Thread by @ryanberckmans

@ $10,000 from transaction fees alone?

We can see a numerical path to $10,000/ETH through the lens of "city-like" DeFi shards.

City-like DeFi shards were introduced in this great article by @hosseeb:

bankless.substack.com/p/defi-in-eth2…

Thread 👇 1/8

I agree with @hosseeb that Eth2 will likely have one or two "city-like" DeFi shards that contain the majority of all base layer liquidity on Ethereum, and have extremely expensive gas prices. 2/8

City-like DeFi shards likely have no direct competitors, including other base layers.

Customers won't want to run serious DeFi on another base layer any more than on a non-city Eth2 shard. 3/8

The transaction fees from city-like DeFi shards will generate massive profits for ETH holders.

profit = revenue - cost. Eth2's cost is the low, flat cost of validator hardware and electricity, so profit ~= fees.

This will be a numerical game-changer for the price of ETH. 4/8

If city-like DeFi shards generated 70x the fees that Ethereum did last week, then the price of ETH would be a minimum of $10,000/ETH from the cash value of those fees alone.

Last week, Ethereum generated an annual run rate of $700M in transaction fees. 5/8

70x growth in fees is a total of $49B per year in fees. This is reasonable, even likely for city-like DeFi shards, where global financial firms congregate, the average transaction moves hundreds of millions of dollars, and flash loans borrow a billion dollars. 6/8

In summary, we are making a numerical argument here:

Just the profit generated by Eth2, which can be thought of as a dividend or continuous share buyback, might be worth $10,000/ETH when Eth2 launches and city-like DeFi shards flourish. 7/8

A counterargument is that layer2 technologies, such as zero-knowledge rollups, may cause total transaction fees to remain orders of magnitude less than $49B per year. 8/8