Bankless - The 7 Most Bullish Crypto Narratives of 2024

Episode Date: March 20, 2024

The crypto bull market is here and nothing drives price like a good ol' narrative. On the show today we walk you through the top 7 that we're most excited about to watch unfold during this bull run.  Can you guess which one is our favorite? ------ ➡️ Apply to the Cartesi Grants Program here:  https://bankless.cc/Cartesi  ------ 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24  https://bankless.cc/spotify-premium  ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2    ⁠  🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo    🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku    🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle  💸 CRYPTO TAX CALCULATOR | USE CODE BANK30 https://bankless.cc/CTC  🦄 UNISWAP | SWAP SMARTER https://bankless.cc/uniswap  ------ TIMESTAMPS 00:00 Start 06:19 3 Ways To Make Money in Crypto 10:25 #1 - Decentralized AI 18:29 #2 - Restaking 24:40 #3 - Bitcoin Renaissance 30:25 #4 - New Infrastructure 42:10 #5 - Alt Layer 1 50:34 #6 - DePin 55:09 #7 - Real World Assets 59:45 David's Top Choice ------ RESOURCES https://www.bankless.com/the-2024-bull-run-narrative-glossary  https://www.bankless.com/this-is-the-ai-x-crypto-cycle  https://x.com/TrustlessState/status/1766087668595638336?s=20  https://dune.com/hashed_official/lrt  https://www.coingecko.com/en/categories/restaking  https://www.bankless.com/8-bitcoin-l2s-you-should-watch?ref=bankless.ghost.io  https://www.coingecko.com/en/categories/data-availability  https://www.coingecko.com/en/categories/layer-2  https://x.com/BanklessHQ/status/1764722637333229610?s=20  https://www.coingecko.com/en/categories/layer-1  https://www.coingecko.com/en/categories/depin  https://youtu.be/kdQi-N1BfO4  ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

Bankless Nation, we have a bankless takes episode for you today. I think it's a continuation from our episode last week, David, maybe by popular demand. A lot of folks like that episode. So what we're going to talk about today is seven investment narratives for the 2024 bull market. We touched on one of those investment narratives in the last episode. AI. Number one, yeah. We'll talk about that again. But then we'll give you six more that we think are very interesting. How we're going to format this is, I think we'll go one by one. We'll talk about what the narrative itself is. why it's important and what some projects are in that particular category. What is investable? So that is the format for today's episode. Before we get there, a message from our friends and sponsors over at Cartese, the first modular execution layer in the crypto space that runs Linux. We all know Linux, but now Linux can be your virtual machine for your particular layer two, layer three app chain on Ethereum. This is what Cartese allows you to do, let you use Linux runtime for your virtual machine for your chain. So you can build DAPs that leverage all of the traditional open source

libraries and toolings that, of course, Linux has. There is a $1 million ecosystem grant initiative from Cartese that is live right now. So there's a link in the show notes if you want to get some of that $1 million to build on Linux in Web 3. There's two things I like, David. I like a million dollars and I like Linux. And Cartese provides both of those things. As we get into this episode, I want to just kind of like zoom all the way out and look at the crypto industry from like a satellite's view. Every single bull market, there are narratives, and there are many narratives in every single bull market, and every single bull market has their own specific set of narratives. So we are trying to define the set of narratives that we think will capture attention and energy from

different corners of the globe. There's always more than one, some more relevant than others, some larger than others, and some will speak to you more than others. My suggestion is that you pick your favorite version, your favorite narrative to pay attention to in crypto and double down on just like one or a few. Trying to be an expert in all of them will make you an expert in none of them. Oh, go deep. Yeah. Pick your flavor, pick your investment style. And also remember that these are narratives and narratives can be fleeting just as a bull market will also be fleeting. There will be times when this narrative quells, when this dies down. And then also one more big, just zoom out moment. The meta theme for all of these.

these narratives is more or less air drops. The point of crypto is tokens. We all like tokens. We like playing with tokens. We like speculating on tokens. We like investing in tokens. Air drops for all of these projects, all of these narratives, all of these categories is going to be the way, the dominant way in which a lot of people speculate on receiving air drops, receiving tokens, perhaps holding the tokens. But AirDrops is really the big overarching strategy for how to get exposure to all of these, unless there is, of course, already a token. that exists. That is especially true. I think it's great if you have not a lot of capital to play with. So if you're second cycle or a first cycler, right, you can like earn your way into these

opportunities as well. So that is a nice feature. So let's go ahead and get into the seven different investment themes that are going to define the 2024 bull market. But first, a moment to talk about some of these fantastic sponsors that make this show possible, especially Cracken, our preferred way of getting capital into the world of speculative narrative vesting in crypto. If you do not have a Cracken account, consider clicking the link in the show notes to getting started with Cracken today. If you want a crypto trading experience backed by world-class security and award-winning support teams, then head over to Cracken, one of the longest-standing and most secure crypto platforms in the world. Cracken is on a journey to build a more accessible, inclusive and fair financial system,

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Start swapping smarter with Uniswap. David, before we get into the seven narratives, Do you mind if I give them the quick dad talk in a... Please. We all need a good dad talk in crypto. All right. So quick dad talk here. The lens we are approaching this episode is not the typical bankless lens.

And we said some of this at the end of our previous episode where we talked about AI tokens and narratives. But just a quick summary. There are three ways you can make money in crypto. You could be a trader, monitor the ups and downs on kind of like the daily, hourly, weekly, quick moves. You could be a narrative investor. That's what we're talking about today. crypto narratives. And the focus there needs to be on the attention economy rather than fundamentals. So attention matters more than fundamentals in this lens in crypto investing, we'll call it,

or veers on speculation. And then you can be a fundamentals investor where you forget the noise, you denominate in Bitcoin and Ether and you buy assets with fundamentals and your time range is like, you know, three to 10 years. You measure it in years and in decades rather than in months, which is what a good narrative generally provides. It's weeks to months is a narrative. So this world of narrative investing is kind of a dark art in some ways, right? You're not actually speculating on real usage, real utility. You are speculating on attention. That's not to say these narratives don't have fundamentals because some of them do, but recognize that when you are speculating, trading a narrative, investing in a narrative, you are investing for the attention.

Fundamentals are a subset of that, but fundamentals don't necessarily drive the attention. A bombastic founder could drive the attention. Elon Musk tweeting something about the project can drive the attention. A article in the New York Times, Trump, you know, giving a speech, like all of these things can actually drive the attention, and that is very frustrating if you're looking at these narratives from a fundamentals perspective. I'll also mention that this is an optional side quest. If you just want to ignore the narrative noise and be a fundamentals investor, you are totally free to do that.

Just stack your crypto money assets, buy assets with good fundamentals, and then just wait things out because the narratives will come and go. So that is the preamble. The other thing I'll say is just like, don't get caught up in gambling your entire crypto portfolio on narratives. That is a dangerous track to go. maybe if this is your first or second cycle, you want to be a bit more, you want to lean into the risk a little bit more. But remember, remember to sell. Remember to sell, not just for stablecoins, but sell for crypto money assets, the things

that are durable, the Bitcoin and ethers of the world. So that's the dad talk and a quick preamble to the rest of this episode. One thing I'll say, we have, of course, like just a pyramid here, Ryan laid out the three layers of the pyramid. Traders on top, narrative investors in the middle and fundamental investors at the very, very bottom, the longest term holders. The narrative investor section is kind of like speculation on what might become fundamentals. I'll call it the pre-fundamental layer. And that can be correct or incorrect. But we're more or less gambling, speculating on what will eventually become

fundamentals. Whether they can achieve that or not will be up to history. But this is always kind of like where people move up the stack in the bull markets, where people go risk. gone, people go away from fundamentals and in towards like more the trader archetype. And right in the middle of that is the narrative investor. There are also two sources we pull from. One is a fantastic article from one of a bankless writer, Arjun, called the 2024 crypto investing narrative glossary. He's got, you know, a bunch of narratives here. We've kind of consolidated some of them and simplified, but we'll include a link to the show notes for that article if you want this in a more written digest. We'll also be pulling from the coin gecko. Top

crypto categories by market cap. So you can see examples of some of the assets that accompany some of these narratives, at least those that are public. So those are two sources for you as we get into the rest of this episode. Let's go ahead and get right into it coming in at number one. The thing that I think, I think Ryan also agrees, is going to dominate the entire crypto cycle. The narrative is decentralized AI. The description is AI by the people, for the people. AI, of course, is all the rage both inside and outside of crypto. It's capturing just massive consumer interest, general consumer attention. But the problem is that publicly accessible investment opportunities are, like, constrained.

Young people, people generally are not going to get rich from Nvidia at a $2 trillion market cap. That thing is already gargantuan. So how can we get exposure to the AI industry in ways that are young and upstarting and has a lot of like growth potential left in it. And this is where crypto comes to serve some of that demand. Yeah, I think that's a great point. I mean, look at open AI. It doesn't have a, yeah, it's closed, right?

Anthropic, closed. Like all of these things are completely closed. What is open as far as things that you can buy that can capture some of this narrative? It's not actually, you're not necessarily getting fundamentals attached to the AI economy, but you are getting the narrative upside. And crypto tokens provide some of that. I think that's the argument that you're making here. Yeah, certainly.

Yeah. So a lot of these things, I think, are going to be hot air. But there are already projects that have just painted in some absolute insane gains over the last years. Like BitTensor, I think, is the big one. Render of just a few other crypto projects that are working to improve the AI space. Like Render is just putting all the GPU compute resources and coordinating them using crypto coordination mechanisms and then allowing people to tap into those resources. And there's a token.

Like, sometimes you can, in the crypto space, you'll be able to just slap some AI stuff around a token, and the narrative itself is going to make that token very successful just because people are looking to speculate. When crypto-win token prices go up, they tend to go up even more. And when people are looking to AI as an investment opportunity, you just kind of need a name and a brand. Not to say that there aren't actually very real projects in the crypto space

that are also working in the AI space. These are all very early, very speculative, and just a lot remains to be seen as to what they can actually meaningfully produce on their fundamentals. I think for me, Casey Caruso wrote probably the best distillation of some of the more fundamentals

when it comes to this category of decentralized AI, let's say, right? Not to say that this won't get completely out of hand, but it probably will. But a few of her categories are crowdsource compute. Okay, so this is the idea of decentralizing our CPUs and our GPUs. And you mentioned render. That's one example of that. There are a number of non-public startups that are doing this as well.

Hyperbolic is one of them, which I know. There are a few others, but she also lists Akash, I.O.net, Jensen, these are examples of that. Then there's also decentralized interface. So running open source models in a decentralized manner. So examples of that are ritual, for example. Also, on-chain AI agents. So these are on-chain apps that somehow use machine learning. So one example that I'm familiar with is MyShell.

There's also fetch.AI, operator.io. And there's also like the more geeky, nerdy stuff, like data and model provenance. So this is basically having self-sovereign data and machine learning models that collect the value that are produced here. So rainfall is an example of that. Vana is an example of that. We can tokenize incentivization apps. So think of character.a.i,

if you guys have ever used this tool, only with token, crypto token rewards. My shell, again, is another example of that. Diva is another example. And we've got token incentivized machine learning. So think about something like a scale AI, but you just add tokenization. So you add crypto rewards.

That's what BitTensor really is, and that's what ritual is. And then you have on-chain verifiability. So this is how can you prove what the model actually ran? And it turns out the crypto industry has some ZK machine learning technology for that. There are a few startups doing that, modulus labs and upshot. There's a lot of categories. And some of which I mentioned do have some fundamentals.

But again, kind of the narrative is going to get way ahead of these. A lot of these, though, are startups. And they are not publicly accessible by retail. Well, they're all startups. But they don't. a lot of these don't have a publicly traded token, let's say. You can't find it on coin gecko or coin market cap anywhere. One of the reasons why I think this particular narrative is so fun is because there are a lot of different parts of AI that make AI a thing. Like there is

the development of the model. There's the consumption of the data. There is the incentivization of the model layer, which is where like actual crypto money can can come in in crypto payment rails. And I think even just like all of the crypto AI startups are trying to slap a token into like every single one of the parts that make up the AI industry. The thing is it's like crypto and AI both move very, very fast. And doing a like an IPO for a speculative startup is just like it takes too long. People don't want to go through that regulatory hurdles. And crypto is ready for them with like the ability to mint a token. And so there's so many different components that make up the AI industry, very real components,

and there are very real ways to incorporate crypto and crypto speculation and crypto demand into those things. And when there is demand for tokens, which is what a crypto bull market is, there will generally be some sort of startup that will serve that demand. Like, oh, you want an AI token for some semi or very or not at all legitimate purpose in the crypto space? Well, here's a token for that. And so your challenge as an investor is trying to speculate and, and, and, answer the question, is this startup legit or are they only going to exist inside of one bull market cycle? Yeah, what's really like, so here's an example of this. You know, in Coin Gecko,

by the way, has a few categories that are useful. So you can look at, you know, top AI coins by market cap here where you see BitTensor and render and look at that category. That gives you a sense of what projects you can begin to filter for. Here's another category called top AI agents. And just a living example that I know you and I are familiar with here is, this is my shell. Okay, so this is like spin up your own AI agent. A lot of these are like, like, you know, you're talking to some sort of anime character, but it can be really any type of AI agent and then token incentivizing that AI agent. It's almost like friend.com meets AI agents.

And like you can buy and sell various AI agents. So again, it's like AI agents are a thing. Humans want to talk to these things, like character AI, for example. And then you add a tokenization layer to it. That's what My shell is trying to do. So you could get a sense for some of the ideas here. One can spend hours trying to go down all the different rabbit holes that is AI and how crypto will innovate and help AI.

And as we kind of wrap the section, I'll just zoom all the way back out and just say, like, hey, in crypto you can mint tokens, AI is very exciting. At the very least, like this is just all that's happening. It's like crypto tokens, AI, some people are slapping these things together, and that's going to like generate a speculative frenzy. like fundamentals or like reality aside this is going to be a thing simply because of those two things so definitely buyer beware there's a lot of fun there's a lot of research to do there's a lot of like things to speculate and learn but at the end of the day because AI is interesting and because crypto has tokens

this is going to be a frenzy yes what David is saying is when you're narrative investing don't mid-curve the thing okay you don't have to think too hard about AI tokens slap them together What's the next one? So that was number one. What's number two? Coming in at number two, restaking. What's restaking? It's when you stake your ETH, and then you stake it again.

So if ETH staking, Ethereum staking, is the protocol-entrined bond market, the native bond market for Ethereum, Eigenlayer restaking is the surrounding corporate bond market around Ethereum. So companies call these AVS's actively validated services, think SaaS, but with crypto stuff, they will rent security from ETH stakers and pay them a small fee so they can leverage crypto economic security for whatever their app is. It's like the corporate bond market around the Treasury's market, but all in crypto terms. So why is this a narrative? Well, it is a strong continuation on the arc of ETH as a monetary asset, which is something

that is particularly interesting to me and Ryan, but also I'll say mainly due to the Airdrop meta. If you are participating in the restaking corner of the Ethereum, ecosystem, the crypto ecosystem, there is speculation that there will be a ton of air drops coming your way. So if you are restaking your ETH, you are getting the Eigenlayer points, which is speculated to turn into the eigen token. But then there is also the token for the particular restaking app that you are staking through. So Eugenlayer has these liquid restaking tokens, which are kind of like LSTs. So Lido-staked Eth or Rocket Pool Staked Eth in the

traditional Ethereum native bond market, but with eigenlayer there is liquid restaking tokens, and there are like so many of these, like eight, nine, ten of these. And so you are farming both the eigenlayer points for the eigen token. You are farming both points for the liquid restaking token. But then you have all the AVSs, the actively validated services, aka eigen applications. This is, like I said, software as a service, except now in the crypto context using crypto security. And there will be many of these that I think are going to do all their airdrops throughout Q3-ish, Q4. And so you are farming like multiple airdrops, hunting multiple air drops, all with liquid restaking tokens. And so this is like kind of a way to get an index of the entire resaking space just by restaking your ETH.

This is why I think it is in meta to say nothing about the power and excitement and hype around EigenLayer. It's mainly a narrative just because people think the eigenlayer air drop is going to be massive, and then they also get a bunch of follow-on air drops as well. People like yield. What does Igen-Layer do? It gets you more yield on your ETH. There's a $120 billion of ether being staked to Ethereum. There is $13 billion being restaked in the eigenlayer, and all of this is because of yield.

People love yield. Ryan, what do you want to add to that? Yeah, I think that's right on. people love yield and one reference point is defy summer was really the summer of yield that was 2020 and so we've we've called this as well restaking summer because this is another market about like air drops token and yield i'll just add some more context to that number you said was an eigenlayer it's almost 13 billion dollars worth of ether inside of eigenlayer and it's over three million eth as it stands. So it's like, you know, it's almost comparable to the size of all Bitcoin

inside of the ETFs right now as a percentage of total supply. So there's a lot of ether that's already gone in. And I think you're right on with respect to the categories. The categories are eigenlayer itself and the game is collect as many points as you can. And then think about the LRTs. So there are a ton of different LRTs. The LR's the first concentric circle outside of eigenlayer. Right. This is like yield on the potential AvesS is later, and there are a ton of these, Etherfi, Kelphe, Del, Puffer Finance, Eigenpie, Genesis, Swell, Bedrock, Inception. There's a Dune Board that will link in the show notes where you can see a bunch of those.

And again, most of these do not have public tokens yet. So the way to get exposure is probably to start using these protocols and collecting points. And as always, there's risks, right? I mean, you're putting your ether into a... A brand new protocol. A brand new protocol. So be very careful here. And then there's also a category in Coin Gecko that's worth noting.

There's things like Pendle, for instance, which are part of this narrative. The financialization layer around LRTs. Yes. So like LRT applications. And then there's going to be a future category that doesn't have any tokens yet, but that you just mentioned of all of the Aveses, all of the applications that will be built on top. Which are the point of eigenlayer. ABSs are the point of eigenlayer.

And then ABSs themselves, they haven't, I mean, there's no public, there's no public trade token for any ABS. It is still in just this very early stage. And ABS could be like oracles, could be various coins. There could even be other networks like that resembles chains that could bootstrap using eigenlier economic security. So that's one to keep an eye out on. Yeah, the excitement around Igan layer really crescendos at to the point of Aves.

There are 30, 40 different ABSs that are all working to come online. Some blue chip Aveses, some long tail aviases. is this will be kind of the final phase of the growth of the eigenlayer ecosystem. First, eigenlayer mainnet is going to hit sometime in Q2. Many of the LRT projects are going to launch their token in Q2 as well. Etherfi actually just announced the launch of their token using the Binance launch pad. You can only imagine others like Swell have been very explicit about when their token is coming sometime in Q2. So I think it goes LRT tokens in Q2, eigenlayer mainnet in Q2.

Igen token at some point whenever. they get to it. And then just like the ABSs is all drop their tokens of which there are many. And where are the ABS is going to drop their tokens? It's got to be to the restakers. And so this is just like I think one of the most efficient point token airdrop farms that exists. And that's why people are very, very excited about it. All right.

Give us number three, David. Number three, the Bitcoin Renaissance. There is a lot packed into the Bitcoin Renaissance. These are Bitcoin layer 2s. These are Bitcoin Ordinals and also Bitcoin restaking. Bitcoin is also getting restaking as well, just like what we were talking about with eigenlayer on Ethereum, but now with Bitcoin. So the tagline for this section, Bitcoin is growing its first ever ecosystem of decentralized

applications. Since the beginning of Bitcoin, it's never been able to have its own native applications. Building on Bitcoin has been too primitive to do anything meaningful or useful. The Lightning Network, which was Bitcoin's previous path to scalability. is now just kind of being acknowledged as just a failure in technology. It was just a dead end. And now, thanks to new technological breakthroughs, people have learned how to build real applications on Bitcoin,

unlocking the $1.4 trillion of Bitcoin market cap to new native use cases. And the idea here is that applications, layer twos on Ethereum, have already been proven out as finding product market fit in the crypto space. We have now learned how to put those projects on Bitcoin. So we're just taking a lot of the innovation that's happened elsewhere in crypto, layering it on top of the Bitcoin stack, which is one of the the the thesis, the hypothesis that many Bitcoiners would have. Like if the crypto industry would discover anything useful, you could put it on Bitcoin. The demand for Bitcoin Renaissance exposure was, I think, pretty well illustrated in Stax, which is one of these like Bitcoin side chain, Bitcoin app layers before really these technological breakthroughs were really discovered. So Stax is a project that's up 400% on the stack's.

the year. And that to me, that's just illustrating how much demand there is. And it really doesn't stop at stacks. The thing that is, I think, really getting people excited in addition to ordinals, which we'll get to in a second, is the BitVM. The BitVM is unlocking real Bitcoin layer twos, as opposed to just like sidechains. And so this is a technological innovation that is still in research mode, but many startups are building Bitcoin layer twos under the assumption that eventually BitVM will be a fully fledged piece of technological infrastructure that they will be able to use. And so last cycle, Ethereum layer twos went from infancy to maturity. And this cycle, they're getting even more mature.

And now Bitcoin is like, okay, I'm going to take some of that technological innovation and layer that on the Bitcoin layer one. Babylon is the Bitcoin rethinking project. And so just generally, Bitcoin as a unit is being leveraged in a highly, productive ways. Last cycle we had Celsius and last cycle we had blockfi these Bitcoin centralized lending applications and now there's no good way to make your Bitcoins useful. So things like Babylon and also Bitcoin layer twos are allowing Bitcoin holders to do things with their Bitcoin. And in a bull market, people want to touch their tokens. People want to apply their tokens in productive ways to get yield to get upside in ways that are just beyond holding. Lastly, I'll say all of this

kind of got started by the Ordinals revolution, which is Ordinals is basically NFTs on Bitcoin using Bitcoin Blockspace to host images and data. And this is also getting kind of pioneered by the Tapper Wizards Project, Eric Wall and Udi Wertheimer. Magic Eden is an NFT platform and NNT marketplace, kind of like OpenC, but they have specialized now recently in Ordinals. And so NFT drops are happening on Bitcoin and they are pumping, which is a very much. a sure sign of a bull market. So if you are just interested in holding Bitcoin and also playing with Bitcoin, the whole Bitcoin Renaissance narrative is probably for you. Yeah, I think one macro theme of Bitcoin Renaissance is it's basically following the path of Ethereum. So you see Ordinals,

these are sort of Bitcoin's version of NFTs. You heard about layer two's, right? This is something where Ethereum has already explored the frontier here, and this is Bitcoin following along. you were also talking about Babylon, which is essentially sort of a early stage restaking protocol using Bitcoin. It's kind of like the eigenlayer of Bitcoin, let's call it. I think one thing to note just to dampen a few things is, of course, Bitcoin at the base level is less expressive. It hasn't dealt with some of the things that Ethereum has dealt with with respect to like MEV and how do you actually expand the data availability layer, right? I mean, we just, as we're recording this, Ethereum has just completely upgraded its data availability layer and provided a ton more bandwidth to its layer twos.

I expect Bitcoin will have to go through these same sort of things. And even something like the BitVM, which is a breakthrough, it seems like it's not ready yet. It does seem to provide actual real legitimate layer twos. But these are optimistic roll-ups in Ethereum parlance. So we can't yet do a ZK roll-up on top of Bitcoin using the BitVM technology. So there's some limitations there. Anyway, it's an interesting story because this is Bitcoin going through the same trajectory as Ethereum, just with a few more limitations and a few years behind, I would say.

But a lot of opportunity there. Number of the projects you mentioned aren't public. The one that we did talk about and we looked at a chart was stacks. And it seems to be getting a ton. It's up 400% on the year. So it's getting a ton of this narrative activity. I expect many more Bitcoin-centric layer two and projects to launch this year, and people should keep their eyes open.

Yeah, basically, if you have Bitcoin, then a lot of projects are coming online that are going to compete for your Bitcoin. In addition to the ETFs, this is probably the second biggest source of excitement in the Bitcoin space. All right, moving on. Number four, new infrastructure is what I will call this section. If you're a nerd, we will call this section modular protocols and data availability. New infrastructure as a category is always a bull market theme every single cycle. It's also a bear market theme.

It's just a theme in crypto in general. We always invest and build and spin up new infrastructure. Today, in 2024, the theme of crypto infrastructure is learning how to interoperate with each other because every single bit of infrastructure, not every single bit, but like a large number of them are modules, learning how to interrupt and share each other's resources and connect to modules together to build. a global kind of interconnected crypto system. Investing in the modules that are the most useful in crypto is kind of a fun way to sift for gold.

We're getting pretty down the crypto rabbit hole here. So this is the technical side of things, the nerd side of things. If you really like to be on the frontier of trying to see where the crypto industry as a whole is going, investing in new infrastructure or speculating on new infrastructure is like a fun place to do this. Building deep technical infrastructure is like kind of confusing for a lot of the crypto layman, but it is a great way to speed run your way into understanding why crypto is built the way that it's built.

It's perhaps unnecessary. There's a meme that we have way too much infrastructure in crypto and we're investing just in infrastructure over and over and over again without ever focusing on the consumer applications. But this is largely fueled because VCs will fund it and retail will speculate on it. And it really only takes about one out of every 100 projects to achieve a $1 billion market cap and then maybe one out of every 1,000 projects to actually improve the quality life of the users who use these systems. And all the other ones is just speculation. And so whether or not you can

find the ones that will stick around is a fun game for some. But it's also a great way to say educated, I say. If you can be informed about this part of the industry, you're more or less informed about everything there is to know about crypto, I'd say. I think one thing to point out is that when we're talking about infrastructure, we're often talking about protocols and, like, new networks that need to be bootstrapped, which, of course, that is one thing that that crypto does fairly well, is decentralized networks and protocols with tokens attached to them. And so that's why it seems like there's a lot of upside in this category. But I want to zoom out and paint the picture of why we actually need another round of infrastructure investment. And the reason is basically because

our blockchains don't scale today. If we want to preserve decentralization, and want to scale them at the same time. There's like low gas fees, low cost for transactions, then we need a new set of infrastructure. And basically there are two parallel paths being explored by crypto right now. One is the modular path, which is sort of Ethereum and company. And the other is there are some monolithic chains that we'll get to that in kind of an upcoming narrative, some of the alternative layer ones, the monolithic path.

But basically in the modular path, which Ethereum is adopted, is kind of outsourcing a ton of its capability. It's outsourcing the execution layer. It's creating surface area for the development of so many different chains. And that is both an opportunity, but it causes downstream challenges. Like now these chains are all fragmented. And so we have to bridge them together. We have to interoperate. We have to share the sequencing of them.

There's a new set of problems to solve that Ethereum is basically outsourcing to kind of the, the free market, these various modules that are springing up. And so that is the broader context for why I think it's justifiable to have a new round of infrastructure investment. So we're going to need new execution layers, okay, like new virtual machines. And so we see parallelized virtual machine layer two's springing up, right? Eclipse is one of these, right? It's putting the SVM that's the Solana virtual machine inside of layer two.

We need sequencing, shared sequencing. So now our chains are fragmented. So how do we unfragment them and have the ability to transact atomically from one chain to another? Well, we have espresso doing some of that, Astria doing some of that, shared sequencing. We have a whole bunch in DA. I've got this in front of me from Coin Gecko. This is data availability. So Ethereum has some data availability, but it's not enough to support the entire modular world.

So Celestia has been one of the... the big stories of the year, I think, and its price run-up, which is a dedicated data availability layer for chains that supports kind of this modular approach. And I mean, look at the market cap of Celestia at this point in time, fully diluted valuation of $17 billion. And that has been up only this year. So there are all of these like nerdy categories, not to mention layer twos. David, there are so many new layer two's coming online, both in inside layer two frameworks. So the big frameworks like the OP stack, Arbitrum Orbits, ZK, hyperchains, Polygon supernets. And then you have chains inside of these things, pushing on the edges from a go-to-market

perspective, things like Blast. There's so much to talk about with these new, with Layer 2 chains as well. Anyway, all of this infrastructure will definitely catch a bid in various pockets. And what's your general advice for how to navigate this? I mean, in previous bull cycles, one thing we used to say is if you want to see if a D5 protocol has potential, like, just use it. I think that is very, very true when it comes to chains. Like, go use these layer twos, and you can get a better sense for which ones are going to take off or not. That is still good advice, but it's kind of some of these infrastructure things, you know, like a DA layer.

I mean, that's a very B-to-B type of thing, and it's really hard to predict how that's going to play out. do you have any general advice for how investors should look at this entire infrastructure class? Yeah, for me, the first bit of advice comes to the people who are really trying to become extremely knowledgeable in crypto, the most knowledgeable possible. All of these different sectors of infrastructure, like the execution layers, the sequencing layers, the data availability layers, a layer two frameworks, the roll-up as a service providers, the interoperability applications. If you can define each one of these categories and articulate how they work together, because again, modularity means that one module is going to connect to another module, which will connect to another module. If you can articulate the ecosystem for how these weave together and become one global system, then you are basically as advanced as possible as you can get in the crypto space. So it's kind of like a research homework assignment to understand all of these things. And then from the people who are looking to gain exposure to these things, it's about which ones are going to,

hit main net first, and then can you actually touch some of this infrastructure? And so, like, right now, staking your TIA, your Celestial token inside of the Cosmos ecosystem is a target for receiving air drops. It's been a pretty successful way to receive airdrop. So that's one way to get exposure here. Staking TIA nets you some sort of like 20% of like network issuance. Igen, DA, data availability from eigenlayer, not yet a thing yet. and so people are keeping an eye on that. It's like, oh, when that comes online, maybe I want to go play in that world

and see, like, what kind of footprint I can establish over there. That's a double hit. That's two narratives. We got restaking, and also, Igen layer has a data availability layer. Right. Yeah, so it's really mainly about, like,

how can I grow my footprint? These are all deep infrastructure, and your wallet with transactions can establish, like, a presence on a lot of these bits of infrastructure just by leaving traces of your activity on chain. And growing a footprint is kind of like growing a net.

Generally, the larger net you have, the more optionality you have on like finding some way to have exposure. Again, like largely via air drops, but other ways as well. So many layer two is to explore. I mean, this is one of the most exciting areas, I think, to explore the frontier on. And the wallet experience has improved a lot. You know, one wallet I've been using a lot recently is Rabby, David,

which provides a much more seamless, like interface for navigating across chains, right? You don't have to like constantly switch which chain you're on. You could just kind of like see your assets, you know, irrespective of of the chain. So really exciting area, I think for sure. But man, it's so dynamic. It's hard to pick a specific subset of layer twos that are going to absolutely crush it this market because there's just so many new experiments spinning up. Coming up next, we're going to talk about the oldest pastime in crypto, that is the Alt Layer 1 trade. And then we're also going to talk about deep-pin, decentralized physical infrastructure, real-world assets as well.

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We have been producing new blockchains in the crypto space ever since Lightcoin and Dogecoin. These new blockchains, they all attempt to gain some sort of adoption via technological innovation, charismatic leaders, really good memes. It has been the narrative that has high transactions per second. Yeah, that's a great line. Very cheap. Yes, train, yeah. We're the chain for mainstream consumer. adoption. That's a very hot line that many, many have leveraged. Something we've seen like,

oh, we're the real world asset chain. We'll talk about that narrative in a second. They're all narratives. Understanding how each one captures attention and why others win is definitely like a dark art. It's definitely like there's no real rhyme or reason to it. Some projects just figure it out better than others. But just overall big emphasis on like this has always been a narrative of crypto. Every single bull market, there is a new type, new flavor of alt-layer-ones. Right now, this cycle seems to be the meta of the parallelized virtual machine layer one. This was set by the success of Solana from last cycle. And so now there are a bunch of copycat parallelized virtual machine layer ones coming online. Sui, Say, Apdos, Monad, and then also the

honorable mention, the Eclipse Layer 2 on Ethereum, also a parallelized. virtual machine on Ethereum as a layer two. But this will also be in addition to the many other types of layer ones that come on scene. Ever since Bitcoin came about and we made blockchains, people are like, oh, I can make a blockchain. Also, I'm going to make a blockchain that's going to be worth a billion dollars. And so it's a speculative fund venture for layer one founders. It's a speculative venture for a venture capitalist who will fund these things. And it's even a very favorite pastime for retail speculation. It's very, yeah, it's Speculation through and through and through every once in a while.

One works, and that's what keeps the game going. In all these things, you've got to be very careful about token lockups, of course. So all of these chains, this follows with many of the infrastructure investments we were just talking about as well. They raised a whole bunch of money from VCs, and the VCs are looking for an exit at some point in time, right? And so retail can be that exit for them. And so you have to be very careful about tokens when they're on

locking and, you know, the net selling pressure in some of these assets. I do agree with you, David, on the alternative layer ones, like the big theme this year, it seems to me, and for the next two years, is going to be parallelized alternative layer one chains. So Monad has is probably the first project that's going to come online that will actually have a parallelized EVM. So so far, the big virtual machine in town has been Solana and the SVE. Well, Monad is doing that with the EVM. So if you are deployed by the EVM, it can take advantage of some of the Ethereum virtual machine network effect.

And SUI is a parallelized VM that's based on the MOVE VM. So that's another flavor of it. And I think those are the projects that are going to catch a bit. There's also this blending, though, David. We're talking about this in terms of alternative layer ones, just because that's a category. So they are not using Ethereum. They are bootstrapping their own. validators, right? And that's what makes it an alternative layer one. But there's this blending

because they're all chains at the end of the day, right? And so what is the difference between these alternative layer ones and the layer two is that we're talking about? Well, the only difference is the layer two settle on top of Ethereum, whereas the layer ones are kind of bootstrapping their own validator set on their own and they're kind of like settling on kind of their own base layer. Do you see any distinction there? Or it's like, why is that? Why is that, you know, alternative layer ones, why are they a separate narrative? Why aren't they all just chains? For some reason, as a layer one, the market valuation of your token just gets the layer one premium. Layer two, in my opinion, I think in our opinion, has much stronger fundamentals

because as a layer two, they simply don't have to pay for their own network security. That's what a layer two is. They leverage Ethereum for security, and Ethereum secures all of its own layer two's. But then if you're a layer two, you don't necessarily have the same market comparable valuation of like the Solana or Ethereum itself or even Bitcoin itself. So there's always just this incentive pull towards being a layer one because people perceive layer ones to be more valuable. Even though being a layer one is harder and you're less more, you're more likely to fail. In the short term, you can attract a higher market cap. So it's kind of a narrative trade because you can count against something like Ethereum. So if Ethereum is worth $4.4.

$400 billion, right? Well, we have... That should be at least $4 billion. Exactly, because we're going to capture just X percent of Ethereum, and we're not a layer two. We're not settling on Ethereum. We are an alternative to Ethereum. That's why this class has often been called in the past the Ethereum killer type class,

because at some layer, they have to go against, in order to get the valuation that they kind of want, they have to go against King Ethereum in this narrative category and knock them out. and some some have actually had some reasonable traction doing this like salana i would say salana extended the alt layer one trade by like another 10 years lot of some time because it worked i've also had a thesis i don't know how this will play out but over time some of these will switch categories you might see a layer two like transform become an alternative layer one and you might see alternative layer ones become layer twos in fact we have seen many like former class of of 2021 alternative layer ones now actually migrate and become

layer twos like cello network is as one of these they were going off on their own and now they're in a theorem layer two also near has become much more kind of aetherium aligned it's not a full layer two i would say but it's providing it's it's pivoted into like d a coming uh for a theorem layer 2s. Exactly. So very, very interesting. Do you have any takes is basically your assessment that look for parallelized alternative layer ones in this, in this category? Are there any standouts? This is the category that has definitely captured attention now, because like I said, the Solana is set in stone the parallelized virtual machine meta. And so now there are a bunch of Solana copycats trying to wedge themselves between Solana and Ethereum. And so this is why,

both Say and Monad are doing parallelized EVM, not the Salonah Virtual Machine, but the Ethereum virtual machine, which has the massive developer ecosystem. I will say that layer one trade can be dangerous because you might fall into the trap of buying into a VC ghost chain. And so you do not want to buy the tokens of some sort of like VC hyped chain that doesn't have any users and just has fake hype and excitement from the venture capital community. That's the base case. That's generally how it plays out. That's where it starts. Expecting a community and building a community is like the next hardest thing for an Altlayer 1 to actually gain like real users and real adoption. And so like the thing is you can become a

multi-billion dollar VC ghost chain. And what I mean by ghost chain is that like it's a ghost town, like there's no one there's no one using it. There's no GDP there. But you can for some reason in crypto, especially in bull markets, you can still like command like a five, 10 billion dollar market cap even though no one's using your shit. And so generally those investments don't do very well in bare markets. I mean, nothing really does very well in bare markets, but those investments tend to go to zero in bare markets, whereas the ones with actual community adoption and actual economic vitality on the chain actually tend to stick around. Yeah. I'll also say there's a danger here in this parallelized virtual machine category is definitely something that layer twos are pursuing as well.

And why parallelized virtual machines? It's because you can max out transactions per second on these things. And so layer twos will also compete against this category of alternative layer ones. All right, David, let's get to you the next one. We're almost done here. Number six. D-pin, decentralized physical infrastructure networks. The meme of this one is coordinate the world's computer resources together using crypto so we can build novel use cases.

So the D-PIN narrative actually has been around for a long time. Remember helium? or foam. Was it a foam? Sorry, not healing. Yeah, helium is like the one that's working. Foam actually still around. Also like a Gollum.

Gollum was a 2017 project where we're like, oh yeah, like we, people who want to use collective GPU power from like consumer GPUs can tap into Gollum. And so you as a GPU owner can contribute your GPU hash power to this like cloud of GPUs. And then GPU power consumers can like leverage that and pay for that. and you'll pay you for it. So it's a decentralized way to coordinate the physical infrastructure of the world. And so this narrative has been around since 2017. Just now in 2024, we actually have a name for it

because it is being unlocked by very fast, cheap transactions that is what's needed to kind of coordinate global resources. I mean, would you also say that like something like, and this is where Coin Gecko classifies it, FileCoin, would be DPN. Sure, you could really open up the much of what DPN could be, yeah. But this new class of DPN, can we? get into that it's um it's not file coin it's um like what does helium do for for for instance yeah helium i think is perhaps like the thing that really kick started this helium is just like a decentralized data

uh and so you can buy this helium node that local cell phones in your area can tap into your node for data and this is like very proximate so like we're not talking like miles here we're talking about just like you know maybe 100 meters if you are nearby to some one's like helium node, you can use their helium node to get data for your phone. And so it's kind of like a mesh network, much more localized mesh network to receive data. And so you spin up at your helium node, you get paid helium tokens for providing data to your local surroundings, and then consumers of that will pay your node for its data. And so it's a way to like kind of route around the large data providers, like the Verizon's,

the T-Mobiles, etc. And so it's like data, internet, cell phone data, to buy the people for the people. A lot of the themes are going to be like buy the people for the people because that's what crypto does. But that's, this is just like the first of like many D-PIN networks that have like started up. And as I was mentioning Filecoin also render is here, which has kind of like a cross-section, right? So it's like D-PIN meets AI plus crypto, right? And so no wonder these things are doing quite well. What's your of all take? I know we're not really weighing in on the fundamentals here, but I got to confess, I've been somewhat skeptical. Yeah, I'm skeptical on this category.

Some of these projects. Like, just because you are really maxing out token incentives, and it works really well when number goes up. And generally, these types of things work a lot less well when numbers going down. Like, I wouldn't necessarily put this in the category of D-Pen, but like something like step in where you get like paid tokens for just like walking and like running. Right. To me, that is just like not a very sustainable game.

and it went up very high and now it's kind of like come back down and you know the whole deep in category has some of these vibes I wouldn't say so so much so for file coin but some of these other projects like definitely have that vibe well the problem I think that you're articulating is that like just slapping a token onto these like infrastructure networks doesn't mean that there's demand for the token so there's a difference between producing a token and having that token be like truly investible investible in like the fundamental sense of the word. It's in like, well, who's going to be the net buyer of these things? And of course, the answer is just like, well, the consumers of those resources. But the thing is, like, all of these

D-PIN things are like commodities. They're supposed to be highly commoditized. And like if we're going to talk about like coordinating the compute resources of planet Earth, well, then we're competing with like Amazon AWS, which is already extremely commoditized and cheap. So like just because it has a token doesn't mean that it has like strong longevity associated with it. But look at We're using the F word again. This is not how you should view any of these narratives, right? It's not necessarily about the teleph ratio. I would say the deep in narrative is perhaps the most fleeting that I can identify.

AI. I can see a lot of fluff in the AI for sure too. All right, let's get to the last one, David. What is this? Something very tangible, something very real. Right. Real world assets are WAs. Also a narrative that has been in crypto since the inception of crypto.

But as we are becoming more mainstream as an industry, as there are more suits in our industry, as people like BlackRock and Franklin Templeton are playing around on chain, there is a growing excitement around the world of real-world asset tokenization. There is this world in the Tradfai space called a securitization,

where you take some sort of value and you wrap it into a financial asset, and that is called the securitization process. In crypto, we have tokenization. So there are a lot of assets, and there's a lot of value that are not on blockchain rails that we could put on blockchain rails through the process of tokenization.

It's non-trivial, but it's definitely exciting. There's a lot of value out there, and we need more value in crypto. There's roughly a gazillion dollars of securitized wealth out there, and we've only been really able to successfully tokenize dollars, and we call these things stable coins.

So the question for the real world asset narrative is, can we tokenize more? And whoever can tokenize more off-chain value can certainly become very wealthy as like a project founder or a leader or whatever. And so I know right now the meta has shifted beyond stable coins because that is a very successful real-world asset tokenization endeavor. And now we are in the world of tokenized treasuries,

which is like the next hardest thing after tokenized dollars. Real estate has always been a focus of many startups. Many startups have come and gone trying to tokenize real estate. But then after that, like kind of the world is our oyster. Who can crack the real world as aster? asset tokenization nut because that's a hard nut to crack, but there's a lot of value to be had for whoever does. There's a lot of projects in this category too, some of which are kind of like private and startups. A mountain protocol is a treasury tokenization project, but it doesn't yet

have a public token. Ondo is one that's doing something similar with U.S. treasuries. It does have a token, so you could see fully diluted value of Ondo is $5.6 billion. And then there's projects that have been through multiple cycles here, like centrifuge. You remember that was a previous, previous cycle. Darling at one point, Maple as well, Goldfinch. These are folks that are, you know, like tokenizing various debt, various credit. It's a hard game, and I kind of wonder in this category who's going to win. I do think, David, that some of the incumbent players from big finance who are entering,

like, we haven't yet seen what Black Rock is going to do in this space. And Larry thinks said the future is tokenization. Huge token boner. He's got a huge token boner. Yes, he is very excited about this. And he has all of the assets that can be tokenized inside of Black Rock. He has all of the connections. So I sort of think that there's going to be some successful startups here. But edge to the incumbents when they start to kind of enter this space. One project that never gets any love that is so interesting is a real world asset project from my perspective is Maker. Maker Dow. That's actually, they're stable. coin is based on real world assets. They've just recently added a PayPal coin actually to kind of back the output of die. A lot of it's been USDC base. So there's some things going on there. It's also has an insane PE ratio. It's something like 10, right, in terms of priced earnings. So, you know, some, if you're looking at this from a fundamentals perspective, would say that's very undervalued. But again, the narrative has not yet shifted to Maker Dow. So it cannot catch a bid,

which is really interesting. So David, as we close this out, we've gone through all seven. We didn't touch on everything, I'll say, right? There are some narratives that we just can't see right now, that we just didn't have time to cover. There are some narratives that are so large that they deserve their own episode?

Like what? Like Game 5. Yeah. Gaming, we should totally have gaming here. It's just such a large category, and it's just too real. You know, these are narratives. Gaming, extremely real.

Yeah, it is real. And there'll be narratives inside of gaming that are sub-narratives of Game 5. There's also NFTs. Are they going to make a comeback? There's also socialify, which seems to be poking its head up in various ways. We talked about Farcaster, for instance. There could be a, you know, friend.com had a brief blip. Maybe something like that could make a comeback. So there's narratives beyond the scope of what we've covered today. But if you had to pick, like, one particular thing that you are most excited about, are you able to pick? And, you know, use your own criteria for picking. It could be like the narrative you think is going to pump the high. or the one that has the most kind of like, you know, fundamentals or like, what is it? What sticks out in your mind? I've made my selection. I made my choice long ago.

I am a big restaker narrative player. Like I said at the very beginning, you need to find the narrative that speaks to you the most and double, triple down your knowledge. That's how you, I think, how you play this game the best. I have elected to double down on restaking. So I am farming LRTs because I have my ETH in the LRT space. I'm expecting the eigenerirdrop. I'm expecting theirdrop of the LRT that I have my ETH into.

And then I'm expecting to farm all the airdrops of all the ABSs. And so there are the players of these narrative games that like to move fast. They like to hop around narratives. They like to play the meme coin. We didn't even talk about the meme coin, which has zero fundamentals. Oh, God. I did an entire episode on that. But the thing is, it's like, I'm a busy guy.

I make a lot of content. and so I can't be touching stuff all the time. And so to me, restaking, it's the continuation of the arc of the monetary policy and monetary effects of ether, the asset, which I find it extremely interesting. It is yield, which I also find great. It's air drops. It's most importantly passive air drop farming. It's ether, David. It's Ethereum.

It's all of these air drops using ether, the asset that I denominate in. It's the one that speaks to me the most. Yeah, I'll agree on that. And I'll also add a plus one to modular infrastructure. I mean, we've been long-term proponents of this as a direction for crypto. So there's a whole bunch of space for infrastructure that I didn't really know we needed. And now I sort of know that we need, given all of these change. Shared sequencers is a fantastic category, for instance.

So, guys, we hope that was helpful. Those are seven narrative themes for 2024. for good luck out there. I gotta end with this. As always, crypto is risky. You could lose what you put in. Oh my God,

narratives are super risky. But we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.