Ultra Sound Penguins | Weekly Recap
Penguins are causing a supply-side liquidity crisis for ETH
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Dear Bankless Nation,
It’s been over a week since EIP 1559 was implemented and nearly 40,000 ETH has been burned. This is massively beneficial for all ETH holders.
While many of us originally believed that the leading gas burners would be DeFi protocols like Uniswap, so far that doesn’t seem to be the case.
Here’s the all-time leaderboard:
As of now, NFTs are dominating Ethereum via OpenSea. But this week was a bit different—it wasn’t CryptoPunks, Bored Apes, or even ArtBlocks that consumed so much.
It was Pudgy Penguins.
These cute mf’ers are everywhere now. They’ve built an army. They’re all over Twitter.
They’ve already gotten featured in the NY Times.
At this point, it’s almost like there’s a pseudo turf war emerging over NFT avatars. People can only have one profile picture at a time, forcing people to choose their alliance. Punks, Bored Apes, Cool Cats, Penguins…there’s too many to choose from.
But whether you actually like any of these things or not, it doesn’t matter. The beauty is that if you’re an ETH holder, you directly benefit from any “mania” that’s happening on the network—even if it’s just a land-grab for jpegs of adorable penguins.
The through-line is this: Whatever the degens are getting into, ETH holders benefit.
We can see this happening in real-time as the network continues to experience more and more blocks with negative issuance. Remember—we’re still in PoW!
What happens if DeFi has another bull run and starts soaking up more ETH as collateral to fuel its protocols? Or if people start aping into Uniswap gems again?
During DeFi Summer last year, gas prices on Ethereum sustained over 200 gwei for months. That’s a lot of ETH that could’ve been burnt.
What happens if NFTs find their way further into the mainstream and convince millions of people to touch Ethereum for the first time?
And then what happens when the network merges to PoS and issuance drops to <1% in the next ~6 months.
The writing’s on the wall: There’s a growing supply-side liquidity crisis happening on Ethereum.
Whatchu gonna do about it?
P.S. We’ll be back with the regular RSA program next week! Thanks for bearing with me :)
Recap for the week of August 9th, 2021
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