Crypto's "too many chains, not enough apps" problem echoes the early internet's infrastructure glut. Back then, skeptics mocked fiber buildouts — until YouTube, Netflix and cloud computing proved them wrong. Ethereum is now making a similar bet on data availability. Will demand follow? Or are we just repeating history, minus the payoff?

April Fools' crash:

Source: @MoonGotchi

A bizarre April 1 sell-off sent several mid-cap tokens — including ACT, DEXE and KAVA — tumbling as much as 40% within minutes, sparking rumors of a hack or liquidation cascade. The tokens, ranging in market cap from about $30-$800 million, share no clear fundamentals, ecosystem ties or commonalities other than that they dropped sharply around the same time on Binance, leaving traders scrambling for answers.

Some pointed the finger at market makers like Wintermute and DWF Labs, though both denied any involvement in provoking the crash. Was it a rogue algo or API misfire, low liquidity or targeted sell pressure?

The largest of these — DEXE at $787 million and KAVA at $427 million by market cap — are not new tokens. They launched in 2020 and 2019, respectively.

Although some prices have partially recovered, the synchronized plunge remains an April Fools' Day mystery, and not one that holders of these esteemed assets will find funny.

— Macauley Peterson

Ship Fast. Show Up. Build Loud.

Permissionless IV is for the ones building quietly, releasing early, and moving fast.
Not "thought leaders." Not influencers.

Founders with product. Devs with commits. Teams with traction.

🎤 Speaker apps are open. Show what you're building.
💻 Hackathon = $100K+ in bounties.
👀 We cover your ticket if you're shipping.

📅 June 22–26 | Brooklyn, NY

Call for speakers

The Ethereum bet

If you ask the average person in crypto what problems the industry faces today, "too many chains, not enough apps" quickly comes up as a common gripe.

This complaint has a striking parallel to the days of the early internet.

During the dot-com boom of the late 90's and early 2000's, skeptics similarly criticized the perceived overinvestment in excessive infrastructure, particularly fiber optics.

Telecom companies (Global Crossing, WorldCom, AT&T) spent billions laying undersea cables and long-haul fiber networks based on the belief that internet traffic would grow exponentially.

Even internet pioneer Bob Metcalfe criticized this perceived overinvestment, arguing that there simply wouldn't be enough demand.

With the luxury of hindsight, we now know that Metcalfe was wrong (Metcalfe literally ate his words in 2006 after he conceded his error).

The explosive surplus of bandwidth is what makes amazing products like YouTube, cloud computing and Netflix possible today.

Netflix, for instance, was a mail-based DVD rental business for years until it slowly began its transition to streaming in 2007 — thanks to the foundations of bandwidth infrastructure laid prior.

In short, the bet that "if we build it, demand will come" eventually proved true for the internet, though it took a decade and the bankruptcy of internet infrastructure companies like Global Crossing.

Ethereum is kind of placing its chips on a similar bet today.

Per its rollup-centric roadmap, the Ethereum L1 today in effect gives up execution fees to L2s.

But Ethereum plans to eventually reap the profits in data availability (DA) fees through its upcoming upgrades to scale the supply of DA. The idea is that Ethereum DA will eventually be so abundantly plentiful that it would induce eventual user demand.

Just like the early internet builders, Ethereum researcher Justin Drake believes "if we build it, demand will come."

Drake's moonshot math looks like this: At 10 million TPS, with each transaction paying $0.001 in DA fees to Ethereum, that comes up to ~$1 billion per day of revenue for Ethereum.

(This assumes L2s use the Ethereum L1 for DA, as opposed to an alternative DA layer like Celestia or EigenLayer. But Drake believes the benefits of synchronous composability will make it so.)

It's a bold thesis considering DA consumption today. Ethereum's blob gas fees came up to about a mere $272k in March.

Maybe Ethereum bulls believe Web3 will play out similarly to the history of Web2, but Ethereum also doesn't exist in a silo and it faces stiff competition from other chains.

We also still have so few guesses as to the kinds of onchain applications that will dominate blockchain usage. Will the world need that much data availability?

But I digress. The claim that there are "too many chains" may eventually be true. But it's too early to tell, as it was in the early days of the internet.

If true, markets are serving to curb further wasteful spending. Case in point: The L1 premium has been rapidly compressing.

The days of $300-$500 million dollar raises for an L1 are over. L1/L2 blockchain raises in 2024 ranged from as low as $14 million (Initia) to as high as $100 million (Berachain) and $225 million (Monad).

The high costs of running an L1 and a lack of value capture sends a feedback signal to markets to stop funding these things.

In comparison, L2s are much cheaper to launch, about $5-$15 million, per estimates by Blockworks' Jason Yanowitz.

That may explain the Celo L1's recent transition into an L2, or what Kydo, EigenLayer's head of special projects, calls Ethereum's "inevitable gravity toward efficiency."

— Donovan Choy

Level up with lvlUSD's DeFi-native yield

While yield-bearing synthetic dollars like Ethena's sUSDe chase off-chain returns through opaque CEX trades, lvlUSD is doubling down on DeFi. Born out of Peregrine Exploration's Level protocol, lvlUSD has quietly grown to a nearly $150m TVL in just five months of beta — powered entirely by onchain lending and restaking. In March, Dragonfly led another $2.6m round into the project, joined by Polychain, Flowdesk and Frax's Sam Kazemian, bringing its total raised to over $6m.

Here's the alpha: Users mint lvlUSD by depositing USDC/USDT, which is supplied to Aave, then around 10% of those aTokens are restaked on Symbiotic. This yield backs slvlUSD — the interest-bearing version of lvlUSD — which is currently paying 8.76% trailing seven-day APY. Collateral backing is transparent, visible onchain, and contracts are audited and open source.

But don't mistake DeFi-native for fully decentralized — Level runs on a 5-of-8 Gnosis Safe multisig to handle administrative actions such as contract upgrades or fund movements. Signers include independent security firms such as Spearbit, and the protocol has a three-day time lock for admin changes, plus onchain monitoring by Hexgate. Still, that means a small set of trusted parties control upgrades and reserve routing. Level isn't trying to be Sky. One can think of it as a bit more like an onchain hedge fund in a stablecoin wrapper.

For more juice, Pendle and Spectra both support lvlUSD and slvlUSD for fixed yield plays — nearly doubling native APY.

— Macauley Peterson

kain.near @kaiynne

Replying to@kaiynne

This is the FUNDAMENTAL question anyone looking to allocate to Ethereum must ask themselves, either explicitly or implicitly: How does ETH, the asset, increase its profit margin? How does it charge L2s more for blockspace.

3:18 AM • Apr 1, 2025

36 Likes 0 Retweets

4 Replies