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Fwiw, you can make money holding ETH, by staking it. Coinbase and Kraken both do that. They take a percentage of the return customers get by agreeing to lock an

Fwiw, you can make money holding ETH, by staking it. Coinbase and Kraken both do that. They take a percentage of the return customers get by agreeing to lock and stake their coins on the exchange. (Before that was available though, both lived entirely on fees, unless they've been committing massive fraud.)

lazide 4y ago
Since Sept 15th 2022 yes. We’ll see how it goes longer term, and what the fees and economics look like when things settle out. We don’t know what Coinbase and Kraken are doing internally. Coinbase does seem to be mostly off fees (which are sky high), and does seem not sketchy. It doesn’t appear overly easy for them even then (hence the ‘it’s hard’) despite folks being itching to put money in on the way up to the point they’ll mostly ignore high fees. They’re definitely playing the long game, compared to the others that have looted billions elsewhere. As the main on/off ramp in the US, they have a pretty nice position from it too.
- DennisP 4y ago
  Actually since Dec. 1 2020. That's when the production beacon chain went live with real ETH, even though the proof-of-work chain was still running in parallel. Coinbase and Kraken started offering it sometime in early 2021.
  - lazide 4y ago
    When it isn’t the primary or only way of doing it, it isn’t a model for if it will work economically. Which is why I picked that date. That it was possible to do it differently earlier, and some folks did start transitioning, doesn’t change the fact that we don’t have much track record with it yet as ‘the way it is done’. It usually takes decades for these things to stabilize into anything predictable.
    - DennisP 4y ago
      Not sure what you mean exactly, but the live beacon chain was the only way to stake ETH since it was launched in 2020. By the time of the merge, over 10% of all ETH had been staked on it. Total stake now is just a little higher than it was just before the merge.
      - lazide 4y ago
        Considering only about 12-13% of ETH is currently staked, what I mean is, it’s still not the majority of the ecosystem. So there are still a lot of unknown unknowns, including ‘what will the ecosystem look like when it is the majority’. It might be lower on fraud. Or higher. Or economic to just stake. Or not. We don’t know yet.
        DennisP 4y ago
        The intent is not for most ETH to be staked. 12-13% is fine, and they don't expect it to go beyond 30% or so. We just need enough staked so the network is secure. Staked ETH isn't available to be used for any other purpose, like paying transaction fees, depositing in defi protocols, using as currency, etc. Anyway, this is getting a bit far afield of my point, which is just that for ETH, exchanges can earn money on deposits, without loaning them out to risky side ventures.
        lazide 4y ago
        We have yet to see if that is a viable business model, correct? You keep not addressing that point, or providing concrete monetary values to any of these statements you are making.
        DennisP 4y ago
        You mean whether it's a viable model for the exchange? I have no idea, never looked at their numbers. But Coinbase is public, so now I'm curious whether they break out their revenue sources.
KaiserPro 4y ago
> make money holding ETH, by staking it Where to start with that. Sure yeah its part of the protocol, but its essentially baking in fiat like inflation. not only that but its deliberately reducing liquidity, and makes you rely on large exchanges that have bigger stakes. This basically undermines the point of crypto which is a secure way to quickly exchange value in a peer to peer way.
- DennisP 4y ago
  That baked-in inflation rate is only about half a percent annually, less than a third of Bitcoin's current rate of 1.7%. But Ethereum's issuance is offset by the fee burn. Since the merge, the total ETH supply has actually decreased by 4000 ETH. You can track it here: https://ultrasound.money/ https://ultrasound.money/ I don't see the reliance on large exchanges. There are plenty of solo stakers and the protocol gives them the same rate of return as large exchanges. That's an improvement over the economies of scale that large miners typically achieve. People without 32 ETH can use a decentralized staking pool, just like most solo miners use pools. Total stake is under 15% of ETH so it's not a huge hit to liquidity. The real bottleneck for p2p value exchange is transaction rates, and on that front Ethereum is coming along quite well. If it were only doing ETH payments, it would be capable of 700 tx/sec today on chain. It actually does fewer since many of its transactions are more complex, but rollups multiply that significantly, and upcoming scaling improvements should get them to 100K tx/sec within the next several years, while still maintaining full trustlessness.

lazide 4y ago

Since Sept 15th 2022 yes. We’ll see how it goes longer term, and what the fees and economics look like when things settle out. We don’t know what Coinbase and Kraken are doing internally. Coinbase does seem to be mostly off fees (which are sky high), and does seem not sketchy. It doesn’t appear overly easy for them even then (hence the ‘it’s hard’) despite folks being itching to put money in on the way up to the point they’ll mostly ignore high fees. They’re definitely playing the long game, compared to the others that have looted billions elsewhere. As the main on/off ramp in the US, they have a pretty nice position from it too.

DennisP 4y ago
Actually since Dec. 1 2020. That's when the production beacon chain went live with real ETH, even though the proof-of-work chain was still running in parallel. Coinbase and Kraken started offering it sometime in early 2021.
- lazide 4y ago
  When it isn’t the primary or only way of doing it, it isn’t a model for if it will work economically. Which is why I picked that date. That it was possible to do it differently earlier, and some folks did start transitioning, doesn’t change the fact that we don’t have much track record with it yet as ‘the way it is done’. It usually takes decades for these things to stabilize into anything predictable.
  - DennisP 4y ago
    Not sure what you mean exactly, but the live beacon chain was the only way to stake ETH since it was launched in 2020. By the time of the merge, over 10% of all ETH had been staked on it. Total stake now is just a little higher than it was just before the merge.
    - lazide 4y ago
      Considering only about 12-13% of ETH is currently staked, what I mean is, it’s still not the majority of the ecosystem. So there are still a lot of unknown unknowns, including ‘what will the ecosystem look like when it is the majority’. It might be lower on fraud. Or higher. Or economic to just stake. Or not. We don’t know yet.
      - DennisP 4y ago
        The intent is not for most ETH to be staked. 12-13% is fine, and they don't expect it to go beyond 30% or so. We just need enough staked so the network is secure. Staked ETH isn't available to be used for any other purpose, like paying transaction fees, depositing in defi protocols, using as currency, etc. Anyway, this is getting a bit far afield of my point, which is just that for ETH, exchanges can earn money on deposits, without loaning them out to risky side ventures.
        lazide 4y ago
        We have yet to see if that is a viable business model, correct? You keep not addressing that point, or providing concrete monetary values to any of these statements you are making.
        DennisP 4y ago
        You mean whether it's a viable model for the exchange? I have no idea, never looked at their numbers. But Coinbase is public, so now I'm curious whether they break out their revenue sources.

KaiserPro 4y ago

> make money holding ETH, by staking it Where to start with that. Sure yeah its part of the protocol, but its essentially baking in fiat like inflation. not only that but its deliberately reducing liquidity, and makes you rely on large exchanges that have bigger stakes. This basically undermines the point of crypto which is a secure way to quickly exchange value in a peer to peer way.

DennisP 4y ago
That baked-in inflation rate is only about half a percent annually, less than a third of Bitcoin's current rate of 1.7%. But Ethereum's issuance is offset by the fee burn. Since the merge, the total ETH supply has actually decreased by 4000 ETH. You can track it here: https://ultrasound.money/ https://ultrasound.money/ I don't see the reliance on large exchanges. There are plenty of solo stakers and the protocol gives them the same rate of return as large exchanges. That's an improvement over the economies of scale that large miners typically achieve. People without 32 ETH can use a decentralized staking pool, just like most solo miners use pools. Total stake is under 15% of ETH so it's not a huge hit to liquidity. The real bottleneck for p2p value exchange is transaction rates, and on that front Ethereum is coming along quite well. If it were only doing ETH payments, it would be capable of 700 tx/sec today on chain. It actually does fewer since many of its transactions are more complex, but rollups multiply that significantly, and upcoming scaling improvements should get them to 100K tx/sec within the next several years, while still maintaining full trustlessness.