You asked for my alt. Here it is.
Joined October 2021
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Recently moved to 100% USD allocation at a centralized bank (near perfect timing on local top) yet I still feel the pain of the drawdown.
What kind of mental illness is this?
Bernstein: Buy everything [digital assets] that you can! Our Digital Asset bucket:
50%: BTC/ETH
50%: Alt-L1, ETH L2, ETH L2, ETH L2, ETH Defi, ETH Defi, ETH Defi, Gen-infra, ETH gaming
CT: “ETH is ded”
Cope • /kōp/
Verb
To perform daily pontification of how the worlds most adopted smart-contract platform, which maintains the largest developer base, and continues to produce the most innovative applications is dead, antiquated, and overvalued.
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Fwiw my firm’s backlog doubled overnight with Tradfi-x-Crypto engagements.
We don’t have enough staff to support the Tradfi onboarding (the household Bank/AWM names)
Things have shifted. Agree this does not seem to be fully appreciated yet
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Pure SOV: Bitcoin
SOV Enabled Economy: Ethereum
Crypto Networks: Solana, Arbitrum, Optimism, Polygon, Sui, Aptos, Sei
Stop comparing things across categories. Oh and btw these have been the visions from day 1 for each of these projects. No goalpost shifting here
You can also preach that anything that isn’t falsifiable is hand-wavy. That’s cool and all, but the market has disagreed with you for over a decade, so the onus is on you to prove why BTC and ETH shouldn’t be valued for prioritizing the values that led to the categorization, not the other way around
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PK (99.9,0.1) 🦇🔊 retweeted
I’ve been excited about Polygon and the AggLayer for a while but the last two weeks have been holy shit moments.
Going to melt some faces as we get into the first half of 2025.
Congrats to OP w/ Uni W
I have a soft spot for AggLayer (Polygon) since their technical contributions to this vision outstrip other L2 teams
But the path is clear. L2 teams (Polygon, OP, etc) are misunderstood. While fierce competition between them, there’s really only 3-5 credible teams working toward this vision amongst a crowded sea of 50+ L1s
@matthew_sigel following up on my view here:
The main dislocation I am seeing is how L2s are thought of today. People correctly identify the benefits of L1s: interoperability & censorship resistance, but they miss the critical drawback of ceding sovereignty
Sovereignty in this case is broad and can mean many things including: what vm best suits your business need; MEV capture ability; regulatory flexibility, etc. Many builders require an isolated environment that they control- we have seen this with crypto native apps- and we will see more of it when traditional firms enter. The trend imo will be towards this architecture.. This is where “blockchain- not crypto” originates from; which while incorrect as a whole had an element of accuracy that most people gloss over now
Where people really miss the forest through the trees is in the categorization of what an L2 actually is. “ToO ManY l2S” is wrong. If you reframe to more accurately define all those L2s as users, you’ll come to understand that constructs such as the AggLayer is the actual *product* being built by the “L2 teams”. As a category it’s undefined- or poorly defined- such that people don’t view it as an investable category. People still largely view L2s as cheap blockspace. This is incorrect and so I understand why assigning no value is prevalent-blockspace is abundant. So what is it? What is the “product”?
I’ll define simply like this: L2 teams are providing the missing link. A user (app/firm) will now be able to tap into credibly nuetral, interoperable blockspace, WHILE maintaining sovereignty. L1s are vitally important, but they cannot provide the latter without L2s. Because of this, my base case is a large majority of activity occurs on this 2nd layer (it’s happening in Ethereum and will come to Solana Et Al.
From a value capture perspective I think of things like this:
We are saturated w/r/t people who actually care about underlying tech. New chains in coming cycles will struggle to form communities with staying power. Incumbents will remain strong.
With most activity occurring on L2/appchains, AggLayer type contructs will be able to maintain pricing power because they are charging for 2 things 1) sovereignty as a service and 2) network effects. (Many L2s have the largest apps today and have the closest relationship with top of funnel- Coinbase, OKX, Robinhood). Fees will accrue to them only for cross app transactions (I.e. when you move from Immutable to Uniswap- that tx hits the AggLayer). My base case here is that tx on each app will be so cheap that it will be subsidized by the app, and that most end users will have their funds at a “Bank”- I.e one app where assets are held. Meaning every net new app interaction will coincide with a tx passing through the AggLayer. This construct will now more closely represent something akin to your Credit card processing fee ($0.001/tx). But the pie is much larger than just that market when taking into account other non-financial tx that will move through this new layer). I’ll leave to you to model this one out- the point isn’t “look how large the market can be” - its that people are not defining L2 correctly
Now why have L2s languished in the market? Beyond the lack of understanding highlighted above we have been in a cycle of really bad flows (I expect this to continue for a bit- but not forever). Think of where these projects are in their life cycle: Massive unlocks + fierce competition amongst L2s to win this new market. The good news is not many new players have joined the race (unlike the # of new L1s), giving space for the network effects to build here. Ironically I think the less competition- resulted in more competition because the pie is being split in 3-5 not 10-20. Effects are taking hold none-the-less (as mentioned above with strategic top of funnel exchanges + big apps like Polymarket, ImX, Farcaster etc)
Over a reasonable frame unlocks+grants slow and fundamentals shift
Thats why Im an L2 bull
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Crypto industry needs to reset itself tbh
Nobody is left to buy your bags. Twitter battles are futile and counter-productive
The only option left is to build your way out
A lot of talk on getting Polymarket to join [your bags] chain
Here is the easiest way to get this accomplished with a 100% success rate (vs 10 chains vying for the spot on CT)
🧵
Tbh w/ @Polymarket, @DraftKings & @Immutable all on Polygon… It’s starting to feel like the logical home for esports gaming/betting
Doesn’t hurt that it’s one of the few chains with ramps from major exchanges like Coin & OXK
Work to do, but very close to network synergy
An application, without a token, built on Polygon: is this cycles breakout.
How’s that for a narrative violation
Update your priors
Nate has been an inspiration for me since long before I started Polymarket. Thrilled to have him aboard. @NateSilver538
axios.com/2024/07/16/nate-si…
PK (99.9,0.1) 🦇🔊 retweeted
ETF buyers going from 0 to 1 are price agnostic. They don’t care if price is 25k, 30k, 45k, 60k. They’re buying.
If you sold anything in the last 3 months or are willing to sell lower than launch date.. you’re [redacted]
You’ll have another shot with ETH ETF though
I’ve been very busy [hence my absence -which will persist for some time] but finally got around to the Drake/Toly debate on @bankless .
A thought re: issuance:
A US reporting company sells widgets abroad. The country it sells in has a highly inflationary currency. Cost to produce a widget is $4 and is done domestically. In the beginning of the year both country’s currencies were in parity and and products were being sold at $5 (or ¥5). Translated profit was $1 per widget.
By the end of the year $1 = ¥2.
A couple of scenarios can occur:
(1) Do nothing. In this case Revenue at the beginning of yr2 (¥5=$2.5)- cost ($4)= a loss of $1.50. This fx translation is at the expense of the operator. This example is extreme & non-viable. A less extreme example would result in a still profitable operator, albeit with compressed margins. Said another way, the operator bore the expense.
(2)As an alternative, to retain margin, price of the product needs to rise in parity with the fx rate in order to maintain margins. (Widgets now need to be sold for ¥10 rather than ¥5). This cost is borne by the end customer. *But what if the customer can invest their idle funds in inflation protected assets to hedge against the inflation? Sure they could do this. We first must assume the following (1a) there are no income taxes on the income generated off these assets (1b) 100% of funds are allocated to these investments, funds are 100% liquid, redeemable at par- at ALL times, and there is ZERO risk of ever losing principle- so as to mitigate the cost of capital, as well as credit risk*. In reality, only a minority of countries have no taxes, and there is always (even if small) an element of credit risk/CoC imposed.
Solana validators are the company. They earn revenues is SOL, an inflationary currency. (Yes it is a currency because it is used as a medium of exchange for services. While Toly tries hard to market SOL as a pure equity play [by way of comparison to Apple; and by saying token derives value solely from the network produced cashflows] it is in fact used today as a currency. The validators’ expenses are primarily based in fiat. Be it the cost of electricity to run the boxes or any other cost borne by the operator in their daily lives (the chief life-currency is in fiat and revenues are not).
No matter how you slice it, or react to it, there is an expense via issuance. Though it can be obfuscated well. That expense can borne by users, operators, or guised by hidden costs such as CoC/smart-contract risk.
And if you are still not convinced then answer me this: Why does issuance exist at all? If it’s not an expense, then surely it’s not revenue (the IRS disagrees btw). If issuance is merely a stock-split as Toly suggests, then what is the purpose? Why not turn it off completely? If stake provides no ‘economic security’ and validators are only receiving stock splits(no revenue), why are they running boxes? The best, yet still inadequate response is, “not all people will stake therefore it is revenue to those who do”.
In this case you are now arguing against the points that a) anyone can solo-stake b) you are a user friendly chain not taking advantage of less sophisticated users who don’t. If this is the only rationale response then it would appear Toly has abandoned his users despite supporting them in the past.
While inflation rate is an easily fixable problem, and therefore, itself, is a non-concern to me, having very influential leaders like @toly remain obtuse to the matter is a notable.
Some firsts today (I think):
1) 1st US public company (non-crypto native/finance) to launch an L2
2) 1st Alt-L1 to embark on L2 roadmap leveraging an Eth L2 stack
It’s important to step back from announcements to recognize the big picture:
Blockchains will eat the world. All companies will be hooked up to public blockchains. Multiple L1s/L2s will be used. Fragmentation is a meme to be solved by engineering. We’re in the early days.
While both of these wins today were brought by the efforts of Polygon (ala FOX & Ronin), they are wins for the industry at large, as the homogenous slushpool of users, activity, and economic activity will flow freely between chains. Tribalism tore the industry apart; the Agglayer and emergent interop will mend it back together
They wouldn’t listen to me, perhaps they will listen to him
I spent months campaigning this & was left feeling more disheartened than ever as a result
Intra-op ≠ inter-op
I agree with Chris, however point in time data comparisons are not useful in isolation (which I’m sure he’d agree with as well)
This will be an interesting metric to watch over time, but it’s fairly meaningless today for the following reasons:
1) No chains are valued off of TTM TEV, nor will they be at any point in the near future (or ever). Builders, Apps, Network Effect are still the only relevant metrics atm imo. Still yet, not a single chain has a rationally ascribed relative value today whether comparing adoption/network effect/TEV or any other metric. Overindexing here will lead to false conclusions (whether you’re on the right or wrong side of that trade). Moreover, this metric should not be extrapolated without consideration of the below.
2) Ethereum is in the early stages of its L2 network build out (cyclically the lowest point of TEV capture) while Solana has not started here yet- remaining as a pre-L2 & maturing chain (in a higher point of its TEV cycle) [not making projections on where TEV goes for either of these chains over any time horizon-merely pointing out the cyclicality of TEV:Stage in roadmap). It would be reasonable to expect this to reverse in a big way when Eth L2 eco matures and Solana embarks into L2s for example.
3) This does not break out TEV source. All else equal, higher discount rate should be utilized for retail vs L2s/app chains, given stickiness (switching costs for these customers is vastly different) [cc: @smyyguy Something worth breaking out at some point in the future]
4) One could also argue that Ethereum L1 customers are much sticker than any other chain as there are many low cost L1 & L2s today. This signals the true value of the Ethereum L1 blockspace (whatever that may be & one that transcends eth maximalism). There is clearly a differentiated product here that people value more than they value lower cost chains (be it L1/L2). While Solana has its own maxis, I don’t believe it has a similar moat today wrt premium blockspace. Its differentiator of high throughput low cost will continue to be challenged in the coming years.
All this to say, while I agree the TEV metric here is the appropriate metric (L2 TEV should not be included for the L1), if someone would were to model this out there would be qualitative factors needed as inputs to the model which imo currently weigh in favor of Ethereum and are not captured by purely looking at a standalone data point. (Caution: Please don’t model this out for the sake of the industry)
Data is good, but in order to draw a conclusion, we need to understand it in order to make forward looking projections. Ethereum, being much further ahead than any other smart contract platform, often is not ascribed the benefit of such nuance
each L2 is a different blockspace environment - TEV compares blockspace value, and the comparison stands as an important one to watch (ETH L1 vs SOL L1), and will stand when Solana has L2s
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