你必须观看的最伟大加密货币辩论……（Haseeb vs Santiago）

Honestly, gentlemen, I'm glad we did this. I think now is the perfect time. The market has slowed down a little and prices have fallen, so let's spend some time and discuss Layer 1.

I'll give you a quick introduction and let you introduce yourselves. Haseeb, you wrote this eloquent, long post about Monad and MegaETH. Then you continued, writing about the economy and how we rate Layer 1s from the point of view of exponential growth. There was a comparison with Amazon, and maybe some nuances were lost.

Santiago saw this, published 2 articles on Substack supposedly refuting your post, and they were spot-on. Both became viral and received many views. Then you said, “Let's have a debate,” and he replied, “Let's arrange a debate.” Or vice versa. He threw down a challenge, challenged you, and you agreed.

For the sake of fairness, Haseeb wrote that eloquent text. He said, “Listen, it's time to write about L1, because when markets fall, everyone starts to talk about fundamental indicators.” Of course, people started dragging us into this, saying, “Hey, this could be an interesting discussion.”

It would be rude of me not to say that Paradigm is our main investor, and Paradigm is launching its own L1. So this is important context for our conversation.

As a person who builds an L1, I'm coming to this discussion claiming that L1s are overvalued. Paradigm is my main investor, but despite our own biases, I respect Haseeb very much because we discuss ideas, and that's exactly the kind of debate that ultimately moves this area forward.

In any case, thank you for inviting me. I think this will be a great debate.

Of course, Haseeb, I regret not hearing your arguments before investing in the Layer 1 that you're building.

I don't regret anything.

Listen, there is a special clause in the agreement that says if he wins the debate, there will be a return of funds.

I'm kidding. That's right. Yes, that's right. A return of money is probably in fashion now.

To supplement your context, Dragonfly—you guys are obviously huge investors in cryptocurrency. You support a bunch of Layer 1 projects, and Santiago, you are building a Layer 1 network, as was just noted. So I think this will be an especially interesting conversation.

Here's how, in my opinion, we'll do it. We're live on Twitch. If you're looking at Twitter and want to chat or talk about anything, come to twitch.tv/threadguy. This is the only chat that I'll read.

I'll give each of you 3–5 minutes for a quick introduction, so you can tell people who you are, what you do, and outline your general position on this discussion and debate. Then we'll move on to 5–10 topics that we'll discuss.

Interruptions are allowed. I want you to lead the dialogue and exchange views. If it gets too heated, I'll intervene. I have a mute button if I have to press it. But I really want to give you space to make your statements. I'm here just to moderate and help you get to a constructive discussion.

Once again, I think the timing is simply wonderful, so I'm looking forward to this. To begin, because Santiago is the challenger, let's give him 3–5 minutes without interruption so he can introduce himself, explain what he does, and state his position. What is your vision of this discussion?

Of course. Like Haseeb, I have dedicated the last decade to investing in crypto infrastructure. I've invested in most of the projects we'll be discussing. This isn't criticism of any specific network. I was an early investor in Ethereum and Solana. I was a DeFi investor, investing in many infrastructure projects.

I discovered this field back in 2012, when I worked at JPMorgan, and at that point it was just an idea. When something is just an idea, I think you really understand why crypto captured the imagination of an entire generation.

Many of the things Haseeb says in his argument are quite truthful. Crypto can become the next level of the internet. It has all the potential to become the best layer of socioeconomic coordination. The internet's creators never opened up the same monetary layer, and crypto comes along and solves that.

This is the most influential socioeconomic transformation. This may mean that I can build something that reaches millions of people. This may mean that you can transact within a few seconds.

Good. Oh, dude. Wi-Fi. This is a bad sign.

This comes from his side, right?

I know. This is a bad sign. I won't lie.

Okay, I think he—yes, he was interrupted a little. Give me a second here.

I think we may have to let you go and come back to you. This is unfortunate.

Okay, Santiago, I guess you can come back on stage.

Yes, I can pick up.

Santi is at a company meeting. They're in some remote place, so I think the internet may be a bit slow. Santiago, are you back?

Oh, sorry, guys. I'm back. I'm back, guys.

The question is, why am I entering this debate? Why did I start publishing all these things? You enter the year, Trump is elected, you get all the headlines you wanted, and prices are falling.

Of course, there are many other reasons why this may be happening—macroeconomics, rates, and so on—but that's precisely where I'm leaning. We invested over $100 billion in infrastructure, and now we're dealing with problems of excess. We don't have problems with block space anymore. Fees are extremely low.

We have a surplus of Layer 1 blockchains, and frankly, the market isn't stupid. It's saying, “Look, there's fatigue. Why do we need additional blockchains?” I'm an investor in Monad. I'm an investor in MegaETH. I'm an investor in many of the projects Haseeb has also invested in—we share a lot of projects—but you have to ask yourself: isn't this overrated? At what point will you say, “Hey, enough already?”

In the classic Silicon Valley meme, they say, “Never show a profit,” because as soon as you start showing a profit, the market takes you back to reality. I think this is the evolution crypto is going through now.

Specifically, Ethereum is a $380 billion asset. It will bring in $1 billion in fees. That's a 380-times price-to-sales ratio, right? Amazon never traded above 28 times sales at the peak of the dot-com bubble. Historically, it traded at 2–4 times sales. All successful technology companies trade at no more than 20–30 times sales.

I'm looking at sales because it's the most understandable indicator. Are you generating profit or not? I would say that Ethereum isn't generating the profit people were counting on. Most of it goes to Layer 2 solutions.

If you look at other blockchains, Solana is the same: $1–2 billion in revenue and an asset worth $75 billion. That's a 75-times price-to-sales ratio. Look at all the other networks. There simply isn't any value capture.

One interesting aspect that sums up my argument is that I think we're in a transitional stage, where the market realizes that we need to discover demand for blockchain space. What useful applications are we actually creating to justify these valuations?

That's all. I think they're very overvalued, and this is part of the growing-up process for the industry. Value should accumulate higher in the stack, in DeFi projects such as Ethena, in which Dragonfly invests, trading at a price-to-sales multiple of 8, or in companies that really have a connection with users.

I think this is part of the evolution of technology. Aggregators of users accumulate more of the value: Facebook, Instagram, WhatsApp, and Google. These are aggregators of users.

I believe that L1 networks are significantly overvalued, and I think their valuations will fall to real values, as they did during the dot-com bubble. That's good. It's very good for crypto.

Perfect. Thank you for the introduction. Haseeb, I'll pass the word to you. Give us a short introduction: who are you, what do you do, and why do you think the idea that these networks are overrated is blasphemy?

First of all, there is no such concept in this field as blasphemy. I think these conversations are important, but Santiago is overgeneralizing because he's very upset. It was a difficult year, and that's quite natural at a time when it seems like, “Hey, our assets were supposed to grow. We got everything we wanted. Why isn't the price increasing?”

People naturally search for reasons. Everyone feels this, but different people express it in different ways. When you're a financially literate analyst like Santiago, you say, “Oh, P/E ratios. Look at them.” People finally understood that the game was over. That's all. It was all nonsense. They were all castles in the air.

I don't think that's the right way to interpret what is actually happening. I'm the managing partner at Dragonfly. We're a global crypto fund managing $4 billion.

I was an early investor in many projects in this area, and not only in L1s, although I have invested in many L1s: Avalanche, NEAR Protocol, Monad, MegaETH, ZKsync, and all sorts of infrastructure projects. I also invest in applications. We're investors in projects such as Polymarket and dYdX, as well as a whole pile of companies that make money.

So I do both. I work on applications and L1s. There is an opinion becoming more and more popular that L1s are overvalued. There was a time when we really didn't know how much these things should be worth. Now we do. Now we have data from all these years.

We can look at P/S ratios. We can look at fee burn and say, “Yeah, that was a mistake.” The entire market was mistaken. We can look forward and say, “Well, the rest of the market can't read DeFiLlama.”

They’re too stupid, or they simply don’t know, or they’re just reading about it on CNBC. They buy something through an ETF because they heard about it from someone during dinner on Thanksgiving Day. But we literate people see the indicators, we know that everything is overrated, and we can admit it to ourselves.

I think that’s essentially the story that describes Santi. I consider this whole story nonsense. I don’t think you appreciate enough the ability to understand large market trends and technological trends that are ultimately changing society.

The analogy I make in the article concerns early e-commerce. Now, Santi seems to have tried to deconstruct my analogy with Amazon. I am not comparing Ethereum to Amazon; it is obviously almost nothing like Amazon. What looks like e-commerce is the trend.

E-commerce was a trend, and at the very beginning people tried to understand: “How big can e-commerce become? Will people buy shoes, clothes, DVDs, and other material goods?” The answer is that almost everyone will buy almost everything through e-commerce, and this is one of those trends that continues to grow. In the United States, electronic commerce is still less than 50% of all retail sales, whereas in other countries it is already completely saturated.

The same thing you see now will happen in crypto as well. I was showing the graph in posts about the first 10 years of Amazon’s shares. In those first 10 years, Amazon was still tiny. Its income was nothing compared to what we see today, and market saturation in the United States was meager compared to what it is today.

Ethereum is already 10 years old. Solana is apparently 5 or 6 years old, something like that. These are still very, very young projects. Everything else is even newer than that. Technology needs time to spread.

We’ll probably talk a lot about fee revenue and value capture. I don’t want to delve into that now, but believe me, I have a lot to say. Most of all, it’s amazing to me that we are now discussing P/E ratios, which previously no one in crypto mentioned.

I don’t think that’s because we suddenly woke up and understood, “Oh my God, financial indicators exist.” I think it’s because the center of gravity in crypto has moved over the last several years from Silicon Valley to Wall Street.

Silicon Valley used to think about exponential technology. Exponential technologies start small, grow like crazy, and simply absorb everything. Silicon Valley saw it again and again. We saw this in e-commerce. We saw it with the internet. We saw it with social networks. Now we see it with AI, where the fastest-growing products in history, such as ChatGPT and Gemini, don’t earn money. They are losing money on a massive scale.

What is the P/E of these things? It’s equal to negative infinity. But Silicon Valley understands that as you move along the curve toward saturation, everything changes, and the ability to capture the value evolves. Therefore, Silicon Valley has always understood that with exponential technology, it’s worth being patient when evaluating an exponential trend.

Wall Street lives in a world of linearity and linear technologies. It’s right for them to evaluate everything through the P/E ratio. I just think that’s an incorrect mental model.

I’ll stop you right there. At this moment, Santi, the stage is yours. Free time and unstructured time are over. If I have to interfere, I’ll intervene. Santi, let’s begin.

Listen, the reason why I created Virgin [?] last year was that we had a problem with demand. Nobody uses this thing except for speculation. That’s the problem you’re looking at with the fee revenue of these networks: it is running out.

Are you building a real product? Again, I consider the analogy with Amazon and e-commerce very accurate. If you look at Amazon in 10 years, it generated $10 billion in revenue and was profitable. Profitability was low, but the company reinvested in growth, and I think the market is not stupid.

You look at this and create a good product. It all began with books, then expanded to everything, order sizes increased, customer retention was high, and you continued to capture the market. You invest money to satisfy demand for a product that people like.

Let’s call things by their names: at the moment, the crypto industry is only a casino. That’s not bad. You can say that at the dawn of the internet, it was like this. The problem itself, you know, started with several academic use cases, then pornography, and then you expanded.

Good. We have proven that we can absorb and make transactions for memecoins. Perfect. It’s time to get busy with serious things. It’s time to move real economic activity online.

That’s exactly the problem that worries me: unlike e-commerce or the internet, we have not yet found the same demand. What is the product? If you look at user retention in these networks, it is zero. A month later, in each network, the majority of users are gone.

Why? Because they were liquidated. The longer you are in the casino, the higher the probability that you will lose everything. If that’s true, and you have already made this argument in one of your posts, then you claim that Layer 1 blockchains do not have “moats.”

I believe the essence of this statement is precisely that you said: if you stay here for a long time, eventually you get liquidated. You will lose all your money, your LP position will burn, or some other event will happen after which everyone’s money will disappear, and you will leave. You’re just leaving, aren’t you?

We see massive capital migration from one chain to another—to Blast and all these different places—and you can see how mercenary this capital is. Everyone who understands this intuitively understands your point of view.

But your argument does not apply to Ethereum. It does not apply to Solana. It does not describe the winners, which have been incredibly stable, with very stable capital, very stable applications, and constantly engaged developers, despite the fact that Solana, of course, has great execution.

Ethereum, I think we can all agree, has actually been asleep at the wheel for about 4 years, and yet it was able to hold on to this huge moat protecting its capital, users, and developer activity. How do you explain that if you think Layer 1 blockchains do not have moats and are not holding us back?

I never said that. I never said that Layer 1s do not have a moat. The question is whether that moat is monetized.

Linux has a phenomenal moat. You know this better than anyone as a technologist and an engineer. Every open-source technology has such a moat. It has an established developer community. Open-source technologies ultimately win. This was true for the internet, and it is true for cryptocurrencies.

But are you monetizing it? Let’s remember Tim Berners-Lee, the inventor of the internet. He is not a billionaire. Who became billionaires? Mark Zuckerberg and the people from Google.

That’s my question: is this moat priced in, or do you capture the value? Peter Thiel has a wonderful thought: when you are in highly competitive industries, profitability falls to zero, as in airlines or most infrastructure projects.

What we have in crypto today is an increasingly competitive Layer 1 market. Now there are hundreds of networks. I agree with you that Ethereum has a developer mindshare, ERC and EVM contracts, and standards that Ethereum created. Those are moats.

My problem, my friend, is that I can’t pay a 380-times price-to-revenue multiple for this. You are an investor. Investors pay you for making money and managing risks. So tell me: what would you rather own—Ethereum at $380 billion and a 380-times price-to-revenue multiple, Stripe at $100 billion, Ramp at $32 billion, or even OpenAI at $1 trillion?

I also think it’s worth answering directly: do you think that networks have moats, and what is over the moat? That might clarify the situation.

Okay, look, Santi. It seems you’ve now admitted that blockchains have moats, and we can all agree by looking at the top networks that they don’t change very often. If something didn’t have a moat, you would observe very rapid turnover.

I already mentioned this in one of my previous tweets: if Layer 1s didn’t have moats, then you would have to bet on a reversion to the mean. Everything would align with measures that made it look like restaurants.

Every restaurant has people. There is no institution where absolutely everyone goes. There is a natural mechanism through which some people go to one restaurant and others go to another, and no restaurant captures everything. That’s what a market without moats looks like.

But Layer 1s clearly don’t look like that at all. We see huge stability and great enthusiasm in the market. Even if the market is falling, something new appears, but Solana remains Solana, Ethereum remains Ethereum, and BNB Chain remains BNB Chain.

How can you observe such stability if there were no moats? So we agree that moats exist. It seems that Santi now agrees that there is stability in their positions, holding TVL, protocols, and developers who continue to build there. These are the things that have value for financial ecosystems.

Eventually, of course, you can say, “Well, yes, but look, memecoin activity switched to Solana or Base. So it’s obvious that they don’t have…” You were looking at the flows between Solana, Base, and memecoin trading. Have you looked at Solana’s fee revenue considering volatility?

There are more and less loyal users, and, of course, there are trends that come and go.

NFTs started on Ethereum, almost disappeared on Ethereum, switched to Solana, and almost disappeared on Solana. Trends naturally arise in different places, right? It is like a restaurant that becomes incredibly popular for several months and then suddenly goes out of fashion while another becomes popular.

Some trends are, by nature, temporary phenomena. But most importantly for the network—and you agree with this—the financial flows and financial activity matter. It does not really matter who is doing it; what matters is that it is happening. This stability is clearly traceable in Ethereum, BNB Chain, and Solana, the current titans of the industry. They have very powerful competitive advantages, and Solana has now joined that group.

What is the point of having an advantage if you are not monetizing it? By this indicator, you are just beating around the bush. Why does Ethereum not have $38 billion in revenue? Why does Solana not have more?

Listen, I really like this technology, but I hate the price. You compared Ethereum to Amazon and OpenAI. OpenAI is literally unprofitable, and that is part of the reason markets are so nervous: people are concerned about how incredibly unprofitable OpenAI is. Would you short OpenAI shares on that basis? I doubt it. You just put me on the spot, asking what I would choose: this or Ethereum.

You also talked about how Amazon was profitable. What do you think Amazon’s price-to-earnings ratio was during its first 10 years?

I am looking at the data right now. Amazon’s peak valuation was 26.3 times revenue. I said P/E—I meant P/E. I do not have a P/E ratio for Ethereum; I have a price-to-revenue ratio.

There is a very clear reason Amazon was not profitable: it reinvested in growth because it knew its customers would stay with it.

Ethereum has no concept of profit, does it? Ethereum has no costs.

It has commissions and fees.

This is a very clear definition.

This is torture.

You are forcing this distinction, but that is why I use revenue. Revenue is a very clear indicator of how many people are willing to pay for block space.

No, absolutely not. The market price for block space is not willingness to pay for it. It is only valid for a competitive auction.

Remember the number 26. At the peak of the dot-com bubble, investors traded Amazon shares at 26 times revenue. Now, in which version of this universe does Ethereum trade at 380 times revenue? Explain to me how you buy profit. You told me about profit, right?

I am looking for an example. Amazon was valued at billions of dollars in a year when it generated $100 million in profit.

Good. Amazon also traded at an extremely high price-to-profit ratio.

I am talking about price-to-revenue.

I am talking about the price-to-profit ratio, according to which the stock market usually evaluates companies. It does not evaluate companies by revenue; it evaluates them by profit, right? In a stable system, you are looking at your ability to monetize the business. Uber was extremely loss-making for a long time.

Let me ask a question. I want each of you to clarify this in about a minute. Santiago, I will give you the word first, and then Haseeb. Which indicators do you use to evaluate blockchains? We keep jumping from profit to revenue and rushing back and forth. How exactly do you evaluate them?

I look at revenue, and I look at softer indicators, such as developers and applications. When I invest in Layer 1s, I usually allocate a lot of money to investments in applications. At ParaFi, we were among the very first and most active investors in DeFi, and I evaluate these networks based on developer and user activity.

I also look at maintenance. I agree that TVL is a kind of surface-level indicator, but the important question is whether capital remains there. I do not agree with Haseeb on this, but I am finally starting to think about whether you create value. This is not a problem only for Ethereum; it is a problem for practically every ecosystem. I do not care whether you have a “ditch” or not.

This is a very intelligent discussion, but you cannot ignore the fact that these Layer 1s simply do not generate that much value. Five or seven years ago, when we invested in Ethereum, Solana, Monad, and all these different networks—DFINITY, Nervos, and everything else—you could not evaluate them this way because there were no protocols or applications on top of them.

You are currently in a completely different state of the world. It is like 2001, 2002, 2003, or 2006, when, returning to the analogy with e-commerce, you saw incredible numbers of people saying, “I can buy not only books here; I can buy everything here.” If you are Amazon, what do you do? You invest all the money to satisfy this growing demand.

The market was not stupid. I do not believe in the thesis that Wall Street does not appreciate exponential growth in Silicon Valley. It invests at different stages of the curve. The market can never be stupid; it is simply playing short-term games, and we can talk about that.

So you agree that the market can never be stupid? You think the market is mistaken about Ethereum and Solana? You think the market will revalue these assets by 10 times?

I think you can start a whole discussion about why crypto exists today and why these valuations—Ripple and the other components of this space—exist. But we are talking about Ethereum and Solana, not Ripple.

I think there is a slow decline toward the real indicators and a return of these networks to a reasonable valuation. I think Ethereum will be like Cisco, which will never reach its historical maximum again. I will add one caveat: this assumes there is no resolution to the demand problem. If we figure that out, then I will rewrite my thesis.

People hear this and say, “Wait a minute. You supported all of this. Why did you suddenly change your mind?” I will tell you why. I think there is something in looking at the structure, and this is probably my most important argument for why they are overvalued: you cannot take a position because none of these revenues are stable or recurring. None of them. It is all tied exclusively to speculative activity.

What will happen when Jerome Powell stops pouring money into the economy? There will not be enough money for people to go to the casino. The valuation of these networks today is closer to the valuation of Wynn casinos in Macau than to that of technology companies, purely because the revenue stream and online activity are completely tied to one specific type of activity: speculation.

That is the problem I have. Would I buy Solana for $75 billion or $80 billion if I saw durable applications there? If I saw, perhaps, Rain cards—you invested in Rain—if I could see more Western Union deployment, then there would be signs that this technology would be useful for purposes other than speculation.

I think that is why I am building.

However, the only thing I will say is that, as an investor, you do not pay for “if this, that, and the other will happen.” You have to discount it to today. Today, they are not worth what people are asking for them.

Okay, give us a short explanation of how you evaluate these blockchains and which metrics you use so that we can come to an agreement.

Investing in something valued at $100 million is a different story. I do not think I invested in any Layer 1 valued at $100 million for a long time.

First of all, I agree with you: markets are not stupid. When I say that the center of gravity in cryptocurrency is moving from Silicon Valley to Wall Street, I do not mean that Wall Street is now the center of the market. I think the center of discourse is moving. Discourse changes very easily; markets change much more slowly.

I agree with you that markets are not stupid. Markets look to the future; they do not look at the present. The whole point of a price is that it contains all the information about the future. The future is not just next year or next month; it is the next decade and the next 2 decades.

Of course, when interest rates are low, you are willing to look 20 or 30 years into the future to decide whether to own a certain financial asset. So, returning to metrics, what do I pay attention to? If you think Ethereum is a company, then you should look at revenue, profit, and margin. That is the correct way to evaluate companies.

I do not believe that this is how Layer 1s should be evaluated. If you ask Santiago—listen, people, it is important to know this—Santiago is probably one of the 3 most active angel investors in the history of cryptocurrency. If you look at the leaderboard for the number of angel deals, he is almost at the top.

He made a lot of investments. And I guarantee you that he never asked a founder of an L1 about their revenue, what their margins should be, or when they planned to raise gas prices to get more commissions. He never did this because he understands what to evaluate in a Layer 1. Those would be meaningless questions to ask an L1 founder.

So how are you thinking about it?

It depends on the stage.

Okay, good. But how are you thinking about someone else?

The answer is that I have in mind—and I think Santi agreed with this analogy—that you should understand a Layer 1 more like a city or a state. It is better understood as a geographical unit.

A geographical unit such as Singapore. I believe Singapore is a great analogy for Ethereum. Singapore is a city with a very low tax rate, right? That is why many people are moving to Singapore, because the tax rate there is very, very low. They also have a great rule of law. It is a very reliable place.

It is not very big, so real estate there is very expensive. But everything is very stable, and it is a great place to keep a business because the tax rate is so low. You can think of Singapore as a place where they collect very little tax revenue. Think about all the value that is in Singapore, right?

How should you think about the value of Singapore? In a deep sense, you should not think about the value of Singapore as the country’s tax revenue. You should think about it from the point of view of all the wealth that exists in Singapore.

Let me give you another analogy. Look at the United States. Actually, look at almost every first-world country. The debt-to-GDP ratio is increasing, right? Everyone knows this. We need greater fiscal savings, blah blah blah.

Despite this, bond markets are behaving quite calmly, right? Bonds are not saying, “Oh my God, these debts will never be paid off. All these countries will announce default.” Bond investors are not stupid. Following Santi’s words, markets are smart.

So why are bond investors not panicking because these governments are not going to pay their debts? The answer is not that the bond market believes these governments are going to reduce everything to the bone, or something like that. They are not going to say, “Go to hell, old people. Let you die.” That is not what will happen.

What will happen is that when they need it, they will massively raise taxes and confiscate wealth in order to settle accounts with those they owe money to. Governments have done this again and again and again when it was necessary. When the market demands it, they raise taxes and collect the money they need, whether it is in wartime or during moments of real crisis.

That is actually what the bond markets are saying. They believe that when things get tough, governments will show up and do the dirty work.

Likewise, if you look at Ethereum, there is a huge amount of locked funds, or TVL. There is a huge amount of financial activity happening there. The only times Ethereum received significant income were when the markets were absolutely crazy. NFTs were literally flying off the shelves. The amount of activity was crazy.

Ethereum, even if it wanted to, could not lower gas fees. And actually, people wanted those fees to be lower. It is not like a business where you would say, “Great, this is just great. Let’s get even more revenue.” Ethereum said the opposite. They said, “Oh, damn it, come on. Implement L2. Let’s try to scale, because we are taking too much of this income, and we do not want that.”

You are increasingly seeing all these networks say the same thing: “We do not want to have high fees. We want to have low fees.” Why would they do this if it were a business?

The answer is that it is not a business. It is more like a state. It looks more like a city. The city says, “Listen, we will make up for it much, much later.” The game is much larger than this, right?

There is now a proposal, EIP-7918 or something similar, which is going to raise the minimum blob fee.

EIP-7918, yes. That will increase the minimum blob fee.

Ethereum now has blob storage, which allows rollups to publish data on Ethereum. Everyone complains, saying, “Oh my God, the fees for blob storage are this low. This is absurd,” right? There is a proposal for blob pricing in Ethereum that will increase the minimum price on the network.

Yes, but why are they doing this? This applies to blob storage, not the regular base Ethereum network.

The reason is that externalities are currently being priced too cheaply. The cost of those externalities is not being taken into account.

But you can imagine: if they can do this, why can’t they raise the minimum price on Ethereum to $1, or even to $10 or $20? They are obviously choosing the wrong product. Absolutely wrong.

For many people in Ethereum, for whales, let me ask you a question. With $50 billion in TVL, will they pay $10? They already did.

Let me put a question to you. If Dragonfly is a prolific investor in L1 networks—many of them, like me—then if you really believe Ethereum has all these network effects and barriers, why are you investing in additional L1s?

Well, that is a lot to unpack. I will tell you, and I admit that I am speaking from my own point of view. I will spare you the compliance lecture. Investing in infrastructure projects with valuations below $100 million or $200 million was a phenomenal trade during the last 10 years.

Why? Because everything was based on this anchoring effect, right? If Ethereum is worth $380 billion, let’s capture 1% of that. If we get 1%, we are in profit. That is exactly how trading works in crypto today.

Simply put, say that to the Berachain investors. Say it to the Movement investors. Tell it to all the people who thought it would work and lost a lot of money.

And that is my opinion. The market for Berachain and all the protocols you just mentioned—Berachain and Movement—is a different paradigm. It is not DFINITY, Ripple, or Cardano.

There is a mimetic component that complicates the value of these networks, but they are viscous. We are probably too intellectualized and excessively complicated in the way we think about the fact that some protocols simply capture the world’s imagination, because that is how the world works.

When you ask an ordinary user what DeFi is, they will call it Ripple and Cardano, not Solana. They cannot even pronounce Solana. So let’s not over-intellectualize it.

But that is exactly what I am saying. I mean that the market is not stupid. Look at Movement, for example. Is there evidence that the market is stupid? Is it really stupid?

The market is not stupid because it says, “I have had enough of this.” I am not on the liquid side. There is not enough demand in the market for $50 billion.

If the market is not stupid and says, “I have had enough,” why does it value Ethereum at $380 billion? Why is Solana worth $80 billion?

I am saying that the market is already giving you an early signal about where these assets will fall.

That is not how it works. Markets are not hinting at where they are moving. They just go there.

I think you can justifiably assume that Berachain—and all these protocols—fell in price for specific reasons. But I am going back to the question: if you sincerely believe that Ethereum has all these advantages, why bet on the next one? Why invest in Mega? Why invest in Monad?

I invest in NEAR and Avalanche, and this is the question I keep coming back to.

Why do you care? I just said that from a trader’s point of view it made sense, because you guys invest in the early stages. It is completely different when the project is worth $380 billion than when you invest below $1 billion. Completely different. Totally different.

Okay, can I answer now?

Come on, light it up.

Okay, please, thank you. I will tell you: if your mental model of these networks is that they are more similar to cities than to companies, then the answer is this. Singapore already exists. Why do you need another city?

The answer is obvious. One city cannot cover all the financial activity in the world. That is simply not how it works. If America already exists, why do we need Canada? Canada exists. There is room for more than one.

And this is not a theory. It is reality. I claimed this 5 years ago, back when people said, “Why do we need another chain?” Do you remember that? Were you there at that time, when people thought, “Okay, there is only Ethereum, and then essentially nothing”?

There was only Ethereum, and then a wasteland of isolated coins that did not have any ability to deploy smart contracts. I claimed then that the point was not that “ETH killers” would appear and we would see who would get their hands dirty, finally killing ETH.

Instead, the situation would be that there would be many networks, and they would interact with one another. They would conduct commercial activity with one another. There would be a larger universe of these interconnected things.

That is actually what we are seeing, and it describes reality. I am not making statements about the future. I am making a statement about the present.

Now the burden of proof is on you if you claim that something will change—something really big will change. And that big thing can be composable. Well, we have composability, right?

Maybe it could be a little better. It has already become much better. And yet we still have fragmentation between many, many networks.

I think the basic assumption should be that this will probably always be the case, for enough fundamental reasons. Look, you could fit all the people in the world into North America, right? Geographically, we have enough space to do this, but we just won’t do it.

Even if it sounds like, “Theoretically, it would be better if everyone were closer together in one good place with good weather,” the world will never go this way. We’re not trying to find some theoretical optimality.

Okay, look, here’s another way to understand this, I think. We’re going to—I'll let you finish.

Give me a chance to finish, yes?

Okay. Look at TRON. You want to know about L1s that monetize? Look at TRON.

Because they really solved the demand problem.

No, absolutely not. That’s not the reason why TRON monetized. Look at TRON’s bandwidth. TRON’s ability to pass transactions is not already that high, but TRON commissions are very high.

So why are TRON commissions so high? The answer is that Justin Sun decided to raise commissions much higher than the required level to generate excess income, which, as he knows, he is guaranteed to receive from TRON.

Why is he doing this now? Why doesn’t he wait 10 years, as Ethereum, Solana, or anyone else can? I don’t know. Maybe he thinks that now is the time, and later Tether will create its own blockchain. They could come up with a bunch of reasons, right?

But the state’s capacity to tax its own citizens and their economic activity is a story as old as the world. Justin Sun decided that he would raise commissions on the TRON network. TRON is now one of the most profitable L1 solutions, one of the most profitable applications in crypto. He earns huge money on TRON.

This is proof that if there is political will, you can monetize your advantage. That’s what they do. But most blockchains don’t want to do this.

Why don’t they want this?

Because they believe, like me, that the future is much larger than the present. You compared this to Amazon. At the beginning, people thought, “Is this just a bookstore? A CD store?”

Yes, and in crypto, in the beginning, people say, “Oh, it’s just a casino.” What else is there to do except gamble, play games, and bet on things?

The answer is that all financial assets will eventually move onto crypto, which will become the infrastructure, clearinghouse, and level of computation for everything that has value in the world via the internet.

If this happens, then it will be worth much more than it is now. People are willing to wait for the story that is considered large enough and valuable.

Yes, I like your analogy with cities. It’s so clear and attractive. I lived in New York and visited Singapore. I like it.

The problem is that this technology is open source, and people can collect their things and go somewhere else. You see the spread of L1 networks, where smart developers go and create their own projects, like Monad.

You agreed with me that L1s have their own advantages. Can you explain your argument?

I must engage with your analogy because it’s so attractive. I like it, I love it, and I want to believe it.

So, again, yes, Ethereum is like New York and Singapore. The problem is that Ethereum is earning revenue at the city level, not at the federal-government level, right? Ethereum provides security, just as the United States provides security. That is the role of governments. It’s the role of Layer 1 blockchains.

Okay, we can agree on this?

Perfectly. Ethereum has powerful protection. Its security is underestimated. That’s why EigenLayer and restaking appeared: to create a security market that never took off. AVS actually never worked.

So security is underestimated, and this is visible from Ethereum’s revenues—the tax revenue that Ethereum collects.

What do you mean by “underrated”?

Ethereum does not collect federal tax income. It collects city or state tax. You pay 30% federal tax. You’re saying it could take more than it does now.

A bigger part of the costs is taken away by L2 solutions and applications built on top of it.

L2 solutions don’t earn much money, in my opinion. There is a great report from 1kx, and I think everyone has read it.

I’m familiar with it.

In fact, it says that L1 networks constitute 90% of today’s total market capitalization, while their commissions have significantly decreased. Previously, it was 60% when Ethereum commissions were that high. Now, it’s 12% of commissions.

Most of the commissions generated today arise at the application level. DeFi protocols generate 73% of commissions but account for less than 10% of valuations.

Therefore, I want to be on the right side of history. I think more and more value will move to applications, because the ratio of 90% L1 market capitalization to 12% of commissions, compared with DeFi generating most commissions at less than 10% of valuations, should change.

I think you want to be on the side of the trade where that ratio eventually evens out. So that’s point number one.

And again, going back to the data about commission generation: protocols like Ethena, which you know well, trade at a price-to-sales multiple of 8, which is very smart.

The point about TRON is interesting. I think they actually solved the demand question. Why is USDT so popular and able to maintain its position? Why don’t they scale TRON? What do you think? Why don’t they scale TRON?

The reason TRON became so successful is that it dominates the retail sector. It dominates stablecoins. People don’t give it enough credit, but TRON is very good at getting USDT into the hands of people in Africa and Asia.

Let’s look at this in perspective. Let’s go back to the numbers. I’m more comfortable with Excel tables, and I have one open here on my phone.

TRON has a valuation, and I’ll lay it out for everyone afterward. TRON is valued at $26 billion, not $380 billion. It generated $629 million over the past 12 months. It trades at a price-to-sales multiple of 41.

This is one of the cheapest options. Solana is at 42 on a circulating basis. Ethereum is at around 380. BNB is at 400. Arbitrum is at 37.

So I think L2s actually capture a lot of value in the form of sequencer commissions. They capture it and don’t share it with Ethereum L1.

I have a problem with Ethereum as an L1. I understand that certain technologies and proposals are emerging that will focus more activity on L1. Your analogy with the city is wonderful, and I think I use it as a basis for understanding that Ethereum simply doesn’t collect enough of the security income it provides.

This security market is greatly underestimated. And one last point I want to make, to explain the pace: you say that blockchains have this moat. Explain the pace. Explain the spread of L1s and the leakage that is happening.

Okay, I’m happy to do that. I’ll do it.

The first thing I want to indicate is the simple theme of this conversation, right? One of the questions given to me was: Why has Santi suddenly changed position and begun to criticize everything in crypto, although he was the largest crypto bull for the last 5 or 6 years?

I think it’s symbolic, so it’s possibly worth first explaining what inversion is.

You build a chain that takes on real businesses, absorbs them into crypto rails, and internalizes value in itself. You call this an inversion chain. Because of this, you spend all your time studying traditional companies and trying to decide which businesses are worth buying.

This means that these days you look at traditional businesses, price-to-sales ratios, profits—you live in spreadsheets. I think it affects your ability to distinguish between categories of assets.

What represents Ethereum and Solana is very different from what a traditional company represents. A traditional company does not have the potential for the kind of growth we’ve seen in crypto over the last 10 years.

Now, you can claim that growth is over. We’ve passed the growth phase, and I’m not going to pay for growth because I don’t see it.

Of course, if you think that, then you exit the game. You say, “Look, trading L1s is over.” You think that $80 billion in TVL, or something like that, is practically everything we’ll get. These things are overvalued not because they don’t generate enough income, but because they won’t grow.

Amazon traded at a huge P/E ratio, and OpenAI has negative profits. These businesses are effectively selling a dollar for 50 cents. They are valued based on growth. They are valued based on growth because you believe that when they reach scale, everything will be fine. You’ll be able to catch up later.

The US government is a business with negative margins, and people still buy our bonds. Why do they buy our bonds even though we lose money every year? The answer is that we’re growing, because we’re very big and we’re developing.

If people thought we weren’t growing, they would sell our bonds instantly, and we would be forced to move toward fiscal austerity, right?

So this story ultimately comes down to growth. Therefore, I think the debates about how much income DeFi generates, and how much it doesn’t, are not of great importance.

I’m not claiming that L1s will have greater value than DeFi in the long term. It really doesn’t matter. I may still be right that L1s will grow radically, that there will be a renaissance of all kinds of applications, and that it will be huge—like the internet.

This is not true. Google is a big part of the value of the internet, but it is also true that there are an incredible number of companies built thanks to the internet and the positive externalities created by Google.

I am in no way adhering to a single position. But again, if you look at states and governments, nobody looks at the US government or Singapore and says, “Hey, you collect too little tax. You don’t monetize enough. What are you doing? What a foolish business. Why invest at all if you don’t maximize the amount of income you can pull out?”

The time to maximize income comes when you have reached scale, when you are no longer going to grow, and when there is no point in sacrificing future income for current income. But if you believe that the future is bigger than the present, you must sacrifice current income for the sake of development.

Santiago, I think so. Look, I don’t argue with that. I believe this field has huge potential for growth. I don’t confuse my skepticism with cynicism. I fundamentally believe we can move NASDAQ onto the blockchain.

I continue to bet big on this sector. I really question the profit-making mechanism of L1s, but I still make big bets on this sector. You make big bets on L1s?

I still have significant positions in some of these networks, including Monad, MegaETH, and Solana. Do you do something similar?

Mostly not on the L1 side—very little. I’ve really changed the composition of my portfolio. I don’t play on the downside. I’m not joking; I’m not a degenerate gambler.

The market structure is insufficiently liquid. I don’t short. If I want to play on the downside, I’ll put all my time and energy into deploying the fund for direct investment. I would rather buy real businesses and make them more efficient with the help of this technology. I think that’s where it all happens.

One thing I’ll tell you about real estate is this: when you buy Ethereum or Solana, I think you’re buying a certain future stream of tax revenue for these cities. And yes, there are moats, or protective barriers. People want to live in Singapore because it’s safe and clean. You can’t chew gum, but damn, it’s cool there—even in the summer. It’s incredibly hot, but it’s great.

People like to live in New York because—I don’t need to explain this. If this needs to be explained, go there, and then you’ll understand.

The problem is that when you buy these tokens, you buy future tax receipts. That is essentially what this thing is. You say, “Yes, these cities are flourishing. There is economic activity. My God, you come to New York, and this is the financial hub, the financial capital of the world.” And I say, “Yes, that’s right.” The problem is that’s not what you get as a token owner.

Bonds, you know, play their role in capital markets. I want to buy a building. I want to buy Madison Square Park. I want to buy Wall Street. I want to buy NASDAQ.

There is more to value, except in cases like Great Britain, where the royal family owns a significant portion of the land and you simply rent it from them. That’s a certain nuance, and I hope I’m not giving up on being a skeptic. But I don’t want to buy tax receipts. I want to buy the building itself. I want to buy economic activity.

That’s what DeFi applications are. That’s what we do at Inversion, involving real businesses. And I’ll tell you one thing: simply put, I think the analogies are imperfect. It’s very difficult to fit this into the framework of states.

But I really think the theory of aggregation of users will remain relevant. The greater part of the value will be captured by those who control users: wallets, exchanges, and protocols like Ethena. You know, Phantom Wallet—I see the logo in the background.

Yes, sir. If you control the user, you control where you direct that flow. Infrastructure is a commodity.

I completely agree with you. However, it’s not only about control of the user, right? Aggregation theory is definitely correct, but it’s not just about control over the user. It’s also about control of capital.

Ethereum is not laying claim to users; it is laying claim to capital. Just as New York and Singapore are not laying claim to all the people who are located there. Maybe for some people they are, but for most—as in Singapore, where there are mostly expats, people who came there—this is not a situation where all the local Singaporeans are building these amazing businesses.

It is a home for capital, and capital is very difficult to leave Singapore once it gets there.

Let me ask you about a good analogy. We’ve been here for a while, delving into the nuances. I want to ask you about the analogy with a city in general, because you connect it to ETH.

First, what is your time horizon when you look at it? And secondly, and more importantly, why hasn’t ETH achieved a significant all-time high in this cycle?

Okay. Let me start with the second one. I don’t know why ETH didn’t reach a significant all-time high in this cycle, but I want to note this: ETH started the year at the bottom, having fallen at one point to $1,600. Then there was an incredible reversal. I think that reversal is the most instructive moment for this discussion.

Why am I saying that? What was the main criticism of Ethereum when it found itself in such a deep crisis, descending to $1,800 or $1,700? The answer was that Ethereum had not monetized its value or its moat enough, and had given all the advantage to L2 solutions. It had fallen asleep at the wheel, right?

What happened is somewhat similar to what happens when a sovereign state approaches default. In ordinary times, you think that voters are in control. But if you remember what happened in Great Britain when Liz Truss tried to reduce taxes, you understand that the government is not actually guided by voters.

Ultimately, the real owners of state capital are bondholders. Bondholders manage the government when it is playing with capital markets. So bondholders said, “You lost. Remove Liz Truss. We have new rules of the game for you, which are that you collect taxes and pay off your bond debt.”

And exactly this happened with the government of Great Britain.

It’s the same with Ethereum. People who hold ETH—you think Ethereum is controlled by the core developers. And in ordinary times, it is. They are the voters. But when this happens, ETH holders actually control everyone.

ETH owners said, “We will send you to zero if you don’t get your act together and start running this as a real city.” And they said, “Okay. We’re going to get rid of the infinite garden. We will abandon the laissez-faire approach to cheap L2s, and we’ll stop saying, ‘We’ll think about monetization later.’”

“We’re going to scale L1. We’re going to bring people back. We’re going to create a team to work with entrepreneurs.” All of these things Ethereum is doing are aimed at keeping people on the first layer, so that it can continue to grow, increase TVL, and monetize later.

That does not mean monetizing right now. If you want to monetize directly right now, raise the minimum gas fee. That will bring profit now. But they don’t do it. Nobody wants to do that.

So the idea that Ethereum is a socialist paradise, like Linux, was refuted in February. I think this is a sign that all these tokens finally have financial constraints, and those constraints depend on token holders.

Let’s see what percentage of your portfolio is in Ethereum. Let’s say you have $1 million, or let’s say $1 billion. Let’s say you have to build a portfolio from zero—it’s always a useful exercise. I do it again and again. I say to myself, “I don’t want to have anything to do with this.”

I create Inversion. Here are $100 million. How would you invest them today?

Okay, first of all, not in this business. Yes, it’s probably not worth doing this. But I will say that we ourselves keep a fairly significant stake in Ethereum. We’ve been holding it for a long time.

I think it’s 20%, 30%, 40%—somewhere in the area of 20-something percent, without taking into account all our venture positions, of course, because they’re illiquid.

Yes, ETH is a super-liquid asset.

Yes. Among liquid assets, we have about 20% of our positions in ETH, as well as a series of L1s.

But you’re going to launch Hype Capital as a GP/LP, and you’re going to invest—will someone do something? By the way, you’re not representing Dragonfly; I’m just saying: here are $100 million. Give me the best return for the next 5 years. How would you invest them today? In what proportions would you buy ETH, Ethena, and HYPE? You’re following the list.

Listen, I’ll continue to evade the answer, but I’ll describe what it could look like. I think it’s worth having a little bit of everything. It’s worth owning assets that are undervalued.

And I agree that there are many assets trading at very noticeable P/E multiples. They trade there for a reason, right? The market is not stupid. I agreed with you when you said that.

The market is not stupid. The market knows how to value applications as companies. It knows how to value them based on profits. It can also value L1s based on something else.

Based on what does it value them?

It looks much more closely. It’s actually funny because we used to criticize TVL as an indicator. But I think TVL is an incredibly good indicator. It’s the first indicator we came up with for estimating L1s, and it’s surprisingly reliable for everything except Bitcoin, of course.

I think TVL is, to a large extent, that simplification, which is worth watching. It’s like when you look at a state or a city: you can think about stocks and flows. Flows are obvious things to measure—tax income, revenue, corporate profit, and so on. For networks, flows are the same as transaction fees and commissions.

Stocks are the value of all the companies and all the wealth that exists in the city. With stocks, it’s usually better not to tamper, right? It’s ugly to come in and confiscate people’s property in a city. But it happens. It happened in America and in many other countries, especially during wartime, when it becomes extremely necessary to pay the bills. Very high tax rates are effectively equivalent to confiscating property.

I think these networks earned a lot of money mostly by accident. They weren’t trying to earn that much money. That should tell you that you shouldn’t interpret periods of high profit as evidence that they could only do it once and will never be able to do it again.

What is that signal? They say, “You showed us your income. The cards were revealed. Now we know you can only earn this amount, and even then only on days when the casino is extremely active.” That’s the wrong way to understand L1s. If Ethereum had tried to monetize in 2021 and was now experiencing failures, then yes, you would be right. I would agree with you. We would really be seeing that L1s simply can’t monetize.

But again, why don’t they act according to Justin’s script, Santiago? I don’t think he gets enough credit. He really is a businessman. I believe he’s a wonderful businessman. Cities are businesses. They need to run as businesses. Otherwise, the bondholders are knocking at your door and will destroy you—unless you’re the United States.

Do you think we run the US government as a business?

Besides, that’s an unfair comparison, because the United States is a global hegemon. Every other country—Greece, Cyprus, and every other country—manages itself in its own way.

Which countries run themselves that way? Wait a minute. Are you saying that Ethereum is essentially the United States? Is that what you have in mind?

Could you give me an example of Singapore, which differs from the United States? Obviously, cities are jumping around here and there.

Look, this isn’t the dominant player you’re talking about. This is the United States. Then why invest in Monad? Will Monad be like the Bahamas, or what?

Coming back to this idea, let me give you the context very quickly. Before we go further, it would be fair if I asked you to respond, just so we can be on the same wavelength. If you were given $100 million in liquid markets, how would you want it distributed?

I would buy a business that could become more efficient because of this technology and generate profits. It’s very simple.

So you’re not buying crypto?

I would buy some crypto assets. If you reject venture-capital investments, I would buy something. But that’s not financial advice.

Returning to my thesis, I’ll publish this next Monday. I work with Blockworks; they do phenomenal work. I think it will be useful to observe this and find correlations. You’ll see things like annualized revenue growth.

I’m looking at Hyperliquid, for example. I’m looking at circulating supply and market capitalization, because everyone has different inflation curves. The data can therefore be normalized, but specifically based on circulating supply.

Let’s go through the list. Hyperliquid has an $8 billion market capitalization. In the last 12 months, it generated $780 million in fees. It’s trading at 10 times revenue. I have concerns about whether that trading activity will persist, because if the macroeconomy goes to hell, the casino will be empty.

So I would rather pay 10 times revenue than 380 times revenue. I wouldn’t hold any ETH. I think ETH is completely burned out. It will never reach its historical high again, like Cisco stock. I don’t want to own it. It’s fundamentally broken. I haven’t owned it for the last 4 or 5 years. It’s simply not what I think is viable.

Most of the value is accruing to L2s. But let’s go through the list. I’m looking at Ethena, which is trading at a valuation of $1.8 billion, with $7.5 billion in total supply, but $1.8 billion circulating. It generated $430 million in revenue and is trading at 4 times revenue. Amazon traded at 4 times revenue in its time.

This is the fastest on-chain credit fund that can scale. I think crypto is very attractive to liquidity. As Global Open said it beautifully in your post, money wants to be free. People will come to crypto. You want to be on the right side of that curve, because TVL will definitely grow.

The question is whether Ethereum is going to capture that revenue. Ethena will capture it. By the way, rates are decreasing. Ethena is very well positioned because, theoretically, you’re playing on the growth of risky assets. Unlike Circle, which has now fallen back to its IPO price because of its sensitivity to lower interest rates, Ethena actually has the opposite exposure. Funding rates increase when people want to hold long positions in risky assets.

So for me, from a macrostructural point of view, this is very compelling. I was a long-time investor in DeFi. I continue to believe that, at some point, the market matures. I’m trying to say that the last 10 years of investment in infrastructure were a phenomenal deal. The next 10 years are about implementation.

Carlota Perez—I don’t need to tell you this, but to simplify it: we invested $100 billion in L1s, and there isn’t enough demand in the market to absorb those tokens. The market is not stupid. It woke up and said, “I don’t want to buy your token at a valuation of $2 billion, $3 billion, $4 billion, or $10 billion. I might consider buying something at a more reasonable price.” And that’s good.

In the last 2.5 years, it generated—I don’t have the exact numbers I work with—but with Pump, I have to make a complete disclosure: I was a seed investor in Pump. Its market capitalization is $1.6 billion. It generated $650 million in fees, so it’s trading at 2.5 times revenue.

However, the reason I’m being very careful, and the whole reason I started this discussion, is that it was phenomenal to see people engage. I think it raises the level of discourse. Why am I revising my thesis? I’m still very optimistic about this technology. I’m revising my thesis because, first, I don’t think I have enough patience. Second, I have concerns about the macroeconomy, since we’re in the late stages of the cycle.

Of course, it raises the question: have we solved the problem of block space? We’ve made incredible improvements in infrastructure and scaling. That is no longer the problem. Now this forces you to ask: where is the demand? Where will it come from? Where are these skyscrapers being built? Where is all this activity?

And by the way, if it is built, the largest part of the value will go to the developer and the owner of the land, not to the government that taxes the landowner.

Everything you’re describing is true, until the government decides to intervene and start taxing things. If you look at the US government, it earns incredible amounts of money. Whatever it is—33% as the top tax rate, or whatever the average is—33% is the fully loaded tax rate.

The US government is operating at scale. This is more linear growth. It is not growing exponentially, and this is not Singapore, a developmental state that is trying to stimulate ever more capital formation and the creation of ever more companies.

Everything you see on the internet today is based on the assumption that we’re at an early stage. If you don’t believe that we’re at an early stage—if you think we’re late, that everything is already done, and that further growth will only be linear—then the correct solution is to raise fees and monetize as much as possible. Right?

Mainly, if you know the Laffer curve, the Laffer curve is essentially a method of adjusting taxes so that they are high enough but don’t force people to avoid paying taxes, leave the country, or emigrate. That optimal point of taxation describes what Santiago wants: the optimal point of taxation for all these networks.

If all of them were taxed optimally, you would say, “Great. Now, finally, we can get optimal income from all these networks. Now, finally, they won’t waste our time or force us to pay these incredible P/E ratios.”

I think California and Santiago wanted to maximize the wrong thing.

What do you mean, “understood” wrong?

Well, they went a little too far, and everyone went to Miami.

No, we didn’t. That’s absolutely not true. Everyone went to Miami. I’m still here.

You know what? By the way, most of the capital in California and New York is still there. Take Ken Griffin, for example. What percentage of Ken Griffin’s capital was from Illinois—Chicago? Maybe Illinois is another story, right?

Illinois doesn’t have the same protective moat as New York or California. I’ll tell you that for sure. So yes, that’s absolutely true. You can make the mistake of believing that you have a moat when you don’t. That’s a catastrophic mistake.

If you’re not Tron, let’s say you’re, you know, Sui, and you’re raising fees aggressively, then yes, people will riot. They’ll leave. They’ll say, “Great, I was here as a favor to you. I don’t really care about this. I didn’t even like it. I’m leaving.”

But if you’re Ethereum, you may get away with it, because there are many more hands.

As we saw when Ethereum had really high fees, activity remained; people continued to carry out transactions. Although not all the same people—it was mostly whales. But, of course, we know that in DeFi, as in the example of the billionaire who leaves Illinois, the super-rich create a greater part of the economic value, a greater part of the commissions, MEV, and everything else.

Now, okay, let’s take a step back, because time is running out and we have been talking for a long time. I want to try somehow to summarize. I think there is much that we agree on, right? We agree on many things regarding our understanding of the mental model of these networks: how they actually earn money when they earn it, and the answer to the question, “Are these things expensive in terms of price-to-sales or price-to-profit?” Of course, they’re expensive.

The question is not profits or income. The question is future growth. Markets look to the future. They look ahead. If you see that this is essentially nothing, simply a bloated bubble, entertainment, and more or less an eternal “player versus player,” and that there will not be exponential growth of assets in a network that expands—if this is one of the largest technological trends you will witness in your life, when you look back at everything, what do you think you will say?

Will you say, “God, this was so exciting. I thought that was going to happen, but it turned out to be a casino”? Or will you say, “Wow, I had the possibility to watch from the front row as everyone’s finances became digital and went online on permissionless blockchains that we collectively own”?

Okay, I think that’s exactly what we’ll see. In fact, I feel we’ve already seen the first act of this play. I didn’t expect us to go this far, as we have already arrived, and I don’t see any obstacles. You talked about Tempo, you talked about Wells Fargo, and all these other groups that are coming to the network. If you had told me this when I just started working in crypto, I would have laughed at you. But here it is. We are here now.

So it seems we have come too far to now say that this is probably the end. So let me just answer.

Please.

100%. I’m just like you. I’m on the front line. I believe in it. I believe in exponential growth, even if the brain cannot understand that this technology is going to open up. We are going to revolutionize capital markets. We are going to revolutionize entire industries. You see it today.

Western Union, the company I constantly talk about, decided to go to stablecoins. So sometimes Ethereum drops, or Solana drops, and you understand what I’m talking about: the type of value capture.

Let me put it this way. I have a question for you. I asked a friend, one of your partners, Rob, and even argued with him. What demonstrates the best results: Solana or Western Union?

Western Union.

Do you know why? Because it traded at a P/E ratio of 4. And Solana, I don’t know, 100 times more. Therefore, again, you love it—you just load up on Western Union shares. Bet on P/E. I have. And I won the bet with Rob.

I have my career on this. I mean, I’m rambling here, but I’m betting my money and career because I fundamentally believe that this industry will be explosive. But we need to deal with our own affairs.

I believe that value will accumulate not to infrastructure, but rather to aggregations of users. This does not mean that L1 networks have no place in this equation of value. This does not mean that there will be no value capture.

I fundamentally do not agree with your thesis about Ethereum being like the United States. I see no convincing signs that Ethereum positions itself as the United States, as a protective asset. It is simply fundamentally not that. You can consider this from different angles, but this is simply not true. It is so fragmented. It’s a federation. The states generate more income than the federal government.

To your question of whether this will change: perhaps not. Ethereum is just a community of developers. I don’t know what that will lead to, and I don’t want to risk my own money until it is resolved.

When that happens, I’ll see the signs too. I can guess what the future will look like. I think we can agree that stablecoins are one of the most important, if not the main, “Trojan horse” of this industry.

Back to Tron: Tron holds 35% of all stablecoins in circulation. There is a reason USDT dominates. Justin was smart enough to satisfy demand. He did the hard work: convincing people and recruiting them in Hong Kong and Africa.

Have you seen this? In the Hong Kong market, quotes are in USDT; in Argentina, in USDT. Why? Because Justin was there with Tron. And I think that’s why he can hold an advantage in monetizing his users, because user behavior never changes. Even as technology has changed our lives, user behavior never changes.

Why? Here’s the reason MetaMask is so popular and earns money: users pay for convenience. USDT has brand power that USDC may not have. I give some credit to Tron for this.

That’s why, in my opinion, Justin from Tron isn’t in a hurry to raise commissions because, as you mentioned with the Laffer curve, he says, “Hey, listen. Are my users really going to be worried?” No, dude. They love USDT. They love digital money. So, yeah, Tron.

To be clear, users do take this into account. Users really care about what they pay in commissions—$2 or $3. There is always a certain proportion of people sensitive to elasticity of demand. I would say that applies to those who want to have a digital dollar.

Allow me to ask you about this: are you ready for a decrease in the market share of stablecoin transaction volume?

It’s a trick question, because if you have more stablecoins, the total market share relative to Ethereum L1 or Ethereum L2—L1 in total—I think Tron—

You know, I’m not working to make such bets. I’m just saying that Ethereum is fully overrated. Narratives are very attractive, but ultimately I would say that Tron is more fairly valued than Ethereum.

The last thing I’ll say is that Cisco never recovered after its historical maximum, and then many companies appeared, such as Amazon, Facebook, and Instagram. Again, you didn’t answer my question about how you would invest my $100 million.

I think I’ll have to give it to someone else.

But, you know, I think you would want to invest in Amazon, Facebook, and Instagram. I don’t want to invest in Cisco or Linux.

Open source is phenomenal technology. It receives recognition. I just don’t think that if there is no profit and it doesn’t show up, I really want to pay. If Ethereum were rated more sensibly—for example, at 50 or 20 times—that would be another conversation. But it is rated as an ideal asset. You can buy a great asset at a terrible price.

By the way, returning to Uber and other e-commerce companies, don’t confuse a company that provides a great service but can’t monetize it. Uber may be an example, because we considered it during the Series B round when TPG invested. The unit economics were horrible. Apparently, the only reason those networks really earned money was record-low interest rates and venture capitalists subsidizing Uber en masse for expansion.

The difference between Uber and Ethereum—and I’ll tell you what would change my mind about my pessimism regarding L1—is this: I want to see Ethereum and other protocols demonstrate another type of activity that is not purely speculative, activity that is stable and not tied only to Jerome Powell and the M2 money supply.

This damn bet on liquidity, on people who come to the casino from time to time and lose everything—that liquidity is really bad, unlike Uber. Uber had somewhat distorted economics, but it took six or seven years in San Francisco and key cities to show profitability. Still, it was a great service. I don’t see that now.

So this story you’re talking about—that Ethereum is purely a casino—is much more about Solana and Hyperliquid than Ethereum, right? If you think about which Ethereum applications bring in all this income, it’s spot trading, lending, and stablecoins. That is happening on Ethereum. This is not a casino. Casinos don’t bring much Ethereum revenue, except for 2021, when the casinos were NFTs.

Yes. So the idea that Ethereum is mostly a casino is simply a false characterization. This is a criticism that many people put forward against Solana. Exactly—from there comes most of the MEV or REV in Solana. But that does not apply to Ethereum at all.

Now, okay, listen. I think we have expressed our arguments, and I don’t find it useful to walk in circles and review points that we have already made. But the last thing I can say is that I give due credit to Justin Sun. I completely agree with you: he did an enormous amount to promote stablecoins all over the world, in developing countries and elsewhere. This is largely the reason Tron succeeds in the way it does. To the extent that he monetizes Tron, I think that’s true.

I think he is overdoing it with Tron monetization, and I think he is doing it in a way that will ultimately lead to a loss of market share, because this always happens when you over-monetize a product. You can exhaust it earlier; you receive income faster because you think, “Hey, I don’t have much time to hold it.” And, as you aptly noted, Tempo is following him, right? All these other networks—you know, Arc, all these other players—are following him.

I think he is smart enough to know this. He understands that Tron’s monopoly is a temporary situation, because it is too big a market to keep to itself.

I think what he does is perhaps a rational reaction to events in this market. And this concerns both Justin and Inversion: regardless of whether you agree with the idea that all these L1s will become much bigger and that it is foolish to try to monetize them today, I think what you build and what Justin builds both depend on large-scale exponential growth from Ethereum, Solana, and stablecoins.

The history of the internet was not about, “You should have sold this and bought that.” The history of the internet was that everything grew at a frantic pace.

And yes, maybe it is true that Ethereum will never again reach its historic maxima. Personally, I doubt it. I don’t think Ethereum is like a network company or a router manufacturer. I think Ethereum is definitely something different—something different from any other financial asset that you or I have seen before.

The thought that, in 10 years, when the crypto industry is still tiny, when the tokenized volume of assets is still less than 1% of the M2 money supply, and when, outside of stablecoins, almost nothing is happening on-chain, we can already look at this and say, “We know exactly how this will unfold”—I think that is unreasonable.

So, as a final question, I’ll give each of you a few minutes to summarize and complete our discussion. By the way, this has been incredible. It has been a lot of fun. You guys really energize me.

Santiago, I would like to ask you for one of those vests when we finish. I’ll start with Haseeb, then Santiago. We are currently on the road for a team event. We finally received the merchandise, but we’ll have to send ours to the lead investor.

Yes, great. I’ll wear it in the next debate. The whole stream felt like a hidden Inversion show. I like it.

Okay, I’ll pass the word to you for your conclusions. Santiago, what, in your opinion, has to happen for the narrative and economics of layer-1 blockchains to increase by 10, 100, or 1,000 times? What do we need? Is it worth paying attention to? What should happen?

I think the answer is quite obvious. It seems to me that this whole discussion is an attempt to look at L1s more intellectually: delve into the table, figure out the price multiples, ask whether this is the presale price or the price-to-earnings ratio, and decide which analogy with corporations we should use.

The answer is simple: look at what is taking place in the networks. Watch the TVL. Look at the growth in volumes and how many assets and companies are coming online. Just look at how large-scale it becomes.

Is there any universal indicator for this? Not quite. The nearest thing is TVL, but that is more in the category of, “You see it and you understand.”

When someone drives $2 billion of TVL into a network for the sake of farming, we know that this cannot be counted the same way as long-term capital that came for a real purpose. But when we see that the capital in the network is getting bigger and is doing more things, that is a sign that exponential growth continues and is absorbing the world’s assets until money itself becomes on-chain.

Of course, if this does not happen, if we were mistaken, if all of this was a fiction and we simply fooled ourselves, then Santi will have been right. The question will become: Can we monetize what we have? Can we monetize it, raise commissions, and do what Justin Sun did, but for Ethereum and Solana?

I don’t think we are close to the moment when it is worth thinking about that, but such a moment may come. And if that happens, I will be very sad.

That would be very sad for Santi, too, because I don’t think any of us wins in that world. The L1 does not win, Ethena does not win, and no one wins in such a world.

Santi, I want to ask you: how, in your opinion, has the narrative developed so that these layer-1 blockchains are valued according to their true value? And what else do you want to add?

That is a great question. I think it would be reckless not to say that there is a whole mimetic component to why networks such as Ripple and Cardano have such large market caps. There are no tricks here. Everything is simple: you attract a lot of attention, and crypto has become, for many people outside the U.S., a way to bet on the growth of the Nasdaq and technology.

You know, crypto, as Haseeb noted, is exponential. It has enchanted and attracted the attention of this generation. It is an attractive narrative. Haseeb probably knows how to formulate it better than anyone. It is hard not to feel the crazy drive. I felt it, but my job is to preserve capital and earn money.

I would rewrite my thesis—and I do this all the time—if I saw stable network activity. There is a lot of volatility and fees in every network.

I also think crypto is simply a young industry, and we have focused on only one use case to prove this technology. But I want to see a real economy, real GDP on the network. How do we do it? We call it Inversion.

We want to attract real business activity. The simple reason why I founded Inversion is that if we do not take this seriously for 4 years, who are we? We will be blamed for the fact that most fees, including Ethereum’s, come only from trading on DEXs and trading these altcoins and meme coins.

Look, I have nothing against that. Speculation attracts attention and is a harbinger of every technological revolution. I am not here to argue about it. I have changed my mind about this. I have held meme coins, and that is different. It proves that the technology is useful.

But at some point, the music stops. I think the worst problem for an investor is the belief that “this time, everything will be different.”

It is useful to look back at some of the companies we talk about when we say, “It’s like Amazon, dude.” Believe it. Believe it, dude. It is simple. An exponential will happen.

Listen, there was no market. Amazon became profitable 4 years after establishment. Yes, you successfully rode that wave of e-commerce and earned a lot of money, but the stock never traded at more than 28 times sales.

You have to sit and think: “At what point are we going to…” I just won’t. I am not going to do this.

By the way, I can absolutely be wrong. I have been terribly wrong before, assuming that certain protocols, stablecoins, or certain memetic forces around Cardano would work. I cannot explain it, and I am not going to invest in it.

I hope that if someone is kind enough to take my $100 million, they will not invest it in Cardano. But maybe that is the correct or incorrect way to invest in this industry. I think we can do a lot more.

In 4 years, we will not be able to blame bandwidth. We will not be able to blame fees. We will not be able to blame regulators. And at that moment, I think we will find ourselves in a difficult situation.

We will find ourselves in a really tough situation, because everyone around us will say, “What the hell have you built? You invested $100 billion, and this is not useful at all, dude. We have 40 million active users. ChatGPT has 800 million of them.”

That is the problem. If I start to see real activity, such as Western Union pilots—and, interestingly, Stripe is doing something of its own—I think many companies will start using crypto because they can cut costs faster than they can succeed with AI in 12 months.

But someone has to convince them. And I don’t think Ethereum is doing that. Ethereum has a terrible strategy for entering the market. This is a real problem that worries me.

There is no director of marketing at Ethereum, and this definitely is not Tom Lee calling corporations and saying, “You have to start using this technology.”

You can see this in the implementations. BlackRock has somehow ended up across many different chains. Circle has deployed on Tempo. Everything is very fragmented.

There is no “U.S. crypto,” and I don’t think you will ever see a monopoly. Tron is definitely not a monopoly. Ethereum is definitely not a monopoly. It is extremely fragmented.

Amazon is a monopoly. I saw this once, right at the beginning. It was simple and fascinating. Therefore, I would be careful and remain aware of how wrong I can be.

I think these valuations are adjusting, and that is good. It is part of growing up. I think more value will accrue to applications and to the people who control users.

Sorry, just a brief point. I tried to get a reply through ChatGPT and Claude. In 2004, Amazon traded at a P/E ratio of 630. I’m talking about price-to-sales.

I know. I’m talking about P/E.

In any case, we can leave it there.

I mean, I think the correct indicator for Amazon’s valuation was price-to-sales because it was investing very aggressively.

But if you look at this—and I’ll publish it on Monday on the Curve—maintenance, then wallets are not directly related to users. These are draining protocols. It seems as if everyone is farming airdrops, and there is no real product behind them, so it is all hired capital.

I understand that there is some delay and that the protocol has more TVL. A protocol traded at an estimated $3 billion valuation? That gets my attention. I have no interest.

To buy something that trades at 380 times its price-to-sales ratio, when a recession begins, is something I have no interest in. Boy, how fast that income will dry up. I don't think you want to be on the other side of that trade.

I like it. I will say there is a certain irony that, at one point, we agree: ETH sucks, and that's great.

But I—wait, I don't agree. You nodded your head.

I will say it was cool. ETH is great. ETH is great. This is just a terrible investment.

Yes. One more hour. Damn it. This is cool. I appreciate that you guys were open and respectful, but gave real fire.

Santiago, it's not me. I know. This story is just great. You see the problem and say, “Damn it. I will go there. I will take it on. I am this. I will build it.”

I think I speak on behalf of all of us when I say that your optimism is very appreciated. Good luck. Isn't it respectful to people who take risks with their own money? I think it's worth giving them their due.

It seems that this is the main thesis of what I do with Stream and with Counterparty, which I built in crypto media. We must respect those who take risks, provide them with the playground, and become the change we want to see.

And that's why I want to continue. Of course, thank you, because this is not easy to argue about something like this.

But he has completely hedged his bets, dude. If 20% of his portfolio is in Ethereum, then he is invested in Ethereum. He is a lead investor. So this is Inversion. And, you know, him leading the round in Inversion is reasonable, because it's the right hedge in case his bet on ETH is not justified.

Okay, let me say this. First, thank you, Santi, for this, because I know what you told me before the show, which is that it might be a little strange to argue with your own lead investor. But I think we both have a big ego, and we also sincerely believe what we are saying.

I have great respect for everything you do with Inversion. That's why we invested, and I think the vision that you are trying to sell is a big, ambitious goal. That's one of the reasons I like it so much.

This also echoes the idea that we should move more GDP onto blockchains. I'm totally with this. I agree. In my opinion, this is consistent with what other networks are trying to do.

I see and respect everything you are saying and preaching, because I know you are really into this. You believe in it.

Amen, brother. This is wonderful.

Thank you to both of you for choosing Thread Guy to moderate our discussion. We will wait for the second part, when ETH will be worth $10,000 or zero. In any case, this will happen again. Let's repeat it for $10,000. If you're in chat watching Twitch, there's a poll there: who do you think won? I'll share the results afterward. Thank you for your time. See you later.