Emotions drive narratives.
Narratives drive the market.
If Merge = LSD hype
then EIP-4844 = L2s hype
Thread 🧵👇
2#
Everything has to scale
You either scale or you die forgotten - those are the rules.
You cannot walk while everyone’s sprinting.
Ethereum’s way of scaling are L2s...and L2s development will get a huge boost from EIP-4844.
3#
What’s the timeframe?
EIP-4844 - a.k.a. Proto-Danksharding - is scheduled for Q3/Q4 2023
What’s the fork codename?
#Cancun
What’s the direction?
Scaling Ethereum ecosystem.
4/32
Let’s talk about the timeline
#Cancun is set to take place somewhere in Q3/Q4 2023
While delays are possible, most crucial #Ethereum upgrades took place in Q3/Q4
The Merge
EIP-1559
Beacon Chain back in 2020
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Okay, but what is EIP-4844?
Well… it’s a vital step towards full #Sharding on #Ethereum aiming to help L2s scale by orders of magnitude
One of the major changes is introduction of Data Blobs
But what are Data Blobs?
6/32
Let’s clarify the picture by simplifying some things
Rollups currently use L1 Calldata for data storage - it’s quite expensive and limiting
#Calldata stays on the chain forever
EIP-4844 introduces a new type of transaction - no need to use L1 #Calldata for storage… twitter.com/i/web/status/1…
7/32
New type of transaction will use attached Data Blobs instead
In short, those Blobs will be alive only for about 2 weeks and serve the purpose of the Data Availability layer for L2s
i.e. if you want to check the data, just take a look at the given Blob
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If a batch of transactions is a closed briefcase
Blob is a short note on top of that briefcase - kinda like a list of contents
It stays there long enough (2 weeks) for everyone to verify the data (commitments)
And makes life easier for the inspector (L1 Nodes)
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It’s easier because we don’t throw every briefcase (Calldata) to the office
We attach the notes (Data Blob) to every briefcase
This way the inspector (L1 node) can verify if it’s valid by looking at the note (commitments)
10/32
So what will EIP-4844 bring us?
Major thing is L2s becoming cheaper… by A LOT!
Some say it’s about x20 cheaper, some say it’s even x100 decrease
You thought paying less than $1 for Tx on Arbi is cheap?
Well… soon that $1 will sound expensive when you get used to… twitter.com/i/web/status/1…
11/32
Yeah yeah… “but to me $1 is not that expensive”
For you it might not
But you know who cares about cheaper fees?
Projects built on L2s and L2s themselves
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It’s oversimplified but it’ll show you a point
Imagine having costs of running your company go down x20 or more
Imagine providing your users the same services x20 cheaper
In such a competitive market like crypto it’s a #gamechanger
L2s will thrive - and projects built… twitter.com/i/web/status/1…
13/32
What will we see along with EIP-4844?
Boost for L2s development
Decrease in L2 Tx fees
Accelerated userbase growth
New types of projects emerging
New solutions within projects
Cheaper user onboarding
14/32
Even if some of these points won’t be so game-changing, I assume the market will use them to build the narrative around EIP-4844
15/32
Every point above makes another step to L2s hitting mainstream adoption
And what do we need to hit mainstream adoption?
- scaling the userbase by easy onboarding and cheap Tx fees
- creating a service or feature going viral far beyond Web3
EIP-4844 definitely helps… twitter.com/i/web/status/1…
16/32
In order to position ourselves properly, we need to establish the timeframe
#Shapella upgrade was a huge catalyst for LSD narrative
Projects like $LDO $FXS or $RPL rose significantly prior to the event
Twitter feed was all about LSDs
17/32
April 5th marked peak prices of LSD protocol before Shapella - scheduled for April 12th
What we saw was the classical “sell the news” event
Some projects made new highs after April 12th
And some did not
18/32
While we do not know the exact date of the #Cancun upgrade
We have to consider a similar “sell the news” event as we come closer
Sell the news on #Shapella happened 7 days prior to the upgrade
Will we see a similar scenario prior to #Cancun?
19/32
But when did the hype begin?
Hype is built gradually over time - it’s a process
It’s safe to say #LSD hype began about 3 months prior to the even
And every next month the hype only intensified - to reach its peak on April 5th
20/32
Exact date of Cancun is not known - but Q3/Q4 seems plausible
We can assume the hype will begin to build up about 3 months prior
If we take the middle of Q3/Q4 - we get Sept./October
It means the first phases of narrative might start to take off somewhere in June/July
21/32
Now, let’s see how we can take advantage of the upcoming narrative and L2s hype
22/32
First & least risky idea - Creating exposure to major L2s
@arbitrum $ARB
@optimismFND $OP
@0xPolygon $MATIC
@MetisDAO $METIS
@0xMantle $BIT
@arbitrum @optimismFND @0xPolygon @MetisDAO @0xMantle 23/32
The front row always gets the most attention
Major L2s today are the winners of the previous battle
Will they also succeed this time?
Will they bring the highest returns?
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What about those in the back rows - the underdogs?
Choosing them might be riskier, but can also bring higher returns
If you want to pick some, there are a few approaches to consider.
25/32
Pick most recognizable projects from every major L2 ecosystem
Find projects having their own catalyst at the time of the EIP-4844.
👇
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Look for undervalued projects - EIP-4844 might create a double boost
Pick promising projects that might benefit from EIP-4844 - DEXes, Game-Fi, etc.
Find project which are the most vocal about EIP-4844 - those will double down to create hype for themselves
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With narrative comes hype, and with hype come shady projects
Every hype created a lot of forks, alleged novelties, and shitcoins
Will we see *new and promising* L2s emerge prior to EIP-4844?
Possibly yes, with a bunch or rug pulls and stories of x10/x50s
Double caution… twitter.com/i/web/status/1…
28/32
So… if transaction costs will go down by x20 wouldn’t it trigger on-chain activity?
It probably will
What about cross-chain activity between various L2s?
That’s also possible
It means we might see a sub-narrative focused on Bridging protocols
However, it’s just a… twitter.com/i/web/status/1…
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What about Zero Knowledge Rollups you might ask?
Well… rules are the same as with Optimistic Rollups
But…
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ZK Rollups and their tokens - if come before #Cancun - will be rather new
Those won’t have a lot of established projects like $GMX - if any…
ZK Rollup bet has significantly higher R/R ratio that’s hard to predict today
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Previous cycle was all about activity on Ethereum L1
The next one will be all about Ethereum L2s
My investment thesis is that we might see a significant price action on major Ethereum L2 projects, as well as projects related to L2s that might gain attention along the… twitter.com/i/web/status/1…
Thanks for reading!
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