Let’s look at Solana validator economics here as an example just to get some order of magnitude ideas. Solana is more expensive for validators to run compared to most networks. The resource requirements are higher than average, but it’s certainly not as unattainable as is commonly believed. You can run a Solana validator full node for as low as $35... See more

For our purposes here, we will just draw a simple distinction between L1s and L2s:

• L1 – Network relies on its own dedicated operators.


• L2 – Network relies on the operators of another network. It may or may not have its own dedicated operators in addition to these.

• Operating expenses to run PoS networks are wayyyyyyy lower than PoW. The cost of running software will continue to approach 0.


• As I discussed in Endgame: Proof of Governance , and many others have before me, the superpower of PoS security is really accountability. If you double sign, everyone knows who you are. We tend to even know their real-world

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• Example 1 – We all agree that a token is worth $1bn based on the potential income from earning it. However, they have some weird really high issuance, and you live in a place where that would create a huge tax burden. You probably won’t buy the token, but someone living in a jurisdiction that doesn’t tax their issuance rewards should be willing to

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Crypto is designed to break down barriers, allowing the best money to rise to the top. We see this behavior in stablecoins, where >99% of stablecoins are US dollars. There isn’t a whole lot of organic demand for fiat currency #109. Many people are artificially restricted from holding dollars offchain, which is a major reason for the success of... See more

Imagine that you own 100% of the tokens for a PoS network, and it issues 100% of new tokens to stakers. This makes it clear why it seems silly to tax this issuance. This looks like a stock split – it’s just a redenomination.

Given this, we could say the total income (i.e., revenue) of all traditional PoS token holders = TEV. They are productive income-generating assets. Conversely, the total income of all PoW token holders = 0. For example, BTC holders have no rights to receive any TEV. BTC’s value proposition is as a monetary asset, not an income-generating asset.

The difference is that these operator payments do look a bit different for L2s. L1s have their own dedicated operators that are paid from the network’s own TEV. L2s just recycle the operators of another network. We’re primarily concerned with the data cost here. L2s post all of their data to some other DA layer. L2s need to charge fees which... See more