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Speaker A: Hey, guys, welcome to bankless takes. We've got a few topics for you. First of all, David, I want to talk about Ethereum. Ethereum right now is hilariously underpriced, my friend. I'm just calling it. I've gotten to the stage where I'm just a bit angry about this and. |
Speaker B: We'Re going to talk about. |
Speaker A: Yeah, there's a fundamentals mismatch between the market price and what Ethereum is actually doing. We've got bitcoin above 40k, we got token prices surging, and I want to talk to you about why I think Ethan should also be surging. David, it's the market that's wrong. It's not us. What else we got? |
Speaker B: Speaking of fundamentals, does Solana have any notable crypto investor said that there is a 25% chance of Solana flipping ethereum? How did he get to this number? We will do our best to unpack that. |
Speaker A: Lastly, I want to tell you why I'm starting to hate debating the word decentralized or decentralization. I love the concept, but I hate what the word has become and what I think we should use instead. As always, these are the takes this week from David and my if you don't like our takes, there's other episod... |
Speaker B: Why is ethereum hilariously underpriced? This is a tweet you put out not too long ago. What do you mean by this? |
Speaker A: Dude, I'm just sick of it. I think. I think somebody has to say it. Somebody has to start getting loud or louder on Twitter because it's just not right. David, I feel like ethereum is hilariously underpriced at 2.2k right now. It's very clear with bitcoin above 40k, we are now in the bull market, and I'm see... |
Speaker B: Tokens, other what if price movements. Yeah, yeah. |
Speaker A: And I think ethereum has actual fundamentals. So I spent some time enumerating the fundamentals. And again, I don't know, there's some price point at which, like, Ethereum is fairly priced, but in a bull market, I don't think that price is 2.2k, right? I think it's a lot higher. I spent some time enumerating... |
Speaker B: That is fee revenue collected versus Ether. |
Speaker A: Issued a. Yeah, and you could see all of this on ultrasound money, by the way. And if you contrast this with like, if you do like a price to earnings, I mean, how much are you paying for ether market cap versus how much it's earning in terms of profit? That $2.7 billion. The P E ratio, which is a common metr... |
Speaker B: Okay, so what that, what that means, 98 to 75, is that the market is pricing in that ethereum will grow at least 25% faster than Amazon, to put it like reductively. |
Speaker A: Yeah, 25%. Is. Is that a conservative estimate to you? Feels that way. |
Speaker B: To me, Amazon is a massive company. How do you grow that thing very quickly? |
Speaker A: I know. So you, I mean, if you look at other high tech stocks, Salesforce right now, you know what their PE is, David? |
Speaker B: I think, like, I saw Netflix at one point in time was at 400. |
Speaker A: Netflix goes to 400. Salesforce right now, like a customer relationship management software. Software as a service. You know, it's been 163. Is their zoom is 150 also dumb? |
Speaker B: I mean, maybe that's fair, but something is dumb here, because Ethereum is only 98. |
Speaker A: The global settlement system for the world, potentially that's the total addressable market we're playing at, is only 98. And to me that seems ludicrous. Compare that to last cycle. All right, David, we, like, I don't know what our pe was like infinity. It was actually in the negative because Ethereum wasn't... |
Speaker B: Yeah, shout out to him. |
Speaker A: And Tron, shout out to Justin sun Tron. So that's my first point. I think that is completely different than last cycle. Also, David, I was looking at ultrasound money yet again, which is a fantastic place to go. View all of the Ethereum fundamentals. And you know who are the highest block space buyers? Oh, l... |
Speaker B: Protocols are other protocols. |
Speaker A: Yes. And a new entrant here. Okay, so I looked at the past seven days. If you do that, of the top ten block space buyers, consumers of Ethereum block space, five of those were layer twos over the past seven days. That is an entirely net new demand agent, consumer of Ethereum block space that we didn't have i... |
Speaker B: I would also add arbitrum, polygon, zk, sync, optimism. They all have their chain development kit, which is about the freedom to fork their train development kit. So at that, anyone can be a chain that settles on Ethereum. Anyone can spin up a protocol that consumes Ethereum block space. So these teams of th... |
Speaker A: Yeah, I mean, how many net new layer twos do you think will get this cycle, David? |
Speaker B: More than I can think of today. |
Speaker A: Like at least hundreds. So those are all net new buyers of Ethereum block space. There will be some power law winners there. Another point that's different from last cycle. In 2020, Ethereum is going to be deflationary this entire cycle, right? It already is. Last time it inflated at about 4%. So between thr... |
Speaker B: We've never seen the full, a full market cycle where Ethereum was deflationary. We had EIP, we had the merge happen late 2022, like at the end of the bull market. We have never seen, like, when all of the massive amounts of demand for Ethereum block space was happening, was all pre merge. We have never seen ... |
Speaker A: It can. It can get pretty hot. I wouldn't be surprised if we saw, like one to 2% for, like, periods of time, maybe weeks, maybe months. But, like, we've never been net deflationary in a bull market. And this time, uh, we will be another point, David. Okay, so we've been talking about Ethereum as if it's valu... |
Speaker B: There's actually only one part of the triangle that is valued at 98. |
Speaker A: So there's a dial on, ultrasound money where you can just like, you crank this up to the equivalent to gold. Equivalent to gold, yeah, equivalent monetary premium. |
Speaker B: Because that's table stakes. If crypto meets gold at par in terms of money, I will consider that the bearish case for crypto, we are here to be at least be gold. |
Speaker A: So gold is like a ten x above its utility value in terms of monetary premium. If you did that for Ethereum, just add ten x to it, it would be already be worth 22k. |
Speaker B: Yeah. |
Speaker A: Okay. |
Speaker B: And this, okay, so this, it's worth 22k if we give Ethan monetary premium, equivalent amount of gold, and at ape ratio, equivalent to Amazon, which again, I would consider both of these the conservative versions of the long form of these things. |
Speaker A: Sure. And people can adjust that however they want. If you don't believe in monetary premium, you just want to view Ethereum as a capital asset. Well, great. It's pe of 98 right now. Okay? If you want to crank that to like ten x, then you, then you have the monetary premium value. The other point that's diff... |
Speaker B: Up when block space demand also goes up. So 5.3% is the current floor in this, like, early stage bull market environment. |
Speaker A: And people say, well, a lot of chains have yields, like any staking chain has yields, okay? But the difference is ethereum has real yields, not just nominal yields. A lot of the issuance when you're doing proof of stake on other chains, if they're not, if they're inflating as much as they are dishing out to ... |
Speaker B: Yields are like 10% and inflation, inflation is like 7%. So actually you're only getting 3%. |
Speaker A: Yeah. And oftentimes it's even less than that. Right. It's like there's kind of a delta there. So this is all 100% real yield versus, like nominal yield, which I think. |
Speaker B: Not just, not just 100%. It's always 5.3% real yield. And then you add on the 1% deflation, the half a percent deflation that we're currently experiencing. You add on both of those things. Yeah. |
Speaker A: Okay. Here's another thing, David. This cycle bitcoin is very likely, hopefully January, when you go destroy Gary Gensler's horror crux is going to get a spot ETF in the US. We've done episodes on this. This is going to unlock trillions in capital. Guess what else is likely going to happen this cycle? I give... |
Speaker B: Because the market wants that. Somebody loves your values, that's fine, but the market loves that as well. |
Speaker A: So that's what we got. We got the only asset to get a spot ETF, and it's the only asset to get a spot ETF aside from bitcoin. But it's the only asset to be ESG friendly with the spot ETF. So that is bullish from an inflows perspective. |
Speaker B: Oh, I've got. I've got more to add to that from. Yeah, so this, you know, the bitcoin and Ethereum ETF's, this is something that's echoed by Matt Hogan at Blockwise and a few other, other places. Ethereum as an instrument, as a financial instrument, is just more interesting to traditional market investors be... |
Speaker A: This is. |
Speaker B: What is the vibe that has been reported by people who speak to traditional investors out in this space. |
Speaker A: I think bank listener David and I could go on with these takes. |
Speaker B: There's the Eigen layer, increasing the ETH yield. There is ether being sent out to other chains, being the money for other chains, which is something that we saw in market. The monetary premium of ETH is strong. People need low liquidity chains, low TVL chains need to have ether as the money in their system... |
Speaker A: Yeah. |
Speaker B: Has been up only. |
Speaker A: Yeah. I just like, you know, as an ether investor and watching the rest of the market kind of like rage. And ether hasn't followed suit. Right. I'm actually past the cope phase. This isn't even coke. This is now I'm in the phase. And I remember I was in this phase in 2022, whereas I'm just objectively, like,... |
Speaker B: That you were pointing out, which, recapping. |
Speaker A: This, we're all looking at ether, and we're like, everybody is chasing these what ifs. And Ethereum has fundamentals. |
Speaker B: Everyone's going down the market cap stack, going down on the risk curve, and it's stupid. |
Speaker A: So whether the market catches up to that or not, uh, I'm feeling very comfy with these fundamentals, and I'm just going to, you know, keep being angry until Eth is, uh, you know, a little closer to ten k at least, David. So, you know, I'm, I'm going to keep tweeting this. Five k and below at least. |
Speaker B: Um, so this is your narrative, Ryan, or is this fundamentals? |
Speaker A: Yeah, good question. |
Speaker B: Which is this? |
Speaker A: What's the difference? What's the difference? Should we talk about that? |
Speaker B: Sure. |
Speaker A: Okay, so there was another narrative, I think, going on in crypto Twitter that was the flipping not of ethereum, of bitcoin, but of Solana flipping ethereum. And friend of the show and investor Santiago Santos said this on the podcast. He thinks there's a 20% chance that Solana actually flips eth. I thought ... |
Speaker B: Okay, let's hear the rationale. |
Speaker A: Okay, so do you want to hear him explain himself? |
Speaker B: Yep. |
Speaker A: There's a version of this next cycle where Solana flips ethereum. I think it's a greater than 25% probability. You think it's a 25% probability that Solana. 20% probability that Solana flips ethereum. I don't want to say this cycle doesn't necessarily mean that ethereum shrinks in size. Solana just uniquely ... |
Speaker B: Only possible on Solana. Opulent opposite. |
Speaker A: Number four, the ecosystem survived FTX and is flourishing, similar to Ethereum, post dao hack and fork. I definitely agree with that one. Let's talk about these others, maybe contrast them. First of all, some people are saying this is more narrative than it is actual fundamentals. |
Speaker B: I would be one of these people. |
Speaker A: Okay, what's your take on this? |
Speaker B: Okay, so, yeah, so this is kind of what has come to be the Solana chant. Fire dancer. Low fees, parallel execution, local fee market. All of the things, by the way, that ethereum doesn't have, like, ethereum doesn't have local fee markets. Ethereum doesn't have parallel execution on its layer one, bro. On it... |
Speaker A: Okay, well, Santiago says all of these equal a 20% chance of actually flipping ethereum. So let's say. Let's. Let's just. Let's just quantify this. If Ethereum is valued at $1 trillion at some point in this. This market cycle. So that'd be a four x, that's a ten k eth and above. Okay, that would make, you kn... |
Speaker B: That would be Ryan. To get. For Solana to get to 1.1 trillion, that would be a 44 x, which would put sole price at $2,640. |
Speaker A: Dang, it's big. |
Speaker B: I should go buy soul. Clearly. |
Speaker A: I mean, there's. But let's talk about that. There's definitely a case for buying sole David. Mm hmm. Right. But the question is, what is the case? Is the case fundamentals? Is it narrative? Or like, maybe there's some miss, there's some difference in what people mean when they say fundamentals. Because if yo... |
Speaker B: Show me the numbers. |
Speaker A: Where's the 3 billion in blockchain? |
Speaker B: Get these ideas out of my face. Show me the numbers. |
Speaker A: I'm a little bit more skewed on that direction. |
Speaker B: Like the $25 billion network. Show me the money a little bit. |
Speaker A: Right? At a $1 trillion network, you better damn well be showing me how this thing is throwing off, like, tens of billions in cash annually anyway. Go on. What do you thinks going on here? |
Speaker B: Okay, so heres exactly what I think is going on here. There is this tendency. I remember doing this in 2017 where I would pull out my calculator. I would perceive some likelihood about three x on my shitcoin bags, and then I would like, you know, add those two together, and then that would be my future net w... |
Speaker A: Or a spreadsheet, if you're more sophisticated, sure. |
Speaker B: Yeah, you know, yeah. But you don't. You just need your iOS app to really do it to look at all of your future rich net worth. So, like, my critique here is that there's no inputs into the calculation, and this is something that I think all bull market navigators should be aware of. Remember when Cardano fina... |
Speaker A: Okay. But let's explain a few things that that fishy catfish is saying here. He's basically, he shows a chart here, which is Solana revenue fees versus expenses. Okay, let's, let's reorient bankless listeners to what this actually means. So the first thing you have to know about blockchains is they sell some... |
Speaker B: They sell something called one things. There's one thing they tell. |
Speaker A: They say, blockchain sell blocks. Apple sells iPhones. Blockchain sell blocks. Okay? We repeat that all of the time. And there's a market price for the value of their blocks. Those are like. And the market pays for that in two ways. One, they pay to get their transaction in a block, okay? And then they also ... |
Speaker B: Putting these into daily numbers, Solana collects $140,000 of daily fees, daily transaction revenue, and then it issues $11 million in soul tokens to go to validators who, similarly to bitcoin, actually have to sell a decent amount of their soul in order to maintain their, their profit. Maintaining a salon o... |
Speaker A: Well, let's, let's go back to Santiago stake, though. So, um, I actually think that there is the possibility that Solana Flippin's ethereum, I wouldn't rate it as 20%. I would rate this as, like, I don't know, in the single digit percentages. But I wouldn't completely say that that that's not going to happen... |
Speaker B: Yeah. What are some catalysts, some sole catalysts that I can actually get behind that it doesn't have now that it could have in the future? We give a lot of critiques. I'm about to give a lot of critiques of Solana TVL and it's not that great. But that's something that could actually change. More stable coi... |
Speaker A: It's competitive out there, David. It is like all of these layer twos, all of these chains are launching. It's basically all the competition is going on, the execution layer. And there's even probably, I would guess there'd be up to five SVM layer two chains. That's Solana virtual machine layer two chains th... |
Speaker B: Yeah. And that's, that's just the SVM. There's also parallelized EVM teams like Monad coming onto the Ethereum into, into the layer one space, to be honest. And so also the whole narrative around Solana is the payments chain because visa is integrated there. I'm sorry, Ethereum's not even the payments chain ... |
Speaker A: So I don't think so. And I think it's time to start looking at kind of the, these chains from a profitability perspective. I mean, we've been doing this for. |
Speaker B: 13 years to get this industry to move towards fundamentals and profitability for a cycle. |
Speaker A: That said, let me flip that, and let me give you the, if we're wrong, how are we wrong? Sort of take. You could take that. You could make the case that we are so early that competing for market share is the thing that you want to do, that profitability doesn't matter. So if you look at a startup, they don't ... |
Speaker B: Yep. |
Speaker A: It's really freaking stupid and hard. Like, I'm moving from Ethereum to like, arbitram and like, the centralized exchange only supports Ethereum. And so I have to hop to Ethereum and then get on my layer two and what do I do? And now I'm on this chain. Now I'm on that chain. Where are my assets? I can't even... |
Speaker B: I want to unpack that last thing about decentralization and whether this crypto experiment can actually produce the censorship resistant, non sovereign store value money or if it just becomes an extension of tradfi in a more efficient manner. There's a lot of perceived ness about the word decentralization. I... |
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