Bankless - 2024 Crypto Investment Themes

Episode Date: January 4, 2024

Welcome to Bankless Takes! This week, the first week of 2024… we have 6 Predictions for the major investment themes ahead for this year.  What are going to be the trends that define 2024? What do you need to know to stay ahead of the game? At least, for what we can see today.  ----- 🏹 Airdrop Hunter is HERE, join your first HUNT today https://bankless.cc/JoinYourFirstHUNT  ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2   ⁠ 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle  ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum   🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo   🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/Toku  ------ TIMESTAMPS 00:00 Intro 04:45 Restaking and Liquid Restaking Tokens 12:34 What is Liquid Restaking? 20:26 Solana 28:18 Parallelized EVM's 37:16 Games 43:56 Data Availability 50:07 Airdrops ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠ 

Bankless Nation, welcome to 2024. And on the first bankless takes of the year, we have six predictions, six investment themes that we think are going to define the meta for the rest of the year, maybe into 2025, but from what we can see today, at least is already setting in place some six different investment themes that we are going to watch develop over the years. Brian, how's your holidays? Oh, it was good, man. I have a little bit of COVID. So if listeners, holiday COVID. Yeah, if listeners hear the present from the family in my voice, yeah, a parting present. But David, I'm excited to start 2024 in this first episode of the year. And predictions are curated by you yourself, or these investment themes, I should say. So I've gotten a chance

to look at them at a high level. I think I'm going to need your help to get this through this. Do you want to get in? Absolutely. And if you've been a content consumed crypto, you know that Every single content producer that exists in crypto has put out their predictions for 2024, whether you are a writer or a podcaster, you have your page. This is a little bit of a meta, an aggregator, because I've been reviewing all of those and also putting my own spin into these. And this is also an article that I wrote. It came out yesterday on bankless, bankless.com.

You can read it at bankless.com slash 2024-crypto-hyth metas. but we will also regurgitate that content for you here on the podcast, six different ones all across the space, both inside of Ethereum and outside of Ethereum. And so we're going to get right into all of these metas, these six different metas that will define 2024. But first, I'm going to talk about some of these fantastic sponsors that make this show possible. Especially Cracken, our preferred crypto exchange for the year of 24 all year long. If you do not have an account with Cracken and you didn't sign up in 2023, well, you have a whole other year to do it. So get started with Cracken today.

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But Sellow is a community governed protocol. This means that Sellow needs you to weigh in and make your voice heard. Join the conversation in the cello forum. Follow at Sellow org on Twitter and visit cello.org to shape the future of Ethereum. So we have six crypto investment themes for 2024. And let's take these one by one. So let's start with the first one, David. All right.

So last year was a big breakout year for LST. is that was liquid staking tokens. This year, a major investment theme is restaking and LRTs. That's liquid restaking tokens. That's what you're saying here. Tell me about this, David. Why have this theme going into here? This theme begins with eigenlayer, who, of course, brought restaking into crypto at all.

Now, there's already eigenlayer kind of copycats. There's an eigenlayer on Bitcoin. There's an eigenlayer in the multi-chain. But really, eigenlayer itself has kind of dominated the next. narrative, right in the last week, or maybe week before, yeah, the week before Christmas, $1 billion of TVL was hit by Eugen layer. And the caps that, Egan layer has the liquid staking token caps. Every single liquid staking token has a limit as to how much can be deposited into eigen layer just as a safety precaution, keeps getting hit over and over and over again.

The most recent cap that was raised just a couple weeks ago was hit yesterday. What do you mean by that? What do you mean by that? So it's like S.T. ETH has a cap of how much ST-Eath, that is LITO's staked-Eath, how much Lido-staked Eth you can put in eigen-layer right now, and R-Eth has a similar cap. That's what you mean by cap. And eigenlayers and self-imposing this cap, I believe, just because it doesn't want to grow too fast, too quickly, it's still in kind of an early form, like call it like a beta-type form. Is that what you mean by these caps?

That's exactly right. And the caps for kind of the longer tail liquid-staking tokens are lower than the Lido. cap, but everything that is a liquid staking token has a cap. Lido is the largest, the next largest deposit into eigenlayer is swell, and then Rocket Pool as well, Coinbase, but all of these individual liquid stake token has a limit on them. Ether, vanilla ether has no limit. So you can deposit as much ether into eigenlayer to farm eigenlayer points, which is kind of where this whole investment narrative starts is eigenlayer AirDrop, the eigenlayer AirDrop, starting with eigenlayer points. And if you deposit ether into eigenlayer, you get eigenlayer points.

If you deposit liquid staking tokens into eigenlayer, you also get eigenlayer points. But you are probably also farming the liquid restaking token of the system that you are depositing into. So, for example, if you are depositing into eigenlayer via swell or via stakewise or via any of these other, like Stata, for example, you can also farm the liquid restaking token that comes as well. And this is one of the major themes, the last major thing that we'll talk about, Ryan, is air drops. But we'll get to that one. Right now, eigenlayer is the dual air drop farm. Because everyone is very hyped on restaking, but you are also able to farm two air drops at once, the eigenlayer drop, which everyone's excited about, and also a specific liquid restaking token

that is entering the competition to ultimately replace liquid staking tokens, to replace rocket pool to replace Lido because this game board for liquid restaking tokens is brand new. It's a brand new fight. It's a brand new fight for TVL and attention and liquidity. And all of the wars of LST that were so hot in 2021 and 2022 are about to restart over again with liquid resaking tokens. Okay. Okay. So I think we need two points of clarification here is one. Could you just reset? Why are people putting tokens in eigen layer to begin with? Like what's the entire, like what's the point? So you were kind of talking a bit more and emphasizing maybe a bit more airdrop farming and kind of that sort of use case. But of course, that is kind of a speculative use case that is to bootstrap

the network, that sort of thing. But what is the end reason for why people are actually depositing tokens into eigenlayer? What does eigenlayer do? Right. Igenlayer restaking networks are an additional source of yield to deposited capital. And technically that capital can be anything, but for right now, it is just ether. If you want to explore why just ether, we recently did an episode with Sri Ram, with Mike Nuter a couple weeks ago. That's already out. And so that answers in that episode. But really, you have ether staking and the yields from eth staking. And this is the world, the arena of liquid staking tokens that we all know, you know, R-Eth, ST, ETH, Lido, etc. We are now entering the world of liquid restaking tokens.

and for all of the restaking networks that eigenlayer enables, which is the point of eigenlayer, there is additional yield that comes from the fees or inflation from these networks that get imbued into the liquid resaking token. So the first restaking network that's going to come online is eigenDA, a data availability network. And there is going to be fees from roll-ups or from really anyone who wants to use and consume eigen-DA's data availability,

those fees for that service will be paid into the liquid resaking token. And so you have the yield from each staking. You also have the fees going to eigen-DA. And then for any other, what is called an AVS actively validated service, which is what IGNDA is, is what a resaking network is, for any other eigen-layer network, AVS, that generates yield, these liquid restaking tokens will secure those networks and they capture those yields and depository.

them into the liquid resaking tokens. So liquid resaking tokens are ether, the yield from eth staking, and the fees from all eigenlayer networks that that particular liquid restaking token provides security for. So it's simply just more yield. And we all love yield in crypto. It's ether denominated yield. It's ether capital as a deposit. And also it's combined with these double airdrop farms of eigenlayer and the specific liquid reshaking token. token project that is working in this arena. So I think it's the, um, an aligning of an handful of stars, uh, that are all putting up in layer and liquid recent tokens into the narrative in 24. Okay. And I should mention, of course, uh, with, with any yield, there is, uh, also risk associated

with, uh, 8. Nothing free, right? So, um, that's a note that a bankless listener should always be aware of wherever you see yield. It's really about your, uh, risk adjusted return. And, You have to factor smart contract risk, the risk being slashed by all these various protocols. But let me try to make sense of that. So what eigenlayer essentially does is it takes a monetary unit like Ether. And it uses in the same way the Ethereum network uses ETH, staked ETH as a bond to secure the entire Ethereum network. Eigenlayer is basically saying now you can use Ether and kind of the validator set of Ethereum to secure other applications. and eigenlayer DA is a data availability application that eigenlayers kind of developed in-house.

And that's one of the first applications on top of the eigenlayer network. But there will be more in the future. You can imagine entire like chain link style Oracle networks launched on top of eigenlayer. You can imagine entire kind of like sort of we should call them roll-ups, but sort of chains that are economically secured by ETH in kind of a different way than a roll-up is. So an entire roll-up maybe secured by eigenlayer as an app. All of these various apps, these are the A-V-Ss that you mentioned. And so A-V-S stands for what, active validator?

Actively validated service, which is kind of a complicated name. It's really just a re-staking network. It's an eigen-layer app. It's an eigen-layer app. It's a re-staking app. Okay. And so that's what's happening. And then just clarify this.

So what is the difference between a liquid-staking token, like STBth, and R-EGELA. These are liquid staking tokens. We're all familiar with that. And a liquid restaking token. Is it just that you just take a liquid stake token, you take an R-Eath and you stake it again, and then it becomes a liquid restaking token? Is that basically it? Yeah, that's basically it. So think of it as a set of concentric circles where at the very center, you have vanilla ether, and one more concentric circle out, you have staked ether, either staked ether from Lido, staked ether from Rocket Pool. You could also solo stake, and you get the yields baked into the liquid staking token baked into that.

And so now we're two concentric circles out, you know, ether, liquid staking tokens. And now with eigenlayer, you get one more concentric circle out, which is liquid restaking tokens. So inside of a liquid resaking token, you also have the yield from staking, also get the yields from actively validated services in eigenlayer. Now, you can go to eigenlayer.com and check out all the Aveses that are either online or coming to be online. There's, I think, about 15 that are on the website, but there are many, many more in stealth still working on their systems. The amount of yield coming out of these things, we are unsure of, it's still kind of an unknown metric. It'll be a combination of network inflation, which we know can be significant historically.

And then also fees from actually payments for these services, which I think is the largest unknown. We don't really know how large fees can get. I would guess it's going to be a much less amount of yield in comparison to network inflation. So there's still some numbers that are still to be determined here. Ryan, you talked about the risks of slashing and the risks of restaking. And that is definitely a very important theme that I think is going to differentiate certain liquid restaking token teams. There are many different reasons.

That's why a liquid restaking token team will win or lose this game. but really the game is ultimately defined as maximizing exposure while minimizing risk. Can you maximize your liquid resaking token to every single restaking network and capture all of the inflation and all of the yield and bake that into your liquid restaking token? And can you do that earlier than the other teams while also minimizing risk? And so the event of getting slashed if you are a restaking network because you are providing these actively validated services is significant because, A, you're losing capital. but you're also losing trust. So this is kind of how I think this game will win. There's

the classic, like there needs to be BDFers, there needs to be integrations, there needs to be partnerships, but really the liquid restaking game will be won by maximizing exposure to ABSs and then minimizing risk. And the reason this is a big deal is from a supply demand perspective, I guess from a supply perspective, there's a lot of ETH out there. There's a lot of staked ETH out there in search of yields. So this is another use case for ETH, kind of as the internet bond to secure non-Etherium networks, non-Etherian applications as well, which is kind of novel. And that's on the supply side. I guess on the demand side, it will really be a function of, you know, how many networks, how many applications require ETH or can benefit from the economic security of

ether. Rather than, I suppose, bootstrapping their own token, you kind of use Ethereum's validator and ether as a monetary asset to bootstrap your network security. I guess that's on the demand side of things. How many of these applications will really take off? It seems like DA, I know that's another point that we'll get to, but DA, I can layer DA in and of itself might be a huge catalyst for demand here, but there could be others. And I guess Eigenlayer is waiting for its breakout app. Now, Eigenlayer is not the only restaking protocol. It's probably the most well known and the biggest, but are there others as well, David? Not natively on Ethereum. And in my opinion, not having access to the capital of Ether makes other restaking networks not as interesting.

But that's always, you know, my perspective, that would probably come as no surprise to listeners. there is Babylon on Bitcoin, so Bitcoin restaking is a thing. There's another one, I'm forgetting the name, but it's more in the multi-chain, multi-layer-one ecosystem. And really, like, there's actually no reason why Ether needs to be the enshrined asset of choice inside of eigenlayer, except for just the monetary network of ETH, of ETH is money as money-like properties, it has a high market cap. Again, we talked about this point specifically in the episode I did with Myonel

Meantreaner and and Streerun from Eigenlayer. So go listen to that most more recent episode that we put out on the bankless podcast feed. There's also just one of the reasons why I know this is a big theme going into 2024 is the sheer number of teams that are going after this. I've heard reports of up to 15 liquid restaking teams. I haven't been able to categorize them all, but just like puffer finance, Rio restaking, etherfi, swelled network, Ender Protocol, Kelpedow, Renzo Protocol, Restake Finance. the number of teams is like large because everyone is kind of saying like, oh, this is another shot at winning what was the liquid staking token game, but that game has kind of

been won by Lido. It's hard to dethrone Lido at this point. But Lido's not in their liquid restaking game. And so it's an open playing field and everyone's very, very hungry. And so this is why I think it's a theme for- Why isn't Lido in the liquid restaking game? They kind of are, but they're not doing the Aveses. They're not doing the Agenlayer applications directly. I mean, but, um, you can put STEth inside of Igan layer, correct? Correct. Yeah, you can put STEth inside of number of these applications.

So Kelpdow, for example, you can put Lido-Staked Eth into Kelpdow along with Stater Eith, X-Eth into Kelpdow. And you can use both because they are restaking token. It's one of the 15 lip of reseaking token projects that exist out there. And so, yeah, so some of these things have their own liquid staking token. So like Swell Network, for example, Disclosure, Brian and I are angel investors. They are more vertically integrated because they have SWE, but they are also one of the earliest teams to pivot into liquid restaking.

And so they're more vertically integrated, whereas Kelped Dow isn't doing their own LST, but they are aggregating other LSTs into their LRT. So there's a number of ways, different permutations to build these systems. But the end product is a liquid restaking token, which will have more yield. than liquid-saking tokens, and it's going to be a fight for integrations into defy and just more liquidity in market makers. And, you know, eventually there's only so much capital to go around. So that's where all of these teams are going to be competing on. And it's going to be hot. I really like it because it's just like a dual yield farming opportunity. And so like I'm farming

one of these air drops. And it's, it's nice because you get eigenlayer points and you get the LRT points. And it's just extra dopamine, you know? Yeah. No, this has all of the, I guess, the setup to be an investment theme. for next year. I can understand why you picked it. We've got teams developing in the space. We've got kind of a new base protocol that is sort of net new hasn't been tried before, right? It's kind of like, you know, using the economic security of a and the validator set of a network like Ethereum and applying that to other networks and other applications. That's novel. That's new. Also has the yield side of things. Also has the airdrop hunting side of things. So I can see why this

makes your list. So restaking, okay, and liquid restaking tokens. That's number one. David, let's go to number two. This is Salana. Tell me a bit about Salana. Why did it make your list of investment themes? Well, it kind of had to. My hand was forced here. The big question is, is the meta now Bitcoin, Ethereum, and Solana? Is that the new question? Is that is Solana now a blue chip? is now number six or number five in total crypto market cap, so it's pretty far out out there. And Solana has absolutely won Q2, or Q3 and Q4 of 2020. I think now kind of the question, now that Solana has been like repriced significantly doing like a 9x when Ether did a 2x in 2023 and Bitcoin did a 3x. Now Solana, you know, it's come back from the grave.

It's come back from the beating of FTX. Now that's in its review mirror. The Lido AirDrop has awoken Salana's version of a defy summer. And so now the question is, is like, can Solana follow through on this, you know, top five market cap valuation that it's got itself? People are speculating that it can. In my opinion, if Solana wants to achieve its dreams, it needs to enable unique and novel applications that would be impossible to build anywhere else. Right. So like right now, we have like a very popular application on Solana is Jupiter. And it's, a Dex. And there's another popular application on Solana called MarginFi, and it's like a margin collateralized lending and margin position. Gito is FlashBots plus Lido. These are all things that

we have on Ethereum. And so they're important Defi financial primitives, and Solana needs them, and now they do have them. But in my opinion, Solana, in order to follow through on its newly discovered valuation, it needs to enable new categories of apps that cannot be built anywhere else. It can't just be a microcosm of Ethereum. People are calling what's going on in Solana right now. Solana's version of Defi Summer, which is necessary, but it's not novel. It's not new. Dpin, decentralized physical infrastructure is a contender here for types of applications that can be built on Solana, in my opinion, TBD, if this is a real category. But this is kind of where I think people are focusing their attention and their energy and their capital in 2024.

for is like what new novel use cases can be built on Solana, what new novel users can Solana attract, and can it follow through on its promises of being a top five blue chip asset? Do you think that Solana, the Solana community will get serious about economic protocol upgrades as well? I mean, certainly its fee market needs an overhaul from a variety of perspectives. there is no 1559 type of mechanism yet, although I think there are murmurings and talk of that. I've seen over the last couple of weeks, and certainly Bankless has said this in the past too, but some emphasis and some surfacing of the idea that Salon is actually creating a lot of inflation with respect to the amount that it issues on a daily basis versus the fee.

that it kind of takes in. Do you think that these get resolved during the cycle, or do these more get resolved during the next bear market? Yeah, that's a good question. I do think from what I've been watching, my conversation with recently with Anatoly and other people that I talk to in the Salana space who are more informed than me, they're all starting to see a elevating of priority of the economics of Solana, not just because you have like the Ethereum bullies who are like your guys' economics are broken, but

also just for network congestion and just fee market pricing and resource pricing in Salana is under optimized and kind of blunt and needs to be perfected. You know, Salana's been focusing on other things. Now it's time to focus on Salana's fee market structure, which is also the same opportunity, similar opportunity for Salana to focus on its economics. So I'm starting to see a increased priority of this conversation inside of the Salana community. We will see what they come up with because the other thing that Salana is entering, Ryan is the arena of governance because there is now multi-client Salana coming into the fold

with FireDancer and a few other clients that are being built. And so now in order for Salana as a system to upgrade, it can't just be the MB validators channel in the Salana Tech Discord who are all pushing updates, telling all their validators to update their software. Now there needs to be consensus among these different clients to upgrade in the same way according to the same spec. And this is a new arena for Salana to enter. protocol governance. And so they are doing focusing on economics while also learning how to govern themselves, which is new for Solana. So this is a topic of interest for me and definitely an area of focus in 2024, I'd say. It seems to be now consensus, at least among kind of VCs and

other investors that Solana is kind of the Ethereum of this cycle. You know, last cycle, famously Ethereum did like, I don't know how many did like a 10x. something like that, you know, 20X, something like that. And the idea is that Solana may repeat that, basically, and be kind of the Ethereum this cycle. Part of me wonders about that. And I'm not sure that we've seen L2s really take off and have their moment. I mean, they've had glimmers in the sun, you know, arbitraim optimism.

In fact, if you look at like the, you know, OP price and Arb Price, a mutable X price, it's all kind of coming closer. Well, O.P. is at all-time highs right now, right? Arbitrum is at all-time highs. So maybe we're moving into a bit of kind of another later two season. I'm not sure. But what's your take on that as a premise, that Solana is the Ethereum of this cycle in terms of its price appreciation.

And maybe the bear case for Solana is that we haven't actually seen the L-2s kind of bite back and really, you know, and they are crushing it on a lot of metrics. If you kind of look at total locked value, if you look at what base is doing, all the development there, what's your take on this? Yeah, the bare case for Solana is that the price movement already happened. It was 2023. Like going from $100 sole to back to $250 sole is not like, it's not a clear path to that happening.

And so that's the bear case is like the bullishness has already happened. the more bare case is that like it's not just Ethereum layer two is biting back, but it's also other highly optimized virtual machine layer ones that are coming online, which we will also talk about in a second. That's another theme that's coming. Say and Monad and Sui and like other parallelized VMs as layer ones

are also coming onto the scene. And if you are an EVM compatible, optimized virtual machine like Moinad or say, then you get the network effects of Ethereum but the scale of Solana. And so the kind of the meme around Ethereum lately in the narrative is like Ethereum is squeezed between Bitcoin and Solana. And, you know, Bitcoin the Money, Salana, the execution network. Well, I think you could present a similar scenario that Solana squeeze between Ethereum and other EVM-optimized layer ones that are EVM-compatible, of which there are a couple.

And so it's really, I think, about how far can the network effects around the Solana virtual machine take it? and can they attract a decent amount of network effects that adding the EVM compatibility of Monad plus the virtual machine parallelization of Monad, how much does that squeeze Alana and is Monad too late? I think that's a big question to ask. All right. So since we've been talking about it, why don't we flip to number five, David, on the list? We'll cover three and four in a second, but you've been talking about Suey and Monad and all of these things. And I think this fits with your number five investment theme, which is parallelized EVMs.

So tell me about this. Why is this investment theme that makes your list? What is a parallelized EVM? I recently did a podcast, Ryan, with Anatoly. I don't know if you listen to it, but I asked him the question that I also like to ask Bitcoiners,

which is what is the most important component about Bitcoin? There's a number of different components about Bitcoin, the 21 million hard cap, proof of work, the ability to run your own node. What's the most important component about Bitcoin? Do you know what they all say? They all have consensus on?

I know, I know. that from our episode with Bitcoin Bull, Robert Breedlove, which comes out pretty soon, actually, a canonical Bitcoin episode. He said difficulty adjustment, which actually surprised me, but maybe you already knew that this was kind of the case sense of view. They all love the difficulty adjustment. They kind of call it the capstone, keystone thing that really puts the Bitcoin system into alignment. And so I asked that same question about Solana to Anatoli. And he said parallelization, the parallelization of this. Salon a virtual machine. That's really the thing that Salana is unique and differentiated about.

That is it's moat. Well, the thing is, there are a number of efforts to parallelize the EVM that have come online or are coming online. I started writing this six investment themes for 2024, Ryan, in a couple weeks of December when Say was about 40 cents. And they also had just announced their pivot from being a move-based virtual machine chain, I think, if I recall correctly, the move language from Facebook. And they pivoted into being a parallelized EVM, which was a surprise. A welcome surprise because the benefits are clear. You get all of the network effects of Ethereum. If you are bytecode compatible with the EVM, your Uniswap app, your Avey app, your synthetics app can just copy and paste now onto say with the low fees of a parallelized virtual machine, the low

fees of Solana. And so Say has attracted people's attention because its price went from 40 cents in mid-December to 80 cents now, so like a 2X in two weeks. Monad was the first team to really develop this parallelized EVM narrative. I met Keone, the founder of Monad at DevConnect in 22. So two DevConnects ago in Amsterdam, April 2020, and he was talking to the Ethereum ecosystem and because he was raising for Monad way back when because he wanted to parallelize the Ethereum virtual machine. So here's a Keone tweet where he's just posturing. He goes, list of EVM chains, parallel EVM chains

as of two months ago. And it goes, a list of one, Monat, his project. And then he goes, list of parallel EVM chains as of today. Monat, avalanche, Polygon, say, scroll, neon, which is a little bit of, you know, ha ha, we were here first kind of thing. there have been a number of different parallel EVM projects to all come online as of recently. I don't think this list is exhaustive.

One of the reasons why I'm calling this an investment theme of 2021 is A, the layer one trade is always on. It has always been a thing in crypto. VCs love it. Retail loves it for some reason. Say and Monad, we should say, are layer ones, right? Yes, exactly. Yeah. And then also like, the price performance of Solana and has, you know, defined the meta of parallelized EVMs, or excuse me, parallelized virtual machines with the SVM, but then the network effects of Ethereum are, you know, have always been trying to be like bitten at by other layer ones. And so this is why I put parallelized EVMs as an investment theme for 2024.

Yeah, that makes sense. And parallelized EVMs can also happen in roll-ups, right, on, on layer two. So they don't have to be layer ones in the way that Sui and Monad are. But some on this list like Polygon and scroll, certainly those are layer twos. It seems to me when we talk about parallelizing the EVM, what we're trying to do is we're actually trying to squeeze as much throughput and transactions per second out of the execution layer, aren't we? So it's innovation that Ethereum has actually not undertaken in its seven years. of existence, which is like actually re-engineering its execution layer to support like massive throughput, massive transactions per second. That's what Solana and SVM were built with from the ground

up. And Ethereum is just never innovated on that. And now it seems like it is, which is kind of good. When I say Ethereum, by the way, I mean, the entire crypto ecosystem. The EVM counts as Ethereum. Exactly. And so Monad is not right now building on top of Ethereum. at all, but they are creating a new parallelized EVM. That's going to be pretty innovative. So what do you think here, David? Do you think some of this will start to nip at Solana's narrative a bit more? And do you think some of the narrative investors might switch from like Solana to the newest low market cap parallelized EVM layer one, like jump on Suey, jump on Monad? And that could take some of the attention away from Solana? What's your take here?

I think the answer is yes and and it can also take it away from Ethereum. Like parallelized EVMs are trying to nip at both. The difference I would say with the parallelized EVM is that it's, I don't think really the Ethereum layer one is ever going to upgrade its implementation of the EVM. But layer twos, I think, are much more free to experiment and explore with different virtual machine specs. I would be actually a huge fan. I know I've asked Keone, hey, like, will you ever, like, open source the Monad EVM?

He goes, yeah, yeah, we will. And that gives layer twos the option to bump out the single-threaded Ethereum virtual machine that powers optimism and arbitram with the asteros because they have stylus and pop in their parallelized virtual machine. It's not really even appropriate to put a parallelized EVM on the Ethereum layer one because there's a trade-off there between execution and security that I don't think we should make on the Ethereum layer 1. We want the most secure, single-threaded, basic, non-complicated version machine settlement layer for the Ethereum layer 1. But let's take the monad VM and put on all the layer 2s.

Let's really juice those things up. It does seem like the best of both worlds. You get kind of like highly secure, single-threaded settlement, and then you get in the execution layer, parallelize like infinity TPS like execution. So it's, I understand why that's a theme then, David. So before we get to number three, four, and then eventually six, we want to tell you about the sponsors that made this episode possible. Are you launching a token?

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games, that episode that we did, was that back in November? Yeah. Yeah, they definitely did. Definitely if you look around at all the gaming experts, the crypto gaming experts, it's just an unequivocal fact that a strong number of games, crypto. games will launch in 2024 and then even more will launch in 2025. It's like a likely outcome that most of these will flop, but that's just the, that's just a normal thing to happen in the gaming industry. Sometimes, most of the times games just flop. And, you know, they get some initial experimenters who like to play new games and then hopefully with like marketing on Twitch and, you know, influencer marketing with game streamers. They can capture some traction. Uh, we all

need, Ryan, one game to work to actually make a breakthrough in the world of crypto gaming. Well, this is the stat that blew my mind, David, is I think Vance gave it on our podcast. There are 3.2 billion gamers globally. That's a lot of freaking people. That's like half the world is a gamer of some sort or another. Like, I think I'm sure a lot of, you know, Candy Crush casual gamers are included in this stat, but who knows? This is the most expansive. definition of gamers possible. For sure, but that's a lot of people. And so do you think that this could be an on-ramp for all of those, like, I guess maybe the vision for crypto gaming is people don't even know they're on crypto-rails, they're playing a game, they're just having fun. And underneath it all,

there's like, you know, gas, block space being consumed, right, at the kind of the very basement level. And it's fun. And there's some economic component. And, like, the wallet experience is seamless. It feels very much like a, you know, a typical Web 2 gaming type of wallet. Is that where you're thinking, how you're thinking this plays out? I think that's exactly right. I think when we say the words crypto gamers or gamers in general, people kind of assume people with like an ultra-wide screen monitor, they have the most expensive graphics card, they're playing very intense AAA, beautiful games that took hundreds of millions

of dollars to develop. We're not there yet. That won't be 2024. it'll be it'll be like candy crush probably um maybe it'll be some game there was a pretty beautiful dark souls like game that i played at east denver that items were assets so there are like in these kind of these beautiful arena games it's going to be cheaper and easier to develop the candy crush like games also like the slot machine type games like these are kind of a little bit easier to develop and more closer to crypto because you know we're already gambling um but putting assets into

these things, not that hard. And it's easier to test and iterate. One of the reasons why I think this is so bullish, Ryan, is because like I said, if we just have one game that has crypto features get adopted by non-crypto people, it will be the first time that crypto gets adopted by non-crypto people. We had a taste of that with FrenTech when we saw an NBA player, like an influencer and like OnlyFans artists briefly adopt FrenTech for a couple weeks. So we got a taste of that. But I think this is, like kind of our best shot at getting crypto agnostic people to be touching crypto stuff. And now is kind of the time. And there's a clip from the Van Spencer episode that we did that I think

explains why gamers are like the most likely candidate. So let's go ahead and play that. Go into that a little bit more advanced. Why are gamers like crypto people? How cut from the same cloth are we? I mean, have you ever hung out in a like a gaming discord and they're all screeching at each other for, you really can't even interpret and they're on their computer they're internet people they're obsessive they own digital items they participate in digital economies

like a lot of nerds David they are literally like somewhere in the genealogical tree like there are cousins and so it just doesn't feel like a large lift to get them in here it's a lot different than like I don't know say like music people like music people are cool

they go out there You know, they do different thing. They're not, they don't own digital assets other than something on like iTunes. It's just different. Okay. So that was Vance making the point that gamers and crypto people are very similar, have like a lot of shared culture, very online native types of communities. The question in my mind, though, is how do you get exposure to crypto gaming, right? Because the big winner from the last cycle in crypto gaming was probably Axy.

And that was an individual game title. To me, it feels risky to bet on an individual. a game title unless you feel incredibly strongly convicted about that particular game. And the way you probably do that is you have to play the game, really love it, really understand it. And there's a path there for investment returns. The other path is picks and shovels, right? So you invest in platforms or you invest in tools. Certainly immutable is one of those. And like the price point from the time even we did that conversation with fans and Michael to now, this is the IMX charts, David, what are we looking at?

It's rocket. Yeah. Yeah. And so IMX is maybe a platform. I think they have over 200 games that you could invest in if you're bullish on crypto gaming, in particular what the, you know, like what teams are building on immutable X. Another way is maybe the Ronan chain. That was the origination of Axi is actually kind of a side chain. And there's the possibility that that comes back and has a form of a salon. Lana-style renaissance, if you will. So those are two possible bets. What else is in your mind with how you get exposure to crypto gaming? I think Avalanche has a gaming division. And so that's definitely a contender if you're into that ecosystem. Beam is something to look at as well. I recently did an

episode with Robbie from Immutable and Beam because they are teaming up with Immutable. How those tokens are split. I'm not too sure. What is Bean? But really like Beam. It's like a gaming tech stack, for example. And so, like, there's, like, it's being built on immutable, which was built on Polygon, which is built on Ethereum. So there's, like, this emerging tech stack of gaming. There's also the immutable passport for, like, gamer IDs. And let's see, off the top of my head, I'm not super deep in this ecosystem, but I think

those are kind of like the big ones. There you go. David, let's go to number four, which is DA, data availability. So do you think that we are going to see the data availability? Availability Wars in 2024. And what could that mean? Lay out the landscape for us. Who are kind of the big DA players coming into this year?

I think the DA Wars starting pistol really got fired when Celestia Air dropped its network token to a lot of people at a $2 billion valuation. And then the token went from $2 to $14 without ever going down. And so big wealth effect. Is it still doing that? those kind of moves? It has topped out briefly between $12 and $14. It has not gone down. Why did the price just go up, up, up, up? Well, because T.S. Stakers are earning 16%. And so there's a very strong demand to buy up tokens and to stake it to get that yield. In early bull markets, yield,

we like the yield. When people are buying tokens to stake for yield, it starts to become dubious. I think we're starting, we're in the relatively early phases of the bull market. So there's still plenty of time left before the musical chairs really gets in 10th year. But that's kind of my model. We saw that with the yield farming of last cycle, right? I mean, we're talking about David Celestia, $12 billion market cap. 12 billion market cap. Yeah. I think there is a lot left to explore as to the margins of data availability as a product. That is an episode that I've scheduled with John Charbano and Neil Somani from Eclipse to ask the question, is data availability a good business model. But right now, people are earning 14%, 16% yield on staking Celestia. And you know what else, Ryan?

They're also getting air drops. And so staking Tia, staking Celestia has turned into an airdrop target. There was anirdrop that went out yesterday called Dimension that went out to Celestia Stakers, as well as like Ethereum Layer 2 users, Pudgy Penguin holders, Mad Laddholt holders, Tensorian holders, osmosis on Cosmosis users. So it was like a four or five network platypus of airdrop targets across many different networks. And so people have also started to speculate that sticking Celestia is also an air drop target, which makes much more sense as a margins business than data availability.

But that's, of course, a short-term fleeting narrative. That only lasts in bull markets. So that was the reason why I think the DA Wars have started to kick off. And that's just about Celestia. EigenDA, we've talked about this with the restaking meta. Egen, DA is set to launch pretty damn soon here. And that will be a different kind of data availability network than Celestia with different properties, more scalable, less secure.

I'm not actually totally sure. I'm not totally well versed on the different properties here. This is something I'm researching in the moment. But I think Celestia and Eugeny are the two big data availability contenders. There's so many Ethereum Layer 2s and other types of services that have integrated with eigenDA. And then people have also started to pivot into data availability. Near Tezos has a data availability. I remember Tezos Run has a data availability service.

Near recently pivoted. There's Avail, which is a former Polygon project. I bet you there's probably more in stealth. There's probably more coming. And so I think the DA Wars are going to be a very big investment theme in 2024. It's also interesting. Ethereum is throwing a hat in the ring. Oh, yeah, Ethereum.

Ethereum is a DA layer. Well, Bitcoin is also being a DA layer for all the goddamn ordinals that people are buying. Right. I mean, with Ethereum in particular, of course, it is a DA layer now for layer two. It's a shitty DA layer, but it's a secure. It's a very expensive DA layer. It's highly secure, very expensive, not scalable. And 4844 should come out probably in Q1.

It seems like we're getting really close to. Testnet. Early Q2. You think early Q2? So maybe late Q1, early Q2. And that will, actually, I can't recall off the top of my head how much of an amplification that will be for, you know, but we did that entire episode on Ethereum blob space to give you a clue there.

Anyway, lots of data availability. I think the big question in investors' mind is, is DA more of a commodity? Like, will it retain an accrue value? Over time, it seems like everybody can provide some sort of DA with different security assurances. Or is this an investable thesis? Are you kind of investing in the modular blockchain by purchasing TIA at $12 billion market cap or eigenlayer, right? That's a big DPD. And I think it's going to be a topic of research for us in the months to come.

I think the answer about gain availability is, yes, it will become commoditized. but in the same way that like internet bandwidth became commoditized, people just used more. So our capacity to consume DA is going to be matched by projects' ability to commoditize DA. So it'll be kind of an arms race of like people always buy more space, more data availability. And so it's a little bit of a yes and. So I think the final fully evolved economics of these layers is undetermined. But I don't think anyone's in doubt about the need. for like mass consumption of data availability.

It's a big question though in general in these three layers in the modular stack, which will accrue the most value. You have the kind of the settlement layer, you have the DA layer, and then you have the execution layer, right? And I mean, the big contenders right now are obviously settlement with Ethereum being worth 250 billion and then execution layers, which is where we get kind of all of the L2s. But how about data availability?

Will it, will it take an equal share of the pie? Will it be less? Will it be more? That's the big question. All right. So that brings us to number six. This feels like a bonus to me, investment theme, if you will. But it's more like a free gifts.

We're all getting free stuff this year. David, you're calling it, 2024, kind of the year of the air drop. You've got this tweet here. The biggest air drops of all time. Explain this one to us and why did air drops make your list here? Yeah, I think. it's already an investment theme. Discords are a flurry with airdrop hunting strategies.

Bankless Discord is buzzing with like Mantas of recently. There's a lot of air drop farmers in the bankless Discord, of course, because we have the AirDrop Hunter product. But like a few of the other discords I'm in are also all playing these same games, just like AirDrop Farming, air drop farming, air drop farming. This is an older tweet that I put out where biggest air drops of all time.

Arbitrum coming at number one, who put $1.5 billion into the hands of its users when it dropped it at a $15 billion valuation. ENS dropped $1 billion at a $4 billion fully diluted valuation, and then DYDX dropped $900 million at an $11 billion fully diluted valuation. And I think EigenLayer is coming for the number one spot, and it's going to be easy. And that's just because there's so much hype and demand for EigenLayer. But it's really, I think it's going to be a theme that, dominates in 2024. We already saw the dimension air drop. I mentioned that earlier,

go live yesterday or the day before. And that's a pretty hyped chain. And it really the strategies for how to get these airdrops, I think will always be kind of a hot potato because all of the easy things are going to be, you know, crowded. And so like the dimension strategy of like Mad Ladd holders, Pudgy Penguin holders, Tensori and NFT holders. T.S. Dacres, Ethereum layer two users, but not the layer one. Cosmosmosis chain users. Like really getting precise and specific about air drop criteria has got to be a strategy for all these air drops because otherwise, like, the farmers are taking all the low-hanging

fruit. And so in order to have a good air drop, you need to become more precise. And like Celestia, for example, there was a bunch of layer twos. and other applications that are using Celestia for data availability. So that's a pretty hot target. But I bet you people are going to need to become more sophisticated than that to really get these things. Earlier or later last year in 2023 Ryan, I made the claim that $2 billion will be airdropped to users in 2024. I'm going to go and update that prediction.

And I say $2 billion will be dropped to users in 2024, not counting EigenLayer, separately from eigenlayer, because I think IgenLair can drop $2 billion by itself to users. That is my prediction for 2024. There you go. That's it. Those were five and then plus this bonus one. So we talked to restaking. We talked to Salana.

We talked about games. We talked about data availability, parallelized EVMs. And lastly, AirDrops. It's going to be an exciting year, David, for sure. Anything else before we close? I think that's it, my man. Are you ready for 2024? Yeah, dude, 2023 was tiring in a lot of ways.

But, you know, we'll see what we have in store for us in 2024. I think I'm excited. I think I'm excited. I remember going through the bear market of 2018 to 2020. And then like when DFI summer started and then Ether broke from $400 to $700, like everyone knew, it was like, oh, it's on. Like it's a bull market. And I was like euphoric.

I was like, yes. Like this is the bull market. I was promised. And then six months left, like later, like my eyes are bloodshot, hairs brazzle, I don't have any sleep. Like, like, Tara Luna, frogs are attacking me. Rug pulls are happening. It's just like mortar shells and dead friends.

And I did not realize the insanity that was coming our way. But right now we're in that, like, quiet limbo pevere where we haven't attracted the grifted ears and the scammers in the retail. So it's actually kind of nice. They're coming, though, David. They're coming. Some of them are already in our midst. We just don't really know who they are yet. Some of them are already walk amongst us. Oh, God. Well, hold on, everyone. This is 2024. You're definitely in crypto. I got to end with this. Risk and Disclaimers. David and I are angel investors in Swell. I think we mentioned them in this episode. We certainly mentioned Eganlayer. We're advisors in eigenlayer. I'm an angel investor in Monad. There's always a link to all disclosures at bankless.com slash disclosures. On with this. Crypto is risky. You could lose what you put in. But we're headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey.

Thanks a lot.