Optimism updates, Client diversity chat and more - The Daily Gwei Refuel #341 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the delegate refuel where i cut the latest news in the ethereum ecosystem i'm your host standing this hunter and today's the 25th of march 2022 all right everyone let's get into it so this isn't directly crypto related but i did see this uh i think a couple days ago and i wanted to kind of like talk about it and how it kind of relates to crypto so what i'm talking about is there's this kind of like meme account on twitter uh called nancy pelosi cfa which is kind of like a parody account of nancy pelosi who is the speaker of the house in the us very uh famous politician actually and a very rich politician which brings me to what i wanted to talk about so nancy pelosi in the kind of like the parody account he

had tweeted out saying uh nancy pelosi just exercised 25 call options for 2500 shares on tesla worth five million dollars at a strike price of five hundred dollars the share price is 943 today and nancy pelosi is the greatest investor the world has ever seen now for those of you who don't know how this works basically uh she she or whoever manages her investments took out these kind of um option call options a while ago uh with with the strike price of 500 bucks so that basically means that she's by exercising them today she was able to buy tesla shares for 500 bucks when the share price is 943 today leading to a pretty substantial profit now why this is an issue um beyond her being kind of like you know beyond this being suspect given like how how often she

tends to do this is the second tweet here where it says nancy pelosi regulates the oil and gas industry and benefits when she puts on undue burdens on america's energy independence then she profits handsomely off her burdensome regulations with tesla call options very disappointed in the sec here and that's what the account said now as far as i know and from what i've read the insider trading is pretty much legal if you're a politician there is no it doesn't seem to be any kind of like hard laws against it and you're able to kind of like trade stocks and and call options or whatever you want basically even if you're a politician even if you're a high-ranking politician even if you have cons conflicts of interest like what nancy has here which is obviously really stupid right like i i the fact that this is even a thing is

really dumb but i'm not necessarily surprised because as i've said plenty of times before guys i think financial regulations are way too harsh um but they're always kind of like overreaching but they're not they're not kind they never get kind of go after the right people like the sec for example you know i quote tweeted this tweet and said don't worry guys i'm sure the ssc will be all over this soon they're not going to investigate this the sec is not doing its job of protecting investors it's not doing its job of looking into insider trading and and all that sort of stuff it really is just a protection racket i think for those in power and i'm not going to go on a kind of like rant about the sec but how this relates to crypto is that you know there's obviously a lot of

insider trading in crypto it's everywhere guys like seriously it's really bad right there's it's very hard to stop this like even centralized exchanges struggle with this all the time so for example a centralized exchange may kind of like announce internally that they're going to be listing a certain token say it's coinbase and they're going to be listing a new token and for a while not so much these days but for a while whenever coinbase listed a token there was like the coinbase pump right where the token would go up substantially in value immediately after listing now if you worked at coinbase you're obviously going to sign you know agreements saying you're not going to trade based on this information and if court you'd be prosecuted blah blah blah but how would they police that because it's not like you have to set up a brokerage account do kyc or aml in order

to trade these things on on ethereum as a token right like say there's an erc20 token and it's trading on unispot but it's not on coinbase yet you can literally go home spin up a new ethereum address fund it from another centralized exchange if you want or fund it through tornado cash or something and then trade based on the information you got as an employee at coinbase right and this has happened plenty of times before guys like this is not hypothetical this happens and not just with coinbase with every other centralized exchange and there's really not much that can be done to stop it so i i totally get like why maybe the sec or other regulatory bodies don't want to go after this because it's just a waste of their time because they already know that it's very very hard to difficult to stop and all those sorts of things and

that's totally fine but they don't even go after the most obvious things like for example all the youtubers that kind of just shill coins that they don't disclose that they're holding right for a basically a pump and dime uh there's been hardly anyone that has actually kind of been prosecuted for that or you know all the regulatory bodies have gone after for that um but the regulators continue to go after the legitimate teams building legitimate products with like uni-swap labs so i think just looking at all of this together i i you know i struggle to to understand why people would want more financial regulation or why people want financial regulation to begin with when it's not actually doing its job we see stories of banks all the time being caught money laundering they pay a fine you know away they go so many of these things

of these um all these scams they just end up paying a fine and away they go like block one did it with eos paid a 24 million dollar fine to the sec after raising billions of dollars in an unregistered security sale and wash trading and that's it now they have like a massive btc treasury and and they're you know they're on their merry way eos and never amounted to anything but they're they're off scot-free they're living on private islands whatever they're doing with that with that money so you know that that's crazy in of itself uh but there's plenty of examples of this kind of like you know especially in crypto but it just keeps happening again and again and again and you kind of like say to yourself well if these financial regulations are really strict and they're basically restricting the legitimate teams from being able to do

anything because they're just scared of the financial regs but they're not actually stopping the bad stuff from happening then what's the point right like what really what is the point and obviously it's a lot more nuanced than than i'm making it out to be there is a there's a lot of kind of i guess um a lot of complexities that go into this but i just i'm just so bearish on a lot of those regulations like i don't understand why they exist outside of being a protection racket like honestly it seems like especially laws like the accredited investor laws exist just to protect the already wealthy people because accredited investor laws is literally a wealth test if you don't have a one million dollar net worth or you don't earn i think it's 250 000 us dollars a year um for two consecutive years uh and that net worth

has to be excluding your primary residence you're not able to invest in early-stage companies like like someone else who has that kind of um that net worth is that right there is wealth gatekeeping of opportunity and uh like that that doesn't make sense to me like the only way it makes sense to me is if it's been put in place as a protection racket and honestly in the traditional kind of like uh finance world uh as i've said before it's an average of seven years for a traditional company to ipo and by the time they've ipo they've gone up to like a series d or series e funding round maybe even further than that sometimes and uh by the time it hits the stock market those 100 x gains you know or 1000 x gains even are completely gone like you may get that over the long long

term like decades of holding a stock for example if it's relatively undervalued when they're ipo but for most of the time you're not getting anywhere near that and you're basically going to be exit liquidity for the vcs and the funds that got in on the earlier rounds because they were able to to get in due to kind of like those laws and other and other things around that so i don't know like i i would love to see hear someone give the bull case or give like a good justification for why so many of these harsh financial regulations exist and why they should exist i'm just not seeing it i think a lot of them need to be repealed a lot of them need to be just completely removed and i do think that there is room for some of them but i i just there has to be a balance

between kind of i guess like innovation and and regulation and i think at this point in time the pendulum has swung way too much towards regulation especially in the crypto space for no good reason considering the fact that uh all the scammers or at least 99 of the scammers in this space get away with it get away with making millions tens of millions potentially hundreds of millions of dollars off of this stuff i mean there are literally there have been billions actually of dollars made from pure scams in this space and these people are just laughing all the way to i mean maybe not to the bank as the classic terminology goes but they really are laughing like really really hard at the fact that they've just gotten away with this and uh and then you have like other teams like legitimate teams getting prosecuted

getting you know fines and stuff like that and getting pressure put on them which i just think is very very unbalanced and very very unfair but anyway a little bit of a round there for today's episode but i think it's very important to think about these things especially in the context of crypto because defy is being built to resist this sort of stuff and maybe we can't repeal or replace or remove a lot of these uh financial regulations maybe we just have to build around them maybe we just have to keep building these true defy tools in order to uh basically get around all of this because once something is truly decentralized on ethereum it becomes basically impossible to shut it down and from then we we don't have to worry about financial regulations anymore um for the app itself and we do you know

extra protocol stuff like stable coins and and fiat on off ramps are always going to be pretty heavily regulated or centralized stable coins that is but i think at least if we have true d5 products it just becomes a lot easier for us to kind of route around this sort of stuff rather than trying to fight the bureaucracy and the politics and all that sort of stuff so so yeah anyway i'd love to hear your thoughts on this guys like in the discord channel or in the youtube comments um as i said try and give me the ball case for financial regulations and why you think that i'll assume that a lot of them should exist then if that and give me like a positive and give me some positives of what they've done to outweigh the negatives of what they haven't done basically all right so crypto gucci shared a tweet

today where they said cnbc ran a segment today around ethereum outperforming bitcoin amid new quote-unquote ethereum 2.0 the narrative around the ethereum merge is finally getting out in the mainstream media it won't be long before the world grasps the power of ethereum now you can see here there's a basically a picture being taken of cnbc and it says ethereum 2.0 bull case of quote unquote the merge um the ethereum network to become more efficient that's that's completely correct and and kind of like accurate in terms of if you're if you're framing it in terms of the fact that it's using 99.98 less power but i guess becoming more efficient could be taken other ways but i'm not going to knock them for that but then they go on to say it's cheaper to create because it will require less computing power and energy now i don't even know what they're

trying to imply here but i'm guessing like cheaper to create blocks maybe uh but no no like i think this is where kind of like the narratives around the gas fees will uh will be reduced to the merge come from a lot of people seem to think that because proof of work uses heavy computation to produce blocks or i guess in order to kind of like produce those those results in order to to have the right to produce a block sort of thing it means that the because proof of stake doesn't do that you require less computing power so we get more scale that's not actually how it works uh and i think this is a very actual common misconception and i finally figured out that that's where the the narrative came from about the merged low and gas fees

is because people think you know proof of stake makes things more efficient that must mean we get more scalability out of it and we have less gas fees no the the the gas fees are always set by the op codes right the operation operation codes in the evm which have a fixed cost or a cost that i mean fixed cost at all times but can be changed by a hard forks of course but you know as i've explained before um it's all dictated by that and because there's a gas limit there's only a certain amount of gas that can fit into a block so if the if we're at that limit then you then basically people have to outbid each other to get their transactions in so that remains the same uh post merge like that is not going away that is not changing and that's

exactly why the merge doesn't reduce gas fees uh so i i think you know i i finally figured it out that that kind of like bad narrative and i and i actually get the logic too i really do get the logic it's not just people being stupid it's people just having this misconception which we do need to try a really hard to kind of like fit i guess like rectify before the merge happens but at this point in time guys i think that the only thing that's going to happen is that the merge will happen people have realized that gas fees didn't get lowered because of the merge the ones who care will go and research uh more about it and see you know okay how is the gas face actually being reduced things like layer two and shining and other upgrades coming um but

then there'll be a lot of people who just be like oh this is a scam this is a rug whatever you can't help those people you know they have to help themselves at the end of the day and then the third point here is crypto's carbon footprint has been a key critique which obviously it has i mean as i've said to you guys plenty of times it doesn't matter at all if bitcoin or a proof of work is actually good for the environment for whatever reason i'm not even going to give the the kind of like arguments i'm just gonna say it doesn't matter if it is good the narrative is against it and and not just the narrative everyone's against it i mean i think a lot of people really do need to speak to the younger generation especially the people that are still in

their early teens about what they think about things that use a lot of energy and just climate change in general and kind of like you know sustainability within the within the environment they have a very very different view guys like and it makes sense for them uh they are pretty much going to be suffering from it for most of their lives if they're like 12 years old for example right and they live to be 80 they're going to be dealing with the effects of climate change for 68 years right and they're looking at that and among all the other things that they're looking at like you know rising um housing costs rising costs of everything at this point in time uh you know inequality all that sort of stuff they're looking at all of that and they feel kind of an existential dread even at that young and you know i don't think

a lot of people realize this especially people you know older people like i'm i'm almost 30 and i'm just starting now to realize that but i think a lot of older people in their 40s 50s and 60s the ones who just don't have much contact with this generation unless it's like directly their kids but even then they don't seem to make that connection and they don't seem to realize just how how concerned these people are so that bad narrative or i guess bad or good narrative whatever you want to call it that narrative around proof of work being bad for the environment is not going to go away and i'm as i've said plenty of times i'm so thankful ethereum won't have to fight this fight i'm so thankful that we basically get away with it by saying well i mean we're merged now like we're on proof of stake

you know we don't we don't use mining and i i think from there it'll take a while for that to kind of like just that information to disseminate across the crypto sphere but i think once it does it's going to be very very positive uh but it's still cool to see cnbc covering the merge i mean we're mainstream now guys remember i told you guys that i i felt like the merge narrative was really going to pick up steam well in the last two weeks it really has and it's crazy how fast that happened but i remember saying to you guys like you know when it starts picking up steam it's going to be too late to kind of uh uh i kind of like get the alpha out of it like obviously is back over 3k now and i really do think it's because of

that but you had plenty of opportunity to buy eight under 2 500 bucks uh and even earlier than that obviously if you kind of uh sorry even less than that if you had kind of like clued into the merge earlier than that too but uh anyway not going to give our financial advice there for you guys uh moving on to the next update here so something from dan crowd feist who who is an ethereum researcher at the ethereum foundation it's a post about uh client diversity so it's a blog post titled ethereum merge run the majority client at your own peril and the trdi is for reasons of both safety and lioness liveness ethereum has chosen a multi-client architecture in order to encourage stakers to diversify their setups penalties are higher for correlated failures a staker running a minority client will thus typically only lose moderate amounts should their

client have a bug but running a majority client can incur a total loss responsible stakers should therefore look at the client landscape and choose a less popular client now obviously i've spoken about client diversity a ton on the refill so i'm not going to rehash my thoughts there but this is a very very good blog post basically required reading to understand exactly what i've been banging on about about the fact that if you're running the majority client right now which is obviously prism then you stand to lose a lot if there's a bug um and it could incur a total loss meaning you lose everything if you're staking in in your eighth so that's a pretty big penalty guys like when you when you really think about it and it's really just as simple as changing over your validator clients to the non-super majority clients if you're

staking on your own but if you're sticking with an exchange or something like that encouraging them to change over to to something else and i i think uh you know once they once kind of like more customers put pressure on these exchanges it'll happen but as i said before they move slowly but i think it's happening in the background i really do i think we're going to get the prism down below the super majority that they currently have which is 66 i think we're gonna hopefully get them down below 60 sooner rather than later ideally we want to do that before the merge uh and ideally we want them below 50 we don't want any client over 50 i'm not just trying to pick on prism here but i've explained all this before i'm not going to rehash it for today but definitely go check out this blog post

for sure guys i mean this is uh required reading this is the thing that you should be reading right now i mean pause the video and go read it that's how important it is to understand this stuff especially if you're a staker um on the on the beacon chain here all right so paulina has a new blog post out today which which also is a highly recommended read so this is their updated thoughts on modular blockchains now obviously polynomial was the one who basically popularized the modular blockchain term has been talking a lot about them it's with the separation of concerns here that i've spoken about a lot where you separate um you know execution settlement and data into into different layers execution being roll ups or layer twos as we call them settlement being the ethereum chain and data ethereum layer one chain and data

also being the ethereum a layer one chain but polynomial has kind of changed his thinking about this and he wants to add kind of i guess like a fourth i can uh a fourth concern here called history which i've talked about a lot lately about history expiry and stuff like that in state expiry and all that stuff and where uh it got that kind of gets stored and then he goes uh paulie now goes on to i guess dive deeper into this and talk and talks about enshrined roll-ups which i've mentioned before as well so i'm not going to kind of like break it all down here because you do need to read this blog post for for further context on it i believe and to get the good explanation of it but essentially paulina's vision i guess for the modular uh i uh sorry the modular

stack is that everything is just ethereum right execution settlement data and history is all just ethereum and nothing is i mean the concerns are still separated but it's separated in a way that uh it's all enshrined within the within the kind of like ethereum protocol itself so that we have uh interoperability composability and all the good stuff that we're used to while getting the scalability and security that we we all want right so i highly recommend giving this blog post to read to learn more about that and i think the the overall point of this piece was also to show that there are a lot of hybrid constructions right now uh like validiums and and and um validity and and all that sort of stuff going on and obviously uh there's there's other kind of like constructions like zk porter

what celestia's working on what polygon avail is working on and and things like that and i think people are getting confused by calling them roll offs when they actually aren't like a roll up so so the strict definition of a roll-up is something that stores both its transaction proofs and its data on kind of like the settlement layer which in this case is layer 1 ethereum it's not a roll-up is not something that will store its data off chain that is a volitium or you know some or some other such construction like a zk porter or something like that so i think it's very important to realize the differences between these things because at the end of the day your funds are only as secure as the data really and if the data isn't on chain and not on avail on layer one not available on layer one ethereum then

you're at the mercy of wherever the data is somewhere else and there are other solutions like people being able to um host their own data and kind of like secure their own data which is a step above the other solutions but still this is kind of like the nitty-gritty of what we talk about when we talk about scaling via the modular blockchains and getting the terminology right is very important so i'll link this in the youtube description and you can go check it out i highly recommend giving it a read all right so optimism announced today as i mentioned yesterday that they have shipped their core data compression to mainnet so 40 transaction free reductions are coming they're not live just yet but they are coming you see optimism said 15 hours ago that you'll start to see few reductions over the next week as they figure out the correct new

overhead numbers stay tuned so i mentioned this yesterday how i think the fees yesterday what are the feasts today actually on uh on optimism to solve a token 41 cents same as yesterday i mentioned that they would drop to about 30 cents uh uh with this kind of like um actually i think less than that probably uh yeah less than 30 cents with this kind of upgrade but it's not live gesture so if you're using optimism you're not feeling it just yet but you will over the next week as they kind of like adjust these numbers obviously as they run the only sequence sequencer they um they can kind of like play around with this and tune it uh correctly and all that sort of stuff but there's also a link here to the first compressed mainnet transaction that you can see on etherscan which is really really cool to

see this is i mean this is awesome guys like honestly i think uh arbitrary nitro can't be far behind at this point because of the fact that uh optimism has just shipped this uh they i think they're cheaper than arbitram right now because of this or will be cheaper than arbitrary i think they already were cheaper because of their optimizations yeah they're a bit cheaper than arbor trim and uh this makes them even more cheaper and once arbitram does albertum nitro and a bunch of other kind of like things that they're bringing in i'm sure we're just going to have like a battle down to like you know less than 10 cents you know cents on the dollar kind of transaction fees yeah and that's what we want to see we want to see this kind of like healthy competition between roll-ups and especially between similar roll-ups like

obviously optimism arbitrage the leading optimistic roll-up solutions we want to see competition between them as well so very very cool to see this this live on ethereum main net uh and that's a pretty massive fee reduction coming for optimism users in the coming week and speaking of optimism uh huabi global has launched each deposits and withdrawals on the optimism network now they were supporting arbitrary before and now they support optimism so this is just another way for you to get from a centralized exchange directly onto optimism and i believe the fees are less than uh the other kind of exchanges out there i know binance is currently overcharging for fees they're actually charging users more to withdraw from to withdraw to arbitrary than they are to withdraw to ethereum layer 1 which makes absolutely no sense and this is one

worry that i had about centralized exchanges in that the fact that they can charge whatever they want for withdrawal fees and they wouldn't dynamically adjust it binance is actually a really really uh bad uh offender of this and i think they do it on purpose because they make so much money from it but they they always consistently have uh fees that are higher than what that is what is required to be paid uh to pay the fee on the network and as i said i think it's really because the fact that they make a ton of money off this like think about the amount of withdrawals that centralized exchanges process a day and if they can inch out an extra 10 to 20 percent on the um withdrawal fee why wouldn't they and i think it's much higher than that in some cases like 50 higher than that or

something so makes sense from a business perspective i guess being profit maximalist as these centralized exchanges are but it sucks for a user experience and usability perspective so i hope we see more competition there i hope that we see the fees come down over time as more centralized exchanges launch support for for these sorts of things uh but yeah cool to see hobby uh launch support for optimism so if you're a user of the hobby exchange go check them out and go withdraw some funds to optimism all right finally here we have orbiter finance announcing support for immutable x so you can transfer in and out of immutable x within 30 seconds and for less than two dollars now for those of you who've used the mutable x before uh you'll know that it is a validium it is not uh technically a zk roll up but they

have about a 12 hour withdrawal time i believe which honestly i mean it's not that bad it's like a seven day withdrawal time or anything like that but 12 hours is still a little while like i've withdrawn funds there from there before i'm like oh i have to wait 12 hours right even if i didn't need the funds immediately i was like oh god waiting waiting 12 hours here well now you don't have to do that you can transfer in and out of immutablex within 30 seconds using orbitar and orbita i mean look at how many uh i guess like chains they currently support basically pretty much all the the popular l2s you know polygon post chain there uh as well are now immutable x too so which is really really cool to see so if you want to check this out you can go

to orbiter.finance to kind of like use it if you're a mutablex user if you trade nfts on there and all that sort of stuff you can use this to hop in and out within 30 seconds which is very cool to see and i think this is the first bridge to support immutable x i believe i don't think hot protocol or connects or anything like that are supporting it just yet uh so orbit is moving much quicker than these than these solutions right now which is very very cool to see all right so i got a few minutes left here guys and uh i think what i want to cover today uh given that i've got a few minutes left is the market i did briefly mention before that is back above 3k it's at like 31.50 at time of recording i don't usually talk about the market

too much i don't give an investment advice i try not to kind of like give any advice like that and i don't trade so but what i'd like to do from time to time is reflect on kind of like where we came from where we are today i did mention i think a couple weeks ago that i felt really good about eth because if so if the war like in ukraine if the fed rate hikes if all the uncertainty around the china stuff and then more didn't bring us below 2k i just thought to my and with the merge kind of like catalyst coming up i thought to myself who's left to sell ethia right like who's actually left like in 2018 it was very different we had ico treasuries that were selling a ton of eth right they had so much left to offload

you could you quite clearly point to it on chain and be like okay well these people are gonna sell um you know let's kind of like front run them and that's i think a big reason why eth went down as much as it did but the opposite is actually happening now where instead of eth being sold from these kind of like there's no ico treasuries to sell eth but ethio's actually being hovered up by the market because you have eighth going into staking at a record amount right now i mean the validator queue is like 11 000 right now and that's 11 000 times 32 eth we have over 10 million ethan staking you have eighth being bought up for the merge narrative right you have eight being burnt with one five five nine which no one talks about anymore but it's still happening guys we burned two million

eight the other day you have all these massive demand drivers and when i look at that i kind of look okay well i don't really feel like there's a reason for east to go below 2k and i know i was posting about it but i never actually thought ethan was going to go below 2k personally and it could still happen right i'm not telling you that it's not going to happen but just when i look at all of these sorts of things holistically i feel really good about about ethereum and eth right now especially with the massive catalyst of the merge coming up i mean honestly as i said like who's who's going to sell their ether with that catalyst coming up there's going to be massive demand drivers uh and it seems the market is turning up very positive positively right now so i'm very excited about that obviously

obviously but what i'm more excited about actually seeing the amount of eth going into staking i think i think a lot of people have clued into the fact that staking apy is going to go up post merge and they want to get in now because of that validator queue um and i also think that uh people kind of like are like okay well what's the safest thing to hold and uh you know i want to earn a yield on it so they'll go with eighth they're not just doing kind of like staking on their own they're going through platforms like rocketpool and and lido and centralized exchanges and all that sort of stuff but it's just more east going into staking it's more it's being locked up it is a very high kind of like signal to the market and i mean over 10 million each guys like

that's like a eight nine percent of the total supply or something like that that's huge and not to count all the ethan defy all the eggs sitting in people's wallets as kind of like a store of value all the eats being burned like i i don't know and and and then we have that massive issue introduction coming as well which is obviously part of the merge narrative yeah i just don't see a reason to be bearish like i i just it's just too hard right if there were like massive piles of waiting around to be sold like in the ico treasury days of 2018 then yeah you could you could try and convince me of that but at this point in time i am i'm very excited about i think we could see new all-time highs before the before or around the merge to be honest given how strong that

narrative is uh but that's not investment advice of course that's just my own opinion on things uh and you know you guys know that i buy eighth all the time anyway so uh and i've never planned to sell my eighth either so and it's just going straight into staking every time i get you know another 32 week i just put it straight into staking uh because uh what you know i want to earn more earth on my earth right like i i i love supporting the network with my validators as well but anyway i think that's enough about the markets just wanted to give a quick thing there but 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 the video a thumbs up subscribe to the newsletter join the

discord channel and i'll catch you all in next week thanks everyone