The Wolf Den #994 - There Is No Second Best

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In This Issue:

1. There Is No Second Best

2. Bitcoin Thoughts And Analysis

3. Legacy Markets

4. CoinStats Was Breeched

5. Fidelity Discloses Seed Funding In Ethereum

6. Will Michael Dell Be Bitcoin’s Next Billionaire Supporter?

7. London Introduces First Staked ETH ETF

8. Bitcoin to $1,000,000? How Sovereign Debt & Dollar Weakness Could Skyrocket Bitcoin | Jack Mallers

There Is No Second Best

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One of the most rewarding aspects of this newsletter is the ability to magnify, showcase, and broadcast the insights and conversations that permeate this space. Because each of you continues to show up daily, we have built a theater of knowledge and ideas—sometimes original and fundamental, sometimes exploring meta-ideas.

The possibilities are endless. As the bull market intensifies, I foresee several profound developments: conferences will multiply, titans old and new will emerge and return, and a renaissance of new paradigms—both poetic and disruptive—will flood our timelines. Rising prices will birth new perspectives, and these perspectives will, in turn, drive prices higher. Markets are indeed beautiful.

In this melting pot, what I find appealing might not suit your taste, and vice versa, but sometimes, we must partake regardless. All this is to say, I have something truly epic to share. Some of you may find it distasteful, others delightful. All I ask is that you care enough to consider what’s being put forward, because powerful concepts matter.

Without further ado, I present to you Jack Mallers' recent talk at Bitcoin Prague. This keynote defends and differentiates Bitcoin against everything else, offering a deep dive into what in our digital world occupies the physical realm, the nuances of this relationship, and why it matters.

The presentation is 40 minutes long, so I went ahead and condensed it as best I could. You can watch the full version HERE. If you found this talk intriguing or had differing views, I had Jack Mallers on the WOAS Podcast to delve deeper into his ideas. That conversation is linked below

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“So, what I decided to do, very ambitiously, is give a talk titled "There Is No Second Best" and do an extreme deep dive into the difference between Bitcoin and every single other cryptocurrency. I will warn you, this is a strange and very ambitious talk, but we're going to do it together. Fair game? Fair game.

Okay, so I know deep in my heart and in my brain that there's a huge difference between Bitcoin and something like Ethereum, or Solana, or BNB token, or Toncoin. Of course, I know that. But I thought, ‘How am I going to be able to explain that in 30 minutes?’ So, I went on CoinMarketCap and I looked at the top 10 coins—all of these coins. And I'm not going to be derogatory; this is really about science, explanation, truth—not about being mean.

So, I'm looking at these things and I thought, ‘Hold on a second, outside of Dogecoin, which was invented to be a joke, Bitcoin is the only cryptocurrency that uses proof of work.’ I couldn't believe my eyes. Ethereum doesn't use proof of work, Solana doesn't use proof of work, and Cardano doesn't use proof of work.

Okay, the best way to understand the difference between Bitcoin and the rest of the cryptocurrency world is through proof of work.

Next, we're going to try and deeply understand proof of work. Then, we're going to understand how Satoshi invented Bitcoin with proof of work. And then, we're going to look at why altcoins have to be different from Bitcoin because they don't use proof of work. Fair game? Fair game.

Chapter one: Proof of Work—A Physical Leap into the Digital Realm. To understand proof of work, we have to understand the digital age that we all live in today.

Virtual representations of reality are not reality itself; they are abstractions

The map is a depiction of the territory, the map is an abstraction of the territory, but the map isn't actually the territory.

The virtual realm is an abstraction; cyberspace is not physical reality.

Romeo and Juliet is an abstracted fictional story—a figment of Shakespeare's imagination.

The hardware of the computer is real, the computations are real, but the experiences we create with computers are abstracts of our mind. This is a crazy trippy thing to think about.

The point is nothing in cyberspace physically exists. The reason you can't see the real power of digital technology is because its power is in its own abstraction. It's not in the specific algorithms, hardware, or software, but in the layer of reality we build on top of them. So, we live in a virtual age. We live in a world of abstractions.

The story of "The Matrix," the movie of the scene I just showed you, is that Neo realizes that software is simply an abstraction and nothing in the Matrix is real. Once you realize that none of it is real, then you can exploit it. From that point—and this is the most important part—there were no physical limitations to Neo's power.

So, physical power is the opposite of abstract power. It’s tangible and bound to the laws of physics. Think military, think physical assets like gold. We have abstract power, which is intangible and often unchecked. It has pros like being energy-efficient and injury-free but cons like requiring a lot of trust. Physical power, on the other hand, is very inclusive. Everyone has access to physical power, energy, and physical power isn’t restricted by any limits.

For example, this guy, Jerome Powell, demonstrates how the US dollar transitioned from proof of power with physical constraints to abstracted power with no physical limits. When the US dollar was on the gold standard, it was tangible and bound by physical laws. After shifting to the Fiat standard, it became intangible, unchecked, and unbounded in its abstract power.

So, gold standard, physical reality. Abstract reality is when we are on the Fiat standard. There are physical constraints, abstract constraints.

It's impossible to apply real-world limits and constraints to an abstracted virtual world until this guy, is Adam Back in the crowd. 

Adam required physical resources from the physical world to apply physical limits and physical constraints to an abstract virtual action.

So, proof of work is actually the only physically real thing that any of us can see on any digital screen.

Using Proof of Work To Invent Bitcoin

What Satoshi did is, anyone who solves the hash cost function and produces the proof of work gets to update the ledger of our digital tokens.

So, how do you defend against the threat of people trying to control a digital ledger? Well, in hindsight, it's pretty simple. You make the people that solve the hash cost function the people that can write to the ledger, and by doing that step, you're imposing physical real-world costs to do a digital abstracted action. You protect digital cash with physical power.

If we look at physical power, Satoshi's requiring and protecting Bitcoin with physical power, right?

Bitcoin is a distributed state machine for our time and energy.

There are many ways to approach this, there are many differences between Bitcoin and altcoins. I'm going to stick to these three for this presentation.

Link to reality

Whereas proof of stake is virtualized in this way, it's basically letting us create a simulated universe that has its own laws of physics.

Adam Back created a computer program to take the physical world and abstract it into a digital object, and Satoshi Nakamoto used that computer program to connect a digital money to the physical world and allow us humans to physically protect, with physical power, our digital money. And these altcoins said screw the physical world, I want my own abstracted reality.

Now, this is a trippy question you should ask yourself late at night: Is Ethereum physically real? I don't know if Vitalik is watching, I'm curious your answer.

Security

In the physical world, there is nothing physically preventing anyone from gaining control over a non-proof-of-work system.

In a proof-of-stake system, there is no unbounded way to protect yourself; it's proof of rank. You're trusting that the people high up are going to follow the rules and do a good job. And so, is Ethereum. This is a good question: is Ethereum under attack by Wall Street? There's nothing that's preventing BlackRock from buying up all of the Ethereum and then doing what they want, sanctioning a country off of the Ethereum network.

Bitcoin is physical reality, and Ethereum is abstract reality. When you take yourself away from the physical world, honest people can't protect themselves. 

Equitable and Fair

60% of the current Ethereum supply was pre-mined. Ethereum pre-mined 72 million Ethereum, and there's only 120 million today. So, the public Ethereum network actually hasn't even generated more Ethereum than they generated privately for themselves when they created it, right? 

Ethereum does not live within the physical constraints and the physical realities of the universe. Ethereum and altcoins that are not on proof of work are abstract power.

I love this Greg Maxwell quote: “Most of the altcoin industry is in the business of drawing a false equivalence between Bitcoin and their centralized, pre-mined, inflationary, recklessly constructed platforms, but they're supposed to be 'better' because of some jargon that goes over people's heads. They're just like Bitcoin; it has smart internet of world-contract-computing-hypercube things that all the venture capitalist and Wall Street so excited about you better buy now you better not miss out, right?”

To understand Bitcoin is to understand proof of work. Bitcoin is the only cryptocurrency that uses proof of work. There is no second best.

Bitcoin Thoughts And Analysis

DAILY CHART

Bitcoin revisited the range lows this morning, almost reaching $60,000. Bulls want to see this area hold as support. As you can see, the 50 MA was breached days ago, and the 200 MA is screaming up below, currently around $57,000. If the range breaks, look for that area as support. Price has not been below the 200 MA since $28,000. You can see price’s history with that red line below, going back to the 2021 highs.

Let’s take a quick gander at RSI. The daily is finally touching oversold, for the first time since August. As you know, RSI will always make the trip from overbought to oversold and back, so there was an argument to be made that we could not really “bottom” until this happened. Important to note that we did not even reach oversold when price last broke the range and went to $56,000. Price is $4,000 higher now, with RSI much lower.

Things looks scary, but important not to become bearish at key support… yet.

Legacy Markets

• Stocks Rise as Traders Await Inflation Cues: Markets Wrap

Global stocks rose as traders prepared for a week of political risks and critical inflation data. The Stoxx 600 Index increased by 0.4%, driven by gains in auto shares after China and the European Union agreed to discuss tariffs on electric vehicle imports. However, European markets may face pressure ahead of Sunday’s parliamentary elections in France, where the far-right National Rally is gaining traction.

In the US, S&P 500 equity futures rose by about 0.2%, while the dollar eased following a five-week rally. The week ahead is pivotal for markets, with upcoming inflation data and political events, including the first US presidential debate between Joe Biden and Donald Trump, and euro-area inflation data expected on Friday.

Elias Haddad, a strategist at Brown Brothers Harriman, highlighted the significance of the PCE data and the Trump-Biden debate. He noted that French political risks and strong US growth could support the dollar’s uptrend. Investors will be closely watching whether the Federal Reserve’s preferred inflation measure shows a slower monthly price growth, which could lead to interest rate cuts by September.

In Paris, Eurofins Scientific SE dropped by 24% following a short position disclosure by Muddy Waters Capital LLC. In New York premarket trading, Broadcom Inc. rose 1.4% on news of a collaboration with ByteDance to develop an advanced AI processor, while Micron Technology Inc. gained ahead of its earnings report on Wednesday. In Japan, the yen remained near 160 per dollar, with officials ready to intervene if necessary.

Key events this week:

• Bank of Canada Governor Tiff Macklem speaks, Monday

• San Francisco Fed President Mary Daly speaks, Monday

• Fed Governor Christopher Waller speaks, Monday

• Canada CPI, Tuesday

• US Conference Board consumer confidence, Tuesday

• Fed Governor Lisa Cook, Fed Governor Michelle Bowman speaks, Tuesday

• Australia CPI, Wednesday

• UK Prime Minister Rishi Sunak and Labour leader Keir Starmer debate, Wednesday

• Bank of Finland’s 3rd International Monetary Policy Conference begins, Wednesday

• RBA Deputy Governor Andrew Hauser speaks, Thursday

• Japan retail sales, Thursday

• Philippines rate decision, Thursday

• China industrial profits, Thursday

• Eurozone economic confidence, consumer confidence, Thursday

• BOE releases financial stability report, Thursday

• Sweden rate decision, Thursday

• Turkey rate decision, Thursday

• US durable goods, initial jobless claims, GDP, wholesale inventories, Thursday

• Mexico rate decision, Thursday

• Japan Tokyo CPI, unemployment, industrial production, Friday

• UK GDP, Friday

• France, Italy, Spain CPI, Friday

• US PCE inflation, spending and income, University of Michigan consumer sentiment, Friday

• Richmond Fed President Thomas Barkin speaks, Friday

• Colombia rate decision, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.4% as of 9:47 a.m. London time

• S&P 500 futures rose 0.2%

• Nasdaq 100 futures rose 0.2%

• Futures on the Dow Jones Industrial Average rose 0.2%

• The MSCI Asia Pacific Index fell 0.2%

• The MSCI Emerging Markets Index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%

• The euro rose 0.2% to $1.0717

• The Japanese yen was little changed at 159.76 per dollar

• The offshore yuan was little changed at 7.2887 per dollar

• The British pound rose 0.1% to $1.2662

Cryptocurrencies

• Bitcoin fell 1.3% to $62,868.1

• Ether fell 1.3% to $3,388.71

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.25%

• Germany’s 10-year yield was little changed at 2.40%

• Britain’s 10-year yield declined two basis points to 4.06%

Commodities

• Brent crude rose 0.2% to $85.43 a barrel

• Spot gold rose 0.3% to $2,329.95 an ounce

CoinStats Breeched

• 1,590 CoinStats crypto wallets ‘affected’ in security breach

Popular crypto portfolio manager and wallet platform CoinStats recently experienced a security breach, leading to a temporary shutdown while the risk was mitigated. In response, CoinStats released a Google Doc listing all affected addresses and advised users to export their keys. The tradeoff with this course of action is that it inadvertently exposes unaware victims to further attacks since the compromised addresses are now publicly known. Thankfully though, CoinStats claims that the platform "asks for read-only access," ensuring that all funds are safe. But of course, Twitter users are claiming they have lost funds. More updates are expected to follow.

Fidelity Discloses Seed Funding In Ethereum

• Asset management giant Fidelity discloses $4.7 million seed investment in Ethereum ETF: SEC filing

Fidelity has announced a seed funding of $4.7 million for the Ethereum ETF. Although the reaction on Twitter has been tepid, there's no cause for concern. Looking back at the Bitcoin ETF launch, Bitwise committed $200 million, VanEck invested $72.5 million, but other issuers contributed significantly less; BlackRock only invested $10 million, and ARK committed a mere $100 (yes, you read that right). In late May, it was reported that BlackRock had already secured an unnamed seed investor who purchased $10 million worth of ETHA shares.

In my opinion, the critical metric to monitor is the inflows during the initial days. Despite anticipated substantial outflows from Grayscale, if Ethereum's inflows reach at least 20% of what Bitcoin achieved at its launch, it should be considered a successful launch. As the ETF launch approaches, I will provide updates on the fee details here..

Will Michael Dell Be Bitcoin’s Next Billionaire Supporter?

• Click HERE To View The Tweet

Here's what happened: Dell's CEO, Michael Dell, posted, "Scarcity creates value." Michael Saylor responded with, "#Bitcoin is Digital Scarcity," leading to Dell sharing an AI-generated image of the Cookie Monster eating Bitcoin. While Dell currently has no exposure to Bitcoin, this could be a subtle hint. With $34.6 billion in assets and $5.8 billion in cash, Dell is approximately the 150th largest company globally.

London Introduces First Staked ETH ETF

• AETH 21Shares Ethereum Staking ETP

21Shares, the firm behind ARK's Bitcoin ETF (ARKB), has launched an Ethereum exchange-traded product (ETP) in London. This innovative product offers reinvested staking yields, representing a significant market breakthrough. Assuming a crypto-friendly president in the future, the U.S. will likely see similar developments.

“100% physically backed by Ether (ETH), the second-largest cryptoasset by market cap, the 21Shares Ethereum Staking ETP (AETH) tracks the performance of ETH and delivers staking yields that are reinvested into the ETP for enhanced performance. AETH has the longest track record of any physical ETH product on the market.”

Bitcoin to $1,000,000? How Sovereign Debt & Dollar Weakness Could Skyrocket Bitcoin | Jack Mallers

Jack Mallers, the CEO and founder of Strike, the global Bitcoin app, shares why he is a Bitcoin maximalist, his skepticism towards other cryptocurrencies, and his bold prediction that Bitcoin could reach $1 million. He also reveals how he lives off his Bitcoin holdings. Jack is a rare guest on my show, so don't miss this opportunity to hear from one of the biggest Bitcoin bulls!

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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.