1/ OK, so what's going to happen on #Ethereum as L2 starts to take off?
in this thread, i'll make some guesses on what the next year might look like
no, i'm not an engineer, but what happens next is mostly a question of human behavior & response to an evolving system
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2/ first, let's assume @optimismPBC launches this month
a few pioneering apps will be ready to deploy on it from day one, assuming porting apps onto it is as easy as the team claims
the apps everyone will be looking to use first will undoubtedly be DEXes
3/ a big question on everyone's mind is "where will @Uniswap deploy?"
imo, it's going to be on Optimism. the question is when?
if they wait too long (and i mean even a few weeks), @SushiSwap et al will come and eat their lunch
they need to be willing and able to move quickly
4/ no doubt the #1 use case on L2 will be more active trading, since L1 fees are prohibitive for this with small dollars
an interesting wrinkle here is the expected imminent release of Uniswap v3
5/ ideally, the team probably would have wanted to battle-test v3 on L1 first before deploying to L2
now, i'm not sure they'll have the chance
another option could be deploying v2 onto Optimism first, but i guess we'll see when we see
6/ so what will DEX LPs do?
i suspect ~20% of liquidity will move over quickly, then more to follow over the next month of operation
it's pretty hard for me to forecast what demand will look like on L2, but i think some may underestimate how much greater volumes could be
7/ more volume = more profit for LPs
if trading volumes are very high on L2 with many active traders, it makes sense for much of the liquidity to reside there
there will still be many who prefer to trade on L1 or need to in order to interop with other apps
8/ pretty quickly, i think we'll see a natural arb ecosystem evolve, creating an equilibrium of economic activity b/wn L1 and L2
another thing which will evolve quickly are lending services allowing users to borrow on L1 for "instant withdrawals"
9/ this is b/c optimistic rollups have a week long withdrawal period
zk-rollups do not have this restriction, which makes them better for NFTs and apps which require more frequent interop w/ L1, but more on that in a second
so what happens with the rest of DeFi?
10/ once DEXes are there, i expect the full financial stack to basically recreate itself on L2 / Optimism
this means all of your favorite apps from lending to prediction markets will quickly migrate to L2 within a couple of months at most
11/ we will also see enhanced functionality for some of those apps, and entirely new apps, which could only operate on L2
cheaper tx's means things like smart contract wallets will become default (as we've already seen start to emerge on L2s like Loopring)
12/ this will spur a "golden age" of bringing the mainstream to Ethereum
but the action won't be confined to Optimism
parallel to it, a vibrant ecosystem of zk-rollups will also continue to develop
long-term (say within 3 years), it's probable nearly all L2s are zk-rollups
13/ zk-rollups simply offer a lot of benefits over optimistic rollups (like fast withdrawals to L1)
the problem is that the tech for zk-rollups isn't ready to offer full EVM compatibility
i expect this to change over time, but for now, this is a HUGE plus for Optimism
14/ but zk-rollups will shine in the near-term with very powerful application-specific L2s
@Immutable X will bring game-changing functionality to scale NFTs
15/ and many others will emerge or continue to develop apps in their own niches
many of these L2s are highly scalable and can offer *thousands* of transactions per second
over time, interconnections among them will build into a universe of chains across some zk-rollups
16/ as this happens, it will be come less frequent for users to ever use L1, until one day, perhaps many ever use it again
so what happens to L1? well, it's important to note that all L2s are secured by Ethereum L1. they PAY L1 for that security
17/ and L1 will still provide unique value as the highest security programmable blockchain on the planet
so i expect it will continue to be used for a variety of higher value transactions- becoming a true global settlement layer
18/ as L2 activity starts to really heat up (say in Q3/Q4), i expect we'll see a lot more focus on interop solutions between L2s
there are a lot of clever tricks which can be done to minimize friction for the users to work around some of the issues discussed above
19/ but true interop between chains is likely to take longer
but there's no doubt even this fledgling L2 ecosystem will bring some real relief to users of L1
tx's will be cheap again (hopefully for a while), and while we'll take a hit on composability, the ecosystem will adapt
20/ market-wise, all of this, will likely spur continued institutional and retail mania into Ethereum
a scaling ecosystem will allow for a lot more users and a lot more economic activity
in particular, we may see a BIG second wind for DeFi
21/ but importantly, we're also going to see new use cases at scale which haven't been possible at L1
i'm most looking forward to platforms like @Immutable X massively scaling NFT tx's to 9000 per second
this could spur the emergence of HUGE in-game economies on Ethereum
22/ so yes, it's going to be an awkward transition, an exhilarating one as we see the Ethereum ecosystem evolve to this new capacity, and address emegent issues
i think L2's will offer formidable competition to other L1s too, but that's a discussion for another time...
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1/ we have new participants entering #Ethereum, first from #DeFi, but increasingly from #NFTs
many highlight concerns on energy consumption from Proof of Work blockchains like #Ethereum & #Bitcoin
let's talk about it, and how we'll move past it in #Ethereum Proof of Stake 🌳👇
2/ first, it takes a tremendous amount of energy to secure a Proof of Work (PoW) blockchain
PoW blockchains are secured by computers (mostly graphics cards and specialized hardware known as "ASICS") from "miners," solving a work-intensive math problem for every block produced
3/ the total "miner" contribution of this energy/computational power is known as "hashrate"
the "winning" miner who solves each new math problem first gets to produce the next block, and receives a block reward (in ETH, BTC, etc.) and any fees paid by users within that block
1/ yes, the celeb #NFT thing will be a huge bubble, and at some point, people may start to *hate* new releases and become jaded by them
the near-term benefit for the adoption of #Ethereum is many of their fans may be compelled to buy $ETH and use Ethereum for the first time ever
2/ but some celebs won't be able to resist the low-effort cash grab
some firms are making it easy for them- doing all of the work for them and just sending them a check for their licensed work
would you buy a SouljaBoy lunch box? no?
but some would buy the NFT apparently
3/ this will be free money for these folks while it lasts, and in truth, it could last for a while
but keep in mind that if the creator is too prolific with low quality work, then expect all pieces from that creator to plummet in value one day (esp if B-list celeb)