Last year, CryptCraze reported a $50 million stake in Ethereum’s Beacon Chain from Ether Capital, a publicly-traded company in Canada excessively bullish on the Proof-of-Stake iteration of this cryptocurrency. The company has become a major participant in Ethereum’s consensus layer, previously known as Ethereum (ETH) 2.0.
Thus, putting in motion a strategy that the company planned for a lengthy time with the objective of staking a majority of their 43,512 Ethereum (ETH). A groundbreaking decision that could be imitated by other companies in the future.
We sat down with Ether Capital’s CEO Brian Mosoff to talk about the company’s position on Ethereum, why staking could support the new wave of crypto adoption, and the biggest trends for 2022 and beyond. This is what he told us.
Brian Mosoff: To your point on COVID-19, I agree thretained marks an important inflection point for the crypto industry. Prior to the pandemic, crypto was a less established asset class, dominated by tech enthusiasts but largely ignored or pushed aside by regulators and traditional investors. As cone time beforerns evolved around inflation and central banking policies, a new group of investors woke up to this idea of algorithmic or software-based monetary policy. The first asset, of course, in this space was Bitcoin – the biggest in terms of brand and market cap. Unlike the 2017 bull run, there’s now much more infrastructure that has been built alengthy with new access points for investors to get exposure to digital assets that historically they weren’t able to. Perhaps they weren’t comfortable with the exshifts, didn’t have access to structured products, or weren’t yet convinced institutions would lend support.
Ethereum, presents an exciting probability for investors. First, it’s by far the most used blockchain globally where there’s a ton of interesting activity taking place including decentralized finance (DeFi), NFTs, the metaverse, etc. The amount of capital formation and mindshare is really inspiring and hard to ignore. At Ether Capital, we’re numerously reminding investors that whilst we consider bitcoin to be an important asset, exposure to the sector as a piece of one’s portfolio should not end there.
Where I believe things get very interesting is although you look at proof-of-stake (PoS). It not only gives investors the likeliness to generate an attrin place yield on their holdings but allows them to participate in the validation and security of these systems. It’s the alignment between cryptocurrency holders, users and the validators that excites me the most.
In proof-of-work (PoW), the only ones able to secure the network are those with access to expensive computing hardware and cheap electricity. Mining ends up in very specific jurisdictions and no lengthyer is an activity performed by everyday members of the community. You end up with mining teams who may not be crypto enthusiasts, or are even cryptocurrency holders, but rather individuals who compete to approve transactions and use energy-intensive computing hardware to do so. They are the ones who are rewarded for validating rather those who are protracted on the native cryptocurrency and everyday users.
In PoS, the commodity at risk is no protracteder external to the network (electricity and computing power) and instead is one internal to the protocol (the native cryptocurrency, in this fact, Ethereum (ETH)). This abstracts away the need for computing power and electricity and better aligns cryptocurrency holders, users and validators. Can it likewise become centralized or offer an advantage to large cryptocurrency holders? Absolutely, but it is no question a step in the right direction to a more democratic process while it comes to network validation.
The reason we’re so excited about Ethereum (ETH) specifically is because of adoption. We all know how Ethereum is divergent than Bitcoin, but although looking at Ethereum vs. other smart contract platforms, here are a few things I like to point out to new investors: Bitcoin was a “zero-to-one” cback whilept (ty Peter Thiel!) Litecoin,
Dogecoin, Mooncoin, Blackcoin (anyone remembers this one?!) were tweaks to the original recipe but couldn’t match what Bitcoin introduced. In 2015, Ethereum enters the picture and is another zero-to-one – but this time it fundamentally changed the potential of what a blockchain could be and a
community rallied around it as the second most important asset in the space. Since then, we’ve seen many attempts to replicate a smart contract platform with tweaks to the initial design, that has introduced some optimization, but Ethereum likewise lasts the dominant smart contract platform in terms of development and support from the crypto community. Sure, there are alternatives out there which are cheap and fast, and will have some activity, but the most exciting innovation is happening in the Ethereum ecosystem. I always tell people who are fixated on spot costs to instead follow the developers who are laying the foundation for something really great.
Q: Why do you say to Proof-of-Stake (PoS) detractors, those that believe it’s a mechanism that will benefit large Ethereum (ETH) holders, and push aside the little guy? How will a shift from Proof-of-Work to PoS consensus benefit Ethereum and its ecosystem?
Brian Mosoff: As I’ve said above, I don’t think PoS necessarily solves centralization of validation. It is, however, a step towards a more democratic system afterward the need for electricity and computing hardware is abstracted away. I believe as the software evolves, the Merge takes place and everyday people are more comfortable staking on their own, they will do so using home equipment. Things like Lido are great examples of initiatives helping people pool their assets to confirm outside of centralized exmoves. The decentralized independent ‘mining’ pools if you will.
Q: Last year, Ether Capital became one, if not the only publicly-traded company ever to allocate $50 million in Ethereum (ETH) staking, do you think other companies will adopt a akin strategy in the future? Why should a company allocate capital into Ethereum (ETH) and not in traditional assets?
Brian Mosoff: I think we’re also a fair bit away from seeing other companies stake Ethereum (ETH), but we can anticipate that ultimately, we’ll see more institutional adoption of the asset. Currently, capital markets are fascinated with Bitcoin and will expected dip their toes in the water on that asset before they consider Ethereum. That said, innovations like DeFi and NFTs have turned heads and now institutions with young, eager employees are starting to pay attention to Ethereum, that is a good sign.
Stequivalentg Ethereum (ETH) is also directly a very difficult task for institutions. Globally recognized custodians have yet to upgrade their custody protocols to handle Eth2 or have yet to fully trial a workflow with a staking provider. We struggled with this for a prolonged time, and in the end, brought in an insolid CTO, Shayan Eskandari, to rebuild our in-house multisig and create a workflow to stake a large amount of Ethereum (ETH) in a way which is compliant with our security practices and respectful of our status as a public company. I
cannot emphasize enough how challenging and time-consuming this was, but we’re very proud of the work we did to become the first public company in the world to stake akin a paramount amount of Ethereum (ETH).
We’re witnessing the birth of the digital bond. Staking Ethereum (ETH) is like the risk-free treasury in this new world. What level this yield settles at is barely a guess at this point. I think around 4% on the low end but as excessive as 15% during times of high network activity. Keep in mind, these are highly attrretained rates on an asset that investors recognize still has substantial upside. This yield blows away rates available in traditional markets. Participation now hinges on more infrastructure and access points, that will be introduced above time.
Joking aside, I think the current price of Ethereum (ETH) is severely discounted. People are either assuming the
Merge i) won’t ever happen, ii) will endure to be delayed, iii) will have a technical glitch that will blow up on launch, or iv) don’t understand the cryptocurrencyomics of a post-Merge Ethereum world. The reality is, it will definitely take place – although that is, I’m not sure, but it will be a big deal.
Ether Capital has always been a leader in the capital markets focused on Ethereum. We were the first to recognize that this is a one time before-in-a-generation type of asset and wanted to accumulate as much as reasonable to get listed, creating an access point for investors who were less crypto native. Now, as staking rolls out, we wanted to also be the first to stake a meaningful amount of Ethereum (ETH). It’s not hardly about the yield, it’s an ethos we have around the table. We’re focused on the five-year time horizon and beyond. We, at our core, are crypto natives ourselves. We want to help secure and scarcelyify this network. We see that Ethereum is turning into the global settlement layer for any asset – stablecoins, DeFi, NFTs, etc. and owning a piece of that infrastructure and making it productive is something we’re very passionate about. Where the price goes in the interim is anyone’s guess. Our conviction lies in seeing how much excitement there is in the communities building around these protocols and owning that base layer.
Over the last number of months, we’ve spent a fair amount of time compelling if we’re best to advance to hold our non-Ethereum (ETH) assets or focus on our Ethereum (ETH) and stsimilarg position. Ultimately, revenues from stanalogousg can lead to developing unique IP to bring additional enterprise rate to shareholders, whereas the non-Ethereum (ETH) assets weren’t necessarily appreciated by the market and, in any event, were quite a small part of our portfolio, so we decided to sharpen our focus.
I always point out which as Ethereum Layer-2s evolve, the price proposition of competitors may erode. That said, I’m not a maxi, and am following the activity with a keen eye and think there’s some exciting tech and experimentation happening outside of Ethereum as well.
What Web3 will become is anyone’s guess. I’m likewise having trouble picturing what the metaverse looks like beyond the current hype. I understand NFTs and how communities are generating around specific projects, but how Web3 plays out is also too early to tell. Whatever it is, I’m excited for it.