What's a Fair Value for Crypto Networks Like BTC, ETH and SOL? - Ep. 721
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And so in large part, that is what Ethereum is kind of making a bet with kind of all these l twos, at least from an economic perspective implicitly, is that it's worth this trade off. Like, we are giving up some amount of cash flows that's gonna go to these l twos, but we're gonna end up with, you know, a 1,000,000 chains that are all ETH denominated, and ETH looks like this more store value commodity like currency like asset that's kind of used everywhere. Hi,
everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin, author of the Cryptopians. I started covering crypto 9 years ago and as a senior editor of Forbes, was the 1st mainstream reporter to cover cryptocurrency full time. This is the October 11th, 2024 episode of Unchained. Polkadot is the original and leading layer 0 blockchain with over 2,000 plus developers, and the Polkadot 2 point o upgrade will be a massive accelerator for the ecosystem. Join the community atpogadot.network/ecosystem/community. FBTC is the fastest growing omnichain BTC asse
How's it going? Thanks for having me on. You
just came out with a paper about how to value tokens for both layer ones and layer twos. Why did you feel compelled to write this paper? Yeah.
So it's it was somewhat of a successor to, like, a post that I'd written probably about a year and a half ago at this point, on just kind of talking through basic l one economics. And I would say kind of the impetus for this post was I would have hoped at some point over the past couple years or in the years before that, we would have started to get more as an industry just kind of a better idea and common understanding of just terms that we use when we're, like, talking about these networks, because it's been very clear when people are trying to think about the value that's moving through the
Yeah. And it sort of feels like the conversation is coming up in different ways because of, you know, things that are going on with Ethereum and Layer 2s. But also, you know, now now, like, people are calling into question the fat protocols thesis and all kinds of things that were sort of, like, standard conventional wisdom for a long time. And in a way, it's like covering crypto over this long period of time. I almost feel like everybody in the industry are, like, little sculptors chipping away at this block. And, like, a sculpture is emerging, but we're still, like, in the early phases. And
Sure. Happy to. So the the main things I was trying to do to start were, like, as I was saying, just set some you know, what what are some basic terminology that we can kind of use across different networks? The really basic ones I ended up using were just TeV, total economic value, which is just very simply what are all of the network fees, MEV tips, you know, for people who are capturing arbitrage and sending along that value to stakers, and then issuance. So token issuance, whether in proof of work or proof of stake. What is just all of that total amount of value? And so that's what I just
Yeah. Well, one of the things that interested me was when you started your analysis, you made this point about staking tax laws or and just taxes in general. So I just was wondering, like, why is it that you started with that? Because it seems like that's sort of, like, a baseline assumption or premise that you think needs to be factored into all these value you know, ways of valuing networks. Yeah.
Yeah. That's a good topic we could tackle on its own. So the taxes were a a good thing to start with. I particularly put it up front because I thin
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