Yes, this is the third post in a row about crypto.
That’s how large the original post (Q4 crypto macro) was getting. There is too much to talk about. But in today’s post, we are going to take a brief peek at what I consider to be a great speculative opportunity in the BRC-20 environment with Ordinals.
We’ll also discuss what we can learn from Olive Garden and why a congested blockchain is not a bad thing.
There are probably still one or two more crypto only posts coming.
Song of the Week - Jaden Smith - Scarface
Yes, we’re listening to this today. This is what I liked 8 years ago, I make no apologies.
Table of Contents
What We Can Learn From Olive Garden
BRC-20 NFTs
Degen Activities
Native ETH yield
Bitcoin ETF and Price
Conclusion
Internal References
1. What we can Learn from Olive Garden
One of the most promising aspects of Stacks (STX) is also the most frustrating. The blockchain is clogged with transactions. 60,000 pending transactions in the mempool right now. Even spending 1 STX on gas can sometimes see you waiting days for confirmation.
There is an upgrade coming down the pipeline to allow for more transactions in a single block, coming before the BTC halving in April, so hopefully there will be some relief. But in general, this is what you want to see from a blockchain. You may remember during the last cycle all of the Eth-killers were claiming crazy TPS (transactions per second) numbers and low fees. But this was primarily because those blockchains were empty. Tech doesn’t develop from luxury, it develops from necessity.
If users value a blockchain, it becomes crowded and expensive to use. Eventually to the point where spending development resources on efficiency and speed becomes a necessary use of developer resources.
This is what you want to see from a blockchain, you want to see genuine users overwhelming the infrastructure and resources spent expanding that existing infrastructure.
What you don’t want to see are empty blocks and miners doing nothing most of the time. It doesn’t matter how great the architecture of a blockchain is if no one is using it.
When I was in high school, I used to work as a dishwasher at a chain Italian restaurant called Carinos. I loved the food there, truly. Better bread and better prices than Olive Garden. Just all-around better, and they gave me 1 free meal for every shift I worked, coincidentally this is the only job I consistently showed up 30 minutes early to every shift for. But compared to Olive Garden we just weren’t doing the same kind of numbers. Looking back on it now, Olive Garden was absolutely teabagging us with their Chad-tier advertisements.
There was no other reason for Carino’s failures. Can you think of any Johnny Carino’s slogans? No. But you probably have a few memes in your head about unlimited soup, salad, and breadsticks. Or the waiter piling parmesan on your food because you never said “when.”
First movers in the space typically are the big winners. Unless they mess up royally, it’s not enough to simply be better than them to outcompete them. The same is true for crypto. People would happily wait an hour for Olive Garden. Carino’s could have advertised, “Look how fast our service is during rush hour,” but that’s not a plus, it’s a negative. It likely would have made people even less willing to try our restaurant. Similarly, you don’t want to be trying to pile into an empty blockchain because “look at how fast it is,” that’s a mistake.
The best measure of a successful blockchain is how busy is it with real transactions. Some blockchains will try to fake this. SUI is an example of one. I outlined SUI as a potential chain to grab some exposure to by Q3 2023 for a simple reason.
As repeated before, SUI has the potential to be a hype darling for the bull run that will ensue at the end of this cycle. If you want my opinion on when that bull run will officially start and when we truly enter that Euphoria period; I’ll put it at roughly Q4 2023 - Q1 2024.
The VCs need to pump SUI so they can dump on people in profit. Much like Solana during the last cycle. So to do that, they are essentially paying people to eat in their restaurant and make it look crowded. Some of this stuff is genuine, but a lot is spoofed. They even incentivized users to play a game built on SUI where every single move in the game would sign a transaction. It’s total BS, people got paid with SUI inflation to play the game, and then SUI claimed there were 20 million daily transactions. But we’re not here to fight the market, pass judgement, or pout in the corner. We’re here to ride waves and make money while keeping our eye on the ball. Which is why we like Sui… for now.
In the above tokenomics, we can spot an easy wave. Ride SUI until the end of Q1 2024. The major token unlocks for VCs and Early contributors all come in April 2024. I have no doubt they will be juicing transactions through all of Q1 to pump up their valuations. At which point we’ll go from ~1.8 billion circulating SUI to ~2.4 billion in circulation and then 3 billion by the end of the year (that’s 50% inflation for 2024). Just make sure you jump ship before the VCs do, mid-March might be an excellent exit date after milking the chain for it’s yield. If they can succeed at establishing a long-term community, much like Solana did, then you can always come back and re-invest in 2026 or late 2025 after inflation and token unlocks have slowed down.
So SUI is largely paying for their transactions to spoof having a full restaurant so that others will come. But what’s going on with STX? Basically, every time a new protocol launches, the fairly significant active user base tries to ape into it, and the mempool overflows with transactions, and only high-fee transactions get processed by the miners. During an off week, STX might only cost 0.1 STX per transaction and resolve in ~10 minutes. But right now a new inscription protocol has launched built on top of STX called STX20 and a protocol called .stxmaps launched on it. You can mint one for free (just pay gas) and in the day and a half since launch over 60,000 transactions were attempted and the website appears to be down at the moment as I can’t connect my wallet to it. There will likely be an airdrop for all participants who execute transactions on STX20, but I have not participated yet as I was busy over the weekend. If it’s of interest to you, join their discord or follow their Twitter to see what else may be launching on STX20, but consider STX20 to function similar to BRC20’s in that it allows for transactions to be inscribed in the memo field of a transaction. Essentially a transaction within a transaction can be completed.
This means that you have to send STX somewhere to utilize the function. Many suggest having 2 STX wallets and just sending the STX to a wallet you already own so you aren’t losing STX. If you want to try minting a .stxmap, you will have no ability to see which ones have already been claimed, so you may try and lose your gas fees as what you want was already gone.
I’m not going to bother doing it, but it’s just so you know what’s going on.
With this current congestion, the miners have a long backlog, and they are starting with the transactions paying the highest fees first. I tried paying 0.75 STX for a recent transaction, and it’s still sitting in this backlog. Many people have started paying as much as 5 STX for a transaction just to get something through.
It’s also possible that there is a technical issue with the chain at the moment as I’m not seeing any microblocks at the moment on the blockchain explorer.
A lot of the backed up transactions would typically be processed as micro-blocks here, but they simply aren’t. But we’ll start getting out of my depth if I try to explain what this means, but it doesn’t matter.
When evaluating blockchains during this period, what you are looking for are full restaurants.
You want to go where the real users are. If you hear chains are getting congested or that blocks are full, that is a good sign. It is not something that a competitor can leverage like the Eth-killers of last cycle tried to leverage. If any Eth-killer had actually succeeded it would have soon found it’s own blockchain getting congested. Congestion during bull markets is a sign of success, not of failure. Remember that, and remember to always be wary of blockchains attempting to spoof numbers.
Keep reading with a 7-day free trial
Subscribe to Flirtcheap’s Asymmetric Economics to keep reading this post and get 7 days of free access to the full post archives.