How Should ETH Be Valued? | Ryan Berckmans vs. Jon Charbonneau

Jon Charbonneau and Ryan Berckmans join Bankless to debate Ethereum’s future: is ETH undervalued, or has the market already spoken? We unpack whether Ethereum can rival Bitcoin as a store of value, if L2s will drive real value back to ETH, and whether Solana’s momentum signals deeper trouble for Ethereum. Jon argues ETH has lost its lead and may never reclaim it. Ryan contends Ethereum’s neutrality and institutional traction make it the inevitable hub for the onchain economy. This is the definitive conversation on where ETH stands—and where it’s heading. ------ 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium ------ BANKLESS SPONSOR TOOLS: 🪙FRAX | SELF SUFFICIENT DeFi https://bankless.cc/Frax 🦄UNISWAP | SWAP ON UNICHAIN https://bankless.cc/unichain 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🌐SELF | PROVE YOUR SELF https://bankless.cc/Self 🟠BINANCE | THE WORLDS #1 CRYPTO EXCHANGE https://bankless.cc/binance ------ TIMESTAMPS 0:00 Intro 0:32 Is ETH special? 32:55 How ETH should be valued 51:42 ETH over or undervalued? 1:09:59 Being wrong on ETH 1:13:00 Closing & Disclaimers ------ RESOURCES Ryan Berckmans https://x.com/ryanberckmans Jon Charbonneau https://x.com/jon_charb ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

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

• 0:03David Hoffman?

  Bankless Nation, we got John Charbonneau and Ryan Berckmans on a debate today. We're debating a handful of topics that all point towards each other. We're going to go through four different questions. We're probably going to touch on all of them if we have time. Is Ethereum special versus alt-layer ones? Is Bitcoin a special snowflake? How should ETH be valued? And is ETH over or under valued? Ryan, welcome to Bankless.

• 0:26Speaker 01

  Thanks, good to be here.

• 0:26David Hoffman?

  And John, also, welcome to Bankless.

• 0:28Speaker 02

  How's it going?

• 0:29David Hoffman?

  I would like a clean fight from both of you gentlemen. Shake hands and let's get off to the races. Ryan B., I'm going to throw this one to you. Is Ethereum special versus alternative layer ones? What do you think?

• 0:40Speaker 01

  Absolutely, David. The world is coming on-chain. We're going to level up the whole global economy and boost productivity by applying both on-chain technologies as well as decentralization. It's going to increase wealth. And while many different chains can provide the same things such as ERC standards, the transactional model, giving all users public and private keys, you know, so that you can kind of level up the privacy and interaction model. It's really only Ethereum that provides the level of neutrality to serve as a global hub so that the entire global economy can be brought on-chain with an acceptable level of risk. So yes, Ethereum is absolutely special.

• 1:24Speaker 01

  And what we're seeing now is the gradual process of rerating either the asset up towards Bitcoin to reflect that, you know, distinguished status.

• 1:34David Hoffman?

  John, same question to you. Is Ethereum special versus all-layer ones?

• 1:38Speaker 02

  I would say no. And I'll also just dovetail off of that last point of I don't think that ETH has been rerating closer towards BTC. I think it has been consistently rerating further away from BTC over the past few years. And I think that's actually a pretty strong reflection of what my general view is, which is Bitcoin is the only chain that is of any of these layer ones that is actually special. And what I mean by special there in a more literal sense is that Bitcoin is the only chain, in my view, that gets to just play by a different set of rules from everyone else. As a product of, it's obviously very directly going into this, you know, the core asset is money. This is what we are trying to do. What matters there is story and network effects.

• 2:19Speaker 02

  The practical reality is Bitcoin is the only one that was first and that has this built up great story. The network effects, this is my opinion, this is, as I was saying, the market has been saying this for several years. Up through everyone to the most powerful government in the world is saying, hey, this is the special one. This is the one that we put into reserve that we accumulate and that all of these other ones, they're in a different bucket. They fight amongst themselves. And so I think Ethereum is very firmly in that second bucket. Where everyone else has to play by the rules of you need to win as a tech platform effectively. Try to get everyone to come deploy and build on you. You can't wait for them to come to you. And I think that has been at the core of a lot of the problems that Ethereum has had over the past few years. Is that it acted like it was in the Bitcoin bucket, which brings this sort of assumption, which makes sense if you are Bitcoin.

• 3:04Speaker 02

  That everyone will necessarily come to you and build on top of you because you are the best asset. You are the money. They must come to you because everyone wants your asset. And I think we saw that reflected in a lot of the sort of malaise around Ethereum scaling compared to these alt L1 competitors. Looking at these types of attitudes of, ah, maybe we don't really need to scale execution that much ourselves. The rollups will do that for us. Maybe we don't need to scale D A that much ourselves. You know, Eigen D A and Celestia and AnyTrust, they'll go do that for us. Maybe we don't need to scale our consensus, you know, Espresso and Ag Layer and all of these other ones, like they'll go do that for us. And it's fine because ETH is money and like, we're going to be at the center of this and restaking is going to skew everything anyway. And I think we've seen pretty firmly, the market has rejected that over the past few years and said, no, you were in the same bucket as.

• 3:47Speaker 02

  Solana, Celestia, Bonad, Hyperliquid, whatever else, you need to win as a tech platform. If you get complacent, you will lose. Bitcoin is the only one that can afford to move very slowly. Act as this money and kind of everyone necessarily comes to you. So in short, I don't think anyone is special outside of Bitcoin, just because it is so clearly in this bucket of it is elevated. It was the first one. It is this story. It is money. It has all the network effects. Everyone else is in very much a ship or die bucket where you need to win as a tech platform first. And then everything else is downhill from there.

• 4:16Speaker 01

  Yeah, and you know, I think John makes a great point that Ethereum's price versus Bitcoin has been catastrophically collapsing over the past few years. And the reversal really only started in the last few months, and we're at the very early stages of that. And the timing for the reversal is not a coincidence, it's not accidental. It is fundamentally driven by the fact that Ethereum's underperformance financially and in terms of sentiment, and as well as in terms of L1 demand growth over the past few years, has really been driven by three separate issues. The first issue was that the previous US administration was extraordinarily hostile

• 4:59Speaker 01

  to on-chain technologies, and their war was really a de facto war against Ethereum, more so than BTC. BTC was a lucky beneficiary of the fact that the war was primarily aimed at chilling on-chain growth. And that's caused Bitcoin to appear to be more special than in fact it will seem to be when on-chain is 1,000x larger. So that's the first issue. The second issue is that the Ethereum community had a really significant set of unforced errors. We weren't telling our own story. We weren't going to market fast enough with new business development initiatives like

• 5:44Speaker 01

  Ethereumize. In fact, as we sit here recording in about an hour and a half time, Vivek Ramen of Ethereumize is going to be testifying to Congress on the importance of digital assets on Ethereum. And so our set of unforced errors as a community exacerbated that natural problem of the previous administration really coming after on-chain growth. And the third problem for Ethereum these past years was the extremely violent transition to our scaling model of L1 plus L2 scaling. This was externally violent in terms of how we communicated it and how we supported our community's transition with You know, technologies like, like Interop, for example.

• 6:30Speaker 01

  Serious Interop to make all of Ethereum feel like a single user experience really only started about a year and a half, two years ago. Should have started four years ago at the dawn of Interop. And so the, the transition to L1 plus L2 scaling has been really, really challenging and violent. And of course, you know, that, that, that episode culminated about a year ago when Ethereum launched blobs with Deng Kun and L1 gas prices plummeted, which was like always the plan. But due to a lack of communication and a lack of, you know, I think ecosystem leadership on our part, people were like, oh my God, Ethereum's giving away the farm. We're closing the business.

• 7:13Speaker 01

  We've given it all to L2s, but it's just not the case. L2 cannot do what L1 does in terms of driving credible neutrality and counterparty risk minimization and distribution. And L1 can't do what L2 does in terms of inventiveness as a marketplace of global solutions and to scale politically to give the world's, you know, operators the opportunity for control and customization on their own terms. So both are needed. And, you know, when it comes to demand growth, it's incumbent on us to not just build it and expect the world to come. We have to get out there and meet the customers where they're at. And so I, you know, I echo John's concern there around making sure that we're not just sitting by idly, waiting for folks to come to our ivory tower.

• 7:57Speaker 01

  And so, you know, Bitcoin has done an incredible job selling the, the meme of Bitcoin, the asset of Bitcoin. And, you know, Ethereum does not need Bitcoin to fail to win. But ultimately, these negative factors that have caused Ethereum to underperform, both in terms of growth and sentiment and price action, are fundamentally reversed now. We have things like the new executive directors at the Ethereum Foundation that are doing a fantastic job, you know, you know, re-steering the ship. And so in the coming years, as on-chain gets a thousand X larger and the whole global economy comes on-chain and the world's central banks and institutions pile on to real world Assets and you know, once they bring the assets on chain, they're going to say, what are we going to do with them? They're then going to have DeFi.

• 8:42Speaker 01

  And so all that growth is going to naturally diminish the importance of Bitcoin that can't compete in that on-chain space. And then that will, that will really open the door to greater focus on all of on-chain. But Ethereum will win the lion's share of growth because neutrality creates wealth. And that is what is really going to propel Ethereum, you know, to the top of this asset class. Maybe not the top, we don't, we don't necessarily need the flipping to win. But you know, that's really going to cause us to re-rate from, you know, today's Ethereum dominance is like, what is it? I don't know, like single-digit percents, you know, you know, much, much closer up to where Bitcoin's at. Multi-trillion dollar asset.

• 9:22Speaker 02

  So I think we actually agree in some meaningful sense on looking back what some of the issues have been historically for Ethereum and where the missteps were. And then I'd say differ probably in the interpretation and forward-looking guidance on where those goes. Basically stepping through those three points, I mean, one is the regulatory war. I actually agree that it, that probably disproportionately benefited BTC, at least as a share of the field. Relative to ETH and Sol and all of these other crypto assets. I'd say probably hurt it in the absolute, but helped it in the relative sense versus these other crypto assets. But at the same time, that war wasn't directed just at ETH. And in fact, it was actually directed more at ETH's competitors than ETH itself. ETH was not the one that was being listed as a security in these lawsuits. That was Sol, that was these other alt-L1 assets.

• 10:07Speaker 02

  And yet, at the same time, those alt-L1s and their assets were gaining on Ethereum throughout that period where they were actually subject to even much harsher regulation and actions against them. So I don't think we can explain away Ethereum's underperformance, just based on that. I don't think it holds up. And even when you look now going, say, okay, let's say forward-looking, everyone's friendly now, should this help Ethereum? What we're seeing even on the BTC side is we currently have the most crypto-friendly administration like ever right now. You know, they're on-chain, doing the most degenerate stuff on all these different chains. And at the same time, even that administration is saying very explicitly, no, BTC is special. This is the one that goes in the SPR. This is the one that's in a different category. Everyone else is fighting amongst yourselves. And so it's great that regulatory guidance will get better, that will help these assets.

• 10:52Speaker 02

  But it's certainly not going to help ETH as a relative share and it's not going to help it against Bitcoin. And looking forward, I mean, what do we see also as far as, you know, even though all these alt platforms are growing, what are people gravitating towards money? Not just the administration people. What do we see the asset that people want to hold amongst global uncertainty that we have right now? People are not, you know, shilling ETH as this is what you hold in the midst of these tariff wars and the trade wars going around the world. You hold Bitcoin. We see the usage of that growing on chain even, I mean, something I was poking fun at yesterday is what happens if BTC surpasses ETH on base? Like, is it a Bitcoin L2 or an ETH L2 right now? And fundamentally, the reason that's happening is people demand fundamentally BTC as an asset.

• 11:34Speaker 02

  And so you see the BTC usage on chains like Base and many other Ethereum centered chains actually just going up and to the right on track to eventually surpass ETH. And that's because that is fundamentally the asset that people want. And then you build the tech from there versus Ethereum has been much more of a, it's used on these platforms because it was just a thing that was there in the beginning. And now as these barriers break down, people will gravitate towards the asset they want. As far as the stronger go to market, I agree that Ethereum is getting better at these things. I've been super positive on all the changes like the new EDs at the EF. I think they're great. I've spoken to a bunch, like, love the people that they put in. I'm sure Ethereum realized will do great work. Again, it's just still just, it's a forward looking comparison of, okay, but how do we stack this up against the competition? What is Solana doing? You know, they have the Solana Policy Institute. They have the Solana Foundation of Labs and all these organizations around them

• 12:19Speaker 02

  that are incredibly competent in these areas and are already ahead of the game. And it's not like they're slowing up and letting Ethereum just catch up to them. So they're already in a lead and I think better position to generally take these actions. They're probably going to compound that lead. It's the same story on that third point of the transition to L1 and L2 scaling. I agree that the right things are happening now. I mean, I genuinely think that the EF and a lot of the people in the Ethereum community are saying all the right things and starting to prioritize more a lot of the stuff that I would have liked to see prioritize earlier. But the time to prioritize them was earlier. Ethereum isn't in this just, you know, magically dominant position anymore where it can just compound its lead. It is actually like materially lost its lead in a lot of these areas too. If you look at the Alliance DAO startup data, where are most startups going?

• 13:03Speaker 02

  They're going to Solana over Ethereum and Ethereum L2s even in aggregate. You see the same thing in the Electric Capital Developer Report. You see the same thing in on-chain Rev. You see the same thing in on-chain application revenue. All of these metrics are actually shifting to a meaningful degree to these other chains already. While at the same time, these chains are like 100x ahead on scaling and compounding their scaling lead more. So I think it's great that Ethereum is pivoting towards doing the correct things and prioritizing better. You know, we're going to scale more aggressively and do these things, but still the practical reality is they are still orders of magnitude behind and increasing their rate of iteration at still a slower pace than all these others. So while you are doing the right things, I think going forward, the market is still pricing ETH as you know, many times larger and more successful than these other ones,

• 13:47Speaker 02

  while it is actually behind on the categories that I think that are going to be that matter and are going to be predictive looking forward of success where we're going.

• 13:53Speaker 01

  Yeah, I think that there's a big difference between technology and institutions. And there's Ethereum, the technology in terms of the PDF protocol spec driven by the research community. There's Ethereum, the technology, the clients that run the software that I can go spin up my own vanilla, empty, new copy of Ethereum and EVM chain anytime I want. And then there's Ethereum mainnet, the institution. And when we look at things like some of the growth patterns you're describing, such as the Electric Capital, that famous developer report from some months ago that talked about how there was a majority of new developers

• 14:36Speaker 01

  were on Solana. We dig into that data. A lot of it is, you know, young developers in emerging countries, which is not to say that there's some developers are more important than others, but it is to say that what will drive the next big leg of Ethereum growth is going to be institutional growth. It's going to be folks who are looking to make serious long-term investments that are not incentivized, that they're not, they're not going somewhere because they've been paid to go there. They're going somewhere because it's the best next step for their business. And these folks are doing serious diligence and overwhelmingly, they, when they're free to choose, they end up on Ethereum. And it's going to be those

• 15:20Speaker 01

  companies that bring their own, you know, massive sets of distribution. And so as we look forward to You know, for example, Kraken recently launched equities on Solana. You know, that that was an incentivized launch. Another good example would be all of the corporate L2s on Ethereum. We have things like

• 15:45Speaker 01

  Sonium, Immutable X, Base. Like, yeah, they're okay. So there are OP governance token grants, but that's not why they launched them. And the thing about OP governance token grants is they're not there to dump them. That's like a strategic reserve they're going to keep and they'll probably never sell and they use to vote. Like, these folks who are building on Ethereum, they're not there for the incentives. They're there because of the serious institution, because of the accumulated network effects in developers' tooling, infrastructure. And so when it comes to things like like Solana's metrics, like you said, that you said Solana, for example, is like 100x further ahead in scaling.

• 16:28Speaker 01

  But Solana has basically never done more than approximately, I haven't looked at the latest numbers for some months, maybe about 1,300 or 1,500 burst TPS, you know, with a relatively high failure rate. Like, L2s are going to be doing more than that inside a year. Solana is not going to be the cheapest chain or the fastest chain. And so what's left? What's left is this, for them, an ecosystem that they have done an admirable job building that has excellent grassroots developer programs, but lacks the kind of neutrality and robustness that's going to drive institutional adoption. And it's really that institutional adoption that is the the big prize, because the whole global economy wants to come on chain

• 17:13Speaker 01

  and it simply can't do so if it's too risky. And it's going to be Ethereum that's the right home for that.

• 17:20Ryan Sean Adams?

  I want to get John to respond to all of that, but I don't want to lose sight of the overall question that David posed to both of our debaters here. And maybe this is not just the first question, but also the second. The first question was, is Ethereum special versus alternative layer ones? The second is, is Bitcoin special? And John's answer to that, Ryan, for Bitcoin seemed to be, well, Bitcoin is special because of narrative and network effect, particularly around this store of value monetary phenomenon. So I want you, maybe for a minute, Ryan, to crisply answer the question, because I don't know that we have yet.

• 18:01Ryan Sean Adams?

  If you're saying Ethereum is special relative to all alternative layer ones, are you saying it's special like Bitcoin? And why is Ethereum special?

• 18:11Speaker 01

  Absolutely, Ryan. Bitcoin is special because of the immaculate conception and the very high degree of neutrality that, combined with its consistent, excellent job done by its supporters over the years, has created this incredible penetration into global consciousness and a very high level of aggregate confidence. Ethereum is as special, but not in an absolute sense, but on a trajectory to be as special, but in a different way. What makes Ethereum special is the very high degree of decentralization and neutrality that we have pursued that has, over time, created this incredible community of talent

• 18:52Speaker 01

  and eyeballs that is creating a public institution that the world's entire economy can build on. And similar to how Bitcoin might have been able to have a true peer if that peer had started early enough and done a good enough job, Ethereum could have had a true peer had they started early enough and done a good enough job. But just as nobody can match Bitcoin's ossification and neutrality, nobody can match Ethereum's institution building and neutrality and suitability as a global hub for economic activity. So yes, both Ethereum and Bitcoin are special, and they both stand alone in their respective categories.

• 19:36Speaker 02

  So walking through the different points there, I'll kind of go through them in order that we talked to them. I mean, the first one I'll push back very, very strongly on because I just think it's a straight up double standard is we're saying, oh no, everyone is going to Solana just because they're being incentivized to do so. But all the people are building on Ethereum and it's not because of the incentives. When, when literally the primary example is, I don't know if Kraken was incentivized at all to launch on Solana Equities first. Yeah, they may very well have been, which is totally fine. They were also given a gigantic OP grant to deploy ink in the OP super chain. I don't think that we can-

• 20:09Speaker 01

  The OP grants are perhaps the strongest counter example of this. If you look at stats like 59% of stablecoins being on Ethereum, it's over 90% excluding Tron. You start to realize that the depth and breadth of growth is predominantly unincentivized.

• 20:22Speaker 02

  Yeah. And so let's get into that point next because I think this is, this is one of the big metrics that you always use as like Ethereum is ahead in total app capital and like the real money is there. I agree that the real money is literally there today, but what, what we need to care about is one, I mean, what is that capital doing? It's doing very different things on these both chains and I'll argue it's much less valuable what it's doing on ETH. The other part is where are we going in the future? I just do not think it holds up at all that, oh, the institutions are naturally all going to go to ETH and they're not going to go to anywhere else. We just don't see that anymore. The institutions are clearly very comfortable deploying on these other places like Solana now. You look at whether it's the Biddle fund or any of these things, they're deploying these on every chain and then the user is just going to gravitate towards where they're going to go. And if the, if users continue to gravitate towards these other chains and they deploy those products there, then that is where they're going to ultimately end up getting more usage over time.

• 21:05Speaker 02

  And we see this with real, you know, real stablecoin financial products going forward too. What is the biggest thing that was hyped recently was the Stripe stablecoin financial accounts that they were deploying. What are the two, first two chains that they are supporting for that is Solana and Base? Because those are the chains that institutions, these are B2B, like large corporate customers. That is what they're going to use because these are the two reliable chains that give them scale and ubiquity and just, just access that are like well-plugged in. It wasn't Ethereum L1 given because it is not there on the scale and it's not forward looking. The majority of that money that is sitting on ETH today is largely idle capital, which is not moving around, is not high velocity, is not generating a lot of REV. This is just the default place that for example exchanges just leave billions of dollars. And then they're just like sitting off chain.

• 21:47Speaker 02

  Like this is not the same flows and meaningful activity that is going to these other chains going forward. And that's what actually matters. As far as the point of, you know, Solana is not going to be the fastest or the cheapest going forward. I completely agree with that. Like I'm also, I'm not here just to defend Solana to be clear. I mean, like clearly we do on Sol, we're positive on it. But we also do own a lot of these other new competitors, stuff like Hype for this reason. Like there are going to be competitive advantages that people are going to have over Solana. There are going to be faster, cheaper chains. I don't think that most will work out because I think you need a real 10x unlock to actually surpass and provide a real value proposition. Like Hyperliquid, I don't think is winning just because of scale. I think it's winning because it has a great app. But, but let's say even that happens, like, like other places are going to scale. That's great.

• 22:31Speaker 02

  It's not Ethereum is not going to be that place that's going to be 10x better than Solana and a lot faster and cheaper. We're like, maybe it's going to be some of the L2s. And then we get to the question of, okay, what are we actually calling an L2? And how does this actually accrue value to ETH? I think that is also like super unclear, which I'm sure we'll get into later. But yeah, broadly, I think if we just like, look at where usage is going, going forward. I don't think that we could just like blindly say like, all the institutions are just going to go to ETH and like nothing else matters. Like, I don't think that we just see that in the data at all. I think we're like, starting to see very clearly the exact opposite trends starting to play out.

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• 24:56Speaker 01

  I would be the first person to say that Solana has done an incredible job with growth and that we should expect their retail and institutional growth to continue moving forward. Sometimes my colleagues in Ethereum like to say things like, "Now we've defeated Solana," or "Now Solana is dead," and it's just not true. If you were to kind of Thanos Ethereum out of existence, including all the L2s, Solana would be over 90% of what's... Well, Solana and Tron would be, you know, 99% of what's left. And Solana's not going anywhere. They started with a technology advantage and a vertical integration advantage, and now they're graduating that to an ecosystem advantage and still the same vertical integration advantage.

• 25:41Speaker 01

  So they're going to continue to win on incentivized growth, especially among retail. They're going to continue to win these pure launches in institutional products where the institutions launch on multiple chains. Of course, launching on multiple chains doesn't mean that the lion's share of the institutional capital is going to end up on Solana. For example, BlackRock's Biddle, I believe, is over 90% on Ethereum. And so when we look at Solana's growth story, they've done an incredible job. There can be no doubt about that, but... They sell the same 1300, 1500, sometimes they claim up to 65,000 TPS to every single user. How are they going to scale?

• 26:25Speaker 01

  They're naturally going to need an L2 ecosystem. You know, they have, you know, challenges with their transaction failure rates. They, they're stuck in the middle. They're in a middle ground, a middle strategic position that was so strong last era, where if you want to fast, cheap chains, they were the only game in town. If you wanted perceivably infinite block space, go to Solana. But now as the world comes on chain, like there's this kind of new barbell where if you need risk minimization and distribution, you can go to the L1. And if you need retail distribution or your own customized products, you can launch your

• 27:05Speaker 01

  own L2, you can go on a range of existing L2s, you can also go to Solana, you can go to Tron. But the fact is that Ethereum as the global hub is going to become more and more unique and distinguished as time passes and capital piles onto the L1. And the web of interleaved connections that are increasingly rich, you know, things like cross-L2 RPC calls across the web of L2 is going to get increasingly dense. And it's going to be the, the hub that is unique. And then Solana is, is going to be like a, like a competitor to an increasingly diverse, high-scale, competitive landscape of L2s.

• 27:50Speaker 01

  And so Solana's absolutely done an incredible job, but you know, the main reason they're threatening right now is the amount of capital they're willing to spend to grow and not anything inherent in their strategic position.

• 28:03Speaker 02

  So I want to pull the conversation back towards Ethereum because I feel like we're starting to argue a little bit against Solana and more, less so about Ethereum itself, which is like supposed to be the focus of the debate. So I mean, broadly, I will just put it to like agree to disagree. I don't think that the natural, the default, you know, institution-friendly risk minimized place is going to be Ethereum. I think Solana is absolutely increasingly already in that conversation is going to be. For the customizability and control, people are default launching L2s today for that. I think that in general, like, most of these issues are that I would say that they are generally different and theoretically solvable in the long term. We'll see where if Solana can actually figure out, you know, better monetization from being in a shared chain, continue scaling, all of these different things, whatever. We'll put that aside and we'll just like say Solana is going to lose, like, we'll even

• 28:48Speaker 02

  agree on that. I don't agree on that, but like, we'll just take that as a given to kind of like bring the conversation back.

• 28:53Speaker 01

  Solana is not going to lose absolute, just relative. I mean, they're going to, they're going to keep winning.

• 28:57Speaker 02

  Exactly, but okay, but let's say as a relative, you know, Ethereum, we'll just assume that Solana is like share, it's, you know, Solana is not going to eat the world. It's going to go to a lot of other chains, including people who need a lot of customizability and scale. What is the argument then that you have high confidence, because I don't think this was touched on in your answer, of why will those naturally, those other chains be, you know, quote unquote, L2s of Ethereum and accrue value back to ETH in some nondescript way? Because I think what we're actually seeing right now, the market doesn't really care. When we see these like new customizable apps that are super successful, what is it? Hyperliquid. Hyperliquid is not an Ethereum L2. They are very explicitly like their own chain, they're building their own ecosystem. They didn't, because they didn't need Ethereum to do that. So what is the argument that these like new chains of the future, the people who do

• 29:38Speaker 02

  really demand customizability, control, monetization, whatever, that they need their own chain, that they're going to be successful? Why are those going to have a tie back to Ethereum and accrue value back to ETH, like, very explicitly? Because I just don't think that we see that at all.

• 29:51Speaker 01

  Yeah, John, Hyperliquid is an incredible example here, because first of all, it's a secular trader product and the hot ball of money is they get their utility on Hyperliquid and then they take their capital and they buy the Hyperliquid token and that's been a very successful arrangement for everybody. It is an incredible product. Why was it an L2? The answer is timing. At the time Hyperliquid was launched, the L2 SDKs and still today do not support a Hyperliquid style customization. But in the future, the Hyperliquids of the future, and there will be competitors to Hyperliquid, you know, they seem so dominant today, their Hyperliquid will not, will not last 1,000 years. And so.

• 30:36Speaker 01

  The hyper liquids of the future will be L2s. Because if something can be an L2, it should be an L2. You don't need to pay the cost of consensus. You benefit from improved security guarantees. That's really the whole story. You get better cross L2 bridging in terms of the guarantees of staying in the same the same zone of sovereignty on that global settlement layer. And so, yeah, Hyperliquid has been an incredibly successful product and they make a lot of money. And that's been great for their token price. But the hyper liquids of the future will be L2s. And the reason that people are going to continue to build on Ethereum is really for the same reason, is that neutrality is worth money.

• 31:20Speaker 01

  And when you look at how that translates into sentiment in terms of L2 value accrual, look at Bitcoin. What percentage of Bitcoin activity occurs on the L1? It's like 0. many zeros because Bitcoin is a de facto centralized product these days. Sailor holds in custody. Everybody uses it as exchanges. And yet, that usage of Bitcoin in centralized context contributes to aggregate confidence in Bitcoin, in Bitcoin's monetary premium. And so if you look at the Ethereum price that's fallen versus Bitcoin and in absolute dollar terms in the past few years, that's not because of some missing value accrual link.

• 32:01Speaker 01

  It's not, it's because confidence in Ethereum was in the dockheads. It was way, way down. Why was confidence down? Because people thought Ethereum was done. They thought, as you're arguing, that everything's going to go to Solana or it's going to go to Bitcoin L2s or it's going to go to, you know, there won't be value accrual. But as confidence in Ethereum increases, it's not, this whole value accrual argument is not going to end up being operative. It's going to drive confidence to Ethereum, to Ether the asset. L2s will distribute Ether as a store of value. They will use Ether, not all of them, and they all don't need to. Because the same phenomenon that's caused Bitcoin to be successful, where the use and

• 32:44Speaker 01

  attention on BTC the asset is going to occur for Ether the asset across the L2 ecosystem and as that L1 becomes the more dominant, you know, increasingly dominant global hub.

• 32:55David Hoffman?

  John, I see you taking notes, so I want you to respond to Ryan however you see fit. But I also do want to introduce question number three, which is a little bit downstream of what Ryan was saying. Ryan's talking about gaining confidence in Ether, the asset. Now, there are a lot of possible lenses for viewing and understanding and evaluating Ether, the asset. And John and DBA, you, to my understanding, don't own any ETH, and so that is a choice. Because you guys have a particular lens on Ether, the asset. So I'm wondering if you could share your lens, your vantage point of Ether, the asset, and why you don't have confidence in Ether sufficiently in order to put ETH on DBA's balance sheet. So like, what's your perspective on ETH? How do you view it as an asset?

• 33:39David Hoffman?

  And why are you less confident on it than Ryan?

• 33:42Speaker 02

  So I agree that there will be, you know, call them L2 hyperliquids. I've actually tweeted out a bunch of times, like, I think there's a big opportunity to build the quote-unquote, like, people have talked about, you know, the ZK hyperliquid. I just don't think you can build it on Ethereum. I think it's like, literally mathematically impossible. If you look at any of the numbers, Ethereum is many orders of magnitude away from being able to support it on DAO. I think that people are going to build this, and it's going to be on top of Celestia. It's going to be on top of Vic and DA, or it's going to be on top of some other centralized DAO thing. I think people will limit consensus and customize and do these things. You just can't build it on top of Ethereum. Ethereum DAO is just, like, for anyone who looks at the numbers, it is so far away right now. The, just like to give a sense on some of the numbers, the, you know, the big, like, endgame dank charting number that people have, like, usually given for Ethereum is like 128 blobs, 1.33 megabytes per second. That's where Celestia is today.

• 34:27Speaker 02

  That is also about, I think it's like 40x or something like that, where, or no, maybe it's 20-something x where Ethereum is today. Let's assume they get there. Okay, great, that's where these other chains are today, or already surpassing that. And then where are these other chains going to be, obviously, by that point? You know, like, you look at the last test set for Celestia, it was like 20-something megabytes per second. Like, them, I can DA, they're all going for like gigabytes per second. So these high-scale things, they're just not going to be on Ethereum DAO. Like, we're already seeing that, we're seeing where did the new chains go? Where did the converges of the world that Athena securitized chain? They go to Celestia. Like, where are these all new chains are going to go? They're going to go to different DAO layers. So I generally just discount that, as I do not think that mathematically Ethereum can win this market anymore. At least at scale, it's not going to be the dominant player in there in the long term, because it literally can't on scale.

• 35:10Speaker 02

  So then do we take this sort of like other definition of L2, which is, all right, it's not the DA cash flow thing for me. It's the, they're going to use it as ETH as money in some abstract sense. I also think we just don't see that in supporting data and like demand from users. You know, there, there isn't this inherent demand for people on Hyperliquid of like, oh, this would be a better product if we had a enshrined bridge to ETH that like sort of gave us vaguely better possible guarantees as ETH as an asset, because like we demand ETH on Hyperliquid so much because there's user demand for that. We just don't see that. And so I don't see either of these value accrual paths as being compelling right now of that, oh, we're going to win the DA scale game and like, we're going to have a gazillion rollups on us and we're going to get a bunch of cash flows for that. And I, because I think that Celestia and these others are like very clearly ahead

• 35:55Speaker 02

  there. And I don't see the, oh, there's just this overwhelming demand for ETH. So people like have to put their enshrine bridge here. And like, people are just going out, want to use a bunch of ETH. The only place we see that for is Bitcoin. People really want BTC as an asset. It doesn't apply to anyone else, other than US dollars. People also love US dollars. Generally, so generally is a framework for how to view and kind of value these assets. The very, I mean, the very simple thing, which is probably what I've like written a little bit more about, is what is effectively the floor for these assets, which is very simple. It's a DCF type calculation. You know, REV is effectively revenue for these types of chains. You know, what are the fees and MEV that people are paying? That is just the absolute, at least floor of what these things are worth, where if no one buys your story, no one thinks this asset is money, nobody cares what you think, they all disagree

• 36:40Speaker 02

  with you, blah, blah, blah. You can just buy the asset and you can make your capital back based on cash flows. So that's at least the floor of what these assets are. Obviously, that is, I would say, a generally unsatisfying answer for most of these chains. If you're trying to justify a trillion something dollar valuation, and where I think practically what does come into it is you're assessing, okay, what is the actual store value market that the, that the thing, that this asset is going after? And then what do I assess the probability of it actually winning that market? So the very simple calculation is you could say, hey, Bitcoin is worth $2 trillion or whatever it is today, two and a half trillion, something like that. I think that ETH has, you know, I think that is like a reasonable size on this non-sovereign store value asset market. I think ETH has an X percent chance, whatever, of winning that market. And I think this is a durable market.

• 37:26Speaker 02

  Realistically, I think that's where probably like most of the value is coming from something like ETH. If you're already valuing it in the hundreds of billions of dollars, which is a totally reasonable thing to do. I think we have like very clear market evidence that there are many trillions of dollars in demand for non-sovereign store of value crypto assets. It's very clear Bitcoin has that. The area where I would assume that we differ very strongly is I have a much lower assessed probability of ETH actually capturing that market from Bitcoin. I think this is like a very high power law distribution into the top one, maybe a handful of crypto assets having a durable, very large monetary premium going forward. And then what ultimately is going to be the path, whether it's ETH or Sol or whatever, these other assets

• 38:06Speaker 02

  to try to cut into that store of value market durably is it's really going to be winning as a tech platform. The way that you're going to have a shot at winning and getting some durable store of value is because everyone's building on top of you. You're the natural censorship resistant asset at the middle of this ecosystem. And then, you know, people recognize and just use you. And I think it's like actually a reasonable thesis. If the end state of crypto is Ethereum is the base layer upon which everything is built on top of either L1 applications or like everything is a roll up on top of Ethereum. And ETH is this trustless censorship resistant asset across it. I think you like have a reasonable pitch that in that world ETH, you know, is a meaningful crypto asset store of value that is on par with, maybe even bigger than Bitcoin. That's like totally possible.

• 38:50Speaker 02

  The market is just telling us right now that they assess the probability of that outcome on like a literal technical architecture level has just been going straight down for the past few years. And I think it's very clear. ETH is not going to be the like the winning store of value money. If what smart contract platforms end up looking like is a fractured field where ETH is like sort of Ethereum is like sort of important that there, there's meaningful stuff there, but it's not a clear winner. All these other competitors are gaining share in that world. There's no ETH is the store of value that's going to compete with Bitcoin. So generally, that's how I view these like large assets is, I mean, the very simple floor is you're looking at what are cash flows? And then beyond that, what is a durable store of value kind of premium that I think that this asset can capture? Which is usually, you know, there's some big outcome. What is the small probability that it captures that?

• 39:34Speaker 02

  And for ETH, I think the market is just pricing in way too high a probability right now that it actually does capture durably that market in the long term.

• 39:42Ryan Sean Adams?

  So Ryan, let's get you to respond and also answer that same question. How should ETH be valued?

• 39:48Speaker 01

  ETH should be valued as an institutional-grade store of value that comes with this incredible backing of being the world's economic hub. It is Bitcoin plus the next foundation of the world economy for decades, hopefully centuries. And right now Bitcoin seems so important that it's able to sustain this monetary premium with no fee revenue, no direct value accrual, because it has this incredible confidence premium. And in crypto, we tend to think on such short-term time horizons.

• 40:33Speaker 01

  Bitcoin is only 16 years old. Ethereum is only 10 years old next month. Onchain, the story of Onchain is very, very new. DeFi summer that really unlocked the first, starting to scale lending markets. That was one of the first main use cases. It's really only summer 2020, five years ago. And so as we look forward into the future, the growth of Onchain by 1,000x is gonna increase attention. Like the world, the institutional investment community, their attention on Ether as a store of value. So assuming that Bitcoin's special status is somehow impossible to replicate

• 41:14Speaker 01

  or immutable across large stretches of time is overconfident. It supposes that the future is like the past when there's good reasons to expect it not to be, especially that Onchain will grow 1,000x with the lion's share of it on Ethereum. And so to address some of these other points. I started studying on-chain fees in 2019. I got some of my first following being like a fee bull poster, talking about how Ethereum's fees were, you know, growing so quickly. And in 2021, I co-authored with Vivek from Etherealize a short paper called Ethereum:

• 41:59Speaker 01

  A Store of Value with Cash Flow. And we talked about the fees and the growing fees, and we hyped up the DCF case using cash flow to value Ether. And it really wasn't until late 2021 that we realized that you can't use DCF to value these assets. Not because it's bearish for the valuation, because it's literally a broken model. It's nonsensical. And the reason, the primary reason for that is that the cash flows are valued, are denominated in the chain's native token. And so, whereas if you look at a business like McDonald's or Walmart, cash is the independent variable. It earns some cash, and then that backs into the share price, and the whole thing flows downstream naturally. In crypto, the amount

• 42:43Speaker 01

  of cash generated is a function of, the US dollar-denominated cash is a function of the aggregate confidence in the chain. Because it's like, alright, my REV was like 10 units of native token. Okay, what is that worth? Is that worth one hot dog, or a thousand hot dogs, or a ton of gold? And so, the DCF model is fundamentally mistaken when it comes to L1 valuation. So I wouldn't agree that it's a floor of valuation on these instruments. I think it's completely unrelated. And that's a journey that we came on, having started as DCF bulls in the years past. And, you know, I stopped being a DCF bull while Ethereum

• 43:28Speaker 01

  was extremely dominant in fee. So this isn't like some reaction to rising REV on Solana. Started years ago, when Solana's REV was, you know, it was over at like a 1,000x PE ratio at the height of 2021, when Solana had 54 billion in uncirculating locked insider token allocation. And so, when it comes to things like building on top of, you made a remark, John, about how the hyper liquids of the future won't be built on Ethereum, they'll be built on Celestia, EigenDA. I think you gave another example. As an Ethereum bull, I love that sentence because you're saying, which is the fact, which is that there's a lot of DA options out there if you're not going to use blobs.

• 44:13Speaker 01

  And so when that hyper liquid of the future comes together, it's going to settle on Ethereum,

• 44:20Speaker 01

  but it's probably not going to use Ethereum DA. To your point, blobs are New York City, you know? The L1 is Manhattan, blobs are New York City, and alt DA is the whole rest of the universe. There's going to be significantly greater demand in terms of gigabytes, not economic value, for alt DA, and it's going to be a significantly more fractured landscape. And so DA is not a commodity in general. Every DA is a unique snowflake, but there is going to be that substitution effect. And if we look at blobs today, like it is the job of blobs to enable the L1 to win as a global hub. It's not the job of blobs to sell the most gigabytes or even to make the most money,

• 45:05Speaker 01

  although eventually blobs will make lots of money. And so by that metric of helping the L1 to succeed as the global hub, blobs are crushing it. Like, there's huge demand for blobs. We have excellent rollups building on top of them. We have a diversity of rollups. And, you know, so that's a trend that I expect to continue. And so when it comes to this fundamental comparison of like, why is Ether going to outperform? It's because of the pairwise competitive dynamic. Ether versus Bitcoin. Ether's going to win on a relative basis because on-chain is going to be so important and most of it's going to go to Ethereum. And this value accrual issue is going to end up going to the dustbin of history when aggregate confidence in Ethereum rises.

• 45:51Speaker 01

  You look at the other pairwise comparison between Ether and Solana. You know, Ether really only has two competitors in this L1 token landscape. And, you know, that speaks to the success of the... Solana's done a very good job, but their strategy... is not politically scalable. And so when you look at the Ethereum versus Solana pairwise comparison, Solana is insanely unreliable and centralized in the comparison. They lack a real PDF protocol spec driven by a research community. They lack client diversity of 3+ production clients, and they always will. They probably will never have a nice balanced stake among two production clients. They recently spoke about how Fire Dancing is running on 5% of the network.

• 46:35Speaker 01

  It's still Franken Dancer, it's not the original codebase. They had an irregular state transition where they like quite literally stealthily in the dead of night upgraded the chain to change the bytecode of a deployed contract. Did it fix a critical bug? Absolutely. Was it maybe the best decision for their individual situation? That's up to them. You know, they decided it was, and it's certainly better than having a critical bug in what I believe is an immutable contract for them. But it puts the public in this situation where they think, wow, this time they coordinated in the dead of night, you know, like on a Discord server to update the immutable, you know, so-called immutable history of the blockchain to fix a bug.

• 47:20Speaker 01

  That means they can do it. That means they're practicing the muscle memory of these emergency upgrades. Maybe next time it's a Fed or a spook or, you know, that mercenary firm Blackwater who shows up at Anatoly's pad, you know, at 3 a.m. on a Tuesday. And, you know, like, the fact is that these irregular state transitions build on themselves. This lack of client diversity is an enduring, significant issue. This focus on speed and, you know, increased bandwidth, reduced latency, above all else, it doesn't speak to the risk minimization that institutions need to bring the world's

• 47:59Speaker 01

  economy of tens of trillions in assets and, you know, 100 trillion in economic activity on-chain. And so that's why Ethereum wins against Bitcoin on a relative basis, because Bitcoin is not going to be successful in doing on-chain, and on-chain's going to get 1,000x larger with the lion's share of it on Ethereum. And that's why Ethereum wins against Solana, because Solana is

• 48:25Speaker 01

  Catastrophically risky and centralized in the comparison to the L1. In addition, Solana will no longer be the fastest and cheapest chain as that high-scale block space is increasingly commoditized and new institutions launch their own L2s that provide a great launchpad for things like that, those RWA launches that tend to happen on many chains.

• 48:47Ryan Sean Adams?

  Rather than get us to a place, because I know John could probably respond, but he doesn't necessarily want to be in the place where he's defending Solana, as he said earlier, because that's not the crux of this debate. It's not a defense of Solana. It's really, it's about how Ethereum could be successful. I want to pin down your take on this, Ryan, like maybe there's some shared agreement with John. So the central question here is, how should ETH be valued? And John's answer to that was, the floor is basically DCF, and that is true for all chains, it's DCF. Okay. The upper limit is essentially this magical property called monetary premium. And his rationalization for that is you just

• 49:30Ryan Sean Adams?

  take percent market cap of whatever you think store of value demand is, whether that's Bitcoin price, the gold price, something else. And then you measure Ethereum's probability of getting there for Ether, the asset. And that's essentially your valuation mechanism. Are you on the same page with respect to that? I know John rates that as very low, but as far as the mechanics, DCF is a floor, and then percent probability of non-sovereign store of value, that equals the price that you should pay for Ether. Do you agree with that aspect of what he's saying?

• 50:08Speaker 01

  Yes, Ryan, I certainly agree with the non-sovereign store of value aspect. I don't want to pigeonhole into DCF. DCF is broken. I'd encourage anyone to reach out to me if they want more information on that. Don't use DCF.

• 50:22Ryan Sean Adams?

  So you don't even think that's a floor?

• 50:23Speaker 01

  For L1 tokens.

• 50:24Ryan Sean Adams?

  You don't even think that's a floor for Ether?

• 50:25Speaker 01

  It's not a floor. It's not a floor.

• 50:28Speaker 01

  When it comes to non-sovereign store of value, I like valuation frameworks that are directionally accurate, but not necessarily precise because it's difficult to be precise about the future. So look at gold, about 16 trillion. Bitcoin, about 2 trillion. Bitcoin, about 0, almost close to 0% of it is used productively. For gold, we have about 50% used in jewelry, 10% used in industrial applications, and 40% held for pure investment purposes. And so I just think you say, all right, gold, 16 trillion. Bitcoin, 2 trillion after 16 years. You know, where could Ethereum as digital oil

• 51:10Speaker 01

  with a high percentage of productive capacity relative to Bitcoin and similar to gold, where could it fall in that pantheon? Well, I think on-chain is going to get so important to the world and so much of it's going to be on Ethereum that we could just think of Ethereum as being like a peer of Bitcoin and they both gain on gold. So, you know, for example, both assets at 4 trillion in four to 10 years, for example.

• 51:38Ryan Sean Adams?

  Okay, and this gets us maybe to sort of the final question. Yeah, this gets us to the final question, right? Which is sort of related to this, which is the crux of this debate and what the market is trying to figure out is Ether, the asset, over or undervalued right now? I think the time we're recording is probably worth, you know, 300 billion or so. Certainly, in the last two years, has depreciated relative to Bitcoin, also to some other alternative layer-one ecosystems. Lately, as you mentioned, Ryan, it's been showing some strength. The market still doesn't know where this is going to head, of course. And you've got bullish takes on this and bearish takes. But it seems like, given you both agree on kind of the upper value accrual mechanism for Ether, the asset,

• 52:22Ryan Sean Adams?

  and you're saying that's a store of value, it seems incumbent on your bull position, Ryan, to make the case that Ether, the asset, becomes a store of value. And so if you agree with that framing, what is the case that Ether, the asset, becomes a store of value?

• 52:38Speaker 01

  Yeah, absolutely. And I think that it's really two things. It's that OnChain is going to get 1,000x larger. The world's going to realize that OnChain isn't just some parallel financial system. It's the new financial system. It's the new economic system. It's going to permeate all aspects of the global economy from institutional and sovereign capital flows and business deals, all the way down to emerging countries where you're going to have farmers who are able to sell product directly to buyers and then ship it individually with these point-to-point economic connections across oceans. And so OnChain gets so important that it's naturally going to re-rate the L1 token

• 53:23Speaker 01

  space against Bitcoin. And that speaks to how the L1 token space wins, but not Ethereum specifically. And then the way that Ethereum specifically wins as a fraction of that L1 token space is that the L1 as a global hub just doubles down on that capital gravity well, on that settlement gravity well, similar to how Bitcoin has continued to pull ahead from its pure digital asset competitors over the years. And so the L1 today, 220 billion in app capital, about 90% of that is on L1. That's the lion's share of app capital in

• 54:03Speaker 01

  the whole crypto space. I think it's about 3/4 or more of all app capital. It's over 90% if you exclude Tron. Ethereum has 59% share of stable coins, 90% on L1, 80% of real-world assets, that's 3/4 on L1. And so this gravity well effect is a real thing. And my take for Ethereum being undervalued is that OnChain gets more important and Ethereum's dominance position only increases, Ryan.

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• 56:27Ryan Sean Adams?

  Okay, before we get John to answer then, price call. So if you're saying it's undervalued, the question is by how much? So let's just define that in a price. The price call, market cap of Ether in the year 2030, what do you think? Multi-trillion, two-plus-trillion. So two-plus-trillion in five years' time? Yep.

• 56:44Speaker 01

  Okay, John, same question. ETH over or undervalued?

• 56:49Speaker 02

  Uh, overvalued today. And I'll go through the various points that Ryan had there.

• 56:55Speaker 02

  Though, I mean, the one very quick one, which I agree, I don't want to harp on Solana because I feel like we keep deflecting towards that. Though, I, a lot of the upgrade argument, I would say is just incorrect. This was not an upgrade where state was changed. This wasn't like user funds removed or anything like that. Also Ethereum has literally done this before. Also, this is literally the same upgrade mechanism that every chain has and like most of the validators.

• 57:17Speaker 01

  Nine years ago was the DAO fork. It was catastrophic and never, never again. You can, you can do this once and you can do it a long time ago. So sorry to interrupt, but the DAO fork was nine years ago.

• 57:29Speaker 02

  And this was a contract bug change, not like moving user funds or locking funds or anything like that, to be very clear.

• 57:34Speaker 01

  Today, yeah.

• 57:35Speaker 02

  This is, okay. And again, this is the same thing that every chain can do. It's literally the same validators across these chains. It's Coinbase, it's like P2P, it's Figma. It's literally the same people who are coordinating on these things. This is how it happens across every chain. This has happened to Bitcoin. This has happened in Ethereum. This has happened in Solana. This has happened in Cosmos. Like, you don't have to even look far to see all these. It's happened many times across every chain. There are bug fixes across chains. This happens. Don't want to harp on Solana too much there.

• 57:59Speaker 01

  I think Bitcoin was 14 years ago and never happened again.

• 58:03Speaker 02

  Uh, they had an inflation bug fix in 2018, uh, where they had coordination for it.

• 58:07Speaker 01

  I think it was 2018, but.

• 58:10Speaker 02

  Regardless, again, this is, like, I want to put this aside. The point isn't like pulling down other chains. It's supposed to be about like why Ethereum is special.

• 58:18Speaker 02

  So the DCF point, I will unpack this for people. Also, I'm, I'm really literally going to talk about this next week with Jonah on.

• 58:26Speaker 01

  It was in 2010, pardon me. Look, I had to look that up.

• 58:29Speaker 02

  Okay.

• 58:31Speaker 02

  Yeah, that's a different one. Okay. Regardless, besides the point, the, so the DCF thing, I mean, one, we're going to talk about this next week. The, the circular reference argument, I would say, is just wrong. You can do a DCF on these things. I have like tweeted about this. I will talk about it a little more. This is just like fundamentally not a problem. I'll explain the way that like multiple people get confused and where, where I. Know that like our actual argument is over this. A lot of people get confused on the simple idea of like, oh, it's because the, the, the, the fees are like charged in this currency. To be clear, that is not fundamental. Like some chains have like some notion of enshrined fee mechanisms or like the base fees you need to pay in ETH. Even that is not fundamental. Most networks don't have that. You can avoid it. You can pay fees in whatever you want on any of these networks.

• 59:16Speaker 02

  You could pay in USDC. You could pay your priority fees in whatever you want. You could pay your MFTIPs in whatever you want. Like you can pay whatever you want across these networks. And this isn't one, this isn't like a theoretical thing. We see this literally in practice. Where chains are starting to and increasingly are going to move towards users are going to pay in USDC. Because that is the reference asset. These people denominate their wealth and they do not denominate their wealth in ETH. That is what users want, and that is why we are seeing it move towards that. The way that you get a circular reference in doing a DCF like this. Is if you fully assume that the wealth effects are just like entirely based on the base currency. And that like, oh, if the ETH price triples, well then my willingness to pay triples. And like, we're basically just assuming like, oh, like some percent of ETH each year will be paid for fees. And it's just like a completely linear relationship.

• 1:00:00Speaker 02

  If you base, if you have that assumption, then yes, you get a circular reference. That is not reality, though. I do not base my willingness to pay a fee on Ethereum linearly with the Ethereum price. That is not what I denominate my wealth in and hold my wealth in. The reference asset for the world is the US dollars. That is what people are basing their like willingness to pay for a transaction on. It's not like denominating their wealth in ETH. That is not what the world bases their wealth on. So you can very easily go forward and look forward and say, hey, if I think that Ethereum is going to generate a billion dollars this year and two billion dollars next year and three billion dollars next year and four billion dollars next year. You can run a DCF of that. That breaks if you just denominate everything in ETH and you assume that ETH is money. And like people aren't denominating their wealth in dollars, which, which is just like not reality.

• 1:00:43Speaker 02

  And like the examples of like, I mean, like the other simple examples, like for the denomination point, like you can imagine a company like Apple saying, all right, we're gonna, you need to pay for your phones in Apple shares tomorrow instead of dollars. It doesn't make a difference. You can still look at their, look at their line items and say, okay, they received their shares. What's the dollar value of those at the time and convert that to the reference asset, which is US dollars. And you can see, okay, here's the dollar value of their revenue for the year. All they did was like, these are just like mechanical tweaks to change how buyback mechanism works is effectively all they've done. You can run a DCF on these assets.

• 1:01:14Speaker 01

  Like. DCF is not broken because fees are paid in Solana or Ether or Apple share. DCF is broken because.

• 1:01:24Speaker 01

  In practice, during this era of crypto, it is overwhelmingly the case that the US dollar amount of fees is reflexive in exuberance and short-term trends, and it's not representative of independent customer demand, the way it is at Costco or McDonald's.

• 1:01:44Speaker 02

  Two points. There are people who will dispute this. There are research papers that very empirically show that that is actually just not true in practice, even if you look at backwards looking, that it is not this clear reflexive relationship. And again, more importantly, we are going to look forward, not where we are today. In the early stages of crypto, I would imagine that there is a higher degree of reflexivity relative to where you will go in the future. Because yeah, it's an nascent industry. People just like putting irrational amounts of the money. You have a lot of native users who are using the thing. Fine. It's not where the world is going. People do not nominate in the world in ETH. And therefore, as you expand to a normal audience, you will have a correlation to what people actually denominate their wealth and spend their money in, and that is US dollars.

• 1:02:25Speaker 01

  I agree with you. And I think maybe in five, 10, or 20 years, the cash generated could be much more orthogonal to the current spot confidence in an L1. But it's simply not today, and it's unlikely to be so in six months, or in a year, or in two years. And I think that the Solana, for example, Solana REV chart over the last few quarters demonstrates that.

• 1:02:49Speaker 02

  And again, you can say the correlation in the other direction as well, of like, people are paying more dollars, so the asset should be worth more. Regardless, the idea is not fundamentally broken unless you believe the reference asset for the world is this base asset, and the world is going to get more mature. We're going to move towards a DCF as like, absolutely a reasonable thing to use. Like, it just simply is. The other point that I want to drill onto, because I don't know if this is contradictory, or you've changed from recent ones. So you're discounting the importance of DCF and a lot of fee revenue stuff, which is like, fine, I want to understand the point then. Like, I listened to your work pod before this, and you were talking about, like, the way that Ethereum is going to get out of this mess is entirely metrics-driven, and primarily the number one thing is fees, and that we're going to generate a bunch of fees based on DA Caftos. And I've seen a bunch of your tweets in that direction. So do you think that generating billions of dollars of fees is important?

• 1:03:34Speaker 02

  And do you believe that? Because that is the point to dispute on this. Because you do seem to believe that that is very valuable. And I also don't think that it will happen, that we could debate that next.

• 1:03:43Speaker 01

  Yep. So...

• 1:03:45Speaker 01

  Ethereum has underperformed so significantly. Like, I have, you know, normie crypto friends and they think Ethereum is a joke. They ask me if I'm still holding my ether, why would I do that? Ethereum got itself into quite the situation. It was really bad. In fact, it was even worse behind closed doors. And that's all changing now. It has really, the fundamental change has already occurred and the trajectory is now bright. The problem is, is that the world needs salient evidence to believe it. They're not going to take our word for it. They're not, we can't talk our way out of this crisis. We can only grow our way out of this crisis. And so there's really only going to be, you know,

• 1:04:29Speaker 01

  a handful of metrics, to your point, that are going to convince people like my normie crypto buddies that Ethereum is finally back in a great place. And one of those is going to be an increasing amount of fees on L1 from blobs and execution. And I absolutely agree that how long is it going to take for those fees to recover? Could be a while, you know, could be a long while. Blob capacity continues to increase, staving off the congestion pricing that would give us a real sense of price discovery. And, you know, L1 execution demand is even slower growing. So it's going to take, you know, time. Other metrics include things like landmark institutional partnerships,

• 1:05:13Speaker 01

  institutional TVL. And then I think the third metric that's really emerging that we're starting, I think, to crush on slowly but surely is ether treasury companies, you know, things like the Strategic Ethereum Reserve, great website, things like Joe Lubin's new S-Bet. So absolutely agree that fee revenue is an important signal, but not because of DCF, because it drives confidence.

• 1:05:39Speaker 02

  So going through this, one at a high level. So all we're talking about here is effectively story. It's not like evaluation, demand-driven, whatever type of metric, like any of these things. It is just, we think this is going to give us a better story. And fundamentally, all of this still gets back to the point of nothing is a 10x better story than Bitcoin. Like, nothing is even close to that right now. What all of these changes-

• 1:05:59Speaker 01

  Are you sure about that? Bitcoin's 15 years old. I'm going to be, I'm in my late 30s.

• 1:06:06Speaker 01

  Ethereum is going to be 10 years old in July. The first stablecoin is only about seven years old. Dye, dye on mainnet, single collateral dye. These are very, very, very young networks. What if there's 10 trillion in stablecoin in five years?

• 1:06:23Speaker 02

  Then the dollar will be money.

• 1:06:24Speaker 01

  I think it's too early to say that Bitcoin is a special snowflake that will stand a decade over decade test of time.

• 1:06:31Speaker 02

  I'm not saying it is like 100% chance that Bitcoin is like, obviously the special snowflake. I'm saying like at minimum today, based on all information we have and any reasonable prediction we can make, it is by far ahead of everyone else. There is no reasonable story that anyone can craft here at any point in the near to medium to even to closer to longer term that anyone is actually going to credibly have a better story than Bitcoin in the absence of Bitcoin effectively imploding, whether that's quantum or a security budget issue or whatever in like 10 years from now. And even in that world, honestly, that's probably bad for everyone in crypto because it's probably just going to drag everyone down. But we'll see. Regardless, this is all like story points. And the practical reality is like no one is going to have a better story than Bitcoin. And it is very simple and you cannot be competing fundamentally

• 1:07:15Speaker 02

  with these other ones to like have a good story. The only way that you can have a credible story as like the story value thing is if you just like are this special thing that people accept. You can't pitch ETH as money to anyone like outside, like even in crypto, but outside of crypto. And then like, oh, let's just ignore the fact that like, by the way, we have these 10 other competitors that like might flip us on utility and all the on-chain activity in the next couple of years because like, oh whoops, that's like already sort of happening. Those are just like very fundamentally incompatible. The only world where you maybe get one of these other assets to get into that category is if it just effectively wins everything. And we just don't see any evidence of that happening. And then on the cash flow point, I do agree at minimum, even if you're not doing a cash flow type analysis, like a lot of this is really just a demand signal.

• 1:08:00Speaker 02

  I'm like, hey, people want to use a chain. This is important. Like it's, it's just a sign of the chain is doing well. The practical reality is I like, I had also like looked at the numbers that you had like posted for Ethereum. One, I don't think they're meaningful enough. Two, I don't think that they're going to happen. And like these projections make sense. Of, I mean, one, it's assuming like Fasaka 48 blobs per block when we get that. The users are just going to keep paying 1% per transaction. And that the margins for L2 is like, they're just going to happily pay 30% of their fees to the L1. Was like the numbers you had given, but that just like doesn't line up with reality. If like Coinbase is making a billion dollars a year, they're not just going to pay $300 million a year plus to Ethereum for blobs for like a relatively fungible service that they could go put on Celestia or build their own DA layer or do something else.

• 1:08:45Speaker 02

  The only way that you're going to ever fundamentally generate a durable, high amount of value from something like blobs is if you just scale the hell out of this to like a million times more. And that's effectively what like the Celestia pitch is, the EigenDA pitch is, the whatever. They're like, ah, maybe we can get a billion dollars or a few billion dollars a year or whatever, just by scaling the hell out of this thing. And, you know, we get like on-chain AI agent micropayments that are doing like fractions of a sudden transaction. And that's like possible, it like might happen. But even I will say, as someone who has like been public that like we own Tia, like I, I think that's possible to happen. But like, I won't even say that that's the base case. And then what you fundamentally get to is like, something like this is incredibly speculative and like small investment thesis that like maybe justifies you taking a bet on something at like a couple billion dollars.

• 1:09:30Speaker 02

  This is not an investment thesis for an existing $300 billion asset, where this is like all speculative and like none of this is proven out. Like all of these just like forward looking like predictions on ETH are just like, they're just not proven out. And ETH is fundamentally priced at $300 billion. Like it's clearly winning and like going to win and going to crush the aggregate of the competition. And we just don't see that. If we look at the numbers on the ground today and then project forward based on everything that is going on, like where is activity actually going to go from here?

• 1:09:59Ryan Sean Adams?

  Guys, this has been great. I know we can go for another hour probably on this debate subject and maybe we will another time. I want to end with this question. It's maybe an introspective question for you both. John, first to you. If you're wrong about Ether, how will you be wrong?

• 1:10:18Speaker 02

  The most likely way that it's wrong in my, if I were to guess, is that Ethereum gets itself into a good enough position for the next, call it five, 10 years, whatever, where it's still very relevant, it's a very big platform, and then Bitcoin missteps. Whether that's like, quantum becomes a real issue in like, five to 10 years, where the security budget and like, you're in the second best position, and the world has such a demand for a non-sovereign store of value crypto asset, that like, somehow, the second one ends up taking the reins, and people don't lose confidence in crypto assets as a whole. Which I don't think is likely, but that is the most likely way for the gigantic outcome.

• 1:11:00Speaker 02

  Because I think that, I think a lot of it relies on Bitcoin misstepping, which, and competitors too, like, assuming that these other ones don't also catch up, which is the difficult part. It's not clear to me that Ethereum's fate is in its own hands at this point, based on the rate that it can move.

• 1:11:16Ryan Sean Adams?

  Ryan, we know you're the ETH bull in this debate, but same question to you. If you're wrong about Ether, how will you be wrong?

• 1:11:22Speaker 01

  It's such a great question, and it's similar to the question, like, what keeps me up at night? And two things for Ethereum really keep me up at night. The first is if we take Ethereum's reliability for granted. If Ethereum has a material outage, or something of that category of disaster, it invites a direct comparison with other platforms. Similar to when Bitcoin has to tail inflation to solve security budget crisis, or it dispels

• 1:12:02Speaker 01

  the sacred cow. And Ethereum's reliability must be absolute, so that keeps me up at night. The other thing that keeps me up at night is the need to meet our customers, especially our new customers that aren't yet on the platform, where they're at.

• 1:12:21Speaker 01

  Billions of people are going to come on-chain. Ethereum needs 10 different Ethereumizers. Ethereum needs many more Y combinator style, batch, you know, serious startup incubators and accelerators. We have to get out there and cultivate business development and net new innovation because we have the best platform, but that's not enough. We have to grow demand for what we sell, which is on-chain economy.

• 1:12:53Ryan Sean Adams?

  I think we'll end it there. John, Ryan, thank you so much for joining us for this debate. Fun, fun. Thank you.

• 1:12:59Speaker 01

  Thanks for having us.

• 1:13:00Ryan Sean Adams?

  Bankless Station, got to let you know, none of this has been financial advice. Of course, crypto is risky. ETH could go up, it could go down. Both of our panelists have different perspectives on that, I suppose, but we are headed west, as always. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.