Ok I just read through vitalik’s paper and if the vision he outlined is executed the implications are absolutely insane especially for the app layer. The paper is basically Eth’s plan on how they will enable computation off chain with Eth verifying the result (ensuring computation occurred and what it did etc etc). Now what this means is the definition of “onchain” itself changes, because instead of every part of an app having to execute inside a smart contract you can push a huge amount of complexity elsewhere and still inherit ethereum’s guarantees, this really does open up a huge amount of design space especially for DeFi. For example with lending you could have really sophisticated systems analysing collateral, liquidity, borrower behaviour and market conditions offchain, with multiple solvers or execution systems competing to produce the best outcome, like the cheapest liquidation route, best refinancing rate, best collateral swap or best way to match borrowers and lenders all while the protocol only accepts outcomes that satisfy its rules. So basically a lot more of the smart stuff behind a financial product can happen outside the smart contract, while Eth still acts as the final layer that checks the rules were followed and makes sure the money moves exactly as it should. The MEV implications here are quite interesting too because more economic activity happening before settlement means more value moves upstream into who gets the information first, who computes the best outcome and what gets presented to Eth. But the thing I’m most bullish on is what this does to the TAM of Eth just because this vision means ethereum doesn’t have to be fast enough to do everything itself it just has to be able to verify everything that matters. And that’s an enormous difference. It’s literally a world computer.

Gearbox is a great example of why you shouldn’t confuse lack of attention with lack of progress, the market hasn’t exactly treated them kindly, but while everyone moved onto the next narrative they just kept grafting on the same core architecture. This RWA leverage solution they’ve just released is where that strategy is really going to pay off imo. I’ve spent a bunch of time looking into the different approaches being built here but what @GearboxProtocol has done is by far the most elegant design I’ve seen. It’s not just better looping ux, looping naturally assumes the underlying asset is liquid and everything settles atomically so you borrow, buy the asset, deposit it again and repeat, which is great for crypto native assets but doesn’t really work for RWAs where you have different redemption timelines, transfer restrictions, KYC requirements and in a lot of cases barely any secondary liquidity. So gearbox gets around all these issues by using the credit account to borrow the full amount upfront and subscribe directly with the issuer. Instead of needing 5 or 10 or however many separate loops and waiting through the settlement process each time, you can create the entire leveraged position in one go and redeem the entire thing in one go on the way out. What I really like about this is that leverage no longer needs to depend on secondary market liquidity to the same extent, because it was always pretty silly to expect an issuer to bootstrap $50m or $100m of dex liquidity before people can take levered positions on the asset. With this model the position can scale against available credit instead because the credit account is interacting directly with the issuer, which means the lending side can support assets that would have been impossible or just really inefficient to support through the normal loop model. Even the asset specific stuff like KYC, transfer restrictions, redemption and specialised liquidation logic can sit inside gearbox’s infra rather than the lending protocol having to figure all of that out. And because gearbox is separating the asset specific execution and risk machinery from the funding layer, I think the bottleneck for lending protocols changes quite a bit too. Because the problem is no longer whether an asset has enough secondary liquidity to be listed and what really starts to matter is whether somebody can actually originate good borrow demand against the liquidity sitting there. If an issuer can bring the asset, gearbox can handle the market specific plumbing and a lending protocol can provide the funding, which is just a more efficient way of creating leverage around assets that never really fit the normal money market model in the first place. These guys have done a great job of addressing the actual market specific pain points and creating a structure where everybody wins, RWA issuers get leveraged distribution without needing deep secondary markets first, stablecoins get a new structural source of borrow demand and lending protocols get access to a much wider set of credit opportunities. What I’m really excited to see now is how much leverage this can support in practice, because if you can get a decent amount of leverage on assets that were basically unleveragable before then you open up a pretty massive new market. Really excited to see how this plays out and wishing the chads at gearbox all the best with this launch.