The 7 Most Bullish Crypto Narratives of 2024

Bankless Nation, we have a bankless takes episode for you today. I think it's a continuation from our episode last week, David. Uh maybe by popular demand. A lot of folks like that episode. So what we're going to talk about today is seven investment narratives for the 2024 bull market. We touched on one of those investment narratives in the last episode, AI.

One, yeah.

We'll talk about that again, but then we'll give you six more that we think are very interesting. And how we're going to format this is I think we'll go one by one. Uh we'll talk about what the narrative itself is, why it's important, and what some projects are in that particular category. What is investable? So that is the format for today's episode.

Before we get there, a message from our friends and sponsors. As we get into this episode, uh, I want to just kind of like uh zoom all the way out and look at the crypto industry from like a satellite's view. Every single bar mar bull market, there are narratives, and there are many narratives in every single bull market, and every single bull market has their own specific set of narratives. So we are trying to define the set of narratives that we think will capture attention and energy from different corners of the globe. There's always more than one, some more relevant than others, some larger than others, and some will speak to you more than others. My suggestion is that you pick your favorite version, your favorite narrative to pay attention to in crypto and double down on just like one or a few. Trying to be an expert in all of them will make you an expert in none of them.

Oh, go deep. That's

So, yes, pick your flavor, pick your investment style, and also remember that these are narratives, and narratives can be fleeting, just as a bull market will also be fleeting. There will be times when this narrative quells, when this dies down. And then also one more big just zoom out moment. The meta theme for all of these narratives is more or less airdrops. The point of crypto is tokens. We all like tokens, we like playing with tokens, we like speculating on tokens, we like investing in tokens. Airdrops for all of these projects, all of these narratives to all of these categories is going to be the way, the dominant way in which a lot of people speculate on receiving airdrops, receiving tokens, perhaps holding the tokens. But airdrops is really the big overarching strategy for how to get exposure to all of these, unless there is, of course, already a token that exists.

that is especially true. I think it's uh great if you have uh not a lot of capital uh to play with. So if you're second second cycle or a first cycler, right, you can like earn your way into these opportunities as well. So that is a nice feature.

So let's go ahead and get into the seven different investment themes that are going to define the twenty twenty four bull market. But first a moment to talk about some of these fantastic sponsors that make this show possible.

David, before we get into the uh seven narratives, do you do you mind if I give them the the quick dad talk and uh and a re

We all need a good dad talk in crypto.

Alright, so so quick dad talk here. The lens we are approaching this episode is not the typical bankless lens. And we said some of this at the end of our previous episode where we talked about AI tokens and narratives. But just a quick summary. There are three ways you can make money in crypto. You could be a trader, monitor the ups and downs on kind of like the daily, hourly, uh quick weekly, quick moves. You could be a narrative investor. That's what we're talking about today, seven crypto narratives. And the focus there needs to be on the attention economy rather than fundamentals. So attention matters more than fundamentals in this lens in crypto uh investing, we'll call it, or you know, veers on speculation. And then you can be a fundamentals investor where you forget the noise, you denominate in Bitcoin and Ether, and you buy assets with fundamentals, and your time range is like, you know, three to ten years. Uh you measure it in years and in decades rather than in um months, which is what a good narrative generally provides. It's weeks to months is a narrative. So this world of narrative investing is uh kind of a dark art in some ways, right? You're not actually speculating on real usage, real utility. You are speculating on attention. That's not to say these narratives don't have fundamentals, because some of them do, but recognize that when you are speculating, trading a narrative, investing in a narrative, you are investing for the attention. Fundamentals are a subset of that, but fundamentals don't necessarily drive the attention. A uh bombastic founder could drive the attention. Uh, Elon Musk tweeting something about the project can drive the attention. A uh article in the New York Times, Trump giving a speech, like all of these things can actually drive the attention. And that is very frustrating if you're looking at these narratives from a fundamentals perspective. I'll also mention that this is an optional side quest. If you just want to ignore the narrative noise and be a fundamentals investor, you are totally free to do that. Just you know, stack your uh your crypto money assets, buy assets with good fundamentals, and then just like wait things out because the narratives will come and go. So that is the preamble. Uh the other thing I'll say is just like don't get caught up in uh gambling your entire crypto portfolio on narratives. All right, that is a dangerous track uh to go. Maybe if this is your your first or second cycle, you want to be a bit more, you want to lean into the risk a little bit more.

But r remember, remember to sell. Remember to sell not just for stable coins, but sell for crypto money assets, the things that are durable, the Bitcoin and ethers of the world. So that's the dad talk and a quick preamble to the rest of this episode.

One thing I'll say, we have, of course, like just a pyramid here. Ryan laid out the three layers of the pyramid. Traders on top, narrative investors in the middle, and fundamental investors at the very, very bottom, the longest term holders. The narrative investor section is kind of like speculation on what might become fundamentals. I'll call it the pre-fundamental layer. And that can be correct or incorrect. But we're more or less gambling, speculating on what will eventually become fundamentals. Whether they can achieve that or not will be up to history. But this is always kind of like where people move up the stack in the w in the bull markets where people go risk on, people go away from fundamentals and in towards like more the trader archetype. And right in the middle of that is uh the narrative investor.

There are also two sources we pull from. One is a fantastic article from one of a banklist writer, uh Arjun, uh, called the 2024 Crypto Investing Narrative Glossary. Okay, he's got you know a bunch of narratives here. We've kind of consolidated some of them and simplified, but we'll include a link to the show notes for that article if you want this in a more written digest. We'll also be pulling from the uh CoinGecko Top Crypto Categories by Market Caps. So you can see examples of some of the assets that accompany some of these narratives, at least those that are public. So those are two sources for you as we get into the rest of this episode.

Let's go ahead and get right into it. Coming in at number one, the thing that I think, I think Ryan also agrees, is going to dominate the entire crypto cycle. The narrative is decentralized AI. The description is AI by the people, for the people. AI, of course, is all the rage both inside and outside of crypto. It's capturing just massive consumer interest, general consumer attention. But the problem is that publicly accessible investment opportunities are like constrained. Young people, people generally, are not going to get rich from NVIDIA at a $2 trillion market cap. That thing is already a gargantuan. So how can we get exposure to the AI industry in ways that are young and upstarting and has a lot of like growth potential left in it? And this is where crypto comes to serve some of that demand.

Yeah, I think that's a great point. I mean, look at uh open AI. It's it's doesn't have a uh it's closed, right? Anthropic, closed. Like all of these things are uh completely closed. What is open as far as things that you can buy that can capture some of this narrative? It's not actually you're not necessarily getting fundamentals uh attached to the AI economy, but you are getting the narrative upside and the crypto tokens provide some of that. I think that's the argument that you're making here.

Yeah, certain certainly, yeah. So it's a lot of these things I think are going to be hot air, but there are already projects that have just painted in some absolute insane gains over the last years. Like BitTensor, I think, is the big one. Render, uh just a few other crypto projects that are working to improve the AI space. Like Render is just putting all the GPU compute resources and coordinating them using crypto coordination mechanisms and then uh allowing people to tap into those resources. And there's a token. Like sometimes you can in the crypto space you'll be able to just like slap some AI stuff around a token, and the narrative itself is going to make that token very successful just because people are looking to speculate. When crypto win token prices go up, they tend to go up even more. Uh, and when people are looking to AI as an investment opportunity, you just kind of need a name and a brand. Not to say that there aren't actually very real um projects in the crypto space that are also working in the AI space. These are all very early, very speculative, and just a lot remains to be seen as to like what they can actually meaningfully produce uh in their fundamental um on their fundamentals.

I think for me, Casey Carouso wrote probably the best uh distillation of some of the more more fun fundamentals when it comes to this category of decentralized AI, let's say, right? Not to say that this won't get completely out of hand, um, but it it probably will. But uh a few of her categories are crowdsourced compute. Okay, so this is the idea of decentralizing our CPUs and our GPUs. And you you mentioned render, that's one example of that. There are a number of non-public uh startups that are doing this as well. Hyperbolic is is one of them, uh, which I know there are a few others, but she also lists Akash, Io.net, uh Jensen, these are examples of that. Then there's also um decentralized interface, so running open source models in a decentralized manner. So examples of that are um ritual, uh, for example. Um also on-chain AI agents. So these are on-chain apps that somehow use machine learning. So one example that I'm familiar with is uh MyShell. There's also fetch.ai, operator.io. Then there's also like the more geeky, nerdy stuff, like data and model provenance. So this is basically um having self-sovereign data and machine learning uh models that collect the value that are are produced here. So Rainfall is an example of that, uh, Vana is an example of that. Uh tokenize, we can tokenize incentivization apps. So think of um character.ai, if you guys have ever used uh this tool, only with token crypto token rewards. Uh MyShell again is another example of that. Uh Diva is is uh another example. And we've got like token incentivized machine learning. So um think about something like a scale AI, but you just add tokenization, so you add crypto rewards. That's what BitTensor really is, and that's what ritual is. And then you have on-chain verifiability. So this is how can you prove what the model actually ran? And it turns out the crypto industry has some ZK machine learning technology for that. There are a few startups doing that, modulus labs and upshot. There's a lot of categories, and some of which I I mentioned do have some fundamentals, but again, the kind of the narrative is going to get way ahead of these. A lot of these, though, are startups and they are not publicly accessible by retail. Well, they're all startups, but they don't a lot of these don't have a publicly traded uh token, let's say. You can't find it on Coin Uh Gecko or CoinMarketCap anywhere.

One of the reasons why I think this particular narrative is so fun is because there are a lot of different parts of AI that make AI a thing. Like there is the development of the model, there's the consumption of the data, there is the incentivization of the model layer, which is where like actual crypto money can can come in and crypto payment rails. And I think even just like all of the crypto AI startups are trying to slap a token into like every single one of the parts that make up the AI industry. The thing is, is like crypto and AI both move very, very fast. And doing a like an IPO for a speculative startup is just like it takes too takes too long. People don't want to go through that regulatory hurdles, and crypto is just ready for them with like the ability to mint a token. And so there's so many different components that make up the AI industry, very real components, and there are very real ways to incorporate crypto and crypto speculation and crypto demand into those things. And when there is demand for tokens, which is what a crypto bull market is, there will generally be some sort of startup that will serve that demand. Like, oh, you want an AI token for some semi or very or not at all legitimate purpose in the crypto space? Well, here's a token for that. And so your challenge as an investor is trying to speculate and answer the question is this startup legit, or are they only going to exist inside of one bull market cycle?

Yeah, what's really like so here's an example of this. Um, you know, and CoinGecko, by the way, has a few categories that are useful. So you can look at, you know, top AI coins by market cap here, where you see BitTensor and Render, and look at that category. That that gives you a sense of what projects you can begin to filter for. Here's another category called top AI agents. And just a living example that I know you and I are familiar with here is uh look at this is my shell. Okay, so this is like spin up your own AI agent. Uh a lot of these are like like uh you know you're talking to some sort of anime character, but it can be really any any type of AI agent, and then uh token incentivizing that AI agent. It's almost like friend.tech meets AI agents, and like you can buy and sell various AI agents. So again, it's like AI agents are a thing. Humans want to talk to these things, like character AI, for example, and then you add a tokenization layer to it. That's what My Shell is trying to do. So you can you can get a sense for for some of the uh ideas here.

One could spend hours trying to go down all the different rabbit holes that is AI and how crypto will um innovate and help AI. And as we kind of wrap this section, I'll just zoom all the way back out and just say, like, hey, in crypto you can mint tokens. AI is very exciting. At the very least, like this is just all that's happening. It's like crypto tokens, AI, some people are slapping these things together, and that's going to like generate a speculative frenzy. Like fundamentals or like reality aside, this is going to be a thing simply because of those two things. So definitely buyer beware. There's a lot of fun, there's a lot of research to do, there's a lot of like things to speculate and learn. Uh, but at the end of the day, because AI is interesting and because crypto has tokens, this is going to be a frenzy.

Yes. Uh what David is saying is when you're narrative investing, don't mid-curve the thing. Okay. Don't have you don't have to think too hard about it.

What's the next one? So that was number one. What's number two?

Coming in at number two, restaking. What's restaking? It's when you stake your ETH and then you stake it again. So if ETH staking, Ethereum staking is the protocol enshrined bond market, the native bond market for Ethereum, eigenlayer restaking is the surrounding corporate bond market around Ethereum. So companies call these AVS, actively validated services, think SaaS, but with crypto stuff. They will rent security from ETH stakers and pay them a small fee so they can leverage crypto economic security for whatever their app is. It's like the corporate bond market around the treasury's market, but all in crypto terms. So why is this a narrative? Well, it is a strong continuation on the arc of ETH as a monetary asset, which is something that is particularly interesting to me and Ryan. But also I'll say mainly due to the airdrop meta. If you are participating in the restaking corner of the Ethereum ecosystem, the crypto ecosystem, there is speculation that there will be a ton of airdrops coming your way. So if you are restaking your ETH, you are getting the Eigenlayer points, which is speculated to turn into the Eigen token. But then there is also the token for the particular restaking app that you are staking through. So Eigenlayer has these liquid restaking tokens, which are kind of like LSTs. So Lido staked ETH or Rocket Pool staked ETH in the traditional Ethereum native bond market. But with Eigenlayer, there is liquid restaking tokens, and there are like so many of these, like eight, nine, ten of these. And so you are farming both the Eigenlayer points for the Eigen token. You are farming both points for the liquid restaking token. But then you have all the AVSs, the actively validated services, aka eigen applications. This is, like I said, software as a service, except now in the crypto context using crypto security. And there will be many of these that I think are going to do all their airdrops throughout Q3 ish, Q4.

And so you are farming like multiple airdrops, hunting multiple airdrops, all with liquid restaking tokens. And so this is like kind of a way to get an index of the entire restaking space just by restaking your ETH. This is why I think it is in meta to say nothing about the power and excitement and hype around Eigenlayer. It's mainly a narrative just because like people think the Eigenlayer airdrop is going to be massive, and then they also get a bunch of follow-on airdrops as well. People like yield. What does Eigenlayer do? It gets you more yield on your ETH. There's $128 billion of Ether being staked to Ethereum. There is $13 billion being re staked in Eigenlayer. And all of this is because of yield. People love yield. Ryan, what do you want to add to that?

Yeah, I think that's uh that's right on. People love yield and one um reference point is DeFi summer was really the summer of yield. That was 2020. And uh so we've we've called this as well restaking summer because this is another um market about like airdrops, uh token and and yield. Um I'll I'll just add some more context to that number you said was an Eigenlayer. It's almost $13 billion worth of ether inside of Eigenlayer, and it's over three million uh ETH as it as it stands. So it's like you know, it's almost comparable to the size of all Bitcoin inside of the ETFs right now uh as a percentage of of total supply. So there's a lot of ether that's already gone in. And I think you're right on with respect to the categories. The categories are Eigenlayer itself, and the game is collect as many points as you can, and then think about the um LRTs. So there are a ton of different LRTs.

Concentric circle outside of Eigenlayer.

Right. This is like yield on the potential AVSs later. And there are a ton of these. Etherphy, Kelp Dow, Renzo, Puffer Finance, Eigenpie, Genesis, Swell, Bedrock, Inception. Uh there's a Dune board that we'll link in the show notes where you can see a bunch of those. And again, most of these do not have public tokens yet. So uh the way to get exposures is probably to start using these protocols and collecting points. And as always, there's risks, right? I mean, you're putting your ether into a uh protocol.

A brand new protocol, so be very careful here. And then there's also uh a category in CoinGecka that's worth noting. There's things like um pendle, uh for instance, which are are part of uh this narrative.

The financialization layer around LRTs.

Yes.

Like LRT applications.

And then there's going to be a future category that doesn't have any tokens yet, but that you just mentioned of all of the AVSs, all of the applications that will be built on.

The point of Eigenlayer. A V S is the point of Eigenlayer.

And then AVSs themselves, they they haven't, I mean there's no pu there's no public trade token for any AVS. It is still in just this very early stage. And AVS could be like Oracles, could be various coins, there could even be other networks like that resembles chains that could bootstrap using uh eigen layer economic security. So that's one to keep an eye out on.

Yeah, the excitement around Eigenlayer really uh crescendoes at to the point of AVSs. There are 30, 40 different AVSs that are all working to come online. Some blue chip uh AVSs, some long tail AVSs. This will be kind of the final phase of the growth of the Eigenlayer ecosystem. First, Eigenlayer Mainnet is gonna hit sometime in Q2. Uh many of the LRT projects are going to launch their token in Q2 as well. Um Etherfy actually just announced the launch of their token using the Binance launch pad. You can only imagine others like Swell have been very explicit about when their token is coming, sometime in Q2. Uh so I think it goes LRT tokens in Q2, Eigenlayer mainnet in Q2, Eigen token at some point, uh whenever they get to it, uh, and then just like the IG, the AVSs all drop their tokens, of which there are many. And where are the AVSs going to drop their tokens? It's got to be to the reestakers. Uh and so uh this is just like I think one of the most efficient point uh token airdrop farms that exists, and that's why people are very, very excited about it.

Alright, give us number three, David.

Number three, the Bitcoin Renaissance. There is a lot packed into the Bitcoin Renaissance. These are Bitcoin layer twos, these are Bitcoin ordinals, and also Bitcoin restaking. Bitcoin is also get is getting restaking as well, just like what we were talking about with Eigenlayer on Ethereum, but now with Bitcoin. So the tagline for this section: Bitcoin is growing its first ever ecosystem of decentralized applications. Since the beginning of Bitcoin, it's never been able to have its own native applications. Building on Bitcoin has been too primitive to do anything meaningful or useful. The Lightning Network, which was Bitcoin's previous path to scalability, is now just kind of being acknowledged as just a failure in technology. It was just a dead end. And now, thanks to new technological breakthroughs, people have learned how to build real applications on Bitcoin, unlocking the $1.4 trillion of Bitcoin market cap to new native use cases. And the idea here is that applications, layer twos on Ethereum have already been proven out as finding product market fit in the crypto space. We have now learned how to put those projects on Bitcoin. So we're just taking a lot of the innovation that's happened elsewhere in crypto, layering it on top of the Bitcoin stack, which is one of the theses, the ideas, the hypothesis that many Bitcoiners would have. Like if the crypto industry uh would discover anything useful, you could put it on Bitcoin. Um, the demand for Bitcoin renaissance exposure uh was I think pretty well illustrated in Stacks, which is one of these like Bitcoin sidechain Bitcoin app layers before really these technological breakthroughs were really discovered. So Stax is a project that's up 400% on the year. Uh and that to me that's just illustrating how much demand there is. And it really doesn't stop at Stax. The thing that is, I think, really getting people excited uh in addition to ordinals, which we'll get to in a second, is the BitVM. Uh the BitVM is unlocking real Bitcoin layer twos as opposed to just like side chains. Uh, and so this is a technological innovation that is still in research mode, but many startups are building Bitcoin layer twos under the assumption that eventually BitVM will be a fully fledged piece of technological infrastructure that they will be able to use. Uh and so last cycle, Ethereum layer twos went from infancy to maturity. Uh, and this this cycle they're getting even more mature. Now Bitcoin is like, okay, I'm gonna take some of that uh technological innovation and layer that on my on the Bitcoin uh layer one. Um Babylon is the Bitcoin restaking project, and so just generally Bitcoin as a unit is being leveraged in highly productive ways. Uh last cycle we had Celsius, and last cycle we had BlockFi, these Bitcoin centralized lending applications, and now there's no good way to make your Bitcoins useful. So things like Babylon and also Bitcoin Layer 2s are allowing Bitcoin holders to do things with their Bitcoin. And in a bull market, people want to touch their tokens. People want to apply their tokens in productive ways to get yield, to get upside in ways that are just beyond holding. Um, lastly, I'll I'll say all of this kind of got started by the Ordinals Revolution, which is Ordinals is basically NFTs on Bitcoin using Bitcoin block space to host images and data. Uh, and this is also getting kind of pioneered by the Tapper Wizards project, uh, Eric Wall and Udi Wertheimer. Um, Magic Eden is an NFT platform and NFT marketplace, kind of like OpenSea, uh, but they have specialized now recently in ordinals. Uh, and so NFT drops are happening on Bitcoin uh and they are pumping, uh, which is a sure sign of a bull market. So if you are just interested in holding Bitcoin and also playing with Bitcoin, uh the whole Bitcoin Renaissance narrative is probably for you.

Yeah, I think one uh macro theme of Bitcoin Renaissance is it's basically following the path of Ethereum. So you see ordinals, these are sort of Bitcoin's version of NFTs. Uh you you you you heard about uh layer twos, right? This is something where uh Ethereum has uh has already uh explored the frontier here and and this is Bitcoin uh following along. Uh and you were also talking about Babylon, which is essentially sort of an early stage restaking protocol using using Bitcoin. It's kind of like the eigen layer of Bitcoin, let's call it. I I think one thing to note, just to uh dampen a few things, is uh of course Bitcoin at the base level uh is less expressive. It hasn't dealt with some of the things that Ethereum has dealt with with respect to like MEV and like uh how do you actually expand the data availability layer, right? I mean, we just uh as we're recording this, uh Ethereum has just completely upgraded its data availability layer and provided a ton more bandwidth to its layer twos. I expect Bitcoin will have to go through these these same sort of things. And even something like uh the BitVM, which is a break breakthrough, it seems like, it's not ready yet. It does seem to provide actual, real, legitimate layer twos, but these are optimistic uh roll-ups in uh Ethereum parlance. So we we can't yet do a ZK rollup on top of Bitcoin using the BitVM technology. So there's some limitations there. Anyway, it's uh it's an interesting story because this is Bitcoin going through the same trajectory as Ethereum, just with a few more limitations and uh a few years behind, I would say. But a lot of opportunity there. Um that uh we did talk about and we looked at a chart was stacks, and it seems to be getting a ton. It's up 400%, uh 400% on the year. So it's getting a ton of this narrative activity. But I expect many more Bitcoin centric layer twos and projects to launch this year, and people should keep their eyes open.

Yeah, basically, if you have Bitcoin, then a lot of projects are coming online that are going to compete for your Bitcoin. Um, in addition to the ETFs, one of the just this is probably the second biggest source of excitement in the Bitcoin space. All right, moving on. Number four, new infrastructure is what I will call this section. Uh, if you're a nerd, you'll we will call this section modular protocols and data availability. New infrastructure as a category is always a bull market theme every single cycle. It's also a bear market theme. It's just a theme in crypto in general. We always invest and build and spin up new infrastructure. Um today, in 2024, the theme of crypto infrastructure is learning how to interoperate with each other because every single bit of infrastructure, not every single bit, but like a large number of them, are modules. Um, learning how to interop and share each other's resources and connect modules together to build a global kind of interconnected crypto system. Uh, investing in the modules that are the most useful in crypto is kind of a fun way to sift for gold. We're getting pretty down the crypto rabbit hole here. So this is the pretty the technical side of things, the nerd side of things. If you really like to be on the frontier of trying to see where the crypto industry as a whole is going, uh investing in new infrastructure or speculating on new infrastructure is like a fun place to do this. Building deep technical infrastructure is like kind of confusing for a lot of the crypto layman, but it is a great way to speed run your way into like understanding why crypto is built the way that it's built. Um, it's perhaps unnecessary. There's a meme that we have way too much infrastructure in crypto and we're investing just in infrastructure over and over and over again without ever focusing on the consumer applications. But this is largely fueled because VCs will fund it and retail will speculate on it. And it really only takes about one out of every 100 projects to achieve a hundred one billion dollar market cap, and then maybe one out of every a thousand projects to actually improve the quality of life of the users who use these systems. Uh and all the other ones is just, you know, speculation. Uh, and so whether or not you can find the ones that uh will stick around uh is a fun game for some. Uh, but it's also a great way to stay educated, I say. If you can be informed about this uh part of the industry, you're more or less informed about everything there is to know about crypto, I'd say.

I think one thing uh to point out is that when we're talking about infrastructure, we're uh often talking about protocols and uh like new networks that need to be bootstrapped, which of course that is one thing that that crypto does uh fairly well is decentralized networks and protocols with tokens uh attached to them. And so that that's why it seems like there's a lot of upside in this category. But I I want to zoom out and uh paint paint the picture of why we actually need another round of infrastructure investment. And the reason is basically because our blockchains don't scale today. If we want to preserve decentralization uh and want to scale them at the same time, in other words, like low gas fees, low cost uh for transactions, then uh we need a new set of infrastructure. And basically there are two parallel um paths being uh explored by crypto right now. One is the modular path, which is sort of Ethereum and company, and the other is there are some monolithic chains that we'll get to that in kind of a uh an upcoming narrative, some of the alternative layer ones, the monolithic path. But basically, in the modular path, which Ethereum has adopted, is kind of outsourcing a ton of its um capability. It's outsourcing the execution layer, it's creating surface area for the development of so many different chains. And that is both an opportunity, but it causes downstream uh challenges. Like now these chains are all fragmented, and so we have to bridge them together. We have to interoperate, we have to share the sequencing of them. There's a new set of problems to solve that Ethereum is basically outsourcing to kind of the free market, these various modules that are springing up. And so that is the broader context for why I think it's justifiable to have a new round of infrastructure investment. So we're going to need new execution layers, okay, like new virtual machines. And so we see um parallelized virtual machine layer twos springing up, right? Eclipse is one of these, right? It's putting the SVM uh that's the Solana virtual machine inside a layer two. We need um sequencing, shared sequencing. So now our chains are fragmented, so how do we like unfragment them and have uh the ability to transact atomically from one chain to another? Well, we have Espresso uh doing some of that, Astria doing some of that, shared sequencing. We have um a whole bunch in DA. I've got this in front of me from CoinGecko. This is data availability. So Ethereum has some data availability, but it's not enough to support the entire modular world. So um Celestia has been one of the big stories of the year, I think, in its price run-up, which is a dedicated data availability layer for uh chains that supports kind of this this modular approach. And I mean, look at the market cap of Celestia at this point in time, fully diluted valuation of 17 billion, and that has been up only this year. So there are all of these like nerdy categories, not to mention uh layer twos. David, there are so many new layer twos coming uh online, both in inside layer two frameworks, so the big frameworks like the OP stack, Arbitrum Orbits, ZK uh hyper hyper chains, polygon super nets, and then you have chains inside of these things, you know, pushing on the edges from a go-to-market perspective, things like blast. Um, there's so much to talk about with these new uh with layer two chains as well. Anyway, all of this infrastructure will definitely catch a bid in various pockets. And what's your general advice for for how to navigate this? I mean, in in previous bull cycles, one thing we used to say is if you if you want to see if a DeFi protocol has potential, like just use it. I think that is very, very true when it comes to chains. Like go use these layer twos and you can get a better sense for for which ones are going to take off or not. That is still good advice, but it's kind of some of these infrastructure things, you know, like a DA layer. I mean, that's a very B2B type of thing, and it it's really hard to um predict how that's going to play out. Do you have any general advice for how uh investors should look at the the the this entire infrastructure class?

Yeah, for me, the first bit of advice comes to the people who are really trying to become extremely knowledgeable in crypto, the most knowledgeable possible. All of these different like sectors of infrastructure are like the execution layers, the sequencing layers, the data availability layers, the layer two frameworks, the roll-up as a service providers, the interoperability applications. If you can define each one of these categories and articulate how they work together, because again, modularity means that one module is going to connect to another module, which will connect to another module. If you can articulate the ecosystem for how these weave together and become one global system, then you are basically as advanced as possible as you can get in the crypto space. So it's kind of like a research homework assignment to understand all of these things. And then from the people who are looking to gain exposure to these things, it's about which ones are going to hit mainnet first. Uh, and then can you actually touch some of this infrastructure? Uh and so, like right now, staking your TIA, your Celestia token, inside of the Cosmos ecosystem is a target for receiving airdrops. It's been a pretty successful way to receive airdrops. So that's one way to gain exposure here. Uh staking TIA nets you some sort of like 20% of like network issuance. Um Eigen DA, data availability from Eigenlayer, not yet a thing yet. And so people are keeping an eye on that. It's like, oh, when that comes online, maybe I want to go play in that world and see like what kind of footprint I can establish over there.

Double hit.

Airdrop.

That's two narratives. We got restaking and also Eigenlayer has a a data availability layer.

Right, yeah, so it's really mainly about like how can I grow my footprint? These are all deep infrastructure, uh, and your wallet with transactions can establish like a presence on a lot of these um bits of infrastructure just by leaving traces of your activity on chain. And growing a footprint is kind of like growing a net. Generally, the larger net you have, the more optionality you have on like finding some way to have exposure. Again, like largely via airdrops, but other ways as well.

So many layer twos to explore. I mean that this is one of the most exciting areas I think to explore the frontier on. And um the wallet experience has improved a lot. You know, one wallet I've been using uh a lot recently is Rabby, David, which provides a much more seamless like interface for navigating across chains. Right? You don't have to like constantly switch which chain you're on. You can just kind of like see your assets uh you know uh uh irrespective of of of the chain. So uh really exciting area, I think for sure. But um man, it's so dynamic. Um it's it's hard to pick a specific subset of layer twos that are going to absolutely crush it uh this market because there's just so many new experiments spinning up.

Coming up next, we're gonna talk about the oldest pastime in crypto, that is the alt layer one trade. Uh, and then we're also gonna talk about D-Pin, decentralized physical infrastructure, real-world assets as well. But first, a moment to talk about some of these fantastic sponsors that make this show possible. The oldest pastime in crypto, the alt layer one trade. It never dies. New layer one blockchains come online every single year, every single bull market. Uh, we have been producing new blockchains in the crypto space space ever since Litecoin and Dogecoin. Uh, these new blockchains, they all attempt to gain some sort of adoption via technological innovation, charismatic leaders, really good memes. Uh, it has been the narrative that has

Transactions per second.

Yeah, hide that's that's a great line. Great, yeah. Very cheap. Yeah. We're we're the main the chain for mainstream consumer adoption. That's a very hot line that many, many have leveraged. Uh something we've seen, like, oh, we're the real world asset chain. We'll talk about that narrative in a second. Um they're all narratives. Um uh understanding how each one captures attention and why others win is definitely like a dark art. It's definitely like um uh there's no real rhyme or reason to it. Some projects just um figure it out better than others. Um but just overall big uh emphasis on like this has always been a narrative of crypto. Every single bull market, there is a new type, new flavor of alt layer ones. Uh right now, this cycle seems to be the meta of the parallelized virtual machine layer one. This was set by the success of Solana from last cycle. Uh, and so now there are a bunch of copycat, parallelized virtual machine layer ones coming online. Uh Sui, Sei, Aptos, Monad, uh, and then also the honorable mention uh the Eclipse Layer 2 on Ethereum, also a parallelized virtual machine on uh Ethereum as a layer two. Um, but this will also be in addition to the many other types of layer ones that come on scene. Ever since Bitcoin came about and we made blockchains, people are like, oh, I can make a blockchain. Um also I'm gonna make a blockchain that's gonna be worth a billion dollars. Uh and so it's a speculative fun venture for layer one founders, it's a speculative venture for a venture capitalist who will fund these things, and it's even a very favorite pastime for retail speculation. Um it's very, yeah, it's speculation through and through and through. Uh every once in a while, one works, and that's what keeps the game going.

In all these things, you gotta be very careful about uh token lockups, of course. So um the all of these chains, this this uh it follows with many of the infrastructure investments we were just talking about as well. Uh they uh raised a whole bunch of money from VCs. And the VCs are looking for an exit at some point in time, right? And so retail can be that exit for them. And so you have to be very careful about tokens when they're unlocking, and um, you know, the the net selling pressure in some of these assets. I I do agree with you, David, on the alternative layer ones. Like the big theme this year, it seems to me, and for the next uh two years, is going to be parallelized uh alternative layer one chains. So Monad uh has is probably the first project that's gonna come online that will actually have a parallelized EVM. So so far, the big virtual machine in town has been um Solana and the SVM. Well, Monad is doing that with the EVM. So if you are deployed like via the EVM, it can take advantage of some of the the Ethereum virtual machine network effect. And SUI is uh a parallelized VM that is based on the the Move VM. So that's another flavor of it. And I think that those are the projects that are going to catch a bit. There's also this blending though, David. We're we're talking about this uh in terms of alternative layer ones, just because that's a category. So they are not using Ethereum, they are bootstrapping their own validators, right? And that's what makes it an alternative layer one. But there's this blending because they're all chains at the end of the day, right? And so what is the difference between these alternative layer ones and the layer twos that we were talking about? Well, the only difference is um the layer twos settle on top of Ethereum, where whereas the the layer ones are kind of bootstrapping their own validator set on their own and and they're kind of like sell uh settling on kind of their their own base layer. Um do you see any distinction there? Or it's like why is alternative layer ones, why are they a separate narrative? Why aren't they all just chains?

For some reason, as a layer one, the market valuation of your token just gets the layer one premium. A layer two, in my opinion, I think in our opinion, has much stronger fundamentals because as a layer two, they simply don't have to pay for their own network security. That's what a layer two is. They leverage Ethereum for security, and Ethereum secures all of its own layer twos. But then if you're a layer two, you don't necessarily have the same market comparable valuation of like the Solana or Ethereum itself or even Bitcoin itself. So there's always just this incentive pull towards being a layer one because people perceive layer ones to be more valuable. Even though being a layer one is harder and you're less more you're more likely to fail, uh, in the short term, you can attract a higher market cap.

So it's kind of a narrative trade because you can come up against something like Ethereum. So if Ethereum is worth four hundred billion dollars, right? Well we have

I should be at li uh at least four billion dollars.

Exactly, 'cause we're gonna capture just X percent of Ethereum and we're we're not a layer two, we're not settling on Ethereum. Uh we are an alternative to Ethereum. That's why this class uh has often been called in the past uh the Ethereum Killer type class. Because at at some layer they're there they have to go against in order to get the valuation that they kind of want, they have to go against um King Ethereum in this in this narrative category and knock them out. Uh and some some have actually had some uh reasonable traction doing this, like uh Solana, I would say.

Solana extended the alt layer one trade by like another ten years.

It worked.

I've also had a a thesis. I don't know how this will play out, but over time, some of these will switch categories. You might see a layer two like transform become an alternative layer one, and you might see uh alternative layer ones become layer twos. In fact, we have seen many like former class of 2021 alternative layer ones now actually migrate and become layer twos. Like uh Cello Network is one of these. They were going off on their own and now they're in Ethereum uh layer two. Also, NIR has become much more kind of uh Ethereum aligned. It's not a full layer two, I would say, but it's providing it's it's pivoted into like DA becoming uh Ethereum layer, yeah. Yeah, exactly. So very very interesting. Do you do you have any takes? Is is basically your assessment that uh look for parallelized alternative layer ones in this in this category? Do you are there any

The category that has definitely uh captured attention now. Uh because like I said, the the Solana is set in stone the parallelized virtual machine meta. Um and so now there are a bunch of like Solana copycats trying to um wedge themselves between Solana and Ethereum. Uh and so this is why both Say and Monad are doing parallelized EVM, not the Solana virtual machine, but the Ethereum virtual machine, which has the massive developer ecosystem. I will say the layer one trade can be dangerous because you might fall into the trap of buying into a VC ghost chain. Uh and so you do not want to buy the tokens of some sort of like VC hyped chain that doesn't have any users and just has fake hype and excitement from the venture capital community.

that's the base case? That's