Author: taetaehoho

Compiled by: Deep Tide TechFlow

Do concepts like L1 premium, monetary value, xREV/TEV... really exist?

Special thanks to @smyyguy and @purplepill3m for reviewing and providing feedback on this article.

If you are not very familiar with REV, you can read this article by @jon_charb.

The following multiples are based on valuation data as of 12:00 PM (Eastern Time) on October 30, 2024.

L2 profit is its revenue (including base fees and priority fees) minus on-chain operating costs (such as L1 data calls, blobs, and verification costs). Data for Arbitrum, Optimism, Zksync, and Scroll are from the past twelve months, while Blast only has data for three quarters (which inflates its multiples compared to other projects). Data for ETH and Solana is also from the past twelve months.

A few points to note:

  1. REV and L2 revenue are comparable metrics. L2 revenue is the income before deducting operator costs (sorter costs), which is similar to REV.

  2. L2's DAO allocated a large number of tokens during the token generation event (TGE). A portion of L2's fully diluted valuation (FDV) can be attributed to governance value, which does not exist in L1 tokens. Therefore, we psychologically adjust the multiples for L2 upward but do not make this adjustment when discussing the observations.

Direct observation at what time:

  1. There is no significant 'L1 premium' in terms of fully diluted valuation (FDV), but most L2s are not fully circulating yet. However, there is indeed an 'L1 premium' in market cap comparisons. (The FDV/L2 revenue for Arbitrum and OP is approximately 100-250, while Ethereum and Solana's FDV/REV is around 118-140).

  2. The trading multiple of Optimism is significantly higher than other comparison projects. Investors seem to be optimistic about its collective expansion.

  1. Through collective profit sharing (i.e., 15% of sorter revenue and 2% of profits), the DAO has generated net profits exceeding OP's L2 revenue in the fourth quarter to date. From the total value accumulated in the treasury, the collective strategy has been successful. Considering that Base has contributed approximately $9 million to the collective treasury, it would be a good option to conduct large-scale revenue sharing grants in the future.

  2. Restricting block space is not related to increasing revenue. The median fee for Arbitrum during liquidation peaks is around $10, but its L2 profit is lower than Base.

  3. Token buyers have not priced in the growth of Scroll (the market cap is 3 times the L2 revenue).

  4. The L1 verification cost of ZKP has temporarily reduced the profitability of Zk rollups. Currently, we have not seen the cost savings from state differences being passed on to users.

Please refer to the spreadsheet for more details.

This raises several questions for me:

  1. Does a monetary premium genuinely exist? Or do L2s have the same valuation when on-chain activities are identical?

  2. Does ETH truly have a sovereign premium (SOV) compared to Solana? (Ethereum's REV is primarily concentrated in the first and second quarters of 2024; if we only compare the most recent quarters, is this premium apparent?)

#ETH