ETH will nuke itself if this deadline is missed...
GM, we take the latest Web3 news and translate it into plain old English - so you can stay up to date, without your eyes glazing over.
In today’s edition:
How to value a Web3 project
Turns out there might still be hope for algorithmic stablecoins like LUNA
RESOURCE: Web3 Frequently Asked Questions (answered in 17:30)
Ethereum will nuke itself if its developers miss their deadline
Terms used (click for translation):
Web3, dApps, Algorithmic Stablecoins, Stablecoins, Proof Of Work / Proof Of Stake, Blockchain
How to value a Web3 project
The terminology and mechanics of Web3 are dense and confusing.
So if you're looking to put some money into the space - what do you look for?
And how do you make sure you're investing and not just gambling?
They're good questions to ask, and this linked article helps to answer them...but the terminology is still a little confusing.
So here's a translated 'highlight reel' of some solid metrics to look for in a crypto project.
Total Value Locked (TVL)
Put simply: TVL represents how much money has been put into the project, that can't be immediately taken out.
The more money that's locked up in a project, the more robust it is in the short term.
The quickest way to find a project's TVL is to Google: "[Project Name] total value locked".
Active Wallets
Tech companies often use metrics like Daily/Monthly Active Users to reflect how frequently their product is being used.
The Web3 equivalent of this metric is known as 'Active Wallets' or 'Active Addresses'.
The more Active Wallets there are, the more people are using the product, the better chance it has of growing.
The quickest way to find a project's total Active Wallets is to Google: "[Project Name] total Active Wallets / Addresses".
Number of Developers and Applications
Web3 apps (aka dApps) are designed to integrate with existing cryptocurrency networks (eg: Ethereum).
The more dApps that integrate with a Web3 product or network, the more it is relied upon by others. The more its relied upon, the more money and support it has coming into its ecosystem.
Eg: The iPhone has a MASSIVE amount of applications built for it, which not only earns Apple ~$12B per year, but also attracts new customers to the Apple ecosystem.
To get an idea of a project's current number of dApps search google for "[Project Name] total dApps".
And to get an idea of how many dApps might be coming in the future search "[Project Name] total developers"
Total Number and Size Of Transactions
This one is simple: if a lot of people are transacting frequently and in high amounts on a network, this makes it more valuable.
The quickest way to find a project's Total Number of Transactions is to Google:
"[Project Name] total transactions per day"
And for Total Size Of Transactions, look for the '24hr Volume' or '24hr Trading Volume' on sites like CoinMarketCap.
Alright, this is already turning into a doozy of a newsletter - and we still have two articles to go (!)
So if you want to take a deeper dive and get project specific, like what metrics to look for in a play-to-earn Web3 game, click the big red button below.
Turns out there might still be hope for algorithmic stablecoins like LUNA
We have a friend, Luke, who put his title down as 'Lord' when applying for his first credit card, just to see if they'd accept it.
They did...until they didn't.
Six months after they delivered his card, the bank cancelled it and sent him a replacement with the title of 'Mr'.
To claim back his 'plastic talking point', Luke went as far as buying a 1ft x 1ft plot of land in Scotland, so he could claim the title of 'Lord' on a technicality.
If you're wondering how we're going to tie this into a Web3 analogy, here's your answer:
Everyone's been talking about the risks of algorithmic stablecoins after Terra Luna's 'UST' collapsed.
Surprisingly, everyone has seemed to gloss over Maker's 'DAI' token, which is another algorithmic stablecoin - technically.
DAI is backed mostly by ETH, Wrapped BTC (aka Bitcoin that is tradable on the Ethereum network) and the USDC stablecoin.
So what happened to DAI when Terra's UST went into a death spiral and dragged the entire stablecoin market down with it?
Almost nothing.
While UST collapsed, DAI only ever dipped as low as $0.9961c, before bouncing back to $1 USD. Not bad.
So why did one algorithmic stablecoin do just fine as its neighbor burned to the ground?
Well, 42% of DAI's reserves are made up of USDC, which (yes) is a digital currency - but it's backed by real US dollars, which aren't as sensitive to the ebbs and flows of the crypto market.
So technically, DAI is backed by those same US dollars - making it much less vulnerable to attack/collapse than Terra.
Moral of the story: there's still hope for algorithmic stablecoins, even if it doesn't feel like it right now.
Resource of the day
Web3 Frequently Asked Questions.
(answered in 17:30)
Ethereum will nuke itself if its developers miss their deadline
'If I haven't finished writing this newsletter by 10pm ET, send this embarrassing photo of me to all of my colleagues'
This is an example of raising the stakes, in order to meet a deadline.
Sometimes it works, and sometimes this gets sent to your entire professional network.
The Ethereum team are doing something similar to ensure their merge from Proof Of Work to Proof Of Stake actually happens.
But instead of a goofy photo, they're going to detonate a 'difficulty bomb' in August, which is a program that will slow down the Ethereum network by making transactions more difficult to process.
If you're wondering why there's so much fuss being made about the deadline for a network upgrade, it's because it's been 'a month or two from happening' for the past two years.
The new changes aim to:
Reduce Ethereum’s energy consumption (by up to 98%)
Increase transaction speeds
Give users the ability to earn interest on their ETH
If you're thinking 'that sounds cool, but other blockchain projects already offer those things' - you are correct.
It's not what the changes are, but where they're being applied.
Ethereum is the second largest cryptocurrency in the world, with a massive and wide reaching user base.
This upgrade brings ETH one step closer to competing with the likes of Visa and Mastercard in terms of efficiency, which will have ripple effects throughout the Web3 landscape.
Let's hope the threat of 'the difficulty bomb' does its job.
Your Daily Dose of Web3
Bitcoin and retirement: U.S. House Bill to include crypto on 401(K) plans
Former BitMEX CEO Arthur Hayes sentenced to 2 years probation
NFT artist Beeple’s Twitter account hacked in phishing scam
Alright, that’s it for today!
Love to the family,