ROLLUP: Special Guest! | Airdrop Week | Base Szn | The DeFi Wars

I think specifically going back to the whole Athena thing, people are are like getting their reflexes triggered when they see a stablecoin offering 35% APY, and they're like, oh, the last time I saw that was Terolina and Anchor.

Bankless Nation, welcome to the Bankless Weekly Roll Up where we cover the entire weekly news in crypto, which is always an ambitious endeavor, which is why we are tapping in. Substitute teacher, Anthony Susano, while Ryan Sean Adams is uh stepping out for some downtime, some software updates, some repairs. Anthony, how are you doing, my man?

I'm doing good. Always happy to be back as the substitute teacher here. There's a lot to get through today and I'm I'm I'm pumped basically.

There is a lot to get through. It's actually conveniently a pretty Ethereum-focused week this week. A lot going on inside of the Ethereum ecosystem. There is a debate inside the Ethereum community. Should Ethereum, should ETH change its issue, issue its curve? So we're talking about monetary policy of ETH, a very old subject that is now rearing its head once again. Convenient to have you here, Anthony. I know that you are following this debate, and I think you can you can kind of give us both sides of this. I have my opinions. I think you have your opinions. I think we're gonna go back and forth on that. Also, what else is going on this week? Base season continues to heat up. The base chain is hotter than ever. It's getting its own layer threes. Are layer threes real? I think we're gonna talk about that. And also some DeFi wars between Ave and Maker Dow. Things also getting spicy inside of the Ethereum app layer. Uh, these are all the takes that we're gonna get through. First, we're gonna start with the crypto prices. Thanks to Kraken for the Bitcoin charts. Bitcoin starting the week at $70,300, down 5.5% to $66,500. Ether doing something pretty similar on the week. Uh last week we thought we were going to resume up only on the trend, but looks like there is still a pause in this bull market. Uh, coming up on almost three weeks of a pause now, uh, since the first big um big 20% sell off uh in Bitcoin and Ether and all the other uh blue chips. Anthony, just overall sentiment on where we are in the market right now. This is the first big pullback, uh, and we're trying to get the engine started again. Haven't really been able to do it. Uh, what's your read on the state of the markets?

Yeah, so my overall read is basically that we haven't really bought brought in that much new money into crypto. I mean, besides the BTC ETFs, I think that generally there hasn't really been much fresh new money coming in from the retail investors, as we kind of like to call them there. And I think uh what's happened now is that obviously some of the flows have slowed down with the ETFs because the ETFs aren't going to be just like a huge flow, you know, kind of thing every day, uh happening perpetually. It's a slow kind of moving beast, it's a passive thing. So people are kind of trading around that. But typically what you see when Bitcoin reaches, you know, its old all-time high is that it will kind of go sideways for a little bit. Like if you look at the previous kind of history of this, the last two cycles, it stayed there for like a month at least before kind of heading up again. So I think everyone is questioning, you know, is that what we're gonna do? You know, the hardening's coming up for Bitcoin in a in a couple of weeks. Like, are we gonna continue up after that or are we gonna dump? Like, there's you know, there's competing kind of, I guess, narratives coming around right now. But generally, yeah, I mean, for the last few weeks it's kind of been a little bit boring there. I know that meme coins have continued popping off and things like that. But as I said, uh, or have as I've mentioned on Twitter for those who follow me there, I think that's just a lot of crypto native money sloshing around. I don't think that's new people coming in and being like, I'm gonna go bid this meme coin on base. Like, they don't even know how to do that, right? So I really doubt that it's that right now.

So the uh we hit Bitcoin all-time highs around $73,000 on the 14th of March. And uh the day of recording is the 4th of April. So we are approaching uh one month. So next week will be one month since the Bitcoin all-time highs. Uh and this is, I feel like generally pretty expected, especially when you zoom out and you look at the Bitcoin chart. Uh the trend is 100% still intact, right? So, like after hitting the the Bitcoin all-time highs of $73,000, we hit the 61,000 and a half uh lows on the 20th of March. Uh so just a yeah, just like a week later. Uh and and we haven't hit those lows since. Uh all of the lows that we we've hit um uh have been slightly higher than that. So trend looking good. Uh I nothing is broken here. Uh this is, I think, very, very expected. To say that like Bitcoin would be would break all time highs and then just like rock it and like do its whole like 2x, 3x thing, I think is pretty um uh pretty greedy, I would say. Uh we we gotta we gotta hang out for a little bit. And I would say the the longer that we can stretch out this period, the better.

Definitely. Yeah. I think that, you know, if if you kind of look at, you know, not just the history, but look at kind of the vibe and the sentiment. I think people are are looking at the history or like in in large part. Like I've seen this on on crypto tweet, a lot of people looking at the history being like, you know, we're just recharging. This is usually what happens, you know, and then we're gonna go kind of up only from here. Uh, and then I I kind of pause on that and I'm like, yeah, okay, you know, that it is based on history and there are kind of historical precedents here. But then people are like, oh, is it really going to repeat itself? Or have we kind of gone up too quickly and now we're gonna spend like six months down here? So that's always the tricky thing with with market kind of commentary is that you're right that the trend is still intact, especially the trend on the higher time frames. But you know, we could go sideways for like six months and the trend would still be intact. That's that's the thing with sideways movement, is that it doesn't necessarily break trends.

For sure, for sure. Honestly, I would enjoy six months of flat at at high prices. I could play that game. Yeah, Ether doing something pretty similar. Start of the week, $3,570, down 6.5% down to where it is right now at $3,340. The ratio uh at.050, which is relatively low on the long on very long time frames. Uh Anthony, what's your what's your take on the read on the on the ratio? It has a lot of just like pessimism priced into it right now.

Yeah, I mean, I think this is a very obvious kind of thing to look at where essentially the market is pricing in that the ETH ETFs are going to get denied, right? Like that is the general sentiment right now, uh, based on everything that I've seen. Uh, and that's why ETH is uh generally relatively weak uh on the USD pairs against like kind of other things as well, but also against Bitcoin. You know, if we were seeing ETH BTC go up, I think that would be a sign that people are confident that the ETFs are getting approved. But right now, you know, people are just like, well, why would I, you know, buy ETH when I'm not confident that these things are getting approved? No one else is, so I'm gonna play the kind of trend of don't buy ETH until May 23rd, which is it where when we're expected to get a decision on a denial or approval, then I'll kind of play ETH. And the funny thing about that is that I think that if we get to May 23rd and people are still doing this, it kind of means that there's no one left to sell at that point and there's no one left to kind of, you know, short ETH. So ironically, even if it gets denied on May 23rd, we could see ETH go up. Like that's the funny thing about markets.

Okay, so you're what you're saying is that it's likely, it's possible that many of the people who have who would sell ETH on the expectations of an ETH ETF denial have already done that because the market has priced in uh denial. One piece of news that we got this week, one glimmer of hope potentially, uh, is that uh the SEC has asked for public comments from Grayscale, Bitwise, and Fidelity about the spot Ethereum ETFs. And so previously, over the last two weeks, people have been bearish about the Ethereum ETF getting improved simply because the SEC has just not engaged, just like crickets, indifference, radio silence from the SEC. But this week, uh the SEC asked for comments from Grayscale, Bitwise, and Fidelity, uh, specifically about the spot Ethereum ETFs. Anthony, does this change anything? Is this news? Like, how do you interpret this?

Yeah, I mean from what I've seen, it's not necessarily news. It's just kind of part of the process of what the SEC has to do. So I think that it's like illegal for them not to do this. So people were saying that, you know, this is just part of the process, basically. So I wouldn't say that it's anything to get too excited about, even though, you know, I really want there to be something to be excited about here. Because I mean, I personally still have hope that these ETFs are getting approved on May 23rd. But I totally understand why I would assume the vast majority of the market just does not have any kind of confidence in this. And we've seen, you know, the Bloomberg ETF X experts that uh we all kind of have been following since the BTC ETFs, they've basically lowered their odds to what, 20, 25% of approval by May 23rd. So I think that generally the market is in that kind of range there. Um but that can change quickly. If we actually do some do see some proper actual back and forth between the SEC and the issuers, you would very quickly expect the market to kind of uh latch onto that and basically say, well, look, this is what we waited for. This is what you wanted to see. You know, why would they be doing this if they were just going to deny the ETFs, right? So I think we have to wait a little bit. But I I think that on the podcast that you guys did with Bitwise, they basically mentioned that we have till really the end of April. But then if we leave it later than that, essentially there's not enough time to do all the paperwork to get them approved anyway. So yeah.

Right, right, right.

Moving into Marcus, total crypto market cap, $2.7, $2.6 trillion in the total crypto market cap. But let's get into some layer two conversations. The scaling factor, which of course is how many Ethereum's worth of capacity all layer twos have uh hit 11, which is an all-time high. This is a tweet from you on a warpcast. Crypto prices may be down, but layer two activity just hit another all-time high. The numbers around layer twos are just great. Uh I think they're great. Uh, we still are below that 39 over that $40 billion in TVL on layer twos, but to me, it's just like a matter of time. Um, scaling factor 11.33%. Linea coming in at 51 transactions per second over the last week or so. That's a 200% increase. Base is just holding really, really steady. 30 30 transactions per second over the last seven days. Uh, Anthony, I know I know these numbers make you happy. Uh give us your take here. What's your sentiment?

Yeah, I mean, I I think since Blobs went live on March 13th, we've had that kind of economic stimulus injected into the Ethereum economy, where essentially we brought fees down in such a massive way that it became like a narrative that, hey, okay, Ethereum can actually scale. Like people actually saw that we are scaling, we know how to scale, we're just doing it differently to other blockchains, right? Like there's been this perverse narrative, obviously, for a while now that Ethereum can't scale. But we all knew that blobs were coming, you know, anyone paying attention to the Ethereum roadmap. Uh, we just didn't really know how much it would actually scale because it's hard to measure these things on mainnet. But as soon as it went live, we all saw the fees just dramatically drop. And since then, we've seen base increase their actual kind of capacity on their side as well by about 100%. So they've doubled their gas limit essentially on their side. So that's decreased fees further. We've seen Arbitrum do some uh specific upgrades there. And then the other layer twos are also working on their own upgrade. So we're really, I would say that we're just on the cusp of like such a big kind of scalability error for Ethereum now with the advent of blobs. Um, but yeah, as you said, like these numbers make me really happy seeing kind of the scaling factor at all-time high, TPS numbers up, uh usage up across the board, uh, and seeing people actually like talk about it as well. Like that's the main thing I like to look at is that, you know, I think I said this a while ago on my own show where I said that it's it's very hard to look at any metric in crypto, any metric in for any blockchains, and one compare them to each other, but also take much signal from them because they're influenced by a lot of different things. But the one metric that I really like, and it's a subjective metric, but I really like is just vibes, right? Like the vibes of an ecosystem gives gives me kind of like, I guess, like uh a good insight into how strong an ecosystem is. And there are bad and good vibes, obviously, that not all vibes are the same, but I think the vibes around layer twos have dramatically changed over the last, you know, three weeks since Denkun went live because of the fact that people saw that they actually work. The fees can be cheap and they can still uh inherit the security of Ethereum and do what we've been saying that they can do for many years now.

I I think definitely to add on to that, the vibes specifically around the base ecosystem are definitely given some tailwinds. I think because of Farcaster, because the vibes on Farcaster, on Warpcast, are great. They're just great. Like there's no, there's no bots, uh, there's no toxicity. Uh, there's like hearty, healthy debate, not like toxic, like poo throwing debate. Uh, and then base and farcaster have this like unofficial, official relationship where there's just like a lot of activity on Farcaster that points to some sort of NFT mint on base or just like discussions on base. And so, like base, and we're gonna talk about D Gen here in a little bit. Uh, base just has this like its own native like locale for discussion where the vibes are like really, really good.

Yeah, yeah, exactly. And I mean, definitely base has been the main benefactor of all this new kind of activity and all this new narrative energy over the last uh, I guess, like three weeks or so. Um, and obviously that's got to do with the fact that Coinbase has just been so strong for like a while now, and everyone's knows that Coinbase is obviously gonna try and push so much of their users to base as well. So people are kind of playing that. So yeah, but but I want I do want to stress though that even though it like a lot of attention has been focused on base, the other layer two ecosystems are you know are strong and are growing stronger as well. Like Arbitrum One has been around for a long time now, uh, and he's still as strong as ever across many different metrics. You know, they have a lot of upgrades coming to their um to their chain as well. They have a lot of great ecosystems on there. So I think that narratives, you know, short term narratives kind of stuff, maybe take with a grain of salt when you see them too, and kind of look into other ecosystems as well. Because yes, base has been uh uh, you know, a main benefactor here, but yeah, the other ones are definitely doing a lot of great stuff as well.

Yeah, the whole uh D Gen Layer 3 uh thing, which we're gonna talk about, that's actually an Arbitrum orbit chain, uh, which is interesting because it settles to base, which is an OP stack. Uh so we got we got some chains interwoven with other chains. Uh, and this is just a very, very interesting part of the story. We have an entire section to talk about the continuation of base summer and the D Gen Layer 3. Uh, there's plenty of blob market stuff to talk about. Uh, and then we're also going to talk about the three airdrops that injected $30 billion into the crypto ecosystem wormhole, Athena, and also D Gen, of course. So, before we get into all those conversations, a moment to talk about some of these fantastic sponsors that make this show possible. Three huge airdrops this week. Athena releases their ENA token uh coming in at a $17 billion market cap. Uh, what is Athena? Athena is a synthetic dollar. Don't call it a stable coin, but if you thought of it as a stable coin, close enough. Uh, this is one of the more controversial products, I think, that has come out of the space, mainly because of the dependency on centralized exchanges. This is the synthetic dollar that is produced by having staked ETH on one side and the yield from that going into the value of the USDE stablecoin, uh, and then also shorting perps on centralized exchanges and other exchanges uh on the other side. And so this as a result of this basis neutral trade, collecting yield on both sides, produces a stable coin. That token uh is now live, uh, like I said, coming in at $17 billion. Current current market cap, uh $1.6 billion. If you bought the token right when it dropped, uh it dropped at I think 60 cents-ish, and then it is now at $1.15. Uh, so already some strong price appreciation. Like we've seen with every single airdrop. Uh airdrops get dropped, and then they tend to like triple in price over the next like, you know, days to weeks. It's just a trend that I'm seeing in the crypto space. Uh, and they have already kicked off their season two of their airdrop. So there is more tokens to come. Uh, they are focusing on building integrations with a mantle, eigen layer, pendle, maker, morpho, and spark ecosystem. Uh, if this is just five percent of the supply that was distributed, that's 750 million ENA tokens. Uh Anthony, what's your what's your take here? Give me give me your thoughts and reflections.

Yeah, so I mean I've been aware of the Athena project for quite a while. Now I should disclose that I am an investor in Athena for for from a while ago. Um I invested in them because I thought the idea was really interesting at the time, you know, and this kind of, I guess, like as you mentioned, synthetic dollar that they called it, basically tokenizing this kind of uh perp trade that people already do on centralized exchanges. And you kind of mentioned it, you know, there are risks associated with this. And I think a lot of the debates recently around Athena have focused on these risks. You know, right now funding is positive because there's a lot of demand for crypto, there's a lot of demand for uh to buy these assets, but what happens when funding goes negative for prolonged periods of time? You know, do people start uh because people start losing money, what happens? Do they start unwinding their positions? And then what happens to the ST ETH backing that? Like, does that depeg? You know, as we've seen before, ST ETH can trade at a discount to its fair value. Um, we saw this during the terror collapse. And then what happens in that environment? Does it lead to, I'm not, I struggle to use the term death spiral because I hate that term. I think it gets overused, but does it lead to a you know mass deleveraging event where a lot of people get burnt and hurt? And then eventually does that affect the Athena protocol? You know, stuff like that. But you know, I think that those discussions are great to be having, and I'm glad that people are being very kind of uh, I guess, like uh analytical about it rather than I guess uh ignoring it because we saw what happened with Terra. Not that Athena is like Terra, but I think when you're comparing projects in terms of ones that were, you know, scrutinized by only a few people, and then the majority of people were like, oh, this is gonna work, you know, we got an infinite money printing machine, so on and so forth. But this time around with Athena, you have a lot of people scrutinizing it, a lot of people questioning it, a lot of people saying, you know, what these are the risks, you know, this is how I can get crazy. So I'm I'm very happy to see that. I'm very happy to see that that's actually a trend now within this ecosystem. But in terms of the project itself, I mean, as I mentioned, I'm an investor in it because I thought the interesting, the idea was interesting. Um, and it's just been crazy to see them drop the token at this valuation. Like uh, as you said, like it seems to be a trend right now with these airdrops, you know, not all of them. I, you know, there are some out there that haven't really taken off. But uh, yeah, there are these kind of things that get airdropped, you know, the market tries to find a price for them, and then they have these just huge, fully diluted valuations, which may or may not make sense. It's up to the market to kind of choose this. But I think that, you know, a lot of them obviously they haven't distributed tokens to investors yet. Investors have vesting, team has vesting. So I think a lot of people are basically trading these things based on the short to medium-term hype around it, whereas they're not worrying about investor unlocks because they're not for a year plus. So they're like, you know, what can we, you know, trade this for the next six months, so to speak. So I think that's what you're seeing with a lot of the airdrops. Um, but I'm I'm really glad to see people getting, you know, all this money from airdrops because it means that we're basically creating more kind of economic activity on chain and we're getting more and more people to actually come on chain to claim these things and to actually use these things. And, you know, there's this whole points program stuff that's been going on over the last few weeks as well, a few months now, uh, which has kind of spurred a lot of activity too. So I think on net, they're a good thing. Like, I'm I I I don't think they're a bad thing, but it's gonna be funny when the music stops because, like, as you said, most of them are going up right now. But eventually, when the market kind of exhausts itself, you're gonna see the reversal of that. And I'm wondering what that kind of looks like.

Yeah, yeah, they're going up because there's no sellers. Everyone is like, why would I sell? There's no one to sell. Like all the all the team is locked up. All the investors are locked up. And so it's like a safe purchase in the short term. Um, I think hopefully market participants knowing full well that's not necessarily safe in the long term because you know, Bitcoin will roll over because it went up too fast because of reflexivity. ETH will roll over because it went up too fast because of reflexivity. And then all of these um investors and teams that are up some bajillion percentages will also be interested in selling. Uh, and this is what a bear market looks like. This is just how cycles go. I think specifically going back to the whole Athena thing, people are are like getting their um like their reflexes triggered when they see a stablecoin offering 35% APY and they're like, oh, the last time I saw that was Terra Luna and Anchor. Um, even though like this source of this yield uh is materially different, uh, I would say this is a real sustainable yields that are generated by the market price, rather, whereas Terra or the Anchor ecosystem on Terra was like, oh, we're just going to just mint UST and then offer 20% for the depositors out of thin air. Uh so materially different um market structure here that's backing this thing. Not to say that there are no risks, but I would just say the risks are different. Uh, and you can't just like kind of like copy and paste the risks of Terra onto the Athena system. Um uh Athena currently coming in at $2 billion in TVL, $2 billion of ETH that's deposited into the system. So pretty strong launch so far. The product is working. Also, the um playing a role in this debate that we're gonna talk about later between uh Morpho, Ave, and Maker. Uh, there seems to be uh some borders going up between the stable with the world of the stable coins, but we'll talk about that later. Also, that came in uh that this week is uh wormhole.

And the W token, so just one single letter for the token, kind of cool. Wormhole is a cross-chain, cross-layer one bridge protocol. It's been very, very hyped. They just dropped their token this week, uh, coming in at a $14 billion fully diluted valuation. Current market cap, $2.5 billion. So of the 10 billion total wormhole tokens, 1.8 are currently circulating. Uh price dropped at $1.3 and then went up to $1.45 since the recent sell off in the last like 24 hours. We were down to $1.16. Uh Wormhole. Uh, what do you know about Wormhole? Have you ever used Wormhole, Anthony?

No, I mean I don't think so. I whenever I bridge I usually use um jumper, which is like a bridge aggregator. And I don't think I've ever used wormhole via that. I mean I don't do that much bridging, especially to other layer ones. I don't really do much much bridging with

Wormhole is like speci uh specified for.

Yeah, yeah, and and obviously like Wormhole is a big player in the Solana ecosystem. So they're all about, you know, bridge between Ethereum and Solana, you know, so on and so forth. Um, but it's funny looking at the token and looking at what it's valued at versus other bridging protocols. Like if you go and look at like Connext or Hop protocol or uh, you know, Across, I think, and a bunch of these others, they're not valued anywhere near what Wormhole is valued at. Um, so I it's like when I look at this valuation, I'm like, okay, well, you know, either the market is wrong on, you know, the wormhole side or it's wrong on the kind of connect side and the hop side and so on and so forth. But I don't even know if the market is valuing this thing based on what it is. I think it's valuing it based on the hype behind it, not on the fact that it's a bridging protocol. And that seems to be the trend as well with other protocols like Athena, for example. I would struggle to think a lot of the people actually even know what they're buying, to be honest, because Athena is uh inherently like uh uh maybe more uh more complex to understand than other projects because it's something that a lot of people don't really kind of get exposure to. So yeah, it's just it's just kind of wild to see these massive valuations on these things. And as you said, like in the bull market, it it can kind of happen because of the fact that there's not really, you know, there's no sellers, there's all these demand and there's all these kind of narratives. But in a bear market, like that goes the opposite way. So I'm very curious to see in like a couple of years, if we're in another bear market, what these valuations kind of look like. Um, because yeah, there are going to be investors and team that have vested out by then. Not just for I'm not trying to pick on wormhole here, but like for every one of these, that you know, who knows what's gonna happen. Like, are they gonna be selling? Is that gonna be down only? Is the demand gonna be gone? So on and so forth. But yeah, I mean, you just brought up Connect and Across, they're both worth what, two, two fifty billion fully valued valuation compared to wormhole.

Not even. Uh connects is two hundred and thirty million, uh across is two hundred and ninety million, and then wormhole is

Oh yeah, million. Yes, yeah, correct. Yeah. Yeah, billion, not billion. Million. Yeah, yeah, yeah.

Yeah, so that that's like a huge difference. Like that's like a massive difference, like a hundred X difference, basically, uh, in valuations here. Um, and even if you just look at market cap, not just fully diluted value, wormhole's market cap is still like 10 times bigger than these other protocols. So yeah, like it's just crazy.

Maybe maybe I th this is a take from the hip, but um because wormhole is like a cross layer one bridge, uh it holds state in ways that a cross does not. And I think also connects does not. And so maybe to like uh advocate for wormhole here, just like holding state is bullish. Uh just because like it is there's additional like value capture surface area with holding state, whereas like a cross is like more of like um a port for um market makers and our bots to fulfill uh intents. Uh so a cross actually doesn't hold any state. Uh and so maybe maybe there's like a market valuation going on there. But I will also say it's a shiny new token uh with zero sellers. Uh and so that is perhaps also why it's commanding such a strong valuation.

I very much doubt that people are doing that kind of thinking on this, to be honest. Like that you just kind of outlined. Like from all mid-curving people.

Well, that's the thing. Like, for all the people that I've seen speculating on these things in my community on Twitter and everything, they don't mention any of this, right? It's always like the narrative stuff, it's always the hype stuff, which is fair enough. Like, I actually think that that's probably the proper way to trade these things uh when they first launch, at least, because as you said, like you're probably mid curving it and uh by kind of analyzing the fundamentals.

To say it's because of state.

Yeah, yeah, yeah. Um, but I mean long term maybe, but yeah, I don't think like short term is defin is focused on that at all, really.

Let's get into some blobs because we lost the first blobs. Uh, but this is, of course, by design. As 14 days approach, blobs, 14-day old blobs expire. This is a pretty cool graphic that uh we saw circulating both on Twitter and on Warpcast. This is blob storage. Uh, and you can see some of the blobs are starting to get uh pruned. Uh so data is expiring here. This is this like deep red color right in the middle of the uh the screen here. Um, since we are 14 days beyond uh the introduction of Dankun and 4844, blobs are being pruned. Um, just to really set the stage here, why do we prune prune blobs, Anthony? Why why does this mechanism even happen?

Yeah, so by default, all the clients will prune these blobs after I believe it's 18 days. Um, yeah, 18 18 days. Um, just to keep the kind of node requirements uh basically steady. So if we didn't do this, it would be an extra such and such gigabytes every 18 days added to the chain, which all the full nodes would have to store, and then it would put more of a burden on the network uh from that perspective. So that's why by default all of the clients will prune this. Now, of course, uh that means that uh you can actually keep them if you want them as well. So, for example, I'm keeping all the blobs, I'm storing them on some hard drives that I have in my um NAS uh kind of storage devices there. So your blob.

Holder hoarder.

Yeah, I'm a I'm a I'm a blob h blob hoarder, definitely. Yeah, yeah. Um just as a as a

Storing all the people's JPEGs for them.

Yeah, yeah, just as a whole, yes. But but the thing is, is like there's there's plenty of services doing this as well where like they're gonna be offering this and you know, maybe charging for it basically if you want to access this historical data here. But yeah, we we we expire it, we prune it because of the fact that we want to keep node requirements low. I mean, that's at the heart of I guess Ethereum's design, is right, uh right, keeping node requirements low. Uh, and this was the magic of blobs, really. And that's why we were able to add them because we knew that there wouldn't be a permanent thing that people would need to store.

Yeah, to really drive this point home, this is another chart of uh the increased capacity of uh the Ethereum layer one with the introduction of blobs, uh, but also the decreased capacity of the consensus layer and the execution layer. So we got three different colors here on the screen uh with on a graph. We got blobs in green, which is like the dominant part of this graph, and then we have the consensus layer payload and the uh um execution layer payload, uh just the size the sides of Ethereum. Consider this the size of Ethereum, like the how much like overhead or just like state that it has. And it's gone up bigly with blobs. Uh, and so like can compare to where it was before Dankun, uh, like just like this is like really rough napkin math, but like three to four times larger as state, as just like overhead uh capacity of the Ethereum um blockchain. The thing is, we prune the blitz the big stuff, all of the green gets eventually pruned. And so only the permanent parts are the consensus layer and the execution layer, which are the uh blue and green parts of your screen here, uh, which are now as a result, you can see it those parts are actually much smaller since the introduction of blobs. Uh and so this is just what I consider a good optimization. So Ethereum both grew in capacity, uh, which is the green part, but also shrunk in long term state growth. So Ethereum is both um larger and faster and quicker in the first 18 days until we prune the blobs. But then post 18 days, it is uh slimmer, it is leaner, it is faster as well in terms of just like total state growth. Uh I just call this a good optimization.

Mm-hmm. Definitely. Yeah. And I mean, I think like what this chart is illustrating, if I'm understanding it correctly here, I think I saw this the other day, but I didn't dive deeper into it, is the fact that instead of using kind of like uh call data as well, or it might be a different chart, like because the um layer twos are roll ups using blobs now instead of call data, essentially what happens is that we take a load off the network from from that side of things, take state growth off from that side of things. And yeah, as you said, it's gone to blobs, which do expire. So we've yeah, we've done we've kind of like increased that capacity there.

Here's a tweet from you that I saw on Warpcaster. Blobs are now ranked fourth on the ETH Feeburn leaderboard over the last seven days. So we got Uniswap, of course, coming in at number one, just always a gargantuan, uh burning 3,500 ETH in the last uh week. Uh ETH, regular old ETH transfers, 1700 ETH, uh moving tether around on main chain, 1100 ETH, and then blobs coming in at 672 ETH burned over the last seven days. And I kind of expect that to continue to go up only, especially as more and more and more uh layer twos come onto the scenes. Uh inscriptions also burning a lot of ETH. People are really paying because they want their JPEGs on the on the layer one, even though they're going to be pruned 18 days later. Uh where do you think this is going? Are we uh approaching an equilibrium? Is this going up? Where do you think this is going?

So I think that a lot of this was due to the inscription stuff, because of the fact that inscriptions were just pushing up the base fee of blobs, which just pushed up the price of blobs for everyone. But I think that what it gives us an insight into is that once we add, as you said, more layer twos, more roll-ups, once there is kind of more people using blobs, like the price naturally goes up, like it does uh on the non-kind of blob transactions. And that translates to more fees being paid and more fees being burned, obviously. So I think this is going to go down again because of like if not for inscriptions, it would go, it's just gonna go down and kind of like reach a kind of plateau there because the roll-ups are very like uh I guess um efficient in how they use the blobs, in that like they don't want to overpay if they don't have to, obviously. Um, and they have different ways of kind of uh measuring this and and and kind of uh uh seeing when the best time to post blobs is and things like that. But as the you know, as more roll-ups come online, as the uh the crawl-ups have more activity, they're gonna need to use more and more blobs, which means that while blobs are at what they're at today, you know, targeted three max of six, uh, then essentially what happens is that even without inscriptions, the rollups will be taking up a lot of capacity, and then we'll see the fees go up there. But it is worth noting that we're not gonna be stuck at three blobs as a target in a max of six. We're gonna keep increasing both the count and the actual size of blobs as well uh over time, which is really the magic of blobs, is that we get to do that. Um, but yeah, I mean, uh over the longer term though, I mean, I expect the kind of fees to go up just based on on demand because yeah, like the demand will go up on the L2s, which will treckle down into the into the data, which is the blobs, and then we'll see the kind of prices of blobs go up.

Yeah, even in the last like one or two days, we've actually seen some inscription fatigue. I'll call it. Uh the supply of inscriptions going into blob space uh has gone down. And so we've actually seen a reduction in blob fees uh and the a reduction in the number of blobs going below the target of three blobs a block. Uh so we're down to like 2.2, uh, 2.3 uh yeah, of blobs per block. Uh and so this is kind of like when uh gas fees are under the target that EIP 1559 sets as a result, then the gas fees go down. So actually in the last like you know 12, 18 hours, uh blobs have actually been free uh because people are just like not posting inscriptions, getting inscription fatigue. People are bored putting their JPEGs onto the chain. Um and so as a result, like layer twos have more, uh they are basically free once again. Uh, I think people are overall surprised about like how much total space there are uh for layer twos to leverage blobs. I kind of consider like inscriptions as like backfilling whatever layer twos don't use, because layer twos will outbid inscriptions like any day of the week. Uh like a layer two is going to outbid your interest in purchasing uh blob space to put your JPEG on the chain. Uh, but like when there isn't that much demand from layer twos, then like people will go ahead and put JPEGs in. But we've seen a an um uh just a reduction in overall usage of inscriptions, and layer twos aren't totally using all the blob space. Well, do you have any like comments about just like what how how much slack there is in this system and where this is going?

Yeah, I mean it's hard to tell because obviously there aren't there isn't just one layer two, right? There are many of them, and they're all gonna have different kind of usage profiles over time, and some of them will be used more than others, and some of them will be more scalable than others. Like as I mentioned before, base increased its capacity by like 100% because they were hitting their capacity on the execution side. So, I mean, there's really two parts to to uh, I guess like two high-level parts to a roll-up here. You have the execution side and the data side. Um, the data side is obviously on Ethereum L1 with blobs, but the execution side is squarely on the L2. So they need to increase their capacity. And then essentially, once you reach capacity on on the um on the on the data side again, because of the execution side, we data gets more expensive, execution is cheap, and then it's like a balancing act between those kind of two sides there. Um, but as I said, like there's not just one L2, there's gonna be more of them coming online, more of them using blobs, and that's gonna affect everything as well. Not just these layer twos getting more scalable, but also the number of layer twos uh using blobs here.

Yeah, we're only like two weeks into this whole thing. But when we get the reduction in cost to layer twos, which is what this tweet that I'm showing on my screen is showing, is a total spend on blob fees over the last like 24 hours. I think this is a daily chart, was uh 1.9 million. Uh so $1.9 million was uh spent purchasing blobs. What it would have cost had blobs not existed to purchase the same amount of call data is $50 million. Uh and so, like, you know, going down from $50 to $2 million, what does that do? That opens up more viability for more layer twos. And now we're only 14 days into blobs, so like people haven't like decided to make more layer twos in the last uh 14 days. But this is kind of the idea is as soon as you like do what is a 25x reduction in the cost to you know maintain a layer two, is like you're gonna get more layer twos. Uh, I think that's kind of like the overall prediction. And that is what the whole like roll-up centric roadmap is is like let's reduce the cost to be a layer two so that we can get more layer twos. Let's dive in specifically to uh to the uh base ecosystem. Uh, because as you said, like the big constraint now is not necessarily the size of blobs, but it is the uh execution side of layer twos. Uh last week we talked about base increasing their gas target, basically their block size, their throughput, by 50%, which they did. And then they did it again this week. Uh, and so I think we were at 3.75 milligas per second last week. We are now up to five milligas. So that's five million gas a second, uh, which is an interesting way to measure scalability. Uh, this is Jesse Pelak saying fees are declining quickly and expected them to expecting them to stabilize lower, though this of course may increase demand, with a long-term goal of one gigagas, which is 400 times more. So Jesse and the base team are targeting a 400x increase in capacity on the base layer two. And then they said they will be sharing how they are getting there in the weeks ahead. Uh, maybe that happens on a bankless podcast when we schedule uh one with uh with Jesse. Um, so yeah, this is this is just exactly what you're saying here. Like base is trying to get real big, real fast.

Mm-hmm.

Mm-hmm. Yeah, yeah, they definitely are. And I think that uh as they get bigger here, you're gonna see them hit the data constraints again, or at least like they're gonna be bidding like really big for these blobs because they're gonna be posting so much data to to kind of like uh L1 here, but also at the same time on this chart that Jesse has posted. The reason why I really like this chart is because it shows you the concept of like basically induced demand. Um, if you look at the the longer term one, so this chart in particular is only the short-term one, but it still shows you kind of what the effect is. So um before this uh spike in the blue line, uh earlier in this chart, there's another spike in that blue line, and the yellow line is the fees. So the yellow line will go down every time this spikes, but the thing is it went down last time and then started going up again because there was that demand that was latent and then it came in once fees dropped again. Uh, and essentially what it becomes is basically a cat and mouse game of okay, we increase the capacity, and then all these new people come in, all these new users come in because they're like, oh my god, there's more capacity for us now business coming in.

Two, yeah.

Exactly, exactly. And then once you see that, uh, you'll see the kind of fee spiking up again. And then you're like, okay, we have to increase the gas again because of this. So and essentially, like it it for the foreseeable future, while we grow out the whole crypto ecosystem, this is not going to be a thing where it's like uh you know a spike and that's it, like based on an event. Uh, it's gonna be a constant thing. It's like a constant demand for block space um because of the fact that we're not even anywhere close to the you know, I guess like the um the adoption that we want to be at when it comes to crypto. Um but yeah, that that's why I like that chart, is it basically shows you that there is a lot of demand already waiting. And as soon as you if as soon as as soon as you scale up a little bit, that comes flooding in and then you're back to square one. So you have to keep scaling up. And I think the base team definitely understands that. That's why they've set such an ambitious goal. But with that goal, there is a lot of work involved in getting there. It's not just as simple as what they've done over the last week of increasing the gas limit. They have to do a lot of optimizations to make sure that they can actually run the software that allows for that to happen.

So what I'm showing on a screen is uh a Dune graph of the median layer two fees in orange, the median layer one fees in blue. And so, of course, that gap between these these two uh charts, these two colors on the chart, is uh the profitability of a layer two. And then the gray line piercing through the middle is the total transactions over the the course of time, which I think is um 24 hours. Uh base uh cleared 7,000 transactions inside of one minute. So over 100 transactions a second. Apparently, Arbitrum is also doing the same. 100 transactions per second. Is that is that high? Is that low? Like other chains, uh Anthony are boasting. Like,

Twenty thousand transactions per second. Like how how m how do we make sense of these numbers?

Yeah, so the TPS metric is not one that can really be translated across chains. Um, there are different ways that different chains will kind of meter TPS, and there'll be different ways that the chains handle transactions. So I don't think that we should be kind of maybe comparing these chains to each other in terms of kind of TPS just because they're different, especially chains that are not EVM. Like if you're comparing an EVM chain to like the SVM on Solana, for example, like it's not gonna be a one-to-one comparison. They have a different different architecture. So I don't think it's apples to apples. I think that when people are comparing these things, they shouldn't compare that. But at the same time, um, you know, when it comes to TPS, there's also a concept of like the weight of a transaction, right? Like what are the actual transactions happening here? Because if all you've got is like spammy transactions that are basically doing nothing and it's just people spamming because their fees are so cheap, then to me, that's not really kind of like weighty transactions, right? It doesn't really add much value to the ecosystem. Whereas if you have like um, you know, uh transactions that aren't just doing that, that are actually kind of real activity on the network, then that adds more value in in my mind. So it it I think that people can disagree with that view, but I don't know. Like the way I kind of view it is that I want to see like high quality, valuable transactions happening on these networks. Um, even though it's a permissionless network and people can do whatever they want on them, uh, I have no issue with that. But at the same time, I would rather these networks be useful to people rather than just being a playground for spam, essentially.

Mm-hmm.

Other things that are going on on the base chain. Uh Uniswap passed a billion dollars and 24 hour volume on base. I think that's the first time that a billion dollars has been crossed on a layer two. I wonder, uh Anthony, if we're gonna see a flipping of Uniswap layer two volumes versus Uniswap Layer 1 volumes this uh cycle. The trajectory is definitely pointing us there. But really, the biggest thing that's been going on on the Bakus base ecosystem, at least from a tension standpoint, is this whole D Gen chain. So this is coming out of uh the Syndicate Twitter account. Today we're excited to announce the launch of DGen Chain, a layer three for the DGen token community built with Arbitrum, uh, with an Arbitrum orbit on base, using base for settlement, and then Arbitrum Any Trust for DA. So really just like a super juiced chain. So, like Arbitrum technology, of course, absolutely fantastic, settling on base, which is super cheap, using off-chain data availability, which is of course super cheap. And then the native token for this layer three is D Gen. Uh, and so I don't think a lot of people know this, which I think actually kind of explains with the crazy, crazy D Gen price action. But when you put your ether on base and you bridge it over to the DGen bridge, it sells your ether for DGen and then gives you D Gen on the D Gen layer three, uh, of which is like kind of more or less a casino, like almost by in by design. Uh so there's a bunch of meme coins on there, people are speculating. Being D Gens, it's literally called DGens. Uh, and so this has kind of like uh created a question inside of the Ethereum community and just with the broader crypto community are layer threes real? Uh, this is actually not the only layer three that's going on. There's, I think there's like three or four of them. I think most of them are settling on base because everyone realizes that like

Imagine having Coinbase as your top of funnel for your chain. Well, that's what base is. Uh and so, you know, really D gen is actually just a layer two, but your layer one is base. Uh, and like the Ethereum layer one is actually kind of just like irrelevant from the perspective of the D gen chain. At least that's kind of like the way I think about it. Anthony, what's your take of like all of these uh uh layer three D gen shenanigans?

Yeah, I mean, I think a lot of the debate, like as you mentioned, is centered around what's the point of a layer three, basically, because there are very strong opinions from the top L2 teams on these things. So I think it's obvious that Arbitrum is in favor of them, considering that they built the Arbitrum orbit infrastructure in order to allow this to happen. Um, but then you have, you know, I've seen some of the Polygon guys saying, you know, we don't really see the value in layer threes. Like we kind of, you know, see layer threes as this thing that that doesn't even, it shouldn't even exist. You know, we can just do it at layer two. And then there are other people with similar opinions. But look, I I haven't got like a strong opinion either way at this point. I think for me, this just represents more experimentation happening within the Ethereum ecosystem. And it really represents like the, I guess, like the modular thesis, right? Because as you mentioned, you know, this chain is built using Arbitrum Orbit, but it's settling down to base, which is built built on OP stack, but it's using any trust DA, which is Arbitrum's DA solution here, uh, for data availability instead of settling that down. So there is a lot of experimentation happening here with with modularity in mind. Um, and I actually think it makes perfect sense for something like DGen to be doing a layer three, to be utilizing this, because they get they get their own chain, which basically becomes their own casino, essentially. They get to have users on there that really are just wanting to do DGen stuff, essentially. Like, so it's not a shared environment, it's more of like an as specific environment. And yes, it may be like super centralized, but I think when it comes to layer threes and it comes to these kind of I specific themes.

Right.

It's kind of it's kind of the point. They don't really need to be, you know, too decentralized or anything like that. So I think that if that's your kind of environment that you want to create and people are happy with that and people want to kind of bridge into that, then you know, who are we to say otherwise, essentially? But I think some of the arguments definitely kind of double-clicked on the fact that we could just do this with an L2 instead of an L3, you know, just do L2 with DA off-chain if you want to keep the costs low, and then we can, you know, and then uh instead of an L3. But that's more of maybe a deep architecture question and more of something of like how easy is it to do that? Because I think it was very easy for DJen to spin this up. Like it happened within like a few days, from what I saw. And then they were able to get people bridging in straight away. And apparently there's better bridging kind of infrastructure coming as well. So, yeah, I mean, my general take is that I'm all for the experimentation. Like I love that it's happening because whether people find it valuable or not, we're not gonna know until we actually kind of do this experimentation uh in a live environment.

Yeah, the kind of the crazy thing uh about this whole Dijon thing is some of the stats that have been painted over since the launch of base chain. Uh 2 million transactions, over $57 million bridged, uh 24,000 active addresses, uh 0.1 second average block times. Uh these numbers are actually starting to rival some of the layer ones out there that uh are commanding like multi-billion dollar like chain valuations. Uh and now this is happening as a layer three. I did an episode with Will Papper and uh Yassik from uh the DGEN who created the DGen token uh just to kind of like peek into their heads about what's going on here. A lot of why the answer to like why they say why'd we do a layer three uh instead of a layer two is just like, well, of course, base has all the users. Like I said, uh Coinbase is your top of funnel, so just like tapping into that. But also, they get to have a lot of opinions about how to build an ecosystem. So they get to be much more opinionated than Optimism or Arbitrum or Base could, because they're kind of building something closer to an app. Like they have a very narrow specific direction for what they want base chain to be. Uh, and so they get to become much more opinionated about how to build that thing. Uh, and really, especially as a layer three, when like rather than having the Ethereum layer one as your settlement layer and therefore like settlement costs, like imagine settling onto the cheapness of base, which we just saw, like it has increased their capacity by 50% twice over the last two weeks. Uh, you have no constraints in scalability. Like transactions are like billionths of a penny. And so, like, that's that's a free transaction. Uh, and they with actual without any sort of like constraint on like block size or anything. Like, and so this is a hyper specialized chain to do a hyper specialized thing, which is to be a D Gen casino by design.

Mm-hmm. Exactly. And it's kind of funny because it reminds me a lot of like, I guess, the Cosmos thesis, right? Where they were like, you know, out of specific chains. And I think that I've been, you know, I've been talking about this for a while, but basically, like the Ethereum L2, L3 kind of modular ecosystem seems to be realizing that, but it's realizing it in, I think, a more scalable and better way than I think Cosmos was originally architected, where essentially they wanted to have everyone be their own kind of, you know, super sovereign chain, bootstrap their own security and nodes and things like that. Whereas with a layer two and a layer three, you don't need to do that. You can just reuse Ethereums essentially and kind of inherit that there.

So a lot of the uh the monolithic people out there are seeing like the Ethereum people like tweet and like dance around about their layer threes, and they're just like, uh, layer threes, like, yeah, guys, you guys haven't even fixed layer twos. Your layer twos aren't even uh decentralized yet. Uh meanwhile, Vitalik Buterin comes in with a tweet on uh Warpcaster saying, re-epping my post from 1.5 years ago on layer threes. Uh and so he uh wrote a an article on it on his website saying what kind of layer threes make sense. Uh and so if you didn't know that this article existed, he wrote this in uh late 2022. Uh he says he's now updated it, especially with uh the modern um context that we have today. Uh and so definitely go read that. There is a link in the show notes to get uh to get access to that article. There's some drama, Anthony, that I want you to help me unpack as we progress further in this episode. There is a big debate about the ETH issuance curve. So we are now talking about the issuance curve of Ether. There are some decisions to be made uh and some controversy that has been had uh around changes to the ETH issuance curve. There's also LRTs flipping LSTs, and there's just a new equilibrium uh between the liquid restaking tokens and normal liquid staking tokens. There's also drama between maker and Ave in the DeFi lending app layer. Lots of drama this week. Uh so we're gonna get to all these subjects and more, but first a moment to talk about some of these fantastic sponsors that make this show possible. All right, let's go into one of the bigger debates that I've seen in the Ethereum ecosystem. And this is a debate over the Ethereum protocol, which uh we have these every now and then. This is um a particularly lively one, and I would call a very, very important one. Uh there was a recent proposal from Casper and Ansgar to Ethereum uh EF core devs about uh the proposing the need to change the issuance curve of ETH. So we are now talking about the monetary policy of ETH, which is always a very delicate subject. Mike Neuter, uh, he released it uh releases blog posts, very comprehensive uh blog um blog post, uh decently technical, at least just trying to really uh get very concrete and detail-oriented about some of the debates here. Uh it's just titled Issuance Issues, uh, and then he has a TLDR. Issuance on Ethereum defines how Ethereum pays for security. Entering mid-2024, the realities of staking have changed seismically since the inception of the beacon chain at the end of 2020. The future remains uncertain, but we can explore the impact of issuance on solo staking, ETH, the asset, and protocols building in and around Ethereum consensus. Overall, uh, changing, like I said, changing the ETH issuance curve is a touchy subject because we are talking about the monetary policy. The last thing that I think anyone in the Ethereum ecosystem wants, wants any sort of resemblance to the Federal Reserve. But this is kind of the pattern that is being invoked here. Uh, meanwhile, there are some very good arguments about like, hey, we still have a pretty blunt issuance curve. We never really put all that much rigor into uh how and why the issuance curve is what it is. And so let's revisit that conversation and generate a more uh precise issuance curve. Uh, Anthony, like, what are your reflections on this debate? How would you characterize the the two sides?