CFTC vs DeFi, EigenDA detailed and more - The Daily Gwei Refuel #653 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily way refuel where we cup the latest news in ethereum ecosystem I'm your host Anthony 8th of September 2023 alright everyone let's get into it so I just apologize for the mess behind me I'm doing some stuff in my study today and I didn't get it done in time you can see it's like step ladders and things like that around me I'm moving figurines around it's always a fun day when I when I do that um but yeah just apologies for that but anyway you don't care about that let's go into the news so to kick off today we have some news out of the cftc which is the commodity Futures Trading Commission in the US it is basically the sister regulator to the SEC it is responsible for regulating uh Futures products derivatives products in the US and

everything in between now this is not positive news this is out of this eftc this is uh you know what I don't even know if it's negative news it's just news uh and the the headline here on the Block reads that the cftc has settled charges against D5 protocols opine or open 0x and diridex so I guess like I had heard of two of these before deridex I may have heard of before but Xerox is a very very old project now they did an Ico all the way back in 2017 uh open is also quite um not not exactly new but not old so it's been around for a little while here but yeah uh these are all us-based Protocols of course uh and the cftc has gone after each of them and ordered them to pay civil monetary

penalties of 250 000 200 000 and 100 000 respectively to each of them and to season this this from violating the commodity exchange act act and cftc regulation so essentially what they have kind of I guess like or how they've run afoul the cftc here is that they had products that they had created and issued themselves that were available to us persons um and uh these products were I guess like derivatives products and Futures products and things like that and the thing is is that I believe pretty much all of them uh blocked us people from being able to access these products at least Geo block them obviously you can't block them if they're using a VPN or

anything like that um but apparently that wasn't enough now I haven't read the whole kind of detailed the details on this but essentially you can see here a quote that says the order finds that o s q t h tokens which is uh opens product are swaps and leveraged or margined retail commodity transactions and therefore can be offered to retail users only on a registered Exchange in accordance with the cea and cftc regulations open unlawfully operated as a facility for the trading or processing of swaps without registering as a SEF yeah so the cftc recognizes each responding substantial cooperation with the division of enforcement's Investigation of this matter in the form of a reduced civil monetary penalty the regulator are continued so yeah I mean as I said not

bad I mean not good good news not exactly bad news uh it's kind of just news but I think when I look at this and when I look under the hood here it seems that the cftc is really just applying the law all here I guess because if you want things to change in the US or I guess anywhere when it comes to regulating or like I guess like legislating on crypto it needs to be done uh at the at the kind of like base right the laws need to be changed and they need to be updated in order to reflect the changing I guess Financial system that we live in today where essentially there are smart contracts that power it which means that they're not and there are validators that everyone runs around the world that confirms transactions so that aren't

exactly money transmitters the smart contractors do they can do these things on their own people can create their own tokens from anywhere in the world and you and you can very easily and trivially get around jira blocks right there's no way to know because there's no kyc uh and AML uh there's no way to know who your counterparty is here and even if there was kyc and AML those things are very easily defeated um in various different ways uh so yeah I think that the laws and regulations need to be updated to reflect this and it seems like the cftc I guess is applying the law or at least applying the law as as as how they see it now Jake chavinsky actually had a comment about this where he said uh he has like a tweet here where he said perhaps we

should lay to rest the idea that the cftc is a better regulator for crypto than the SEC uh apparently today the cftc violated the Court's opinion in the uni swap class action and its own principles in an attack on defy and apparently one of the cftc Commissioners here are dissented and she she wrote her descent here which I'll link in the YouTube description below and then Ryan Sean Adams replied to this tweet asking you know how are we going to win when they just keep respawning genslers I'm here and fighting it's just depressing and then Jake gave us a bit of opium here which I uh in his reply where he said they can say whatever they want in a settlement agreement or in speeches or in guidance or in notices of proposed rulemaking none of it counts unless a court says it does you may have noticed

that we keep winning in the court that's not going to to stop in the end we win and I've said this before on the refill as well it seems like the U.S court system is although you I guess like the U.S courts generally uh for these matters are actually sticking to the letter of the law and are our kind of like last Bastion here to fight back against uh regulatory overreach not just with the cftc but obviously with the SEC as well and as those losses keep piling up for these regulatory agencies in court uh Congress starts to take notice and then it becomes a kind of political thing where it's like well we need to actually legislate on this because we can't have our Regulators continuing to lose in court because that legitimizes them and it means that they have less teeth essentially and it means that we

build all this precedent in the courts that's not good for the government So eventually you know the I guess like the theory is that they'll legislate on this and provide better guidance around this here so you can go read all this I'll link it in the YouTube description below but then uh uh commissioner uh uh Caroline D fam here also tweeted out um as a as a kind of I guess um a different kind of thing not not with regards to the settlement but she said you know it's time to take action I propose the first ever us pilot program for digital asset markets as a regulatory sandbox to test gather data and examine Innovation this creates a safe framework for new technologies and Market structures under under existing regulations and protections look I'm more for sandboxes to be created in the short term but in

the medium to long term we need actual new legislation and regulations to cover crypto like crypto does not fall into the old old a lot of the old regulations and and protections here and and laws because as I mentioned there are different ways of doing Finance now like traditionally Finance has been done through intermediate areas right it was not done in a peer-to-peer fashion or appear to I guess uh automated smart contract fashion it was done through intermediaries like Banks and clearinghouses and they have to do kyc and AML and most of the time on pretty much the whole time they custody assets as well but in the crypto world and the D5 world it's a completely different thing right everyone uh who is using defy

um directly from their own wallet is uh is uh doing self-custody right they're not giving custody over to any kind of one party or any unilateral party here they're interacting with smart contracts you know some of the smart contracts will have multi-cigs uh to do various things and some won't and things like that and that's I guess like a tangential uh kind of um a thing there but generally it's done in a peer-to-peer fashion where the transactions are not I guess like settled by a centralized Clearinghouse or centralized financial institution or Bank the transactions are put together by I mean at least in the ethereum ecosystem put together by block Builders as I explained yesterday then they're passed on to these validators that uh uh um uh stake that obviously is part of

the ethereum stacking ecosystem that proposed the blocks and then those blocks get appended to the chain and then the validators attest to those blocks and the chain continues on in a decentralized distributed diverse fashion right completely uh um disconnected from any kind of centralized body that controls that there's no kyc or AML because they can't be really I mean you can it's all code at the end of the day right you're just interacting with a platform that cannot kyc and AML you and it doesn't make sense for it to do that obviously uh as well there so I think that the the existing laws regulations and protections they all need to be updated to reflect that new world that we live in it's going to take a long time so I'm I'm all for these sandboxes in the short term but medium to long term we need

that that kind of stuff happening in the background there but anyway you can go uh check out all of this stuff I'll link in the YouTube description below all right moving on from the regulatory stuff to a new EIP that has been submitted by a Dap lion here now this EIP uh was basically suggested to be included into a dencoon which means that it's it's cutting it tight here right and there's a few things that go into this so I'll describe what this AIP is first so this is something that I talked about before on the refuel where the core devs were considering um putting together an EIP to essentially cap the churn limit of validators on the network so that we could cap the uh so that we could slow

down the rate of validators being added to the network now this was suggested because we had such a long deposit queue you know it was over 90 000 and it was persistent and the core devs were afraid that we would add too many validators to the network um and basically overload the network and kick off the smaller players because as you add more validators the bandwidth requirements go up uh and and uh for everyone because the more validators have to talk to each other and it can overload the network now now since then uh and since those concerns were brought forward uh since then the validated queue has come down a lot and it doesn't seem like it's going to be going up uh anytime soon I feel like if it's going to start going up again it'll probably be next year uh maybe when the the kind

of Market heats up again or something like that so it seems like this issue is not as I guess urgent as it as it once was um but even still this EIP was submitted by dapline here and he basically suggested that it could either go into the fork uh of dencoon or another Fork next year but I feel like if it doesn't go into Den which it doesn't seem like it's going to go into dencoon by the way just reading the comments here uh from um uh I guess like from from all the uh the core devs and and researchers they I mean I say it doesn't feel like it's going to go in but there is a kind of split and it and it what happens is that it starts bleeding into other questions because uh for example this AIP would be an effective monetary policy change it

would be a small monetary policy change but it would still change the money military policy because right now the churn limit right doesn't have a Max limit on it um and every time a validator is added to the network the issuance uh overall goes up of new each being issued because we have more validators uh to pay now if you change that and you cap it and you cap the churn limit to 12 instead of letting it continue to go up as more validators uh get added here you essentially change the rate at which that that new issuance goes up because now it's capped right it's it's capped at the 12 the sorry the churn limit is capped it's not increasing anymore so it is an effective monetary policy change it's still in line with ethereum's monetary policy

which is minimum viable issuance because it doesn't increase issuance it actually net reduces it over time um or at least reduces the potential uh growth of the issuance right uh it doesn't reduce uh uh new issuance um as it exists today but just like the potential uh for growth year but still it is an effective kind of a monetary policy change so yeah I mean I'm not going to spend too much time on this I want you guys to give it a read for your yourself there is um a link to this uh in the YouTube description below but in terms of kind of timing for things look this could make it into Den realistically because it's not actually a complex change uh technically why technical wise but to be honest I don't

actually want this to make it in that fast because as I said there are considerations to be made around um you know the the fact that it changes the monetary policy other things like a lot of the assumptions that have been made around ethereum staking uh change a little bit here with this and as I said it is not something that I believe is urgent right now because it doesn't seem like we're going to get to that kind of like urgent state that the core devs and researchers were worrying about just maybe a month or two ago uh uh there so because there's a lot of assumptions baked into this that the uh deposit queue is just going to keep growing uh at a at a kind of like assumed rate and that's going to lead to this many validators but that's not what's what's

happening right now uh but if it was kind of included for Den Kuhn um I don't yeah as a thing I don't think it would delay the timing around this and I still think dencoon can happen this shot look I'm gonna say it's not gonna happen in October that's for sure there was some people talking about October and I was like on the fence about it because it really doesn't feel like it's gonna it's gonna happen in October specifically because we haven't even got any test Nets forked yet um so I'm still sticking by November uh but I have said before that it could push into early December uh but but yeah we'll have to see how that goes I think on the next all-core Dev call they're going to discuss this and that'll basically be the decision that that gets made on that call whether to go ahead

with this or not but essentially uh yeah that was that was the new AIP that was put forward today by dapline you can go check it out for yourself I'll link it in the YouTube description below all right just wanted to put on your radar something that I missed the other day so this is from August 31st but this was an introduction to something called pep C Dash DVT which is a novel mechanism for enforcing proposal commitments in ethereum without requiring changes to consensus now I have talked about Pepsi a bit in the part in the past and how this kind of plays into the whole PBS roadmap well basically this is a design that doesn't require a change uh to consensus which from uh I guess like my uh from the way I'm looking at this it doesn't require a

hard Fork which means it can be built extra protocol uh sort of like how the Mev Boost network exists extra protocol here so if you want to learn more about that I'll link the post in the YouTube description below but just wanted to put it on your radar because I did miss it when it first got published about a week and a half ago now all right so I was on the Twitter spaces yesterday with um uh with etherfi and I don't know if you guys caught that one I did shout it out on the refuel a few days ago but I was on there talking about all things ethereum staking and I was reminded of this really great website called staking directory which I think I have brought up on the refill before but I had forgotten all about it I hadn't mentioned it uh for a while

here but staking dot directory is amazing I mean as I said in my tweet here it basically gives you a breakdown of all the different types of ways to stake your teeth and you can see here that they not only list the services but they also list the software that you can use and I've covered some of this software like ether wizard before you know this is a Solo solo sticking software that aims to make it really easy to be a solo sticker and and on the staking.directory website it actually tells you here what the staking type is the 30-day backward looking APR what's the fee you know what the minimum stake is when it was launched on mainnet and it gives you all these links to do your own research as well uh it's it's awesome this this resource is something as I said I had forgotten about but I'm

glad that I was reminded of it because it is something that you should definitely go check out if you're at all interested in in staking your wreath and not knowing which provider uh to go with which software to go with here um and and yeah I'll link it in the YouTube description below for for you to check out there but they currently have 40 active listings and in development they have seven this is crazy I didn't realize that there were so many different ways to stake honestly I mean I had followed a bunch of them but the fact that there's 40 different ways to stake uh that that um the staking dot directory has updated here and they've got uh seven other different ways that are in development right now which I've talked about a bunch of these before I think I've highlighted nice note on the refuel Diva

of course stakewise V3 e to Phi um and more there but yeah I I guess like just wanted to give this a shout out to you guys for you guys to check out I'll link it in the YouTube description below and you can go view it all right geode Finance has published a blog post today titled modular staking infrastructure a library and standard for ownership so essentially geode is trying to do lsts but in a different way so they say here Jared is a not is not a liquid staking provider Geo is a liquid staking enable enabler so you can create your own instance of geode smart contracts and run your own custom Eve staking solution in minute minutes so basically it's a kind of framework here to allow you to essentially create your

own LST protocol uh which you can kind of get more details about I'll link it in the YouTube description below here and you can see how this works I mean there is there's the blog post obviously but there's also some graphics to show you how it all works here and how it all plays into something called Geth which is their uh kind of like parent liquid staking uh kind of token here and they've got all the different features uh listed but the reason why I wanted to highlight this for you guys is because there are a lot of lsts right now and a lot of them just like look very similar right but the fact that Jr who's basically offering this software up for people to be able to create their own lsts and to make it so that it can be liquid and interoperable and actually

easy for people to do is is a killer feature I think because as I said before the only way we're going to reduce dominance of any one big player on the network of whether it be lighter or someone else is by increasing competition on the network and then what better way to increase competition on the network for ethereum stacking for e-staking then allowing people to spin up their own kind of staking pools allowing them to spin up their own lsts allowing them to essentially kind of like plug and play uh with with the ethereum's taking infrastructure uh that that already exists um and and the LST stuff that obviously uh a lot of people are hungry for everyone wants an LST so yeah I mean you can go check out this post for yourself for more details on Jared

Finance but uh I just figured it was worth highlighting because it's something new in the ecosystem all right eigenlayer have finally published more details on eigen da which is their data availability solution that they are basically going to be launching I believe is one of their first if not first products as part of the eigen layer uh kind of product Suite here for everyone to I guess restake and be a part of so you can go give this blog post a read I'll link it in the YouTube description below but it talks about how the eigen da kind of like works from from a high level it talks about the security it talks about how restaking comes into it and all that good stuff there as I've said before I think that out of all the non-etherium data

availability layers so non-uh kind of like ethereum layer one da layers um and for for l2s that don't want to be Roll-Ups but would rather be validiums it makes a lot of sense to me that they would pick something like eigen data availability or eigen da over one of these other Solutions um purely based on the fact that um logically you would think it would be more secure because it is got it has got um you know validators eighth nodes restaking as part of it right and and not operators uh sorry I should say note operators that run ethereum staking infrastructure running this infrastructure as well and getting that Economic Security of each stake behind it uh too on on that front uh there so yeah I feel like it's a natural choice

but at the same time there are other security considerations as well uh there are liveness considerations uh on top of that and it also uh I guess like matters about how distributed the nodes are because not every ethereum validator full node uh runner I guess you could say or maybe I should say not every ethereum node operator is going to be an eigen layer data availability Network a kind of operator as well right there's going to be a subset that does that and and by virtue of being a subset it's never going to be as secure as ethereum itself right and that's why uh if you want to be a considered a full roll-up you're going to have to put your data on ethereum layer one and your your proofs on ethereum layer one uh that's why we call and that's why you're not

considered a roll up if you're using eigen data availability or an external data availability layer here even if it is using restaked eth because it's not the same security guarantees and I think that's a distinct point that people need to keep in um keep in their mind when interacting with this stuff just because it is harnessing the um you know staked eth and and using it to secure its own network doesn't mean that it's as secure as ethereum layer one there are so many other things that go into that and not just security but decentralization censorship resistance all the stuff that ethereum layer one affords you uh it's not going to translate to you know whether it's eigen da or another service running on eigenlayer just because there is some eighth that was that's taking on

ethereum that is restaked with an eigen um kind of eigenlayer service here so I think that's important too to keep in mind but anyway you can go give this blog post a read I'll link it in the YouTube description below for you to do so all right so I think this may not be surprising to any of you out there and this is something that I've talked about in the daily word Discord channel before but it's funny when you look at gas prices and you can actually see the I guess hours of when the gas prices Spike correlate with the hours where I guess the New York Stock Exchange and NASDAQ are open in the US so the trading hours I believe of the New York Stock Exchange is 8 A.M to 4 a.m uh eastern time uh 4 a.m 8 A.M to 4 P.M eastern time I think

it is um and in that window you can see here Hill Dobby has actually kind of highlighted it on the on the chart that's when uh the bulk of the higher gas prices are because the bulk of the users are now online and they're basically using the network in business hours which is kind of funny because you can use the network 24 7. you don't need to use it within us business hours but it seems like a lot of people do and I think that it's partially because when the stock exchange is open uh you know maybe maybe the crypto markets are kind of correlating with it and people are doing transactions to follow along with that obviously it's because those are the hours where people are awake and paying attention to quote unquote work whether that be I guess like trading on the stock exchange or trading within

crypto or doing things within crypto so it does make sense here and apparently if you look at BSC and look at where when their activity spikes it's during the business hours of um of countries in Asia so it's kind of funny how different blockchains have different kind of regional uh yes busyness to them um but yeah as I said this is not new information but when you see it plotted out on a chart like this I think it's very interesting so yeah thanks to hillw for for plotting this out um and this comes from his gas dashboard which I actually showed off yesterday and you can find a link to that I'll link it in the YouTube description uh below all right speaking of dashboards uh Tom Wan here he shared a new enhanced dashboard uh for stable coins that uh 21

Co has put together here so you can go check this out I'll link it in the YouTube description below but essentially um you can get a lot of insights on different stable coins yeah and Tom lists some of them so you can get the overview of the stablecoin landscape on ethereum so they're tracking 25 stable coins I didn't even know there were 25 stable coins on ethereum but apparently there are and they're tracking uh 25 of them here you can track things like circulating Supply and market cap what their Peg currently looks like change in Supply percentage all that good stuff there I mean this is a very comprehensive dashboard as you can see in front of me here and if we kind of look at the market cap of each of these stable coins we pretty much already know which ones are the top kind

of five here it's tether you know usdc die busd is still in there but that's soon to be zero because they've got till February 2024 to basically zero that out uh and S die uh and then there's just a bunch of the long tail here I mean the reason why you probably haven't heard about most of these is because they're really small you can see that most most of them don't even have a billion dollars uh kind of market cap here you can see that uh actually uh uh the the I guess like top uh 19 to 25 have under 100 million you can see PayPal's USD stablecoin here is around 44 million right now um it is obviously very new so not not uh kind of um not no not not larger market cap yet uh but then if you scroll down you can see kind of Trends over

time the stablecoin market cap Trends obviously given that you can get a really good yield in Trad fire right now the stable coin market cap has gone down pretty significantly and of course this kind of coincided with the top of the bull market as well so you can see here that the top of stable coins market cap was 125 billion now we're down to about 74 billion so not like not even a 50 outflow but a pretty substantial outflow across pretty much all stable coins and I think that's due to the fact that as I said like people are going to Chad fi to get that yield because rates are high and I've fully expect stable coins to come back in during the bull market when rates are going down but also the fact that we're onboarding more real world assets too crypto so uh from that lens

uh we expect seven coins to come online uh anyway here and yeah as I said you can scroll down all on this dashboard and check out all the different metrics they've got here it's a really great way to keep track of stable coins I'll link this dashboard in the YouTube description below uh for you to do so all right a fresh post from Aztec uh uh yesterday or today they said here at Aztec Labs We Believe building an L2 represents a huge opportunity opportunity to improve privacy uh ux that's why we're making privacy uh that that's why we're making a privacy first app development more intuitive than ever with painless State Management introducing a privacy abstraction with Aztec so you can go give this a read this is more for maybe the developers

amongst us and how Aztec is thinking about privacy but as I've mentioned before Aztec is building a layer 2 that is not a ZK evm it is not evm compatible um and uh it is being built from the ground up using Aztec's own technology they're kind of creating a brand new smart contract language called Noir which I believe is currently live but and it's been around for quite a while um and they're actually working on uh building an L2 based on I believe the utxo model now for those of you who don't know the utxo model is an accounting model that Bitcoin use so the reason why ethereum doesn't use this or the evm doesn't use this is because uh it's very limited in what you can do

with it uh it's essentially with Bitcoin it works for payments uh and it's and it works really well for payments and works really well for moving Bitcoin around um and and works really well for just the Bitcoin ecosystem generally but if you wanted to do more than payments say you wanted to do smart contracts say you wanted to have tokens so you wanted to have nfts things like that then you need a different model and that's why ethereum Works off of an account model where essentially you have one address that is your account whether it is an externally owned account or a kind of like smart contract accounts um it is still an account it's still based on the account model here where you can have all that stuff and it's really easy to keep track of really easy to integrate with and build with right

whereas with bitcoin's utxo model it is working uh like I guess like um like how cash payments work in real life where essentially you pay someone and then you get like change uh for that payment and then that change change kind of it creates a new address in the background in your Bitcoin address and that and while the wallet software basically collates all of this together and then you're left with essentially a kind of like unified balance but for things like tokens and and smart contracts and and nfts and stuff like that it doesn't necessarily work very well and that's why even with things like ordinals on bitcoin it is very clunky compared to nfts on ethereum right it's very different um it's built in a very different way and the ux is a is a kind of different

experience there so that is definitely not just due to the utxo model but that plays a big part in it there so as I've said to you guys I've always been really excited with what Aztec's building because they are building something that's non-evm uh same with obviously stockware with stocknet as well but if you want to learn more about that you can go check that out I'll link it in the YouTube description below all right so I think that's going to be it for today's episode but you won't have to wait till next week to hear my wonderful voice again tomorrow there is an episode with Eric Connor dropping uh we talked about pretty much like the markets the entire time but in the context of the ETFs right the regulatory news stocks all that sorts of stuff it's about a 45 minute episode and it was great if

you're not feeling feeling bullish by the end of the episode uh then I don't know what was going to make you feel bullish because yeah we were both very bullish in the episode so anyway look out for that as I said that'll be live tomorrow tomorrow being Saturday around the same time that the refuel goes out uh for you to enjoy there but on that note I'm going to end it there 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 next week on the refuel thanks everyone