Crypto regulations, Eth2 client diversity and more - The Daily Gwei Refuel #214 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daily grey refuel where recap the latest news the ethereum ecosystem i'm your host anthony sosano and today's the 22nd of september 2021 all right everyone let's get into it so a bit of regulation news overnight uh there was a kind of meeting with i can't remember who it was who it was with um but gary gensler the sac chairman was meeting with someone else i think in washington or some group of people talking about crypto regulations doing kind of like a live stream around it and he mostly reiterated a lot of the points that he'd already gone through such as he expects more regulation to come from the sec he expects companies to fall in line he he expects to put like a whole framework around crypto and regulate it from that framework so

definitely not being shy about the fact that more regulation is coming but then you know while i was kind of like i wasn't watching this because i was in bed but i was kind of lying there scrolling through twitter seeing all the quotes and stuff like that of what he was saying and i kind of thought to myself well ethereum has been built to withstand gary gensler's and not just him but like all the regulators around the world um so let's just keep building right let's keep building these better systems let's keep building systems that are more decentralized than what they are today i'm not just talking about the smart contracts or anything like that i'm talking about decentralizing the entire stack so things like the team right let's make sure the team's distributed let's make sure it's very hard to prosecute all the team at once

so there's no central points of failure within the team let's make sure that the supporting infrastructure is decentralized let's not just rely on centralized providers like infuria and alchemy and things like that they're good don't get me wrong but let's kind of like um try to decentralize that out uh uh obviously like the smart contracts right you want we want to decentralize that as well um and the front ends too is a very important point too so we just need to keep doing that because you know we can fight them in their own home turf like we can bribe politicians uh sorry sorry lobby politicians uh with with kind of money there to get them on side we can call our representatives not my representatives but people in the u.s can call the representatives stuff like that we can try to educate them whatever but

really when we when we when we're doing that we're fighting them in their arena and this is not something that we shouldn't be doing we should definitely be doing that but i think that the better use of a lot of our time is just building better more decentralized systems so that you know in the worst case if these regulators come after the apps and things like that they can really only choke the centralized kind of points of failure and i've spoken about this before but the two largest centralized points of failure within the crypto ecosystem right now are the centralized exchanges and the stable coins so it's very very hard to decentralize the main function of a centralized exchange which is uh being a fiat on an off-ramp there's been attempts at this such as local bitcoins but they actually ended

up having to implement kyc so if you wanted to do a truly decentralized kind of like uh um i guess peer-to-peer trading of or of pitopia on and off-ramps it'd be very hard and it'd also be probably right with rifle scamming i just don't see it as something that we're gonna be able to do in the anytime soon um there are limited ways that we can do it there are some ways around it but i don't see us doing it in a scalable way for for quite a while now when it comes to stable coins obviously the ecosystem is very reliant on things like usdc usdt and some other centralized stable coins like busd and they're not necessarily bad they're actually good they do what they're supposed to do um from that perspective but they're not decentralized so they're very very easy for regulators to target

so there are plenty of projects working on decentralized stable coins i've mentioned them on the refill before i'm not going to go through the whole list again and they're trying to achieve that holy grail that i've spoken about before which is being a scalable stable and decentralized stable coin um lots of experiments running in parallel there i think we're going to have a much easier time doing you know decentralizing this at creating a truly decentralized stable coin then we are uh trying to create decentralized fiat on and off ramps it's just it's just not going to work out there but in saying that the exchanges especially the ones based in the us such as coinbase gemini kraken they're going to be fighting any kind of like really stiff regulations uh such as you know for example what if the sec or any other kind of regulator in the us

says well uh coinbase you can't let uh you can't allow users to withdraw their kind of like funds to their own wallet anymore they have to kind of uh or if you want to do that they have to kind of like go through all these hoops and and like verify their address and everything like that and tie their identity to it and stuff like that so there's that aspect to it um but you know in that kind of world and that's like the kind of like worst case world where they choke all those points uh we need to make sure that they can't choke the actual uh you know layer ones layer twos defy apps supporting infrastructure all that sort of stuff we need to decentralize all of that as much as possible and i think you know the lowest hanging fruit for uh the the apps

themselves is probably the front ends i would say uh the front ends we've seen you know uni swap labs made a move where they actually censored some tokens on their their own centralized front end uh so i think they're gonna go after those sorts of things but it's very very very easy for anyone to spin a front end up for for these kind of like apps as long as the smart contracts are decentralized and you can't have i guess like censorship on the smart contract level and you can't have i kind of like centralized controls there and things like that but setting up a front end that kind of like i mean there's plenty of front ends there's one project that i really like called liquidy that's actually been doing this um where they basically encouraged people to run their own front ends or build their own finance they didn't

actually offer an official one so they just offered the smart contracts and then they have links to all the other ones out there right now so we need more of that much more of that and you know it's not good enough for us to just be relying on the quote-unquote official front ends for a lot of these things i know it's easier i know they're really nice but we need to kind of like decentralize and distribute that out from from that perspective of course um and you know and then i said today you know i've been speaking to a fair few teams lately and many of the us-based crypto teams that i know are now bringing forward their plans to decentralize because of gensler's comments and by this i mean that they may be centralized today or they may be kind of like an early stage where essentially they've

started as a centralized company they're building something but they've brought forward their plans to issue a token and become a dao because of all these you know genzo's comments and the sec's kind of like attitude towards crypto in general over the last few weeks and months so that's actually a pretty good byproduct of this it means that teams are going to decentralize faster at least from that perspective but as i said we still need to decentralize across the entire stack it can't just be you know create a dial put a token on it do token holder voting and throw our arms up in the air and you know it's a job well done it's not going to work we need to do everything across the entire stack and i'm hoping to see more teams take that on board and more teams are kind of like focus on that

all right uh so argent uh i got a few a later two updates actually today for you guys so this is exciting but uh arjun put out a little blog post here explaining what is zk sync so for those who remember i've talked about arjun and their layer 2 plans before they're actually going to be working with zk sync first and adding others later but in this kind of like short blog post here they're describing what zk sync is what the benefits are you know how does it all work what's a roll up and then links to further resources so i just wanted to highlight this because i thought it was a great pose so definitely go check this out it'll be linked in the youtube description uh bartek is back here with another one of his great threads about layer twos and this one's about how censorship

resistance with regards to late layer two so in this thread bartek explains how important it is and you know how different applications or different l2s uh can essentially uh censor individual users but also how users can prevent that not prevent this some censorship from happening but basically exit the system once they do once it does happen or you know if they kind of experience it happening at that kind of some sort of scale here there's a short little thread about seven or eight tweets here but i thought it was just very informative um bartek's done a few of these now he actually i'm pretty sure works on l2b with the rest uh with a few other people here helps them um on that site as i mentioned before l2b is one of my favorite websites within the crypto ecosystem right now for you know i mean tracking

layer two growth but not only tracking layer two growth being able to kind of track the risks associated with each layer two and all of kind of like i guess the information about how they work and uh you know what what like sorry links to resources about the project all that sort of stuff i just think it's really cool so definitely check out this thread from bartek nevermind here i put out a blog post talking about solidity on stark nets and reaching terminal velocity here so i've spoken about this before about how the nethermind warp team released their demo for transpiling an erc20 solidity contract to cairo and deploying it to starknet so i spoke about this a few weeks ago but essentially um i you know just a quick refresher for people who may not may not be aware uh

stark net is not evm compatible uh and it's not using kind of solidity natively it's running on their own kind of virtual machine and they're running their own programming language called cairo now what this transpiler does is it allows for solidity contracts to be ported over and to be transpiled uh so that they run on stark net now stock net has a few different things that are going to be running on it um obviously there's star x today and that's going to be uh kind of like uh folded into stock net i'm pretty sure uh and these are the projects like that we all know and love like uh dydx and and other sorts and and uh diversify and immutable x and things like that there's like a mix there between um uh validiums and zk rollups as well um but this yeah

this post gives a bit more detail about how they did it you know uh from a technical level so if you're technical and you're a developer and you want to check this out i definitely recommend giving it a read but this sort of stuff's really cool as i've said before layer twos give us the ability to be super expressive we're not limited by the evm we're not limited by solidity you can basically build anything you want as a layer 2 and i've spoken about it before and it's actually a perfect segue into uh paulina's tweet here where he you know he put out another great tweet today where he said um l1s will be technical technologically obsolete in the modular era um they have three options become an execution layer uh such as so rare or arbitrary uh so execution layer i spoken about before about how you can

have these layer twos executing the transactions and only settling that that kind of like a proof or the data of that transact of those transactions onto layer one ethereum uh they can become a security layer such as ethereum which is often combined with a data availability a layer for example polygon avail there's celestia and there's a couple others out there as well but essentially uh this is just what you know what i was talking about i guess i've been talking about this a lot lately but essentially splitting up the i guess security data availability layer and execution layer so ethereum has uh the security layer obviously uh the data availability it has it right now but in a very limited fashion once we have sharding introduced uh in in kind of like the protocol there um it'll be much

much better because sharding will basically allow for uh more data availability but it's not just going to be ethereum it's going to be stuff like polygon and veil and celestia but this is the kind of modular blockchain era as pauline likes to call it and i think that's a great way to where to put it and you know ends this tweet by saying our ones must focus and i was actually talking about this in the in the deadly gray chat we were having tonight and the voice channel in the discord channel um and i was saying that i think that uh we've spent all this time doing research and development and i think we've finally at the point where we know how to scale blockchains and these kind of like monolithic l1 that are going in the opposite direction such as solana are going to be obsoleted and i think

that the new competition is going to be in being a layer 2 on on ethereum being this execution layer and just tapping into other security and data availability layers like ethereum polygon unveil and such now what this means is that you're going to see i think a lot less layer 1's launch and a lot more layer two's launch and especially when these layer twos issue their own token and the valuations are pretty kind of like sky-high because they will be to be honest i mean there's so much hype around these things for good for good reason of course um but you're gonna see that people are gonna be like oh well let's just become a layer two on ethereum because you know you can still have your own token it can still be a staking token um but you know it just cements ether it's kind of like

this security data availability sentiment layer um and then it uses eth within the system uh within the layer two for you know they may choose to use it for fees that's kind of like the path of least resistance i think they will uh and then they can kind of just like focus on driving value to their token in other ways whether that be as a staking token as a governance token um you know maybe they burn some of the token based on fear revenue and things like that i'm still taking aethersphere revenue but maybe they sell the eth or trade that eighth for uh for their own token or like do a a a burn um that way as well so there's a lot of different things you can do there of course um and and and they can you know that's how they decentralize as well these layer

two so i really do think and completely agree with paulina that over the coming years we're gonna see layer 1 like monolithic l1 become obsolete there's going to be way less focus on layer ones and the focus is gonna shift to layer twos and we may see some some newer layer ones come online but as data availability layers only they won't be doing execution so when i talk about like more layer twos coming online they're purely gonna be kind of like these execution things um from what i can tell it doesn't make any sense for i guess like a layer 2 to be a data availability layer uh because it just that doesn't just that's just not how it works from my understanding but maybe it does work like that in the future and you know this is another thing that i've

been thinking about as well is that we don't want to fall into any form of like maximalism when it comes to uh this kind of technology obviously uh scaling has evolved a lot over the years we started off with state channels then we evolved into plasma and all of its flavors now we've come to roll-ups and all of its flavors and we have valydiums and volitions which are like kind of like hybrids and things like that uh and we don't know we're going to have in the future so there's no point being kind of like a roll-up maximalist for example i know i talk about roll-ups a lot and i know i talk about them being kind of like this holy grail for scaling but what i really mean is that the holy grail for scaling is everyone kind of like realizing that l1 is or you know l1 blockchains uh work

best as a security data availability uh kind of like settlement layer and l2s built on top is where all the execution should happen it doesn't matter if the l2 is a rollup it doesn't matter if it's a validium volusion plasma whatever whatever works and whatever works best should be used and the funny thing is like the cryptography that goes into this sort of stuff is very is different based on which l2 you're using and building and there's kind of like trade-offs when it comes to each of them but it's just going to keep getting better and better and it's actually a great discussion from that mahalo highlighted here from geordi bailena who's uh part of the hermes team or i think the founder of hermes which is obviously now acquired by polygon where he basically uh was talking to someone from uh from aztec protocol zachary

williamson one of the co-founders of aztec protocol about different kind of uh cryptography primitives and how they all work starks snarks plonks or p p lookups groth 16 all these i mean this is super super technical cryptography stuff if you don't know any of those words don't worry neither do i i just i mean i know the words i don't know what they mean i don't know cryptography um but this is what i mean by the fact that this space is still evolving so very very quickly and this is exactly why teams like polygon have committed one billion dollars to zero knowledge research because we know that zero knowledge kind of like technology is the the kind of where we want to be in the long term is going to be the best solution but we there's many solutions within that and we don't want to get

stuck on one and just like kind of settle for it we want to keep pushing the boundary here just like we do with with any technology so and and obviously polygon isn't the only one putting resources towards cr and if you think that optimism and arbitrarily basically saying uh you know i'm sitting hardly by and saying oh well we're just going to let zk roll ups take eat our lunch as optimistic roll ups that's not true at all and i think optimistic roll-ups still have their place but arbitrary and optimism are definitely going to have research and development into uh zk rollups as well and all the zero knowledge stuff and and things like that so it doesn't pay to be a roll-up maximus it doesn't pay to be anything maximalist it pays to be a decentralization maximus of course uh because that's what we all

know and love uh and if you wanna call me an ethereum maximalist whatever that's fine uh i think it pays to just pay attention to uh i guess like what technology is working what the best design is going forward and leave your biases at the door the the funny thing is is that ethereum and bitcoin are the only in my view if you're in bitcoin of the only truly decentralized and secure kind of like security settlement layers uh uh right now but there could be more in the future but the thing is is that bitcoin doesn't support uh um uh kind of like any kind of like expressivity at layer one you can't settle or you can't post batches and proofs to layer one bitcoin from from layer two so that's why bitcoin's very limited in what i can do with layer two with regards to the lightning network

through through kind of a state channel kind of construction there and a few other little things they heavily rely on side chains bitcoin the bitcoin ecosystem whereas the ethereum is materially different because it it can you know we have the the evm and everything like that we have the expressivity so we can settle those batches and proofs on layer one to have a really really vibrant layer two ecosystem so from where i'm sitting ethereum is the only truly decentralized and secure sediment layer layer for layer twos that we have today and it's gonna be like that for the foreseeable future i don't see anything coming close to ethereum in that regard so as i said before the other blockchains are competing with layer 2 ethereum they are not competing with layer 1 ethereum because they've already lost and they pretty much have no hope of of um

matching ethereum's decentralization and security i mean i know that might be too early to say for some people but i really don't believe they have any hope of catching ethereum and honestly i don't really believe they have any hope of catching ethereum's l2 ecosystem which is already bigger than most of these other l1s and they don't have token incentives there are no native token incentives on arbitrary optimism um there's no arbitrary token there's no optimism token yes there's token incentives from other projects but that's fine that's always going to happen uh that you know these other ecosystems that these other layer 1 blockchains that have seen some growth lately they have massive token incentives and i'm you know pretty sure that when they run out most of the liquidity is going to leave and it's probably going to go into l twos on ethereum to be honest so yeah i

know that might be a maximum view to some but that's just my my view and that's just how i see things and i'm i'm looking at it from kind of i guess like a an objective point of view where you can objectively measure a lot of this stuff and you can kind of like see that this is the path forward and this is the best path forward and there's no use getting hung up on the subjective arguments about oh you know we have to have like um and we have to embrace every chain we have to embrace everything blah blah i don't believe that i believe that we should embrace what works what's actually legit i believe that there's a lot of stuff that doesn't work and there's a lot of stuff that isn't legit i believe a lot of technology being built today in the blockchain crypto

space is very misguided so i'm just not going to support that at the end of the day i but i will support the the kind of like ecosystem on ethereum that's building out with the layer twos because that's what i truly believe is the path forward but anyway i'm going to leave it at that and talk about new albertum bridge interface which went live today this has been the main pain point i think for a lot of people remember the arbitram uh if you saw the old arbitration bridge interface it looked really bad uh it was basically uh basically hardly any styling look like a scam website and now you can see that they've updated it and it looks awesome i mean it looks like uh you know a normal interface you'll see on something like uni swap we just basically put in how much you on layer one that

you want to put into layer two and then click the deposit button uh and you know choose the token that you're depositing and away you go so yeah very very easy very very nice little uh bridge portal here bridge interface here if you haven't kind of like bridged into arbitrary yet i mean i suggest you do so go enjoy some arbitrary stuff i've been playing around with it uh uh you know on a bunch of my different addresses that i have for various different things it's just so awesome to be able to like do a trade for much lower fees and layer one and also have like an instant confirmation of the transaction obviously it's not instant finality as i've explained before but the confirmation just being instant to the user on the ui ux side is just a pleasant experience much better experience than basically you know

waiting for a block to be mined uh for 15 or so seconds and then if you haven't set uh uh you know even in a one five five nine world if you haven't set like your gas fee kind of high enough and the gas fee spikes then obviously it's going to be a bit of a delay there but still even in a one five five nine world where most of the time you'll get your transaction in within one block 15 seconds you know 10 15 seconds whatever one block is i mean depending on when you've done your transaction as well but let's just say on average it's like a 10 second wait time i mean that doesn't even come into the same kind of reality of competition as these layer twos that give you instant um confirmation now i know there's a major difference there because

on layer one you basically get like instant finality because it's settled on layer one but you uh but obviously you you have to wait for that to happen and you have to pay for that too whereas with on layer 2 you may get it within a couple of minutes this kind of like instant sorry this finality but you still get that instant kind of confirmation of your transaction which is just a much better overall user experience i believe all right so uniswap has published their uni swap product update number two here going over basically the layer two beta with improved user experience as you guys know that optimism is optimism unit type is currently on optimism and arbitram uh you know they've got updates of the developer guides help center erp1559 support and ens on their sybil kind of

platform which is like a governance platform that they're using i believe so if you want to catch up on all the latest uni swap updates be sure to check out this blog post it's got you know details about all of it on there um this is an interesting thread from michael sproul here who's working at uh sigma prime uh one of the one of the teams building an eth2 client called lighthouse uh and he's showing an estimate of client diversity for the eth humane net derived from block proposal data and he's got a thread about how accurate this is he basically says like it should be pretty accurate but obviously it's not at 100 but what's really awesome to see and what i wanted to focus on was that i just i think a couple months ago prism was like over 70 of the network now it's only 64.8 percent so

wait it's getting better here lighthouse has a healthy 21.9 share and then the minority clients taku and nimbus have the rest of it now you can see here that in the uh kind of like orange color teku or nimbus accounts for eight point six percent uh michael mentioned that he wasn't able to uh to discern if these clients were teku or nimbus but he was able to discern that 4.7 percent were teku so i think the main thing to look at here is just prism like we want prism to ideally stay below two-thirds of the total kind of like network and they currently are that's 66 percent so we want them to be 66 percent or less of the of the um the the client share here uh be uh uh for for kind of i guess like beacon chain

health reasons but also for kind of uh i guess like liveness reasons as well because we want to be able to keep the chain running we want to keep be able to keep the chain finalizing and justifying even if the prism nodes go offline which they have before on on the on the test nets and i think on may that there was an incident as well if i remember correctly here but ideally as i said before we want no client having more than kind of like 50 so if we can get prism down to 50 or less that'd be awesome and in an ideal world we would have like 25 25 25 25 right across these four clients there's actually a fifth client um load star that that recently went live as well but i don't think we're gonna get there i think we can get to a point where

fifty percent is prism maybe thirty percent is lighthouse and the remaining twenty percent becomes uh tekunimbus and maybe load star in there as well which is very very healthy so if you're running prism consider switching i know that switching can sometimes be scary because of the fact that you you know you don't want to get slashed and it's scary kind of like changing things and messing around with with validators i understand that totally get that but there are resources to help you out there the eatstaker discord is a great resource as well and all and as far as i know all these clients support windows too so if you're a window staker like i am you can definitely run these other clients on windows instead of running prism here for your for your validators so if you are running prism consider switching off not because prism is a bad client just

because it it kind of like helps the the client diversity and helps the security and health of the beacon chain at the end of the day but yeah this this thread will be linked in the youtube description you can go check it out from michael it gives a great little breakdown here of how he came to the conclusions uh and i really really like that he did this because this is definitely important as we get closer to the merge so gavin andresen posted an interesting blog post today and this wasn't about ethereum per se but the blog post is titled a possible btc future and it's very short it basically talks about and and posits that bitcoin's future is essentially the bitcoin network dying off because of the fact that it can't secure itself as i've i i've described this notion before where the bitcoin

block rewards become so small the bitcoin network isn't able to secure itself via fear of a new alone um and and at some point in the future uh the chain just basically grinds to a halt because no one wants to mine it or it gets attacked constantly and you know the bitcoin blockchain just becomes this kind of like a dead thing and what what gavin basically says is that he thinks that btc will end up migrating to some other network where it'll be burnt on the bitcoin blockchain and then issued on another blockchain or it might live on multiple blockchains or multiple different kind of like chains even layer ones or layer twos but the btc kind of like supply would always be fixed now for those who don't know who gavin is he he doesn't really kind of like pop around much these days but he was a very

early contributor to the bitcoin core software and eventually he i mean depending on who you talked to he either kind of kind of got pushed out of bitcoin core development or he was kind of already kind of like uh left himself but from what i can tell it seems that he got pushed out of of core development so uh that was sad back then but he was very early like i'm talking i think satoshi yeah if i'm remembering correctly satoshi actually gave the reigns over to gavin for bitcoin when satoshi disappeared in i can't remember the exact year but it was it was early on obviously so you know when he speaks i listen like he's definitely a person that i respect within within this industry has a lot of great thoughts he hasn't just blogged about this he's blocked out a bunch of other things but it's great to see him

thinking about this in the same way that myself and a few other people have thought about this uh in the past like i have constantly gone on about the fact that i think that the bitcoin network will not be able to secure itself in the future once the block reward gets too small and it's not in the far future anyway i mean gavin says in the far future like 2061 and 20 and the year 2100 but i actually think it's going to happen in the next 10 20 years i don't think we're gonna have to wait that long um so yeah we'll see how that kind of shakes out there but this is a nice little blog post i'll link it in the youtube description it's very very short i mean you can see here that it's it's super super short um so you'll be able to read it there but yeah it's

good to see gavin still blogging still kind of like uh putting forward these ideas because he's got a he's got a nice different reach to to what i have and what other people in the ecosystem have so yeah great to see him putting this out there but i think on that note that's going to be 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