Beacon Chain withdrawals, Recapping 2022 and more - The Daily Gwei Refuel #515 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily way refuel where he kept the latest news in ethereum ecosystem I'm your host Anthony 2nd of January 2023. that's right guys 2023 a New Year hope you all had a good New Year's party or maybe you just stayed home or you know whatever you were doing right maybe if you're a Trader you weren't having too much fun as uh the markets weren't doing anything but uh but yeah hope you guys had a great start to the new year so far uh I gotta I gotta remember to say 2023 whenever I say the date at the beginning of the podcast now I remember last year at the you know for the first couple of weeks I was getting a bit confused there but anyway moving on to the news from the weekend so Balaji here on Twitter asked

a question what are you bullish on for 2023 and vitalik replied of course with with reaching the basic roll-up scaling milestone in my roadmap diagram that means eip4844 rolled out and roll ups partially taking off training wheels at least to stage one as described here any links to an ethereum magician's post now I've talked about erp4 4844 a lot and The Surge generally a lot on the the refuel um but what I haven't really talked too much about is these kind of training wheels that Roll-Ups have like we all know that right now Roll-Ups are rather centralized they have these training wheels whether they be multi-cigs to control upgrades on the network or control the assets uh we'll have custody over the assets or technical customers say literal custody I should say

technical custody because the the multisig exists for the bridge and it exists for the whole protocol but basically these things aren't in their final State they have centralized sequences and validators and all that stuff there now there was a post on The ethereum Magicians Forum that I highlighted when vitalik put it out back in November so not too long ago now basically talking about the different stages of um of roll-up decentralization and there's three main stages he called out here now he's hoping to see uh Roll-Ups taking off their training wheels at least to stage one as described in this post so basically he wants to see stage zero uh for you know at least some of the Roll-Ups going to stage one from stage zero now stage stage zero is basically the I guess Alpha Beta stage

of these rollers where there can be fully centralized and maybe don't they don't even have active fraud proofs but then you go to stage one which is called The Limited training wheel stage which I'll let you guys read through here I'll link this in the YouTube description but uh yeah that's something that not a lot of people focus on they'll focus on 4844 when it comes to Roll-Ups but decentralizing the Roll-Ups themselves is I guess arguably more important than than scaling them really I mean scaling them is all well and good but at the end of the day if the Roll-Ups remain centralized then we don't even need to post data to ethereum right we can just use our validium for example a hybrid where we post data off chain the whole point of a roll-up is that it can actually be fully decentralized and we

can have the data stored on chain rather than stored as part of some data availability committee that leads to centralization concerns so so yeah that's why I say it's arguably more important than 4844 because it doesn't matter if we have cheap data sorry cheaper data fees on uh let out on layer one ethereum for Roll-Ups if the Roll-Ups themselves are just centralized and it defeats the whole purpose of being a roll-up if you're just going to stay centralized right so I mean I I would suggest reading this if you're a magician's post from metallic if you haven't yet and even if you have maybe give you a refresher on it because I personally would love to see you know especially this year these Roll-Ups especially the more mature ones like arbitrary and optimism begin to roll out into stage one and then hopefully stage two which is no training wheels uh maybe

next year or even later in this year so yeah that's what vitalik is most excited about for uh 2023 now speaking of ARP 4844 that is the main one of the major upgrades coming to ethereum this year the other one of course is Beacon chain withdrawals which I have talked about at length on the refuel but there is one thing that I don't think I've talked about too much before and I said in this tweet here you know I I believe that Beacon chain withdrawals are actually going to lead to more eth being staked not less which is contrary to the popular belief that is that as soon as people can withdraw their e-stake there's going to be this Mass unlock of State sake now I'm not saying that there won't be people um you know withdrawing their stake or unlocking their stake to sell especially if they've been staking

for quite a while but there are there are many nuances here so the first Nuance is that there is rewards right and then there is the actual stake so there's the 32 stake which everyone obviously needs to spin up you know each validator needs to collateralize itself with so that it can begin earning rewards then there are two types of rewards there are consensus layer rewards and execution layer rewards the execution layer rewards are already available to stakers because they come from the execution layer side of things so they come from tips and uh Mev rewards as well as part of the flashbots network I should say the Mev Boost network so and the consensus layer awards are the ones that are currently inaccessible they're the ones that accrue based on attestations block proposals and sync committees and they accrue to the validator on the consensus layer side

which will be able to be accessed once big and chain withdrawals are enabled and of course once withdrawals are enabled you'll also be able to exit your validator and withdraw your stake uh to sell it or or maybe to restake with another service or whatever else like that great reshuffling that I've spoken about before so there is a lot of nuance here uh and that you've also got to look at the market price as well I mean when eth um a lot of the eth being staked actually I've seen a chart that says a lot of the E that was stake maybe even over 50 of it was staked when the eth price was higher when the price was around two thousand dollars or more now does that mean people are going to withdraw and sell at a loss because uh they you just want to get out of their

e-stake they made a mistake there or does that mean that people are going to continue staking because they don't want to sell at a loss and then you've also got the LSD side of things where a lot of people can actually exit their e-stick if they want to right now I guess they may take us a small haircut due to the discounts of these lsds but they can exit because they can sell their STS or their reth or their CBE or their bee threat and and exit the um they're staying position like that obviously the eth hasn't exited the beacon chain it's just the position that the user had but that could lead to that each staying in the beacon chain because the user exited that um that uh LSD to the market which has bought the LST right there's always a buyer there for

that and if there isn't much of a discount then there won't be much of an Arbitrage there between the market price of the LSD and the beacon chain itself so logically we won't actually see much stake withdrawn because of that and then on top of that you have like the withdrawal queue which means that only a certain number of eighth and certain number of validators can withdraw per day right which limits the the amount that that can come out and limits the amount of cell pressure that can be from that as well and then you have the other side of things so that's that's all the unlock cell slash you know restake side of things and there's a lot of nuance there as I explained but then you also have the demand side so why is more eth going to be staked when withdrawals are

enabled well why do I believe this and not that I'm not saying it's guaranteed to happen why do I believe this well the major reason is that it's a de-risking event right once withdrawals are enabled people can be like okay well I can stake my ease now and I have the option to withdraw it at any time and I don't have to take a discount either I can withdraw it directly from the beacon chain even if you have an LSD asset you can withdraw that from the beacon chain there's no need to go to the market and take a discount on it and the market itself is going to become a lot more liquid and a lot better at pricing this because uh it'll be able to close that Arbitrage loop with the beacon chain if it goes out of sync whether there's a discount or a premium on the assets

there uh so I think that that's going to lead to a lot more eighth being staked uh and I think that right now we're at what 15 million each staked or something like that I think we're going to see that go go higher 20 25 30 million also and I've spoken about how there is a I guess discussion right now about imposing a limit on how much active stake there can be so and it's a balancing act as well with the rewards like the rewards become not worth it or too little once there's too much e-stake and then we kind of plateau there which I think is fine it's by design of the protocol that may change in the future that you know the the um I guess like policy that dictates that might may change in the future I haven't seen any proposals for that yet

but there obviously is always ongoing research and development when it comes to that sort of stuff but that's the main reason why I believe that more youth will be staked because it's a massive de-risking event for the entire industry not just for solo stakers but for obviously lsds for institutional stakers for these exchanges that offer staking it just completes that Arbitrage Loop it completes the the staking Loop that I've talked about a lot on the refill before and I think that that's going to be uh you know a big deal obviously and I really do think that that will offset any kind of selling pressure that will come from people uh you know unstaking their eth in order to sell it now in saying that we can kind of guarantee that there is going to be a rather large chunk of the consensus layer rewards probably being sold off to

cover taxes now it depends because it's very hard because people can cover their taxes through other means they don't have to sell their eighth maybe they don't want to sell their eighth and they'll just happy to pay their the taxes that they owe with money they already have or maybe they sell another asset to pay those taxes it's it's complex when you think about every individual is different here but you could make a rather I guess like rough assumption that some percentage of the consensus layer rewards are going to be sold uh because of the the tax obligations there it's got nothing to do with people wanting to take profit it's just the tax obligations so we can do napkin Matthew and say that if a million eighth worth of rewards has accrued since the beacon chain went live on the consensus layer side which I don't know

if it's a million I think it might actually be a million uh because I I believe it's been what two years since the beginning chain went live and then by the time withdrawals go live it will could be around a million if I have to check my math on this but give or take a hundred thousand eight but for the sake of argument let's just say it's a million if let's just say at most 50 of that needs to get sold to cover taxes I think that's on the I guess like very uh um a very aggressive side of things I don't think it's going to be 50 but that's 500 000 if that would be sold Now is it going to be sold all at once I don't think so so and even if it is sold uh I guess over a period of a few months

is that a lot I mean yes it's a large chunk of eth but it just depends on what the Market's like like are we you know is there a lot of demand offsetting that are we back in a mini bull market for example or is there some kind of demand Spike how much ethi's getting uh staked and locked up because of that they're risking event so all of these are open questions all of these are things that people love to use to paint narratives in either direction at the end of the day it's impossible to know you have to make a lot of assumptions nothing has been done like this before there's no precedent for this uh and there are going to be people as I said selling you a narrative on either side of the spectrum I'm not going to tell you if whether withdrawals are going to be

bullish or bearish for the eth price all I'm telling you is that I believe that more eth will be staked not less now we'll let that happen immediately probably not that we'll probably see a short-term uh reduction in total eatstake but I believe you know shortly after that maybe within a few months we're going to see that the all-time high Eve Stakes uh continue to accrue from there so yeah no no idea what it means for the eighth price itself but when it comes to the amount of eth being staked in the beacon chain I do have a strong belief that we're going to see more uh at least a couple months or at least a few months after the beacon chain withdrawals are enabled there now one last note here before I move on someone asked uh you know what's up with the range of fear reduction for with

erp4844 because I've commonly quoted that uh 4844 will bring with it a 10 to 100 times reduction roll-up fees for users you know why it's such a large range well a few of the reasons from my understanding it's obviously hard to predict what the cost reduction will be for each roll up so we have to estimate it for now uh we'll depend on how each roll-up uses the new blob transaction type so they have to integrate this themselves some roles may take a couple months to integrate it so 4844 may ship and then the roll-up team will be like okay well we're not going to ship our implementation or we're not going to be compatible with 4844 until maybe two months after or a month after it goes live and then also not all the Roll-Ups are created equal there'll be differences between ZK Roll-Ups and

optimistic gloves there'll be differences with between ZK VMS and uh and and non-dkvm uh ZK Roll-Ups right so there is a lot of nuance there as well but anyway going to move on from that one to uh thread from Proto Lambda which I recommend I mean this is one of the best threads I've ever read to be honest like I can't recommend it highly enough and it's he starts off by saying my crypto predictions for 2023 mostly about each related Tech just for fun let's see if next year is as full of surprises as this year was and he wrote this on December 31st so next year being this year now but highly highly highly recommend giving this a read you should even just pause the video right now and go give this thread a read because it is going to give you probably the best

summary of what to expect in 2023 from the ethereum core protocol ecosystem I think it's just a really great thread and it's quite lengthy as well it's it's uh how many tweets is it it's about 24 tweets here and they're all great prediction now for those of you who don't know who Proto Lambda is well he's a long time ethereum researcher he is half of Proto dank sharding Proto part is Pim right he came up with half of it um and he now works at the optimism Labs uh uh Team on optimism of course so someone to take very seriously when it comes to ethereum called protocol development and things surrounding that I should I I highly recommend going and giving this thread a read and he's also got a tweet here which I wanted to highlight which is his second tweet in this thread which he basically uh he

believes that there's going to be a lot of Ico treasuries that that still have eth left over from when icos were big that are going to stake their eighth because of withdrawals being enabled now this is a perfect uh example of what I was talking about before the Ico treasuries if they're using ease to fund development of their project then they're going to want their eth to be liquid right they're going to want to be able to sell that eighth whenever they want to well if they stake it they can't do that right now and they and if they stake it the most of the rewards that they earned won't be able to be unlocked because their consensus layer rewards but when withdrawals are enabled they'll be able to basically have their expenses covered by the consensus layer and execution rewards together and they can

withdraw that and then they then if they need to and they run into a snaggler they need more money they can withdraw some of their stake as well because the the bigger chain withdrawals are there but now they can't do that so just from the icos staking their Ethan from other big players taking their Reef such as consensus for example maybe Joe Lubin wants to stake his Eve and then uh be able to fund consensus off the off the rewards from staking that eth that alone represents a lot of eth and that would easily I believe if all of it was staked or at least most of it would offset that worst case scenario of half a million eth being sold uh to cover taxes which I don't think is going to happen to be honest because I'm I'm obviously uh on the side of aggression there but even

still like that's another variable to play into this so yeah when thinking about it like that I think you know you got yourself some good data to go off yeah but anyway I'll link Proto lambda's thread in the YouTube description below you can go check it out for yourself all right so Tony has updated his Mev boost dot pix website uh to include a chart that now displays the block building Market over time so you can see here if I scroll down uh what where is it total slot share cumulative for Builders yes here it is so you can see over time what the Builder Market has looked like well it looks a lot healthier than it once did right look look at the builders uh look at the Builder Market here at 80 percent was Vanilla Builders which was obviously uh solo stickers right uh but then you had

the purple here which was flashbots now we want to kind of exclude the blue because if we include the blue that includes solid stackers and that includes people that weren't using Mev boost and obviously that's come down a lot because most of the networks using Mev boost now but if we take up uh take vanilla Builders away flashbots accounted for a large portion of the builders and so did this yellow here which is uh I guess like yellow orange which is blocks route now as you can see over time that got a lot healthier and you can see that it's basically equal across the top what five four builders and then you have a long tail of Builders which are slowly gaining market share as well and the reason why this is important is uh because we want you know obviously a more healthy and

decentralized Mev boost Builder ecosystem but also from a censorship resistance perspective it um it helps the network as well so just wanted to highlight that from Tony uh who shared this today on the Mev boost.picks website which I'll link in the YouTube description below all right we have a tweet here from uh Lao Zoo uh hopefully that's how I say your name uh which is a tweet thread on an article about that they wrote on current ethereum and details of the Shanghai upgrade so you can go give this a blog post to read uh Lao Zoo works at scroll in r d Department they've done a bunch of threads around ethereum and layer twos and all that good stuff before along with blog posts well this blog post will give you an overview of the main things coming in Shanghai such as Beacon chain withdrawals eof Erp 4844

and possibly other erps and the roadmap and timeline so if you are interested in diving deeper into those things that I've talked about on the refill before definitely go check out this blog post I'll link it in the YouTube description below all right so January 1st marked one year since the protocol Guild was unveiled unveiled which is and the protocol Guild is an experimental new funding tool which provides recruitment retention and reward mechanisms for core protocol contributors and today being the first of January that experiment received 10 million in donations and has distributed 5 million dollars to core protocol contributors it really is amazing how quickly the Corp the protocol Guild was able to get stood up get money in and start Distributing it to core

contributors and as I said when they first announced this I remember covering this on Jan 1st of 2022 this was a pilot this wasn't actually the full thing this is just to test out the idea to see if it works see if they could get some money in and start paying protocol contributors and they did and as I've spoken note before the protocol Guild is like a union for core developers it really is showing that core developers and researchers are coming together and basically uh and and their community members are coming together creating this new thing called the protocol Guild and finding themselves via that instead of relying on funding from places like the ethereum foundation and potentially like consensus and other companies uh the the goal is that the protocol Guild can always pay out two core protocol

contributors even if there's other these other companies stop giving money to core protocol contributors which I think is really really awesome uh but yeah congrats to the protocol Guild on one year since being unveiled here's to another year of amazing uh protocol contributor contributing all right so I've been talking about nevermind a bunch on the refuel over the last few months and mainly because they've been gaining a lot of market share on the network well in the start of 2022 never mind uh was at two percent of the network and they've ended 2022 at 11.6 which is awesome to see business client diversity in action guys it's it's really great to see that nevermind has come such a long way in just 12 months and they are such a big part of the network now uh representing 11.6

rather than two percent and they are second only to Geth now of course get still has a big lead here at 70 but it's looking a lot healthier you have never mind Aragon and Basu I never mind and Aragon are about the same 11.44 for Aragon 11.63 for nevermind a percentage and base two at six point four percent so just a great thing to see that the client diversity is improving on the execution layer side of things and great to see that never mind has grown so well in 2022 I hope to see them grow even further in 2023 we don't want guests to be over 50 we want uh them to yeah at least be be under 50 I mean the threshold is technically 66 as that you know finality uh threshold there but definitely one at under 50 hopefully we can get there this year uh moving on

from that uh flcl who is in a developer never mind put out a tweet saying syncing an ARP 4844 devnet V3 and pair with prism the next aim is to try to run with load star and Lighthouse uh I bet it will go smoothly and you can see a picture of a terminal window here so devnets continue obviously for 48.44 I would expect some test Nets to be spun up around this uh maybe not not this month but maybe next month uh maybe the month after obviously we know that it's not coming with the Shanghai upgrade which hopefully we're going to see in March uh and I believe the Shanghai test net should be spun up this month or some of the short-lived maybe some Shadow Forks as well to go along with it uh but great to see development continue on

48.44 here uh oval Network reflected on their 2022 and DVT technology in general distributed valid head validated technology and over was another team that had a great 2022 they've had a bunch of test Nets go live they've had a bunch of pilot programs uh uh play out one of the biggest ones with Lido and their Sharon DVT middleware middleware was launched they also have a road map that you can go check out I mean this thread is packed full of information for you to go check out which I'll link in the YouTube description below but I believe opal's gonna have a really great year this year because if withdrawal is being enabled it makes a lot more sense to start using this technology because that's another thing and this is speaking to my point earlier about Beacon chain withdrawals the really cool

thing about this is that there are certain players that can migrate their validated infrastructure to use opal uh once withdrawals uh become enabled and it's a lot easier for them to to kind of do this and to rotate things around if they want to do it rotate keys and all that sorts of stuff so we're going to be seeing a bet an uptick in the oval uh Network um a kind of adoption this year I'm really I'm really looking forward to seeing that obviously uh some of you will know I'm an investor in opal so just a disclosure there uh but yeah I think they're going to be doing a great work this year um arbitrim put together a thread on their recap of 2022 as well recapping all the growth that they had as you can see their growth has been amazing and I've gone through this before so I won't

bore you again with the details we just wanted to hide the threads so you can go check it out for yourself it's not just me saying that layer 2's are growing amazingly and that arbitrim is growing really well there is data to back this up there is data on doing analytics this isn't just Arboretum putting out bias data you can go check it out on Doon analytics for yourself which is linked in this thread which of course I'll link in the YouTube description below for you to do so all right we have an update here from fire who says that they have Firefox users can now use the fire extension now I've talked about the fire extension a bunch on the refill before it's the extension that basically shows you more detail about your transaction talks to metamask um traditionally you've only been able to use it with I believe Chrome and

maybe even chromium-based browsers but now you can use it with Firefox and I know there are a lot of Firefox users out there I may change the Firefox soon myself actually because Chrome unfortunately I believe they're getting rid of ad blockers this year uh Chrome just eats so much RAM it actually has gotten so much worse it's it's insane that it's gotten worse but it has um so I may be coming a bit be a Firefox user uh relatively soon and I'm glad to see that fire is supporting them because I love using fire uh myself on um when I'm using kind of uh uh on-chain stuff with metamask and things like that uh so yeah go check out fire if you haven't yet it's now available for you on Firefox all right so I've left a few minutes here to talk about uh this last thing

that was my last tweet I think of 2022 where I said my advice to people who are trying to figure out what to focus on full-time in crypto get involved with ethereum's layer 2 ecosystem I strongly believe it offers the best return on investment from a social economical and career path perspective you won't regret it now I should have said Financial instead of economical but I guess the point still stands the ethereum layer 2 ecosystem I know I've said this so many times but it's still so young there is so much opportunity no matter what team you join at this point they're all early stage they're all seeing growth they're all uh part of the ethereum ecosystem and the whole ethereum Community is trying their best to raise them up

trying their best to be able to adopt them and we're seeing real adoption happen the alt L1 thesis is severely wounded I wouldn't say it's dead because nothing ever dies really in crypto as I've said before there it's a very rare effect of something to die but right now they're severely wounded a lot of the ultr1s will Fade Into Obscurity like they always have and I just still strongly believe that the old the l1s in general aren't going to make it really I strongly believe that I strongly believe ethereum has a settlement layer will make it obviously and ethereum's layer to it because system is where the majority of user growth at least sustainable user growth is going to be going forward so while it's still in its nascent stage your best bet is to join that team and now there was a bunch of

reply uh join those teams now there was a bunch of replies to my tweet here that you can go through yourself but every team is pretty much hiring at this point you can go check that out for yourself but it's not just the layer two teams themselves it's also the projects building on these layer twos or building around these layer twos whether that be D5 projects or nft projects or middleware like infrastructure projects anything involved in that area I I still think is going to give you a lot of return on investments uh from those perspective from those perspectives that I mentioned before but in saying that the layer two teams themselves are probably going to give you the most return on investment now does that mean every layer 2 team is going to succeed no as you I've said before and I'll say it again the on the generalized layer 2

front I don't believe there's going to be that many winners or at least big winners on the app specific layer twos there's probably going to be a a a lot of winners there but you kind of limit yourself then because you're not really working on uh player two specifically you're working on an app with a layer 2 attached to it so to speak right so something like a DIY DX whereas if you're working on a layer 2 itself like arbitrary optimism then you're working on the core protocol infrastructure you're working uh on on a grander thing in a more generalized thing but yeah as I said like there aren't going to be that many winners there there are a lot of there's a lot of competition already right there's I'm not gonna name all of them arbitrome optimism you know polygon scroll stockware uh you know Tycho

there's more coming out every day consensus is ckvm um but not all of them are going to win and by when I mean like get a lot of market share just like we have a very few layer ones with a lot of market share and it's basically ethereum BSC and Tron and the only reason why Tron has any has a majority of its market shares because Justin Sun uses it as his personal uh chain right um other than that most of the other Chains Don't Have Much activity on them uh and they maybe did in the bull market but now in in Bear Market it's not sustainable that's why I always say sustainable activity is where you want to be looking at things and what you want to be judging these things based on and well through 2022 the layer twos have continued to grow that's real

organic growth that's happening yes you know a lot of a lot of it or I mean some of it maybe a lot of it I wouldn't say most of it but there are there is a healthy chunk of it of airdrop farming especially for the networks that don't have tokens yet but in saying that I still believe there's a lot of organic activity happening there I see a lot of organic communities forming around these things especially stuff like nfts so there is real activity and user growth happening there so if you are interested in getting involved with crypto full-time there's probably no better team to join than a layer 2 team as I said you can check out the replies here for that um for I guess like links to people or I guess teams looking for people to hire uh but yeah I'm going to leave that one

that's one last thing I want to talk about while I've got a few minutes left in the markets because it's always funny to me the markets in the New Year in January if you look at the the chart and I had a friend point this out to me um you know a few months ago and I looked at it myself but he really pointed out to me draw the lines on it and he goes look the the start of the year is usually you know most of the time a good year for the markets especially if it's come off a bad year and I'm like okay that's all well and fine but if you go through history it that doesn't mean that the the market activity at the start of the year is going to hold to the rest of the year like just because

something that we have you know a positive q1 for example doesn't mean we're going to have a positive Q3 and Q4 so if you see the market recovering really well say you see East go to 2K and you're like yes the bull Market's back on I I said it before and I'll say it again the bull market is not back on if it goes to 2K that's not how it works go look at the 2019 chart eth went from 80 to 360 dollars back to like a hundred dollars or around that so that can happen again and so don't fool yourself or delude yourself into thinking that just because eighth goes up to 2000 or 2500 that the bull Market's back it doesn't mean that at all it can retrace and it more than likely might we Face simply because of the fact that people

will be taking profits they'll be like I don't believe in this rally I'm going to sell into this and then obviously come back down and then you re do the re-accumulation again and all that good stuff there but I just want to put out that warning as we begin the year that the markets are going to be funny this year I think because last year we had like a brutal down Market it was the worst year for the stock market in a long long time and markets are forward-looking so even if we go into this recession that everyone's been talking about even if the economy looks weak that doesn't necessarily mean the markets are going to be weak but that also doesn't mean the bull Market's back so just stay grounded in reality don't get ahead of yourself don't fomo you know always the golden rules there and I

think you'll do fine um but I think at this stage of the uh I guess like Market because we've been in the bear market for a year now everyone listening to the refuel is in it for the 10 heck so I don't think you guys are going to get too ahead of yourself but I always think it's worth reiterating that especially when I've got a few minutes left at the end of the episode but on that note that's going to be it for today so thank everyone for listening and watching make sure to subscribe to the channel if you haven't yet give the video a thumbs up subscribe to newsletter join the Discord Channel and I'll catch you all tomorrow thanks everyone