Ethereum competitors, EIP-1559 updates and much more - The Daily Gwei Refuel #52 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daily gray refuel where i recap the latest news in the ethereum ecosystem i'm your host anthony sosano and today is the 8th of february 2021. all right everyone let's get into the news from over the weekend so actually before we jump into the news i did want to go on a little bit of a rant because i got into a lot of heated i guess discussions over the weekend on twitter about you know different ethereum competitors as you know they're getting kind of i guess popular lately i guess you could say because of the fact that um uh the gas phase on ethereum are high so you know you always have people going gas phase are going to kill ethereum you know come use this chain it's better it's faster blah blah whatever right and in general you know i'm i try

to be very open-minded right about certain things and you know when you've been in the space kind of like as long as i have and you've seen kind of like all these things come and go it becomes very hard to be open to i guess like newer things that you've seen fail a million times before like the the quote-unquote ethereum killers have been around for a while now right we had like one of the biggest ones kind of launched in 2018 called eos right you know and back then there were so many people shilling eos for the exact same reasons as they're kind of showing these other things today it's basically the same old kind of talking points of you know it's more scalable than ethereum it can do more transactions you know who's going to use this for you know who's going to use ethereum

and only do 15 transactions per second blah blah blah and you know it's funny because since then ethereum has just kept growing right ethereum has not stagnated it's developing it's growing it's it's it's as big as it's ever been right so i mean eos isn't the only one you know i don't want to kind of harp on any particular project but there's like a whole laundry list of them that were around you know in in the 2017-18 kind of 19 cycle which just got completely washed out right they got basically zero traction and you know no one even really talks about them anymore like you know you might hear some people talking about them here now and again but there are there are literally some that were talked about so much in 2017 that i haven't heard about from for years now basically i didn't even hear

about it during 2020. so from that perspective right you know and this is why like i guess a lot of us in the ethereum ecosystem are extremely skeptical of any of the other quote-unquote ethereum killers or competitor chains right uh yeah there's a there's a fair few out there right now and of course they're getting a lot of attention because of the high gas phase on ethereum and i think they they often act as like a trap for newer people as well uh because newer people obviously don't have uh you know very much to go off of when they get into this ecosystem right their first experience of ethereum these days is unfortunately they load it up you know they see what what the what this default thing is all about and then they hit right with like 40 50 fees right right from the get-go so i

can understand why people fall into this kind of space where they go onto one of these other chains and you know a popular one is is binance smart chain for example and again i don't want to single out any projects but i just want to give some examples here but that's a popular one that people always mention to me and say you know ethereum's going to lose to binance and smart chain because they have like lower fees and more transactions and blah blah and all this stuff but these people never i don't know if they question it to themselves but they never actually seem like they question why this is the case right so why do these other quote-unquote blockchains have lower fees and um uh and higher transactions per second right and the the common denominator and the answer acros

every single time is that they sacrifice the centralization for scale right so in in binary smart chains case they have 21 validators that's it right have 21 distinct validators who you know they say are run by 21 different people or whatever um but in reality you know i would bet that most of them are run by the same few entities and if push came to shove there would probably be a central party that could shut down that entire chain right um and it really i i really is controlled by binance so i wouldn't even compare that to ethereum because it's very very different right to shut down ethereum is extremely hard yes you know miners going to mining pools right and then the mining pools get all this hashrate and it kind of centralizes from that

perspective but it's not the same thing because miners can switch from from different pools right like instantly they're not tied to a different pool and there's there's it's not a permission thing where you need to be one of these 21 validators to validate the network anyone can become a miner right or an eth2 anyone can become a validator staker so there's that perspective and that's always what happens right there is not a system that i know of today that scales without sacrificing decentralization even even sharding to an extent doesn't give you the exact same kind of properties that like a kind of singular blockchain would and this is just how it works this is the very technical this can be very technical and and i completely understand why

newer people to the ecosystem kind of fall into these traps where the marketing from these other chains where they're like you know we're more scalable we've got low fees and all that sort of stuff and the second thing is you know thinking to yourself well i mean you've got low fees because you don't have any usage right you go on these other chains you look at their transactions per second or that story do their transactions per day and it's usually very very low like i looked at one before and again i don't want to single anyone out but i looked one before and it was doing like i think 10 000 transactions over 24 hours and the thing is it all those transactions and i look i look through a lot of them we're just staking transactions and arbitrage transact transactions so it was basically

you know these chains are obviously proof of stake chains and it was just staking rewards being paid out and then it was just arbitrage transactions from exchange to exchange for the token trading there was no activity outside of that and these networks are worth billions of dollars so it's just it you know it's it's crazy to me that this is happening and you know i say on my tweet here that you can kind of see that it's always the same kind of talking points like do your own research or smart contracts coming soon or fees are going to kill ethereum and i've heard all this before and i just don't think they're good arguments and i i i tried to fish for some arguments with this thread and i and i i got to talking with a few people about it and i still had nothing come up right it

was the same thing like funny enough people in this thread told me that high gas phase is what's going to kill ethereum and i'm just like like give me some better arguments right and you know if any of you know of anything better for me to kind of like go over i'm i'm all ears but you know i just have not seen any compelling arguments as to why ethereum is going to lose its market share saying that you know the fees are going to kill it is is not true because the fees have been consistently high for the last few months right and the ethereum network has kept growing it is not stagnating yes it has priced out some smaller users but we're going to fix that with layer 2 and things like that and the ultimate irony to me is that whenever i bring

this up with people who are fans of other chains they say layer 2 is taking too long you know it's not going to work ethereum's taking too long it's going to lose its lead because their favorite blockchain is going to you know add smart contracts soon and take over the grand irony here is that okay while you're so you're basically saying that it's going to take longer for ethereum to adopt layer two like uh have a like a bustling layer two ecosystem then it would for another blockchain to basically get all the same network effects that ethereum enjoys today right like what do you think is harder it's obvious what's harder it's very it's much much harder for these other ecosystems to spin up and get to the same level as ethereum layer two is much easier so you know it's just always funny when i see these

kind of arguments and you know i get that there's some merits to these other kind of chains and they have like novel technology and all that and i'm not kind of having a go at the technology per se i'm more having a go at the fact that you know if you're building a system and you're saying that it's like an ethereum killer or it's like better than ethereum right you have to prove that on merit you can't just say it right you can't just have like a fan base who buys the token and it goes up and you know they they make money so they think it's the best thing ever you need to actually prove it and you know ethereum is the only one that's proving that it does anything you know sorry that it does more than just like validate its its own

blockchain for example like staking transactions or or you know staking payouts and not you know it's just staking activity it's like nothing right it's nothing important it's not like defy activity right um and all this sort of stuff so yeah a little bit of a rant i don't want to go too much about this but it's obviously a hot topic right now and i think that if you're seeing a lot of this kind of i guess like on twitter right on reddit on youtube you're probably seeing a lot of this it's always good to question whatever you're sold by people question whatever you're sold by me but i i think that you know i'm at a point where i try to be as like objective as possible about this and as neutral as possible as i can be obviously i have a bias against ethereum

right that's that i don't need to explain that but at the same time there are literally people out there who will tell you all the benefits of a system without the drawbacks of it and there's plenty of drawbacks to a theorem i talk about it all the time on the refuel right what ethereum needs to fix right obviously they need to fix the gas phase i'm not saying that the high gas fees are a good thing for end users i would never say that but you know these other things and these other trains i always just see them kind of marketing the quote-unquote benefits and they never ever once say we sacrificed the centralization to achieve scale because if they said that then people would immediately clue in and be like well if you're not decentralized then what the hell's the point right like literally what is the point of a

blockchain if it's not decentralized you are literally way better off just using a centralized database because it's faster and more efficient and cheaper and you don't have to bootstrap this entire thing right which is very hard like bootstrapping a blockchain is not an easy task so from that perspective like it just doesn't make much sense to me so obviously i'm going to continue to bet on ethereum and eth i think that it has an enormous kind of like advantage over the other kind of chains i think it has an enormous lead i think that developers are what bootstrap and ecosystem or and what keep it alive and all the developers i know have zero interest in working on a kind of a chain that is not decentralized right they're kind of they're not leaving the web 2

ecosystem that is completely centralized to just work on a centralized kind of blockchain right they're leaving to come into a new world and work on you know decentralized open source software so they can actually stick it to these centralized companies so that is what i'm betting on i'm always betting on the developers the people the community and ethereum has one that has the strongest by far there is not even a second place because as i've said before on the refuel if you were to ask 10 different people you know what is second place to ethereum you would get 10 different answers right but that will all tell you that ethereum is number one so that to me is enough you know maybe one day we will have a number two right i'm not saying that these other chains can't get market share or can't kind of

grow all i'm saying is that i i believe ethereum will remain number one across like all the metrics that i track right um it'll rename the most secure settlement layer it'll remain kind of like the one with the most activity on it right uh the most mind share the most developers i just don't see any other chain kind of beating that out because you need more than you know promises of greater scalability and lower fees to attract people right that's just it's such a surface level kind of argument and if that's all you're offering then you've already lost to ethereum layer twos right so yeah anyway enrant there if you do have other thoughts i would love to hear them in the comments because as i said i'm always open to learning more uh i do have a lot of obviously experience with other kind of like uh

ethereum competitors that have been around for years so i definitely know my way around this sort of stuff but i'm not gonna say that i like know everything right so i'm always willing to learn more so yeah if you've got things share them in the comments or dm me on twitter always happy to have a friendly debate none of this is kind of personal right people like to make this religious and personal i'm not like that i'm not going to call you a scammer or anything just because you're a fan of another chain or whatever that's just not a great way to go about stuff so yeah looking forward to some healthy debate debates on this hopefully all right on to some more positive news i think uh so cme uh have launched their eighth futures um what we'll be launching the eighth few just kind of today or by the time

you watch this it's probably already launched they they kicked it off at 6 p.m on sunday actually eastern time where people could place their kind of first trade uh sorry place their trades but the first trade would occur on um on feb 8 which is obviously today so that's huge right we had this announced i guess a couple months ago where cme came out and said yeah okay we're going to do e futures now um after you know i guess three years it's been three years since they did btc futures and you know everyone was like is this going to be bad for the price right you know when when the futures launch for btc the price tanked and went into a bear market but i think i've explained this before on the refuel the cme bitcoin futures launched at the end of the bitcoin bull

market or end of the crypto bull market in 2017. you know btc had already gone x right from its last all-time high um ether had already gone you know 140 x right from from what it started the year on so we were at the tail end now we're kind of like still at the beginning right 80 is just above its all-time high btc is only two times it's all last all-time high right you know there is some froth going on right now but it's still kind of like it's it's definitely i would say early to mid kind of stage here so this to me is just a very very bullish event for eth um and institutions institutions who kind of uh play with these products on cme have been buying anyway through other products like uh like grayscale right so yeah i don't see this as a bearish

event at all and i look forward to the market kind of showing that right it's we'll see what happens with the eighth price over the coming days so another big kind of hot topic on twitter lately has been around i guess ethereum scalability and raising the gas limit to bring more scalability to ethereum now for those of you who don't know what the gas limit is i'll give you a quick explanation i have a daily gray uh piece about this as well but basically the way gas works in ethereum is that the each block has a gas limit and the gas limit is essentially a block size so you can you might remember that bitcoin has a one megabyte block size it's a bit more than that with segwit but you know one megabyte hard kind of block size um

where ethereum's block size is is variable and it depends on kind of the gas kind of limit here so the gas limit is i mean i don't know what it is right now i think it's like 15 million or something or maybe almost 15 million and the higher this gas limit is the more transactions can fit in the block or i guess like the more gas that can be used per ethereum block right and you know you will know that each transaction on ethereum costs a certain amount of gas and each transfer costs 21 000 gas token transfers more than that smart contract integra interactions within d fire a lot more than that right so if you have you know a higher gas limit you you can obviously fit more kind of transactions into each block right so the miners on the network have

the ability to vote up this gas limit essentially so they can actually kind of um you know any money can do this and basically say okay i want to signal that the gas limit should be high like should be this high and then if enough of them do this the gas limit basically raises to that they've done this a couple of times in the past but raising the gas limit comes with trade-offs and i'll go through them quickly but this this is a great thread from marius that you should read um it's quite long here and it's quite technical but i'm not going to read through it all but i'll give you like the tldr here so the reason why we can't just raise the gas limit like 10 times from here is is is twofold so uh as marios mentions here there's the concept of an

uncle ray now what the uncle rate is is that um there's when when mine is are producing blocks sometimes they will produce what's called an uncle block or a stale block where it won't get included in the main chain but because the miners still did the work to produce that block they will get paid a small reward for it right now you don't want the uncle rate too high you ideally want it as low as possible now raising the gas limit means that the miners have to process more transactions right the the the burden of of the network becomes greater for them which means that they are more likely to produce more stale blocks or more uncle blocks for example so we don't want that to happen because uncle blocks are a security issue and i think a a denial of service issue as well so we

obviously don't want that that to happen and that's why the gas limit hasn't just been raised you know really really high from here secondly is that the the ethereum kind of blockchain um blockchain size is dictated a lot by the size of its state now the more you raise the gas limit the bigger the state becomes so the state is already quite large and if you just you know say you raise the gas limit by like 10 then um the the state growth will increase by 10 essentially now what that means is that it becomes harder to sink an ethereum full node so you don't want that to happen so these are like the two main concerns with it you don't want the uncle rate to increase and you don't want the state size to increase or at least you don't want to you know kind of put an

even extra burden on people running ethereum full nodes with this so you know marios is is a kind of a core developer on the gate the geth client and he goes through in this thread about kind of like why we shouldn't do this right why we don't we shouldn't raise the gas limit why it's dangerous and you know it basically speaks to the points i just went through but he goes into a lot more detail about it so i highly recommend reading this thread but i just thought it was prudent to explain to to you guys why this isn't like a i mean there are people calling for this on twitter and it just it isn't something that can just be that's not it's not a silver bullet right it's not something that uh is gonna just fix all our scaling woes uh and all that sort of stuff for the

reasons i just outlined and i think peter has a has a kind of uh a tweet here as well saying that he thinks that it shouldn't happen either um and peter is the team lead at go ethereum so he's back i mean if i had to say peter is probably like the lead ethereum one core developer he knows the the goal ethereum code base back to front he could probably code the whole thing with his eyes closed at this point he is critical to to eth1 and he knows what he's talking about if you know if you needed to trust anyone with eighth one development and cork like protocol development it'd be it'd be peter here so i trust what he says always um he's very good good at kind of getting his point across here and you know he says here that if you want more gas or you want

the gas limit to be raised then you should bring a technical solution to make the clients 10 times faster now this is as i was saying before you raise the gas limit you increase the burden on miners and node runners and those miners and node runners obviously running clients right and a lot of them are running go ethereum so if you can make the clients more efficient and better and and make them faster so they can process you know this increased gas limit in a better way then you know you can get the uncle rates down or at least stay at the same kind of place and then you can deal with the the state growing you know faster than it was before so that's another thing to consider here um but as i said i've got a daily grade piece that i'll include in the youtube description called pump

the gas limit um it was basically i guess a few months ago the gas limit was actually raised and i went through you know exactly what that is and what happens when you do it and like the technicals behind it it's one of my better pieces in the daily way newsletter i usually write short pieces but it was actually a long one so i'll link that for you to go check out basically so some updates from tim biker on eip1559 here which i thought was cool so i mean it's funny how this was just like buried in a random kind of thread here but basically um someone asked for an update on when 1559 would be ready to launch and tim went on to say i think it should be ready to be considered for mainner in the next few weeks see this checklist for what's left to do

we want to get the client level open issues done before we present it on the all core devs so there's a checklist here that i will link in the in the youtube description of course and you can go check out the implementation kind of readiness for each of these clients and the checklist i mean most of this stuff has been checked off which is really awesome to see and this is yeah basically all the work that needs to be done before one five five nine can be included and i think he kind of alludes to you know once this kind of happens in the next few weeks then uh he'd be comfortable proposing one five five nine for inclusion uh basically and that could happen within the next six to nine months so you know as i've speculated before you know i kind of said that

we might see one five five nine in like july or august sort of thing um and that would fall into like this six to nine month window i think from today so that makes a lot of sense uh so that's great right i mean tim as for those who don't know he is uh basically the eighth one kind of um uh hard fought coordinator or network upgrade coordinator at this point um i think yeah i think i think he is and he he's basically top level kind of all-called debs ethereum um and he also is leading the eip1559 effort too so he's very important and he knows what he's talking about when when he's saying saying these things so very very positive news here and he does remind people that 1559 is not going to fix the high gas prices

it is going to smoothen out transactions and give a better fee estimation so people won't be overpaying but it's not going to materially bring down the cost of transaction b's and i have said this before on the refuel but you know there are so many other benefits to 1559 that i think we can we can live without the gas fees being lowered by it at this point so will price put out this interesting uh kind of chart here that shows uh basically you know the gas spent the gas used by different transactions interacting with both kind of unisop and sushi swap and you know it's funny i explained kind of last week on one of the refuels that the reason why or one of the major reasons why the gas fees are so high is because of these arbitrage bots now

what these arbitrage bots do is they they take arbitrage opportunities between different liquidity pools on ethereum so you'll have a liquidity pool on uni swap on sushi swap on balancer on curve wherever right and these are bots will basically you know outbid each other in gas wars to kind of like get this opportunity to make a profit now these account for most of the transaction fees as you can you can see here and you know hayden actually they said that it's the leading cause of the insane gas price gas prices and basically you know users are competing with these arbitrage bots for space in a block so you know this is something that is i don't know if it's something that you know you can solve i think it's a very hard problem when you think about

it because we obviously you know are going to have arbitrage on across these these decentralized exchanges no matter what we do the only solution i guess would be to centralize all the liquidity into one pool so but then you know you wouldn't have competing kind of ecosystems it would just be one big swap protocol which obviously doesn't work either so i think basically you know with this reality as i've said in the past most users users are going to have to sit on layer 2. layer 1 is going to be a settlement layer for layer twos it's going to be a settlement layer for high value transactions it's going to be a layer that some users go to sometimes it's obviously going to remain a layer for arbitrage bots and stuff like that but it is not it's going to be too hard to keep it as like a cheap kind of layer

for end users to use and of course these arbitrage bots will exist on layer 2 as well but because we have so much scalability at layer 2 it will be you know less of a problem as well on there and probably not i mean it might be a slight problem but i don't imagine it being like a huge problem like it is on layer one ethereum today so yeah unfortunately this is what we have to deal with but it is usage right these art bots wouldn't have anything to do if there weren't users trading on these kind of exchanges because there would be no arbitrage opportunities opened up because the bots would just basically collapse that to zero because they're efficient whereas humans aren't efficient right there'll be lots of humans that go to uni swap and do a trade and they don't care about like what the price is on

like sushi swap for example right and then the arb will need to be closed sort of thing so yeah interesting to keep an eye on this and i'm glad that kind of like will tweeted this out because i thought it was very interesting so uh santiago tweeted out this thread um from kind of like parify on behalf of parify saying that they're proposing the rollout of liquidity mining incentives into avair to further drive growth sorry to drive further growth and to drive the v2 migration so there's a proposal on the governance forum here that you can see if it loads about liquidity mining incentives and you know it's it's a pretty lengthy kind of post here so i won't read through it but basically uh what they kind of propose and they've

got like a nice table here is that uh you know the other protocol should basically pay uh if the rv price is 500 which it is today i think um the the rv lp rewards daily would be 18.2 million dollars um uh you know over over a course of like 100 days here um so yeah that's not too much right because that's over the course of like 100 days if i'm reading this chart right um which i think you know is is fine i think it should i i don't think ivan necessarily needs liquidity mining but i think the incentives here are basically to get people to migrate off of v1 to v2 faster essentially right um which i think is a is a good goal to have because

you know i think v1 is very expensive to use for starters compared to v2 there's a lot of features missing from that maintaining both protocols is very intensive for the team and you know it's it's also a security hogs i think v1 would be less secure than v2 i don't know for sure right maybe it's not um but yeah so this is kind of like i guess the main benefit of it and then the secondary benefit is to further kind of drive growth to ave which which obviously you know we would want to do here so yeah um great to see this i'll link this in the youtube description you can go read the whole proposal so uh as i mentioned on last week's refuel yearn finance one of their vaults was unfortunately exploited there was a few million dollars lost there

um so now what uran's doing is they're evaluating options to make the vault whole um and the current path that they're on involves making a make a cdp with wi-fi tokens as collateral and drawing the deficit against that and then paying it back with protocol fees in plain english they're basically proposing to take on debt on their wi-fi tokens right borrowing say five million dollars from maker using wi-fi as collateral and then paying that five million dollars back with protocol fees generated on yearn i actually thought this was quite quite cool right i actually thought this was a very innovative way to kind of cover the losses and then you know basically take the the losses and basically convert it into protocol fees for yearn

so it's not like socializing it by printing more kind of wi-fi tokens to pay it back it's basically saying you know we're going to take on debt but we know that the the yearn protocol will keep generating fee revenue and we'll just pay down this debt with the fees generated which i thought was was was pretty genius uh so yeah great to see them kind of i guess like compensating users but also going down like a pretty pretty new path here so there's a tweet here uh from crypto navi basically describing that there's a proposal on the sushi swaps forum to leverage arbitram uh which is like a roll-up technology from off-chain labs uh optimistic well technology as the sushi swap layer two solution here so

yeah i mean this is just another app on ethereum looking at layer twos to kind of adopt here and i think it's great because obviously there's a race now to get onto layer two and i don't know you know if if it's great that we're kind of fragmenting things you know maybe sushi swap should be on optimism with with uni swap right um but maybe you know because they're competing with each other they they don't mind fragmenting the liquidity here you know who knows right um but there's al there's there's also bridges that are being spun up too so i think the fragmentation of liquidity is not going to be a big deal for very long as well so yeah it's good to see another project kind of tackling layer 2 here all right so an interesting tweet from mike shinoda from lincoln park so for

those who don't know who this is he is the lincoln park co-founder and lingam pup linkin park is an extremely popular kind of rock band that's been around for a long time now um you know and uh i think kind of like uh it was interesting that he tweeted this out because he was tweeting about nfts so he did like a thread on nfts and kind of like why is finding them exciting and valuable and why i thought it was interesting was because this person is not like into ethereum and d5 right like as far as i know and i've spoken about how ethereum has a million different doors that you can enter its ecosystem in and mike is basically taking the door of nfts and i think a lot of people are taking the door of nfts and i think the nfts have mainstream

appeal faster than something like d5 does because nft covers like a broad spectrum of things that people are already used to like art right like collectibles like in-game items and nfts aren't just those things they're also other more technical stuff but most people are interested in that they're interested in those three things art collectibles and in-game items so when you tap into that massive kind of existing user base that's already there right um you know you you get like kind of these famous people you know flooding in essentially because you know a lot of the i guess defy stuff to the outside looks scary if i'm being honest right you know a lot of it you know some of it is scary to be fair but a lot of it is kind of like a confusing too because most people in

the traditional kind of financial system they defer to their kind of like banks right or their kind of brokers for to to do this stuff for them right to do all the stuff we do in d5 for them you know no one's doing active kind of trading outside of like traders in the in the real world like it's not like people are their own bank or anything like that most people aren't so you know i think d5 is going to take a bit longer to resonate with people but nfts are immediately resonating with people especially the art scene so yeah i thought this was an interesting tweet from mike here and he's not the only celebrity that has been doing this there's been tons of them coming into the nft space and i think a lot of them are coming in as well because they can monetize their

work now there's this whole thing of like these centralized companies taking people's kind of um work monetizing and leaving them with scraps so why not just bypass them and kind of monetize it using an nft or some other kind of digital right system on ethereum which i thought was you know i think is a really cool and appealing thing for these people to to kind of um you know get on board with so this is one of my favorite accounts recent accounts that i followed on twitter called documenting ethereum you can go give this a follow it'll be in the youtube description but basically before they tweeted out a chart showing that eighth balances in exchanges are at a 16 month low so the amount of ethane centralized exchanges hasn't been this low since the ninth

of uh sorry since september 2019 which is yeah as you said 16 month low so i mean you can see the kind of like collapse in ethon exchanges here and how the price basically is tracking this like pretty you know pretty closely here on the chart so what how much if you see i think it's like 15.5 mil or less than 15.5 million if in decentralized exchanges right now down from what is it 19 million here so about like four million eight has been taken out of exchanges over the last i guess you could say seven months um which is quite a lot of eth right and and this eighth is either going into smart contracts or it's going into cold storage which i thought was really cool but yeah go give this account a

follow it's definitely very valuable and they post a lot of interesting stuff so dc investor posted this tweet uh just before and i wrote about this in today's delegate newsletter but i'll read out the tweet for you he basically says and i quote if one more person tells me governance tokens can't accrue value i'll lose it if you don't get it by now you're not going to make it also don't ask what i think about xyz chain if it doesn't have users or liquidity it's irrelevant for all intents and purposes right now end quote so i think dc was like me at the start of this video he's going on a little bit of a rant here i won't address the second part of his tweet i just want to focus on the first part about people saying governance tokens can't accrue value this to me is just like so silly because

what do you think governance tokens do they govern the platform okay so if they govern the platform don't you think that that gives them the right to vote in value accrual mechanisms for the token right i mean it does so this is what i don't get when people say oh it's a governance token it's worthless why would you buy it i mean you buy it now right when it's cheap so that later on when the protocol keeps growing the project keeps growing and eventually you get to like a point where the the kind of like community agrees and the token holders agree that okay well now it's time to turn on cash flows for token holders because the protocol self-sustaining is generating a lot of fees let's pay this out to our token holders right what do you think is going to

happen to the token price at that point it's already going to be really high at that point right you you have a chance to buy it cheaper when everyone's kind of calling it you know dead or whatever or calling it valueless but you know and it's not just the value accrual that you can vote in the governor's tokens can literally vote on anything in a lot of these systems so and that's power right governance is power so i i just i mean i'm the same as dc i get like very frustrated when people kind of say this i'm just like you're missing the alpha right yeah it's staring you in the face governance tokens are only called valueless by you know kind of the teams for for regulatory reasons right it is not a valueless token it has a lot of value and will accrue more value into the

future as long as the project's successful i mean there's a clear example here like the clearest example i can think of the uni swap token uni has a fully validated market cap of 20 billion dollars it currently has no fees going to the token there is no fee generation to the token all protocol fees currently go to liquidity providers but the uni token holders and a lot of people buying uni are betting on fees being switched on at some point in the future and they don't care when they just know that there are plans and there was kind of like a plans to turn it on in the future and it should happen right so they're betting on that so from that perspective you have a d5 protocol that i think is the most valuable on a fully diluted value basis that doesn't have any cash

flows at all so you know i don't want i i hope to not see people saying governance tokens can't accrue value for very much longer because it doesn't make much sense to me basically okay so on that note i tweeted out something today that was that was pretty bullish and i'll read it i said i believe that the best defeat protocols on ethereum are going to be worth trillions of dollars someday don't let short-term market move movements blind you to this reality it's a long-term game and we're still extremely early now obviously over the weekend we had a bit of a cool off in the markets right eath dipped to about fifteen hundred dollars default tokens dipped a bit more um across the board which was natural after we had such a big run up i think recently but you know i saw some panic kind of on

twitter you know in some chat groups that i kind of frequent and i was like this is this is weird you know if you zoom out like a week ago the prices are the same as that they what they were a week ago uh so why are people panicking right now and i think it's because there's a lot of short termism in this space where we're spoiled by how fast things can move that people often forget to kind of zoom out so you know i often like put out tweets about like zooming out and i and i put out one the other day saying that eth was 400 in november 2020 yeah yeah 400 in november 2020. it's over 1600 today four times in three months right um so and and and four hundred dollars seems very far away from sixteen hundred dollars as well so and no that's on the eighth

right not to count all these other d5 tokens you know at the bottom of the bay of the d5 summer bear i think ave was 26 dollars it's almost 500 today you know i can keep going on and listing through all these examples but i won't i think my main point here is that because we're rebuilding the financial system because the fun a new financial system has a total adjustable market of the entire world because we have protocols that are already generating a lot of cash flows for token holders right i think these tokens at least some of them are going to be worth trillions of dollars someday and i'm not going to say which are because i don't know for sure right i have my bets like everyone else but no one knows for sure but if these protocols or when i mean i shouldn't say if i

should say when these protocols take over the traditional finance system a lot of them will basically be worth trillions of dollars right i mean if you look at some of the the top companies in the world today like apple and google and microsoft and things like that they're worth high hundreds of billions of dollars or in the trillions of dollars in terms of market cap um and you know even just comparing it to like banks and things like that that banks are banks are in the hundreds of billions of dollars of market cap and banks are actually siloed right they're not they're not global they're siloed within you know usually within their own country sort of thing so yeah i think just zooming out a bit here and as i said i think this space suffers from short-termism i think zooming out even like a few

months is going to give you an amazing picture and when you're investing in this space you should always invest with in something with like a a kind of i guess like multi-year time frame you should never buy something as an investment right you can buy it as a trade and kind of like say i'm going to hold it for a week and then sell it but you should never kind of invest in something and say okay i'm going to hold this for a week and then sell it right unless it's like unless you're a trader if you're a fundamentals based investor then you're investing in stuff when you think it's like a good time to get in and you're thinking to yourself i'm going to hold this for years i don't care how much it you know dips during that time i believe in this project i think it's going to go

far i think they have like a kick-ass team all that sort of stuff right and i think it's going to bring us to the promised land right essentially and if you did this with a lot of the top defy tokens a year ago you would be very wealthy right now like if i'm being honest like even if you only put in like you know a small amount of money you would have made a lot um just from like the top d5 protocols today you know aver synthetics you know compound all those sorts of things i mean maybe not compound so much because it launched later but i guess tokens that have been around for a while that were kind of active back then even like sushi if you invested in that towards the end of last year it was like 60 cents it's 14 now right so invest in things with it

more of a like a multi-month multi-year time frame rather than like a short time frame and that's not again that's not investment advice that's just like uh i think should be common sense among you know people who are investing in this space is that short-termism leads to pain because you know you might see like a massive dip happen and be like oh wow that's dipped a lot now what's going to happen like are we going is it going to keep crashing and you know if you sell because of that it means you didn't really invest based on fundamentals you invested based on pure specula speculative reasons so that's to me a losing strategy i think all right finally here so i spoke last week about how layer 2 decentralized exchange volume is going to catch up to layer 1 volume and i think it's going to happen

quite quickly and last week i mentioned that loop ring was doing 10 million dollars of 24 hour volume well as of today it's already doing 25 million dollars of 24 hour volume yep that's that's over 2x growth in a week already and that's because they added more pairs to the exchange they have a liquidity mining program going a lot of people that are getting priced out by the gas fees and moving to layer twos on ethereum so yeah i think that was just like really great validation of what i was talking about last week about how layer two exchanges are gonna grow much faster than people think they will and we'll get to a point where they like you know basically as as kind of big as their layer one counterparts and we'll have like a very nice and bustling ecosystem between layer one and layer two

where kind of the people who kind of i guess most people who can't afford the the high gas phase on layer one still get the kind of uh benefits and experience of d5 at layer two so yeah i just wanted to point that out but i know i've gone way over time here i think this is the longest refuel i've ever done so yeah i'm gonna i'm gonna stop that there for now so yeah thank you everyone for watching and listening i really appreciate it if you haven't subscribed to the channel yet be sure to do so give that video a thumbs up join the daily grade discord and subscribe to the daily grade newsletter and i'll catch you all tomorrow thanks everyone