SEC sues Coinbase and Binance, ETH staking and more - The Daily Gwei Refuel #598 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily way refuel where you got the latest news in ethereum ecosystem I'm your host Anthony 6th of June 2023 alright everyone let's get into it so some big regulatory news over the last 24 48 Hours uh what's funny about this is that uh it happened back to back um and there's a lot to unpack here so what am I talking about I mean I'm sure you you're all aware by now but firstly uh yesterday I think this happened after I recorded the refuel um uh binance uh ended up getting sued by the SEC for a bunch of different things and in the law in the suit uh SEC the SEC has listed a bunch of tokens that they're deeming to be Securities which I don't really think there's much

to that I think that's kind of really weak and I'll go into why um but just happened about like 15 minutes ago since I since I started recording this uh coinbase has also been sued by the SEC now what are they being sued for well basically the the commonality here between coinbase and binance is they're both being sued for enabling the trade trading of unregistered Securities and that those were those assets that I mentioned uh just just earlier there there's a bunch of Assets in there some of them random some of them not it seems like they took a bunch of assets where they feel like that they could get the strongest case from and then put them in the in the lawsuit uh but yeah they've gone after both coinbase and binance here so look I think this both angers me and kind of

makes me laugh and I'll explain why it's kind of a weird thing but the reason why this angers me is because it's just continuing the same old [ __ ] trend from with the SEC from Gary Gensler of not protecting anyone right not protecting any investors and doing this regulation by enforcement where they're literally going after I mean binance look to be honest early binance especially up until maybe I guess late 2020 was was very shady right I'm not talking about them trading I'm interested security I'm talking about them doing a bunch of other things like uh insider trading trading against their own customers stuff like that all that those stuff that stuff hasn't been proven um that's just me kind of speculating there but honestly I think it's uh it's based on on uh healthy speculation it's

not just uh conspiracy theory I do think early binance was was definitely a cowboy town from 2017 to like late 2020 was definitely Cowboy city um but uh in saying that coinbase is a weird one because coinbase is a U.S publicly traded company that the SEC approved to go public and they approved them to go public when coinbase was trading these assets that the SEC is now deeming Securities I don't have the list of assets up with me right now but funny enough eth isn't actually listed in there so I guess Gary Gensler is taking a a page out of Jerome Powell's Book and being labeled a security is now transitory apparently uh which is just weird but I guess uh I I I guess like not just weird but like as I've

explained before I don't think athe is going to be labeled as security and I think that even things in these lawsuits that are being labeled as Securities aren't going to be uh actual Securities aren't going to be declared as official Securities because the SEC from what I've read isn't actually going after each of these individual uh tokens and individual companies they're going after binance and coinbase and they're just using these assets as I guess like evidence that binance and coinbase has enabled trading of unregistered Securities so it's just to build their argument now in saying all of that I put out this tweet here right where I said you know Gary Gensler never even hinted at going after one of the biggest Financial frauds in history FTX but he just sued the two largest crypto

exchangers back to back with one of them being a publicly traded us company protecting investors might ask it's never been about protecting investors guys and I've been saying this for years I think that most Financial regulations if not almost all of them uh are [ __ ] and especially when it comes to crypto where I'm not talking about like centralized exchanges when it comes to things like D5 where things are very open auditable or transparent um uh verifiable like there's a lot of these Financial regulations uh just is to punish good actors and we're seeing this play out with the SEC they're just going after good actors like coinbase I'm not going to call binance a good actor so to speak because as I said they do a lot of shady stuff I think they've cleaned up their act their act over the last couple

of years um but it seems like the SEC went back as far as I believe 2018 and is kind of using examples from back then of of shady stuff binance was doing but I think the biggest issue I have with this is the SEC once again trying to get things or trying to label things Securities without really proving it because no one can I mean okay everyone can say something's a security but you actually have to prove it uh based on Security's laws so Gary Gensler at the SEC or the SEC as a whole they have to actually prove that every single asset that they call is a security is a security meets the definition of of the Howie test and then officially declarative security and get a ruling on it and usually that ruling has to come from a court um and usually it it ends up in kind of

like a trial which is what uh the SSA does not want to do because they're winning a trial is actually very difficult so what ends up happening a lot of the time with these cases is that uh they get settled the the um I guess uh company behind it that's uh that pays the fine doesn't actually admit guilt or anything but they do sometimes admit that when they issue the token it was an unregistered security sale but from what from my understanding that doesn't make the asset a security still so for an asset to actually be labeled as security uh after the fact like obviously any asset that goes through the SEC for example a publicly traded company in the U.S to become one and to issue stock you have to go through the SSC you are automatically a security but to declare

something a security after the fact and actually enshrine that uh you have to go through the whole process to do that it is not something that can just be done by someone calling something a security which thankfully is the way of of the land in the US but it doesn't stop uh agencies like the SEC and people like Gary gensla are just calling whatever they want to security because they're just alleging it at the end of the day right they're not they're alleging it to security they have to prove it is but they know that just alleging it is enough to basically uh achieve their goal which is basically get the headlines especially for Gary Gensler because he's all about career advancement get the headlines potentially get a settlement and then move on to the next case and you know what's funny against those probably not

going to be around for the end of these cases anyways either going to move on to the treasury or get fired if the Republicans win on the presidency next year not exactly sure on the mechanism there but I believe that there is there would be a way to remove him in that world uh but yeah it's just it it angers me and it just disappoints me that we continue to see it doesn't surprise me but that's kind of uh my thoughts on the on on that front there now why I said it also makes me laugh is because this just continues to remind me of what happened in the 2019 bear Market uh and this didn't happen in 2019 but there were similar things happening back then but then if people will remember in 2020 I believe it was October 1st 2020 uh bitmex was uh I think uh not sued by the

SEC but the Department of Justice doj charged uh their three top uh bitmex Executives with uh violating the bank secrecy act and they also uh I think um are charged bitmex with a bunch of things as a company whatever it was and at the time bid Max bitmax was huge bimx was I believe one of the largest if not the largest derivative exchanges I don't remember if they did spot trading but they were big you know there were a lot of people trading on there now of course after this whole thing happened um they lost a lot of money could share but the funny thing is is that if you'll go look at the chart of BTC and eth on October 2020 it was just after D5 summer and it's when really the bull market started really getting getting going now

what's funny about this is that when you have one of the biggest exchanges literally uh I get I guess criminal get a criminal charge against them and against their Executives which is not what's happened with finance and coinbase from from my um reading here it's not a criminal thing it's a it's a civil thing so it's very different but when you see this and you see the price not really breaking down not setting new lows and just kind of continuing what it's been doing or or heading up that is usually a pretty bullish sign because what it basically tells I guess the world the market tells everyone is that the market is out of sellers the market does not want to go down the market is over all of this the market is exhausted and I always think of that Meme from uh the the gift from South Park where Randy

is like is that all you've got and he's like completely beaten up right and he's just ready to keep fighting that's what it's like in crypto bear markets you get you keep getting hit hit hit but you keep getting back up and eventually you've been hit so many times that you're just like screw it I'm just going to keep going until I'm literally dead and of course crypto doesn't die it just continues on uh through its next cycle so I think that's what we're seeing now now am I saying that price can't go lower than here of course not right I'm just saying that it's kind of funny how history kind of Rhymes a lot of the time uh doesn't exactly repeat but definitely Rhymes and I do think ultimately these cases with coinbase and binance uh aren't really going to go anywhere people are going to forget about this

anyway in a couple of days like we forget about everything because the the fast news cycle but essentially I don't think coinbase is going to go down without a fight especially because they have already committed to fighting as uh fighting all of these things and they've already been sued by the SEC or oh no they they got issued that um that Wells notice right and binance as well has said that they're committed to fighting this so if they're committed to finance It's Gonna Take Years for this stuff to resolve and by the time anyone even remembers about this or by the time this gets resolved no one it will even care I mean it'll be a distant memory right so over the next few days you'll see opinions on this maybe won't even take a few days but you see takes on this the market volatility will be there of

course we've seen over the last 24 hours but people will forget about this because a month ago uh the doj the Department of Justice went after binance as well have you heard anyone talk about that over the last few weeks I haven't and the market certainly didn't care because it started going back up again so I think the market is not really sensitive to just generally to this stuff yes there was volatility when um when the SSC suit against binance came out and there's been a bit of volatility over this coinbase stuff but that really is just the opportunistic traders that are just starved for the volatility they're trying to take advantage of any volatility because that's how they make their money right or that's how they try to make their money but generally I don't think you have uh as I've said before you don't have the tourists

around they're not going to panic sell the long-term investors are not going to sell based on this they're just going to hold through it all because where that where Randy right now we're like is that all you've got and keep hitting us we're just going to keep getting back up because we are you know experienced bear Market participants at this point I mean me personally I've seen some [ __ ] guys like it I've seen some [ __ ] I mean I've been I've been around technically since 2013. I saw Mt gox explode back then and then I've seen so much [ __ ] since then I I am randy like to like on on steroids right now but for me it's like okay keep coming keep coming keep coming you know Building Technology like this building Revolution revolutionary technology like this is always going to be met with

stuff from the old world that they don't like it obviously they're gonna try what they can to slow it down to potentially shut it down but I don't know I'm I'm more positive than ever still I think these two lawsuits really are going to be forgotten about in the next few days not really going to ultimately mean anything and it's going to take years for this stuff to resolve yeah so those are my general takes on this sort of stuff I'm sure you've seen a bunch of threads from actual lawyers discussing the suit itself so I'm not gonna dive into that there but I also wanted to mention that coinbase's Chief legal officer Paul grebel is going to be testifying on Capital hill before the house committee on agriculture on the need for Clear crypto rules and the digital asset Market structure discussion draft and you can read a

summary of his testimony in this post so that will be today I believe that he's testifying um uh at uh at the the at Congress yeah uh sorry at the house committee on agriculture here so yeah you can read his statement I'll link that in the YouTube description below but yeah generally guys I mean if you've been listening to me for quite a while my my general take on these sorts of things is always the same it's short-term noise ignore it unless you think it's actually existential for crypto um you know like if you do think it's existential for crypto then you would sell your crypto and move on but I don't think any of you think that and also I should mention I didn't mention this before but the Lord the the suit against binance is only against binance uh us the SEC does not have any jurisdiction

in binance proper only only over binance us so they can't go after binance global but uh in saying that there do allege that CZ was co-mingling funds between binance us and binance I've heard this story before with FTX and stuff so we'll see how that shakes out there uh but yeah as far as the scc's kind of jurisdiction goes they are only able to go after I believe us-based entities but potentially also if they can work with other bodies around the world go after companies that were dealing with U.S persons so we'll see we'll see how that shakes out but anyway you can check out Paul's uh testimony draft I'll link it in the YouTube description below all right moving on to non-regulatory new system ethereum related news I just

saw this pop up on Twitter so uh Mike new day here uh Francesco uh aditscha and Justin Drake have put forward a new proposal to increase the max effective balance on the beacon chain so they say here we argue that a validator set contraction has positive implications for the roadmap and the current peer-to-peer layer and the validators so basically right now the max effective balance of each validator is 32 each so essentially 32 eighth is both the minimum and maximum so if you put more than 32 8 into a validator it's not going to earn you more rewards 32 8th is the minimum and 32 8th is uh is the maximum that you're going to earn rewards on there now what this proposal

does is say hey can we increase the max effective balance beyond that so that uh Solo stakers or smaller stakers I guess generally can Auto compound their rewards and can also add more stake per validator instead of having to split it up amongst validators so for example let's say you have 40 eighth well if you want to be a solar stacker you can only stake 32 8 and then that other eight eighth you have to go stake somewhere else right you can't stake it as a solar sticker well with with this if this was to be implemented you could stake that whole 48th and get rewards on that whole 48 which I think is obviously very very cool especially for um compounding rewards as well because say you're you've got rewards coming and you want to compound them well you wouldn't be able to compound them until you had

another 32 years worth of rewards to spin up a new validator so and this is something that I think I've spoken about before but this is an actual proposal that's been posted to the E3 search Forum from a bunch of gigabrain researchers here so it's something that I'm definitely super interested in and then you can check out this post for yourself it's quite uh long I actually haven't read it yet because it just came out I wanted to cover it for you guys as I recorded the refill here but but yeah I think this has a high chance of going in I don't see why anyone would really be against this and it also enables other things as you can see here that it unblocks single slot finality and enshrined PBS and reduces unnecessary strain on the peer-to-peer layer as well so what it effectively would probably do

is essentially reduce the number of validators on on the network uh because people would essentially not be spinning up an extra validator uh they would be putting all their eighth into just one validator or as many as much as they can I don't know if there's actually a maximum uh here of I don't know if it's going from 3280 to something else so it's got obviously going from 30 to eighth but I don't know what number it's going to I don't know if it's going to be 64 8th or 120 18th or whatever number it ends up being um I'm just scrolling through here to see if they've actually come up with a number or anything like that but whatever it ends up being um uh you know they would obviously be higher than 32e then would allow you to stake so I think that the number of

validators on the network if it ends up so for example if it ends up being like 128 eighth well that's four times the current um the current maximum which means you would expect a a reduction in validators by about you know to a quarter of what we're at now so if we're at 600 000 validators you you would expect that to go to around 125 000 am I doing my math correctly here uh 125 000 validators or something like that and then it would still be the same security but it would be less strain on the network and it would actually mean that we have probably uh more time to Institute a a kind of like validator cap um or maybe we don't need to do it but I I don't know I haven't read the post in

full yet so I'm just speculating here but you can go check out this post for yourself I'll link it in the YouTube description below all right so speaking of ethereum staking The Rocker pool account on Twitter today put together a thread of where they started off by saying decentralization is not a buzzword it ensures that ethereum continues to have value as a resilient incredibly neutral blockchain read on to find out some ways that you can help to defend the ecosystem from a range of centralized threats and they go over things such as obviously client diversity and Solace taking and staking with rocket pool and different ways to stake with uh rocker pool and and solo staking so just that really great little thread here that I highly recommend reading I'll link it in the YouTube description below um but yeah this is again speaks to my

point last week where I said that a lot of its value I believe comes from under the surface stuff such as ethereum's decentralization credible neutrality resiliency security as a network and if we want to preserve those properties we have to ensure that the uh that the um the backbone of ethereum security uh the beacon chain and the and the stakers are as decentralized and distributed and and incredible as possible you know we want to maximize the amount of solar steak is we have we want to maximize the amount of decentralized stakers staking pool participants we have we want to make sure that no single entity has more than I believe the threshold was 22 market share um and you know I was thinking about

this today as well with regards to Lido's market share obviously it's around what 32 33 right now I think once the queue clears it's going to be a bit higher than that but I think that because of the Dynamics of lsds and how they generally work and because of the Dynamics of the beacon chain obviously the validator execute and entry queue I think that if we're going to eat into market share from Lido and I've said this before on the refuel but it's going to come from people staking with other services so sticking with obviously rocker pool and other other lsds the newer lsds like swell and obviously stakewise V3 and stuff like that rather than people exiting validators from later itself and the fun thing is that people can actually sell their steth and buy our eth right and then more demand

for R8 means that there's going to be more demand spin up mini pools so it does translate in into more valid editors being spun up and then if there's a discount on St then it's deep enough for an Arbitrage opportunity then what people will do is that they'll withdraw from the beacon chain and they will essentially ARB that that spread there so it kind of works slowly but it does work and that was just something that I was thinking about today in particular but anyway you can go give rockapols a Twitter thread a read I'll link it in the YouTube description below all right Dono here from the l2beat research team has put together a thread where it started off by saying the l2b risk framework is undergoing some updates beginning with the second sequence of failure assessment and

they've said we've identified four categories of interaction with the sequencing mechanism uh the first is self sequence this mechanism bypasses permission sequences entirely allowing anyone to autonomously push transactions on L2 this is true for arbitrine one where you can push transactions on L1 through the delayed inbox uh contract and eventually move them to the main inbox as techconnect Aztec and fuel V1 also forced to fall into this category and then they've got a bunch of other categories the second category is force via L1 and the next is the NQ via L1 and lastly is a no mechanism so they're basically showing you on the l2beat website what kind of mechanisms exist for you to get your funds out of these l2s in a worst case scenario such as the L2 basically rugging I guess or the L2

going offline and not being able to come back online stuff like that this is what this is trying to to show you so you can go check this out I'll link this thread in the YouTube description below all right so I mentioned yesterday that optimism Bedrock is going live on mainnet today uh so June 6th uh it's 4 P.M UTC uh here I don't know what the current UTC time is maybe I'll Google it quickly just to see if it's going to be happening soon so the current UTC time okay tell me it's 5 p.m but what date 6th of June sorry uh it's 12 52 p.m uh timer recording 6th of June so this is happening in the next few hours it may have already happened by the time uh you watch the refuel but there will be a bit of downtime here I think there's like a

couple of hours of downtime uh on on mainnet here uh but yeah exciting day for the optimism Network this is a huge upgrade for them it's obviously been a long time coming it's as big as an upgrade as uh Nitro was for arbitrim and I can't wait to see how you know what the fees end up being how people uh start building apps on on optimism upgrading their apps to take advantage of it off of it and uh people using the op stack are also going to be able to benefit from this as well so you can go check out this post and this thread from optimism I'll link it in the YouTube description below all right last up here we have immutable introducing their immutable product roadmap so they say here amidable is committed to transparency and building

in public our product roadmap will be updated monthly to provide Insight on our long-term vision and what the immutable product team is prioritizing so you can see here that this is basically the product bro map in a nutshell so you have obviously ethereum at the bottom here you have two layer layer twos immutable X and immutable ZK evm which is powered by polygon and the middle X is powered by stockware and then you have the immutable Suite of products such as their passport product uh gaming sdks uh nft trading and so on and so forth and then there's more details about this as you scroll down here so great to see immutable continuing to build throughout the bear Market they're in a tough market right now I think because they're not only in a bear Market but they're building for nft and crypto gaming which is which is

is in its own bear market right now I think so kudos to them obviously for continuing to build through here and they've been building for a very long time actually for those of you who remember their first game Gods Unchained that came out last bear Market um and since then they've just continued to build that game out they've onboarded other games they're building obviously their their L2 platforms they were actually very early to l2s as well so continuing to innovate continuing to build no matter what the market is doing so kudos to them but you can check out their roadmap oh their product roadmap for yourself I'll link it in the YouTube description uh below now I have a few minutes left here in today's episode I did want to continue the conversation about the regulatory stuff for a little bit I know I talked about it a lot at

the start but I think I want to change gears a little bit from the SEC and look at the regulatory regime uh uh for the rest of the world so the US I think is in a unique position this isn't a good position to be in but in a unique position where it's taking a very hard-line stance against crypto whereas pretty much everywhere else in the world that is I guess economically relevant to crypto where there is active crypto communities and active crypto buyers such as Europe such as uh Asia you know in other parts of the world of course like uh like Africa and India as well but I think India is still pretty hostile to crypto from the last time I checked but they're getting better but

there's other places especially Europe and and uh and particular Asia and even China now like Hong Kong they're actually embracing crypto in a really big way Europe recently passed or the EU I should say recently passed the uh that new legislation uh Micah I believe it's called Uh which provided clear guidance on crypto uh so same with Hong Kong and they're actually going to be starting crypto trading again for a select for a select bunch of assets which funny enough the assets that they're trading look very similar to the ass assets that the sac listed Securities in their binance and coinbase Suits but maybe that's just a coincidence I don't know uh but yeah it's just kind of funny to see the the juxtaposition between the two the um the various different

jurisdictions around the world and it really does seem insane to me that one person so Gary goes out the SEC and maybe some others at the SEC but Gary Ganzo is obviously in charge there and a few of the top ranking Democrats like Elizabeth Warren who says that crypto is basically the devil like um uh I guess uh if you I don't know all the names on top of my head but if you you know you know which ones I'm talking about the high ranking ranking Democrats out there uh Brad Sherman I believe as well really hates crypto but I think he's just really corrupt from what I've seen generally so I don't know if he hates crypto or just hates America America generally um uh but you know looking at that and and looking at uh their stances on it and how really a small group of people

can dictate what happens with an entire industry just screams to me that there is a broken system there and it really gives the opportunity for other jurisdictions around the world to seize it and to take market share away from the US and I think the US is blowing it in a really really big way here and if they keep stonewalling if they keep down this path as I've said before they're going to lose and they're going to lose big can you imagine the next bull market rolling around and the us not being the premier place for Capital to flow through and all the a lot of the exchanges are based offshore none of the revenue is being seen by the us they miss out on all this tax revenue they miss out on all this economic activity all this business activity no one's starting businesses in the US anymore

they're all studying them overseas that that's just that's really bad guys I think it's a really bad outcome for not only the us but also for the American people like I feel sorry for the American people a lot of them uh don't want this I mean I would say most of them don't pretty much anyone in crypto doesn't want this no one is asking Gary Gensler the SEC or any of these bodies to protect them no one wants this protection no one's even asking for it after all the blobs we saw last year we want uh to be left alone basically we do want better uh uh obviously better Protections in place for centralized actors like centralized exchanges we do want Clarity on things so that teams can actually build this stuff but mostly we just want to be left alone to to do our

own thing and if you're going to go after anyone go after the actual [ __ ] scammers stop going after the legit players how many scammers in crypto have just completely gotten away with everything and never been charged with anything because it's not in the sec's interest to do that because it doesn't give them headlines right it only gives them headlines if it's a celebrity but how many scammers grifters rug pulls have we seen in crypto and these people just got away with it nothing happened to them it's [ __ ] ridiculous like this is the angry part that I was talking about earlier it's absolutely ridiculous and it really really pisses me off that this is going on but and the fact that they can stand there and and go on video and and and kind of give testimony and say that they're committed

to protecting investors and they're doing this to protect investors is the biggest load of [ __ ] [ __ ] I've ever heard it is beyond uh uh uh logic right is beyond reasonable it doesn't make any sense and I think they know that but I think they just don't give a [ __ ] so when you have Regulators like this when you have hostile politicians like this something's got to give and you know what what's what's going to give if the US doesn't become friendlier crypto just leaves the US crypto is not going away it's not going to die you're not going to kill it by doing this stuff what you're going to do is you're going to push it away from the US and it's going to be adopted by other countries other jurisdictions and people are just going to to use it because they want to they

want to invest in it they want to use the products they get value out of it so stop stop trying to mess with it and embrace it all you have to do is provide guidance do your [ __ ] job that's all you have to do instead of doing this right instead of being like uh self-serving and being an unelected bureaucrat who knows that you can't get fired and people can't vote you out and the only way that you get uh you get uh removed from your position is you if you get promoted or as if the regime changes and you get kicked out but again you're probably just gonna get promoted anyway whether that's in the public sector or you go work for some investment back on some Bank on some cushy salary you know that's that's the end game there for a lot of this this stuff and this is again

why I absolutely hate politics I hate all that [ __ ] because there's so much self-serving going on there there's so many games being played it doesn't help anyone a lot of the times uh it's basically just all I mean most of the time it's really just self-serving um not to say that all government is bad and I'm not trying to say that like I I'll try to be a hardcore libertarian here or anything like that I don't think all government is bad but I think when it comes to our industry and crypto and uh all the the stuff that they've been doing they haven't played nice with us at all they haven't tried to how to to protect investors and they're really just gaslighting us at the end of the day but anyway I'm gonna end my rant there for today I hope you enjoyed that

little rant but that's going to be it so thank you 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