Is Ethereum Undercharging L2s? Kain Makes His Case: Uneasy Money

Transcript

You guys have thoughts on Robin Hood chains? >> What a slash. >> Yeah, but I I have a fear. Uh I've seen this over and over again where like the hot new thing is really hot for like a month and then we see it kind of play out like uh over time and it loses it momentum. So it'd be interesting to see like what real difference it's going to change over like you know from base or some other ecosystem that was really exciting for a few months and see how sustained it can be but for right now people are loving it >> and does okay so for listeners who have not been in the trenches with the rest of us it's

been live for two weeks now basically they launched um And it was they had big goals. Let's say Robin Hood chain has big goals. >> However, >> yeah, but the biggest I guess actually activity that we've seen just like exponentially go up over the last well two weeks has been the mostly the meme coins. >> So surprising, >> which is not what I expected.

>> I mean, how's that surprising though? That's like the They don't really have any >> memecoin in this market. >> Lots of people. >> I thought like natural selection. >> There was the handsome coin went up for like >> everybody lost their money that like was going to trade these type of things. >> I think it's trash. I think like meme coins are trash and we should get rid of them and it's bad for space and there's no attention economy doesn't mean anything. Um, what I want to see Robin Hood, you know, they have Robin Hood Gold where you can earn kind of TBO yield, put that on chain or do what Stripe did, you know, they brought a lot of their deposits onto Tempo. I think that's the stuff I want to see Robin Hood do and forget about this like name coin stuff because last long anyways

like Wes said. >> Yeah, but they are going to do like uh tokenized stocks and stuff like that. So I think they're trying to use the change for like trying to do a mix of like what they do proprietary to them like their you know application their Robin Hood app where they're stock trading options trading you know crypto trading and also trying to bring that stuff on chain. I think that's sort of the connection you're trying to make there but um I think you can already trade certain like equities and stuff on Robin Hood chain. So that's their proprietary >> and the big morpho integration. That was very good. I mean let's talk about Morpho. They've been getting some very good integrations. Coinbase and now what they did with Robin Hood. That's that's

amazing because it sets like the it says a path for a lot of other DeFi startups to do similar things. I I I think they're doing fantastic. >> Yeah. And I think I mean ultimately I don't necessarily have a problem with Robin Hood accidentally stumbling into the memecoin madness and you know volume speaking on that. I do think that they have to get diversity though. You have to get and and convert some of those memes into something else. It's not enough to just >> ride that wave.

>> Um especially because >> everything's fine until everyone gets rugged and then none of your users have any money. >> So you have to protect the user. >> That's what I mean by I said meme quiz are trash. I'm not trying to hate on anyone. >> That's probably like the early like how do we grab early attention, right? >> If they just launched, they had nothing. Like it was like, hey, we have Morpho lending where you can earn 7% yield. People be like, "Okay, >> that's pretty sexy to me." >> Yeah, >> I guess I'm I'm a nerd. >> It grabs all that uh attention with like Cash Cat and stuff like that, which I didn't even realize. Oh, you you knew that. But like Cash Cat was supposed to be like Robin Hood's original name or

something. >> I didn't know. I didn't know that before. >> I was like, why is this meme so popular? I don't really get it. I was like, oh, it's cuz it was the name of before Robin Hood was Robin Hood was supposed to be cash or something like that. So, >> that's a terrible name. >> It is a bad name. They did much better with Robin Hood. good to have more of these retail because I maybe it's just me but I see Robin Hood and Base in a similar neighborhood of like what they're trying to attract. You have Coinbase with I mean Robin Hood with Robin Hood chain and the more at least you have the more competition and competition is fantastic >> because then it makes your space better.

>> Well, they're porting their users, right? Coinbase is porting the Coinbase application users and then same thing with Robin Hood porting those users onto their chain. So >> yeah, let me tell you it's >> it's pretty it's much easier for Mega to convince a Robin Hood chain user to use their platform than it is for them to convince an average person on the street to you know download a wallet and start using their platform. And so I think um you know the more users we can get anywhere in the blockchain I think it will it will benefit all of us because then I could go pitch them hey come use cap now that they're already using the blockchain.

Yeah, exactly. And then so the second half of this I guess conversation and I'm I'm really interested to hear your guys' takes on this is obviously Robin Hood chain has taken off and it's only been a short amount of time but it there is activity mad activity going on but then people are sort of looking at how much Robin Hood chain is uh put simply paying Ethereum mainet right >> and they're getting quite upset about the fact that there's not uh you know it's sort of start it's starting to feel on the surface that like you know Ethereum is perhaps undercharging people for settlement being the settlement

layer. Um and obviously there's two sides to this. There's people who are like yeah it's way too cheap. Crank up the prices. Like what are we doing? And there's other people that are like they'll just leave. Right. So what's what do you guys think? >> This is not new though, right? like all the sequencer L2. Yeah, I mean the the same argument we've had for years, I think about L2s. I think Vitalik himself even came out and said something >> uh in that regard about how you know the L2 vision didn't work out like he thought it was going to work out. It's really it's bringing in very little revenue for actually you know the mother ship. So I don't think that's

>> you get what you pay for, right? It's not like you have >> Ethereum level security on these L2s. >> They're extremely centralized. >> And so at the end of the day, >> yes, it's cheap. Yes, they're not paying a lot, but they're also you're not getting that much either, right? You're at the completely at the realm of these uh teams that are running the L2s. >> Yeah. Yeah. And I go back and forth because on the one hand I think whatever if you look at say how much like Robin Hood chain Robin Hood like how much they're making and also in this case they're paying a percentage to arbitrum Foundation whatever right that's how the the Dow works right

>> you look at those two numbers and then you look at the number that's going to Ethereum and you're like wait we should be charging more, right? Like just from a basic business perspective. On the other hand, if you I don't know. >> Would they still be here? >> Would they still be here? Is it Is it really like Can you really say that it's lost revenue? I'm not convinced. >> How do you charge How do you charge more? I mean you could well I mean we lowered the the whole blobs was this years ago when you know with the introduction of blobs they made the settlement cheaper and at the time it was massively important that we did this

because uh the L1 was impossibly expensive but even L2s were massively expensive um and so they introduced some new technology some new settlement They're called blobs, which is a great name. Love it. Now they're but now they're super super cheap. And then of course now in hindsight we're like wait is this really the is this the vision? Was this the way to go? What's the val value acral to Ethereum and ETH the asset? You know it is an old debate. But I think yeah, it's it's interesting to have the conversation restarted in light of Robin Hood chain, but also just in light of like people kind of not saying that

people are completely over L2s at this point, but it's not, you know, it's not 2022 anymore. It's not and it's definitely not like 2017, 2018 when you couldn't even settle on mainet, right? I I think you still have to keep transaction fees down for people to still wanting to like interact on chain and build. Uh I think when I was deploying contracts a few years ago, it was costing me like $300 to deploy a contract. >> Uh I think upwards of a thousand is like the most I've spent. So it becomes >> like and that's just to to do to deploy a contract but interact. I think when I first used A like 2019,

I think it cost me like $50 to deposit $100 worth of fees into a to try it out. >> Yeah, it's like so much voice. >> It was really bad. It was really bad. >> Actually, guys, I think for startups, because let's think about Ethereum as a startup, you don't really need to monetize that fast. How how many years did it take for Amazon to turn a profit? And did it matter? I think our KPI for Ethereums should be, you know, how many companies are posting to Ethereum? Because the reality is if you're not building on Ethereum, you're paying in tokens. Every chain outside of Ethereum, if you want to get real capital, you're paying it with tokens. And that says

everything. Um, and so at least at least Robin Hood is is building on on Ethereum and they're not making their own chain like Stripe. Um, and and I hope more people do it because I I would I would take that a hundred times over than um making a few more bucks over like a lesser brand for example. >> Yeah. Yeah. 100%. And I think I don't know I still think that there is immense value to keeping I guess things a bit eith centric even if the you know if you run the hard numbers and you're like h it's you are still there's still a consistency

if everything I think we'd be in a worse position if everything was like a truly completely separate like you just said alt L1 alt 0 L 0 L O L O L O L O L O L O L O L O L1 all L1 one. I think it just like the innovation goes down, the interoperability goes down. Like it's even like the L2 Ethereum experience is not the best, but like it's way better than if you go back in time to like when it was like Bitcoin, Litecoin, Doge, Monero, >> right? >> Yeah, >> we do have interoperability. We do have settlement. We do have asurances.

Um where Yeah, you can like force yourself back to to the L1. We don't have to rely on fully centralized things to bridge back and forth. You can have innovation. You can have different rules, but you still do get that the interoperability. So, I don't know. I I'm not I guess my my take ultimately is like I'm not super upset that that Ethereum isn't making more here. I get the conversation, but I think it's more important to keep people just using this stuff, right?

>> Yes. >> Uh we're just talking about Robin Hood chain, but also like, you know, the conversation on like is is Ethereum undercharging these L2s? >> Yeah. I mean, yes, I've been I've been an advocate for like I've been an advocate for this for a while. Like Ethereum should charge more. Um, you know, it's it's like there's a massive advantage that uh L2s get from uh not needing to deal with all of the stuff that Ethereum has to deal with. Um, but still, you know, getting to be a chain.

Um, and I think that like it does not capture enough of that value like unequivocally it should capture more. Um, the question is can it like it should definitely try, right? um what would the consequence be of trying to capture that? Maybe all the L2s are forced to become L1's that actually would also not be too bad because if all of the L2s stopped laring as decentralized and had to actually be decentralized, they would find that it's much harder than it looks and it would be at least an equal playing field, right? Like I promise you like the 85th L2 is not viable as no one if they had to actually like produce

their own blocks and have validators and clients and all of that stuff, right? Um so so I I you know I think it would be the the fact that like we have this weird L2 thing in the first place is like such a strange pathopen weird thing. Um, I think we will eventually kind of they'll they'll either die off or they'll become L1's and it'll be a bunch of L1's competing against each other. Um, and you won't just be able to like be a parasite hanging off Ethereum the way that we have now.

>> Yeah. But do you think that we can I mean do you think like it's realistic that ETH could like raise the prices now or do you just wish that >> Yeah. Yeah, like I Yeah, for sure. Like what are they going to do? >> No, I mean this is true. >> I mean there are benefits that to be aligned to these if you look at the because I think in terms of capital right we have a DeFi startup if you look at the cost of capital for incentivizing outside of the L2s outside of Ethereum is meaningfully higher. I mean go to a on monad and look at the price that the market is giving for supplying USDC and compare that to all the L2s it's much

higher but go to any of these other alt ones either they have no liquidity or if they have it at scale it's costing them much higher and so I think that's the market saying it cost you more and so I as an L2 I'd pay a little bit more right now I'm paying nothing if it means I can save 2% APR on the capital. >> Yeah, agreed. I I just think it would force a much like more clear competitive landscape is what I think would happen. Right. At the moment, you have this weird uncanny valley where like, you know, there's so many flavors of L2s.

It's not clear how decentralized they are relative to each other. We've been trying to figure this out for five years. No one really has a good sense of it. So my my like my view would be if if Ethereum jacked up the price, either people who couldn't leave would have to pay it, right? And the people who could leave would leave and then they're competing on equal playing field. So I think it's it's good on both sides for Ethereum, right? Like if you know if Arbitum had to be an L1, it would probably be good for Arbitum on some level, right? To actually just be like, "All right, fine. [ __ ] it. We're an L1.

Let's go. Let's let's try to compete directly. >> Yeah, >> we'll see. We'll see. >> I mean, yeah, there's arguments on both sides. Again, we're back to incentives, though. And I do think if we if anyone's >> all the way down, >> if anyone wants to change anything, I think bare markets had time to do it. Rip the [ __ ] bandit off. >> Oh, yeah. >> Let people get mad. Let it Let >> You can do anything in a bare market. >> Yeah. Yeah. The thing, you know, the thing that I always say, right, is like the status quo is what reigns, right?

The status quo can be [ __ ] insanity. Look at some of the status quo things that we have right now. It can be sheer lunacy, but because you have so many autists in the space, they will defend that because it's the current rule structure that they exist in, like their lives depend on it, right? And so when you come out of a bare market, whatever the status quo is, yeah, you'd have to fight with them a little bit, but like they will be the ones who will be like getting the pitchforks out in the bull market if anyone tries to change anything. And so you actually like build up this like, you know, kind of uh defense system so that when you get into a bull market, this the new status quo, whatever comes out of the bare market is

like the thing that is the stable equilibrium now. And that's what will run through the the bull. So, >> but it takes guts, man. You make a mistake and uh you get burned. >> You get burned. Yeah. >> But better to get burned in a in a bare market, right? Because people will have short memories. They'll forget about it. >> No one will even remember in a bull market that that even happened. >> There'll be like five guys who are still crying about it. >> So, >> yeah. And you can rebuild stronger, right? You can you can you can you know I think the community is a bit more it's they still get very upset about things. Let's not be let's not be crazy.

>> And I was looking at the timeline today some people like attacking Kodora and I'm like man can we all just calm down? We can just go down. It is. I think when there's I don't know. It's It's a bit narrower of a community, the anger lasts a bit. It's a bit shorter. I think you can weather it a bit easier. Like bull market anger is >> Well, but here's here's the thing though, right? Is like in a bare market, it used to be that you had all of your friends around and so the people who were angry were like really balanced by like your friends kind of being like, "H, it's okay, right?" But we lost that until like three days ago because on this timeline all you had was like the,

you know, cancer people who were just like, you know, [ __ ] like losing their [ __ ] about like you couldn't see your friends. Right now at least as of like 48 hours ago, your friends are back on the timeline, right? So like you see a balanced thing. You do something and you see like someone tweets like, "Hey, it's okay. Like don't worry about it." Because they actually saw that people were attacking you and they jump in to be like, "No, no, this is a good guy. a week ago that didn't happen. It was just like wallto-wall like [ __ ] cancer people. So, uh yeah. Anyway, here we are. If you enjoyed this segment, make sure you tune in at 400 p.m. Eastern every Wednesday where we have much more content like this.

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