Thread by @ryanberckmans

@armaniferrante, in the linked thread, asks great questions about why I think ETH will be a cash-producing asset.

Here are my answers, discussing fee growth, the usefulness of decentralization, whether buying ETH is a consensus bet, and more.

Thread 👇

https://twitter.com/armaniferrante/status/1302673654556184576

> But how confident are you [that eth will grow and sustain its fees over the long term]?

Today, we know that a mechanical relationship exists between fee growth and Ethereum's success.

https://twitter.com/RyanBerckmans/status/1300676971114921984

The proliferation of L2s and the success of other L1s won't prevent eth's fee growth, because the L2s use large amounts of gas and/or L1 financial apps will pay huge fees for composability in "city-like DeFi shards", as popularized by @hosseeb.

> Eth agrees that 1.0 is not the right architecture. But why is it sharding? Sharding has major tradeoffs.

Whether ETH grows and defends its fees depends on its capabilities, the transaction costs of leveraging those capabilities, ...

...and the value users get out of leveraging those capabilities. Implementation details like sharding have a direct effect on those dynamics and aren't themselves competitive elements.

> Cosmos, Solana, Oasis, Polkadot. These are all projects that will perform totally different with different applications.

We know conclusively that the price elasticity of demand for blockspace is highly elastic. For example, @darkforest_eth's recent beta on ropsten...

...consumed more gas than eth mainnet's entire capacity. Other L1s have an opportunity to serve demand at lower price points and, to Armani's point, other kinds of applications for which Etheruem may be poorly suited. ...

...Or, perhaps these projects may accrue network effects in specific verticals, geographies, or industries. My view is that the competitive landscape of ubiquitous L1s will be an oligopoly. Ethereum will be an 800lb gorilla. There may be other 800lb gorillas.

> So the question for me becomes, what are the best use cases for permissionless blockchains? The only place I've seen PMF is DeFi/gambling. DeFi favors non-sharded architectures due to composability. What else is there that isn't massively better on a centralized system?

...

A global commons will have countless use cases. This is a system that can hold governments and corporations to their commitments. This is a system that acts as an alternative for many classes of large intermediaries. ...

...Only a fully decentralized system can truly enable others to choose the level of decentralization that's right for their projects.

> Furthermore, if you're purely talking about outsized returns as an investor, Ethereum is a consensus bet. All the other non-Ethereum projects are way more attractive non-consensus gambles than Ethereum. Super low prices. Equal TAM. Roughly equal probability of success.

...

I think we'd find diverging community opinions on all L1s having "roughly equal probability of success", if only due to the magnitude of that success and its associated fees. However, I think there is a way more interesting, two-part answer to this question...

One, Ethereum doesn't look like a consensus bet to me when I browse Hacker News or talk to my non-crypto business or tech friends.

Two, within the Ethereum community itself- even if we restrict ourselves to a core of maximalists and tech experts- I believe that most of these...

...(elite) ETH holders would ascribe their reason for holding ETH as being >90% digital gold + utility, and <10% other reasons. This bucket of "other reasons" includes "massive amounts of profit accrued by ETH holders from fees". ...

...I believe that buying ETH, where 50%+ of your _reason_ for buying is your belief in the NPV of fees, is not a consensus bet even among Ethereum experts, and certainly not among broader investors.

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