According to CoinDesk, the emergence of cryptocurrency as a new investable asset class worldwide is set to change the way the internet functions. This will lead to new business model analyses, key performance indicators, metrics, benchmarks, reporting and audit structures, data providers, and buy- and sell-side research structures. Crypto investors must understand concepts such as Metcalf’s Law, Moore’s Law, Lindy effects, open-source technologies, composability, and the 10-year window to effectively analyze crypto networks, protocols, and applications.
Ethereum is approaching its 'broadband moment,' where throughput constraints are resolved through a layer-2 blockchain, enabling scalable infrastructure to support new applications and the next billion users. In under two years, transactions on Ethereum's largest L2 scaling solutions (Arbitrum, Optimism, and Base) have grown by 3,438%. Investors must understand the economic relationship between L2 and L1 to accurately assess and predict value accrual within the tech stack. L2s are complementary to Ethereum and its related asset, ETH, with L2s retaining an average of 23.5% of all transaction fees and Ethereum validators receiving the remaining 76.5% of user transaction fees paid on L2.
As L2s continuously drive down costs and enable superior user experiences, this should ultimately increase the usage of Ethereum L1. However, L2 margins are expected to compress over time as competitors enter the market and Moore's Law continues to play out. To advise clients or invest within the crypto tech stack, it is crucial to understand how value is created and captured at each layer.
