Web3’s Land Rent and Seigniorage

Source: Zuoye Waiboshan

Now is the crisis moment when the Earth encounters the Trisolarans, and you are Yun Tianming, who has lived in the Trisolarans for many years. Now you need to pass some information to the people on Earth, so you edited three stories:

Story 1:

You are a young man from a small town. You can wander around the town. When you reach adulthood and want to support yourself, there are two choices in the market:

1. Caizhu Liu is kind-hearted and can sell you a piece of land. You pay for it in one hand and the land in the other. But the problem is that you lack sufficient funds to purchase the land, so Caizhu Liu is even kinder. He says he can rent the land to you, and you only need to hand over a portion of the harvest to him;

2. The county magistrate heard about it, and he was also kind-hearted. He said he could let you lease a piece of public land in the county, as long as you hand over a portion of the harvest to the county after the wheat is ripe.

After careful consideration, you choose the land of Mr. Liu, hoping that you can work hard and save enough start-up capital to buy a piece of land from him. However, due to natural disasters and man-made disasters, there is always not enough food to eat, and sometimes the harvest is not enough to pay the rent. So Mr. Liu lends you money so that you can sow and eat. He is really a kind man.

You also heard that the county master can't find labor to work, and is ready to sell the land to Mr. Liu. This is also good. If you sell it to Mr. Liu, you may be able to rent it, and you can buy it when you save enough.

Story 2:

You are a young person who can travel around the world. When you reach middle age, you want to settle down and buy a house. Now there are two choices in the market:

1. You can choose to pay in full at one time, handing over the money and the house at the other hand, and then you only need to pay the property management fee, water and electricity network fee. However, you looked at the house price and your pocket, so the bank was kind and said that it could let you take out a loan to buy a house. In this way, you signed the loan contract, the developer had money to pay the migrant workers, and the local government received the civil servants' salaries and pensions;

2. The Chinese agent on the other side of the ocean heard about it, and he was also kind. He said that you can buy a house in installments. Now is the interest rate cut cycle, and mortgage loans will become cheaper and cheaper. In the future, you only need to pay a little property tax every year, and you will have permanent property rights after the mortgage is paid off.

After careful consideration, you choose to take on a mortgage. At least now the house is yours, and you don't have to pay taxes in the future. However, after three to five years, the government will provide fewer and fewer services, community security will become worse and worse, and housing prices will seem to be gradually falling. However, the mortgage you pay will occasionally be a little less, but it is still expensive compared to the current housing prices.

At this time, you begin to envy another paradise where you only pay property taxes. Property taxes are the economic pillars of community security, education, and community joint actions. Hayek's big hand will build a paradise on earth.

Stop for a moment, and tell the third story later. In fact, the above stories are not complicated. They are the land rent/taxation economic models of the agricultural era and the urban (industrial) era. Under the agricultural economic model, people can only have economic ties with the land. Being relegated to hired farmhands and lowly people is not the most tragic. The unrestrained vagrants have gained freedom, but they often fall on the roadside overnight.

Land in the industrial age is still the most important means of production, but the economic value of food output is rapidly decreasing. Only factories built on it have value. Therefore, the income generated by renting land to build factories will quickly exceed that of landlords. However, production still needs to be sold to realize cash, and selling to individuals can be directly realized. Therefore, commercial real estate is popular, but weak risk resistance leads them to regard real estate as the only value carrier. The rent economy has once again become the center of economic activities, and productive activities cannot be compared with it. "Re-feudalization" will lead to Liu Caizhu's family being the only one to stand out.

Suppressing rent and maintaining production activities will allow people to get rid of the shackles of the rent economy and allow more people to share the profits of economic activities.

Ethereum is a rent economy, and ETH is a seigniorage

Before proposing more effective economic policies, let's take a look at another global commons, Ethereum's "land" policy.

Similar to the Trisolarans, there is no concept of private property here. Open source and openness are its underlying concepts. Similar to Linux, fewer developers have created an economic scale of trillions. The uniqueness of Ethereum is that Token can change the current situation of Linux's value realization, which can only rely on donations and hot money. The asset issuance method without thresholds also allows private property and public value to grow together. As long as ETH is used, everything is meaningful.

If everyone can understand the profound significance of using ETH, then they will find that the recent debate around the Layer2-Rollup expansion route is meaningless, whether Vitalik no longer supports L2 or only mentions the Stage 1 stage of Rollup.

The economic model of L2/Rollup is to leave enough L1/Ethereum, grab more than other L2s, and the rest are their own. The tokens issued by them are all based on ETH as the de facto reserve. The higher the L2 economic activity, the more stable the value of ETH.

Similar to the relationship between USD <>stablecoin, the logic of ETH <> L2 Token is consistent:

1. Stablecoin issuers need to reserve USD assets at a 1:1 ratio. Even if these USD are deposited in banks, an equal proportion of USD will still circulate on the chain and play their own value. The collapse of the USD on the chain will cause people to rely more on the USD in the bank.

2. The use value of L2 Token lies in its role in L2 <> L1, and L2 transactions need to be recognized and confirmed by L1, that is, Blob space needs to be denominated in ETH. Therefore, L2 Token actually depends on ETH, but on the contrary, ETH does not rely on the stability of L2 Token's currency value or rich usage scenarios.

What changed all this was not L2's "rebellion", such as custom Gas Tokens, nor the external DA concept of Celestia, but the land rent route chosen by Ethereum.

First of all, we must admit the fact that AppChain or RollApp have not become mainstream, and ETH Layer 3 is not a big threat. If L2 Token cannot challenge ETH, then L3 is the same.

I have written about re-staking before. Here I can briefly explain that re-staking will further enhance ETH's central position, because re-staking is the act of monetizing Ethereum's security and is denominated in ETH.

That's why Vitalik separated Rollup from L2, and then separated different stages from Rollup. The purpose of selecting the best is to promote the decentralization of Rollup, but the baseline of this decentralization is Ethereum's ability to control it in dangerous moments, and the judgment of funds being transferred to Ethereum.

The reason for the failure of the L2 track has never been the dispersion of funds, but the degree of centralization, such as the decline in L1 control caused by the centralization of the sorter.

In this sense, Ethereum is a distinct rent economy. The activity of dApps on it and the income generated are not important, at least not that important. It is more important to control the entire process of economic generation and distribution. For the Ethereum-ETH system, LRT/LSD is much friendlier than L2/Rollup, which is disobedient and intercepts ETH income.

The wisdom of releasing water to raise fish

Yun Tianming finally prepared a little love story for Cheng Xin:

You are a cosmic-level Virgin Mary, you can wander in the five-dimensional space, wait for the earth to perish, and prepare for cyber immortality. Now there are two choices in the market:

1. Yun Tianming gives you the 647th microcosm. Although it is small, it has everything you need. It has a self-contained ecosystem, which is enough for you to live out the rest of your life here;

2. The Zeroer broadcasts in the universe, hoping to return the cosmic mass stolen by various civilizations and restart the universe. Fish can only thrive in the sea and become giant whales that travel the world.

If you were Cheng Xin, which choice would you make?