Empire Cross-Post: The Bull Case For Ethereum | Tom Dunleavy & Ryan Berckmans

This episode of Empire Cross-Post unpacks Ethereum's strategic pivot and its burgeoning bull case, exploring how internal realignments and a renewed focus on L1 development are positioning it to capture a dominant share of the on-chain future, a critical insight for Crypto AI investors tracking platform evolution.

1️⃣ What Went Wrong for Ethereum? Addressing Past Criticisms

• The discussion kicks off by confronting criticisms Ethereum faced over recent years, particularly concerning its price stagnation despite L2 growth.
• Ryan Berckmans acknowledges that Ethereum's rollup-centric roadmap—a strategy where Layer 2 solutions (L2s) handle transactions off the main chain (Layer 1 or L1) to improve scalability—experienced "significant growing pains."
  • L2s (Layer 2s) are scaling solutions built atop a main blockchain (L1) to process transactions faster and cheaper.
• He points to "unforced errors" within the community, such as delayed narrative communication and late initiation of crucial initiatives like interoperability and L1 business development.
  • Interop (Interoperability) refers to the ability of different blockchain systems to exchange and make use of information.
  • Etherealize, a key business development group, only began operating "in earnest" this year.
• Despite successes like World Chain (an L2 associated with Worldcoin, boasting over 12 million verified users) and Coinbase's L2, Base, a prevailing sentiment was that these L2 achievements didn't translate into value for ETH, the asset.
• The hosts reference critiques from figures like Onsgar at the Ethereum Foundation, who suggested "Ethereum has rejected growth" and "built for 10 years out, not today," questioning if the focus on a distant rollup future neglected immediate L1 improvements.

Actionable Insight: Investors should note the acknowledgment of past strategic missteps. The current "pivot" aims to correct these, suggesting a potential re-rating if execution improves L1 utility and value accrual.

2️⃣ The Importance of Confidence and a Holistic Ethereum Economy

• Ryan Berckmans emphasizes that valuation is driven by confidence in the platform's future.
• He argues that the L2-centric roadmap was initiated at the "exactly the right time," but lacked crucial supporting activities: interop, user experience (UX) across all layers, L2 network synergy, L1 business development, and a cohesive narrative.
• A past miscommunication, exemplified by calls to "Get off the L1," is now being corrected to an "L1 plus L2" model, where both layers are integral. Ryan states, "It's really supposed to be L1 plus L2, not L1, you know, or L2 in some kind of blood dome."
• The current shift involves greater attention to the "holistic Ethereum economy," encompassing both the technical roadmap and the narrative explaining Ethereum's strategy and global purpose.

Strategic Implication: The focus on a unified L1+L2 narrative and supporting infrastructure is crucial. Researchers should monitor how effectively this holistic view translates into developer and user adoption across the entire ecosystem.

3️⃣ Defining Ethereum's Product: Beyond Raw Materials

• The conversation explores what Ethereum truly sells to the world.
• When asked if Ethereum sells ETH the asset, blockspace (computational space on the blockchain), or blobspace (dedicated data space for L2s introduced via EIP-4844), Ryan Berckmans offers a broader vision.
  • Blobs (EIP-4844) are a cost-effective way for L2s to post transaction data to the Ethereum L1, enhancing scalability.
• He likens ETH, blockspace, and blobs to "raw materials." The actual product, according to Ryan, is "freedom and global prosperity by giving folks self-sovereign access to the global economic hub."
• Tom Dunleavy, Head of Venture at Var's Capital, adds that while speed is a commodity where centralized systems excel, Ethereum's unique offering is "censorship resistance, distributed world ledgers," and proven security.

Actionable Insight: For AI applications requiring decentralized, censorship-resistant computation and data storage, Ethereum's core value proposition, as defined by the speakers, remains highly relevant. The "product" is less about raw TPS and more about trust and sovereignty.

4️⃣ The Ethereum Pivot: A Social and Technical Realignment

• The "Ethereum pivot" is described as a significant shift, primarily at the social and narrative layer, though with technical implications.
• Ryan Berckmans clarifies the pivot was "more of a pivot at the social layer than the technical roadmap layer." He notes that L1 scaling was always part of Vitalik Buterin's long-term plans.
• A key moment was Vitalik's talk in Taipei, where he reframed the L1 as "not just a security vending machine" for L2s but a "broad-spectrum hub" providing bridging, governance, liquidity, and more.
• This resonated with the community, leading to the popularization of the L1 as the "economic headquarters." This social shift helped reprioritize L1 scaling initiatives that were always planned but perhaps not foregrounded.

Strategic Implication: The renewed emphasis on L1 capabilities alongside L2s could create a more robust and versatile platform. Crypto AI researchers should assess how L1 improvements might directly benefit decentralized AI models or infrastructure.

5️⃣ L2 Tokens and Value Accrual: A Point of Contention

• Tom Dunleavy expresses concerns about value accrual to ETH in an L2-centric world, highlighting that significant volume (e.g., 80% on Base) on L2s with their own tokens might divert capital from Ethereum itself.
• He controversially suggests, "All L2s should retire their tokens," arguing their primary purpose should be customization, settling back to Ethereum and paying a "tax" in ETH for security.
• Tom's perspective is that "every dollar that goes into Arbitrum or Optimism or zkSync or whatever is a dollar that is not going into Ethereum," given the currently limited capital in the crypto space.
  • Arbitrum, Optimism, zkSync are prominent L2 scaling solutions for Ethereum.

Investor Consideration: The debate around L2 token value and its impact on ETH is critical. Investors need to analyze if L2s are synergistic or parasitic to L1 value, and how mechanisms like "based rollups" might change this dynamic.

6️⃣ The Challenge of Pricing Blockspace and Economic Security

• The difficulty of appropriately pricing L1 blockspace and the economic security it provides is a central theme.
• Tom Dunleavy calls this the "million-dollar question." He suggests that pricing is influenced by where assets can achieve more "velocity" (be used more effectively within an ecosystem) and the native security benefits.
• He concedes that valuing these aspects is "somewhat unknowable" and not solely based on direct cash flow, emphasizing the importance of factors like monetary premium.

Research Focus: For AI models deployed on-chain, the cost and reliability of blockspace and data availability are paramount. Research into optimal pricing mechanisms for these resources is essential for sustainable decentralized AI.

7️⃣ Ethereum's Internal Dynamics: Overcoming "Civil War"

• The discussion touches upon Ethereum's internal coordination challenges and recent improvements.
• Ryan Berckmans candidly describes a period of "low-grade civil war in Ethereum over the last 18 months," stemming from disagreements over L2 strategy, L1/L2 interplay, and value accrual.
• He notes a developing social consensus around Ethereum as an "overall economy" where participants can "choose their own adventure," with value accruing through long-term fees and, crucially, confidence.
• A past weakness was the "lack of recognition of the actual problems" like strategic misalignment and insufficient business development. Ryan states, "The world is ready to come on chain... it's not okay for Ethereum to, you know, operate in its ivory tower."

Strategic Implication: Improved internal alignment and a sense of urgency within the Ethereum community are bullish signals. Investors should monitor if this translates into faster roadmap execution and more effective go-to-market strategies.

8️⃣ Bolstering Business Development: Ethereum's Go-to-Market Evolution

• The need for robust business development (BD) for Ethereum is highlighted as a critical factor for growth.
• Tom Dunleavy shares an anecdote about a policymaking organization in DC that had met with representatives from Stellar, Polkadot, and Cardano, but not Ethereum, because they "don't know who to meet with."
• The emergence of Etherealize and more coordinated efforts from the Ethereum Foundation (EF) are seen as positive steps.
• However, both speakers agree more is needed. Ryan Berckmans asserts, "We need 10 times more Etherealizes," emphasizing the need for a scalable human capital strategy for global outreach. Tom Dunleavy notes Etherealize is likely "massively understaffed versus all of these other competitors."

Actionable Insight: The strengthening of Ethereum's BD arms is a key trend. Researchers and investors should track Etherealize's impact and the broader ecosystem's efforts to engage enterprises and institutions, which could drive significant adoption for AI use cases.

9️⃣ L1 Scaling's Positive Impact on L2s

• Contrary to concerns that L1 scaling might compete with L2s, Ryan Berckmans argues it's "massively net good" for them.
• He clarifies that the primary value of L2s isn't just technical scaling, but "political diversity" and "business model innovation." L2s allow organizations to customize their chains while remaining part of the broader Ethereum economy.
• Even if the L1 were infinitely scalable, large entities would still desire "their own walled gardens" or customized environments, which L2s provide. "It is inventive primarily and technical scalability is an input and requirement into that, but it's not the whole thing in and of itself."
• Therefore, a more scalable L1 enhances the entire L1+L2 ecosystem, making it more attractive for diverse use cases.

Investor Note: A stronger L1 benefits L2s by providing a more robust and cheaper settlement layer. This synergy is crucial for the overall health and growth of the Ethereum ecosystem, including AI applications that might leverage both layers.

🔟 Navigating User Experience (UX) and Roadmap Timelines

• Tom Dunleavy raises concerns about user experience and the pace of Ethereum's roadmap.
• He points out that current UX for cross-chain interactions can be "confusing" and "too hard," citing Solana's simpler UX as an advantage. "Solana's opportunity I always thought was the Ethereum road map is going to take way too long to deliver than the user is willing to wait for."
• Tom also expresses concern that current upgrades like Pectra (referred to as Spectra in transcript) and the upcoming Fusaka are primarily focused on scaling L2s (e.g., larger blobs), with significant L1 execution scaling not expected until late 2026.
  • Pectra/Fusaka: Ethereum upgrades focused on improving L2 scalability, particularly through enhanced blob capacity and data availability sampling.
• Ryan Berckmans confirms Fusaka will increase blob capacity significantly (target 48 blobs from 6) via peer-to-peer data availability sampling (DAS) but contains no specific L1 execution scaling EIPs. The subsequent upgrade, Glamsterdam, is where L1+L2 changes are being considered, but explicit L1 scaling EIPs are indeed further out.
  • Peer-to-peer Data Availability Sampling (DAS): A method allowing validators to confirm blob data availability without each downloading all data, crucial for scaling blobspace.
• However, Ryan notes ongoing efforts to increase the L1 gas limit via social consensus among validators, which could offer near-term L1 capacity improvements.

Actionable Insight: The timeline for L1 execution scaling is a critical factor. While L2s benefit from cheaper data, AI applications needing high L1 throughput must monitor progress on gas limit increases and the Glamsterdam upgrade. UX improvements via account abstraction are positive but broader cross-chain UX remains a challenge.

1️⃣1️⃣ L2 Competition and ETH Alignment

• The potential for L2s to be perceived as competitors if Ethereum L1 starts offering similar features is discussed.
• Tom Dunleavy argues that relying on social consensus for L1 gas limit upgrades isn't ideal and that native L1 upgrade commitments are needed to excite builders and VCs, who might otherwise look outside Ethereum due to the perceived slow roadmap for L1 execution scaling.

Investor Watchpoint: The dynamic between L1 evolution and L2 offerings is key. If L1 incorporates features that L2s currently provide, it could alter the value proposition of L2 tokens and platforms.

1️⃣2️⃣ The Debate on "Tariffs" for L2s

• The idea of L2s paying more (a "tariff") for using Ethereum's security is debated.
• Ryan Berckmans views it as "shortsighted and premature," arguing the current low fees are a "loss leader" to grow the network effect. The focus should be on global adoption, after which value accrual will follow.
• Tom Dunleavy, however, "kind of like it," noting the high profit margins L2 sequencers currently enjoy (90-95%). He sees based rollups (or enshrined rollups), which would more directly share sequencer revenue with the L1, as a positive development on the roadmap.
  • Based/Enshrined Rollups: L2 designs more deeply integrated with the L1, potentially sharing sequencer revenue and MEV with the L1, thus improving ETH value accrual.

Strategic Consideration: The evolution towards based rollups could significantly impact L2 economics and ETH value accrual. This is a critical area for AI investors to track, as it affects the cost structure of L2s.

1️⃣3️⃣ Ethereum's Long-Term Vision: A Thousandfold Growth

• Ryan Berckmans articulates a vision of massive on-chain growth, with Ethereum capturing the lion's share.
• He is unconcerned about current L2 fee structures because "it is so unbelievably early for the on-chain story." He anticipates "onchain growth getting a thousandx larger" in the coming years and decades.
• This growth, largely on Ethereum L1+L2, will make Ethereum "much more special and valuable," diminishing the relative importance of other L1s and even Bitcoin, driving value to ETH through confidence and its central economic role.

Investor Outlook: This long-term vision underpins the bull case. For AI, this implies a future where a vast, interconnected on-chain economy provides fertile ground for decentralized AI services and data markets.

1️⃣4️⃣ Valuing Ethereum: Beyond Cash Flows

• The challenge of valuing Ethereum, a $300 billion asset, is addressed, particularly when direct L1 cash flows might seem low relative to its market cap.
• Tom Dunleavy suggests valuing Ethereum based on the "amount that is secured for the current infrastructure and all projected future infrastructure," including applications, assets, and users, akin to valuing "the new Linux."
• The core idea is that ETH's value is intrinsically tied to the economic security it provides; to attack the network, one would need to acquire a significant amount of ETH, linking its value to the total assets secured.

Valuation Insight: For Crypto AI investors, this "security premium" model is important. As more AI-related value (models, data, IP) is secured by Ethereum, the intrinsic value of ETH as a security mechanism should theoretically increase.

1️⃣5️⃣ The Bull Case for ETH: Catalysts for Growth

• Tom Dunleavy outlines his bull case, including a 10K ETH price target within 18-24 months.
• The primary driver is "assets are coming on chain faster than people think," citing examples like governments tokenizing real estate. Ethereum's network effects and security position it to capture this influx.
• He emphasizes that the catalyst isn't one single event but "a number of small catalysts": improved BD (Etherealize), L1 scaling efforts, better L2 integration, and crucially, enhanced coordination within the ecosystem.

Investor Takeaway: The bull case rests on broad-based adoption and incremental improvements across multiple fronts, rather than a single silver bullet. The tokenization of real-world assets (RWAs) is a significant component of this.

1️⃣6️⃣ Ethereum's Path to Dominance Amidst Competition

• Ryan Berckmans, an "Ethereum megabull," believes Ethereum will "eat the economic world" and become a multi-trillion dollar asset.
• He acknowledges Solana's success, attributing it to a different, more centralized strategy in both technical architecture and business development. However, he argues Solana faces "political scaling challenges" and "monolithic scaling challenges."
• In contrast, Ethereum's "modular road map and the L1 plus L2 scales the way the world actually works," offering crucial choice and customization that will ultimately win out. Ryan confidently states, "Ethereum is now through the woods... and it scales the way the world actually works."

Competitive Analysis: While acknowledging competitors, the core argument is that Ethereum's decentralized and modular approach is better suited for long-term, global-scale adoption, a key factor for AI systems requiring resilient and adaptable infrastructure.

1️⃣7️⃣ Portfolio Strategy and L2 Token Viability Revisited

• Tom Dunleavy shares his personal portfolio approach, holding ETH and Solana (SOL) in similar proportions historically due to past uncertainties about Ethereum's execution, but now leans more heavily on ETH.
• Regarding L2 tokens like Optimism (OP) and Arbitrum (ARB), Tom reiterates his skepticism: "I don't understand the value of them," believing their functionality will eventually be more natively integrated into the L1 via based rollups.
• Ryan Berckmans disagrees, stating "every L2 token needs to justify its existence." He believes the best L2s with strong tokenomics and utility will thrive, and this competitive token marketplace is a strength.

Investor Strategy: The viability of L2 tokens remains a debated topic. Investors must assess each L2 on its individual merits, tokenomics, and its specific role within the broader Ethereum ecosystem, especially as L1 capabilities evolve.

1️⃣8️⃣ World Chain and Concluding Perspectives

• Ryan Berckmans reveals his second-largest holding is World Chain (WLD), citing its high growth, prominent token, association with Sam Altman, and successful miniapp framework as key attractions.
• Tom Dunleavy concludes by emphasizing that his critical stance on Ethereum's roadmap is constructive, aimed at addressing the final "2%" of issues to unlock its full potential.
• Ryan Berckmans closes by highlighting Ethereum's current market cap relative to Bitcoin and gold, suggesting that as on-chain activity grows exponentially with Ethereum at its core, ETH will become significantly more important in the store-of-value landscape.

Final Thought: The episode underscores a pivotal moment for Ethereum, with renewed internal vigor and a clearer L1+L2 strategy. For Crypto AI investors and researchers, this signals a maturing platform increasingly capable of supporting complex, high-value decentralized applications, demanding close attention to its roadmap execution and ecosystem growth.