Why ETH is Permissionless Money | Mike Neuder

Ethereum Foundation researcher Mike Neuder joins us at the Bankless Summit with a really bullish articulation of what ETH and Ethereum is in 2024. Mike Neuder explains why ETH is permissionless, why ETH is money and therefore why ETH is permissionless money. ------ 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🤖 dYdX | UNLIMITED LAUNCHING SOON https://bankless.cc/dYdXUnlimited 🗣️TOKU | CRYPTO EMPLOYMENT https://bankless.cc/toku 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🦄UNISWAP | BROWSER EXTENSION https://bankless.cc/uniswap 🪄 MAGIC EDEN | HOME OF WEB3 https://bankless.cc/MagicEden ------ ✨ Mint the episode on Zora ✨ https://zora.co/collect/zora:0x0c294913a7596b427add7dcbd6d7bbfc7338d53f/101?referrer=0x077Fe9e96Aa9b20Bd36F1C6290f54F8717C5674E ------ TIMESTAMPS 0:00 Intro 3:08 ETH is Permissionless 13:28 ETH is Money 28:42 The Full Picture 30:05 Questions ------ RESOURCES Mike Neuder https://x.com/mikeneuder Presentation Slides https://docs.google.com/presentation/d/1X5YxaSbpjl1wUdi4HczfAN6aObumH82e ------ 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?

  Welcome to the Bankless Summit, a series of talks from speakers all around the Ethereum ecosystem which were presented at a one-day event hosted the day after DevCon called the Bankless Summit. Mike Nordert spoke at the summit, talking about how ETH is permissionless money. Mike is a researcher at the Ethereum Foundation, and this talk is a formalization of an idea that combines the strong property rights assurances that Ethereum's stage-two rollups offers, along with the monetary networks that they create, along with the sound money properties that ETH Economics has, all wrapped together into a single talk, along with some very apt quotes from Hayek, Graber, and Mises, to make this one of the stronger articulations of what ETH and Ethereum are in 2024. I hope you enjoy, because I

• 0:46David Hoffman?

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• 2:43Speaker 01

  How's it going? Okay, raise your hand if you were at DevCon. Okay, pretty much everyone. So, yeah, thanks for coming. Second half of the, you know, the day of the conference after the conference. So, thanks for sticking with us. Yeah, the title of my talk is "The Ticker is ETH", which is this kind of meme that Vitalik tweeted out. But really, the true title is "ETH is Permissionless Money", so that's kind of what we'll go into.

• 3:09Speaker 01

  And yeah, I'll divide the talk into two halves. The first half will be ETH is Permissionless. And so we'll kind of talk about property rights, about what I think is the most important feature of ETH or the asset, and how it spreads property rights to the L2s and kind of beyond. And the second half will talk about money. And that'll be kind of my own personal take on how I think about money and how ETH or spreads as a monetary asset as well. So, yeah, let's jump right into it. So ETH is Permissionless. And I'll start with a few quotes to kind of motivate why this matters. This one's from Hayek, and he says, "What our generation has forgotten is that the system of private property is the most important guarantee of freedom." And a similar sentiment from Milton Friedman,

• 3:54Speaker 01

  "I think that nothing so important for freedom as recognizing in the law each individual's natural right to property." So, yeah, both of these kind of allude to the same point and really is the core of why I'm super excited about Ethereum and crypto generally, which is it gives strong property rights to digital assets. And that's fundamentally the value proposition of Ethereum and ETH asset to me. So, how does this work? What are property rights of ETH? I think it's useful to start with ETH on the L1 and kind of remind ourselves from first principles what ETH as, what purpose it serves on the L1. And it's pretty amazing. We can summarize it in, I think, one sentence pretty succinctly by saying,

• 4:35Speaker 01

  "Anyone can permissionlessly store, send, and program ETH, the native asset." Right? And this is kind of remarkable in its own right. And to kind of help illustrate this, I have a diagram. We have Ethereum mainnet and it has a few different accounts and a contract. Right. So these are kind of like the two different ways that you can interact with ETH on Ethereum mainnet. Obviously, you can transfer ETH from one account to another. And just this in itself is like pretty amazing, right? You can send money globally in 12 seconds and it's like super secure and extremely easy to do so. You know, sending money over banking infrastructure is like very painful.

• 5:18Speaker 01

  And this is a remarkably simple way to do it. But of course, beyond that, there's this programmability aspect, right? So we have an account here, number three, and it's interacting with Uniswap to swap for some stablecoin. DAI, or as someone pointed out, it should be rebranded to USDS, which is kind of the maker rebrand of their stablecoin. So yeah, this is kind of table stakes. Everyone here has probably heard this story a million times, but I think it's worth reiterating and kind of grounding what Ether does on the L1 before moving on to kind of Ether in the rollup-centric roadmap more broadly, which is what we'll get to now. So what about the property rights of ETH on rollups?

• 5:56Speaker 01

  Right. This is kind of the next stage of the scaling roadmap of how we expect people to interact with these decentralized applications, these blockchains. And the one-sentence summary here is actually maybe something different than what you've heard before, which is anyone can permissionlessly bridge ETH in and out of rollups. So this isn't to say anything about being able to continuously use any application on any rollup. That's kind of not possible. That's one of the sacrifices we make by moving to the rollup-centric roadmap. But the core thing that the rollups do preserve is the property rights of the ETH. And importantly, once you bridge your ETH in, you can always get it out, no matter what the sequencer says.

• 6:37Speaker 01

  Even if the sequencer goes offline or is like explicitly trying to censor you to stop the transfer of your value, it's not able to do so because of this forced exit mechanism. And we'll kind of go through that now. And I'll say before jumping into this, that when I say rollup, I'm talking about the kind of canonical definition of rollup, where there's a smart contract bridge on Ethereum mainnet. It has DA that it posts the transaction data onto Ethereum blobs themselves. And that's that's kind of important and we'll see why in the next slide. Right, so diagram number two, we have Ethereum mainnet. And now we also have this Ethereum rollup on the right. And the rollup is a different state. It's separate from the Ethereum mainnet state. But you can bridge from mainnet into the rollup by sending Ether to this bridge.

• 7:21Speaker 01

  I'm kind of representing it with this bridge in arrow. This gets reflected in the rollup state by accrediting account one with some balance. So now this Ether is locked in the contract on L1. But kind of from the view of the rollup, this is now able to be used by account one in that state.

• 7:41Speaker 01

  Obviously, you can transfer it around. You can use it in applications on the L2. But the element of the ETH on the Ethereum rollup that I want to focus on is the ability to exit, the right to exit. And that comes through this forced withdraw mechanism that takes place for these rollups. So the forced withdraw mechanism is a pretty cool feature, where you include a transaction on Ethereum mainnet to unlock it from the bridge. And the kind of key distinction about property rights of ETH on rollups specifically is that this forced withdraw function only depends on Ethereum DA. So Ethereum DA is the set of blobs. This was what was the focus of the previous hard fork, Ethereum 4844.

• 8:26Speaker 01

  Or sorry, EIP 4844. And it's kind of remarkable that you get this property, that now Ethereum rollups have only have given the kind of exact same property rights to ETH on their chains, because they only have to depend on Ethereum blobs to do that forced withdraw exit. And this will allow the bridge out to take place. And you know, you now have access to your Ether back on Ethereum mainnet. This is kind of what I mean when I say that Ethereum rollups don't only scale Ethereum execution, but they also scale the property rights of ETH asset as it kind of moves around this L2 ecosystem. But what about property rights of ETH on non-ETHereal DA L2s?

• 9:08Speaker 01

  So this is a very common pattern that people are saying, "Oh, the Ethereum blobs are going to be too expensive. There's only three per block, so we're going to use non-ETHereal DA like Celestia, like EigenDA, to post our L2 transaction data." So I think this is fine. I don't think that type of construction is categorically wrong or that no one should use it, but it's important to acknowledge that this changes the property rights of ETH on those systems. And in particular, you now no longer have the exact same guarantees and kind of strong censorship resistance that you had previously. And this is why. The reason is this first italicized part of the sentence, which says, "If the external

• 9:50Speaker 01

  DA layer is live, anyone can permissionlessly bridge ETH in and out." So now you have this kind of added trust assumption, right? You have not only Ethereum mainnet, but you have to depend on some other data source in order for this forced withdraw to take place. And I kind of put the cart ahead of the horse there. Let's just show this on the diagram, right? So same diagram as before, except we have this new thing, which is another blockchain. It doesn't necessarily need to be a different blockchain. This could be like an Amazon S3 bucket, but the point is the DA is coming from some external source. The bridge inflow is quite similar as before. You send ETH from an account on L1 to the bridge contract. That gets reflected in the state. Oh, and I should say, the right-hand

• 10:35Speaker 01

  side is an Ethereum optimium. I use that word to succinctly say, "an Ethereum optimistic rollup that posts its DA to a different DA layer, not Ethereum blobs." So it's kind of one of those words that sounds like a sci-fi term, but whatever. It's succinct for this case. So yeah, as before, you can interact with Ether on this L2. But again, the thing we care most about is this process of forced withdraw. How do I get access to my ETH if the sequencer that is sequencing this optimium goes offline or is actively censoring me? And the key dependency that we inject here is that this check validity function now

• 11:15Speaker 01

  depends on some external DA source. And now your property rights fundamentally have shifted from being only centered on the Ethereum mainnet and Ethereum validator set to depending on this other blockchain as well. And only after that check passes, will you be able to bridge the Ether out of the bridge contract into your account number one. And then, one quick aside. So, we just talked about, like, all of this was just focused on Ether, the asset specifically, on L1s, or on L1, on L2s, and on Optimiums. But people also think about, when they're talking about programmable money, oftentimes, they kind of say, "What about USDC? What about USDT?" Like, these things are denominated in US dollars.

• 12:00Speaker 01

  This is something everyone's very familiar with, and it has the same kind of programmability. It still has that ERC20 native token interface. Like, you can do most of the things that you do with ETH. But the reality of the situation is that you have no property rights with either of these, because you are effectively banking with the stablecoin issuer, who has the real dollars that back the stablecoins. So, these two Dune histograms, or bar charts, show the increase in the number of banned addresses for USDC and USDT. And these numbers are only going up, and it's not actually that different from the existing traditional financial rails, where the government can effectively decide whether or not you have access to this value. And so, it's kind of important to acknowledge that,

• 12:44Speaker 01

  sure, USDC and USDT can be programmable, but they're certainly not permissionless money. It's a very permissioned money, in fact.

• 12:53Speaker 01

  Right, bad. So, to summarize this first half of the talk, we made the argument that ETH is permissionless. First, on the L1, ETH is permissionless and programmable.

• 13:06Speaker 01

  Roll up, scale the property rights of ETH the asset. Property rights on non-Ethereum D A L2s depend on another chain, but it still kind of expands the effect of ETH the asset and the amount of surface area you have to interact with it, which we'll talk about in the following slides. And USDC and USDT have no property rights. Cool. That was the permissionless part. Now let's talk about ETH is money. And to motivate this section, I have two more quotes. This one from John Maynard Keynes. By a continuing process of inflation, governments can confiscate secretly and unobserved an important part of the wealth of their citizens. So this kind of motivates the initial part of the ETH is money discussion where I'll

• 13:49Speaker 01

  talk about supply, I'll talk about inflation and kind of how inflation is a process by which kind of wealth is transferred from those who are protected against the inflation or those who aren't protected against inflation to those who are. And the second quote is from David Graeber in his book. Money has no essence. It's not really anything. Therefore, its nature always been or has always been and presumably always will be a matter of political contention. So I put this quote up there just to kind of caveat emptor that this is my opinion of what ETH is money is. And hopefully it's just like a useful additional framework for you to think about. But clearly like there's no definitive thing that we can say what money is or that ETH is money specifically. So yeah, that's kind of your mileage may vary.

• 14:35Speaker 01

  Right. So I thought it would be useful to just go through a brief history of the ETH supply. Sassel did a great job kind of running us through the whole history of Ethereum. So some of this may look familiar and I'll go relatively quickly. But on the left side, we have 2016. This is like immediately post Genesis. And here we have 2024 on the right. And you can see that there's kind of a few very important changes, like regime shifts in the history of the Ethereum supply. So in October 2017, there was an EIP that changed the block rewards from five ETH to three ETH. In 2019, that reward was changed from three to two. So these are kind of like monetary policy changes. In every block now issues a smaller amount of ETH than it did previously.

• 15:20Speaker 01

  In August 2021, this is when EIP 1559 was activated. This is probably the most famous EIP. And Ethereum, the burn started happening. So as you can see, prior to this, the supply was kind of increasing at a relatively linear rate. But at this moment, you have the burn kick in. And now, not only do you have the inflationary pressure of block rewards coming at each block, but you also have a burn that is resulting from transaction fee usage on mainnet. So that kind of leads us to the most important day in Ethereum history, September 22, where the merge happened. And we no longer have proof of work rewards, right? And you can see that at this point, like for the past two years effectively since then,

• 16:04Speaker 01

  the supply of Ether has completely flattened out. And it's right at about 120 million Ether tokens in existence. And yeah, effectively, the total growth of the supply has plateaued.

• 16:17Speaker 01

  And one more date to point out, March 2024, this is about six months ago now, which is when 4844 went live and blobs came out. So as you can see, like this didn't really impact the supply very meaningfully, even though a lot of the L1 activity did start to migrate to L2s. And that's because if you look at the, like if you zoom all the way out, on the total supply change, you know, view of Ether, the asset, it's, the amount of inflation is like effectively a rounding error at the current moment. Cool. So just to kind of double click on that, let's look at the numerical values for ETH inflation, because I think it's interesting to kind of see and think about compared to other assets. So there's 120 million ETH supply. We saw that in the previous slide.

• 17:02Speaker 01

  And about 34 million of it is staked. So that's about 28%. And at that stake rate, we have 3.25% yield for each of the Ether staked.

• 17:12Speaker 01

  So you multiply that through and you get about 1 million new ETH per year, which is less than a 1% annual inflation rate, right? So, you know, if you think about compared to fiat currencies that have seen like much higher inflation rates recently in the US and, you know, the, the target of 2%, we're already like way below that in terms of what Ethereum supply is growing at currently. On the Solana side, things look slightly different. The supply is 588 million and 40 million of it is staked, or sorry, 400 million of it is staked. And it's staked at a 7% yield. So not only is the stake rate more than double what the Ethereum stake rate is, but it also has a double, more than 2X the, the yield for each of those staked soul.

• 17:56Speaker 01

  Again, you do the math and you see that the overall annual inflation rate is 4.7% or five times higher than the Ether inflation. So this is kind of just another point of comparison to another asset in the, in the ecosystem and, and showing that the, the monetary properties of ETH are actually very, very good kind of compared to, compared to this. Bitcoin also has inflation currently, which is kind of this counterintuitive thing because when people think about Bitcoin, they think about the 21 million supply cap. They think, oh, it's, it's zero inflation. But actually, the, we have not reached that 21 million supply cap. There's only 19.78 million Bitcoin in supply. And with the present 3.125 block reward, Bitcoin per block reward,

• 18:40Speaker 01

  that results in about the same inflation rate that we have in Ethereum, which is, yeah, 0.8% annual inflation. So, you know, for the next four years until the next halving, the rate of Bitcoin inflation is going to be about the same as the rate of Ether inflation, which is kind of an interesting thought experiment. Of course, there, there... The monetary policy of Bitcoin is programmed so that that inflation rate will get cut in half in 2028 and 2032 and so on. But obviously, the thing that they compromise on in that situation is that's your security budget. Like, that's what you're paying people to secure the network. You keep cutting that in half. And the kind of, in my mind, the multi-trillion-dollar question for Bitcoin security is, how

• 19:25Speaker 01

  does that economic security play out when the block rewards are actually zero? And there's kind of a lot of work questioning that. I don't have time to go into it too much here, but that's why Bitcoin inflation, kind of in the current form, is still necessary to compensate miners for producing blocks and doing the proof-of-work. Cool. So, let's talk briefly about the burn. You know, we're talking about ETH as money. We've made it, you know, 15 minutes into the talk and haven't even talked about the burn. So, currently, on the L1 transaction fee level, over the past 30 days, we're kind of amortizing it out to about 470,000 ETH burned per year, which is pretty remarkable, given that most, like, a lot of the L1 activity has actually already migrated to L2s.

• 20:09Speaker 01

  Like, we're still burning a lot of ETH on the L1, and there's still clearly demand for L1 block space. And I think a very important point about the burn is that it's highly dependent on market conditions, right? So, currently, we're in a period of high volatility. Prices rose after the election. Stuff is happening. So, people are very eager to consume block space and very willing to pay high transaction fees to interact with Ethereum state. However, there's gonna be periods where it's not as, there's not as much demand to use Ethereum block space. The burn will go down. And so, I view the burn as kind of this natural absorbent of business cycles, right? There's kind of periods of inflation, periods of deflation, but overall, you still have the kind of underlying block rewards that come from participating in proof-of-stake

• 20:53Speaker 01

  that serve as like the honesty budget. This is how much we're willing to pay people to run proof-of-stake, and this is critical to keeping the chain online and safe.

• 21:03Speaker 01

  And yeah, just as kind of a reminder, we're only producing about 1 million new ETH per year. So even after 4844, after a lot of L2 activity migrates, we're still burning 50% of the total inflation per year just through L1 base fees, which kind of leads directly into the second question or the next slide, which is what about burning from L2 usage? And the way that L2 usage gets reflected into the burn is through blob fees. So blobs are these data types that are written to the Ethereum blockchain. L2s pay to post this data to the Ethereum network. And it's kind of worth going through the napkin math to see how much block space can be exported to L2s

• 21:47Speaker 01

  and how cheap transactions can still be while continuing to burn a lot of Ether on the L1. And this is kind of like alluding to Justin's point earlier, which is in his vision, there can still be very cheap transactions on L2s, but those transactions will still in aggregate end up paying a large amount for Ethereum DA and for that like very strong property right guarantee that is provided to the L2s. So the kind of full Dank sharding DA layer vision of Ethereum has 128 blobs per slot. And you can kind of multiply that out to get to 2 gig of gas per second. So that's 2 billion gas per second. In terms of transfers and swaps, that turns into 95,000 transfers or 6,000 swaps. So these two things have different gas costs,

• 22:32Speaker 01

  but this is just like two reference points to think about how much scale can be absorbed by these L2s, given 128 blobs per slot. To fully offset the issuance, which is just kind of like a reference point for how much each of these transactions would have to pay to allow the burn from blob fees themselves to offset the issuance completely, is 1/10 of a cent per transfer and 1.5 cents per swap. So the point here is that in aggregate, these transactions are still effectively zero for all intents and purposes for the users, but in aggregate, they can burn a lot of ETH. So the TLDR is L2 transaction fees stay low and can burn a lot of ETH. Cool.

• 23:16Speaker 01

  So the first, you know, part of this money-ness arc was really talking about ETH as a store of value. Right? We were paying attention to the supply. We were thinking about inflation. But there are other elements of money-ness that are probably worth calling out and worth digging into when we think about Ether, the asset, and how it is interacted with across the ecosystem. So this is the last quote. This one's from Adam Smith. He says, "That wealth consists of money, or in gold and silver, is a popular notion, which naturally arises from the double function of money as the instrument of commerce and as the measure of value." So if you Google kind of like, "What is money?", you almost always see kind of a version of this statement, which is that it's a store of value,

• 23:58Speaker 01

  it's a medium of exchange, and it's a unit of account. And this quote kind of focuses on the second two, which I'll now like highlight specifically about Ether, the asset, across the L2s. ETH as a medium of exchange. So the one-sentence summary here is that ETH is the natural instrument of commerce, using Adam Smith's words, for paying gas and for use in applications. So back to our diagrams. We have Ethereum mainnet here. And when we're talking about instrument of commerce, there's kind of like a few things that this kind of represents in my mind for how ETH is used on the L1. First, it's both used as the gas token and it's useful in DeFi on L1 itself.

• 24:39Speaker 01

  So you might send it from an account to Aave to lend against it, or you might use it in Maker to mint USDS. But the point is, in both of these cases, Ether is kind of both being used to facilitate this transaction. It's kind of the lubricant that allows this transaction to take place. And it's also used in each of those applications as the medium by which the value is stored.

• 25:06Speaker 01

  Of course, you can also bridge, as we've been talking about repeatedly. And if you bridge into an Ethereum rollup, you can do many more things. And ETH is still being used in a medium of exchange way throughout the rollups ecosystem too, right? So you might swap with with different pools on Uniswap to buy other tokens. Or you might use EAS, the Ethereum out of station service, to make out of stations. But the point is, in each of these cases, you're still using Ether as the medium of exchange in the L2. Also, you can bridge to Ethereum Optimiums. And in my mind, Optimiums serve the best role as kind of the lowest security transactions. There you might bridge a smaller amount of ETH there because you don't have the same property rights

• 25:50Speaker 01

  that you do on mainnet or on a rollup. But you're still willing to do the long tail of activity, the high volume activity that might come up in social phi. So you might send a cast to Farcaster. You might battle your axes and axie infinity. But the point is, you're still using Ether as the medium of exchange to facilitate this on-chain activity. Right. What about ETH as a unit of account? So I summarize this in one sentence as ETH is the default measure of value for pricing and economic security. So a few examples of this. We have Ethereum mainnet. We have kind of two Optimiums on the top right and then Ethereum rollup on the bottom. And when I talk about measure of value for economic security,

• 26:33Speaker 01

  I think the best example of this is Eigenlayer and restaking, right? So this is a way in which the economic security of other chains actually can depend on Ether, the asset. And this spreads the meme of Ether being used to price security throughout the ecosystem. And for those of you not familiar, Eigenlayer allows Optimiums or other L2s to effectively use the Ether that is bridged into the Eigenlayer contract to provide economic security for those chains. And the reason for that is these other chains might want to run a proof of stake network, but the value of their own token is not sufficient to create economic security for their proof of stake chains. And Ether in this context

• 27:16Speaker 01

  provides like a very strong guarantee around the economic value of your security. And that kind of exports the numerare of Ether to these other ecosystems as well. Another example of unit of account is kind of this idea of pricing, right? And so if you bridge into an Ethereum rollup, you also might want to buy some meme coins with Uniswap. And if you look at kind of lots of the Uniswap pools, very oftentimes, the numeraire pair that a meme coin is pooled with is Ether, the asset. So ETH provides liquidity across all of these pools, and it's served as the value that other things are measured against. Same with buying NFTs, you might want to buy an Aladi,

• 28:00Speaker 01

  and NFTs kind of historically have always been priced in ETH. So again, this is another example of the value of Ether being used to kind of price other assets in the crypto ecosystem. Cool. So to summarize the ETH is money section, we have the Ethereum supply being stable. We have inflation that's low and sustainable. We have L1 burn offsetting half of the existing inflation. And L2 is burning ETH while preserving subcent transactions through the consumption of Ethereum blobs. We also have ETH as a medium of exchange and as a unit of account throughout the broader crypto ecosystem. So to kind of summarize with one giant picture,

• 28:44Speaker 01

  I like this idea of kind of concentric circles growing out and this being more and more surface area exposed, more and more on-chain surface area that Ether can be used both as a permissionless money and also as a money itself. So kind of first, thinking about ETH as a permissionless asset, as a bearer asset. We have the ability to transmit and program Ether on the L1. We have the forced withdrawal mechanism that imbues the same property rights to ETH on the Ethereum rollups themselves. You have the forced withdrawal mechanism that depends on external DA to ensure that some level of sovereignty is retained over Ether that's bridged into the optiums. And this kind of completes the picture

• 29:29Speaker 01

  of how ETH is permissionless across this space.

• 29:34Speaker 01

  In terms of money, we have Ether being burned on the L1. We have Ether burned through the blob fee on rollups. And we also have the spread of ETH as a medium of exchange and a unit of count, both across Optimiums and of course, within rollups and the L1 itself.

• 29:52Speaker 01

  And this is kind of the full picture of why I think ETH is money. So that's all. Thank you very much. And I'm happy to take questions after this.

• 30:05David Hoffman?

  Questions. Time. We got time for one question. Who's got a hand up? One guy, one guy.

• 30:12Speaker 02

  Do you see any issue with Ethereum L2s not guaranteeing property rights for other tokens?

• 30:21Speaker 01

  Yeah, it's a good question. So I didn't get into this idea of ledgers of record. And I think that's kind of the theme you're highlighting here, which is Ether the asset is a ledger of record on Ethereum L1 itself. But you can imagine L2s that issue different tokens where the L2 state basically defines what is the canonical, you know, source of truth for the value of those tokens. So for example, optimism is the place where the OP, yeah, the OP token contract is minted. And so even if the OP tokens are kind of tried to bridge down to the L1 itself, the source of truth is still optimism mainnet itself. I think this is a problem.

• 31:04Speaker 01

  I think in general, in the future, we'll probably see most tokens be issued on L1 to use the L1 as the source of truth. But in kind of the grand scheme of things, I think what Ethereum should focus on is maintaining that super strong sovereignty over Ether the asset itself. And I think if anything, that is like more compelling reason to denominate your wealth and to hold, you know, ETH as the store of value rather than a governance token. And actually, to one point that I was going to mention in my talk and I forgot. So thanks for reminding me, which is, you know, people often talk about users maybe preferring to use OP or arb as their gas token on the L2s. But I actually think it's the opposite. I think. As someone who owns ETH already and who wants to use the on-chain economy, I'm very happy to be using ETH across all the chains.

• 31:49Speaker 01

  And so I don't think it's like an Ethereum alignment reason that all the L2s use ETH as the gas token. I think it's a market demand. Like, users actually prefer to use and hold ETH rather than to have, you know, each of the L2 respective tokens that they're paying in gas with across their, the different ecosystems. So, yeah, that's another reason why I think ETH is, is kind of the natural shelling point for, for the medium of exchange across the space. So, thanks for your question.

• 32:13David Hoffman?

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• 32:58David Hoffman?

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