Panama to intro crypto law, Layer 2's in context - The Daily Gwei Refuel #203 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daily gray refuel where recap the latest news in the ethereum ecosystem i'm your host anthony sosano and today's the 7th of september 2021 all right everyone let's get into it so basically i put out this tweet today because i was looking at the crypto markets and i was thinking to myself wow there's a lot of crap pumping in the crypto markets right now uh and as i said as is tradition in bull markets and you know then i went on to say long term bear markets of over two years are decent at separating the crap from the legit projects but uh for the most part i guess um but i don't think we're going to experience one of those for a while now and i went on to kind of like explain a bit more about this in my in

my other tweets here but what i wanted to kind of focus on was kind of what i was looking at today was essentially i was going down the list on coin gecko and coin gecko and i was like what the hell is going on like why does the top 30 still look absolutely atrocious i mean tron is still in the top 30. it's number 28. uh it's just crazy i was just looking at it i'm like okay there's tron there's xrp at number six there's um i'm just scrolling through the list now because i can't remember them all obviously uh there's ethereum classic at 24 with a 10 billion dollar market cap i'm just like like what is this like this it's just absolutely crazy to me and then there's a bunch of others like eos at number 32 still with like a 5.5 billion dollar

market cup they're just dead kind of like zombie projects right they're not going anywhere they're not doing anything like and it just doesn't really make much sense and the only reason why they have such inflated valuations is because we're in a bull market where kind of a rising tide lifts all boats right like a 10 billion dollar market cap may sound like a lot uh for etc uh for ethereum classic but the total crypto market cap is 2.4 trillion so really it's it's still a small part of it uh but still i mean it's just it's just really really bizarre to me there's plenty of other assets that should be ranked much higher than that the top 10 is still a bit of a disaster with you know xrp being in there um uh i mean dogecoin i guess is like i don't know what people think of dogecoin right

cardano being number three and then i mean it's funny because like i didn't notice that litecoin had been pushed so far down at number 14 but it's still number 14. it doesn't doesn't really do anything right and maybe this is subjective maybe this is just me kind of like i don't know what i'm kind of like bearish on but this is what bull markets do they just make absolute crap pump but it's not just these there's plenty of other things out there that are pumping and then during the long term bear markets is when you actually get a flushing out of things because if you go and look at basically all the assets that were popular at least most of them that were popular in the 2017 bull market uh through the bear market they got absolutely slaughtered against usd and specifically against eth and then

they've just been kind of like training down against eighth as ether continued to descent up uh things like eos and and neo and q10 and all these other kind of competitors from back then um but it's not just those sorts of things it's just all these zombie chains it's just ridiculous uh the fact that they're kind of like in um you know they're ranked so highly but then you know in my thread i went on to say like how do you play this well i mean you can ride the waves if if you if you want to take on that risk you can kind of like buy into these things trade them back and try and ride these short-term waves it's very risky it's really only something a trader would do it's not something that an investor would do um but it's definitely something that newer

investors like to do right they buy into narratives they're buying to surface level stuff because they don't have the extra context they haven't done a deep dive they're kind of like behind on on on on various different things here but they're going to kind of get up to speed with that and then you know i went on to say that this is the first crypto bull market where nfts have actually really taken off we've never seen this before there was a small blip of this with the cryptokitties mania and at the end of 2017 but it was absolutely nothing compared to what we see today and this is like a different dynamic to what we've seen i guess like the token markets where it's much easier to get wrecked on nft than it is on tokens because with nfts the floor can collapse very very very quickly like it can

literally fall 90 in a day whereas a lot of these tokens they can fall pretty quickly as well but 90 in a day is usually only seen when there's like a rug pull or an exploit or a team kind of like gets hit with like an scc notice or something like that it's not generally something that happens that quickly like nine you know 90 kind of fall in a day so and and also you still have liquidity after that like i'm saying you know if nfts fall 90 the floor falls it doesn't mean anyone's there to buy it it could keep falling from there so nfts really do have a different dynamic to them um but but on the plus side even if they kind of like collapse in value you still have the jpeg right you still have the image and for a lot of people that's enough for

them like oh well i lost some money here but at least i still have something to show for it whereas with a token a lot of the time it just burns a hole in your wallet unless you sell it unless you kind of like send it to like a burn address if it's just completely worthless to you so there's definitely that that dynamic and you know then i wanted to say i don't think any of this speculation is bad um it's the lifeblood of crypto after all it's the reason why pretty much you know all of us are here all of us came into crypto um i would say like 95 plus is speculation which is fine speculation can lead to net positive effects as i discussed in yesterday's delegate newsletter if you want to go read that um and i think it's also net positive

for the entire ecosystem if you just want like one clear example of this the the the higher the eighth price goes the more kind of money if your ecosystem has the more stuff gets built like that is literally the most basic example i can kind of give but this has a massive on-flow effect to the rest of the ecosystem so nothing wrong with speculation and short-term games are fun to play in bull markets because you can make all this quote-unquote easy money but it's only easy money if you cash out if you just hold it then it's just paper profits that you can potentially have but if you don't sell anything then it's really not something you should be measuring in your portfolio the way i actually kind of think about my portfolio is i look at it and everything that's not eighth i just look at and i'm

like okay well that can go to zero um don't look at what the price is now because that's all worthless because i haven't sold it and the reason why i don't look at eats because i don't plan to sell my eighth um but everything else i kind of look at i'm like yeah who cares like the only thing that matters is what the price is when i sell it and that might not work for you but that kind of like works for me to keep me sane because these things can go up enormously like they can go up like 10x 10x in in a month or less some of these things that i hold but then they could fall much you know just as fast and i you know i didn't plan to cash out sort of thing and maybe i kind of like i was waiting for a

different time to cash out or i still wanted to hold for a variety of reasons right like i don't sell every top i don't buy every bottom i mean i'm not a trader i'm an investor um but generally i try not to count my chickens before they hatch for lack of a better term there uh and all this isn't to say that i'm bearish or anything like that i know we had a bit of a sell-off in the markets over the last few hours that's all short-term noise i'm definitely not bearish uh uh far from it actually like i'm still very very bullish on the ecosystem and as i said at the start of this tweet threat i don't expect the two year plus bear market uh for a while if ever like i don't know if i can imagine another kind of like two years plus

where essentially the world just basically goes to sleep on crypto and then um basically forgets about it stops using it i just don't see that happening especially with the advent of stuff like nfts and and d5 i really don't see that happening uh but i could be wrong of course maybe we go so crazy with a pump maybe maybe the whole market pumps so crazily within like six months it goes to valuations that none of us saw coming and then because of that there's just a lot of people are sitting on paper profits they decide to cash out and we crash back down right and then the crash is so brutal that we go into kind of like a long-term bear market but the funny thing is is that the crash was pretty brutal during may and june right we felt he felt like 60 in like a week

and we know we stayed around the 1700 to 2000 level uh kind of where we bottomed out at for for a little while and now we're back at almost like we hit 4k you know we've come down a little bit now i think at time of recording we're at like 3800 3800 or something like that um so yeah it's been quite a quick recovery there and i think i you know i might have said this on the refuel but my whole thesis was like i just don't see any reason to be long-term bearish right now because there's still tons of people pouring into this ecosystem there was only a very brief period of time during i guess like that downtrend of like one to two weeks where it felt like everyone had kind of like gone off crypto twitter the the you know the markets were very

quiet the ethereum chain was very quiet like we had prices in the single way prices in the single digits again which i never thought we would see but that didn't last very long at all i think you know as soon as the nft mania started picking up just a little bit we had people flooding back into this ecosystem a bunch of money coming back in we had one five five nine go live of course and and the price went to 4k and now we have so much other stuff coming on the l2 stuff which i'm going to talk about in a sec so yeah i mean it's really impossible for me to be long-term bearish on anything right now maybe that'll change in the future if i see things getting way out of hand but from what from where i sit right now i don't

see kind of like that being the case i just see lots and lots of adoption lots and lots of growth lots and lots of money being thrown around to fund these sorts of things so yeah that's kind of like my whole view right now so i guess to end this tweet thread i said enjoy the short term games play around with different things ape into things if you want to but always try to minimize your risk as much as possible and don't get stuck holding the bag in the end that's always very important but of course none of that is investment advice that is just kind of like my general thoughts on i guess the state of the market right now instead of the crypto ecosystem and where i think we're going uh you know over i guess like the short to medium term and you know who knows maybe we go

crazy and then there's a long-term bear market that hits us but that's not to say that there won't be like shorter medium-term bear markets either that's just the way markets kind of kind of tend to work but the amount of adoption that we're seeing i just don't know i don't know i don't know if i see this kind of like happening anytime soon um and speaking of adoption moving on to the next piece of news here uh panama announced a crypto law so similar to what el salvador has done and you can see in this tweet here i mean most of it is in uh is in kind of like spanish here so i can't read it unless i click google translate which is a neat feature i always find that amazing right the fact that we have a button we can just press to translate any language in the world

and if it's not on twitter it's on like google translate um just think about like that to me always blows my mind the fact that we can do that and think about just like 20 years ago none of that was possible even 10 years ago a lot of that wasn't possible so again just as an aside there but anyway if i translate this tweet from gabrielle silva here um who i assume is the president of panama i don't know i don't know the politics of panama i don't even know what kind of like um democracy they have but anyway um uh gabrielle says here today we present the crypto law we seek to make panama a country compatible with the blockchain crypto assets and the internet this has the potential to create thousands of jobs attract investment and make the government transparent you can see this

project here and this links to a pdf which describes all of this it is in spanish so you'll have to translate it if you don't speak spanish and then he you know he's got a tweet thread here which basically has a bunch of i guess like nice little images and stuff like that and then kind of like the benefits here i think you know why is the crypto law important to panama job creation new ventures governmental transparency supports innovation decentralized expand the offer of financial services and products and much more uh and then kind of like finishes off the tweet here kind of like saying panama should not be left behind you know let's let's do this sort of thing this is really cool i think this is cooler than the el salvador stuff because el salvador is basically forcing bitcoin on their citizens which i really

don't like uh and i've called this out before i think on the refuel um and elsewhere where they basically made btc legal tender and if you don't um if you can't refuse to accept it you have to accept it as legal tender in the car in the country so it's kind of like uh i guess uh very similar to fiat whereas by decree and it's you're being coerced into using it i really hated that so i don't know the exact details of what the panama crypto law is going to look like i hope it doesn't look like that but they've also oops they've also expanded it out to i guess not just um uh uh bitcoin but also crypto like more generally and they actually mentioned ethereum in the in the pdf if you open it up there and what's really cool is when you think about this right now

ethereum l2s are are ready for kind of like countries of this size because panama's obviously a small country a lot of the south american countries are small and the l2s that for payments uh such as zk sync and some of the slackware stuff they can already do thousands of transactions per second that's more than enough for a small country because if you think about it uh visa globally the last time i checked does what 40 50 000 transactions per second that's a global network that's integrated with all of finance so just a couple thousand transactions per second for one small country would be more than enough to service them and and over time that will obviously get better we'll get more uh tps and more scalability out of our layer two ecosystem but i mean just thinking about that on

from a higher level it's already ready and that's amazing and it's funny because uh el salvador wants to use the lightning network but they have to do so in like such a weird way they have to basically have these centralization vectors and all these kind of intermediary intermediaries sitting in between and apparently the app already broke today for some reason there's all this kind of crap whereas with something like a zk sync or or a starkware based kind of payments l2 uh they could definitely service uh this this demand and this need and um you know maybe they will maybe they will get in contact with the panama government here and and try to help them which i i'm really looking forward to but anyway you can read this whole kind of announcement in this pdf it'll be linked in the youtube description as i said in spanish but you

can of course use google translate to translate it all all right so speaking of layer twos i think i'm gonna go through a few layer two things now i just wanna move this here uh so essentially uri kind of announced today or i guess like said today that stark x uh inuit for those who don't know he's the co-founder and ceo at starkware he said the starkx community cumulative trading volume uh trading is now at 20 billion it was 10 billion less than two weeks ago um and then he goes and waits you'll hear about warp nethermine's progress on the evm to cairo compiler which i spoke about on a refuel i think a week or two ago but anyway this is this is awesome i mean stockx is powering things like dydx and diversify and um i believe immutablex maybe maybe i'm wrong there

but essentially it's uh i mean you can see here uh so rare as well and immutable oh yeah he lists them all here the adx diversifies so rare and immutable um but uh all the action is mostly minting not yet trading there so it's mostly dydx and diversify which is really really awesome to see so this i mean this growth here is just going to keep going like exponential on these l2s like i i don't think people realize how much demand there is for these networks and i mean it's funny the fact that people don't realize this is always funny to me because think about how high the gas fees are on ethereum and people are still willing to pay those gas fees to get their transactions in now layer 1 ethereum throughput is limited to 15 transactions per second which means it's roughly limited per day

i mean anywhere from 1 to 1.5 million transactions per day and because it depends on how much gas is used per transaction so it's kind of like hard to tell but on average you could say 15 tps right these layer twos like optimism and arbitrary are limited as well right now um arbitrary is limited to the same scalability as layer one uh and optimism i think is is even less than that a hundred thousand transactions per day a limit there but they're going to keep increasing their limit limits over time and they're going to get to a point where they're offering thousands of transactions per second and that's going to get filled like people are going to fill up that capacity uh there's just so much demand for the for these sorts of things and you know you may have seen and this is probably a perfect segue

into the next thing i wanted to talk about you may have seen this site from david mihal here his latest kind of crypto uh sorry uh dot info site called l2 fees dot info which shows you the cost of the of the different kind of like things you can do on l2 so here you can see a simple transfer of eth on each of these l2s is a um you know 40 cents on loot bring 40 cents on hermes 83 cents on zk sync and then 2.75 on albertum 1 and 5.83 on optimism now you may be thinking wow anthony like these costs are much higher than i thought that would be especially on arbitrary and optimism here i thought l2s were going to bring costs significantly down and it's like okay well technically i mean this is already significantly down from r1 but you need to understand the

way l2s work and i've explained this before but i really want to reiterate this point l2's work of economies of scale so the more transactions that they process the cheaper that they get up to the limit that they have so if arbitrary was tran uh has like a thousand transaction per second limit and they hit that limit well of course the fees are going to increase from there because everyone's trying to outbid each other but everything under that is basically just paying the normal kind of fees that you would pay and essentially uh you the fees are basically being are there to kind of i guess i mean a few reasons prevent spam of course but also pay for the l1 batch transactions that these l2s need to do so the perfect example here at least the simplest example i can give is that imagine that hl1

sorry each batch transaction from these l2s to r1 is 500 and say they're doing this once an hour so this 500 is split between all the transactions on the network within that hour if there's only 100 transactions for that hour then each transaction will pay five dollars in fees to um to kind of like make up for that minimum because there's obviously more than just the batch costs and you you know you kind of don't know what the batch cost is going to be like in the future you can have like a kind of um kind of estimate there but you don't know exactly so i'm kind of giving a very very simplistic example here just for illustrative purposes um but then imagine that there's a thousand transactions in that hour instead of instead of a hundred well the fees per uh per transaction should go to 50 cents

right as a simplistic case here and then 10 000 transactions five cents you get you get what i'm saying here right so and up to the kind of like limit that they have so this is this is kind of like how l2s work opposite to l1 in that on l1 the more transactions you process uh uh the kind of like fees get higher with l2s the more you process up to a certain point there's like a goldilocks zone i guess um the the kind of fees can become cheaper for everyone because they have spread out over uh basically all these different individual transactions so that's why you see this here um and as you know as i said albert trim and optimism also throughput limited right now so they can't do more than what they're limited to in terms of transactions as i said arbitrary is

limited to l1 uh capacity optimism is even more limited than that so that's why these fees are currently kind of like high here and this is just for transferring it you can see here swap tokens is a bit higher on each of these sorts of things but again economies of scale and already significantly cheaper than ethereum while still in inheriting ethereum security and guarantees there which is really really cool um but i thought that was just kind of like an important thing to note there because at the end of the day l2 scaling is a marathon not a sprint we're not going to get to the point where transactions are super cheap and everything is like super scalable and we're on boarding the world next week that's not not going to happen this is a multi-year rollout thing and i said at the beginning of this year that um it

would be the year of layer two and what i meant would be the year of layer two that rolling in the amount i should have specified that that's the year that we actually get these things to mainnet which it has been so far and continues to be but it is not the year that we onboard the world to these layered twos um they're not ready for that they're definitely very far away from that and none of the solutions are ready none of the other chains are ready to do this stuff like scaling is only one part of it you have the ui and ux stuff you have um i kind of like the the education around it you have the onboarding tools from different places it's just it's going to be like a longer term process here so i mean don't get kind of like caught up in the short-term

noise don't believe people fighting this and kind of posting screenshots of this on twitter saying haha these fees are already really high it's a scam blah blah i mean i hate seeing that because it's just surface level you know smooth brain takes on these sorts of things if you really dig below the surface and know what you're talking about you can clearly see the advantage as of l2 and how it works uh and the fact that we already have this massive kind of advantage with the lower costs here uh given that um they're you know that their throughput limited is is still really really cool to see so yeah and i love this site because as i said these costs are going to come down over time we'll be able to kind of show that and it's going to be really really great to see i hope that there's a graph here

or at least the chart that shows the fees over time because i would love to see you know it's starting like really high not really high but starting high and then going down over time because the network gets more activity and then posting that on twitter and see like here's the layer two economies of scale in action here's how it actually works and i think that would be a really cool thing to share there but anyway uh moving on from that to it to a related tweet from optimism uh they tweeted out to say we found some nice l2 gas cost reduction techniques aiming to roll them out in the next system upgrade will get us much closer to optimal get hype um and the next upgrade is uh will get ready so it might be coming soon which is really cool uh and i said you know

i'm very hype already for this but essentially this is another kind of facet to scaling via l2s we can keep making them better over time it's not like we roll it out and there's no road map and there's kind of like no improvements coming we're going to keep making them better there's going to be plenty of other constructions coming to life optimistic roll-ups and z-care apps are just two of them there's also volidium and kind of like um zk porter from zk sync that have different trust assumptions but it's still you know for all intents and purposes considered an l2 for example volidium keeps data off chain instead of putting it on chain which means that um you know and the way they keep it off chain is part of like kind of a data availability committee which is basically a bunch of nodes kind

of keeping this data alive for you but the downside is that if the nodes decide to withhold the data from you or if they delete it um or if they're kind of like um you know a loser or whatever then it could lead to a potential loss of funds or it could lead to censoring because they're withholding the data from you um that's just the trade-off you take to achieve more scale but at the same time these are just like a handful of solutions a handful of constructions we uh there's so much money pouring into this kind of like ecosystem i mean the other day arbitration raised 120 million dollars uh uh polygon obviously uh merged with uh the hermes team to do zero knowledge stuff they committed a billion dollars plus to that i'm sure these other l2 teams are either already raising or already have a tons

of interest to race like optimism uh zk sync i mean star ware raised what like 80 million dollars a couple months ago or something like that um and you know when they do do their tokens which they will like you guys keep i mean not you all of you guys but some of you guys keep pushing back on on me on that's like oh you know it doesn't make sense that they do a token guys like it actually does make sense and some of them are i've already announced that they're doing a token zk sync have said that they're doing a token like it's not it's not a secret and these other ones you know they may say that i don't have a token right now but they will probably have one in the future and that's not me having any special knowledge or anything like that but it's

just the way i see it is that a token is needed for st for staking because you need to stake the token so that you can decentralize out the sequences or the the block producers essentially of the layer twos so you can get more censorship resistance uh and then you can also kind of like have a more of a self-sustaining ecosystem as well um and yeah and and and and there are different uses here maybe maybe there's governance as well all these layer twos and stuff like that i know that's a meme but it could be that right so from that perspective definitely expect that but anyway i'm really excited to see all of the kind of like uh layer two innovation that's gonna keep happening over the coming years and and the fact that we get to kind of like do this while preserving

ethereum security and decentralization is what makes me most excited about about this ecosystem at the end of the day so uh frank shapiro shared a article from the block today saying that standard chartered which is uh one of britain's banking giants apparently i'd never heard of this bank before um it is more bullish on ethan bitcoin they have a 35 000 price prediction for eighth now really who like i mean realistically who really cares what the banks think at the end of the day i certainly don't but i think this just sends a signal out to all the trad five people but all the like legacy system but hey this bank's giving this kind of price prediction here uh you know uh kind of like let's take this some people take this literally and say oh my god i

better like buy ether i better buy bitcoin or whatever because they also gave a um a kind of bitcoin price prediction where they said bitcoin could increase up the three times from current levels while it sees eth going up to 10 times from current levels i'm sure they have their own internal valuation kind of like um uh kind of like report they put together for this they're circulating to all the institutional clients and stuff like that at the end of the day people just pump their bags right like we all do it and and this is just sending a signal out i mean i don't think 35 000 is out of uh out of kind of like the question at all like you guys know that my longer term price addiction for ethereum is a hundred thousand dollars and i'm talking long long term like you know five ten

years sort of thing not tomorrow come like guys don't quote me on on that and say hey you know sasebo predicted 800 000 tomorrow like no no short to medium term i could definitely see ten thousand dollars happening um but a hundred thousand dollars i expect to happen on a more longer term time scale here but people will often say like these are crazy price predictions how could you say that it's like guys like we're not building something uh like a hobby project here we're building the future of the financial system and if that is not worth 10 trillion dollar market cap then what are we doing like if once it really takes over the world and really gets integrated with all of kind of like um the world's financial system and becomes the world's financial system it becomes ubiquitous there's no reason in my mind that eth can't be worth a

hundred thousand dollars or a ten trillion dollar market cap or a bit i guess more than a ten trillion dollar market cap depending on the supply at the time due to the fee burn and also we have all the kind of like value accrual mechanisms to eighth because of the fee burn because of staking because of deficit collateral because of like everything else like money uh it's being used as money within nft the nft economy and elsewhere so uh yeah i mean these price predictions may be superficial whatever it just sends a signal out to the ecosystem that hey you know these banks saying this and these trade five people and institutions may be like oh we better buy or whatever that's just how this kind of works i think so channeling god put out a good tweet today reiterating my stance about eip1559 not being the cause for the

higher gas prices right now so he says no erp-1559 did not raise gas prices it stabilized gas fees and helped prevent users from overpaying on average ethereum gas prices are higher because of nft mania increased demand for block space which has gone absolutely exponential correlation is not causation now i think i've mentioned this on the refill before that it's just a pretty freaky coincidence that nft mania started at the same time one five five nine i kind of like um went live so people are kind of saying oh well one five nine increased gas fees no that's not the case and there's a few charts here you should be made aware of this is the chart that shows what the gas fees kind of look like prior to one five five nine and what they look like post one five five nine so you can see that

they're a lot more erratic on the left hand side you know prior to one five five nine going live and a lot more kind of like smoothed out on the on the right hand side and a lot more predictable over time which is really cool uh and then there's another chart here showing uh kind of like uh i think this is the one that nick uh uh nick johnson put out i can't remember exactly what what this show but i think it just showed that like kind of like the baseline that people were paying kind of came down over time came down with one five five nine essentially or sorry the overspend i believe so that the amount people were overspending on fees came down and and and it came down exactly when one five five nine went live in one sharp drop on all in august

fifth or sixth depending where you were uh and then you can see here look at the open sea mon monthly volume for august like this is clearly incredible network demand because of nfts like there is no clearer explanation to this than nft's increasing network demand and then you can see here the gas guzzlers are you know open seas number one right right i mean open and axe infinity as well uh he's number five here and that is also available in the ultrasound money website and their little table that they have it's very clear to me that nfts are the things that that cause gas prices that go up one five five nine is not the cause there anyone's saying so is either misinformed or just trying to spread fud at the end of the day so syntheman uh kind of quote tweeted this tweet from uh liam here teasing

just uh decentralized bitmex on layer two which is basically uh quinta which is uh leveraging synthetics's protocol here uh they're going to be offering uh i guess uh futures on optimism's layer 2 protocol we are permissionless and available both in the us and china as well so that's pretty cool they're not limiting this to people outside of the u.s which a lot of these kind of d5 protocols seem to be doing these days so looking forward to seeing this go live just another i guess kind of like app and another thing to do on the optimism network and speaking of things to do on layer 2 networks mcdecks here announced that they are fully live on arbitrarium so liquidity mining and transaction mining are starting next week um so stay tuned for that but if you want to play around with uh mecdex which is a perpetuals trading

a virtual swap protocol on arbitram on layer 2 experience the lower fees you can go do so now mcdex dot io and switch to the arbitrary network obviously to interact with that and as i said the liquidity mining and transaction mining programs are starting next week but i think on that note i'm going to end it for today so thank you everyone for listening and watching be sure to subscribe to the channel if you haven't yet give that video a thumbs up subscribe to the newsletter join the discord channel and i'll catch you all tomorrow thanks everyone