Bankless - 203 - ETH in 2024

Episode Date: January 1, 2024

✨ DEBRIEF | Ryan & David unpacking the episode: https://www.bankless.com/debrief-eth-2024  ----- 2023 wasn’t great for Ethereum… from a price perspective. But it was fantastic from a building perspective. Where does Ethereum go from here? What does 2024 have in store for ETH the asset and Ethereum the network? Anthony Sassano, Mike Ippolito, and Jordi Alexander join to give a high level overview of the Ethereum ecosystem. The problems, the solutions, and the future. ----- 🏹 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   ⁠ 🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask   ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum  🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo  🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/Toku ------ TIMESTAMPS 0:00 Intro 6:13 Ethereum in 2023 17:40 ETH as Money 24:30 The Internet Bond 30:00 From Execution to Settlement 37:40 Inside vs Outside Crypto 43:20 Restaking and Data Availability 1:10:00 Layer 2s and Modularity 1:23:00 Fragmentation 1:33:15 Decentralization 1:46:50 Wrapping Up 1:51:00 ETH Price Predictions ------ RESOURCES Anthony Sassano https://x.com/sassal0x?s=20 Mike Ippolito https://x.com/MikeIppolito_?s=20 Jordi Alexander https://x.com/gametheorizing?s=20 ------ Not financial or tax advice. See our investment disclosures here: https://bankless.com/disclosures

You guys are all bullish for different reasons. Like, Jordy was bullish because of layer twos and community money. Anthony is bullish because the internet bond and Ethereum is a settlement layer. Mike was bullish because Ethereum has the potential to export its validator and staker set to the world and receive yield on top. So there's just a lot of reasons to be bullish on ETH going into 2024, especially when it's had a 2023, let's face it, kind of a mediocre year compared to other crypto assets. And so this is the question that everyone's going to have to decide for themselves going to the next. year. Is Ethereum being squeezed between these two sides, or is it actually starting to push its competitors to the margins by being a bit more generalized?

Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more... Bullish on Ether. Oh, is that what we're doing here? David, you made me change the title to Ethan 2024. I wanted to call this bullish Ethan 24, But, and then you came in with a bull statement. And that's what this episode actually is. 2023 for Ethereum wasn't great from a price perspective. It was fantastic from a building perspective. It felt fantastic from a fundamentals perspective. But what's going on with the narrative?

We have three panelists today to talk about the case for ETH in 2024. We've got Mike Ippolito, Jordi Alexander, Anthony Sassano. And I really like this panel, David, because they're not all hyper-eth-Max see bulls. Right. Just one of them. Yeah. And they've got some sobriety with respect to Ethereum. And they all have different takes. And, you know, they went back and forth. And there was some debate. And at the end of this episode, I walked away with just like a really strong feeling of what the catalysts are for Eith and Ethereum going to the next year. I think that's exactly right. Previously, we've done this show format with Anthony Zizano, DC Investor, and then like Eric Connor or Cyrus UNessi, people who all, I think, are in agreement about the articulation.

for the bulk case for ethie asset in a vacuum, I would say, whereas Mike and Jordy understand that Ether and Ethereum is not in a vacuum. There are other networks. There are things to be pragmatic and realistic about. And so bringing these new alternative perspectives who, they're all bullish Ether. Mike and Jordy also have other assets, but they're also bullish Ether. And so bringing these more diverse perspective into the conversation about where is Ether's position in 2024? What is its role. Why will people buy it? What does it do? How is it positioned inside of the world of crypto? I think that is something that I think just generally crypto is interested in and peaked by it because it feels a little lost in the last quarter. Straight out, if you hold Eath, you're going to love this episode.

If you don't hold Eith, you're going to love this episode. This is a fantastic episode for you to evaluate this asset and this network at the beginning of the year. And that's why we brought it to you on the first of the year. And of course, David and I are going to be recording a debrief, which is our episode after the episode. David, I'm hoping that we get a little more bullish in that debrief. I want to hear your takes on Ethereum as well and your takes on what we discussed during the episode. Guys, we're going to get right into the conversation. But before we do, we want to thank the sponsors that made this episode possible, including a recommended exchange for all of 2024. If you don't have an account, if you want to buy some Eath, this is the place

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This is the Heath Bull episode, but honestly, these guests are just coming as they are. I don't know what their opinions are on Heath, except for Anthony Sassan. I know, I know Anthony's opinion. I know his opinion is. But we've got a brain trust here, and we're going to talk about Ethereum ending 2023 and going into 2024. We've got Mike Ippolito. He is the Relentless Podcaster from Blockworks. How you doing, Mike?

Howdy, fellas? Glad to be here. Doing well. We also have Jordy Alexander. He's the chief alchemist at Mantle and the CIO of Salini. Jordy, what's up, man? Good. I'm excited not to be the bear for ones.

I don't need to play that role. Yeah, well, the last time you were bare, really bad things happened for the network in question. Let's hope that doesn't happen for Ethereum today. Anthony Sassano, the Infinite Creator over at Daily Gway. How you doing, Anthony? I'm doing well. I'm glad I don't have to be the bear either today. Are you ever the bear, Anthony?

I mean, not on Ethereum, of course, but certain other things, yes. Well, let's start with you then, Anthony. So let's talk about Ethereum. So ending 2023, if we kind of zoom out, ETH was up what, like, you know, 70% from 1, January 1st to 2,200 as of today. And by the way, for bankless listeners, we are recording this pre-holidays. Okay? So the date of recording is December 22nd.

The time, by the time you will hear this, this is our first episode of the year. So a few things could have changed. I know Anthony's been looking at the two-hour charts, and Heath is looking a bit more bullish on the two-hour. So things could have changed, but that's the context under which we're recording this. But Anthony, tell me about 20-23, because Bitcoin was up 2x. 3-X. You know, Heath, just like a measly, 3-X, excuse me, Eth was just like a measly, not even 2x. Salana, of course, 6x on the year. There's been a massive narrative shift for myself, personally. I almost compare this not to Ethan 2020, but almost Ethan, 2019, in terms of like the narrative sentiment for ether the asset and Ethereum the network,

being at some kind of local lows. I don't want to say all-time lows because things have always been worse. Like there have been times where things have been worse. Recap the year for 2023. How are we looking on the Ethereum front from your perspective? Yeah, I think 23 and three has been a really interesting year. It has basically challenged everyone's beliefs, I think. It doesn't matter if you're in the Ethereum camp or in the Solana camp or the Bitcoin camp. I think a lot of interesting things have happened across the board. You know, we had 2022, obviously, we came off that, and that was a pretty brutal year across the board. I mean, there were so many things that collapsed.

The crypto lending market basically collapsed completely. All of the main characters from the last cycle are now either arrested in prison or, you know, still sticking around like cockroaches somehow. But, you know, most people got kind of wiped out. And then we entered 2023. The narratives of 2021 and 22 were all kind of like old and defeated at that point. And I think that if I'm looking back on the whole year collectively, as I said, you know, just before, we've had a lot of different kind of shifts over the whole year and we've basically challenged all of our long-held beliefs. And I think Ethereum is at the center of that, right, where Ethereum has been and continues to be the powerhouse of crypto, you know, so many things happen on there. Everyone talks about it, whether you hate it or love it. You know, it is the thing that everyone kind of talks and thinks about. But of the last few months in particular, right, we've had the Salana recovery, basically, where, you know, obviously the prices went up of Seoul and other assets on there. And but also the network started getting usage. And then, of course, the sentiment shifted greatly in, I guess, the Ethereum community and the Salana community around that. But whenever I look at

these things, I kind of look at the timeline that it's happened in and why it's happened. I think that a lot of sentiment in crypto is definitely dictated by what prices do, right? The narrative follows the price. So if the price is going up on something, suddenly it's like the best thing ever. And if something else is lagging, that's something that gets made fun of a lot. You know, memes get made of it. But you made a joke before how I was looking at the two-hour charts. I mean, we're recording this, and ETH and some L2 tokens went up over the last few hours in price, and suddenly everyone's now a bull on Ethereum and L2 tokens, like literally within a matter of hours. So I think that if you're ingesting content from like Twitter, crypto Twitter exclusively,

your entire mental model of this industry is going to be very warped, I think, and you're going to lose sight of the bigger picture. So I think that just to round out, I guess what I was saying here is like, if you're going to let your, I guess, thoughts be dictated by that, by the short term, you're going to get whiplash and you're going to get whipped around a lot. And I don't think that's a good way to approach the industry. I think that there's been a lot of good stuff that has happened over the longer term. I think that there are certain ecosystems positioned for really, you know, strong, long term kind of growth now. But at the same time, things get ahead of themselves so absolutely completely. And people calling Ethereum dead when Ethereum layer one and layer twos are at all time high usage across the board is just utterly insane to me and just speaks to the fact that the narratives have followed the price. And because EAT has relatively underperformed, everyone suddenly became bearish on Eath, which I think is more of a trade bear kind of thing, not a fundamentals bear thing. And it just depends on who you're following and who you're listening to, really. Yeah, as we are entering 2024, everyone assumes that there is a bull market going on. And I think we're more or less all in agreement that there is a bull market happening. And I just see a lot of chips being shuffled around. And that's really kind of defined the

activity in Q4 or so. And all that conversation about how and where chips are being placed is happening on Twitter and more conversation is happening than actual chips moving because that's just the perception, I would say. Mike, as we've wrap up 2023 and entered 2024, like overall, how would you characterize like why the narrative is what it is and how important the narrative actually is? Because the narrative, I would say mostly happens on Twitter. And like, overall, anything else you want to add to just the placing of Ethereum in Q4, 2023. Yeah, I have some longer-term thoughts on ETH's narrative moving to 2024, but I would just say, I agree with what Anthony said, that narrative tends to follow price. So price is what leads, and then we all infer quite a bit from

that. I would also just say that in some senses, what's playing out right now is actually relatively typical in what you might expect from a blockchain cycle. And what I mean by that is if you're winding the clock's back to 2019, 2020, you know, usually what happens at the end of a bear cycle going into a bull cycle is actually Bitcoin dominance tends to peak and Bitcoin tends to lead. So if you're around in 2019 and 2020, you saw this really typical pattern of sort of Bitcoin leading and then ETH would kind of follow. And then, of course, ETH overtook Bitcoin by the end of the year. So people pointing towards Bitcoin outperforming ETH this year as some sort of evidence that people aren't going to want ETH. I just think that's pretty misplaced. And that's relatively

typical and not something that folks should be worried about. I think what's throwing people off a little bit is this more idiosyncratic thing that's happening with Solana, frankly, which is sort of a mini-defi summer. I think I've seen that analogy get placed a lot. And that's what I sort of think it is, too. There was, you know, Solana went through a lot of hardships with the fall of FTX. It probably fell more in price than it actually needed to. And what you're seeing now is sort of a rebalancing, which is, I think, confusing some folks a little bit. And actually, if you go back in time, and probably one of the only people out there that loves to go back and listen to old podcast, that I like to get a sense of what people were talking to at a time.

And I actually went back and listened to some old bankless podcasts that you guys were recording in 2020. How'd they hold up? Well, but there was a really interesting narrative that was actually going on back then, which was this barbell narrative of Bitcoin and DFI that was happening during DFi summer. And the thought back then was, well, maybe you only want to hold Bitcoin for your sound money. And DFI is just a high leverage play on ETH. So why would you hold Eith? There's going to be this sort of barbell strategy. And time is a flat circle.

and I feel like that's probably the place that we're at in the current day. I remember when that narrative was in vogue, and that narrative ended as soon as Ether ripped from $400 to over $1,000. And no one talked about that narrative anymore. What is the barbell in this narrative, Mike? Is it Bitcoin plus Solana, basically? Yeah, Bitcoin plus Solana. And to be clear, I think Solana has a really bright, promising future. I just think people tend to, you know, fit narratives around recent price action, and I see a bright future for all these ecosystems.

And, yeah, Ether is not dead by any means. It's funny. I'll give you a sense of that barbell. take. This is from Udi this morning. It jumped into my timeline. So, of course, I had to retweet it under my Ethes Dead kind of like thread that I'm compiling here. He says, Bitcoin for high-end luxury digital collectibles, of course, because, you know, wizards. And Solana for day-to-day degeneracy. Ethereum for what? Mental illness? Question mark. That's a taste of the narrative right now. Thank you, U.D. Bitcoin and you got Solana and then Ethereum is kind of crushed in the

middle. It's not just Udi. And people like Ryan Selkis and his predictions are like, hey, you know, Ethereum is getting squeezed between Bitcoin and Solana right now, these fast, high TPS chains. The folks at Van der Ks said something similar. That seems to be the narrative. What's your take on all this discussion so far, Jordi? Yeah. So the last time I was on, it was actually around the merge. And I would say I was a year early.

Exactly what I was saying was that Ethereum has a huge problem. It's stuck in the middle. You have Bitcoin as like the better hard money on the one side. And then you have, you know, the cheaper chains, kind of faster chains on the user side. So if you go back, literally one year ago, this was like. very laid out. The good news is I've kind of like taken like a much more positive tone in terms of where we are right now. So going forward, you know, if we look at this in a year from now, there's a couple like very positive things that I see about Ethereum right now, apart from the fact that everyone's already capitulated and the whole timeline is just crying about underperformance.

But that aside. So, you know, we have seen this play out. But ultimately like in my mind, Ethereum has a few like massive things going for it. One, it's already in that sort of top two breakaway zone where it is an institutional asset. It will get an ETF. People can legitimately treat it as, you know, a Lindy asset. And that's massive. That's huge. Like, it's hard to underestimate how big that is. I think what's happened to Ethereum lately is we've had like Celsius selling.

This is apparently been going on daily, like thousands of ether. It's just kind of being sold off. And I completely agree with Anthony. like price in the short term just dictates that's the narrative right so it's underperforming because there's more cell pressure but in the meantime you know soon enough you will have bitcoin cell pressure because you know you do have government coins and you will have ongoing salana cell pressure and here's like the key thing i want to get to Ethereum is not based money in my mind but it is community money and it is the best community money because it is very widely distributed there's no

VC unlocks going to be going on for the next five years. If you look at Solana, March 2025, it'll, that's the reason why I don't hold any Solana, because I'm not going to play around the March 2025, like, you know, a huge unlock that's happening. Teum doesn't have that. So as a community money, and we can get into that later, I think Ethereum is fantastic. Well, unpack that definition, Jordy. You said base money versus community money. Why isn't ETH base money and why is it more community money. So like me and Michael have gone into this in the past. So I think that in terms of the gold narrative, Bitcoin has the storyline. You know, it was what was created for this purpose. It's just like it's like if you're a Christian, you understand like the power of like this

immaculate conception, right? Ethereum is the first smart contract money. It is kind of based around activity and socialness. Bitcoin, if nobody uses it and it just kind of sits there, it's still kind of works, Ethereum requires, you know, the innovation and the apps and everything else, community, it really needs it. And being the first community money that doesn't have unlocks, it's a new form of money. It's not something that's, it's not easy to do when you have Fiat because Fiat is within a geographic zone. This is like an internet money. So it's a little bit different. It's not as pure as like a base money, but it's very powerful as well. I sometimes wonder about that definition, whether base money is just scaled up community money

and your community becomes like a whole bunch of institutions and governments and bankers in that way. But I'm curious actually, Jordi, and this is a quick side track. We'll get back on Ethereum in a second. I'm just curious, do you think that other layer one tokens, essentially cryptocurrencies are contenders to become community money as well? Is that just a path that maybe Solana is going to go down or other chains beyond Ethereum are going to go down?

Yeah, they can. I think the characteristics, And this is like so early, no one talks about this. And I think over the next years we'll have more people talk about what is good and bad community money. In my mind, the worst kind of community money is the VC money where you just kind of get people dumping on you, you know, for years every month. That's really bad. So that's a huge thing. And with Solana specifically, you know, there is a community aspect, clearly.

Like these people have gone through a lot. And it's like this like Phoenix rising. And so it has this community buzz. But even Anatoli himself, he says, if you. If you look at his tweets recently, he says, I don't even want Salana to be in the top 99 coins. I would just want apps to be there. Salana is kind of, can be like number 100. It's not meant to be money.

He's kind of like talking long term, maybe it'll accrue some value. But the fees are low. It's meant to be used as a platform. And in my mind, it's sort of like a meme coin. And people get very upset in the Salana community when I say soul is a meme coin. But it is. It's just a better kind of version of bonk because it's kind of more widely distributed. Now you're making everyone mad, Jordy.

stop. No, because the founder is not saying it's money. Yeah, right. So it's not on the left side. And there's no fee accrual, you know, at least for the next 10 years. Like, you know, we'll see what kind of stuff comes up in 10 years. But so it's not money, right? I was talking to Anatolia earlier this week, a couple days ago. And it was interesting. We talked about Seoul as the unit of account, which he just had no interest in. And he was actually like inviting ether, Eith, to be the money inside of Solana, not in trying to ether above any other like unit account. It could be. be BTC, it could be Heath, it could be USDC. But he was like, yeah, sure, just like, come in, it's like, other things can be money on Solana. And it's like, my mental model doesn't compute

with that for, like, layer one chain. So it's just such an interesting, like, layer one philosophy of how these systems are built that I just- I mean, Cosmos tried that too. Yeah, right. When Cosmos was going down that path. For sure. So I was eventually going to this as well, but, Jordi, it's interesting. Because I also sort of saw that as a potential issue for Heath going into 2024 about this like trying to compete with Bitcoin and maybe to say the slightly more negative part but build to the positive going forward is I've never liked the ultrasound money meme. And the reason I never liked it is because I feel like Bitcoin won that spot. And if you talk to people in TradFi, it's just very clearly like, okay, Bitcoin is this sort of money thing.

But, you know, if you look at money or talk to people in Tradify that study money, you'll find that there are many different types of money that exist out there. And it's actually very difficult to even define what money is. So even within the U.S., we have this sort of definition of M0, M1, M2. And there are different types of money for people and banks and other sovereigns. And it depends where you deposit that money. Is it in the U.S.? Or is it if you deposit it outside of the U.S. And is it a Euroddollar? And it gets actually like the more you look at it, the more complicated it actually gets. And there are different philosophies around money as well. And because, Because Bitcoin was the first essentially app chain that tried to be money, it was based off a very

specific philosophy of money, which is Austrian economics. And we all got inculcated by this idea of sound money. And that's the only way to protect your wealth, right? And everyone in crypto has seen the chart of the dollar going down over time and 98% of your wealth got destroyed if you held dollars. Well, there was actually another way to protect your wealth over that time. It was better than holding gold. It's called staking your dollars. That's bonds, right? That's yield-bearing money. And yield-bearing money actually outperforms gold. Bonds are a much larger asset class than gold. And actually, most people in Tradfai don't own gold because it has this massive mental hang-up with people that it's not productive. If you're a gold bug and you've tried to talk to people

about getting gold in their portfolio, you've heard this over and over. It's not a productive asset. Those are the people that keep saying gold is just a meme, right? Yeah, yeah. It's a barbarous relic is what Paul Tudor Jones calls it, right? And it's a very specific type of person that wants to hold it and trade it over a long period time. And it's actually a limited market size. What is an extremely large market is the market for yield-bearing money. And that is where I've always seen ETH sitting and having an extremely unique and very interesting advantage. Internet bond, Mike, you like that meme? Yeah, I love the internet bond meme. I love that mean. I was like, this makes so much sense to me. And Eith has these really, you know, all these L-1s,

we created this new commodity called Blockspace. And we're still figuring out which properties of this created block space makes sense for which you. cases. But I've always seen ETH is kind of like it's one, it's more useful than Bitcoin, right? We haven't tried to like make it so useless that it can only be this hard form of money. It's not as performant maybe as something like Solana, but it sits at this very interesting intersection where it's still a monetary money-like asset, but it can do more things, specifically be productive and get yield. And that to me is like a very interesting niche that I would love to see. It's not even a niche. It's the largest market in the world that I would love to see Eith go down.

Maybe we're getting into a little bit of the bulk case. There's still. some I think FUD we need to talk about, but let's dip into the bullcase for just a second here and throw it to Anthony maybe. This idea of ETH as an internet bond as a productive asset that can be used in other chains to power other applications. I know there's been a lot of, just, I would say, latent conversations like sitting in the background about restaking, Eugenlayer and that kind of thing. What's your take on this internet bond meme and this property of ETH as a yield-bearing asset, collateral maybe going into 2024. Do you think that is powerful? Do you think that is something that can resurrect the narrative power and actually fundamentals of Eath? I mean, I think that is the biggest

narrative and meme that we really have within the community. And to go back to what Mike was saying about, you know, him not liking the ultrasound money meme, I think in the Ethereum community, we have this tendency to create these insider memes that just get out of control, right? I always felt like the ultrasound money thing was an insider Ethereum thing that we made for ourselves to poke a little bit of fun at Bitcoiners, right? But of course, memes take on a life of their own and they go way crazier than you think they're going to go. And we've done this with other things, right, with like the Ethereum alignment meme. Like that just is not anything that should be taken seriously. It is an insider thing that we talk about amongst ourselves. But because we do it publicly and because

we speak about it on Twitter and podcasts and because it's easy to poke fun at, right? The ultrasound money memes easy to poke fun out. The alignment stuff is, it just goes much further than we can control. And that leads to bad narratives forming and that leads to people making fun of Ethereum. And I think that's why Ethereum's always kind of in that spot. And I will agree also with the earlier points made around the fact that Ethereum has always sat in the middle, I think, between Bitcoin on one end and all the other layer ones on the other end because Ethereum is competing with all of that or at least tries to. Like I think ETH is competing with BTC.

You know, people disagree with me on that, but I think it is. And obviously Ethereum as a platform is trying to compete with the other layer ones as well. But I think, you know, over the last couple years, Ethereum's competition as a platform is actually shifted to the L2s, right? Because we're using the L2s as kind of the execution layer and L1 as a settlement layer. So we've shifted that. But that is a thing that's going to take a while to play out because we've now shifted basically what Ethereum was to what we want it to be and what we think it's best to be. But that takes time for the network effects to catch up, for everyone to understand that, for all the complexities to be abstracted away, right? Like the interoperability and the fragmentation, those sorts of things.

They're all going to get solved. They're all just engineering issues to me. But over the short to medium term, they're not going to get solved. They're not going to be seamless. And that's going to be a narrative point for not just the other layer ones to hit on us about, but also for the Bitcoiners as well. Because now they have things like ordinals. And now suddenly they're incentivized to pump ordinals and say, oh, we can do NFTs on Bitcoin now.

We don't need Ethereum. So Ethereum's always in this kind of middle ground where everyone around us basically is competing with us. And I wouldn't say they hate us, but they're going to obviously not talk favorably about Ethereum if they're trying to promote their own thing. And I don't think that's, as I said, a new phenomenon. It's been around for a while. But I'll circle back to the point around ETH being that kind of internet bond and appealing to those more TradFi folks. I've heard this from a lot of people, honestly, and a lot of smart people have said the same thing that, yeah, Tradfire is obsessed with yield.

You know, in crypto, I don't think people understand how obsessed Tradfire is with yield, because in crypto, people look at yield, like, I can get 5% on my ETH or I can go DGEN into this dog coin and make 100x, right? Because it's just like a lot of Dgens that are crypto-nees. natives. But there are a lot of people who care about that yield. I mean, there is a lot of ETH staked. And I think people look at the amount of ETH stake and like, oh, it's not as much as other chains. And it's because ETH is used for much more than staking, but of the ETH that he's staked, they're earning a real yield from, obviously there's the inflationary rewards, but then there's the real yield from the network activity, right? The M.V. And the tips that

are going to these stakers. So people are using this already within crypto. But I think, yeah, as I said, like crypto natives tend to vastly underestimate how popular yield is in the the TradFi world. And just for everyday people, you know, everyday people don't want to be a D-Gen and don't want to sit on their computer, throwing money at random things and hoping to score it big, right? And, you know, people do that in real life, like in casinos, but it's not like an everyday thing. You don't, you know, most people don't go to the casino with their life savings. Like, I'm going to put it all on black and we'll see how we go. But yeah, there's that disconnect. But as we progress in the 2024, as we get the ETF, right, as E8th continues to

integrate with the traditional finance system. and becomes kind of that asset, that breakaway asset, as it was put before, where BTC and Heath are the only things that are there right now, ETH stands on its own because BTC doesn't offer a yield, right, because it is proof of work. So ETH really stands it on its own in that arena. And I think that is a huge narrative that we actually need to be leaning into more because I feel like a lot of Ethereum natives, they're stuck in like the crypto native memes and narratives and they're forgetting about the fact that we've actually graduated from that. It's like we're still thinking we're in high school, but we're actually in college now. And we should, we should be

focusing on that. We shouldn't be trying to improve. the high school kids. We need to impress the college kids. Right? So we've actually, that's the problem I will actually say is that we're still stuck in high school and we should be in college with BTC. Anthony, I see you as one of Ethereum's most effective educators and communicators, really. And I'm wondering if you could talk a little bit more about kind of that narrative because here's maybe kind of a setup that I have or an idea I have. I think that we are stuck in high school and Ethereum narratives are stuck in high school. And I think that basically memes have sort of shelf life to them. And ultrasound money was fantastic coming out of like 2019, 2020, where the

popular narrative was eth is gas and has no monetary policy, right? But like maybe its shelf life has kind of expired. And maybe the Ethereum community needs to move more towards this internet bond type of motif. But I'll tell you something else that I see is happening in the background is Ethereum itself has shifted from an execution chain to a settlement chain for other chains. And that is totally different than other points in the cycle. So one of the things that I've seen is basically when somebody comes into crypto, it used to be 2019, 2020, they want to use some cool defy stuff. Their first spot is the Ethereum Mainnet, right?

They spin up Metamask and they start using the Ethereum Mainnet. Now that's no longer the case, all right? And people in the Ethereum community wouldn't even point them to mainnet. People in the Ethereum community would be like, go pick your favorite L2. And we've got Arbitrum and Optimism and Polygon and CK Sync and all of these different brands and names. So there's kind of like some fracturing, it seems like. And then also, I think I've underestimated previously as an ethel myself, the effect of somebody coming to a chain, and then they just buy the local asset of that chain. Why? Not necessarily for use in gas. They're just like, this shit's cool.

I want to own some of the native token in this protocol. And they're no longer doing that on Ethereum. Because when they get to Ethereum, they see a $30 gas fee. And they're like, what is this? Like, what is this? I'll go to Salana. And I think previously I have under. underestimated that effect. So there's a twofold pivot here. There's one. It's the pivot of ether moving from kind of like an ultrasound money type of motif to an internet bond type of motif. And I still want to talk about how that plays out in its maximum form in 2024. But there's also a pivot on the network layer of Ethereum moving from an execution layer for end users. And it's really, let's call it what it is. It's now it's a whale chain. Now it's a settlement layer for other

chains effectively. Can you talk about that and reflect on that pivot? Do you see how that's been harmful over the past few months with respect to eth's narrative and different than it has been in the past? Yeah, yeah. So there's a few things to unpack there. I think that the first thing I'll touch on is that kind of shift in narrative around kind of Ethereum and that kind of shift from Ethereum being the execution layer to that kind of sentiment layer there, right?

Where essentially, as you said, people no longer go to the Ethereum main chain because, I mean, one, no one's going to tell them to go there unless you're, as I just said, a whale or someone that can afford it, which is not most people. they should not be going there. And at the same time, if we want to make Ethereum a chain of chains or a settlement layer for other chains, then we should be encouraging people, obviously, to go to those L2s. And then you spoke about, like, people buying the native asset of those kind of chains that they go to, whether it's an L2 or something else. And I actually wrote about this a long time ago in my newsletter, and I called them shelling point assets. So, you know, you have a shelling point of that ecosystem. So if you go to Solana, you buy Sol, right? Because that is, even if it doesn't even make any sense from an investment perspective, it doesn't matter, right? You're using Salana, you buy. I sell, not just to obviously pay for fees. The fees are really cheap so you don't actually need much, but you buy it because you're like, oh, well, I'm on Solana. I'm having fun.

You know, this seems cool. I'm going to buy Soul because if Solana does well, I think Sol's going to do well, right? Or then, you know, you go to these L2s, but the L2s, I think, are a little bit different. I think the L2s are using, like, ether's gas, right? They're using for gas fees. They're using Ether's money. Heath is like the base money asset of that ecosystem to use as collateral. It's accepted everywhere on all the defy apps, right?

So, ETH is still seen, I think, is the shaling point asset for those ecosystems. But then it becomes that kind of open question around, okay, well, what happens when these L2s start using their native token as gas? Like I know David had a tweet the other day about how StarkNet is actually going to be using their stock token as a gas token. Okay, then do people suddenly think to themselves, well, I should just buy stock because I'm using it as the gas token and it's the shaling point asset for this ecosystem. But then you can go even further down that curve and say, well, in the end, everything's just going to be able to be paid. So you're going to be able to pay for gas fees and really any token. and it's just going to be abstracted away from the end user. So people will probably pay mostly in stablecoins at that point because that's just the

most obvious thing for you to do. If you want to pay for fees, you're not going to go speculate on some token. You're just going to buy stable coins, have them in your wallet, and you'll pay for fees that way. So I think that there's a lot of open questions around that about, okay, what asset are people going to buy when they go to different chains? And it was said earlier that in Solana, they're not even viewing Seoul as kind of money or as like an asset that should even accrue value, at least the founder is. And I'm sure a lot of the people on there are as well.

So I don't actually think we have answers for those yet. We're just going to have to see how it plays out in the coming years. But I still think that the strongest point is that if the asset is used as money within that ecosystem, it doesn't have to be necessarily used as gas fees, because as I said, that's probably going to be abstracted way. But it's used as money in that ecosystem within defy as collateral. Obviously, ETH is great collateral because it has a really high market cap. It's accepted everywhere, you know, as good liquidity profile, all those sorts of things. So I think that all plays in of itself.

and what gives obviously a lot of strength and a lot of staying power. And people want to hold ETH as well because they're using it in that way, even if they aren't using it to pay gas fees. And on the L2 point as well, like even if you're not using it to pay gas fees, you still have to settle to L1, which does use ETH to pay gas fees, which goes back to,

we were saying, you know, ultrasound money, it makes ETH deflationary those sorts of properties. And on that note as well, there was one other thing I wanted to say before about how you said that we maybe should move forward from the ultrasound money meme. And I actually agree with this because we made up this meme in like 2019, 2020, because we wanted to prove to the world, that Heath was a investable asset. We wanted to prove to the world that Heath was a strong asset,

that it would accrue value, and that it wasn't just some shit coin that, you know, had its cycle and now no one's going to buy it again. But we don't have to prove that anymore. Even though the narrative over the last few months has been bad for Ethereum and Heath, right? I mean, Heath is still almost a $300 billion asset. I mean, if you want to do market cap comparisons here, ETH can double and like could triple or triple Solana's whole market cap from just doubling, right? And Sol has already done like a 10x or whatever from the bottom if you want to do relative comparison. So people tend to forget just how big ETH is as an asset. Obviously it's not as big as Bitcoin.

But because it's that big, as I said, I don't think we need to prove that anymore. So we can move past that. And as I said before, we can graduate to now, okay, everyone knows that Eith is a great asset. Not everyone, but like people generally believe ETH is a great asset. It's investable. It's number two. And it has all these interesting properties. So what is the new money interested in?

the money that's going to be coming in via the ETFs and stuff like that. Well, they're interested in yield. Okay, so let's start promoting that instead of falling back on ultrasound money, which literally means nothing to these people at all. Like, even, like, it means absolutely nothing, right? So that meme is not going to hit with them at all. And I think even the term sound money isn't, but yield, right? Yield is going to hit with them. Yield, everyone knows what yield is. All right, so we've got to do an episode with Justin Drake and ask him to rebrand to internet money. He's not going to like me for here, but I just said then. Sorry, Justin.

I do see us falling back. The line between inside of crypto and outside of crypto, I think is worth to reconsider every time we have a part of this conversation because bull markets are times in which people come inside in crypto and everyone gets really chaney. Like they love touching the chains. They love like, like, yeah, they open up the hood. They see what's inside. They're like really curious.

But really the bull market for crypto at large is to not necessarily have that behavior. Like getting crypto people to become crypto people is not the bull market for crypto. it's to get crypto into the internet in this invisible fashion. And so there's like this inside crypto, which is crypto Twitter, which is dog tokens, which is, you know, touching the chain, having a handful of wallets,

you know, fighting on the narrative on Twitter. And then there's like the rest of the world who are just using apps and then sometimes there might be like crypto under those apps and they don't really care either way. And so I do want to like, as we move forward in conversations, remind us like when we are talking about outside

crypto and when we're talking about inside crypto because I think it's outside crypto that's really the golden goose here outside crypto is really the big thing to win jordi as we've been going on through these conversations a do you agree with that sentiment and b just what do you want to add to the conversation that's far yeah i agree with some of it so i guess i'm not as kind of gung-ho on the internet bond meme either i would say that i agree that yield is good for trotify and it's mainly because like you want those like middlemen like the fidelities and the black rocks and the sales you want them to be able to sell something extra and maybe like you know you get eath but they're the ones taking in and they're keeping the yield like stratify kind of needs those ways to generate some

extra fees and i think that type of existence is good i don't know that it's that sexy to be like oh this is like a bond internet bond maybe for like some boomers you try to get them to diversify it the boomers have the money if you have the money for now yeah eventually like us millennials will get a chunk hopefully i will say that you know the yield is not even higher than treasuries right now, unless you're buying meth, which has a higher yield. But for normal ETH, I would say, yeah, let's be clear. We're talking about a token. My guys listening are maybe not want to know about Mantle Eat. Mantle, that's Mantle Ead, folks, all right?

It's a holiday episode. 7.2%. I do agree about one thing very heavily. I think the L2 ecosystem, that's what's made me bullish on ETH because it changes everything. I was always a like multi-chain guy because I love incentives. I think about game theory a lot. And I love incentives. And I think that's what drives the world is like incentives and game theory. And when you have like different chains, it allows different use cases and different ways to incentivize people. And you can kind of perfect different things. And I think L2's allowed that now. We didn't have that before when it was like this kind of like,

you know, one monolithic Eith. That's it. Now I really like the fact that, you know, you can have an L2 that's focused on gaming, you know, immutable or you can have one focused on defy like Manville. You can. And then you can use the native token. It's obviously not for security because that's ultimately, you know, you're paying gas to ETH. That's always going to be the case. But you're using the native token for incentives. And that allows like all these little ecosystems. And if ETH is kind of like the security layer, that's like so powerful for a community money use case, which I think is very, very strong.

One more story. So like I said, I used to not be as bullish before the L2 thing came out. So in 2021, I was stacking Solana. I bought a ton of it at $20 and just staked it and rode it up to $300. I went to Breakpoint. And at that point, I had like 80% of my net worth in Salana. It had gone up so much and had just kept all of it and it was staking and all this stuff. And I had made multiple Australian mansions of Salana money.

And I was like feeling good about life. I have the right. This is like a good money, right? And I remember sitting in a car like going to one of the parties. And everybody was starting to play this clip from All In podcast where all these billionaires are sitting around talking about how like, oh, I got a billion. I got a billion. I got it a discount. I'm holding it is. Like this like Chama thing just changed my world. I slept that night and I woke up and I'm like, A, I'm selling all of this because I'm not going to wait for like Chumath to wake up one day and like dump it all. Why, you felt like the sucker there? Yeah. I feel like this is not a reliable form of me to store my wealth in.

this is like 80% of my network. It's not going to be like a joke. A billionaire who like got it at a discount. And then, you know, Anatoly is very like, I've had interactions with him on Twitter. People can go find where he just like, he doesn't get it. He's like, oh, it's eventually in the long run, it's all going to get distributed. So it doesn't matter that like, you know, it's very concentrated right now and the VCs have it or whatever. Because in the long run, it's just, it's just going to go out there.

But like, no, there's a canty yon effect. You don't understand things of like, you know, being close to the source of money and how powerful that is. And it changes like the entire dynamics. I think Ethereum had that issue. Maybe, like, you know, people can definitely criticize the early days and, you know, the ICO, et cetera, et cetera. But now we're like a decade in. Everybody, it's kind of distributed very widely and there's no kind of unlocks. I feel more comfortable having like money, like having my net worth some of it, like a chunk in ETH.

Jordy, let me just follow up on one thing because this has been definitely a source of fud against ETH, which is basically the idea that layer twos are bearish for Ethereum. Why? Because it takes users from the L1 to this diverse ecosystem of L2s. But I heard you just make the opposite case. You actually said that this diversity of layer twos was bullish. I'm wondering if you'd double down on that. Why? Why is that so bullish for Ethereum and then maybe in particular, ETH the asset? Yeah, I mean, the reason I love this episode is because, you know, me and Anthony are very, like, he's the maxi. I'm definitely not a maxi of anything by my nature. But we agree so much on some like key parts. And the one that I agree with Michael as well, I think the kind of more like a Bitcoin direction, that's where like each should go and not like the casino direction. First of all, even right now, if you take 300 billion as a market cap and you look at like how much the gas, you know, it's like one or two billion. We talked about this in the past. The P.E ratio is like a hundred billion. We talked about this in the past. The P.E ratio is like a hundred billion. 100, 200, it's a very high P-Ratio. What that shows is there's potentially like another source of like, you know, premium.

And it's not the gas fees that are being burnt. It's the fact that like there's a shelling point coordination that's going on. That's very powerful. And I think that's ultimately like where Heath will thrive and do really well. And so the L2s, yeah, maybe like, you know, they're taking away some of the gas. You know, people might not even want to use it for data availability. And, you know, we have Celestea, eigenlayer, all this other stuff. it creates a better user experience

and maybe you get more users that way and maybe it's a better community money and it's a better shelling point for that first thing and not so much necessarily maybe people don't want to pay for data availability on EVE maybe that's not the end goal

maybe some of them do because they want to be very Ethereum aligned but again that's the beauty of the L2s people can do it in different ways and then we'll see kind of where the users go Mike with what Anthony and Jordan have been saying what's been fitting into your mental model of Ethereum

and what is not fitting if anything So, David, you and I were talking a little bit about this. And I think one of the things that Ethereum is getting knocked for a little bit right now or just why it feels a little bit disjointed is because this is a thorny problem that many blockchains are going to have to solve. I actually think a lot of different blockchains out there are sort of converging on this end state of maybe like a base asset and then this interoperable network of different app chains or generalizable sort of L2s.

Certainly Ethereum's going that way, Cosmos is going that way. It'd be unpopular to say at this point, but I even think, Lana's going to end up in that direction as well. And it feels a little bit confusing at the current time. And everyone has a different idea. So maybe to just chuck a little bit of a bomb into the room here, I actually don't like the idea of ETH as a settlement chain. And I'll tell you why. Like the reason I don't like it is because that is a bomb. I think it's bullish for Ethereum, the network, but I think it's bearish for Eith, the asset. And the reason is simply incentives. You know, we can say Shelling Point all we want, but ultimately, these L2s are businesses.

They all raise money from VCs. And they're all going. to want to produce solid economics. And the largest cost that they have is what they pay to the network, to ETH. And you're starting to see this already with DA. So, you know, we can shame these L2s all they want. Like if you talk to these L2s, they're going to outsource their DA to Celestia or eigenDA because that's 70% of their cost and it's entirely variable. So I just think that's, again, it's very good for ETH the network, but I think it's bearish, ETH the asset, if we just want to call it this settlement layer. But the good news is, I don't think we have to do that, and I don't think we have to leave it at that. So even if you look at something like Igen, DA,

like what is Igen, DA, right? It's this sort of outsource network of operators who are going to opt in to run DA services for basically ETHL2s. Maybe ask ourselves, like, who is likely to do that? I think the most likely group of people that are going to do that are existing ETH validators, right? And they're doing it through restaking. So for me, I think for ETH the asset, we can love what's going on on the L2 layer. That's ultimately going to accrue some value to ETH the asset. But we have to ask ourselves, what are people going to do on ETH the main chain? And this is why I do just think restaking and yield is so critical here.

We do need activity that's happening. We do need a reason for people to buy ETH. And one of the assets that I think ETH has is this network of people that are willing to stake it. That's a really difficult. thing. If you talk to anyone in Cosmos, you will understand it's actually not that difficult to get people to go out and validate your network from day one. They'll make a profit. You can pay them. What's really difficult to get is this evangelical group of people that will hold and stake your asset across multiple cycles. On the way up, on the way down, that is an incredible asset that Eith has. And to everyone's,

you know, credit on the show, it's because of East monetary properties. And I think the obvious next step is to say, what else can this network of stakers ultimately do? And I think what they're going to do is offer and sell their security to other chains. And what that creates is an incentive for people to actually buy and stake ETH to opt into not only ETH yield, but incremental yield from other chains as well. I think I am bullish on ETH the asset, but it's for that reason. I want people doing things on ETH, the main chain. And the unique set of the tradeoffs that ETH has chosen, and for its block space is it's incredibly secure. It's very, very secure, but it's also flexible enough to do things like restaking. And so that to me is ultimately, you know, I see the point,

but when it comes to just calling it a settlement chain, I don't see any reason for anyone to buy and hold ETH. And I think to be bullish on ETH the asset, we need to give people a reason to buy and hold and ultimately stake ETH. That's what I think. Let me throw what I just heard right back at you, Michael, and I can make sure that, like, my interpretation of this is in line with yours. So eigenDA is like the first restaking network. It's the first AVS coming out of eigen layer. It does the same thing as Celestia. It does actually the same thing as every single blockchain because every single blockchain is a DA layer to some degree, but some chains are meant to be DA layers. And Celestia is like the new DA layer on the scene. Igen DA, I kind of consider as like

a sidecar to Ethereum. So like picture a little motorcycle, that's Ethereum. And you have the little sidecar. And that's eigenDA. It's attached to the main chain of Ethereum because, it is restaked ether that secures eigenDA, whereas Celestia is just like a different car. It's a different car over there. It's disjointed. It's not connected. And so to some degree, there's a alignment between eth-staked to eigen-DA and what like many, many, many layer twos want to settle towards or use DA from, which is something more proximate to Ethereum. There's also a proto-dang charting and dang-sharding to talk about, but if we're going to talk about alternative networks, that's adjacent. And so Igen-D-A can recapture some of

what you think might be lost if roll-ups start to settle to Celestia. And it will recapture that value towards ETH. Fees paid towards EGENDA will actually be ending up as yield towards Ether. And that's just network number one. That's just like the first one that we know is coming online. And I think what you're saying is that there is some sort of like mesh network of many possible interoperable chains that are also not blockchains, but other types of networks as well. And with restaking, Ether, the monetary unit gets exported. into these pluralist types of networks. Some might be blockchains, some might be DA layers, some might be Oracle networks, some might be something we can't even imagine yet. But the idea

here is that ETH, the monetary unit is being exported to these like pluralist networks beyond just like the layer two's, just like these new types of networks that are coming from Eugenlayer, rethinking networks. And that yield flows back into ETH. Is this a fair interpretation of what you're saying? Yeah. I also think it does something very powerful, which is, you know, this has been kind of overly talked about as well, I would say. And there's a question about, is this going to exist? But people have asked, like, is there a risk-free rate in crypto? There is in Tradfine. There's something, it's the rate that the Federal Reserve sets. It's treasuries. That's what you get. But ultimately, I think restaking comes to multiple different chains. But I think ETH is the furthest along,

and it has the block space properties that are most suited to it. And I think what the opportunity that I see for ETH is to set itself as the definitive risk-free rate. for crypto, where basically the interest rate gets set by whatever ETH ends up paying out to stakers, plus the incremental yield that you can earn from securing other chains. And you could actually imagine in the future ETH conducting some sort of monetary policy based on its issuance rate where the less issuance ether ultimately offers to stakers, the more people are incentivized to restake to riskier and riskier change. And the more it issues, the less people are incentivize to go out along the risk curve. But that's ultimately the future that I see for it.

And, you know, when it comes to these larger blockchains like Bitcoin and ETH, there's, I think, an uncomfortable tension that everyone has to ultimately reconcile, which is we're making it into the big leagues now, right? Like, people say this about Bitcoin. I've been pointing this out for years. People like, Bitcoin is money. Well, money doesn't go up 100% a year. If we wanted to be this big thing like money, we all have to get comfortable eventually with slower, marginal sort of growth from a price appreciation standpoint, but less risk. It's been de-risked. So I would argue for these larger crypto assets, even though the absolute returns might go down over time, I do think the risk-adjusted returns continue to go up because every year they exist, they're less and less

risky. And this isn't like the sexy narrative that I think crypto people want to hear, but it is the narrative that people in Tradfai want to hear. And actually, I think one of the big knocks on crypto generally is Tradfai people don't trust stuff that goes up 100% in a year. They just don't. They look at it and like this doesn't make sense to me. This doesn't foot with what I think is realistic in terms of assets. So yeah, that's to me the yield thing and restaking gives people a real incentive to hold the asset. This is just my opinion. And by the way, I realize this is orthogonal to the thinking at the Ethereum Foundation. Yeah. I don't want to like cut in because like I completely disagree about the restaking thing. I think like you're adding risk. First of all, staking is not risk free. If it was completely risk free,

Because you're staking something, it means you might lose it. That's kind of like the whole point. Once you start like restaking, I know Vitalik has also kind of like expressed concern about this and it does remind me of 2008 a little bit with the CDO squared and like all this stuff because at some point you're just think about what you're doing. You know, you're taking Eith and it's staked. And then you're taking the staked Eith and they accept Rocket Pool Eith and Lido Eith and which, you know, other Ease. And then you restake it.

But then like if there's actually a slashing event and then, you know, you might have have to take it and then unwrap it and then slash it there like it starts to get i don't know that this is like the true like fed rate it just feels like a like an option that people might decide on the risk curve whether to do or not but i wouldn't call it like fundamental i kind of see it differently i think it's definitely like apples to oranges to calling it the risk free rate but like the patterns are there and like the systemic risk in eigenlayer restaking i mean we didn't have smart contracts in 2008. We have a lot more clarity in crypto in these worlds. So I do think that there are new patterns here to unpack. Wait, but Jordy's just basically talking about. He's not saying

that Staked Eath isn't the risk-free rate for Ethereum. He's saying he probably agrees with that. He's saying once this gets bundled in all of these other like high yield but like incredibly high risk and like shitty app chains basically or just like bad things, then that could cause a cascade of trouble on Ethereum. Is that what you're saying? Like you're worried about rebuttling this risk and chasing yields. Yeah, I guess like when I look at like 10 years in the future, I don't see like restaking as being like a fundamental piece of what's happening. I see it as being, you know, kind of what it is now.

Like some people do it. They want the extra yield for them. They decide they want the risk. Like they kind of, they do it. And maybe it's a good service. And I agree with everything about eigendae being kind of like this sidecar. And it's actually pretty cool. And mantle, of course, is kind of like the first one that chose eigendae versus, you know,

Celestia. and that's all like very agreeable with like the whole thesis but ultimately i don't think that everybody will be like restaking and then like kind of chasing down that path i don't know what anthony i would love to hear what anthony thinks and i would also love to see if anthony can diffuse the bomb that mike throughout i want to attempt to diffuse the bomb first diffuse that bomb because he said anthony let me just repeat he said that the settlement layer is bearish ethereum being a settlement layer is bearish for ethiasa i wonder if you address that too Yeah, so there's actually the other part to that as well, which is the part about where the data is going to be posted to, right, for these L2s.

And I want to just quickly define some things so that people know what I'm talking about when I use these terms. When we call something a roll-up, it means that it both settles its data and it's like proofs and everything to the same layer. So like to Ethereum L1, that is the technical definition of a roll-up. When we call something a layer two, it means it can settle its data on Ethereum L-1 or on the same kind of layer that it's settling its proofs to and it has its bridge on and things like that. or it can store its data elsewhere, like on Celestia or Igan, DA or something like that. These terms are a little bit debated in crypto, but that's how I view it, right? So when you think about where to post your data, okay, well, why are roll-ups paying so much in fees today to post their data to Ethereum? Well, obviously because it's more secure.

Like, that's the main reason, right? Because if your data is on another network and then you no longer have access to that, your funds cannot be stolen from the L2, but they can be frozen. So if you don't have the data to come and say, okay, well, the L2 is offline. I want to escape back to L1, you can't do that if you don't have the data piece. It won't let you. It just literally is impossible to do it, right? And there are debates about like letting people store their own data, but then what does that look like? You know, does it actually work? There's this whole kind of worms that gets opened when you start storing data off chain, and it definitely makes it less secure. But then the argument becomes, okay, well, it's a cost

argument. As Mike said, these L2s are businesses. You know, they're going to have token holders that want to maybe stake the token and earn fees. And then they're going to see, well, why are you paying so much in fees to Ethereum L1, why don't we just use another data availability layer and pay cheaper fees and get more yield for ourselves? But the thing is, is that like, when it comes to fees, it's always a race to the bottom, right? Like, DA, I think is a race to the bottom. Like, if you're storing it on eigenDA or Celestia, you're still choosing between which one you actually consider it to be more secure, right? Like, because you have to make a decision there about where you're storing your data. And obviously, Ethereum L1 is in this decision. So then it

becomes a game of arbitrage. Like, is Ethereum L1 cheap enough for you to just, by posting your data there now. Okay, well, if it's not, you post it somewhere else. And then you keep playing this game of kind of just driving costs down to zero, basically, across all of these different layers. And in the long-term roadmap of Ethereum L1, if dank sharding actually works, like full dang sharding actually works like we hope it does, it's actually going to offer, like, a lot more throughput capacity than we have today. And the reason a lot of the L-2s are choosing to store their data off-chain is not necessarily cost. It's because Ethereum L-1 cannot actually handle their capacity. Like I know Eclipse, for example, which is the SVM-based,

L2, it's impossible for them to actually have that live with data posted to Ethereum L1, because not only there's that cost, but they actually can't do it, because they can't offer the TPS that they want to offer, because Ethereum L1 does not have that data throughput, even with blobs, with EIP 4844, because that's just the first step. That's just laying the groundwork for full dank sharding, which hopefully, I'm not going to promise anything, of course, but hopefully, you know, the whole design spec around it is to offer a lot of data availability. And then, of course, you get the security of Ethereum, and that's why you would kind of settle there. But DA is definitely a race to zero, especially on these off Ethereum L1 data availability networks. Like, if you're trying to

compete, you're not competing with Ethereum L1 because Ethereum L1 is already expensive and will be for the foreseeable future. You're competing with other DA networks now. And then you've got to convince these projects to use your DA layer over someone else's. The quickest way to do that is to lower your fees as much as you can. But then, again, it falls back to the question of security now. It's like, okay, which one is more secure? Is it eigen-DA because it's using restaked eth and eith, you know, node operators and whatever? Or is it Celestia because they have such and such going on? Or is it NIA? I know NIA's pivoted to a DA, right? There's all these kind of considerations you have to make. So I think that for the L2, for the roll-up, they would ideally want to settle on Ethereum L1,

first and foremost, after some certain cost. Eventually, they'll be priced out, or at least for the short to medium term, they're not actually going to be able to settle there just because Ethereum doesn't have the capacity right now for that to happen, right? And then they'll go somewhere else. But then in the long term, if we think, you know, when full dank sharding is out, what does that world look like? So those are the open questions around that. I know a lot of people are debating this in the community right now about where data is ultimately going to be stored. But at the same time, just even if your data, and this goes to the bomb about Ethereum not being a settlement layer or, you know, it's not good as a settlement layer, even if your data's

off chain, you're still settling stuff to Ethereum, right? Like the bridge lives on Ethereum. You're settling the proofs there. You're using Ethereum, as I said, like the bridge is there. So people are bridging in from Ethereum to these networks. Maybe they won't be bridging in themselves. from L1, but the centralized exchanges are bridging funds across these kind of things, and they're obviously still secured by that bridge on L1 Ethereum to the L2. And then if you wanted to do like arbashage between things or market makers doing their complex strategies between different layers and accessing liquidity on L1 versus L2s, it's still going to be used for settling these types of value.

But then ultimately, some of the L2s will still store their data on Ethereum, right? They want to be the most secure, for example. If they want the gold standard security, they're going to pay for it. Even if the token holder start pressuring them into putting it somewhere, else, like the logic becomes, but we're trying to be as secure as possible. And with security comes money, because there's a reason why a lot of money is invested in BTC and ETH, right? It's security. I mean, you can argue about decentralization and things like that. But decentralization is an emergent property of many other properties of a chain. And I think security is one of the

most critical here. So that's what the conversation basically boils down to. And each L2 is going to approach this differently based on their own individual needs. But I don't think it takes away from Ethereum being a settlement layer, and I don't think it takes away from ETH either. And the kind of restaking front as well, I'll just finish up here. I'm actually someone that sits like smack bang in the middle of people between that love restaking think it's going to change the world and people who think it's going to be the end of Ethereum. I'm in the middle.

And I love being in the middle because it means I get to talk to all these people and I get to hear their arguments and I get to kind of account with my own opinion on this. And the number one opinion or the high level opinion I have about this is that restaking is going to happen whether we like it or not. the network allows it to happen, it's going to happen. And the only way we're going to know if it destroys Ethereum or has negative externalities or increases risk exponentially is if we do it. So there's no point debating all of these things right now about restaking because we're all making massive assumptions about it. And we're all making massive assumptions about how much risk people want to

take, which is pretty much like what the markets do, right? The markets are a waiting machine for risk at the end of the day, how much risk people want to take. And we've seen that over a longer time friends, people are actually quite conservative with their money. Yeah, they'll play the GGen games over the short term. But as I said, there's a reason why BTC and ETH account for most of the market cap of crypto, because those are the safe havens, right? They're their security for people. They're the risk off, so to speak. Obviously, cash as well. But, you know, if you're a crypto native, you want to go there. So that's my whole take on those topics. I rambled a bit there, but hopefully that landed. Arbitrum is the leading Ethereum scaling solution that is home to hundreds of

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but uses Eigenlayers data availability solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle treasury is one of the biggest Dow-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 onboarded, like Game 7 for Web3 gaming, and Buy Bit for TV.

and liquidity and on-ramps. So if you want to build on the Mantle network, Mantle is offering a grants program that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first Dow-led layer-2 ecosystem, check out Mantle at mantel.com. And follow them on Twitter at Zero-X Mantle. So Anthony, right in the middle on restaking. And I'm wondering, Mike, if you want to respond. So Anthony is expressing, hey, you know what, it's still great to be the settlement layer and bullish on a settlement layer. And I think he was saying, The DA layer kind of becomes a commodity and prices go to zero, so there's more value accrual on the settlement layer side. We didn't touch on the execution layer and value accrual there. But in general, Mike, how would you respond to that?

Yeah, just to touch on the response to restaking, Anthony, I wouldn't change a word. It's going to happen. This is the whole point of being a permissionless network. It's going to happen. And we'll have to see how it ultimately ends up playing out. For the record, I do think ETH is going to be the dominant settlement layer for most things in crypto. I don't think that that's not bearish. I'm not disputing that idea. The reason I'm a little bit more bullish on Eith the asset falls more in their restaking camp than the settlement camp. I'm not saying that that's not valuable or that won't lead to value accrual to ETH. But if I'm kind of waiting, you know, my different bowl cases, I would be more in the restaking camp than the settlement layer camp. I just want to ask a question on that follow up. Do you think more people are going to restake their ETH because Ethereum is a secure settlement layer? Because they know that they can get a real yield. So then it becomes self-referential. I think you're right. It becomes like self-reinforcing. I think you're right about that, actually. So that's how I kind of view it as well. Like I just view all of Eats value accrual mechanisms as self-reinforcing, right? And it all just plays on each other and kind of, I know, you know, you can talk about risk and

things like that. But I just think that they all work in tandem and they work really nicely. I wrote a piece about this a while ago called the grand design. And it was me describing Ethereum's design with its L2s and being a chain of chains. I didn't mention restaking because it wasn't a thing back then, but you can slot that in. But I was talking about all these things and how they all just Ethereum is trying to be something that works in concert with each other. You have all of these things going on. It's trying to be a grand concert that works perfectly in sync with each other and that all of the incentives are aligned, stuff like that. Obviously, it's not what it is today because because MEV is that one big thing that's kind of like overarching everything right now.

And I call MV the blockchain killer if it's left unchecked because it is not a pretty thing. But that's how I imagine these things and how I see them all playing with each other. Do you look like you have something to say too. Yeah, I mean, you know, whenever I hear this stuff, so I'm just like, there's this meme on Twitter. There's like the elephant, you know, going after his own dong. It's kind of like self-referential. Holiday episode, folks. And that's, journey talking meth and elephant on.

Life's a Ponzi, guys. You just got to accept it. That's why you have me on the show. No, but the concern I have is that, you know, the argument is being made is, well, you know, ETH is going to be valuable because it can be restaked. And why will people choose it for restaking is because it's valuable and like, you know, it's secure because it's a lot of money. But that's like very self-referential.

And I think that can ultimately like be the bull case. It has to be this kind of shelling point of community and like settlement for sure is a big part of that. So I thought that was actually a really profound point. Like my mental model for crypto in general is that we've created a new commodity-like thing, new asset class called block space. And the properties of the block space ultimately determine what the use case is. Bitcoin's a really interesting example of that because they took a pretty bold strategy of having extremely small, very non-performant blocks.

And that closed them off from a ton of use cases. But what it did is it made them really useful for this very specific large market size use case, which is this card money, store value, digital gold type thing. Ethereum has a different set of tradeoffs for its block space. And I think, Anthony, the point, if I understood the way that you made it, is it's kind of like one more to the left here, where it's still very secure and can be used as a settlement layer. And one of the things that's just difficult to predict about all of this is this whole technology is super emergent, right? None of us really know how this is going to play out, no matter how confident we sound on this podcast. And

it can allow you to be, like, there are multiple different ways to skin a cat, right? We have this property of Ethereum block space, which is it makes for a very good settlement layer. Ultimately, that could be roll-ups paying fees down to Ethereum to settle to it. It could be that the settlement property of East Blockspace makes it good to restake, but that's very similar, right? So I thought that was a really profound point that you made, Anthony. I agree with you. I think a lot of the debates as to whether eth is bearish or bullish really is determined by what you think about its positioning in relation to other blockchains. Like we talked about the barbell theory, right? You got Bitcoin on the left squeezing ether as money. You got Solana on the right squeezing

ether as an execution layer. And that can make you bearish. Alternatively, you have Ethereum in the middle doing both of those things and doing both of those things pretty well. And that can make you bullish depending on how you want to see it. And it's really, to me, my interpretation of the value accrual for ether and the utility of Ethereum is that it does everything. And Anthony talked about, like, you know, ether's value accrual or value capture mechanisms all kind of being self-referential to each other. You know, the layer two by the block space makes ether have yield, which makes it, you know, highly interesting as an institutional asset, which makes restaking a possibility. And like all of these different value accruals, which can be siloed and made more stronger by like a modular chain,

like Celessia for data availability. And that one narrow. aspect. It can be stronger as a single purpose chain. But when you get a little bit of everything, you have a self-referential value accrual mechanism, which is a weak narrative because it's spreading it out over like all possible utilities. But nonetheless, you do have like this kind of whirlpool of assets. At least that's how I kind of interpret it. And I do want to bring us to the last maybe part of ether's value accrual mechanism, which we haven't talked about yet, which is definitely in the conversation sphere in crypto-twiter, which is layer two's and Ethereum's execution layer. Because without layer-toes, Ethereum doesn't really have a very good

execution layer. Ethereum needs its layer twos. And right now, the narrative around layer twos is that, like, they're incomplete, no one wants to bridge. Bridging is unnecessary. It's a byproduct. They're fragmented. It's a byproduct of like a primitive blockchain. Mike, I'll throw this one back to you. What do you think is signal about this narrative going around in crypto-twitter? just more broadly, crypto. And what do you think Hasmare and what do you think doesn't? I think it highlights an issue. Like I said, I view the endgame of most of these blockchains as there being some sort of base layer, which does a thing. And then ultimately, a layer of interoperable roll-ups, app chains, whatever you want on top of it, that settle back down to it.

So if you talk to people from Cosmos, interoperability has been a challenge they've been focused on for a very long time. And I think ultimately it's something that's thorny. I think Cosmos underestimate it. I think ETH underestimated it a little bit, but I think it's ultimately something that's solvable and not a long-term bear case for roll-ups whatsoever. In terms of the EVM, I would say that this is a case where steel sharpened steel and Solana focused extremely, they had like a very narrow focus on execution with SVM. And I think what it's going to push layer two's to do is to experiment with improvements to the EVM. I actually heard someone from the EF recently say that the EVM was originally designed for ETH, the blockchain.

But the assumption was that once we got layer twos, there could be more innovation that would happen at the execution layer that would be appropriate to, again, the sort of block space qualities of roll-up. But because, you know, these roll-ups had so much to do, there were so many different things that needed to happen at a really quick time, they just didn't prioritize that. And one of the things that I'm really interested in in the coming year is to see how these roll-ups end up tackling things like parallel execution. You can see it with Monad, you know, which is a new blockchain that's going to launch, which is parallelizing the EVM, a whole bunch of other improvements, pipelining, etc.

I think the layer twos are going to start doing that as well. They haven't come out publicly and said it, but I would be really excited to see what the innovations that roll-ups have on the execution layer. So are you bullish layer twos then, Mike? Yeah. So there's the strong Ethereum case, which I'll make, which is layer twos will just freaking eat everything. And Solana will have to become an Ethereum layer two at like one point. in time. That's the extreme bullish eith take. According to Anatoli, it already is. What? Yeah, he says that. Stop throwing bombs, David. Yeah. I was just going to add on that point that

I mean, the scalability thing is obvious, right? That's the whole point while we're doing it. But it's never been the main strength for me or the thing that I've been most excited about. I'm most excited about exactly what Mike's talking about. The fact that we can now experiment way beyond the EVM, right? And even like within the EVM, because to change the EVM on L1 would take so long to do, right? Because to get that through L1 governance and to like convince the core devs that it's a good thing to do because they will look at it from a security perspective and they'll look at it from a change stability perspective, it would take years, many, many years. I mean, it took us two and a half years to get EIP-1559 into the network. And that was the most popular EIP in history. So just using that as a benchmark here. But then the L2s, they have freedom to do whatever they want. They can literally be completely centralized or completely decentralized. They can use whatever VM they want to use. They can store their data on Ethereum or elsewhere, right? depending on their needs, and they get to just have this grand experimentation phase that Ethereum L1 could never have. And I don't think any L1 can actually have this, because by very definition, if you want to be a decentralized L1, you cannot move that quick. If you move too quick,

you are de facto centralized in my eyes. Like, I think one of the strongest barometers for decentralization for me is how slow actually changes are made to the L1, right? So if you want to be decentralized, you cannot do that. Whereas the L2s will be decentralized eventually, like it's not going happen overnight. It's going to take years, right? But in the meantime, they trade off that for the fact that they can experiment in a million different ways that could never be possible in L1. So that is, and will always be the most exciting thing I think about L2s for me. Like the scalability is table stakes. If you're not scalable, then why are you even building an L2 to begin with? But then if that's table stakes, what else can you do? And it turns out you can do anything on an L2.

Anthony, I completely agree with that. We agree on a lot. I'm curious to see, like, I was about to explain like my sort of prediction for L2 market structure plays out. I think one of the things that sort of trips people up is even the last couple of months, it's like there's an L2. It's like, why do we need another L2? And you're reading that like, oh, that doesn't really bode well. If you have to say that caveat in your initial announcement, like how do you view the ultimate market structure playing out for layer twos? Yeah, yeah. I mean, right now we're just in a Cambrian explosion, right? Everyone wants to experiment with L2s. And that means that most of them will not work out long term. They're just like anything else. I mean, we had that with DFI, right? DeFi summer was

a Cambrian explosion of stuff. Do you guys remember Danny Sester, the Frog Nation Army or whatever it was called back then? Yeah, I remember. That was like the biggest thing for like three months and now no one talks about it, right? I think L2s are going to have a longer shelf life obviously than three months just by their nature. But the thing is, is that I ultimately envision what you were talking about where you essentially have these super chains, which are chains made up of all these other roll-ups, all these other L-2s that cannot interrupt with each other. And there's not going to be that many of those things that have the market share. It's just going to be like a power law effect. Like we already see pretty much everywhere in crypto. And it's not just in crypto, obviously, it's outside of crypto as well.

But that's how I ultimately envision it playing out. But the cool thing is, is that we still get all of this experimentation. And then all of the cool things from these L2s that don't work out can just be ported over to other L2s. I mean, if you want to take an early example of this, Polygon just bought Hermes, which was an L2, right? They just bought other ZK teams. And they're like, well, come build the Polygon ZK EVM and come build the Polygon CDK. And then we can have an awesome kind of super chain going on. So I think that's what's going to happen with a lot of that because the tech is open source, right? The tech is available to be used. Well, not all of it, but like a lot of it is open source.

And there will be acquisitions between teams as well, definitely. But yeah, I envision the ultimate end goal being just a bunch of super chains. Right now, obviously the leaders are OPE stack, Polygon CDK, but you've also got Arbitrum orbit. They're doing their stylus thing. You've got ZK sync with their whole thing they're doing. And then you have some satellite ecosystems like Starknet, for example, that are very focused on a specific kind of ecosystem. They're not doing the whole super chain thing yet. Some of those will probably pan out, I think, as well.

But yeah, that's how I generally kind of view the L2 ecosystem. I think these Layer 2 CDKs chain development kits, the ones that Anthony just listed off the Polygon, one, the Optimism, one, the ZK Synch, etc. This bit of technology, which, you know, settles to either layer two main chain or directly to Ethereum, doesn't matter, is the only bit of technology that I see as production ready to go into a corner of the internet and be an invisible piece of, blockchain architecture that allows some application on the internet to be a blockchain, you know, token, crypto-based architecture without having to be in front of the face of the consumer.

Like, we're seeing this with immutable and zero gas fees. We've already seen this with so rare and all of the people like playing their trading card games with NBA cards and soccer cards and all this stuff. And the thing is, like, this is an extremely outside crypto narrative. These people don't play, come into the world of crypto Twitter and talk about how they're playing so rare in crypto Twitter circles. And so it doesn't permeate into the inside of crypto circle. And like I said, it's the golden goose. It is the internet. It's the only way that like people, the internet is going to become crypto people because they're going to become crypto people without knowing it. And I don't see any other technology that can get to that point

because we need specialized chains to fit into specialized corners of the internet. So that's what I want to add to Anthony's like answer there. Yeah. I was going to say something really similar, which is I see consolidation across major L2s, maybe major generalized L2s like optimism, Arbitrum, Polygon, ZK, Sink, that sort of thing. And they'll have different business models, like the optimum business model for how it extracts values very different from the arbitram business model. And we'll kind of see the tech development narrative and business model ultimately shake out to a few big winners.

But then I think there'll be kind of this other side of the barbell with, so for instance, blast, whatever you think about it, is kind of interesting because it has a completely different construction where you get native yield on the L2. I actually, yeah, I think there are a lot of reasons to be a little worried about that, but like, it's a novel experiment that couldn't necessarily happen on one of the majors. And, you know, to your point, David, I do think at some point, you know, it's been a pretty good play to fade the like Shopify's of the world when they have a crypto thing or the Reddits of the world. It's like, hey, here's this big thing, but then it disappears. Eventually those things are going to become real. They're going to want their own sandboxed environment-ish to start. And I think L-2s will be a really good solution for that. also. So I would say like barbell of a couple majors and then other L2s that have very specific niche use cases, some of which we can't even imagine right now, and then other sort of corporate use cases for L2s as well, which I think is really cool. I would love to see that happen. So that's how I see it too. I will add on the note about the CDKs or the OP stack, the chain development kits, things like that. The cool thing about them as well, which may

become a liability, not a liability, but may slow things down long term, is that, for example, with the OP stack, it's like a stack that pushes everything upstream to all the OP stack chains when it changes, right? Like, for example, the OP stack will be upgraded to support blob-style transactions on Ethereum L1. Now suddenly, OP main net, base, whatever other OP stack is built on it, it now has access to that, right? Because you're built on the same kind of shared stack here. But why I say it might slow things down longer term is because now you're stuck with the same governance problems that L1 has, where you have to go through that if you want to upgrade. But there are ways to do this more flexibly, where essentially you can do it for your own chain

and then you could push it out to the OP stack and then, you know, have it sitting there, but you could still adopt it for your own chain in the meantime. So there are solutions to this. And the last point I wanted to make as well was around fragmentation, right? Liquidity fragmentation. That's like the number one narrative right now. And honestly, I do think that most of the people that talk about this are only saying it because it is a narrative to just shit on Eath with, if I'm being brutally honest here. Anthony, could you, before you give the answer to fragmentation, can you steal man the case for fragmentation? So what are people saying? What does it feel like? Where's that argument come from? Oh, yeah, yeah, for sure. Yeah. Well, the argument basically comes

from the fact that obviously when we were just Ethereum L1, all the liquidity was there, right? All the users were there. All the apps were there. And now, obviously, in the face of the activity on Salana picking up over the last few months, Salana is that, right? It's basically, you know, we've got Salana, it's one chain, you do everything on here, all the liquidity is here. But then the reason why they're saying that L2's fragment that is obviously because now Ethereum L1 is not the only thing in the Ethereum ecosystem. Now you have these L2s, and there's many of them, where liquidity will go to, you know, arbitrarum, liquidity will go to OPM. that or go to base. It won't just exist on the same kind of singular layout that we're used to.

Same with the apps, not just the liquidity, of course, the apps and the users. So that is the argument here. And the reason why people think this is bearish is because you essentially lose efficiencies by doing this, right? You force people to have to bridge and you force people to have to think about more than one thing and stuff like that, which I honestly don't disagree with on the surface. Like, I agree that that's not an ideal user experience. But the way I look at it and the way that I think this is all going to play out is that like if we're thinking about onboarding the world, I'm not talking about onboarding cryptocurrencies, because crypto natives are always going to bridge to where they can make the most money, right? They're not going to care they have to bridge. If there's a dog coin going

up 100x on a chain and they're going to phomel into that, they're going to bridge there. Like, I'm sorry, but like I don't think people, crypto natives actually realize why people do anything on chain, honestly, or most of the time, they do it for speculative reasons. And you're not going to cry about having to bridge, you know, to speculate. You're just going to do it because you're not going to miss out on that if you really want to do it. But if we're talking about like onboarding the world, right, and onboarding everyone that's not going to ever be a crypto native, then the user experience is essentially going to be like two clicks in an app on their phone, like in their wallet or whatever. They're not necessarily going to know what chain they're on as well, right?

As David was alluding to before about things like so rare and stuff, we already see these things kind of playing out. They're not necessarily going to know what chain they're on. They're not going to be bridging or anything like that. They're not even going to be paying gas fees. That's all going to be obstructed away for them. And the way that gets handled is by the technology that we build within the ecosystem, the interoperability technology that we build. Each of these super chains that are happening have interoperability between their own chains. Polygon actually has a really, really cool way of dealing with this. If you want to read up on it, they've got it on their docks. But they basically have an interoperability layer that

sits as the base of all the chains. And then all the chains basically tap into that, and there you have interpability. So it's a really elegant way of solving it. I just like to cut in because there's so many assumptions that I completely disagree with. They're starting to stack on top of each other. Yeah, challenge me. Please. First of all, you're saying that this is for the future and for onboarding the world. I clearly disagree. Right now there's a huge UX problem.

Oh, yeah, yeah. Right now there is. Definitely, yeah. You know, let's just take this most simple thing. Like, I need to use Tether instead of USDC. And let's say like, you know, curve on main net is where the vast liquidity is. So if I want to change 10 million of one to the other, I have to do it on mainnet. But meanwhile, you know, the app that I'm actually trying to use.

And this is not about dog coins and meme coins. It's not about bridging as a one-off to do like 100x. This is just like, I just need to switch from tether to circle dollars and I need to do something. That's a huge pain. Not only does it take time, you know, these bridging solutions, like they can have a cost. Obviously, there's gas cost. You just want to do Stargate, something like that. There's, you know, 10 bibs.

10 bips is a lot of money for like large amounts. Maybe it's not a lot for you moving $100, but like, you know, to do like large financial transactions. So this is like an existing problem right now. So that's kind of like steel manning. a little bit more fairly, I would say. No, no. And I mean, I completely agree with you. Right now, like I, see, I do this thing where I look too far into the future.

I think this is where I lose a lot of people is that I'm always thinking in the future because I see the kind of path to get there or at least like the path that I think that we can use to get there. But if we're talking about right now, I mean, 100%. Yeah, that's the current state right now. The UX is fragmented. The liquidity is fragmented. The existing solutions are not ideal.

As you said, these existing bridges, they charge fees, right? And they're not necessarily secure depending on the bridge that you're using. and there are ways in which you could lose your money from bridging, right? Or something bad could happen from bridging here. So yeah, definitely right now, I completely agree. And even with the people saying it on crypto-tweater and pushing the narratives and it's not a narrative, it's reality, right? That's the current reality. But I guess like what I was getting to was that I feel like these just issues that are going to get solved. And obviously I went to the end state where essentially, you know, we just onboard the world and everyone's just

interacting with things on apps with like two clicks and things like that. But if we're even looking like medium term out, yeah, I think a lot of it just gets solved by people solving it via, as I said, like Polygon has their own solution and there's different solutions between these, and the bridges will definitely kind of get better. But then, you know, you mentioned size. I think size is actually something that is very important when you're talking about these things, too, because at the end of the day, if you are trading in size, like, and you're on L1, you're probably paying the gas fees, right? I mean, someone's paying the gas fees on L1 right now. So if you are trading in size, you're probably still on L1. So then you think about, okay,

who's moving to L2s right now? I mean, the marginal person moving to L2s is the people that really can't afford the gas fees. So I think that there is still going to be a lot of activity on L1 during the short to medium term for those bigger players. And then once the fragmentation stuff gets solved, and once kind of those things play out, those bigger players will be more comfortable moving and stuff like that. So I think there is definitely a size question there too that. But yeah, as I said, I completely agree with you that right now, yeah, it isn't ideal. But yeah, I'm hopeful that we can get to that ideal state. I have another question of this panel about Jordi. Do you have any comments on what Anthony just said? No, no, I mean, he's clarified and I agree. The one,

thing I would love to just give like two minutes is like my L2 endgame thesis. Oh, yeah. This is something that, you know, I'm actively thinking about L2s every day. This is kind of like, how do I make a good L2? And what Michael said is like the, oh, another L2, you know, every day. There's like another one. Like I fully agree. Like everyone should have a reason to exist, like a raison d'aut.

And there should be like something about it. And my mental framework is like Ethereum is kind of like, is it the earth, is the globe. And then the L2s are countries. And they each need to occupy like a piece of land. And the land is not a physical land. The land is a use case or users, you know, a group of users. So like, yeah, Polygon you could say is like the European Union because there's a lot of countries and they're together and they're sharing a currency. Hold on.

Ethereum as the globe. Are there other planets in the solar system? There's other L1s. Yeah. Like there's other smaller planets. Hopefully Ethereum is like, you know, is flushing out the model. Okay. Yeah.

Continue. But so like if you want to like occupy a piece of land and not get taken over because these guys, I agree. Like there will be takeovers. There'll be mergers. You know, if you're not doing well, another. country is going to come and occupy your piece of land. Let's say you're trying to do perp-dex and you decided, okay, I'm going to like do my own country and we're just going to be an L2 that does perp-dex. But maybe you don't have, you know, good native sort of like USDC. Maybe you don't have,

you know, chain link. Maybe we don't have all these things. And so like somebody else comes and like occupies you. Ultimately, like in the end goal I see is kind of the same as the earth. Some countries will start disappearing. Some countries will like emerge out of nowhere. Even today, Like, that still happens. But you will have superpowers. You will have kind of groups that, you know, are aligned together. Maybe there's like an SVM, you know, eclipse will get some other guys and they'll have like their little thing.

And yeah, some of the ones will share a currency. Some of the ones will be doing different things. And there'll be islands that just have a single app. And it will make sense for that app to do it as its own L2. And that makes complete sense. So ultimately, that's the framework. And I think if you want to exist in five, 10 years, you better like occupies. your piece of land and like do it efficiently. I agree with that. Yeah, I agree with that framing.

And one of the things that I've been thinking about recently is, you know, you sort of have two different types of chains, which is one which produces very general block space, which is kind of the Ethereum turn complete, build whatever you want with this block space is not optimized for one thing. And then you have app specific block space, which is the DYDX or Cosmos full stack app chain approach, which is my app space is optimized for a perpx. One thing that might be, be interesting is like sector-specific block space, actually. So something in between fully generalizable and completely app-specific where maybe I'm the L-2 that's trying to optimize for dexes in general. And you actually see experimentation with this would like say, say which is sort of an L-1,

but has these built-in features that make it extremely optimal for multiple different deckses to launch. So I agree with Jordy's framing. Everyone needs to have a reason to exist. I think one of the big questions is which use cases are going to require composability and then how do we organize users across these different chains. And I feel like probably how it ends up shaking out is that there are kind of these hub countries in Jordy's model, which is maybe your arbitrums or your optimisms where that's where we gather a bunch of different applications that require closer interoperability and they'll figure that out within their hub. And then there'll be these sort of sector specific islands, which is maybe all the dexes over here. I haven't, it's very difficult to reason what that

would be like, but these sort of sector-specific L2s that ultimately settle back down to Euth. But I agree. I think it's a problem today, but ultimately, I do think every blockchain is going to have to face this problem at some point. So I want to throw one last bomb to this panel before we kind of wrap up. And Mike, you threw the first bomb. So we just... And this is, I think, some thought on Ethereum, but it's also sort of an existential question for like, for me. And I think for a lot of crypto natives who've been here for many years, a lot of the OGs is just what if the next cohorts, that come into crypto, don't give a damn about decentralization. Like, what if they don't care? Okay? And so here's the Bitcoin network, of course, like optimizing for decentralization,

the ability to run your own node. And I think Ethereum has followed down that path with a different set of tradeoffs, but it's very important that stakers and validators, and like you were just saying, how important of an export, the validators and stakers of Ethereum could be for the world, Ethereum has made some choices, some tradeoffs in order to allow individual stakers to kind of run their validators from home. Decentralization, right? We talk a lot about OFAC. And like Anthony, you brought that into the picture, is Ethereum letting, you know, like non-OFAC transactions through? So this notion of decentralization. But what if the future cohorts don't care about the cypherpunk values that we care about? Well, like, then is Ethereum over designed?

Is it over optimized? What if World War III never happens? Sure, exactly. What if it's just peacetime? I mean, a lot of alternative high TPS chains make fantastic peacetime chains. And if you could just restart it in like, you know, in discourse with all of your validators there? It's just fantastic. What if we don't need these features of decentralization and what's more?

What if future cohorts don't really care? Do you really need it to create your meme coin? and your casinos and your USC. It's in a bank account anyway. It's not freaking decentralized. Maybe we'll start with you, Anthony. Yeah, yeah. I mean, I have my own interpretation of this, and I think it's like a pretty good response, but I'd love to hear what other people say. It's a short response, but this has been something that people have asked for many, many years now, right? Within crypto. Like, this is always the number one question that I see people ask once they're deep in crypto. And it's like, why would anyone care about this stuff? It's so deep. It takes so long to learn any of

this stuff and like we see people just go to centralize things anyway, you know, everyone went to Terra, everyone went to Celsius and BlockFi and all these things. But I will say that I usually kind of think of decentralization as security. There's a reason why the top two nation states in the world spend a shit ton of money on their security, right? Because they know that you don't do that because even if you expect there'd always be peacetime, you do that because you know that there's not always going to be peacetime, and you don't want to take the risk of being the one with the smaller stick when the shit hits the fan, right? So if you think of it that way, if you think of decentralization as security, you basically design these systems, the people who design them

are the people who care about this, right? You design these systems in such a way that, yes, no one else has to care about it and everyone else can criticize it. They can say that you're doing the wrong thing, whatever. People criticize the U.S. military budget all the time, right? For example, But then when shit hits the fan, you start thinking, oh, I'm glad that we spent so much money on the military to defend ourselves against these aggressors, right? And the same is true for Ethereum and the same is true for blockchains generally. So you're going to be glad that you have decentralization when shit hits the fan and you're going to take it for granted when it's peacetime. Doherty, what's your take? What if people don't care about decentralization?

I think, you know, first of all, like some apps don't need decentralization, but they can still use Ethereum because, A, they want the user experience of, you know, I'm already on the wallet. I already have my money here. There's liquidity here. Like, it's already there. Yes, I'm paying a little bit more for security than like if I didn't do that, but I'm getting so much more. So it still has that like network effect.

And so even for those use cases, it can still make sense, right? Yes, a lot of things, sweat coin, whatever, like walking around, getting points. Like maybe that doesn't need a huge amount of like security budget. It can still be built, you know, on Ethereum for all the other reasons mentioned. So I think that's fine. I think ultimately, like, some L2s will be, you know, maybe more centralized and you're trusting somebody, you know, like an Amazon or whatever, but they're providing a service and you're using it for that case.

And as a sort of money, community money, in my opinion, you know, it can still kind of use that decentralization. And, you know, geopolitically, we are going to see escalations again. Like, yeah, China, U.S., everything else, it's not going to suddenly go away. and having a neutrality of a technology, I think is going to be very valuable. Now, I think Bitcoin is further along on that, just to be clear, and I do like Bitcoin for that reason of the neutrality of it. I think Ethereum is still kind of working its way towards that.

You mentioned OFAC, you know, yeah, like a lot of founders will just shut down their front ends or their apps or whatever because they don't want to go to jail. We saw tornado cash. We've seen things happen. So, you know, people caring or not caring about decentralization is less the boogeyman, in my opinion. Mike, what's your take on this? What if the market just doesn't value decentralization in the way that the first, you know, decade of crypto-ogs have really valued and they allocate somewhere else? Yeah. I think that there are sort of two reasons to care about decentralization, and one, which has been the first decade of crypto has been from an ideological standpoint. There is a relatively smaller group of people in the world who like just deeply care about this idea of decentralization and things being fair. And I think what we're about to move into is the bad news is I don't think. think that's everyone. I think the new entrance of crypto are going to care less from an ideological

standpoint, but the market will value decentralization. And I think that's the important thing to understand. The success of this industry of Ethereum doesn't rely on a small group of ideologs. Decentralization has a value, a market value, which is credible neutrality, in my opinion. And there are just certain things that you could build on blockchain substrates that simply would not make sense in a Web 2 context. I feel like the first 14 years, because there are so many frictions associated with building on decentralized rails, has been all about kind of the downsides. Oh, it's not as efficient. Oh, it's not as cost effective. But it does one thing so much better than anything that's come before it, which is this idea of being incredibly neutral.

And if you look at something like Lido as an example of this, which I know there's been a lot controversy around, but something like 80% of Lido's resources goes towards decentralizing themselves. Why are they doing that? Because it's an ideologically driven group that they just care about decentralization, so they're allocating 80% of company resources. No, they have a market reason to do that because the flatter they are, the more decentralized they are, the larger, ultimately, their total addressable market is going to be. So what I would say to you, Ryan, is the bad news is like, right, every niche industry

kind of starts like this, ideologically driven, et cetera. Crypto probably gets less like that over time, but that doesn't matter. This technology doesn't depend on new ideologues coming in who care about decentralized. There will be market-driven forces. There will be things that are only possible to build on decentralized, credibly neutral substrates. And that should be really exciting for everyone. I remember one thing I've heard you say before, Mike, that the number one rule of

crypto is to survive. And it strikes me that things that are decentralized tend to survive longer and far past their centralized components. Centralization is a liability, right, for a lot of these kind of different projects. I mean, we saw it, right? What happened to Celsius? What happened to BlockFi? What happened to SBF, FDX?

right. Contrast that to defy. Contrast that to the Bitcoin network. Contrast that to Ethereum. They survived. But the counter is that it takes a while for that to play up because you have to go through these kind of like bad times and drastic events and cataclysms for decentralization to show its value. Kind of going back to what Anthony was saying, which is that like you don't really need decentralization until shit hits the fan. Like in the modern day and age, living in an earthquake proof building, working in an earthquake proof building is a non-negotiable. Like, this is built into the world that we live in. And anytime we have cities that aren't built with birthquake-proof buildings eventually

in the fullness of time, they all collapse. And this taps into, I think, what is a very big ideological debate and a point of friction between many communities out there because it's all about, like, future planning for unforeseen events. And that's very hard to debate in current times around, especially while some people are getting rich off of dokey coins, right? This is a philosophical debate. it's an ideological debate.

And it's also a time frame debate. I think a lot of debates in crypto are just because we're using different time frames. Like when Anthony talks about like, oh, in the fullness of time, layer twos will totally have all of their UX issues solved. So therefore, I'm not going to bring up that subject. Well, then somebody who's in the near term is like, oh, well, I just use a layer two yesterday and the UX was broken. Like all of these are like time frame debates.

And I think the reason why I'm here in crypto is that I understand that in the fullness of time, there will be an earthquake. There will be a shock to a global financial system built onto the internet. And if we're not building with those precautions in mind now, then that's actually not what motivates me to be in crypto in the first place. And I think that's why I have found myself in the Ethereum world, because all these all core dev calls are like looking for all potential shocks rather than just trying to move fast and break things. And so I just want to add that one little note of flavor before we move on. So I agree with all that, David. But I even think there's reason to be more optimistic than that.

Like, I think there are reasons today. I don't think we have to wait for something to go drastically wrong. So here's just a trade-off in between something like Ethereum and Solana. Ethereum has optimized quite a bit for solo staking, right? They've made the hardware requirements, bandwidth requirements very low to optimize for solo stakers. That's led to some downsize, higher fees on main chain, ETH as opposed to something like Solana. But in something like Solana, what you also have to, it's more expensive and difficult to be a

validator over there, right? So the advantage is you get quicker blocks, but you have slightly maybe more centralizing properties of the way that proof of stake works over there. So maybe there are applications that are built or rely ultimately on a network of solo stakers and they'd rather pay for access to those validators. I think there are like, there's this ideological thing, but I also think there are more proximate market forces. And builders, like builders and entrepreneurs tend to be really pragmatic.

They do the thing that makes the most sense for their solution. And I think, like, one of the things I'm excited for for ETH in 2024, to keep bringing this back up, but like restaking, like one of the challenges of Solana, if you look at Gito, an interesting inverse mirror of what's going on Ethereum versus Solana is there's a much higher stake rate in Solana, but a much lower penetration of liquid staking, probably because people don't view Solana as money-like as they do Ethereum. And consequently, you've seen this much larger, liquid staking ecosystem grow within ETH, and you have restaking. And so I just don't think we have to wait for a World War II thing. I just think there are tradeoffs in between these different blockchains that will make sense for different use cases. And there's like plenty of reason to be excited about the decentralized properties of Ethereum today. And it will make sense for some use cases over here and some use cases over there. I mean, I can add one more thing to this before we move on because I want to talk about the credible neutrality point that Mike brought up before.

This is not a well-understood term, I think, within crypto. You say this term, a lot of people don't understand it. the way I've been kind of talking about it lately, and it really is just something that I've kind of come up with lately off the back of some conversations I was having is basically that let's imagine a future where EF is like a global money and people don't cash it out anymore. It's just money, right? People use ETH to buy things with and, you know, they don't care too much because it doesn't actually fluctuate too much in value. It's like a normal kind of money that we're used to. Now, let's imagine both the U.S. government and the North Korean government and store their wealth

in ETH on Ethereum. That is a credible neutral network if they do that, because that network is not favoring either party, and either party has confidence that their network will not favor either of them, and either party doesn't have control over the network. So that's what we talk about when we talk about credit neutrality. Basically, a completely neutral layer that anyone can use and have confidence in that no other party, even their parties that they're, you know, basically enemies with at the nation state level, can take their wealth away or can control them or can manipulate them in some way. But it's broader than that, of course, and I think that if we talk about OFAC and stuff like that. I mean, Ethereum has already proven it's censorship resistance, I think, even though

a lot of the network censors the Toyota Cash transactions, it's just delayed inclusion, we call it, where essentially you wait like a couple minutes and your transactions getting included anyway because Ethereum is sensitive resistant network. It's not sensitive proof. Neither is Bitcoin, mind you, because that's a lot harder to do, but I think Ethereum has already proven that out. So Ethereum has proven out the sensitive resistance and the credible neutrality in my mind, but if we want to talk about it in its end state, that's how I kind of think about it. Guys, this has been a fantastic discussion. I'm so glad we had this panel, and we're going to move to wrap up in rapid fire questions and allow you guys to just summarize. But one thing I really

liked about this discussion is because all three of our Heath Bulls today, I don't think we have a single bear here, but all three of our East Boathe was kind of bearish. No, no, no, I don't think so. He's an old bear. He's a bull. He's a new bull. You guys are all bullish for different reasons. Like, Jordie was bullish because of Layer 2's and Community Money. Anthony is bullish because the Internet bond and Ethereum is a settlement layer. Mike was bullish because Ethereum has the potential to export its validator and staker set to the world and receive yield on top. So there's just a lot of reasons to be bullish on ETH going into 2024, especially when it's had a 2023, let's face it, kind of a mediocre year compared to other

crypto assets. And so this is the question that everyone's going to have to decide for themselves going to the next year. Is Ethereum being squeezed between these two sides? Or is it actually starting to push its competitors to the margins by being a bit more generalized? And there's also this discussion of inside crypto versus outside crypto, right? The next millions of crypto users, how will they come into the platform? Anyway, a lot of exciting things in store for 2022. But I want to ask this question as we wrap up. Just rapid fire for me here.

ETH ETF, okay? There's rumor that it's coming. The Bloomberg analysts will tell you 70% probability in 2024. Do you think this is overrated, underrated, or about correctly rated in the market? First, Anthony, to you? Yeah, I mean, about correctly rated, I think, because there is still some concerns around it, but I think generally you've seen Gensler change his tune on ETH. I mean, they proved the futures ETF.

I know that's a different product, but still, that's signal right there. And the fact that it's like, as far as I know, a copy paste from the BTC ETF, because it's not a staked one, they won't have to do these back and forth dance that they've been doing with the SEC, the issuers like they have for BTC, they can basically just copy paste it over, maybe change some things here and there. So yeah, I would agree 70% sounds about right. Mike, what do you think? Is ETHETF overrated? underrated? I think assuming that it gets past, I think it's underrated because I think people are

generally underrating the Bitcoin ETF and people will point to the ETH futures ETF and say, look what happened. Nothing happened. That was very silly as an argument, I think. So I could see this maybe to both case for the ETH ETF would be the Bitcoin ETF surprises to the upside. There's this other narrative of an ETH ETF being approved. And yeah, I would say it's probably actually not being appropriately rated. I'd say more bullish. Jordy, what's your take, overrated, underrated? I think the 70% sounds about right. So I think on that, we're kind of aligned.

And I think, you know, mid-year is sort of the time that most likely I think we do see it. I agree with Mike. Like, if Bitcoin 1 goes well, yes, Bitcoin will do amazing as like a price. But immediately, like, everyone will be like, okay, what's next? Markets are always forward-looking. We talked about this many times before. But, like, the fact that that will be the next thing in the horizon, that will start the price and then as Anthony said price kind of builds upon itself it's it is the product the price

can I'm here and underrated am I here an underrated for Jordan rated I would say underrated I would say underrated as well I think I was just talking about the percentages I was talking about 70% than you jordy yeah yeah I was talking about 70% being fairly rated but I mean I completely agree with what mike and jordy said yeah I mean if the btc et f surprises to the upside for sure you're going to see the narrative pivot immediately to being like, oh, well, if this has happened for BTC, it's going to happen for ETH too. And that will just make ETH, like, explode. Listen, guys, this guy cannot be beat on bullishness, okay? But I'm going to give Jordy a chance to redeem himself near the end of the episode, because we can't have an ETH bull episode without

giving price predictions, okay, for 2024. As we're recording this bankless nation, the price of ETH is 2,325, at least according to my track. It went up 4% during this episode. Congrats, guys. It feels the energy. I mean, well done, guys. Well done, Bulls. And we'll see. Who knows what price it will be by the time the community hears this.

But I want your price for 2024. Okay, so we're starting in the, you know, 2300s or so, starting the year. Where do you think we close? Now, Jordy, it's your chance to redeem yourself. Prove whether you're an Heath Bowl or not. What do you think for 2024, man? I always, like, with my prediction, I'm always conservative. And I'm not a moon boy.

And I, my prediction at the end of last year for this year was a 2000. So we're 2,300. That's good. I'll say like 6,000. And if we end up being at 8,000, I'll be happy. But I'll kind of say 6. 6 to 8K. There we go.

Mike, what do you got? I was literally going to, this is going to sound like I was going to say 6,000. I'm not the price predictions guy. I'm always wrong on this. No one's a price predictions. I know. Yeah, yeah, yeah. Yeah.

To maybe provide a little more color, I think Heath has some catch up room now. Yeah. I think it's been sort of, it hasn't performed as well. My mental model for this has been Bitcoin leads, the beginning of new bull cycles. And it takes a little while for. eat to catch up. So yeah, I think that'll happen more towards the end of the year and get us into the 6,000 range. Okay, 6 to 8K. Mike's going 6K. Jordy's 6 to 8K. Anthony, what do you got for us? And I'll just remind folks, what was the top last cycle? 4,400, something like that for a brief

moment. 4,900. That was the second leverage led top in November. Yeah, yeah. But I mean, I count May as like the real top. I don't know. That's a whole other debate. But what's your take? I do want to just springboard before I, like, I hate giving price predictions because I'm always wrong, like 100% of the time. I'm just too bullish because I'm too biased, but I want to springboard and say, I put a tweet out a while ago where I said that I actually thought ETH wasn't lagging, but it was leading the market because it led the market in the bear. It bottomed first, right? It bottomed in June of 2022 and then didn't set a new bottom six months later when FTX blew up. So my running thesis, which may or may not play out, we'll have to see, is that ETH actually

led. And that's why it lagged this year. And as we said, at the beginning of the episode. I think maybe Mike said it, you know, Seoul got oversold like so hard, right, 96% or something down. And then obviously it rebounded a lot this year. But if you actually look at the price of Seoul a year ago and the price of Ether year ago, they're about the same. So the performance is pretty much like the same. If you look at the prices, maybe not, I guess the last couple days because Sol went up a lot. But, you know, if you're looking at it from that lens. So I would say, I think that I agree with these guys about if you're talking about 2024, 6 to 8K sounds like a good range. But if the hype gets ahead of itself, because of the

ETF stuff. If we go like bombastic like crypto likes to do, I don't see why 10K wouldn't be on the table here. So I'm just going to leave that at that. You know what? Three guests have given their predictions. David, should we indulge ourselves? David, I want to hear from you, man. I don't have any further a thing to add that. Tired of being wrong. David to myself. You know what? I'll get my prediction then. 10K. I think we're hitting 10K. I've been saying it since 2019. It has to happen. I need to be vindicated. Guys, thank you so much for joining us. This has been such a pleasure.

And I know the bankless audience, we'll enjoy this episode as the kickoff to 2024. It's going to be a big year for everybody. Cheers. Thanks, guys. Thanks for having us, guys. We've got to end with this. Of course, God knows, none of that was financial advice. Okay, crypto is risky.

So is Eith. You could lose what you put in. We have no idea where the prices are going 2024. But we do know. We're headed west. This is the frontier. Not for everyone. But we're glad you're with us on the bankless journey.

Thanks a lot.