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Ryan Berckmans Profile picture
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3 Mar, 5 tweets, 1 min read
1/ Rollups are great for the price of ETH

Rollups can be expected to increase ethereum's total fees, and fees will soon accrue to ETH holders.

Here's why👇
2/ Rollups scale ethereum by compressing transactions to use 98%+ less L1 gas. In a rollup, the L1 gas bill is split between a much larger set of L2 transactions, which means those L2 transactions are often collectively willing to pay a higher L1 gas price when necessary.
3/ Rollups use a fair amount of L1 gas to checkpoint state for security purposes. For example, Arbitrum might consume 0.3% of all of ethereum's gas just to checkpoint its state.
4/ So, rollups are often willing to pay relatively high gas prices and also use a fair amount of L1 gas. Multiply that by an ecosystem of many rollups.
5/ This year, we may expect rollups to increase total fees while scaling ethereum. With EIP-1559 and proof of stake, ethereum's fees accrue to ETH holders. That's why rollups are great for the price of ETH.

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More from @RyanBerckmans

Ryan Berckmans Profile picture
4 Mar
1/ Optimistic rollups vs. zero-knowledge rollups

Optimistic rollups, like Arbitrum and Optimism, have different costs and benefits compared to zero-knowledge rollups, like Immutable X and Loopring.

Let's explore👇
2/ Immutable X is an ethereum L2 focused on gaming and NFTs, powered by StarkWare's zero-knowledge rollups. The recent high gas prices and NFT frenzy, and a lack of fast withdrawals for NFTs on optimistic rollups have helped drive Immutable X's growth.
3/ Over the past month, Immutable X had a wave of announcements of serious game developers building on their L2. Immutable X's success highlights the different costs and benefits of optimistic rollups compared to zero-knowledge rollups.
Read 14 tweets
Ryan Berckmans Profile picture
26 Feb
1/ EIP-1559 is huge for ethereum and coming soon

EIP-1559
- likely launches in July
- is now estimated to reduce miner revenue by 20% to 35% at most, not 50%
- would have burned ~$16M in ETH yesterday

Here are some updated EIP-1559 resources 👇
2/

- EIP-1559 is most likely to launch in July in the "London" hard fork

- Today, there was an EIP-1559 community call with miners. Great to see many different stakeholders on the call, including miners that are pro EIP-1559
3/
- EIP-1559 is now estimated to reduce miner revenue by 20% to 35% at most, not 50% as previously thought. The new approach to this estimation is based on community efforts to help miners capture ETH that's currently paid to arbitrageurs and liquidators
Read 4 tweets
Ryan Berckmans Profile picture
24 Feb
1/ EIP-1559 is huge for ethereum

But, miners are upset that EIP-1559 reduces their revenue by ~50%. Who wouldn't be?

imo, miners will accept that launching EIP-1559 as specced and on time is their best option

Here are five reasons why👇

(Reason #2, ETH pays miners 5x vs. BTC)
2/ Reason #1

Ethereum paid block rewards to miners for years when fees were negligible. If fees dry up for any reason, we'll still pay block rewards. We've also always paid miners 100% of our revenue (fees). EIP-1559 reduces this to ~20% of revenue. imo, it's reasonable.
3/ Reason #2

Last week, ethereum paid miners 5x more than bitcoin after normalizing by market cap. If EIP-1559 had been live, ethereum would have paid miners 2.5x more than bitcoin.
Read 8 tweets
Ryan Berckmans Profile picture
8 Feb
1/ Ethereum's fees are a sleeping giant

Ethereum's fees
- are currently worth ETH at $2500
- grew 150x over the past fifteen months
- begin accruing to ETH holders when EIP-1559 launches later this year

imo, fees will soon greatly help us get to ETH at $20k. Here's how 👇
2/ Ethereum's fees grew 150x over the past fifteen months. The net present value of the run rate of last week's fees is worth ETH at $2500 (using a 3% discount rate), a 50% premium over today's ETH price. However, currently these fees accrue to miners, not ETH holders.
3/ Last week, ethereum's daily fees were $24M, and total miner compensation (fees + block rewards) was $47M in ETH. On average, miners must sell all that ETH to pay for their hardware and electricity. That's $47M of ETH sell pressure from yesterday alone.
Read 5 tweets
Ryan Berckmans Profile picture
30 Oct 20
1/ ETH/BTC flippening explained at a mechanical level.

Compared to ethereum's proof of stake, bitcoin's proof of work is too expensive. Here's why.
2/ If we think of ethereum and bitcoin as "corporations", then their "corporate revenue" is equal to transaction fees.

That's the money coming in. Can't pay transaction fees without first owning ETH or BTC.
3/ In PoW, that fee revenue doesn't stay on the "corp balance sheet". 100% of fee revenue, along with 100% of issuance, is paid to miners. Then the miners *necessarily* pay ~100% of their revenue to hardware and electricity suppliers...
Read 13 tweets
Ryan Berckmans Profile picture
29 Oct 20
1/ The ETH/BTC flippening reminds me of the movie Moneyball.

Everybody in baseball "knew" the Moneyball approach would fail.

In reality, the Moneyball approach worked so well that the Red Sox used it two years later to win their first World Series since 1918.
2/ It was a fuzzy belief, not rigorous argument, that drove baseball's common knowledge that the Moneyball approach would fail.

Similarly, flippening deniers have never (that I've seen) rigorously argued as to how bitcoin's proof of work wins vs. ethereum's proof of stake.
3/ Flippening deniers, how does bitcoin's proof of work stay "cheap enough" to keep BTC #1?

The fact is, if both bitcoin and ethereum had a $250b market cap, BTC costs an extra $4b per year just to stay *equal* with ETH.
Read 5 tweets

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