Is anyone able to give a little feedback on this letter to the SEC regarding the Ethereum ETF. The SEC comments deadline is within a few days, so I am prepping the letter now. Here it is: The Ethereum ecosystem, centralization, and Proof of Stake are complex topics, but I will start with an undenied truth: Ethereum was launched as a digital security. Initially, investors purchased the ether token with the expectation of profit through the continued work of the Ethereum Foundation. In other words, token purchases were an investment contract as defined by the Howey test. Yet, there is an argument that Ethereum is now “sufficiently decentralized” to be considered a digital commodity, but I would argue that is a bogus claim. First, this concept of “sufficiently decentralized” is nebulous. But for the sake of argument, let’s assume there is some mythical threshold that Ethereum can cross to allow it to be considered a commodity and not just a clever way for the Ethereum Foundation to avoid 90 years of security laws. If Ethereum can cross this mythical decentralization threshold in one direction, what would prevent it from crossing in the opposite direction if it becomes further centralized? Considering that Proof of Stake is centralizing, that’s probable. It’s actually straightforward to understand why Proof of Stake is centralizing: those who stake more ether will obtain more staking rewards, which means that they can stake even more tokens. As their pile of the ether token increases, so does their ability to capture control over the network. Considering that insiders received the vast majority of the token at the initial coin offering, control over the network was never in question. So even if the mythical “decentralization threshold” was crossed, the centralizing aspects of Proof of Stake means it will cross back into the realm of centralized, digital securities. Yet, the concept of “sufficiently decentralized” was never really accurate—the founding entities never relinquished control over the network. Under the previous consensus mechanism, Proof of Work, the developers implemented a “difficulty bomb” as a way to coerce the miners into following the developers’ changes in the protocol. If the miners didn’t execute the developers’ changes, they would incur prohibitively expensive computing costs. The miners were faced with an ultimatum: follow our changes or go out of business. This is just one example of how the Ethereum network exhibits a hierarchical command-and-control organizational structure. It should be emphasized that a command-and-control organization is centralized by definition—its de facto authority over the network. This is in stark contrast to the decentralized structure of the digital commodity Bitcoin, in which change is extremely difficult to implement. During Bitcoin’s history, powerful entities such as Big Tech, miners, chip manufactures, developers, and FinTech VCs—all attempted centralizing changes to Bitcoin—but were fended off by the community at large (Blocksize War by Bier; 2021). Even now, seemingly beneficial changes to Bitcoin are routinely met with extreme resistance and careful inspection from the global community. Bitcoin is truly a decentralized global commodity. Quite simply, no entity controls the Bitcoin network because there is no command-and-control hierarchy. Deceptive affinity marketing from the Ethereum Foundation’s Communications Department is promoting the perception that Ethereum is decentralized when all evidence points in the opposite direction. Indeed, a Communications Department itself funded by the initial coin offering suggests that Ethereum is centralized. This contrast in Bitcoin and Ethereum underlies the observation that Ethereum is a rapidly mutating protocol. What SEC approves in 2024 could be completely different in just a few years. In fact, the co-founder recently issued a new roadmap that could lead to further centralization by increasing the number of the ether tokens required to run a validation node (from 32 eth to 4096 link: https://ethresear.ch/t/sticking-to-8192-signatures-per-slot-post-ssf-how-and-why/17989). Centralizing efforts appear to be increasing and not decreasing—erasing, once again, the mythical “decentralization threshold”. While the Ethereum network is centralized, please also consider how much investor harm could be avoided if the Ethereum Foundation comes into compliance with security laws. In one example of many, the co-founder and Ethereum Foundation have demonstrated a history of selling Ether at the market tops (see: time:26:57). In a typical security offering there are regulations for disclosure of planned insider sales to prevent significant investor loss. Additionally, the Ethereum Foundation’s significant token holdings can easily lead to market manipulation, clearly harming US investors. If the Ethereum Foundation has the ability to control the network and manipulate the price of the token, why shouldn’t the Ethereum Foundation follow 90 years of securities laws? Unfortunately, approving an Ethereum ETF will cement Ethereum’s classification as a commodity and any opportunity for accountability will be lost.

No S-1 from Grayscale? Does Barry screw GBTC holders one last time? Maybe AP’s are afraid to work with them due to liability issues?

It’s in all bitcoiner’s interest to have it scale for everyone. If bitcoin doesn’t scale, people will end up buying paper bitcoin-and the price will be diluted. Changing the protocol is in every bitcoiner’s best interests.

It would be pretty funny if Larry Fink gains enough leverage over Bitcoin the he tips the scales to bring covenants/vaults.

Ethereum has lost credibility for being a sound money. Once credibility is lost, it can never be regained.

After FTX collapsed, bitcoin has outperformed eth. Coincidence? Doubtful, especially after learning Caroline was instructed by SBF to sell bitcoin whenever the price went over 20k.

Elizabeth Warren’s Digital Asset Anti-Money Laundering Act is now more likely to gain support after Hamas was found to launder via “crypto”. US miners would have to sanction addresses. Anyone who transfers more than $10k would have to fill out a foreign report form with FINRA.

China waiting on US to be involved in two proxy wars

Tesla just demonstrated its AGI robot. It can be trained by videos and perform the trained tasks. Sure, it only performs simple tasks, but it’s not hard to imagine that it will someday be trained by the State with War footage to perform unspeakable acts. When it’s released, it must be hacked.

Ethereum has entered an inflationary spiral

Grayscale vs. SEC. The GBTC court case was rock-solid and left the SEC with little-to-no wiggle room in approval of a spot ETF. The SEC could still deny a spot ETF if they pull the bitcoin future ETFs from the market. I am starting to think this may actually happen and I want to be prepared for it. I think a large part of the SEC’s case against Binance gives the SEC some wiggle room. They can state that they didn’t know the level of corruption present in Binance when they first approved Bitcoin futures. And now, in light of all the charges against Binance, they feel that it would “protect” investors by pulling the future ETFs from the market. The SEC has been against a spot ETF for the last 10 years. Why would a corrupt institution just give up after a 10 year fight?

So few people are using Eth that it has become inflationary. That will make fewer people want to use it, which will lead to higher inflation. It’s the beginning of an inflationary spiral. The only hope Eth has is their affinity scam. Eth fanatics have to hope a bitcoin bull market will pull Eth out of an inflationary spiral.

The Enuts iOS wallet is kinda awesome

There is no empirical evidence that the security budget will ever be an issue. The trends show that even though issuance decreases over time, the hash rate increases. Even when price decreases, the hash rate increases. The talk seems very similar to the “death spiral” FUD. It always seems to be brought up by ETH bag holders in order to justify their bad life choices. The talk overlooks the complexity of mining as a business, and how miners will adapt. Even when miners live off fees alone, wasted energy will be nearly free. Few miners will shut down when energy is free, even when fees are the only block reward. Satoshi developed a durable system.

The ‘24-25 run will be massive. Today’s pop will be nothing in comparison. We are seeing incredibly cheap sats.

Is anyone familiar with #friendtech ? Are people really doxxing their own Eth addresses with this? Wouldn’t this be a gateway to a social credit system on eth? I guess this is inevitable on Eth anyway.

There’s a deep conviction in bitcoin that borders on religion. Some people make that out to be a bad thing. The deep conviction is why we have this statistic:

The US Congress is meeting over a pro-crypto bill today. It doesn’t sound as bipartisan as others are making it out to be. If this version is passed, shitcoins will likely proliferate and gain a pathway to being classified as a commodity. Here’s a recipient of SBF donations criticizing the bill.