Zach Rynes | CLG

🚨 New CLG Podcast is live 🚨 Two years since our last episode, @Crypto___Oracle and I discuss how institutional adoption is reshaping crypto and who will benefit as tokenization scales This one was long overdue Link in the next tweet 👇

Refreshing to see Vitalik directly address the SoV vs cash-flow valuation debate for $ETH However, just to be clear on what the primary trade-offs are with going all-in on the SoV valuation thesis for ETH is It means Ethereum succeeding as a network (from a protocol adoption perspective) does *not* inherently or automatically benefit ETH from a value capture perspective Personally, what originally made ETH so compelling to me was the direct economic connection between Ethereum adoption and ETH value accrual Users paid fees, some of those fees were burned, and some went to stakers. And as adoption increased (based on the fat protocol thesis), Ethereum would retain the majority of fee revenue and MEV generated (with ETH in effect becoming net deflationary long term) Therefore, as an ETH holder, you could benefit from people using Ethereum regardless of what onchain use case took off and whether those users believed ETH was money And yet what happened was a number of technical and ideological decisions were made that resulted in the L1 chain forfeiting the most valuable part of the stack (contention and congestion fees) to the L2s/apps/middleware, while optimizing the L1 for the least valuable part of the stack (settlement and DA fees) As a result, Ethereum L1 revenue collapsed 99% over the last few years, forcing the narrative change to focus on ETH being a SoV Yes, the revenue from onchain ponzi games were not sustainable, but there was a world where Ethereum aggressively scaled the L1, retained its MEV economics, vertically integrated key infra, and leaned into real sustainable use cases that could have reversed the revenue drop Instead, we are on the EF’s mandate path of zero-compromise censorship resistance and CROPS, which while great for Ethereum as a protocol, created an identity crisis for ETH If we’re now comfortable with ETH burn remaining far below issuance indefinitely, and cash flows not being an important part of the story, then the thesis for ETH rests on people voluntarily choosing to hold their wealth in ETH, and not value accrual as a result of protocol adoption Censorship resistance and credible neutrality are valuable properties for a settlement layer, but institutions can value those properties while using Ethereum to issue and trade assets without touching ETH As more traditional assets get tokenized onchain, the more that onchain markets will be denominated and trade against fiat-backed stablecoins, a trend we already see happening With gas abstraction, users won’t even need to acquire and hold ETH reserves to participate, as gas becomes payable in any currency. Someone still pays the underlying ETH fees to the L1, but that’s just the revenue argument again Every additional asset issued on Ethereum means more assets competing for the same capital, its net PvP where ETH becomes one of many assets available on the ledger There’s no automatic reason that someone buying tokenized equities or borrowing against tokenized treasuries, which are stablecoin-denominated markets, will also want ETH as a SoV asset, that’s a completely different unrelated trade And for those looking for a non-sovereign SoV, ETH still has to compete with BTC, where by and large Bitcoin has won the SoV mindshare argument, leaving ETH with a “second best crypto SoV” story as it changes the monetary policy every 6 months I *want* to be bullish on ETH because I think Ethereum is useful and can become more useful over time, it’s personally the chain I trust the most to hold assets on, and the second isn’t even close But owning economic exposure to that success and owning an asset that may become the preferred SoV within that economy are two very different investment theses

Never thought I’d see a world where Chainlink talks about price Turns out he’s the hardest working guy on the blockchain Sometimes Proof of Work is literal