Daily Newsie #1: 2021-02-16
First of all, welcome to my first newsletter where we will cover topical topics in crypto. This is my first true writing shindig so let’s all just level set here. It will be shit. Not easy-to-pick-up solid shit. Puppy shit.
Okay, let’s get on with it.
As BTC approaches $50k for the first time, we begin to look at how these ecosystems scale to meet the exponential demand we are seeing. It’s no secret that Etherum gas fees have gone through the roof due to the incredible demand for DeFi platforms on Ethereum.
This brings up an interesting question - if gas fees remain high in light of continued demand of Ethereum DeFi, where does the overflow demand go (the people using other applications or allocating lower amounts of capital flow)?
The two high-level answers to that are a competing Layer-1 or a scaling solution of Ethereum (a Layer-2). They each have their arguments for value but are essentially telling the same story to the market (“I solve your high-gas fee problem”). One would think they would have similar market caps, no?
You’d be wrong. The competing Layer-1s have multi-billion dollar market caps while the leading Layer-2 solutions have only a sub-billion dollar market cap.
That’s a huge value difference. These are two solutions with similar market stories with wildly different valuations. I get that the Layer-1s should have some value premium over a scaling solution since, in theory, it could take smart contract share from Ethereum and maybe win at the end of the day but I don’t think that represents billions in value premium.
In fact, I think each of these solutions has to do two things in order to get market traction - 1) get applications on the L1 people want to use / trust 2) educate and drive users to the solution. With the L2s, there already exists a butt load of capital on existing Defi platforms, and people by and large trust them. L2s just need to sell the story of cheaper transaction costs. The L1s have to sell both developers and users.
I’m just not sure I’m buying that capital will leave so fast platforms they trust (and have gotten rich on!) for something that has lower transaction cost. The Defi platforms have brands and I’ll buy the story that people will look inside of the L1 for rollups or scaling solutions that involve the same brands they have trusted so far.
Saypien
Noteworthy Items
Coinbase launches waitlist for ETH 2.0 Staking estimating 7.5% return [Link]
Aave closed last week with total value locked (TVL) over $5B for the first time [Twitter]
The Graph will look to roll out new Layer-1 integrations including Bitcoin. Will enable Devs to bring in cross-chain data to apps [Link]
First digital-only art/NFT to be auctioned off in global auction house [Link]
Total Value Locked in CREAM has dropped from $700B to $200B following the Iron Bank / AH hack [Twitter]
Data Dump
Top moving assets against ETH in the last 24 hrs:
Newsies
From now on, for each of my newsletters, I will mint a unique 1/1 NFT that is generated by the text of the newsletter. Essentially the words you are reading right now are taken in as an input to my unique algorithm and spit out as a collectible image/NFT. Each of the NFTs will be made available for purchase on OpenSea via a 24-hour auction.
Every season I will change up the style of the newsies and never reuse an old style again.
Here’s the very first edition of the Newsies as I am calling them. Feel free to check it out on OpenSea.
I look forward to writing these more often. If you have questions or would like to chat, feel free to drop in my digital office. It’s a parcel of land in Somnium Space you can open in your browser, walk around my office, see my collectibles, and chat.