It’s already happened on multiple test nets, there have been a bunch of shadow forks. So, my take on the actual switch is that it will happen this week.

It is a big positive for Ethereum, and its ecosystem and, in my opinion, the effects will be much larger than what people are anticipating.

Damn, you got us more excited than before drinking doodh straight from the packet. 🥛

🍼 This ETHBTC narrative is all over #CT. What’s your view on this ratio post Merge and what’s required in the next few months for ETH to flip BTC?

Quick backstory, what is the ETHBTC ratio:

Usually, when a camp is celebrating, it marks the bottom of the ratio.

So, I believe, the flippening is still a while away.

But we’ve got a good ETH joke.

What did the bartender say to Ethereum when he walked into a bar?

Please pay $100 for gas. 💀

🍼 The past few months have been about Ethereum’s MERGE and Bangalore’s SUB-MERGE. But a ton of blockchain activity has been under the radar. What’s something v v cool that the market ain’t looking at with non-EVM blockchain activity?

To understand this, we gotta take a step back.

Storytime! 📖

My background is in traditional finance, I worked in the asset management team at Motilal Oswal (not waste my time writing unfunny newsletter jk jk)!

A fund manager said to me, “In 2020, you told me Ethereum was the big thing, this year there’s Solana and Avalanche. Next year there will be something else! What’s the point?”

At that time, I didn't really have a good answer.

But looking at some upcoming Ethereum upgrades, I think I do.

See, currently, Ethereum operates as a world computer. If you tell it to add 5+5 it gives you 10!

But after its next update (not the Merge tho!), it can save information as text.

So, it doesn’t have to:

Calculate → 5+5=10

It can just:

Remember → “5+5=10”

And remembering text is far easier than actual calculation, so its cheaper.

All the calculations will happen on another layer. And it will just carry the result as text on the actual blockchain.

So, any improvements in technology can come on top of Ethereum directly.

Damn! Why you making me do public maths Kunal?!?

🍼 How will the yields on staking pools like Lido and RocketPool change post-merge?

Before that — what are decentralized liquid staking pools?

The biggest liquid staking pools are — Lido and Rocket Pool.

What I expect to happen post Merge is — yields to go up to somewhere around 6-10%. Because of this high staking yield, I expect there to be a rush to stake ETH post Merge.

This will inevitably lead to higher TVL, and higher revenue for the staking pools.

Post Merge the cool thing is stakers start earning tips from transactions fees and Maximal Extractable Value (MEV) (or value extracted from block production over the standard reward).

These will be BIG contributors to yield too.

Another big contributor to yield (not just in Ethereum but life 🤌) is subbing to the doodhwala.

Btw, read Kunal’s report on Rocket Pool here and Lido here.

🍼 You’ve been keenly looking at the DeFi derivatives market. Which DApp(s) have got your attention for the right and wrong reasons?

Before this, disclaimer:

The crypto markets are volatile, and trading derivatives isn’t a recipe for success. My mindset is simply buy spot and hold, or hodl as the kids call it.

Derivatives exchanges are massively popular among degens but most of the volume comes from institutional investors who eat the degens. On-chain exchanges are still quite small because the user experience hasn’t been solved yet.

But I’m a blockchain maxi, I’ve dedicated my career to it. So, I think, at some point, decentralized derivatives exchanges will take over. We’re not there yet tho.

If you have to be a maxi — be like Kunal — be a blockchain maxi.

🍼 In DeFi we’ve had protocols play with fixed yields and go 😶‍🌫️ (cc: Anchor 💀💀💀). Are variable yields the only play for token rewards? Or are we missing something wrt yields?

A good question to ask here is — where do yields come from?

One of the answers is: A trader’s demand for leverage. Traders want to maximize exposure to certain assets. And they do that by:

→ depositing volatile assets (say ETH)

→ receiving stable assets (like USDC)

→ buying more volatile assets (say ETH)

With the same amount of assets, traders can get more exposure.

In this bear market, there isn’t much demand for leverage, and we’ve seen yields nosedive.

Another source is the protocols that were issuing tokens and locking them up for staking rewards.

The incentive for this was to reduce sell pressure in the market.

But the problem was — that farmers instantly sold these tokens to earn yield.

And this wasn’t a sustainable way to generate yields either.

The good thing is we will have a sustainable way to generate yields.

Ethereum for instance will have a stable way to generate a 6-10% yield from staking.

And there are a bunch of protocols lending to real-world companies (outside crypto), they plan to generate real returns and then give out yields.

Protocols like:

• MakerDAO

• Maple Finance

• Goldfinch Finance

When the bull market rolls around, we’ll see the demand for leverage return and we’ll see those yields come back too.

🍼 Special question: When will we see the bull market roll around again?

Short answer — I have no idea.

Long answer:

Bear markets have lasted many many years. And we’re only 8-9 months into this bear market, that’s not long enough historically.

I would say — ignore the prices, look at the development.

There is still a lot of value to be found. The bear market is an opportunity to double down in ideas and protocols you have conviction in.

Be thankful for the bear market.

God damn, he put it well. 👌

🍼 Lastly (and most importantly) how’d you take your doodh?

I hate to break your heart but — I don’t drink milk. Just black coffee. I’m a black coffee maxi.

Just Iced Americano and Cold Brews, none of that Chai Tea Latte BS.

No milk for me, but I do appreciate the doodhwala’s newsletters every day.

Thanks (we’re totally not crying) but thanks.

Big ups to KG for educating us about the Merge and answering our silly questions.

You can check out Kunal’s analysis here, and his shitposting here.

Give him a 👋 and let him know the Doodhwala sent ya!

#VibesOverChai

If you want more doodh then, be sure to follow our Twitter (@DoodhwalaDaily)

That’s all for today bhaiyo aur bheno! Naale Sigona!

Aakash "Dahi Cheeni" Athawasya & Arvind "Doodh Peda" Krishna

Yo! Our legal and financial advisors (aka our good ol’ conscience) have asked us to add this boring disclaimer.

None of what you read here is financial advice. We aren’t here to get you to buy or sell a crypto. We’re only here to tell you what’s up in crypto today and make you laugh. So, if you screwed up on a trade, that’s on you G. Stay safe in the markets.