Block 1: Key news

Bitcoin Spot ETFs are popular

Spot Bitcoin ETFs in the US hold over $34 billion of BTC, representing 3.59% of the total BTC supply in circulation. BlackRock and Fidelity are the top two ETFs in terms of inflows, and stand out very clearly from the 11 ETFs available. The popularity of spot Bitcoin ETFs is growing, with significant positive net flows, including record net inflows into ETFs on February 13 to the tune of $631.3 million.

Inflows into Bitcoin Spot ETFs
SoSo Value

These developments undeniably indicate growing investor interest in BTC investment products.

Franklin Templeton: Towards an Ethereum Spot ETF?

Following SEC approval of its Bitcoin ETF, Franklin Templeton has filed an application to launch a spot ETF on Ethereum, and plans to generate additional revenues via Ethereum staking. The 140-page application document states that Coinbase would be the custodian of the ETHs and BNY Mellon would handle the treasury, offering unit holders the opportunity to benefit from staking revenues in addition to potential gains on the ETH price. Franklin Templeton is now awaiting SEC approval, joining other major players in the cryptocurrency ETF space.

MicroStrategy: $9.5 billion in bitcoins

MicroStrategy now holds a value of $9.5 billion in bitcoins, with unrealized earnings of $3.5 billion, which therefore represents 78.5% of its total market capitalization. The recent rise in the price of BTC above $50,000 has significantly increased the value of its holdings, marking the company's biggest quarterly increase in three years with the acquisition of a further 31,755 bitcoins since the end of Q3 2023.Company founder Michael Saylor continues to actively promote Bitcoin, particularly on social networks.

Ethiopia: the next Eldorado for crypto miners?

Ethiopia is emerging as a potential haven for Chinese Bitcoin miners due to its new hydroelectric plants offering cheap electricity, despite China's repressive policy against mining since 2021. The "Great Renaissance Dam", i.e. the construction of a dam on the Blue Nile River, promises to generate Africa's most powerful source of electricity, and therefore attracts cryptocurrency miners in search of lower costs. However, the opportunity to become a Bitcoin mining hub in Ethiopia is tainted by controversy, given that half of the population has no access to electricity, raising ethical concerns about the allocation of resources.

Block 2: Cryptanalysis of the week

Leading staking service providers such as Coinbase, Lido Finance and Binance play a vital role in maintaining the operational integrity of the Ethereum network, whose token, the ether (ETH), is valued at around $278 billion.

Despite the essential role played by these platforms, their over-reliance on a single software package known as Geth (an acronym for Go Ethereum), which is an open-source software client for the Ethereum network, is causing increasing concern in the cryptosphere. This software client is essential for connecting nearly 80% of all Ethereum validators to the network.

The urgency of these concerns was highlighted by a recent incident involving Nethermind, another client software used by Ethereum validators, albeit to a much lesser extent than Geth. On January 21, a bug in Nethermind caused the validators that depended on it to go offline for several hours.

This incident was a stark reminder of the inherent fragility of such a highly centralized software client system. Given the dominance of Geth, which accounts for over two-thirds of all validators on the Ethereum network, the hypothetical discovery of a technical bug or flaw in Geth could have far more disastrous consequences. Such a scenario could prevent the entire Ethereum blockchain from finalizing transactions, precipitate the loss of investor deposits and possibly lead to the network splitting into several separate entities.

Lachlan Feeney, CEO of blockchain consultancy Labrys, has publicly attacked the blockchain community's misplaced optimism about the ease and speed with which bugs can be resolved.

In a blog post, Feeney criticized the complacency of continuing to use Geth despite its supermajority status, pointing out the significant risks involved. His comment reflects a broader concern about the sustainability and security of such heavy reliance on a single software client within the Ethereum ecosystem.

Dependence on Geth is not limited to small or independent validators, but extends to major exchanges such as Coinbase, Binance and Kraken.

Geth is everywhere

These platforms, which operate "staking-as-a-service" business models, enable customers to stake, or staker, their Ethereum tokens through them. In particular, Coinbase and Binance are among the largest validators on the Ethereum network, collectively managing nearly $13 billion in staked Ether, according to data from StakingRewards. This concentration of staked assets underlines the potential impact that any disruption to Geth's functionality could have on the entire Ethereum market.

The recent Nethermind bug catalyzed a critical examination of the lack of client software diversity among Ethereum validators. Following this incident, the proportion of validators using Geth fell slightly, from 84% to 78%. In response to growing criticism, Coinbase and Kraken have indicated their intention to explore other, smaller client software options for their platforms, signaling a potential move towards greater software diversification. Binance, on the other hand, has yet to respond to questions regarding its position on this subject.

The current debate about the heavy reliance on Geth in the Ethereum ecosystem highlights a paradox at the heart of blockchain technology. Despite cryptocurrencies' fundamental principle of decentralization, the industry is facing software diversification challenges reminiscent of those faced by more traditional sectors.

Block 3: Gainers & Losers

Crypto chart (Click to enlarge)


Block 4: Things to read this week

The rise of consumer crypto (Project Syndicate)

Bitcoin price tops $50,000 after launch of cash ETFs boosts demand (Financial Times).

Tokenized, Inc: BlackRock's plan to take over the fractional world (Bitcoin Magazine)