Haha well let's talk about some of the factors at play, starting with the big one: Treasury rates (anyone's treasury rates) are determined by policy, while staking returns are determined by algorithm.
It's true, US Treasury rates reflect the Phillips Curve. In practice, however, that means there are a handful of people (each with their handful of advisors, who have a handful of advisors, who are all influenced a little or a lot by entirely human factors, who are all paid by the government) trying to decide how much they care about the coefficients and factors. We started with
And are now at something that can't be rendered in markup without laTEX, all because the curve really doesn't fit very well. Not only that it fits extra-special poorly during times of policy upheaval - it fit like shit in WWI, it fit like shit in WWII, it fit like shit after the Nixon Shock, it fit like shit as soon as Trump was elected and it fits like total shit now but you don't get to add more fudge factors until the dust has settled or else you give the secret away.
And it's true - the algorithm whereby ETH is burned and created is governed by a bunch of furries with bat signals in their twitter handles. But they tend to argue in public and the transparency into the process is total. Everyone was expecting ETH to be deflationary the minute proof of stake went live - it's not. Everyone was expecting prices to skyrocket - they didn't. Everyone expected innovation and adoption to explode - it hasn't (yet - it's been like five days).
So on the one hand, you have a group of people acting almost entirely in private to stabilize societies. On the other, you have a group of people acting almost entirely in public to destabilize finance. They might both talk about interest rates, but they're coming from such wildly different places that I don't think you can draw any inferences. YES - the whole idea is you get money for locking up your money. Thing is though anybody who has so much as opened Github will tell you it's early early early days for blockchain. I spent much of my week explaining Arianee to a guy who sells RFID for a living.
Another big factor? Exchange rate. Right now the dollar is the undisputed heavyweight champion of the world. With events in Europe and events in China, the dollar is likely to get stronger for at least as long as Biden is in office. American foreign policy never really left the '80s while American business policy spent the '90s and '00s skeletonizing everyone's economy. Now the Cold War is back, the edge for manufacturing in Shenzen has disappeared and Democrats are spraying the moneygun at anybody who wants to put "Made in America" stickers on their products, particularly if it's related to technology or semiconductors.
Compare and contrast. 80% of web3 distributed finance stuff was on Ethereum, and for the past year it's all been rug pull scammyscam ICO NFT bullshit. and.... this.
Enough dipshits convinced other dipshits to buy second derivatives of the gamma of the delta that the actual marker in the middle got lost in the shell game; the contagion around Three Arrows Capital is around $43b, best guess. Ethereum has a market cap, at this moment, of around $175b, or "about a third of a Facebook". If Facebook was facing $120b of losses it'd be fucking over. Google lost a $4b judgement last week but their market cap is 2,650 billion. Ethereum got kicked in the nuts earlier in the year and it's only because the "experts" doing the talking are business majors and armchair dipshits who lack the curiosity or drive to even figure out what the fuck is actually going on.
Finally, let's talk about process. You buy a bond, you get a guaranteed return. You can buy and sell that return, you can option that return, you can future that return, you can do all sorts of crazy shit to that return, but it starts with a guarantee. It's a process with a three hundred year history backed by military force.
You stake ether? you have
- sitting there money. You get this for participating in validation and is dependent on the algorithm. More stakers less money.
- proposal submission money. You get this when luck favors you. It is a random-number-generator process. I had a knock-down drag-out fight with a couple other nerds two or three testnets ago because all of a sudden, I was getting a fuckton of submitted proposals. Based on what I could figure out it looked like Teku had an edge over other validator clients, but just until everyone else updated their software. Regardless, submission money was like 5x sitting there money, then was like 10x, and is now something like 8x. Your "interest rate" requires some serious curve-fitting to turn into a discrete number:
- slashing money. There remains a hefty bounty for anyone who can successfully accuse another robot of being sheisty. The slashing money is so good and the sheisty success odds are so low that this almost never happens? But it's there...
And hey, as of the merge, you're now looking at
- mining money. Now that the proof-of-work stuff is done, the stakers are out there "finding blocks." I literally got an email this morning and went "what the fuck is this?" but apparently I'm a miner now, too.
And of course there's still tips on top of transactions, variable gas fees and all the rest. Time Magazine put it this way:
Developers have explained that updating what is essentially the network’s operating system is incredibly difficult, especially given that it will be up and running the entire time: it will be akin to swapping out a car’s gas engine for an electric one while it’s barreling full-speed down a freeway.
And they did. And it was utterly seamless. I watched a livestream of the merge; it was a bunch of white male nerds sitting around going "well as soon as we get a validation on this block it means it actually happened" and "as soon as we get this message it means it didn't break" so it was kind of like people trying to drum up field-goal-from-the-50 energy for a linux checksum.
But now the metaphor has an entirely different type of motive power that nobody has any experience with. Yeah, Avalanche, yeah Solana but nobody has run a proof-of-stake network this large or this sophisticated. I mean, I looked at staking Avalanche. The amount I was looking to stake? I would have been on the pie charts. And I looked at staking Solana and (1) it's a joke, and not a very funny one and (2) it's a top-down rug-pull scam. You basically roll up with a big expensive server, pay a daily fee and pull your money whenever you want; there are only 1900 nodes, and ONE of them is running the entire testnet.
So really, you've got (1) geopolitical implications (2) exchange rate shenanigans (3) the technological frontier, any one of which absolutely swamp any reasonable trendline. Add to the fact that at some unspecified point in the future staked ether goes from an illiquid asset to a liquid asset, the fact that Gensler thinks proof-of-stake blockchains are securities and the fact that China is perfectly happy to bypass SWIFT and I don't think you can point to anything that gives anyone the slightest glimpse as to what this looks like.
$175b or no, Ethereum is a startup. Geopolitically? Between Iraq and Algeria. The batsignal furries on Twitter think of Ethereum as IBM but from a moxie standpoint it's still a bunch of nerds in a garage.