Ethereum altcoins set to explode?

In this episode of Crypto Over Coffee, Hashoshi breaks down his thesis for why altcoins in the Ethereum ecosystem are ready to explode. The confluence of the Dencun upgrade that will drive Ethereum L2 adoption, speculation on the Ether ETF, and restaking protocols could be catalysts.

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⏰ // Timestamps // ⏰
0:00 Crypto Over Coffee #155, let’s go!
0:50 Solving Ethereum’s core challenges
1:25 Gas fees and the fee market
3:10 The Ethereum L2 ecosystem
4:07 ETH L2’s also consume Ethereum resources
5:40 Solving Data Availability (DA)
6:55 The Dencun Upgrade
10:15 An explosion in Ethereum L2 adoption
13:04 Uniswap is giving us a hint
14:00 Ether ETF
18:22 Uniswap’s recent change could matter
19:27 Speculation drives price discovery
20:09 Alt data availability solutions like Celestia
23:13 Restaking, be excited and be careful
25:25 Putting it all together
27:07 Build your crypto strategy for the year!

#Hashoshi #Cryptocurrency #Ethereum

In today’s episode of crypto over coffeee we’re talking about ethereum and more specifically ethereum layer 2 Season which I believe is coming around the corner where we’ll see an explosion of the ethereum layer to ecosystem and a return back to True bull market form in the ethereum space and there are a bunch

Of different reasons why I think this is going to happen but most importantly I think it’s environmental conditions and some of the different um factors that are going into the ethereum space right now uh around ethereum ETF uh new upgrades to the ethereum ecosystem and just the normal rotation of capital into

Altcoins and altcoin worlds when Bitcoin does really well so we’re going to talk about a variety of things today so without further Ado make sure you get subscribed and let’s get started so the main reason first and foremost why I think ethereum layer 2 season has not

Yet kicked off and then will soon uh is because of an upgrade to the ethereum EOS system before we get to that upgrade I want to facilitate a little bit of learning on what the challenges are and I think people know ethereum is a little long in the tooth there are some issues

That it has including sort of Aging or established challenges with standards like the rc20 standard uh some of the issues around building with solidity which make writing really strong audited contracts relatively difficult we get all that stuff but I think the most prevalent issue that people face is gas fees it’s scalability

It’s the usability of the chain people want instantaneous transactions they want low fees and they want unfragmented liquidity and ethereum right now is a place where really only the wealthy can transact during peak times in particular 20 5075 $100 per transaction or more depending on what you’re trying to do

And there’s a reason why those fees are so high so you can think of ethereum and many other blockchains like economies and in ethereum you have a community of validators who drive the chain forward they help finalize blocks of transactions and they’re chugging along but these nodes in the network really

Computers running ethereum software they’re also performing functions that take resources cost electricity to run these computers first and foremost but second of all it takes compute and storage to execute smart contract logic and store that result on the chain in certain cases it takes resources to store that data data storage costs

Resources and so what this is is in a given block you have a certain amount of gas and that certain amount of gas is basically a resource constraint it’s an upper bound of supply of resources to process transactions that you might be submitting or someone else might be

Submitting and so that is where the scalability challenge comes from and the fee market around gas is driven by demand that far outweighs the supply of gas in any given block there’s way more demand for Block space for compute and for storage resources on ethereum than one can possibly handle on the ethereum

Chain and that is why gas fees are so high and so we’ve seen a lot of movement around scalability Solutions and the driver for a lot of scalability in the ethereum space is now a layer two focused ecosystem which is basically used the layer one blockchain that’s the

Ethereum main net for security derived security but your transaction execution and all of that good stuff at scale on a layer two Network that sort of sits above that ethereum main net and so you first saw arbitrum and optimism which were uh which are optimistic Roll-Ups and we’ll talk about the difference

Between optimistic Roll-Ups and ZK Roll-Ups in a second so stick with me and then you also had others that came out um ZK sync ZK evm by polygon the list goes on and on and on there are tons of layer twos in the ethereum space and a lot of them actually have some

Decent usage particularly arbitrum and optimism now when we look at the problem at the ethereum mainnet level though is that layer twos also consume resources on the layer one because they obviously have to publish proofs of these transactions that happened on the layer two to the layer one and so there is a

Scalability challenge in that as well and that effects the fees that are offered on the layer 2os so there are now people saying well the ethereum layer 2 fees aren’t even that great you know I I’m still paying decent a decent amount of fees on on layer twos it’s way

Lower but it’s not as good as something like a a salana might be so how do we solve that problem one of the foundational problems is that data storage component if you think of an ethereum block and you think of how much gas there is how much res how many

Resources there are to handle the execution and storage within a block you can probably get that you and me doing transactions of erc20 tokens and erc721 nfts and layer 2 is trying to publish proofs to basically finalize transactions from the layer two or process withdrawals those also are requesting

That same space in the same blocks that everybody else is trying to use and that affects the fees that layer twos can offer if they’re paying high fees to finalize transactions on the layer one then obviously those costs get distributed redistributed to the users in many cases so how do we solve this

And why should we solve this why does a layer two even need to publish data to the layer one and so let’s talk about that for a second there is a concept here that you’ve probably heard a lot about recently because of some of the projects that have done really well in

This space that focus on this problem and that’s the data availability problem it’s basically when someone needs to access a certain bit of data to verify something to use that for proofing Etc is it available foundationally the name is exactly what it means it means that

In this case as a layer two let’s say an optimistic rollup and I publish fraud proofs to the chain I need to be able to guarantee that a user who wants to validate a given transaction can validate the validity or verify the validity of a transaction can that data

Needs to be available and so on the ethereum network data availability really happens by way of consummating it on chain here’s the issue like we talked about before the economics of this are challenging because now you have people basically sharing one Highway with layer twos what we’re trying to do now what

You see with the um denune or Denon well I don’t even know how they pronounce it now but this UPG upgrade to the ethereum ecosystem now is to sort of separate those two things is to provide basically a separate rail or separate space for layer twos to publish these

Critical packets of data so for data verification and data availability purposes layer twos like I mentioned they need to publish this data and there’s a reason for that like I mentioned before layer twos in general they are appro in sort of two categories optimistic rollups and ZK Roll-Ups both

Require data availability and data space on the ethereum layer one they rely on the finality and the security model of the ethereum layer one for optimistic rollups they take an optimistic approach to transaction validity they basically say I’m going to assume this transaction is valid I’m going to publish fraud

Proofs on chain on the layer one and then if there’s a dispute we we Rectify it right and so there’s a waiting period for transactions to be truly final or for you to exit that layer two in an optimistic rollup period or an optimistic rollup uh environment because

Of that optimistic approach so it’s assume the transactions are valid unless proven otherwise within a given period so sort of a dispute period ZK rollups on the other hand use very complex mechanisms effectively to bundle up a proof for a huge batch of transactions and they published that on

Chain and that’s basically establishing those transactions as final so you can see why people think or believe largely that ZK rollups are the future because they don’t have that user experience blip with regard to the dispute period or the delay that’s involved you don’t have to assume transactions are valid

Until proven otherwise you can verify them in place and you can execute them as if you were on the layer one and so that’s a talk for another day and I don’t think that one type of of Layer Two is going to win out entirely and you can see that because arbitri and

Optimism which are optimistic rollups even in the presence of ZK rollups are still doing quite well so anyways I digress on that point data availability foundational problem as you probably Now understand based on what we just discussed you also now get that there’s a solution in this Denon upgrade for

Ethereum it is dubbed Proto den sharding and is going to introduce blob space in addition to block space effectively it’s separating those two things so that layer 2’s can use this blob space this arbitrary data space on chain for data availability on the layer one which will in

Turn ease some of the economic pain with regard to usage of this these resources on chain for layer 2 data and this is something that was missing when ethereum went through the merge and we shifted to this layer 2 centry key ecosystem it was always there was always this question at

What point do the layer tws no longer make economic sense to a user because the layer one is so congested and so painful to use and during a bull market it’s only going to get worse so Proto denen sharding this Denon upgrade which is going to come this year it’s in the

Works it’s already been introduced in test Nets this is going to be a huge Catalyst event for the ethereum ecosystem in my particular opinion that is because a lot of people are driven right now by where the economic activity is so let’s talk about why why salana

Why why are people using salana there’s a lot of economic activity around meme coins and Defi and interesting stuff going on there there’s a lot of air drops happening right people come for the economic activity but it needs to be accessible so then people come easy onboarding low

Fees virtuous cycle you have cool things happening Builders are building users are coming they’re bringing in their their liquidity they’re using it because it has low fees they’re happy about that great the same thing can happen in the ethereum ecosystem and it has over the last several years without strong layer

2 presence uh in reality and so this year I believe with strong layer 2 presence with some of the technological issues being resolved actively I think we could be in for a real treat with regard to ethereum layer 2s for the same reason so this upgrade happens proten sharding is

Introduced blob space can be used by layer 2 is you have an immediate step change in the value proposition for layer twos the fees that layer twos have to charge go down in my opinion they will go down relatively drastically it may not be a 100% change it may not be a

100% mean zero fees but anyways you get the point it may not be massive but it will be significant um based on what I think the projections are and what theal calculations are uh in terms of how this will be adopted so you have this as a sort of

Catalyst event it’s setting the stage I think ethereum’s user experience is decent I think there are some room there’s some room for improvement but you have years of wallet development behind ethereum in the form of different wallets I really like rainbow I’m optimistic about Rabbi um you know

Metamask isn’t that bad I think people trash it a lot but it’s pretty decent if you know how to use it there are still some outstanding user experience issues in ethereum uh people not understanding the complexity of ethereum virtual machine executions not verifying their transactions first using

Approved functions on nfts and erc20 is and then getting funds stolen those things are bad we are not ignoring those but we’re looking at this from an economic activity perspective I think the stages set for the ethereum ecosystem to explode as a result of lower fees people building and then

Subsequently users coming and bringing their liquidity you also have excitement around defi even in the Old Guard right Unis swap just recently did their fee switch now the uni token is going to be a revenue generator for owners so if you’re a participant in governance for

UNIS swap you’re an owner of uni you are in a revenue generation place you know very interesting we’re going to talk about another reason why that’s relevant in just a moment to this whole conversation but what I mean is is that we haven’t yet seen that excitement

Level rise for ethereum like we have for some of the other ecosystems yet and some may say well that’s because ethereum is dead I would beg to differ on that and I think that history shows that that is the case of course history repeats until it doesn’t but I’m only

Giving you my perspective you’re free to disagree with me and let me know why in the comments now I alluded to The Ether ETF a little while ago so we understand the technology part denune upgrade introduces lower fees for um for layer twos and we’re going to come back to

Another interesting point on that in a second but I want to talk about the E3 TF first a lot of people on uh crypto Twitter I guess crypto X now are talking about an ether ETF so let’s talk about that now what’s the likelihood of an ether ETF happening considering the SEC and

Their to put it nicely adversarial approach to crypto and they’re reluctant to their chrin approval of the Bitcoin ETF I think that there are a lot of things in favor of an ether ETF on paper right you have members of the SEC and in previous trials I I believe in the

Ripple trial there was some discussion around these points that ether being referred to as a commodity in the past and that is true that that that is documented truth it has been referred to as a commodity by members of the SEC included in the past you also have uh a sort of a

Precedent with the Bitcoin ETF that something like this can be done uh and that it does not have an immediate disastrous impact on the asset Okay the third point is there’s been analysis done on the the security model of ethereum and the strength of ethereum’s Economic Security model and the impact

Of an ETF on its security model which is something that I was relatively concerned about and actually I kind of still am where in a proof of stake environment you know in a different way than proof of work your economic uh ownership of the network token or or coin in this case ether

Directly is correlated to your your sort of your power in the network right and concentration of ether in the hands of small individual parties is a relative concern now there are mechanisms in the proof of State designed for ethereum to work around this and we get that but

What I mean is is that the net of time over a long period of time concentration and increasing concentration of ether Supply does concern me slightly in a proof of stake environment way more than it does in proof of work in proof of work for the Bitcoin ETF I was more

Concerned about people having control of the market in an extremely finite Supply environment if you hold three five 10% of Supply you can manipulate the market wholesale easily that was my concern on the other side for ether I’m more concerned about impact to the network or even the perception of impact to the

Network networ because a lot of this is about trust and belief so there are reasons why I think the e3f could be approved and there there are definitely areas to argue that it could be approved but we have to consider who we’re talking about right now who are we dealing with we’re

Dealing with the SEC we’re dealing with commissioner Gary Gensler we’re dealing with a a a an SEC that by and large does not think crypto should be a thing I I mean it’s very clear that that’s the case and so therefore if you look at ether

And you think ether was a coin offering right it was there were people in the room and I wasn’t in the room during the coin offering uh wish I was but I have a couple people that I used to work with that were in the room during some of the

Early pitches for ethereum and bought in right then and there and said I want I want an allocation of tokens or of coins or whatever this ether thing is right there was a token sale there was distribution that way and people can argue it they could debate it but that’s

Just that is how it happened and I think it was done fairly and I think that is completely reasonable to go that way but the SEC is surely going to argue that that makes ether a security proof of stake ether your ability to earn yield on ether for staking it in the network

They’re going to argue that that makes ether a security and they’re going to say by that hand an ETF needs way more scrutiny we need to think about this more they’re going to delay delay delay delay and then I told you I’d go back to this Unis swap point now on the ethereum

Network you have tokens that are in Real Deal security territory when we originally talked about this this was last year I think we talked about this on the show The Unis swap fee switch or fee swap I forget what they were calling it to make the uni token sort of a

Revenue generator and basically giving owners of the token a cut of protocol Revenue I said that makes this coin in many ways a security and so how is that going to get treated now Unis swap Labs didn’t just make this decision so can they come after Unis swap labs this was

Community governance who are they even going to come after on this or are they just going to ban the coin altogether could they even ban the coin is that even uh something that they could enforce these are all big questions and I think these questions are going to

Start getting raised in the discussions and deliberation for an ether ETF so while I think the speculation of an ether ETF coming down the pike is going to be really profitable for a lot of people in the ethereum ecosystem and their layer 2os because you saw the speculation for the

Bitcoin ETF no matter how many hurdles everyone’s like it’s happening it’s happening it’s happening and we went up up up up that could very well happen but I’m not convinced yet and I will update you on this channel if I change my mind I’m not convinced yet that we have a

Slam dunk case for The Ether ETF right now I think this going to take time to do and it’s going to be a bigger fight than people think if you have a differing opinion though let me know in the comments or on X at hosi 4 now I

Want to Circle back one more time to this data availability situation because I’m sure there are people sitting in their chair right now saying hey wait wait wait you talked about Proto dang sharding you talked about data availability and the economics of data storage on the layer one but you

Completely ignore a huge part of this and you’re correct I wanted to save it for a little later there are data availability solutions that are separate and apart they are alt da Solutions or data availability Solutions one of the big ones you can probably guess is Celestia

It’s one of the main reasons why I’ve I I sat down at the towards the end of last year and I thought when is the ethereum pop going to come and we’re thinking about all these upgrades I’m trying to figure it out I see Celestia just exploding blowing up and why is it

Blowing up it’s blowing up because it’s solving a genuine problem and it was one of the first ones to really really nail that that niche in my opinion so there was there’s another one called a veil I believe those two I think were were ones that were discussed the

Most so anyways what was I saying Celestia Alt da I don’t think that the ethereum layer one Proto Dan sharding is going to mean that Celestia and all of these other alt da Solutions or data availab availability Solutions are no longer relevant what I think it is going

To really result in is a niching down the ability to specialize it’s going to create a market for data availability ju deposing cost security model and security guarantees and economic security and maybe to an extent scalability but those are kind of linked to each other okay so what that means is

Is that some layer twos May opt to utilize a mix of of data availability Solutions some may op for one opt for one or the other you’re going to start to see selective choices being made by layer 2 providers and there are a ton of layer tws out there more than I could

Even mention in this show because I didn’t write any of them down I’m just kind of coming up with them on the top off the top of my head people are going to be creating rollups like burgers this year right like it’s just like an assembly line you’re going

To see the the bar to create a ZK rollup right now is getting so so so so much lower than it used to be and doing it right is still not necessarily easy but you’re going to see people chomping at the bit for data availability Solutions

And this ethereum layer one is is not going to be the only one that makes sense for everyone okay so what I’m saying is is that this ethereum ecosystem layer 2 Season layer 2 summer whatever you want to call it is going to extend to these alt data availability

Providers and it is going to be fueled by and largely benefit as well a whole other breed of projects that I would broadly call these reaking projects reaking okay what is re aking and this is the final Like Home Run smash for the ethereum ecosystem um like liquidity influx or excitement

Overload okay reaking it’s basically a way for people who hold ether in stake and they have either that ether or the derivative like st e you know stake de whatever your derivative token is and to apply that then to other protocols basically it allows you to restake that ether in other projects so

It’s allowing you to extend the um the security value the economic value uh Economic Security value of that ether in stake to other things so igen layer is a project that’s getting a lot of attention right now in the reaking space and igen layer is building out a ton of

Different ways to restake ether you’re going to see a ton of reaking projects coming out into this this world in a very very near future and I have to tell you I think I have concerns with regard to the sustainability of reaking solutions because I think we’re getting

Into an environment where people are basically stretching the value of ether really really really really far I don’t know how sustainable reaking is in the long term I would like to be wrong it could be a huge huge bubble that pops very dramatically but this video is

About the bubble it’s not about the pop so bear that in mind as a warning parties always end this party if I’m correct that it’s going to start is going to start it will be really fun and then it will end and you need to be very

Mindful of when the end is coming so do not think that this party will never stop it will I promise you it will I still believe that the combination of upgrades in the ethereum layer one the alt data availability Solutions together so Proto dank sharding Celestia ital all

Together are going to fuel lower fees better user experience on the layer twos you’re going to see defi you’re going to see to an extent nfts you’re going to see those things start to pop off again in the ethereum space and a lot of it could be driven liquidity Wise by an

Influx of capital speculating on the ethereum ETF or The Ether ETF which may or may not happen quickly but you know how speculation goes and you will have reaking as well which gives an opportunity again for people to extract economic value okay so you have a lot of

Catalyst events in the ethereum space right now sort of converging and we haven’t really yet seen ethereum get that level of excitement yet in this early stage of a bull run so if we start to see the market cap of crypto inflating expect ethereum to benefit

From it not just altcoins and that is my last point of the day is Bitcoin has been going on a major run now we’ve had a little bit of a cooldown now and that’s fine but when we have a cool down on bitcoin generally Capital rotates into altcoins and bull markets we

Haven’t seen and we have data to show we haven’t seen retail flying into crypto like we have in years past so when that happens and I believe that it will happen on the back of institutional adoption and institutional buying you could see that Capital start to roll down into ethereum and other

Altcoin ecosystems so that is my thesis that’s what I’m thinking about right now that’s why I’m optimistic about ethereum and it’s and its layer twos in particular because it provides that low fee instant gratification environment that people really really really want and we can tell they want it because of

Salana and because of some of the other ecosystems out there so so to recap we’ve got a lot of exciting stuff coming please subscribe to the channel if you’d like more videos like this or you have a suggestion for a video or podcast that you are interested in watching or

Listening to please let me know in the comments or in the suggestion box on the podcast really appreciate you stopping by and hope you and your family have a great rest of your weekend and until next time cheers