The Daily Gwei Drive Thru #7 with Anthony Sassano and Eric Conner | DeFi, Public Goods, Burning ETH

Transcript

hello everyone welcome to another episode of the dway drive-thru I'm your host Anthony Sano and I'm here today with Eric Connor to talk about all things ethereum hey Eric hey going Anthony doing pretty well how about yourself good good uh just enjoying I guess like flashbacks to 2019 this week on crypto Twitter with uh bit of drama a bit of the kind of rehash conversations popping up again you know we have this kind of joke you and I that during the depths of the bare market is when ethereum people like to discuss and debate the most esoteric things that don't really and when there's like a few green candles and we go into like a early stage bull market these discussions tend to cease and one of those I guess this week was around the uniop frontend implementing a fee so

there is I think 0.15% fee on trades of the most popular pairs on uniso which I think accounts for 90% of the volume on the uniso front end there you know it's funny I was wondering why they only did like um th those kind of tokens I think it's because one I guess like it covers most of the tokens but two it's also like maybe a Securities concern for them where if they taking fees on like tokens that could be considered Securities were being traded they might get in trouble I don't know that was that was just something weird to me but I guess you had an interesting take about kind of fees within Defi and crypto generally where you kind of Drew a a comparison to tradire where fees are basically a race to the bottom right and in crypto I think that people can get away with the

higher fees right now just because crypto is so small and there's not that much competition for these things or good competition and it hasn't kind of permeated out into the the guess tradire world so yeah I'd love to get your thoughts on kind of the the unop fee implementation on just the front end um it should be clear for people and like where you think fees go generally in crypto yeah I mean I think we could probably talk about this for a while I'm assuming we're going to right and th this is like a really interesting one especially for me personally like going way back to like when I got involved in ethereum and thought about launching a deck myself um I our Theory at the time was if you put any fee in whether protocol fee front end fee or even token

we thought people would Fork it out now this was back in like 2013 before you know a lot was learned and there's like modes around branding and trust and and things like that um and people didn't really like perfectly Envision how the the defi landscape would take place um I find it kind of interesting that we've gotten to this place where now we have like tokens and fees so I guess I'll step back a little bit in the in the Unis swap conversation right and I think if we go back all the way to like early 2018 all these Protocols are kind of being launched there's there's really no fees there's no tokens it's kind of just this like smaller open-source community that is has this idea of defi which is

like hey can we do Finance better and people are just kind of like vibing and writing code like that I'm like making a little more simpler than it is right um but this is like at least how I saw it I think a lot of people in the small etherum community at the time saw it and a lot of cool protocols were launched obviously maker was kind of one of the first augur nosis if you want to call them defi around like prediction markets and then like Unis swap came around and a and you know all these compound did I say compound but anyways like these they came around right and it was like okay this is cool but how can we do Finance like a little bit better and of course you had like the trustless and then you

kind of had these automated market makers and automated uh lending and borrowing protocols and it was all really neat and then all of a sudden like the bull market took off and everyone got like a little bit greedy myself included I'm not going to like act like I'm like out of this right um and token farming started happening tokens started happening and it's like okay well how do we and to be fair like you and I have talked for years about like we think a a lot of app app s and protocols have just shoehorn tokens and right and like I've also been very critical of token governance on the ethereum side I know you have as well um but we kind of went to this boom where it's like okay well there's tokens and like clearly this is just like stocks and these are great protocols and they

should be worth like trillions of dollars someday and like we went through that Mania right and then we kind of cooled off um and I think I think we should still as a community reassessing are these tokens worth it like you know a lot of this was I'll just be blunt a lot of token launches were for like early investors in VC to exit their liquidity and like yes it did give the average Joe like an option to buy a share in Unis Swap and you know stocks are kind of the same way stocks are a governance vote I would say stocks are a little well if you have a dividend stock that's very different and there are some tokens that are doing like dividend revenue and sharing stuff um stocks like at the company like in the

tra traditional Finance world compies get bought way more often and then that you do get cashed out on your stock at like the sellout Price Right which we will get there probably in Defi and ethereum in general General but we haven't really seen like a token buyback I think we've seen like one or two something like that um so I I don't want to quite go to the Unis swap front and fee quite yet because Unis swap if you go back and look at their blog post for their uni launch and I think it was in 2018 I believe um their big pitch to The Token at that time if you read the post I'm not just making this up they hint that this in protocol fee switch a lot right and now

Unis swap gives a fee to LPS like liquidity providers which I think is necessary because you're not going to provide liquidity on Unis swap without earning some kind of money right and they were talking about this well we could also or token holders could enable this fee switch which would go into like a pot and then all the token holders would kind of have like a say at this pot right and I remember at the time people were like so into this because they were like well if Unis is doing like billions of dollars in volume and people were putting out threads like caling like you know how much money could be made their pde ratio and all this stuff and that is what Unis swap put out there it's in their blog post they hyped it up you know it was it was

intentional they put it in their code base it's all there and there's been this whole kind of like debate and Unis swap governance should they enable this um will the SEC come after them for enabling this is it putting token holders or Unis swab at risk and you know let's just be honest VCS and you know early Unis swap investors own the Unis swap vote right this is a typical kind of governance theater type situation um and recently as far as I think five months ago maybe six months ago the latest fee switch on a protocol level was shot down so Unis swap still takes 0% fee the pro the token holder protocol itself takes 0% fee from each trade so I I think I want to put that

Baseline there right and like do is that am I right to that point like is that how you felt about uni token governance to this point yeah I mean I think if we're talking about kind of the token and then the fee on the front end and how those kind of play with each other it's a Clashing of incentives right as you kind of mentioned you have these VC you have the team um but the VCS and the team also they have the equity in in Unis swap Labs or whatever their actual business name is right and this Equity is not translated into the token right the token holders do not get access to any of this they don't get access to any of the money made uh buy Unis swap Labs uh from this fee and whatever other money they make they only get access to

the Token right and if you buy the token and it goes up and you sell you make money obviously but right now as you said and probably for a very long time that fee switch is not turned on which means that the uni token as it exists today does not have any value accural besides some governance value and the hope that the fee switch will eventually be turned on but because of that Clash of incentives there's no real reason or incentive for the unop team or unop Labs team and the VCS to vote in favor of this and open themselves up to possible legal legal repercussions when they can just make money off of the the um the equity right they can just make money off of the fees uh going to them uh instead of kind of introducing this kind

of fee switch thing which then the fees go to every uni token holder and yeah maybe they kind of like uni the value of uni goes up because of that but who knows like how much uni they have left maybe they've sold a lot of it already right because some of these VCS are up a crap ton on their on their uni because they got in super early like for example Paradigm was the first investor in unisoft they gave uniso I think a million dollars in 2019 I think the valuation maybe was 10 million now uni is worth a lot more than that right so uni fully diluted value is what like a few billion or something like that so if you work out how much tokens they would have gotten I don't know the the the terms of the deal but I'm sure it was a

is a pretty good uh return for them it's a,x or something and and like on a million dollars right they just made a billion dollars from uniswap uh or from the uni token and then as I said I'm not entirely certain what the deal structure is and they did invest in follow- on rounds but they also have access to the equity so they also get a share of whatever the fee is making now on the front end so really from from that perspective the incentive isn't there for these VCS and team I don't know it's maybe different as well because like the team really if you if you're talking about the team it's really just the higher ups that make these decisions it's not going to be the the regular employees it's going to be Hayden and and the other co-founders that all the other kind of like higher ups that are

there not sure exactly who those are but it's going to be them and the and the the big VC holders right and as you said they shoot down every attempt that there is to make to make to turn on the fee switch now whether they're doing this because of regulatory concerns or they're doing this because they feel like it's going to make unisoft less competitive because now there's a fee that's not going to the LPS but it's going to the uh the token holders which means people will be less inclined to LP with unop and might go elsewhere I understand those concerns but at the same time like the governance is a sham because of that right the community has no say here uh and it really I mean that's not TR true of just unisoft by the way that's true of pretty much like

all of these governance tokens there are very very few people who hold the majority of them even the older protocols like run from maker for example pretty much de facto owns the makeer protocol because he has enough mkr tokens to to to do whatever he wants with it so I think that to this point decentralized governance with tokens has completely failed um in in pretty much all the attempts that have been tried because it's not decentralized uh it is it concentrates power incredibly bad incredibly badly and it also skews the incentives as I was just discussing about how that now there's a token and there's equity and there's no incentive for the token to to approve value if you can just kind of make it up in equity because at the end of the day you could work out how much uh you would get from

your uni bags in terms of like dividends if the fee switchers turned on and then you as a VC and as the team and then you can work out how much you would get from this front-end fee and I'm sure this front end fee uh would Pro it probably drives more value um and also it only goes to equity holders it's not shared with all the other uni holders so they get a bigger slice of the pie so I'm sure they did the math on this and thought that well this is the better way and also from a regulatory perspective I'm sure it's the way as well so yeah I think that's the that's the disappointment here but I will I will be clear that I have absolutely no issue with uniso putting a fee on or unop Labs putting a fee on their own front end

because they run it right they designed it uh they pay all the infrastructure costs and and everything that takes to run that but it is a kick in the guts to the uni token holders because again it's just showing that there is zero interest from the team and and by extension the VCS to turn this fee switch on uh for the uni token holders and as you said it was kind of described in that blog post it was kind of not not directly promised but it was kind of implied that this would happen and it's been I think that blog post came out in 2020 because uni did their token as a result of sushi sushi sushi swap doing the vampire attack and stuff so I think towards the mid to end of 2020 that's what when it happen so it's been three years right

been been over three years now and we're still nowhere close to that Feast switch being turned on and I think that's the main source of frustration for a lot of people over this yeah definitely and I think I mean so I'll take the counter to you I do have an issue with it because of them doing a token and then doing this and also like there's this wording right where it's in like the blog post we're doing this for a sustainable Unis Swap and then Hayden tweets out a week ago we're doing this for a sustainable Unis swap well what happened to the millions of dollars you rais in the token I mean at the there's seven billion fully diluted today I mean I think at the top of uni it had to be 50 billion probably at least because it's at four bucks

today I think it hit 50 or something like that maybe 10x from what it is now um and it's just I don't know I think I just have a bad taste in my mouth and maybe this is just kind of everyone thought that like unisoft was like The Golden Child for a while it was like the first like kind of like pure defi smart contract it's like oh this is just like a smart contract and it runs and there's no token there's no fees and like you said Sushi comes along and they react to that they launch a token I think the VC is getting there ears the VC is getting their ears again to not turn on the fee switch I think the VC's getting their ears again to turn turn on the UI frontend fee switch now I do sympathize a little bit with your point

where the frontend switch yes people can go around it right so like if they put it in the contracts you can't really get around it someone could Fork uni Swap and take it out so like from a if I'm talking selfishly myself as a non-un holder and as like a Trader that knows how to get around the front end I would prefer the front end switch because I can just get around it and know how to do that and I'm not paying it on the protocol level as like a purist like ethereum defi fan like just Everything feels a little gross to me um and you know that's just my honest opinion I'm just going to put it out there right and I don't know I think I don't know where this ends is one of my issues like I I'm sure over the next few months a lot of

other Protocols are going to throw out frontend fees and it's one thing to say like yeah people can get around it because like a lot of these people say oh yeah you can just get around it right well like 95% of people don't know how to do that and I think I'm I'm starting to wonder like where are we really better than CI now when it comes to fees like I in in like my E Trade account my fidelity account whatever I can pretty much do any stock trade for between like 0o and $10 and this percentage thing is starting to get to me so now and defi were setting like percentage fees and say you do like $100,000 trade you've charged like a large percentage whereas like on CI now that's like free pretty

much or like 10 bucks um I'm not loving this trend of like percentage fees and I think this is of course like a still early Discovery phase for defi right and I like you said I tweeted out I think eventually defi will be a race to the bottom because of the open source nature and because I think people think like defi is going to change every day for the next 50 years and it's not like the finance is kind of boring I think we're going to get like Lindy contracts and contracts everybody just is like oh this is great like look at Unis swap V2 still getting used like crazy that thing's been out there for years right um and there's no fee on that contract and I mean maybe not on the front end but like you get what I mean like I don't think

eventually we'll just have these contracts we trust and if there are fees in them there are fees in the front end they'll be forked out they'll be removed they'll be worked around but I don't like the trend of right now where it's like oh hey by the way we dumped our token on retail and I'm not talking to just Unis Swap this is like pretty much every defi protocol hey we we made multi-millions on our token and dumped it on retail we still have like 60% but governance is working so we're going to throw a fee in the front end too like I'm just not vibing with that I think it's a pretty bad look at the same time I think in 10 years from now it'll all be gone but there's this weird like bare Market thing right now happening that I'm I'm just not a fan of

yeah I think when you look at kind of trfi and how they do it um it's more similar to cow swap than it is to Unis swap because with cow swap they offer gasless trades right and kind of like gasless approvals now now that doesn't mean you're not paying a gas fee what it means is that it's built into the order flow right the the market makers that are that are kind of matching you in the background are paying that they're baking it into what their what what what the what the trade is right it's baked into the trade and I think this is the same for tradire where they have things like payment for order flow where they're just baking this all in and and me is is very prevalent within tradire as well it's just that we don't see it because it's all permissioned and closed

Source there's no kind of ether scan for tradire that's going to show you what's happening there um and I think that's a probably the the the the the better comparison there and I agree with you over the long term it's probably just going to be a race to to zero fees but it'll just be baked into that kind of order flow and I I personally don't use Unis swops front end and haven't in in quite a while I tend to use cow swap because of that because of the fact that I know that it's not you know free gas for example I know that it's baked into the price but in saying that cow swap still gives me a better price than Unis swap does as an aggregator as a way to aggregate liquidity from basically anywhere and have people fight in the background for that liquidity and also

protect me from from meev or from from most me especially sandwich attacks which are which are pretty brutal right um taken to their logical conclusion there so I think that's probably what's going to what it's going to look like but as you said like most people will just use the things like the unisoft front end because that is like The Branding and marketing that has been built up over time where people are like oh I know the unisoft front end you know I know what this looks like I'm going to go there and use it same with metamask swap feature you know metamask swap charges 0.8% on on a trade and they still do a ton of volume because you can actually see the fee Revenue going to their address on on ether scan uh and they make a crap ton of money from this now

okay who is using metamask to swap with that that fee I'll tell you who one it's drop Farmers thinking that they're probably going to get some kind of metamask air drop right but they're don't they're not going to be doing like high volume kind of stuff because it's just going to eat into eat into their money um and then there's going to be the noobs who don't know any better at all they see swap they're like oh I can buy this dgen token that on through metam mask I'm going to do it like that right and you know I know metamask it's my wallet and and that's all well and good uh and then they just use that and they don't even notice the 0.8% fee because for them it's like a calculus of all you know who cares if it's 0.8% fee I'm going to make like a 10x on this

that's the kind of calculator that people run in their heads and that's another part of this I don't think we've discussed yet is that when you think about the calculus that people do kind of like an an expected value thing when it comes to trades like in crypto your expected value from buying a token is at minimum probably a 10x as a regular user right you like I'm not talking about Traders and things like that I'm talking about like a regular kind of retail investor who puts their money into this stuff all they want to do is is make a lot of money right they want to make the 10x the 100x and that's the calculus that they do so for them they're not fee sensitive at all right they don't give a about a 0.8% fee if they expect to make a 10x now whether they make a 10x

or not is another another thing entirely but that's the expectation there so I think in tradire there's much less of an expectation of that than there is in crypto so that's probably why things are different there especially for the larger players like tradire is dominated by the institutions right it's not really dominated by by retail players kind of trading stocks amongst each other whereas crypto is the opposite still crypto is predominantly retail uh predominantly um a lot of funds that act like retail to be honest that don't act like professional outfits because a lot of the time they're unregulated and they don't care about their customer funds as we saw last year with the blow up of things like 3 hours capital and Celsius and and other places where they didn't give a that there that it weren't wasn't their money right I mean FTX is

obviously the perfect example here but that's like the extreme example but they didn't care so I think that until crypto matures a lot to the point where it just looks like tradire looks today which it will don't get me wrong it definitely will especially I guess like now I think we're starting the institutionalized phase of crypto finally with obviously the ETFs and stuff like that I think that's what's going to kind of make a major change in in crypto because at the end of the day like I I'm even the same still at this point where I'm like if I'm buying a token I'm buying it because I expect it to go up a lot right I'm not buying it to make like a a 10% and then sell it because I'm not a Trader so for me even the fees wouldn't wouldn't really affect me but I know better right

so for me I'm not going to go to metamask and do a swap at a 0.8% fee I'm going to go to cow swap because I know I'm going to get a better price and it's going to be better for me over the long run as well but for a lot of new new people who don't know any better they are not going to care at all and I think that's what why we see that and they also because the crypto is inherently kind of like self- custodial when you do that sort of stuff like if you want to trade some new token on chain you can't do that through coinbase you can't do that through binance or anything right like you have to actually go on chain and then what do most people do they have a metamask wallet so they go on to

menam mask and then they use menam mask to swap and unop has their own wallet now as well which I'm sure they're they're loving because that's going to put more order flow through through that wallet which means I'll take a fee on that as well of course so when when you look kind of look at it holistically I think there's like different market segments and different people who are sensitive to different kind of fees um but I agree with you over the long term longterm probably being like 10 plus years at this point to be honest it takes longer than people think it does it's going to look pretty much exactly like tradire I believe yeah for sure and I think also tread fight goes back to what you were saying like C so I I use C for pretty much any decent trade as well and like

all this is just gets kind of like hidden in the order flow and that happens in Shi too it's like oh each trade says they have no fees but you're probably getting a worse price on your stock because they're letting people like front run you like so it all like is kind of a game like at the end of the day um I think the biggest issue that I'm kind of seeing in defi is well let me I think my biggest issue I think if we go back like three years and all the D5 protocols said hey you know what we're just going to throw like a fee in our front end and not do it to token i' been like oh cool whatever yeah that's neat my issue is the token and the fee cuz now you're really admitting that the token nothing right and even I guess I

guess on that point as well like the token doesn't actually get any of the fear from you that's the key Point here right exactly and that's the most frustrating part right like I don't think any of the token well there's a couple like tokens out there are doing unique things I don't want to comment on like every token the ecosystem but most of the the key di5 protocols that also have like a fee underne are not passing that Revenue to the Token holders and it it goes back to what you said there's this whole like Equity ownership and token ownership where like investors and VCS have this Equity ownership and if you're pulling in a fee on a front end like Unis sw's going to you're passing that on to equity owners and you know those Equity owners also got a huge Payday on tokens so it just feels dirty

and I think I truly still believe and like our one of our famous taglines in our previous podcast lives has always been like a multi-decade play right I truly think defi will eventually kind of rid of this hype and greed cycle and will turn into this kind of like more core um open- Source like let's do a better Financial system Community almost like not like Linux but like kind of in a way like back to like OG ethereum stop because I think this is all going to be flush out I think people going to realize for most tokens it's kind of useless and I don't think they'll recover and they'll go like they never go to actual Zer right but they they just won't recover um and I think that's

a misn a lot of people have oh yeah my token will recover with everything usually is not probably gonna or it usually doesn't it's probably not going to happen that way um unless some of these protocols wake up and say hey yeah let's pass some of this fee on to our token and I think one of the other things I'm a little like disappointed about I would say is and I don't want to just pick on unisol I really don't but they're just like front and center right now is these protocols charging fees and then see like debates on Twitter about like public goods and like the D5 Founders and there's multiple cases of this in the last three four years like oh yeah like the protocol teams and public goods are way underfunded well where are the we've talked about this a

lot in the past so this is not the first time we brought this up where is the donation to public goods by these large teams like where is unisoft multi-million dollar donation to protocol teams I personally haven't seen it maybe I missed it I don't know um but at least at a minimum maybe as a community let's get the the talk going about if you are going to charge a fee on your front end and you're just passing this on to equity holders maybe let's take like 1% of that and pass it on to something like protocol Guild donate it to some kind of quadratic funding thing through gitcoin or whatever it might be um and I I think at least that would put a better taste in people's mouth I mean I think if we could go back and just delete tokens and

say hey yeah we're going to a little bit on the front end but we're going to pass 10% of this to protocol funding as well I mean I think we'd be in a pretty good spot I don't think anybody really be complaining right now yeah yeah and on that note I actually just brought up the dashboard on my screen here of um the protocol Guild and the donors so Unis swap Dow has donated to the protocol Guild before and and it was actually a pretty substantial sum uh it was around I think $2.7 million at the time now it's $2 million obviously because uni went down um so they have done that and there's been a bunch of other communities that did it as well like arbitrum um 3.4 million at time of donation Lio 2.8 million so it is happening with the protocol Guild um which which I I think

is obviously extremely positive uh but I guess like at the same time it's not like a I guess a standard yet because I would love it to be a standard right and and it's also done in like their native token which is fine but I mean it should be more palatable to do it with your native token since you just printed out a thin air basically and then the market gives it a value so you shouldn't really care too much about about kind of like giving this away so to speak um so I'm I'm glad that that's that's happening there and I think this discussion about public goods funding and this broader discussion actually kicks us into the next topic that we had slated for for today was um I guess a topic that has been discussed to death in the old days the old days being like 2019 2020 but

for newer people to the ecosystem and or or those who didn't follow along with these debates they may be confused about um something here now what I'm talking about is with EIP 1559 the reason why the eth is burned instead of sent to like public goods or instead of sent to some address that funds public goods or the protocol development or anything like that that's the main question people have like why are we burning the eth instead of donating it well let me put some numbers to this the eth currently the the amount of e that we've burned the dollar value is $10 billion right since Inception so since August uh 2021 right when August 5th I think it was 2021 where 159 went live so just over two years $10 billion has been burnt of e has been burned so that's $10

billion that could have gone to something else instead of being burned right now the reason well there's like a few reasons why this is actually the case but I don't want to focus on the technical reasons I want to focus on the social reasons but I'll give the technical reasons one uh it actually e559 doesn't work properly without um this being burned because it would basically mean that people could still use out of um banned uh fee markets which essentially would mean that they could bypass the mechanism altogether which would just bring us back to the previous mechanism which was which was shitty from a transaction fee kind of mechanism perspective so that's the first technical reason um and and there was another one out there as well that basically I forgetting I'm forgetting off the top of my head right now but the the social you're you're basically

enshrining eth at the protocol level fees yeah yeah yeah exactly and making sure people pay eth as fees instead of something else out of out of band um obviously to to keep eth as the the core asset of the etherum network um but in terms of like donating it versus Burning it so I'm explain technically like why the burn has to happen but in terms of a social thing of like donating it I I I POS the question to the audience is like okay so there10 billion over the last two years that goes into a pot okay who do you trust to manage that 10 billion right who do you trust to distribute it who do you trust to um uh to to make sure it's not rated and also just because you trust them doesn't mean you're going to agree with who they want

to give the funds to right because if you want an example of what it looks like when there's a large um amount of funds being managed by a decentral IED community and I'm using kind of quotation marks there look at Dow's treasuries today right look at how they've been managed a lot of them just get rated A lot of them pay exorbitant salaries to members who do basically nothing right and it's not just Dows it's actually this is actually true of like just organizations in general I mean I saw the other day that the VP of digital marketing at parody which develops polka dot was getting paid like $700,000 a year I don't even hear about polker dot at all like where's this marketing that he's supposed to be doing right right so you know like this doesn't just happen within Dows but could you imagine the amount of capture

that would be attempted of that 10 billion dollar Po and and keep in mind this PO grows over time in perpetuity because it's it's it's it's it's it's um the fees being burned in perpetuity right so like there's no way you can trust anyone to distribute that those funds fairly and fairly is a subjective term because what's fair to me may not be fair to you like for me I'd love all that money to go to the protocol Guild right but like are we now overfunding the protocol called Dev such a ton of money going to what 150 people $10 billion split among 150 people I'm not sure that I I I I mean as much as I want to keep finding the protocol Gear with as much money as as as possible that is like when you really put the numbers to it that is a lot of money and then do we

get into the kind of um issue of dissuading core developers from even working because now they've got so much money they don't have to work anymore right so when you think of it like that as I said what's fair to me is not fair to someone else which is not fair to someone else so instead of giving these kind of like these these fees to some pot that can be captured that can um send money to stupid things that can send money to things that people don't disagree with we just burn it because that is the only credibly neutral way to essentially deal with that and also it has the byproduct of you know in theory and plays out over a longer longer period of time bringing the value back to all eth holders so if you want exposure to that burn you hold eth

that's basically the calculus there and then everyone has access to buying eth there is no one in the world that can't buy eth today um even if they only have a little bit of money they can probably find somewhere to to buy eth right um and and and and and I guess like that all comes down to if you've got money to buy eth and if you you can afford to buy e but that is I guess separate to the discussion it's more about making it so that um anyone can get exposure to this and to the value that's kind of burned here rather than it being up to like some high priests that would decide where all this money went because if you look at DS today there's really only a handful of people per Dow that make the majority of the decisions um out of a

few different reasons one I mean Mal I wouldn't attribute maliciousness to most of it I would say that one it's it's it's a it's a thing of most people don't have the time to invest into this to to vet things and stuff like that um and two most people don't care about this sorts of stuff either like treasury management stuff like that um so yeah that that's kind of like the reasoning behind that but it's funny because as I said we had these discussions extensively in 2019 and 2020 and it was like settled back then and that's why 1559 has the burn um but people like to reframe it to FUD ethereum I think from time to time saying that oh we just obsessed with ultrasound money we're just obsessed with burning eth which I don't agree with because me burn which is a proposed solution or I guess a

proposed way to burn me in order to to make the value go back to eth I'm actually like still on the fence about that I'm not in favor of that and that's because of the technical stuff not because of the the burn stuff and honestly I don't know if we should be burning meev uh to begin with and I'm still kind of working through that myself and learning all about it but I I I I personally wasn't just in favor of 1559 because it burned E I was in favor of because of the massive ux upgrade to ethereum which I guess Eric I'll stop rambling here and let you talk more about because you were pretty heavily involved in 1559 over life so I mean you were coauthor on the AIP R if I remembering correctly yeah correct um I I could rant on this for two hours but I

know we don't have enough time um I think it's important you open the podcast by saying bare Market Vibes and I think you just alluded to this debate we had in 2019 I think people need to First realize like this all comes down to issuing a block reward right and like every blockchain has a block war that's paid out to miners validators whatever you have on your network and that's what they get for creating a block right and ethereum has created this overarching kind of theme of minimal minimum viable issuance right and early on ethereum had a five E block reward as a community reduced it to three they reduced it to two and now with like validating it's a

little bit more complex but it's much lower than that at the end of the day because even when we had a two e block reward under proof of work we're at like three to four three and a half four% issuance I think and now every day we're hovering around like zero% right now like you said the most important thing to realize about 1559 and like when I first started co-authoring it with Vell and a few others we never talked about fee bur and it has become like the discussion of 1559 and it was always like a me mechanism right like you said it has to be there for two essential reasons one to enshrine eth on the base layer and two to make sure miners cannot manipulate it if you if you're not

burning the eth being paid for the for the block reward like they can create third party auctions which is like the old I don't want to get it too technical but it it just has to be there right and so then people the community which rightfully so I don't really mind it kind of latched on to oh we're burning eth it's going to be great like as transactions go up and blah blah blah we're going to burn a lot of eth that was never like until like the final spec was out and people realized it might go into the Protocol no one on the like design team talked about that which is crazy like if you go and read the original blog post it's not even there um so the fact that we would then even think about oh we should direct this to

somebody else no it's all a technical reason right and it's all about this minimum viable issu as well because sure we could say tomorrow oh let's increase the block rward by 10% just pay it out to like a dow like this is the exact same debate we had in the bare Market back in 2018 2019 um when everything was underfunded and the exact same debate we're like well why doesn't part of the block reward go to and then we're like What well who does it go to just like you were saying who can you imagine1 billion do I mean 10 billion you're you're like if you capture that Dow you're one of the richest people in the entire world right like that that's an unbelievable amount of money to be managing like I don't know who you would

possibly put in charge of that and so you get into this you got to just think of the block reward as this pie and it doesn't matter if part of it's getting burned for mechanism part of it's going to validators no matter what it's just a block reward and if you want to say oh we should take part of that and give it to public goods okay I yes but that's a whole different debate you can't just say oh this shouldn't be burned because now you're saying well a very large portion of every block award is going to public goods right like if if you take all the burn amount I mean that's a huge percentage of every block that's been produced and now we're like wait why did you even do that much so it's this never debate and I think vehemently anybody

involved in ethereum should deny this ever on the protocol level because I mean you I don't need to repeat your points but there's no human mechanism alive that can like create can like manage these funds and we've seen just basic Dows like you said be captured do stupid things I mean I'll use like nouns which was like I was into nouns Dow early on and like all of a sudden they had like 22,000 eth in at da and like every was like okay what are we what are we doing with this money like who's voting and then like people don't they fail to miss make the vote and all of a sudden they were like buying commercials for like millions of dollars and Rose like it people just

don't coordinate well enough to manage this typee of money and this should never ever ever ever be put on the protocol level of things um go Ahad yeah no I mean I totally agree with you and I think it brings us to like the the next point of discussion which is the the fact that there are existing mechanisms and new mechanisms coming online or new things coming online initiatives I should say that fund public goods obviously gitcoin has been around for a very long time funded a lot of public goods tens of millions of dollars right you have protocol Guild now which has the goal of actually getting to a billion dollars eventually in in there and it currently has I think tens of millions of dollars in there yeah their first goal was 10 million and they reached that um and then there are some

other initiatives but the the key Point here is that it's voluntary right it is not something that is forced upon anyone it is voluntary contributions to wherever you want to contribute to there's not just one pot there's many pots so that is good for evading capture right of any one kind of like pot being captured because it has a lot of money in it right it's good for decentralization it's good for for distribution of funds and it's it's good for letting people Express themselves in various different ways do you want to just fund C devs okay go fund the protocol Guild do you want to fund uh the app teams and and other things like that or the the other public goods on ethereum go do that on gitcoin and then there's also optimism doing their retroactive public goods funding with their token okay anyone can submit a

proposal and then that proposal gets voted on by their badge holders which are like community members um that's probably the closest thing to what it would look like for ethereum um to be honest and there's still a lot of issues with that like I looked at the last round and was a lot of money that went to things that I didn't personally agree with and this is where you come to the kind of like subjectivity of this all again right but again that's kind of a voluntary thing right um it's optimism voluntarily saying we're going to donate a bunch of these tokens to retroactive public goods funding um and that's fine as well another very interesting uh thing that has been talked about before but isn't implemented right now is what if we had the clients themselves so the validator clients themselves um what if

they implemented a switch where you could say okay well a portion of my block Rewards or fees that I get could go to the client teams themselves and obviously that would be opt in and everything so essentially what would happen is that you'd run like a lighthouse client for example and you'd switch on the thing and say okay well 10% of all the rewards that I get I want them to automatically go to uh Sigma Prime who builds the lighthouse client now that again is opt in and that again is just giving power back to the individual in order to donate to who they want to rather than it all going into one big pot like it would if if the um uh the fee Revenue that wasn't burned went to just this one big pot that was decided on by who right would it be eth

holders that wouldn't work because then you would just have like the eth Wales dominating everything and you wouldn't want you kind of wouldn't want that to happen right um and then would it be just respected people within the Ean Community that's fine like I I would maybe trust some of them but as I said it's not just about trust it's about the fair distribution of this and how the word fair is a subjective term and it is also not um is not the same to everyone that it is to me like I I know tons of people who want to fund things that I don't want to fund at all that I completely disagree with should be funded and people disagree with me on things that should be funded so in that world which is the world that we live in is the reality that we live in rather

than creating massive pots of funds that could get easily captured we have many many different pots of funds for many many different types of things and people can donate to what they actually want to donate to rather than having to decide as part of like a big Collective it's more of like small Collective small groups here and there and I think this even goes back to the point of like outside of crypto where people will say well you know they disagree with how their government spends money right because they've got the like for in the US there's always huge debates over how the US spends money like should they be spending money on foreign aid should they be doing domestic stuff should they be doing more military spending or social spending it's the same thing and and the the way we actually um work around that is through democracy but

it's a very imperfect system and ethereum is not trying to be a democracy ethereum is not trying to be um a traditional kind of nation state it is itself can be considered like a digital Nation but it has its own rules it has its own protocols has its own values its Community has its own values and and and and kind of things that they wants to see um so I think that what the the key difference is that if what the way ethereum does it is as I said very small kind of groups small pots of money here and there that people can voluntarily say where they want it to go to um and then on the nation state level it's more of everyone gets taxed and then you vote in a party and then the party spends the money how they want to essentially right

and and and I mean it's it's very messy from there but you kind of like get the analogy there so yeah I think that should be like what we just talked about for the last 10 15 minutes should explain to people exactly why the fear revenue is burned um and also hopefully encourage people to go and donate to public goods themselves if they want to uh and and do that through wherever they want to whether that's gitcoin or you know op on optimism getting involved with governance there or doing the protocol Guild stuff like I'm very partial to the protocol Guild because I think I think the protocol developers and researchers are basically the Beating Heart of ethereum and without them the road map for the next you know what whatever it is 10 years is not going to get delivered because at the end of the day we need people to

research and build this stuff so I I've made a lot of donations personal donations to the protocol Guild over time um and you and I both have made a lot of donations to getcoin over time as well uh so so yeah if you if there is people out there who want to donate there are many many different ways to do it that it doesn't require some kind of like huge pot of money going from the fees to and to to be captured I I feel like as you said that would be the worst possible thing that we could do and it would very much degrade ethereum's credible neutrality as as a network I think yeah I mean we're in a much better place now than three years ago right so I I think there's better options out there and I think the entire ecosystem is in a better place I mean we're

literally like is this thing going to survive right I don't think we'll ever get back there especially with eth that you know almost 1,600 or whatever it is um I I just don't think will ever return there so at least and the ef's got a ton of money which of course we don't rely on the EF but at the end of the day they' got multi-millions of dollars right so I think just having that's the thing a lot of people Miss as well I think with like eighth value accural is that the EF is solely funded by the eth that they have and obviously they want to be able to sell that eth at a higher price so that they can get more Fe at in so they can pay you know various different things so yeah the higher the eth price goes the better it is for

ethereum generally just just from that one thing and there's so many other reasons but I think yeah that one thing like the EF for every dollar I think eth goes up the EF gets a lot of money like millions of dollars I think so when you look at it like that yeah I think people should understand why we want eth to go up right yeah I always love like oh the E selling well yeah I mean the what are we just hoping the EF holds to a million dollars e and like I yeah they they have to sell like fun this stuff right so I I just that always cracks me up but yeah I mean long story short I think we're in a better place that we have been but I totally agree go out there donate to some of the guilds if you can and I

would I would still encourage some of these defi protocols that are making money every everybody out there to keep donating and maybe I misspoke earlier Unis SW has donated to million but you know let's do better right your protocol is worth seven billion you have a token you got a fee let's all like I like what you said let's commit like a revenue stream right I haven't seen that yet it's like oh once a year let's donate like a million let's commit like oh yeah let's we're going to give 10% of our frontend fee because we've made a lot of money off ethereum and we needed to keep going to you know stay alive so tradire actually has us beat on that because van e committed to donating 10% of their proceeds from their futur product to the protocol GE like why is trfi beating us

on this like come on guys you know so yeah I agree with you there should be that constant kind of stream there from different projects different protocols maybe not just like the tokens that they have but as you said like based on the revenue that the project actually makes right so they can donate a portion of that there instead of the the governance tokens which yeah I mean is a whole different thing they should do both but yeah it would be nice to see the revenue portion definitely all right well yeah I guess that's it for today Eric uh that should make for an interesting episode for people I think as I said there are a bunch of new people who may not be aware of the historical context here around the stuff that we spoke about today so I'm hoping that we help them understand

that but yeah I guess we'll be back in a couple of weeks from now for another one of these