ETHW Plummets After Bellatrix Upgrade Is Activated On Ethereum

SEP 14, 2022 • 4 Min Read

Amey Dandawate Amey Dandawate

🌅 Welcome!

The Merge is less than 24 hrs away, and the Ethereum Foundation is live streaming a watch party on YouTube here (click to set a notification).

The US Treasury talks Tornado Cash sanctions again, the ETH-PoW token is plummeting even before the hard fork, and our Research team is investigating a way to provide passive liquidity on Uniswap v3.

This is the Delphi Daily. Let’s dive in.

🚨 In Case You Missed It

  • US Treasury says that users may apply for a license to withdraw funds deposited into Tornado Cash before sanctions were announced.
  • Alex Mashinsky, the CEO of bankrupt crypto lender Celsius, plans to revive the firm with a focus on custody.
  • KKR partners with Securitize to tokenize interest in a healthcare-focused PE fund. Tokens will be issued on Avalanche with trading limited to qualified buyers.
  • South Korean court issues an arrest warrant against Do Kwon, co-founder of Terraform Labs.

📊 ETHW Plummets After Bellatrix Upgrade Is Activated on Ethereum

  • Since the Bellatrix upgrade was activated on Ethereum on September 6th, ETHW tokens declined 44% to hit an all-time low of $27 on September 12th. During the same period, ETH tokens rose by 9%.
  • ETHW tokens represent an IOU from a particular centralized exchange to deliver an equivalent number of tokens from a potential proof-of-work hard fork of Ethereum.
  • Currently, each Ethereum node is represented on two layers, the consensus layer (running proof-of-stake) and execution layer (running proof-of-work). The Bellatrix upgrade ensured that validators are producing updated blocks on the consensus layer that contain the code for merging the two layers.
  • As this last major hurdle before the Merge was cleared, increasing confidence in Ethereum’s successful transition to proof-of-stake likely caused a divergence among market prices.
  • Since such a hard fork has not happened yet, ETHW is a highly speculative token which may not be withdrawn to an on-chain wallet or transferred across exchanges. In the event that such a hard fork does not materialize, these tokens are likely to suffer extreme drawdowns or get delisted.
  • For more on post-Merge Ethereum, you can read our unlocked Delphi Pro report here.

⚡ Arrakis Finance is Growing, But Must Shed Dependence

  • Uniswap v3 was born out of the capital inefficiencies and LP trade-offs faced by Uniswap v2. With Uniswap v3, liquidity providers (LPs) decide the price range in which they want to provide liquidity – now commonly known as “concentrated liquidity.”
  • However, managing liquidity inside these price ranges is no simple task, since LPs need to rebalance their liquidity fairly often. But rebalancing an LP position also incurs transaction costs, which can be expensive – especially on Ethereum.
  • In a bid to fix this, a swath of Uniswap v3 vault products popped up. These vaults provide active management of LP funds by adjusting their price ranges to best capture trading fees. The cost of rebalancing is thus shared amongst multiple depositors.
  • Despite the prevalence of this problem, most of these vaults failed to find traction – except for Arrakis Finance. Previously known as G-UNI by Gelato, Arrakis has seen its TVL soar to $1.4B today (and $1.8B at its peak). Two key events spurred Arrakis’ growth:
    • An integration with MakerDAO for G-UNI DAI/USDC LP tokens to be used as collateral.
    • The launch of Oasis Earn program for G-UNI DAI/USDC LPs to open 50x levered LP positions through MakerDAO.
  • Arrakis is a liquidity management layer that wraps Uniswap v3 LP positions. Arrakis does this by directly interacting with Uniswap v3 and minting the NFTs.
  • Since depositor funds are deployed using the same strategy, this allows Arrakis to tokenize strategies by creating a fungible ERC-20 token vault to manage LP funds and save on fees.
  • The deployer can allocate an address to be a manager, allowing them to set fees and determine liquidity management strategies.
  • The vault auto-compounds fees for depositors by collecting accrued fees, swapping to the necessary amounts for LPs (if required), adding liquidity to the pool, and increasing LP amount per Arrakis vault share.
  • For more on Arrakis Finance, Delphi members can read our Delphi Pro report here.

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