What’s in Your Bear Market Backpack?

As crypto markets plunged deep into bear market territory last month, discourse in some corners of the Ethereum ecosystem began to veer into the existential. Rather than searching for sky-high lending yields and the next non-fungible token (NFT) collection to rival Bored Apes, many among crypto’s Twitteratti – half-jokingly, half-seriously – set their sights on bigger questions: “What’s it all even mean?”

This article originally appeared in Valid Points, CoinDesk’s weekly newsletter breaking down Ethereum’s evolution and its impact on crypto markets. Subscribe to get it in your inbox every Wednesday.

And then there was Vitalik. On June 20, two days after ether crashed to its lowest price in over a year, Vitalik Buterin, Ethereum's co-founder and thought-leader-in-chief, penned an essay on his closely watched blog: “My 40-liter backpack travel guide.”

Never lacking insight, Buterin wrote a post containing dozens of useful morsels for traveling light and on a budget. He provided links to a flash-drive-sized portable shaver, recommended two different compact laptop stands (the lighter one was only “medium-effective”) and included pictures of his favorite Shiba-emblazoned sweatpants and Uniswap-themed socks. He also extolled the virtues of “Uniqlo maximalism” in a section dedicated entirely to the Japanese retail brand.

The two posts preceding Buterin’s travel guide were titled “Some ways to use ZK-SNARKs for privacy” and “Where to use a blockchain in non-financial applications?” In a tech-focused blog that tends to read more like academic literature than wikiHow, Buterin’s take on life as a digital nomad stuck out.

Its oddness was especially apparent given its timing. When Buterin published his hitchhiker's guide to backpacking, markets were tanking and commentators were calling the entire Ethereum experiment into question.

And yet, Buterin seemed not to be thinking of current events when he suggested that toilet paper rolls can make the perfect portable microphone stand.

Buterin’s public persona – or at least the one he projects out to the broader crypto community – is that of a builder. By Buterin’s logic, prices and Ponzis are merely a sideshow in a world where Ethereum's core technology – consensus mechanisms, zero-knowledge proofs, sharding, etc. – continues to progress.

Zaki Manian, a leading figure in the Cosmos blockchain ecosystem who has known Buterin for nearly a decade, tried to explain this builder mentality in an interview with CoinDesk.

“There's this tiny world that existed in like 2014 to 2015 of people where it was a bear market, no one cared, and there was no money. We all just hung out. It was super fun. Honestly, you can see from his tweeting that Vitalik, just the minute the bear market starts again, he's happier,” Manian said.

“We have this weird joy that we get from the bear markets where it's like, oh, OK, we can just, like, go back to being ourselves.”

Bull or bear, Buterin’s view – at least publicly – is that of an unfazed veteran.

Of course, Buterin’s “all-is-well” posture does not exist in a vacuum. So how is everyone else responding?

As the contagion from the Terra stablecoin ecosystem collapse and the Celsius and 3AC insolvencies continue to wreak havoc across crypto balance sheets, blockchain companies large and small are bracing for crypto winter by laying off workers and cutting down expenses.

Investment activity overall has gone mum relative to the 2020 to 2021 bull market frenzy. And yet, even the more money-minded among us are finding new ways to stay engaged in Ethereum (and crypto) amid the turmoil.

This past month saw a major spike in investment around the Ethereum Name Service – the decentralized domain name protocol built specifically for the Ethereum blockchain. Increased ENS activity suggests that some crypto investors have found solace not by avoiding the ecosystem altogether, but by investing in elements of it that they expect to hold utility beyond just speculation.

ENS provides users with an easily readable name attached to their Ethereum-based crypto wallets instead of a long, complex address made up of numbers and letters. Many have compared ENS to the Domain Name System for web2 (like “apple.com”), while others have approached the purchase of .eth names as an investment, looking to trade or sell popular names.

And with low gas prices, users have seen it as the optimal time to invest in ENS domain names. Over the past week, ENS registrations have spiked nearly 200%, according to Dune Analytics user @makoto, with 30,000 new addresses added on July 4 alone, and 20,000 on July 7.

On the secondary market, in particular on OpenSea, trade in ENS names has also seen large activity. This is not the first time that ENS domain names have spiked. In April 2022, OpenSea saw a spike in its three-letter and four-letter domain names.

But the recent ENS hype comes as the address “000.eth” was bought for a record-breaking 300 ETH.

So why the current spike? Even though gas fees are at a two-year low, users and companies may be picking up .eth names – rather than CryptoPunks, Bored Apes or other non-fungible tokens (NFT) – because of their added utility.

Anderson Mccutcheon, the CEO of Chains, confirmed this view last week via a telegram message to CoinDesk reporter Shaurya Malwa, noting that the interest in ENS is “partly driven by the fact that it's one of the very few pure true utility NFTs that are visible, widely known, liquid and traded on OpenSea.”

The utility of ENS is in serving as a sort of extended domain name – making it easy for users to transact without the need to share complicated (and easy to screw up) lines of numbers and letters. ENS is also a bet on a future of decentralized identity, whereby users can log into apps and services via their crypto wallet at the click of a button.

This wallet-centric vision becomes all the more appealing when a wallet can be associated with an identity – like a screen name – rather than a string of random characters assigned by the Ethereum hivemind.

Of course, ENS also has a speculative component; there is only a set number of domain names that are unique, and over time one might hope that cutesy names like “cat.eth” or “dog.eth” get swept up by brands or collectors.

Could there be an element of FOMO? Absolutely. But clearly, users seem to think ENS domains have some kind of added value compared to the purely speculative side of the NFT market.

The recent ENS craze could be a meaningless blip, but it could also be a sign of what’s to come.

As the bear market drags on and Buterin and his contingent of developers continue to build the core technology underlying Ethereum, utility-minded plays like ENS – rather than purely speculative NFTs or decentralized finance (DeFi) money games – seem likelier to gain retail traction. How long utility will trump pure speculation, however, remains anyone’s guess.

The following is an overview of network activity on the Ethereum Beacon Chain over the past week. For more information about the metrics featured in this section, check out our 101 explainer on Eth 2.0 metrics.

Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network.

Celsius freed up $172 million of collateral from Aave and Compound.

GameStop’s NFT marketplace is live.

Former Terra network projects have started moving to Polygon.

Lightspeed Venture Partners launched several new funds totaling more than $7 billion.

Gnosis Safe rebranded as Safe and raised $100 million from investors.

Valid Points incorporates information and data about CoinDesk’s own Ethereum validator in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post.

You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is:

0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb.

Search for it on any Eth 2.0 block explorer site.