An overview of the Ethereum blockchain

Burn Baby Burn, it's a (crypto) Inferno

https://ultrasound.money & EIP 1559

https://eips.ethereum.org/EIPS/eip-3675 and the Proof of Stake merge

Crypto News

•   bug in the Geth client
•   Cuban resolution 215 and the regulation of crypto in Cuba

Hey everyone. No one on this podcast is a financial advisor and all information presented on this

podcast is for informational purposes only. Now that we have the legal stuff out of the way,

let's jump on in. Welcome to the Generational Wealth with Cryptocurrency podcast. I'm your

host, McIntosh, and today we're going to be talking about Ethereum. Wow, Ethereum,

there's a lot to talk about there. So buckle up. It's been a good week for Ethereum. Actually,

we're recording this on September 1st, fairly late at night. And today, actually, in the last

24 hours, Ethereum has gone up roughly $400. So it's had a nice little jump. So what is Ethereum?

Ethereum is a relatively recent cryptocurrency. It was created in July of 2015. So it's six years

old. And it features what is called a programmable smart contract. And so you really have a general

purpose computing capability on top of this blockchain. And you can use that to build

these contracts, these things that we can use to define financial relationships, or even things

like legal contracts, real estate contracts, insurance settlements, things like this on top

of the Ethereum blockchain. So it makes it very flexible. One of the interesting things about

Ethereum is that it is kind of an evolving cryptocurrency, if that makes sense. And what I

mean by that is, back in 2015, when it was first begun, yes, the smart contracts idea was there.

That basic framework was there. But people had no idea that things like NFTs were going to come

around. And we'll probably dedicate a show to NFTs soon. But NFTs are simply, well, it stands

for non fungible tokens. And what that means is that a NFT cannot be split up, unlike Ethereum or

Bitcoin, or any other crypto that you've probably heard of. And NFT is it's always meant to be a

always meant to be a single piece. And these days, NFTs are used a lot for artwork, basically

digital art. And it's kind of one of the latest crazes, not going to get into that a whole lot.

But it's one of the use cases that I promise you, in 2015, they were not even thinking of.

Now, I already mentioned the Ethereum blockchain is evolving. And that is continuing. I think I

mentioned this in the last episode talk about Bitcoin. Bitcoin stance on this is that they

don't really, they're not trying to evolve the Bitcoin protocol, they're, they're happy with

where it's at. And even though you do actually have some smart contract capability on top of

Bitcoin, there's there's not really much going on there. And so they like the stability Bitcoin

maximalist or be like, oh, Bitcoin's fine the way it is, we don't need to change it. Ethereum,

on the other hand says, well, you know, we don't know what's going to be in 2015, even just six

years ago, they didn't have any idea what things were going to be like today. And so they are of

the opinion that if people agree to it, that we can change, make some pretty fundamental changes

to the protocol. And what I mean by that is, for example, very recently, they made a change and

and changes are called EIPs, which stands for Ethereum Improvement Proposals. So there was an

EIP that was recently executed EIP 1559. If you keep your ear to them, if you if you keep an eye

out on crypto news at all, you may have heard of it recently. And that change was executed

successfully fairly recently. And what it did, it started what they call the burning of gas fees or

transaction fees. Now, with any crypto network, there are going to be transaction fees, Ethereum

has transaction fees, Bitcoin, you know, whatever, whatever network we're talking about, they're

going to have transaction fees are used to pay the people who are doing the mining, they're used to

pay the infrastructure of that network. And one of the interesting things about this is that when

EIP 1559 was implemented, it started what was called the burning of those trends are not all of

the transaction fees, but some of them. What that means is that with Ethereum, you have an expanding

supply of tokens, tokens are mined much currently much the same way that they are with Bitcoin.

And so every few minutes, you get more Ethereum that gets mine that gets added to the network.

And the concern is that, you know, you're just basically printing money, right? And that typically,

that's, well, in my opinion, that's not good for an economy. We just print money with no,

no backing to it, so to speak. And ultimately, that doesn't, it doesn't end well. Bitcoin says

we're going to cap the token supply at 21 million. Ethereum doesn't do that. But what they've done is

actually rather clever. So this burning of transaction fees is essentially a deflationary

method. And what that means is that just by the implementation of this, the supply of Bitcoin,

it slows the increase of that supply of Bitcoin, excuse me, of that supply of Ethereum.

Ethereum. So currently, there's almost 120 million Ethereum, 117 million Ethereum, roughly,

at the start of August of this year. So one month ago,

this EIP 1559, where we start burning these gas fees, these transaction fees,

actually slows the creation, the net creation of Ethereum. Ethereum are still being mined,

but now we're burning these transaction fees on the backside. So it creates a deflationary effect.

Now, another thing that you'll hear when you're talking about Ethereum is what's called Ethereum

2.0. And basically what that is, is right now we're running a version of Ethereum that is based on

proof of work. We discussed this quite a bit over the last few episodes. They're mining Ethereum,

right? They're running machines that do these complex cryptographic puzzles, so to speak,

and they're mining the Ethereum. That's actually going to go away. We're going to move to a model

called proof of stake, meaning there will be people on the network who put up a stake,

which consists of 32 Ethereum, and become what they call validators on the network.

Those validators essentially will replace the functions that the miners do now. The miners

will actually go away. They will stop. There won't be miners at some point, I'm guessing probably

maybe a year from now, or at least very few. That EIP will be, and the number for that EIP,

people aren't really talking about that specific EIP, but it should be 3675, if I'm not mistaken.

That will be what they call the merge EIP. They're merging, so they've built, because we don't just

throw out software in the software world, and just do some major update without a whole lot of testing.

That testing is taking place on a test network. There are people who've set up test systems,

who are doing this staking on this test network. All the information from the primary network is

being fed in kind of one way into that system, so that it's getting all the current transactions

and things. They're really running two systems in parallel. Well, they're going to merge that

together, and that will occur with EIP 3675. At that point, Ethereum will be running an

approval stake model. Now, there's people who say that that's good from an ecological standpoint,

from an energy-saving standpoint. In my opinion, that's probably true. I also happen to believe

that it's easier to run a staking node, rather than run a mining rig. Now, I'm not that familiar

with the Ethereum mining. I am a little more familiar with the Bitcoin mining. I know that

the servers themselves cost a good bit, four or five grand, whatever. Of course, with any servers,

these things are going to be continually, over time, running out. Actually, their capabilities,

the difficulty of mining Bitcoin gets more and more difficult over the years.

So, the same server is less effective over time. Plus, of course, computers just flat-wear out,

especially when they're being used continually. The requirements to run a staking setup for

Ethereum, they are much more modest than one of these mining rigs. And

the requirements are not going to shoot up over the years. Now, the only challenge is,

you've got to put together 32 ETH, which these days, costs quite a bit of money.

You will have an option to do mining pools, just like you are staking pools, I should say,

just like you do mining pools now. But even, let's say, well, if I had the Bitcoin to run

a mining rig, let's say, I had $5,000 in US dollars to buy a mining rig and throw it out

there on the network. Running by itself, the chances of a single rig actually mining a Bitcoin

block is very, very small. Literally, you would run, I don't know what the figures are. What I've

seen is like a year or two before you possibly would even mine a block. That's why the mining

companies have racks and racks, huge numbers, hundreds of servers. And the people who aren't

those big mining companies, which there are a number of those, and they probably generate

the majority of the mining that's going on for Bitcoin. But the people who are individuals,

they have to join a mining pool. So maybe I have a rig and I joined this mining pool and there's

hundreds of other computers. And so they do get Bitcoin block over time on a fairly regular basis,

but then that block is divided up among all those people. So you don't get a big reward.

You do make money off of it. I'm not arguing that at all. I just think that you've got a lot of

money tied up into that. First of all, that computer that's not cheap to operate. It's not

cheap to buy and you will have to upgrade it every few years or you won't be mining. It won't make

any money. And then you just stick it in this pool where it's really out of your control.

Although there are pools out there that seem to do a good job of running that, but it's not in

your control, which is funny because one of the things that we talk about a lot in crypto

and especially with Bitcoin is decentralized. Everything's decentralized. Well, a mining pool

is not decentralized. You're depending on that mining pool to make that money.

On the other hand, with Ethereum, if I've got 32 ETH, I can stake that. I can run that.

And it does require some knowledge to run that. If somebody does not have a system admin background,

I would be hesitant to do it. Now, I do have a system admin background. I've run a test rig on

the test network for staking for Ethereum. And I've done some stuff with Bitcoin as well,

but today we're talking about Ethereum. And it's not hard. There are some concerns that you need

to keep in mind. These are concerns that you need to keep in mind with any crypto dealings and

probably need to leave this for a separate episode, but you got to worry about your server

being hacked. You got to worry about losing money basically. It's not without risk, but frankly,

there's nothing in life that's without risk. The trick is how do we minimize that? How do we manage

that risk? So in my opinion, I guess it is easier to get involved in Ethereum staking than it is

into the mining scene. Now that's my opinion. There's lots of people who will disagree with

that. The only real issue with Ethereum staking is basically the entry cost. When Ethereum was only

a few hundred dollars, it was a lot easier to come up with 32 ETH. Now that it's significantly higher,

that's more difficult. They're not going to lower that number as far as I understand. Maybe they

will at some point if it continues to rise in price, which it certainly seems to be doing.

But at least for now, it's 32 ETH. That's the entry fee. You can always, like I said, there are

Ethereum staking pools. So you can take, oh, I've got two ETH that I want to delegate to this to

staking. So I got two ETH that I can stake to this. Well, you can join a pool. Now here's the thing,

you're not going to make as much money doing that because the pool is going to have overhead to it

and the people who are running the pool are going to make money. They're going to or they won't do

it. Okay. So what are your returns? We're staking 32 ETH. Let's say our ETH costs 3000. That's

actually $96,000 worth of ETH. It's obviously quite a bit. At 7%, I'm getting 2.2 ETH per year

times the 3000. That's 6,600. Now that's pretty good, better than what you would get at the bank,

but here's the thing. And here's the way, again, here's the way that I look at it.

Here's the way that you can build generational wealth. It's not the 6,600. It's the 2.2 ETH

and what that represents. Because right now, maybe Ethereum is $3,000. Maybe it's $2,000.

Maybe it's $2,500. Maybe tomorrow we wake up, there's been a big dip and it goes down to $2,500.

So whatever 2.2 times $2,500 is. But here's the thing. There's no guarantees in life,

but ETH has a good track record. We know that ETH is used more and more by these financial services.

There's different things that are taking place. There's lots of money and I'll go into those

details. There's a lot of money that's being managed on top of Ethereum and that's going to grow.

Ethereum and that's going to grow. 10 years from now, what if that 2.2 ETH is worth $10,000 each or

more? And I'm not going to enter price speculation. At some point I may post some interesting

interviews of people who are far wealthier and far smarter than I am that do this. And some of it's

mind boggling. And what I will post is some figures, some numbers that I can verify

of actual like what's the amount of activity that's taking place on the Ethereum network.

Offhand, I don't know what it is, but I know somebody who does

and has recently released some reports about that. And we'll talk about that because

if you look down the road, 2.2 ETH, maybe they're $10,000 each, maybe they're more. But now that

that means 10 years from now, if you save all this, and I hope you are,

you would have gotten the equivalent of $22,000 US dollars. And when you're talking about wealth

and you're talking about generational wealth and you're talking about building a future,

you have to talk about compounding interest. Now I've done the calculations at 2.2 ETH per year.

And I didn't do it perfectly, but with compounding interest, after 10 years,

you end up with almost 63 ETH. So your $96,000 investment at $3,000 ETH becomes, I've got to

remember, $3,000 after 10 years, 63 ETH at $10,000 or $630,000. And that's if ETH is at $10,000.

Again, obviously I'm not a prophet. I don't know that ETH is going to be at $10,000.

I will tell you, I believe that. So unlike taking my money, sticking it in a bank account,

inflation, eat away at it, getting 0.05% interest or some ridiculously small amount,

I can take that asset, I can put it in a staking system. And there's other ways of generating

revenue, but this is the one that's relevant to our discussion today. And I can increase my supply

of that asset and maybe I choose to pull those 2.2 ETH off and spend them as my retirement or

whatever, I don't know, as part of my retirement money or that kind of thing. That's your choice,

but you can see how, especially if we start when we're younger, this can become quite large over

time because we're generating the interest, which adds to our principle, but the principle itself

is also growing. And it'd be like, okay, I've got $10,000 and after 10 years at 5% interest,

I have no idea what it would come out to, but let's say it's $12,000. Okay. Well, after five

years, I got $12,000, which is good, but what if the dollars themselves were going up in value

and that's certainly what we've seen with certain assets in cryptocurrency, certainly with Bitcoin

and with Ethereum over the course of their life. And we'll be talking about Cardano as well,

and maybe another one or two, but some of these coins over their lifespan and it's not a year or

two. We're a few years out, six years for Ethereum, right? 10 years for Bitcoin. Cardano, I don't know

offhand how long they've been around, but it's been like three years or so. So they're getting

a track record. They're established. Ethereum is well established and certainly Bitcoin as well,

right? So there's reason to believe that 10 years from now, they're still going to be here

and they should still be appreciating in value, assuming that they're continuing with Ethereum,

assuming that they're continuing to innovate. And I do believe that will happen. All right.

So anyways, interesting little site. I want to wrap this up, but an interesting site. We were

talking about the burning of the gas fees. I forgot to mention this, go to HTTP ultrasound.money.

That's ultrasound.money and it shows the burn rate for that EIP-1559. I'm going to go there right now.

That's what the noise you're hearing is. And so right now in 27 days, so it was kicked in 27 days

ago. In the last 27 days, we have burned 166,000 ETH. If that continues for the next year, it will

be 2.4 or 2.2 million ETH according to this site. That's a substantial amount of ETH and that ETH

is being burned. And remember, I mean, we're talking about the supply, the supply, we're mining ETH,

that supply is growing for now, but we're burning part of it. So it helps to calm that inflationary

effect of too many of all these. Just imagine we got 120 million ETH right now, roughly. What

would happen if the ETH supply hit 10 times that? Well, probably ETH would only be worth about

one-tenth of what it is right now, because there's so many more of them. This is an attempt to control

that. The merge and the move away to proof of stake versus proof of work. And when that mining

stops, when the mining stops, which will be roughly a year from now, hopefully less, maybe more,

ETH truly will become deflationary. And the total amount of ETH that are available will go down.

And it will go down for however long that is. It won't go up. And instead of 21 million Bitcoin,

no more, no less, that's all there's ever going to be when they get done mining all the Bitcoin,

it will be, well, we will reach approximately 120 million ETH, and then it will start going down.

And it will be a very slow rate, but it will make the ETH that are left more valuable. And it's not

like they're going to come into your bank account and burn your ETH. That's not the way it works.

Like I said, you pay to use the network, these transaction fees, it's a fact of life. Part of

that is getting burnt. Okay. Part of it goes to the miners currently that will move to the stakers.

That's where that staking fee comes from. But they're not going to, if you're sending somebody

to ETH, they're going to get to ETH, right? You're going to pay a transaction fee. So you may pay

2.01 ETH or something. I don't know, but they're going to get there to ETH. And if you have it

stored in a hardware wallet or your software wallet or whatever, it's not like the fees are

going to burn that away. You're not going to come in six months from now, two years from now,

whatever, and find that you have 10% less. No, yours stays the same. The total supply goes down.

Yours stays the same. The total supply goes down. So you will benefit. It's an awesome thing in my

opinion. Really cool website. You can check that out. Oh, I want to do a new segment. We've been

going on actually for quite a while, but I want to do a new quick little segment here and wrap this

up. So we're going to do a news segment because in the crypto world, there's always news. And

some of you guys, maybe you're not spending all your time on Twitter. Good for you.

Maybe you're not spending all your time on the various crypto websites. That's terrific.

So one of the things I want to do to help benefit you is talk about some of the major things,

at least in my opinion. I did want to mention earlier this week, just like five days ago,

there was a bug in the Ethereum client. It actually caused what they call a chain split. So

unfortunately, these things happen. They happen to all the cryptocurrencies. It was a longstanding

bug that the miners didn't get patched in time, basically. So it's been handled. It actually

didn't cause any issues, but you can look it up. The Geth client, which actually I think stands for

Go. It's written in a language called Go. Go Ethereum client had this issue. And when they

announced the fix, people didn't take advantage of the fix. And we ended up with that chain split.

No big deal. It sounds really scary. Potentially it could have been, but it was very quickly

fixed up and taken care of. One of the nice things about the Ethereum community, I would like to

highlight, it's huge. There's so many developers and whatever. And so when there is an issue like

this, things are typically fixed very, very quickly and resolved. Another thing I wanted to mention,

turning to world news, I thought this was very interesting and it's very crypto related. In Cuba,

in Cuba, they passed a resolution just a couple of days ago, which is going to start on September

15th. So two weeks from today that will regulate, and I'm going to read this exactly what this says.

I'm sure they wrote it in Spanish. This, I guess was the translation in this regulation that the

communist party basically, I guess, released. It's called resolution two one five. And it

says that it regulates the use of certain virtual assets and commercial transactions,

as well as the licensing of providers of these services in the operations relation of, excuse me,

in operations related to financial exchange and collection or payment activities

in or from the Cuban territory. They are going to regulate crypto. Now, unlike El Salvador,

they're not saying Bitcoin is legal tender. That's not what they're doing here.

What they are saying is we're going to regulate this. I'm sure if you're setting up a crypto

service in Cuba, that probably means you're going to be taxed as well, but it will make it official

regulation as much as we may like it or not is necessary. Most people don't like regulation.

A lot of people in the crypto community don't. Unfortunately, it is necessary or oftentimes

things can get crazy wild. People can be taken advantage of. So they're going to recognize,

both recognize and regulate crypto currencies such as Bitcoin. This is not a Bitcoin only bill.

Okay. And it will determine how the central bank of Cuba deals with digital currencies.

The US central bank doesn't deal in digital currencies. Arguably, that's a bad thing.

This resolution actually will officially recognize this and officially set up ways that

central bank will deal with digital currencies. I think, frankly, a lot of this is very similar

to El Salvador. It's driven by the outrageous fees that are charged by wire transfer companies

and that kind of thing for what are called remittances. People wiring money from the United

States or other places in the world to Cuba. Oh, I'm going to send them 200 bucks and it costs

$25 to do that. It's crazy. People want to be able to use Bitcoin. This is making that official.

I want to buy Bitcoin here on Kraken or Coinbase or whatever, and then use Stripe to send it to

my family back in Cuba, if I had Cuban relatives, for example. It's building that framework to allow

that kind of thing. I'll say this, this is not a political statement. This is not a political

podcast. This is what I read and this actually makes sense. I read this in a couple of different

articles talking about this, but the popularity of cryptocurrencies has grown among kind of the

technologically savvy group there in Cuba, and there is a group like that, as it's become harder

to use US dollars. A lot of these poor countries, places like El Salvador, places like Cuba,

I don't know, Ecuador, Bolivia, these type places, they don't have a great big GDP.

They use USD, US dollars a lot, more than we might think as Americans. We don't ever think about that,

but they do. And apparently during the Trump presidency, there was some embargo rules that

were imposed on Cuba. I do remember going back to Obama. Obama said, we can do commercial flights

in the Cuba. And when Trump came in, he said, we're shutting that down. Apparently this was

part of that. Not only was it just the commercial airline stuff, we were stopping the flow of US

dollars into Cuba, and that's hurt them, which I guess was the idea. But regardless, this is the

Cuban way of kind of solving that problem. Just like making Bitcoin legal tender in El Salvador

was the El Salvadoran president's way of helping people to be able to have really a stable. And

that's funny when you say that, talking about Bitcoin, but a stable way for people to save

money and to send money around the world or receive money from around the world without crazy fees.

So bit of news, that actually got very little play in the crypto world. I just kind of happened

to come across it. I actually looked for it and there was a few articles, but I haven't heard

anybody on any different podcasts or anything like that really talking about it. So I don't know,

maybe, maybe I don't want to offend anybody, but well, I'm not going to offend anybody.

I was going to say Cuba is not important. Of course, Cuba is important. The people of Cuba

are important, whether or not they live under, you know, communism or whatever. So anyways,

like I said, this is not a political show, not going to turn it into such.

So that wraps it up. Look, I've been looking at the stats. We've had a number of people

downloading the podcast. It's awesome. I appreciate it. I'm glad I'm not just out here talking into

the ether, into the into nothingness. So I would love to hear from you. You can shoot me an email

mcintosh.fintech at gmail.com. I will get around soon to setting up a website and an actual email

that's dedicated for this, make it a little easier. There'll be other forms of outlet that we'll