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A | Bankless nation. Welcome to 2024. And on the first bankless takes of the year, we have six predictions, six investment themes that we think are going to define the meta for the rest of the year, maybe into 2025. But from what we can see today at least, is already setting in place some six different investment themes th... |
B | Oh, it's good, man. I have a little bit of COVID so if listeners. |
A | Holiday Covid? |
B | Yeah, if listeners hear the present from the family in my voice. Yeah, a parting present. But David, I'm excited to start 2024. This first episode of year and predictions are curated by you, yourself or these investment themes, I should say. So I've gotten a chance to look at them at a high level. I think I need your h... |
A | Absolutely. And if you've been a content consumer, crypto, you know that every single content producer that exists in crypto has put out their predictions for 2024. Whether you are a writer or a podcaster, you have your predictions. This is a, that is a little bit of a meta, an aggregator, because I've been reviewing a... |
B | So we have six crypto investment themes for 2024. And let's take these one by one. So let's start with the first one, David. So last year was a big breakout year for LST. That was liquid staking tokens. This year, a major investment theme is restaking and lrts. That's liquid restaking tokens. That's what you're saying ... |
A | This theme begins with Eigen Layer, who of course, brought restaking into crypto at all. Now, there's already Eigen layer kind of copycats. There's an Eigen layer on bitcoin, there's an Eigen layer in the multi chain. But really, Eigen layer itself has dominated the narrative right. In the last week or maybe week befor... |
B | What do you mean by that? What do you mean by that? So it's like Steth has a cap of how much steth that is Leidos staked eth. How much Lido staked eth. You can put an Eigen layer right now. And Reth has a similar cap. That's what you mean by, by cap. And Eigen layer is in self imposing. This cap, I believe, just becaus... |
A | That's exactly right. And the caps for kind of the longer tail. Liquid staking tokens are lower than the lido cap. But everything that is a liquid staking token has a cap. Lido is the largest. The next largest deposit into Eigen layer is swell. And then rocket pool as well. Coinbase. But all of these individual liquid ... |
B | Okay. Okay. So I think we need two points of clarification. Here is one. Could you just reset? Why are people putting tokens in Eigen lair to begin with? Like, what's the entire what? Like, what's the point? So you were kind of talking a bit more and emphasizing maybe a bit more airdrop farming and that sort of use cas... |
A | Right. Eigen layer restaking networks are an additional source of yield to deposited capital. And technically, that capital can be anything. But for right now, it is just Ethereum. If you want to explore why just ether, we recently did an episode with Sriram, with Mike Nooter a couple of weeks ago that's already out. A... |
B | Okay. And should mention, of course, with any yield, there is also risk associated with nothing free, right? So that's a note that all bank listeners should always be aware of. Whenever you see yield, it's really about your risk adjusted return. And you have to factor smart contract risk, the risk being slashed by all ... |
A | Active validator, actively validated service, which is kind of a complicated name. It's really just a reshaking. |
B | It's an Eigen layer app. Just call it restaking app. Okay, and so that's what's happening. And then just clarify this. So what is the difference between a liquid staking token like Steth and Reth? These are liquid staking tokens. We're all familiar with that. And a liquid restaking token? Is it just that you just take ... |
A | Yeah, that's basically it. So think of it as a set of concentric circles where at the very center you have vanilla ether and one more concentric circle out. You have staked ether, either staked ether from Lido, staked ether from rocket pool. You could also solo stake, and you get the yields baked into the liquid stakin... |
B | And the reason this is a big deal is from a supply demand perspective, I guess from a supply perspective, there's a lot of eTh out there. There's a lot of staked ETH out there in search of yield. So this is another use case for Ethan, kind of as the Internet bond to secure non Ethereum networks, non ethereum applicatio... |
A | David not natively on Ethereum, and in my opinion, not having access to the capital of ether makes other restaking networks not as interesting. But that's always my perspective. That would probably come as no surprise to listeners. There is Babylon on bitcoin, so bitcoin restaking is a thing. There's another one, I'm f... |
B | Lido in the liquid resyncing game? They kind of are, but they're not doing the Avss, they're not doing the Eigen layer applications directly. I mean, but you can put Steth inside of Eigen layer, correct? |
A | Correct. Yeah, you can put Steth inside a number of these applications. So kelp Dao, for example, you can put Lido staked ETH into kelp Dao along with stator EtH Xeath into kelpdao. And you can use both because they are token. It's one of the 15 token projects that exist out there. And so, yeah, so some of these things... |
B | Yeah, no, this has all of the, I guess the setup to be an investment theme for next year. I can understand why you picked it. We've got teams developing in the space. We've got kind of a new base protocol that is sort of net new hasn't been tried before. Right. It's kind of like, you know, using the economic security o... |
A | Well, it kind of had to. My hand was forced here. The big question is, is the meta now bitcoin, Ethereum and Solana, is that the new question? Is that, is Solana now a blue chip is now number six or number five in total crypto market cap. So it's pretty far out there. And Solana has absolutely won Q two or Q three and ... |
B | Do you think that Solana, the Solana community, will get serious about economic protocol upgrades as well? I mean, certainly its fee market needs an overhaul from a variety of perspectives. There is no 1559 type of mechanism yet, although I think there are murmurings and talk of that I've seen over the last couple of w... |
A | Yeah, that's a good question. I do think from what I've been watching my conversation with recently with Anatoly and other people that I talk to in the Solana space who are more informed than me, they're all starting to see a elevating of priority of the economics of Solana, not just because you have like, the Ethereum... |
B | It seems to be now consensus, at least among kind of VC's and other investors, that Solana is kind of the ethereum of this cycle. Last cycle, famously, ethereum did like, I don't know how many did like a ten x 20 x, something like that. And the idea is that Solana may, may repeat that, basically, and be kind of the eth... |
A | Yeah, the bear case for Solana is that the price movement already happened. It was 2023. Like going from $100 sold to back to $250. Sol is not like, it's not a clear path to that happening. And so that's, the bear case is like, the bullishness has already happened. The more bear case is that, like, it's not just ethere... |
B | All right, so since we've been talking about it, why don't we flip to number five, David on the list? We'll cover three and four in a second. But you've been talking about Sui and Monad and all of these things. And I think this fits with your number five investment theme, which is parallelized evms. So tell me about th... |
A | I recently did a podcast, Ryan, with Anatoly. I don't know if you listen to it, but I asked him the question that I also like to ask bitcoiners, which is, what is the most important component about bitcoin? There's a number of different components about bitcoin. The 21 million hard cap proof of work, the ability to run... |
B | I know that from our episode with bitcoin Bull, Robert Breedlove, which comes out pretty soon, actually a canonical bitcoin episode. He said difficulty adjustment, which actually surprised me. But maybe you already knew that this was kind of the consensus view. |
A | They all love the difficulty adjustment. They kind of call it the Capstone Keystone thing that really puts the bitcoin system into alignment. And so I asked that same question about Solana to anatoly, and he said, parallelization, the parallelization of this Solana virtual machine, that's really the thing that Solana i... |
B | And Monad, we should say, are layer ones, right? |
A | Yes, exactly. Yeah. Uh, and. And then also, like, the price performance of Solana and has, you know, defined the meta, of parallelized evms, or, excuse me, parallelized virtual machines with the SVM. But then the network effects of Ethereum have always been trying to be bitten at by other layer ones. And so this is why... |
B | Yeah, that makes sense. And parallelized evms can also happen in rollups on layer two, so they don't have to be layer ones in the way that Sui and Monad are. But some on this list, like Polygon and Scroll. Certainly those are layer twos. It seems to me when we talk about parallelizing the EVM, what we're trying to do i... |
A | EVM counts as Ethereum. |
B | Exactly. And so Monad is nothing right now building on top of Ethereum at all, but they are creating a new parallelized EVM that's going to be pretty innovative. So what do you think here, David? Do you think some of this will start to nip at Solana's narrative a bit more? And do you think some of the narrative investo... |
A | I think the answer is yes, and can also take it away from Ethereum. Parallelized evms are trying to nip at both. The difference, I would say, with the parallelized EVM is that I don't think really the Ethereum layer one is ever going to upgrade its implementation of the EVM. But layer twos, I think, are much more free ... |
B | It does seem like the best of both worlds. You get highly secure single threaded settlement, and then you get in the execution layer parallelized like infinity, infinity TPS, like execution. So I understand why that's a theme then. David. So before we get to number three, four, and then eventually six, we want to tell ... |
A | Yeah, yeah, they definitely did. Definitely. If you look around at all the gaming experts, the crypto gaming experts, it's just an unequivocal fact that a strong number of games, crypto games will launch in 2024 and then even more will launch in 2025. Like a likely outcome that most of these will flop. But that's just ... |
B | That blew my mind, David, is I think Vance gave it on our podcast. There are 3.2 billion gamers globally. That's a lot of freaking people. That's like half the world is a gamer of some sort or another. Like, I think, I'm sure a lot of, you know, candy crush casual gamers are included in the stat, but who. |
A | Knows the most expansive definition of gamers. |
B | Possible, for sure, but that's a lot of people. And so do you think that this could be an on ramp for all of those? Like, I guess maybe the vision for crypto gaming is people don't even know they're on crypto rails and they're playing a game. They're just having fun. And underneath it all, there's like, you know, gas b... |
A | I think that's exactly right. I think when we say the words crypto gamers or gamers in general, people kind of assume people with like an ultra wide screen monitor. They have the most expensive graphics card. They're playing very intense, triple a beautiful games that took hundreds of millions of dollars to develop. We... |
C | I mean, have you ever hung out in a, like a gaming discord and they're all screeching at each other for, you know, you really can't even interpret. And they're. They're on their computer. You know, they're Internet people. They're obsessive. They own digital items. They participate in digital economies like a. |
B | Lot of freaking nerds, David. |
A | Okay. |
C | They are literally like, you know, somewhere in the genealogical tree, like, there are cousins, and so it just doesn't feel like a large lift to get them in here. It's a lot different than, like, I don't know, say, like, music people. Like music people are cool. They go out, they do different things. They don't own dig... |
B | Okay, so that was Vance making the point that gamers and crypto people are very similar, have like a lot of shared culture. It's very online native types of communities. The question in my mind, though, is how do you get exposure to crypto gaming? Right? Because the big winner from the last cycle in crypto gaming was p... |
A | I think Avalanche has a gaming division, and so that's definitely a contender if you're into that ecosystem. Beam is something to look at as well. I recently did an episode with Robbie from Immutable and Beam because they are teaming up with immutable. How those tokens are split, I'm not too sure what is Beam, but real... |
B | There you go, David. Let's go to number four, which is DA data availability. So do you think that we are going to see the data availability wars in 2024? And what could that mean? Lay out the landscape for us who are kind of the the big Da players coming into this year? |
A | I think the Da wars starting pistol really got fired when Celestia airdropped its network token to a lot of people at a $2 billion valuation. And then the token went from two dollars to fourteen dollars without ever going down. And so big wealth effect. |
B | Is it still doing that, those kind of moves? |
A | It has, it has topped out briefly between twelve and $14. It has not gone down. Why did the price just go up, up, up? Well, because TS stakers are earning 16% and so there's a very strong demand to buy up tokens and to stake it to get that yield in early bull markets. Yield, we like the yield. When people are buying to... |
B | I mean, we're talking about David Celestia $12 billion market cap. |
A | $12 billion market cap. I think there is a lot left to explore as to the margins of data availability as a product. That is an episode that I've scheduled with John Charbano and Neil Simone from Eclipse to ask the question, is data availability a good business model? But right now people are earning 14%, 16% yield on s... |
B | It's also interesting. Ethereum is throwing a hat in the ring. |
A | Bitcoin is also being a DA layer for all the goddamn ordinals that people are buying, right? |
B | I with Ethereum in particular, of course it is a DA layer now for layer twos. |
A | It's a shitty DA layer, but it's. |
B | A secure, it's a very expensive DA layer. |
A | It's highly secure, very expensive, not scalable. |
B | And 4844 should come out probably in Q one. It seems like we're getting really close to testnet. |
A | Early Q two. |
B | Early Q two, you think? Early Q two. So maybe late Q one. Early Q two. And that will actually, I can't recall off the top of my head how much of an amplification that will be for. But we did that entire episode on Ethereum blob space, to give you a clue there. Anyway, lots of data availability. I think the big question... |
A | I think the answer about data availability is yes, it will become commoditized, but in the same way that Internet bandwidth became commoditized, people just used more. Our capacity to consume DA is going to be matched by projects ability to commoditize dA. So it'll be kind of an arms race of people will always buy more... |
B | It's a big question though. In general, in these three layers, in the modular stack, which will accrue the most value, you have the settlement layer, you have the DA layer, and then you have the execution layer. The big contenders right now are obviously settlement with Ethereum being worth 250 billion, and then execut... |
A | Yeah, I think it's already an investment theme. Discords are a flurry with airdrop hunting strategies. Bankless Discord is buzzing with like manta as of recently, there's a lot of airdrop farmers in the bankless discord, of course, because of you have the Airdrop hunter product. But like a few of the other discords I'm... |
B | There you go. Uh, that's it. Those were five, and then plus this bonus one. So we talked to restaking, we talked Solana, we talked about games, we talked about data availability, parallelized evms, and lastly, airdrops. It's going to be an exciting year, David, for sure. Uh, anything else before we close? |
A | Uh, I think that's it, my man. Uh, are you ready for 2024? |
B | Yeah, dude. 2023 was, uh, tiring in a lot of ways, but, you know, we'll see what we have in store for us in 2024. I. You know, I think I'm excited. I think I'm excited. |
A | I remember going through the bear market of 2018 to 2020, and then when Defi summer started, and then ether broke from $400 to $700, everyone knew. It was like, oh, it's on. It's a bull market. And I was, like, euphoric. I was like, yes, this is the bull market I was promised. And then six months left later, my eyes ar... |
B | They're coming, though, David. They're coming. And some of them are already in our midst. We just don't really know who they are yet. |
A | Some of them already walk amongst us. |
B | Oh, God. Well, hold on, everyone. This is 2024. You're definitely in crypto. I got to end with this risk and disclaimers. David and I are angel investors in swell. I think we, we mentioned them in this episode. We certainly mentioned Eigen layer. We're advisors in Eigen layer. I'm an angel investor in Monad. There's al... |
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