Thread by @jarzoombek

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

5/32

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

8/32

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)

9/32

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

12/32

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?

24/32

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.

👇

26/32

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

27/32

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…

29/32

What about Zero Knowledge Rollups you might ask?

Well… rules are the same as with Optimistic Rollups

But…

30/32

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

31/32

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!

If you liked this thread, follow @jarzoombek to see what else the future holds

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https://twitter.com/jarzoombek/status/1654145654887686146?s=20