Chainfeeds Summary:
As the largest L2 on Ethereum, Base is now subsidizing Gas fees for users who pay with USDC. Crypto researcher Gwart, starting from this initiative, explores the relationship between the two functions of monetary assets: exchange medium and value storage.
Source:
https://x.com/gwartygwart/status/1870500616742822138
Author:
Gwart
Viewpoint:
Gwart: When assigning long-term value to 'monetary' assets, one thing is crucial: whether people view certain things as a means of value storage. Consider this: the US Dollar is used for trillions of dollars in transactions every year as an exchange medium, but if given a choice, few would view the US Dollar as a means of value storage (except in countries with high currency inflation). An exchange medium does not necessarily make a good value storage. In fact, it is somewhat counterintuitive that even if a currency has a stable supply, if no one has confidence in it and no one is willing to store wealth in it, it will still experience hyperinflation. Therefore, it is incorrect to assume that something being useful as an exchange medium means it is a good value storage. In the (possible) future, Ethereum will have thousands of L2s, settling trillions of dollars in transactions, and be used as the 'primary' exchange medium, but it still will not be viewed as a long-term value storage. The US Dollar has excellent utility, but it is still constantly inflating. In contrast, gold is more scarce, and holding gold is for the purpose of preserving value. Sacrificing some L1 execution/MEV is a wise idea, 'if' (and only if) Ethereum believes the social consensus around ETH is strong enough to incentivize people to hold it as a SoV. This is also why the concept of a 'deflationary currency' is easily misunderstood. Literally, the issuance/burn mechanism is to create a balance where the net issuance is around 0. The 'yield' is how the mechanism operates and should always converge to the cost of capital, and if 'excess yield' (economic rent above the cost of capital) is extracted, the system will self-adjust, either by adding more validators or other means to bring it back to the risk-free rate. Additionally, this means that MEV and priority fee on L1 may tend towards 0 (as execution and ordering have shifted elsewhere). In this sense, it is not a 'cash flow asset'. Returning to the value storage argument, my view is that Base is pushing USDC, not ETH. 'Gas fees must be paid in ETH' does not matter, as the settlement fees Base pays to Ethereum are negligible. So when we discuss whether L2s are parasitic, we can ignore the value extracted from fees and MEV. Perhaps Solana's value is a function of MEV and fees (I'm skeptical of this, but it may have better chances on a larger scale). But the parasitism lies in abstracting away the primary value proposition of the asset, which is SoV. This is a tough battle, but if you want ETH to compete with BTC, then continuing to drive the social consensus of ETH as a value storage is the most important thing.
Source
