My Thoughts on Messari's 2023 Thesis

Some opening thoughts

I’ve been a fan of Messari’s Theses since 2018. Ryan can be annoying on Twitter, but I think we’d actually be friends in real life.

For starters and most importantly, I love how he ends his 160+ page thesis with a grounding point: buy a house in the burbs & start a family.

While that may not be everyone’s goal, it resonates with me. We take our jobs so seriously, nothing beats the feeling of coming home to a 4 year old excited to see you (I’m not there yet, but I’m looking forward to it).

I also appreciate his philosophy around writing. His section “why you must write” is a great reminder around how important it is. To think clearly, you must write well. To write well, you must read well. I’m not sure who said it but I believe in the idea.

I’m writing these thoughts out for myself, but hope that others may find them useful.

My Thoughts

I’m excited about the bear market. I think it filters out a lot of the noise: the scammers, ponzies and pump and dumps. It’s hard to get into crypto as a developer because you must know where to look to learn how it all works. Bear markets are a great opportunity. Bear markets are for builders.

Ethereum will face pressure with T-bill rates so high

I think this is an interesting point. A guaranteed, non-taxable federal reserve rate of 4.6% is great. ETH Staking offers 5-7% on an asset that goes up and down in price. That might be worth it if I’ve been holding eth for years. If I’m thinking about buying eth now, I think I would rather wait for the new year and see what happens.

Ethereum’s revenues are shrinking. Apple’s P/E is 23. Ethereum’s “P/E” is 195. If you’re looking at financials alone, ethereum is overvalued. I was playing around with ultrasound.money and it seems like the current price should be around $600. That being said, after checking it this morning, something was fixed on the site and pegged it’s P/E to 30 and locked in a price of 1.2K USD. /shrug

Validator decentralization

70% of hosted nodes for both ETH and SOL are on AWS, Hetzner and OVH
50% of Solana validators are located either in Germany or the US
60% of Ethereum validators are located in either Germany or the US

I’m not sure if this worries me as much as it offers an interesting fact on what’s going on. I think this might be a cause for concern long term but it also is an awesome opportunity to spin up validators in different countries.

Things I learned

Account Abstraction: streamlines user management of accounts and assets. I think I saw an example of Lens do this recently. It brings a UX experience most of us are used to in web2. Instead of having to sign every mundane transaction, you delegate permission to a smart contract that takes care of that for you. Similar to scopes in OAuth. For lens this works great for posting content.
Proposer Builder Separation: Delegates computationally intensive work to specialized block proposers. I’m still struggling to figure out what this does but it seems like it would make it easier for anybody to run their own ethereum node.
Light Clients: light clients use a new process to validate parts of the tree (I think). This opens up the opportunity to run nodes on laptops and phones rather than through third-party hosted nodes or centralized RPC providers.
Stablecoins. Terra UST took place earlier this year. I liked UST and used it myself. That being said, I was looking the other way when I should have been staring at the red flags. It was considered a decentralized stablecoin, something we need. Something that clearly didn’t work. Ethereum has its own algo stablecoin called FRAX. It’s partially algorithmic, otherwise backed by collateral. Whether it’ll work or not is TBD. I think it will be awhile before algo stablecoins become popular again, even if FRAX is great.
Rollups. There’s a new concept called soverign rollups. They’re a mix and match blockchain that shares consensus or data availability. There’s a thesis that appchains on Cosmos will be part of the next bull run as folks start building specific chains for their own applications (hence app chains). Think of having a specific a e-commerce based chain that can roll up its security to Ethereum, etc.
Shanghai upgrade is supposed to happen around March 2023. This will allow folks to finally unlock their staked ETH. This also changes the duration to 27 hours. You could argue that folks staking their eth have been chomping at the bits to sell. But since they’ll be able to unlock almost every day, the risk to unlock falls dramatically. One could argue that this will increase the amount of ETH staked and increase the price.
JP Morgan proejcted staking could be a $40B/yr industry by 2025. That would have to grow to $40B. In that case, that would be $1.6B/yr in annual revenue for Lido. A massive money maker! Wow.
I learned that Goldfinch has been growing steadily despite crypto volatility. Goldfinch’s offers off-chain loans. Their risks are the fintech sector and higher developing economies
Zerion, Zapper & Nansen make it easier to track specific wallets in real time. They also allow you to manage full, complex portfolios from a single dashboard

Final Thoughts

Although this year has been filled with a lot of uncertainty around crypto, I’m generally excited. I think everyone is looking for the opportunity to buy more. I’m not sure what that will look like long term. I’m not sure if I want to start buying crypto today or sometime in the new year. Things seem pretty stable right now. The feeling of “am I going to miss the next bull run” is always in the back of my mind. Maybe I will, maybe I won’t. Most importantly, I have to remember to keep building.