rennick
@RennickPalley
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modular blockchains are the way
projects like
@dYmensionXYZ
,
@fuellabs_
,
@CelestiaOrg
,
@eigenlayer
are going to become core components of internet infra
its hard to understand all the permutations that will arise
but theres a better way to think about the space
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The top 3 reasons you should own more $ETH:
brought to you by:
• the merge™️
•
@Rocket_Pool
&
@LidoFinance
•
@eigenlayer
Not financial advice, do your own research
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last couple of weeks have sucked for crypto
we will move past this
some thoughts to remind ourselves why crypto is inevitable:
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It may be contrarian to be in crypto again, but for those who remain, our conviction will be rewarded.
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Increasingly convinced that
@dammfinance
is the next big thing in DeFi
Did some more research on market size
5 key takeaways:
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The startling fact about L1s:
The only decentralized network that has sustainable value is
#ethereum
:
sustainability = gas fees > validator rewards
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I spoke with bloomberg
@business
@crypto
about our involvement in memecoins, and our early investment in $wif
some call it gambling but the reality is most liquid assets are derivates of the "meme" concept
memes are just the purest expression of it
cc:
@olgakharif
Hedge funds appear to be finding the siren song of memecoins irresistible
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liquid staking, re-staking, and fractal sharding will underpin the future of crypto
@Rocket_Pool
is the most decentralized liquid staking protocol
Overview of the key aspects of the protocol economics and $rpl
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@fuel_network
is the endgame for rollups.
@IAmNickDodson
is a truly visionary founder that we got to know when we led Fuel's series A in 2021.
most projects in crypto represent incremental improvements over the existing tech
fuel is revolutionary and exists in the same class
Today marks a pivotal moment for Fuel, our team, and the evolution of Ethereum.
Three years after launching Fuel V1, the first optimistic rollup on mainnet, we're proud to introduce Fuel, The Rollup OS for Ethereum - a purpose-built architecture that represents the culmination
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Liquid staking as a primitive completely changes the calculus for an ETH holder to stake
Projects like
@LidoFinance
and
@Rocket_Pool
enable this
Huge implications for ETH security and any other PoS chain w/ liquid staking
The next primitive may be re-staking via
@eigenlayer
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The relevance of the Fat Protocol Thesis will be challenged as monolithic blockchains integrate with or are replaced by modular architectures.
We're publishing our internal research on blockchain economics, starting with the existing L1s:
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Almost nobody understands what Monetary Premium actually is
Users hold your token as money and not just as a financial asset
This allows FDV multiple to transcend traditional valuation metrics
In order for it to exist, you need two things:
• sovereignty
• sustainability
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How the fat protocol thesis got fat:
Blockspace quality drives good projects to build on a chain . . .
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here's my L2 market size analysis, very rough:
1. today there are 480m annualized transactions on L2s.
2. today those transactions account for 2% of total ETH l1 transactions
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I think this gentleman said it best:
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ETH volume/tvl ~= 18%
SOL volume/tvl ~= 180%
SOL tvl is approx. 10x more active per $ tvl on avg than ETH
a couple of take aways:
1. low SOL fees
makes sense - compare ARB OP and BASE ratio - closer to SOL but still lower (~80% volume/TVL for all)
2. degeneracy
SOL has been
Looking into Solana volume, it appears GeckoTerminal is the most consistently accurate. It does not include Lifinity or Phoenix, so add those back in. ($104mm and $77mn 24h respectively)
Solana is still moving numbers, but does not appear to have passed Ethereum base layer. In
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3. re-staking
@eigenlayer
is introducing a new primitive for re-staking $ETH
Liquid staking as a primitive completely changes the calculus for an ETH holder to stake
Projects like
@LidoFinance
and
@Rocket_Pool
enable this
Huge implications for ETH security and any other PoS chain w/ liquid staking
The next primitive may be re-staking via
@eigenlayer
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Think about the value of L1s tokens in 2 components:
FDV = Intrinsic Value + Monetary Premium
Both are dependent on Economic Balance, aka sustainability
ETH - positive
BSC - positive
Everything else - negative
See below for data ⬇️
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A new narrative in crypto today are "real yield" protocols
This is just another term for value investing - looking for assets that generate sustainable real yield
There are dApp opportunities that fall in to this (h/t
@tokenterminal
)
Lets take a quick look at
@ensdomains
:
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makes $ETH an asset with real-estate like qualities
current yield + increasing scarcity = good
“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined . . .” - Andrew Carnegie
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1. sound money
consider that $ETH is the only currency in the world that looks like this:
(not to mention its utility as payment for consensus/compute)
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@eigenlayer
introduces re-staking
Its a fascinating concept that surprisingly has real world precedent
Some thoughts:
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Liquid staking is one of the most important primitives in PoS crypto, and the projects that enable it will be some of the largest over the long term.
Some observations on ETH staking supply and market share of
@LidoFinance
vs
@Rocket_Pool
A thread:
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As a crypto fund manager
@stratos
whos been in defi since the beginning, I've seen a lot of governance token designs.
I think
@Goldfinch
's governance token GFI is one of the best designs for creating and sharing real value - here's why
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restaking is levered crypto disguised as a smart financial risk . . .
with high single digit yield
memes are levered crypto disguised as a dog . . .
with 1000x upside
midcurvers get taught the same mistake for eternity in finance
So let me get this straight. You’re critical of memes but celebrating the financial engineering that is restaking (yield farming)?
Sure, more efficient allocation of stake (security) is a novel experiment. But when you restake and recursively do it to max your yield then you
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We took a look at the venture funding in crypto over 2022.
TLDR valuations have yet to correct
We used fundraising data from
@MessariCrypto
to run this analysis.
Surprisingly, median round sizes trended upwards over the past year despite market conditions
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i'm even more excited about
@eigenlayer
after watching this talk by
@sreeramkannan
:
@eigenlayer
has the potential to increase the rate of innovation in crypto in a big way . . .
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in order to build immersive apps you need a huge amount of data
@SpaceandTimeDB
is the way
cc:
@holiday_nate
@chiefbuidl
The Space and Time whitepaper is here.
We’re proud to release v1.0 of our whitepaper, which outlines the design, implementation, and utility of the Space and Time Verifiable Compute Layer. In it, you’ll find a detailed overview of…
🚀 The Problem: Untapped Potential of Web3
🚀
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Summary:
1. merge made $ETH quantifiably scarce
2. liquid staking makes $ETH a digital real-estate type asset
3. re-staking makes $ETH the base asset of the entire internet
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What does this mean for $ETH holders?
First order impact:
• $ETH yield increases from 5%+ to 10%+
Second order impact:
•$ETH price increases as demand for $ETH increases due to attractive $ETH yields via re-staking
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There are 330 crypto venture funds
Seems like a huge number, probably too many
So we did the research to see how the field stacks up
Looks like only a handful consistently invest in the best companies/projects, based on whats been marked up, according to
@MessariCrypto
data
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Third order impact:
•High $ETH prices make re-staking even more attractive as a form of security
•Easily bootstrapped security accelerates protocol layer / middleware innovation
•Accelerates us to a world where $ETH is the base asset of the internet
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To summarize:
• modular is the way
• people are stuck in the mindset of "one chain to rule them all"
• particular use cases have different design parameters
• theres another variable: how do these needs vary in time
• a dApp can construct the stack they need and evolve
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in terms of crypto venture funding, infrastructure has attracted the most follow on funding:
4 out of the top 5 companies infrastructure related
(and 12 out of the top 20)
meanwhile only 16% of early stage rounds were in infrastructure:
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eventually we will realize that
@SpaceandTimeDB
is the sole source of truth in all of crypto, across every chain
few
cc:
@holiday_nate
@chiefbuidl
📣 Space and Time is now indexing
@Bitcoin
!
Bullish on BTC? You can use the Space and Time Studio to query ZK-indexed Bitcoin data and generate dashboards that show you…
🟠 Historical price trends
🟠 Realtime market movements
🟠 Network health insights
🟠 Ordinals and
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7 Fundamental Principals of Token Design & Economics you need to know if you're a founder or investor in crypto:
I've analyzed hundreds of token designs
crypto will change the world but won't change human behavior
Sadly many projects with unsound "tokenomics" will death spiral
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This is a crazy stat that CT has been chattering about -
@sudoswap
generating huge volumes as % of market
If you're not a huge NFT trader it might be easy to miss. I took a look to figure out whats going on and why it matters (h/t
@0xwangarian
):
If Dune stats are right,
@sudoswap
has ~16% market share vs OS after <1 month of launch.
Past 24h volume:
- OS = $14.3m
- Sudo = $2.2m
This is probably the most exciting application to hit the market in 2022 as traction is complete unincentivized.
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2. liquid staking
the fact that you can earn 5%+
while holding a highly liquid asset via
@Rocket_Pool
@LidoFinance
(and others)
financed via actual utilization of the $ETH network
with additional expected returns via deflation (separate from demand-driven price appreciation)
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The scale of the opportunity for
@SpaceandTimeDB
to enrich on-chain app experiences is vastly under appreciated but not for long
This is a major step in getting there
Congrats team
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@dammfinance
is one of the most interesting defi projects I've seen in a long time
it has the potential be a true advance of the lending primitive
a breakdown 🧵:
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Awesome to have in one of the leaders in cloud computing
@Microsoft
@Azure
participating in the future of data management
Congrats to
@holiday_nate
@chiefbuidl
all of the
@SpaceandTimeDB
team and our fellow investors!!
#SpaceandTimeDB
is the first decentralized data warehouse built for smart contracts. We’ve partnered with leading VCs and
#Web3
visionaries to power the next generation of smart contract use cases. 🚀⏳
Learn more:
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I hope you've found this thread interesting, follow me for more:
@rennickpalley
I created this account to learn how to share my thoughts and analysis on Twitter that I normally would only share with the team
@stratosxyz
Share your thoughts, would love to hear from you DMs open
0
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@dymension
is a new component of the modular stack working hand in hand w/
@CelestiaOrg
and other DA layers
aka dymentia
like $TIA, $DYM = Modular Money
the network effects will be strong - heres what you need to know:
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•
@Rocket_Pool
is designed to be decentralized
• protocol token $rpl is required to be staked to run nodes
• $rpl receives insurance rewards
• insurance rewards are worth $25m today
• $rpl will trade with high convexity to eth
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1/ DeFi comes to Jesus moment:
The narrative that DeFi protocols are an attractive investment based on their fundamentals has become popular
Is this true?
Are DeFi protocols finance companies or tech startups? The answer could redefine how we value them. Let’s break it down.
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people are stuck in the mindset of:
"one chain will rule them all"
and they are projecting this on to:
"one modular stack to rule them all"
the beauty of modular is that it doesn't have to be static!
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2. node runners need to stake $RPL as slashing insurance
$RPL is the governance token for
@Rocket_Pool
10% of the 16 $ETH stake required to run a node must be staked in $RPL alongside it
10%*16 ETH = 1.6 ETH
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Today
@Rocket_Pool
is ~5% of
@LidoFinance
staked $ETH
Will be interesting to see how that changes -
Lately staking share has been pretty stable:
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In exchange for being staked, $rpl receives insurance rewards
There is no fee charged by the protocol on staking rewards directly
Insurance rewards come out of $RPL inflation
$RPL inflation is 5% per annum
70% of that goes to $RPL rewards, or 3.5%
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@milesdeutscher
the real yield narrative is hot right now. its about to get crushed
note that most of the "real yield" is generated by trading fees
trading volume in crypto is strongly negatively correlated to Fed interest rates
Protocols like
@goldfinch_fi
w/ off-chain yield are safe haven
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i was fortunate to start my career at a fund managing $60 billion, focused on value investing, with heavy exposure to tech and finance
when you boil it down, there are two types of value to be found in investments
1. "bird in hand"
2. future value
this is what they mean
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re-staking enables ETH that is ALREADY staked to secure the Ethereum network to be used as security for other PoS networks
this is potentially huge - one of the biggest challenges of any new PoS network is bootstrapping security
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@Rocket_Pool
is designed to be decentralized
unlike
@LidoFinance
, anyone can run nodes for the protocol
how is this secure?
1. node runners have to stake half of the $ETH stake (16 ETH), which is at risk to being slashed
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Thus, the price of $RPL will be highly convex relative to $ETH
Effectively highly levered $ETH
As $ETH goes up in $RPL terms, more $RPL can be staked per node
So more $RPL will be taken off the market
As
@Rocket_Pool
grows node count over time, staked $RPL will grow as well
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@jneu_net
This is an awesome thread
@jneu_net
explaining Data Availability and
@CelestiaOrg
A very cool aspect of DA is its history
Starts w/ one of my favorite scientists and fellow
#mit
guy Claude Shannon
Shannon literally *invented* info theory in 1948
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I hope you've found this thread interesting, follow me for more:
@rennickpalley
I created this account to learn how to share my thoughts and analysis on Twitter that I normally would only share with the team
@stratosxyz
Share your thoughts, would love to hear from you DMs open
1
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The maximum $RPL
@Rocket_Pool
allows to stake per node is 150% of the ETH value
ETH yield + commisions = 6.8%
$RPL staking yield = 8.7%
(150%*8.7%+100%*6.8%)/250%= ~8% blended yield
Note that there is an incentive to stake as much $RPL possible
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I hope you've found this thread interesting, follow me for more:
@rennickpalley
I created this account to learn how to share my thoughts and analysis on Twitter that I normally would only share with the team
@stratosxyz
Share your thoughts, would love to hear from you DMs open
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@pythianism
Restaking w eth not mutually exclusive to staking w native token
But your point stands as a broader issue around assuming monetary premium for alt L1s if/when Restaking is prevalent
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the typical structure of a crypto company is changing
if you're a founder or investor you should read this;
most people are confused
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Really excited to be supporting
@primex_official
- building the next key primitive for DeFi
Today we’re pleased to announce that Primex Finance completed a $5.7M seed round co-led by
@StratosXYZ
and
@coinfund_io
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idk who needs to hear this but premium blockspace just got 40% cheaper.
the argument for execution layers on ETH vs. alt L1s just got a lot stronger (40%?)
reality is that L2s make a spread off of buying ETH blockspace wholesale.
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taking this together, the flexibility of modular architectures will enable the actual utilization of dApps to drive variations in the stack
and thats the point!
this is a flexible future for on-chain usage
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Thanks for having me on the pod
@tokenterminal
@Oskari_0x
🎙️A new episode of the Fundamentals podcast is out!
In this series, we interview both core protocol contributors & crypto investors and together dive into the details behind the charts available on Token Terminal.
This time, we had the pleasure of hosting
@RennickPalley
from
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• a game might need lots of validation during peak game play hours, but 80% less during weekdays
• trading might need much more blockspace during high volume parts of the day
• NFT project may want to reserve low cost blockspace for a mint in 3 months
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Excited to be working with the incredible team at
@aleph_im
and to announce our lead investment in their $10 million round to expand their plans to decentralize blockchain infrastructure
We are humbled and happy to announce that we raised $10M with Stratos Technologies leading the round.
This will propel toward the realization of our ultimate mission to decentralize everything!!!
👉
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@sreeramkannan
“Tokens” as a solution to economic viability is largely overhyped
This is an example of a situation where it is conceivable that tokenizing Infura’s existing position could be a net benefit to everyone:
- Infura
- Users
- Broader ETH Ecosystem
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Key trends we analyzed this week:
- Solana 30d TVL growth highest in all of crypto (benefit from strong SOL buying)
- ETHBTC back to June '22 lows, threatening lt trendline
Check out
@nuss_eli
thread:
We have a regular call
@stratosxyz
with our investment team where we look at different market data to identify interesting trends and patterns developing in the crypto space.
This week's key takeaways:
ETH/BTC at lowest point in 2.5 years
Resurgence of Solana DeFi
More below👇
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• what are the economic incentives for choosing a stack?
• what are the design parameters a particular use case needs?
• how might these needs vary through time?
• how could fluid architectures enable this?
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Crypto is the most vibrant investment landscape that humanity has ever seen
There is so much opportunity to discover and evaluate that it can be hard to know how to spend my time investigating
Here's my process for identifying new protocols worth learning about
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Today,
@Rocket_Pool
FDV is approximately $385m
So, at today's prices, $RPL staking rewards are $13.5m per year
And there are 7.4m $RPL staked
At a current price of $21 USD/$RPL, the annualized staking yield is
13.5/(7.4*21)=8.7% annualized staking yield
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liquid staking reduces the barrier to entry for participating in PoS chain security
more tokens staked = more security
doing so in a decentralized and permissionless way via
@LidoFinance
and
@Rocket_Pool
avoids some of the risks inherent of staking with a centralized provider
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Couldn’t have said it better myself
@pythianism
The next wave of transformative dApps will be based upon data rich use cases on-chain.
@SpaceandTimeDB
unlocks that. Could not be more excited to be among the first to back them w/
@hiFramework
and
@DCGco
Nate and Scott are incredible founders,
@SpaceandTimeDB
is a major middleware primitive and we've been looking for a team good enough to execute this for years
Stoked to back them, pay attention
Decentralized snowflake
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Hope you enjoyed the thread - let me know if you have conter points, always open to having my mind changed
Will follow up on which DeFi I am most bullish on and how they can adapt their business models to generate more economic value
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ETHBTC down only since the merge
the merge was an ESG psyop
dont fade larry fink
lessons in there
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To summarize:
• liquid staking improves security of PoS and is a critical primitive
• re-staking may be the next key primitive of PoS networks
• value staked is the key security driver for PoS networks
• value staked is usually low for new networks
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show me the incentives, I'll show you the outcome:
the app-specific roll-up argument here:
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too bad satoshi is going to rug pull us in 2150
Its been awesome to see the uptick in Bitcoin startups.
In the last month alone there were 11 BTC related companies that announced funding.
To put that into perspective, there were only 4 throughout all of 2022. Very bullish BTC.
credit to
@DefiLlama
for the data
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I hope you've found this thread interesting, follow me for more:
@rennickpalley
I created this account to learn how to share my thoughts and analysis on Twitter that I normally would only share with the team
@stratosxyz
Share your thoughts, would love to hear from you DMs open
2
0
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@eigenlayer
can help solve this
The protocol incentivizes ETH stakers to allow their staked ETH to also be effectively staked on a second PoS network to support its security
Meaning that the total value required to control a majority of nodes increase significantly
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if its a metaverse, you need:
• moderate security
• fast TXs
• 100% uptime
• practically zero fees
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instead of trying to pick the modular stack that will "win", think about it from a dApp developer perspective:
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What that means in practice:
If token price is low and/or low staking participation is low,
which is common early in the life of a network or after shocks
An economic attack on the network is possible
A bad actor could control a majority of staked nodes if the cost is low
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The founding team can:
(1) build a protocol that generates cash flow for token holders for doing one simple thing
AND
(2) create a centralized entity that revolves around the protocol and generates recurring revenue that adds value in some way
Token AND Equity have value
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what are the design parameters a particular use case needs?
(these are hypothetical but you get the idea)
if its a trading platform, you need:
• extremely high security
• extremely fast TXs
• 100% uptime
• low fees
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The Zuckerberg letter is another data point in a secular shift
Social platforms have realized that they are more powerful than incumbent government and are turning on them
The intensification gov't attempts to censor social platforms are the woke mind virus fighting for life
Mark Zuckerberg just admitted three things:
1. Biden-Harris Admin "pressured" Facebook to censor Americans.
2. Facebook censored Americans.
3. Facebook throttled the Hunter Biden laptop story.
Big win for free speech.
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I hope you've found this thread interesting, follow me for more:
@rennickpalley
I created this account to learn how to share my thoughts and analysis on Twitter that I normally would only share with the team
@stratosxyz
Share your thoughts, would love to hear from you DMs open
1
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ETH selling off post-merge is noise driven by macro fears and short term behavior
If you're long term holder of ETH, the success of the merge should make you significantly more bullish
3 reasons why:
1. ETH network operating costs decreased by order of magnitude (if not 2)
When was the last time
a global-scale commodity (ETH consensus)
See a step-change reduction in cost structure
For the entire industry
… overnight?
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my man
@reganbozman
with another killer thread
agree with most of his points but i also think we're nearing max fud on vc backed infra
a rebuttal in a thread:
- they said VM chains were dead after 2017 ICO bubble
- they said alt L1s were dead once $ETH reigned post FTX
- they
We just had top ETF launch ever, BTC emissions halved, Trump's gone full degen, and you're bearish??
Investors are projecting their own misery, not doing objective analysis
1/ Let's crack a cold beer on this sunny Friday, relish how far we've come, and how far we have to go
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this is the stack that will enable and incentivize builders to create the onchain applications we've been waiting for
the unlock: app-specific state layers that are composable with all others
1. very low cost
2. configurable across each critical design choice (VM, DA layer,
“dymension + celestia == <3”
Dymension and Celestia are mutually bullish for each other. Read. 🧵
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1)
@tokenterminal
I like to use the various dashboards on
@tokenterminal
to discover new protocols that may be rapidly growing their traction
Or sometimes ill hear about it on CT
An easy one to start with is the protocol revenue chart:
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Great overview of AA by
@_nishil_
One of the bigger unlocks for crypto UX improvement
Every smartphone becomes a hardware wallet
+ social recovery
+ cheap TXs
= crypto feels like Apple Pay
One of the major shortcomings of
@ethereum
is the complicated UX.
Let's learn how EIP 4337, proposed by
@nethermindeth
&
@opengsn
in sep'21, tries to solve it with Account Abstraction.
A thread 🧵...
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