Shanghai Is Creating a Whole New Market on Ethereum

Plus: Why World Banks “Owe a Big Thank-You” to Crypto; Ordinals Suck Now, But They’re Good for Bitcoin

Shanghai Is Creating a Whole New Market on Ethereum

There are three topics I cannot stop talking about these days.

They are Ethereum yield curves; Bitcoin ordinals; and what the puppet masters at the World Bank, IMF, and BIS are saying when it comes to crypto.

These three things are literally my happy place.

And in today’s Blend, I hit on each of them. I hope you enjoy. And if you have any questions or feedback, please don’t hesitate to drop it below in a comment.

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Moving on to what we want to hit on today…

The Ethereum Bond Market Is Here

2022 was the year all of crypto got an education on yield curves. In particular, the yield curve associated with U.S. Treasuries, and the phenomenon of a yield curve inversion.

In case you don’t know, a yield curve inversion is when the 2-year Treasury yield is higher than the 10-year Treasury yield. It happened last July. And as our analyst TD explained, it has a perfect record in predicting recessions.

If you think about it, it makes sense why. Borrowing capital for longer periods of time should cost more than borrowing for a shorter duration. When it’s the opposite, allocating capital is trickier.

The good news is, our newfound knowledge of yield curves in 2022 is now useful for crypto, too. Not because of price correlation between equity markets and crypto. But because Ethereum is about to have its own yield curve.

Some of you may recall that back in January of this year, I expressed some excitement about my tongue-in-cheek post of the first ETH yield curve. You can see that below.

The reason it shows infinity on the x-axis is back in January, the ability to unlock staked ETH was only a roadmap item. Hotel California, as J.J. puts it – you can check in, but you can never leave.

Thankfully, this has since changed. Stakers can now unlock their tokens.

Last week, our analyst Kodi looked at what effect this has had on the network. The common belief was that the ability to unlock staked ETH would result in a sell-fest.

Instead, the opposite happened. Users became more likely to stake their ETH.

Right now, the wait to stake one’s ETH is more than a month, according to Kodi... while the wait to unlock is 0 days (because few are unstaking).

If a user does not want to wait a month or so to stake, they can purchase a derivative token like stETH to begin earning those rewards the same day.

That’s 35-40 days down to 0, in just a few minutes.

What this means is we have the need for a secondary market beginning to percolate on bonded ETH. Cue up your recent knowledge binge on Treasury yield curves – and also my excitement.

And here’s the really odd part… something that touches on the market’s current inefficiency and the need for a good secondary market.

While there’s a delay to stake ETH and earn rewards, buying stETH allows users to essentially cut the line and begin earning rewards without delay.

Theoretically, you would think this time difference would be expressed in the exchange rate between ETH and stETH.

Right now, a user can get 1.0011 stETH for 1 ETH.

But since there is a month-long wait period to stake ETH, this represents a bit of an inefficiency. The premium should sit in acquiring stETH. Meaning we would expect 1 ETH to get less than 1 stETH in return (ignoring gas fees).

The ETH yield curve is “inverted.”

Zooming out, this time component of earning yield on bonded ETH is very similar to what we do with “staking” dollars to the U.S. government and earning interest.

I anticipate we will see this market become much more robust in the year to come as interest grows in crypto. Specifically, this secondary market will become more efficient.

I recently came across Hourglass Finance, a project which is involved in this secondary market. There are others starting to spring up as well. Even Lido already offers NFTs for those waiting to fully unstake their ETH, representing a receipt for ETH rewards that could be traded in the future.

I’m very excited to see this develop further. That’s because we can gain further insights into how this secondary market acts. Soon, we will be able to larp on crypto Twitter about bull steepeners and bear flatteners when it comes to Ethereum.

And before long, this will result in – mark my words here – a council that focuses on monetary policy for Ethereum.

Crypto’s Overton Window Is Shifting

“We owe a big thank-you to the cryptocurrency industry.”

This comment felt like a backhanded smack across my face.

It came during a Q&A session with Agustín Carstens, the general manager of the Bank for International Settlements (BIS).

I assumed Carstens was undermining what crypto accomplished.

But when I finally read the speech that Carstens delivered earlier that day, I realized I was wrong.

In his speech, Carstens explains his vision of a global unified ledger. The dream is ambitious, but vague. There was no discussion on what would be built, and it was scant on details in terms of the technical implementation. Which is likely why many of the questions from the audience pushed back on how this would look.

Nonetheless, what was so interesting about his speech were some of the topics Carstens hit on. He discussed how smart contracts can provide automation for compliance and even certain financial transactions, and how blockchains can improve transparency. He even hit on tokenization.

This is where his big thank-you to the cryptocurrency industry stemmed from. And it felt like the BIS was embracing what many readers of Espresso already embrace in cryptocurrencies.

But here I was rugged a second time.

Carstens stated his unified ledger dream does not require decentralized or permissionless platforms. Instead, it will push forward with a centralized and permissioned platform. And the money needed for such a system (a money that has what he called “oneness” – whatever that means) is something only central banks can provide.

This stark contrast between distributed and permissionless ledger tech versus centralized and permissioned will be something to watch moving forward.

While on the one hand, the BIS acknowledged that crypto helped innovate money… it also went ahead and neglected the ethos of crypto. I expect as central banks start to go down this route of a unified ledger, without a doubt, they will see why distributed and open-sourced networks are more resilient to bank vault attacks than what they propose.

We’ve already witnessed countless hacks, attacks, and exploits that have caused billions of dollars of losses in crypto. When it comes to centralized banks, this figure is likely much higher – we just don’t know what that number is because of our opaque financial system.

To get an idea of just how bad… in 2014, JPMorgan Chase was subject to a hack where two out of three households in the U.S. were impacted. Meaning if you weren’t impacted, your two next-door neighbors were. That’s insane.

While it’s impossible to know how much the hack cost the victims, we do know the hacker stole sensitive information that is now floating around the internet and being used for financial crimes.

But if the BIS goes forward with a unified ledger and stays true to its claims of transparency, we will likely figure out how bad hacks like this one and others are soon enough.

Regardless, the main point I do want to hit on is that despite its different approach to blockchain, the BIS is not trying to wall out crypto. There was mention of compatibility and inclusion of existing solutions.

This is why my assumption was so wrong from the start. There was actually an air of acceptance to the world of crypto. It caught me way off guard.

This is a great thing in my opinion. If the BIS is rather open to the accomplishments of crypto and does not look to ultimately shut it down… It means it may stay open to changing its tune on being fully centralized and permissioned.

To say this another way… The Overton window on crypto is shifting at the highest level, and we should support solutions that showcase the benefits of permissionlessness, verifiability, and decentralization.

I’ve been a bit skeptical about the path forward for crypto in the face of government regulation, especially in the U.S. But after hearing this speech, I’m much more optimistic about its future amid new plans from large organizations like the BIS.

Why Ordinals Are Bullish for Bitcoin

Bitcoin's ordinal trend sucks right now.

The projects for BRC-20 tokens have no utility attached to them. The indexing tech makes it difficult to keep track of what tokens a user actually owns. And further problems arise when you transfer them to a centralized exchange.

Right now, making ordinals on Bitcoin is like finger painting over the Mona Lisa. They’re ruining a masterpiece for the sake of subpar artwork.

And yet, they’re the reason I’m currently the most bullish I've been on Bitcoin since 2018.

I’ll explain why in a minute. But let’s back up here.

Ordinals allow a user to inscribe a satoshi with various digital files. And they enabled the creation of BRC-20 tokens, a new standard for Bitcoin that allows users to mint a group of satoshis that form a group of tokens or “altcoins.”

The thing is, the user interface to look at these ordinals or trade BRC-20 tokens SUCKS. Seriously, it’s horrendous. In fact, speaking with the lead from one of the few projects working on this major trend (, I am aware of just how new this technology is.

It’s fascinating what this might lead to. But right now, it hasn’t created anything very innovative outside of some grouped satoshis and potential failures.

Specifically, the ability to index these tokens relative to the rest of the supply, to ensure users have the BRC-20 tokens they claim to have, is not foolproof. Meaning errors could happen since some of the current solutions are centralized.

Per my colleague Leo at, we wouldn’t be surprised in a few months to see issues arise where users don’t hold the BRC-20 tokens they thought they purchased.

Furthermore, these tokens aren’t very compatible with centralized exchanges. Specifically, when you transfer a BRC-20 token to an exchange, you sort of separate the inscription from the satoshi. Meaning a user that purchases that BRC-20 later might actually be buying a different satoshi. So what does a BRC-20 token holder actually own?

These questions have led to some contentious arguments in the crypto community. In fact, ordinals are creating such a shitstorm around Bitcoin that their supporters like Nic Carter, Udi Wertheimer, and Eric Wall are getting tarred with their every comment.

And while the Bitcoin maxis have yet to feather them, they are trying.

But let me explain why I’m on the side of Nic, Eric, and Udi here – in terms of dollars and cents.

Remember what makes Bitcoin so incredible. It’s the most secure form of storing decentralized, permissionless, and distributed data. That is a monstrous feat. Nothing else comes close.

The network pays miners for those security efforts. If we pull up what miners have been paid over the last 10-plus years in BTC and USD, we get the two charts below. Miner fees are the blue lines, while BTC’s price is the black line.

Note that before 2018, miner fees were always rising. Since then, the trend has mostly gone sideways and even declined occasionally.

Thankfully, the most recent spike is approaching new highs. The higher this spike goes, the bigger the payout to miners. The bigger the payout, the more likely that new miners enter the mix.

And as more miners come online, the more secure the network is. That’s a good thing right there. It’s a positive feedback loop that needs to continue. And as for price, this trend looks to have a strong correlation with price cycles.

At the heart of this is the fact that ordinals are triggering these feedback loops.

Yes, there are still plenty of kinks to work out with ordinals and BRC-20 tokens. But it’s early. We can’t ignore this trend.

For one thing, Bitcoin is becoming more about builders than it has been for many years.

It’s becoming less about preaching the greatness of sound money, emission rates that can’t change, and its lindy-ness (the idea that because it’s the longest-lasting cryptocurrency it’s more valuable). And more about what is coming next. Innovation is coming to Bitcoin.

It’s exciting. And to summarize what this truly means, I’ll quote Nic who I think has had a sound response to many heated arguments over the last several years…

I'm seeing for the first time, startup investors who would never look at Bitcoin are looking at it as a place to deploy capital. NOT just crypto investors, generalist investors.

Once ordinals really gain their footing with good UI/UX, they will blow the doors off the crypto world. Keep an eye on this space.

Thank you for reading Espresso. This post is public so feel free to share it.

For those that are interested in current ordinal solutions, Jarvis Labs is involved with It allows users to inscribe blog posts using the Bitcoin network. You can set up an account yourself on their site in minutes, and start inscribing your blog posts to Bitcoin.

It’s currently the greatest UI/UX experience in the market, and the team is looking forward to rolling out novel solutions like having your blog or website powered by Bitcoin – and for that matter, any chain – soon.

In the meantime, let’s not bury the ordinals hype. If anything, let’s keep a more discerning eye on it moving forward.

Your Pulse on Crypto,

Ben Lilly