Realtime Ethereum Needs a New Financial Primitive | Kevin Lepsoe - ETHGas

All right, guys. Welcome back. Uh, so coming up next, we have Kevin, the founder of Ethas, talking about why Ethereum needs, uh, Realtime Ethereum needs a new financial primitive. Here you go.

All right. Thank you. Uh, my name's Indeed, the lights are blinding. Um, my name is Kevin, founder of Ethcast and uh, I wanted to take you guys on a journey today and talk a little bit about uh, real time Ethereum and basically how was it possible to make at least part of Ethereum real time and secondly like what does it unlock and maybe what does it mean for the ecosystem and so I don't need to sell Ethereum to you guys of course but you know it's a you know $300 billion market cap it's a huge blockchain If you look at all the tokens or assets on top of it, it's you know 350 billion. It's has a lot of network value.

Of course, you know, half the stable coins are on Ethereum and all the RWAS are coming to Ethereum as well. So, we love Ethereum, but um you know, is it really like does it really deserve all of this and does the world does it deserve kind of the world putting their assets on chain? Uh because it has a couple problems. Um you know the first one is ME. So we uh talked about this a little bit in the last session about $300 million a year is basically like extracted in terms of like front running or sandwiching from the everyday person.

This uh extraction it turns into basically yields for validators. Um and for the validator it's about 30 basis points of yield on top of their consensus layer rewards. So validators get paid about 3% uh uh yields but without me they'd get you know uh 30 basis points less. The second one of course is that well Ethereum is super slow. You know it's 12 seconds and there are other chains that are much faster.

In fact I think almost every other chain is faster. Um so you know I I posit that these are really the two almost last unlocks for Ethereum and u you know the the journey to kind of like get through this. It starts with block space and so this of course is a block. It is uh 12 seconds long and within a block are many transactions. You know these these lines here.

On the left side we call that like the start of the block and on the right side we call it the end of the block. And um you know conventionally like um at the end of the 12 second mark you know like what price you got. So if you're trading like oh this was the price you were executed at um and you only really know at the end of that 12 second period. Now where me comes into play and the extraction comes into play is that um searchers or block builders alongside block builders they say well you know I should move this transaction behind this to either frontr run it or back run it and they basically reorder all the different transactions in the block. And so um this is where the value comes from um searchers and block building.

And so how much is a block worth? It depends. But uh on average you can kind of use like a hundred bucks as a proxy. So technically you could control the entire network and it's $650 billion of assets for $100 for 12 seconds. And so, um, theoretically it's possible to control, bad word, but you know, you could control it for 12 minutes and that would be about 6,400 bucks.

And, uh, the point being is that block space is underutilized. Like, if it's only $100 to control the network effectively, there has to be something else that we can do to um um to make the network and its block space more valuable. And so with blockbased markets, you know, we we come back to u I guess kind of the real world where you have traditional commodity markets. Of course, you have energy, precious metals, base metals, agriculture, and a whole bunch of other um isoteric or exotic commodity markets. Now, these markets serve a few things.

They the first thing is price discovery where effectively like I actually know what this instrument or uh this commodity is worth whether it's like physically delivered in this location in the world or another location. The second thing is risk management and so for the people within a pipeline like let's say you're a uh an energy producer or oil uh miner uh or sorry you're extracting oil u you'd want to sell that offtake. So it basically reduces risk to the suppliers of the commodity and then to the people buying or the demand side they can basically acquire that in advance. Maybe you're like a uh like like a steel steel factory and you're wanting to buy electricity forward because of some certain demand. And so um commodity markets basically reduce risk within the ecosystem.

The third one is um kind of related to price discovery. It's a cartel visibility. And so you know um Ethereum and almost every blockchain you have these uh cartels or searchers u that um control the network. And so the other commodity market is basically block space. And so uh you have Ethereum's Ethereum has one business and its business is creating or sorry is uh selling its block space.

It happens to be the highest grade block space and that's all Ethereum does. Um, but if you were to remove block space from Ethereum, then Ethereum is worth zero and all the assets are worth zero. And so it it warrants the the need for a commodity market. Now, actually, does that show up properly? Okay.

Well, anyway, uh, so you can basically buy blocks ahead of time. Uh, you can buy them about 64 slots or 12.8 minutes into the future. Now, when you buy a block ahead of time, you could do a few things. You could, it's like an empty barrel of gas.

So you could buy it and sell it 1 second later, 2 seconds later, it's entirely up to you. Um the price you buy and sell, it's a function of the market. Uh second thing you can do is you can build the block. So this is like the physically delivered pipeline. It's not really a derivative product.

It's uh well it kind of is but like someone actually has to build the block at the end of the day. The third thing you can you can do is you can strip apart a block into different pieces. And what this means is that you could take the top of the block and front run everyone and then sell off the rest of the block. You could also um you know strip apart and say I only want to be included somewhere in the block. It doesn't matter where and then again you could sell off the rest.

So you could basically break it into different parts. You could do nothing. So you just build an empty block and that's your prerogative. You've paid $100 for it and the validator is seemingly happy with it. And finally you can combine it into multiple blocks.

So if you were to buy two blocks of 12 seconds, that's 24 seconds and you have synthetically created a longer block. Now the ability to um acquire a block, it kind of unlocks this next step which is well what if I built a block differently? What if I didn't build it to uh prioritize me but maybe something else? And so that something else is basically what if I wanted to prioritize building a block in a real-time environment. And within real time, I hope you guys can see the lines, but within a real-time environment, you basically take that block and we've split it into these 100 millisecond uh mini blocks.

And so um yeah, so we break it into 100 millisecond mini blocks where basically at the end of the first mini block, you have a state update. So effectively any trades that landed in that first block, you would know like what is the state of the blockchain at at the end of that 100 millisecond mark. And then you basically could trade multiple times throughout this 12-second block period. And so your transactions, if you traded here, the the ordering would be respected until the end. It wouldn't get reordered at all.

It's basically real time. When the trades come in, you get locked into that um that price and that position. In this environment, there's no front running. There's no sandwich attacks. Theoretically, there is because there's a like a 100 or maybe 50 millisecond window, but the sheer network latency, it doesn't allow you to kind of like uh query that information and be able to like uh uh update your trade within that period of time.

So, um for the most part, about 94% of me disappears, which is huge. Um and so, what does Ethereum look like in a real-time environment? Now, the first thing is AMMs. So unis swap for example uh we ran a study where basically if if Ethereum was real time how much money um would the LPS of unis swap make? And so we took some pools and said well in this pool in particular it was ETH USDC.

And so uh the pool had a fee of five basis points and a block time of 12 seconds. And as you reduce the block time down here, Uniswap could actually reduce their fees from five basis points down to one basis point and the LPs could make 2.7 times what they're making right now. So effectively um you know they're making a lot more money within a real-time environment. And this is obvious because instead of trading once over a 12- second period, people would trade multiple times.

you would trade maybe not a 100 times but like three or five times within that 12-second interval. This is a very blue chip token. There's other alts where um the LP fees go up to maybe 15 or 20 times what they currently are. So um net net you look at well how what are the total fees to LPs over the year? Um and what if they could make you know 2.

7 times as much and the net benefit to unis swap alone just them alone is three to three half billion dollars. I wish this showed up a bit better with the black screen. Anyway, um the other consideration here is that well if Ethereum is real time then you know as much as for legacy reasons we might keep the swap interface on unis swap they could actually have uh like a trading view or kind of candlestick chart because indeed the prices could change that fast within the block. Uh secondly is uh lending protocols. So they could um reduce their risk because now they can liquidate over much smaller interval intervals versus 12 seconds.

Um or they can increase leverage and this kind of increases the money supply within the ecosystem for the everyday person within the wallet. You could have your kind of standard slow medium fast transaction and now you could have an instant button where basically you hit the button and by the time you lift up it's done. And so when you kind of oh I forgot one more thing is that in this environment where Ethereum is so fast liquidity from other L1's come to Ethereum liquidity from L2 has come to Ethereum and now it's a deeper pool with um you know second order effects and so you go from this environment where you know the the value of a block is worth about $100 and now in this real-time environment we've unlocked $5 billion of kind of net benefit. And how can that now be distributed? And so the point is we go from a block which is worth $100 to one is worth that's worth this much more.

And so what does this mean for the blockchain trillemma? Just checking my time is basically you have the trillemma within scalability of course you have throughput and latency. And so throughput is being addressed for the most part by the ZK uh EVMs. Be able to prove blocks in real time. We go from 30 million gas last year to potentially 300 million this year.

So the size of the block is 10 times larger in 2026. And now the latency goes from 12 seconds down to 100 milliseconds. And so effectively it's 100 times faster than it was in 2025. Um we've been doing this within a limited testing environment. uh about 1% of the network is actually real time right now but um we'll be scaling up to 5 10% over the next few months and so finally as a community well we've solved the trlemma across all the different people uh working on these initiatives and so there you go that's a taste of Ethereum but now in real time thank