Doing well is not a function of capital. - xh3b4sd
Social systems require free markets for fair equilibria to emerge. But free markets are competitive by nature, and therefore less fair to begin with. So you want your system to be designed in a way where the most critical activity becomes the easiest thing to do for practically anyone to participate in that very value capturing process. The question might be, where to draw the line for accessibility in a world of tradeoffs? Some things can only be made so easy, until the laws of physics may get in the way, or until our current understanding of technology reaches its own very limits. Health insurance might be such a system in which participation is designed to be as easy as possible. Participating in health insurance, at least in most parts of the western world, works by paying into that very health care system, which entitles individuals to gain access to health related treatments. The bar for participation in this case is financial, and mechanism designers have to make the difficult decisions of defining how much has to be paid in exchange for a certain amount of health related treatments. Up and coming generations, far removed from the inner workings of reality, might claim that health care is a human right. Another social construct far removed from reality. Resources are finite, and if they are not, then they should be treated as if they were. Why, you might ask, dear reader? Because what you can afford today, you might not be able to afford tomorrow. Today the price for something might be affordable. Tomorrow the price for that thing might increase beyond what you can afford. Or the other way around. Today you might have the money to afford some thing. And tomorrow you run out of money, turning every affordable thing into insurmountable challenges. Maybe that is what health insurance was supposed to protect you from all along. Insurance is a promise to protect you from certain harms that are supposed to be unforeseen. And the point that I would like to make here is that insurance cannot protect you from yourself, if you become your own worst enemy. The basis for a functioning health care system are healthy people in the first place. The limits of our available technologies today can usually not reverse the harm that was already done to you. And too many people requiring assistance in the form of insurance put a strain onto those systems, that those systems can only bear so much. A liferaft can only fit a certain amount of people. If you put too many people into any liferaft, then everyone will drown. Insurance cannot protect you from the harm that you do upon yourself. And insurance can also not cover every single one of us. Once too many people become so irresponsible that they all require some form of protection, then that very system will eventually break under the pressure of society. Equilibria of complex systems are so interesting here, because the same system may find itself in the state of many different equilibria temporarily, given enough time. The larger the time scales, the more different becomes the meaning of the word "temporary". Our planet, billions of years old, might go through temporary changes in geology or climate until another new equilibrium is reached. Those periods might last thousands or even millions of years. Temporary at cosmic scales. Unimaginable at human scales. The mechanical definition of equilibrium is rather strict. Mechanically, it is only considered an equilibrium, if the net force affecting a particle is exactly zero. The rate of change inside complex systems may never be zero, and yet the system itself may operate in a stable state that we would consider equilibrium. This relative stability of complex systems keeps those systems in a stable range of states, until a new range of relative stability has emerged. Earth can exist as a planet, whether it is covered in water or dust, whether the surface of this planet is hot or cold. Health insurance can exist to protect you, whether you can afford it or not, whether you prioritized to live a healthy life or a life of excess. What I want to say is that you can make life decisions in a vacuum and extract value from a system temporarily as long as that system remains functional under exploitation. But that does not mean that we as humans are going to be successful long term with that approach across society. Social systems require free markets. And making it too easy for everyone might not only mean to increase participation, but also to increase participation in value extraction. As we said it before. There are only 3 letters in politics: MEV.
Being able to hold two seemingly opposing thoughts in mind at the same time is a challenging prerequisite for making sense of the world. The context in which we are mentioning this particular piece of timeless wisdom is the sentiment of some US voters post election. The argument here goes as follows. Some may have voted republican due to campaign promises of deporting illegal immigrants. Some of those voters may now be concerned with the fact that the new administration wants to increase immigration for highly qualified individuals. The simplified version of the problem at hand could be defined like this. We were promised less immigrants, and now you want to invite more of them. Looking at the United States as a complex system, I see those two things once more through the lens of inputs and outputs. Illegal immigrants and those less desirable individuals can be removed from the system because they may not serve a highly valued purpose in the current configuration of said system. At the same time, you want to allow highly skilled workers to immigrate into your nation state if those individuals may serve a highly valued purpose in the current configuration of the system. In short, you should constantly try to add to the top 90% and remove from the bottom 10% in order to remain competitive long term as a whole. Which campaign promises may be fulfilled at the end of the day is likely to be a matter of compromise, which in turn is the basis of our democracies. One man one vote.
Over the holidays we saw blobs as the number 1 burner of ETH within a 7 day period. That alone was pretty cool to see, because it tells the story of Ethereum native data availability and that L2 rollups provide an increasing demand for ETH the asset. Some may have asked about the cause of this increase in blobspace demand. And the somewhat funny answer to that question was, nothing. As it turned out, blobspace demand did not increase at all. And as cool as blobspace and all its driving factors are, the story that we need to tell here is about the difference between nominal and relative values. As it turns out, blobspace demand was rather constant over the past couple of weeks. What simply happened in the real world was holiday season, and with that came a decline in all other activities happening directly on Ethereum L1. So while blobspace demand remained constant, the ETH burn for every other burner category declined due to inactivity in those other sectors onchain, pushing blobspace up the ETH burn leaderboard relative to everything else. We can takeaway two fantastic insights from this occasion. First, nominals don't matter as much as the context in which they appear. As with most things in economics, what matters often more is the rate of change and the relative standing of a metric, and not so much its own absolute value in isolation. And second, L2 rollups are not so much parasitic as they are constant demand drivers for ETH the asset, all year round.
Our number for the first week of this new year is 13 billion USD in ETH ETF onchain holdings. Within about 6 months the ETH ETFs have absorbed almost 3% of all ETH supply. That in itself is a testament to those who argued nobody would want to invest in those Exchange Traded Products. But as we mentioned above, nominals don't matter much as they never reside in a vacuum by themselves. The context in which we have to look at ETH ETF holdings onchain are the equivalent metrics for BTC ETFs. Over 5.7% of all BTC supply at current date has been allocated to BTC ETFs within roughly 12 months, the entire past year that is. This means almost 110 billion USD are held today in those Exchange Traded Products. The estimations of those who claimed ETH ETFs will see inflows to the extend of 10% - 20% of BTC inflows have been proven right, so far. Today ETH ETFs did only up to 12% in onchain holdings compared to BTC ETFs. And on top of that, ETH ETFs saw only any meaningful engagement during the past two months of last year, ever since the Republicans secured a political landslide in the US presidential election. You know what that means. Job's not finished.