Solana REV, Pumpfun’s Decision, and Base’s Lead Among L2s | Analyst Round Table

Transcript

the question with like blockchains and being in like just these inherently Global Systems is what rules do you apply to the blockchain right now it's no rules anything goes on chain uh even things like tornado cach that have been sanctioned by us governments still exist and it's maybe a little bit harder to a little more friction to interact with them but it's physically possible it's like how do you think about that legality problem in the context of an inherently global system where the there's like jurisdictions that have different rules in the real world nothing said on zerox Research is a recommendation to buy or sell Securities or tokens this podcast is for informational purposes only and any views expressed by anyone on the show

are solely our opinions not Financial advice pachio Ryan and our guest May hold positions in the company's funds or projects discussed what's up guys welcome back to another episod of ZX research I'm Daniel bachio joined by Danny and Dan Smith um from block research on blockworks data respectively um to talk about all that is happening across crypto what's up guys how you doing pleasure to be here B good bullish as always very good very good um Dan I guess just to start us off how did you get into crypto um yeah are you bullish do you think we've topped in private messages Dan

Smith has said that he believes that Krypto is topped but that Solana will keep keep going up because I quote the Rev won't stop baby is this still your position or you okay we need a fact check on all of that um where are we yeah I think I was doing some good old uh nothing hits like some old Bitcoin ta I'm just like doing the fractals baby um then looking at like the time between the first all-time high break of the cycle and then when you actually hit the alltime high High uh for the next cycle and ultimately when you return to that previous all-time high um and we're kind of like right in the middle of that range

where it's like yeah this is about the the time in the fractal where you expect to start running and you got about three to four to five more months before you know you've already kind of peaked and H you're back in the [ __ ] storm of things so tldr is enjoy it while it lasts uh there are some structural changes just given the ETFs and like dude the most important economy in the entire world is talking about building a strategic reserve of Bitcoin uh I just can't underplay that and in my head at all like I try to write it down try to like discount it try to bring it back to there's always Cycles but that one does feel like a structural difference in the world and the bitcoiners were always right man the Maxis ended up being just completely right this was like

ultimately what they said was going to happen and fast forward to today and you've got this economic Game Theory playing out where now you see like a smaller like Eastern European countries come out and say yeah like this this Bitcoin stuff we're like all in on it um and the US is just giving you the opportunity to front run it if we do end up just start t- whopping millions of dollars um so I think it's crazy will that change the cycle structure it's you know my gut says probably um but I'm also beholden to the fact that like every four years like [ __ ] clockwork this it's we're just back to the same spot we thought we wouldn't be at again um now to your other claim no I do not think Solana will keep running if the rest of the market does not let's not

get ridiculous and will the Rev stop is actually like a pretty good question this has come up a lot on Twitter recently of people comparing like eth 2021 to like salana right now um I actually said this and had a good talk on this at the last episode of light speed I was on um but I guess I want to add a little bit more context to that from like a game or like a meta standpoint I think the nft trading on Ethan 21 is identical to trading beam coins on salana today it's just the best casino that the industry has to offer and on a holistic level it's basically all we're offering today um like trading Bots for that are trading meme coins Drive blockchain transaction value or

rev across literally every single chain there is no exception as it stands today obviously I think the us as an industry want that to mature into like a more um I'm going to use the word real offering uh but that's not where we're at today and so I think the games are quite quite similar I think there are some structural technological differences uh between then and now that position salana to have a better shot at capturing the next wave of innovation on this game and that is where eth failed um so the fact that it cost hundred plus dollars to do a basic transfer that is what I think shifted the attention away from ethereum and you can still send a Subs sent transaction of a usdc on salana even though you have people like

outbidding each other or to trade mean points so that I think is like a technological difference in the game that is again I think that the takeaway here is this is the current game we're playing it's meme coins on pump fun it won't be the game forever so how does that game evolve and if you're salana you want to position yourself so you can capture that new game happening on your chain um and I think it that this current setup actually does exactly that yeah I think that's the fair point and I'm glad that you said it's cost sub one cent to s usdc and not to transact on Solana because you know my opinions on the actual um fee to do stuff on Solana is not sub one cent it's like

134 I about 1314 but I I do agree that it's not and it makes sense right there's if you and somebody else want to do the exact same thing there's two ways that I know of to uh have like a dispute resolution there one is what we see on most blockchains today priority ordering based on the amount you're willing to pay and the other is first come first serve so the only chain I know that does this today is arbitrum having a single sequencer I think makes this a little bit easier uh but it's whoever hits me first I'll just put your transaction first so there's like different that it's like a different set of tradeoffs around latency and colocation uh versus you know if we want to do the same thing how how bad do you want it like I'm willing to pay a dollar if you're not

willing to pay a dollar you're in trouble I'm going to go first and you're not going to be able to your transaction is going to revert um and so like yeah that's always that's State contention is always going to be there and I don't again I I don't know another way to solve that other than first come first serve which has its own set of trade-offs or people willing to pay more so if we want to trade the same token at the same time that we're going to form a queue and how do you you know put one person ahead of the other in the queue right now it's based on the amount you're want to pay about the cycle thing I want to get back to this um I want to talk about the cycle a little bit I just spent my first day thinking about the

cycle today because I had another podcast in the morning where we brought up the cycle and most people seem to agree with you Daniel Smith I guess like the data agrees with you because you looked at the data and everybody looks at the same data the chart is the same everybody thinks March um five months six months from now we've topped um and regarding the BTC um the world's second greatest power after Canada bidding Bitcoin um as a reserve I um I think like structurally that could change I still think we see 55 60% draw down and that's like I guess I have to say that on the Pod now but like alts I

think get decimated um I don't think we have an ALT super cycle but I could see a Bitcoin 45 50 maybe 60% draw then and then continue back up so I think structurally that might change it's also like it's really not worth doing this like I should have never gotten into this um but like in my mind that's how I think about I think if there structural changes it's for Bitcoin I don't think it's for like not even meme coins but for utilities stuff like defi stuff I think I mean I think Soul C is probably another 70% 75% draw down and I don't think that's like e as well probably um maybe not because that has an ETF but so also might get an ETF lots of stuff that might but even the ETF so it's like I think that's it's going to be mostly

retail investors that have a simplified access and then you will get like traditional investors but they're you know they're playing for like a theme or a thesis like they're not just like allocating for all sake maybe for Bitcoin you get some of that but I don't think you're going to get that into ether salana um so the question is what is it right I think you can tell a really great story around rev for salana today but when you start unpacking that it's just mem coins and meme coins are absolutely reflective to the cycle so you need to start building things that are like not reflective of the cycle and have sustainable demand um so you're not always having to force yourself to be open to the next iteration on the next game so I think that's kind of the difference there and like yeah I don't I

I don't think any of any other tokens except for Bitcoin are immune to these like massive draw Downs we've historically seen uh and it would be super interesting on your point around the just timing again this is like obviously stupid but it's fun to do anyways uh you know last cycle we saw that like it was like the april-ish time frame that first high and then like a massive draw down and then a second High I think back like later in the year in November um it'd be really interesting if you see like that first one come on like Inauguration Day right around that time uh and then like two months down the road three months down the road you see this like second High um yeah it'd be super interesting to see that play out I do think um I want to add a point

around I don't know that it's necessary that I just I feel like there is this constant like bit of virtue s signaling a bit around like at some point we should replace all mem coin gambling and other like raw gambling Primitives with like what is quote unquote real and like useful activity but the like gambling or gaming industry as a whole is like that's a very large and successful industry in the real world today so there's a future where if it's meme coins or if it's nfts like pick your pick your kind of favored if there's some future iteration of this um I mean I I do think there is a

reasonable like future scenario where this sort of activity continues obviously there's seasonality to this types of stuff but I mean even sports betting that is like an incred inedibly strong and growing category today that is fueled entirely by like people want to run like five leg parlay and whatnot and that's incredibly profitable for those businesses hey don't you start [ __ ] talking five leg parlay I'm not I'm not [ __ ] talking them I'm saying like people love this concept of just like ripping 10 bucks into something that might 100,000 million x for them you know in a week and uh it's entirely possible that this continues obviously there is like you said there's some reflexivity there but I don't think there's any like reason that this has to this has to go away it can continue to

grow from here it could start to cannibalize like the existing like gaming industry as it exists today it's just not sexy though it's like it's like we we started off saying we're building um independent money God I I can never keep up with I I want to but you know what like it's just not sexy it's like you can't be like oh like we're building like centralized Financial Primitives [ __ ] the government I don't want them to T my money that's what I want to does this does this people people think it's like impacting The credibility of the industry or something they they they boil it down to like well we were doing this and it was supposed to be so like cool and impactful but now that people are like gambling it it ruins all of

that I I don't know is that is that something that people are juggling in their minds of like we're we're struggling to gain any credibility when all of it is just memes I I think it ruins it a little bit because my thing is like but like on based on whatever moral okay morality is very different difficult to get into now but let's say that you as a person view Silk Road and um pumped out fun live streams at the same like as the same bad thing like you can do the same stuff on it um and make money off of it like the same genre of stuff you can sell drugs you can do drugs whatever um but Silk Road is kind of like a [ __ ] you to the government versus like pump. fun is like like hey

guys I need to make money so like I'm going to kill this chicken it's not like you know what I mean it's like so I think in the past we had at least like some form of like crypto money was to be anonymous and to do like silly stuff morally ambiguous stuff but at least like it had kind of a purpose now it's like my purpose is to make a lot of money um does it matter I guess maybe like it depends on your view I agree with you I think like gambling is a fine use case to go after and I agree that like the $10 um like bets probably just stay on and I think it's a good use case I just don't know if it's like the sexiest use case um overall after we start off by saying I'm gonna like be independent

yeah I think I generally agree with that but I would have I guess a slightly different view when I think about blockchains I think they're Primitives to build economies on top of and one of the subsets of those things should should can and will will be this like you know gambling side or this gaming side um or the hybrid thereof but like I just don't want that to be the only thing we build um there's no reason for these things to not be able to coexist right like uh I think the way like an to probably thinks about this is you know you have your fart apps of the world that make all this money then you have like the things that optimize for user welfare and not every app that gets built on a blockchain needs to have the same balance on that Spectrum pump fun

is probably not making any body's life's better I guess if you win at the gambling game sure Casino makes your life better um versus I don't know some payments app that like specialize or optimizes for like getting you know dollars in the hands of people in emerging markets that are really interested in getting them right like that probably won't drive as much value to the base layer but it's you know marginally improving people's lives and I think like the you know the golden outcome here is you have apps all over that Spectrum um and so yeah I just I just don't want the only thing we ever achieve is to be in uh five leg parlays in the form of a mcoin and maybe that's a new meta maybe we start launching meme coins that are giants Bengals Steelers and two other sports teams yeah

that' be interesting you heard it guys Daniel Smith is endorsing Giants Bengals Steelers meme coin find it on Solana and buy do not this is not true um we kind of got started on pump do fun and I think we definitely have to talk a bit about pump do they were moving weird um we like my favorite thing about crypto is because there's money involved we go really really fast like we we run stuff really really quickly and that means that we we push like Tech to the limits um the technology but we also like get really crazy really quickly kind of want to hear um I guess there's two sides to this

what do you think do you think they made the right decision by getting off like cutting out the live streaming future um is question one question two is do you think that this kind of stuff will get regulated away or do you think we're going to keep blockchains as permissionless Primitives Danny you can start yeah um in the immediate term I think that was an easy decision from the team uh I mean they're they're at a point in their growth stage where they just don't have enough clearly like people or hands to do the moderation that was required of this like quick explosion in live streams um so I think that makes sense like they can you know spend some money

they can get some like automated tools set up they can maybe hire a few people um quickly and then at some point probably turn it back on um as far as getting regulated away I don't really think that's an outcome here I think more realistically like what we're seeing is and like following the kind of video and live streaming spaces for several years like you see this we we've seen similar things happen on like the YouTubes and the Twitches of the world where content that is questionable um some in some cases is acted upon very quickly and in other cases is not um and in the cases where it is not like these sort of web two businesses that you know

kind of live on on Advertiser income um the backlash for them is really more of like this Advertiser social impact of you know if people are killing animals or like you know I think there was this classic YouTube like prank meta a few years back where it was like you know live in the hood like you know beating up homeless people Etc like just doing absolutely crazy wild stuff and putting it on YouTube obviously sponsors do not want to put their dollars and like their image on top of this stuff um and so there's kind of like this this feedback loop of you know they pull out you know the money goes down for you know monetization goes down for certain types of things creators learn they like you know adjust their content YouTube

adjusts like its algorithms Etc um some time goes by and then maybe sponsors you know that that issue kind of goes away and then they start sponsoring again obviously for a pump fun it's a little different they're not being sponsored by like advertisers today they're just making money directly from people trading on the platform but there was such a visceral like backlash um from on socials from from people who have either if they're using it or not using it um but I think like negative social backlash like social consensus of this nature I mean it pushes them in in a very obvious direction of like there are certain things that they're going to have to limit on the platform otherwise you know it's going to drive a bad reputation and people won't people won't want to use or support like their product um and I think that's kind of

going to be the Natural Evolution they're gonna they're GNA step through some of these things that other platforms have had to experience in the past yeah this was like obviously the right thing to do um it wasn't that long ago we had like that like weird racist meta uh meme coin meta and like deck screener and all the you know trading front ends censor those meme coins because like people don't want to see that I don't want I hate when I don't know Twitter actually does a pretty poor job of this but like I don't want to see murder when I'm scrolling my timeline and that [ __ ] happens on Twitter um but even you know like this isn't a new problem to your point about like YouTube or twitch or any of these like content platforms like this is something that they've been dealing with for a while um

and there's like solutions to it that they can implement where you know there like especially with AI getting very good you can like put filters on top of your platform that you know the second something that shouldn't be shown get shown you just shut it down you don't have to shut down the whole thing so I do expect it to relaunch with some content moderation built in um but like yeah I think people don't want to see the [ __ ] up [ __ ] that was going on there and it's like there I don't know maybe that's too optimistic view of the world but I uh yeah I think the other problem we have to think about here is like all right ignoring the moral side of this and like the things that were happening were very morally bankrupt like the legality side of it like what

is legal in country a might not be illegal in country B and the question with like blockchains and being in like just these inherently Global Systems is what rules do you apply to the blockchain um right now it's no rules anything goes on chain uh even things like tornado cach that have been sanctioned by us governments still exist and it's maybe a little bit harder to a little more friction to interact with them but it's physically possible um so I don't know it's like how do you think about that legality problem in the context of an inherently global system where the there's like jurisdictions that have different rules in the real world it's a tough one I think we could do it by GDP so whoever has the highest

GDP gets to decide on the world rules and that seems to be the case so far um even though we kind of like you know we have to act like that's not really it um no but I completely agree with you and on the other end it's like should nation states even decide on this stuff and that's like kind of what it's like if we let nation states decide on this stuff it also gets kind of bastardized um I think on the app level it should be decided and I think the app level will likely inevitably get regulated um agree and like even on the racist mcoin meta like those things still exist on chain it's just like is much harder to interact with them because the front ends are going to

censor them because the front ends are run by businesses that live in jurisdictions that have to play by rules yeah I was just going to say I don't think anything super novel is going to play out here like you know if you want to go and scroll the dark web today and like look for crazy stuff you can it's just harder to do so and it's not going to be like spit right into your face same goes for you know like the Pirate Bay and wanting to like torrent files and things like you know there are countries where these things are or you know businesses and other entities that try to make these things hard to do um so there's just going to be this like kind of line that gets towed of you know how much is socially acceptable how much is like maybe

legally or acceptable in different countries if if they have to like block front ends in this place or that place um there there's always going to be like this easy to access like maybe friendly for most people option and then maybe the the harder to get at and maybe more questionable venue for for the the more Edge case things that's a good point and um completely agree with you I'm going to take us to a I guess more relevant and investment um discussion worthy topic um even though I would love to invest love. fun God the revenue is 250 mil in like less than a year it's crazy ridiculous um base it is kind of a mini base season I

don't know if you guys are Danny I know you must you should have seen it Dan Smith has been very focused on data stuff I don't know if he's still [ __ ] coining but um there's a lot of coins launching on base um and also they just got Phantom in they got integrated into Phantom I'm curious first of all I want to start off with a very basic question which is do you think that base feels natural like do you think it's astroturfed or do you think like the ecosystem feels like a regular blockchain ecosystem to me it feels fake that's why like Solana very much feels like when you log on to CT that's like I feel like representative of Solana Solana is

representative of CT but base is like their most popular meme coin is named D and Anon it's like what people imagine crypto people like to say you know that's my yeah they're not killing chickens on live streams that shit's so fake I mean yeah it's coming from a corporate entity as well and it wasn't that long ago that the I think it was like a Mady the mes or derivatives thereof uh got like all banned from the yeah and you know I don't know exactly the details of that but it was like you ran into the corporate office and instigated [ __ ] and then got all all got banned and then we upset about it like it's it's [ __ ] coinbase this is what you should expect uh so to some

regard it's like all right I don't know it just is what it is yeah that's true but they they had something to do with The Blob fees and that's what I wanted to bring up today um and Dan Smith I think you can explain it much better than I could ever even attempt to yeah can you add my screen in here and I'll go ahead and share screen and kind of walk through some of the data on this so basis seeing an immense rise in activity over the last three to three to four months um you know now they're doing basically the third highest rev of any blockchain uh behind ethereum and salana and it's really driven by priority fees so you have people again going back to our first conversation the priority fees

are the mechanism of on base to outbid um other users for Priority Access to State now what's driving that has been pretty much mcoin activity um so if we look at like you know this is last 24 hours but the top 10 contracts here you know we have banana gun Unis Swap and two two Unis swap routers banana gun and then we have these unknown bot contracts seven of them which are uh you know these are just trading Bots me Bots that are looking to grab opportunities in the top 10 based on gas consumption so you know to me this is this looks a lot like the activity you see on salana um you know base has been cranking its gas limit higher and higher so we talk to the weekly view here uh on the right you can see the the uptake in uh gas

throughput so you're just measuring the amount of gas or computational resources that the chain is processing U measured in gas per second uh the unit itself isn't that relevant but you can see the clear up in the to the right Trend here same thing with transactions per second this is just another way of measuring again that same type of measure uh when you're looking for the amount of computation or transactional processing that the chain is doing as you can see this total gas and transaction count up and to the right so you've seen this huge rise in onchain activity um and again most of which has been driven by mecoin and just trading activity in general again zooming back out to a lot of this got attributed to being like a salana problem when it's really just an industry problem if you want to call it

a problem based on the last conversation we just had but memecoins are the primary driver of activity in the blockchain industry today um again I I I don't personally want that to be where we end up but that's a fact of the matter of where we are today now a pretty interesting thing that we've seen over the last two days specifically is a sharp rise of the number of reverted transaction again going back to comparing and contrasting between salana and base uh it wasn't that long ago and there was this huge narrative around you know poor transaction quality on uh salana driven by these reverted transactions or you know people like to call them failed transactions personally I think there's like failed transactions or the larger umbrella and within that you have like subsets of what actually happened which is like reverted

transactions and dropped transactions Solana's problem was on the ladder dropped transactions are a much worse problem to have as well whereas reverts really aren't a problem at all it's just generally bot activity that doesn't care if it transaction reverts because if it reverts 10 times and it wins once the view is that that will be that one one Prof the The Profit generated on the one transaction execution will outweigh that of the nine previous reverts um so Jacob sharples from our team uh at Block's research on the data side uh put together a quick little analysis just kind of like highlighting what exactly was happening with this sharp uptick in transaction reverts and interestingly there's about four transactions that appear to be like token snipers where they're just trying to like be the first person to buy a a

new token launch uh we're actually driving the sharp uptick so I toggled back to the Daily you on our dashboard which is available at optimism. blockor research.com to anybody and everybody willing to access it um and again looking back at these same two charts our gas throughput and our transaction throughput you know we see this uptick in the red line here which is our reverted transaction share uh so the gray is going to be your total and then the green and the red are successful in the reverted which will sum to the total um so you we saw this like massive uptick in Topline transactions per second uh but interestingly about 45 of The 100 transactions per second are related to reverted transactions so again these are the sniper Bots saying you know I'm just trying to be the first

person to buy it if I'm not going to be the first person like don't buy it at all um and again most of these transactions end up failing uh and now you see like this it's basically been like this 20 or so percent reduction in available block space to people that are just trying to process transactions so the negative externality that's created from this is users paying higher transaction fees because these Bots are spamming and um you know bases transaction fee mechanism has a global fee called the base fee when that rises everybody has to pay a higher fee to get in the block and I think that's the big risk that you really don't want these reverted transactions to lead to perfect I um guess what I want to ask to you Daniel is you've I mean on the data side you guys have spent a lot of time

looking into bass um and also looking into other l2s and like from my point of view it's very clear to me that Bas is getting a kind of a lead amongst the other l2s especially like for as long as I can remember it's been arbitrum and then everybody else and now it feels like it's base and then arbitrum and then everybody else is this something that you're also seeing on the data side or is there anything you think that like particularly caused this yeah for sure so we track all the major l2s but we don't track all of the l2s um there's just too many and you know with all due respect you can track three or four of them and you're going to get 90 plus perc of activity uh so I like to use grow pie for when I'm trying to look at

like all right you know I want the 95th L2 like I'm curious how when you stack the data in there all the way down the stack what does this actually look like and grow the P does an excellent job of this so interestingly if you do that for like transaction fees which for you know the sake of every L2 is basically your Top Line number that's your rev um Bas is climbing consistently up and to the right on its share of total transaction fees across all l2s now it's up towards about 60% so about 60% of all you know fee paying activ AC it is happening on base I agree with you that like felt like it used to be arbitrum um and now it's kind of like shifted to base I think there's a couple reasons for that probably the easiest one to point to and

feel confident in is just coin coinbase's distribution um you know that was it was never a doubt that they were going to point the Canon at base and I think you're starting to see that whether it's just the stable coins they're parking there or the effort they're putting into bringing developers on chain which is definitely the right thing to do if you're trying to grow a blockchain ecosystem I think they've been crushing it and I think you're now just starting to see uh kind of like the repercussions of that Danny what do you think yeah the other clear one which I mean you discussed in the data previously but I mean they've been growing their throughput as well so I think if they're able to kind of continue to funnel new users onto the chain which coinbase as a brand like you would expect like you

just mentioned that they'd be they'd continue to be able to do that um if that's by enabling like additional Integrations into like the wallet or the exchange Etc that that they can then you know leverage base itself for the products built on there um I think they have opportunities kind of continue to do to do that so um I mean it makes sense that as they've kind of scaled throughput on the Chain itself like more gas more TPS is possible um that we'd also just see growth of like market share in terms of fees generated and um overall amount of amount amount of activity um just based on those funnels they have yeah I agreed there and I think Bachi one of the other things you excuse me Daniel bacho one of the other uh things you mentioned here was the

impact this is having on ethereum so ethereum just closed its highest day ever in total blob fees um I need to fact check that but definitely the the highest day in the last three months uh and this is really like Bas is playing a pretty significant role of the the share of blobs being purchased so it's about 33 let's call it a third um percent of uh all blobs are being purchased by Bas and that's just a testament the amount of activity that's happening on that chain right now um again driven by meme coins as well but this is not atypical this is really what You' expect to see of a growing ecosystem in in the industry today and it's uh I think this has some interesting you know backdrops onto the blob landscape one like it's

you know starting to drive more value back to ethereum if you like plot this against total RAV like now you can actually see the blob fees so that's a a pretty big upgrade it's still you know fiveish percent of total RV but it's there nonetheless I that's just you know marching the right direction from that perspective um it hasn't really you know you can still get fairly cheap transactions on l2s which is great to see I think that's working quite nicely uh the other thing I'm thinking about is you know I think in uh pectra a which is coming in q1 that will be to there'll be a couple changes there so potentially more blobs potentially shorter block times so you're doing two things to increase the supply of blobs um you know that kind of like hits a reset on the

market I think like you know then we'll have to scale back up to the new limit and it's a pretty good way to kind of like grow the ecosystem uh without like any breaking changes right you hit the ceiling add more capacity hit the ceiling add more capacity uh I think that's like a no-brainer way to do it we're seeing salana do the basically the exact same thing in aave 2.1 that's like anza's client onza SP out of the Sal Labs team that's when they want to start allegedly increasing the block space you have you know it's very challenging to get a good read on these things basically just like reading the Tea Leaves of uh cordev tweets but sounds like in 2.1 uh that's when the the release when they want to start actually increasing CU limits cus are just Salon of versions Sal's version of gas so

again the incremental increases here I think make a ton of sense um you know it's just like this weird push and pull for ethereum right now where they've hit this limit they're making money off this driving fees back to the L1 and ultimately the token but you know this impending capacity increase is coming and you know da inherently generates no value off Priority Access to state when we were looking at that last chart I had from our optimism dashboard again available at optimism. blockworks research.com covering all the super chain um you saw the share of uh transaction fees that are coming from Priority Access to State priority fees right I think my favorite chart on there which honestly I might try to show this again here quickly is just looking at the amount of fees

generated uh by transaction fees in the first like X number of slots so you know think think of a block it's filled with transactions um and then in that uh think of like a block it's filled with transactions and then in that they're all ranked you know you know the first transaction to the last transaction so on this chart on the left here you can see the share of the total L2 fees paid between the base fee and the priority fee based on where in the block slot you are so the first transaction in the block plays 99% of the fee is priority fees right because you're out bidding to be there first and uh op stack uh blocks are priority ranked or priority sorted so whoever pays the most goes first uh and so you can see that people are bidding to be first in the block and

then on this chart on the right you can say all right the first if you take the priority fees paid in only the first transaction of every block what percentage of that of total transa transaction fees is does that make up so the first slot alone is about 40% of total transaction fees and then the first 10 slots are about half um this ranges from about half to you know as high we've seen as about 80% I think this is Ed lower over the last month or two given the increased activity pushing up not only L2 base fee uh again that's more of that congestion scaling fee but also the L1 transaction fee because blobs now cost money um so yeah I think that's just kind of an interesting way to kind of visualize how priority fees again this idea of paying to be first in

line to access a piece of state is actually impacting uh blockchain profitability which flows back to the chain or the token holder depending on the setup that's fair um I'm going to kind of tie this into what we were talking about which is like is mem coin activity sustainable and I think for Solana it doesn't have to be sustainable because Solana now has a decent ecosystem like it has Camino it has Jupiter it has jeto it has like all the per stuff I do worry a bit about um base because I feel like it doesn't have that many apps it doesn't have that like base layer of apps that Solon has and we know ethereum has to the point that like activi going up um s are actually worth something now because

activity is going up but okay let's say mcoin craze slows down a little bit which is not like unrealistic to think about um and Danny like I also kind of want to ask about you about this as well like how do you see because to me it's like aerody Drome is the big one on base um they have a few AI agent stuff social fire has just been like kind of a disappointment it might come back but I don't even know how much like uh how many transactions that really requires on that end so curious what you think or if you think it's in terms of sustainability for base like in a in a mecoin cool

off yeah if mem coins were to cool off on like because I think ethereum without meme coins would be fine um it is fine nobody does I mean fine is I guess like a it's I don't want to say fine fine is actually the perfect word there right like yeah I'm fine like you're not it's all right um Solana without meme coins I think would be okay as well like it wouldn't it wouldn't be where it is where it's like we WE Post rev every morning but it's like it would be at a different it would be at a different stage but it would be fine because there would still be relative activity because there are apps on it um bases not that many apps

I think there's different ways of maybe framing or taking this question but there's no base token today that's overvalued on any basis so um in terms of like being fine like I guess you don't there aren't any like base token holders that have to worry about their token being rated downwards um maybe if you're a coin stockholder that might be concerned but I don't think that like base revenues are driving a large portion of that today um although it might be related right like retail demand for trading coins on coinbase the exchange might be related to the memec coin activity that happens on chain but I think that's kind of like neither here nor there I think ultimately like the

fact that base as an L2 is you know it has this s of sort of um kind of corporate entity backing in coinbase like it doesn't really feel like there's a scenario where they're not fine um just from the perspective of like it's been a it's it's been a very profitable like Venture um you know the sequencer and and the fees generated on base have surely been like very good um and it's the I guess we just described it as like the top L2 today um you know sure if you were to see activity fall off that might like adjust your targets for if there's some inevitable base token but I don't think that really has any like Doom and

Gloom scenario for the chain itself just given the kind of the relationship with coinbase and their ability to like continue you know using it and and pushing it and probably like supporting and building products on top of it um they see the value of using you know a decentral well at some point a decentralized potentially chain um and you know Building Products up and around that um and so I think unless that vision from them changes then yeah they will be fine I'm just wondering if if Bas is in the lead not because it's like better than the other l2s but because all the other l2s are just worse than it is and that's my like you know what I'm trying to say is

like I don't know what do you think Daniel I uh I think the question's pretty interesting and I think a lot of this comes down to like life cycle um you know I'll like overgeneralize and say there's like the Venture stage seed stage and then there's like the growth stage I think salana has now entered the growth stage where you know like the napdos is SED one these younger chains is very much in that seed stage um and Bas is sort of like in the seed stage flirting with the growth stage um so I I just think it's like a different point of his life cycle right like salana launched four over four almost five years ago now I think five years in March and yeah there's that last major unlock in March so there you go um where

base is like a year in change let's call it old so like yeah it's just in like a different spot in its development cycle um I think it'll like catch up well provably it has you know it's already surpassed every other L2 and I think it'll like play that like L1 sized game here pretty soon again I think that's just it's it's attached to coinbase and it has a superpower nobody else has um so I think that's pretty interesting as well but yeah I just think of this more of as in life cycles like I saw a tweet the other day I can't remember who was by but know something to like the tldr was they were comparing um the like dollar of like transaction fees per you know dollar of issuance um and it was

about like apos and then they compared it to like salana and ethereum which to me it's just like yeah like no [ __ ] a startup has is losing money like duh um but and all like I don't I didn't really agree with the framework at all because um you know not the entire issuance amount is a cost from the perspective of a token holder if you're a token holder you are literally being paid it the cost is the part you don't get which is the commission and that validators take out of the issuance so like that's really the cost and you know I would have used that number but regardless you'd still end up in directionally the same spot where uh yeah duh Aptos doesn't have a ton of activity yet so that's kind of like my framing on just largely I think we try to look at everything as in the

same point of its life cycle when that's just inherently not true I do think maybe Bach relative to your comment about um comparing it to other l2s like in arbitrum for example uh I would I would maybe be more worried about Bas if they weren't like if the strategy here wasn't to rapidly scale the throughput of the chain today right if they were just sitting around like oh this is fine 10 TPS it's great like this is going to be the future of Finance um while arbitrum has like orbit chains Etc um I think if they weren't going after this like I think I mean I think they have fairly ambitious targets right like wanting to get to like gig ass a second or whatever the number is like thousand TPS Etc I don't know what

the the kind of like probably shifting targets are as you move into the future further but um I think we're seeing that that is like scaling and leading to you know greater demand and and activity for Block space like block space on their chain relative to like the arbitrum chain itself for example I would say feels like has been relatively stagnant for the past you know if you want to call it six to 12 months well they've had a few incentive programs so not particularly stagnant but yeah they've it's a tough one I think um I don't know this is like I'm going to go back to this argument that I once made to Daniel Smith and he called me a

[ __ ] but I don't think l2s are that good at scaling I just no at that good at execution because it's like 40 TPS and you get whatever TPS I what TPS do you get on e it's like 20s sub 20 13 or 14 or something right yeah and like base is far again far in the Far and Away in the lead here at about a 100 yeah so base is now okay um but the rest just aren't they're not like that good at execution they don't have I mean I guess it's a little bit cheaper but at the cost of like you have higher slippage on everything you do and you don't have that many assets to trade and there isn't that much capital on the Chain um I don't like the L3 strategies that all

of them have had not all of them but um arbitrum and ZK sync I like base I think they're actually doing something right and even though it feels a bit like the FED chain because they they launched their tokens as D gen is their meme coin um I do think that like if they can just get a couple more apps the reason I'm talking about apps so much is because we're writing a report on base at the moment and we can't find any perss interesting per per apps which I feel like was the biggest thing for like years and now it's like there's nothing on it yeah it's almost harder to not find per protocols interesting yeah yeah that's literally it and I was like wow maybe this because to me like in my mind

it's like L2 okay base is the relevant one but we can't even find like a basic primitive on it it kind of puts you in a whirlwind where you're like okay but you have the same experience on sui and apas and all the other L ones as well we like again going back to that like life cycle thing right like you just have to grow into those it's you have to you need a lot of [ __ ] to build out basic D5 Primitives which was honestly one of my like strong resistances against the L2 model was you have to just like replicate this over how many chains for what reason again um but yeah to your point about like being bad at execution yeah it's really interesting to just see Bas uh just willing to step on the gas and like crank this uh gas limit like

pun intended crank the gas limit higher um while other teams just like aren't I just think that's like an very interesting perspective where you know I don't have like the deep enough technical knowledge to know that like why you can or can't make this decision like I you know you crank the gas limit higher you risk State growth problems um but like B&B hit these pretty quickly when they did this uh last cycle they only have like 20 validators but there's still like a distributed validator set nonetheless so you have different people running different machines Etc um versus like coinbase taking the very you know centralized decision of like hey we run one sequencer we're just going to throw Hardware at this is my

assumption of what's Happening um but again like I don't know why like if you're arbitrum or another one of these like evm based l2s you're not just doing the exact same thing uh so that's just like one open question that I haven't I don't have an answer to at the moment D anything to add yeah I think um and I I don't know how much this is playing into it but I do think like the decision to scale via like l3s for example from arbitrum like maybe that trying to explore that particular like product design and offering it to apps or like you know would be app app chains um maybe that prevents them in a way um from scaling the arbitrum chain

itself as it would would likely cannibalize some of that activity it's like I don't know that you could sit in both of those worlds and say hey we're scaling the L2 to a00 TPS but also like spin up your L3 and it's like you know the cost and the speed is like basically the same thing so it's like well you know maybe you should just be on the L2 where all the other assets are I you know I don't I don't know if there's like that positioning between those two ideas is preventing some of these teams from from doing the same thing yeah but that yeah that makes sense actually and that would be basically the L1 L2 debacle all over again we're having fun we're having fun in crypto um well prices took take like a 10% discount and I'm back to [ __ ] on L2

this is crazy I think that's good though I think we're done for today um anything else you guys want to urgently bring up to the listeners no all right fantastic um Danny thanks for coming on Dan Smith um thanks for making an appearance Daniel for listening thanks for hosting always a pleasure always a pleasure always a pleasure [Music]