Ethereum’s Biggest Mistake (and How to Fix It) | Sam Kazemian

Ethereum has achieved groundbreaking technological success, but has it failed to properly define ETH the asset? In this episode, Frax founder Sam Kazemian joins us to discuss what he believes is Ethereum’s biggest mistake: confusing the ETH asset with Ethereum the technology. Sam argues that post-EIP-1559 and Proof of Stake, ETH unintentionally shifted toward a discounted cash flow (DCF) valuation model, undermining its potential as a commodity-like store of value. We explore how the Ethereum community can reclaim a stronger narrative around ETH and why social consensus — not just tech — determines an asset’s destiny. ------ 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium ------ BANKLESS SPONSOR TOOLS: 🪙FRAX | SELF SUFFICIENT DeFi https://bankless.cc/Frax 🦄UNISWAP | SWAP ON UNICHAIN https://bankless.cc/unichain 🌐SELF | PROVE YOUR SELF https://bankless.cc/Self 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🏦INFINEX | THE CRYPTO-EVERYTHING APP https://bankless.cc/Infinex ------ TIMESTAMPS 0:00 Intro 4:43 Classifying ETH 17:50 ETH/BTC Collapse 33:39 ETH Revenues 44:35 Blue-Money Gospel 53:44 What ETH Needs 1:10:08 ETH Internet Bond Narrative 1:19:49 Final Thoughts ------ RESOURCES Sam Kazemian https://x.com/samkazemian Blue-Money Gospel https://x.com/RyanSAdams/status/1915874994514452763 ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  If we don't make sure that Ethereum is a store of value, and two, if we don't make sure that Ethereum, the technology, right, the settlement layer is not this fundamental ledger we've lost.

• 0:20David Hoffman?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. Today on Bankless, we're exploring the topic of ETH, the asset. How should it be positioned? How do we talk about ETH? How should we understand it? These conversations, of course, about Ether are not new, but the one you are going to hear today from Sam Kazmanian pitches a specific and different path for the conversation around ETH than what the Ethereum community has been discussing for the past few years. Sam thinks that any and all things related to valuing ETH as a DCF, a discounted cash flow model, is bad, and we should stop doing it immediately. He thinks that we ought to talk about ETH exclusively as a store of value commodity money, representing a huge cultural solution to the malaise of ETH's valuation.

• 1:04David Hoffman?

  And any further effort spent on DCF-ing ETH will only continue to sink the price versus the rest of the market. I find Sam's points are pretty interesting. I'm going to think about them more and more over the coming weeks and months. And I think this is a conversation that the Ethereum community ought to have as well. So let's go ahead and get right into this conversation with Sam Kazmanian from Frax. But first, a message from some of these fantastic sponsors that make this show possible. You may have already heard about Infinix. Infinix has, in my opinion, the nicest cross-chain swap and bridge feature that you will find anywhere. It is called Swidge, swap and bridge, and we're going to show you what it looks like. First, we're going to log into my Infinix account with a passkey. Now, there's no seed phrases in Infinix. This is just a one-click setup with biometric passkeys.

• 1:47David Hoffman?

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• 2:31David Hoffman?

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• 3:15David Hoffman?

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• 3:55David Hoffman?

  Frax isn't just a protocol, it's a digital nation powered by the FXX token and governed by its global community. Acquire FXX through frax.com or your go-to Dex, stake it, and help shape Frax Nation's future. Ready to join the forefront of DeFi? Visit frax.com now to start earning with Frax USD and staked Frax USD. And for Bankless listeners, you can use frax.com/r/bankless when bridging to FraxL for exclusive FraxL perks and boosted rewards. Bankless Nation, I'm here with Sam Kazmanian. He's the CEO, co-founder of Frax, Frax USD, Fraxstill, the entire Fraxstill bankless banking system on top of Ethereum. And I've always appreciated Sam and Frax for a very grounded and first principles

• 4:37David Hoffman?

  position on what money, banking and finance means. And I think you can see that in how Sam has constructed the Frax ecosystems. Sam, welcome back to Bankless.

• 4:46Speaker 00

  Always a pleasure, David. Thanks for having me on.

• 4:48David Hoffman?

  Sam, okay, so you have been a frequent commentator about Ether the asset, the nature of Ether the asset, and also how the Ethereum community, and broadly speaking, we should be branding or positioning Ether the asset. Now, there are a lot of conversations going around these days with the declining ETH BTT ratio, of course, the changing valuation, and there's always been a loose conversation about what to do about Ether, right? Is it a non-sovereign store of value? Is it a tech stock? Do we have revenues? Do we emphasize those revenues? How do we position this thing that has so many different facets? Maybe I can just throw it to you to kind of set the foundation and establish your kind of pillar of understanding about what you think Ether should be what it is

• 5:31David Hoffman?

  and how you think the Ethereum community should position Ether the asset.

• 5:35Speaker 00

  Yeah, for sure. So first of all, I wanted to say like, so I've been involved or like in the Ethereum community since like 2014. I remember signing up for the Ether newsletter when the Ether sale went live and stuff. So I've seen the whole evolution of it and the DAO hack, the Ethereum Classic, ETH, and all that stuff. So I've seen the whole gamut of the entire lifecycle. So I'm well aware of the history. In fact, it's because of the history that I talk about this. And so the first thing I actually just want to say is there's basically two types of ways to essentially value an asset, okay? And there could be mixtures, right? All of these different theses of like triple point asset, ultrasound money and all this stuff, but generally, from a first principle point of view, there's two types of ways to value an asset.

• 6:20Speaker 00

  There's the fundamentals view, right? The discounted cash flow, which means that the asset represents some claim on some kind of like cash flow, whether the thing's producing the cash flow or shares of smart contracts. Of people working to produce something and sell it. Doesn't matter, right? The asset is essentially equity-like. And that doesn't mean this is like a comment on regulation or anything like that. This has nothing to do with it. It's just the fundamentals, like you said, first principles, basic approach. That's one type of asset, right? It represents some kind of discounted cash flow.

• 6:50David Hoffman?

  Claim on future cash flows, yeah.

• 6:51Speaker 00

  Exactly, exactly. And the second one that everyone is familiar with as Bitcoin, but also just normally in real life before crypto, right? Is the commodity view of an asset where it does not represent any claim on that because it coherently can't. Literally, if you have gold, it does not represent like a claim on any group of people's work or anything. It has flows-based, demand-based, you know? The one way that people talk about it all the time is like, there's demand, people buy it, use it either in industrial use cases or use it as a store of value and hold it in vaults, et cetera, et cetera, right? It's used in circuit boards, right? Because it's good conductivity, it's not corrosive, it's malleable. It's like the perfect type of atomic substance, right?

• 7:35Speaker 00

  Like structure for a lot of these things. And then that's the commodity-based like valuation framework, right? That is just, there's nothing that gives you any claims to any kind of discounted cash flow. And then it's just used in different places. And a lot of it is basically used in store of value for gold, for example, right? And then there's other things. You can actually measure it, even though it's really hard to actually go through the entire world, right? And then like deterministically compute how much are people buying for circuit boards? How much is like TSMC buying to code? It's like silicon, right? And then things like that. But you could deterministically, it's not some voodoo magic thing of like, you know? One thing that I really disagree with is like, this is not some kind of, if you talk about commodity premiums, right?

• 8:20Speaker 00

  Like commodity flows, it's not just a way to obscure stuff and get rid of like DCF or something like that, right? It's difficult, but it's a deterministic fundamentals-based view of how to value an asset. Because some assets like gold, like silver, like oil, right? Like it's used in places, it's stored in barrels, et cetera, containers. You can actually reproduce. And so thus you could falsify it like gold shouldn't be trading at like $7,000 if this is the supply should be trading at 3,000 because this is the actual supply. These are all of the buy orders and sell orders in the entire world, even though that's a very hard thing to do. It's a deterministic algorithm, right? So that brings me back kind of to the ETH asset, right?

• 9:04Speaker 00

  And again, I've been in crypto, especially Ethereum for a really, really long time. And I was trying to think about, you know, what actually, in my opinion, went wrong with ETH the asset? And like, the first thing that I always get back to is I always separate ETH the technology with ETH the asset. And this is actually really, really important because you actually had a really good episode last week with Dan Crat, Onscar, Mike and you guys, right? And it was funny because at the very beginning, I think it was Onscar or something. He was like, oh, well, on this episode, we're all going to talk about the price. Right. Let's, let's talk about it. And so the first thing I was like, well, you guys are mainly here because of the awkward price right now, talking on the podcast.

• 9:46Speaker 00

  But I did appreciate that they fully separated the technology from the price and the asset, right? And so I think the first thing I want to say is the exact inverse of him is I'm not here to talk about the technology. I'm here to talk about the asset. And then those are actually more different than people think is interesting because the Ethereum Foundation, these researchers, they're brilliant. And actually, I think I would say this from the very beginning, 2014 to currently in 2025. They're probably the smartest people in the space in terms of what Vitalik has created, how he's created the technology, what ethos Ethereum has actually created in the ability of people to do in the world.

• 10:28Speaker 00

  Decentralized, trustless computation that actually allows people to do things on chain without needing any kind of middlement for a lot of all these things, right? DeFi, Frax, which is what inspired us to build the original decentralized stablecoin now more with like higher order institutions and all these things, right? The issue is, that's great. Like, I think, in my opinion, I think Ethereum is going to continue to be the Flag bearer of that like technology and it's going to continue to make the world a better place. That does not mean the Ethereum price is going to go up. Like those two things are not connected, not necessarily connected. In some way, they can be connected if it's done right, right? But they are not in in some sense necessarily connected. And I think this is a big, big disconnect that people don't.

• 11:13Speaker 00

  Which is where downstream, all of the fighting comes from. Oh, are the L2s parasitic? Oh, or all these things. Or should we be charging more tariff, the L2s tax, the this and that and whatever? It's because the technology is amazing and then I stand by that and it's always has been and I cannot be more bullish. The technology and the ethos. I've always identified and will continue to identify with the Ethereum Infinite Garden, which originally was the World Computer, for everyone that knows the original Vitalik videos before and after the Ether sale, right? And then this thing is the best culture and the best technology. Doesn't mean ETH will capture the actual like value, if there even is any value there to capture, right?

• 11:56Speaker 00

  And so my main thesis is that there's a few things that I think went wrong with Ethereum. And before we get deeply into it, one last thing I want to say for people listening to this is this is not about marketing. Anytime I talk about this, some people are like, oh, so you just want Ethereum, the asset to be marketed differently? No, no, no. This is actually more fundamental because this is a socially constructed definition of the asset that causally changes what it actually is. For example, like if you actually get everyone in the entire planet to believe that like you, David, are the king of France, right? That's not good marketing. You literally become the king of France, right? Let's say it's like 300, 400 years ago, right?

• 12:40Speaker 00

  This is not good marketing. If everyone in the world believes you get to live in the Palace of like Versailles, right? You get to control the entire state, you get to do X, Y, and Z causally, right? If you actually get people to socially, socially believe that you're the king of France. Or more relevantly, the president of the United States, right? There was a lot of disagreement about who was the president of the United States four years ago, like very, very relatable, right? Marketing, that is not good marketing, right? Like, to be able to convince people you are the president of the United States requires a whole host of coordination, a whole host of social definitions, whole host of actual people socially agreeing on a specific thing. There's no physical thing to point at. There's no president of the United States sign or something like that where you write your name on, right?

• 13:24Speaker 00

  But it's not marketing. It's definitely not marketing. And this is one of the main things that I'm really like passionate about to get out here because it's not a bunch of people writing blogs, right? And like, everyone just giving their own opinion, right? One of the first things everyone always says like, well, ETH is whatever you want it to be, whatever you want it to be. It's very, very schizophrenic, right? It's really crazy, right? You can't, you can't, you're not the president of the United States if you want to be, right? You just can't have a bunch of people like shouting and screaming. It doesn't make it so, right? It's only a socially constructed emergent property if a bunch of people agree in an exact same structure. And then it's binary, right? It's a little bit difficult to measure exactly when it's binary.

• 14:09Speaker 00

  But before we discuss everything, right? I just want to make sure that this is like on the record in terms of my beliefs. I'm not advocating to market Ethereum differently. I'm advocating to understand the ETH asset differently as like a universal group of pro ETH Ethereum bulls, like Ethereum's, right? And actually, to do that first, you have to like separate Ethereum, the technology, the blockchain, the roadmap, the amazing culture with ETH the asset. So that's kind of my premise in this like background of why I started writing all of these threads and everything. Instead of, you know, most of my work is like on Frax, Frax USD, building out this entire full stack of money and everything that we're working on. So, yeah.

• 14:47David Hoffman?

  Okay, so like just to really make sure I understand your point. We're not trying to like market what Ether is. We are trying to generate like internal Ethereum community consensus about how we understand Ether, the asset internally. Because then maybe the next step is like, okay, once we come to consensus internally, we can have better marketing. But I think what you're alluding to is like, first, we need to kind of figure out internally what the nature of Ether is as early Leads to Ethereum, the technology. Is that what you're saying?

• 15:14Speaker 00

  That's exactly what I'm saying. It's really well said, and I hope that's clear because very few people, I think. That's why I started actually writing about it because I have a bunch of stuff to do about stable coins and and frax and all this stuff. But I'm like, I don't know whether either I am being dumb and like no one's saying it like this, or someone needs to say it so that people understand. This is not just bickering over. How do we brand this stuff? Or like, how do we market it? If we do it correctly, it will fundamentally change the value of this digital asset. But everything here is digital, right? Like you can't eat Ethereum, right? You can't, you can't build like shelter with it. It's just zeros and ones, right? Like this entire thing is socially constructed, just like how the president of the United States, the role, the title, the power that comes with,

• 15:56Speaker 00

  socially constructed. The king of France, the role, the power, everything socially constructed. There's no fundamental. It's not like energy. It's not like oil that you can burn it, you know, do warmth and like build stuff with it. It's entirely socially constructed. First, the way that you said it perfectly. And then second, after it's socially constructed, how do you want to market this thing? Oh, this thing is like, this thing is a president of the United States, should to use it or whatever, right? Like this thing is this type of asset, that type of thing, right?

• 16:21David Hoffman?

  Right. Okay. So with that framework in mind, tell us the story of the collapse of ETH BTC down from the highs of point zero eight eight in December of 2021 to where it is now at point zero one eight. So like ETH versus Bitcoin has lost 80% of its value. How do you explain that story? Why did that happen? And how does that fit inside of your framework of understanding?

• 16:43Speaker 00

  Yeah. So the main thing and the most important thing in my opinion is to try to like actually look historically because Ethereum has been out since 2015, right? And like it transitioned to proof of stake, I believe sometime in 2022.

• 16:59David Hoffman?

  September 2022.

• 17:00Speaker 00

  Yes. So you can obviously see roughly where these things changed. If you overlay the price, that doesn't mean correlation is causation, right? But the main important thing from a fundamentals perspective, I'm not a trader. I don't ever trade stuff. I hold it for the very long term is to actually learn like what happened around these times, right? And not like look at Charts or anything like that, but the main thing that I've noticed is like the transition to proof of stake plus EIP one five five nine. Fundamentally changed ETH, the actual asset, not the technology. I love the technology and actually very pro proof of stake on the technology layer.

• 17:40Speaker 00

  But it changed ETH, the asset to discounted cash flow P and E asset. Where the thing that is the most predominant definition of the asset is this discussion about the cash flows that come with it. With EIP one five five nine, instead of actually talking about it like a commodity, that's actually a good store of value. The issue is, you can imagine like if you have a DCF asset, discounted cash flow, price to earnings asset, which are traditionally equities and stuff. Necessarily, that's sort of pre necessitates mutually exclusively that that asset has some properties.

• 18:17Speaker 00

  That are made for optimizing DCF and not optimizing for it to be a commodity, such as frequent changes in the supply of the asset. That makes it hard to reason about everything that actually optimizes for increasing the DCF, the discounted cash flow. Right? Like there's certain properties that aren't good for a DCF, like fixed immutable. Like, you know, you can't ever do anything to optimize the standard cash flow. There are certain things that are really good for a commodity and those things are obvious in the differences between like BTC and ETH assets. Now, what I actually think is there's not that many fundamental, as many as people think. What I actually think is we messed up on the social definition.

• 19:01Speaker 00

  Instead of talking about this properly, like this is about, you know, who's the president of the United States instead of a marketing issue, right? Like, I think that people didn't realize until there was, there was like something actually wrong, right? And so the main thing I think is that EIP one five five nine really just changed the entire definition of ETH, the asset. And the other things that everyone coming up with like a really interesting, you know, this ultrasound money. And then actually I read Ryan's new post that came out this morning, which I think is actually fantastic. It gets tons of things correctly. I think it's actually one of the best recent thesis of ETH, the asset and everything that I've read. And then the ethereal guys, you know, Vivek, Grant, Danny, Zach, they're doing God's work.

• 19:44Speaker 00

  I mean, they're doing the Dallas work, right? The holy work for ETH, the asset. I think they're very, very good. The issue is. Like I said, if you have a bunch of people saying like, this guy is the president of the United States, this guy is the president, it doesn't necessarily work, right? It's almost like a Boolean thing, right? Like, it's like all or nothing. Like, if you have a bunch of people here saying, "Oh, Ethereum is this super duper hard thingamajig asset, like, you know, use it, it's better than Bitcoin as store of value." People over here are like, "Well, Ethereum discounted cash flow is going down, so this is super bear." Stop like even doing Bloomberg ETF issuers, they write reports, they all see ETH as a discounted cash flow asset, right? And so it's like, doesn't matter what we're saying online, right?

• 20:28Speaker 00

  Everyone's like analyzing the price to earnings of this asset. We would recommend you buy the BTC ETF, right? This does not comport well with what everyone wants to happen to ETH, which is a unified... It could be multiple things, by the way, just to be very clear, it could be multiple things, but unless it's done properly by all participants in the world, literally all kinds of stakeholders, from ETF issuers to developers to... And I don't know exactly, right? These are social things, I don't know exactly where that Boolean switch is, right? But the difference is, you either get Ethereum is nothing, other than people screaming, like a bunch of definitions, or it's a lot of things that's properly constructed, right?

• 21:10Speaker 00

  If everyone's shouting, "Oh, it's ultrasound money," or "it's this," or "that," or whatever, Ethereum is nothing, it's just chaos, right? Ethereum, the asset, is nothing. It's just a bunch of people screaming different names of US presidents, this person's the US president, that person... But if it's done properly, in a properly structured, coordinated manner, it actually does make a difference. And the last thing I'll say is like, I'm not actually against EIP1559, like, the algorithm might sound that way, people might assume that, "Oh, he's bringing up discounted cash flow, he's saying this was like a mistake." I'm actually a big fan of proof of stake and EIP1559. I want people to understand what we've done wrong, where I think the Ethereum community

• 21:51Speaker 00

  is, as someone that's been involved since 2014, I think we've done wrong, is EIP1559, it just splits fees, right? Like, it's just an algorithm. Again, this stuff is all social, right? It's for people that I'm sure everyone listening to this probably knows, right? It splits fees that users pay to either some gets burned or some goes to validators, right? And then I love it. It's clever. It's really smart. And obviously, the amount that gets burned can't be decided by a central party, right? EIP 1559 is the algorithm. And depending on how much the blocks are full, like the previous blocks, some more gets burned or less gets sent to the validators, or more gets sent to the validators and less gets burned. That's just an algorithm. There's nothing actually about that happening that means Ethereum, the asset, needs to be thought of universally

• 22:35Speaker 00

  as an equity-like investment in block space. In fact, the most important point is like, I was like talking to Haseeb about this the other day, and he actually said it in a way that he recommended I communicated. And I think he's right, which is if you actually think of EIP 1559 as this like discounted cash flow. Let's say like you said, like, hey, it's here, right? It exists, right? Like, how do we go about it now, right? I actually was like, imagine if, imagine a thought experiment where like Bitcoin BTC people actually integrated EIP 1559, or probably BIP 1559 in Bitcoin, right? And into the Bitcoin protocol, right?

• 23:17Speaker 00

  Like the actual block theme model in BTC. You wouldn't, I don't think, right? This, we could go through this thought experiment. It doesn't change the supply of the 21 million, like the overall supply, right? Like, you know, the actual circulating kind of changes a little bit, right? But you would not actually see a fundamental difference in how people in the Bitcoin community talk about the BTC asset. At least I contend you wouldn't, right? If you actually added EIP 1559 to BTC, right? And like anytime someone paid like a BTC transaction, depending on how many blocks prior, whether it's really full or really empty, a little bit of it gets burned or a little more gets burned, and then the rest goes to the proof of work miners, right? You can imagine this scenario. I don't see why they wouldn't do it.

• 24:00Speaker 00

  In fact, one thing, this side thing, is that Doing something like that could actually help the BTC security budget because it smoothes out the value of Bitcoin as like a flows thing rather than literally half and half and half and half from the proof of work happenings. But anyway, that's a separate thing. Think of this thought experiment. If that happened, would you actually think like Michael Saylor or everyone or the BTC ETF issuers, right? They would just stop talking about the real social definition of what BTC is and be like, hey, guys, let's all just model this fee burn. Let's all just talk predominantly about this fee burn. And like, let's everyone coordinate around defining this asset now as how much is going to get burnt over time.

• 24:42Speaker 00

  And let's just stop talking about whether this is a national like store of value for like central banks, for companies, for people, right? Like looking to preserve their wealth in a totally immutable decentralized way with zero other trust assumptions, right? Stablecoins have trust assumptions. The unit they're pegged to have trust assumptions. Every other governance token that actually has some kind of actual expectation on discounted cash flow has extra trust assumptions, right? And that's good because they can optimize for for DCF, right? BTC, no trust assumptions. It's totally decentralized. Ethereum, no trust assumptions, totally decentralized, right? And if you could imagine a world in which the BTC people implemented like EIP1559

• 25:25Speaker 00

  and you didn't think that they would totally change the topic to discounted cash flows and rewrite, not marketing, literally redefine the asset. It's more than marketing, like you understood really well. Then why did we do it? Like, why did Ethereum people do it? And what I mean, I think we made a mistake. This is the core point. And what Haseeb was saying when I was talking to him the other day was that if you actually go and do this, right? Like if you actually have, which we did unfortunately, where everyone started to coordinate around, hey, guys, let's just keep talking nonstop about the discounted cash flow of this like burn fee mechanism thingy. What you're actually doing is you're just talking about the minimum amount of value that the asset can be worth.

• 26:10Speaker 00

  The floor, that is always the floor, right? The burn. The discounted cash flow, it can't possibly be worth ETH the asset any less than the expected discounted cash flow of burns from the block space demand, right? And when we entirely focus on that, what we're basically saying is, hey, guys, ETH could be worth many, many, many times more if we concentrated on different social definition. But let's all sit down and nonstop talk about the floor, right? Like the actual floor of Ethereum.

• 26:40David Hoffman?

  Target the minimum valuation.

• 26:42Speaker 00

  Exactly. Target the floor valuation and just keep talking about it nonstop until it finally trades at the floor. In fact, that's what I say is like, if this keeps happening, ETH should fundamentally probably trade at like $500, $600, right? If you're just like looking at the expected current discounted cash flow and then extrapolate all the, you know, amazing burns will happen because there will be tens and tens and hundreds and hundreds of rollups, which I'm pro L2 roadmap. Again, I don't talk about the technology because I have no problem with the technology, right? Like all of this stuff is downstream of this fundamental deciding who the president of the United States is not marketing. It's really not marketing because once you actually can decide this, everything else falls into place better.

• 27:25Speaker 00

  When you don't have this decided, everything else downstream about the technology is you will never solve it because no one actually has a proper reference of like what the actual asset is, right? In order to have L2s, they need to pay ETH the gas, right? And like some of it gets per. So it's in every single crevice of like the ETH roadmap, right? Without actually first deciding what that thing is, right? You can't actually coherently come to an agreement. And so that's why when I separate the ETH asset, I actually really, really love the technology. I have no issue with the technology. Frax still is currently in L2, right? It's like optimized for certain things. I would love to actually literally like have Ethereum, the asset as its store of value.

• 28:09Speaker 00

  But if no one else properly thinks of ETH as the store of value, it's going to be Bitcoin, right? And so that's kind of my overall thesis and that's how I'm trying to get people to start actually talking about it. Less about marketing, less about trading, more about fundamentals.

• 28:24David Hoffman?

  When Ethereum shifted to proof of stake, there's been a bunch of Bitcoin or tweets that have cropped up in my feed jeering at the ETH BTC decline since Ethereum moved to proof of stake and they're using. This moment in time of Ethereum shift from proof of work, abandoning proof of work, going to proof of stake, and then ETH BTC has been down 80% ever since Ethereum abandoned proof of work. And so they're kind of beating their chests as a way to like validate the legitimacy of proof of work, which I decline that reality. Like ETH BTC is not down 80% because proof of work is inherently valuable. But they're just pattern matching to kind of like validate their understanding that proof of work is like the core thing that makes Bitcoin run in addition to the 21 million hard cap. What you're saying is that when

• 29:07David Hoffman?

  Ethereum did go from proof of work to proof of stake, we moved the attentional focus point away from a commodity store of value asset towards a DCF model. And so maybe it actually was the transition, according to like what you're believing, it was the transition from proof of work to proof of stake, has nothing to do with proof of work. There's no reason why proof of work is like bullish. And of course, I think if you believe in proof of stake, you actually understand that proof of work is actually bearish because it's constant selling pressure. But the bearish side of proof of stake, according to what you're saying, is that it's moving towards social consensus focus point on revenues as the thing to like beat our chest about. And then, of course, when revenues dropped to zero, that anchor just got lower and lower and lower, that anchor point got lower

• 29:52David Hoffman?

  and lower and lower, to the point where you're saying, well, if we continue to value Ether the asset as a DCF model, we come out to like a $500 ETH valuation. And this is where people in the Ethereum community are talking about like, oh, well, Ethereum, the technology can work at a $500 ETH. Like, everything is going to keep on working just fine because the community consensus has pointed around a DCF model as the way to value ETH. So that's like the synthesis of like my understanding of your conversation, and I understand that perspective. I don't think there's anything that I disagree with. But here is what I want you to address next. Ethereum will always have revenue. Like, we like EIP 1559. There is revenue at the layer one. I hope actually that we actually increase revenue. I want

• 30:33David Hoffman?

  the Ethereum Foundation and the Ethereum product mindset to instill, you know, starting now and over the next years, and really think about the layer one as a product. And a measure of success of the Ethereum products is our revenues go up. And so as a construct, as a technology, Ethereum will have revenues. And so I don't think it's Possible to just like ignore the existence of Ethereum revenues. The DCF model or the fact that Ethereum has revenue in the first place will always exist. There will always be something to focus on. Now, I think we can talk about how maybe we should emphasize the commodity-esque side of ETH. But nonetheless, we are not getting rid of revenues. No one is suggesting that. You're not suggesting that. And so we will always have to contend nonetheless with the existence of revenues.

• 31:18David Hoffman?

  We can't really like sweep it under the rug. So how do you balance this idea of we want Ether to be a commodity-like asset with a commodity-like valuations? But on the other side of the spectrum, it is also a revenue-bearing technology platform. It is a revenue-like tech stock. That is a valid perspective, whether it's the right perspective or the wrong perspective. I think it's social consensus, but it is a valid perspective. So how do you contend with this?

• 31:42Speaker 00

  Yeah, that's a really big point. And to actually directly agree with you, I do not think proof of stake was a mistake. I do not think EIP 1559 was a mistake. In fact, that's why I kind of constructed this thought experiment of imagine if BTC like integrated EIP1. It's just a fee algorithm, right? Like it's literally just-

• 32:03David Hoffman?

  Better technology.

• 32:04Speaker 00

  Yeah, but in fact, a lot of people bring up the security budget. And I know this isn't to talk about the Bitcoin security budget and stuff. But I actually think implementing EIP 1559 in Bitcoin actually is one possible solution. There has to be a lot of research done to fixing the BTC security budget because it smoothes out the actual demand for BTC, the floor demand. And so it's not just happenings, right? Like you can actually bring value back to the BTC asset as a function of discounted cash flows from demand from block space. Anyway, so I think that the main issue is those things aren't the problem. And I've actually said like the superpower with proof of work is not that it's more decentralized.

• 32:43Speaker 00

  I don't believe that or whatever, but the superpower is you can't coherently talk about discounted cash flows in proof of work. This pitfall doesn't exist, which is why the BTC people have beautifully navigated it. Whether you know, it's by accident or not, there was no like landmine to step on, right? The BTC token holder- Do not actually have any claims on any DCF, any burns, right? And like, this is why I was saying in a thought experiment, if you imagine they do, they could make a mistake like the Ethereum, but they probably won't because they're so well trained on not actually bringing up DCF, even though functionally, even though functionally, you can imagine a world where BTC has BIP 1559, right?

• 33:26Speaker 00

  And so my answer to you is like, let's look at gold, right? Imagine a world where like, there was an industrial use case of gold that like somehow turned it into lead. It took it out of supply permit, changes molecular makeup. Or even better, there's oil, right? When you use it, it literally changes its molecular makeup, right? You would not say the gold asset has discounted cash flows. Like, taking the gold out of circulation does not mean like atomically, like out of this universe, right? Like reverse alchemy, doesn't mean the gold asset has fundamentally changed its definition. Not marketing, remember, this is more fundamental than marketing, right? You would not say the gold asset is now a discounted cash flow price to earnings asset, right? That wouldn't make sense.

• 34:08Speaker 00

  You said there's this new industrial use case of gold, which is really interesting, right? Where if you code it on the special circuit board or something, it somehow turns it into lead. They're like, you can never change it back to gold unless, you know, we discover real alchemy, right? And that is, I think, the right way to think about it because I'm not saying roll back EIP 1559. I'm not saying go back to, and I'm not saying it's permanently a big mistake. Because if Ethereum actually accidentally went this way, you can think it could on purpose go the other way. So I'm not saying this is like, oh, it's over. It's like, you know, all this stuff, which is why I've actually like tried to bring this conversation into discourse. Because if you can accidentally- It's the point of this episode as well. Yeah, and so it's like, if you could go this way and like Ethereum started, literally proof of work.

• 34:52Speaker 00

  So like Ethereum is actually one of the most interesting and consequential digital assets. And in my opinion, assets to ever exist because it started as a proof of work asset, right? You could not coherently talk about discounted cash flows, right? And it upgraded to the best technology stack of proof of stake, EIP 1559. And then it fundamentally- Fundamentally, slowly, it's not like a switch, but it fundamentally slowly in some point changed its predominant definition. And here we are, in my opinion, right? And so if you could do that, if Ethereum, the entire social coordination layer can do that by accident, I would assume, I don't think people want it all time low against BTC, right?

• 35:33Speaker 00

  You can on purpose go the other direction too, if you understand the issue. And so the point is, like you said, EIP 1559 will be there and like whatever we think about it, it'll still actually exist and I love it. And I think it should hopefully continue to burn more and more ETH, but as an industrial use case of ETH, not as a revenue modeling thing. And the other thing I will say is like, people usually bring up, oh, well, ETH has done worse against solely asset and other things too. So like this doesn't explain the whole thing. I actually don't think that has anything to do with this problem. I think ETH and BTC are like the only two like special kind of assets.

• 36:13Speaker 00

  And this partly why I'm like a big Ethereum person as well as a big BTC person. I think that there's no third best. It's like from the sailor, there's no second best. I actually think there's no third best and every other asset.

• 36:26David Hoffman?

  There's no third commodity money in crypto.

• 36:28Speaker 00

  I think that's probably right. I think we'll see, we don't know, but I think right now that that's the two thing. And the important thing is, I think every single asset that gets big enough will probably have this social civil war. And like whether, what is this asset? Is it like a DCF asset or is it a store of value? And I actually think ETH is obviously the store of value asset. And so I don't think the sole asset, for example, the gains has anything to do with this mistake. I think this is only between ETH and BTC. Sol was just super hot and there's just, there's nothing more to it. And they might keep growing. Great. I love the Solana guys, you know, with Frax issues, it's stuff there. I love Anatoly. They're all amazing.

• 37:12Speaker 00

  But this is not, has anything to do with like other L1 assets. They're going to come to the same like fork in the road. Like if Sol gets like 5X from here and gets like close to hundreds of. Billions of market cap, right? Enough people, when it has like ETF issuers like it will this year where they like Wall Street types, right, that are like, what is the actual fundamental asset? Like, who is the president of the United States, right? Let's actually write this clearly and like, agree on it. That, if the sole asset gets stamped as like a DCF, you know, price to earnings asset, I don't think it's ever cashing up to Bitcoin. And maybe they're not trying to, right? Maybe they're just like, oh, we were just trying to flip ETH or whatever. That's great if that's what they want and they just want to be a DCF asset.

• 37:56Speaker 00

  But this has nothing to do with other L1s because they're not immune to this. So this is not like an ETH problem and like, it's because ETH is the only other thing that is actually legitimate enough after BTC that this is a discussion between all the ETH community. The ETH community people are very mature in that they've traversed this gauntlet much more than any other of these assets, right?

• 38:20David Hoffman?

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• 39:05David Hoffman?

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• 39:49David Hoffman?

  The best part, you don't have to do anything extra. Each trade is automatically routed through Uniswap X, V2, V3, and V4, so you get the most efficient swap without even thinking about it. Whether you're swapping, sending, on-ramping, off-ramping, or bridging, Uniswap's web app and wallet gives you the tools to unlock DeFi's full potential on Ethereum, base, Arbitrum, Unichain, and more. Use Uniswap's web app and wallet for a more efficient way to use DeFi. I want to bring up Ryan's post that he put out on Friday. For anyone who is listening to this podcast that didn't read that post, it's pretty short. He titled it "The Blue Money Religion", "The Blue Money Gospel", and there's, I think, seven points in here, and they're all kind of pointing to Ether as... This is something that Ryan has been beating his chest about since like 2019. Like Ether the religion. Like what does ETH need?

• 40:32David Hoffman?

  It needs to be like a religion, because the money is similar. And he talks about all the things that Bitcoin got right, what Ethereum forgot, and basically Ethereum forgot the narrative around ETH, how there needs to be like cult-like behavior around Ether the asset, "Hold ETH", "Tell everyone to hold ETH", "Shame Layer 2 Treasuries, Whales, and DAOs that do not hold ETH", "Celebrate when people buy ETH", "Stake, re-stake, auto-stake", and then, you know, myth busting, call to faith, all these kind of things that, again, Ryan's been beating his chest about the need for this for forever, about like, you know, shifting the Overton window around Ether the asset towards something that has like a pretty fervorous, zealot-like community around Ether the asset. I want to get your take on that, like, part of this story.

• 41:16David Hoffman?

  What do you think about the call to arms that Ryan has put out there?

• 41:18Speaker 00

  So I actually read it, and right, right before. I love it. I think it's actually one of the best recent things, and, you know, I love to discuss it. The thing, again, that I would say in terms of the results-oriented approach and fundamental, like, understanding approach that I try to take about this is like, that's a big post of saying, "I think this guy is the President of the United States", unless you get a bunch of people to actually agree. Totally useless and I like his where he's pointing because it is my point, right? But again, once you stop thinking about it like this is marketing and branding speak and you just throw that concept out. And you think of it as these are socially constructed fundamental definitions and then everything downstream refers to it.

• 42:01Speaker 00

  The way that we agree about titles of like head of state or like what something actually is used for socially, right? I like his definition. I like the, you know, thing, person he's pointing saying this is the president of the United States, but.

• 42:14David Hoffman?

  So Ryan is pointing towards a particular outcome, saying, hey, this is the way that it should be with. And you are also pointing there. You are also like raising your hand and pointing in the same direction that Ryan is. Is that right?

• 42:24Speaker 00

  Yes, in fact, so actually I said a lot of things similar where I was like Ethereum people have been historically too nice. Which is awesome. I love being nice about everything except certain red lines of things where, for example, the BTC people have gotten very right so that they don't get confused about BTC, the asset being socially fundamentally defined as a store of value. Things like shaming people doing too many tokens or any token in some of it and stuff, calling them shitcoins, right? That actually is good for BTC, the asset, because it's a coordination mechanism to be like, don't you dare point at anything else as the president of the United States, right? To keep the example going.

• 43:04Speaker 00

  The issue is, I've brought this up and Ryan said it really well, is A, we have to define what certain things that we are gonna be, you know, dicks about or like a red line about. And then two, we have to agree on what those things are because if a bunch of people are doing it, they're just assholes, right? If a bunch of people are, there's only a few of them and then, you know, there's just like randomly these people and then everyone else is nice and Vitalik is super nice. And then the Ethereum foundation, this like priest took classes, Amin Soleimani likes to say, right? Are like super duper nice. It doesn't match at all. It just looks like there's like a bunch of schizo people here and then like it like the world is going on without them, right? And again, it just seems like everyone's pointing to like a different, who's the president of the United States, right? And so the two things that I really liked about, the two best things I liked, almost everything was really great in the post is that.

• 43:50Speaker 00

  If we don't make sure that Ethereum is used as store of value, and two, if we don't make sure that Ethereum, the technology, right? The settlement layer is not this fundamental ledger we've lost. So I've actually, because Frax issues the Frax USD stablecoin, we're deep in talking to institutions and about RWA issuance and all this stuff. One of the other, the things I've thought of that's like a concern is like, imagine if like everyone's saying there's RWAs that are, you know, being issued on all these chains, but then everyone's like, oh, Ethereum has the most, Ethereum is the safest place and all this stuff.

• 44:27Speaker 00

  It's actually not good for Ethereum to combine being super nice about like their TVL and saying, oh, it's great, you're issuing stuff on Solana and all these other places too, but look at how big the Ethereum RWA issuance is. That doesn't work because if you issue, let's say, for example, you're like Tether, tokenized dollars or just RWAs, right? Or let's say like someone has a RW, like Blackrock Biddle, right? It's issued on Solana, a bunch of other chains and Ethereum, and it's the biggest on Ethereum. If you issue on Solana and then there's like, you know, the Solana blockchain goes down for about 24 hours, which it has before, right? And things like that. And there's like some issue where someone's redeemed, right? And then like they get the token again if their network reboots, right?

• 45:12Speaker 00

  Et cetera, and all this stuff, right? Like the exact thing that people are saying Ethereum is good at because it'll never go down, it's the most decentralized. If you have RWAs on Ethereum from the same issuer, and then you have native RWAs on Solana or like Tron, et cetera, et cetera, et cetera. And one of these things goes down, you're still exposed to the losses of the actual assets on these other chains because Ethereum is not the fundamental ledger source of truth. It's one of, it's one of the fundamental. And so this is the issue is like, we have to be, for example, a bit of, you know, dicks. And there was like a CoinTelegraph article where I actually talked about this. And then I didn't know the headline was going to be Ethereum community

• 45:53Speaker 00

  has to be more assless about certain things, but it's kind of true. Like we have to have certain social So people know that you have to actually use Ethereum as the source of truth. And then everything else is like a wrapped version of it using some kind of, you know, internal message passing system that like an RWA, sure, use L zero wormhole, et cetera, et cetera. Otherwise, we're doing this thing again where everyone says something nice and you, oh, Ethereum is this, and it's this, and it's that, and it's this. And at the end of the day, if it's everything, it's nothing because it's not properly defined. You want everyone to agree on a unified vision, which could include multiple things, right? Like Ethereum could be a unified definition of it could be a triple point asset or something, right?

• 46:38Speaker 00

  And that by definition means it's three things. But if some people are like, it's this, it's that, this person is the president of the United States, that person is the president of this and this, it's literally nothing. It's just a bunch of chaos. That's the most bearish of all. And that's the problem in like, for example, the proof of work stuff that we were just talking about. The superpower is everyone's forced to talk about the asset in one particular way. That's its superpower, not that it's like decentralized thing or whatever. It's not the work part that's powerful, it's that, it's that part. Exactly, exactly. It's the structural thing. And to be honest, that could be worth the extra cost. Right. Because that's such a good costly, costly social coordination problem that like,

• 47:18Speaker 00

  it maybe it's worth like 10% emission or 5% emission instead of like, you know, 1% of, you know, minimum viable issuance, because it's so costly to think about all this stuff. But think that all of the time that we're talking about this, you and me and every other ETH podcast and every other thing and every other developer and everyone arguing and multiply those man hours by the entire Ethereum global community. Right. How much productivity is lost there versus like a couple million more Ethereum tokens minted to the consensus mechanism, you know, over time, right? Versus all of those millions of man hours, like, you know, being able to use Ethereum in like countries and all this stuff. So that's the most important thing. And I think that, you know, Ryan has a really good proposal.

• 48:02Speaker 00

  He has a really good reference to where the president of the United States again like should be. I wonder if more people will point there or if it's just, you know, like a random pointing matches as usual the past, you know, three years since he had P1559. Yeah.

• 48:16David Hoffman?

  Bitcoin has done this very unique thing where it has stripped away everything in the blockchain that could, you know, move attention away from the 21 million hard cap. Like it has structurally, systematically removed utility from Bitcoin. Bitcoin's intent has to always become totally worthless as a blockchain, other than the 21 million hard cap. And to your point, I think this has made it easier to generate a shelling point, a focal point for the community attention to focus on the 21 million hard cap. Ethereum's strategy has been always, of course, completely different. In pursuit of being money, Ethereum, the ecosystem, has always taken the hardest possible path to get Ether, the asset, to become money.

• 49:00David Hoffman?

  Because Bitcoin has already optimized for, you know, whatever its strategy is, like remove all utility, only focus on the 21 million hard cap. But Ethereum has always had different aspirations. Utility, growth, innovation, updates, scale, all of these things that Ethereum has aspired towards. And it has, you know, confounded, you know, muddied up the waters when talking about Ether, the asset. But in order to get Ether into becoming a money, it has to walk this more narrow, dangerous path, in my opinion, where we have this Ethereum product out there, this technology that needs to be the best possible technology. In addition to that, we also have Ether, the asset, which has its life of its own.

• 49:42David Hoffman?

  And I think the, one of the big reasons in 2021, why the ETH-BTC ratio started to like turn over, was that the Ethereum product started to be misaligned with the needs of the time. Ethereum products started to break down. And so the product that we had to sell to the world started to become an inferior product versus other competitors that are also on the market. So people are going into the supermarket of blockchains, they are seeing Ethereum, they are seeing Solana, they are seeing Avalanche, they are seeing Base, they are seeing World Chain, even Ethereum Layer 2 is, they're like, alright, what, what products do I want to buy right now? And, you know, the Ethereum Layer 1 was not frequently chosen as a product to buy because we were building towards a direction that really didn't emphasize

• 50:26David Hoffman?

  The layer one as a product. And so right now I'm seeing a pivot, a shift in emphasis in the Ethereum core devs in the Ethereum ecosystem to like really prioritize the Ethereum layer one as a product. And that is not just for like layer one users, but also layer twos. Like we have now a head of, that's not his official title, but like a pseudo head of product for layer twos. And they are just working for interops. And then there's also a reemphasis on scaling the layer one, not just to meet the needs of potential, you know, future layer twos, but really for as maximum as possible. So I am seeing a shift in focus point of the Ethereum tech stack to become a very strong product.

• 51:08David Hoffman?

  Now I think that does have a positive feedback signal back to Ether the asset. Ether the asset. In pursuit of everything that you want it to be, a commodity asset with commodity like shelling point and a commodity like focus and a store of value focused by the community. That is actually bolstered by the fact that Ethereum has a very strong product. I think Ethereum with higher fees and higher burn can boost the strength of Ether the asset, the commodity money. It's just really dependent on the very precise, narrow band of possible talking points by the Ethereum community. How do we balance these things?

• 51:45David Hoffman?

  How do we have a very strong Ethereum product, but not focus on the DCF model for Ether the asset and have that strong product, which again illustrates the idea of like why this is a hard walk to walk. We need to be as product builders, very pragmatic and realistic about the Ethereum product that we have. On the Ethereum technology side, we need a culture of pragmatism and product mindedness that I think is growing at the Ethereum foundation. And that to me is Ethereum being nice, pluralistic, open, you know, big tent mentality. And in the technology side of Ethereum, we need to have convexity, Vitalik Buterin style convexity.

• 52:26David Hoffman?

  And then when we talk about Ether the asset, it has to shift. We have to be concavity. It has to be extreme. It has to be maximalist. And so it's this weird tension where we need as a community to be flexible in who we are and what we are in our conversation. When we are discussing a theory in the product, we need to be adaptable, we need to be flexible, we need to be nice, we need to be open. When we talk about Ether, the asset, we need to look to Ryan's post and we need to be maximalist and we need to be strong and we need to be unforgiving and we need to be assholes. And doing both is hard and that is the challenge that I think is set up before us as an ecosystem where we have to figure out.

• 53:08David Hoffman?

  It's not about what lane we want to be in, we have to be in both lanes and pick a lane in the context of the moment in question. Are we talking about Ether, the asset to Wall Street? Yadi maximalist. Are we talking about application builders who are choosing a home to build? Well, we need to be pragmatic in that case. And so we have to do both and that's a little scary to me. That's a little daunting. What do you think about this?

• 53:28Speaker 00

  Yeah, so I think almost everything you said I agree with. There's a few things I wanted to push back on because you said a lot of really interesting stuff. One is, yes, we have to just do a better job of like separating ETH, the technology and ETH, the asset, because ETH, the technology is so good and awesome. And when you confuse it with ETH, the asset, you get this confusion of like, well, ETH, the asset hasn't been good recently. So does that mean the technology is bad? So the first thing though is ETH, the technology, the block space, like demand for the block space, which burns ETH in the EIP 1559, is the industrial use case of like the ETH asset that sets its floor.

• 54:08Speaker 00

  Like this is the fundamental view that I have. If, for example, if you take a thought experiment again, imagine tomorrow, everyone in the world that is using gold as a store of value, which is at all time highs, literally. So it's a good time to have this conversation. Imagine if everyone somehow, I don't know how, but like there was just something in everyone's brain, decided that gold was not going to be used as store of value. They just sold all the gold involved, central banks sold it, everything. They just dumped it on the market and everything like that. It would obviously like the price would go down like negative 90, like something percent. We don't know exactly how much, but it would be. Insane. Most of gold's market cap and price, clearly, like even the recent all time high,

• 54:50Speaker 00

  is demand from store value use case of people needing to store value in times of like unknowns and things like that, right? It would not change the demand of gold in industrial use cases by Nvidia, by electronics producers, chip producers, because the atomic like structure of gold has not fundamentally changed. Even if everyone socially was like, we will never use this thing as a store of value again, there's still this bid on the floor of demand because you need it. It's this very specific type of metal in circuit boards that's not corrosive, conductive, and it's very, very special, right? There's this base demand that is like a floor price that either goes down or up based on the industrial demand, right?

• 55:32Speaker 00

  And the EIP 1559 algorithm, the burn, is in exactly this floor of there's this industrial demand of ETH for the ETH technology, which is the blockchain, the network, the block space, the blobs, right? Like all of this stuff, you can think of it as a digital industrial use case, right? And the thing that I want to say is that everyone has accidentally, since EIP 1559, basically been like, hey, everyone, let's all just talk about this floor price and let's just keep coordinating until ETH trades at this floor price, basically, right? Like, that's basically what the really messed up problem is.

• 56:15Speaker 00

  It's like, this issue is, if you could think of gold's industrial use case as its floor, if no one ever touches it ever again for jewelry, for store value, for investment, for like wrapping and ETFs, right? There's going to be this bid, right? Of course, that's a floor price for it existing, right? As this atomic structure, right? If there's a technology that is programmed in that this asset is the thing you need to use it, the ETH blockchain, the blobs, the block space, and there's like a fundamental way that you pay for it, right? It's the ETH asset. That's the floor price. If you keep talking about that nonstop and you're like, guys, let's completely just everyone talk about Wall Street people, right?

• 56:56Speaker 00

  EF reports about it. I'm gonna get all like, I love the EF guys like and everything. They're the smartest tech people. But like, Justin Drake is basically the poster boy of exactly what I'm talking about. He's been on your podcast, like every time, the Rollup Podcast, all of these places. And he's like, you can think of ETH as a big business. You can extrapolate the ETH asset discounted cash flows. And you can imagine a world in like five, 10, 15 years where there's like hundreds of billions of like dividends happening through this burn. And then you can extrapolate ETH having that. He's basically saying, let's just trade it at the floor.

• 57:35Speaker 00

  Let's just everyone coordinate to talk about the floor of ETH, the way that imagine if people only talked about the industrial use case of gold inserted boards and electronics. And that would suck, right? Because the thing that is important is, and I want to say so that I'm on the record, I am bullish ETH. I am bullish its price in USD terms, like in the distant future, like going to crazy new like 10K, 20K, 30K, 40K, 50K, all of this stuff. But the issue is, in a world where like ETH is 20K, currently with the structure that the ETH asset like has. In a world where ETH is 20K, Bitcoin is 2 million dolpes.

• 58:18Speaker 00

  Because in that world, a future world in which ETH is 20K, based on discounted cash flow floor price, necessitates a world where mankind has embraced digital assets by definition, right? And BTC is almost certainly the supreme store of value. Like, in that world, it's $2 million BTC, new massive all-time low for ETH against BTC, even at 20K. And I think we're headed towards that world, which, sure, I think a bunch of people that hold ETH, me included, right? Will be richer than they are today in dollar terms, but will still be like, oh shit, we should have held BTC if this actually goes in that direction. And what I'm trying to prevent is a future world where ETH is 20K and BTC is 2 million.

• 59:00Speaker 00

  What I'm trying to do is a future world where ETH is like 80K and like BTC is 800. And in that world, I think that's a new all time high. I just threw these numbers out there, right? But you can imagine that world and the world doesn't have to go towards a 20k ETH and 2 million Bitcoin. But that's how we've gotten here is like, and all of these very, very smart people in Ethereum Foundation, like Justin Drake and them that have brilliant roadmaps, which again, there's a reason I've been in the Ethereum like community and always followed the technology and everything that Vitalik publishes. Doesn't mean the ETH asset will capture any of this value if all you're doing is talking about

• 59:40Speaker 00

  how to price it at the floor, how to price it at the minimum viable discounted cash flow price floor. And everyone is pointing to that social definition and coordinating like the way that everyone coordinates around. That's the president of the United States and everyone believes that. So then it literally is on marketing, right? It's it's social coordination at defining a fundamental thesis like definition. And then everything downstream happens with it, like this person can launch nuclear weapons. This person can order strikes, all of this stuff without that definition, none of that works, right? Same thing with Ethereum without the definition. Right now it's a DCF thing. And then there's a bunch of people arguing kind of in like a schizo manner about different things that no one else actually believes, right? Because it's a DCF thing, because the priest took class

• 1:00:25Speaker 00

  and the people on Wall Street and important people with capital allocation. The story they tell is this dominant DCF floor price thing. And that's like where we're headed and I don't think we have to be. And you can even use this issue, right? And then extrapolate why there's so much disagreement downstream. For example, you can imagine a world in which like Ethereum is the largest issuer of RWAs. Like we were just talking about, like they like everything is fundamentally on Ethereum. And I actually, as soon as I started writing, I think a lot of people started extrapolating and understanding like Token Terminal, like the company that tracks all these DCF of coins.

• 1:01:06Speaker 00

  They started posting like BlackRock has tons of like Bittl tokens on Ethereum by far, but they're not high velocity, right? They're not moving around there. In fact, they're So like they're only whitelisted that things can move them, right? And Ethereum doesn't necessarily get any discounted cash flow at all proportional to these RWAs, right? Like they only get settlement cash flows from EIP one five five nine when Biddle moves, right? But you can imagine a world where there's like 500 billion Biddle tokens on Ethereum. They move maybe once a week. And so the EIP one five five nine mechanism captures like literally nothing, right? Of like fees and Biddle, like BlackRock itself takes management fees against the 500 billion.

• 1:01:49Speaker 00

  So they're freaking awesome, like they are a discounted cash flow corporation with actual equity, right? So they're doing their thing right. They're clearly like structured it correctly. And then if the Ethereum people are coordinating in how can we value the ETH asset at this floor? You'll have a world in which the Ethereum technology is amazing. There's half a trillion dollars of RWAs by BlackRock on it. And the floor has not moved at all technically, right? Like the floor, if you're trying to value the ETH asset by coordinating around this floor, it doesn't matter if 500 billion Biddle is there. By definition, the floor hasn't moved. So like people see that in the industrial use case, huh? Like everyone's using the Ethereum technology.

• 1:02:34Speaker 00

  Holy shit, like everyone would love like BlackRock to issue half a trillion dollars of RWAs on their thing. How come the ETH price against Bitcoin just keeps going down and down and down and down and down and down? Because it's valued at the floor and the floor doesn't necessarily move at all or very, very much. If the technology is being used. And so you have a situation where Ethereum, the technology, the culture, the nicest, the rainbows, the unicorns, the all of it, which I'm a huge fan of, changes the world for the better and it's amazing. And I'm here for that and I'm actually very bullish the Ethereum tech roadmap. But you have a world where if you keep talking about the floor, the floor barely moves. And the only upside after these market caps is the not floor.

• 1:03:17Speaker 00

  And if you're not talking about that, you'll basically never move there very much at all. You'll get to 20K, Bitcoin will be like 5 million.

• 1:03:24David Hoffman?

  Right. So one of the lines that has been in the Ethereum community is that Bitcoin going after gold is great. Gold's a great thing to go after. It totally should. But Ethereum is going after bonds. It's going after the bond market. And the bond market is 100 times larger than the gold TAM. Gold TAM is like 10 trillion or 20 trillion or something. Like bond market TAM, treasury market TAM is like 100 trillion. How do you think about this analysis? Like what comes to mind when you hear this?

• 1:03:50Speaker 00

  Like, do you mean ETH the asset or ETH is trying to tokenize all the bonds?

• 1:03:54David Hoffman?

  ETH the asset. No, Ether the asset is going after. If Bitcoin is digital gold, Ether the asset is like digital treasuries. One, like short-term treasuries plus long-term treasuries combined. What do you think about that?

• 1:04:04Speaker 00

  To be completely honest, I think that's a probable mistake. Again, I could be wrong. These are just opinions. But like, for example, like we were saying before, sometimes being a good discounted cash flow equity-like asset does not actually mean that you're a good digital commodity, right? Like, for example, this is actually one of the things, right? So if everyone wanted to agree on Ethereum not being valued at like this floor thing, there would have to be certain things that aren't big changes. They're not moving back to proof of work. They're not moving back to a specific thing. But there would have to be certain social commitments in order for everyone to agree to be able to coordinate around this.

• 1:04:43Speaker 00

  For example, Ethereum has a fixed tail emission equation, right? But it doesn't have any fixed total supply. I actually don't think a fixed total supply is needed. I actually, like, let me be on the record of saying, I don't think a fixed total supply of 21 million is needed. Again, I think that's by accident that when it's just a fixed number, it becomes easy for really smart people and roughly like the both sides of that, the curve meme, right? Like to like to only discuss it as a digital commodity. But for example, Ethereum has to have a social commitment that it will never change the emission algorithm. The algorithm, which is whatever the tail emission is, can never, ever, ever, ever be changed. Right.

• 1:05:28Speaker 00

  Ever, at just as hard as the 21 million Bitcoin supply is. And I don't think we're there. Right? So like, I think there's been a lot of research about minimum viable issue. And so we can cut this even further. And that's like super bullish. No, that's like basically saying a company has like made its costs more economical. Therefore, you can actually see its P and E thing rise. So like the floor value of it slightly raises. And the fact that people even consider that means that it could go the other way too. Right? Like you can increase the missions, which makes it hard for people to actually reason about. Like on this call right now, if I told you, hey, David, what is the current yearly annual? Forget the burns. Imagine there's just no burns at all, like, because those are variable and it's hard to know.

• 1:06:11Speaker 00

  What is the tail emission of Ethereum? In this next 12 months, how many ETH tokens are actually committed? I couldn't tell you, but I could easily tell you like Bitcoin goes from 12.5 Bitcoin were blocked a while ago. Right? Then it goes like 6.25 after that happening. And now it's at 3.1 whatever, right? Like we know exactly. Yeah. Like I didn't even have to look it up, right? But go ahead. Do you know? Look, look it up. Do you know how much ETH will be emitted? Do you know? Well, no, literally no, because it's dynamic. Yeah. So the equation. It changes. Yeah. Yeah. So the equation. Based on network conditions. But the equation is fixed, right? There's some algebraic, but like it's not like Vitalik. Exactly. The equation is fixed. The equation is a dynamic equation that is fixed. Exactly. It's a dynamic. It's not like Vitalik is an API endpoint. It's like, actually I need to change the constants.

• 1:06:56Speaker 00

  Right? It's fixed, but it's very hard to reason about. Right. Right? And so that is one thing that has to be like, the equation will always be fixed. And then instead of talking about DCF, for example, we have to only talk about how to easily, not people who know linear algebra and then like taking the differential of like some algebraic equation. We have to actually teach people how to reason about the emission. That's like one thing. The other thing is like, if you actually want to not talk about like the floor value, which is the DCF, which is what Ethereum is currently talking about. Is that you have to actually make it so that other people can coherently talk about these things properly.

• 1:07:39Speaker 00

  And so it requires some kind of commitment of like fixed emission algorithm. Like the easiest thing to fix is it as a constant, which is what BTC BTC is basically optimized for like the caveman, like, you know, the bell curve. To thing where it's like the guy in the robe and the dumb guy, the IQ thing. It's optimized for this. And then so the smart people are like, it's great because we're we're sure that all the non-technical people get it. Ethereum, because the technology is so awesome and amazing, it's optimized for the guy in the robe, right? And like, because it hasn't been properly defined for the guy on the caveman thing, we're all in the middle now, which is like, oh, Ethereum is this mev like this. Got a triple point like thing and then like everyone looks really dumb because everyone's just like talking in chaos and all this stuff.

• 1:08:23Speaker 00

  So the thing that I wanted to say is like, I'm not against the IP one five five nine. I'm not against proof of state. I'm not against any of the technological things that Ethereum has done nor is working on. I'm very pro L two roadmap, to be honest, and I think it actually has nothing to do with the current like sentiment of the price. Exactly as you said at the beginning, where people are like, if you go to 500 bucks and the technology would work fine. Exactly. Eat the technology totally different than eat the asset. That's exactly correct. But I think a bunch of people would be really like pissed, which, you know, is fine because the technology would work. But if we want to talk about the asset, we have to just isolate and figure out what the fundamental issue is with the actual asset.

• 1:09:05Speaker 00

  Otherwise, this like weird hotch pod of like eat the technology, eat the asset is just gonna, you know, get super messy. But once it's untangled, once it's actually, if we can actually get there, the L two roadmap, the L one scaling roadmap recently, right? And all of this stuff will fit into the things that are red lines that never change. Like the emission algorithm being permanent, the other things that need to happen. And actually, everything will downstream answer itself because you cannot coherently talk about if L two's are.

• 1:09:41Speaker 00

  or they're like not getting like tariffed or like charged enough if it's all downstream of what the ETH asset is. All of this stuff is a side effect of no one knows what's going so they're they're trying to increase the floor of like we need to tax more of the L twos or no, we need to stop like talking about L twos because L twos were a mistake. We need to go the Solana way and like increase L one and then push people to come back and all of that actually is very, very damaging because when you try to entangle the asset with the technology because there's disagreement. You have no idea what you're doing because there's no definition of success. There's no fundamental like conclusion you're trying to get to because the top definition, you can't agree on who the president of the United States is.

• 1:10:25Speaker 00

  So then talking about why you're pointing to this person and that is is not going to actually get to any kind of final conclusion, right? And so I actually think because Bitcoin has this figured out, you know, by accident or, you know, whatever, because of how it works, like Bitcoin L twos and even Ethereum L twos are actually more bullish for BTC the asset than ETH the asset. That's how bad it currently is for ETH the asset, in my opinion, which is like as ETH L twos continue to get better and the ETH technology continues to make the world better by giving these platforms where people can actually hold assets in non-vestiture ways, build AMMs, build, you know, DeFi like Frax, Genswap, you know, Alve, etc.

• 1:11:09Speaker 00

  The thing that's going to benefit the most from that is not the ETH the asset, it's BTC. Because you see BTC wrapped versions of them, BTC like EVM L twos, right, that are Ethereum L twos, right, try to create more store of value usage for BTC the asset. Whereas if you're talking about the floor, if you're talking about the industrial use case of ETH, right, the floor, the DCF, right, like the demand for ETH for block space, that barely moves, even in like a world where like, you know, there's a thousand L twos the size of base. The floor might move up 10x, right? So we'll have 20k like ETH, right? But this usage of Bitcoin in that world, in that world where there's a thousand L twos.

• 1:11:51Speaker 00

  That have as much activity as Base does today is a world in which that necessitates, not probably, necessitates where like BTC, the asset, is like $5 million because the entire world has moved on chain. The Ethereum culture has brought the world on chain and it's done an amazing job. And then the floor price of ETH is only tenants, which is not great, right?

• 1:12:12David Hoffman?

  Sam, this is giving me a lot to chew on and I think probably the Bankless listeners as well. So I appreciate you coming on and giving me this vision. If you have any closing remarks, closing statements, big final conclusions, the floor is yours, my man.

• 1:12:25Speaker 00

  I appreciate it. Love to always talk about these things, but the closing thing that I'll remind everyone on is I could not be more bullish ETH, the asset, if these things are addressed and they're addressable. Because like I was saying, if Ethereum accidentally went this way, there's no reason why I can't purposefully or accidentally go the other way. It was originally a store value commodity and probably the only other credible one than Bitcoin. So I'm very bullish ETH. I think that more people discussing this stuff is required, but then not too much discussion. I'm an engineer and a builder and everything. And I think we'll see in the next six to eight months if this actually, you know, changes history for the ETH asset because after a while we have to decide or the conclusion

• 1:13:10Speaker 00

  is there's no decision, right? So I'm very bullish ETH and thanks for having me on, David.

• 1:13:14David Hoffman?

  Really appreciate it, Sam. Bankless Nation, you guys know the deal. Crypto is risky. You can lose what you put in, but nonetheless, we are headed west. It's not forever, but we're glad you're with us on the Bankless journey. Thanks a lot.