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Ryan Berckmans Profile picture
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21 Apr, 6 tweets, 2 min read
1/ Announcing our report,
"Ethereum: A Store of Value with Cash Flow"
A PDF report aimed at bankers and fund managers.

Read the report now
⬇️
ethereumcashflow.com
2/ The report, previously titled "The Investment Case for Ethereum", is a high-level look at ETH as a store of value, with $10B+ per year in net income while being environmentally friendly.
3/ To aim the report at bankers and fund managers that may already believe in BTC as a store of value, we've focused on Ethereum's growth and financials. Many of CT's favorite concepts, such as the EIP-1559 fee burn, aren't explicitly mentioned.
4/ In the report, our forecast for Ethereum's net income in 2022 is $19.8B, all of which accrues to ETH holders.

Our discounted cash flow valuation, linked in the report, conservatively suggests a value per ETH of $16,770.
5/ Read the report now
⬇️
ethereumcashflow.com
6/ h/t to my co-author @VivekVentures

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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
3 Mar
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.
Read 5 tweets
Ryan Berckmans Profile picture
1 Mar
1/ ETH the cash machine

Ethereum's fees are worth ETH at $2850

The price of ETH is below the value of the cash it produces because ethereum's fees go entirely to miners, who are on track to be paid 8% of all ETH this year

EIP-1559 and proof of stake fix this. Here's how👇
2/ EIP-1559 redirects ~35% of miner revenue to ETH holders by burning a portion of fees.

Note that this fee redirection is secure because ethereum has temporarily overpaid for security. Last year, we paid miners $300M+ more than if EIP-1559 had been live.
3/ Switching to proof of stake redirects ~100% of miner revenue to ETH holders. That's because proof of stake validators are so cheap that they're effectively free compared to proof of work miners. Yesterday, proof of stake would have saved ~$30M for ETH holders.
Read 4 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

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