Speaker A
There's a saying in finance and investing, and I think in life in general, in hindsight, it was obvious.
Raoul Pal explains why a few smart contract layer one blockchains like Ethereum, Solana, and Sui will dominate crypto's future value.
Key Takeaways
- Only a few layer one blockchains will dominate the crypto infrastructure landscape.
- Ethereum remains the most valuable and secure smart contract platform despite some inefficiencies.
- Solana and Sui offer faster, cheaper alternatives with growing economic density and programmability.
- Investing in a diversified basket of top layer ones is a prudent long-term strategy.
- Intelligence output and energy efficiency are key metrics for evaluating blockchain value.
Summary
- Smart contract layer one blockchains will accrue the majority of crypto's total value as foundational infrastructure.
- Layer ones are analogous to major operating systems or cloud providers, with only a few dominating the ecosystem.
- Ethereum holds the largest economic and intelligence density, supporting DeFi, NFTs, and real-world assets.
- Bitcoin serves primarily as global savings and has a capped total value, unlike infinitely scalable layer ones.
- Solana and Sui are notable layer ones with strong technical advantages like speed, programmability, and economic density.
- Sui maintained economic density even during an 80% market drop, showing resilience and potential.
- The value of a layer one can be measured by developer activity, programmability, transaction speed, and total value locked (TVL).
- The universal principle is that systems producing more intelligence per unit of energy outperform over time.
- Raoul emphasizes a basket approach to layer one investments for long-term growth and wealth generation.
- The video also touches on the broader concept of intelligence networks and their role in economic and technological progress.
Chapters
- 00:00Introduction: The Obvious in Hindsight
- 00:27Smart Contract Layer One Will Dominate Crypto Value
- 01:14Layer Ones as Infrastructure Giants
- 01:51Specialists and Bitcoin's Role
- 02:25Economic Value of Ethereum
- 02:55Understanding Infrastructure Value
- 03:16Scalability of Infrastructure Layers
- 03:42Top Layer Ones: ETH, Solana, and Sui
- 04:42Sui's Unique Advantages and Market Resilience
- 05:21Universal Code and Intelligence Output
Full Transcript — Download SRT & Markdown
Speaker A
Yes. This is often said It's often said by people who have regrets, who missed a trend, didn't invest.
Speaker A
We're lucky to have you here, Raoul, the man who can read long-term trends, and you're saying that there are a couple of things that are actually obvious in foresight.
Speaker A
Let's go through them one by one, so people don't have an excuse in 10 years to say, "In hindsight, it was obvious." The first one you mentioned before, smart contract layer one will accrue larger percentage of crypto total value
Speaker A
over time as the investable infrastructure layer. Yeah. Can you explain? So, this is the universe basic equity idea, right? We for the first time we've got a globalized infrastructure, digital infrastructure, unlike the internet, that we can participate in, that the AI
Speaker A
and others will use, and we get to reap the benefits of them. Right? This is This is the trade-off we're giving to them taking part of our knowledge worker away is they're going to give us the ability to make money from their economy that
Speaker A
they create. Over time, the layer ones, people don't understand this, is the layer ones, if you think of all big networks that are important for infrastructure, whether it's operating systems, uh whether it's cloud, all of that, there's basically
Speaker A
three to four main players. Then there's a a bunch of specialists, and then there's a tail of stuff, but it really accumulates to three or four to five people.
Speaker A
This will be the same. So, it's going to be around three, four, five chains as layer ones. Then there'll be specialists, like Hyper is a specialist.
Speaker A
You know, can that continue to one vertical niche thing. Okay, great. Um there'll be somebody who does something slightly different, privacy, but that's really on the Bitcoin side of the ledger, which is a non-smart contract.
Speaker A
Mhm. Um, so the infrastructure layer becomes much more important than people understand. We've talked about in the past. Every ticket becomes an NFT, you know, every All of these things, the whole finance system comes on board.
Speaker A
That's all accruing value to layer ones. How I try and explain the value of a layer one is Ethereum.
Speaker A
Okay, so if you were to pull the plug on Ethereum today, how much economic value do you destroy?
Speaker A
I mean, huge. Every layer two, all of DeFi, all the real-world assets, all of NFTs, everything that's been built on ETH goes to zero.
Speaker A
ETH is probably undervalued for that already, let alone the growth rate of these things, and let alone thinking, well, the finance system's going to come a lot on ETH and layer twos and stuff like that.
Speaker A
So, that's how you got to think about what is the value of that infrastructure.
Speaker A
Uh, and so if you think of Bitcoin, Bitcoin has one job, and it has one target, which is global savings.
Speaker A
And so Bitcoin is a power law distribution, cuz over time, you can only get to 100% of global savings.
Speaker A
Infrastructure layer can scale infinitely, which is why again, Google and all of those companies have just been like that on a log regression channel.
Speaker A
So, that means for you that the layer one, whichever you choose, ETH SOL Sui should be a majority of your portfolio.
Speaker A
I still think, [clears throat] you know, I've done a lot of work. I just presented this Sui live about this.
Speaker A
is for me, and I know I'm biased cuz I'm on the board, but but this is from deep analysis, is it is clearly ETH has the largest amount of economic and intelligence density of any of these. Solana has is proven. And
Speaker A
then we're talking about remember three or four. Mhm. Who else? The only one through the analysis that I got to was Sui.
Speaker A
Mhm. Because it has more TVL per user than Solana does. And it's a lot younger. No and when the market fell 80% it didn't lose any economic density. In fact, maintained it. There was only three tokens that maintained economic
Speaker A
density. ETH, Solana, Sui. And when you look at Sui on a bunch of other bases, you've got the output of intelligence cuz it's programmability, the speed, and all of this stuff. So, I just think there's a basket of four or
Speaker A
five you can own layer ones and you can go to the beach and in 10 years time you can fly back from the beach in a private jet.
Speaker A
Mhm. [laughter] [snorts] [gasps] I thought we don't like to travel anymore. [laughter] Well, private jet yeah, It's different.
Speaker A
It's different. Yeah, I don't know. I've never flown in a private jet, so. Not yet.
Speaker A
Not yet. [snorts] In 10 years. In 10 years. Layer ones that can output the largest amount of intelligence per unit of energy will outperform over time.
Speaker A
Yes. So, this is this I've not really fully released the entire thing on the universal code I've written about it.
Speaker A
People don't really understand it yet. But the [clears throat] there's a set of operating principles that are observable, improvable, and understandable of how the universe works.
Speaker A
The key one is the entire universe from atomic structure to solar system structure completes um continues to convert units of energy, which is the fixed all of physics says is you can't destroy or create energy.
Speaker A
And out of it comes intelligence. We're part of that process. Um and AI is part of that process.
Speaker A
And blockchains are the same process. Everything is. They all are networks as well. Every single one of them are created by networks.
Speaker A
And so what you've got is an intelligent network of computing storage, which is blockchain.
Speaker A
And money, as we talked about, why does Nvidia get more money than anybody else?
Speaker A
Because they're creating more intelligent output than any other company on Earth right now. Why is Anthropic doing it? Because they're they're producing more intelligent output. It happens literally everywhere.
Speaker A
Why is the Nasdaq outperforming? Once I discovered this universal code, I see it everywhere in everything. It's the organizing principle of the universe.
Speaker A
And what you find is all geopolitics is based on it. All of what human activity is based on it. Everything is based on it. So that's what this is about is anything with more intelligence does well.
Speaker A
How can you measure that for a layer one? To know which one you should bet on or which ones you should bet on.
Speaker A
So intelligence comes in many forms. Firstly, intelligence of human capital. How many builders, programmers, developers.
Speaker A
Then what is the programmability and efficiency of that programmability? How fast does that blockchain convert energy into programmable outcomes. So ETH in this case is actually not great.
Speaker A
But ETH wins massively from the number of developers and economic density, the Lindy effects, the security, all of that, right? So it's it's very solid. As I've said, it's like the Microsoft.
Speaker A
You know, you don't get fired for ETH. You've got Solana, which is much more efficient, much faster, [clears throat] much cheaper, um easier to deal with than ETH.
Speaker A
Uh less developers, but good good density. Um you've got Sui, which is much earlier, but as we said, it's uh it's things like program will um block times block transactions of a thousands transactions within one block. It's like
Speaker A
a different order of magnitude than anything else. It's speed to finality is a different order of magnitude. It's programmability is a different order of magnitude. So, what you've got is provable intelligence. Now, doesn't mean anything unless you can prove that hey, how many
Speaker A
applications does it have built on it? How many applications per user? You know, that kind of stuff. You start to see these metrics and you can see density forming. It's still not there.
Speaker A
It's still early. You know, you want to see you want to see a large portion of stable coins versus TVL, which is like that is stored energy in the system ready to be deployed into the system.
Speaker A
Right now, Sui is like um Sui's TVL is equivalent to the stable coin size. You want to see it twice that or more.
Speaker A
When you get to ETH, you see huge amounts. So, there's a there's a bunch of indicators, but what you're looking for is what can you do with a chain how little cost. So, when people look at blockchains, they look at discounted
Speaker A
cash flow analysis them to value them. How many how much fees does it generate?
Speaker A
Doesn't generate fees. ETH so expensive. It's [ __ ] nonsense because because the very purpose of a network like this is to be the cheapest fastest.
Speaker A
Yeah, absolutely. So, if you use discounted cash flows, you miss the actual signal, which is cheapest, fastest, most programmable will outperform over time.
Speaker A
You move fast, your money should too. Cast lets you spend stable coins across 170 plus countries with a card that works at 150 million plus merchants. No waiting, no bank friction.
Speaker A
Just [snorts] money that keeps up. Cast, keep it stable. Check the link in the description to learn more.
Topics:Raoul Palcryptolayer oneEthereumSolanaSuiblockchainsmart contractsDeFicrypto investing
