Why the Next Ethereum Upgrade Will Ignite Layer 2 Ecosystems | Analyst Round Table

Transcript

Denon is set to go live on eth mainnet on March 13th and this is a huge moment for the ethereum community who has just been bag holding while everything else rips for the past few months obviously e 4844 which is going to introduce data blobs and that's going to kind of set the foundation for dank sharting in the future uh I think L2 tokens are kind of primed to rip off of this because transaction fees are going to go down significantly and hopefully you see some applications arise that will just bring on a whole new wave of entrance to the LTS what's up everyone welcome back to

another episode of zerx research March is just around the corner and I want to make sure to give you a quick reminder to not top tick your prices of your D London tickets if you use codes 0x10 at checkout you can lock in a 10% discount on your ticket don't miss out on your chance to get ahead of the curve I'll see you in London what's up everyone welcome back to another episode of zerox research today is Monday February 12th this should air on uh Wednesday February 14th and today we are joined by zerox pibbles and Matt from the blockworks research team to jam on the latest Market happenings ren do you want to kick us off with kick us off with some governance updates yeah for sure so first is an interesting tweet that caught our eyes this morning on sort of like the effec

effectiveness of the arum STI program so elbarto crypto on Twitter put out some interesting statistics we'll link the post the tweet in the show notes later so overall the program drove a $400 million increase in TV and it basically cost the Aral $54 of incentives for every new address and overall the program resulted in roughly 27 million of additional free Revenue which works out to $1 off fees for every $2 in AR um so in VC then there's this thing called LTV and CAC LTV stands for lifetime value CAC stands for cost of customer cost of acquisition or customers

customer acquisition cost right so at least just for this arbitrum s program it has a LTV the CAC ratio of 0.5 which means you're kind of losing money you're spending more money to acquire a customer than the money that you're making from a customer and in terms of arbit from the only money that you're making is sequence of profits right normally VCS want to see a ratio of 3x of the lifetime value to to the customer acquisition cost so overall I don't think this was as effective as individuals thought but that's like a relatively superficial statement right like it drove an increased number of TBL you don't know how much these additional new addresses that came in will basically help Drive

future profit so it kind of remains to be seen anyone have thoughts around the incentive program design and perhaps like what kpis the Dow should be incentivizing for optimizing for in the future I guess one thing that comes to my mind is that this was an experiment and it was looked at and it was posed in that in that light um so even though maybe it didn't have the success that it could have I think that there'll be a lot of good Lessons Learned for future incentive programs so that's definitely another barometer or like important metric to take into account which is what lessons can we learn for future incentive programs the arbitrum DA has already actually voted and passed a ltip long-term incentive program so they'll

be giving out way more incentives in the future I just think it's important that that program takes into account the Lessons Learned here and if it manages to do so successfully then this can be looked at as a win um of course you know spending more money than you actually the the metrics that you uh POS are not looking so good but at the same time I just think that's another important thing to keep in mind I'd like to see the rewards actually vest over 6 months let's say and then you can only claim that month's allocation as the user if you were active on arbitr from that month just so the value of the customer over the lifespan of the incentives that you paid out is a little bit longer I think there's a lot of room for improvement on incentive proposal design and uh

hopefully like Matt said they incorporate some of the Lessons Learned into the long-term incentive program that they uh just passed on the Forum the other day yeah and if you compare it to the other competitor you look at optimism's retroactive public good funding and like you see like synthetics and vrum got a little bit of rewards but then you see a lot of the op get wasted on random initiatives like I'm going to translate the optimism white paper to Korean pay me $250,000 so it's like if these are our two models at least arbitrum is you know a little bit more successful and useful for the ecosystem yeah I definitely agree with

you there all right next up on news we have Sal of fee Market designs it's been getting a decent amount of attention lately so for those have that have been listening salana of Fe markets are a little broken today not completely broken but relatively broken especially the isolated fee markets so there's a few things that pay here sana's base fee is fixed per signature which means that no matter how many compute units or in ethereum land gas your transaction users you pay the same base fee however priority fee are priced per compute unit requested but 50% of it is burned and the other 50% of it is distributed or passed on to the validator ER the

scheduler today or like the default scheduler implementation also has some wonky issues with it it doesn't work as well as it should and it results in sort of transaction placement or inclusion being pretty non-deterministic and add in some Network Jitter and it basically means that a lot of the time you don't pay for for what you get in terms of your transaction being included fast enough or at like a high enough part of the block this is being partially fixed in 1.18 but overall there's still an incentive spam right uh some statistics from jto is that 58% of computers Wasted by failed arbitrages and 98% of Arbitrage transactions fail and for

example 50% of priority fees being burned means that out of protocol payments are encouraged so there's a few problems at the core here one is inefficient compute unit usage and request because different compute units sorry different transactions carry different Compu units and those cost the same base fee and the second one is it cost us to write lock accounts when you sort of write a transaction on salana you need to specify which accounts you are touching or if you're more familiar with ethereum which pieces of state that you want to interact with but this doesn't cost anything and and so you could quote unquote dos or spam salana just by sending in infinite infinite

number of transactions at right lock accounts so for example one attack Vector is Right locking a Oracle update account right if you keep on right locking that and the actual Oracle update doesn't get priority then the Oracle price feed basically would never update so there's one ongoing proposal that's very much being debated right now and it's called SD 110 or Z 110 and it's basically an exponential fee for right lock accounts it increases the fees in a targeted manner over time to reduce the incentive to spam and how it works is it basically proposes tracking the exponential moving average of each account's compute unit utilization per

block and the cost of right locking an account would increase exponentially based on its respective trailing compute unit utilization so it's kind of like EIP 1559 but much more granular for specific accounts and every single account that exists on salana however the fire dancer team doesn't really like this proposal in this current state and they're going to draft the counter proposal but overall I think the main takeaway is that salane markets are pretty broken today there's a lot of active debate and discussion that's ongoing but we haven't found the optimal solution yet and I think salana will be forced to find a solution in this year if not when users 10x when activity 10x

is something will likely break that was a bit nerdy but anyone have any thoughts it it kind of reminds me just of back in the day and it feels like a lifetime ago but before EIP 1559 like you'd constantly log into metam mask and and have transactions get dropped on ethereum that's a lot how it feels like interacting with salana today when it gets pretty busy it's tough to get a transaction in so I think it's just a testament to the fact of how novel salana is and there's still a lot of iteration to be done but I'm definitely looking looking forward to like a more baked out fee mechanism because I think it'll make the chain like 10x better yeah I definitely see both sides of it which is on one side you know Salon is a pretty nent network uh they're trying to like you said novel

it's trying to achieve a lot of new and Innovative things um so you know facing difficulties early in its life cycle is not only expected but uh it's 100% likely like that that was going to happen um so I do think you know Salon is a great Network I think it's really has a user experience and even though sometimes in times of high congestion it gets hard to get transaction in uh hopefully and likely it will be fixed on the other side of that um even the solutions posed today aren't you know encumbers don't fix the whole problem and they'll likely be more problems in the future I don't think it's like as simple as just adding um you know a fee that exponentially increases depending on the number of right locks that this account has uh put

out like for instance if I'm understanding correctly you'd potentially be able to just sible via many different wallets opposed to you know doing it all from one wallet so uh like you know on one hand Salon is innovative and nent and early in it's life cycle and on the other hand these problems will likely be difficult to fix and continue for you know uh the foreseeable future yeah agree there right next moving on to bitcoin l2s Sam or Matt do you guys want to take this or I can take it too sure there was a interesting tweet or it was actually a portion of a Twitter space that Eric wall uh put on Twitter where he basically is explaining you know what something actually needs in order to be a Bitcoin L2 and why uh

by his definition and I guess by many thought leaders definitions anything that Launches on top of the bit VM is not actually an L2 um basically his main point and the way he posed it was because the bit VM Bridge does not have permiss it's an optimistic Bridge uh so basically it has a you know you have a reliance that at least one validator is actually acting honestly and flagging uh you know malicious transactions he says because that's not permissionless because there's no ability for anyone to go be that one validator that one honestly acting validator it's not actually a uh you know a roll up or an L2 by his definition I think really what he meant even more so than that was that

there's no ability to exit the system without that one honest actor so for instance arbitrum is the exact same in that it does not have a permissionless validator set that allows you know there's a whitelisted 20 validators who are able to to create these fraud proofs and say a transactions malicious so very similar in that regard but the difference is that you have uh forced inclusion and an escape hatch so you actually have the ability to get your Bitcoin out of the system despite um you know this this being a fact of the the way the protocol is set up so it was a very interesting conversation um my main takeaway from it is that nomenclature is a big issue and I think we we already all know that like I think this is most exemplified when we're talking about tvl

and rollups for instance when I think of tvl and Roll-Ups I like to think about it as L2 beats definition which is the total value secured of externally bridged natively bridged and natively minted tokens but if you look at defi llama's definition of l2b it actually has nothing to do with you know the value secured by the rollup and rather it's all about you know the total value in defi smart contracts Lo on on total value locked in defi smart contracts on the rollup so you know these are just completely different metrics they're both valuable but it's important to understand both and likewise the definition of what is a rollup is you know very up in the air today with a lot of controversy and you know people not really understanding uh you know the differences and the nuances between what is a rollup so of course this is going

to be a problem with these centralized systems like who defines what these what this nomenclature actually means but it's just you know a crazy show and makes it really really hard for someone who's not so deep in the weeds to understand it's even difficult for you know all of to understand I think yeah God knows that 95% of crypto users don't understand the trust assumptions of ethereum based rollups so I think for Bitcoin it's probably like exponentially worse and I do think at some point that you're just going to see like a really big rug or like something goes wrong on a bridge contract and everyone stuck there there's no Force inclusion and like a huge amount of TV or assets are basically gone forever I agree Ren we can also drop that uh the link to the space in the in

the show notes and as well we'll drop some notes on uh basically different types of pro proving mechanisms that would need to be enshrined on bitcoin via soft Fork um into the show notes as well I found it pretty interesting but for the next news update we've got informal systems on Twitter today on Monday announced an integration between uh bab ba I always butcher this bab Babalon there we go and the cosmos Hub and it's essentially enabling anyone to delegate Bitcoin to a validator of a consumer chain and the consumer chain can actually set what percentage of their security is uh backed by Adam versus Bitcoin and that yield will be paid out um actually I'm not sure if that yield would be paid out in Bitcoin

now that I'm thinking through it that wouldn't really make a whole lot of sense but nevertheless kind of an interesting spin on the consumer chain narrative over in the cosmos ecosystem not sure if you guys have any thoughts here I think it'll be interesting to watch how much it gets adopted because one of my main questions is how much Duo token staking will be utilized in i l so rather than a middleware a protocol whatever being restake purely by sorry being secured purely by restake Eve a protocol can choose to have a dual staking model where it's partially secured by restake and then partially secured by their own token and I think the main reason you would want that it's basically you don't want like all of the

value of curo inflation going to like resy if you also want some of that to go to your own token so it'll be interesting to see if anyone adopts like a dual token staking model do you think would the in your head in your mental model would dual staking be to secure different parts of the protocol or ecosystem or would it be uh you know two different assets that are both able to be slashed if there's malicious actions um in the like one part of the protocol I think at least for me it would be two different assets securing the same thing or like the same components of the protocol however I'll have yet with that I don't think that we're going to see a

lot of like dual token staking models I feel like it's going to mostly be either if like you use I to secure a protocol and at some point you're like okay I'm going to switch I don't need this like share security or like food security anymore I'm going to switch my own token I think it's a good move though because obviously Adam hasn't performed super well in the the security of it is directly tied to the market value at stake so I think having I guess like an exogeneous collateral in Bitcoin as a slash asset is is definitely makes the consumer chain value prop a lot stronger for the next news update that we got I got vertex is uh has been teasing Blitz I've been talking about

vertex for quite some time so I felt the need to shout this one out but they have an order book decks coming to blast which is the yield bearing L2 by Pacman and Co and basically I'm not sure what the relation is between vrtx the token or vertex the protocol devs and blast but the fact that they're kind of hyping it up on Twitter makes me think maybe they're intertwined in some way so I found that kind of interesting and then one other update coinbase earnings on the 15th I believe that is Thursday this week so definitely know a bunch of guys on the team are excited about that to see what the numbers come in at I think everyone generally thinks it will beat analyst expectations but I guess we'll see um not sure if a coinbase run as

well would lead to kind of like a base alt season I think a lot of people are thinking maybe that's a way to get beta exposure to coinbase equity but uh nonetheless definitely excited to see those numbers now we'll have a quick word from stride thanks for our fantastic sponsor dydx all right guys for this week's dydx segment we have visha co-founder of strid labs the leading liquid staking provider in the cosmos ecosystem so stake dydx be to need launch can you explain a bit about how stake dydx works yeah absolutely um so dyx is super interesting and it's a littleit different than other um lsts uh so the way uh sddx works is users will comment with their DX and uh liquid stake it so

what this means is they'll assign some transaction on the DX chain so on liquid stake um those funds will then get automatically sent to the stride blockchain and automatically converted to St idx which is to the user uh on the back end what happens is the dydx stride will send it to an account that it owns on the dydx chain and when we say mean by owns uh the way stri works is kind of unique it's not like this account is owned by multisig or a validator or something like that it's actually owned by stri blockchain so it has the same kind of trust properties as any sort of POS chain in for stride it's backed by billions of dollars Economic Security so it's it's a very kind of trustless and decentralized custody of these tokens um after stri gets to thex goes and

mistakes it on the dydx Chain but here's where it starts to get a little bit interesting um dydx uh as some of you may know doesn't give inflationary Y in DX token rather it streams usdc revenue from Traders and users of the DX protocol U to its stakers but sride needs to convert this usdc back to dyx to help to restake it and allow for compounding all sorts of benefits and the way it does that right now is I think pretty novel so it takes that USC and trustless sends it to osmosis another account the blockchain owns and then we automatically kind of uh trade that usdc for dydx and does this it batches it up so it only trades once

every hour doesn't relatively small size make sure there is enough slippage um build be executing these trades converts that usdc to dydx then sends that dyx back to the dydx chain and rakes it and so from the users's perspective let's say I liquid stake one DX I get back one SX um the token doesn't rebase but through time as you get thec real yield the one STD idx can be redeemed or traded for more than one dyx so in a year for example one stdyx might equal 1.2 dydx that's a really clever design for a token that's you know usdc bearing uh for stakers so thanks for explaining that um how has adoption been thus far yeah it's a great question so we've seen

pretty good adoption early on for stdyx uh right around $3 million in tvl with around a million dollars in liquidity U we're expecting that we've seen pretty healthy growth on that so far we're expecting some pretty good traction going going forward to we have number of kind of really interesting Integrations with SX on leting markets to stable coins per markets Etc um as well as a few kind of custodial uh solutions kind of coming forward um and a pretty large stri airdrop for early users as well um so we' seeing good growth in that and we're expecting uh you know a pretty good growth going forward as well I think one thing that users are familiar with is liquid staking at least within the evm context but within the cosmos ecosystem right what benefits

does liquid staking bring for users and perhaps what are the current limitations yeah it's a great question um so some of the benefits are kind of the same as anywhere um with ethereum as well but you get um so for Cosmos chains there's kind of this fundamental trade-off that most chains have between staking yeld and defi um for ethereum it's not as large of concern because most of the kind of BAS currency is e which has relatively low staking yeld for most Cosmos chains they care a lot about the chain having really high Economic Security for something thex for example it matters a lot the chain has high security so that Traders feel comfortable trading on it depositing large amounts of collateral um and it makes that the chain kind of function better but in order to get that high Economic Security the chain has to pay

pretty significant yield to sakers and while all this help secure the chain it makes it really hard to use that idx salware so if you want to for example Min a stable coin against your DDX um or you want to deposit it as a collateral lending Market or or even use it on amm like Unis swap um you're forgoing this 15 20% seeking yeld that the idx token offers and it generally makes it so very little defi will occur on the token um but liquid staking you can kind of get access to this uh yield benefit um without having to compromise being participating Def and one thing we've noticed is um the rate of which LSS are used in defi is significantly higher in Cosmos than any other ecos system um and large part of that we think is because

uh you have this really high kind of staking yield one thing that's reallying pretty X is they have a really big priority on Mev um in particular from validators not doing Mev extraction so this whole kind of framework that we can talk about that D ex to enforce on validators about try to help encourage validators to not uh not basically M extract dyx users um but for a lot of the people who delegate stake on DX uh a lot of this is totally abstracted away from them you know they're uh Believers in the protocol beli in the product but not necessarily aware of all the politics of validators liquid staking helps do is kind of provide one layer of abstraction on top of this U and stri really Prides itself in having a really high quality delegation strategy but stri tries to take all this stuff into

account so how much contribution is the validator doing to the protocol is the validator m extracting is the validator running perform infrastructure um are they doing stuff with go to market um we can help kind of better the decentralization of uh the validator set two other kind of quick benefits just want to highlight one is uh for DX because there's usdc yield a lot of users might just want to hold their dyx position they're like hey really believe in DX here's the percentage as my portfolio and that they're not necessarily checking in every day or every week to do something with a usdc or to reinvest it uh but with strive you can just hold your St idx and you know exactly how large your dyx position is um and also leads to buy pressure on the dyx token from users who say hey I don't

want the usdc I want that to go right back into the that's token out I really believe in um the last thing and this depends on your jurisdiction um but with the uscc a lot of jurisdictions treat uh staking income as uh short-term capital gains or income or just like dividend income um but SX just holding a token that's not rebasing um under some jurisdictions it might be long-term capital gains so for users who want to hold idx for a long term um they can significally make it uh much more tax sufficient to hold the LST version um but there are some kind of limitations and two kind of big ones to highlight and we hope these will get kind of get addressed over time um but one is liquidity so if you're kind of a large user uh you want you want to hold like a

eight figure stdx position you want to have confidence that you can exit that position quickly in order to get maximum utility from the liquid nature of your Elsy um what we observed is over time liquidity will build up right now there's right around a million dollars of liquidity which is enough for most retail users but not necessarily enough for Wales but we hope that kind of liquidity will increase another thing is the ls is really useful if you can use it in duration so if you commit stable coins against it deposit as collateral and borrow against it um you know trade with it and lots of pairs on amm um we have uh right like six or seven Integrations for STX we're hoping to kind of expand that to the whole Suite of defi applications in Cosmos but also on ethereum Salon Etc Through Time wow that was that was awesome that

was like a ton of information we could definitely do a whole podcast on this so maybe uh sometime in the future we can do that but unfortunately we're out of time here we will be sure to link to uh strides documentation the site as well as your Twitter velle but thank you so much much for coming on thank you so much for having me really excited to ask youx and see where it goes awesome well let's get over to Hot Seat cool Throne all right moving on to our hot seek kous Throne segment I'm gonna throw it to Sam first Sam who do you got in the hot seek kous Throne this week I got Bitcoin ETFs in the cool Throne I'm actually looking at our podcast prep sheet and I think we've got all cool Thrones this week which is kind of funny but I guess

that's what happens when price goes up but anyways they collectively hold three and a half% of the total Bitcoin Supply which is uh over two and a half billions of net inflows since they launched and meanwhile Bitcoin just hit 50k today so that's kind of exciting uh there's this awesome dashboard from hild dabby which we can link to in the show notes as well basically shows um if the current Pace continues then 2.33% of Bitcoin will be funneled into ETFs each year which is pretty mind-boggling and a fun fact actually that I feel like a lot of people don't know uh the having block reward is actually equal to the four-year inflation rate so today that block reward is 6.2 5 so that means 6.25% inflation over 4 years or 1.56% per year so when the having hits in

April this year that will actually be reduced to 3.125 which equates to 78% of inflation every year which I kind of find like a fun fact um the passive flows in my opinion from the spot ETF approval was just massively underpriced like people did not think it would be that big of a deal and it's proving in real time to be a very huge deal uh Dan mentioned in our chat the other day actually just how his friends have been asking about Bitcoin ETFs and I've been getting the same thing so it feels like real like high signal interest uh and not as much like the retail frenzy that we've seen in in past years and on top of that we still have ordinals rocking there's a new project like literally every half an hour to an hour so that's definitely still going crazy and then we

already talked about Bitcoin L2 conversations picking up so I don't know I just think this cycle is going to be a lot of fun yeah I think something that's interesting is how underes estimated the ETF flows where and we foreshadowed this on our analyst hours call I think in December I think it was you Sam and me and we were just like people are still under allocated Bitcoin and they will stay under allocated Bitcoin for the entire run and like you're seeing that a lot in like the crypto Twitter bubble where people like all right this is the top like we're going to pull back now and we're like expanding Beyond this little bubble that we've lived in for 3 years on crypto Twitter and we're

fundamentally seeing something different that's just going to keep growing yeah I wanted to follow up there with some more personal data points my dad asked me about the ETF approval uh a few weeks ago I think and then he basically asked me like oh I've seen like prices going up which ETF should I buy and I told him like I have no clue maybe go like support one of the more Crypton native ones like bitwise if not black rock is always a safe option and my girlfriend too my girlfriend I think she thinks that I'm like becoming rich and so she's asking me like can I give you like a few thousand dollars to put in crypto I haven't took the money yet just because I don't want to lose it but

I have told her that if she wants so she can go buy a Bitcoin ETF um so I do think like eventually as price goes up even more right people will be like like I need to have like some allocation to it I don't want to miss out on like free money and I think at this point like everyone knows how much money that some people made last cycle during covid and so the Bitcoin ETF is a very natural entry point for a lot of these participants and even if like these participants like never come on chain I do think those flows are like significant not just from like institutions but also like just like normal retail I've been seeing that chart float around on Twitter a lot today though like Google search interest for the word Bitcoin and it's still super super low

like that I think that I don't love looking at that metric and putting too much weight to it but I do think it's a testament to the fact that not many of my normal friends who like don't pay attention to crypto like they have no idea Bitcoin is only 15 16 17K off alltime highs which is just kind of wild I also add on that I think I've seen some discussions or from like the Bloomberg ETF guys about two I'm not sure if this is a correct term like index funds or sort of like investment options and then they basically allocate between like 60% stocks 20 20% bonds um 10% Like Emerging Markets or whatever and like a few of these have started to include like a 1% or like a 0.5% Bitcoin allocation and basically the bet there

is that like people will allocate to these like Diversified portfolios which have some small percentage of like a Bitcoin allocation and over time like I do think the flows from there will be relatively significant I'm not sure how this information is displayed to users but if you did like a back test right of just like diversifi portfolio the one with like a one or like 2% Bitcoin allocation would probably wildly outperform like the one with like 100% SMP because that goes up like 10% on average every year so perhaps like that'll be kind of like a self-fulfilling prophecy but also like a little bit reflexive in nature I wish I could find the tweet I lost it but one of the vanck guys or one of the bitwise guys tweeted this morning

and was like I think it was like six or seven times as much institutional Capital was now exposed to to crypto as before the Bitcoin ETFs launched um don't quote me on that again it was just a tweet but it was from one of these reputable sources and I think it was six times it was like you know 1% of I want to say financial advisers uh you know advertised that they were allocated or their clients were allocated to crypto and I was sitting at like six or 7% if I remember correctly I definitely agree it feels like no one you know even if your parents are asking you like oh what do you think you know Bitcoin ETF coinbase stock like are these things that I should be getting interested in it's not at all all like a level of craze where your friends are texting you about um

you know some ghost chain scami coin which is what I would expect uh once we reach the Mania phase to me it feels a lot like it did when Bitcoin first surpassed 20K um in 20 or you know surpass 20K after uh the bare Market in 2018 2019 and you know for us it's like super exciting times are interesting there's lots of cool stuff going on lots of cool things being built but for the rest of the world they're like not paying so much attention yet and it's always interesting how the Mania phase doesn't really start until we're at the point of like oh this stuff's all you know the mindset of a crypto native at the point when Mania starts versus at a time like now changes completely as well so I guess just all things to be aware of and like keep in mind when you're

thinking about starting when to drisk and uh you know remove exposure to this base I just think it's wild too to zoom out and think like Apple's like a three trillion doll company and bitcoin's like a$1 trillion doll asset like which is you know 50% of the entire industry's market cap so I don't know that's just like mindboggling if you think about it and it's an entire asset class so I'm definitely excited for for the years ahead but Ren who you got in the hot seat cool Throne I got another cool Throne this week um it also helps in F go so I have cleanspark on the C this week so clean spark is a Bitcoin miner I want to say they're maybe the third of four largest they announced their Q4 2023 earnings last Thursday after market

closed and since then they have basically gone up by 100% or doubled um overall all of the other miners have also proceeded to Fen for example today marathon is up 12% R is up 9% and it seems like wet is kind of finally pricing in like both the ETF flows but also it's kind of like the positive impact on BTC miners so for some statistics on clean spark specifically their quarterly Revenue increased from from 27.8 million to 73.8 million year onye which is a 165% increase their net income increased from negative 29 million to positive 25.9 million so it went from a negative

46 cents earnings per share to a positive 14 cents earnings per share and their adjusted EIT increased to roughly 69 million from -2 million year on year so I feel like I've been boo posting about Bitcoin a lot on my Twitter um and it's good to see that the Market's like finally pricing that in and even though like all of the data is on chain especially in December which was kind of like a blowout month for ordinal activity if I'm not wrong out of the total sort of minor revenue 177% of that was from like order no activity and transaction fees and I just don't think Wall Street price that in enough right if not like if the market was like even

close to if Queen spark shouldn't have ripped 20% after market closed and then 30% the next day which is like basically 50% in like 12 hours um after announcing their earnings and I think another thing to notice that the Bitcoin minor infrastructure war is obviously heating up a lot right on the back of the Haring which is coming in roughly 60 days or so Kleen Sparks might hash rate surpass 12.5 EXO ashes per second and they have strategic call option to purchase 100 60,000 bit main miners um for up half to 50,000 EXO hashes per second and there's like a crazy amount of minor infrastructure investment last year if I'm not wrong the number was 1.2 billion

in mining machine purchases and I wouldn't be surprised to to see that heat up even more this year so any thoughts on bitcoin miners I'll just add that it's really awesome to see for the first time ever that Bitcoin miners are making more money from the transaction fees as opposed to block Rewards so there's finally this vision for you know sustainable security for Bitcoin um I know a lot of people on our team always had this you know fundamental issue with Bitcoin in that in their heads there was no way for the network to Su sustain its security while block rewards were going down in other words eventually once enough happenings happened whether it was this one or the next one or the next one um you know the wouldn't be profitable to be a minor anymore and the

network would start losing security so finally seeing multiple days over you know past couple months where more of the block of a Miner's revenue for mining a block was from the transaction fees as opposed to the block rewards is really really cool and it gives us this in a way for us to Envision how Bitcoin can be uh sustainable and have sustainable security into the future so shout out ordinals um you know there's a lot of hate for them but at the end of the day I think in my head anyone who says that ordinals are not bad for Bitcoin is mentally ill has something wrong with them because um this is really really really good I think Riot's pretty interesting too just want to call out the fact that you

know they once the electricity prices in Texas get to like a certain ridiculous P like point they just sell that extra energy capacity back to the grid and that's like another way that miners are starting to like scale their revenue and diversify their their revenue I guess I should say uh through different mechanisms as opposed to just directly mining Bitcoin and I think we'll see a lot more of that I think that's the beginning of a bigger Trend and not just like some oneoff use case I also add that I think there's obviously the big Catalyst for Bitcoin in terms of the ETF flows but also like Bitcoin really didn't have anything other than Bitcoin last cycle where this cycle you have like L2 ordinal like different like VMS made for Bitcoin and

probably like one of the best ways to get exposure to that other than Bitcoin itself is this Bitcoin miners who will benefit from all of the ecosystem activity that developer mind share the additional transaction fees and there's a great Spartan report that they put out in December last year with basically an overview of the entire Bitcoin ecosystem including like ordinal infrastructure LT VMS whatever and I feel like it's definitely worth paying attention to not just like Bitcoin the asset but also Bitcoin the ecosystem what's up everyone March is approaching fast and I want to give you another reminder not to miss out on D London it is coming it's right around the corner and it's in March from the 18th to the 20th we have fre full days of content this is your chance to bump shoulders with some of the world's

top Executives and have open dialogue with both attendees and speakers we're going to be focusing on a range of topics that I'll let Ren discuss for you first on the list we have Bitcoin Catalyst the Haring and spot ETF next we have a view from the buy side from investors on things like strategy portfolio allocation and more we also have a topic on Ras tokenization and stable points which I think we can all agree are going to pay a large roow in crypto future we'll also talk about global regulatory framework like compliance best practices and the evolution of global standards that are shaping the global investment landscape we'll also have someone from the institutional front to talk about infrastructure such as Banking and payments with financial giants like visa and JP Morgan and last on the list the macro case for digital assets so don't

miss out on this Monumental event seats are limited so be sure to register today by hitting the link in the description and using the promo code 0x10 to save 10% on tickets see you in London next uh we'll pass it off to Matt who you got the Hy Throne I also have a cool Throne today um so I'm going to hold Arc 21 shares in the cool Throne they've recently added some language to their ethereum ETF application that includes uh you know the ability for them to stake the assets to drive more Revenue to Holders of their EF if it gets approved this is really really cool um basically you know if you hold Arc 21 shares ethereum ETF if it gets approved and launches you'll also receive staking rewards so not only does this mean you

know potentially a good way to to get exposure to ethereum or at least if uh you know I don't think anyone would want to hold EFS that didn't have that exposure at least no one in this room would so very good for for us but also interesting and amazing to see institutions you know wanting to be involved in staking um being sophisticated enough to have the infrastructure to do so so very very cool good for Youk 21 shares and uh hopefully that you know we see this narrative start to kick off throughout the year whether it be you know this month next month or Q2 Q3 I think that ethereum will have its moment in the spotlight um I don't necessarily know if it's going to be the the best performer throughout the whole year but I do think definitely EF something that's imminently going to start being talked

about and Arc 21 chair is probably at the lead of it yeah one thing that's interesting about this is wondering what uh staking provider they're going to opt for you know is it going to be coinbase e because if so then it's going to feed coinbase revenues and then coinbase stock will continue to rip or they could just do their own thing with like figment but then you have to wonder at what point do people deem something like Leo to be safe enough to institutionally stake Assets in like when they want to sidestep some of those coin Bas coinbase eth fees and get something that's a little more EV another thing that's important about this is just the

development of DVT especially with someone like obal Labs bringing their chairin or Karen client to Market I don't know how to pronounce it um so far only ether fi is using obal so far and that's the only like well there's also SSV but so there's two DVT plays on the market right now and I think prioritizing validator uptime and just Geographic dispersion is really important especially as more and more institutional assets come in the LST angle is actually really interesting to me because my main qualm with it was you're going to have to have a certain amount of liquidity so like I thought maybe like it would only be allowed to

be like 10 15 or Max like 20% of assets under management to be actually Stak because if you get into a scenario where everyone's selling and then you have a long withdrawal Quee then obviously you don't have the underlying to sell in order to make sure you're you're even on the books or maybe they could do some hedging through derivatives I don't really know but the liquid staking angle is pretty interesting just because you'd have that added liquidity obviously then you introduce Peg strength uh risk but nonetheless feel like that'd be a much more attractive Avenue to go and obviously bullish lstd providers yeah I'm actually going to talk about the DVT angle too because I think that's also very interesting if you're you know securing very very large amounts of e Stak it makes sense to be using a DVT solution so obal and SSV

which are really haven't had so much um you know haven't really been looked at or really uh caught a narrative yet definitely could be a catalyst these e eth ETFs for for them if there is any Partnerships there there is also a third play outside of SSV and obal that's Diva um so obal does not have a token interesting one to potentially uh Farm because likely they will have a token in the future D.A does have a token but it is not transferable so you can't buy it can't sell it but um they did like an airdrop a few months back to I believe holders of LSD tokens and you know a few other parties but D.A is actually like an LSD DVT solution so it's got instead of just being a DVT layer where you know uh anyone can go and launch their own

validators with this technology that have multiple node operators for a single validator with Diva it's actually the full stack all the way up to the LSD token itself um so yeah would definitely be paying attention to that space as the ethereum ETF narrative potentially gets closer to you know become catalyzing and being being a catalyst for these DBT protocols I'm not sure if I'm thinking about this completely wrong but assuming Arc Stakes like some portion of their e in this e ETF in to something um isn't like the ETF stock or like shares off the ETF kind of a liquid staking token because you can use that you can like borrow margin against it like that would have its own peeg like I have no clue

how to think about like the liquidity and like Peg risk given that now there's like a offchain LST with like a onchain like staking component and I probably need to think that through a bit more but I think that would be like a really really interesting Dynam I also wonder if Lio would ever introduce like a institutional version of Lio where only institutions can stake they have like a wh listed validator set rather than eventually expanding to like 5,000 validators kind of similar to how like say a two years ago launched the arc which never really turned out to be anything but that was like just for institutions only because institutions do have very stringent requirements on what they can do right like for example

if you're institution you're listed I don't think you can interact with any contract that has had a tornado cash asset like even just pass through it before so if like I troll I send some like tornado cash e to like a specific validator like is a regulator going to come after me and I don't think that that's something that an ETF issuer or like a custody I don't think that's something that they're going to want to deal with so I feel like they're going to adopt institutional Solutions and for now it seems like coinbase is the safest option obious they have like uh like that 25% I think take rate but also you know they're like a qualified custodian and there's only so many qualified

custodians within the us as a coin stockholder the thought of a 25% fee revenue on ethereum held at an ETF is just absolutely uh puts a smile on my face yeah I agree with your last Point too Ren in terms of like having to be ofac compliant aware and maybe having like a wh listed validators set for those kind of solutions although I don't think any of us here are super keen on that idea but unfortunately I think that's just like the reality of the situation and back to your comment on like does this become an LST that is really interesting it's like we just talked with stride you guys just heard that in the dydx segment a minute ago and are they going to take the eth and

just put it back in the trust and then your Shares are redeemable for more like I yeah I I don't understand how that'll actually look in practice but it'll be fun to watch watch that play out all right Spencer you want to hit us with the last hoty Kone yeah so this actually continues to play into the eth ETF thing Denon is set to go live on eth mainnet on March 13th and this is a huge moment for the ethereum community who has just been bag holding while everything else rips for the past few months but um one thing that's neat about this is it it has EIP 4788 which is going to kind of replace

the um the need for custom oracles for liquid staking Solutions because right now Lio igen layer Etc they have to use these complex oracles that are also a risk for um reporting Beacon chain validator data so this is a a huge like necessity before you start seeing this broader staking narrative pick up especially with like igen layer set to like actually provide some avss in the near future another cool thing is obviously EIP 4844 which is going to introduce data blobs and that's going to kind of set the foundation for dank sharting in the future uh I think L2 tokens are kind of

primed to rip off of this because transaction fees are going to go down significantly and hopefully you see some applications arise that will just bring on a whole new wave of entrance to the l2s especially as eth mainnet just continues to get more and more congested as more people come on with the price going up um one final EIP that I'm looking at is transient storage which is going to lay the foundation for UNIS swap V4 which is moving to a Singleton contract and it's going to have its own flash accounting system but basically it's just going to like optimize smart contract development to where you can do a lot more interesting things within the contract I

think out of like 44 which is like the very obvious one I think EIP 11153 is probably the one that I'm most excited about I'll be interested to see a few things I think ambient launched on ethereum after they launch on scroll and so it'll be interesting because amban also uses like a Singleton contract model so it'll be interesting to see like how does ambient volume or like liquidly respond to EIP 1153 or more specifically un Sol V4 going live another thing that I'm excited about is UN solt V4 hooks I feel like hooks are maybe like the frames moment for faster it allows like anyone to build kind of anything that you can code right

depending on like specific events happening whether that's like depositing liquidity withdrawing liquidity tipping to liquidity providers or making a swap and I think there are some really interesting hook ideas that are going to appear over the next day half of your though that may have implications both for liquidity providers sort of like top of Block M and also sort of just general uni ecosystem so to say because it goes from like a DEX to like this a crazy ecosystem where people can build like all of these different hooks but I also with that think with that comes like a whole host of problems like what if someone just copy and paste a hook governance turning on a fe switch but that's probably a problem for

later I just agree with pibbles on the the L2 token narrative I mean mainnet is literally completely unusable right now like there's nothing going on in G at 100 plus like that's insane to me I've been seeing a lot more cries on Twitter of why don't we like try and optimize the Bas layer a little bit more within Denon or like maybe like an upgrade after that and I I would personally really like to see that because you just can hardly even Bridge through ethereum without paying a $50 transaction fee and that's just horrible ux yeah I'm pretty done doing things on ethereum to be honest like it's just it prices me out or maybe it's not even pricing me out and it's rather just the ux on l2s and on salana and everywhere else is just so much better at this

point um especially for cross chain stuff like you mentioned you can't Bridge through ethereum like I have assets on ethereum and I want to go buy something on arbitrum looking at you know current rates like $50 00 fee um so yeah I do agree I think there has been some conversation about um do doing small things to help with making uh you know block space a little bit more abundant post enun uh this would not be anything including an upgrade in Fork it would rather be at the validator client level the node client level um so hopefully we see more progress there I know Justin Drake and vitalic were both in support of it so likely that's a very good foundation for it to succeed in making block space more abundant I would just agree with both of you guys like

l2s and Unis swap are both poised to catch narrative with Denon and will most definitely be uh getting myself exposed to those tokens at some point in the future at least for a short period of time uh Unis swap specifically I think is kind of slept on I think everyone knows or at least not everyone at all but everyone within our in our Circle knows about the how dun impacts l2s but I think it's a little bit less known about how it impacts Unis swap so I do think that's a very interesting angle to look at it from all right well I think that's a good place to call it we got a a quicker episode today but uh thanks for coming on pbes and Matt we will see you guys here next week hey everyone thanks for watching today's zerox research episode I wanted to take a second and remind you

about an upcoming 2024 digital asset Summit in London this March seats are limited so hit the link in the description and use the promo code 0x10 to save 10% on tickets see you in [Music] London