ETH staking up only, L2 sustainability and more - The Daily Gwei Refuel #582 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily gray refuel where he kept the latest news in ethereum ecosystem I'm your host and this is honor it has the 10th of May 2023 alright everyone let's get into it so another glorious day in ethereum staking land so today marks the day that we have more validators active on the network than were active before withdrawals were enabled so I put out a tweet and I said uh exactly that and it took less than a month for this to happen and each staking is up only now what I mean by this is basically before we had Chapala go live you can actually see the amount of validators that were active on the network which had peaked at around uh here we go about oh it's just before April April 9th it peaked at 563 uh

thousand eight hundred and three validators then uh validator started exiting uh before withdrawals were enabled they could exit early obviously we saw uh Kraken and a bunch of other people doing this and then since then obviously the net validators have have gone down a bit but we're going back up up and now as of today we are um uh we are higher than what we were back then so yeah it took uh it took around a month I think less than a month from withdrawals but a month from when it started going down here for validated for the active validators to be higher than they were pre withdrawals now this shouldn't be a surprise to really anyone that was paying attention and that knows that e-staking really is generally up only there are so many amazing reasons to stake eth I mean just like uh if

you're just a profit Maxie they're looking at the APR that you can get on eth right now is kind of crazy right so there are and there are obviously a lot of other reasons on top of that as well now I had some comments around this tweet uh someone saying if someone commented saying you know if staking is up only until there is like a a staking cap put in place I've spoken about this concept of a staking cap before basically capping the amount of validators that could be active on the network at any given time now from the proposals I've seen if this was implemented it wouldn't be a hard cap it would be a soft cap so what would happen is that you would have like for example say let's say the total amount of eat staked on the network is 60 million uh

and then there was only 30 million each stake that was kind of actively staked at any given time so you would have 30 million uh stake that was dormant right and 30 million stake that was active and the network would handle this by doing a kind of like round robin thing uh where it essentially goes to all the validators and they're active at various different times and then the APR would just kind of even out over time uh to the same across all validators but there would only be 30 million each worth of validators active at any given time uh it doesn't you know and I should say if we're talking about time here it's more active um attesting to and proposing uh any given blocks right so that's the proposals I've seen there are a few still floating around and I remember I

shared a post from vitalik quite a while ago covering this but as far as I know there are no there is no kind of I guess decision being made yet on which proposal seems to be the best and which one actually makes sense when you consider all the trade-offs but I would I would imagine that there's going to be a validator cap put in place one day uh but it will not cap the total amount of each stake from what I've seen it will just cap the active amount of uh of each state uh from a technical point of view there so he's taking generally is up only but I've also discussed in the past that I don't think that we're going to get uh you know like most of the eat Supply stake like some networks have 70 80 of their native tokens staked and

that's because they're a mixture of a delegated proof of stake Network their native token doesn't really have any demand outside of staking it and if you're not staking it you're getting uh kind of inflated Away by the uh the issuance of the network here whereas ether's an asset has many many use cases Beyond just being used to to stake now in saying that obviously with the rise of the lsts the liquid staking tokens and also the coming rise and and the coming I guess like a wave of restaking protocols that's going to change the calculus a bit where people are going to be like hmm okay well if I've just got this vanilla ethr but it's kind of useless because I could stake it get an LST and then I could like restake it and get I get kind of a an LST on top of

that and then I can go use it in defy and then I can get leverage and all this other crazy stuff that can go on to to you know boost your yield and be able to kind of like unlock that liquidity I think that'll be a big boost to the amount of each stacked but to get to 70 of the total eighth staked on the network I think it would be like what 80 90 million each staked we're at 18 million right now so it's a pretty tough ask I I don't know I I don't think that we're going to get there anytime soon if if ever really and I'm talking total steak even with a validator cap in place I'm still talking total stake uh not just the active stake uh so yeah looking at it from that perspective it's kind of hard to know but I just I don't see any

reason for there to be 80 90 million each stake and the funny thing is about ethos and asset as well is that it is deflationary at least right now and it has been for quite a while actually uh which I'm going to talk about a little bit at the end of the the episode today I've got the um ultrasound money website up here but essentially that's uh that percentage of estate changes right over time because let's say for some reason in 10 years we've burnt 20 20 million eighth oh sorry we have changed the supply of eighth by 20 million so instead of each Supply being 120 million it is now 100 million well I mean the percentages very quickly changed from there like if we have 50 million each staked that would be 50 of the eighth in at 100 million eighth whereas at 120

million it would be less than that obviously so there is a different calculus there as well so as I said a lot of kind of I guess like guesses being made here a lot of assumptions have being made here but I think that we can all safely say at least at this point in time that the amount the amount of eighth that's going into the deposit contract that's ending up uh on the beacon chain uh as part of a validator AKA being staked is going to be up only for the foreseeable future so great to see that great to see that all the fud has kind of been more than dispelled at this point around withdrawals it's kind of been obliterated all the fun that you ever heard like no one's said anything since then I think all the people that were spreading that fud have kind of

crawled back into their hole or kind of admitted they were wrong uh which I guess like you you know you can't really not do that if you want to keep your I guess some reputation intact but yeah just just great to see that uh and forget I'd point it out for you guys now moving on a couple more things about staking so Jasper from the rockapole community has shared that you will soon be able to use rockapool with ledger to stake eat for our eighth and more so you can see here there is a GitHub um I kind of repository here for The Ledger app uh rocker pool plugin which is very cool to see so yeah people that have a ledger app and want to stake their eighth can now well we'll be able to soon do so through the rocket pool protocol uh and

you know this might not seem like a big deal to people who maybe are more kind of crypto native on chain native and maybe don't use the Ledger app itself but there are plenty of people out there especially the I guess people who don't really do anything on chain who just store their crypto on a ledger device that's the most they'll do right they'll move their crypto from an exchange to their Ledger device or they'll move that from their metamask hot wallet to a ledger device or something like that right so those people use The Ledger app and then in that ledger app they're actually able to stake their eth via I believe Lido is supported right now but in the future and I don't know who else is supported I think it's lighter it might be it might not even be lighter I can't remember but they do support I

think one or two other services but soon they'll be supporting rockable which is obviously huge Boon for rocker pool because there are plenty of Ledger app users out there and they are probably not users that the rockapool protocol has traditionally been exposed to which is obviously great going to be great for rocker Paul's growth yeah so yeah I can't wait to see rocker pools uh growth continue and hopefully be up only into the future as well all right opal Labs has announced that lodestar has become the first validator client to support aggregation duties with DVT or distributed validated technology this was one of the final missing technical pieces and now allows distributed validators to be fully Duty complete so you can check out this prostrable DVT in a nutshell uh talking

about everything that you need to to know about that is also as well as a client support checklist here uh uh for cl and and VC combinations or consensus layer and validator combinations successes duties observed on the public test net uh and and a few more things here which I'll link in the YouTube description below but great to see more clients supporting distributed validated technology here this is exactly what we want to be seeing at the end of the day DVT is going to play a big role going forward in ethereum staking you guys know that I run um an opal DVT a validator or service on my solo sticking box I talked about that the other week and how that's just been a very smooth experience minimal maintenance if any really I mean there obviously are going to be up with

updates sometimes for the opal software so I just update them as they come but generally it just runs in the background like normal validators do uh and I'm doing and I'm able to validate with three other people from around the world so four of us running a DVT uh or distributed validator client I should say which is obviously uh very cool for a number of different reasons security you know resiliency decentralization all that good stuff there what I'm most excited about with regards to DVT and I've spoken about this before is the uh I guess bigger players like centralized exchangers embracing DVT and one day allowing for non-custodial staking so as I've said I've talked about this before but just to refresh your memory here essentially what that would mean if set up correctly and if the exchange

supported it it would mean that people would be able to stake with coinbase for example without having to give coinbase custody of their eth they would basically delegate their their eth um I guess not not literally delegated but but for all intensive purposes don't delegated to Queen base and queen base would run the validator software for them but they would never take custody of that eth they would just run the validator for those people so those kind of use cases I think are huge for obviously the decentralization and health of the ethereum network and I'm very much looking forward to seeing those go live hopefully uh at some point in the future now of course these biggest taking operations are going to move a lot slower than the smaller ones it's probably going to take them a while to one uh trust the the um I guess like

code here for opal and other and other providers but also just kind of integrate it within their stack because they're bigger players they take a while to move here but yeah you can go read more about opal I'll link this in the YouTube description below all right last up here was something about staking was something from Super fears so he shared an EIP that I think Danny Ryan published here and he said this is very exciting and I desperately hope it enables tooling to allow small staking providers and DVT to further decentralize the beacon chain so this AIP is going to be adding execution layer triggerable triggerable exits and Danny uh describes this as adding a cross layer method to trigger

validator exits from the execution layer and note the consensus layer spec is just a sketch and will be implemented on the consensus layer specs repo soon and then mitchokia says this is massive for liquid staking protocols and DVT setups this EIP would allow to manage risk much much better for scenarios like loss of private keys or scenarios where DVT validators have lost connectivity to a majority of their keys case shares which could occur if there's Mass censorship or downtime in a popular AWS region for example um and then he he continues by saying I agree with Danny that no solution I've heard of relies on this not being possible and that a smart contract is an elegant workaround for any cases which might so yeah you can read full a full

breakdown of what this entails here on uh uh on the um the GitHub repo itself or the GitHub issue I should I should say itself which I'll link in the YouTube description below for you to do but yeah this is super exciting I mean I've gotta I've got to read more about this and understand how it actually works under the hood but essentially what uh I believe it would do for the day you know as Mitchell describes here for DVT is be able to manage these kind of I guess like maybe edge cases because these things aren't expected to happen most of the time but when they do happen you want to have a way of recovering from from this issue so something like a loss of a private key right or uh or something that's a real kind of I guess

like uh uh worst case scenario is if there's Mass censorship happening on an AWS region so for example let's say a lot of the DVT clusters are running on AWS uh West or something like that right in in the US there so let's say that uh Amazon decides okay well we're going to censorship sensor all of these kind of ethereum related infrastructure on AWS uh and then we're not gonna be we're not going to give the our customers the ability to to run this stuff on our on our um on our on our AWS I should say sorry and that could lead to slashing events and other such events like that so yeah those kind of worst case scenarios in edge cases would be

addressed by this which is obviously very very cool and that's the kind of stuff that I think each researchers and developers really think about is those worst case scenarios because as I said it's all well and good in the normal case where everything's running fine and everyone expects things to keep running fine but generally I think that uh when thinking about it you have to think about worst case scenario things even though it and I highlighted this I think a few weeks ago that the total amount of of validators that have been actually slashed on the ethereum network is very very small it's like I think it's like a few hundred or something out of the hundreds of thousands that we have and a lot of them were slashed on accident because they didn't uh they they accidentally double signed because they had like a redundant set up that kicked

in when it shouldn't have um and there hasn't actually been I've believe I don't know if there has been any malicious attacks on the network yet that have been slashed like actually provably malicious I think there might have been uh one instance of it but I I can't remember off the top of my head uh but that's just because there it hasn't happened yet doesn't mean it won't happen in the future I think that's a principle for a lot of things in life but especially when it comes to building uh and maintaining the security of economic networks like ethereum decentralized economic networks especially as well but yeah you can go check this out I'll link it in the YouTube description below for you to do so all right Paulina had a great quote tweet thread uh about arbitrim's

announcements here so I'll go over arbitrim's announcement first and then subscribe and then read out paulina's thread so arbitrim announced that they have they they are the only roll-up that sends all Surplus revenue generated by transaction fees to their respective Dow and it is time for the Dow to collect the funds so far so uh this is basically arbitrim announcing the fees that were in excess of what they needed to pay for L1 fees going to the Dow and polynia broke this down and basically said that um arbitrim doubt net earned about six million dollars worth of eth and cost of operation was about 11 million dollars so and then Apollonia continues by saying here's a trick for L2 series about challenging arbitrim's dominance

and then has a thread around how essentially arbitrim could fund themselves or fund arbitrim1 with just a moderate uh or I guess like a very low ARB inflation of one to two percent which is a fraction of most ones of course and that would actually be able that would actually enable arbitrine one to make end user fees be zero right now of course there's things like cybullying and and filtering out what's actually spam and what should be reimbursed stuff like that but that's the reality of how economically um I guess like efficient l2s are besides uh sorry uh altuzar compared to to l1s here uh and then polynomial continues basically by saying you know you can undercut arbitrum uh here by doing this uh on your own right up with

your own token which obviously relies on liquidity for the token but still I mean it is a path here uh and also they could the uh Paul and I are brought up that this is a temporary measure until erp4844 uh which which uh they suspect 0.2 percent or some negligible inflation would be enough to send user fees to near zero L2 economics are just too good here and they really are I mean as as Paulina mentions here I know I keep going back and forth between Pauline polynomial I don't know why Brandy's doing that lately but it is what it is anyway I know some of you have noticed that so I'm just gonna I'm just gonna say that there but the point of why I'm highlighting this this thread here is really that that uh kind of sentence that they said where they said L2

economics are just too good and this is because the L2 does not have to worry about funding its own security uh and consensus and decentralization because it gets that from ethereum layer one and this is really the superpower of l2s because you don't have to worry about this stuff anymore you just have to settle down to ethereum and doing that is a lot cheaper even before 4844 goes live then starting a new L1 because at the end of the day when you start a new L1 your token is what pays for the maintenance and security and upkeep of the network this should be obvious to everyone at this point but just to just to kind of explain what I mean by that the tokens are let's take ethereum proof

of work and ethereum proof mistake for example what do you think the miners were getting paid with in order to cover their electricity bills right that they were getting paid with eth and they were selling eth to cover the the electricity bills and other bills and that was securing the network right and as the East price went up the hash rate followed and and obviously more hash rate doesn't uh equal more security but uh but you know the more more kind of like activity you have on the network the more the price goes up the more hash rate uh and the more miners that come on the network the the potentially more secure it can be it's a it's not an exact science but that's the general gist of it there and then with proof of stake it's the same thing we pay um we pay eight stakers in eighth right

and we pay them a percentage in eighth in order to want to stake their eth and and and and have validators and proposed blocks and test the blocks and all that sort of stuff there so they're basically putting their eat at risk so it's an incentive mechanism right and but in order to to fund that security the people getting those rewards have to sell and this is and this is the this is a even worse case for the monolithic chains where the hardware costs are so high even if they're proof of stake that they have to sell a lot of the token in order to fund the uh I guess like fund the chain fund the upkeep of the chain and this is especially true for the ultra low fee chains because the only Revenue that the validators are really making is from the issuance right from

the token issuance from the token inflation they've got no fees to sell so they have to sell the token inflation which just puts downward pressure on the price so essentially what ends up happening is that the holders of the token are the ones paying for those cheap fees so if you are holding a token and you bought it at ten dollars and you're thinking wow okay this is really bullish I'm really bullishing this platform and this platform uh it has really cheap fees and and maybe it gets some usage in the Visas uh uh uh I still I still kind of cheap there and everything like that but then the token goes down to five dollars because everyone's selling the token in order to sorry all the validators are selling the token in order to cover their costs well the cheap fees were paid for by by that

right so there's no free lunch here is what I'm basically saying but it's all about making it as economically efficient as possible and that's what ethereum L1 has done with its Economic Policy of minimum viable issuance which includes erp1559 and it's also what ethereum has done with its roll-up Centric roadmap where the l2s get to inherit this without having to pay for it themselves to the same extent because all they have to do is pay the normal user fees and then with 4844 those fees are going to be much much cheaper and they still get to inherit that that consensus that decentralization and security from ethereum L1 so it just is a really beautifully economically sustainable system which I think is something that a lot of people miss when they discuss the TR the um the

trade-offs between L2 uh modular modular roadmap and the monolithic roadmap is that economic sustainability because at the end of the day what brings the most attention I believe to your network and what allows you to gather such a missionary driven Community is a token right that is tied to that Network obviously in ethereum's case it's eth that doesn't just go down only because that's not going to create any missionaries that's just going to create bag holders and bag holders don't stick around forever uh they'll cut their losses and move on whereas with eth right there are so many reasons to be bullish on it has I mean obviously it's not at all-time highs now but it has been a very nice thing to hold over longer periods of time so that brings with it a lot of confidence and that brings without adoption and all that

other stuff that I spoke about yesterday when it comes to speculation which I think is something that the people that are heavy on the technical side miss the economic sustainability is at the heart of what makes blockchains tick and it's at the heart of what makes the ethereum roll-up Centric roadmap so appealing to um you know not just developers but also I believe users as well as as time goes on so anyway you can read Pauline's thread for yourself which I'll link in the YouTube description below for you to do all right speaking of layer twos Aztec has a tweet thrown out today where they said decentralizing ethereum Roll-Ups is one of the biggest open questions right now in the in the development of layer twos without it ethereum scaling will be no better than side chains that's why we're issuing an open request for

proposals for our decentralized sequencer design so basically they've got a thread here uh talking about how they obviously want to get proposals in for designing a decentralized sequencer for the Aztec Network and they also link to a discourse uh Forum poster which of course will be linked in the YouTube description below about how they're thinking about this and the feedback that they're looking for uh there's a lot of information here actually it's actually pretty cool and there's a lot of uh there's a few replies here I should say from people uh so far talking about this and if you want to jump in you can as well but it's really really positive to see so many of these layer twos and roll ups already uh looking very seriously at decentralizing their sequences because that really is the the end game for a lot of them right

decentralizing out the sequencer taking those training wheels off getting rid of the admin and multi-seat keys and all that stuff there so they can actually become true Roll-Ups on ethereum now uh there was a vitalik post quite a while ago about roll-up decentralization and the different stages that they can actually uh the different Milestones or stages that they can hit I think arbitrum one is the the furthest along so far in terms of the economically relevant Roll-Ups there are other Roll-Ups out there like fuel V1 that are pretty much the the you know the only true decentralized Roll-Ups with without admin keys and stuff like that on them but no one's using it there's no apps there there's no economic activity so I guess it's kind of pointless I mean it's cool from a proof of concept point of view but it's kind of pointless from

every other point of view whereas with aperture one it is the biggest roll-up it has the most economic activity uh and it is growing all the time it has a token and a down now and they're well on their way to becoming that truly Visionary this I guess that true vision of a decentralized roll-up on ethereum so they're not the only ones as I said everyone's pretty much looking at this now uh and Aztec is as well of course so I'll link this forum Post in the YouTube description below for you to check out all right moving on to some uh I I don't think this is misinformation or fight or anything moving on to some misconceptions that I've been seeing floating around on Twitter lately around the eath burn and supply chain so you may see this screenshot posted around on

Twitter which is a screenshot that comes from the ultrasound money website where at the top of the the page here you can see the supply chain number now right now since the merge the supply chain number is negative 205 000 eth now this number is not the total eth burned since the merge that's exactly the misconception that I've seen that I've seen on Twitter is that people are taking this number and saying oh my god look 200 000 8th Burns since the merge no no it's much more bullish than that right that is the net Supply change since the merge so if you look over to your right hand side here on the ultrasound money website you can see a little water drop alert Emoji next to the number 418 000. now this is the total eth issued since the merge right

new eth issued from the beacon chain two validators since the merge then underneath that there is a fire emoji and the number next to that is 624 000 since the merge now when you take the number of uh each burned away from the number of each issued since the merge that's where you get this 205 000 or negative 205 000 number of the supply chains so that that should explain it and should be pretty clear of why the supply change number is not the eastburn number it is the net Supply change from the merge or from whichever time frame you choose here you can go far as far back as all time or you can go five minutes or one hour one day seven days right but the supply change number is

always the Nets issuance right the net issuance number since that time frame that you've selected whereas the on the right hand side you've got the total eth issued in the water droplet and the total is burned um with the burn emoji with the fire emoji and then you just subtract the fire Emoji number from the issuance number to get that Supply change number here so hopefully that that spells it out for you now if you scroll down and you go to this little table here underneath the burn heading this is where you can see all the relevant metrics around the burn so I've selected here since the merge a little panda emoji you can see 624 000 eth has been burned since the merge uh you can see what the issuance offset is the burn rate per minute what the the burn

leaderboard is obviously our fan favorites they're like uni Swap and stable coins and open C and all that stuff there and then scroll down more you can see burn records burn categories uh and then there's more information on here I mean the ultrasound money website is my Bible you guys know I love this website if you can understand this website at a deep level and understand what it means for ethereum and eth it's like reading the Matrix code I like using that analogy because I really think it is like that uh to an extent um but yeah just wanted to clear up that that bit of um that bit of uh as I said it's not misinformation it's a misconceptions that I've been seeing around uh this screenshot here but you can check out my tweet about this if you want so just have another explanation of

it and read through some of the replies to that I'll link it in the YouTube description below but you can check out the ultrasound.money website as well to get a full I guess um uh breakdown of everything there now also actually while I'm here I may as well shout this out um there is a 1559 nft I believe that you can claim or pull up that you can claim and I believe there's still a few that haven't been claimed yet so you might be eligible for it uh you can go check out and check it out on the ultrasound money website I believe I think there's only like 10 or something left that hasn't that haven't been claimed yet but just wanted to give a reminder there for people who may be eligible so you can go check that out uh but on that note 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