Elias Simos: Rated Network - Reputation for Machines = Transparent Blockchain Infrastructure. Ep 515

Transcript

welcome to epicenter the show which talks about the Technologies projects and people driving decentralization and the blockchain revolution I'm Felix luch and today I'm speaking with Ila Ilya simos who is the co-founder of rated Network rated is providing node operator metrics and and ratings for the ethereum network Alias and the welcome to App Center thank you Felix thanks for having me huge fan of the show since since I joined the uh the industry so very very glad to be with you today awesome yeah yeah I'm also really excited to have you we have a long history of like working together in in the staking space and yeah I've been really interesting to follow your path and now see new build your own project

with rated so which is what we're here to talk about today but yeah let's let's start with the the classic basics of you know how did you get into crypto and end it up where you are today cool um so first touch with uh with crypto started in 2013 I used to live with a really good friend of mine she found out about Bitcoin and he started talking about it non-stop I started building stuff talked about it even more um initially I thought he was kind of nuts uh and didn't really get it but then the more we talked about it the more I got it but didn't really pay

attention too much when it really clicked for me was in 2015 um I'm Greek originally and so in 2015 was the worst part of the the decade-long crisis effectively that that Greece was in and in 2015 we had Capital controls come in huge referendum should we stay in the European Union should we break away that means also like leaving the monetary Union issuing our own currency um and so Capital controls was this really gut wrenching periods if you will for Greek society at large it like crippled the economy all the young people left but like there are there are really

visceral images that I still have sort of in my mind of very long lines of pensioners around each ATM that you see like on the on the street driving around talking about you know 50 people 100 people blocks like whole blocks uh worth of of lines uh waiting to get their weekly ration of money uh and and so at that point like I had the sort of the light bulb moment regarding Bitcoin I was like okay I get it now non-state money you're not beholden to uh this idea of you know institutions and and the way institutions work uh in you know the modern Financial system

um and and I really found that appealing so then started you know researching more but again not not being like very involved it all sort of came together in 2017 with uh with ethereum uh for me and and this whole idea of you know applications that you're you're able to build on on a platform that has like the properties of Bitcoin but then can extend this logic sort of arbitrarily right like the vision of the the world computer and so on so spent the whole year just researching stuff trading uh trying to build uh things with with friends but by the end of it I looked back and I was like well you're having like so much fun and you resonate with like the whole mission of of

self-sovereignty and just building something better than kind of the uh the the Alternatives which is kind of what is the status quo uh and I decided to commit myself full-time to the space so uh I got a job with a fund called the Central Park Capital they were just starting out back then I was the the first hire that they made uh as an analyst I stayed with them for three years made a bunch of Investments built a pretty expansive data platform while at the fund when you know Dune did it exist token analyst was uh like one of the one of the earlier uh data companies that were looking at blockchain analytics specifically uh and helped

them raise a 75 million dollar fund too and then I left uh and I joined the startup called uh bison Trails which at the time that I joined uh was I think it was employee number 20 or so uh I was a protocol specialist there um I think it was the second ever person to be called the protocol specialist uh in in the industry although I know you you have been doing like very similar work in your in your history in the in the space so the first was Victor who's my colleague who who hired me in basically under bison thrills as he was validators as a service right that's what we were building we ended up building a pretty large platform I think at the top of the market it was you know

north of 30 billion dollars on on platform a year later we're acquired by uh by coinbase and then I stayed there for for another year before I branched out on on my own to found found rated with my uh my co-founder ours but you know super happy to talk to you about uh you know the internals of of the story there but uh I wanna I wanna let you ask whatever questions thank you thank you for that background it's really interesting to see you like witnessing and I guess firsthand in Greece and how how it meandered to where you are now like seeing blocks of pensioners and now you're seeing blocks on on the ethereum Chain being full hopefully

um so yeah I I guess you know what stands out to me is like your you've been always like in this sort of space around data and and um obviously that's sort of what rated is focused on so um maybe just to start can you explain to us you know what what is rated and sure what are the the products you are building and sure so the whole thing that we're building we we fit it under uh a one-liner which is reputation for machines uh and this is like a really charged term you can fit like a lot of a lot of scope in it but really like the

the mission of of what we're doing is it's providing transparency into the infrastructure layer of blockchains right and we've started with ethereum now where this is coming from like the why are we doing this ties actually in pretty well with you know 2015 and those lines of of pensioners and so on um I'm here I'm doing what I'm doing I got involved in the space because I really do think that we have sort of an opportunity to build something better something more compelling something more transparent by default but also transparency is not handed to you right it's like sure the the source

material is open anybody could theoretically just go and access the data but without the interpretation layer you're really not improving much right and and the beauty of blockchains is that actually they allow you to go and get the data but obviously you know interpretation doesn't come out of the of the box so on a long enough time frame I think we're working on systems and we're building systems that are by default a lot better than uh what the financial system for example is is running on and I also do think that it is a matter of time until things migrate to the systems that we're working on

um now how much time that is going to be that's another story it could be 10 years it could be 20 years but I think the fundamental properties of the things that we're working on are undeniably orders of magnitude better than than the Alternatives so if you then take that to be true then I also don't want to imagine that world where we don't have transparency invisibility into kind of the the layer that guarantees it all the layer that actually packages transactions intents whatever that is and transitions it you know from a want to be done state to a done state it there is a protocol There

are rules to be followed but also like rules can be broken and uh actors that operate the protocol and the base layer could act selfishly and acting selfishly means that you you impose a negative externality on everybody else that is not only everybody else that's around you and that's honest that's acting as they're supposed to be acting or expected to be acting but also everybody that transacts on uh the uh the top layer which are really like the most important uh part of the uh the whole the whole equation so that's what we're largely here to do that's the that's the mission this is why reputation for machines right and

how you get to reputation is by indexing and contextualizing and building and dispelling the subjectivity of what is necessarily good and what is bad but also what is right just just merely providing the context of what is happening what has happened how what is happening fits in the context in of of what has happened and is this Behavior like expected or or not or what even constitutes a Behavior Uh that's that's all the work that we're doing with data so it's at the moment we're operating on on ethereum we we started with ethereum because it is I think the most consequential uh piece of infrastructure

on blockchains out there by users by developers by uh assets that are powering the uh the infrastructure and so on um and we currently host a network Explorer where the index is not the Block it's actually the operator so we're uh basically contextualizing how ethereum infrastructure works and then you can be as granular as the validator index but then we're providing sort of abstractions in terms of um you know node operators and and different pools and how these pools are composed of not operators and then all the way up to sort of the global uh

Network State um with the ability to actually like zoom in down to like the the most granular unit of account which I suppose is the validator index at this stage we also have an API which uh basically serves the data that you can sort of see on on the Explorer but also way way more to build interfaces to power Financial products that serve the infrastructure layer um and we also recently released an oracle which is a gateway for us to bring the contextualizations that we uh we curate uh on chain and actually be able to like power a suite of products uh on you know the ethereum uh mainnet

execution uh layer yeah that's that's super interesting I I guess most people the the blog Explorer is essentially like the portal into the the crypto space right like many people's interactions with like when they first use crypto I mean aside from the wallet is probably like looking at ether scan and look at looking at their transaction and it's it's quite powerful because like yeah like you said right and initially everything is open theoretically accessible but like how do you actually do it in practice so um I guess ether scan like was like kind of the first wave there to like really um do it on the transaction level and maybe the application layer and from

what I understand you are very focused on on this infrastructure layer for the proof of stake like chain how does it work on the on the very bottom layer and and is that going back on your like sort of uh experience and bison Trails or um yeah could we say that is that how you yeah totally um so like the origins of of rated uh go all the way back to I guess October 2020. so I had joined bison it was like uh six months in or maybe a little bit less um and then the beacon chain was launching at the end of the year and the ethereum foundation uh put together a hackathon and the brief was do anything

with all the data that the medasha uh testnet produced and that's the last um test net before the beacon chain Infamous for like a a prism bug uh with like an update that they they pushed that had a cloudflare clock uh to run side by side with like the validator Zone like sense of of time and then it just like wiped out I think one third of the of the Network's validators uh at that point great that it happened in the test net uh and I guess that's that's what tests are for so um uh my myself and and my friend Sid Shaker he was back then I think the CTO of of token analyst and they had they had just been acquired by coinbase

um if I remember correctly so we we sat down and we basically went on a two-week Sprint where we just really took all the data that the um the network produced and we did like a very expansive report on anything that happened from like you know client syncing times like even off-chain data to storage to how kind of the the clients and the nodes behaved uh over uh over like a span of like two weeks which is basically like when we run the the research to slicing and dicing and Diving super super deep in all the on-chain data that we got so you can I think you can still find it on e2data dot GitHub dot IO it was still called

these two back then so we uh did this hackathon we keep we won silver prize uh I think um and we learned a ton from that uh we we learned that there's like so much wealth of of data about the network and there is so little definition of actually how you can make this data useful we learned things like you know performance externalities risk but like primarily performance and you know the risk and externalities thing was a was sort of a realization that came a little bit later but it's very subjective right like people were

measuring no common language and what performance actually means or is it uptime rewards is it something else um no no clear answers and then kind of over time as I kind of went about my uh my my work at bison trails and you know we were operating on north of 30 networks uh I think 40 45 50 maybe more I kind of saw this issue everywhere around me like it was a very narrow slice of of of value in the world that I was I was looking at but as kind of someone operating in that industry I didn't know how well we're doing all together I didn't know how what

we're doing versus our Network neighbors or competition or whatever you want to call that I didn't know how the network is doing I didn't even know how to articulate or I mean at least I had like some sense but in general it was like again pretty hard to even articulate what it means to do well and what it means to not do well and compare it compare it against what and then I started thinking well if this thing is going to be super successful and run incredibly consequential things on top of it uh one percent of the world's transactions in finance Commerce media I don't know you name it that cannot be the case right it it can it cannot run on

um something that is amorphous and not like very well articulated right and then at the same time you know you you know it as well as as anyone um proof of stake Grew From what some I don't know hundreds of millions of assets staked to the the height of the market at some like over 300 billion dollars at stake which is like a massive number uh in in the span of like you know three and a half years uh or so in a massive increase so you're like there is so much at stake quite literally and so little data about what is at stake

and so so little understanding and then also like extrapolating forward then then you're like well you know that that stake element in nodes in general are important they are important because they they help these networks run if these networks are going to be valuable and they are to different degrees then security at that layer is important the will functioning of a network is important how do we but but also like the the assets themselves the nodes are valuable um because they do jobs and they produce future cash flows they're like you know it's inflationary rewards it's transactions it's like all kinds of things so we can actually like then you think you

can actually build products out of that and in order to like help the industry move forward you need credit for those things you need insurance for those things you need like you know potentially even derivatives right like you can do like lots of cool things to hopefully not gamble but like provide levers for people to like operate businesses in that in that space and actually contribute to running infrastructure for really really important uh uh constructions right so um and then and then I started thinking well you need like a third party independent guardian of all that data to actually help power all of these products that you foresee in the future

because you know accredited Underwriters for example job is not to Wrangle blockchain data their job is to underwrite credit and and do that that that type of uh type work right equally with with insurance so this is this was kind of like the initial impetus uh for for starting rated I was also like relatively good with with data historically like I built this data platform at the at the fund uh when not much existed out there through that thing I ended up being like one of dune's earliest uh users before starting until until I started the company I

think I was number three on the you've been dropping the leaderboard uh but then I got like I got eaten alive you know there's uh it's like you gotta you gotta run just to stay still and you know go go to work closely with with Frederick and Matt there as like one of their earliest users feedback that allow all that stuff um so it felt like a natural sort of extension of my work uh putting putting infrastructure and and data together and and seeing what we can we can build so I guess I guess here we are yeah it's super interesting because yeah like from experience many operators like sort of struggle maybe so you have like

these different users I guess right like the operator itself wants to understand better how they are doing maybe serve their clients data on their rewards and like might end up trying to build some of these systems themselves but then you know you know all the other operators have that same problem and you're not depressed like project obviously like because you might not want to share that data you just want to do it for yourself so like obviously there is also a need for a third party and then I think so you basically have the side of the so the like if you think about the users for rated right one is like the the stakers or The Operators or can you like sort of talk about it in in those layers you know who is the consumer of rated data

um and what are they using it for definitely I'm going to talk to you first about kind of what what I see in like very very high level and then and then go down to like the Nitty Gritty presently who's using us how they're using us and so on so I sort of see us in the middle of a possible Network right of networks themselves node operators that run these Networks capital and applications and there are like if you think about things today without rated in the picture these are all connected right these are all sort of nodes in a broader ecosystem that are connected with one

another and and what they sort of exchange uh between one another is distribution legitimacy and data right and we can sort of exist in the middle of that we can basically help facilitate a bunch of implicit value transfers uh implicit like in in the broader sense and make them explicit help them actually materialize easier more systematically and thereby hopefully just inviting more of that now all the way back to like where we are today and the products that we have on on ethereum we can can and we do serve node operators and the use cases there are anything from you know rewards

accounting to Performance monitoring or just being sort of a a second source of Truth to your internal monitoring for example to uh performance benchmarking and understanding how well you're doing versus your your peers and so on and I think increasingly more so there's like this idea that we have of just becoming a data core effectively maybe explicit maybe um implicit but you know a shared cost center effectively for node operators where your job is not to Wrangle data necessary but also like you know there are node operators out there that have these capabilities but it's it's sort of

awkward to think that you know now they're actually powering another note operators reward accounting or or performance benchmarking or even like the credit products and the accounting products and the in Insurance products and so on because there is like a large surface for for moral hazards there and if that sort of actually transpires then we're no better than sort of the mistakes that that have been made in in previous iterations of the Matrix right the other uh part of of our our user base is Pools and More broadly it's Capital allocators right because in you know improved stake as you know

stake is one part of the equation so how does Capital get allocated into these uh into these not operators so we're working with with several pools like Lido liquid Collective working with stator and the things that we're helping there is with the tools that we've built to better manage the active set both in terms of deciding like who is onboarded onto the active set and who might be off-boarded one day I don't think we've seen offboarding from active sets yet but it's natural to think is that this industry matures these things are not going to stay static right like I mean specifically in ethereum you couldn't even withdraw up until April 2023 so for the first two and a half

years of of the beacon chains existence so even just evicting someone from the set was really like not possible but I'm sure that eventually we'll we'll see those things and then you know uh compositions of active sets changing as a manager as like a custodian as a steward as a whatever you want to call it as like you know this could be a Dao this could be a company it could be uh it could be an interface whatever that is you have to make decisions about the well-functioning of your uh of your set and so understanding with it that will functioning is uh and making decisions is all powered

by data and this is what we're what we're helping and seek to do more of uh these these pools uh with thirdly you have applications and these are applications that basically reference the infrastructure layer to create new value right and that could be credit for example like so think think in terms of we have it we haven't really announced it yet but we're working in partnership with uh with with a credit fund to actually uh trial out uncollateralized credit for node operators based on their accounts receivable so you think of it as pipe for for validators there's a predictable

stream of uh rewards and transaction fees that they earn and thereby you could actually monetize that Revenue add a premium to sort of the interest rate that you earn on the beacon chain um there are interfaces that we're powering with our API to help Capital that sits on the other end make better decisions along the lines of okay where am I uh allocating my Capital to which operators am I putting my Capital to monitoring it in an ongoing basis revisiting that decision and so on and then you'd think that you know oh yeah just like I just won some APR

give me the maximum APR uh and and then you know see you in a year or what not sure um that's how things really started I think but then the more the industry grows the more the industry matures the more other factors are going to come into play right it's like Risk versus reward then you have things like eigenlayer you have more risk you have like you know risk starting to sandwich on top of like pre-existing risk and so on so without like um well contextualized data world in in that Paradigm you can't even articulate those things so and I like to think that

we're playing like a like a like a virtuous role in in the ecosystem by helping people actually like articulate those things so far it's been it's been a pretty uh it's been a pretty uh pretty exciting journey to get here that's that's the the case for me I think I also like I mean in the end you see a lot of times the rated data the aggregate data being used in like these sort of discussions around decentralization maybe right like now we talked a lot about contextualization maybe mostly on in terms of like performance and you know it's the operator doing well there's like this objective things but there's also the wider goal of like I guess incredibly incredible neutrality of the

network and um maybe Geographic diversification yes which you are also looking at that like the end user being more the the wider Network right uh which I think is like a very nice outcome right you kind of getting maybe money from the people that want to like optimize performance but also providing this this public good of you know what is the the state of decentralization in the in the network and I think you know there's like really really interesting things to see there if you'd visit rated.network which will also Link in the show notes you'll you'll be able to see that for ethereum you know like all these uh things that that if try to keep if you're Mutual or like decentralized like you can like actually check is it actually happening

so maybe um thinking about that maybe can you like yeah talk a little bit about how you think about it and how you how you see the current state of ethereum in terms of like its goal of becoming incredibly neutral is it actually happening like from from the data you're seeing or where are Maybe like things that need to like be worked on since I guess you were like probably one of the people that has like the deepest insight there I think that would be nice to focus on that dimension I I think ethereum is on a is on a really great path it's obviously messy and hard and sometimes like undefined in terms of like where you're at uh and how

you're tracking in terms of your of your goals but I think undeniably it's like on the on that right path right um and I I'd like to also think that we're helping just push that conversation forward right like I I still remember um when we were starting out when we first launched so we I think we first launched the website in February 2022 then March April around that like two months period it was like a big conversation about client diverse so I think prism at the time uh had 80 dominance or or something of that of that nature and we are just launched the the first feature that we we delivered on on the front end which is based off

of um Michael Sprouse work on on block print which is basically an open source tool that fingerprints The Proposal patterns of validators and and works backwards to identify which client they're wearing effectively and so we actually pushed that out on the on the front end and then we started getting shared all over Twitter it's like client ever is the client diversity and now here's like a way to actually measure client diversity since then client diversity has massively improved we're now I'm just looking at the slash overview uh screen on on the Explorer and we've we've gone from like 80 percent uh prism to like 40 prison

Lighthouse is at like 35 percent Tech was at 17 and then the smaller clients named this end load star are actually like improving we I'm not claiming we were responsible for it but I like to think that you know we had we helped and and that's all we can we can really hope hope to do right just give people the tools to make make the right decisions whatever the right decision is for for their objective function also like in terms of another stated goal of ethereum I guess is resilience right and and just surviving like a catastrophic event in terms of censorship in terms of war in terms of like nuclear Holocaust and and and so on

and since the beginning ethereum had like a very strong Focus uh in Soul staking right staking from from home which is kind of antithetical to like the whole proof of stake thing from when you look at things from bottom up right because proof of stake is part capital or like one half capital capital is dominated by power laws so like just crushing those those power laws is very very difficult um but you know if you if you transport yourself back in time and you think you know when the beacon chain was launching or even before it was launching and what the conversation was shaped around is like you know validators are going to run from fridges and everybody's gonna run a validate her at home and so it turns out it's like it's actually not

that easy right uh 32 weeks is a lot of money these days for for the average Joe or Jane it's the interfaces I mean with things like dap node and so on like tremendous progress in making the whole solo staking thing more accessible but it still is pretty daunting like what happens if my valves is good am I going to get slashed I'm not going to get slashed like education around this whole thing it's not like I buy a pack of candy no pun intended from you know the kiosk or or whatnot it's actually like it takes like a pretty long learning curve and you either have to be very committed to some higher order goal uh to to be part of it um or

you're just incredibly interested in sort of the nuts and bolts of it for whatever idiosyncratic uh reason again like these two things don't make for like a hugely available Market sandwich on top like the capital requirement and everything actually like is a the pretty small segment but we have found that be that as it may ethereum does have about 6.5 of all the validators that are active on the beacon chain being solo stakers which is a tremendous outcome right that's like in the billions of of dollars running on on people's homes uh and so on and more interestingly even like if you if you now change the denominator from amount of stake that is running to Beacon nodes

which are sort of think of it as the box that is running those valve layers and you can run like many validators on a one box it's probably like our best estimate there is 25 of the network which is tremendous for like a proof of stake Network where really important stuff runs on sure it might not be 50 it might not be 70 but I'd contend that even if it was six percent of the boxes that's an amazingly resilient long tail of operators where if the large operators that have a lot of capital and are visible companies and so on are easier to shut down in an event of like extreme censorship that lasts

line of defense which is running in like you know random homes or basements or I don't know where all across the world uh is is an incredibly sort of resilient backbone that is demonstrably uh helping ethereum like achieve achieve its goals I think the last thing the last stronghold that uh that remains is really uh you know Geographic uh distribution and increasing increasing that and uh execution clients uh diversity so Geth is is is you know still the dominant client something goes wrong with get than the network will

experience uh you know sour times like I think it was just this week or maybe uh late last week when Jeff had a an issue with block production and then together with how prism actually decides where to build the blocks when when the validators are are boosted they actually you know we saw the network experience as low as Effectiveness since uh chappella which is uh not really a frequent phenomenon like a theorem is running really well uh for for all intents and purposes and again like it was you know a two Sigma event

that didn't like no one bat an eyelid on the execution layer if you were transacting with ethereum you wouldn't know that this thing was happening um so you know they're still like work to do from like a network perspective uh you know we're we're seeing that the network is actually like pretty heavily concentrated you know in North America and in Europe particularly when it's relating to what we've sort of contextualized as professional operators and looking only at that slice of of the network but then you know you have things coming up like DVD uh so you know oval uh SSB uh device working on a a DVT uh solution of the

run I think there are a few more so the idea there is that you can you know now separate sort of operation keys and custody keys and then you can have these like fractional sort of staking schemes effectively so you can you know you can airdrop adapt nodes someone in Africa and they can get started with like a very small amount of of collateral you know one eighth half an eighth whatever that might be and then someone else basically puts puts up the rest so I'm generally hopeful now is that going to be enough to quell basically the the power law maybe not so but it doesn't matter

right what matters is how strong that backbone is because you know when when push comes to shove this is going to be the last line of defense and and and that's what I think matters the most yes super interesting also like just to see here about the the Practical issues right now I think yeah there's so many layers that you theoretically want to have decentralized right and then every one of them is like on a different level on on the Spectrum sometimes it's even subjective you know is it you centralize many people been like criticizing for example also like title to be like centralizing but then again right layer below there's like 30

different operators operating in Lido which can be overlooked if you just see like the 30 on on even not rated but you guys have like the drop down right and showing like the different operators that operate lighter for example that's right or even even on on client distribution right like so I I think chain safe that is the developer of uh lodestar which is like the fifth uh client that's available to run run ethereum on on validators and also like the the one with the least penetration they are now running some like 10 000 validators under Lido with lodestar right that's I believe something that kind of Lido as the pool manager the

active set manager in that sort of neighborhood of of ethereum and it's like one one-third at the time uh we're we're recording um I don't necessarily think that this would have happened like this you know increase in participation of lodestar in the mix of clients would have happened if a pool manager like Lido didn't actually design for it right so there are like there are benefits and I it's it's it's a really hairy subject I generally don't have strong views I try I try to be you know just the facts and like here's here's some data and you can make your own mind up I don't necessarily have like a strong view on

whether you know having limits on pools and so on is like the the right thing or the wrong thing to some degree it is the market that will eventually decide right and I don't know that even having like at least you know for my own disposition that having like a certain opinion even matters I see I see positives I see negatives I see opportunities and I see I see risks and I try and I try to quantify them uh as as best as I can and then also like you know offer it uh to people to to help them sort of make make the best decision possible for for the network yeah extremely valuable I think we can

building off the the solo Staker sort of discussion and I guess the wider sort of state where ethereum is at right now I think one very relevant discussion as we're recording this is around uh eip7514 right so basically the amount of growth of staking that that ethereum was experiencing and sort of the design with 32e is per validator it's like impacting a little bit the network performance uh as from what I understand so I think it would be helpful maybe if you could explain a little bit the background of or what this change is about and and why it's happening and then maybe we can discuss

a bit you know what the implications are after that but maybe we just give it like a bigger overview of what of what this is about I think it's been like in the news now and I think it is quite relevant um you know for many number of participants including like The Operators of course and uh stakers themselves right perhaps we should better set some some context for for listeners that that don't have it right so in ethereum uh validators uh are basically the the unit of accounts in consensus it is kind of an instantiation of a water consensus participant that basically attests

through the state of the network I see things around me and the flattest most dumb sense possible I see things around me and I report what I saw basically um and then in order to have one of those virtual Watchers or participants of consensus and so on you need to have 32 Heath right 33 enables one now that doesn't mean that that one validator is also like a one machine in fact you can run like many of these validators on a one machine now I think the design originally was was as such to like you know help solo staking happen make it a little bit more difficult for

concentration to happen you know as we've seen in delegated proof of stake these constraints don't necessarily exist and so it's it's much easier for power laws to actually uh instantiate right so design decisions made at a time in the past for reasons and arguably the right reasons right or at least the right reasons for for ethereum now the the downside to that is that when you have a lot of interest in in staking you have people wanting to participate you have increasingly more validators uh joining the network these these digital instances of consensus uh participants

which means that you have a lot more data that the network needs to handle there's you know data that's being exchanged in the P2P layer of the network which is you know all those validators talking to one another and saying I saw this I saw this I saw this I saw this everybody saw something and then there's like another consensus actor that's not like really explicit um on chain that takes all the click what did everybody see okay let's put it together like what what is what is reality in reality tends to be what most people saw but now you have like so much more of these messages being changed really like it it looks like the the people that were on the you know the withdrawals are

are bullish uh and sort of an enabler rather than a oh my God like all the stake is going to flee the beacon chain uh people were on the right side of History so we've we've basically seen like a 50 increase in active stake in the last six months uh or maybe less it's April now it's recording at the end of of September so I think at when withdrawals came uh that that upgrade uh came to the four it was 500 000 active validators now we're at 800 000 right and we're talking about 300 000 extra validators which is more than 50 percent of what we're active back then that joined uh the network in the

last six months it took the network two and a half years to get to 500. so if you're like I mean that's a concerning kind of trend right like a good concerning from like a network load perspective because then you see kind of like a straight line but then you see that line accelerate and the curvature change that sort of fits in an exponential curve that's concerning because then there might be like an undo load for the network to process which means that the network is going to underperform because it's not set up to actually handle this type of load of messages then a bunch of

like useless effectively or let's not call it useless but the marginal value that this extra message I saw this brings is Tiny they're more of you know the more of these messages you actually have uh so in order to basically prevent the network from uh experiencing Hard Times uh in terms of infrastructure and networking and state bloat and and all of these things a decision was made to actually cap the validator uh activation uh limit to eight validators per ebook

which I think was the number that uh the network was at before withdrawals activated it was seven or eight I don't remember which one was uh it was exactly I think uh right now that number has gone up to 11 and basically ethereum Works in a way that um creates like a bottleneck on the way in and on the way out the same rules that apply to the activation queue roughly apply uh one to one to the execute as well but basically the bandwidth um scales together with with demand that bottleneck becomes wider uh and and relaxes as more demand sort of uh comes

to uh the the door um effectively and that bottleneck exists to also manage part of that whole data uh clutter and so on but also to control stake in terms of it leaving as well right and suddenly ethereum not only losing like a bunch of useful information or maybe not so useful information in terms of consensus in the will function of the chain but also like a lot of security in terms of stake so this EIP as I understand is a sort of short-term solution to actually give the network some breathing room so that a

more permanent decision can actually be made as to okay well we have this real issue you know too many attestations too much load on the P2P Network a bunch of like redundant information that just like bloats the state of the chain what do we do about it and so there are again like as a as a person that's trying to be neutral and like look at look at just the facts I I don't necessarily have like a strong view on whether this is good or or bad I can see like arguments on on both sides right in the argument on on the pro side is like well let's buy ourselves some time with this you know not so intrusive change to the protocol roll back so like a few months

ago the state of of the queue two months ago and and allow steak to trickle in more slowly so that we can buy some time to figure out what we're going to do eventually but then on the other end this creates at least when you're looking at the two states right like you know 11 uh validators per Epoch versus eight validators per Epoch two states of the world moving from one to the other you are disproportionately with that move favoring the status quo such that if for example there was a strong need or willingness of existing stake to be reallocated or new

stake that on boards to go to places that are not dominant uh in terms of their representation of stake in in the beacon chain now they have like less of the window for them to actually kind of catch up uh if you will is narrower which effectively buys time for whoever's in the lead I don't know if there is like uh value in in really kind of uh diving a lot deeper into that or really ruminating on it on it that much because it's it's all very subjective it's all in the eye of the the beholder but the the problem is is is still like existent

right like from a network perspective from like a well-functioning Network Health perspective like that's a problem that we're going to have to solve eventually right and there's it Rhymes well with like another proposal which is like okay let's aggregate um the state why do we need to have uh 32e per validator when we can just collapse that and do it I don't know 20 times 50 times 100 times more and just allow validators and validator operators that option not make it mandatory keep the minimum at 32 but then you can add those 32 increments instead of running various instances having many of these digital agents of consensus that send

all these messages suddenly instead of 100 messages you can just have one but that also comes with like a whole world of of trade-offs and like largely like like all of these things are ends up being like a a political thing among among other things right which is you know people have made design decisions people have built technology and infrastructure it actually matters the state of the network as it is today which might or might not be a competitive Advantage so I've made all of this effort uh and build that that advantage and build all these these capabilities and now maybe they will be deemed uh completely redundant right or I will need to like retool a bunch of the things as as I've worked with them

there's also like very credible you know arguments in terms of okay how do we handle slashings does the penalty sort of increase proportionately which means that well I might [ __ ] up the same way excuse my my language but uh I might fail in the same way uh that I do today but instead what is at stake and the slashing panel today is one eighth uh with the stake is much larger um whereas now for example like a correlated failure will be staggered and it will be one validator after another after another which basically buys you time to actually address the issue before it kind of like causes contagion in like that one box or that one cluster of boxes that is running like all of

these validators and so on so you know real issues uh that that don't really have clear-cut uh answers and that's both kind of you know the the beauty of it and it it's also sometimes what uh what you know slows progress down right and it's again it's a world of it's a world of trade-offs yeah definitely like thanks so much for elaborating like this on it I I do think it's very interesting how you know these dynamics that you mentioned are like sort of like one on one hand like favoring in a way the power loss by like sort of limiting

how many new can enter and that's like sort of a result of this design Choice tool that actually tries to kind of achieve the opposite right by like helping solar stickers to stay so it's a really interesting trade of space and I do think maybe the solution could also be right like because of like we're saying it's it's a temporary solution so like something needs to change and it seems like or from my perspective one of the only things I guess that I have seen is that sort of increasing that limit or aggregating the validators in some sense so I do think what's also interesting is that maybe you can do that but then also you have like Solutions like DVT that maybe like can still maintain like the ability for

solo stickers to sort of participate even if they don't have because already 32 if like you said is already maybe too much for many these days and actually so if it's even higher I guess maybe dvg can be the layer that like sort of solves that and it wouldn't like blow the ethereum state so much but um yeah very interesting field and yeah I guess also cool to have like all these teams like working on different parts of it and you you sort of you know making it all transparent and like contextualizing it I think that's like a very cool spot that you're in we're trying our our hardest but just to harp on what you were you left off for for a little while longer like the

the flip side of having all of those teams work together in in like Loosely or less Loosely connected ways in no sort of central planner that just explicitly says like you know this is what should be done and it all kind of like basically gets done in you know a network of of influence uh effectively is that you have the bloat situation right or you keep just keep adding features to something because that's sort of the natural impulse to do but then you have like like a like a strong contingent of like client developers and so on actually advocating for a cleanup for let's not do like all the sort of

improvement stuff and add this and then you know DVT comes into the picture and then other components come into the picture and then complexity just like piles up because again that's the natural impulse of like humans to build features uh and not not to like actually reduce features reducing features is is painful uh it means that you have to like roll back your decision that you made earlier it means that you have to like accept the mistake admit defeat and also it's it's it's generally more more painful do that but very necessary so it's just so fascinating right just seeing seeing humans just work together in like implicit ways at this level of of scale yes it's really fascinating

yeah and I guess like one spicy topic we had there before we started recording I guess he's also like yeah how are these decisions then made in the end you know like ethereum is known to be like sort of uh Advocate against or like I guess ethereum community at large and I mean maybe who even is that right but like I guess also italic and some of the core early people uh sort of against this sort of notion of unchain governance like making the tokens decide but then we can definitely see in this case for example that these choices are made by some of the core developers or in some way right the decisions are made but they're potentially not like taking into account the people that this change is impacting right in in a

way that maybe other systems would and I think that's that's also very interesting now to see how these things play out as you know many have critiqued the online governance but actually like here I feel like it's very good um example of why maybe this other path isn't like working as well either right so you yeah I I guess if you want to comment on that like what how are you thinking about this image you've come out there are no good options we're we live in a world of like bad options uh when it comes to this right like it's still look at governance like outside of of chains or whatnot it's not like things are Rosy there or that like we've solved that problem as

like a human civilization so we just have to live with like bad options and it's also like there's precedent of one chain governance actually like not being a solution like there was a a tesos upgrade I think was there sixth or seventh upgrade maybe like already two years back it was like a big debate about an escape hatch feature and then the upgrade wouldn't like actually go through it's a very political process with ethereum as as as you mentioned earlier there is no like explicit on-chain governance and I don't even know that like explicit on chain governance is is the answer so governance happens in a uh in a rough way right the ethereum community calls that rough consensus where where you

know ecosystem participants call it the client teams the ethereum foundation The Operators and so on they're all in like you know three or four different forums not including sort of all the all the private chats and and IRL places and so on but it's you know I guess it's research it's like a couple other forums it's like a couple discords and so on they discuss those issues uh at large right like upgrade issues what are we doing how are we moving forward and so on what ultimately happens is that if the operators don't decide to upgrade the software even if like all the client Developers for example agree and like the protocol researchers and program developers agree to like push the change forward if the

operators don't upgrade their nodes to the new version then the network doesn't upgrade right what is like a little bit under talked about perhaps and also maybe a little bit spicy is that these operators have a lot of stake on the line right like they have their actual stake they have uh businesses that they've built on top of that they're they're effectively like not not custodians but they're agents of the stake of others right so there is like really like a lot on the line for them and so ultimately if they're if they if they did have like even as a solo sticker if you did have like a deeply rooted belief about like a

specific feature which you know even saying it that way sounds like a little bit ridiculous but you know so be it like if this if this infrastructure is as important as we all think it is and as important as as it will be like being sort of religiously militant about features um it actually makes some sense um so the point is that even if you were like vehemently against your your stake is uh at risk if you're in the uh you know if you're in the less representative side so you know what happens like if you follow right right right you know the other chain ethereum classic

or what for state classic like you know what happens like your your your your value at risk so you know again really dense not only technical like in fact far far from technical uh issues that have no no clear uh answers but I I will say that you know ethereum has gone pretty far further than most if not all with that model of of governance uh that it's that it's got so you you have to acknowledge you know success when when you see it right right yeah definitely I yeah

that's it's a super interesting discussion like you said it's far from Technical and it's uh something that we haven't solved as as civilizations anyway really I do think you know yeah you have that extreme option like you mentioned at four king but obviously that's yeah like not really a tool for like day-to-day operating like this sort of network right it's like in a very rare situation maybe that will you will like sort of play that card I guess you know um some sort of formalization of this governance to me at least feels like is potentially like a direction that is maybe underexplored in ethereum also I I do think yeah in other places maybe it was

formalized too early and like not well enough but uh I guess being some more effort there I feel like this is a big area um that's yeah one needs to like talk about more like builds or like discuss what what could be done um but yeah so thanks for this like sort of expedition into that direction I guess we're already talking quite a bit so wanted to end it on the notes about rated again so we've been talking a lot about ethereum obviously you guys are very focused on on ethereum but uh the broader Vision right is very reputation for machines so there's like obviously other machines aside from ethereum validators

um what's your yeah sort of what's the future for rated how are you thinking about what you're building and how you're expanding maybe from ethereum or are you even doing that player twos who knows um if you agree to just yeah talk to us a little bit about that and then we can wrap up awesome uh so we are as we've discussed present on ethereum today this is where we we started from but the vision is is is much larger than that uh it's potentially like as large as ethereum can and will get and and even bigger so it just coming from from the background that I did and having worked with people across many different networks and

having kind of like interface with these these networks I I see value in like blur plurality right and I I do see a future of of multiple different networks that have different core value propositions of different layer twos and I'm you know multi uh chain multi-network Maxi I suppose although this might be like a somewhat contrarian view to have uh at the time that we're recording because it's like the the Deep of the deep in in the bear market and and you know it's it's hard sometimes to see kind of like the the light at the end of the tunnel um so what what we're planning to do in in the coming quarters is actually

expand to multiple proof of stake networks uh the solanas of the world the cosmos of the world the polygons of the world and thereafter to expand to actually covering multiple agent sets so not only validators but there are many node types that actually have very similar properties they participate in networks they produce useful work they earn rewards or a fee stream they participate in the fishing for the useful work that they produce they are agents in networks and they're entrusted with sort of missions and they might be fulfilling their missions successfully not so

successfully not at all they might be inflicting positive externalities in the context of their networks or negative externalities by taking and do risk uh and and so on so you know I think by just doing what we're doing in multiple networks and and going into all these different environments not only can we help these networks just be better achieve their their goals better I like one more like little little anecdotes I I run the numbers at some point and and I looked at you know the historical effectiveness of the ethereum network on the whole and it turns out that apart from the merge which was a very volatile uh month uh effectively the network

hasn't had a lower Effectiveness month than the month that we launched now again I'm not like the saying we are wholeheartedly and and and uniquely responsible for that outcome but I do think that we've had a small part to play right by contextualizing by surfacing like information about performance transparently and and in an easy to uh access and and understand way so I I do think that we you know there's benefits in actually having that unified view uh common abstractions in terms of you know what is performance what is rewards what is risk that are virtuous for for these Networks there's a lot of work to do uh there's a lot of scope

there's a lot of complexity it's a big infrastructure build uh and then you know while your ability of uh adding the marginal Network might improve over time and the cost of doing that drops then there's there's another like more Insidious curve that you don't get to actually uh realize until after some time which is like maintenance and and cost and and scope right so these are all very challenging things and also there's there's another challenge in that there might be and I think there are more networks and more agent sets than a one company might be able to cover right and then you end up being in a in a

situation where you know you're you as the as the company or the organization or whatever you're in in that boat and then you know there's three holes and then there's a fourth hole and there's a fifth hole and then you have like to cover the fifth hole you have to just open a twister open another one right just move your hand from like one to the other and then exactly it's the it's it's the whack-a-mole analogy that we we talked about before before the recording so um that's gonna be a challenge figuring out how to solve for that is going to be a challenge but it's a challenge on super super excited um to be to be taking on because because you know we see the positive impact of

of the work that we're doing and and that is sort of the biggest rewards uh of of of all uh if you will so just being able to have like a like a small contribution to things moving forward to things improving to arming people with the right of an arming might be like the the wrong word but but giving people the ability to access information and Empower them to make good decisions for whatever their objective function is is something I can you know get behind and continue doing for a very long time so I'm excited I'm excited to uh to be on the path that

that we're on and I'm excited to to explore where it takes us awesome yeah thank you so much advice for like the inspiring conversation you'll you'll die on this hill we we get that after this I will die on this hill right um yeah I mean appreciated Felix again yeah thanks so much for coming on epicenter I I hope this yeah very very interesting episode about ethereum about infrastructure and this um will add to the show notes like a bunch of the things that were mentioned in this episode so yeah our listeners can find out more there and yeah hope to see you soon really appreciate it thank you so much for having me huge huge fan