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polynya
Blog: https://t.co/dhmnNEBrbK
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Jan 19 • 10 tweets • 3 min read
Nothing in this thread will be new, but worth reiterating:

spxdey is asking the right question. Now, some may be tempted to say "more scalability just adds demand" or "more small tx * lower fees = higher net fees" - but this is a common fallacy in the crypto space. Currently, Ethereum L1 fees are high because there's extremely limited supply and high-value financial transactors don't care about fees. However, as blockspace supply increases, demand will fall off non-linearly. At S', the total fees are a fraction of total fees at S.
Jan 17 • 4 tweets • 1 min read
The ultrasound money cult is missing the forest for the trees

Tx fees are a low quality demand driver - extremely volatile, very seasonal with unsustainable spikes in mania times (btw, manias diminish as protocols mature)

Further, it has a very limited TAM relative to... ...higher quality (IMO) demand drivers like economic collateral

Ethereans must focus on making ETH useful as money (in its various forms)

What would you rather have? A $10K ETH at 1% inflation or a $2K ETH at -0.5% inflation (yes, there is a trade-off)

Jan 17 • 5 tweets • 2 min read
Common fallacies for companies/protocols/sectors experiencing exponential growth:

1) Extrapolating said growth

2) It's "more than..." what it actually is / "new paradigm" narratives

3) "We're still early" narratives

In reality, it's in the middle of the adoption S-curve, and further growth will be greatly diminished

Bitcoin went through this in 2017, Ethereum in 2021 (and other non-crypto stuff like Tesla around the same time)

It's important to note scaling does not lead to adoption in $ terms, particularly for financially-oriented products
Jan 6 • 4 tweets • 1 min read
Financialization and fun are contrary & conflicting design goals for a game. Applying Unreal Engine lipstick on a ponzi pig achieves the worst of both worlds. To build a successful crypto game, developers have to learn to own it - embrace the financialization, build it and market it as a novel casino.

For heaven's sake, stop marketing it to core gamers who are interested in fun, not financialization. Instead, market it to gamblers and degens - there's a large untapped market, we can do a lot better than today's ponzis, memecoins etc.
Dec 11, 2022 • 5 tweets • 2 min read
As Arbitrum One makes it to #3 across a few key economic activity metrics, now behind only Ethereum and BSC, I'd caution you from using it - it's weakest link (instant upgradability by an opaque 4-of-6 multi-sig) makes it incredibly high risk

reddit.com/r/ethfinance/c… OL has been working on decentralizing; IIUC it looks like at some point they introduced permissionless block proposals if the whitelisted validators are inactive for seven days

I think we're getting close, converting multi-sig to a transparent...

l2beat.com/scaling/projec…
Dec 10, 2022 • 4 tweets • 1 min read
A year on, now that the speculative games have faded away and (at least some) crypto is no longer grotesquely overvalued, let's look back

Nothing has changed for me, personally

Money remains the dominant value generator for crypto, followed by useful applications Infrastructure like L1s, L2s, exec/data layers, whatever else are still broadly overvalued by the industry

Applications will dominate the landscape - they must, it's imperative - for this space to evolve beyond speculative games

Of course, money is the most valuable application
Nov 11, 2022 • 8 tweets • 2 min read
A personal rant on investing:

I don't talk about this because it's bleeding fucking obvious, but this market is mostly gamblers, so I'd actually have something relatively unique to say by stating the bleeding obvious.

Investing is not about getting rich quick - that's gambling It's not about "saving the world" - that's somewhere between delusions of grandeur and philanthropy

Investing is about allocating capital to projects that are on a path to being productive and generating more demand than supply for their respective assets - as simple as that
Nov 9, 2022 • 5 tweets • 2 min read
~10.5 months on, let's see how rollups have done

A ton of progress has been made, but there's been a clear trend:

Instead of initial release -> decentralization -> performance as expected

Most rollup teams have pivoted initial release -> performance -> decentralization Arbitrum, Optimism, zkSync 2.0 barely resemble their 2021 iterations under-the-hood; StarkNet probably looks similar, but they have also decided to swap around performance and decentralization on their roadmap

The good news is some of these projects are starting to...
Nov 9, 2022 • 4 tweets • 2 min read
It does, though, just on different magnitudes

Where Luna collapsed in a few hours, crypto projects may take years or decades to collapse

Without economic sustainability, almost all crypto projects are going to zero over the long term

Almost no projects are even trying The crypto industry has a grotesque entitlement with "subsidize and inshallah" (credit: @toghrulmaharram) type economic models

"We'll just build and they'll come"; NO - you must build for sustainable economics, and make sure your protocol lives through adverse conditions
Oct 22, 2022 • 8 tweets • 2 min read
While it's true the top X% block producers in plutocratic networks (i.e. PoW, PoS) tend to centralize; and counterintuitively they may centralize more as the network goes mainstream & onboards ambivalent normies, there are many nuances missed in this often rehashed narrative: Firstly, not all aggregators are equal. Lido has 29 entities, and the governance can at most eject these over time AFAIK, & they are working on governance minimization. The actual number when damage happens at 51% is 32. This is a pretty poor showing nevertheless.
Oct 2, 2022 • 5 tweets • 2 min read
Today, 7 out of top 15 on L2beat go with off-chain data

StarkEx/Net, Arbitrum, zkSync, Polygon, Metis have either released or announced in-house off-chain data solutions

It's happening whether we like it or not

So, here's the showerthought: split-security data-sharding... Image ...for validiums & optimistic chains only. Dankrad says this is "trivial". The obvious downside is security is split - but different transactions require different levels of security, and it may be a significant upgrade over fragmented solutions anyway

Sep 9, 2022 • 5 tweets • 1 min read
I'd add that as:

a) data layers / validiums become more sophisticated and approach permissionless 1-of-N assumptions (see: StarkWare's Adamantium) [Note: StarkEx validium, Arbitrum Nova already 1or2-of-N, just permissioned, gotta make that permissionless]

(contd...) b) sequencers learn to compose with each other; so you can have hundreds of sequencers, composing to one common state, i.e. true parallelism (of course, this is speculative, but I know multiple teams are working on similar ideas)

c) bandwidth and storage keeps getting cheaper,
Sep 9, 2022 • 5 tweets • 2 min read
Crypto twitter, earlier this week: whining about OPEC cutting production and stringently controlling oil supply

Also, crypto twitter: Likewise with AWS, they also control supply and manage server inventory & activation through in-depth demand analysis

It's time to design economically sustainable solutions - this requires controlling supply and meeting demand

Sep 8, 2022 • 9 tweets • 2 min read
Questions you should ask:

Does the protocol require honest-majority in real time? E.g. proof-of-stake consensus involved? Then their first and foremost priority should be security & sustainability. If they handwave it away, big red flag, it's likely going to fail. Does the protocol require honest-minority, i.e. only 1 or 2 out of N need be honest, and they are collaborating with an honest-majority layer whose top priority is economic security & sustainability?

This is OK, with some caveats:
Sep 7, 2022 • 4 tweets • 1 min read
Don't fall the "modular blockchain" hype

In many scenarios, it'll lead to worse sustainability & security properties than monolithic blockchains

It only makes sense in very specific scenarios, adding honest-minority layers to one provably sustainable honest-majority layer A common mistake is to think "modular blockchains" is where different projects do different things

The ideal solution is actually for one project to do the technical stuff, and aggregate socioeconomic security & sustainability - Tezos is attempting this
Sep 5, 2022 • 5 tweets • 2 min read
The crypto industry, supply-constrained for the longest time, is ill-prepared for a demand-limited, over-supplied environment

Now's the time to talk about controlling block supply, increasing quality of transactions, retaining minimum viable security, and finding a balance 1) "Demand is infinite" - there's a demand ceiling for every product
2) "Web3 is a new thing" - it's a niche subset of the internet
3) "Demand is up only" - irrelevant, what matters is the relative rate of demand versus supply
4) "Demand always saturates supply" - no, see 1)
Sep 1, 2022 • 6 tweets • 2 min read
Arbitrum Nitro gives us some clear insights to what makes up a rollup's transaction fee:

L2 fees: ~35%-45%
L1 data fees: ~55%-65%
L1 settlement fees: <1%

Post EIP-4844, the L1 data fees component will be reduced by orders of magnitude. However, the L2 fees are unaffected. So, even if after EIP-4844 L1 fees drop to ~1% of total fees, the rollup still accounts for 99% of the fees. Hence, it remains completely up to the rollups on how low the fees are. Today, Arbitrum has chosen a flat 0.1 gwei gas price as a floor, presumably to avoid spammy bloat.
Aug 31, 2022 • 4 tweets • 1 min read
Good thread, we have known for a while now monolithic smart contract execution layers are hopelessly unsustainable

But I'll suggest even an appchain is unsustainable in most scenarios

The problem is, an appchain's ability to securely custody funds is directly tied to its usage A successful DEX can certainly securely settle billions of dollars in value, but it's a bit of a chicken-and-egg problem. A new DEX will necessarily be insecure barring speculation. Instead, a DEX collaborating with a focused settlement layer will always win significantly.
Aug 9, 2022 • 10 tweets • 2 min read
A few days ago, I drafted a proposal to pause funding activities on Optimism, primarily citing regulatory risk. I believe we now have precedent to take the matter more seriously. While the proposal doesn't have much support, I will personally abide by it.

gov.optimism.io/t/proposal-to-… I believe it's totally unacceptable for a rollup to have centrally controlled backdoors. An approach like zkSync with an emergency council is significantly more resilient, and has no material drawbacks. OF can retain emergency pause rights, if necessary, but not upgrade rights.
Jul 7, 2022 • 4 tweets • 1 min read
You can do a shitpost with jokes and such, but that's unambitious

You could also do serious commentary - but that's not shitposting

The best shitpost is when you're having a laugh, but everyone thinks it's serious, or vice versa

Finding the right balance is high art What I've learned:
- It has to be believable: there must be elements of truth and sincere opinion
- It has to framed provocatively: otherwise it's not a shitpost
- It must work as both a shitpost and serious commentary, and reflect the eye of the beholder, with a spectrum in b/w
Jun 26, 2022 • 7 tweets • 2 min read
Regrettably, this is somewhat true. I have been clear that I dislike most of crypto and crypto twitter, and much of this account is a performance. My only goal was to help in my own little way to address information asymmetry around scaling in 2020/21. I stopped enjoying a long time ago, for a long while now I'm here mostly because of inertia and people keep requesting me to. I have been committed to a gradual wind-down, but I'm personally better off putting a hard stop to my rollup-related discussions on twitter.