Arbitrum drama, Scaling Ethereum finalists and more - The Daily Gwei Refuel #560 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Deadly gray refuel where I recap the latest news in ethereum ecosystem I'm your host Dan the Nissan and has the 3rd of April 2023. alright everyone let's get into it so a bit of drama I guess over the weekend around uh the arbitrim project now I think a lot of you may have seen this on Twitter over the weekend and be confused about exactly what the drama is uh and how it kind of affects the network how it affects the Dow the governance the token all that stuff so I'm gonna try my best to break it down here I have a couple of threads that I want to speak to which of course will be linked in the YouTube description below but before I get started I wanted to quickly say that I am an investor in off chain Labs the

developers of arbitrim so just the disclaimer there and obviously I'm a big fan of the arbitrim project uh generally I have been a big fan of them for a very long time uh for for a few years now actually um and been very supportive of them in saying that I'm going to try and be as objective as possible here I'm going to try and not be biased any one side and I'm just going to try to stick to the facts so what are the facts well to start off with what happened was that there was a governance proposal called aip1 or arbitrary Improvement proposal are one that was submitted to the arbitrum uh governance Forum Snapchat uh snapshot where people could vote with their ARB tokens on it and basically what this proposal asked was that 750 million uh ARB tokens would be issued to

the arbitrim foundation right now this was obviously very controversial because everyone was like why does the albertron foundation need a billion dollars worth of ARB tokens and well it came out later that this wasn't actually a vote this was just a ratification or basically a formality and the tokens had already been issued to the foundation as part of the initial distribution of up tokens that happened I think it was last week of the week before that when we all got our airdrop basically and that they had already uh spent I think 50 million up tokens they sold 10 million are and and 40 million they have lent to a market maker named wintermute in order to Market make the ARB token on on the public markets now they're not the only

project that does this uh and and speaking of layer two projects that have done this optimism also if I remember correctly gave 20 million op tokens or lent it out to uh winter to Market make for the op token back when it when it first came out so that's not unusual and that's not what people are necessarily upset about and what they're kind of um going on about on Twitter what they're upset about is that it I mean rightly or wrongly they feel like the project or I guess like off-chan Labs has rugged them so to speak and has come out of nowhere with this proposal to allocate such a huge portion of uh the ARB tokens to themselves now I think this is where a lot of the confusion stems from the arbitrim foundation is a separate entity to off-chain Labs right to the

developers to the centralized company that builds the arbitrim software the albertron foundation was stood up when the token was launched or shortly before turkey was launched it has a separate governing board and it also has a separate way of funding itself now a portion or 10 million ARB that I mentioned before was sold in order to fund the arbitrim foundation or initial funding for the arbitrim foundation now you may be wondering why can't uh off-chain Labs use the money that they raised as part of all their VC rounds to fund this Foundation well this is where the legal stuff comes into it and this is something that I think a lot of people don't understand you cannot co-mingle funds in these scenarios if you create a new entity like uh like the arbitrim foundation of chain Labs cannot

give the arbitrim foundation uh the funds that they raised from my understanding at least and that's and that means that uh the aperture Foundation needs to fund itself using uh the tokens because the Albertson Foundation is what issued the token essentially of chain Labs didn't issue the token again from my understanding I'm trying to stick to the facts here but it can be a little bit confusing to follow along with because there are a lot of moving Parts here but that's what happens in the background with of these token launches they set up a separate Foundation from the actual centralized company and they do this for a number of different reasons obviously a major reason is because a lot of these companies are based in the US and they don't want to uh don't want to um draw the eye of regulators that's obviously one of the biggest reasons uh two it

just makes things a lot cleaner right and three it limits liability for for the team and and and for I guess like the the founding members and things like that so it's done for a multiple different reasons here and as I said because of that the arbitrim foundation needed a way to fund itself needed a way to pay legal costs obviously they needed to get lawyers involved to do all these sorts of stuff so they sold that 10 million up to ensure that the foundation had enough money to fund itself now obviously that's a lot of money right let's just assume uh was a dollar and that was the price that they got for the 10 million ARB that's 10 million dollars but I don't think people realize how expensive these things can get very very quickly obviously not 10 million dollars expensive but they obviously wanted to

make sure that the funding was at least future proof for you know at least some period of time I don't know what the period of time is but for the foreseeable future sort of thing so those are all the the kind of like facts that I have gathered from reading all the threads and and things like that and there are a bunch of other other moving Parts here that uh that I may have glossed over but as I said there are two main threads from arbitrim themselves which you can read I'll link them in the YouTube description below uh but as I said before the drama basically stemmed from the fact that uh this proposal was even put out there in the first place now where I draw issue or where I take issue with this is not so much that I believe that off chain Labs is trying to

rug anyone that I've been trying to arbitrim is trying to rug anyone or that they are purposely trying to just sell uh tokens and enrich themselves I don't believe that for a second but the issue is is that their communication here was really really poor on a number of different fronts like firstly they didn't communicate that the proposal wasn't actually a real proposal that it was just a formality and the decision to allocate those tokens had already been made before tge so they didn't they didn't communicate that at all in the proposal and they didn't communicate that uh properly uh before the proposal was put out there and then uh when once they did communicate it it was kind of felt like a Band-Aid right I was like people being okay well you only communicated it because everyone called you out on it blah blah so the

communication here was was not great at all I mean it was terrible to be honest right uh and because of that they I get I think rightfully copped a lot of heat for that I think one of the the things that a lot of projects in crypto need to be very very aware of is that communication is key as long as you communicate things ahead of time you nine times out of ten can uh can uh you know I I guess like avoid this drama and avoid this Fallout you know I say nine times out of ten because sometimes the drama happens anyway and a perfect example of this while I'm on this topic was that uh off-chan Labs a couple days ago announced that they were moving a large sum of ARB tokens uh to a custodian uh and then there was an account on Twitter called I believe look

on chain or an on-chain analytics account account that basically I think today put out a tweet and said a large number of ARB tokens were moved was moved to uh I believe it was coinbase now they weren't moved to coinbase to be sold and those tokens belong to uh investors and team members they were moved to coinbase to custody and off-chan Labs had already communicated this on April 1st it wasn't like this was something that they hadn't uh warned I guess like uh the market about a warned the community about this was happening now for those of you who don't know and I know this because I'm an investor in of Chen labs they gave the investors a choice a two choices you could either custody your funds via coinbase customer via coinbase custody and it would be vested out on the normal

four-year vesting um vesting schedule with the one-year Cliff so no one had no investors or team members have their tokens yet they are just in the custodian the custodian obviously uh uh custody's the funds right and then pays it out uh to people this the same thing was done for the op token as well by the way uh or the second choice was to have an Unchained smart contract that would cost to do the funds and the person and individual group fund VC whatever could claim the tokens once they had vested out on that vesting schedule from that contract so as I said like you can communicate things and nine times out of ten would be fine but there are always exceptions as this one time out of ten where I saw all the replies to that um that look on chain tweet talking about

this and no one was interested in the facts because there were already I guess they got their pitchforks out about all this arbitrum Dow governance kind of like Shenanigans going on so the truth was kind of buried and no one really cared about the truth there so I just wanted to to clear that one up there for you guys but back on the topic of of governance here more broadly there were people saying things as well like if the ARB token isn't actually being used as a governance token well that means that uh the foundation basically retains control of the arbitrine protocol and that makes uh a security or that means there's going to be legal proceedings against the foundation and all these sorts of stuff I don't know too much about that and the consequences there or what can happen with that I doubt there's going

to be much stuff around that it feels like a lot of uh a lot of people on Twitter jump to conclusions very very quickly uh that happens with so many things right it's very very annoying but outside of that as I said very very poor communication on on the part of the foundation uh off-chain Labs as well and just like the arbitrim kind of uh uh core team or team generally right which they've since tried to obviously make up for and I think they've very much learned their lesson from this you you learn that lesson once I think like you only need a one uh I guess like relatively big scrub to learn that lesson and not make that mistake again uh so hopefully I mean obviously going forward that hopefully they don't make that mistake again with the with the poor communication here

um but I have personally been satisfied with their explanation of things with their threads here I honestly think that but this is a case of crypto Twitter getting their pitchforks out about something that they're just going to forget about I I kind of said on Twitter today like think how quickly people forget about things like even things like usdc so when usdc depaged on a lot a couple weeks ago now on the on the weekend there were so many takes like it was incredible everyone on crypto Twitter had their pitchforks out everyone said that usdc was going to fail that it was a scam blah blah all this sorts of stuff right and I remember at the time saying that one it's gonna be fine uh even though they have lost a bit of market share over the Deep pegging event usdc is at a dollar and

redemptions are fine right and uh the money that they had in silvergate bank is also fine um and and two that I um I believed that uh everyone would forget about it very very quickly and they did like within 48 hours no one was talking about it anymore you're gonna see the same thing happen with this arbitrim Dallas stuff as well now is that a good or bad thing is another thing I want to talk about well at the end of the day it doesn't actually matter if it's a good or bad thing because the the problem I guess or like the world we live in and I I do think it's a problem but the world we live in today is one with a 24 7 News cycle there is no way possible for a human to be able to keep track of everything happening in uh in one

industry let alone all Industries even me who covers this stuff every single weekday right and I try to keep on top of it I spend so much time in it there is absolutely no way for me to be on top of everything and then there are plenty of things that I don't cover on the refuel that people may think is are important or interested in but I just don't have the ability to do that I'm not a machine right I'm not an AI I'm a human I can't keep up and and obviously I'm not the only one if I can't even keep up someone who literally spends all his time on this sorts of stuff can you imagine how many other other people aren't able to keep up either and that's exactly why things move very quickly people forget about things very quickly and that's why For Better or Worse a lot

of these things don't actually materialize um into things that people think they do a lot of the time what dictates whether they succeed or fail really is just the long term it's just long term over the long term what's going to dictate if arbitrim succeeds or fails as a protocol will be uh it's you know if it can sell its block space essentially right and as a dow it will be if people are actually interested in being part of the governance process personally I'm pretty bearish on Dows generally at least for the foreseeable future I think that most projects are just going to end up with a governing Council that essentially looks like a public company with a board of directors and I think that's totally fine um I think that governance minimization is very important so basically getting

it to the point where governance only controls things or only has control over things like a treasury for example rather than having control over the protocol so let's just use arbitrary as an example here let's say the end state is at the arbitrine protocol is completely ossified it it cannot be upgraded on chain and has to go through a hard Fork if it wants to upgrade right so it has to go through a kind of off-chain governance process like that but it can't be changed right there's no on-chain upgrade of the smart contracts or anything like that there's no operatable smart contracts it has to be done via a hard fork or something like that and and let's just say that the arbitrim doubt only has control over the treasury well in that case you could say

that the arbitrine protocol is decentralized and the treasury For Better or Worse is controlled by the Dow and that and the Dow is really just the governing Council of uh trust a trusted kind of like uh bunch of people that allocate resources uh how they see fit uh or like not just how they see fit but also via community important votes of the ARB token and things like that but generally that's how I view a lot of these governance kind of things or Dows I mean I wouldn't even call them in Dallas in that state I would call them maybe Do's Do's decentralized organizations where you've still got a decentralization and a distribution of people but it's it's much more concentrate concentrated it's not like you know thousands of people that's never going to happen there's there's no

kind of organization on Earth that has thousands of people making decisions and has an equal say in anything no there's not nothing how it works it doesn't scale it doesn't scale for centralized companies it will not scale for decentralized protocols it's probably even worse in decentralized protocols than it is with centralized companies and I think that's okay but that's such a tangent about Dows generally I'm not gonna rant more about that because I I'm going way over time here I've spent 15 minutes on this so far but hopefully that covers the majority of what happened uh there as I said I probably miss things because there's a lot a lot of moving Parts here but you can read these two threads from arbitrim uh for more details on on everything here uh and everything that happened and and yeah you can go uh check that out for

yourself it'll be linked in the YouTube description below but on that note gonna move on to the uh rest of the news for today all right on to some news that only came out a couple of hours ago or a few hours ago so I am not totally up to speed with what what is happening here there is still information coming out about it but a major Mev event just went down as Hudson Jameson says here so his thread he's basically a meta thread of what happened you can find the link to it in the YouTube description below but essentially what happened from my understanding is that a valid data was able to steal a bunch of Mev from a uh enemyv Searcher or a builder uh performing sandwich attacks now for those of you who don't know what

sandwich attacks are they are basically a really toxic form of Mev where essentially Mev is used to I don't know if the word steel the steel is the is the right word to use here but it essentially follow intensive purposes does look like stealing uh people's assets from things like liquidity pools so as I said it is a very toxic form of Mev and uh trufia explains that sandwiches both front run and back run transactions uh they can do this because bundles Define the front run by transaction victim by transaction and background cell transaction in one and Trust validators to execute it all together uh the validator in this instance inserted their own cell

transaction after the sandwich or front run so basically as I said uh stole the um the Mev the validator itself stole the Mev here from uh the Builder now Hudson has his own explanation here and he says he's not an Mev expert either but he has this explanation in this uh Thread about this too which I'll link in the YouTube description below uh Gupta the asizo at polygon Labs also has a description about this and I forgot to mention that the amount of money that was stolen from the Searcher was uh over 25 million US dollars so not uh not chump change it's actually a a ton of money here um so mudit basically said you know the validator that did this takes a sandwich bundle from the Mev bot and replaces the

victim transaction with its own that exploits the Mev bot instead that's the trdr what happens and what it has a better description uh here for you to to read over now I don't have a proper explainer like I'm five or anything just yet because as I said this only came out a couple of hours ago I haven't had time to digest it but I figured it was worth highlighting because I saw some people in the School Channel talking about this so I and I felt it was really interesting so I wanted to put it on your on your radar here as I've said before Mev is still the I guess like biggest existential risk to all blockchains every single blockchain even Bitcoin um if it is not dealt with in the proper way now dealing with it in the proper

way is a big open research problem and question and there's a ton of different ways to do it but they all have trade-offs uh ethereum is currently using the Mev boost software as a way to essentially democratize Mev and also uh protect the network against the harmful effects of Mev it is not a perfect solution it comes with trade-offs because you're using things like relayers which as we've seen in the past can can censor on a on a large scale uh and there's not many of those relayers either um even though it's gotten a lot better over time which I'm going to talk about in a sec it's still not not great right so and it and it centralizes uh it tends to centralize block building and things like that so obviously there is a lot of things to consider here and of PBS and

stuff like that I've talked about in the past there's a lot going on here but that's but this is again a more evidence of why Mev is such a serious issue for blockchains because stuff like this can lead to instability of the chain I'm not saying it will in this instance but I can over time as the profit opportunities become more lucrative as uh people become more sophisticated and more of these attacks happen that can happen at a larger and larger scale and could potentially lead to some very negative consequences so as I said this is just more evidence of of that point that I've been making for for a little while now but you can check out both Hudson's and mudit's thread which I'll link in the YouTube description below uh and as I mentioned just before I wanted to talk a bit more about Mev boost relay

as well Tony uh who I've talked about a bunch on the record before uh you'll know him from the Mev boost.pics website that I've talked about uh basically put out a nice GIF uh looking at the relays so he said here today four relays hold 18 to 30 market share each our sync Builders share climbed from 10 in early March to a stable 15 now no Builder has more than 25 market share 4 out of 35 are at 15 to 25 so we have a nicely distributed Builder and relay kind of ecosystem right now it is still not great obviously these numbers are quite small it's not a huge deal I guess uh you know it's it's not as centralizing as uh as something like a like um concentration

of validators are but it's definitely not not uh totally ideal and definitely we want to see more relayers and more Builders come online but this is very sophisticated stuff but it's not easy uh and honestly without flashbots developing Mev boost this ecosystem would look very very different there would probably only be a very very small not even a handful of big players that would be uh competing in this market because it would just be too hard for everyone else this is very sophisticated stuff it's very technical uh and if you mess up you can stand to lose a lot of money if you if you mess up trying to do certain things here depending on what you're trying to do um but yeah you can check out this GIF uh I'll link the threat the tweet in the YouTube description below but it's also

on this GitHub page where it's interactive so you can check it out here as well which are which will be linked in the in the Tweet here all right so vitalik has published a blog post that I thought was worth highlighting titled how will ethereum's multi-client philosophy interact with ZK EVMS so obviously ZK ibms has been the Talk of the Town over the last few weeks uh and a few months even and uh multi-client or client diversity is at the heart of what makes ethereum special now I've talked about client diversity so many times on the reefer before you can see this website here client diversity.com where there's a screenshot here that vitalik has included in his blog post showing how we have uh five different consensus layer clients and

four different execution layer clients that have the majority of the market share and this is what we mean by client diversity there's not just one client there's not just Geth right or there's not just uh never mind on the exclusion layer side or it's not just prism not just Lighthouse there is a diversity of of clients here and and that's very very important for a number of different reasons that I've talked about on the refill before but basically when looking at this you kind of so start asking yourself you know should we have a multi-client philosophy for uh kind of um ZK VMS or layer twos and how does it actually affect layers like how does the layer 1 client diversity and multi-client philosophy affect these layer twos like how can they interact

with that how will um ZK VMS come in on layer one in the future what does this mean for things like enshrined Roll-Ups and stuff like that so you can check out all of this in his blog posts here I'm not obviously not going to read it out uh but I'll link that in the YouTube description below but I felt it was worth highlighting because it is definitely a very important topic in the ethereum ecosystem and uh something that we need to be talking about now and focusing on now uh before it potentially becomes uh maybe an issue or a problem down the line uh that becomes something that we need to to deal with at that point all right so I came across this tweet thread here from Nazar who's building monobace.xyz and uh he said that they're introducing something called a universal

front end which is a procedurally generated front end for every ethereum contract so essentially this Universal front-end tool allows you to interact with any contract on the ethereum network one page outlines all the functions that the contract has and you can enter function parameters in line now what's really cool about this is that typically you'll interact with one of these smart contracts via something like etherscan where it'll give you a front end but it'll be very very basic it's not going to be anything that's going to uh hand hold you know it's not going to be anything that's going to explain something to you basically you get a list of the function names you have to kind of assume what they do and guess what they do and then you're able to interact with them by connecting your

a metamask wallet to it well that's good and I've used it a bunch of times and I I haven't really had any issues with it but I'm definitely more technical than most people and even I look at the functions and I'm like do I really want to interact with this function uh it doesn't seem to be something that that is trustworthy uh but uh but yeah because of that uh this this new kind of universal front end it gives you more information it won't give you like everything that you need to make sure that if something's safe or to understand exactly what something is is doing but it'll give you more information around this and it'll pretty fire pretty fire for you as well you can see here basically it's it's much more detailed and much and color coded and things like that than something like

etherscan so I just figured this was worth highlighting because I know a bunch of you have interacted with contracts manually on either scan before uh for one reason or another usually it's to claim things like airdrop tokens when the network is when when the RPC is busy so for example with arbitrim the ARB token the RPC was was really busy so you could basically go to etherscan while I mean well I'll be scan I should say which was also very busy but he tracked the contract from there in order to essentially uh uh basically um uh claim your ab tokens now as I said RB scan was actually overloaded at that point so if you had something like universal front end you could interact with the the contract or potentially interact with the contract using this

instead of having to rely on RB scan but anyway I'll link this in the YouTube description below for you to check out all right another project that I uh came across just uh the a couple days ago was called contractreader.io so this is obviously related to what I was just talking about uh with uh with universal front end but basically what this does is it uses AI specifically gpt4 to uh create something called a smart contract reviews so what this does is it gives you a near instant code review of mainnet or test net smart contract so this is obviously one out there for most developers but also for people who just want to know what a contract is doing what a smart contract is doing with uh you know without having

to ask a I guess smart contract developer or professional bug them about it uh but this basically uses AI to break this all down for you which I thought was very very cool I know AI is a huge topic right now I think within coding uh and and scripting and reading code and translating that I think it's doing a a really great job in that area and this is just another tool that you could use in order to do this so you can see here that in their exam example they're using the cool cats smart contract here they input the address and then they click review this contract and then it gives you a description of what this contract is doing in plain English if there's no code here or anything like that it's just giving plain English and it's pulling out the relevant functions

to tell you what they do so as I was saying before you could actually use this tool in conjunction with the universal front end in order to manually interact with smart contracts to do whatever you wanted at the end of the day which is really really cool so these two go hand in hand I'll link them in YouTube description below for you to check out but I just thought that this was a really cool use of AI all right so eth Global has announced the 11 scaling ethereum 2023 finalists now I have covered one of these before op clave which I covered last week on the refuel but there are 10 others here that you can check out for yourself and there's all they're all linked here on the East Global website I just wanted to highlight this thread for you guys to go check out I haven't been able I haven't

had the time to review them myself just yet but these Heath Global run events are always packed full of great projects so if there anything like the op the op clave project in terms of quality uh then 100 uh they're going to be awesome so definitely go check this out I'll link it in the YouTube description below uh next up we have a rebranding so element Finance which I've talked about on the refill before and I should disclose that I'm an investor in has announced a new name a new identity and new product so their new name is delve d-e-l-v uh and uh they're not called lme element Finance anymore and they are calling themselves the factory of defy essentially they are uh delve and cut

encapsulates a suite of products including the element protocol Alfie verse Echo hyperdrive Council and Agent Zero now I've talked about a bunch of these projects before element Finance is obviously um their defray protocol here for fixed rates you have uh hyperdrive which I've talked about for Council which is a governance roll-up and a bunch of other uh products that they've got under their umbrella here so if you're wondering what happened to element Finance uh this is what happened they changed their name to delve and you can go check out all their products they've linked them in the Tweet thread here which I'll of course Link in the YouTube description below all right last stop as I said before the ZK Wars are heating up well Daniel from the polygon zero team has put together a

nice little blog post TR titled a comparison of a ZK EVMS and as I said it is little it is not very long so you can go check out this for just a brief overview of the different ZK EVMS that are currently live or in production uh in the ethereum ecosystem I know there has been so much kind of debate around this on Twitter between the different teams honestly I think a lot of the debate is a pissing contest if I'm if I kind of use that analogy or use that terminology I should say uh there because it doesn't feel like it's pushing the space forward it doesn't feel like anyone's really getting anything out of it all it feels like is that these different ZK developers and researchers are all trying to argue that their ZK evm is best and that they uh

you know what they're building is amazing and what their competitors are building are not and you know this one's a real ZK AVM and this one's not at the end of the day look most users pretty much all users are not going to care about that stuff they're going to care about what is usable to them what is a good user experience what is secure of course but they're not going to care about what type of ZK VM they're using they're not going to care about that it's not exactly evm equivalent or uh or or or or to spec or whatever like they don't care about that sorts of stuff as I said it is a pissing contest for researchers on Twitter from what I've seen just to one-up each other and it is it's turned a bit toxic over the last I guess couple of weeks which I really

don't appreciate because I hate seeing that especially within the ethereum family because it feels like my kids are fighting so to speak right for like the big dad as involved as I am with ethereum I feel like I'm sitting there watching all the all the kids fights like please stop like stop fighting um you know you don't want to see that but it is what it is and I think it's going to continue I don't think it's going to slow down there are a lot of egos at play here which I totally understand people want to see their work succeed but I hope that it doesn't get too toxic but anyway you can read this a little process from Daniel I'll link it in the YouTube description below but that's going to be it for today so thank everyone for listening and watching be sure to

subscribe to the channel if you haven't yet give it a thumbs up subscribe to newsletter join the Discord Channel and I'll catch you all tomorrow thanks everyone