EigenLayer raising restaking cap, L2 wars and more - The Daily Gwei Refuel #639 - Ethereum Updates

Transcript

hello everyone welcome to another episode of the early gray refuel breakup latest news in ethereum ecosystem I'm your host and this is the 14th of August 2023. all right everyone let's get into it so we have an update on the SEC versus coinbase case here from meta Lawman on Twitter he says six Securities Law Scholars file a devastating Amicus brief in support of coinbase law professors from Yale University of Chicago UCLA Fordham Boston University and Widener filed an amicus brief last night last night being August 11th that absolutely shreds the sec's investment contract theory so you know this is just continuing the trend of seeing people being on coinbase aside in this case and

obviously as I mentioned last week the SEC continues to be this big bully that that kind of has disregard for the law they lost their case against Ripple well part you know parts of the case against Ripple because of that right they were disregarding what was actually written in the law and it seems that that's what they're doing with uh with coinbase yarn and you know I've said this before I've gone through it before I basically said that uh the only thing that can change this uh or the only thing that can uh that can kind of like uh make this a more positive outcome is if Congress is that is was to actually uh legislate on this and make the make it a lot clearer for companies like coinbase otherwise the SEC would just use the ambiguity to go after these companies and you know

some of the time they'll force them to capitulate other times uh they will fight and then capitulate and then sometimes they'll lose right they lost against Ripple I expect them to lose against Queen base but they won against Kraken right the Kraken agreed to shut down their staking service and pay to find they won against um against EOS back in the day right uh which I mean back then I did I mean I saw them do that and I was like this is crazy they find them what 24 million dollars um and then they got away with like four billion dollars or something like that but it's all about what they're going after them for right they're going after them for issuing an unregistered security it's different to them going after you know coinbase for writing unregistered Securities and all those sorts of stuff and then I think recently

yeah I mentioned that the bitrex thing the SEC went after bitrex and again bitrex just settled because they're like well we're in bankruptcy anyway and we'll just pay you out of the bankruptcy kind of filing here so as I mentioned last week SEC just continues to be that bully just continues to be that Mafia or mob like entity that basically gets protection money from these companies in the form of settlements or or fines so great to see that these law professors uh put filing amicus briefs on behalf of coinbase or in support of coinbase against the sec's kind of frivolous lawsuit um against them uh so great to see that and I'll keep you guys updated if there are any anything uh anything else on that comes out but you can check out the Tweet Olan kid in the YouTube

description below for you to do so all right Chandler guy put out a really great tweet over the weekend where he basically summarized some of this the really exciting stuff that's been happening over the last few months when it comes to user experience so he's got a list of things here and I wanted to briefly go through each thing each of those things on this list because I think that's pretty really important so the first thing is account abstraction or Erp 4377 so account abstraction has been a pretty big Topic in the ethereum community this year especially over the last six or so months there's been a lot of work happening on that in the background I've highlighted a bunch of it uh there's been a bunch of work from different teams such as Argent that have been working on it for quite a while now

but really the the wheels seem to be turning right I mean I didn't be turning I'll you know I'll be slowly but but turning on account obstruction and making the user experience generally better for users uh at Layer Two I mean there was an EIP that was going to I think it's 43.77 or no I think it's actually another EIP that wanted to I wanted to allow people to convert their externally owned account or their normal ethereum address into us into a a smart contract which would essentially make it I guess an account abstraction wallet uh depending on the terminology that you use there so there's all that sort of stuff happening in the background as well but yeah it is it is a slow kind of um chug here now next up we have pay Master gas fee sponsors so what this is is basically what I spoke about last

week when it comes to Visa allowing people to essentially pay gas fees in whatever token they want using their debit or credit cards this has been a thing that's been around for a while basically in the form of something called meta transactions where essentially you could pay a fee and any number of supported coins or tokens and then obviously it would be converted in the back end to each because eth is the only coin uh that you can use to pay uh fees on the ethereum layer 1 Network you have to settle in eat there but it was abstracted away from the user and it obviously made the user experience and makes the user experience a lot better because at the end of the day let's just say a user has been onboarded they're just doing stablecoin stuff they have some usdc uh or some dial whatever it is

and they don't have any eth well they shouldn't be prevented from using using the ethereum network from using the layer twos just because they don't have eth and now with stuff like paymaster and of course meta transactions things like that once they've been you know added once they get added a support to various wallets and various other infrastructure providers we can allow for that uh that abstraction away of gas fees and as I said it's still ultimately paid in eighth in the back end but for the user it's displayed to them in whatever token they choose really I mean I I do think that the end state would be Ethan stable coins I don't imagine people paying for gas fees in many other tokens to be honest considering that Ethan stable coins are definitely the most liquid they're the most used they're the most logical for for it to

be used as gas fees But ultimately it doesn't matter if you're using stable coins as I said it's still settled in eighth then there's Pass Key authentication which was something that I mentioned last week as well TurnKey has been has been pioneering this has been using this uh they had a demo with goldfinch and you can go look at last week's episode for a breakdown of that there's MPC and secure Enclave custody which is uh not necessarily new but has been getting more and more traction I know coinbase wallet uses it uh you have obviously the l2's optimistic and ZK Roll-Ups just absolutely taking off right I mean I think they've taken off more than people thought they would considering it's a bear Market still and considering like how quiet the market is right now and I'm going to talk about that towards the end of the episode but

obviously that's making huge strides and I've talked about that a lot we have Proto dank sharding or erp4844 coming in hopefully November as I've said before as part of the dencoon upgrade and then of course crosschase chain messaging such as chain links ccip solution there which I talked about a couple weeks ago best get allowing for arbitrary message passing between different chains allowing for mint and burn of tokens on on different chains you don't have a honey pot of tokens on these Bridges so yeah a lot of exciting stuff happening there and generally God basically uh finished off this tweet by saying the user experience of web3 is becoming rapidly abstracted and simplified and it really is it really is it really feels like like we're having this UI ux Renaissance within the crypto ecosystem

right now where we know we have the infrastructure in place you know l2s we know they're getting cheaper over time we know that uh that there that we can get the fees down to subsense we know that there is going to be a massive influx of users at some point and there are there is a lot of demand for these sorts of things and we just need to abstract away as much of this stuff as possible for the end user so they get the best user experience possible as I've said plenty of times in the past the future is not metamask guys like the future is not metamask interface the future is much closer to what we see from a wallet's like rainbow and and uni swap but even then and coinbase wallet of course but even then it's still not simple enough it's still not obstructed

away enough it needs to be as dead simple as possible and I've talked about it on the refill of course where essentially we need you know just two clicks Max of someone to be able to do something within crypto using a wallet and I think we're going to get that we're going to get there pretty rapidly in term like relatively rapidly I mean I say rapidly maybe some people will say it will I think oh we're gonna get there in six months no I mean relatively rapidly and it's probably going to take a couple more years and UI ux is always improving but it definitely feels like we're we're on the precipice of a uh Renaissance in UI ux uh in in the crypto sphere here all right moving on so eth wave this Twitter account uh put out a tweet today where they basically summarized the

activity of staking around uh since 8th withdrawals went live so they say here since 8th withdrawals were enabled which is what three months ago now April May June July August uh I think it's three months three or four months uh I'm I'm not doing the math correctly in my head uh yeah it actually is because the 14th was when it went live I believe um back in back in April there so since then there have been over 10 million East deposited slash acute uh for the for staking over 6 million net Heath flow to the beacon chain over 460 000 each burned over and that that translates to 18.5 billion dollars uh deposited it's 11 billion dollar net flow and over 850 million dollars burned so yeah I mean

the ethereum network is such a Powerhouse doesn't matter if it's staking if it's burning fee Revenue with erp1559 there is so much economic activity going on and as I mentioned before it's still a bear Market guy we're in like the depths of the bear Market I actually think that I was looking at the chart the other day in terms of volatility across the BTC and eighth I think this is the lowest point almost in history of volatility for for those two coins there and what that means as I mentioned before the market is is dead right now there's no new money coming in uh and as I said I'll explain more about that towards the end of the episode I have a tweet that I want to I want to talk about but in the face of all of that we still have massive growth of each staking we still

have a lot of eat being burned and I'm telling you guys this is all not being priced in right now this is all going to be priced in when demand comes back uh but right now it definitely isn't so there is definitely a kind of like opportunity there in in my mind uh but yeah great to see this uh breakdown of things from from each wave here all right so eigenlayer has announced that they'll be raising the cap for their LST restaking on August 22nd at 7 00 a.m Pacific time so they say here there will be a global pause that takes place if any one LSD hits approximately 100 000 eth re-staked so essentially uh they're going to be raising the limit up to a hundred thousand each I think per LST but there'll be a global pause that happens once once one of them reaches

that limit so for example if a hundred thousand um our is restaked but only like 60 or 70 000 stf it will still be paused so you won't be able to enter into the SD pool anymore which I guess like makes sense since they're still doing their guarded launch here but this is crazy guys this is actually really crazy that this is I I actually do believe that that Cap's gonna get hit very very quickly I mean the the appetite for restaking is just insane there is a um uh a kind of like tool that you can use to track it I I think nevermind built it yeah it's here I'm just bringing it up now at restaking.nethermind.io you can actually see the Caps here so the Caps right now are quite low compared to what they're going to be raised to they're 15 000

each per um uh uh per LST here as well as Beacon Chinese which is just natively restaked eat there so what they've said is that they're going to be raising all of these caps to a hundred thousand uh but as I said if R8 reaches a hundred thousand before stf and CBE then it would only be uh it would only uh it would Global pause as I said right it would globally pause everything and you wouldn't be able to enter into any of these uh yeah but uh but yeah uh just keep that in mind if you want to get in and you want to restake some of your lsts it's going live up there I guess like the cap is being raised at 7am Pacific time so that's PT that's Pacific time in the US there there's more details about this in the Twitter thread

which I'll link in the YouTube description below all right Diva has announced that their first operator test net is now live they say here it's for it's it's the first ethereum liquid statement solution powered by distributed validator technology so in this tweet thread they explain exactly what a diva node is uh and links to the relevant um kind of places to get started with this but they say a diva operator note enhances ethereum by efficiently performing validated duties it connects to ethereum coordinates with other Diva nodes for key management using MPC dkg and collaborates for validation using Diva's distributed validated technology so very cool to see that uh we're getting I guess differentiated uh liquid staking

protocols now because obviously we have a bunch of them out there right now but you know rockapool's decentralized uh uh decentralized LST you have Lido you have stakewise V3 um and obviously all of those can integrate distributed validated technology into their stack but DV seems to be doing it from the get-go you know they're launching basically as a new LST with DVT uh from you know at launch basically uh and that's on the test net right now and they'll be mainly on mainnet obviously at some point in the future here uh but yeah I love seeing products differentiating themselves see I love seeing more of these staking products come online especially obviously because at the end of the day competition never hurt anyone

I think so if you're interested in becoming a diva operator on testnet and potentially on mainnet as well testnet will be good practice for you so you can go check out this tweet thread I'll link it in the YouTube description below for you to do so all right so I was just talking about overall crypto user experience and user interfaces before and I came across this interesting tweet from Brian Armstrong of all people actually over the weekend where he said one thing that on chain summer which is bases um uh on-chain initiative uh is exposing is just how broken our user experience is in the main coinbase app for nfts dapps and l2s today sorry to say but true if we face the truth we can get motivated to improve it these need to be

first class experiences and on-chain summer is a great impetus to have every employee feel that pain ourselves and fix it Queen baseball is farther ahead on this Dimension but still lots of work to do there as well the good news is that we have just about every employee dog fooding these flows now and if you have a pain if you have a ux pain point or something not working you can send coinbase feedback in the replies to this tweet and they'll try to prioritize it so the reason why I wanted to hide this tweet in particular is because how often do you see a CEO or founder of a company shooting on their own products basically that's what Brian is doing right he's basically saying that our Queen baseball while you know it is farther ahead in in UI ux in the UI ux Dimension and it is

decent it's also uh not great right it needs to improve a bit it needs to improve be improved radically and there needs to be a lot of work done in order to abstract away certain things in order to improve the overall experience and I think this sends a strong signal out to the ecosystem that not only is coinbase serious about things like uh bass and serious about obviously their exchange and fighting the SEC and stuff like that but they're also serious about making sure that they can uh essentially improve their wallet improve coinbase wallet which as I said before is already great but they're serious about improving their wallet infrastructure in order to uh to basically onboard the masses because at the end of the day that's what they're trying to do with bass and if the front door isn't a

friendly user experience they're gonna they're gonna lose people because it's all about the funnel at the end of the day right there is this kind of I mean there's a concept of this funnel where essentially you have the top you have all these people funneling in and then deeper and deeper that you go through the funnel you lose people for various different reasons and it's typically used in marketing you have a marketing funnel at the top you have all these people coming in so you have like a thousand people coming in from the top because they've seen your ad and they all click on it but then once they've come to your site right uh because you've marketed them some kind of product say you've tried to sell them some clothes they come to the site and the vast majority of them will click off

and you'll be able to tell sometimes why they clicked off maybe they uh they clicked off because they just lost interest or what or um it was too expensive for them or any a number of other reasons a lot of the time you won't know where that why they why they clicked off but there'll be a small portion of those that actually make it to purchasing a product so let's just say that 10 people out of that 1 000 actually purchase a product in the end and then you do like a cost benefit analysis here of okay well did our ad spend actually result in a profit from those 10 people spending on there and uh you know is that the conversion that we wanted so the same is true for something like a crypto wallet if a thousand people downloaded the wallet but only

like 10 people are using it uh semi-regularly let's just say 10 people log in each week out of the thousand of a thousand people that have downloaded it well that's not a very great conversion okay so why are people not using it is it is it this reason is that reason and really the only way you can tell is through direct feedback I mean the only real way you can guess through other other ways of measuring these sorts of things you can do a b testing all that sorts of stuff but really you need the feedback from the users themselves and this is Brian Armstrong sending out that strong signal being like hey we want your feedback on this and hey here's me giving feedback to our own products and here's me really just sitting on our own product which I think makes other people feel more comfortable

in order to send that honest and potentially harsh feedback to coinbase that basically says you know this sucks for this this and this reason and then they go ahead and fix it and that's exactly what we need sugar coating things doesn't help anybody and I'm glad that Brian put out this tweet because as I said it sends out this strong signal to the market or to the crypto ecosystem that coinbase is serious about improving their wallet and they they really want to be at the Forefront of crypto wallets yeah so on that note if you do have feedback about coinbase Wallet be sure to reach out to coinbase uh and give them feedback on this you can do it on the Tweet itself from from Brian sweet here or I'm sure coinbase has a bunch of forms on their website for you to use uh

to give feedback to them there all right David Krampus here has put out a new blog post titled A Roll-Ups are real a roll-up economic economics 2.0 so I think I may have highlighted his original roll-up economics uh blog post a little while ago on the refuel but essentially if you are at all interested in how Roll-Ups and l2s handle the economic side of things such as fees and like shared sequences and and um and staking and kind of a gas fees and costs and profits and all that sorts of stuff this is a must read post and I'll of course link it in the YouTube description for you to check out but not only is it great a great read it also has a really great bunch of diagrams here that basically allow you to

visualize what the flow actually looks like and you can see in this one here you know the flow goes from users the L2 fees goes into these services that goes into shared services and potentially back down to the L1 and then they split these things up into like data costs operational costs you know at the end of the day it really does come down to economics so the same thing as an L1 L1 has economical considerations known as an L2 and that's exactly what they're doing here uh sorry what this blog post is doing it's basically explaining uh the differences between this and how uh the robust incentives group I believe the ones doing this at the ethereum foundation is thinking about this so you can go check this out I'll link it in the YouTube description below for you to do so all right speaking of a layer two things

you should read roll from the off-chan labs team here put out a tweet thread over the weekend saying last week we announced bold our new dispute protocol at off-chain Labs which can enable a permissionless validation for arbitrim technology this is the security property along with fraud proofs are what make arbitrim technology decentralized and safe but why is bold unique so if you're interested in diving in deeper into what bold actually is and how it all works you can go check out this Twitter thread from Roll I'll link in the YouTube description below but there isn't another reason why I bring up this tweet thread as well is because I wanted to use it as a springboard for a little discussion around l2s generally and in particular l2s like uh um optimistic Roll-Ups so there's been a bit of discussion I saw over the weekend

around this and I've talked about this a lot on the refill before about how right now arbitrim has fraud proofs but they're permissioned but they have a road map to getting towards permissionless validation and fraud proving on the arbitrim networks but the other the other popular um optimistic Roll Up is everything built on the op stack right of op mainnet bass Zora Avo there's a bunch of these now right now optimism doesn't have fraud proofs as part of the op stack so none of these chains actually have have fraud proofs enabled so essentially what the security model boils down to is really it just uh the operator of the actual L2 of the op stack of the op mainnet of bass so in

reality you could say that these uh optimistic Roll-Ups I mean aren't really optimistic Roll-Ups and also their security guarantees are as good as a centralized exchange really when you really think about it now this is a temporary thing hopefully I do believe that optimism is going to um is going to release either their fraud proof technology soon and implement it implemented soon or just LeapFrog right over it and go straight to validity proof which are ZK proofs that that'll definitely come because I think it's a liability for them not to do that not only for security reasons but also for them themselves because they obviously want to decentralize out as much as possible but keeping these things very centralized is also not a great look and not uh not great for the users either

obviously but also on this note as well I saw some comments on on Twitter saying that you know it's kind of hypocritical that so many people in the ethereum community gave you know polygon over the polygon POS chain and about how it's not a real L2 blah blah right but then you have the op stack kind of not really an L2 at all right now because they don't have fraud proofs uh implemented into their into their stack so you know why people not calling that out and I think that's totally fair I mean you guys know I'm a huge fan of of both of those teams obviously I'm an advisor to polygon I'm also an investor in optimism a huge fan of them but you have to call a spade of Spades sometimes right and really realistically the polygon POS chain is is is much more

secure than an OP stack chain because the POS chain has independent validators that verify the network right has the has those crypto economic rnts as well and all obviously there is a bridge as well between ethereum and the polygon POS chain but there is a a Time block multi-c last time I checked on on that bridge and the multi-sig holders are from independent entities as well whereas the op stack uh chains don't have anything right now they really just have a a very centralized setup now as I said I don't think this is going to be the case for very long I do think that either fraud proofs or validity proofs will get enabled but until then you know I can't in good conscious tell people hey you know this is somewhere where you should park lots of money on I've been saying it for for a while now I don't

think that you should put lots of money on these things not because I don't believe that if something were to go wrong these teams wouldn't fix it they 100 would but it's also got to do with the fact that okay how much do you trust these teams because it really is just trust me bro Finance right now on these things right it's like you put money there you trust that the team operating at is not going to rug you obviously the chances of you know the optimism team the optimism Labs team or coinbase team running off of the funds on base or op mainnet is extremely low if not pretty much zero percent but that's not the point the point is is that it can happen the point is is that those funds could potentially even be frozen for for one reason or another maybe the um you know

they get a subpoena to freeze the fun or something like that so you should never trust your funds on something that is not decentralized and secure that's why for me personally I have the vast majority of my wealth still on ethereum L1 I mean I I struggle to to bring it to uh to bring it to layer twos let alone other l1s and I don't normally I do have things that I play around with on on various different addresses out there but at the end of the day I would never store my entire net worth on on one of these l2s at this point in time when they eventually get to a point where they're fully decentralized where you've always got the option of exiting via L1 with the Escape patch and where no one could take that ability away from you then of course I'd feel much more

comfortable but right now really none of the popular ones are like that arbitrim is the closest to getting to that I do believe that they'll all get there eventually or at least most of them will get there eventually but right now that's not the place that they are so good to keep that in mind uh there but yeah anyway as I said I'll link roles Twitter thread in the YouTube description below for you to check out all right just to round out today's episode I had a tweet that I put out that I alluded to earlier in the episode and the Tweet reads the crypto Market is not pricing in anything right now because there's no new money coming in this is why we see a lot of positive news not translating to sustained upward price action this will not last forever and it's why I think now is the best

time to accumulate now I should also just say before I dive into this that this is not investment or financial advice I am not telling you that you should buy anything right here I'm just giving my perspective on things now this is not news to regular refuel listeners and Watchers I've talked about this a lot of times on the refill the last probably six months at least but what I really wanted to just quickly recap on was that the funny thing about the market right now as I alluded to earlier is the volatility is as low as it's probably ever going to get it is almost at all-time lows from from the charts that I've seen now is this going to continue going lower to new all-time lows or are we going to bounce from here you know what's the price actually going to look

like I can't tell you that for sure I have said before that I think that the rest of this year will be that kind of low volatility crab market and that and that next year will definitely be more positive I mean I say definitely like it's a short thing I mean I think and I believe it it could it should be a sure thing but obviously that's not a kind of like crystal ball prediction it's just me making my own prediction based on a number of different factors that I've gone through before uh but but what I really wanted to focus on was not so much that but more that this thing of the positive news that we have a lot of positive news obviously last week we had PayPal and Visa announcing they're building on ethereum and the East price did absolutely nothing right we have all

that positive news coming out we have all this adoption happening um even if there's no new money coming in we have a lot of people just using these different kind of tools base obviously had a great launch there's a lot of nft activity happening on the polygon POS chain for those of you have been paying attention to that so just just a lot of various different things happening here uh and also outside of crypto I'm talking to a bunch of teams that are doing stuff uh with crypto technology that isn't necessarily on chain yet but it's happening outside and affecting real world um Real World products and services that will eventually come on chain but similarly as well someone commented on my tweet here uh saying you know and a lot of the negative news is not translating to downward price trends either and that's exactly right right

during this kind of low volatility crab environment it doesn't matter if it's positive or negative it's not reflected in the price now I do think that on the negative side of things is because we've really just run out of sellers right we've completely run out of sellers no one wants to sell the people that are around right now are traders that are just trying to scalp some volatility and long-term investors who are stacking and obviously are in it for the long haul here they don't going to be selling at these prices they're hoping to sell at much higher prices right um and then on the flip side of the of the positive news not leading to Upward price action is because as I said there's no new money coming in there's not uh there's not new money coming in to push it up and as I've explained

before the people that are buying right now are limited in how much they can buy they have to wait until they get paid and things like that right whereas if there's new money coming in there's no need to wait for that you know you just essentially have all these new people coming in with new new money and it pushes prices up relatively quickly rather than the accumulation kind of um zones that we see are typically during the end the tail end of bear markets and that's why as I said before I believe we are at the tail end of a bear Market I believe that next year is going to be a lot better because uh we're out of sellers um everyone that was going to blow up has blown up right I know there's rumors still about binance blowing up or tether blowing up those

things have been around for ages I mean especially the tether staff that's been around for a long time now but generally the stuff that we can see the stuff that has played out um since basically I guess like Tara blew up and even before then all of that has been flushed out so now what we have is we have the accumulators we have the the kind of like sideways price action that we've seen that will probably continue towards the end of the year but next year will be in my mind a lot more positive I do think towards the end of next year there is a really strong chance we see new all-time highs on Ethan BTC and then leading us into a proper bull market in 2025. now I could be completely wrong on this as I said this is not investment or financial

advice do not do stupid things um with the you know with the kind of prediction that in 2024 and 2025 you're going to make all this money that's not how you should play it how you should play it is that if you really do believe that uh like I do right now that uh the their own accumulation Zone that all this positive stuff hasn't been priced in yet and will be one day then you would be accumulating right now if you believe that and that's exactly what I've been doing but I'm in the same boat right I don't have uh I don't have uh any spare fit left from when I cashed out during the bull market I mean I've deployed pretty much everything so now I'm really just earning uh yields from various different places and buying each with that obviously the yield that I get

from each taking I already have eight so I don't have to buy the eighth of that it's just stacking it there but yields from other sources I have to wait for that to pay out right I have to wait like a a few days or a week or two weeks just depending on when I feel like kind of selling it and things like that and then I can go in to eat so it's a slow trickle in and that's exactly why you see this time-based capitulation that I've discussed before which I think we're at the tail end as well but also why you see things going slower but eventually there will be new money coming in it will start pushing the price up and then it'll just become a self-fulfilling thing from there where it just snowballs out of control and we get a fresh new bull market so there is

your daily dose of hope you're my guess or weekly dose of hopium on the refuel there but that's going to be it for today's episode 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