97 - The Bull Case For ETH III | Anthony Sassano, DC Investor, Cyrus Younessi

Anthony Sassano, DC Investor, and Cyrus Younessi return to Bankless to complete the Bull Case for Ethereum Trilogy. Comparing this episode with the previous two Bull Cases, we can see what has held up so far and what we have to look forward to in 2022. Spoiler: these guys have gotten a lot of things right. Covering topics like the meteoric rise of NFTs, the BTC Flippening, and Ethereum Maximalism, there remains much to be incredibly excited about as we close out a historic 2021. While macro conditions remain uncertain, the conditions of the crypto markets and ecosystems are perhaps surprisingly more digestible. With the Proof-of-Stake merge on the way and the modular blockchain thesis taking shape, the inevitable conclusion is that ETH is destined to go up. What’s 2022 going to look like? No one knows for sure, but this episode left us feeling incredibly bullish. ------ 📣 HASHFLOW | POOL & TRADE OTC https://bankless.cc/Hashflow ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🍵 MATCHA | DECENTRALIZED EXCHANGE AGGREGATOR https://bankless.cc/Matcha 🔐 LEDGER | SECURE YOUR ASSETS https://bankless.cc/Ledger 🧙‍♀️ ALCHEMIX | SELF-PAYING LOANS http://bankless.cc/Alchemix ------ Topics Covered: 0:00 Intro 5:45 Recapping the Prequels 10:21 Crypto in 2021 17:09 Narratives and Scaling 23:21 The Cultural Asset Layer 27:57 Core Value Pillars 35:34 Do the People Know? 40:24 PoS and Monetary Policy 46:45 Bullish APY 52:52 The Merge and Price 57:12 Users & Gas Fees 1:05:59 Layer 1s & Modular Blockchains 1:09:40 Extreme Decentralization 1:12:15 Chains that Care 1:18:00 Maximalism 1:22:42 Is ETH Going to Scale? 1:28:09 Market Conditions 1:38:10 The Flippening & Price Predictions 1:46:14 Closing & Disclaimers ------ Resources: DC Investor on Twitter https://twitter.com/iamDCinvestor?s=20 Anthony Sassano on Twitter https://twitter.com/sassal0x?s=20 Cyrus Younessi on Twitter https://twitter.com/cyounessi1?s=20 Bull Case for Ethereum I https://youtu.be/36HkwlqfBaQ Bull Case for Ethereum II https://youtu.be/85M3yGvzCe4 Ultra Sound Money https://www.youtube.com/watch?v=bWqhn1hXvVc&t=0s https://www.youtube.com/watch?v=bWqhn1hXvVc&t=0s Ultra Scalable Ethereum https://youtu.be/xjxyjgWiqLE ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

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

• 0:00Speaker 00

  Am I allowed to give financial advice?

• 0:01Ryan Sean Adams?

  You're allowed to be bullish Cyrus. This is a bullish podcast only.

• 0:06Speaker 00

  It's probably like a good thing for the price of ETH if all those things kind of converge all at the same time. So yeah, the numbers and the merge and everything is exciting, right?

• 0:18Ryan Sean Adams?

  Welcome to Bankless. We'll explore the frontier of internet money and internet finance. This is how to get started, how to get better and how to front run the opportunity. This is Ryan Sean Adams and I'm here with David Hoffman and we're here to help you become more bankless. David, great episode today. This is the bull case for ETH. ETH as an investment in 2022. How's it going to perform? What's it going to do? There's five key takeaways we talked to the panelists with. First, why ETH is destined to go up. Second, what happens to ETH price? When Ethereum finally scales and the panelists bleep it will scale. Will the flipping happen is the third thing.

• 0:59Ryan Sean Adams?

  Also, we asked some controversial kinds of questions like are ETH maxies the new Bitcoin maxies? Is there even an ETH maxi? Is that a thing? We also end the podcast with price predictions. So you're going to want to tune into this one. David, what were your thoughts after this episode?

• 1:17David Hoffman?

  Oh, my thoughts are I'm incredibly bullish, Ryan. We start off this episode with just recapping the year in 2021, which in hindsight, it's crazy how long this year has lasted, but also simultaneously how quickly it blew by. So much happened in 2021 and I think 2021 was really, it was the year that crypto people wanted to have. In the bear markets of 2018 through 2020, we dreamt of 2021. And so like reflecting on the year, like we have to pat ourselves on the back. Like this is the year that we got breakout, generalized adoption of so many different things. Turns out it wasn't DeFi that did it. Turns out it was NFTs, but something did it.

• 1:59David Hoffman?

  We had EIP1559 finally go live in the middle of this year. We set new all time highs twice, first at 4,300 and then again at 4,800. Still time left in the year. Set a new all time high, I will say that. And then DAOs are now in the mainstream and it's just crypto vernacular. Has been gone into the mainstream. We all gonna make it is part of like general Twitter discourse now. So many of things about crypto and Ethereum specifically got exported to the rest of the world. Not just the, the, the values of our assets going up, but also our culture too. Uh, which is definitely something that we also talked about how Ethereum is now the base layer for culture. So many different things we talked about in this episode and all of them made me bullish.

• 2:42Ryan Sean Adams?

  Yeah, I, I'm just gonna say in 2021, we were right. Like the ETH thesis was right. A lot of things that, uh, that we said, that happened, right? And so it was very gratifying from that perspective. I think the big question in people's minds that we talk about, um, with the panelists is what's 2022 gonna be like? Are we gonna have a repeat year? Is Ethereum actually going to be able to scale?

• 3:06David Hoffman?

  Can we do it again? Can we do 2021 all over again?

• 3:09Ryan Sean Adams?

  Can we do it again? Right? That's the question. And I think ETH is as an asset has, um, you know, made huge strides. Been through the acid test in 2021. Now Ethereum, the network, the big question in front of it is can it scale? So we talked to the panelists all about that. Guys, if you like this panel, make sure you like and subscribe to the podcast, to the show. Also stay tuned for these awesome tools from our sponsors. We're gonna get to them right before we get to the podcast. Here they are.

• 3:37David Hoffman?

  Alchemics is one of the coolest new DeFi apps on the scene. It introduces self paying loans, allowing you to spend and save at the same time. Deposit the DAI stablecoin into the Alchemics vault in order to get an advance on the interest it generates. Borrow up to 50% of the total amount of your deposited DAI in the form of Al USD stablecoin. Here's the craziest part. The loan pays itself back and you cannot be liquidated. Unlock your assets potential in the ultimate DeFi savings account. And brand new to Alchemics is the ETH vault where you can deposit ETH into the application. Borrow Al ETH against your deposits while having your advance gradually paid back over time.

• 4:20David Hoffman?

  V2 is rapidly approaching, which will allow for even more collateral types, plus a variety of yield strategies to choose from. Harness the power of Alchemix at alchemix.fi. That's A-L-C-H-E-M-I-X dot F-I. Follow Alchemix on Twitter at @AlchemixFI and join the Discord to keep up to date with Alchemix V2 and to get involved in governance. Matcha, everyone's favorite DEX aggregator, has just launched an open beta for gasless trading. So if you're trading more than $5,000 in common ETH and wrapped Bitcoin pairs, then your gas fees on Matcha are free. And that's why you should be using Matcha. Matcha routes your orders across all the various DeFi exchanges on Ethereum, Polygon,

• 5:05David Hoffman?

  Binance Smart Chain, and gives you the best possible price without any trading fees or unnecessary slippage. Matcha has smart order routing that splits your orders across multiple liquidity sources if Matcha sees that it gives you better pricing. Trading on Matcha is super easy because it pools the liquidity for me into a single and easy-to-use platform, and has even saved me multiple times from accidentally picking the wrong DEX to trade on and getting a bad price. Matcha also allows you to make limit orders on chain, so you can set and forget your DeFi trades, and they will go through automatically while you're away. So when you're making a trade, head over to matcha.xyz/banklist, connect your wallet, and start getting some of the best prices and most liquidity when you trade your crypto assets.

• 5:45Ryan Sean Adams?

  Banklist Nation, we are super excited about our next guest. This is the ETH Bowl panel. This is the third that we've done. Very timely, the end of 2021, the beginning of 2022. Want to introduce our guest to you today. Anthony Sassano, you know him from the Daily Guay. He's an investor, he's a Twitter meme lord, he's the bleeding heart of Ethereum. I've heard him called that, at least maybe David and I call him that. Great to have Anthony on. We also have DC Investor. He is an investor, advisor as well, consultant, an NFT god. Had him on the show many times as well. You also know Cyrus Unesi. He's former Maker Dow on the Risk Team, financial wizard. Now he's just a guy with great takes on Twitter, investor in the space as well. All three of these people.

• 6:30Ryan Sean Adams?

  Have one thing in common, that thing I know is they are bullish on ETH. We're going to talk about that today. The theme is, is ETH a good investment going into 2022? That's what we're going to talk about today. And you know, these bulls are going to be bullish on the subject. So if you don't want to be bullish on ETH, if you're not ready for that, I suggest you skip this, this podcast episode and go on to another one. Go listen to Up Only or something like that because we're going to talk about the bull case for ETH today. Guys, it is wonderful to have you back on the podcast. How's everyone doing?

• 7:08Speaker 00

  Hey, Ryan. Yeah, great, great to be here. Thanks having us on.

• 7:12Ryan Sean Adams?

  Well, I hope you guys are feeling bullish. David, do you want to lead us in? Maybe just do a recap of this crazy year that we've had of 2021. And just for folks, the last time we had the ETH bull case was about five months ago. And the time before this, we've recorded it in December 2021 of 2020 of last year. Our very first ETH bull panel session. Maybe guide us from there, David. What happened since the very first time we've recorded an episode like this up until now?

• 7:44David Hoffman?

  Yeah, we recorded at the price of roughly $700 per Ether. And by the time we hit May, it peaked out at $4,300, largely driven by NFTs. NFTs really came into their moment, especially in the first half of the year. And lots of people were getting exposure to Ethereum, the network and Ether, the asset via NFTs. As it turns out, DeFi was not the thing that was going to take Ethereum mainstream. It was NFTs. And so NFTs had just a very bullish first half of the year and expose a lot of people to just crypto at large, especially Ethereum. Gas fees were insanely high. 200 to 400 Gwei were sustained for months. EIP 1559 was not yet live.

• 8:28David Hoffman?

  That would come out about, that would come out later in August. The Polygon proof of sidechain was all the rage largely pushing as a result of being, people being pushed off of the L1. And DAOs were just beginning to form in the first half of the year. Then we recorded the second episode, which was when Cyrus came on to the panel. We recorded that on June of 20, on June 28th, after Ether and the rest of the crypto markets went from $4,300 down to $1,700 in a very quick liquidation event. And they had recovered by the time we started recording it to $2,500. So off, off the top by a very significant amount. EIP 1559 came not too long after that second recording on August 5th.

• 9:13David Hoffman?

  And we set again new all time highs, $4,800 in the first week of November. After Ether just slowly climbed out of that crab season, after crab summer. This is then when macro inflation started to come around in the scene. And also crypto moved into the forefront of the regulatory conversation. And also we saw DAOs really take their strides. Constitution DAO made, made big time news. Pleaser DAO bought the Wu-Tang album. Many, many DAOs spun up all across Ethereum. Layer twos by this time are in much better state than they were six months ago, but still leaving a lot to be desired.

• 9:52David Hoffman?

  And the demand for block space had really been satisfied by non-Ethereum layer ones, mainly Solana and Avalanche. So guys, that was the recap of 2021 in my, in my words. And I just wanted to ask you guys, what did I forget to, did I forget anything? What also comes to mind? And what were really the big things that moved the needle? When it comes to Ethereum progress and overall crypto market development? And Anthony, let's start with you.

• 10:21Speaker 03

  Yeah, I mean, I think you gave a really great summary there of kind of like the high level points of what's been going on. Throw, throw a bit of macro stuff in there as I think that's actually going to be a big theme for today. Talking about the macro environment and how that's affecting crypto and ETH as a kind of like asset these days. I think you, you know, you touched on layer two. I think that became a much bigger theme towards the end of the year, when these things actually started going live and started getting kind of apps deployed to them. And people realized that Ethereum scaling wasn't a pipe dream. It wasn't a joke. It wasn't something that was coming at a later date. It was here now and was getting exponentially better over time. So and I think as time has gone on into November and now December, it's become even more apparent and we've had some really nice growth there.

• 11:02Speaker 03

  We have steady growth without token incentives, like native token incentives, which is always good to see. We've had a lot of big acquisitions, like Polygon has been acquiring all these ZK teams. And we've just had a much clearer picture coming to view of how Ethereum is going to scale via Layer 2. We all knew about the rollup centric roadmap, but it was kind of like, okay, well, what's that actually going to look like? Which teams are going to be the big ones? A ZK rollup is going to dominate or an optimistic rollup is going to dominate. And I think even that debate has kind of like almost been put to bed now where it's like, well, both are going to exist. They both have their strengths and weaknesses and we're just going to kind of keep developing that out as time goes on. So I think that would be like the major stuff that just got much hotter as time went on in the year.

• 11:47Speaker 03

  But yeah, I think you covered most of the other stuff that I can think of of right now in terms of the highest level things. But yeah, maybe DC or Cyrus has something else to add there.

• 11:56David Hoffman?

  Yeah, DC, you want to take it?

• 11:57Speaker 04

  Sure, yeah, I'll jump in with a couple of points here and I really want to focus on the NFT side. And you mentioned it, David, but I think a lot of what happened in NFTs is incredibly significant for Ethereum as a network in 2021. And in particular, if you go back to the beginning of the year, the the community has expanded so much since then. I mean, in January, there were not that many people talking about NFTs. And then really in the March timeframe, that's when they started to take off. And what I've seen over the past year is a tremendous introduction of new participants into the network. And these aren't people who are in other cryptos before necessarily. They came to Ethereum and to other networks as well because of NFTs.

• 12:41Speaker 04

  And I think that that NFT momentum has really pushed Ethereum into the zeitgeist in a way that it hasn't been in before. And it's starting to gain more recognition among people who are not that deep into crypto like Bitcoin has. And I think we're going to see that continue frankly into 2022. The other point that I'll bring up around NFTs is it wasn't just these NFTs as assets. It really represented this creator economy taking off on Ethereum. And for the first time, I would say we had this organic economic activity because before we had ICOs and we had DeFi, there are people who would probably rightfully argue in some cases, they were kind of self looking ice cream cones

• 13:23Speaker 04

  that didn't necessarily have a purpose. The technology is there, but there those things become valuable and they become applied in a true economy. And that's what NFTs represent. It's a creator economy where creators can create something and earn money for the work that they're doing. So I expect that to continue in the coming years.

• 13:41David Hoffman?

  Cyrus, what do you want to add on to the state of Ethereum and overall crypto in 2021?

• 13:47Speaker 00

  I mean, it's hard to go wrong in a year when ETH pumps from 700 to 4,000. But I think for me, you know, for years, we have all been shilling ETH as this multifaceted protocol that does not just one thing really good, but does 10 things extremely well. And for years, it was always like, you know, one day it'll do all these things, but today it does nothing, right? And then all of a sudden, out of nowhere, ETH, you know, it gains consumer adoption on the NFT side. Scalability solutions such as, you know, the L2 stuff comes into play.

• 14:32Speaker 00

  You have DeFi apps launching on these L2 platforms, right? It's no longer just a Uniswap maker compound, but you know, you have a bunch of awesome teams building directly on Layer 2, which has led to kind of an explosion of L2 DeFi.

• 14:49Speaker 00

  ETH2 development has, you know, obviously been humming along as well. EIP1559 was kind of the monetization or the financial aspect of Ethereum. Right? So these are all like completely diverse endeavors that the Ethereum community has gone after. And they almost all came to fruition around. Around the same time, right? I thought that was really exciting. And for me, like, I can tell because I'm having completely diverse conversations with more people than ever. And it's, it's always about something else with, you know, people are, people are interested in different things. All the financial people are interested in the burn and, and the tokenomics.

• 15:28Speaker 00

  And then you have the, you know, the NFT people doing their thing and the, the tech wizards are, are interested on layer two adoption or E2. So I don't know. I think it's like finally showcase, you know, Ethereum has finally been able to showcase all these different things that we'd always hoped that it would start to do. And it's, you know, so far it's going well.

• 15:47Ryan Sean Adams?

  Cyrus, so Anthony was talking about layer two and DC was talking about NFTs breaking into mainstream. Do you think like 2021 was the first year that ETH kind of broke out under the shadow of Bitcoin on its own? It's like, was it the first year that it became confident in itself? And it broke into mainstream without being sort of overshadowed by its older brother?

• 16:12Speaker 00

  It, it was kind of the first year where I think we stopped, um, we stopped being afraid or like nervous or worried, you know? Kind of, there was always this like overhang of, um, will, will the broader investment world ever really care about ETH? Are we kind of doomed to this, this weird awkward shadow position? I kind of feel like, and I see this, you know, maybe it's just bull market vibes, but like people feel increasingly less threatened by Bitcoin. It's just like not really even in the, in the realm of the conversation. Maybe that's a little bit, uh,

• 16:51Speaker 00

  toxic to say, but it's just like, you know, I just, we're talking about it less. It's become, you know, and the institutions are now starting to like slowly pump out, um, reports on ETH and, and all this stuff. It's just, the narrative has changed. So do with the, do with that what you will.

• 17:10David Hoffman?

  One thing I want to pick your guys' brains about is, what Cyrus says is that Ethereum goes in so many different directions all at once, right? We do DAOs, we do NFTs, we've got Layer 2s, we've got ultrasound money. What would you guys say that Ethereum did the best in 2021? What is Ethereum's definitive, clear biggest W? And then also, what did Ethereum kind of lag behind on? What did we also kind of not prioritize as much as we could have? So like, what did we do the best on and what do we need to continue to work on? Anthony, let's start with you.

• 17:48Speaker 03

  Yeah, so I think what we did best in 2021 was probably, I think, selling the value prop of ETH in a much better way than we had previously, and we got buy-in from people. As Cyrus was saying, because we no longer felt like we were, I guess, under the foot of Bitcoin, where, you know, we couldn't say anything, we couldn't kind of talk about the flipping, or everyone would kind of like ravage us or anything like that, we became a lot more confident in ETH and its value accrual, because, I mean, at the start of the year, we knew 1559 was coming, we didn't have a date, but we knew it was coming relatively soon. You know, the merge has been known about for quite a while, dropping that issuance down as well, and ETH was continuing to be used in DeFi, it was being staked at a really nice rate.

• 18:32Speaker 03

  We had, you know, obviously at the start of the year, we'd come off the high of December 1st beacon chain launch, where everyone said that, or a lot of people said that, we wouldn't even meet the minimum ETH required to launch the chain, and we did that, you know, and then we went way past that. So I think the best thing we did was we basically made it so that people saw the value prop of ETH as an asset, and we weren't scared to do that anymore, which was, you know, my highlight of this year so far. The worst thing, I think, is the most obvious, is that we didn't scale fast enough, and we allowed other kind of like chains to eat into Ethereum's market share as kind of like a flowover. You know, you mentioned the Polygon POS chain, which is obviously Ethereum-aligned, it is not what people would consider a true L2, but it helped a lot to keep people within the Ethereum ecosystem. But then, because of the scalability issues, we kind of like lost the narrative war on that front.

• 19:17Speaker 03

  At this point, to other chains, as you mentioned, like Avalanche and Solana, which are not necessarily friendly to Ethereum. So Ethereum basically got too popular, got too big, the fees got, you know, got, um, got too high before we had scaling. But at the end of the day, I think that's a short term, kind of like pain and long term gain, because I believe without these pain points, we wouldn't have even had a lot of these scaling teams working on this sort of stuff. Because there wouldn't be anything to work on. There's a reason why we didn't have the layer twos for a very long time. Well, there's multiple reasons, but a big reason, I think, is because fees were cheap on Ethereum for a very long time. There was no necessity to get these solutions out there. And then, once we had the high fees, everyone was like, okay, we really, really need to, you know, get, get Ethereum scaled here.

• 19:57Speaker 03

  But it took longer because we're trying to do it the right way, the decentralized way. We're trying to not compromise on our principles and our, and our core values. Whereas these other chains, they're scaling in different ways, right? Like Solana has taken the approach of, we don't care about letting users run their own nodes at home. We're happy using data centers. We're happy, kind of like, just having something that they call decentralized enough. Avalanche, I think, takes a similar approach. You know, they have their EVM C chain, which is just, from my understanding, a higher gas limit chains, something like, you know, a BSC, for example. But they've managed to cultivate their own ecosystems because they have tokens, people got in early on the tokens, they made money. Like, let's be honest here, that's, that's a big reason why a lot of people stick with these ecosystems.

• 20:37Speaker 03

  If they, they get, they make money from them, they get rich off them. This is not, this is, this is kind of like an open thing. It's just people don't talk about it. So I think that that's where we kind of like performed, you know, worst on and we lost on, and maybe some value from ETH, you know, bled to other, I think, I think it did. I think ETH value from, that would have gone into ETH, bled into other kind of like ecosystems. But at the same time, I actually think, funny enough, that these other ecosystems help ETH as well. I read the other day that wrapped ETH on Avalanche is one of the top assets that is used on that chain. Even more so than the native AVAX token. Now, I have to verify that, but, you know, it makes sense because ETH is so liquid, ETH has such a large market cap, there's so many people who have ETH.

• 21:16Speaker 03

  And it's so easy to bridge across and it's an EVM chain. So you're literally just kind of like bridging there to farm the tokens, you know, get, get, you know, um, yield farm and all that sort of stuff. So in a way, these other things are kind of like, still a net positive, I think, in the longer run. But at the same time, if ETH doesn't kind of like scale on its own with layer twos, the narrative war just keeps getting, you know, we keep losing it. And the narrative just keeps getting worse and worse. And people just like have this really sour view of Ethereum.

• 21:43Ryan Sean Adams?

  Want to ask DC the same question too, but before we do, I want to highlight the win that you talked about first, Anthony, which is like something because I think all of these panelists have been involved in it to one degree or another. And that is this chant, this idea, this narrative that we've been talking about from 2018 onward, ETH is money. Remember, we'd say that in 2018, people would laugh at, no, it's not money.

• 22:10Speaker 03

  It was crazy.

• 22:11Ryan Sean Adams?

  2019.

• 22:12Speaker 03

  It was crazy. We were all crazy for saying that.

• 22:15Ryan Sean Adams?

  ETH is money. Yeah, right. Whatever, bro. No, it's not. 2020, ETH is money. Come on. It's not money. 2021, ETH is money. Oh, it's money. Yeah, of course. It's money. Sotheby's says it's money. It's money. That in itself was a massive three-year victory, I would say. And I'm not just talking from a narrative perspective. I'm talking, it's like, this is where holders, I think, help their respective communities, like long-term believers, is they see the vision from the beginning, right? ETH deserves a monetary premium, the asset. It's not just gas. And I think many of you, like everyone on this panel, has believed that, you know, from 2018 onward and kind of pushed that. And

• 22:59Ryan Sean Adams?

  how far we came in 2021, it's actually unbelievable. There's bank reports talking about Ether as a productive asset, as an internet bond, as a monetary unit, as a money. And I think NFTs were key to that, too. So huge, huge, huge progress, I think, in the last year. But DC, what do you think? What's your take on this? So what are the biggest wins for ETH? And then maybe some of the things where ETH needs improvement, fell down a little bit in 2021?

• 23:32Speaker 04

  Sure. Well, I definitely agree with Anthony's assessment. And if I had to say the biggest win and where we struggled a little bit, I would agree with that. But I would say my second, second biggest win in my mind was we established Ethereum as, well, I'll call it like a cultural asset layer. And I think that people don't realize how significant that actually is yet, or a lot of people don't. I mean, if you look Back to the a year ago and the year before that, right? Typically, the Ethereum community, most of it was all focused on like the same thing at the same time. And everybody was focused on like ICOs, then everyone was focused on DeFi. And then we came into NFTs and it kind of led to this explosion of content that we were not ready for, right? We went from having really dorky discussions about money and like

• 24:16Speaker 04

  security layers and stuff like that, that that we, guys like us love having those conversations. But for the new people coming in, they're not having those conversations. They're just talking about the assets that are being built. They're talking about the communities that are emergent on Ethereum. They're not so much focused on like the technology that's powering it in the backend. Although they understand, I mean, a lot of them do understand more than they let on or more than they might realize. But but I think that's a really interesting transition. We're finally at a point where we're talking more about the applications on Ethereum than just the protocol layer that's powering it. I think that's pretty pretty significant. I think an area where we struggled, and this goes back to the scaling piece that Anthony touched on is

• 24:58Speaker 04

  I don't know that we as a community have communicated that coherent vision around how rollups will scale Ethereum, around how bridge technology is going to plug into that. There's still a lot, and I think part of that is because Ethereum is not this centrally controlled blockchain, you know, I mean, even the layer one protocol development is led by multiple client teams who have to collaborate and agree on changes to the network and they have to manage an equilibrium with what users expect and and soon what stakers will expect, right? But I think that really we need to communicate more of that vision around how Ethereum is going to scale and what and I think we've done, I think this has actually stepped up significantly in the past few months. They're talking about the modular blockchains and so on.

• 25:42Speaker 04

  So I'm hopeful that we can have more of that conversation in 2022.

• 25:48David Hoffman?

  We definitely have some rooms slotted in the agenda today to talk about that. And so, but before we get there, Cyrus, what are your takes? What are Ethereum's big wins in 2021 and what are our big Ls?

• 26:00Speaker 00

  I mean, I think you guys hit upon all the big wins. But what I wanted to add was that, you know, these weren't just like things that just like randomly materialized this year, right? They were the result of, you know, a compounding effort over many, many, many years. You know, everything with with rollups and scalability research is the product of many hard, many years of hard work from the research team.

• 26:26Speaker 00

  You know, everything with DeFi and NFTs and, you know, UX is just, there's been a lot of work that's gone into it. And I think we're just finally getting to enjoy like the, some of the fruits of that labor. I think, you know, Ethereum's commitment to decentralization and developer adoption and it's kind of, it's consistency there is, you know, what I would consider a win, right? Like I haven't.

• 26:54Speaker 00

  It's kind of like an easy time for users and developers and, you know, whatever people to kind of jump ship and go explore like the new shiny object. But I don't really see that a lot. I kind of just see the best and brightest minds still gravitating towards Ethereum. I think that's, you know, primarily because

• 27:18Speaker 00

  these, you know, these people, they can rely on the community and the protocol to kind of uphold those, those values of decentralization and whatnot. And I think that's pretty cool to see.

• 27:32Speaker 00

  You know, maybe it's not totally transparent from, from the outside, but that's just kind of like, kind of a feeling I get is that people are still really excited to build on Ethereum. They, they, they trust, they trust that the core devs and, you know, all the researchers can kind of mold this platform into something that will scale for all.

• 27:53Speaker 00

  I think that's really exciting. I think it's cool.

• 27:56David Hoffman?

  So guys, I want to, something we didn't do in the first episode and/or second episode of the Ethereum Bull Case is actually recap some of the core drivers of how Ether, the asset, actually accrues in value. And Anthony, you've said this a number of times before on the Into the Ether Podcast with Eric, as Ether's three value pillars of accrual, value capture pillars. Can you just quickly walk us through each one and quickly define each one, and then we're gonna take it back to Cyrus in DC to talk about the state of those things in 2021?

• 28:29Speaker 03

  Yeah, yeah, for sure. So yeah, I've had this kind of like thesis around ETH's core value pillars, like three of them for a while. I think there's many more reasons why ETH is valuable, but there's really three core kind of reasons that you can point to. And the funny thing is, up until December 1st of last year, we only had kind of like one of these, and then kind of like, we unlocked them all as time went on. But so, just to describe them, so the three are staking, so ETH's use as a staking asset, or an internet bond, as you guys like to call it, which I think is a really cool name for it. It's used as trustless collateral in DeFi. Obviously, there's a lot of ETH kind of powering DeFi, it's the best collateral asset you can get on Ethereum, it's the most trustless. And then you have ETH being used to pay fees. Now, paying fees and burning those fees,

• 29:13Speaker 03

  see, that wasn't unlocked until recently. So, you know, we still had people using ETH to pay for transactions, but all that ETH was going to miners, which, to be honest, like, it's kind of like hard to argue how much of a value accrual pillar that was, because the miners tend to sell their ETH that they get to cover costs and things like that. But now, in today's world, we have all of those three at full power, essentially. Like, staking is at full power. I guess you could argue that it's almost there. Like, once we have the merge done, the stakers will actually be getting the unburnt fee revenue as well. So they'll be, you know, they'll be getting even more value out of their staked ETH. But, you know, we're pretty much almost there with staking. ETH's use as trustless collateral within DeFi, I mean, that's, you know, no one can argue against that, that's obvious. And not just on Ethereum Layer 1, but also Layer 2, and also all the

• 29:58Speaker 03

  other chains as well. As I mentioned, like ETH is being used on the Avalanche C-chain, you know, pretty heavily. So, it's not trust, it wouldn't be Like trust us like it is on Ethereum, but it's still used as a collateral asset, which is obviously one of the pillars. And then you have one of the most important pillars, which is uh using used to pay fees. But now with we are 1559, we have value directly going to ETH as an asset because we're burning most of those fees. So those things have been kind of like on the roadmap for a long time. I've talked about them for a long time because of that. Uh but we didn't unlock them all until recently. And as I said, I would argue that we aren't at that kind of like full power until the merge, because that's when stakeholders get the most value out of their their stake. Because they get the unburnt fee revenue and also potentially MEV as well. So those are the three core ones.

• 30:43Speaker 03

  But as I said, there are also other things that fall off of that and kind of like are auxiliary to that. Like you could say ETH is a store of value because of all these sorts of things, right? People want to hold it because they know there's these three core value accrual pillars, even if they aren't using it to stake or within DeFi or to pay fees. They're just holding it in cold storage. That's, you know, it's used as a store of value. Um and then obviously it uses money, right? Powering the NFT economy. People are kind of like using it to uh buy and sell things and then all that sorts of stuff. So ETH becomes an M O M O E of the Ethereum ecosystem. And people said that stablecoins would replace this. And I mean, they have in some kind of ways, but at the same time, people will just like because ETH has uh has is so desirable as an asset, I think people would rather hold ETH than a stablecoin. And it just makes it much simpler to kind of like price things in ETH and and trade with ETH.

• 31:27Speaker 03

  But obviously, DC would have more color on the NFT side. But yeah, those are the kind of like the three core pillars and some of the stuff that falls off of that as well.

• 31:35David Hoffman?

  So let's start with EIP 1559, because some of the numbers that came out of EIP 1559, I think blew a lot of people's expectations out of the water. Uh so since August 5th, we've had 1.2 million Ether burnt. So that's 1.2 million Ether burnt over roughly 130 days. Which is about 9,230 ETH per day, which is also roughly $37 million per day in Ether that is being quote unquote, bought back from the network every single day. So let's start with uh DC. DC, do you have any reflections on these numbers? Like, were these what you expected or or anything to any thoughts that you have?

• 32:15Speaker 04

  I think the burn has been really significant and of course that's going to ebb and flow based on the use of the network, but use and demand to use Ethereum has been pretty high. So we've seen a lot of burn. Now, we are still seeing issuance, of course, and I think, you know, it is important to understand that we're not at a deflationary state yet. But when you stack these numbers with a potential proof of stake issuance model, which might hit, let's say, in the next four to five months or something like that, right? We're starting to look at a pretty compelling value proposition for Ether as an asset. And I think this is, I think, I think a lot of people, a lot of the financial industry will probably start looking at these data, especially as staking, especially as we transition to full proof of stake and those assets become withdrawable from

• 32:57Speaker 04

  the network. I think that's gonna, I think that's gonna totally shift Ethereum into a different kind of asset posture, even than we, I mean, we've all been thinking about it, but I think it's going to be realized in a way that we can't really anticipate until that merge happens and until those earnings become withdrawable.

• 33:15David Hoffman?

  Cyrus, what do you see when you see some of these metrics that have only been around for roughly 130 days?

• 33:22Speaker 00

  A few thoughts. One is, you know, the first time a protocol or a company or anything, you know, is able to monetize its, its product and kind of start to pull in revenues is just an exciting, it's just an exciting component. And, you know, it, it really sets it apart and distinguishes it from other protocols that, that, you know, all these super scalable, you know, other layer ones, they, they have super low fees, they don't have any burn. It just kind of provides like a different metric to benchmark Ethereum versus its competitors. Just as important, it allows fundamental investors to kind

• 34:06Speaker 00

  of value Ethereum and try to construct, you know, valuation models using DCF methods or whatnot. You know, there's this like, there's this narrative out there, you know, in the, in the current macro climate that fundamentals don't matter and it's a meme-driven economy and everything is just memes, memes, memes. You see it with Tesla and whatnot. That's all true to some extent, especially, you know, obviously in the current environment, but. You know, there will come a time where fundamentals do matter. There will come a time when P/E ratios matter again. And there's, you know, plenty of, there's plenty of money out there that, you know, if they haven't already, we'll start looking at these, these metrics and they'll start

• 34:50Speaker 00

  valuing these blockchains as companies. They'll start applying traditional methods. They may not be perfect or whatever, but once they do, I think people will start to wake up to what the burn actually represents and what that value capture means for, for the price of Ether. It hasn't, you know, it hasn't happened quite yet. I don't really see that discussion out there publicly, but I, I'm betting that within, you know, one to two years, we'll start to see, you know, big bank reports, you know, using, using these, these methodologies to try to put a, you know, put a, put a multiple to what, you know, the ETH network is and, and try to value it.

• 35:33Ryan Sean Adams?

  I'm just really curious from the panel, really quickly here. Do you think that the general public is aware of what's happening now and what's about to happen? And sorry, of course, the general public is not aware of it. What I mean is like the crypto investor, the typical crypto investor, do you think they are aware of the burn rate? The fact that issuance is going to be cut by 4% and ETH is going to go deflationary next year? Like, do you think they're even aware of these dynamics and the whole ETH as a triple point asset thesis?

• 36:13Ryan Sean Adams?

  Or maybe a way to ask that is what percentage of crypto investors do you think are aware of what is coming in 2022 for Ether the asset? What do you think, Cyrus?

• 36:25Speaker 00

  I mean, what percentage of investors, you know, counting one, one per person? Very, very few because kind of most of the, most of the retail community out there is just kind of chasing, chasing kind of the meme cycles. As a percentage of kind of capital out there that's, you know, able to be deployed today, certainly less than we would hope, right? I think, you know, a bunch of us in various interactions with members of the broader crypto investment community have, you know, we, I, I think it's fair to say that we don't think that there's a lot of good due diligence out there, right?

• 37:06Speaker 00

  It's a fairly, I guess you could say inefficient market by educational standards. You know, it's not really, put it this way, until like a year ago, you never really had to like dig down deep on the fundamentals to, to make money investing in crypto, you know, following trends and following hype had, was a pretty successful strategy from 2010 to 2020. I think we're like starting to enter this cycle where you can find latent value by applying some of these methods. And, and once they do, I think that that'll just kind of be a self fulfilling prophecy where all this institutional capital will start to basically FOMO win based on the fundamentals.

• 37:50Ryan Sean Adams?

  Yeah, well, I mean, what do you think, DC? Do you think this stuff is priced in? A lot of people will say, like, I feel like we've been talking about this for a year. I'm talking about all of this for a year. Now EIP has happened. Now, you know, the merge is going to happen next year and some people will say, well, there's execution risk and that sort of thing. But like, my question to you, DC is, do you still feel like this is alpha? Or is this old news? You think the market's like, nah, we priced this in already. That's why E this sitting above 4K at the time we're recording this and sorry.

• 38:17Speaker 00

  Yeah, you E's boomers.

• 38:18Ryan Sean Adams?

  Yeah.

• 38:20Speaker 04

  I definitely don't think it's priced in, to be honest. I would say maybe like fifteen to twenty percent of crypto participants really understand the implications of what's going to happen as Ethereum transitions to proof of stake. But most people just don't get it. You know, most of the crypto market needs like really simple memes. And they're like, that's why Bitcoin is so successful with its hard cap. Because it's very easy to understand, even though I know for some of us, including myself, it doesn't make a lot of logical sense, which is part of why Ethereum does not have a hard cap, right? We realize that you need to have sustainable issuance. I think the other thing to think about with the fees is you can't fake this, right? It's like, like these other layer ones can't fake the fee income that Ethereum has, right?

• 39:05Speaker 04

  You can't fake the users who are willing to pay or need to pay that much to use the network. And that results in those transaction fees being burned. So I think that is going to over time become this differentiator versus other networks, especially within the context of all the other things that we talked about with respect to Ether as an asset. And by, by the way, I do think it's important because I think, I think that there's a false narrative that's been propagated by some hedge funds and other folks who say things like, well, the fee situation on Ethereum is this extractive. And I want to set the record straight on that point because it's really important to understand that fees are not in place to make money for Ethereum or for Ether holders.

• 39:47Speaker 04

  The reason why fees exist and the reason why there's a fee market on Ethereum is because we need to be able to limit the transaction demand so that you can get transactions included. We have to be able to decide what transactions get included in any given block, which has a limited capacity. So on, on balance, before all these fees were just being paid to miners, now we're burning them, which creates this indirect benefit for all Ether holders. So we basically reassigned a benefit that was very concentrated. And we've now turned that into something that is very distributed and benefits more people in a positive way.

• 40:24David Hoffman?

  So I want to turn the conversation to proof of stake and again, I'm going to rattle off some stats here. Currently at the time of the recording, right before we recorded, I wrote these numbers down. We have 8.9 million Ether that is currently being staked, roughly 7.5% of the total supply. Almost 270,000 validators are earning 5.2 ish percent on their Ether year over year. So 5.2% on your Ether, pretty, pretty good returns. But I want to also talk about some metrics with what we would see if the merge happened right now. So if the merge took place, we are burning and I'm using, I'm going to bake in an assumption here.

• 41:05David Hoffman?

  So disclaimer, a 70/30 gas burn to tip fee payment split. So when you pay gas, 70% goes to, gets burned by EIP 1559, 30% gets paid to, as tips to validators. And so we are currently burning roughly 9,230 Ether per day. Annualized at a 70% gas fee rate, which means if that's true, we're adding on 16% APY to, to yield if we were to merge right now. Just again, some quick math is 9,230 Ether per day times 365 is 3.3 million Ether burnt a year. If you multiply 3.3 times point seven, you get 4.8 ETH paid to validators.

• 41:49David Hoffman?

  70% of that gets burned, 30% of that gets paid. So that means 1.4 million Ether is paid to validators in tip fees per year. And 1.4 million is roughly 16% of the 8.9 million Ether that is currently being staked. So therefore, post-merge ETH APY, if the merge were to happen right now, would be at 21% APY in ETH terms. And I want to pull up a website.

• 42:15Speaker 00

  Can I ask a quick question?

• 42:16David Hoffman?

  Sure.

• 42:17Speaker 00

  Does that include the MEV projections as well?

• 42:20David Hoffman?

  Yes, I think that, I think that bakes in MEV into it as well. Definitely, definitely does. Yeah. And so, and using those numbers as context, I want to pull up this website, Money Printer, one of the, one of David Mihal's great, great websites. And just to kind of juxtapose Ether's monetary policy, its issuance rate versus the other, other blockchains. And now with all of those stats in our brains and our listeners' brains, Anthony, I want to throw it to you. How does Ether and Ethereum's monetary policy differentiate itself from the many, many other L1s that are out there?

• 42:53Speaker 03

  Yeah, yeah, so I can talk about that. And also, I think like the fact that you brought up kind of like these numbers speaks to what we're talking about before as well about how how many people actually understand this, right? In a big way, you know, how many people have priced this in, things like that. But first of all, you know, I'll answer your question for sure. So with Ethereum's monetary policy, it's been designed in a way that allows it to be sustainable while also driving value back to ETH holders. So it's being designed or has been designed to basically minimize the amount of value being bled. And what I mean by that is minimize the amount of value going where it shouldn't be going. So previously before 1559, we were overpaying miners. And I actually think we're still overpaying miners at the current issuance rate of 4.19%, right?

• 43:37Speaker 03

  But we've offset a lot of that with the burn. Last time I checked, I think the net burn was like either 60 or 70% since inception. So we've offset that issuance in a really big way already. Obviously not net deflationary yet, but we will be post-merge if this continues, right? So the way that Ethereum has kind of like created this symbiotic relationship is that with proof of stake, we will have a constant issuance of, I think right now it's what 0.6% or something like that over the total kind of network amount. You mentioned 5.2%, that's just what's paid to validators. But if you take it as a percentage of the total amount of ETH in circulation, it is about 0.6, 0.7%. It may be higher by the time the merge happens because more people will stake, the issuance rate goes up slightly.

• 44:19Speaker 03

  So let's say we have like 1% issuance a year, once the merge happens, right? But then we have much more than that, I think over 2% being kind of like burned each year. So then you have kind of like the net deflationary effect, which means that even with constant perpetual issuance with no hard cap, you still have a net deflationary ether and you still have a secure network because the validators aren't reliant on fees. They are paid, you know, very nicely from the block reward in perpetuity. There is no need for them to be like, oh, what happens in the block reward goes down like with Bitcoin, right? Because Bitcoin's bet is that the fear of it, you will make up for the block reward. Well, that's not going to happen. It hasn't happened and it's going to keep getting worse because the only thing you can do on the Bitcoin network is transact BTC.

• 45:03Speaker 03

  There's not that much demand to do that, right? That people aren't going to pay lots of money to do that. Whereas on Ethereum, layer one, you have a million reasons to transact on the network, and that is reflected in the amount of fee revenue. Like, people think to themselves, like, how? Like, how are people paying, you know, tens of millions of dollars a day to use this network? Well, it's because they're getting more than that out of the network in terms of value. So it is worth it, even if you're only getting 1% of the transaction as profit. It is still worth it, especially for MEV people who say, okay, well, I can extract the $100 of MEV out of this transaction, but $99 of that is going to be a cost that I have to incur, whether that be kind of like fees or some other costs, gas fees or some other costs. So they're willing to pay to do that.

• 45:47Speaker 03

  Now, none of that exists on the Bitcoin network, because the Bitcoin network is really just there to be home to BTC. So that's where a lot of the fees come from. But then, prior to 1559, all that was being bled. I think that value was being bled out to miners who would sell it. Now, it's going to ETH holders. And post-merge, it is actually going to go to stakers as well, the MEV, which are ETH holders, right? Because you have to hold ETH to be a staker. You have to stake it. As a miner, you don't actually have to hold ETH at all, right? You can just set up your miner, and that's it. You don't have to stake ETH, nothing like that. You can sell all of your ETH. You don't have to do anything. So I think that, from that perspective, that's where the symbiotic relationship gets created, where we have a network that sustains itself through a perpetual block issuance.

• 46:31Speaker 03

  We have the burn to offset that issuance to make ETH net deflationary. We're sending all the value to ETH holders and ETH stakers, which is, you know, how it should be, in my opinion. And we're ensuring that the network is secure forever. So that's kind of like the gist of it there.

• 46:45David Hoffman?

  Cyrus, I know there's a lot of numbers there, and you're kind of a numbers guy. When you see all of these proof of stake and burning metrics, what gets you going? What makes you excited about this?

• 47:00Speaker 00

  Yeah, you know, when when an asset all of a sudden starts yielding like an additional an additional 20%, you know, that that definitely kind of

• 47:11Speaker 00

  gets into motion a sort of, you know, a pseudo carry trade, right? Where people will borrow or invest from other capital assets and and inflow it into ETH to, you know, to earn the yield and they'll they'll maybe want to hedge this, you know, even if they want to hedge exposure, you know, whatever. There's a number of ways to play it, but just, you know, fair, very simply, when an asset goes from yielding 5% to 20 something percent, that that typically has impact on capital flow.

• 47:46Speaker 00

  Yeah, I mean, it's exciting. I mean, not not to mention when that happens, like, it'll also be, you know, it'll be ushered in along with kind of this significant achievement, which is the actual kind of the technical launch of the merge, right? I mean, I think I think nobody really knew what to expect when the beacon chain launched last year. And I I think there was like maybe one to two days after it was successfully activated, the kind of price of ETH was stagnant. And then kind of investors started to say, you know, holy crap, like, they actually pull it off, like, it's the first step, but it's still such a huge achievement. And and and that was the start of the bull run, right?

• 48:26Speaker 00

  Just just almost like a self fulfilling prophecy. We've been talking about the merge for so long now and how important it is. And what a landmark achievement it is. And now you have kind of the financial component like, I think it's like my, I don't even know if I should say not financial advice. Am I allowed to give financial advice?

• 48:46Ryan Sean Adams?

  You're allowed to be bullish, Cyrus. This is a bullish podcast only.

• 48:50Speaker 00

  It's probably like a good thing for the price of ETH of all those things kind of converge.

• 48:56Speaker 04

  All at the same time. So yeah, the numbers and the merge and everything is exciting, right?

• 49:01Ryan Sean Adams?

  DC, can I ask a question to you too? So this is the crypto fees website. It's one of my favorite sites to see this year and kind of gets me above the noise of asset prices and actually focus on where is the block space demand. When we had Chris Dixon on the podcast, he said, you know, I am super bullish block space in general. And if you look at like the actual market and what block space they're particularly bullish on, they're particularly bullish on Ether block space, on Ethereum's block space. And how do we know that? We know that because they're paying a whole lot for it. So seven day average fees

• 49:42Ryan Sean Adams?

  on Ethereum right now, $33 million. Okay, this dwarfs every other chain out there, including Bitcoin. At times this year, I pulled up this chart and it's been like $80 million seven day average fee. And if you look at some of Ethereum's competitors, you know, the avalanches of the world, $376,000 seven day average, not million, $1,000 versus Ethereum, 33 million. If you look at, let's, let me scroll down, way down, I don't even know if I can find Solon on here. Polkadot is 4,700 seven day average volume. Ethereum

• 50:26Ryan Sean Adams?

  is just dwarfing all other, all other chains in terms of its block space demand as measured by revenue. What do you make of that? And why is that important in your mind?

• 50:40Speaker 04

  So I think the reality is that not all block space is created equal, quite frankly. And it's easy to spin up any blockchain and say, oh, we've got block space, come use it. But the reality is not all of it is created equal. And I think that's where when we talk about is decentralization important, the market still says it's important, right? A lot of the higher value activity is still occurring on networks like Ethereum, which espouse that stronger decentralization ethos. I also think, though, because, and this is kind of an accretive network effect, because Ethereum has already tokenized a lot of these important assets, and I'll go back to that cultural asset layer comment that I used earlier. Because those assets exist on Ethereum,

• 51:25Speaker 04

  in order to transact with those assets, you have to use Ethereum. Or if you want to transact with them in a truly censorship resistant way, soon you're going to be able to use layer twos also, right? And I think that's another aspect to consider because as layer twos take off on Ethereum, the way that I describe that is it's increasing the transaction density of layer one, right? So you're replacing the barns on our layer one transaction layer, and you're replacing them with skyscrapers effectively. And skyscrapers can allow for a lot more commerce, a lot more reserve demand for Ether, and a lot more demand for Ether block space, right? Because the marginal value of Ethereum block space is going to be set by how much commerce can occur on those layer twos and in the commits that they make back to layer one.

• 52:09Speaker 04

  So I think that that is a really important story. And I think, I think those layer twos, and we can talk about how other chains will also probably eventually move to a rollup model, but Ethereum is the one that is constrained at layer one first. And I think people actually underestimate how much of an innovation driver that's going to be for Ethereum, right? It's going to take a Solana or maybe an Avalanche a lot longer to get to the point where they feel like they need to move to rollups, right? Ethereum is going to be developing a full-fledged rollup ecosystem in the next year. I feel confident about that because the demand is there, the technology is finally there, and that's going to be reflected even further in the value of Ethereum layer one block space.

• 52:52David Hoffman?

  I have a question for the group is that with, when this merge does happen and Ether taking turns into having a 20% APY, do we think that that's actually going to incent people to actually go and buy Ether to get that APY? Or do you think instead, maybe some dormant Ether wakes up and tries to get that yield? Or the question is, does that actually result in an Ether price increase? Does that actually make Ether a compelling financial investment as a result of the merge?

• 53:23Speaker 03

  I would say 100%. I would say it would be both. I'd say this would be some kind of like dormant ETH that comes into staking because then it just becomes like, wow, okay, I can get 20% ETH denominated yield. Why wouldn't I do that? There's going to be a lot of new kind of like ETH being staked, I believe. And I think even just the narrative of that, like, it would be bullish because people will be like, oh, you know, the yield's so high, that means people are gonna buy ETH and stake it. Like, that means ETH price is gonna go up. And it becomes like this self fulfilling thing, right? A lot of crypto is narratives and self fulfilling things, but I think that would be a big one. But it also goes back to what, you know, we were talking about before about how, how much of the kind of like ecosystem, crypto ecosystem, understands all of this sort of stuff?

• 54:04Speaker 03

  Like, not just the high yield that's coming post merge for ETH staking, but also all of the other things happening. And, you know, going back to earlier when we were talking about the numbers around 1559, so many people were surprised by how much ETH was being burned. And I'm like, how are you surprised? Like, we talked about it for a long time. The metrics were there. It wasn't hidden. I was posting about it, not just me, but like all of us. We were posting about it on Twitter all the time, and people were still surprised by this. So that just is empirical evidence that basically shows me that there's a very few people who actually, one, understand all this stuff from kind of like a high level, but also understand the impacts of it on ETH via the short term and the longer term.

• 54:45Speaker 03

  And I think that that's going to play out the same way with kind of like this staking yield and people seeing that and being like, I didn't know about this when it has been public information. Just like everything else is public information. I mean, I remember in January of 2019, ETH just fallen 94%. It was around $100. I wrote a blog post titled "Why Ether is Valuable", and I had feedback from a bunch of people in this group as well on that and kind of like helped me write it. But I was talking about the staking, the merge, the burn, everything, everything at that price point. So when you kind of like talk about that sort of stuff and talk about, do people actually understand this? I would say that very few people understand it at all. And that's probably the most bullish case for ETH I could give is that you're still early even though you think you're not.

• 55:30Ryan Sean Adams?

  This is, uh, this is so good. And it, guys, so here's where I think we need to shift the conversation, though, is because...

• 55:37Speaker 00

  Can I add one point?

• 55:37Ryan Sean Adams?

  Go ahead, Cyrus.

• 55:38Speaker 00

  Just one quick thing? Yes, to answer your question, David, I'm, that's, that's what I was referring to earlier with, um, the concept of the carry trade and just kind of a super simple example for people who aren't familiar, especially crypto people, but like, you know, let's say you're sitting on, um, some USDC, uh, you're not really doing anything with it and all of a sudden Maker increases their DAI savings rate or the DSR to 20%, right? Well, then you're automatically, uh, incentivized to either, you know, trade in your USDC for DAI, uh, which would push the price up so you could get the staking, uh, reward. Or, uh, let's say you're sitting on ETH, uh, then you would kind of borrow funds off of your ETH collateral,

• 56:22Speaker 00

  which you would then use to purchase DAI to then stake it. Um, and we, we saw this, um, kind of my, my favorite examples of this was in a DeFi summer last year, when a yield farming first came, became a thing.

• 56:36Speaker 00

  On Compound, you could earn, you know, a pretty high, uh, APY on staking BAT. Um, there's like kind of a really high BAT yield and, you know, we saw this kind of rush to just purchase BAT, uh, the BAT token, even, you know, kind of regardless of the, uh, the price volatility, um, and kind of led to some interesting price dynamics. But my point is, you know, we've seen empirical examples of, of one, one APY of a particular asset jumps drastically. Uh, there's typically, uh, a follow-through of, uh, investment.

• 57:12Ryan Sean Adams?

  Okay, so here's the thing, and I, I want to maybe, uh, get to the point of the conversation where we start to answer some of the critics about Ether. So, uh, one of the critics has famously said that, um, ETH holders like to sit around jerking off to the burn. And I wonder if, if somebody listening, uh, heard what we were just saying and all of the amazing bullish things that are happening to eat the asset, is asking themselves, "Well, what about users? What about gas fees? What about Ethereum scalability story?" And I, I want to both position ourselves as a, as a listener who's maybe asking that question, but also to address that listener and, and to also say this.

• 57:53Ryan Sean Adams?

  If we rewind the clock to a year ago at this time, again, no one actually believed in everything that we were just saying. Ether as an ultrasound money, right? It like, we were fighting, the narrative battles were fighting for that to be a thing. The popular narrative was, you know, Bitcoin is the asset. Ether is an interesting maybe commodity, but it's not a store of value, right? Now, look at how far we've come. Now that is generally accepted. And so the FUD has turned into, well, now ETH holders are a bunch of rent extractors. And they're just trying to get ETH value to go up and up and up. Like a year ago at this time, folks remember,

• 58:37Ryan Sean Adams?

  like, the popular narrative was that ETH would never retain value. And like, would just be a sort of a,

• 58:46Ryan Sean Adams?

  a, you know, a commodity that people don't store, but they just use to purchase gas and then they kind of cast away. So we've come far from one perspective. And now I think the Ethereum community has to really address the question of gas fees. And I'm going to make a statement. I'm wondering if you guys agree with this. But I think that the story of ultra scalable Ethereum, it's the modular blockchain story is just as underrated now as Ether the asset was at this time last year. And I want to have discussion on that and see if you agree. But maybe I could turn it to Anthony first.

• 59:27Ryan Sean Adams?

  Can you tell the story of how Ethereum scales into the future? What is this? We've referenced it a few times. We've called it the roll up centric roadmap. We've called it modular blockchains. I just called it ultra scalable Ethereum. What is Ethereum scalability roadmap? And why aren't we there yet? Why have gas fees gone so high? And what is the hope for users to actually use this system again, without paying, you know, $20 fees to trade something on Uniswap?

• 1:00:00Speaker 03

  Yeah, so I think first off, I totally agree with you that I think Ethereum scalability is at the same place Ether's an asset was probably, you know, same time last year. Definitely getting very similar vibes on that and getting a lot of people that just don't understand it, which, you know, I can definitely explain it for everyone. You guys did a great episode on this as well, the ultra scalable Ethereum one, so people should check that out too. But the TLDR is basically that Ethereum wants to remain decentralized and secure at the base layer. Now, in order to do that, the most fundamental thing is that the chain can be run and verified as like a full node by the regular consumer on a regular consumer laptop or a PC or something like that. And it shouldn't require some kind of data center or some kind of beefy hardware to do this. That is the fundamental kind of thing behind why the gas fees are high.

• 1:00:45Speaker 03

  Because if we were to increase the block size, for example, which is kind of like the gas limit in Ethereum, we make it harder for end users to verify the chain. And it could also lead to chain instability between kind of like the miners and things like that as well, um, kind of staying in sync with the chain. We saw this play out with BSC where they just raised the gas limit up incredibly. And to run the BSC chain, you need beefy hardware. And there were still a lot of issues for people to keep it in sync because they were just using VVM, which, you know, has not been optimized to go to those kind of gas limits just yet. So that's kind of like the fundamental reason why we're keeping the base layer decentralized and secure and keeping it limited in how many transactions it can process. Then enters the rollup centric roadmap.

• 1:01:29Speaker 03

  So this roadmap basically stipulates that, okay, well, since we want to keep Ethereum layer one as decentralized and secure as possible. And because of that is a result of the fact that it's kind of limited in its scalability and its throughput. Let's take this kind of the heaviest kind of work off layer one and put it on layer two. Now, the heaviest work is obviously processing transactions, right? Doing that actual execution of those transactions. And this is what rollups do. They basically take the execution, do it on any PC that you want. You can have beefy hardware at layer two, it doesn't matter. You can run these kind of things, run the transactions, run the proofs and then post these proofs and what's called call data to layer one Ethereum. So essentially what ends up Happening is that layer two acts as the compute engine and layer one acts as the settlement engine.

• 1:02:14Speaker 03

  Where you basically have this layer one attesting to the validity of what's happened at layer two and keeping it secure and keeping it available as well, which is very important. So that, you know, the data and the proof of the transactions is always there. Now, what that does is it gives users the benefit of if the layer two goes away, if it goes offline, if it shuts down, if they run away, it can't actually steal your money. You can always get your funds back from layer one Ethereum. Because the funds actually exist on layer one still. They've just been bridged over to these layer twos in order for you to enjoy the cheaper transactions. Because rollups basically pull all the transactions together by computing them off-chain and then posting it to, posting a proof of that to layer one.

• 1:02:54Speaker 03

  Now, that's the rollup-centric roadmap, but what also feeds into that is what people have heard about before, what's called sharding. And this is layer one scalability. So with sharding, essentially what we want to do is we want to split the blockchain or split the Ethereum layer one into multiple parts. But the shards are just going to act as what's called data availability layers to allow rollups to just dump their data onto the shards. And for a much cheaper price than doing it on the existing kind of like Ethereum chain. They can do it, you know, on either kind of like chain there, but allows them to kind of like dump what they need to onto there. And it's still just as secure as, as kind of like, as it normally is, but you have a lot more capacity. So it's, it's essentially horizontal scalability at layer one. You can imagine it kind of like, like that.

• 1:03:37Speaker 03

  And then vertical scalability is layer two and they both feed off of each other. And they both kind of like allow each other to increase the overall throughput of Ethereum. And then that's what's called the modular kind of like architecture, where you, where you split the concerns. Where Ethereum layer one remains decentralized and secure as a settlement layer. Ethereum layer two is the compute layer where all the transactions get processed. And obviously Ethereum layer one is also the data availability layer with, you know, as it is today, but also with sharding that enhances that. And then sometime else into the future, we also have what's called statelessness coming to Ethereum, which would allow us to increase the gas limit much higher than what it is today, which gives us even more capacity at layer one, which enables.

• 1:04:19Speaker 03

  Potentially at layer two, millions, if not tens of millions of transactions per second, while still retaining the decentralization and security of layer one Ethereum. So you're not just sacrificing that, you're not just requiring like end users to trust these layer twos. All they have to do is run a full node on layer one and they get the same guarantees, no matter kind of like where they're at there. So maybe that that is a bit technical for some people, but that's kind of like the the the view of how Ethereum is scaling. And final point, the reason it's taken so long is because it's bloody hard to scale systems in a decentralized way. It's it, you know, all this would be very easy if we just said, oh, who cares about decentralization? Let's just jack the gas limit up. Let's have a few miners. Let's have a few, you know, or even just stakers running the chain.

• 1:05:02Speaker 03

  That's all well and good. There's been layer ones that have done this, right? Um, and they're just taking a different path, but that's not the path that Ethereum wants to take. That is not what we are building this stuff for. And yes, there's short term pain for users. They have to kind of like put up with the high gas fees. There's alternatives they can use and that's all well and good. But with the layer two ecosystem, they're going to do what these alternative L ones do in terms of scalability, but also give you Ethereum security and decentralization too, which is the most important thing, at least in my view. Um, and and they know that's why it's taken so long because rollups are a tech or technology that's been worked on for many, many years. I believe Arbitrum started working on them in 2014 for for Bitcoin. I don't even think they're working on it for Ethereum because Ethereum didn't exist till mid 2015 as as a live network.

• 1:05:43Speaker 03

  So this isn't an overnight thing. This has been coming for a very long time, but we needed to get to a point where essentially we did it in the correct way and we had guarantees that that it was all valid and it would all work. And it would actually work at scale, which is obviously the most important thing. So, so, yeah.

• 1:05:59Ryan Sean Adams?

  So one of the implications here, DC, of what Anthony just said is that it it seems like the Ethereum main chain is not really for users. Right? Like right now it is, but if this modular blockchain approach plays out and rollups play out, it's really a settlement layer for chains, not a settlement layer for users. Like users would actually start their life and live their entire life in some sort of a a rollup ecosystem. What do you think? Like, first of all, is that is that true? And what does this mean for the average user? And do you think that Ethereum and its scalability approach, as Anthony just described,

• 1:06:39Ryan Sean Adams?

  how can that be competitive with all of these alternative layer ones that we've seen rise up over the last, you know, six to nine months or so?

• 1:06:48Speaker 04

  So I think that, you know, first, no centralized development blockchain team and Ethereum is not, Ethereum is the least decentralized in terms of, or excuse me, most decentralized in terms of how it actually does development at layer one, right? We've got the different client teams who are all working on a spec. They work together to set that spec and they execute, right? That is, that, that kind of process and the technology that we have at layer one is not going to allow for significant scalability at layer one. There are things like sharding and execution and sharding that we may eventually get to. I mean, I do think we're going to have data sharding sooner rather than later. I think a lot of people realize that that is a priority as we move into a roll up centric world.

• 1:07:29Speaker 04

  But the reality is a lot of execution, if not like almost all of it, will shift to these layer twos. And that's actually a positive because when we get, as we move into this future, this layer two future, it's not just one team that's developing the one roll up solution. It is a bunch of different teams all competing in the free market to develop competitive solutions. And I think that is going to be like a really powerful driver for innovation. I think a lot of people who are in crypto will hopefully intuitively understand that. They understand how capitalism works. And I just think we're going to unlock a lot of innovation through that process. How do we get there and what does it mean for your average user? I think we do need to see a couple of infrastructure pieces fall into place.

• 1:08:15Speaker 04

  So one, we need the roll up technology operable so that users can use it. And I think we're there on some of the roll ups already, which is really exciting. And we're going to see the Starkware and ZK sync solutions come out relatively soon, which will have pretty close to generalized EVM compatibility. That'll be exciting. One of the key things that we do need is exchanges to support withdrawals to these layer twos. And I think we're going to see more of that in 2022. We've already seen a little bit of that on some of these layer twos, but not as much as we need. And I think once we get there, we will be in a world where users can just interact with a layer two. They never need to settle, they never need to withdraw assets to layer.

• 1:08:57Speaker 00

  They are just working in layer twos and we will have bridges connecting the layer twos. And that is going to be how most people interact with Ethereum. And by the way, that there's also potential for improving UX in that process versus using layer one. Using layer one is still, it reminds me of my early internet days when I was doing like hacky stuff to get my computer to work, right? But that's how layer one works. It's it's designed for machines to use almost. It's not really great for humans to use, but layer two can solve a lot of those UX issues. It I think smart contract wallets will become the norm. I think users won't have to manage keys. These are the things I see playing out over the next three years.

• 1:09:40Ryan Sean Adams?

  Cyrus, what if we're wrong about that? I saw a tweet this morning here. That said something like extreme decentralization is just a solution looking for a problem. It's just a very small market demand. Okay. And if went further to say, ETH maxies have yet to wake up to that. What if, what if we hear just ETH maxies that haven't woken up to the world saying, hey, we don't really care that much about decentralization. You don't need to push it that far. We're happy on some of these more centralized chains. We just want low gas fees. What if users don't care about decentralization, Cyrus? What would you say to to that?

• 1:10:18Speaker 00

  Well, I think I think that's just empirically false. Just looking at the Bitcoin market cap, you know, it's just kind of dominating the space and dominating the narrative. Clearly, there's a, there's a need for, you know, there's a value there. I think maybe what the tweet is getting wrong is that a kind of the more transactional crypto community doesn't necessarily care about about decentralization, especially when they're already using somewhat pseudo centralized tokens and coins like USDC and Tether. But that's not the whole story, right? There's like this huge swath of wealth coming in from, you know, all over the world that that are just looking for a place to park their capital.

• 1:11:01Speaker 00

  I mean, we've talked about at length about kind of the the reach for yield and trying to store your store your capital in a world that's slowly being overrun by inflation. And you know, they're not necessarily the most vocal vocal group, especially in kind of the more in the smart contract ecosystems, but they're definitely driving the most value.

• 1:11:26Speaker 00

  So, so, yeah, sure, you know, retail users who just want to trade on, on, on DEXs and whatnot, they don't care as much. That's, that's fine. But so, so what, right? There's like clearly this huge contingency of, of investors worldwide that definitely, definitely do care. And that's kind of why the market cap rankings have, have shaken out the way that they are right now.

• 1:11:51Ryan Sean Adams?

  And I mean, I guess that's maybe a justification for Bitcoin's $1 trillion valuation, right? It is highly decentralized. It's a store of value asset. And so people value it as such. And of course, like the market cap of Bitcoin reflects in the economic security of the Bitcoin network. And the same is true for Ether as well. Wanted to run like an idea by the panel as well. I was thinking it's like if this whole modular, as this whole modular blockchain thesis plays out, when we talk about the users not caring about decentralization, you have to kind of ask yourself, well, who are the users of the Ethereum main chain, right? Because they're not necessarily individuals anymore.

• 1:12:31Ryan Sean Adams?

  As we just said, many of the users of the settlement block space of Ethereum will actually be chains. And so then you have to ask the question of, do chains care about decentralization? And I think that's a different question entirely. You're not talking about the average Joe who's just like, hey, I want my, you know, gem on Uniswap. And, you know, I want to pay $1 gas fee. I don't want to pay $50 gas fees. We're talking about entire chains like ZK Sync, Optimism, Arbitrum, their entire ecosystems. How valuable will they rate decentralization on their, their priority list? What's your take on that, Anthony?

• 1:13:10Speaker 03

  Yeah, I mean, I think I was thinking about this when Cyrus was talking too. I think that framing the question about as kind of like, do users care about decentralization? Has two parts to it. Your, your point about kind of like what users are actually using Layer One Ethereum and which will use Layer One Ethereum over the long term. And you're right, it'll be chains, right? It'll be a layer twos and things like that. It won't, and it'll be whales as well, right? It won't really be the everyday user. I mean, we're already at that point. But I also think that decentralization Is just security as well. It's another way to think about it. So if you ask users, do you care about security? Like, most of the time, they're gonna say yes, right? Like, nine out of 10 are gonna say yes. I think that, um, and, and by saying yes, they also implicitly are saying they care about decentralization as well, because it's just they go hand in hand.

• 1:13:52Speaker 03

  So, and I also think that people say they don't care about a lot of things until they do. Like, you can say, oh, God, insurance is so expensive for my car. Like, I hate having to pay this. I don't really care about it. And then you get into an accident and you're like, oh, I'm really glad I had that insurance, because otherwise it would be kind of like paying a lot of money. And, and it's the same for like, basically all insurance. I think that's like the classic example that's used. But also just kind of like, um, in the real world, like contracts. A lot of people don't like contracts. Like, oh, I have to sign another contract. This is eh. But then you have that contract there. If something goes wrong, if you didn't have that, then, um, you'd have to go to court. You'd have to kind of like battle it out and it would be up to the court to decide who was right and who was wrong. You still go to court, you know, if the contract, if you want to dispute the contract.

• 1:14:31Speaker 03

  But the reason why we have contracts is so that we can kind of like settle, you know, things between people and have like a, a written thing that people agree to. Um, so the same is true for Ethereum. There's a contract within Ethereum that basically says, you know, Ethereum is a decentralized and secure network. Hey, Layer 2, you can come and you can settle on us. You can, you can kind of like post your data on here. And we can give you, like, you know, it's not gonna be a hundred percent guarantee, but we can give you a really high guarantee that your data and proofs of your transactions are going to be secure, that they're always going to be online, and that users are always going to be able to access it, just like your, you know, you, you, users as in everyday users, just as you are going to be able to access it as a kind of like Layer 2 chain as a user. So I think the, yeah, the correct question is to basically pose it to users of like,

• 1:15:13Speaker 03

  of course, you care about security, like you care about your assets being secured, you care about people not being able to kind of like steal your assets. So then you implicitly care about decentralization, even if you say you don't, you, you do. Like, I'm sorry, but like, people can say whatever they want. Actions speak louder than words.

• 1:15:29Ryan Sean Adams?

  Yeah, I totally agree with that narrative because the term decentralization doesn't really mean anything, but like if you think of decentralization as like anti-corruption technology, right? And if you ask someone like, "Do you care that like the system where you store all of your wealth is, if it's corruptible or not, right? If insiders can take advantage and bend the rules in their favor, everyone will say, "Of course, I want the least corruptible system, which is the most decentralized system every single time."

• 1:15:59Speaker 03

  And that's exactly why people store their money in a bank instead of under their mattress, right? They know the bank is more secure than their mattress. So like it's just, people already do this, they just don't realize they're doing it because it's just ingrained into them about security. They, you know, as humans, we kind of like, it's built into our DNA that we need to protect ourselves, we need to defend ourselves, and we do that in different ways all the time. But as soon as you start posing the literal questions to people, they're kind of like, "Oh, it's not something that I actually think about." You know, and then it's like, "Well, you do care about it because you treat things like that. You lock your doors, right? You put an alarm on if you have that in your house. You have security cameras." That's the same kind of concept here. Your security cameras or your security system with Ethereum is its decentralization. So that's how I kind of think about it.

• 1:16:43David Hoffman?

  Arbitrum is an Ethereum scaling solution that's going to completely change how we use DeFi. And now it's live with over 100 projects deployed. Gas fees on the Ethereum L1 sucks. Too many people want to use Ethereum and it doesn't have enough capacity for all of us. And that's why teams like Arbitrum have been hard at work developing layer-two solutions that makes transactions on Ethereum cheap and instant. Arbitrum increases Ethereum's throughput by orders of magnitude at a fraction of the cost of what we are used to paying. When interacting with Arbitrum, you can get the performance of a centralized exchange while tapping into Ethereum's level of security and decentralization. That's why people are calling this Ethereum's broadband moment, where we get to add performance onto decentralization and security. If you're a developer and you want to save on gas costs and overall make

• 1:17:28David Hoffman?

  a better experience for your users, go to developer offchainlabs.com to get started building on Arbitrum. If you're a user, keep an eye out for your favorite DeFi apps building On Arbitrum. Many DeFi applications that are on the Ethereum Layer 1 are migrating over to Layer 2s like Arbitrum. And some are even skipping over Layer 1s and deploying directly on Layer 2s. There are so many apps coming online to Arbitrum. So go to bridge.abitrum.io and start bridging over your Ether or any of the tokens listed and start having a DeFi experience that you've always wanted. Living a bankless life requires taking control over your own private keys. Not your keys, not your crypto. That's why so many in the bankless nation already have their Ledger hardware wallet, which makes proper private key management a breeze.

• 1:18:12David Hoffman?

  But the Ledger ecosystem is much more than just a secure hardware wallet. Ledger is the combination of the Ledger hardware wallet and the Ledger Live app. And if you're used to seeing all of your crypto services and favorite DeFi apps all in one spot, Ledger Live is where you want to be. Not only does Ledger let you buy your crypto assets straight from the app, but it also hooks into all of the DeFi apps and services that you're used to. Using Ledger Live, you can stake your ETH in Lido, swap on DEXs like Paraswap, or display your NFTs with Rainbow. You can also use Wallet Connect inside of Ledger Live to connect to all the other DeFi apps that keep coming online. DeFi never stops growing, and the Ledger Live app grows alongside with it. So click the link in the show notes to see all of the DeFi apps that Ledger Live has,

• 1:18:56David Hoffman?

  and stay tuned as more apps come online. And if you don't have a Ledger hardware wallet, what are you even waiting for? Go to ledger.com, grab a Ledger, download Ledger Live, and get all of your DeFi apps all in one space. So there's a growing theme that I'm noticing, and I find it particularly interesting. And Hazu has talked about this, how Ethereum culture is downstream of Bitcoin culture. And now we're watching these new chains with these newer users kind of have the same reaction to the incumbent chain, the Ethereum chain, in the same way that Ethereum people once had a reaction towards the Bitcoin chains. Like, oh, you guys are lost the plot. Like, you guys don't care about the users.

• 1:19:40David Hoffman?

  You guys are just religiously zealots about just like purity standards and just talking down on newer chains. Are Ethereum maxis just Bitcoin maxis 2.0? Are we the new maxis, the incumbent maxis? DC, do you have an opinion on this?

• 1:19:59Speaker 04

  Well, I do think that there are individuals who exhibit more maximalist tendencies, right? So yeah, you can find that person that's just yelling Ether is the only asset that should be worth anything and everything else is worth zero. Do I think that's a predominant view in the Ethereum ecosystem? Frankly, I don't. I think that Ethereum inherently is a pluralistic blockchain, right? We, I mean, Bitcoin is a mono asset chain by definition. There's only one asset on Bitcoin. It's Bitcoin. On Ethereum, there's hundreds, thousands of assets. And so I think we have always been comfortable with the fact that other assets are going to accrue value.

• 1:20:39Speaker 04

  I think where the Ethereum community has taken exception is there's been a lot of undeserved, there's been deserved criticism of Ethereum, but there's also been a lot of undeserved criticism, where we're criticized for focusing on things like decentralization. And there are certain people who are like, well, these things aren't important. All that matters is how much TPS you can, transactions per second you can put out. Well, if that's all that's important to you, by all means, use one of these other chains, right? I mean, I'm not, and I'll never tell anybody, hey, don't use some other chain. All I will say is, these are the kinds of trade offs and assumptions you are making when you choose to use another chain. If that chain better meets your needs, then use it. And I think there's a lot of people in the Ethereum community who feel that way.

• 1:21:22Speaker 04

  But I think what, where we take umbrage is we're not going to listen to everybody just like, put out false narratives about Ether and Ethereum anymore. Times have changed, right? And I think that this narrative that's being pushed of like, well, Ethereum doesn't care about its users is simply false, right? I think Ethereum cares about its users a lot to the point where we maximize security for them, right? That is what Ethereum maximizes for, for security. And the blockchain doesn't go down once every couple of weeks, right? It's, it stays up. And so we prioritize that bulletproof, consistent operation, which is what you need, I think, to secure trillions of dollars worth of value, right? And so when we think about the future of Ethereum and we think about like,

• 1:22:04Speaker 04

  what is, what is going to be better UX as we've been talking about, I think actually- Users are going to continue to use it and L2s because that is where the liquidity will be. Because the really big depositors understand these things, right? Even if you're a retail user that's depositing $10 and deciding to put it on an L2 or Solana or Avalanche, right? They might not understand, but the person that's deploying $100 million understands these things. And they are acutely focused on this, right? And they're the ones who are adding value to a lot of these apps and retail participants then come in behind them. So I think beyond all these things that we've talked about, users will follow the liquidity and they're going to follow the value.

• 1:22:42Ryan Sean Adams?

  Okay, so let's wrap up the ETH scalability discussion with this. So so many users are still asking, is ETH going to scale? DC, is ETH going to scale? What's your confidence on ETH's scalability roadmap?

• 1:23:00Speaker 04

  It's it's very strong. I think it's going to be a very uncomfortable period as we get there, to be perfectly honest. But I think that, you know, in talking with the development teams, everybody's going to be at the layer one. We're going to be focusing on data sharding, coming straight out of the transition to proof of stake. So we're going to start working on that immediately. And I think that the layer two teams have learned a tremendous amount. They have working product now and we're going to see bridges get better and we're going to see the exchanges bridge in. So I'm confident.

• 1:23:30Ryan Sean Adams?

  Anthony, are you confident as well? And how soon does this happen? We've been waiting a while.

• 1:23:34Speaker 03

  Yeah, I mean, I've never been more confident in Ethereum scaling roadmap as I have grown to being over the last six months. Obviously, we've known about a lot of these things, but kind of like the picture wasn't very clear because there was a lot of moving parts to it. But I think that everyone in the community, or at least most people in the community, the ones that spend every day in here, work in here, work, you know, work on everything. They understand they're coming to grips with the ultra scalable roadmap. We've had a really great cheerleader in Polina, who is a relatively new entrant to Twitter, who I talk about a lot on my show and you guys talk about a lot as well. But they've been able to really shape the narrative and push forward on this kind of narrative about a modular Ethereum. And I think that has given everyone, you know, a lot more confidence in it. And I think the fact that these things are live or some of them are live right now is is just.

• 1:24:18Speaker 03

  Given a lot of people confidence in the Ethereum scaling roadmap as well. So yeah, never been more confident. I think that 2022 is going to be a really great year for layer twos. I think that all of them or most of them are going to do tokens as well, which is really going to bootstrap the growth of these things. And it's really going to change the narrative because people want to hold something, right? I mentioned this earlier, people want to be early to something. They want to hold a token. They want to get value out of it. They can do that with ETH, but they can also do that with other things. And once you hold a token, you become a very ardent supporter of something like it actually changes. You know, I'd love to see a slightly done on this, but it really changes people's mindset and how they treat these things. So I do think that L2s and just scalability in general with Ethereum has have never been at a better place than it is today.

• 1:24:59Ryan Sean Adams?

  Cyrus, how about you? You've been with Ethereum since the early days. How confident are you in the scalability roadmap or gas fees going to become reasonable for the transactor user class?

• 1:25:10Speaker 00

  I mean, I'm not like much of a technical guy in that respect, but you know, I'm watching TVLs. I'm watching Dex volumes. I'm watching kind of like general user adoption of these layer twos. Kind of taking a more empirical approach. I've never been one to like, kind of

• 1:25:30Speaker 00

  push people to use a certain product or L2 or whatever. I'm just kind of waiting to see if they're naturally drawn to these, to these platforms, right? Like people should want to

• 1:25:43Speaker 00

  naturally migrate onto the L2s. Maybe, maybe they need a little bit of a push with some liquidity mining incentives, which I think is totally normal and appropriate.

• 1:25:56Speaker 00

  I think the numbers have been, you know, again, I'm not like the most knowledgeable guy, but I think the numbers have been pretty, pretty decent for, for what we've seen for Arbitrum and obviously Polygon has, has morphed into this massive ecosystem of its own. And you know, you guys are just saying like, this is all just sort of getting started, right? Like optimism is getting ready to take its whitelist off. We really haven't seen much in the way of ZK rollups beyond kind of just a few things here and there. But we're still waiting for it to like morph into this massive platform for, for users. So.

• 1:26:31Speaker 00

  Yeah, you know, it sounds exciting, right? Like, we're seeing some traction. The, you know, there's a lot of work and effort being put into it. Like, I guess my question is like, why, how, why wouldn't I? What are we seeing? You know, question to you guys, like, what are we seeing? That is, is putting you, you know, putting cause for concern, right? From the L2 ecosystem. Were we expecting? You know, sure, in timelines, yeah, we would have all loved to see this, you know, years ago. But now that these things have launched, is the, you know, the adoption metrics seem to be pretty good to me, right? It's like about as good as I could expect for these new, these new platforms that have just launched in the past couple of months.

• 1:27:12Speaker 03

  I mean, I would definitely agree with, with that. I think that the growth has been, has been decent. I think that tokens always supercharge your growth. I was actually looking at the Avalanche C-Chain TBL the other day, and you can literally pinpoint where they added their token incentives. Like, that's what really kickstarted it. And, you know, for better or worse, that's how you get users to use these things. I mean, Ethereum started the same way with DeFi summer. Like, DeFi was still this very niche, small thing, until DeFi summer happened, and liquidity mining happened, and yield farming happened. And that really just gets the flywheel going. So you need that nudge. I think every new ecosystem needs this. I don't think, you know, you need to give the users an incentive to move across, especially when bridging fees are still quite high, and we don't have centralized exchange bridges into these L2s.

• 1:27:56Speaker 03

  So I think that's why I mentioned the tokens. You know, once they go live and they start doing these, you know, they do an airdrop, they do some liquidity mining, that's going to supercharge it, like, to the next level. That's going to get, you know, a lot of people to migrate across, for sure.

• 1:28:09David Hoffman?

  All right, guys, I want to get specific here with regards to the markets and prices, because as we wrap up to a close, I think that's what really everyone wants to hear as they go into their holiday, their holiday break. So where are we in the market these days? Because there seems to be a lot of bears out there. There's a lot of people paying attention to the Fed. There's some macro concerns. Some people are really bullish. Some people are really, really spooked. Where are we in the market? And what do you guys expect from, from maybe in Q1 2022? Up, down, flat? Anthony, I know you pay attention to the markets pretty closely. What do you think?

• 1:28:43Speaker 03

  Yeah, I mean, you mentioned kind of like the Fed, the macro environment. I think that's playing a big part in crypto these days, a much bigger part that it has traditionally had because we have a different set of actors now. We have lots of institutions. We have a lot more money in here. And those kind of investors, traders, whatever you want to call them, they definitely pay attention to the macro environment and they kind of like make moves based on that. But traditionally, end of year in December is kind of like a bit of a lull period, but besides some kind of like outliers like 2017, December was a really big month, obviously, for Bitcoin and then Ether followed on from that. But usually, December can be quite, can be quiet because it's the holiday period. People are selling for taxes as well. It's a big kind of like source of sell pressure for a lot of, for the market.

• 1:29:25Speaker 03

  And also, you have a bit of uncertainty as well, I think, generally right now, as you mentioned, like the Fed stuff and inflation's like super high too. Like, I mean, anyone who says they can understand the macro environment is lying. I think there's very, very few people. I mean, there's some people, but there's very few people who can actually accurately kind of like predict what's going to happen. I mean, you know, everyone was a bear until this meeting today, and then the meeting happened, the Fed meeting, and then the prices went up, right? It's kind of like, okay, well, everyone was saying that would go down and if the rates were going to increase and it's just very hard to read that environment. In terms of crypto specifically, I think that, I mean, in terms of ETH specifically, I don't really know about the rest of the ecosystem, but ETH specifically, I think Q1 and Q2 is going to be really good for ETH.

• 1:30:05Speaker 03

  Because we have the merge coming up in Q2, hopefully, which is a massive narrative driver, that kind of like triple halving that people hear about, that massive issuance reduction is going to play a really big part in that, I think. I think layer two adoption is going to play a really big part into changing the narrative around Ethereum to saying, okay, well, Ethereum can actually scale. Like, this is awesome. Just get on the L2s and, you know, you can enjoy these cheap transactions and it's still Ethereum at the end of the day. So I think those are the two main narratives in Q1, Q2 that should drive ETH kind of like higher. I'm still expecting, obviously, a 10K ETH and beyond, you know, very, very bullish on that. Just timelines are always a bit difficult, especially when the macro stuff comes into play.

• 1:30:43Speaker 03

  Like, I couldn't begin to understand or describe what, how the macro is going to affect the price of ETH, let alone the crypto markets more broadly. But I do think it's a positive thing that we're more correlated to institutional markets because it means we have the more institutionalized player. It means we're going to have bigger money coming into the ecosystem and not just buying the assets, but participating and adding liquidity to things like DeFi, which is going to benefit all users. So that's just my general view. Just, yeah, I mean, the next six months, very, very bullish for those reasons.

• 1:31:12Ryan Sean Adams?

  Anthony, do you think ETH is going to outperform alternative L1s in 2022?

• 1:31:18Speaker 03

  It's actually an interesting question because I think some of them are high beta to ETH, where they actually will just outperform ETH because people are like, well, it's this market cap, so why can't these ones go to this market cap? Like, they have traction, they have users, they have, you know, an ecosystem. I think, you know, we've already seen that play out with something like a Solana and Avalanche. Their tokens have outperformed ETH this year, Solana much more. It's greatly outperformed ETH, which is fine. But if you're talking about like five years, you know, over the longer term, it's impossible to tell, but I would caution against most of these things outperforming, especially as the L2s come online with tokens. I think the other alternative L1s, that value is going to bleed to L2 tokens, and it's going to be kind of like this kind of wishy-washy stuff going on.

• 1:32:01Speaker 03

  I mean, you can look at Matic as a perfect example of a scaling token on Ethereum. That's performed better than all the alternative L1s this year, I believe, in terms of like price performance. But in terms of long-term against ETH, very few of them are going to outperform ETH in the long-term. Like, maybe one or two, but picking those one or two is going to be hard. It might seem obvious right now, people might be like, oh, I can just buy Sol or AVAX, and that's going to be fine. Well, what if it's not? What if in two years, they didn't really go anywhere because the L2 ecosystem took all their market share? I don't know, like, it's too hard. And it's just going to be very interesting to see, over the long-term, like, I'm talking five years, what's actually going to happen? Because look at five years ago in 2017, or four years ago, with all the L1s that were around back then.

• 1:32:44Speaker 03

  They're all, never reached their all-time highs in USD and are massively down against ETH. So it's just, it's so, it's very, very difficult to predict what's going to happen. But short-term to medium-term, I can see some of these L1s greatly outperforming ETH just based on narrative and lone hype cycles. That's just the way it is. But, you know, if you can catch that and stack more ETH, more power to you. But lots of people don't. Lots of people will kind of like, hold them and hold it down to the bottom, like they did with the 2017-era L1s.

• 1:33:11David Hoffman?

  DC, what about you when you see the current market structure, current macro environment? What's really paying atten- what are you really paying attention to? What's on your radar these days?

• 1:33:20Speaker 04

  So there's still obviously uncertainty in the macro environment. But I think we're still in an era of money printing, you know? And that's, that's probably not going to change significantly anytime soon, even if rates go up a little bit. And so I do think crypto is somewhat correlated to macro in the sense of if the macro economy just crashes, right? I don't see crypto being spared from that necessarily. I, I see that, that because crypto is still viewed as a risk asset, you know? Even with all of the, all of the pushing of the narrative that people have said like Bitcoin is a hedge against inflation. I don't know if that's really, I don't know if that trade is fully played out. People treat Bitcoin and most of crypto like risk assets, like stocks even.

• 1:34:06Speaker 04

  I do think what's interesting in crypto is that the market seems to have fractured in ways that we haven't seen before. And when I say that, I mean, we used to see a pretty clear behavior of like Bitcoin pumps, then Ethereum pumps, then all of the other quote altcoins pump, right? And everybody, and the participants were a smaller group, but everyone would kind of rotate into the same trades at the same time. And, and what that meant was that increased the price reflexivity when people would rotate like that, right? Because if you have all those people piling in from one asset, you know, Bitcoin tops, let's all rotate into Ether. It sends this price like soaring, right? And we're not seeing that kind of behavior in the same way. And I think that's because we have more assets.

• 1:34:52Speaker 04

  We have NFTs are now in the picture. We have more chains that people are invested in and some of them may or may not be leaving their ecosystems. And we just have more participants, right? So There's a possibility that we're going to see somewhat reduced reflexivity moving forward. But I think actually, long term, if that is the case, that means we're entering a period where crypto valuations might be more sustainable, right? And if there's any rationale to believe that we're in a post-four-year cycle world, and we're not going to have another 85 to 95% bear drawdown, and in like, let's say Bitcoin and Ether, that's it, in my opinion. But I, my, just my general feeling is, humans are, I will believe in cycles until they stop occurring,

• 1:35:36Speaker 04

  because I think that humans tend to be motivated by greed. And, you know, when you see emerging technologies, and this was true of internet stocks as well, people saw promising stuff start to take off, narratives built up, and then everybody started to pile in, right? And that will then attract that reflexive price action and investment as a result of that. But I think the reality of where we are is, crypto fundamentals are so strong that the industry has been de-risked for participants, for people working in the space, for people investing in the space. And that's going to drive a lot more capital flow. And whether we have a blow-off top bull market, and, and then, you know, and then a bearish period that follows that, I don't know if that is going to continue to happen or not. But I think demand for crypto is definitely going up into the right, right? We're going

• 1:36:21Speaker 04

  to keep going up, and I think that's what's important.

• 1:36:25David Hoffman?

  Cyrus, what about you? When you look at the charts, look at the markets, look at CNBC, look at Fast Money, what do you hear?

• 1:36:32Speaker 00

  I mean, does, does anybody realize how massively bullshit is that, you know, with, with all of this FUD and negative sentiment, and all the macro concerns that we've gone through for the past few months, like ETH fell from its all-time high, down about 25% down, you know, from 4,800 to 3,600 roughly. You know, I don't know if like, investors have grown soft or whatever, but 25% that, you know, we, we used to have those in like, one day in the last cycle. You guys remember, just like, randomly, like, the entire, you know, coin market cap would be down, like, 25% for no reason, right?

• 1:37:10Speaker 00

  That means there's like, you know, and there's, it felt like there was a lot of energy expended to push prices down, right? Just, just from how, how people were kind of freaking out. And to me, that just signaled that there's just an insane amount of, uh, buy support. There's, there's just a lot of people buying the dip at the, I think at the institutional level.

• 1:37:31Speaker 00

  Otherwise, there's like no, right? Like, nothing has happened that anybody should be concerned about from, from an up only perspective, right? This is like, this is like just full send right now, as far as I can tell.

• 1:37:47Speaker 00

  I, I, I can't, you know, I'm, I'm obviously super bullish, but like, I'm just trying to contextualize that, like, the price has performed extremely well, given everything that's, that's going on and, you know, all the negative sentiments. So, yeah, I think we're, I think we're good for, you know, we're, I think we're still on track. I think things are still going very well, right?

• 1:38:10Ryan Sean Adams?

  Guys, we got this far into, guys, guys, we got this far into a ETH Bull episode. We didn't even say the word flippanting, which I am astounded about. And you're, you're talking about ETH, ETH strength there, Cyrus. And, you know, I'm reminded at the ratio is getting close to, not quite there, but getting close to all time highs, right? And we'll, we'll have to monitor where that goes moving forward. May, maybe we should, uh, maybe we should ask that question now. It's like prediction time, all right? It's prediction time. So, price of ETH at the end of 2022. And in 2022, will ETH have flippant Bitcoin or not? That is a question put toward the ETH Bulls right now.

• 1:38:56Ryan Sean Adams?

  Anthony, those two questions, what do you think?

• 1:38:59Speaker 03

  I think ETH can flip Bitcoin leading up to the merge. I think the merge narrative is going to be so incredibly powerful. It is going to perpetuate everywhere. Even ETH's haters are going to be buying and promoting ETH because they know the trade is so juicy. Uh, especially when we get like, uh, more of a, a kind of confident merge dates or at least window, like If they say they being the developers and researchers that are confident about a June merge, like if they say something like that, I feel like the trade is on in a really big way. I feel like it's already on. I feel like there's people acquiring ETH for this trade. But obviously, as time goes on, the trade gets bigger and bigger, more money pours in. So if it's gonna happen, I think it's gonna happen then. And I don't know if it's gonna be temporary or permanent.

• 1:39:41Speaker 03

  I would wager that there's gonna be a lot of volatility, so it could be a temporary flip. And then ETH and BTC fight for number one for a little bit. But I think that it's very different to 2017 where there was nothing holding ETH up against Bitcoin. Now there is a lot holding ETH up against Bitcoin. So even if it is a temporary flip, you're gonna have, I think ETH will just gradually permanently flip Bitcoin. Like even if it happens like six months after the temporary flip or whatever. I've always been bullish on that. I've never kind of like wavered on that. And in terms of price predictions, it's very hard to tell what ETH is gonna be at the end of 2022. It could pump really hard going into the merge. It could go up to like 20K, 30K or something. And then by the end of 2022, it could just be at 10K because it came down off that or something like that.

• 1:40:24Speaker 03

  I, it's very hard to tell, but I think that, yeah, if ETH is gonna flip Bitcoin, it's gonna have to be leading up to the merge because that's just the most powerful narrative that ETH has ever had, really. More powerful than 1559. I say this, that 1559 is like the appetizer and the merge is the main course. Dessert may be something else later on, but I think the merge is the biggest upgrade in Ethereum's history, not just from a technological standpoint, but also from a monetary perspective standpoint. And more people are gonna wake up to that because the narrative is just gonna be too strong.

• 1:40:55Ryan Sean Adams?

  There we go. Anthony's calling a flipping possibly up in, toward the merge. And maybe ETH price 10K the end of this year, maybe we go above that for a period of time. But it's hard to tell. DC, what do you think?

• 1:41:10Speaker 04

  You know, I try not to focus too much on the flippanting because I think the value that Ethereum is creating is almost independent of what Bitcoin provides. And I'm not an anti Bitcoin person, but I think if you just look at it objectively, what is the narrative value that's going to propel Bitcoin from this point? And I think that there's a few things that are possible. You can see that nation states might start to add it as a reserve asset. We haven't seen a lot of that play out beyond El Salvador, but like that is something that could happen. But we're not really seeing, but the ETF has already happened. And granted, it's not an asset-backed ETF, but it is a Bitcoin ETF.

• 1:41:53Speaker 04

  And your average investor is not going to know the difference between a spot-backed ETF and a synthetic ETF. And that happened and it didn't really drive the price up. So I think that Bitcoin will continue to remain in this digital gold aspect. Compare that to Ethereum, which is going to be hitting on all cylinders. I won't repeat everything Anthony just said, but like especially when you talk about that merge, when you talk about how the narrative of ETH as a productive asset is going to take off and the scalability is going to hopefully start to kick in in a meaningful way, I just see a lot more upside for ETH. So in that situation, I see that flippanting could be possible, right? It's not something that I'm necessarily waiting for, but I am watching the ETH BTC ratio.

• 1:42:35Speaker 04

  And I tweeted today that I sold, I didn't have a ton of Bitcoin left, but I sold the remainder of it because I feel like, yeah, just looking at the charts, and this is not financial advice, you know, my circumstances may be very different from your own, but I feel like I'm very bullish on where Ether is headed. And into the following year, you know, price targets are always difficult, but nothing has fundamentally changed in my point of view. And I said 10,000 to 30,000 before, and I'm going to stick with that, like whenever, however this bull cycle plays out. And if we don't get that manic blow off top, then all the better. We just grind up slowly and sustainably and eventually I think we'll still have that blow off top. I just can't tell you exactly when.

• 1:43:17Ryan Sean Adams?

  Feeling healthy now, 10 to 30K maybe in the next year, or at least in this cycle. Not willing to predict the flippanting, but DC just sold his last Bitcoin. So what does that tell you? Cyrus, what do you think? Flippanting and then price predictions?

• 1:43:35Speaker 00

  Uh, yeah, you know, I, I, I spent so many years like, you know, obsessed with the flipping and, and kind of waiting for it to happen. And it obviously, um, it, it petered out, but I, I think this was like the first year where, where I noticed that there was like a palpable, like, people stopped caring about, you know, people from the ETH community just stopped caring about Bitcoin. Uh, they kind of don't really even focus that much on the ratio anymore. And, you know, just so happens that's the year where the ratio just explodes, right? So I think like, I think that sentiment is like indicative of like, you know, ETH is just kind of developing into its own, uh, its own, its own thing. And it just, it doesn't really care about, you know, rankings or anything else like, I, you know, I kind of want to say that

• 1:44:21Speaker 00

  really don't care too much about like, uh, the alt L ones either. Um, and I think that's just kind of like bullish for me from a investor standpoint. Like we're here for ETH, you know, we're all pretty well informed for like, you know, what it's, what it's been trying to do, how far it's come and, you know, all that stuff. And, uh, yeah, I think if it continues to execute, especially the merge, like, I, I think the merge is just seems like a very poetic catalyst for, you know, big price run up and, you know, potentially um, snowballing into a flipping, um, like I just, I wouldn't be surprised if that happens. Uh, I also wouldn't care too much. Like I just, I'm, I'm, I'm as least concerned about the flipping as I've ever been.

• 1:45:06Speaker 00

  Um, if it happens, great. Um, if it does happen, you know, uh, ETH price probably, um, you know, I, I, I just, you know, I see everything that's going on, you know, the, the, the way adoption is trending, like, you, it's hard for me to envision that like ETH does everything it's, it's, you know, slated to do next year. And the price only goes up from like 4K to like 7K, you know, that, that just doesn't seem to like comport with reality for me for kind of the, the gravity of, you know, or kind of the momentous nature of, of what's, what exactly is going on right now, especially in, you know, especially in the context of like the macro, the macro cycle and, you know, I think,

• 1:45:50Speaker 00

  uh, there's clearly this shift towards more utility, you know, extracting utility out of blockchains and, and Bitcoin is just kind of continuing to lag on that front. Uh, it's continuing to lag on its scalability solutions, so.

• 1:46:05Speaker 00

  If ever there was a time, this is, this has got to be it, in my opinion. You know, I would, I would bet on it and I have been betting on it. So yeah, let's see how it goes.

• 1:46:14Ryan Sean Adams?

  There we go. Price is higher. This has been the ETH Bull Panel. This panel is bullish, maybe more bullish than they were last year, if that's even possible. Anthony, DC, Cyrus, thanks so much for joining us. We really appreciate it.

• 1:46:29Speaker 04

  Thanks, guys. It was great.

• 1:46:32Ryan Sean Adams?

  Action items for you today, of course. Listen to this podcast. You gotta be bullish. Being bullish is always the best position to take in crypto and specifically with respect to ETH, at least historically. If it doesn't work out, if we're wrong, historically, we've only been wrong for a short period of time. You just have to zoom out and wait. Also, listen to some of the bullish podcasts that were mentioned. Ultrasound Money by Justin Drake, that was one of a classic podcasts from last year on why ETH is ultrasound money. Also, Anthony mentioned a podcast, Ultra Scalable Ethereum, where we talk about modular versus monolithic chains. That's another must-listen. It's in the archives. We'll include a link in the show notes.

• 1:47:15Ryan Sean Adams?

  And finally, this has been a holiday episode from Bankless. We hope you just take some time this week. Enjoy the holidays. Hope you enjoyed hanging out with the ETH bulls and listening to Bankless last year. It's been quite the journey. We've really appreciated being with you for it. Of course, gotta end with risks and disclaimers. No one knows what's gonna happen next year. Bitcoin is risky, ETH is risky, DeFi is risky. So is all of crypto. You could lose what you put in, 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.

• 1:47:49David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast, and community as a Bankless premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive And even the bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the bankless community is where you want to be. Click the link in the description to become a bankless premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders,

• 1:48:30David Hoffman?

  Ask Me Anythings, and weekly rollups where we summarize the week in crypto and other fantastic content. Thanks everyone for watching and being on the journey as we build out the bankless nation.