CFTC calls ETH a commodity, Layer 2 growth and more - The Daily Gwei Refuel #507 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily gray refuel where I cut the latest news in ethereum ecosystem I'm your host Anthony sassano and today's the 14th of December 2022. alright everyone let's get into it so we saw some new charges be brought against uh SPF from their cftc uh after I put out yesterday's refuel but I don't want to talk about the charger specifically I think at this point we've all seen the threads we've all seen the information about it we know that he's pretty much gonna go to jail for a very long time I found guilty here which I mean shouldn't be too hard to prove right but there was a part of the cftc uh document that actually specifically calls Eve a quote-unquote digital commodity alongside uh Bitcoin tether and others now of course tether is a weird uh I

guess addition there considering that tether is a currency but there are arguments to be made and there were some people kind of making arguments in the replies about how tether it can be considered a commodity um and currencies can be considered Commodities as well and then the and others kind of category here we don't know what they mean by another others and obviously they've just said and others as a as a way to just put that in there without specifically naming anything but this is funny because I was talking about the other day about how like there's a lot of fud around each being level to security and how it looks like a security and acts like a security when in reality it acts and looks much more like a commodity money uh right you know athes used his money within the ethereum economy it's used as a as a

commodity within the ethereum network to pay for gas right uh there is no Central uh body that manages ethereum ethereum is decentralized so that means there's no central body that manages eth um and and people always make up the silliest argument so I'd say oh Vitality controls the chain or consensus controls the chain or the ethereum foundation controls it when we know the reality of the of the matter is that no one controls ethereum ethereum it has a decentralized governance process to get any changes into the network and there's been countless examples of things that haven't happened in ethereum even though people wanted them to happen just because it needed to go through the governance process they can't just be a unilateral thing that happens on the network and one example that I always go back to with regarding that topic is EIP

triple nine now for those of you who haven't been around for that long you won't know what Erp triple 9 is but basically a bit of a bit of context around this so in 2017 18 there were two bugs with the multi-sig uh smart contract created by parody Now parody had um being in the ethereum ecosystem for quite a while they're a separate company to the ethereum foundation and consensus and they were building the parody ethereum client and they also had this popular multi-sig now the first bug happened it wasn't that bad there was a white hat operation that happened and then it was all good and people kept using the the uh the multi-sig but then the second bug happened and basically Froze all the funds in that multi-sig and of course uh after that happened the multisig was shut down but there was an

EIP that was submitted called EIP triple nine to basically rescue those funds now the reason why the funds got frozen is because there was a library on chain that essentially got deleted um it's actually pretty Infamous in the community in the ethereum Community someone went on GitHub and said oops I accidentally deleted it um but that that's a bit of a meme around it but it was a lot of eight there was hundreds of thousands of of eight I believe maybe it was a half a million eighth if I remember correctly and that's still stuck to this day but there was this Erp that someone came up with as a recovery Erp I think it was a quart of album that came up with this as well from parody uh afri who's still around today does a lot of work on test Nets um but yeah that AIP came along and they

were like you know why didn't we just do this because we can see you know where the funds are we can see what we have to do to fix this and to give people their funds back uh let's just do this and then obviously it didn't go through but the whole reason why it didn't go through was because while it's a slippery slope right like if we do fun recovery for this what's to say we can't do fun recovery for other things in the future other exploits and other hacks so it was decided by the community that we wouldn't do it and it was never even on the table to begin with it was just an I mean anyone could submit erps for anything but it wasn't being seriously considered at all and I think that just shows and this was back like in I think

2018 right like quite a while ago now um but I think that just shows that ethereum really is is is is very decentralized there is even even for uh things that happen um and or a bit of context that I didn't add here is that parodies company was co-founded by Gavin wood who's a co-founder of ethereum obviously working on polka dot now but we didn't do anything even though that was you know obviously going to benefit Gavin wood who's a co-founder of ethereum so not even a co-founder of ethereum has has power over the network and I don't even believe that if the EIP came from vitalik it would have had any diff it would have made any difference at all people would have been like you know this doesn't make sense for all the reasons I just outlined so we're not going to do it so yeah as I said like

none of the arguments that ether's security makes any sense to me um I firmly do believe if there's a commodity money and the cftc has reiterated their stance here saying that Eve isn't that they're calling eth a digital commodity now the problem with statements like this is that they're not binding right they're not legally binding the SEC can come out and say well we think either the security and the cfdc can say okay well we think either is digital commodity but I mean it they're both I guess like playing their hand here vying for I guess regulatory control over eth in at least in the US now I'm not familiar with the entire process here but eventually one of these bodies gets control given to them I don't know how that works specifically but that's what they're doing now they're vying for

control here obviously I would like to see the cftc be the one that is that handles regulation of eth in the US because that means that the that um Ethan would be considered a commodity and not a security but until the US puts in place a proper crypto regulatory framework we're going to keep having those quick these question marks pop up in saying that I don't think Eve is going to be officially labeled a security I just I put a pretty much zero percent chance on that obviously anything is possible but I personally put a zero percent chance on that and as I said the arguments make much more sense for Eve to be a digital uh commodity money rather than a security all right moving on to a slew of layer 2 updates from today so first off we start with

eip4844 and the latest implementer call notes from Terence uh who's at prylabs here so uh basically he put together a little thread here about what was discussed on the call it's not too long I just wanted to hire this for you guys to go check out obviously work continues on 4844 even though it's not going to be in the Shanghai update and uh the latest implementers call a summarized here by Terence for you uh now moving on to the layer twos themselves so we have two charts here that I want to focus on one of them comes from Michael uh sibling who works at optimism showing that optimism achieved an all-time high in Daily transactions uh today basically and you can see here on the chart that it's over half a million transactions on the day there and as I've been saying uh

layer 2's continue to grow in this bear Market you can see on this chart I mean the hilarious thing about this is that the growth since the bottom or since since 8th bottom in June at 880 has just been up only really I mean it just keeps going right and the the bear Mark I mean it's grown more in the bear Market by far than it than it grew in the bull market but that's and that's simply because I think the return to quality of the ecosystems building themselves out obviously it's how longer to bake because I mean for the for the most of the bull market optimism or for at least a partial part of it optimism wasn't really live in a public capacity but now that it is we're seeing this happen here now a related chart was one here posted by uh M hokkala so uh Salo on Twitter

showing the daily transactions on both arbitrim and optimism are very close to flipping ethereum L1 right now you can see in the chart here what this looks like now I've discussed before how ethereum L1 is obviously limited by a hard gas limit that it has on the network that uh kind of uh I guess like governs how many transactions can be included in the network per day and it depending on the transaction types I mean there's a theoretical limit of the transactions that can be included but normally at Hobbs between a million and 1.5 million a debt per day just depending on what types of transactions depending on the um I guess like the the market action well as you can see here uh arbitrary optimism which can handle more transactions per day are almost up

to flipping ethereum here and then once they flip ethereum they're going to keep going I don't know exactly how many uh bitumen optimism together can handle per day uh but that can definitely handle more than ethereum and then obviously what happens when they reach their limit is the same thing that happens on ethereum where the fees start going up and that's really the only way to do congestion control um on a blockchain I don't think you should like I really don't agree with doing things like dropping transactions or doing kind of I guess um quality of service on blockchains I I more like I'm also agree with doing uh the control around uh around fees right and making it so that if once you reach the limit the fees control the the demand rather than doing some quality of service I guess like load balancing stuff which

lends itself to potential censorship vectors there but I guess that's an orthogonal discussion to to this in particular but I mean yeah we can see that these layer twos continue to grow in this bear Market which I think is extremely positive now one thing I did want to say about these things is that something that's been I've been seeing a lot more people talk about on Twitter lately and I'm kind of glad they are is that I and I've mentioned this on the reef for plenty of times but basically both arbitrary and optimism right now are very very centralized and I would actually argue that they're more centralized than uh most of or at least some of the alt L ones out there now this is of course because they're in their beta training wheel stages uh they either don't have fraud proofs enabled or they don't have permissionless fraud

proofs enabled they have multi-sig uh upgrade Keys you know they can just upgrade the network to do whatever their bridges are behind the multi-sig of course uh and and obviously that is it can be used for nefarious purposes not that it would be not that I think it would be but it could be right so it's always good to keep that in mind I mean personally that's a big reason why I haven't actually put a lot of of my funds on these things I could definitely play around with them I do you know a healthy amount of activity on these networks but majority of my funds are still on ethereum layer one of course most of my eighth is in staking but other any other things I just prefer to keep them on layer one and obviously it's easy to do that easier to do that

when fees are low uh you know I I it's funny I always talk about fees on on layer one how they're obviously very volatile and depending on how much money you have you don't care about them but like uh generally like even for me I don't want to be paying 100 fee if I don't have to like it doesn't matter how much money people have or how much someone has I'd rather not be burning more Ethan I have to so to speak I know that obviously it literally does get burned but I'd rather keep keep the eighth right so I think right now it's just easier to be on on layer one um that you know and it's surprising to see the layer twos grow so much considering that layer one fees are kind of low here but I think that layer two's it's not just the fees it's also the the

speed of the transactions the ecosystems that they're developing which just aren't available on layer one a lot of these apps it's also the um the potential to be early things of course and on top of that it's it's got to do with I think once you've bridged over you don't really want to go back to layer one you don't want to go back to slow more expensive transactions right so you stay on Layer Two uh and and kind of enjoy what's on there especially if you can do everything that you could do on layer one anyway and no one wants to be spending you know a crap ton on fees and giving up all their their hard-earned eth uh to do that right but uh yeah cool to see the growth here uh and uh thank you to Michael and uh I I think this his name is Michael as well

uh he have fought for sharing this all right so our slingshots announced today that one year after launching on arbitrim a slingshot has become the largest Dex aggregator by retail market share and you can check out their growth Journey on arbitrim in their latest blog post so this still comes with uh sorry sticks with the theme of arbitrim and layer 2 is generally growing here and you can see slingshot's growth uh uh uh as a DEX aggregator on arbitrim and you can also see a bunch of nicer charts through these blog posts as well I think the charts are on the Twitter thread too yeah you can see the number of active vaults using slingshot on arbitrim was only uh I believe 7000 or 700 No 7 000 in November of 2021 now it's at uh no no it was it wasn't 7000 or 700 I don't

know why they wrote uh 0.7 K like that at 700 wallets now it's 56 000 wallets which is an 80 times growth in one year uh and these are active volts as well they're not just wallets that touch once and that's it and this is a total of 126 000 while it's swapped 264 million dollars on arbitrim on slingshot so very cool to see a this growth on slingshot as you guys know I am an investor in them so of course I'm going to disclose that there but I think as I said it speaks to the growth that we're seeing on the layer 2 side especially on arbitrim and optimism all right shifting gears here a little bit but staying on the layer 2 theme we have a blog post from scroll today talking about zero knowledge proofs and how they have a big bottleneck which is

proof generation which is slow and expensive so why is proof generation slow as expensive and expensive can it be accelerated and you can learn all about proof generation in their new technical blog post here so as as they said it is technical it's actually very technical I mean if you don't know what these things are in front of me these kind of like mathematical equations here then the blog post is probably going to be gibberish to you 100 gibberish to me I can't read this and make sense of it myself I I was so bad at math that's cool that's for sure but if you are into this stuff and you are a technical person I highly recommend giving this um giving this kind of blog post to read to be able to get a grip on these sorts of things and I've talked about I guess

like proof generation times before and how it's slow and expensive right now on zks and that's why zk's um uh are kind of like um well I guess like depending on what you do with ZK Tech can be more expensive at more slow and expensive than even layer one especially when you start doing privacy stuff but in saying that these costs are going to come down over time there are companies working on Specialized Hardware as I've talked about before like ingonyama um that are working on Specialized Hardware to get these costs down and it's not just Hardware it's a lot of the software improvements that are coming down the pipeline as well there is a huge vested interest from all these ZK teams to get these proof generation uh down as much as possible and in saying that you know people will sometimes ask you know what's to say that they're

actually going to get this proof generation costs down like uh you know why hasn't been why hasn't it been brought down uh you know already well it's because people knew about ZK stuff for for decades right like zero knowledge proofs is not something new but it's always been in a theoretical realm it hasn't really had a practical application well obviously with blockchains with with um ZK tech for layer twos and Beyond it has a lot of practical applications so now there is a reason to bring these costs down there is a reason to work on this sorts of stuff and there is a ton of money billions of dollars at this point right um going into this this stuff across everything a software Hardware um ecosystem development Community stuff which all kind of culminates in making

it better making this technology better so yeah anyway you can go give this blog post a read here from scroll I'll link it in the YouTube description below all right so a final finally up here on the lead uh litay Layer Two topic here we have consensus announcing the private Beta release of the ZK evm testnet which is available on infuro here so I've talked about consensus doing their own ZK AVM before but this kind of came out of nowhere it's funny it can send us a few months ago it's actually quite a while ago now uh and I believe I covered it on the refuel they launched something called Palm which was a side chain or an evm sidechain for nfts and I think I discussed it when I talked about it originally that I didn't understand why

they did this I mean a evm sidechain in the era of layer twos does it in you know in 2022 doesn't really make sense especially something specialized for nfts when we already have like layer twos that are doing that like immutable X so I thought that was weird and it doesn't seem like uh that that Palm side chain has really gone anywhere so it's really great to see that that consensus is actually bringing out a ZK VM because they must see the writing on the wall they must see that layer twos are the future right I mean I hope they do consider that they're such a big part of the ethereum ecosystem and they actually uh developing uh towards that with their own ZK AVM which has now entered private uh beta in the private beta test net so if you go to this blog post as a form on

the right hand side here that you can fill out uh which you can do so I'll link it in the YouTube description below but I very much love to see that uh consensus such a big organization is throwing their weight behind ZK evm I mean it's just another signal that ZK VM is the future and I've talked about why a million times before but I think if you're betting on the layer 2 future you're pretty much like all in on evm right now not just EK VM but just evm in general at Layer Two uh and then taking that a step further you're definitely all in on the ZK VM Vision as well and there's different types of ZK AVM I believe there's three or four types of them that I've discussed before and different projects are tackling different types I mean typos tackling uh

type one I believe scroll is tackling type two type three I think polygon is tackling I might be wrong there it's kind of hard to keep track of it all I'm not sure what type consensus he's tackling but obviously they would fit into one of those categories there uh but we're coming at it from all sides it was thought zkvm was fire you know five years away just just a year ago well it seems like it's not even you know I guess like a year away at this point it's me a month away so very cool to see a consensus getting into the uh the game here all right moving on to other updates from today so party Dow introduced the all-new party bid today which is an which is which they're calling an on-chain multiplayer for nfts parties

can now do anything together as a group coordinated on chain and it's now live at partybid.app so what does this new party be it be do well it brings multiplayer functionality to the entire ecosystem of nfts so you can buy or crowdfund to buy an nft as a group you can take actions together on chain to own and use these nfts and you can of course sell the nfts on popular marketplaces as well so basically it's a way for groups of any size to come together with a shared goal as they say here in order to do something on chain specifically with nft CR which I think is very very cool because I remember this was uh being done to purchase I can't remember if it was a crypto punk I think it was a crypto Park people would

purchase it and then and then it would get split up amongst them and they had their own tokens that would be able to have a claim on that I remember covering covering this on the refill and think it was really cool well now with this new party bid you can basically do this for anything I don't believe uh yeah sorry for any nft uh basically and you can do it uh any and you can do it as a group or you know as a large group or a small group so very very cool to see this and this thread has more information about what the exactly this is and how this all works here and a few parties that have already been started so if you're interested in that sort of stuff definitely go check this out I'll link it in the YouTube description below

all right so something I missed yesterday was a small update from fire here they now have ens resolution live in the app this was something that was bugging me for a little while I I I was using fire and I was like okay well I'd like to be able to see the enses because I feel like if you're trying to show what a transaction does it makes sense to show the ens instead of the full ethereum address because obviously the ens is much easier to read right than the full ethereum address and obviously uh much easier to verify as well and you can do your extra verification I'm pretty I haven't tested it out myself but I'm pretty sure you can hover over it and it'll show you the full ethereum address too so having both of those things there is obviously very important um but yeah just generally I as I said I

have been using fire lately uh it's quite good I think I think I mentioned this before but basically there are things that that fire does uh that a little bit annoying at times where it'll keep coming up with something I keep coming up with uh I guess a pop-up for transactions that I do frequently such as unisop trades which I get why it does that but still I wish I could like have an option to mute things for a certain period of time and also sometimes it doesn't automatically close after I submit the transaction using the metamask UI which is a bit annoying but those are just things that can get ironed out obviously fire right now is in very early stages so I'm just nitpicking there but it's a very great tool I enjoy using it I feel safer using it to be honest and then um then you

know and then otherwise because I can actually see what's happening uh so yeah very cool to say that this small update came out from today which is ens resolution I mean they're calling it a small update but I think it's a pretty big deal uh at least personally but yeah you can go check out fire for yourself I'll link this in the YouTube description below if you haven't yet all right finally here I know I'm short on today's episode but I've got something else I want to talk about after I I mentioned this uh but finally I announced yesterday on Twitter that I got my flights and accommodation booked for 8th Denver 2023 which is happening in early March and I asked who's going to be there this is my first East Denver since early 2020 so it's going to have been three years since I um since I've

gone to an eight Denver yeah obviously because of covid I think it's my first it is my first time in the US since then as well uh and I'm so looking forward to it I'm gonna be there from Feb 27th to March 8th I think it is when I fly back home um and I'm currently planning I haven't I booked it in yet but I am planning and I'm I'm getting someone to help me with this a daily gray meet up at a bar near the venue um hope probably before the conference starts so the main conference days are like the Friday Saturday Sunday I believe so it'll be on the Tuesday Wednesday or Thursday night and we'll probably have capacity for about 100 people but I'll let you guys know more details about that once we confirm it but yeah I'm just so excited I'm so

excited to see as many of you as possible there I know there's a lot of you in the us that watch the show so probably you know it's more likely you're going to be at East Denver then maybe another conference that is further away uh it's going to be at a new venue as I've mentioned before uh that's much much bigger than the venues uh the venue that was um that was done in previous East Denver's and I think it's going to be huge honestly I mean I went to the east Denver in Feb 2020 when it was like deep bear Market this was pre-defy summer this was pre you know uh covid a print money printing this was pretty stupid bull market this was like the basically it was the end of the bear at that point I think right even though that a month later the covert crash

happened it was the end of the bear but in saying that the place was packed there was so many hackers everywhere I judged the hackathon there were so many people everywhere it was crazy I mean the venue felt like it was over capacity at that point in time and then two years later obviously the the um the aea was done again and they had three venues this time uh the Sports Castle which is the main venue was just like absolutely overloaded and of course because that was still the I guess Feb 2022 I mean it wasn't the bull market it was like the end of the bull market but still I think that there are so many people still around there are so many people that go to the east Denver that is going to be such a packed event so I'm very much looking forward to seeing

uh people there if you're going to be there let me know on the Discord Channel as I said I'll let you know guys know more details once I confirm about that daily Meetup I want to try and get as many of you there as possible it will be free to attend but the drinks you'll have to pay for yourself because just renting out the space is not cheap I'm not going to pay for drinks for everyone but uh but yeah I mean it's just to meet up to to shoot this and meet as many of you as possible all right so I got a few minutes left here I'm gonna talk about the markets for for a sec I don't do this often as you guys know but when I think it's relevant I talk about it so basically we saw the latest I guess inflation numbers come out of the

us yesterday and out of the UK today but I'm gonna I'm just gonna focus on the US so the US numbers uh basically following the trend that they've been following for the last 40 five months that shows that core inflation has peaked now I've talked about this before and about its effect on the market and how I think that the crypto Market basically has front run this by like at least six months because I mean bottomed in June I know Bitcoin set a new bottom after the f-tex collapse but Heath bottomed in June uh and I'm just going off ather uh and Bitcoin didn't really set like too much of a of a of a harsh bottom from where it was before so where its previous bottom was so generally I would consider that capitulation event in June to be the bottom at least at this point

in time so that's about six months ago uh now right and then we saw that inflation went really high uh above nine percent I believe core inflation and then since then it's been coming down and if you adjust for an annualized inflation rate it seems like it's even below the target of two percent and of course rates have gone up in that time as well and people people are like okay when's the FED gonna pivot um you know when the rate's gonna stop going up when are they going to come back down again all these sorts of stuff and you guys know that I don't really focus on the macro environment too much much like it's not something I really care to focus on I mean there's so many no so much out there just kind of hard to sift through and it's not something that I really care to use my

mental Cycles on but the reason I bring it up is because there is the trend of inflation going down signs point to it being less because of monetary inflation subsiding and more supply chain inflation supply chain related inflation subsiding because obviously uh because the the covert stuff has has diminished or gone away completely for most of the world uh the supply side is coming back and there's more more supplies trickling in the more demand and there's so many other factors that I could go into but as I said like I was getting to the point here the reason I bring it up is because of its effect on the markets and we saw a little it wasn't even a big pump we saw like a little pump on Ethan Bitcoin once these numbers were announced I it's

worth reiterating these are short really short-term medium-term movements guys it doesn't really mean anything it doesn't mean that the bull Market's back on for crypto doesn't mean that you know next necessarily the next year is going to be an amazing year it doesn't mean that uh yeah if he's gonna go back to all-time high anytime soon or anything like that but I think what people need to be very aware of is that there are people right now on Twitter pushing something called an echo bubble now what they mean by this is that they think that we're going to have like a mini bubble that Echoes parts of the last bull market and the reason that they're saying this is because of 2019 because in 2019 you can go look at what happened to BTC and eth they had I guess you could call it an

echo bubble where they both pumped uh and Heath basically came back down and retraced his entire pump but BTC ended the year are basically at two times what it was so if we get the same thing next year right you would expect eth to settle around 2500 say if it doesn't retrace his pump and follows what Bitcoin did in 2019 and then I don't know what with Bitcoin honestly I don't even pay attention to bitcoin that much but I'm just talking about ethia but in saying that the people pushing this Echo bubble narrative they're looking for a exit liquidity if they're big players they actually need to much more exit liquidity than they have in the past because uh volumes and liquidity is generally down and they're not going to hold these positions they're not long-term investors they are short-term

medium-term Traders so I just want to caution you guys against falling for the other side of the narrative which is the bull narrative right which is getting caught up in the bull narrative thinking that everything's awesome you know even if it goes back to above 2K there's there's that doesn't signal a start of a new bull market or anything like that I've said to you guys before that uh I would tell you when I felt like the new bull market was was happening and I feel I I and I'm gonna just wait till like pretty much the last minute until I say that but I don't think he's going to 2K 2.5 k is is something that people should be like oh wow oh my God the bull Market's back you know we're going back to all-time high awesome and then you know know throw all your money at it and

blow yourselves up just be very very careful generally of narratives that are going to perpetuate because I already see some see a lot of this happening next year inflation subsiding it's a new year people calling for these Echo bubble we're you know Season seasonally if you look at the chart the beginning of the year is actually very good for crypto generally like I wouldn't say 100 of the time it happens like that but like most of the time it happens like that so I just caution against falling into these narrative traps as I always do not to say I'm not bullish long term of course I am but narrative traps in Bull markets okay sorry in Bear markets can trap it can um Can wreck you as much as they can wreck you in Bull markets as well so just keep that in mind uh I and and

hopefully you'll be okay as I mean the number one rule as always is that survive in these markets whether it's bull or Bear Just invest for the long term in I mean I'm not going to tell you what to invest in of course it's up to you but investing for the long term in my experience has been uh you know a much better strategy than short-term staff but in saying that not everything you invest in is going to pay off so you have to understand that as well but anyway none of that of course is investment advice it's just me kind of looking back at my experience with these things trying to share some of my wisdom with you guys and you can listen to me or tell me I'm full of I don't really care right but I do want to just put that out there for anyone who wants

to take that on board but on that note that's going to be it for today so thank everyone for listening and watching be sure to subscribe to the channel if you haven't yet give that video a thumbs up subscribe to newsletter join the Discord Channel and I'll catch you all tomorrow thanks everyone