Based Rollups To Transform Ethereum's Economic Model

According to Foresight News, Based Rollups are set to fundamentally change Ethereum's economic model by altering the incentive structure, potentially increasing the long-term demand for ETH by 100 times. The core idea behind Based Rollups is that Layer 2 (L2) solutions will no longer just pay for data availability (DA) but will also utilize existing Layer 1 (L1) validators for processing. This shift is expected to make processing the most profitable part of the blockchain economics process. Validators who help verify and process these Based Rollups will benefit beyond the general network inflation rewards. This change does two significant things: it increases the value of staking ETH in a way that is not dependent on the amount of ETH staked, and it opens new avenues for the monetization and value capture of ETH. For instance, validators participating in MEV (Miner Extractable Value) auctions will bid in ETH to become the block validator, earning one-time profits. Other models could include pre-confirmation staking, where validators must stake more ETH than the value of the transactions they pre-confirm, and proof of burn, which requires ETH to be burned to select new L2 validators. Additionally, Based Rollups can operate across multiple rollups, increasing liquidity access and the number of cross-market settlement transactions, thereby increasing overall gas demand. This dual approach helps ETH appreciate by making regular ETH staking more valuable and allowing competitive bidding for idle processes within the Ethereum network without increasing L1 gas. When combined with Ethereum's deflationary mechanism, this creates an intriguing scenario where the minimum feasible issuance rate for Ethereum could reach 0%, yet validators could still earn a yield of 4%-8% due to the value captured by Based Rollups and MEV. If the new issuance rate is 0% but the yield from staking ETH remains higher than U.S. Treasury bonds, the concept of Ultrasound Money could thrive. This improvement not only enhances the Ethereum user experience and L2 modularity but also eliminates liquidity fragmentation through Based Rollups. This fundamental change in Ethereum's economic model will occur without any updates to issuance, as the incentives between L2 and L1 validators are realigned. This will be the first time that the incentives for staking Ethereum will be driven by overall EVM (Ethereum Virtual Machine) usage rather than ETH issuance rates. This separation could make a $100,000 ETH a reality within the next decade. While there is a key economic issue regarding value capture that needs to be addressed, aligning usability with the goals of every ecosystem participant has already brought us halfway to success.