What If ETH ETF Gets Approval: Who Takes the Lead?
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The anticipation around the potential approval of an Ethereum Exchange Traded Fund (ETF) marks a pivotal moment in the crypto landscape. While similar excitement had surrounded the Bitcoin Spot ETF, insiders are now hinting at BlackRock's confidence in the SEC's probable approval of an ETF for Ethereum, significantly impacting the market dynamics.
I. What is ETH ETF?
An Ethereum Exchange Traded Fund (ETF) represents a structured investment vehicle that tracks the price of Ethereum. Its approval by the US Securities and Exchange Commission (SEC) signifies a gateway for traditional investors to gain exposure to Ethereum's value without directly owning the asset.
The approval of an ETH ETF holds the potential to significantly influence the crypto market by legitimizing Ethereum as an investable asset, attracting institutional capital, and possibly driving the mainstream adoption of cryptocurrencies.
source: @JSeyff - post on X
II. Emerging Cryptocurrencies Poised for Growth
1. Liquid Staking Derivatives (LSDs)
a. The Post-Merge & Shapella Influence
The culmination of Ethereum's critical upgrades, The Merge and Shapella, has catalyzed the rise of Liquid Staking Derivatives (LSDs) within the crypto sphere. These transformative milestones paved the way for the conceptualization and implementation of LSD protocols and the establishment of the LSD Finance ecosystem.
The success of The Merge's upgrade, transitioning Ethereum's consensus mechanism from Proof of Work to Proof of Stake, instigated a surge in ETH staking. This surge underscored the necessity for innovative platforms like LSD protocols, designed to address the evolving needs of a rapidly growing market.
b. Addressing Barriers in Ethereum Staking
The transition from Proof of Work to Proof of Stake via The Merge brought about significant changes, increasing the number of ETH stakers. However, this shift also unearthed hurdles that inhibited broader participation. LSD protocols strategically target these obstacles, offering solutions to challenges such as the demand for substantial staking amounts, specialized hardware prerequisites, and the risk of slashing penalties during network disruptions.
With the advent of Shapella, an upgrade enabling users to withdraw previously staked ETH, staking has become more accessible to the broader spectrum of retail investors. LSD protocols act as a facilitator, ameliorating barriers to staking and enhancing user profitability, all while reinforcing the network's security.
c. Benefits for Retail Investors
The emergence of LSD protocols signifies a paradigm shift in facilitating easier participation for retail investors in the staking ecosystem. By streamlining the staking process and mitigating entry barriers, these protocols democratize access, empowering smaller investors to engage in the staking of ETH. This democratization not only augments the network's security, correlating staking volumes with enhanced network resilience, but also fosters an environment conducive to greater market participation and decentralization.
2. Layer 2 Solutions
a. Alleviating Network Congestion
During periods of heightened activity on the Ethereum network, Layer 2 solutions serve as the critical antidote to network congestion. These auxiliary networks operate off the blockchain, augmenting its capabilities and addressing the scalability limitations observed at the base layer.
b. Improving Transaction Throughput
Layer 2 technologies aim to revolutionize the transaction throughput by facilitating quicker and more efficient transaction processing. By alleviating the strain on the primary Ethereum network, these solutions significantly enhance the speed and scalability of transactions, thereby fortifying the ecosystem's overall functionality.
Layer 2 solutions are a strategic response to the limitations of the base layer, optimizing the execution, data availability, and consensus functionalities of the Ethereum blockchain. Their implementation fosters an environment that champions scalability, speed, and accessibility, crucial for the sustained growth and evolution of the Ethereum network and its associated applications.
III. Impact on Related Assets
1. Dinosaur Tech: ETC & ETHW
a. Evolution of Ethereum's Forks
Ethereum's post-Merge landscape brought forth consequential forks, notably Ethereum PoW and Ethereum Classic (ETC). These offshoot chains are emblematic of the divergence within the Ethereum community regarding the transition to Proof of Stake.
Ethereum PoW emerged as a response from miners, contesting Ethereum's move away from the Proof of Work mechanism, a shift they deemed an abandonment of the core attributes defining classic crypto assets like Bitcoin. This divergence signifies a critical moment in the network's history, resulting in the continued existence of a chain maintaining the pre-upgrade Ethereum features.
Ethereum Classic, formed as a result of the contentious DAO hack, embodies the split within the Ethereum community. The philosophical divide, rooted in the 'Code is Law' principle, led to contrasting views on the handling of the hack's aftermath. This division remains a testament to the broader philosophical and ideological diversity present within the Ethereum community.
b. Community Philosophical Divisions
The ideological fissure stemming from the DAO hack's aftermath underscores the contrasting perspectives within the Ethereum community. The debate revolving around the decision to reverse the hack or uphold the principle of code immutability led to a definitive split, giving rise to Ethereum Classic.
The Ethereum Classic network, advocating for code immutability and the sanctity of the original blockchain, stands in opposition to the majority's stance favoring the reversal of the DAO hack. This ideological schism highlights the fundamental philosophical differences regarding the role of blockchain in correcting or preserving immutable transactions.
2. Dex Tokens
a. Role of Decentralized Exchanges
Tokens associated with decentralized exchanges (DEXs) such as Sushi, Uni, and Balancer are positioned to benefit from an ETH ETF approval. These decentralized platforms play a pivotal role in the crypto ecosystem, facilitating peer-to-peer trading, eliminating centralized control, and ensuring a more democratic and transparent trading environment.
b. Potential Growth Amid ETF Adoption
The approval of an Ethereum ETF is anticipated to significantly impact DEX tokens, amplifying their relevance and adoption. As the broader crypto market gains momentum and mainstream interest surges, DEX tokens stand to witness accelerated growth, bolstering their position within the evolving financial landscape.
source: @hagaetc - Dune/ DEX metrics
3. Extra Assets to Watch
Additional cryptocurrencies such as Rune, CRV, YFI, ENS, LINK, and MINA offer unique investment prospects. While not directly tethered to the ETF approval, these assets exhibit significant potential for growth and innovation within the dynamic crypto space.
The potential approval of an Ethereum ETF holds vast implications, not only for Ethereum itself but also for various related cryptocurrencies and protocols. As this regulatory milestone approaches, the broader market eagerly awaits the ripple effects that could shape the future of digital asset investment.
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