🔍 Vitalik is rethinking trust

From protocol simplicity to disappearing ETH supply, ETF pressure, MSCI risks, and Coinbase’s all-in finance play

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Cryptopolitan News
December 18, 2025 ‱ Estimated Reading Time: 9 minutes

Ethereum is taking a different route. Ethereum’s latest debate debate isn’t TPS, fees or price targets.

It’s about something deeper:

Who do you really trust when a blockchain gets too complicated?

Vitalik Buterin has been making the case all this week: Ethereum cannot really be trustless in practice if only a tiny cabal of experts can understand how the protocol functions end to end.

Trustlessness, in his words, isn’t simply the elimination of intermediaries. It’s about adding to the folks who are able to validate the system for themselves.

And if we give it some thought, it makes good sense. How can a network “belong” to the people, if most don’t even understand how it works.

đŸ€” Quick explainer: What Vitalik really means when he says “trustlessness”

Most think that trustless = no banks, no servers, no men in the middle.

But Vitalik’s framing is sharper:

  • If Ethereum becomes so complex that:

  • only elite devs can audit it,

  • only big players can have nodes,

  • just a small number of infra providers can keep things running,

then users are still trusting people, just a different group.

So, what does Vitalik propose?

That’s why he’s pushing:

  1. Simpler protocol design

  2. Stateless and/or lighter clients (so that running a node isn’t a hardware arms race)

  3. L2s which are more Ethereum dependents instead of pushing complexity elsewhere

This isn’t about slowing innovation. It’s about avoiding silent centralization.

The on-chain data supports the change in mentality

Although this may sound philosophical, market action is anything but philosophical.

Supply of Ethereum on exchanges just hit its lowest level since late 2016.

That’s not a typo.

According to CryptoQuant:

  • Only ~13.7% of the ETH supply currently on exchanges

  • Binance’s ratio of exchange balance in ETH is near a record low

  • Net flows have consistently been outward since mid-2014

đŸ€” Quick explanation: Why supply on exchanges matters

ETH on the move out of exchanges typically signals one of three things:

  1. Long-term holding

  2. Staking

  3. Institutional custody (ETFs, treasuries, funds)

All three help ease near-term sell pressure. And right now, all three are happening at once.

Institutions are quietly absorbing ETH

Some context most people miss (the quiet signal):

  • ~36 million ETH is now staked

  • Public companies and entities own ~6.7M ETH

  • ~6.2 million ETH held by Ethereum ETFs

That’s more than 10% of the total supply of ETH locked up in long-duration structures. Meanwhile, the price of Ethereum has tumbled below its highs.

So this isn’t FOMO accumulation. It’s strategic positioning during volatility.

Cryptopolitan’s take

There are two developments in Ethereum at the same time:

Simplifying the protocol to establish greater decentralization and watching the liquid supply go down because of long term holders stepping in

That combination is rare as markets tend to chase speed and narrative first, then mend fundamentals later.

Ethereum is in effect doing the reverse.

The risk? Simplification takes time and crypto market is impatient.

The signal? Capital that wants to stick around is in no hurry to head for the exits.

Ethereum might not lead the race to be the “fastest chain.” But it is teeing itself up to be comprehensible, verifiable and hard to dislodge. That matters more than most cycles realize, until it suddenly matters a lot.

POLL: ETH exchange balances are at 2016 lows. What does that signal to you?

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📊 Market Watch

📉 ETF boom, ETF bust?

James Seyffart, an analyst at Bloomberg Intelligence, says many of the crypto ETPs that are hitting the market today won’t be around in 2027. And with more than 126 crypto ETP filings still outstanding at the SEC, supply is ballooning faster than demand.

History is not on their side: hundreds of ETFs close every year for lack of inflows, and crypto funds are no different. And even if that accelerates under new SEC listing rules, Seyffart is blunt: most of those products won’t find enough assets to survive.

🧼 MSCI rule change could mean force $10B+ selling

Crypto treasury firms are staring at potential $10–15 billion in forced outflows if MSCI moves ahead with a rule that excludes companies holding 50%+ of assets in digital assets.

A provisional list names 39 companies, such as Strategy, Marathon and Riot. Industry resistance is mounting, and the argument from opponents of the move is that MSCI is recasting companies in terms of balance sheets, not actual businesses.

đŸȘ™ WLFI bets on its own Stablecoin.

World Liberty Financial will devote 5% of its unlocked WLFI treasury to promote the adoption of its USD1 stablecoin that is rapidly approaching $3B TVL in only six months.

The tactic directly links WLFI’s value to USD1’s expansion throughout CeFi, DeFi and institutions. The news comes after a $10M WLFI repurchase backed by USD1 and increasing institutional ‘liquidity’ support.

 đŸ‘€ Are you watching this

Users can now purchase U.S. stocks directly inside Coinbase with USDC, as well as crypto, futures and soon prediction markets powered by Kalshi.

The goal for Brian Armstrong is clear: one app to trade every asset of value on earth: stocks today, tokenized equities tomorrow.

Why it matters:

  • Coinbase is breaking down the wall between TradFi and on-chain markets

  • Prediction markets are turning into a sentiment layer, rather than just a gambling tool

  • Stocks are the on-ramp, tokenization is the endgame

 đŸ„ Top tweets

🎭 Culture corner

Bitcoin jumped +$3,000 in one hour, reclaimed $90,000, then flipped to $86,000 after $120M in shorts and $200M in longs were liquidated, creating a $140B market-cap swing in under two hours.

Headline picks by our Editor in Chief

Episode 16 Editor GIF by The Simpsons

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