Bitget AMA Transcript: Ethereum Shanghai Upgrade Enters Countdown - The Ecology and Opportunities of the LSD Track.

Source: Bitget

Bitget held an online topic interview on Twitter Space last week with the theme of "Ecology and Opportunities of the LSD Track in the Ethereum Shanghai Upgrade". The interview was hosted by Rolling Aunt, and we were fortunate to invite five professional guests in the industry, including Mindao, Joy Lou, 0xTodd, 0xRJ.eth, and Yuuki, to discuss and share their views on the topic.

This time, Space analyzed the dimensions of LSD and the Ethereum ecosystem around the Ethereum upgrade. Guests from different perspectives shared their personal views on the Shanghai upgrade before and after the cycle. Different views were also exchanged and collided in this discussion.

Q1: Since its launch in 2015, the Ethereum blockchain has implemented multiple major upgrades. What is the most unique aspect of this upgrade compared to previous upgrades? Which part of the upgrade corresponds to the current LSD track situation and what are the most direct benefits it will bring?

0xTodd: Ethereum's upgrades are unique upgrades. Last year, Ethereum's upgrade shifted from PoS proof to equity proof, completing the consensus switch. However, the current equity proof still lacks the final part, which is the inability to withdraw from Staking. Only when withdrawals are possible can it be considered a complete PoS. The most important content of the Shanghai upgrade is to allow Ethereum PoS withdrawals. The core of this upgrade is to completely finish PoS and lay a good foundation for Ethereum's expansion in the future.

Yuuki: The biggest benefit of this upgrade is that ETH can be withdrawn, followed by four protocols mainly aimed at three points. The first point is to reduce Ethereum gas, such as EIP-3860 and EIP-3855, which are protocol upgrades that reduce Ethereum gas. The second point is to make transaction speeds faster. Currently, everyone is observing or researching around the upgrade of ETH withdrawal, and Layer2 and other upgrades are expected to be postponed to subsequent upgrades.

Mindao: The entire PoS system would be incomplete without this withdrawal function, similar to a country's policy that can only raise interest rates but not lower them, or only increase taxes but not decrease them. This creates an unsustainable cycle. The biggest problem with ETH is its very low staking rate, which is only 15%. The staking rate represents the overall security level of the network, so a low staking rate is definitely detrimental to the network's security.

The main reason for the low staking rate of Ethereum is the inability to withdraw, so LSD's product will be excessively magnified by the market due to the inability to withdraw. Therefore, this upgrade is a milestone event for the economic security and integrity of the entire Ethereum network. Therefore, the Shanghai upgrade is a major event second only to Ethereum's transition to PoS.

Q2: When the withdrawal of Ethernet is opened, how much pressure will be put on the secondary market price? What changes will occur in the current pledge price compared to now? Will it increase or decrease?

RJ: Many people actually believe that there may be a lot of selling pressure in the short term, but in reality, if we look at it from a longer-term perspective, the overall selling pressure will not be particularly high. If Shanghai's upgrade is successful, it will be a very direct benefit to the entire Ethereum ecosystem, strengthening liquidity and boosting market confidence.

The reason why there is not much short-term selling pressure: If we look at the four staking methods of Ethereum, the real selling pressure risk actually lies in solo staking and solo nodes. And this part of the users are often early stakers, who can choose to do this solo node despite the big risk, or need to lock their tokens for a long time, which actually shows that they have a long-term positive outlook on Ethereum and can be said to have faith in it. So in the current situation, they must be more confident that the Ethereum upgrade will be successful. Many early stakers and investors have a consistent attitude: even if there is a proposal to withdraw, they will immediately re-stake or add more tokens in other ways to get higher returns.

Joylou: Regarding the view on post-withdrawal dumping, I believe that there will be dumping, which will have a significant impact on the price of the secondary market.

Yuuki: From a qualitative perspective, it is similar to the widely held view in the market that upgrading Shanghai is definitely a good thing for the entire Ethereum network, whether from a medium-term or long-term perspective. With the Shanghai upgrade and the increase in confidence in ETH staking, there will be less ETH staking flow, which is also beneficial to the Ethereum price. This is a medium to long-term judgment. When we trade, we may pay attention to some short-term price fluctuations, and at this time, we need some more quantitative calculation methods. The most important time point is the four or five days before the Shanghai upgrade, where we need to make a rough judgment on the selling pressure in the secondary market, as the selling pressure in the later period is relatively small, with only a few tens of thousands of coins per day. The principal and profits of Ethereum may have a significant impact on the market and coin price after the upgrade.

Mindao: Different definitions of selling pressure have been proposed from the perspectives of validators and coin-based systems. Currently, the assumption that this group of users will buy and sell fiat currency after leaving ETH is questionable, as ETH-based individuals are unlikely to consider converting profits into fiat currency. There is a high possibility that a large number of people will withdraw their funds in the month following the upgrade, with one reason being the convenience of the new format, as many people want to convert to the new address format. Another reason is to switch to a different staking service provider, neither of which are due to selling pressure.

0xTodd: To discuss whether these people will sell or not, we should first refer to their approximate cost price. All data on the Ethereum chain is transparent. Looking at the top three intervals with the highest average cost of participating in Ethereum Staking from 2020 to now, it is not the average cost that determines how much Ethereum will eventually be worth under the current situation of poor liquidity, but the lowest bottom price. Second, due to poor liquidity and the mentality of retail investors, holders of trading platforms will also be potential cash-out objects. Third, the core idea of Ethereum is not the more you store, the better. Ethereum's interest scanning mechanism automatically withdraws all excess interest to your withdrawal address, similar to an automatic salary system that automatically puts all excess interest into your account. Finally, regarding the issue of cashing out, exchanging Ethereum for stablecoins is the most direct way to cash out. There is also an indirect way of cashing out, such as buying some LSD. Although it is not a direct cash-out, it will be realized in the next cycle. In summary, after the Shanghai upgrade is completed, Ethereum itself will face a relatively large pressure on the market for a period of time.

Q3: Can teachers share some advantages, opportunities, or high market value projects in this segmented track? What are some advantages or technological advancements?

Yuuki: A detailed technical analysis supplement has been made for the definition calculation of throwing pressure, ETH profit and loss, and pledge rate. Regarding the new development and opportunities in the LSD track, let's start with the fact that LSD itself has a relatively complex product structure, and it also corresponds to a relatively complex risk structure. Currently, it is difficult for LSD to have a significant development in the entire chain ecology without innovation. The characteristics of the three mainstream operating models in the current LSD track are also introduced in detail. Currently, Lido and Rocket Pool have made significant innovative progress, and the growth of Frax itself is also very fast. We can see if there will be higher development after the Shanghai upgrade is completed.

RJ: When the entire staking pool grows, the newly added funds are likely to flow in a certain direction, which is a judgment angle. In addition to projects directly related to LSD, the verification technology related to DVT is a direction for the entire Ethereum layer staking infrastructure. Regarding the DVT-related aspects, it involves how to fragment and ensure the decentralization of the network while ensuring the stability of Ethereum verification and improving the degree of decentralization. Personally, I am more inclined towards this direction.

Yuuki: Supplementary information has been provided regarding SSV. How much ETH can be stored in SSV? 67% of ETH will participate in network operation through DVT solutions. You can use this data to evaluate the value of the SSV protocol.

Q4: This year is the big year for Layer2. After the upgrade in Shanghai, what kind of impact will there be between the ETH mainnet and Layer2, or what kind of development will occur?

Mindao: Layer 2 will extend and capture the overall value of Ethereum, playing a significant strengthening role. LSD assets themselves also expand Ethereum externally. After the LSD track is upgraded, there will be two significant changes. First, all LSD will gradually simplify at the node verification level in the backend. Second, after ETH is upgraded, it will change from equity assets to debt assets.

After the upgrade in Shanghai, every node, regardless of size, can obtain liquidity through zero-coupon bond trading in the market. This is why the top few projects are not particularly optimistic, as they do not have much advantage in terms of liquidity. Therefore, Ethereum Layer2 is more optimistic about the large application layer, whether it can attract some large applications to build themselves, which is the most important architecture for ETH as a dominant public chain.

RJ: The reduction of Gas fees is the most direct benefit of layer2 upgrade. MEV track is also worth everyone's attention. When the currency price fluctuates significantly, MEV can capture most of the profits. Lido's staking return rate has doubled. As the leading project in the LSD track, Lido has a great advantage in capturing MEV. In addition, some content related to DeFi on the LSD track is also worth everyone's attention, such as decentralized trading platforms and new lending protocols.

Joy Lou: The most noteworthy in the LSD industry is still Lido, and the growth rate of Frax business is very high, so it is necessary to configure it in the long term. The DVT and FYI business links are currently not closed, but if the links are closed, there will be demand for yield aggregation protocols like USH and LSDX.

Three additional track directions are being added. The first is income aggregation, the second is lending + stablecoins, and the third is multi-chain with new innovative models. Based on the current market performance, we do believe that the LSD track and the price of Ether itself have some room for a certain degree of correction.

Q5: What will be the exchange rate of Ethereum to Bitcoin in the next bull market? How much can we expect from the future of ETH?

0xTodd: The overall view is somewhat pessimistic, and there may be some pullback in April. The trend of ETH before the Shanghai upgrade is still relatively healthy. The current market and the market in April-May 2019 have many similarities in terms of indicators.

RJ, Mindao, Joy Lou: hold a relatively optimistic view and are optimistic about the future direction of Ethereum.

Bitget was established in 2018 and is a leading cryptocurrency trading platform that serves over 8 million users in more than 100 countries and regions worldwide. Bitget has numerous trusted partners globally, including legendary Argentine footballer Lionel Messi, renowned Italian football team Juventus, and official esports event organizer PGL.

Note: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice, and is only for the discussion and exchange of guest opinions.

This article is from a submission and does not represent the views of BlockBeats.

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