Key takeaways

• Layer two solutions face challenges in their value proposition without strategic changes.
• Composability is crucial for creating a self-contained blockchain ecosystem.
• Execution is becoming more important than monetary components in blockchain value.
• Ethereum’s economic model struggles due to an overemphasis on execution.
• Ethereum’s price may challenge its all-time high as the market evolves.
• Fragmentation in Ethereum’s ecosystem leads to value capture by individual Layer 2s.
• Excessive transaction fees highlight Ethereum’s scalability issues.
• Layer twos explore diverse trade-offs while anchoring security to Ethereum’s layer one.
• The roll-up centric roadmap focuses on exploration rather than productivity.
• Centralization versus performance is a fundamental trade-off in blockchain.
• Layer twos can outperform layer ones in terms of performance.
• Layer twos are cost-efficient due to fewer servers compared to layer ones.
• Latency limits layer ones in applications requiring real-time interactions.
• The layer two centric roadmap has succeeded, capturing TVLs from layer ones.
• Layer twos preserve Ethereum’s security while allowing fund withdrawals.

Guest intro

Brett DiNovi is the Co-Founder and Head of Strategy at MegaETH, a high-performance Ethereum Layer 2 blockchain targeting 100,000+ transactions per second. Previously, he led growth and strategy efforts at Optimism, a leading Ethereum L2 scaling solution. His insights on L2 ecosystems and MegaETH’s 2026 roadmap stem from hands-on experience building and scaling blockchain infrastructure.

Challenges in layer two solutions

• “The value proposition of layer twos is broken unless they implement certain strategies.” – Brett DiNovi
• Vitalik Buterin’s comments highlight the need for strategic changes in layer twos.
• “We aim to create a self-contained ecosystem with maximal composability.” – Brett DiNovi
• Composability is key to maximizing the potential of decentralized finance applications.
• “The value in blockchain ecosystems is increasingly driven by execution rather than just monetary components.” – Brett DiNovi
• Execution over monetary value marks a shift in blockchain ecosystems.
• Ethereum’s economic model faces challenges due to an overemphasis on execution.
• “Ethereum’s monetary premium has not materialized as expected due to an overemphasis on execution without capturing execution fees.” – Brett DiNovi

Ethereum’s ecosystem and scalability issues

• “Ethereum’s all-time top may be challenged again as the market evolves.” – Brett DiNovi
• Fragmentation in Ethereum’s ecosystem leads to value capture by Layer 2 solutions.
• “People think about Ethereum as this one ecosystem but it’s very fragmented and value is being captured by these individual subsidiaries called l twos.” – Brett DiNovi
• Excessive transaction fees highlight Ethereum’s scalability issues.
• “I remember looking at my addresses interacting in Ethereum and it was I paid for a house in fees and it’s disgusting.” – Brett DiNovi
• Layer twos are essential for exploring diverse trade-offs while anchoring security to Ethereum’s layer one.
• “The shift to a roll-up centric roadmap was driven by the desire for exploration rather than just productivity.” – Brett DiNovi

Performance and cost advantages of layer twos

• “The trade-off between centralization and performance is fundamental to blockchain technology.” – Brett DiNovi
• Layer twos can maximize performance beyond what layer ones can achieve.
• “What layer twos can serve in this trade-off curve is the far end of the curve which is maximizing performance.” – Brett DiNovi
• Layer twos are cheaper for processing transactions due to fewer servers.
• “It’s cheaper for a layer two to process transactions and there’s no question around that.” – Brett DiNovi
• Layer ones have a fundamental limit on scaling and reducing transaction costs.
• “The cost basis for layer ones is just fundamentally higher than layer two.” – Brett DiNovi
• Latency in layer ones limits their use in applications requiring real-time interactions.

Security and decentralization in layer two solutions

• “Layer twos preserve most of the security guarantees from Ethereum while allowing users to withdraw funds back to layer one.” – Brett DiNovi
• Centralization in block production can lead to censorship, but proper design can mitigate this risk.
• “With centralization the major risk is centralized is censorship.” – Brett DiNovi
• Layer two security relies on the correctness of smart contracts managing state transitions.
• “The layer two security mostly relies on correctness of a piece of smart contract.” – Brett DiNovi
• Future layer two solutions may need to align closely with Ethereum layer one’s specifications.
• “My guess is they are going to push a spec that is equivalent to Ethereum layer one.” – Brett DiNovi

Strategic direction for Ethereum and blockchain ecosystems

• “The Ethereum community needs to adopt a more aggressive approach to compete effectively in the blockchain space.” – Brett DiNovi
• Composability in DeFi allows for innovative financial applications.
• “Composability was one of those things where you can have all of these applications of core property cryptos.” – Brett DiNovi
• Ethereum’s scalability is limited compared to other chains like MegaEath.
• “If you take Ethereum’s current throughput you 10x it and then you 10x it and then you 10x it.” – Brett DiNovi
• Ethereum will never achieve the scalability needed in the next five to ten years.
• “It’s just like it’s just how the systems work whenever there’s this much capital at play.” – Brett DiNovi

Execution environments and market dynamics

• “The focus should be on creating a high-performance execution environment rather than just integrating with other chains.” – Brett DiNovi
• There are always trade-offs in technology, particularly between security and centralization.
• “There’s always a trade-off security centralization whether you believe it is real or not.” – Brett DiNovi
• Ethereum could become a performance and user experience black hole due to current debates over consensus mechanisms.
• “Mega eth will be a performance and ux black hole because right now we’re in the early stage of all this stuff.” – Brett DiNovi
• User experience will drive applications to gravitate towards the best execution environments.
• “Apps are naturally gonna just gravitate towards the place that gives them the best execution environment.” – Brett DiNovi

Valuation and economic considerations in blockchain

• “The pricing of security in blockchain ecosystems is grossly miscalculated.” – Brett DiNovi
• The fair market price of security can be calculated based on in-flight volume and transaction settlement times.
• “The fair market price of security is the number of transactions or the amount of money you are sending.” – Brett DiNovi
• Ethereum’s value proposition is fundamentally flawed and does not justify its current market valuation.
• “I fundamentally think that I cannot justify the value proposition or the value capture of Ethereum.” – Brett DiNovi
• The value of Ethereum is tied to the amount of tokens staked and the market cap.
• “The token itself becomes more valuable because Ethereum itself is secured by pos proof of stake.” – Brett DiNovi

Innovations and future trends in blockchain

• “The unique construction of our ecosystem allows us to utilize our native stablecoin, USDM, to create value and rewards that stay within the system.” – Brett DiNovi
• We believe our approach to launching USDM from zero gives us a competitive advantage over other stablecoins.
• “Since we’re starting from zero right it’s already live people are already doing it.” – Brett DiNovi
• Athena provides flexibility in asset management, allowing for strategic asset swaps.
• “The reason that we went with Athena for this is because it gives us flexibility for the mixture of assets.” – Brett DiNovi
• The proximity market allows users to bid for physical closeness to the sequencer.
• “We have this virtual space next to our sequencer we are then this is effectively would be a priority fee.” – Brett DiNovi

Speculative investments and industry maturity

• “Meme coins are fundamentally speculative and do not pretend to offer anything substantial.” – Brett DiNovi
• The rise in speculative investments like meme coins is driven by human nature and economic pressures.
• “The underlying reason why someone goes to pump is because there’s an affordability crisis.” – Brett DiNovi
• The crypto industry needs to focus on more substantial products rather than just meme coins.
• “If we really wanna grow up as an industry and wanna be taken seriously we kinda need to focus on the real shit.” – Brett DiNovi
• Stablecoins can provide consumers with better financial returns compared to traditional bank accounts.
• “If you put your money in a bank account they’re gonna give you maybe 200 three like no 25 to 30 basis points.” – Brett DiNovi

Societal impact and future directions for crypto

• “Crypto should aim to solve harder societal problems rather than just focusing on technology.” – Brett DiNovi
• Attaching a chain’s image to certain applications can limit the ecosystem’s growth potential.
• “If people kind of attach the image of a chain to these kind of applications it does limit the cap.” – Brett DiNovi
• Valuations in the crypto industry are broken and need to be reevaluated.
• “I think valuations are frankly broken in this industry and I think I see where the puck is going.” – Brett DiNovi
• Building supportive ecosystems for developers can enhance overall market efficiency.
• “If we can own an aggregator inside of our ecosystem we can create things that are actually better.” – Brett DiNovi

AI and blockchain coexistence

• “The talent drain to AI will eventually lead to a resurgence in interest in crypto.” – Brett DiNovi
• In a world of mass abundance created by AI, blockchain will be essential for verification.
• “In a world of mass abundance and as these techniques for replicating and creating things continues to get more advanced.” – Brett DiNovi
• There is no fundamental competition between AI and crypto ecosystems.
• “I don’t really think there’s competition between the two ecosystems because I think it’s just fundamentally different skill sets.” – Brett DiNovi
• In five years, we should not blame regulation or infrastructure for our challenges.
• “I would hope that in five years’ time we don’t have regulation to blame maybe on the margin.” – Brett DiNovi