How value accrues onchain

Transcript

GM GM welcome to web3 Academy your one trusted source to capitalize on the next big phase of the internet don't get caught in the hype cycle I'm jird joined by my co-host Kyle reidhead and we believe that onchain value acral is going to chain your world that's why we're carving a path for doers to confidently build and invest in web 3 what up my friends I'm excited to be here and talk all about onchain value C something we've been working on a lot mainly in our Pro reports and it's time to present it further in the podcast where does value acrew on chain that's what today's episode is all about and I just want to highlight a couple of numbers before we jump into this did you

know that as a result of friendch set over $700,000 has in fees have been paid to Bas from that Bas has profited $500,000 now these numbers are actually from a month ago when we wrote our frch report these numbers are more than double that now so as a result of one app on an L2 they have made likely over a million dollar in profit wow and we can see all of that on chain did you know when we talk about Unis swap as a result of all the activity of Unis swap 1.6 just shy of 1.6 billion of ethereum has been burned and

that same number 1.6 billion in eth has been paid to eth stakers wow those are big numbers now how do we know those numbers we know those numbers because of onchain value acral we know them because we can see these the way value acrs on chain from the application layer all the way down to the execution layer if you understand this you're going to have more convictions in your Investments and how you allocate your capital in web 3 and you're also going to be able to make better decisions as a builder as an entrepreneur as a Creator in terms of which chains you spend your time on and

which applications you spend your time on so these are very important to understand and at web3 Academy we have a couple of key Concepts that really form our hypothesis and our conviction for web 3 why we believe that this is the next big phase of the internet we talk a lot about verify don't trust eyes on chain always very important we always talk about don't get caught in the hype cycle we're focused on sustainable business models here at web3 Academy we believe that onchain is the next online we talked last week about speculation plus as a key concept for builders in the space and now this week we're

breaking down on chain value acral about a month ago when we wrote our first first on chain value equal report focused on friend Tech and then last week we wrote a report focused on Unis swap so if you haven't gone and read those you're going to want to go read those but you want to listen to this episode first because it's really going to give you the solid foundation of understanding this core concept that is so so important in web 3 and unlike anything in web 2 basically doesn't really exist and we'll explain why it doesn't exist and why it's different in blockchain but before we jump in there is one thing happening onchain right now that I can tell you that is way better than the on the online world and that is

the onchain gift shop which we just launched last Friday so right now if you go and you collect or follow if youall use the web two term if you follow us on lster we'll put the link in the show notes it's free you don't need a lens handle to do it and if you go do that then you can enter the onchain gift shop you can get access access and once you're in the onchain gift shop you can win prizes this week and we've got 20 mystery boxes we've got three t-shirts we've got a oneon-one call with me where I would consult you on your business and so much more in the weekly raffle also if you collect our newsletter you can

get another entry into the raffle and you can get an entry into our weekly cash prize where you could just win straight up cash because let's be real everyone deserves a w when you transact onchain so make sure you check out the onchain gift shop link is in the show notes super excited we got more weeks coming of more prizes and more stuff that you can win make sure you check it out you deserve a W for your onchain activity okay let's jump into how do we understand how do we know that $1.6 billion went towards ethereum stakers as a result of Unis swap let's explain and break that all down but first we're just going to take a minute to hear from our sponsor modern newsletters are built on

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going to give you all the credit although maybe somebody else came up with it you can tell us let's just start at the top explain to our listeners who don't understand or don't know what is onchain and value acrel what what is it how does it work yeah I mean definitely I don't think I was the inventor of this I think we've just that went through Academy done a good job of creating nice infographics and images to help people wrap their heads around this whole idea but people have definitely been talking about this before me if you're listening on the podcast right now you're not watching on YouTube we've got an image up that we've created you might have seen our Twitter before but it's called value CR web 3 and it basically breaks down the layers of blockchain and so the starting layer the top layer is sort of

the application layer right you could think of this like onchain consumer apps like fch you could think of this like defi things like Unis Swap and a etc you could think of this like lens protocol or even use cases doesn't have to be necessarily apps but use cases like pfps right it's not really an app but it's something we do on chain stable coins are another application layer use case all in-game assets identity all these things are happening on top of blockchains right they create transactions there's volume that's happening and so this is sort of the application layer where users interact and value is created now what happens is in order to transact and move things on chain you have to pay fees right and so that's like the next layer that's

underneath which previous to l2s coming along there was just sort of two layers there was like a use case we didn't have many back then uh but there was just a use case and then you paid fees to ethereum Salon or like whatever L1 blockchain and so you could think of those as the two layers it's like a settlement layer settling those transactions and then the application layer and so anything that happened in the application layer there was always some sort of value that was occurring back to these l1s to facilitate those transactions but now we have sort of another layer that's sandwiched in between those which is the execution layer settlement layers are typically at least in ethereum's case quite expensive because they're focused around like decentralization we're not going to get fully into that and so what we've had to create was another layer in between

where would execute the transactions for much cheaper and faster and then it would ultimately all settle down the on the layer one and so that gives us sort of our three layers we have application layer we have the execution layer which is your l2s optimism arbitr immutable base eventually polygon as it makes its shift and then you have the settlement layer underneath which is the L1 and so what happens is for every action that happens on the application layer there is value that's created that moves to the l2s and then there's some value that then moves all all the way down to the l1s and so there's always been this discussion of well where is all the value going to acrew who's going to make it all is it the ethereum is it the L1 is it these l2s is most of the value going to remain up on top and so finally

this year we've had our ability to actually look at that and we still don't know like the answers of where all the value is going to crew yet but we're able to finally break it down which is really cool and so if we think of like when we first started Pro one of the things that I always wanted and I always compared to was well we have these like quarterly reports for companies right and so this is cool right I guess sort of like every quarter the company comes out says hey here's how much money we've made here's what our expenses are Etc and so I was like oh when we create Pro like we could do that but we can do it anytime we want we don't have to wait for quarterly and so like for everything that's on chain you can see the revenues

that companies have made you can see the costs they have in terms of what they're paying to the chain to facilitate transactions you can see how much creators are making in the sense of friendtech will share that and so like you can start to see a lot lot of the value that's flowing within the app itself now not everything is onchain we don't know how much they're paying employees we don't know those kind of things but we can see what revenues were generated what some expenses are and then going down the protocol area we can see all of it how much is getting paid to an L2 what is an L2 paying in fees to ethereum and so we can just start to understand a lot of Concepts and a start of like where the value and how the value is actually uring across different

applications so it's a whole different world we couldn't really do this with trafi but it's quite interesting to see this happening now and be able to actually look at it the first time you look at one of these charts one of these visuals that we've made it's like an aha moment for you because there is nothing like this in web 2 where you could see value acre in this way and it also points out the way that web 3 is different than web 2 we're building in a composable manner where we are building on top of things that are already built because it's permission list Tech you couldn't do that in the web 2 world so it opens up so many new

possibilities Kai in your mind before we jump into like all the possibilities that this opens up and like why this matters to you and how this helps you be a better investor why does value acrel in Block in blockchain what is different what is happening that allows this to happen yeah I mean so first I would say like in web 2 you could build there was composability like for for example the internet is a prot and we all have built on the internet we all use the internet right you could think of ethereum or or you know any blockchain as something similar it's just a protocol that you can build on top of and it has the use case of when things are on chain they can move around frictionlessly right value can move around friction frictionlessly and permissionless that's not possible on the protocol layers of the internet we

had to build in a new protocol to allow for uh Financial assets to move around right um and so whereas the internet lets information move around blockchains let value move around right frictionlessly now we didn't have this with the internet for example Because the Internet doesn't have a token you can't own the internet no one owns it so no money is created there I can't hold you know whatever the Internet Protocol like I can't hold that token and then make value based off anyone who builds on it and does things with it the internet just is there and exists and that's kind of it but blockchain's a little bit different we need it to be more decentralized we need to be more secure and so we needed a sort of different form of allowing this protocol to exist right

and so that's where tokens came along and so a layer of blockchain so the settlement layer let's say ethereum for example has eth the asset that goes along with it it's a native token that goes along with this protocol and it's what allows the protocol to exist in function right so for ethereum to exist it must have eth and for ethereum to exist it must have people staking eth right it's a proof of stake blockchain if there is no unstaking eth there is no security to ethereum and then ethereum is useless and none of these transactions will ever happen on there well they can't happen without that right we have this like symbiotic relationship between these holders of eth the token and the users and applications and everything that are on top of of ethereum whereby like I hold

this token and I stake it and now I can earn from it and it's almost like a form of Ubi right Universal basic income we always talk about how web 3 like and blockchain provide equality anyone can own any thing right in terms of like the apps and stuff you still can't a lot of apps are still like open C you can't own but it's one of the biggest ones on in our space but you can own all the transactions that happen on openc you can own the protocol that facilitates those right and so I think that it would be like every user that owns the internet imagine they could make a percentage of everything that happens on the internet like you can't do that with blockchain now you can it's a mindblowing concept that I think I actually think it is when we have Ubi I

think it's going to come as a result of blockchains and in this form so it's just a cool way for anyone to own the kind of next phase of the internet which is very interesting to me it all happens because of a token so simple when you think about okay you have a protocol you can own a piece of that protocol and provide value to that protocol in the case of ethereum by staking it there's other ways to provide value to a protocol in the case of op you could provide governance right and as a result of that you can have value ACR to you without you doing any other action just being a part of the system well let me explain further like what we mean by this so

when any app has a transaction there are fees that are paid right those fees I guess if it's on top of a layer two those fees go to optimism arbitrum base like whatever the L2 is and then the L2 then bundles up those transactions sends it over to ethereum and takes x% of those fees and then has to pay ethereum for those fees what does ethereum do with that well it burns 50% of it at least sometimes 99% of it depending on the type of transaction and so just that burning of eth drives value to eth Holders because it's making the asset more scarce anything outside of what was burnt is going to stakers and so those who are staking now can earn a percent almost like a dividend of the stock of eth and so like a comparison sort of a

comparison to this but the only like closest thing I could say is like let's take Apple for example Apple has an app store that makes a ton ofy money right I mean they have many other ways that they make money too but like let's just take the App Store example because it's similar to ethereum but anytime payments are made on that app store Apple takes 30% of it okay and then Apple's like I don't know makes billions of dollars in profits per year if you own Apple stock it can go up and down just like eth can go up and down but then Apple also decides to pay dividends to the stockholders right I think it's like 0.5% so it's not much but they pay a little bit to stockholders and so you're basically that's value that's technically value cruel from things happening in the Apple ecosystem right

now it's done in a very permissioned way because in order for you to get stock of Apple well that's a permissioned share they could basically take those away at any point they wanted in order for people to use the app store that's all permissioned Apple decides everything and then like they don't have to give dividends they just have decided to do that internally the board has said hey we're going to do this for shareholders and then every quarter they give that share out it's all done manually by humans ethereum has you think of the same setup it has an app store essentially it's not exactly that but it's somewhat of an app store it makes revenues from fees okay whether that's from L2 blockchains whether it's just from use cases rate on ethereum and then through smart contracts through automation it just automatically takes

fees from every transaction and then it automatically Burns it and automatically spits it out and gives it to people who stake and so you have this like whole new way of value cruel of dividends of equity of the whole thing that we have in trafi except it's fully automated and fully permissionless which is just like mindblowing and I think the reason that this is cool and what we can start to look at is right now we've shown and we're gonna about we're about to show you like frch and how that value has accured to base and then to ethereum we also have one that's gone out on Unis swap these are just two apps let's think about the app store which has I don't know how many apps it has but Millions I believe now let's million yeah so let's think about when ethereum has millions

of apps being used on top of it they are all generating value to the l2s and then down to ethereum it's going to be one amazing to see that you know because we can actually look at it and create these images and watch it happen on chains like that's going to be really cool but then to help guide your investment thesis and where you're building Etc because you can watch where all the value is moving you just have never seen anything like it it's going to be really cool let's jump into friendch for those listening I'm going to pull up an image on screen but I'll describe it if you're listening if you're watching on YouTube you can see the image before I jump into the specific numbers here what really stands out to me when we talk about onchain value AC cruel is this is a

chart about friendtech but it could be as Kai just said when there's millions of apps this chart could be about any of those apps so yes it's a chart about frch but it's not about frch you know it's about understanding the layers of that support friendtech that are underneath frch that are being used in order to enable friendch to exist and that is a key differentiation for me because right now if you try to stay on top of every app every use case in blockchain and web 3 you go insane Kyle and I try to do it every week and we

struggle to do it there's so much happening right so I think that a lot of people in this space you can get burnt out if you come in and you're like oh I need to know all the apps all the use cases all the tools blah blah but you don't what you need to understand is onchain value acrel because if you understand onchain value acrel you don't even care if it's friend Tech if it's Stars Arena if it's postte if it's parallel the game if it's draft King rain makers you don't care about any of that you only care about how does value from these apps acrew down to the ler tws to the holders to the stakers and that simple concept allows you to

basically abstract away following every app and understanding every app and make easy investment decisions so that was a key unlock for me and to frame that it's like in the 90s A lot of people knew the internet was going to be successful but they didn't know what companies on the internet were successful and so a bunch of people invested in pets.com which went to zero some people also invested in Amazon and some people invested in Google but there was like you know if you look at after the dotcom crash not many of the tech companies actually made it on to go back to all-time highs right but the internet made it and that just continued to grow no matter what unfortunately at the time you could invest in that and so this is why if you've taken our investing master class I always talk about most of your

Investments should be in eth because it is the one thing that like if web 3 makes it eth makes it right because it is the king of all this right now right it doesn't matter what app makes it it doesn't matter what L2 makes it as long as any of them make it ethereum generates value it means that ethereum will continue to burn eth and stakers will continue to get paid right and so like that concept removes most risk out of this entire space if you just buy eth right because you don't have to pick the app that's going to win you don't even have to pick the L2 that's going to win it's all acre back to eth now we'll touch on these and look at some numbers to say like how much will acrew back there but ultimately like to make life easy you could just buy that and no

matter what you're going to be it's like investing in the internet back in the 90s ENT that's insane to think about that you could invest in the internet if you could do that why would you bother investing in the apps I mean sure you take a few take a few Flyers take a few risks maybe it hit maybe it doesn't but there's a sure thing that's available to you okay let's talk about some numbers on frch because I think there's some really interesting numbers here that tell a story but also show us what we can learn as a result of looking into onchain value acral so first I want to focus on the application layer and let me be clear these numbers are from August 10th to September 13th September 13th is when we wrote this report these numbers are a month old so you can

assume I mean with the rise of front Tech these numbers are probably double roughly well the cool thing is you actually don't have to assume you can just go to Dune and go to web3 academy Pro and you can watch the live dashboards and you check out our dashboard yeah never have so if we look at the application layer on the application layer of frch we have value acre to two stakeholders well two groups of stakeholders first value AC cruise to frch they take a fee on total trading volume they take 5% fee on all trading volume that has led as of this report that had led them to $7.5 million in Revenue a more upto-date number I

know it's over 20 m ion now I don't have the exact number though but over 20 million in revenue from two months of operations and we can see that we can see on chain that they have made revenue and we talked a bit about in last week's episode about how they did this using speculation plus as a key concept and they had fees on speculation and we think that's a great concept if you're looking for early stage Revenue in a business so you might want to go back and listen to that if you want to understand how they did that the the other important thing to see here is that as of the time of writing this report over $7.5 million do had gone to creators now that's to all creators but

because this is onchain we can even dive deeper into of that seven and a half million who did it go to and we can see that some of it went to different creators and how much each creator has made but here's the important thing is we can see how values AC crewing to the creators that are basically making this app exist obviously in web 2 we don't know we looked at X who is now providing value to creators on X we don't know how much each Creator is making we don't know how value is acing to them right which if you're a creator that might impact your decisions to which platforms you spend your time and your money on whereas the web three we can see that

which is awesome okay then we go to the protocol layer on the protocol layer couple numbers I want to highlight first number is BAS Bas is making big fees off of one app which is really what's incredible to realize bases made as of this report writing over $700,000 in fees now of those fees they have to pay out part of those fees to ethereum through the settlement and then they also have to pay part of their fees to the op Collective because base is built on the op stack so they don't take all 700,000 of that for profit but that's their revenue they take about 400 of that they take about 500,000 of it for profit so what is amazing to me to see

here is we only need a few apps to really make it and then value will acre right and this is a great example that is like one app has led to up-to-date numbers over a million dollar in fees have been paid to base as a result of one app in two months so you can imagine as Kyle said when there's millions of apps and maybe 90% of those apps are small but 10% of them are big and have millions of users well the value that's going to ACR to these layer 2s and to the l1s that support the settlement of these layer twos you're talking big big dollars yeah I think the thing that

stood out to me when I saw this image is there's like a dotted line box around the application layer then a dott line box around the protocol layer the protocol layer it's Revenue always and this will never change it makes its money from transactions so when you're looking at l2s when you're looking at l1s the number that matters is transactions we used to always look at tvl on blockchains that's actually pretty useless metric but that's what everyone's always done because we we're so used to defi since 2020 and so we always looked at tvl tvl actually is pretty IR relevant number I mean tvl is great in terms of like you need liquidity in one place and so like the more liquidity there total value locked like that app is probably going to be better um because there's more liquidity so it's cheaper Etc but ultimately it

doesn't matter for the revenues of the chain what matters is transactions and so if there are apps on chains that have lots of transactions that is really really bullish for that chain whether it's an L2 or an L1 it's all about transactions right in the case of ethereum and its l2s they're all profitable right every single L2 um every transaction is profitable for them because they just take you know x% of whatever the revenue they got from that fee they give it off to ethereum and now that that transaction itself is profitable which is great salana and others are not there yet because they don't have that sort of setup they need a lot more transactions to maybe eventually get profitable but right now they're not there they're inflating their currency more than they're burning it whereas ethereum is burning more than it's inflating although in the last

couple days not so much but uh long term that's what it's doing so that's the thing to understand the protocol it's all about transactions on the application side of it in at least in frex instance it's all about volume right so transactions don't impact the revenue that creators are making or that fch is making what matters is the volume of those transactions right meaning if you're a creator that your key is worth $100,000 now that doesn't exist on there but if it was one transaction is worth hell of a lot but if your key is worth $10 your transaction is not worth much right so it's all about volume and same with FR Tech Revenue they need volume because that's how they make their money this is the same as like Unis swap right

Unis swap takes a whatever it is 3% or whatever Z 3% on volume of trades on Unis swap transactions are not necessarily what the thing that matters so that's quite interesting although and so for when we first made this it's like oh okay it's volume for application laters and then transactions for protocol layer but then when I thought about it if you think of Zora their new model they're also transactions because they just take a set fee it's not a percent it's just a set fee on every single transaction or every single mint I guess and then same with paragraph which is our newsletter right when you collect an article one of our newsletters whether it's free or not they take a I don't know whatever it is like a tiny tiny fraction of a fee but

it's a set fee so it just matters on transactions so paragraph wants more transactions they're not necessarily caring about high volume transactions so there's sort of on the application side there's two ways you can make money and creators can make money which is either by volume and taking a percent or by like just transactions and taking a set fee what will be the best away no idea we'll see I mean volume obviously you can make a lot when we get to the unisoft one you'll see how much the LPS have made which is in the billions that's so far ahead of Zora and paragraph but those are also two new applications but anyway something to think about when you're building an app is you can either take revenues from volume or from transactions yeah it's great to point out those two levers that you have to play with as you're building

in the space let's move on to teased Unis swap there let's move on to Unis swap because these numbers are offs the charts in comparison to friend Tech Kai I've got the numbers up on screen here what stills out to you about these I mean so first the interesting thing about Unis swap is it's been around since 2018 okay so it's got the volumes of a bull run right which fch does not have although kind of looks like it to be fair considering those numbers in just one month so one Unis swap has what kind of volumes and numbers transactions users can happen during a bull run not just in a bare Market the other interesting thing about un swap is it's on eight different chains now the only ones we showed in our image here are the l2s so base optimism arbitrum and then

you have it also directly on ethereum and so we can start to compare how value acrs when there's an L2 versus when there's no L2 tough to compare this though because we're looking at all time from November 1st 2018 to like October 1st 2023 so the comparisons are are very weird but the interesting thing I think is a couple things that I've noticed when a transaction happens on ethereum so directly on the L1 there is the base fee that is burned right so you burn a certain amount and then the tip or the like extra on top of the base fee is what goes to stakers so in Unis swope's case here as Jay mentioned at the beginning of this episode $ 1.56 billion dollar have been burned and 1.6 uh billion dollars has gone to eth stakers so like about a 5050 right which

is quite interesting so great you're burning and you're paying to the stakers but what's interesting is if you look at the and actually You' have to go back to the FR tech one for this if we look at the amount that when an L2 is um paying its gas to ethereum L1 it's like 99% is burned of the eth and like 1% goes to stakers and that's because LTS don't necessarily need to do a tip or to pay the extra amount they have a their setup is different and so if we look at here and on the frch side things 254,000 was burned e but only was it like 500 bucks was paid to stakers so like it's very small and this is true of all apps on L2 so Unis Swap all of the fees that went

to stakers from l2s like from optimism from arbitrum from bass it's like next to nothing I think like from all transactions on Bas it's like for 50 bucks that I've gotone to e Staker so it's very low but then if it's directly on ethereum it's much higher because just the way the transaction is that was something that I was a little bit mindblown on I was like oh well that's a bit worrisome is the ethereum community actually like do they understand that and have they figured that out because that means like if you're only making like 0.1 when everyone moves to l2s and you're making like less than 1% on your stake are people actually incentivized to stake eth at this point like this could be a security issue now I'm sure

lots of transactions will still continue on ethereum L1 so like maybe it's all fine again this is so new we don't really know but that was an interesting finding for me so I'm not sure how that's going to play out but just something interesting to watch there's still tons of e getting burned so like overall I think it's fine but interesting to see that when it happened when our analyst first brought that I was like no this is wrong you need to go back and fix your numbers and he's like no no no this is right and I was like no there's no way I was like you're 100% wrong I'm 100% right and then he went back looked and he's like no you're 100% wrong I was like no way C you're never wrong what do you mean so anyway that was interesting and

then as I mentioned of Unis swap being part of the the bull run so the liquidity providers of Unis swap which is where the revenues come from from volume they've made 3.19 billion since the launch of Unis Swap and that's across all chains not just ethereum so that's pretty wild and pretty cool to see and then interestingly which I was also mind one of this and also told our aunt that he was wrong unisoft has made zero dollars I thought they were taking a cut it turns out they are not taking anything so that's also mind-blowing but again you wouldn't know this unless you're looking on chain so really interesting to see how does Unis swap have a business then if they're making zero dollar did you investment so unisoft yeah unisoft is raised I mean they have the most users

in the entire space they have billions of liquidity they have a a product with product Market fit and so I think what they said was their goal was let's get as much liquidity as we possibly can and so to do that let's not take any fees ourselves like other decentralized exchanges probably have taken a cut so meaning if you're a liquidity provider you're going to make the most profits if you use uniswap versus anything else and it worked and over the last few years Unis swap has like a 70% market share even to to this date even though it's been around for five years and there's hundreds of dexes now so it's worked and then the way that unisoft has survived well two ways one is investment they've raised like I think over half a billion dollars uh in total or something close to that and then also they launched a

token so they launched the unit token to help decentralize their protocol Unis swaps protocol and so of course they aird dropped a bunch to a bunch of the users but they also have whatever 20 30% of the tokens whatever it is which I think the market cap of Unis swap is in the billions so they also made a ton of money on that as well the thing that really stands out to me about both of these charts is how value is always accruing to ethereum that is such a obvious thing that you see right away if you're looking at the Unis swap chart right now we have base op and arbitrum three l2s that we are showing on this chart and base over $200,000 in value occurring to them 35,000 to

ethereum op over 11 million occurring to them 7 million to ethereum arbitrum over 9 million uring to them almost four million to ethereum so you have this constant acrel to the settlement layer which as you said Kai is not going anywhere is a core part it's the equivalent of investing in the future of the internet yeah it's really I mean the other cool thing of this is if you go up to to the FR or go back to the frch one that I don't think we mentioned is although frch is on base and it's occurring value to ethereum optimism is actually taking a little bit of Revenue here too in the sense of frch it was $72,000 in that first month of ftech

launching and that's because Bas actually pays 15% of its Revenue over to optimism now why does it do that another form of value acral here is that optimism obviously has its op stack where anyone can build a layer two using their technology and so you could just Fork it and do that and not pay anything but optimism is building more things like Bridges and like layers to make this all better and improve the technology and if you want to be part of that you have to pay into that fee you have to pay a certain fee over to optimism and so again anyone that is like lower on the tech stack ethereum is the lowest and so value from everything acrs there optimism is quite low and it's it's actually lower than many other

l2s like optimism is below base in this instance right Bas uses the stack of optimism which then uses ethereum and so like Bas is paying ethereum but it's also paying optimism and so this is the protocol sync thesis that we've talked I talked about in The Rabbit Hole course which could be another concept that probably we should talk here but really matters in the onchain value C is protocol sync thesis is this the most decentralized technologies will always sync to the bottom and what that means is apps will build on top of the things that are decentralized apps aren't building on top of Twitter or Facebook anymore they used to and then they realized oh they can get rugged and they can change the rules of the game they can block their apis and then your whole business is screwed right but if it's something decentralized like ethereum

well then you want to build on top of that because you know the rules of the game can't change and so the most decentralized protocols will syn to the bottom people will build on top if those decentralized protocols have a token value will always acre there optimism has a token and value it's becoming a decentralized protocol that it's building more things value is acur there even Unis swap it's part of the application layer but it is a decentralized protocol that's governed by all the users there will be apps and things that are built on top of Unis swop there already is and so I'm sure some sort of values will ACR to that and so you got to always think of like what are the protocols that are the most decentralized that are sinking to the bottom of the tech stack and if those sync lower in the tech stack like

ethereum and they have a token that people need to pay to use their thing then it's going to generate significant revenues and so I think that's a really good concept to try to like understand when you're investing in this space the other thing that's really cool that we can look at is we're just talking about two applications right now we're talking about Unis Swap and we're talking about friend Tech but obviously there's many more applications built on top of ethereum and if you go to ultrasound. money you can look at the burn of all of these applications so I've got it up on screen right now Kai walk us through how this works and what what what you're seeing

as a result of looking at Ultra sale money yeah this is cool so when we talked about imine what happens when there's millions of apps and millions of use cases I mean there's already a hell of a lot of apps and use cases on ethereum l2s and so you can see a burn leaderboard here and you can go by any time frame right now Jay has the 7day and you can see that the the app or the use case that's burned the most eth in the last seven days is unis Swap and it's it's burned 950,000 ethereum so almost $2 million us oh sry $950,000 US dollars of ethereum right good point so almost a million dollars and then second to that is unisat V2 so actually the second version of uniso which is funny the third one is just people moving eth so eth transfers so it's not even a use

case of like any application whatsoever it's actually just people buying and selling eth or trading eth that's burned half a million dollars in the last seven days stable coins I always talk about this how non-speculative use cases are actually going to be a very bullish thing for this space the fourth highest use case on ethereum that burns eth is tether right which is the usdt so people just interacting and using tether on ethereum is burning $430,000 worth of eth every seven days that's insane and then you have people are like well l2s are bad for ethereum right they take away from those gas fees but look at what's fourth and or what's Fifth and what's sixth ZK sync starkware two l2s using zks that are burning over

$243 and $300,000 of uh US dollars of eth every single seven days if you went to maybe 30 and 60 I bet you Bas would be up there optimism would be up there Etc and then you have abside like coin tool I don't even know what that is but it's one you have banana gun which is like a telegram bot right which is number eight so like it's interesting that you have all these different use cases and they're all doing the same thing they're all generating value back to ethereum and they actually categorize it here which is cool you have it categorized in in Industries so you have dii l2s nfts miscellaneous transfers and then MV stuff and they all can categorize which Industries are burning more eth which is quite interesting to see as well if if you're sitting there listening you're like wow this this

episode is mad nerdy it's because it is like this is serious nerd stuff but if you take the time to understand these Core Concepts it will push you way ahead of the curve this is how you stay ahead of the curve this is how you capitalize on the opportunity of web 3 nobody gets this stuff not nobody a very very small percent of people understand this and this is why when people come in the space they're like well what's the new best thing right even if it doesn't crew any value and look value cruel in a bull market this stuff might not matter as much it's all narratives right anything can go up a billion percent in a bull market but it's longterm what's sustainable what's

going to stick around and it's understanding this value Cur that's really really going to help you in long term in this in this game let's talk about why this matters before we wrap up here Kai in your mind how does this help you make better investment decisions understanding onchain value acrel so for me it's I mean whenever you invest in anything you want to understand the bottom line you want to understand the revenues the expenses right you want to understand the supply and the demand this is what everyone has done for forever in the web 2 world right not even web two but just in the equities world is trying to understand how much money are these companies making how much are they spending how much profit do they have and then how much can I make from that and you can do that live anytime you

want real time and in the form of blockchains anyway specifically ethereum you just have this whole like Network that's being built on top of it right and that's where most of the users are right now and this is not to take away from any other chain out there but what I'm saying is that one app like let's say FR Tech takes off a bunch of liquidity goes onto base bunch of users go onto base you now know you have liquidity there you have a bunch of transactions you have a bunch of users there and so you have Network effects so so more and more things that launch on that L2 makes that L2 more useful right and so because there's people don't have to bridge if they're already on a base if you launch your app on Bas well that makes more sense because there's already

a bunch of users there they already know how to use Bas they already have money there and so now they can easily go from that app to your app so you have these Network effects and this is what's being built in ethereum over the last seven years it's sort of network effects on ethereum and what's great is these Network effects don't just drive more Builders and more users it also drives more value to ethereum right and so again it's you go back to the App Store comparison of like more users that have iPhones right more developers that are building in the App Store it makes that thing more valuable except that thing was always more valuable just to Steve Jobs and the crew over at Apple right until they went public and like you get your little 05% dividend whatever and this is the first time where those n

network effects can be that value can acrude to anyone in the world right and since day one you could have done this since day one whereas like you didn't have to wait 20 years for it to become legit and go public you could do it today even when no one really knows about it and so like that opportunity is just massive and so like then you kept saying like building conviction I think it's being able to see that eth is actually deflationary and it's truly profitable and sustainable has made like if that wasn't true I would have a lot of doubts about this space not gonna lie because there's as much as it has so much promise a lot of it is a pones and then the fact that we have one technology that's not a Ponzi is is quite interesting to me and by the way

like salana is not profitable and so like we don't often talk about salana much in that regard but it it can be and I think it probably will be so I'm not saying that son is bad by it means it has the same thing as eth right Network effects if people are on its chain it makes gas fees it burns soul to which a lot of people don't talk about its inflation is way too high at the moment but that will change it will get better and it will have the same sustainability like ethereum does eventually I think we'll see to me that this is even a thing that exists is super super exciting and so it helps guide Investments it also helps guide you know as a builder it helps you guide where you want to launch your applications right where are the users where's the

liquidity where's the value uring to and then that's a big a big aspect as well yeah for me being an investor is a lot of work and we all have full-time jobs and we're all freaking busy my investment thesis used to be well I'm going to pick the 10 to 100 X's right and that's what I try to do in last bull run with nfts you know what it's really freaking hard it is very hard to pick those unicorns you're most of the time you're going to fail so and also you have to be a very active Trader you got to flip constantly you got to follow every project and you

gotta you have to take advantage of hype and then get out right whereas for me my invest plan is long-term keep it simple right and so knowing onchain of Val value acrel allows me to say okay which are the chains that have the most value occurring to them great I'm going to invest in those chains as Kai said because of network effects and I don't need to go pick the next nft project or the game or the identity platform or the web3 social platform I don't need to know which one of those is going to make it because that's hard so just that

ability to keep it simple for me gives me just a a sigh of relief that I don't have to follow and pick the winners and then there's like there's two other things I think are really important one it's not like buying eth is like a boring asset right like maybe in the crypto terms but like the thing still goes up 10 20x in a bull market you know it went from like a 100 bucks to like 5,000 in the last cycle compare that to any other asset in the world and that's still insane and so like did was that not fine or did you have to get the THX right which like on whatever the heck that the axi infinity or whatever like but who knew that that was going to happen and then the other part of it is like okay so you can get your 10 to 20x

in a cycle on eth which is I mean is amazing but also you have the value c meaning you're getting a dividend right automatically stream to you every second of your life you are making between three and six% on your Holdings and you can see it happening on chain with every single interaction that happens on friendtech and on Unis Swap and whatever and so like the last year and a half basically no one has made any money right like if you bought at three four 5,000 whatever back in 2021 from 2022 you only lost money 2023 you you were hoping to like maybe get back above water but most people are still not if they were buying back then but if you just Stak your eth for the last two years and you had 20 eth you may made a

whole eth right you made an entire eth by doing nothing and that is only because of value Cru that is why that exists and so let's say you have 20th you made one e if you have 40th you made two e you have 60th you made three and so on and so forth right so like those numbers are pretty incredible and then not to mention you also 10x or 20 or whatever in the next cycle so it's like once you understand this value Cru it's just a complete no-brainer right you could try to buy some shitcoin like Pepe and hope that it goes a b like 1,000x but even if it goes down you didn't make any like you didn't make any dividends from that I don't know it's so obvious to me just keep it simple stupid well here's what I want to know I

want to know you guys that are listening do you want to see us talk more about onchain value Cru and more specifically which apps which use cases do you want to see us talk more about onchain value cruel on because we want to dive deeper into done friendch we've done Unis Swap and we're planning to do some more in the future so please let us know which ones you want to do post on Twitter send us an email Post in our Discord let us know which ones you want to do because we want to highlight the use cases and the apps that you guys care about I also want to know if there's anything more we can do to support you in in understanding on chain value crel because this is as we said just such a core concept that is so important in

your web 3 and your blockchain journey I hope today's episode helped you all bring you up to speed on the importance of onchain value acrel thank you for listening to web through Academy your one trusted source to capitalize on the next big phase of the internet if you enjoyed this episode please share it and subscribe or follow so that you don't miss the next one while you're at it there's a link in the description for our free newsletter where we provide timely and relevant web 3 insights so you can confidently build and invest in web 3 make sure to subscribe today one final note this podcast is for educational purposes only and nothing we say is financial advice crypto and web3 are risky and you should never invest more than you're willing to lose thank

you friends and see you in the next one