Kraken supports Arbitrum, OFAC compliance under 50% - The Daily Gwei Refuel #540 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the other way refuel where he kept the latest news in ethereum ecosystem I'm your host the endless assignment has the 14th of February 2023 right everyone let's get into it so we have a new prism release today this is the first official release supporting the upcoming Shanghai capella Network upgrade it's a mandatory uh upgrade on the sapolia test net and recommended on mainnet uh right now so if you were running the test net definitely go download this as it is mandatory and obviously once the mainnet deployment goes ahead uh we're you know we're obviously hoping end of March here it will be mandatory then as well to upgrade your nose now this obviously only applies to people running solar validators whether that be on testnet on mainnet if you are I guess when it comes

time to mainnet if you are delegating your stake to I guess another provider or staking with another provider such as Lido or just say you own our wreath uh you don't have to do anything the people who run the rockable mini pools obviously have to upgrade the people who run the lighter operators have to upgrade but you don't have to do anything I've had a few questions about this from people who are basically staking their eighth via these Services whether they're holding steth or re through one of these other lsds are all sticking with an exchange no anytime there's an upgrade you don't have to do anything because you're not actually running the software right but if you are in the software such as a rocketball mini pool or a solo validator or in the future any other kind of type of validator where you are running it on

either your own Hardware or or I guess a hardware that you've rented from AWS or something like that then yes of course you would have to manage that and upgrade it yourself but for most people they aren't doing that they're going through these uh these other providers which is which is totally fine right those providers will take care of that for you there but anyway you can go upgrade I'll link this in the YouTube description below now I know I spoke a bit about this yesterday but uh the Mev boost ecosystem he's just getting so much better I mean I the the thing about this is I speak about it a lot but there's a reason I think that this is the greatest demonstration of ethereum's decentralization in its history I know that's a big call to make but the more I think about it the more I guess like

excited about it I get now of course I'm talking about this ofak compliance thing that that everyone's been talking about since it happened in August of last year uh and now we're actually under 50 ofac compliant blocks uh including all blocks and you can see the ultrasound money um websites weirded this out today that means that more than half the network is basically uh rejecting the I guess of compliance so to speak right he's using non-censoring relayers or is not using any relay at all as I said yesterday it's about eight to ten percent or validators that aren't actually using Mev boost at all there and as you can see from this chart that ultrasound money shared uh it's just been kind of like down only on the ofak compliance since it peaked at about 80 it hasn't really

gone back up since then it doesn't seem like it's going to go back up uh uh uh back up then as well now I wanted to give a huge huge shout out to the ultrasound money relay here because they've done a lot of work in a very short period of time for those of you who don't know their market share has grown so fast that I believe it is the fastest growing relayer in history now I can't count flashbots in this because flashbots was around um you know before even the merge happened but it and and it was obviously the first relayer so they had the majority market share but since then ultrasound money has grown uh so incredibly fast and it actually came much later than most of these other relayers right so it launched the same day as the agnostic boost relay uh and

the agnostic boost relay is at 4.9 of Mev boosted blocks and ultrasound money as it is at 16.3 percent uh block shot Max profit is is at 24 so ultrasound money is all almost caught up to the biggest non-censoring relayer which is just an incredible amount of growth here and why I'm obviously really happy about this growth is because the ultrasound money relayer is non-censoring right it's not a censored relay uh and that has contributed a lot to the fact that we are now under 50 uh o5 compliant relays which is just as I said before guys it is so bullish it really has has been the perfect demonstration with UMC centralization and and maybe I should kind of um give my reasoning behind that this is stuff that I've said in the past

but I think summarizing it here would be probably a good idea so the reason I say that is because I believe that you can't really know which blockchains are truly decentralized until they're actually faced their kind of end game boss so to speak and to me the end game Boss of a blockchain um and and and something that tests the blockchains decentralization is a nation state and not just any nation state but like powerful nation states now obviously the most powerful nation state in the world as it is today is the US right right there's there's really no second best at the moment I mean there I know there are other large and Powerful nation states like China um and and India but the US is still the leader especially in military budget I mean they are absolutely smash every

other every other nation state in terms of how much they spend on their military now the US was obviously the one that put these sanctions on ethereum through ofac they put them on tornado cash as we all know and that really did test ethereum censorship resistant properties which obviously comes from ethereum decentralization properties now since August and it hasn't actually been that long guys like August was was and this was August last year obviously wasn't very very long ago you know seven or eight months since then the ethereum uh ecosystem has shown that we can successfully fight back against U.S government level enforced censorship on ethereum how is that not incredibly bullish right how is that not such a validation of ethereum's decentralization and ethereum's uh I

guess ethereum social layers care for decentralization because this didn't just happen on its own but when the ofax sanctions happened there were very very few relays and flashbots had I believe 90 of market share of of relayers here since then there have been all these other ones that have launched uh flashbots has done their part and obviously open sourcing the software that they developed Mev boost the builders uh the relay software all that good stuff there they've also done their part in um doing research like the Min bid thing as well so there's been a lot of work in in a very short period of time relative to I guess uh ethereum's life cycle here to greatly improve ethereum censorship resistance and decentralization properties which I think is just incredibly validating for

ethereum as as a whole here so that's basically the main reason there and you know I I kind of talk about this sometimes on the refuel where I basically say that my the oh the only thing that makes a blockchain different to a database is it censorship resistant properties if a blockchain is not censorship resistance then it really could just be a database and there's obviously kind of a bit of a spectrum here as well because when it comes to the ofak compliance thing it peaked at about 80 so 80 of all blocks were censoring tornado cash transactions those 20 still weren't which means that within five minutes you still had a near 100 chance of getting your turnerto cash transaction included that's why we say ethereum and other blockchains are censorship resistant not censorship proof but what ethereum has done is

basically it is obviously uh still retained its censorship resistant properties but it's improved those properties over time because now if another sanction comes along let's say oh fact decides to sanction another app on ethereum for similar reasons as to why they sanctioned to another cash well the thing is is that the way it works right now is that obviously the current censoring relayers would also censor those transactions but the non-censoring ones uh wouldn't do that so we're in a much much better position than what we were when ofac sanctioned tornado cache so that there is a massive Improvement already right especially because depending on what uh what's being censored can lead to degradation on Network and I've talked about this a lot on the refill about how let's just say

for example the uni stop transactions were being censored that would have a much bigger impact on the performance of the chain than Toyota cache transactions being censored because unisob is obviously integrated with pretty much everything on chain right especially within D5 whereas Sonata cache is more of a siled thing where it doesn't actually matter that it takes you know five minutes or one block to get your transaction included it doesn't actually impact impact the user experience that much right I mean you have to wait a little bit extra a little bit longer you know who cares right but when it comes to UNI swap obviously waiting five minutes for your uni swap trade to go through is it can be catastrophic especially from an Mev perspective where you could get a sandwich attacks pretty brutally there especially if the

Market's moving quickly especially if other Protocols are relying on these traits to go through you know within a block or two so to speak so and it obviously kills a lot of composability it kills a lot of things like flash loans so that's when it becomes a big issue there so that's why this stuff is is really important the back to the matter is that no longer will the majority of the network be censoring as it exists today maybe you know there's another censoring reel there that comes online and gets market share I don't know but I think there's a low chance of that happening because no more you know the only relays that have come online have been non-censoring ones it hasn't hasn't actually been one censoring relayer come online uh since uh a long time ago now I don't know if uh if um uh

block native was live uh at time of the ofax actions I don't think they were I think they might have been the last one to go live here but but besides them there hasn't been another censoring relayer online here and I think that's because they probably know that uh you know launching a censoring real air right now is not great from multiple different perspectives right and it's probably not going to be able to gain the market share that you want to gain and it's definitely a very specialized thing the people working on the ultrasound money relay uh are obviously very very smart they obviously know what they're doing because they've been able to gain so much market share very quickly it's not just people seeing that and being like I want to use the ultrasound money really delay instead what happens is that most of the

validators are actually subscribed to all the relays and then the builders choose where they want to send their uh they're kind of like bundles too and then uh based on the performance reliability of these relays uh they get more and more popular and then obviously they relay those blocks to to validators and all that stuff there so yeah just again a massive kudos to the ultrasound money team for what they've done here as well as the other uh you know non-censoring relays too like blocks about Max profit has been an absolute Beast for a long time now they're still at 24 market share here the agnostic boost relay is still at almost five percent and then the smaller players they're still there they're still doing their their job right um just because they're not bigger doesn't really matter I think that the fact that they exist

the fact that they're there as backup so to speak or maybe they improve over time and they are there as non-censoring is something to be cheered so yeah I guess um that's all I wanted to say on that front uh but before I move on from that as well I did show yesterday a picture that uh Tony posted on Twitter of the flow between you know builders as relayers and validators well here's a gif that shows it as well so you can see the kind of uh bundles that are going from the builders to the relayers and then the relay is sending them out to the validators so it's just a nice little gift that I figured was worth highlighting and you can check this out I'll link it in the YouTube description below for you to do so all right so we have a funny little update that came

about all the paxos busd drama so DB on Twitter here said uh apparently Circle warned the uh New York regulator that I spoke about yesterday about uh binance token issues in 2020 and then they continued by saying that they alerted the Watchdog last Autumn to to issues its team had surfaced in blockchain data that showed binance did not store enough crypto and reserves to support tokens it had issued around the time when binance top support for usdc and started Auto converting into busd now the reason why this is really funny is because this is basically two major exchange players uh going to war with each other because if you remember uh bit of binance um a few months ago basically announced that they

were doing Auto conversions from usdc into busd now obviously Circle and coinbase didn't like that because it was adding into the usdc market share so what they did to fight back and you know I mean so it says here that Circle did this not coinbase in particular so I'm just going to say that that Circle did this um what's funny about this is that that's this is the way that Circle fought back they're like okay well if binance wants to do this we're gonna we're gonna play dirty as well because that's what binance was doing they were playing dirty obviously it's a business strategy but you know it's a bit dirty to be doing that auto converting users in trying to siphon market share off it's it's a little bit of a dirty move uh so that's what Circle did as well like okay well you know what binance and

obviously circle is is annoyed that binance gets to operate outside of the lore a lot of the time as well obviously they're not based in the US but still that would annoy them the fact that their hamstrung all these regulations and rules and binance can just do what it wants I mean less so these days and but in the past they were just cowboys right so they went to the regulator and they said hey you know they gave him a nudge like hey you should look into this and they probably gave him some data to look at blah blah because as I've said before these Regulators they are very slow to move because they don't actually have the special um uh the um uh the expertise that they need and a lot of the time they're given data from third parties to look into and

you know that obviously they they're given things from from exchanges as well because they have a lot of the data and that's what happened here so I thought that was just a quiet uh quite a funny update there uh and and I mean another thought about this as well is that it's actually quite positive because if circle is working directly with these regulators and helping them uh and basically nudging them in these directions they may get preferential treatment from these Regulators so usdc is is I I mean I said this yesterday I think uscc is likely safe yeah I don't think there's going to be any big issue there I think it's going to be fine uh or obviously remains to be seen but definitely think that's going to be okay there and then there was uh another update as well the DB post so that paxos

is going to be engaging with SEC staff on on the issue of their lawsuit and are prepared to vigorously litigate if necessary so it seems like paxos is also going to fight uh what the SEC is bringing to the table here which is pretty cool I mean I want to see more of these us-based crypto companies fighting these Regulators taking them to court making it hard for them just rolling over and letting the regulator get away with it it's not great right it means that it empowers the regulator it makes them uh more confident in their actions it gives them things to go to other I guess um other companies with and say Hey you know you're doing this thing and this company did this thing as well and they paid a fine and basically shut it down so you need to do this as well so

fighting them in in court and take and and basically uh are forcing them to actually provide a proper argument and proper uh reasoning as to why they're going after you I think is a better way of doing this and the other better way of doing things as well with Regulators is exactly what Brian Armstrong has been doing where he said in a tweet today I'm in Washington DC and had a meeting canceled will be at the uh the Dirksen Senate Office Building snack bar for the next hour or so if anyone wants to come and chat about crypto and how we get crypto legislation plus regulatory Clarity this year and then he posted a picture with a few people here that he spoke to so the reason why I think this is really cool and what Brian is doing here is that he's doing what you're

supposed to be doing which is directly engaging with these Regulators um at their level basically going and meeting them explaining uh things to them making sure that you have a direct line of communication to them so that they don't just get lost and they don't just do all these arbitrary enforcement actions that is the proper way to do this sorts of stuff in politics and that's exactly why um lobbying works so well and why these the companies that you see spend so much money on lobbying that's why they do it because they know it works right they know that's how they get their way and that's what crypto needs to be doing we need to be spending so much more money on lobbying yes lobbying is basically bribing and yes it's a shitty thing but that's just the way it works you know you can you can think it's shitty but

still still play the game like don't hate the player head the game sort of thing right so I think that's exactly what Brian is attempting to do do here which I thought was really really cool and as I mentioned yesterday coinbase is doing a lot of great stuff for this ecosystem Brian you know putting himself out there going directly to these Regulators to make sure that they're educated on this stuff to make sure that um the US remains a leader in crypto and blockchain doesn't just push everything overseas is a very Noble goal who knows if he's going to succeed or not but I think if anyone can do it it's definitely Brian and coinbase here all right last up on the regulatory front there was a tweet that I saw from Tong Vai here who said uh oh he was quote tweeting a tweet from Justin

Slaughter who said uh personally I was pretty sympathetic to the sec's position five years ago the questions posed by crypto are hard learning about a new space takes time but have gotten less sympathetic since there's been no progress on regulations over that time uh and then uh Tong Vai said here agreed I was at the SEC and started working in crypto in 2017. everyone was trying to wrap their heads around it then including going after outright scams it is now 2023 we should have come up with a working regulatory framework by now I mean preach it right like it's not like these Regulators have just had this stuff lumped on them in the last year or something like that right this has been a long time coming I mean The Regulators were looking at crypto as early as I believe 2013. so the fact that that even

since 2017 since that that bull market of 2017 they still you know five or six years later they still haven't been able to provide a regulatory framework they haven't been able to wrap their heads around around this they haven't been able to provide guidance here and Clarity and all that stuff I think it really just shows that either they don't want to do it or they uh they've done it but they're only doing it to suit their own agenda right um or that you know they probably haven't even made an attempt or they don't have the right expertise to do it either that is also a concern but I think that when you hear people that have worked there say these things you should really listen and the fact that um it's 2023 and they've been trying to do this for so long now and they still

haven't come up with a working regulatory framework is a really bad position to be in and that's what I you know what I was mentioning before that if Brian and other people like him can help these Regulators if they actually are open to this help if they're actually open to providing Clarity in a framework then Brian is one of the best people to do it along with you know others in the industry but sometimes uh maybe even a lot of the time these Regulators they don't want to be told what to do right they don't want to be uh and some of them aren't even open to it I mean I don't believe that Gary gensley is actually open to listening to the industry I feel like he definitely doesn't like most of crypto he seems like a Bitcoin maximalist um and he probably will will go after

everything except Bitcoin uh for whatever reason right and there are other people in um in in the US uh other politicians who definitely don't like crypto especially on the the Democrat side uh they definitely don't like crypto at all from what I've seen uh people like um like Elizabeth Warren for example has gone on record and and blasted crypto uh for some reason they just don't like crypto I mean there are definitely reasons and they've stated some of them before I think they view crypto as just like uh what the um what Wall Street was especially pre-2008 but that's a I guess like a story for another time there I just wanted to point out here that it's been a long time for these Regulators to get their together they still haven't hopefully they will in the future but I'm not holding my breath that's for

sure all right so a kraken has now added support for deposits and withdrawals on arbitrim so this is really cool because I mean obviously supporting these layer 2 networks with these on and off ramps is a is a priority here there it has taken a little while for them to do this but I'm glad they did do this because obviously arbitrim has been out for quite a while now right um I believe uh coinbase maybe coinbase supports arbitrim I'm not totally sure I think they do I know binance does a few other exchanges out there do and at the end of the day these networks are exactly like just supporting layer 1 networks all you have to do is um you know follow a similar process maybe some of these exchanges aren't actually set up for for layer twos because there is a

a slight difference in things like bridging funds and stuff like that but overall uh you know it's a similar process here so I'm glad to see Kraken support arbitrim here so if you are a kraken user you can now directly deposit and withdraw eth on arbitrim I'm actually happy about this because I am a kraken User it's one of the only exchanges that I use and I'm glad that I'll be be able to in the future either deposit or withdraw eth from arbitrim directly because I am an arbitrum user as well so you can go check that out for yourself uh you'll be I think you can just log into Kraken and it should the option should be there for you all right so polygon ZK Twitter account here uh put out a tweet thread today saying the test net or deploying on DK VM testnet nearly reached 300 000

transactions a milestone for the future of scaling ethereum and a testament to the maturity of polygons ZK VM other big news is coming soon until then a quick rundown of all polygon ZK VM metrics for last week showing continued momentum so you can see here uh the kind of like General metrics around this and a thread with a bunch of metrics I mean I think I've highlighted one of these threads before just good to keep on top of what's happening in the polygon ZK VM space I mean uh all these EK evm teams are making big promises and it's definitely always a welcome thing to get uh data and and information backing up these promises and backing up what they're actually saying on Twitter and polygon has been one of the teams that have been doing that the same with scroll as well scroll has been pretty

open about it too which has been great to see there and another Thread about the polygon ZK stuff uh is from Bob and threadbare here who works on polygon Maiden who started off this thread by saying this may be an obvious point but zkps or zero knowledge proofs open up a whole new design space and how we can scale blockchains in the context of Roll-Ups this means that ZK Roll-Ups can scale Way Beyond what is possible with the Alternatives a short thread so highly recommend giving this thread a read as to why zero knowledge proofs are so amazing I mean I'm sure a lot of you guys already well first in that at this point since we've been talking about it for quite a while now but bobbin uh is is really great I mean he's very smart he's been as I said he's working

directly on ZK stuff at polygon and I highly recommend giving his three thread a read if you haven't done so yet it'll be linked in the YouTube description below all right last up here we have a announcement from Caldera which uh announced a 9 million dollar funding round or seed funding round LED by Sequoia and dragonfly with a bunch of angels participating as well now what is Caldera well they are a platform to deploy an application specific roll-up in one click or at least that's what they're building themselves as and I mentioned yesterday how North swap had a thread on this you can go check out uh that thread from North swab it's linked in yesterday's YouTube video description talking about all of these different uh Services I think there's nine of them now all these different projects that

want to do roll up as a service basically allowing anyone to quickly spin up their own roll up using whatever architecture they want which is obviously a big deal because as I've said in the past plenty of times I think that the generalized roll-up space is definitely going to be only a handful of very successful winners but the application specific roll-up space is going to be quite large I do think there's going to be a mini number of successful application specific Roll-Ups especially if we and once we get those bridges that allow arbitrary message passing which basically means that you'll be able to talk to all of these different l2s no matter what construction they are no matter them being isolated or whatever you can share liquidity you can share uh uh messages and all that good stuff there which is

obviously very very important for scaling out ethereum here so cool to see uh Caldera raised this round congrats to them on it uh and I'm excited to see them build out what they have apparently it's already live I'm running on mainnet right now I believe it might be in like a kind of whitelist uh kind of mainnet where you have to contact them and work with them to spin something up I don't know I haven't checked out I checked it out myself but definitely still early days but great to see that it's already live it's not just promises right it's already live for developers to check out if they would like to do so you can go check them out I'll link it in the YouTube description below now there I left a bit of time here because there's something I wanted to talk about in the

context of I guess some of the stuff that's happened over the last few days and uh the market in general now what's funny whenever we get these like harsh regulatory moves on crypto the market has a weird reaction depending on what state it's in if the market is in a state where sellers are really exhausted right it doesn't really the price doesn't really move and I think that's the period we're in right now because let's just say it's the bull market there's tons of Leverage in the system things are extremely volatile there's so much attention on the on the market now let's let's say it's you know early 2021 and we get some bad regulatory news well of course people are gonna or not people I guess the Traders are going to speculate on that they're going to dump

the price or they're going to sell and they're going to uh you know uh short and they're going to basically play on that fear now because in that point of time there's a lot of Leverage in the system what ends up happening is that it compounds The Dumping and you see those very violent candles right those very extremely violent candles that we've seen in the past I mean there were some doozies in 2021 that was for sure uh but that's usually what happens now we why the current market is right now there's barely any leverage in the system I mean we wiped out pretty much all the big levered players last year and in 20 and I guess like late no basically most of last year obviously with three hours Capital with FTX with all the leverage that was built up with Terra you know a

number of other funds um and all the other leverage from retail investors that that just got all blown up right so and it has exists today there's just not that much leverage in the system so if you actually mapped it out and saw what happened to the price yesterday when the announcement came out that's uh that the uh New York regulator and SCC was going after busd the price went down a bit right but it went down from like 15 30 to 1460 on eth I should say that is basically a normal daily move a normal small kind of daily move that we see pretty much like every other day but if that happened in a bull market the move would have been much more violent because of that leverage as I mentioned so when markets and and this is something I look at on the on the

broad broad um broad stroke of things when markets don't react violently to things whether they're good or bad news it means at least in large part that Leverage is quite low on the system it means that the current players in the system uh in a bear Market they're very very exhausted right the sellers are exhausted we're basically in a in a kind of period where people are accumulating and buying and they're not in any rush to sell because they're because as I said they're exhausted and because there's no leverage the swings and the volatility is a lot less here that's not to say that there can't be extreme volatility there can especially if we say move up to 2K eth and then there's a lot of Leverage that builds up and then we go back down to you know 1500 really you know over the course of a couple of

days uh but definitely in the grand kind of macro scheme of things of the macro cycle of crypto uh these events serve as a really really good uh and not remind us so to speak but really really good way of gauging what part of the what part of the cycle that we're in and I have maintained for a little while now that I think that uh we're in or at least Ethan BTC are in that kind of like that accumulation range gearing up for the potential next bull market I have been buying eth with that in mind personally obviously this is an investment advice but I always tell you guys what I'm doing I've been buying either you guys know that um I'd be buying much more aggressively over the last few months than I had previously um and employing it into staking but yeah I think it's always good to keep

that stuff in mind and another big thing is that when there's lots of bad news and then the price just doesn't go down and it either stays flat or goes up that is also a very clear signal that the market is out of of sellers right the market is it does not care about it and it's actually quite bullish if the price starts going up uh in spite of all that news uh generally now that's not to say there won't be volatility or anything like that that all there always is but if we're talking Grand macro scale multi-yard kind of cycle things which is what I pretty much always talk about then that's how I view these things now when you know what does that mean like what does that mean over the longer term when's the next bull market coming I mean obviously that's the question in

everyone's mind um I have no idea I still maintain that most of this shell is going to be just range bound I think I think that the accumulation range takes quite a while there are two types of bear markets or I guess like capitulation events there is price-based capitulation and then there is time based price base basically means uh when it you know obviously bottoms out and then we bounce off that bottom and then that we don't revisit that price again I think eth did that it went to 880 Bounce from there hasn't gone back there yet but and that it actually did it quite quickly within seven months um but time-based capitulation takes a lot longer because it's basically where the price just stays sideways just flat just range beyond for quite a long time it can lie it can last a very long time

actually for eth uh in the last cycle it lasted almost two years I believe before it broke out of that that range there so it can last quite a while doesn't to say it'll last that long again it's not to say it can't last you know in four years or it can't last just a year but we've been doing this for quite a while now I mean if if we bottomed in June it's already been I mean it's coming up on a year soon right it's like nine ten months so when you look at it like that uh and look at the Grand scale of things uh that's a good way to to view and analyze things as well but yeah anyway just wanted to get that off my chest something I've been thinking about a little bit lately and on that note that's going to be it for today 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