A weekly recap of the most insightful news, analysis, and capital flows in the wild west we call crypto.

Hello and welcome back to the Web3 Rewind! Per usual in this industry, lots has happened this past week. Here's what we have in store for you:

• Things to watch for in 2024

• BTC ETF competition

• TRB market manipulation

• Telegram trading bots

• Helium data usage

• Parallelized virtual machines

The Latest

Key things to watch for in 2024

Regulatory Approval dept.

BTC ETF competition

We are a mere five days away from the first spot BTC ETF deadline. If the spot BTC ETF hasn’t been approved yet, or denied too, I guess, then the SEC has five days to get to it. It’s an exciting time, and this is perhaps one of the most important regulatory events in the history of crypto. I genuinely do not believe that’s an exaggeration. The approval of a spot BTC ETF would open up this traditionally hard to access asset to trillions of dollars of capital wanting some exposure to our nascent industry.

With that potential, there is a lot at stake, especially for the ETF issuers. For example, if we compare a spot BTC ETF to gold ETFs, gold ETFs currently have $120B in AUM with an average expense ratio of 0.60%. That works out to $720M a year in fees, and if you do some fancy financial mathematics on how much an issuer would earn in fees over the next few years, that’s a lot of money. The same could be said for the spot BTC ETF.

Another thing about the fees earned on an ETF is that as the price increases, you make more fees. So if BTC goes up five-fold over the decade, which I think is a relatively safe bet with the state of global monetary policy, then the fees earned by all issuers will also be 5x. In addition, spot BTC ETFs are much like normal ETFs. Once you have decided to chuck your 401K into one specific S&P ETF, you don’t really change which ETF you chuck money into. For example, I would guess many of you put a portion of your salary into Vanguard’s S&P ETF, VOO, and have been doing so for a long time. In addition, if you put 1% of your take-home salary into a spot BTC ETF, chances are you’ll continue to do that, even if your salary increases. So combine all those factors together, and there is a lot of future fee revenue at stake for all the BTC ETF issuers.

This is why BTC ETF issuers have a massive incentive to go on a mass marketing blitz to capture every single possible dollar into their spot BTC ETF. The lifetime value of each dollar in AUM today is just too high not to justify that marketing spend. With that, we’re already seeing some tactics from issuers in order to try to increase their AUM in the early days. For example, we’ve seen a few issuers reduce their fees, with Galaxy taking that to the extreme and implementing a 0% fee for the first six months and $5B in AUM. On the other hand, Bitwise has already indicated that they have $200M in interest lined up to go in their ETF on day one. I suspect that the marketing and incentive wars in the months to come will make DeFi liquidity mining rewards look like child’s play.

We truly are in the final stages of the process, especially as some news outlets have reported that the SEC is holding meetings with multiple exchanges such as Nasdaq, CBOE, and NYSE to finalize comments on various issuer filings. Godspeed everyone, and see you on the other side of this historic moment. Gary, please don’t rug us. — JC

Quick Bits

TRB manipulation

• I had certainly not heard of this ticker, TRB, until last week when it soared from $300 to $619, and then proceeded to plummet to $136, all within 13 hours on December 31st. This smells like market maker manipulation to the extreme, but we’re an unregulated industry so I guess this is what we get.

• As a result of the price action, $68M in assets were liquidated, resulting in a hefty number of DeFi protocols reporting massive losses as liquidity providers are often counterparties to any profits realized on perp trading protocols.

Unibot moves into Solana

• The Telegram trading bot wars are heating up. Especially with a new entrant, BonkBot, on Solana, taking the sector by storm. If we took the highest grossing day for BonkBot in December last year and annualized it, the bot stood to make $280M in a year.

• With that, one of the market leaders in the telegram trading bot category, Unibot, has decided to join the party on Solana. My gut is telling me that Telegram trading bots will be widely adopted in this cycle as retail apes back in and seeks to get an edge through these bots with a friendly user experience.

Helium data usage

• Helium, a crypto DePIN protocol that currently offers a $20/month unlimited mobile data phone plan has seen explosive adoption. They’ve seen a 79% growth in users in the past 30 days and are showing no signs of slowing down.

• A staggering statistic is that more traffic now flows over Helium’s hotspots than the T-Mobile network. I suspect there’s some questionable activity occurring with that level of data usage, but nonetheless, even if the numbers are really far off, that level of adoption is still impressive to see.

And last but not least

Parallelized VMs

The Ethereum Virtual Machine (EVM) is currently the most widely adopted virtual machine by a wide margin. There’s just one slight drawback. It isn’t exactly that good. For starters, the EVM currently features sequential processing. This means that only one transaction can be processed at a time, which, as you can imagine, isn’t exactly that efficient. That would be equivalent to your local DMV only having one counter, which is probably the most nightmarish thing I’ve ever heard. You can hardly blame Ethereum for making this design decision. The EVM launched when crypto was still a speck in the universe of technology, and they were probably hardly thinking about virtual machine optimization. What’s the alternative to sequential processing? Parallel processing. With parallel processing, a virtual machine can execute multiple transactions at the same time. This is equivalent to your DMV having multiple counters open, all of which are staffed. Some example of blockchains with parallel processing include Solana with its Solana Virtual Machine (SVM) and Monad with its EVM compatible VM with parallel execution. With such architectures, these chains can execute multiple transactions simultaneously instead of waiting for them to execute one by one, greatly increasing the network's throughput. However, if transactions touch the same state, e.g., they interact with the same contract within a DeFi protocol, then they still have to be executed sequentially as the input of one transaction depends on the output of the previous transaction.

At this point, you’re asking, if parallel processing is so amazing, then why doesn’t every blockchain use parallel processing? Well, blockchains are all about tradeoffs. If you are processing transactions in parallel, then chances are you are processing more transactions in the same amount of time, which means that your validators will need to have beefier hardware to process all that activity. In addition, you’ll need different threads to process all those transactions because one computer core can only process one instruction at a time. All of these higher hardware requirements probably mean that being a validator is more expensive, and thus, you have a less decentralized validator set. In addition, if you are processing transactions in parallel, you need to check a lot of pieces of state to make sure transactions aren’t interfering with each other, and your state grows a lot faster. This means that a validator would also need much more storage to store the existing state of the blockchain. You get the point. However, parallel processing was one of the biggest unlocks for high performance computing. Over time, it is inevitable that blockchains will have to trend in this direction if we want to support the mass adoption use cases we’d all like so desperately to see. — JC

Have you read the definitive history of Ethereum? No? Well then get your copy of Out of the Ether while you can.