The State of Ethereum Today | Analyst Round Table

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on that same regard I mean it's a matter of supply versus demand and on the demand side I think ETFs just add into that in such a big way um especially this year in 2025 and so it really depends on if ethereum can get its North Star in order and it can like co co us around some kind of narrative and actually push that a bit further this episode is sponsored by scale scale has differentiated itself from other layer ones by offering users a network of gas-free interoperable evml 1s where the user experience comes first explore the gasf free ecosystem at scale.

Spacey and follow their Journey on X at scale Network to learn more about the gasf free architecture and growth of the scale ecosystem visit the scale research Hub at scale. space resarch nothing said on ZX research is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice Pacho Ryan and our guests May hold positions in the company's funds or projects discussed hey guys welcome back to another episode of ox research today I'm joined by Mark Dan and Ox Mims or Darren um we're representing all of the sort of internal teams of the research

team today from blockworks um we've got research members data team members and advisory team um representing us today so glad to have you guys on how we doing always a pleasure to be here my friend yeah happy to be doing an episode about eth yep happy to be here awesome Mark let the cat out of the bag we are going to talk about eth today um maybe I'll just drop a glimmer of excitement into the chat first um the markets looked Doom and Gloom I think a little bit last week when we spoke um people were worried about macro fears and I feel like the sentiment has completely 180d in the past week um since our our last conversation is um is everyone rocking on their heels back and forth

um right now at this kind of crazy volatility up and down or how are we feeling I'm not sure if this is just part of being in you know second and a half cycle but I mean this volatility seems normal I mean if you like zoom out and look at the draw down charts like this is nothing and I can't believe people are calling the top is in already so I mean I'm not worried I'm just trying to see if any um gems come on sale while all of this fair is happening the AI token price action has been pretty funny over the last few days it went from you know AGI is imminent to oh wow these things really are token scams to AGI is imminent in about 48 Hours um so it's pretty funny it's like people suddenly remembered that these

are like chat Bots with a token and then people immediately forgot again yeah I'm feeling kind of like similar way to Mark everything's just on like a like a sale a buy one get one sale almost um personally for me I'm looking at like the AI sector since that's come down pretty hard and like the D siiz sectors um so we'll see what happens there yeah I think good call out um it is funny to note that I think a lot of the AI tokens were some of the worst performers of maybe the prior week and we're now looking at them being some of the best performers of the past 24 hours um very big you know turnaround which um is expected with you know maybe some of the most kind of speculative assets um in in

this in the industry right now um let's hop along though last week we talked a bit about Bitcoin and started to get into a little bit of an eth discussion um that got cut short I think we wanted to just turn this whole episode into a conversation about eth um starting off the year sort of like you know looking at the majors and and thinking about valuations road maps things ahead for them um and kind of level setting ourselves and the audience um going into 2025 so um maybe let's just kick it off when thinking about eth I want to hear let's start at the high level I want to hear like what is the bull case for eth um and maybe I'll give it to Mark to start off um and we'll go from there um I'm just going to I'm going to say bull

case for eth is eth as money as baby as unlikely as it is we're going bull case here and on that same regard I mean it's a matter of supply versus demand and on the demand side I think ETFs just add into that in such a big way um especially this in 2025 and so it really depends on if ethereum can get its North Star in order and it can like Co coal around some kind of narrative and actually push that a bit further because you know as we're probably going to talk into it doesn't seem it's going to be like on the Rev Cash Flow side so it might have to be on the E the asset side and I think if we can if we can get that especially with

the ETFs then that could be a good 2025 I mean just to I don't want to like derail the the agenda here but on the like okay if you look at Bitcoin obviously nobody is buying bit Bitcoin for its ability to produce cash flows it's some other reason um some people would describe it as money some people would describe it as a store of value I think there's like an important distinction at least like in my head between between the difference of those two things I think of money generally as more of this uh medium of exchange side of things whereas store value is the a tool for transport wealth through time uh what I think Bitcoin got incredibly right was never like wavering from what

it was trying to be for over a decade uh it was like the beauty was in the Simplicity like there's 21 million Bitcoin that's that predetermined monetary uh policy is important in a world where that is a material issue for not only the us but many nations across the world um so the question is like all right so eth didn't exactly start as that it started as more of this world computer thesis and now the it's pursued the RO Centric road map which is starting to show some signs of fruitful uh the fruitfulness of its Endeavors right like Bas is doing incredibly well you can argue about how good that is for eth but I think we'll

get into that but um the point being that you know in no time in the next few years is like the da side of things is going to replace the the the cash flows side of things um and so the question is again is is how are you going to back into this moneyness factor or this store value factor and I think there spent a lot of good time on the supply side of of the eth the asset where you know net inflation is plus or minus one one and a half percent basically no matter what happens uh as is today if no eth is burned you know you're looking at like positive you know plus one and a half% inflation that's fine nothing's going to break from that um and they want to try

to get that lower as well with a lot of the discussions going around inflation going on around inflation and if there is abundant activity whether it be through blob fees or through L1 activity and base fees then you you're just pushing lower from that one and a half percent number right and again it can go negative so I think that the supply side is fine so that kind of like creates the ability for it to be the store of value Asset but now you need to like back into convincing everybody that that's what it's going to be and that seems like the the boulder that needs to get pushed up the hill um which like it did seem like everyone was kind of browling around and then e the ethereum Twitter handle tweeted uh like Hello World computer or something along

those lines for the first time in like many many moons uh which is like oh like are we back on the world computer now like which which one is it and again like I don't I don't like the the store of value money in this thing like I think that's a great thing to back into I don't think it's a great thing to pursue uh the world computer is like what got me into crypto that's awesome that's so cool and that's what I want to build I kind of definitely agree with you on the money side so like when I said money I kind of meant store value not medium of exchange not unit of account so let's you know I might use it interch interchangeably but um you know Bitcoin didn't always have this clear thesis right you know 20176 there was this big block moment where some people

wanted it to be bigger blocks to use it as cash but people were happy with the way was and more as like digital gold and you know with ethereum I'm also kind of going to push back on the supply side yeah you say like 1% is fine yeah it is I mean like Bitcoin probably had more than that for most of its um lifetime but you know regardless of whether it's money or not an asset that has negative inflation asset that's decreasing over time becoming more scarce I think that's like super important and that's almost necessary for it to become a money to get that narrative going because bitcoin's one was 21 million there's never going to be anymore that scarcity helped push that narrative and I think if eth can go back to negative um

inflation then that can help push that narrative more and then I see stuff like like you said ethereum's tweet hello world computer and was like okay so you know it it may seem trivial but I was like I I retweeted it and I was like okay so is this the new North Star is this what we're going to go with because you know if they're going to start to push everything off of the L1 you know then it's not really a world computer like I mean Bitcoin L2 is might be coming up within I don't know a decade given how how quickly they move but I mean I still don't think that if Bitcoin moves to a rollup Centric road map it will take away from its moneyness but I know I I do think that eth needs needs that narrative and you know maybe

maybe the person behind the Twitter account still hasn't figured that out either Darren you have any thoughts here uh no not really I mean I think Mark has really said everything that I wanted to say in response to uh Dan's points which is just that like we have a really good like uh inflation rate going on for ethereum right now but we could get it even lower and that like our current like Supply Dy Dynamics like arguably work better than Bitcoins in the long term um and yeah that's the main point that I want to just lean on and add in there maybe let's uh jump to the inevitable discussion of RV then um economic value and I'll I'll be Ryan Connor from a moment and kind of segue us into the cash flows

discussion um I guess there might be an opportunity to kind of get that um real inflation rate to a negative value um or another way of thinking about that might just be to find additional ways to increase cash flows to ethereum Holders to ethereum such that um you know that inflation is offset by incoming flows of value that offset it and make it a value you know make it an asset worth holding like you might expect from you know a company that can grow revenues and and you know reduce its cost over time um Dan how does this kind of play into the kind of the ongoing kind of battle or

conversation between like trying to be a store of value Asset versus um maybe how we think about value of of economic sort of flows on ethereum yeah so like the discussion around the inflation rate is is the supply side um and when a supply side there's a demand side and demand is users transacting on ethereum uh whether that be to directly execute L1 transactions or whether it's be to purchase blobs it's all the same uh from a perspective of demand so when we look at this chart we have up which is the ethereum network reev since 2020 you see like a cyclical decline in RV uh peaked out around 2021 shortly after the

introduction of the base fee uh I think it was November of 2021 was the highest month he cleared you know over $2 billion in a month and since then you know I haven't even like flirted with those levels and on a more industrywide basis um salana or excuse me ethereum has historically been the industry leader in rev or which again is a measure of user demand to transact on chain is the fees paid into the system uh it has lost its Throne as the number one uh demand-based chain in in terms of monetary demand uh of course to salana so we've talked about that a bunch I won't har too too much on it I just think it's an interesting to perspective

to say like you see the pendulum like swinging away from the cash flows and back to the money thing and to me it's like well how much of that is because the demand side of the equation wasn't optimized for and now cash flows are in a cyclical decline so you can't talk about how that's the driver here and it's like well what else is the driver it's like oh it's money um to me I think I I mentioned earlier like something to the effect of it's hard to back into the money thing uh I say that because you know if you fast forward a 100 years and you know something like Global oil trade is settled on a blockchain and that is denominated in eth eth will be money eth will be a store of value people will buy

it for reasons beyond the cash flows because they need it to buy oil which Powers the country right like that to me is how you're get more interesting way to be backing into this money thesis rather than like you know a couple DJ on on an L2 that denominate their portfolio in eth right like sure my base AI meme coins are denominated in eth and every time I buy and sell meme I'm trying to increase the number of eth that doesn't mean I'm like viewing eth as money that doesn't mean I'm like you using it to transport well through time um it means I'm gambling so it's not like the most compelling thesis to me and every time I get like I definitely intentionally stir some of these baates up debates up on Twitter because I really want to

understand this perspective better and it's I don't know it's like uh it was Jasper the ghost I was having a good conversation with over the weekend and I always I I enjoy having these discussions I think they're fun and and you know I don't think they're ever in Bad Blood uh so I don't mean this in a negative way at all but you know he's talking about his perspective on the moneyness of ethereum and it's like was talking about how oh like you know eth can be used as collateral so it is a you know good uh it's like increasing the moneyness of of the asset and that's how it's driving value and to me it is like a completely backwards view because for something to be a good collateral in defi it needs to already have value right it's like

you're there's a there's a chicken in the egg problem here and to me it's like his point was well if it's already a store of value it's already money and that's the reason why it has value and that's why it's a good collateral but I just am totally unconvinced that that is the case today yeah I'm going to unfortunately agree there because I don't think ether is money at least it's not good money and you know Danny asks what's the bull case with and the fact that they're pushing execution away means like the last bull case for eth might be ether's bunny I mean I would love love if eth kind of slightly tweaked their road map and did Native rollups as in rollups that are native to the L1 launched by by

validators they're part of the client they're part of all these different clients and that that way ethereum could capture some of those execution fees directly and then if anything that might help it more with its with the money because it's being used more across ecosystem that being said you know if you just look at the current landscape of of eth um of the eth rollups like base that's the most popular one it's um you know it has the most users transaction fees Dex for you name it right and one of their newer implementations is to replace gas fees um with usdc and you know obviously e is still going to be burnt in the back end it's just being abstracted away from the users but the fact that the users won't

be seeing that this base asset anymore severely takes away from it being having any kind of monetary premium there and this is not this is not going to be a flash in the pan this is going to be a trend like you know across all of crypto crypto they have like what 13 million active addresses give or take right but you know if you're really going to hit mainstream you cannot be denominating these fees and these other and these transaction fees in something that's very volatile and something that um users unfamiliar with and basically looks like magic internet money right you need to denominated in something they're familiar with and if it's any if you're going to take away anything from stable coin um domination particularly USD like it's going to be denominated in

that and I'm sure everybody when they look at their own like metamask or Phantom wallets and they see what transaction fee they're going to pay they're not looking at the soul they're looking at the dollar value of it right so it's kind of you know slightly already happen happened anyway but I mean the way that I see rollups going and evolving uh it's just going to be more of that obstruction and and and making eth further away from like the base asset and the asset that you see in Dex pools and whatnot especially as we start to adopt like more real world assets yeah I think you hit on a really important piece there which is okay so if it's like what's going to make it money right it's the belief that it's a good medium exchange or if it's like

more of the store value side of things it it's a good tool to transport wealth through time um on the first piece you're dead I think you're dead right about the whole fact of l2s not using eth as the gas token right if you're if the only thing that matters is the fact that eth is burned on the back end then on the back end well then okay that's they're just saying the only thing that matters is R which is you know I guess kind of an antithetical to the point that uh it's it's it's money right and so if the user doesn't need it to pay gas I don't think that's the only like uh money like use of eth right if I could like buy goods and services with eth that's equally as useful as paying

gas but that's not a huge sector either um so then it's like what is the value that an L2 is bringing eth you know people always point to the amount of eth on the L2 this is not like a super compelling number to me for this discussion because it's like okay it's sitting there but what is it doing and if the answer is just being like parked in a okay like this is this is so circular and there's nothing that's driving the value to it um so also collateral rapidly degrades in quality when the price decreases so that also gets a little bit of a in the armor of the narrative there as well so this is why I'm like left scratching my head with what like what is going to be the

thing that drives it forward and and not to mention with coinbase specifically they are offering gas rebates on transactions that use usdc and we're tracking this number it's a super small percentage of activity today it's like less than 1% of all activity but they're incentivized because they have their own business case for why they want usdc on chain um and Danny you just had that one chart up of the Rev distribution of coin base uh specifically looking at just last quarter so Q4 2024 they did about $30 million in total Network RV which is like three streams of transaction fees about 70% of that comes from Priority fees um so when you look at that $30 million that came in the front door so what users pay to use base and then look

at where it went coinbase got 23 million of that so roughly 23ds optimism Collective got $4 million through their revenue share agreement with base for licensing the op stack and and being a part of the super chain more importantly um and then ethereum got $2 million so ethereum got like what one one six or one uh 160th of the total and sorry 115th that's terrible math uh 115th of the total and optimism Collective got double the amount of value that ethereum got right optimism Collective took in more value from the existence of base than

ethereum did in terms of dollar value so then okay if you're were trying to counter that and said no ethereum got more value like where is it coming from because it will be increasingly less used as gas and yes there's a lot of eth on the Chain but what is it doing um okay like the hottest app on base right now is virtuals and it pairs its own Dex uh its own AI agent tokens with its own token not eth so it's like you just I don't know like I'm genuinely trying to pursue this because I want to find out what the value of driver will be and I keep hitting these dead ends and that's that's the challenge that I've been having yeah I think you you can maybe steal man for eth here a little bit um in that the potential opportunity here

is to have you know not just this one base statement but maybe there's maybe there's hundreds of bases right and they're all contributing a little bit to eth um and maybe they're not all contributing to the op Collective or coinbase um so that adds up to a larger sum that's not that doesn't really reflect the reality today the reality today is that um a large majority of all of the L2 activity is either driving on base or arbitrum um and it and it kind of dwindles from there um so I I agree with your point there Dan it does beg the question of um like does optimism and then you know therefore by extension coinbase like is the business model and revenue model of of the op Collective

greater than that of ethereum itself and like do we have a valuation mismatch here of op to eth as it stands today because of this picture have we have Kraken coming out with with Inc that's G to join um you know the op Collective as well as another L2 so um if they're able to scale in a similar way to base like does that further Propel this this potential view point I think that's a I think that's a stretch I think you're you're pointing a loaded gun at me no is a $300 billion asset and it has I think a lot of that value comes from the value of the lendin of the L1 specifically um again look at the amount of stable coins

in the industry and look at the percentage of them parked on ethereum it is staggering it is staggering that is that is a huge Edge um that it has it has still some of the best developers in the space that have built ogdy protocols that are still building on ethereum today uh the L1 is why I think it has this valuation I can't remember who said it but honestly they articul ated in such a beautiful way that is like exactly how I feel about how these assets are valued today is basically like what is the market opportunity here and it's to be the smart contract platform that operates the global finance and global trade and the Tam of that is huge so everything is trading on their probability of winning that sector uh or their like endstate market share

of that sector right this is in my opinion this is why older protocols tend to have very high evaluation still is because you know you rewind to that era and when ethereum launched it was the only shot at like getting exposure to winning that Tam um and then you know competitors gradually came online and it's like okay like even if they only have like a 2% chance at winning this like this thing's going to be worth a lot uh so I think they have these like lingering bloated valuations because that's sort of how all these things were valued and that's like not atypical I don't think of uh you know Venture investing on on these startup companies that are like trying to break it into this very large uh Market um so I don't know I think that's kind of the

the PC I'd push back on is like yeah like this base specifically uh doesn't look great for ethereum value acrel and it doesn't look great for eth moneyness but and it's great for optimism but um optimism does not have a lot of what ethereum does have on on the L1 yeah I asked a very intentionally loaded question here um I wanted to lead into this data and then let like sort of postulate about the future of ethereum um if if we're thinking about this continued road map of driving more and more execution and even assets onto l2s and away from ethereum does the future picture at some point look drastically different than it does today where maybe

there are hundreds of billions of stable coins and still a large aggregate amount of value and and trade activity occurring on the L1 does the future State look different from that and if it does like what's then the impact of you know the the L1 to L2 relationship you know Daren what uh what L1 improvements are we going to get in pectra imp pectra L1 improvements we're not really seeing any um unless yeah I was I was going say unless like uh gas limit increases come but that's not coming in pectra that's just a product of like validator voting um yeah so no improvements for the L1 execution on that front uh one more

question was wasn't there something about block times getting shortened that was up for discussion and potentially being included so a what happened to that and then B what is uh pectra timeline pectra timeline is still um so I'll answer that backwards pectra timeline is Q2 um end of Q2 for this year and then um as for the shortening block times right um I actually don't know um let me find that really quickly in the meantime I just pulled it up uh data always is my my go-to person on Dune for uh eth Centric data huge fan of their work and right now 26% 25% of uh blocks in a day are

signaling for an increased uh gas limit and I don't know you need like a pretty material percentage of the network to be opting in to actually drive a change here but if I just pull up ether scan really quickly go to the last block and look at the gas limit let's see I had of oh here we go yeah so it's like just above 30 million so 30 million 30,000 so I know that's like what 10 bip increase in total gas so yeah 20% of the network is oping in but there's probably a few large players that are dragging their feet there I don't understand how that number isn't going up more quickly like like there there needs to be probably more of a

fire behind them to get this up and it's just a I think it's a I think they're trying to increase it to 36 million it was originally 40 it was the original push but then they found some kind of bug at 40 um which they need to fix so I think that's why the new Target is 36 which kind of shows the importance of client diversity as well if that if the 40 million had gone through but I mean this this increase in the gas limit and you know pivoting to da and the evid eventual reduction in fees whether it coming from da or base is kind of why I'm on the camp of we need to lower the staking rate in ethereum um because it's

you know you don't there's minimal viable issuance right we don't want to be overpaying for security and every single other blockchain forever has done fine let me let me not exaggerate and say every single one but most of every single major one has done fine with much less um is want much less security and and so I I I I don't see why ethereum can't do the same thing and there's also proponents saying it could help with um with LSD market share which is another issue that ethereum has um through their own fault of trying to be letting the free markets um have their way I will jump in here and say that like um well two things one for reference uh the EIP for lowering block

times from 12 to 8 uh this looks like it's largely been like abandoned the last update was back in October so I would just assume that this EIP has been like completely abandoned it's 7782 for anyone's reference um and on a side note here going off like Mark's point I I would like to see something similar to like uh the difficulty bomb I think uh implemented for like the gas limit in some way or just increasing the gas limit I'm not sure if it would be possible to do something like that but like so for example here the um blob limit and blob Target is going to be increased on a schedule uh per like EIP

7840 and so I think putting some sort of schedule um that would at least schedule like a vote or something to be pushed to validators to raise the gas limit um might be something that would be beneficial to the to the network although you know that would still run into the same problems as right now which is just that like not enough people are signaling that we should like raise the gas limit it would still probably be pretty slow you need something that's a little bit more like quicker like a like a snap change I guess but then you have the push back from like the different client implementations right so we'll see it's funny that October was when it was last edited because that's around the same

time you know November is when the elections happen and num starts to go up and everybody starts to stop caring and I think that's around the same time where Marx Resnik also stopped caring about ethereum maybe behind closed doors but yeah I just it's just funny that October is when that happened does this just turn into a much stronger like push and pull kind of discussion um around both both or either raising you know blob targets as well as raising gas limits because I think from like if we think about it from the economic standpoint um we've just talked about kind of the how much value is driven based on the execution that happens either on the L1 or the L2 um so

obviously there's an ongoing tradeoff if l2s continue to scale you know at a greater rate than the L1 does um and you push more execution to those places and then drive a lower fraction of kind of that Revenue running back to the L1 is are we getting to a point here where like you know I think at for a time there was this gung-ho mentality of like you know make a million l2s let's get blobs let's scale the heck out of blobs like do tons and tons of them um and I think now this opinion of raising the gas limit on the L1 and raising potentially even getting to this conversation of maybe even raising Hardware requirements um for L1 validators like has come more into the

fold since this has become a topic so like how how are you guys thinking about that like this I the way I see it is there's this push and pull happening where you know you see L2 is doing well and and you know generating a lot of value for themselves and generating less value for the L1 so it then drives this sort of response action of well maybe now we actually do need to scale the L1 uh I'm going to share a screen here and show a chart of why I don't think the whole idea around a million l2s makes a ton of sense so grow the pie does a great job of curating data for like most l2s um I don't think it's only rollups because like I don't think orderly Settles to ethereum at all but I could be wrong or like Manta Pacific

like I'm pretty sure like I know they use celestian same with derive so I don't really know but honestly it's not even a material portion of the analysis so we're going to include everything and right like the huge blue section of this chart is bases market share of total transaction fees and at the current as of yesterday uh 75% of all transaction fees across every L2 in uh tracked by grow the P which I think that's the best source for L2 specific data um 75% of that from is is BAS so there had always been the idea there's going to be a power law effect play out um and it's happening like very quickly and yeah Bas is just becoming a black

hole and so you know if you're a developer you have an app that you want to build like where are you going to launch it if you're you want to build on nl2 and that's like you've decided you know you're basically picking between Bas arbitrum ZK sync uh maybe maybe Linea maybe World chain has it like an has its own uh uh sort of incentive to come build there because of the whole idea that you know there's only people there and less Bots that could be interesting for a developer but largely where is all the activity happening is is generally where you're going to want to be and that kind of becomes this uh Snowball Effect where it keeps growing as more activity moves there hey everyone we'd like to give a special shout out to the sponsors of

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for ethereum is if is if like all the major financial institutions start to launch their own l2s and with you know there's good interrupt it's cheap to run it's the it's abstracted away you know and that kind of thesis we still have to see if it's going to play out like it's one thing for base and Kraken to do it because it's native to crypto audience but you know we we see I think DEA bank is launching on zky elastic chain um what kind of traction is that going to get we'll see like you know there is that F Financial overlap and but there's also going to be some kind of regulatory uncertainties you know I can I can kind of see that working in a sense maybe if there's multiple of them all across

every major Bank in the world assuming they don't want to launch in any of the chain which is a far stretch um and then secondly there's also maybe what non non-financial l2s like I I saw that um Sony is partnering with um ASA a poke former polka dot chain and they want to launch an an L2 through a JV called sonum which I haven't heard anything about in a a in quite some time but you know like but even if these chains start to launch and they start to do meaningful have meaningful activity like in the next two years ethereum still might not benefit because their d capacity isn't enough red because we're seeing like chains like Eclipse move to

I mean not move but choose uh Celestia as their data availability layer because ethereum just can't handle it because they're prioritizing like keeping node requirements low and you know I I assume the same is going to happen with like movement and some of these other ones just because not because they don't want to but just because it makes more economical sense and Technical sense to move so even in that kind of scenario uh where we do get a lot of r UPS like is ethereum even going to capture capture da fees from that when they can't even handle the capacity yeah I think that's absolutely a fair point um eclipse is a very unique one because it it can't fit on ethereum it there you

know based on the three today and ethereum is scaling is absolutely scaling it's da there's no question to be had there right uh even in pectra Darren jump in if I'm wrong here but like there is a increase in the blob count I think it's a double on both the Target and the limit yeah so or I was just going to say it's gone from three to six at for the uh Target and the limits going from six to nine okay okay so not a double on the limit got it um so yes there's an increased uh capacity uh for blobs coming and that will continue to happen right but Celestia is moving faster and I think their endstate road map is a more throughput than ethereum with P ass don't quote me on that but I believe it

is uh one gigabyte blocks one second blocks I think that's just more than what ethereum is targeting so the idea of the whole premium da thesis like that's complete nonsense to me I don't I don't think things are just going to willingly pay more than they need to um and so this the cost side of things doesn't doesn't make sense Celestia is still like 90 plus perent cheaper than using ethereum blobs um so like AR will never switch ZK sync will never switch Bas will probably never switch but you could see a world where that's not the case um yeah thanks for pulling this chart up like the cost for one megabyte of data on ethereum blobs is somewhere in the neighborhood of like three to4

right now and Celestia is like 10 cents uh 15 cents and there you can also see the change in volatility and this is a log scale because you would see you wouldn't even like really see the pink line which is celesia on this chart if it because call data of course is so expensive um so it's like where I think the throughput we're seeing on robs today is not representative of what they will be in the future I think eclipse is a very good taste of that um e eclipse is doing they're doing like a tap game so this obviously low quality activity it's not like high Financial D5 value or anything like that uh no shame to them I think that's interesting right you can run

super you can run consumer applications that are very low cost on on Celestia rollups and you can't do that on ethereum that's like an an advantage that Celestia has over ethereum today so I think you're going to see a ton more da consumption and I think it's going to be very cheap and I I don't think ethereum is well positioned to capture a lot of it so for for what's worth or I guess to put in perspective uh just pulling this up now Celestia is Mammoth mini like testnet and so again like test net this is um this isn't like a main net performance or anything um they saw like 27 um uh I could be wrong megabytes of per second for for da whereas ethereum is targeting 32

megabytes per block or and that's on an unknown time frame so that could be like two plus years out um so it I won't say that you know the da Outlook is um bullish for eum because I don't think it is frankly um but just wanted to throw that in there yeah just like it seems like ethereum's Community is getting pulled in all fronts ethereum is as well it's trying to maybe do too many things at once which is something I'm everybody's talked about for quite some time now and you know Henry Ford you know perfected specialization and Celestia is doing it for da Solana and SOI and doing it for execution so it kind of leaves a

settlement that will fuzzy blurry thing which is such a tiny portion of fees that I don't even know if a million rollups would make a dent for settlement for settlement um fees but I mean I guess that's the state of where things are now yeah I think it it hearkens back to your point earlier Mark that if ethereum had in shined a native rollup and then basically recaptured the value of that execution um by basically owning the sequencer itself rather than allowing coinbase Etc to do it to go and do it themselves and capture that um you know they kind of they basically have missed out on that opportunity that in that way and and like Dan had pointed out almost all of the activity today is is

happening on base like you could have realistically just made one roll up and scaled the heck out of it and captured basically all the activity that you needed to um and their I mean I think their basis scaling targets are pretty ambitious far greater than where they're at today um I think their North Star is they want to be doing you know I'd have to go back and look at the numbers but um like a gigabits per second in gas or something along those lines or or Giga gases per second um yeah Giga gas per second which is significantly higher than what they're doing today uh for comparison I'm pulling this up but they're at about 20 M gas per second so

like that's another 500 times higher so yeah they're trying to is is the tldr is it really impossible for eth to sorry 50 times higher I'm doing horrible math today is it impossible for eth to do like not necessarily a 180 or like just start to I guess double down in some ways on like the native rollups because I don't think that's like that far of a stretch for ethereum it what that really means is just like maybe putting those like minimum node requirements in place right or maybe just like letting or pushing that EIP through to like reduce block times right and that would already just be a massive benefit to like the native rollup scheme at the

same time there's already there's still like the massive amounts of liquidity on the L1 which like those could take advantage of right so I don't think that's that narrative is entirely dead quite yet I I agree I don't think it's too late for ethereum to do it technically speaking like it's you know you you can implement it from a social standpoint I think it becomes a little bit trickier because and here's the irna right I mean they've for four or five years now they've you know purported this rollup Centric mod road map and a bunch of teams hundreds of people thousands of people and teams have built their rollups VC money funded and based on this Vision right and then

for ethereum to come and have their own native rollups increase some of the um Hardware requirements as well almost like rugging this this community that they've that they've L on for the past five years but but that being said isn't you know I'm thinking isn't ethereum supposed to be credibly neutral like why why are you favoring these these people like you pivoted away in your road map prior when it used to be execution shotting and you pivoted to the rollup Centric road map you know for whatever reasons the free market element of it and because you couldn't maybe they couldn't solve execution so they wanted to push it off but now that you markets have essentially done the hard work for them I think if they were really

credibly neutral ethereum would create some kind of enshrined roll up you know or at least put it on the road map in a sense could be a zk1 because ZK Tech is coming I mean cyc's sp1 is letting any op stock roll up change to ZK roll up with you know like a few lines of code so it's I mean it's it's definitely technically feasible it's whether that we have you know whether we have the actual push to do it and I would love to see that even if it's even if it's analogous to the 2017 Bitcoin Block Wars like let's let's get that on like let's let's see what happens when you actually have an ethereum with a native rollups that that's what I want is does this discussion is this driving a fork in the

community in the future Mark is there some inevitable outcome here where there's some split I mean we're we're I think we're we're getting in maybe into some early Innings of that right with some some people going to different ecosystems over you know over about about scaling the L1 or or scaling um consensus and L2 I think uh people leaving for other chains that are pursuing the visions that they personally more align with and want to pursue is like the 2024 2025 version of like a hard Fork uh you don't need to like Fork the whole network and because that's just so damn hard uh especially now these systems are larger um I I'd be very shocked if we ever saw something

like that again it's that's just you're really it's like a true 50-50 split nobody's budging um I just watched jury number two on Netflix and it's like you know we're gonna we have a hung jury and that's the only the only path forward is not a retrial but like a hard Fork yeah I I don't see that happening um in the case like resin's a good example here where he had these ideals the community that he wanted to build on was like pushing him out and he left to go to build on another chain um that seems like the much more realistic path of how these things progress yeah unfortunately I'm going to agree with that too because I don't see it happening and it would take like it would take you know unlike Bitcoin where it didn't really have a

face you know ethereum kind of does whether it's vitalic or the or certain key members of the ethereum foundation it would take like it would take a split there and they all seem very United in that front so definitely don't see that happening I kind of agree that the fork is more like losing Talent losing mind share losing fees more than than than pivoting or the chain but you know that being said the one thing that still keeps me optimistic about about eth is the ETFs you know like it's been out for I think it was it's six seven months now right and you know they haven't performed well but I think most of that has was was due to due to grayscale selling off right

but you know yeah thanks for pulling up the chart and you know if if you look at this trend like how does that how does that not make you smile a little bit as an eth holder right like it it's it's trending in the right direction we want to see more flows and especially under this upcoming Administration and more friendly regulations and perhaps Stak eth ETFs which they already have in um Europe by the way um you know this this this number can go higher like these flows can go higher and ethereum's on in there in the in its first full yeah yet in terms of ETFs but it's I think the launch so far puts it in top I don't want to misquote but I think it puts it in the top 10 or 15 most successful ETFs in terms of um inflows just in flows and

it's not the full first year yet so I'm obviously um kind of being a little bit naughty and like extrapolating there but if by the time you reach a second year and these things start to become more of a passive flow like it you already see this with like large retirement funds are allocating a certain percentage to the to the ETF we see that from the 13 F5 ings like it's just going to become another natural part of it especially especially when in these larger investors tend to make allocations on a market cweed basis it maybe that's a good point to make here is or a question to ask um has has e has the timing of the ecfs kind of coming coming onto the market and eth existing as still sort of the the key

largest um you know smart contract and like World computer asset I guess if you want to say the center of this largest ecosystem within crypto today um does it does it give it a little bit of like a you know the the road map and these issues we just discussed don't matter too much because we have this ongoing potential bid in the future coming from passive flows that maybe do or don't care um yeah I mean I I definitely think so I mean six months of the ETF including including outflows from grayscale ETFs already hold more eth than the l2s do right I think I think it's like 2.5 2.6% in l2s and all

the l2s not tvl like on the bridges and it's probably like 3% maybe closer to 3% on ETFs and last in six months like ETFs are doing better a better job at scaling eth than the l2s are right e the hey you got in trouble for this with for this once what do you mean by scaling eth like Distributing eth amongst amongst holders right not not scaling it in any kind of form not SC right not not putting it in tvl just scaling eth the assd which which is what l2s are doing anyway right I mean it's you know the more just having more eth on l2s doesn't in of itself scale the asset or make it money or anything it really depends on

how it's being used and you know I use you know when I first learned about ethereum it just kind of clicked to me I was like oh you know in my early days I thought this is kind of like an app store Global World computer app store right and I was just like there's no there's permissionless anybody can build anything on it it's t in complete you know I kind of I kind of got it and as the years went on I was like why can't people see that you know like these smart contract platforms have such a have such a benefit to the world and I was like oh one of the bull cases for eth was just to be understood you know and now I kind of think one of the bull cases for eth might be traditional institutions ignorance in the sense that

they don't know that there's other assets other smart contract platforms um that they can invest in because you know it's only Bitcoin and ETFs right now in the US and then when I talk to some of these larger TR traditional institutions some of them which I used to work for and have colleagues in you know they they would me I would talk to them about Bitcoin they know about ethereum now if I mention another another smart contract platform like SOI or salana they've never heard of it right and which is kind of like wild it kind it's kind of like when everybody only knew about Bitcoin and didn't know about ethereum but now ethereum is coming into the forway and I think the ignorance of the rest of the market and the fact that none have an ETF yet and ethereum's market cap was actually a

good benefit for it for these flows yeah I agree with your analysis there I'm very excited for I think it's February 14th is the deadline so actually a month from the recording day here uh to file the for uh I think it's form 13f that large funds have to disclose their Holdings and I'm very very curious to see who's buying this up right if you get you know large funds that are known for like buying and holding for long periods of times that is incredibly bullish uh from a perspective of like who's wanting to buy and hold this asset um so that's kind of what I'm hopeful for from this and yeah I think we touched on this a second ago I don't

want to Pivot too hard but like ethereum Advantage is what it has going on the L1 and I'm like I'm finding out live that Darren's Point earlier that they're not including the block time decrease uh in pectra that's like super that's that is super disappointing to me um I know they're also doing the blob increase I think that was the push back on look we're adding uh we're putting more load on the validators with The Blob increase in terms of the bandwidth they need to consume let's not also shorten the block times which like I gu it that's a smart move to make but at some point you just want to like ship some things together that create a more holistic package of what the offering is and how it's

improving Darren wouldn't Max EB also decrease the bandwidth requirements I guess so actually I didn't think about that really yeah but that'll take time right like that's not like a silver bullet validators need to like it needs to go live and then they have to collapse um there many validators into one so I'll give them that too also I'm curious like to what extent that would help actually I'm not sure how you'd quantify that it seems like um the big question here is are you know the flows that we've seen through the ETFs today you know the expect maybe the guess the Guess of the estimate there is that that is still largely a retail bid from people who now have the ability to

buy it within their you know their 401K accounts their various other accounts that they previously could not buy this asset Within um that's sort of unlocked those funds to also be used as purchasing power and if you know if they're already big eth Maxis then of course they're going to want to buy some meth um in those accounts as well I think Dan you highlight the question here is that um are we going to see a similar sort of bid from large corporations trafi institutions to um maybe begin accumulating this asset on a on a regular Cadence um like the sort of inklings I think we're starting to see um around around the kind of Bitcoin narrative as it stands today who is ethereum's Michael sailor the burning question I me it's kind of a

joke but it's also true right if it's truly a store of value that's that's what people should be doing with it uh who's going to be the El Salvador who's going to eventually be the US and talking about you know I'm I'm a Bitcoin fee truther I think the fee model is broken and if fees do not rise to offset the loss of continued issuance decline then there is a demand problem for Bitcoin and like that is that is acknowledge the existence of that problem however you know the the push back there is you know nation states will own Bitcoin and they're going to be willing to mine it as a loss as a cost of storing their wealth in through time and it'll still be profitable for them to do so it's like a fairly ridiculous claim until the president elect of the United States in

America the most powerful economy in the world says Hey I want to buy this I want it on the balance sheet that's a ridiculous claim too so if it does happen like Bitcoin achieved its store of value piece and like it'll be very very hard for it to lose it so those are kind of the ridiculous laders steps that need to be climbed if you do want to attain this store value moneyness like thing like again for a smart contract platform something like Global oil trade being settled on chain that is a ridiculous claim if it does happen I can assure you the valuation will transcend cash flows um so yeah I don't know I guess and one last thing on the ETFs I guess is people point to them and they're like oh yeah that like price is going to pump

because ETFs to me the ETFs are more like a can of gasoline uh sitting there by itself there is no fire but if you pour it on the fire you get a bigger fire uh so the ATF can't be the it's again it feels like the circular thing same as the collateral conversation we had earlier it's like what is going to drive the value you've got all the tools in the world for things to happen once the value is driven but what is going to be the Catalyst that pushes the immovable Boulder of why this thing is valuable that's the question that I struggle to answer at the moment yep I think that's a great Point um without demand desire from the market um for these assets you don't end up in a world that has ETFs selling them to people um

which just opens up an additional kind of pile of cash that people have that they can now spend um on these assets as well that maybe they previously did not have you know accessibility um into Bitcoin or eth um in the sort of in the world that lacked um the relevant ETFs so yeah I think I I agree with your point there any uh I think that was a great discussion any last big takeaways it can be about eth it can be guesses on who the future Michael saor of ethereum is maybe it's Donald Trump um you know him and the team they're building um some things on eth he's done some nfts uh maybe maybe the the thing that's not been discussed yet is is there a

strategic reserve of of eth in the back of the mind after the Bitcoin one I guess um for my view on eth here I am personally not super I wouldn't say I'm super bullish on the whole eth's money uh situation I haven't really seen um I haven't really seen it built out on that front and at the same time I am not bullish on like the The Da road map or I suppose like the rollup road map the the reason why I think that I'm bullish on eth is because I do genu L believe that they see that they're doing something wrong and they they have like an idea that they need to change something I don't think they've executed it properly like looking at like the beam chain like

upgrade announcement from like uh devc con there's very clearly like this idea that like okay we need to like step up to the plate in some way um and I suppose I I I genuinely believe that the foundation will actually like recognize this in some way and pivot on their road map eventually I think the beam chain was like a prototype of that like of course like a fiveyear timeline for an upgrade that would like reduce block times like from 12 to four isn't that great but I think it's a start um that's really just like my biggest like take from from um all the recent developments so for me the only thing I'm looking at

the only thing that's closest my vision or hope of native rollups is based booster rollups which is kind of a version of based rollups which mimics the L1 State and expands the storage so that that way you know you deploy an app on an L1 and it it it automatically exists on every single booster rollup and you know you can the booster rollups automatically have interrupt there's no need for like a Shar SE I mean a Shar sequencer is ethereum and then you know because of the storage because it's on multiple rollups you can get some benefits of paral paralyzation as well as just not having just tapping into the liquidity the

shared liquidity of the L1 through these base rollups through these booster rollups I should say that that's the only thing I'm keeping my eye on and I think Tao is building out one called gwth that um that I'm hopeful as of of for its success but the only the the glaring issue with that is what are the incentives to build these things right um and that has yet to be yet to be seen so yeah show me the incentive I will show you the outcome love it great app guys great discussion um thanks everyone for watching and we will catch you next time see y'all thanks again to scale for sponsoring today's episode if you weren't already planning to make sure to go check out scale's ecosystem explore

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