Paper 33: The Merge Preparation
Important questions to consider before The Merge
Contents
The Merge Preparation
This Week in NFT World
Thought of the Week
Meme of the Week
Before we get into today’s paper I want to announce I’ve made open to the public way more channels of the 32 Dreams discord.
Now you do NOT need to be our NFT holder to
see which airdrop opportunities we see (core tutorials are still exclusive to holders)
see what our members are discussing
access tokenless bridges which may drop a token in future
participate in some of our bonus tutorials (e.g Zerion + Orbiter Finance.)
Come and check it out if you are interested: 32 Dreams discord.
Have a great week!
B
1. The Merge Preparation
You are going to be given 1 ETH POW (Proof of Work) for every 1 ETH POS (Proof of Stake) you hold on Ethereum mainnet when the Merge is scheduled for September 13 2022. Free money!
Right?
Did you know that? Are you prepared for that? Do you know what you might be able to do with that ETH POW? And where? And how much each 1 ETH POW might be worth?
And do you know about replay attacks which might make you lose your ETH after you transact with ETH POW?
To not do something stupid, dangerous, and to try to be thoughtfully opportunistic I published this summary of a call we had with our NFT holders in the 32 Dreams discord.
We are coming together to produce a report on how best to think and act on ETH POW hitting our wallets and will hold a live '“war room” for 32 Dreams NFT holders when it happens in a couple of weeks.
Here is the key information and questions we have discussed so far:
SUMMARY OF MERGE (POW vs POS) STRATEGY CALL 30/08/22
1. ETH POW vs ETH POS - why is this happening & background
The Merge is happening on approx. Sep 13.
We explained ETH is being hardforked. This just means the chain is being replicated. This is happening because ETH wants to move from POW to POS (more efficient).
This means there will be two chains: ETH POW and ETH POS.
All of your assets will be duplicated (if you have 1eth, you will post-merge have 1eth POS and 1eth POW; 1 bored ape = 1 bored ape POS and 1 bored ape POW).
Whilst most ppl are happy to move across to POS, miners are not happy and want to keep the POW chain running because they make money on the POW chain - and they will not make money on the POS chain. This means there will be a period of speculation in which people try to decide the value of POW assets.
2. What is the upside?
This is not the first time forks have happened: Bitcoin Cash, Bitcoin Gold, and Ethereum Classic are examples of previous forks.
They tend to trend downwards in value, but even now they are still worth something. And they appear to have more value close to their release.
The upside lies in getting hold of ETH POW safely and selling it safely as quickly as possible.
Alternative strategy: as people try to maximise their on-chain ETH, it might mean you can lend your ETH at a more attractive rate - could this be better/safer than participating in the ETH POW trade?
3. What are the risks?
A replay attack is when an actor takes a transaction from one chain and replicates it on the other.
If you send 100 ETH POW on the POW chain from your wallet to a friend, then your friend could broadcast the same transaction in the POS chain and send himself 100 original ETH to his same wallet. (You lose your real ETH!)
This is serious and not to be underestimated.
4. What are the implications for L2s and CEXs?
Any ETH on L2s will not be duplicated and get ETH POW. It is very unlikely you will get hold of your ETH POW from CEXs.
5. Preparatory questions
A. Strategy 1 - Maximise on-chain ETH
i) How should we maximise our ETH on mainnet? Should we spread across multiple (burner) wallets?
ii) When exactly will the ETH POW be tradeable in our wallets?
iii) How do we connect to ETH POW chain?
iv) With which exchanges should we sign up because they will support ETH POW?
v) How do the replay attacks precisely work?
vi) How do we mitigate the replay attack risk?
B. Strategy 2 - Lend ETH and fade the POW trade
i) Where is the safest place to lend ETH?
ii) Who is offering the best rates to lend ETH?
iii) What are the risks to lending ETH?
C. How can we compare Strategy 1 vs Strategy 2?
i) What is the analysis of these two strategies against each other?
D. Any other strategies?
i) Any other big brain ideas?
Hope that is an interesting insight into something which many people do not even know is happening.
I do not have a definitive recommendation on what to do when The Merge happens. But I do hope to answer the above questions in the next week or so.
Best place to keep up with us on this is in the 32 Dreams discord.
2. This Week in NFT World
Yuga Labs reveal trailer for Otherside - A two minute trailer was released for the Otherside, the metaverse being built out by Yuga Labs, the creators of the Bored Ape Yacht Club. The story will continue in Q4 this year.
Marketplace gives buyers option to ignore creator royalties - X2Y2, an NFT marketplace, announced that buyers on their platform could opt out of the creator royalty which is usually set by the creator of the NFT. This is very controversial because many in web3 believe royalties empower artists.
PROOF deliver multiple announcements and reveal their vision - PROOF announced (amongst many other things) that they will launch their own Curated line of artwork and many established traditional artists into NFTs.
New scam of disappearing ETH - High WETH offers above the listed price of NFTs were making people think they could buy the NFT and sell immediately to the offer. As soon as they bought, the offer disappeared: no arbitrage!
yOOts NFT mint - The most anticipated NFT mint in a while was delayed. They selected minters via an application process instead of using a tech-solution to whitelist buyers.
We spoke about all of this and more in this week’s episode #16 of NFT World.
3. Thought of the Week
Do not, under any circumstances, suggest in public videos that the government can “go f*** themselves" when trying to tax Bitcoin which may or may not have been lost in a boating accident.
Michael Saylor, famous Bitcoin investor, is being sued by his district for tax fraud.
If you do choose to do this, the government may come after you.
Only two things are certain friends: death and taxes.
4. Meme of the Week
Leo wouldn’t last 25 hours in the NFT space. Shoutout @NFTsAreNice
Have a great week,
B
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Disclaimer: The content covered in this newsletter is not to be considered as investment advice. It is for informational and educational purposes only.
I hold some of the NFTs mentioned in these newsletters.