- How we can benefit from the “Merge”…
- The EV boom will have to solve this infrastructure problem…
- How to choose the right crypto wallet…
Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
How ether benefits from the Merge…
Let’s begin with a question on the coming “Merge” in Ethereum (ETH)…
Hi, I love the information in Part 1 and Part 2 of The Merge. I own a decent amount of ETH and my question is this: Do I need to stake my ETH to ETH 2.0 to capitalize on the Merge, or will I realize the same benefits just by holding onto my ETH?
– Randall G.
Hi, Randall, I’m glad to hear you enjoyed the premium content we unlocked in recent weeks.
For anyone who missed it, “The Merge” will be when Ethereum – the world’s second-largest blockchain network – switches from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
In Part 1, we explained why Ethereum is planning to upgrade to 2.0…
And in Part 2, we had a look at the coming applications and roadmap forward for ETH.
The Merge is a bullish development for ETH, which will increase adoption – and ultimately, in time, the price – of ETH.
As explained, the Merge introduces PoS to the Ethereum network. That means ETH holders will have the option to “stake” their tokens.
An easy way to understand staking is to use an example from traditional finance (tradfi), such as when we put our money in a high-yield savings account. In the case of a bank account, the bank typically takes our money that we deposit and lends it out to others at a higher rate of return, enabling the bank to pay our yield with its own earnings.
It’s similar with crypto. When we stake, we “lock up” our tokens to help provide liquidity for a blockchain project in exchange for rewards.
Locking up tokens usually provides the benefit of price stability, in the sense that all participants can’t dump their tokens on the market at the same time. In a way, these kinds of lockups are similar to how public companies usually lock up the shares for employees and early shareholders for 180 days after an initial public offering (IPO).
But there are a few considerations investors will want to think over when they decide whether or not to do that with ETH right now.
First, there is a waiting period for people to start staking… And users who stake cannot unstake right away. The time to unstake is not defined yet and could be anywhere from 6–18 months away.
Second, the Merge will likely result in the creation of a second or even third token. And we can’t confirm yet whether every exchange or wallet will support these new tokens.
Additionally, users who stake right now will need to validate blocks, and have an “uptime” of nearly 100%, in order to avoid the loss of funds. That’s why we will recommend using a service that minimizes this risk.
So right now, unless an investor is very experienced with smart contracts or running a validator, I would not stake ETH to ETH 2.0 at this time.
For one thing, the current rewards are not as high as they will be post-merge. And post-merge, we will see a lot more service providers offer methods to earn yield. They will vary in complexity and risk.
Right now, many analysts believe yields will settle around 5% for staking, which is dependent on the number of stakers and transaction activity. However, I believe the yield will ultimately be much more than 5%.
So my general advice right now is for us to be patient and wait until we have a clearer view of the opportunities in front of us.
And as Ethereum 2.0 rolls out, I’ll be sure to update subscribers of Unchained Profits, my cryptocurrency- and blockchain-focused investment service, with the latest developments in this upgrade.
So stay tuned for that in the coming months…
How will EVs get all the power they need?
Next, a reader wants to know more about the infrastructure for the electric vehicle (EV) boom…
Jeff, I follow your technology work closely since I have been in semiconductors since 1971 at TI, Teledyne, Motorola, and then my own.
I am interested in the EV craze but have not seen any real in-depth discussions on a fundamental issue. How do you get all the power needed to charge cars in an older neighborhood when populated with EV units?
The underground wiring delivering to my 40-plus-year-old community does not have the capacity to carry all the needed current. Replacing in-ground wiring is cost prohibitive for most locations for many reasons. Superconductors delivering power is not likely. Some friends at the local utility believe we will have some very large blackouts in the near future.
Your thoughts?
– Bob A.
Hi, Bob, and thanks for being a reader. What a fantastic career experience you must have had, getting a start in 1971 and seeing firsthand the developments in the semiconductor industry in the 40 years that have followed.
You’ve hit on a hot topic for me. Politicians and so-called environmentalists always gloss over these kinds of inconvenient details.
There is so little discussion about the practicalities and realities of widespread EV adoption. They’ll tell us that if we all just buy an EV, we’ll eliminate all of the emissions. But very few people ask how the electricity is produced that fuels the cars (in the U.S., it is almost entirely coal, natural gas, and nuclear fission reactors that produce radioactive waste).
And to your point, what about the practicalities of last mile distribution of electricity – enough to fuel a neighborhood of new EV owners? It’s not just as simple as installing a 240-volt NEMA 14 – 50 outlet with a 50-amp circuit breaker in your garage. That’s the easy part that any electrician can do for us.
The hard part is replacing all of that old wiring and electrical infrastructure in the neighborhood that connects to the grid, in order to support the dramatically increased loads. And there’s no easy answer.
Most neighborhoods wouldn’t want to bear the cost of the upgrade. And electric utility companies are often unwilling to incur the expense of those kinds of upgrades as there is little to no return on investment.
That leaves the remaining solution of having charging infrastructure widely deployed and accessible to neighborhoods across the country. It will take the next couple of decades to build out this kind of infrastructure, but it will happen.
And financing will come from a variety of places, whether it be municipal, state-funded, federal-funded, or funded by private companies specializing in charging infrastructure.
Condos or apartments are starting to add EV charging stations for residents. Additionally, more offices are adding stations as well. That will give consumers more options to keep their vehicles powered up, as a convenient alternative to charging at home.
And on top of that, I’ve previously shared how EV and self-driving technologies will combine to enable shared autonomous vehicle (SAV) networks – essentially, a self-driving Uber-like service. Once that becomes widespread, it will likely decrease car ownership.
And functionally, an SAV service like this could use large electrical fueling “centers” for industrial and commercial usage. This would lessen the burden on last-mile utility infrastructure.
There are also some more novel solutions that are showing promise for charging.
Last year, I wrote about technology under development that would enable our EVs to charge themselves using advanced “magment” – magnetized cement. This technology would enable EVs to receive charge while driving over a stretch of road. If proven to be efficient and cost-effective, this would be a remarkably convenient solution.
I wish there was an easier solution, but the reality is that we are in for a multi-decade infrastructure upgrade to improve our electrical power grids from plant to homes.
And that leaves us with the other major challenge that needs to be overcome… replacing our power generation with clean energy production so that we’re not fueling our EVs with coal, natural gas, hydro (that damages freshwater ecosystems), or nuclear fission (that produces radioactive waste).
Solar and wind simply cannot produce enough power for baseload power requirements necessary to fuel an entire economy and country, which is why I believe nuclear fusion is our best hope for limitless, clean energy… enough to fuel factories, neighborhoods, municipalities, and even planes, trains, boats, and trucking with sub-compact fusion reactors (Avalanche Energy).
Are hardware wallets safer for crypto?
Let’s conclude with a question about crypto hardware wallets…
Hello, could Jeff expound on hardware wallets? With the rise of crypto usage and online hacking, this is definitely a topic worth exploring. Thanks for your time.
– Jonathan W.
Hi, Jonathan, and thanks for writing in. I know many readers are wondering about how to safely store cryptocurrencies, so this is a good topic to discuss.
There are thousands of cryptocurrency wallets that investors can use to store their cryptocurrencies like Bitcoin and Ether. And some options are safer than others.
A digital wallet can be web-based or hardware-based. Or users can even write down the private keys and addresses used for access on a piece of paper.
Each of these options has risk. Human error and fraud are big ones.
Every wallet contains a set of private keys… without which, the crypto owner cannot access his or her tokens. So if someone loses their key – or if it’s hacked – the user will never see those tokens again.
That means if you crash your computer where your keys are kept, for example, you won’t be able to recover your money. The same principle applies to misplacing the paper you wrote your keys down on, or a hardware wallet that breaks or gets lost or stolen.
As for mobile and desktop wallets, it’s critical to only choose a credible cryptocurrency wallet provider.
Unfortunately, many of them are also scams. You might think you are setting up a legitimate wallet, transferring and storing your cryptocurrencies and tokens… but in reality, your money is gone.
And sadly, it’s still not uncommon for projects to get hacked. This is where technical expertise is useful in evaluating blockchain projects that are more resistant to being hacked than others.
How each blockchain project deals with a hack will depend on the project. Some projects actually have insurance to cover such an event, whereas others might sell off their own assets to make everyone whole. Some have chosen to “fork” their blockchain and essentially reset the clock.
Yet due to these occurrences, many people recommend a “cold-storage” method, which stores a wallet in a way that has no connection to the internet. This helps prevent hacking as well, since there’s no web connection for a hacker to exploit.
This is the absolute safest way to store digital assets while maintaining control over the asset’s private keys.
For investors who want to self-custody, I recommend using a hardware wallet for anything more than just a few hundred dollars’ worth of cryptocurrency.
The Trezor brand is a great option in this category. Ledger and KeepKey are also fantastic hardware wallets to consider.
However, there’s one more point worth mentioning – cryptocurrency users should ensure whichever wallet they choose is compatible with the coins or tokens they wish to purchase, as not all wallets support all cryptocurrencies.
The digital asset industry is a rapidly growing and maturing space, but as we can see, it may require a little research to ensure we’re comfortable with our method of storing these assets.
But as the crypto markets recover from their pummeling during the first half of this year, I believe those of us who use this pullback to gain exposure will be richly rewarded for our efforts.
That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.
Have a great weekend.
Jeff Brown
Editor, The Bleeding Edge