Speaker 1: This is Bloomberg Crypto, a daily Bloomberg Ihad podcast, and
Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News.
Speaker 1: It's Monday, February six. It's almost time for another blockchain
Speaker 1: software upgrade on the Ethereum network. Yes again. Nearly five
Speaker 1: months ago, the Ethereum blockchain successfully completed what was at
Speaker 1: the time a very complicated and years in the making update,
Speaker 1: called the Merge. It allowed the blockchain to move from
Speaker 1: validating transactions using computers that were very energy intensive two
Speaker 1: computers and a process that was a little bit less
Speaker 1: energy intensive, or actually a lot less energy intensive. That
Speaker 1: switch cut if Arium's power consumption by more according to
Speaker 1: various calculations. And after that upgrade, the price of Ether,
Speaker 1: the token that trades on the Ethereum blockchain, rallied a
Speaker 1: fair amount, but it's since fallen by about fifteen or
Speaker 1: so percent. Now the software developers who work on Ethereum
Speaker 1: are gearing up for another upgrade. This one is called Shanghai,
Speaker 1: and the reason that people care about it is because
Speaker 1: it will allow the tokens that are used to order
Speaker 1: those transactions on the brock chain to be withdrawn Basically,
Speaker 1: it means that all of those tokens being used to
Speaker 1: order transactions on the blockchain that can't be withdrawn will
Speaker 1: once again be available and accessible to their owners. Here
Speaker 1: to talk more about what's coming in the Shanghai upgrade
Speaker 1: is Bloomberg Proposa Olga, Karif Olga, Welcome back to the podcast.
Speaker 1: I feel like there's always something going on with the
Speaker 1: Ethereum blockchain, so true, it seems like can upgrade after
Speaker 1: an upgrade, after an upgrade. So you know, several months
Speaker 1: ago we had you and our colleague David Pan on
Speaker 1: the show a few times to talk about what was
Speaker 1: called the merge. We've been waiting for this upgrade for years.
Speaker 1: This change, known as a merge, is a software upgrade.
Speaker 1: It's a Theium's transition from proof of work to proof
Speaker 1: of state. People were like, well, work will be a disaster,
Speaker 1: and it went super smoothly. The upgrade will allow Themium
Speaker 1: developers to introduce new features. This update will see the
Speaker 1: Etherium may net combined with the Beacon chain, which is
Speaker 1: a proof of stake system and is expected to be
Speaker 1: more eco friendly by minimizing the environment. As a result
Speaker 1: of that going super smoothly. It now sounds like Ethereum
Speaker 1: much like any kind of software project has this roadmap
Speaker 1: that requires you know, app updates pretty much, what's the
Speaker 1: next big update that's coming to the blockchain. So the
Speaker 1: next big upgrade everybody is talking about is called chain Hai.
Speaker 1: It's expected to happen in March. But you know, as
Speaker 1: with everything Ethereum, it might still the timeline might still
Speaker 1: slide um and essentially it's um. It's it's the next
Speaker 1: step after the merge that should uh sort of help
Speaker 1: Ethereum become a more attractive ecosystem for you know, everybody,
Speaker 1: from investors to developers. Why so, what the merge did
Speaker 1: was it moved Ethereum from being run by so called
Speaker 1: miners or you know, very powerful computers that helped order
Speaker 1: transactions on the blockchain to a blockchain that takes a
Speaker 1: lot less energy and sort of After the merge, what
Speaker 1: happened is that Ethereum started ordering transactions using so called
Speaker 1: staked coins. Essentially, anybody who has Ether can uh stake
Speaker 1: it or put it into special staking wallet. What Shanghai
Speaker 1: does is it allows people who staked their Ether into
Speaker 1: the special staking wallets to take it out believe it
Speaker 1: or not. If you right now, if you've staked your ether,
Speaker 1: it's stuck there and you cannot take it out, that
Speaker 1: seems less than ideal. Why why do people agree to
Speaker 1: do that? You know, there's a lot of trust in
Speaker 1: ethereum developers who have proven time after time that they
Speaker 1: do what they say they will do. Plus people who
Speaker 1: stake their coins they aren't yield, which fluctuates. For instance,
Speaker 1: in the fullts at one point it was about ten
Speaker 1: percent um and right now it's around six. So it's
Speaker 1: it's pretty substantial, uh, you know, especially in today's uh
Speaker 1: unpredictable you know, often sort of down crypto markets. Mm hmmm.
Speaker 1: So if I'm hearing you correctly, it sounds like one
Speaker 1: there was a lot of trust in the ecosystem. There
Speaker 1: was a lot of like developer belief that this is
Speaker 1: the right thing to do. These folks are going to
Speaker 1: do the right thing. We're comfortable, you know, as you say,
Speaker 1: staking our ethery essentially like putting our hard earned tokens
Speaker 1: away for a while in service of the cause the community,
Speaker 1: the greater good. Pick a motivating factor, and it also
Speaker 1: sounds like while you're doing good for the community, you're
Speaker 1: getting free money, absolutely, and that's exactly what it is.
Speaker 1: You know, after the crypto crash of last year where
Speaker 1: a lot of crypto lenders essentially went up in flames,
Speaker 1: or most of them rather. Um, you know, there aren't
Speaker 1: a lot of places to put your crypto into and
Speaker 1: to earn yield. And for much of last year, crypto
Speaker 1: prices have been trending down, like in the double dgets.
Speaker 1: So um, you know, for people who are looking for
Speaker 1: safer you know, relatively safer returns on their coins while
Speaker 1: they're sitting there waiting for another bullmarket. Um, this has
Speaker 1: been a pretty attractive option, not without its risks. So
Speaker 1: and what are some of those risks that you just
Speaker 1: don't get your money back? Right? So, one of the
Speaker 1: risks risks is that shang Hai gets delayed, you know,
Speaker 1: the subgrade that allows you to withdraw your tokens could
Speaker 1: get delayed still by some unexpected bugs or something else.
Speaker 1: Another risk is that while your tokens are sitting there
Speaker 1: waiting to get unlocked, eventually, you know, something crazy happens
Speaker 1: in the crypto markets and you can't withdraw, You can't
Speaker 1: sort of make a smart move to save your money.
Speaker 1: So that's another risk. So let's assume because crypto is
Speaker 1: full of optimists, but everything goes completely smoothly, there's no downtime.
Speaker 1: Everything's great, people get their staked ether back. What happens next,
Speaker 1: what comes after? So what comes after? You know a
Speaker 1: lot of people have very rosy expectations for what happens
Speaker 1: after Shanghai. They think that they'll be able to take
Speaker 1: their money out of the staking wallets, you know, immediately
Speaker 1: whenever they want. People who are I guess more realistic
Speaker 1: believe that it's gonna it could take days and weeks
Speaker 1: and perhaps even months to get to unlock your tokens
Speaker 1: because there might be a line, and especially right after Shanghai,
Speaker 1: as this unlock functionality first appears, you know, there could
Speaker 1: be a rush to take money out. A lot of
Speaker 1: people lost money in the crypto markets the last year.
Speaker 1: They might need it, so there could be a lot
Speaker 1: of withdrawals and a very long line. So you know,
Speaker 1: this is something to keep in mind. This is not
Speaker 1: like in and on sort of functionality where you can
Speaker 1: just everybody can just unstake all at once. Now, if
Speaker 1: you are, say a normal person who's not a crypto
Speaker 1: reporter or the host of a crypto podcast, and you're thinking,
Speaker 1: does the Shanghai upgrade me and Ether is gonna go up,
Speaker 1: down or sideways? What's the answer. So it's one of
Speaker 1: those expected upgrades. Everybody has known about it for months,
Speaker 1: essentially how it often happens, and this is what happened
Speaker 1: with the merge as well, the previous upgrade, where while
Speaker 1: Ether basically price ran up ahead of the news, and
Speaker 1: then as merge happened, it plunged as investors wanted, you know,
Speaker 1: to realize their profits from making this bet. And a
Speaker 1: lot of people believe this is what could happen here.
Speaker 1: And this concern is not just Ether but a whole
Speaker 1: There is a whole, big ecosystem of tokens related to
Speaker 1: steak that this uh sort of selling the news um
Speaker 1: expectation could impact as well. So there's an expectation that
Speaker 1: this run up will continue until Shanghai happens, and then
Speaker 1: some of these prices could uh come down back to
Speaker 1: earth again. So so there's a lot of um gameplay
Speaker 1: involved here as people try to speculate on on Shane
Speaker 1: Hai coming up, you'll hear more from Bloomberg reports Olga
Speaker 1: Cariif on how ethereums next expected upgrade could affect the industry.
Speaker 1: We'll be right back. See this is why you never
Speaker 1: ask your reposto what a price is gonna do, because
Speaker 1: I'll give you like a very detailed technical explanation, but
Speaker 1: then not tell you if it's gonna go up outside,
Speaker 1: which do we know we are not allowed anyway, So
Speaker 1: this is like the ideal way to handle this question. Um.
Speaker 1: Just as kind of a final thing. You know, we
Speaker 1: saw just in the past couple of weeks that n
Speaker 1: f t s are potentially coming to bitcoin, which has
Speaker 1: shocked and appalled Bitcoin purists, but other people are like,
Speaker 1: whoa more ways to make money? And f t s
Speaker 1: obviously are one of the big defining use cases of Ethereum.
Speaker 1: Most n f t s today are built on top
Speaker 1: of either Ethereum itself or one of kind of you know,
Speaker 1: the associated slash spinoff blockchains. What are the kinds of
Speaker 1: things that Ethereum developers are thinking about beyond like upgrades
Speaker 1: and bug fixes, Are there any really transformational new features
Speaker 1: that might be coming to the blockchain to continue to
Speaker 1: make it be an attractive place for software depth A
Speaker 1: whole bunch of features we're supposed to be part of Shanghai,
Speaker 1: and we're taken out at the last minute because the
Speaker 1: developers just want to get this unlocking, you know, withdrawals
Speaker 1: functionality done so right now. With n f t s,
Speaker 1: for instance, most of n f t s still live
Speaker 1: on Ethereum. There are um on Salona and a few
Speaker 1: other blockchains, but the bulk really is lives on Ethereum.
Speaker 1: And if you look at developer activity um, you know
Speaker 1: Ethereum is definitely one of the very few places to
Speaker 1: be especially in this market. Developers are thinking of a
Speaker 1: whole bunch of new types of applications. A lot of
Speaker 1: them are thinking about, for instance, social type applications with
Speaker 1: coins baked in, and um lots of other interesting use cases.
Speaker 1: During downturns is when they uh sort of come up
Speaker 1: with the next big thing. I think we're still waiting
Speaker 1: to see what it will be after this downturn, but
Speaker 1: that's at least my bed just because there is so
Speaker 1: much development still help happening here. Yeah. Yeah, this is
Speaker 1: kind of like the classic argument for why people are
Speaker 1: excited about one of our favorite buzzwords on the show,
Speaker 1: the underlying technology. All right, thank you so much. It's
Speaker 1: always a pleasure to have you on, Stacy. My pleasure
Speaker 1: is really enjoyed it. That was Bloomberg Report Olga Karif
Speaker 1: you can find more of her reporting on the Bloomberg
Speaker 1: terminal and on Bloomberg dot com, and for more check
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