Most information's value is basically zero. Uncertainty about these information is therefore irrelevant. - xh3b4sd
This week I want to open with a framework that I call the relevant and probable. The relevant and probable describes types of information and their value that we should rather pay attention to, or rather not. From a system point of view, information can be many things. And only the information that is more relevant and more probable at the same time can help us make better decisions for ourselves. What I am getting at is that you can drink from the firehose that is the internet and get all the information all day. And when you do that you will go completely insane. It will simply be too much, too wrong, and too damaging. I have heard some people complain about the type of content they see on social media platforms, as if the technology is to blame for what content it reveals based on user preference. Those platforms and those algorithms enable users to follow other accounts and therefore allow everyone to see content that they choose for themselves. And then pushing the blame to somebody else for your own poor choices feels a little bit irresponsible, to put it in more charitable terms. This is all on you. Those problems are not about technology. Those problems are about yourself and your own actions. You have to deliberately choose the kind of information that you want to consume every day. And this information should rather be relevant, and probable. Naturally, irrelevant information is not useful, exactly because it is irrelevant. So relevant information is what we need to consider for our information diet in the age of "new media". Relevant information on the other hand can be right or wrong on a very wide spectrum. We could make an argument for information that is rather wrong, or improbable, to be useful though. Imagine a game in which you have to go through one of three doors. Only one door holds a reward if you pass through. The other two have punishment waiting for you. There is one person in that game, and they could tell you truthfully which door is guarding the reward. The twist, you cannot talk to that person. In other words, the probable information is unavailable to you. There are nine other people who are all well known for consistently picking the wrong door over and over again. You can talk to those folks all day long. Now what is your strategy? The strategy here would be to use the relevant and improbable information in order to inform our actions accordingly. We talk to the naughty nine and get a sense that, according to them, there are two specific doors that they would pick. Those two doors are the ones we will not go through. Because we know how improbable the information is presented to us in this specific scenario, we consequently use it to eliminate some of our options in order to come to the more probable conclusion. In our thought experiment we pick the only door that is left after eliminating the other two improbable choices. We go through the door we chose, and get handsomely rewarded. Nature is healing again. We can totally see how this scenario is constructed and rather unlikely to happen as described in the real world. The point though stands. Improbable information does not have to be useless after all, even though it usually is. If we are able to choose information, then we should try to choose the probable, if it is relevant of course. The relevant and probable tells us what's what, by design. By definition the relevant and probable tells us what to pay attention to and what kind of outcomes are more likely than others. All of that is to say that we have to structure our information diet wisely. And we have to do it every day. It is like brushing teeth. Some things you have to do every day a little bit in order to get the outcomes that you prefer. You cannot brush your teeth once a year and expect great dental health. But enough of the ramble. Go out and find the relevant and probable. Every day a little bit.
Somebody may let me know one day whether I become too much of a ratio enjoyooor. The balance between ETH/BTC and SOL/ETH has been fascinating to watch over the past couple of months. In prior issues of the Powerlaw memo we were suggesting that there might be a real powerlaw relationship between the relative strength of BTC, ETH and SOL. Matter of fact, the distance between either pair has been rather stable, which is so curious to me. Over the past couple of months ETH/BTC has been topping out around 0.055 and in the same ballpark SOL/ETH has been rejected multiple times. As I am writing this both ETH/BTC and SOL/ETH are near 0.05 once again. As mentioned in the past. I am not sure what to make of that observation. It is just so fascinating to ponder the underlying dynamics when ETH is as far away from BTC as SOL is from ETH. Is this information relevant and probable you think?
The Eclipse L2 rollup launched just this week and is now open for builders. I think this is a pretty big deal for the future development and competition between Ethereum and Solana. Why? Because Eclipse uses Ethereum mainnet for settlement while using the Solana virtual machine for execution. This hybrid experiment brings the Solana flavour onto Ethereum with all of its implications. We will be watching what kind of applications people build and use in Eclipse. And it will be super fascinating to see what kind of user experience people will be getting on that new L2 rollup. I am not well informed right now about the kind of wallet that people will have to use. It could be pretty awesome if users would simply be able to use their normal EVM based wallets. And it would make so much sense for Eclipse because then they would be able to tap into Ethereum's vast user base natively like every other L2 rollup. If somebody has more insights here please feel free to pass it on!
In hindsight the summer hole was real and it has forced an endless trading range upon us including excruciating breakdowns. The markets do what markets do and people lose their minds over it. I heard of a trading competition amidst these market conditions the other day and found it utterly hilarious that the person not making a single trade outperformed everyone else, simply because every single trader got eventually liquidated. The do nothing tribe was right all along it seems. Funny enough, ever since we pointed out how abandoned Hildobby's ETH ETF dashboard was on Dune, it got actually be setup properly. And the Powerlaw memo claims full credit for it now, obviously! Grayscale's ETHE still holds almost 3 million ETH tokens that it can still shed. A couple glimmers of hope could be seen during the past days when we saw a little bit of positive net inflows on a daily basis. The weekly performance of the ETH ETFs overall has so far been terrible, considering that this has only been the second week by now. Trading volumes are high-ish, but if that volume is only from selling coins, then it's not worth anything. I think we will see more Grayscale bleed, but those outflows should subside eventually. I did not know what to expect on ETF launch, also because the early days don't matter really. We could say it's not relevant! Long term though, the ETH ETF flows will be net positive. And I am pretty certain that those inflows will show up on the charts eventually.
The number this week is 2 million. This is the amount of daily active stablecoin addresses world wide as reported by Artemis. About a third of those addresses appear to be active on Tron, their highness Justin Sun chain, respectfully. I hear stories once in a while that real people in far away countries use USDT on Tron in order to pay for goods and services as if it is the most normal thing in the world. A country in that category that was not on my bingo card was Georgia. So that is one interesting data point. Call it relevant and probable! In terms of stablecoins I find it very interesting that Solana shows considerably more growth in TVL compared to Ethereum. Understanding what Solana is good at, this data point makes total sense. On the other hand, Ethereum shows way more growth in onchain treasuries. What we see here is the difference between payment and investment products on use case specific chains. Solana is being used for frequent exchanges. Ethereum is being used for storing wealth. And I still hear people saying that "ETH is money" is a meme. Yes. Yes it is chibi-chan. And it's a good one!