Are L2s Parasitic to Ethereum?

Sony's Stablecoin | Solana MEV Earnings

Marco Manoppo & Karon Pangestu
September 09, 2024

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Good Morning.

The market is still flatlining after a weekend dump to the $52,000 range. Honestly, it’s better to zoom out and chill out a bit on the liquid side — pay attention to the interesting consumer products that would be releasing in the next few months, and maybe wait until CZ is out end of month, cheers.

In Today's Email:

What Matters: Is L2 parasitic to ETH? 🤔
Product: Sony’s Yen stablecoin 💴
Charts: Magic Eden’s volume, Solana validators earnings 📈

Narratives: Sideways action continues. Nothing much.

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WHAT MATTERS

Is L2 Paratistic to ETH?

State of play: The relationship between Ethereum and its Layer 2 solutions is multifaceted, with debates surrounding sequencer fees and the pace of L2 decentralization.

Max Resnick views L2s as 'parasitic' because they rely on Ethereum for security and decentralization while potentially capturing value that could otherwise go to Ethereum.

Resnick questions the economic sustainability of this relationship in the long term.
Resnick criticizes the slow pace of decentralization in L2s, implying that they might prioritize short-term profits over achieving true decentralization.
On the other hand, Justin Drake counters Resnick's argument by stating that L2s are incentivized to decentralize to maximize fees.
Drake stated that by becoming more decentralized, Ethereum can attract more users and increase their revenue.
Drake's argument hinges on the idea that a decentralized fee mechanism would be more efficient and transparent, leading to higher fees and more revenue for L2s.

on $ETH vs L2s:
people need to take a step back. realize that chains operate like countries or cities. this analogy is undeniable at this point.
cities or countries, especially emerging ones, will want to cozy up to superpowers (either ally with the US or CN).
but internally,… x.com/i/web/status/1…
— Marco Manoppo (@ManoppoMarco)
11:06 AM • Sep 6, 2024

Doug Colkitt uses the analogy of a plane with a questionable landing plan to highlight the uncertainty surrounding Ethereum's rollup-centric roadmap.

He suggests that the current path might be risky and lead to unforeseen challenges.
The analogy implies that Ethereum might need to adjust its roadmap and consider alternative solutions to ensure a smooth transition to a rollup-centric future.

What’s next: The contrasting viewpoints highlighted in these discussions underscore the need for ongoing dialogue and collaboration within the Ethereum community to navigate the future of L2s.

For builders and investors: The relationship between Ethereum and L2s is similar to the relationship between superpowers and emerging countries.

L2s, like emerging countries, seek to benefit from Ethereum's influence and security while pursuing their interests.
Both Ethereum and L2s can benefit from this relationship. L2s gain security and credibility from Ethereum, while Ethereum's influence expands through the growth of L2s.
If L2s can attract new users and generate economic activity, it could indirectly benefit Ethereum by increasing demand for its native token, ETH.

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PRODUCT OF THE WEEK

Sony’s Yen Stablecoin

@neurolauncher

Sony is making significant strides in blockchain sectors through its partnership with Startale Labs to launch the Soneium blockchain network and develop a stablecoin pegged to the Japanese yen.

The project is currently experimental to ensure compliance with Japan's legal and regulatory framework.
Sony Bank aims to comply with Japan's legal regulations while facilitating cost-effective transactions through this stablecoin.
The stable yen token could be used in various sectors, including gaming and sports, leveraging Sony's intellectual property.

Other cool products:

Monerium, an onchain fiat issuer.
Dappmon, an onchain Tamagotchi.
Etehrvista, the PumpFun of Ethereum.
Ray Finance, a DeFi ecosystem on BNB.
Chef Fun, a platform that simplifies token deployment.

CHARTS OF THE WEEK

Magic Eden's $60M Daily Volume

Credits to The Block and Hellomoon for the original chart

State of play: Magic Eden's daily NFT trading volume surged from $1M to an average of $30M, reaching peaks of $60M, fueled by excitement around its upcoming utility token airdrop, $ME.

Magic Eden is dominating 80% of Bitcoin Ordinals and Runes trading.
Magic Eden now commands 60% of the NFT market's revenue.
Magic Eden has recorded a total volume of more than $6B.

Our take: A token is a crypto project’s superpower. Magic Eden is not repeating OpenSea’s mistake.

Solana Validators’ MEV Earnings

Credits to Delphi Digital for the original chart

State of play: Solana validators' MEV earnings have surged throughout 2024, driven by increased tips and transaction bundles. Despite the suspension of a mempool feature, the MEV ecosystem on Solana continues to thrive.

Tips received by validators increased from nearly zero in September 2023 to over 15,000 SOL at peak levels in mid-2024.
Bundles submitted rose sharply, reaching up to 12.5M in June 2024, highlighting significant growth in MEV-related activity.
Even after the suspension of the mempool feature, tips consistently stayed above 10,000 SOL, and bundles remained above 7M.

Our take: The MEV earnings have been dropping significantly since the Solana Foundation and Jito taken steps to discourage private mempool participation.

QUICK BITES

Fractal Bitcoin goes live on mainnet.
Tether addresses $102M agricultural investment.
Friend Tech renounces control of smart contracts.
Bernstein predicts a BTC price of $8-90k if Trump wins.
WazirX hacker moves $11M stolen ETH to Tornado Cash.
Snapshot X launches to enable gas-free onchain voting via Starknet.
CFTC files an emergency motion to stop Kalshi from listing election prediction contracts.

NOTEWORTHY READS & MEME

Fiskantes’ read on postponing TGE.
Irvin 104’s read on exploring SVM rollups on Solana, part 2.
1impal’s read on lessons from the failure of web3 game guild.

Gun to head I could not tell you where the metaverse is or how to get there
— Gwart (@GwartyGwart)
4:25 PM • Sep 7, 2024

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