Data Availability & Why It’s Important - The Chopping Block Ep.599

Transcript

you know if if we zoom out and you're listening to the show and you're like who the [ __ ] cares about this data storage thing like why is ephemeral storage versus longterm who cares all you need to think about is this allows you to lower you know fees in some certain way not a dividend it's Tale of Two now your losses are on someone else's balance generally speaking air drops are kind of pointless anyways uned trading firms who are very involved I like that e as the ultimate D5 Protocols are the antidote to this problem like hello everyone Welcome to The Chopping Block every couple weeks the four of us get together and give the industry insiders perspective on the crypto topics of the day so quick intros first you got Tom the D5 Maven and master of memes hello

everyone next we've got Robert the crypto conasur and Zar of superstate GM everybody then we've got tun the gigabrain and Grand Puba at Gauntlet yo finally I'm hase the head hype man at dragonfly so we are early stage investors in crypto but I want to cave out that nothing we say here is investment advice legal advice or even life advice please see chopping block. XYZ for more disclosures okay so we finally got to the post ETF hangover I think as much as we're tired of the ETF it looks like the market is even more tired of the ETF uh because the market has just been basically puking for the last I don't know three four days uh BTC is down about 20% from the high so it was at 49k

on the high side it was it was threatening to touch 50k and as the ETF has been live it's just been kind of slowly drooping downward to today as a press time at something on the order of about 40K kind of circling up and down it hit a low of uh I think I think it blew below 38 so um this a lot of the downshift in BTC has been blamed on gbtc so uh if you recall from the previous shows we were talking about the net inflows to the other uh ETF products I think Black Rock finally hit a billion in net inflows and almost all the other products have been net inflows uh but that has not been able to counter the outflows coming from gbtc so initially I think last week we we tallied up the

gbtc outflows I think you know a day or two after the ETFs had launched and it got to about 500 million of outflows and we were like wow that actually doesn't seem like that much given the 20 some OD billion they have uh however it looks like people were eventually waking up and realizing like oh [ __ ] I'm paying all these fees in dbtc it's time for me to get out and there's been now net estimated something on the order of $4 billion in total gbtc outflows and it looks like that's not being balanced with inflows from other for other ETFs and so a lot of these people are not just rotating out of gbtc into other ETFs they're just selling and getting the hell out so it this seems to be a big drag on the overall Market uh apparently the FTX estate has sold over

a billion dollars of gbtc shares uh and so it looks like if if this is to be expected there may just be more puking to go as gbtc continues its its uh uh you know many of these people who have higher cost bases rotating out of gbtc and just getting out of their positions well I'll be the first one to actually take a slight disagreeing position on this one so I don't think you can blame gptc because the total net flows across the entire ETF and ETP complex for all of the Bitcoin products is actually positive so gbtc you know we can look at the exact data you know as of this

morning was about you know $3.4 billion of outflows or so and there was about $4 billion across every single product of inflows and so you know in aggregate the flows were you know call it ballpark close to zero over the you know over the last week um no more money has been moving in or out of Bitcoin in the aggregate through these products um it's basically flat and the price is down dramatically even with roughly flat flows and this just in my opinion you know a result of the fact that there's hype leaving the market and what we're not seeing are the flows outside of the exchange traded complex we're seeing you know only the exchange traded complex

there's clearly net sales action in spot markets elsewhere and you know you can blame jpdc as that's the product that's losing the most money but it just seems to be moving into other products into you know ey shares moving into bitwise moving into you know all of the other products and really just a transfer from gbtc yeah if gbtc didn't exist at all or if the SEC had declined you know grayscales application while approving all of the others we might see a significantly larger net flow in the ETFs well on if you look at the flows basis my understanding was that like day one day two it was quite positive right and basically it's been turning negative

to balance out and and end up zeroing out and I think this was the opposite of what people were expecting which is that gbdc maybe pukes day one but then everything else starts like really gaining and we end up in a net positive flow position but it seems like we went from positive to negative which ended up net flat yeah I mean the bad day was the day where gbtc lost a billion dollars and I think it completely transformed The Narrative around the ETFs into one in which there was more assets at stake to leave the products than there was to enter them in the Aggregate and I think that's really transformed The Narrative across the market and has led to a declining price even though the flows in the aggregate since launch are positive right but the expectation was

that they'd be even more positive right it's always a question of relative to expectations yeah yeah I mean a billion dollars net sounds like a lot but like for an asset that trades you know $40 billion a day like over several days is it's it's really pretty in insignificant and you there are a lot of forced sellers like like the FTX estate and and things like that um but I also think there's a little bit of like reflexivity to uh gptc too where if you think hey people are who are in loss are the ones who are selling where it's like if you add any sort of you know incremental you know negative sell pressure then more people are going to be lost and more inclined to rotate so I don't think it's exactly a super efficient market and I don't know what that sort of you know cost

basis breakdown looks like for gptc holders but I mean people are sort of optimis IC that you know volumes on gptc are going down over time and so um you know hopefully we're sort of reaching the end but who knows yeah that seems plausible to me and I guess the other thing is I think this Market is probably going to continue being spooked until we see the gbtc outflows Stop and like it find finally finds the equilibrium of okay the these were all the sellers they're done now we go back to net inflows because all the other you know all the other ETFs are are only going to accumulate capital over the year as the um you know financial advisers and allocators finally start getting some of their clients into this product which

which I don't think we expect it to be all at once right I think it's kind of a slow grind over the course of the Year tun looks so bored right now tun hates the Bitcoin ETFs it's just like wake up wake up please kill me please kill me if I have to hear this will be the last show where we talk about the Bitcoin ETFs for at least one show I don't know if that's true I we'll see I hope that's true all right all right look we we' we've um we we've made our sacrifice to the ETF Gods I think we can move on now uh there was there was one much more interesting crypto native story which was around a bug in one of the ethereum clients called nethermind so um I think

it's maybe worth doing a bit of backstory just so people understand kind of what the story is about so ethereum uh back in the day ethereum had one client and when we say client we mean the program that people run in order to validate the ethereum network um in the in back in the day ethereum basically just had G which was the go ethereum client written in the programming language go which is basically existed you know from the very beginning of time essentially when when ethereum first came into existence uh when ethereum uh went to ethereum 2.0 they split up into two clients one is called the execution client and one is the consensus client the consensus client runs uh basically the staking and the consensus layer the the what was called The Beacon chain and

the execution client actually runs the code on ethereum and uh right now there's been this big haloo around what's called client diversity which is basically how much concentration is there in which client everybody is running to actually validate the ethereum network or to run execution of the ethereum network on the consensus layer for ethereum there's actually very good client diversity uh there many different clients like you know Prismatic labs and you know nethermind and whatever all these different people have clients and uh there's there's a good distribution where I think it's like you know 40 30 20 or whatever it's pretty good um the execution clients however are a very very different story on the execution clients more than what

is it like 90% uh or 85% or something 78% are gu 78% I see okay so about 80% of the clients that run execution ethereum are running gu so now gu again it's the oldest it's also the one that most other networks that fork the evm also use gu so most of the rollups you know Avalanche uh you know Phantom all these other guys as far as I know they they pretty much everybody runs gu um it's just the most battle tested and it's the most used now the problem with this and uh so this came to a head on January 21st uh there was a critical bug in nethermind uh in their ethereum client which Powers roughly 8% of validators and now nethermind is a minority client

it's not the most used client uh but this got people worried that like hey what if this bug instead of being a nethermind was in gu ethereum was able to continue running because nethermind was such a small portion of the ethereum um you know validator set but if this bug was in gu then this would halt this this would completely halt the network and it would mean that ethereum would stop producing blocks and it would just get stuck and until somebody would go in and fix the the GU bug and there would be no realistic way that people could rotate clients in that period of time uh rather than just waiting for the bug to somehow get fixed and so this has led to a big conversation in ethereum about should we work to intentionally increase client diversity and move away from the

Monopoly that gu has over um uh over over execution in ethereum so a lot of people going back and forth one thing to also note is that this is pretty weird in the sense that almost no other blockchain has client diversity at all so if you look at Bitcoin Bitcoin core is the Bitcoin spec there is no other client that that has any meaningful market share you look at other chains like salana or near or whatever none of them have any other client there's only the conical client effectively um so ethereum is unique in having other clients to begin with but it's increasingly being talked about as hey maybe we need to push as consumers of staking services or as you know the uh exchanges push them to start adopting

clients to enforce client diversity so what do you guys think about this whole client diversity debacle and debate uh and and where do you feel like this is going do you think that client diversity can happen or is this a pipe dream well I I personally don't think that you know client diversity is necessary what you need is operator diversity Geographic diversity you know resilience and strength through numbers it doesn't matter if you have 12 different clients running the network it's about at the end of the day how many different validators are there and you know having diversity and resilience you know from you know how wide your validation is um you know I think it's almost safer to have one

completely you know battle hardened client that everybody's focused on as opposed to assuming that like through having multiple clients like you know it doesn't matter if there's an issue you know yes Bitcoin core moves slowly but and yes GE moves slowly as well but implementing clients in the first place is unbelievably complicated like the effort that it would take to create you know I think multiple new clients hypothetically would be astounding implementing you know the ethereum you know spec so to speak is not easy it's like not trivial the odds that you get it wrong I think are significantly

higher from a new client that's originated from scratch than you know an existing one um you know when I entered you know the ethereum world in like 2016 2017 this was actually a pretty big conversation back then and you know I feel like the conversation's died out over the years and it was oh well we need to implement this in multiple languages you know gu was go how do we implement this in Rust how do we implement this in Java how do we do this in like different programming languages because the idea was that one language itself wasn't Dependable I mean I think that's a risk that can be taken you know and I think you know it's almost more reasonable to have the entire Community get behind gu make it you know strong and perfect than to try

to spin up new clients which is a herculan effort and the amount of effort that goes into getting it right I almost think you know potentially can't even be done safely at this point um yeah I would I would mainly Echo that although I I think like if you look at the history of um sort of mission critical open source software so like compilers um Linux operating systems you know you you generally do see this thing where there's like some core component that is conserved there's very very very few sort of like core kernels like there's you know

there's all these people who make research kernels and Academia but there's not really like something that's used in millions of production servers that differs that much from the core Linux kernel like obviously you have modules and stuff uh in the operating system that are different but and there's also the same thing with compilers like it took so long for there to be like a compiler to competitor to GCC in llvm and there's sort of this question of like why you want to do it usually one of the reasons people kind of when they take a mission critical piece of software and they want to rewrite it you know Linux did it because it got over licensing and

patenting issues from Bell labs and Unix and then Windows eventually um that makes sense right that that's that's a reason to make another operating system it's cheaper um you know open source AI it's the same thing it's like getting around sort of the licensing agreements and stuff um but if you look at other Mission curricular software it's very rarely that there's a reason to do it that's like hey we want to make sure that there's Kumbaya for every possible programming language right like there's a reason almost all compilers still just use the C++ compiler C compilers at the bottom of the stack and then write stuff

around it as opposed to writing their own from first principles um this just very easy to make mistake and then mistake is catastrophic and very hard to find um on the other hand I do think there is some benefit so so sorry another reason that people will make Mission critical things that are not just close Source uh competitor is extensibility so like you may in order to make a system more modular so you have like the core component and then things that people can extend you may have to rewrite the main thing because you know it was initially written as this monolithic single code base and so you can't really break it apart into pieces and there's a

reason to make another so in the compiler case for llvm that was sort of the big deal right like it separated the front end and back end more cleanly and so people could build compilers for other programming languages using it and so kind of had this nice little feedback loop um I don't really see an argument for that here either it's not like adding other clients makes you more modular it does adding other clients does give you some new functionality like you know you can double check particular implementations of like very core cryptography you can make sure that like hey multiple people have seen it in different languages and come to the same thing so like everyone's agreeing on the math

correctly um but I I think there's sort of yeah there's kind of always been this war like Robert was saying um I think it's only become kind of more interesting with with staking derivatives and also with the fact that there are tons of forks of these clients for different purposes that exist and maintaining the forks the forks you could think of as like the modular components right like I have the main thing I can add these other pieces and use it for my use case um so so I guess long story short I think client diversity is generally a bad idea I think it is a good idea from a as an academic exercise of proving hey there's like these faults that you can

correct but I don't think it's necessarily a good production software exercise because like I said I I think there's only really two reasons you you rewrite Mission critical software one is licensing getting over licenses and the other is kind of this modularity thing and that that neither of those apply to the scenario I thought the the Linux kernel analogies is actually really apt the difference is that like the Linux kernel does not update nearly as frequently as something like gu right gu is expected to be this sort of core that then people you know sort of sort of lus tvold from the 90s would be offended by what you just said no I think if anything you know that that's the whole point is there very protective and he's an [ __ ] about the colonel so that it is solid and robust yeah yeah I I just

meant in the '90s it was updating like oh sure well everyone does crazy [ __ ] in their 20s so um but I think uh I think it's it's really comes out to like an incentive issue right if you look at the clients today and actually to your point around around gu if you remember back in the day there was also parody right and the idea with parody is that would going be more you know sort of for profit you know Red Hat Fedora kind of style and like there therefore there was sort of a a profit motive to it there there's maybe a story around modernization these days you know all of the clients right are basically sort of research or Grant driven um development there's there's W which is you know coming out of Paradigm so it is possible to build a new client

but there's not really a profit motive there's not really a business incentive there's not really a uh you know any anything sort of self- serving around developing it and so I think therefore there isn't really a you know desire or movement or or any reason to um hey have a competitive Marketplace of these things these are kind of like R&D projects um almost sort of like nonprofits in a way and and so it's like you know how are you going to incentivize people to uh uh build new clients and run new clients if there isn't really um you know any sort of U Marketplace uh for these kinds of things so I I will gently take the other side of that although I'm I'm somewhat sympathetic to the arguments you guys have Lev I think if you look at the execution layer uh it kind of looks like

okay well clearly this is impossible right like there's just naturally going to be centralization in the most robust version of the ethereum client which is gu and the end if you look at the consensus layer it's kind of the existence proof that that's not necessarily true right the consensus layer is pretty dispersed like there there is not a lot of concentration in a single client and you know the uh uh tun you're making the point that like look you know something that as actually Mission critical you have one implementation and that's the implementation and that's the view that Bitcoin has always taken is that look Bitcoin uh Bitcoin core is the spec for Bitcoin there is no external thing that is Bitcoin there's just Bitcoin core literally this piece of code is the is the uh uh is the spec for the protocol um ethereum does not take that view and

I think in a way that is in some ways you could say it slows it down in other ways you could say I think it makes it more robust Al also to to be fair I I I think Bitcoin is a weird example nowadays because now people are making all these custom clients for ordinal support and l2s and stuff so Bitcoin actually I think is evolving more quickly than you think right now but I I agree like the three year ago vision is sort of like like it's sort of like Linux it's sort of like Linux in the way you're describing right where like core is the kernel and you can kind of add yeah yeah yeah but but but I I think these add-ons now thanks to ordinals have been getting seeping in more in the innards if that true true true but I

mean you know rsk was doing that back in the day and you know there's all all sorts of other stuff like lightning is kind of this weird you think of it as the thing the thing that's worth remembering is the first ethereum client was neither in Russ nor in go it was C++ ethereum written by Gavin wood and it's very important to remember that ethereum itself flipped its client pretty quickly uh and that's a historical vestage that's quite different than than uh Bitcoin right there was also ethereum J which was the I think what Tron originally was a fork of ethereum J which is the Java version and yeah so there there have been many ethereum clients over the years and they've come and gone um but I guess the the the point that that I'm trying to make here is that actually I thought the analogy

you're making like okay Mission critical software means there's one implementation the the one canonical example that I actually remember learning about when I first got into crypto was uh space shuttles space shuttles actually do precisely this which is that they have I think it was four implementations by different programmers of the same Mission critical code because a space shuttle it's like if there's a bug at least especially back in the day when you can't do over the a updates uh if there's a bug it's like game over the space shuttle crap there's billions of dollars down the toilet and so they have four implementations of the same code or the same program uh and they run Byzantine fault tolerance over those uh like a Byzantine ftar algorithm over those four implementations of the same code because of course there can be

bugs there can be cosmic rays flipping bits and all sorts of craziness um and that's what like re like Mission critical comes from space shuttles that's where the term comes from uh and that is the place where you yes you actually do want this reimplementation of code um because it's very very important that this thing always works now in normal software right if I'm just running like an operating system this is why I left the trapo of like the academic exercise of using it is good I think in production it's kind of annoying I think the thing about space shuttles that's very nice is they have a finite lifetime so you need it to work for this U-turn lifetime I think the problem with blockchains is they have this like Perpetual nature that makes the the the running multiple versions

like a lot more hary to deal with yes it's true and obviously ethereum moves pretty slowly I mean obviously Bitcoin moves slowly too so maybe it's more a function of age than of the the fact that they're multiple clients but you can tell etherum development moves very slowly because of all the coordination that's required across all of the client development um that said that's just kind of where ethereum's at you know like I would never recommend salana or you know any new generation of blockchain start by saying great let's go go multi client and support multiple clients simultaneously although salana is trying to do that a little bit with fire dancer but they're still saying look look we're not going to slow down for fire dancer to catch up we're just going to keep iterating and keep improving the tech

and I think that's right when you are a startup um when you are is kind of in you sort of first flush as a new blockchain trying to get your footing uh but I think where ethereum's at I think it's possible and you're seeing it right now like there was this uh tweet thread from uh who is it um uh who the guy yelled at uh coinbase and was like I'm pulling out all my Stak from rocket pool uh no no no no uh let me see who it was uh whatever I don't remember uh there was some guy who was like Hey I'm pulling out my money from uh coinbase because I don't like the fact that coinbase is all running on gu and Brian

Armstrong replied and said hey we're going to look into this and fix it and make coinbase Cloud go multic client and make sure that we're staking through different validators or it's a DC investor DC investor yeah yeah exactly DC investor so now look it's one guy I don't know that there's you know this flood of people who are going to be following in his footsteps but I think it's relatively easy for a small number of players to just kind of feel the Zeal that's coming at them and decide to change their minds the same way that in in Bitcoin uh uh uh mining pools people just got mad on Twitter and then the the the things changed even though the incentives weren't really there right we know look the B the bug was not in gu the bug was in nethermind which is a minority client there was a bug

previously in Bess which is another minority client most of the bugs are in the minority client so the reason why G is dominant is not because people are lazy it's because people are rational is that they know this is the most battl tested uh and and the oldest of the of the realistic clients that one can use so people are smart people you know people are maximizing their own profit but if consumers can change the incentives and say hey it's really important to me that you actually lower your usage of the majority client it's kind of like the the ethereum version of ESG I think it can I think it can work and I think it's already starting to work I I I think I it's it's it's not that I don't think it's possible it's it's that I think investors have never

[ __ ] done devops in their life and had to do an on call ration and all I gotta say is [ __ ] you people who who've never had to do that because like it is very stressful let me tell you in like many different contexts it's like the worst and it's usually just some like when token [ __ ] yelling at Peter S the main maintain one of the main maintainers of gu about like [ __ ] like this and I'm like I I don't know how that guy does the thankless job not only does he have to deal with the emergency stuff he has to deal with these [ __ ] [ __ ] airdrop Farmers like you know it's it's it is it is kind of like a very thankless thing to work on bitcoin yeah because there on ethereum no no no

sorry sorry sorry sorry in his Twitter like if you if you ever see like him complaining about tokens you know like the airdrop farmers will just be like giving him [ __ ] and you're like you wouldn't have any airdrops without this guy what it's just they're just so dumb like I it's like actually impressively like idiotic in some ways yeah I mean look it is it's obviously technically possible to have client diversity I I think you know the point is it's not natural it's very inefficient and you have to sort of force it and be willing to eat the in efficiency you're buying a ton of tail Risk insurance which you're basically never going to cash in and so you're like hey this is just something that

we're going to eat and you know even even the you know consensus client example like prison and Lighthouse are pretty much a doopy so it's not that actually diverse and those were also that was also a very concerted effort with eth2 as you said where large grants from the ethereum foundation from consensus went out to like build these things if you went through like the E staking flow um on ethereum.org like they they pushed you to choose a more diverse client like it was a very considered effort and so I think if there is willingness to basically you know burn cash for the sake of sort of this tail Risk insurance then yes you absolutely can do it I think it's it's my question is more how can you make this sort of self-reinforcing how can you make the market desire client diversity how can you make entrepreneurs

want out want to go out and make a brand new client and I don't really know what that answer looks like today if you have a answer for that then I think you kind of have a um self-sustaining solution no that's a that's a fair point I don't know that you're ever going to get an economic mechanism to make this kind of thing happen right and like the blockchains I think they're you know they are about tail risk because it's about being like the whole point of blockchain it's up all the time it's usable all the time and the one thing that could really shatter ethereum story is that it fails in a catastrophic way um at the same time like look it's it's almost C the case that there are bugs in gu you know like there's no way that

there are zero bugs in gu I mean we've had bugs in op SSL and the Linux kernel and things that have been around much much longer than gu and have had many fewer eyeballs on them over that period of time so there's just no way that there's literally zero and we'll never find another bug in gu ever again um so there you know there there will be bugs and and at some point we are going to have a bug that ends up causing some kind of consensus failure you know like it it it will just happen if it's not a chain split then then some kind of uh massive downtime for ethereum uh and so I think it's a matter of creating the resilience to I think what is more or less inevitable at the expense of yeah we're going to eat more complexity and

we're going to move slower in the meantime but like I don't think ethereum at this point is about being the fastest to iterate or to move I don't I I think it's probably wrong for ethereum to prioritize that at this point in its life cycle yeah maybe but I I think that's also you know there's there's a sort of um you know Bandit problem type of thing here like I can either spend I have a fixed amount of resources uh I have a bunch of different places I can spend them I could spend them on having 10 clients or I could spend them on having one client but get Dan charting working or 4844 do you know like and from an engineering organization standpoint I think it's

kind of it's it's yeah it's a different trade-off point the trade-off surface right like the salana version of this is kind of interesting because they somehow outsourced clients to other people which is a Bizarro well I mean yes but they also have GTO Soul they also have the forks of the salana labs validator that I think like salana is actually much more diverse than you think all the people doing svm rollups um also have C kind of client Forks it's like it it is starting to look like ethereum's ecosystem it probably the only L1 that has like that many Ling limitations but I I just think like you have to remember like whenever

people are complaining about like oh my feature didn't make it into main net or like why are why do we have no bandwidth on al2s and we need alt da layers you know like all of that stuff stems from the fact that we split the fixed engineering P fixed budget across many places and so and and and look look look it's a values judgment right as community that value for for salana yeah for salana my understanding I mean correct me if I'm wrong my understanding is like everything is derived from the salana core client and like they added little things on the same way that people have added stuff on together it's all still the it's so many little soul goo is is added it's like but fire danc totally different fire

dancer in C+ fire dancer fire dancer is a ground up rewrite but fire dancer they didn't they didn't they um constrain their initial launch to say like look we actually a bunch of the stuff we just going to run uh the original code and then we're just going to add like modules over time because the ground up rewrite was just way too big for them to actually they changed like everything even the like eraser codes are completely Rewritten like I I I I I think you should really yeah I mean the the read implementation there is completely different so I I I I think at least from what I seen there GitHub which you know is my my North Star on this uh I I I think like you should really consider fire dancer a complete you know like it's like bre and

gu yeah that's my that's my assumption is that they want to eventually get to a complete rewrite where they jettison all the old code yeah um but my understanding was that they were they were basically like look we're going to chew we're going to bite off something that we can actually chew initially as opposed to waiting until we have the entire client Rewritten um but yeah look fair fair point I understand obviously fire danc is not live uh and uh well I I think it's interesting that they they chose different you know engineering choices right like fire or chose particular optimizations they want to do they're going to rewrite it whatever but they didn't hold up hard Fork inclusion right it wasn't like they had engineering resources that would have

gone towards adding new features for next hard Fork into maintaining another client right whereas in ethereum I I do think that's actually true I really think there's a I don't think the pool of people working on clients is growing anywhere near as fast as like transaction demand is growing and you have this finite resource and you have to allocate it and you you chose an allocation as a community to to spread it across clients but you could have imagined an alternative Universe where all these features that everyone talks about which aren't implemented actually are already in the chain because like instead of rewriting the client x times you actually added the featur so there's there's also this kind what are all

these features that you're I mean dank sharding and all of the data availability related stuff are you kidding me like that that there's an entire there's there's tens of billions of dollars of market cap that have Arisen because of how slow this is never forget that right like that literally because people just didn't want to invest time so it is a a management thing it's an organizational behavior thing of like we have finite resources and we're treating them as if they're not finite but they actually are and so what's the opportunity cost well it's this thing and then so now we have a da layer War so actually maybe this is a good transition to talk about Denon so Denon is the name for the

upgrade that is going to be actually shipping Proto Dan sharding so Proto D sharding for those who are not familiar long story short this is essentially what's going to implement EIP 4844 which is the um blob storage uh so essentially what this is going to do is right now if you're a rollup and you want to do to uh post some data to ethereum uh you have to pay a lot of money and basically you're you're taking up the same space that every other competition in ethereum is taking up of you know writing writing uh uh volatile storage onto ethereum um in a Proto Dan sharting world there's going to be a separate Lane that is only going to be for data availability basically meaning it's going to be short-term storage

where you can just dump some blob of data arbitrary data ethereum doesn't care what you're putting there it's just anything um and it's stored for stored and retrievable for a short amount of time essentially uh this is more or less ready to go I think people are projecting right now maybe like end of q1 uh I think this is projected to potentially hit mayet um there was a there was a test net trial run that was taking place on Gurley apparently didn't go very well uh and so they're now kind of going back to the drawing board that may end up delaying things but uh this is projected to lower the data availability cost for rollups on ethereum significantly now that being said um from what I've read the expectation for the throughput meaning the total amount of data that's going to be writable to the the the um blob

storage on ethereum is something on the order of6 megabytes per second something like that like not we don't know the exact numbers right now but it's it's not huge relative to what people are talking about for data availability layers like Celestia or aale or igen da those are projected to be more in like the many megabytes per second of total data throughput that they can uh withstand ethereum is going to be relatively low and so there's a lot of projection that even in a Proto charting World although it will lower costs for rollups significantly the total demand for da is so high that uh there's still going to be we're still gonna have to use external da uh in order to withstand all the demand for uh data availability usually you are um you are the uh person

who forces everyone to stop and Define some terms but I'm going to flip the script on you and make you define dat availability for The Listener I I used it first but I'm going to still make make you do it okay thank you um no good good shout uh so data availability it's the new hot term that everybody's talking about um Celestia Igan da and Avail are all data availability layers data availability is basically the very simple explanation is that uh there are certain kinds of storage that are not needed for long-term storage but basically short-term storage or medium-term storage uh so for example for rollups especially optimistic Roll-Ups often times you have what's called this challenge period you need to be able to

see uh the data that has been committed to this layer 2 for up to two weeks uh or up to a week or two weeks or whatever different rols parameterize it differently um and so data availability is a mechanism to prove this data has been uh stored and it's available for up to some short period of time it's not forever like a network like filecoin or um uh uh uh what's the infinite story R weave right or R weave which claims that stores data forever or filecoin which stores data up to you know some long contract period uh but instead it's like hey this data is going to be available for X period of time and then you know no no bets are off on whether or not this data will continue to be available and um the the the replication and the

availability is very important to rollups in particular so almost everybody when we talk about data availability we're mostly pointing at rollups almost nobody else really has this data access pattern uh and but rollups are the big story for ethereum scaling and that's why data availability has become such an important idea that many different teams are trying to um uh add on to the capacity of ethereum in a Proto dank sharting world uh to give it more data availability capacity so what do you guys think is going to happen when we get data availability increases a lot of people are now projecting that because of the total demand and the total number of rollups increasing so much that we may actually not even get the discount in da prices that people are projecting with Proto sh

stting because basically as soon as we get more capacity demand just increases to fill it up so do do you do do you know what braces Paradox is uh oh is that the um yes exactly it's one where when you add a road you actually increase congestion in certain networks under certain types of flows um I feel like this is a a nice apt version of this where like sometimes you build a road and actually all you do is congestion because everyone wants to take the fastest road or the safest Road or whatever and so they all just kind of uh keep doing that that that does seem uh I mean on the face of it it

seems implausible today because almost everyone is using the main road ethereum as da yeah everyone is using the main road right so I think braces Paradox only works if there's already multiple roads yeah you you need you need roads of different amounts of traffic like you need roads that are highways and that they're kind of have constant speed that doesn't the speed it takes you doesn't depend on how many other people are on the road versus like single Lane roads where like speed you go at depends on but you could argue that a lot of the alternative da layers now in a world where you have multiple of them you might actually start having this kind of brace like effect um well what's going to happen is the newest data availability layer that you know people

get excited about will be the one with this paradig because everyone's going to race to whichever layer yeah yeah I agree I agree I kind of agree with that well they're all fighting to be the layer everyone wants to be the brace Paradox you want to be the brace brace data availability right that's the Paradox it's a double Paradox is that it's G to happen because the road itself wants it to happen well data availability is kind of weird because it is it is in a sense like a B2B thing in that consumers like don't know where their data is being made of available because they don't necessarily care yeah exactly so like would that not be an indication that like actually the protocols themselves are likely to be pretty

rational and sort of allocate efficiently across all the all the roads so to speak I mean I think we're seeing we're seeing certain rollups or like people who have moved some of their applications for their own rollup like Avo announced today they're using Celestia um a it was like a large perpetuals decentralized perpetuals exchange that disclaimer I think everyone in this shows uh investor in um and uh you know I think there was there's Lyra finance a couple weeks ago so you're starting to see like people who have real users and are paying the da cost suddenly be like wait I don't want to pay the da cost anymore and I think the market is starting to to flip into this fee mindset now I was talking with someone

today even if the da layers lower the fees to you know Salon like levels for a lot of these applications like I think that's like the the goal in some ways of like you know if if we zoom out and you're listening to the show and you're like who the [ __ ] cares about this data storage thing like why is ephemeral storage versus long-term who cares all you need to think about is this allows you to lower you know fees in some certain way because it turns out these data storage fees are quite high if you make them Perpetual but if you time bound them you can make them cheap and I still don't think that you can say that rollup ux is like rollups are like one to one with salana just because the fees are the

same because I I really think the uux difference is still not very non-trivial between the two I mean how do you feel when you you know do you feel like if you went to a roll up to use an application and the fee went down 100x you would you'd be like okay great I'm gonna stay here versus moving to a cheaper yeah I don't know how much I mean this is actually also an interesting argument uh I I think there's like if the fee is low it doesn't really change the ux at least not for me if the if the fee is like 10 cents versus like a tenth of a cent I think for meme coin Traders is that's the only place where it it matters because it's like people who are like I have 10 bucks I want to buy 10 different meme coins right now you know it's like

okay then you're very very fee sensitive yes yes but I mean if you look at like binance smart chain or you look at like polygon like fees are not like I I don't think there's a lot of evidence that you need to be like that that basically demand is responsive to like fractions of a fraction of a scent you know like I I think like maybe there's a theory that oh the guy with $10 like he can do all these things on salana he can't do on binance Smart chain um but I I just don't think there's a lot of actual evidence for that story being a driver of of behavior well I'm just saying that this is something I this is something I feel like I hear all the time that people are saying it's like oh like are like salana then we will

compete for the meme coins again I I just don't does feel like that's true to me but I'm willing to be wrong it doesn't feel like that's true to me either I don't know Tom what do you think oh I I was going to say I mean I think you know sort of like the whole like log versus linear wealth debate I think there's sort of like a inverse log like like cost debate here thing too where I think you're right if you go from I think a tenth of ascent to 100th of ccent or a thousandth of ascent like it's it's actually like so negligible at that point and I think even we get this argument too on like latency as well people say okay you know salana you have you know few millisecond block times versus you know 1 second confirmation time on a rollup sure maybe if you're

high frequency Trader maybe you're trying to do you know NASDAQ on chain that that is a meaningful difference for people who are trying to send usdt back and forth to their friends or you know mint nft that is really not a meaningful difference um and so I I just find it hard to believe that um that is going to be where people are sort of making their decision I think it's going to be much more around where do developers want to actually build their next application is this a place where they feel like they can find users and they can find Capital and they can find you know a great experience to build on top of and think you know again that think that's more where salana succeeds versus a rollup is that it's you know simple it's monolithic um you can come up and you

can you can you can you can deploy but obviously the downsides of the SPM people having to Bridge Over You know having to like find new users in capital so I think in many respects like the the costs of the tech are a very minor you know determiner of um uh uh usage and it's much more about s of these other factors as I going back to your uh uh fee question there's actually a poly Market um for the gas price per blob one month uh after EIP 4844 um I just don't know like what one blob want show screen yeah yeah I have not done the back of the envelope math to even like Gro the basics I didn't know what this means um so yeah I'm like I real like

we're actually we actually are like one unit off from like a like average like transaction or like you know call data amount or like you know uh uh a a storage size but um interesting there already a market here um I guess if listeners know what a blob corresponds to um in terms of practical usage I'd be curious to to hear okay so none of us actually know what this means no not I'm glad I'm glad we threw it up here is is like a rollup uh is a rollup settling one blob per yeah yeah yeah so is it like one blob per block okay a blob is 128 128 kiloby of temporary data yeah it's just 100 it okay this doesn't seem that off I mean

in this prediction Market it doesn't seem that off from vaguely with the costs are today in the status quo I mean looking at the upper bounds of like 01 ether and stuff to 0.1 ether um no that is cheaper it is cheaper this yeah yeah yeah the market is pricing in a 10x ruction effectively yeah sorry yeah yeah if it's 128k um let me zoom out let me zoom out and look at this from first principles for a second so I think data availability does lead to different types of applications fundamentally I think everyone's focused on like oh it leads to l2s being

efficient but I also think it could lead potentially to very different things um you know when you look at like what is the cost of writing something to a blockchain some data the reason it's so expensive is because like you're not writing it to one computer you're writing it to like 200,000 computers and like forever that's like the notion that most people have about Bitcoin or ethereum me it's like data is crazy expensive because like you're writing it all over the place and you're writing it in Forever versus writing it all over the place for a short amount of time that's way cheaper right but it's still fundamentally like crazy expensive because you're writing it all over the place you know to write 128k of data to like you know an S3 bucket is you know

nothing right like it's it's free forever um so I think what happens is you start to innovate on the data availability products oh it's not forever it's for a week it's for two weeks it's for you know two minutes you get different like applications entirely like actually think you know crypto gaming actually might be a weird like long-term beneficiary of like blobs and more transient storage in general um just because like you know if I'm making a video game I don't need the data to persist for 20 years I needed to persist for like I don't know maybe a couple months in some sense and like maybe it just completely unlocks a new type of

application there and yeah maybe like there's a lot of onchain like NASDAQ like trading that just doesn't function at all but when it's more transient it does function and you know I'm curious to know what sort of like the use cases that erupt from this are that aren't just like oh this was designed for l2s to post data that you need for exactly two weeks yeah I mean so far I I haven't seen a single I don't think I've seen a single game I don't think I've seen a single application yeah claim to me that they're going to use da for this alternate use case that said the further away you get from the more crypto native stuff of like defi or layer 2s or whatever the less people even care about

any of these Concepts they're like oh yeah I mean look my game's already centralized so I might as well just store all the [ __ ] myself and there's a$1 15 billion doll uh market cap coin that says there's some amount of care a 15 billion Mark cap coin that wait what about Celestia care and these things I'm saying I'm just saying FTV excuse me FTV yeah not say market cap FTV sorry sorry f okay I was thinking market cap uh yeah look uh yes yes yes okay here here's the other thing I would say and kind of going back to the previous point about um performance right because I I I I want to continue this thread of like how much are people sensitive to fees and also how much are people sensitive to latency because I

think this is also a big part of the story about rollups and about salana and about why people are going to be moving away from ethereum mainnet and these traditional experiences I mean this is also something by the way is unique to crypto this like fee verse latency tradeoff in ux design right like in in in like if I made Robin Hood or revolute I don't really ever think about that right I just try to well you do in that you want to get the L low as possible yeah exactly exactly you make both zero yeah exactly but the data is plentiful because you just stored on one server oh totally and you can do it un limited scale I mean ironically I'm pretty sure that storing stuff on R weave which is supposed to be forever is cheaper than call data on ethereum which

is supposed to be temporary right so like I I I think the the absolute um externality is not how these things are being priced it's just a it's just a market and there's like some constraints that are being set somewhat arbitrarily on like why why is ethereum call data more expensive the data onever storage on our weave can't really do anything there's no like other applications that are composable with that data really at least to my current knowledge like there's no applications composable with call data right call data is transient yeah that's true but like on ethereum and on salon and all these places is like the data is like super valuable because it represents like token balances and the transfer of those tokens and it's like you know extremely valuable data like storing like a photo or a movie or

something like that like you know it's not as valuable I I I also think there's kind of this this weird thing that I I still have not been able to philosophically get around which is like philosophically blockchain started as a pend only right like there's no there's no notion of this like delete transient Behavior right of course you know you eventually add that back on but the history of computing has always been this kind of like just in time storage just in time compute right like that's how the cache hierarchy kind of means that you know whatever you you're not really a Von Norman architecture computer in any sense of the word in a modern computer but it's never been clear to me

like what blockchains get from these types of caching optimizations like I I I think l2s are an example but it's sort of a blockchain eating a blockchain it's not like a caching thing that without the cashing you would just like never work right like l2s are working right now without blot space they're just more expensive in some some sense so there's just kind of this weird thing to me where I I don't I haven't seen something that isn't just like what's the use case of this particular thing another blockchain you know like we haven't quite that's that is true that said we love blockchains especially on the show we love blockchains that's the best that's the best Christmas present is

more block yeah The Chopping Block Chain yeah exactly I'm just saying I would like to see some like you know like how could you how could you you're ruining Christmas I know I know I'm sorry I'm sorry I'm just I'm just saying like like it would be cool if the like to to Robert's point of like is there something else because like okay yes I agree what is there you are in the wrong industry if you're asking is there something else I think I think may maybe you need to take a vacation come back renew your your love of blockchains personally I think if there are more blockchains that's [ __ ] awesome I think I just think like caching caching right enabled a lot of things in operating systems like

window managers like why do you have the ux that you have with like having multiple windows like caching helps a lot with with like a a very basic LEL for them that's like some application that was enabled not just strictly like oh I could like do more of this compute you know and and like I just feel like somehow that is not obvious to me in a lot of these systems like where that comes from other than fees like the fee part I get right you know I honestly would say something like privy and like embedded wallets is much better for user ux than this 10x fee reduction because it makes it feel closer to web 2 app or salana and the fee reduction matters

until some point right people aren't elastic like what we were just saying right like yeah but we're not anywhere near that point for something like ethereum right ethereum fees are crazy I agree but now suppose we we we take the da L we we made the Fe salana fees I still think the marginal utility to the user actually goes up more from the privy style embedded wallet experience versus the the fee Beyond like there's some Threshold at which they completely flip right but but here's the point that I was going to make is that l2s also enable a lot of this not necessarily you don't need a privy style thing but you just need the fact that you know l2s have these sequencers who basically run the chain right it's it's potentially even a centralized entity although people want it to be decentralized

sequencers over time um one of the advantages of these sequencers is that you can give people these optimistic confirmations instead of saying okay we're going to fully achieve consensus and do all this fancy [ __ ] instead we're going to say look uh we're going to tell you thumbs up you're in the blockchain even though you're not actually in the blockchain yet but I promise you you'll be in the blockchain and if you're not you know you can you can at me and take some you know I'll pay you some money I'll give you a refund later if uh it turns out you're not in the blockchain and this actually enables really great ux at even lower latencies than salana right you can basically say like look the moment you get the moment you ping my IP and I give you a check mark you're

good so that can get you down to like 100 millisecond latency or like more Web Two style latencies um you know I I I think this uh kind of the uh intermediated architecture where you have this optimistic layer in between yourself and the chain confirmation I think this is going to be the direction that all blockchains go over time or not all blockchains but I should say all applications go over time right if you're if you're a dexs if you're a game I'm not actually going to wait until the blockchain says y or nay because yeah I I don't even if I'm a game I don't want even if I'm on salana I don't want people to wait 400 milliseconds like that sucks no game would ever say great let's we have to wait 400 milliseconds because the blocks you know block time says so well it does ask the server you

know very quickly did like you get the kill shot or not or whatever exactly but it doesn't wait 400 milliseconds to ask whether you got the kill shot right it needs super Snappy latency and it uses a lot of optimistic tricks to assume the answer is yes and if the answer is no then I go in revert this optimistic thing is effectively the same as you know in some ways what you know cash is in a process processor do right they like optimistically store a cach line even if it doesn't know it needs to read it because it assumes there's some sequentiality and like you'll get some benefit well it's it's more like the sort of super scaler processors for sure sure sure but I I I just don't to me it's there's still kind of this like missing thing of like I

open Phantom and I use Salon applications and it's very responsive I mean they have problems with transactions not Landing like that they have tons of problems with like spam so like let's let's ignore that but the the actual application usage is just so much easier onboarding for a new user than an L2 and L2 like you kind of need an intermediary lending you money on the L2 otherwise you have to go through the canonical Bridge it takes forever you don't have the same onboarding ux either I feel like and that's that's something I I don't I've been think I disagree there are exchanges that will you know give you a direct deposit on an L2 going to base is easy this is this is like looks nice this is like a very like on

binance it's like almost every L2 they support direct withdrawals yeah I guess I say imagine this is just like a a this is like a Twist on Chinese room argument you know you're you're sending transactions into a box and you know on the outside they say hey transaction was confirmed do you does it matter if it's just you know a single server s sitting somewhere that's actually processing all the transactions or it's you know the entire Solon blockchain going through consensus practically not especially if the the end result is you know going to get you at the same point you know several days down the line yeah I just think I just think somehow like features that improve ux seem to never get any priority in these road maps and again maybe we're back to where we started of like hey we have a fixed

engineering budget maybe we shouldn't spend it on duplicating the thing more than three times right well going back to vitalic post about Cypher Punk values I think it is really like yes you look you're totally right and obviously you know four of us are investors and we care a lot about creating great products as opposed to just you know great protocols um but ethereum is ethereum because of the values that it espouses for sure for sure I'm we're not focused on ux like the ux of ethereum is [ __ ] no it's like C+ uh okay well that's I mean I don't know for for a startup that's [ __ ] right like from the perspective of product building and Bitcoin is even worse yeah

and Bitcoin it's like yeah yes you're right it's it's bad and it's going to stay bad forever God bless Bitcoin well I that I actually am I I would be willing to to bet against I think I on the next shopping block I think I think the Bitcoin rollups are are are the Bitcoin rollup world is kind of interesting lately okay all right all right interesting maybe we'll have to RIS but but I I I I I I guess to me it's just more like I I want to kind of feel like the L2 progress is more than just fees CU like I I get the fees are important but I think I think the the fees are not linearly elastic it's not like I I decrease the fees 10x I get

10x more utility for a user and I somehow think like that keeps just being completely missed and it in ways that like annoy me when I use try to use some products yeah there's definitely diminishing marginal utility for reducing fees but we're not there yet right we we can still reduce and we we will get a much you know much better ux yeah yeah I think that that Gap is between like salana and the rollups is where or like salana and polygon right like that's where there is this just in inelasticity where nobody really cares if it's like a a tenth of a scent or a thousandth of a scent but people really really do care between like it's $2 to do a swap versus it's too cents to do a swap I think there's a lot of elasticity

in that in that Gap so anyway we're up on time uh we'll be back next week I'm sure there's going to be no more ETF conversations at all in any way so uh for to for for for the record block I feel like somehow someone on the internet will interpret what I said as being a salon shell so I I I I want to let the record be straight are you not a salon shell I think I think there's Duality where both of the both ecosystems have their right and like each like using products in both places gives you it it just like gives you a lot more insight into like there are things they could learn from each other but instead everyone's just like constantly beating each other up and like I think the the the code bases the

products like if you use those and read the code there's a lot of lessons that could be learned and like somehow I I just think like in eth this like obsession with optimizing da I feel like at some point the the returns to that are going to zero right and so we need to do something else and I think that's why people are excited about reaking because it's not it's like it has like yes there's da but then there's more right and like I don't know this sounds like something salana shill would say [Laughter] all right with that thank you for giving us the last word tun we're going to sign off thank you everybody