The era of Ethereum, Layer 2 training wheels & more - The Daily Gwei Refuel #482 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily way refuel where we cup the latest news in ethereum ecosystem I'm your host and his assana and says the 4th of November 2022 alright everyone let's get into it so a really interesting thread from Mario's here from the uh Geth Team all about uh Mev boost and why people have been uh well why people that are using Mev boost relays to propose blocks have been significantly more profitable than solo validators now he starts off this red thread by saying the recent rise in Mev boost blocks might be caused uh because I made a mistake This Thread will explain what's happening why local block building on Geth was worse than it could be and how to fix it tldr please update your nose to the latest Geth Master now

there is an update if you are running the gef execution client which I believe still 80 of the network is uh but basically he continues in his uh thread by saying the following chart illustrates the problem very well and this is the chart that I went over the other day from pintail showing the profitability from uh Mev boost relay blocked as opposed to self a built block so self-built blocks or solo built blocks uh the bottom here in blue and then the everything above it right is uh is relay blocks uh it goes Mev boost with all relays outperforms local block buildings significantly this resulted in a lot of valid validated switching to to Mev boost mov boost will most likely always have an advantage over locally built blocks due to private autoflow Etc

but a bug in Geth made local building perform worse than it could be in order to explain the issue we need to look into how block building Works post merge and then it goes on to I explain that which you can check this thread out in the YouTube description for that explanation and then he followed up around 24 hours later by saying looks like the fix will increase rewards drastically with only mined three blocks we being the guest team with the new code but so a 1.5 times on the low end and a 20 times Improvement on the high end I really recommend updating to the latest Master Branch this is actually pretty significant guys I mean one a 20 times Improvement up to a 20 times improvement over uh the previous version of Geth in Solo built blocks uh is huge because as Mario's mentioned people were

seeing that they could make much much more money by using um Mev boost relays as opposed to building solo and that's what caused a lot of people to switch over now obviously Mev boost in of itself is not a concern but the concern is around that sensor censorship right and the censoring relayers so that's why those things have gone up and as I mentioned yesterday I think 90 of the network is now using Mev boost but and as Mario's mentioned even if even with this fix in place Mev boost will probably give most people more rewards but it's not going to be significantly more because it was so it was so great that people were like well what am I doing leaving basically you know in some cases it was double the the yield uh then what they were getting as a solo

validator you know why they're leaving that on the table and it was because of this bug that Mario's found in Geth which is kind of crazy that that this this happened here but this is one of those things that I I think I mentioned you know when the merge happened that we would only catch post merge because of a real live Network environment this is not something that you can really catch in a testing environment because there's not really any Mev to extract in a testing environment so this is one of those things that get caught gets caught on mainnet and fixed on mainnet luckily it's not like a critical bug or anything like that in terms of uh in terms of like the protocol itself but it obviously has a lot of first and second order effects uh stemming from this bug the biggest is that more people adopted

Mev boost and then they more people adopted the sensory relays which led to even more uh sensory censorship on the network I think we're over 70 now of uh of uh oh fat compliant as they call it blocks on ethereum so this is one reason you know the funny thing is about this as well is that even though uh the ofak compliant blocks have been growing so have the the non-of-a compliant blocks it's just that because so many people switched on Mev business and obvious see coinbase did this the other day it's basically led to this uh this increase across the board basically so I'm curious to see if people switch back uh and turn Mev boost off uh if you know by once they put this fix in or once they update their their nodes I'm not sure

you know how quickly that process will be but it's definitely not going to be a a two times greater reward uh if you use a relay instead of solo building uh with this new fix here and as I said the reason why this is so prevalent is because uh 80 of the network still runs gef like we do have other execution layer clients but only 20 of the network network runs them so obviously there is that majority effect as well and this is another positive to client diversity if 80 of the network wasn't running Geth then 80 of the network wouldn't run into this bug right so another point for client diversity so if you are running Geth consider one of the other clients out there not to say that Geth is a bad client of course it's not but we obviously care about client diversity

for a number of different reasons and this is just another one that people may have not considered uh before so great thread from Marius that you can read or about this bug which I'll link in the YouTube description below alright so keeping on the topic of Mev boost uh Sarge here from uh the block native team so he's a product manager I believe at block native put out a thread saying is the block building Market doomed to Monopoly I've been concerned like many at centralization and sensitive censorship vectors related to relays especially in a context where one relay has control over 64 of the total block space of ethereum ethereum some thoughts so there is a blog post and a Twitter thread here so you can go check out both of them I just wanted to highlight this thread because it was a

really great read it's uh you know what it did actually it got me thinking about something that I haven't thought about before and there's one thing I really wanted to call out here I don't know if I can find the Tweet while I'm scrolling through but basically what they called out and that hadn't occurred to me was that flashbots not having a fee uh and not taking any fees on their relay uh is actually detrimental to the network now let me explain why because if they're not taking a fee that means they inherently going to be more profitable than other relays that do take a fee say the other relays Tech 10 fee I don't know what the fees for each relay but say they're taking a 10 fee then flashbots already has an edge automatic edge of 10 there because they're not taking a fee there's nothing going to

the flashbots team it's going all to the participants of of that marketplace right so that already gives flashback just a massive head start there and then obviously count the the network effect that flashbots has the brand awareness and the overall reliability and Trust in it you can see why people use them so would it be better for flashbots to actually take a fee but maybe not for themselves if they don't want to do that but then redistribute that fee out to other relays based on market share that'd be pretty cool right if they'd say say they took a 10 fee and then they redistributed that 10 to each of the relays uh per on a per maybe per day basis based on their market share at that point in time uh that would encourage people to I believe uh switch relays uh I I think that would go a long

way towards that uh and it would get it would stop giving flashbots that edge that they that edge that they have which is funny when you think about it because people think oh they're not taking a fee they're you know they're doing it just for the public good and like yeah that's the reason they're doing it but there are unintended consequences of that and as I said it's the the basically the fact that they have a flat I don't I don't think it's 10 um but whatever it is they have a flat percentage uh increase automatically in profitability over these other relays just from that and we can't expect every relay to do that because a lot of them the only reason why they want to spin up a relay in the first place and take that potential extra risk and obviously extra work is to earn a fee from it it's a

business after all to to to to host one of these relays whereas flashbots does it out of altruism because that's been their whole um their whole shtick uh and I'm really glad that they do that but at the same time as I said they have been unintended consequences of that so that's one thing that I got out of sergeo's thread that I hadn't considered before but the whole thread is really really uh worth the read and same with the blog post so you should definitely go check out both of these I'll link them in the YouTube description below for you to do that and speaking of anime V boost related blog post we have one from Patrick McCory as well which I highly recommend giving you read it is titled Mev boost and layer one censorship resistance it's basically Patrick's thoughts on all of the topics

that I've talked about over the last few months and the community has talked about over the last few months uh two you know to no end basically but but I really respect Patrick and his thoughts and I thought the blog post was really great he's been around for quite a while he teaches um different uh things about crypto to a wide audience and has uh has worked with things like inferior has a layer 2 expert so to speak as well so if there's someone that you would take someone's opinion that you should take seriously it's definitely Patrick so I'll link that blog post in the YouTube description as well for you to go check out all right shifting gears here a little bit so uh Ryan berkman's put out a really really great tweet thread today uh but he started off by saying IMO in

my opinion the era the era of Earth has truly begun we're seeing a huge positive shift in eth investment in the 8th investment client this time is different and he goes on to give all the reasons why he thinks this time is different now I'm not going to read through all of them but there are some of them that I wanted to go through and the first one is like the biggest one from this thread to me where he said the merge turbocharged our legitimacy institutions and mega corporations are onboarding rapidly and at scale our multi-chain world is becoming an L2 World eth Adoption is immune to the bear and there's so much truth in this because if you look at the ethereum ecosystem as a whole I'm talking layer ones layer twos whether they be Roll-Ups or these hybrids and even things like evm

compatible side chains that uh the ones that um ethereum aligned ethereum secured are growing really really quickly right they're still growing and it's a bear mark and we can see this in the metrics and I've I've talked about metrics before there are various metrics you can look at you shouldn't just look at any one metric and deduct anything from that but I am looking at all of them in Aggregate and saying that there is real and genuine growth there during a bear Market which is extremely positive because it means it's not just fake growth uh being propped up by token incentives in the bull market it's real actual product Market fit that's that's starting to to show itself on these things which is which is absolutely awesome uh and then on the um the first note of what he said here about uh the merge turbocharging ethereum's

legitimacy I've talked about this as well where basically in the eyes of uh the the world that are paying that any of the world that is paying attention to this they saw ethereum go through an absolutely massive upgrade and do it perfectly and that also gave a lot of confidence to uh core developers core researchers everyone working on that side of things uh to keep delivering and keep going full stem ahead on the ethereum roadmap because we got that massive undertaking out of the way and let's just filled in with such confidence that's why we're seeing things like like eip4844 being worked on so quickly and and things coming together so quickly for it it's just people have this newfound sense of uh of uh of motivation to do this stuff because they're like wow we actually delivered the merge Now's the Time to

execute the rest of the ethereum roadmap let's keep this momentum going so uh there's that aspect as well and then he talks about uh you know as I said like eth roadmap Bears have been crushed by the merge of success so that's a that's a great way to put it right A lot of people were roadmap Bears so to speak of ethereum before the merge because they were like you know ethereum takes so long to ship anything and but okay it took a while to get the proof of stake but we got there and everything else that on in in the roadmap is being worked on in parallel right now uh and it seems that we're going getting uh faster and faster at deploying things in terms of ethereum time obviously it's not going to be as fast as we want it to be but it's still much faster than it

previously has been and then uh Ryan touches on uh the censorship uh stuff that's been happening and he says ethereum uh government tournament and censorship bears are ascendant this season but informed people know these concerns are way overblowned ethereum isn't close to being captured of our compliance is largely voluntary and dynamic in the profit motive and politically minded people know crypto is going to going to spend in 2024 and the the second sentence here is what I wanted to or third sentence was what I want to focus on where he said ethereum isn't close to being captured and then he goes on and says of compliance is largely voluntary and dynamic in the profit motive and this is something I've discussed as well where the only reason why people are are I'm going um towards censoring relays instead of

non-censoring ones has nothing to do with the fact that they want to engage in censorship it's got to do with the fact that this is where the most profit lies and that's really the the the the root of it is the profitability um uh behind it that's just Financial incentives at the end of the day and then uh there's a few other things yeah I mean I highly recommend giving this thread a read but I just thought it was a really succinct breakdown of all the really positives happening in the ethereum ecosystem right now it's a lot of what I've talked about on the refuel of course but in just like a thread form obviously I talk about it across episodes and it's very disjointed but I just highly recommend giving this this thread a really really good read digesting it all uh because it's just

great and I really respect Ryan he's uh he's a true etherean through and through uh so you should definitely go check this out I'll link it in the YouTube description below alright so an interesting little uh post from vitalik on The ethereum Magicians Forum today uh that Tim baiko shared on Twitter now what this post does is it basically uh is titled proposed milestones for Roll-Ups taking off training wheels so we all know that roll ups today pretty much all of them except fuel V1 uh have training wheels on them which means they're pretty much more or less centralized they don't have Community governance uh they are working towards that but I don't have it right now they have upgrade Keys uh they don't have fraud proofs in the case of optimistic Roll-Ups that are enabled or

that are working uh and there are debates about that as well uh but yeah we all know they're not in their final States they're basically all in beta uh for good reason and vitalik basically proposes a a three-stage system here where he says that this is how Roll-Ups should approach uh decentralizing or I guess like taking off those training wheels the first one is stage zero which is full training wheels which is what we have today and he he has a bunch of requirements here some of which in include the project should call itself a roll-up all roll-up transactions should go on chain there should exist a roll-up full node so a software package people can run and then a bunch of other things as well but it doesn't mean that this uh this roll-up has to have active fraud

proofs or validity proofs at all uh and that's pretty much where we're at today and then stage one would be limited training wheels so the requirements would be there must be a running fraud proof or validity proof scheme which has the Practical authority to accept or reject which state routes get accepted by the roll-up contract uh there can be a multi-sig for uh for for upgrades and things like that but it must be a six of eight uh or stricter multisig here and there can exist an upgrade mechanism but if it has a lower threshold than the multi-sig upgrades must have a mandatory activation delay of at least seven days um uh or the maximum length of the proof game that that I've talked about before and stage two would be no training wheels so basically this is where the roll up has uh has full forward proofs

full validity proofs it uses two or more independent app implementations of its state transition function eg2 distinct fraud proofers two distinctivity proofers or one of each and the security Council can educate educate only if they just disagree uh adjudicator sorry that's how you say that word and you had to say that word which would only happen if there is a bug and then upgrades are allowed but must have a delay of more than 30 days I think this is pretty good I think keeping it simple with just three stages instead of going up oh out to like 10 stages is probably one of the main things that vitalik wanted to get across here because you can extrapolate this out and create as many stages as you want right and you can pick on every little thing about a roll up but at the end of the day there were really only a

key set of things uh that you need to worry about and I think vitalik called them all out here right like fraud proofs validity proofs uh being able to independently verify the chain with a full with full node software uh being able to uh uh uh know how the upgrades work right so whether they there's a timer on the upgrade your delay on the upgrade whether there is a multi-sig behind it what the community governance process look like is there a security Council those things in particular and then you can worry about validators and sequences as well on top of that but yeah but by not over complicating things you make it easier for Roll-Ups to understand their path towards uh basically taking off these training wheels so I just thought it was a great little uh post here from vitalik which you can check out of course I'll link in

the YouTube description below and there's also a bunch of discussion in there as well from Jesse who works at coinbase on L2 and ethereum protocol related stuff and our smart contracts here which is Kelvin Victor from uh the optimism team and then you have a couple other replies as well uh so you should go definitely check this out maybe leave your own comment if you have one but I just thought it was great that vitalik is getting more serious about this conversation around training wheels on on these Roll-Ups on ethereum all right so speaking of Roll-Ups Lee uh here from the tech lead at arbitrary and put together a final little thread here where he said at arbitrim we've often been asked if our fraud proven mechanism has ever been tested in the wild well last week it was kinda so it was tested

in the wild but on the ethereum proof of work channel the East power chain that was forked off at time of the merge and Lee goes on to say for context arbitrim is implemented with smart contracts on ethereum so when someone Forks eth there's automatically a fork of arbitrim1 too our contracts automatically open validation on forks and an attacker used that to make a malicious assertion on the ew chain last week and Lee says I can't know exactly what the assertion committed to but it looks like it attempted to create a fake withdrawal that would have stolen all the efw in the in the bridge luckily I've been personally running a defensive ew validator which came online and defended the chain my validator successfully challenged the attacker and after the seven day confirmation period my assertion was confirmed instead I got 0.5 HW for defeating the attacker half

of the current role up stake size that's not worth nearly 0.5 eighth but I'll take it so this is a really great little test of arbitrim's fraud prover in the wild obviously not on ethereum mainnet but on a forked chain uh uh the E3 of work chain so that's really cool but what I find really funny about this as well uh is that someone actually went ahead and did this and thought to do this in the first place I didn't even think of this I for some reason I didn't think about I mean I don't really think about this ew chain at all really but I didn't really um think about the fact that you could actually do this which is which is really fun and also on top of this this speaks to what I've talked about before about how when you're discussing fraud on a a roll up it's got

to do with things that are not valid State transition functions so obviously uh someone creating a fake withdrawal that would steal all the ew from the bridge is not a valid State transition function but if no one challenges it in the seven day fraud period then it would actually go through because um the only um the the the chain because it's an optimistic roll-up it optimistically assumes that everything's all well and good and that if if nothing if it turns out that it's not there'll be someone uh calling foul on that and because you have cryptographic proof that that's actually not something that's supposed to happen it's not a valid State transition then you can submit that and you'll you'll win the the challenge period and you'll get a a reward for that now the same thing will have that can happen on ethereum mainnet

but this is why fraud proving is so important on optimistic Roll-Ups now obviously today as I said I believe optimism doesn't have fraud proofs live arbitrim does but they're the only ones who run it I I don't think it's public so you couldn't challenge it yourself if you wanted to uh but that's because they've got their training wheels on of course uh whereas uh ZK Ops have validity proofs uh they're actually called validity Roll-Ups technically people have been arguing about that terminology for ages so they work differently but in the optimistic roll up this is how it works so it's not got to do with something um being hacked so for example if a smart contract on arbitrim was hacked uh and then the smart contract was hacked using the code that it was it was coded with right that's still following the rules of the

protocol that is by um the view of the protocol view of that smart contract a valid State transition that is just as it was programmed to do right whereas actual fraud like this uh uh is not a program to work like this at all and this is something that can be challenged because it's not actually within the rules of the system uh unless there was a bug of course but this wasn't a bug this was just someone trying to to literally do fraud so very cool to see this and great to see arbitrim's fraud prove I tested in the wild all right so just to highlight here from ashwari who says Tell Me I'm Dreaming but MasterCard is doing a full demo of how to buy a nfts on polygons uh uh Mumbai test net using MasterCard uh a

full demo by MasterCard folks yeah this is pretty cool uh I mean as usual polygon killing the um the business development here but it's just another big corporate getting involved uh with polygon and this time on the Mumbai test net which is a test net of their POS chain uh and you know this is a full demo of buying nfts now I wonder if this is going to be integrated with metas implementation of what they're doing with polygon through Instagram I think it would be uh and that'd be really cool to see but yeah great to see just these big corporates getting more and more involved with uh the crypto ecosystem I think that you know as I've mentioned before people often have this I guess uh a version to corporates because they're like you know we're trying to disrupt

these people but as I mentioned on the refill earlier in the week we're disrupting them only if they let themselves be disrupted they can come on board they're allowed to just like anyone else they're allowed to come on board adopt this technology integrate it with their own technology to make it better they're only going to get disrupted if they fail to evolve and that happened a lot during the internet era of course but I think because the internet era you know I mean really it doesn't it didn't happen that long ago right it's happened over the last 20 years where the majority of the big internet companies have have existed and grown and the majority of the disruption happened that's still very refreshing people's minds so now these big companies are much faster to move on these uh these new technologies uh relatively I guess uh because of the

fact that they know that if they don't they're going to be disrupted so we should be encouraging that from every one of these corporates I I believe and even the banks right even and even the big Banks as I've discussed JPMorgan is even using uh polygon as well so but just another thing another cool thing to see here from the polygon ecosystem all right so Argent uh today has launched something called meet the DAP where you get to learn about Stark net dapps from teams building them uh they've started with Argent X the most popular and only open source wallet for stocknet uh and there's a video here uh called meet Argent X now this is uh I don't think you can hear the volume uh in no I haven't got my desktop audio here but this is a video it's obviously got audio uh but it's basically uh

someone walking you through uh Argent X as it exists which is as I mentioned a um open source wallet for stocknet so browser extension wallet which you can go uh check out uh for yourself uh but basically uh this is just another educational YouTube series that has been stood up I talk about talk about synthetics as the other day but cool to see Arjun doing one as well I just been killing it on the education side recently I remember a few days ago maybe last week I talked about their thread on account obstruction which is still one of the best threads I've ever read uh you should go find that and read that uh but great to see them doing this uh meet the series this actually reminds me of Team Fortress 2 when they were when they um we're developing the game all those

years ago they were doing like a meet the series of the different characters and it worked really well just like a really nice introduction so I'm glad to see uh Arjun taking this up and doing uh meet the meet the daps for different adapts infrastructure providers anything in the stock net ecosystem for people to learn more about starknet all right wallet connect has announced a 12.5 million dollar a series a funding rounds here uh led by I believe uh with I read it just before uh right we're LED um no no I don't know where it's I read I read it before and now I've lost it anyway this is a big race for a team that's been around uh for quite a while now actually so while connects actually been around

I believe since 2017 or 2018 or something like that I remember them from back then and they were they've been building ever since basically and supporting ethereum and branching out to different uh uh different uh chains and things like that as well uh because obviously uh given that they are an infrastructure provider they're not just going to stay with ethereum they want to support every Network that they can uh but yeah they uh yeah so they thank all their investors here I'm not sure if they called out any lead but they have big investors like Shopify coinbase Ventures consensus and a bunch of angels of course as well listed here so you can go check out the blog post for a full breakdown of their rays but just cool to see that there's more infrastructure providers getting more funding because

at the end of the day it's all well and good for apps to get funding and layer ones I guess to get funding which I still think is dumb but you know it happens uh but I like seeing this core infrastructure that people use that the end users use because while it connect is end user facing right uh getting funded and making sure they have Runway even in a bear Market now it's funny because uh people often say that uh the private Market lags the public market in terms of valuations I think that it does by about six months so I think back in June July was it had already kind of uh a lot that was already the point where the valuations came down to earth and now we're seeing evaluations uh be much more in line with uh reality and also we're seeing much

better teams getting funded and then just the absolute crap not getting funded anymore not getting funded as much as it would off now this is similar to the dynamic that played out in 2017 with icos had been all the manner of crap got funded in 2017 and then 2018 basically nothing got funded right uh because it was just such a brutal bear Market but because I think there's been so much adoption happening in this bear market and everyone's convinced that crypto is the future now uh even though it's it's a very it it's a kind of a deep bear Market as it currently stands the good teams are still able to raise which it wasn't the case for 2018 and 2019 they were I mean to put some context here 29 to 2019 unisop raised one million dollars that's it from from one investor uh I don't think anyone

else really wanted to touch uni swap uh and uh there was no like D5 was still very small it was very much a moonshot bet uh but these days it's not a moonshot bet but at the same time valuations are higher than they were back then uh and and also the expectations of Landing that 1000x are much lower even for VCS and funds because the the unisop investors are the people who uh the um the investor that did that one million dollar check Paradigm that was their biggest win I think by far and they made I believe a thousand X on that investment uh or more than that right uh just because of the the valuation was so low at the time but uh it's not the reality today for for better actually I believe because it means more teams get funded with more money they can build uh uh more more

quickly and they continue to build through these bear markets you know what's funny I say it's a deep bear Market this feels nothing like 2018 2019 guys like this is a this is a cruise like and I'm not just saying that because this time around uh obviously I'm in a very different position than I was personally in 2018 and 2019 just from a portfolio perspective um but also from a my place in the ecosystem perspective but just generally like I remember distinctly what 2018 and 2019 felt like it was it was so different so you know if you're sticking around now if you're still watching the refuels you guys are gonna make it like I truly believe that I mean if you're getting involved in ecosystem if you're placing the right bets and that's up to you where you place your bets obviously I do truly believe that uh that you're

still here you're still early you're still gonna are gonna make it and and it's really awesome how uh I guess like even though we're in the depths of this bear Market things are still going still growing things are still happening and so many exciting things are happening on ethereum specifically so very cool to say that but again congrats to wallet connect uh for this uh but moving on to the last thing I just wanted to quickly point out which is a bit of a comedy uh to end our week here today so Eric Wall tweeted out saying that someone made a website to track what Microsoft strategy would have made if they longed eth instead of BTC and it turns out they would be up 1.47 billion dollars instead of down 1.35 billion dollars so you can see there's a chart here that shows this

shows the amount invested in USD at different points since November 2020 uh till today uh which is I guess about two years worth of investment you can see on the Orange Line bdsc Holdings in USD is below the amount of money they've put in microstrategies micro sailor just for those of you who don't know and then you can see the blue line here potential eat Holdings in USD is above that line that they've invested and then you can see with staking how much they would have made and there was a tweet the other day that actually said that if they had bought um instead of BTC they could be making 100 million dollars a year from staking all of that eth now obviously they probably wouldn't have staked all that eighth uh and by doing so they would have lowered the yields a lot because I

believe it would have been yeah 3.5 million ether would have owned if they bought Heath instead of BTC so that's obviously uh I guess a big chunk of the current eighth at staked I believe that's a what is it like a fourth or a fifth of the currency that Stakes so obviously we don't want uh them having that much control over the network uh but still it's funny to see this website and I think it's funny because there's also this meme of uh Michael seller saying there is no second best uh to bitcoin uh when in reality I mean b2c is the second best to eat here eighth is outperformed BTC for such a long time now and if uh if microstrategy or sailor bought eth they'd still be up they wouldn't be underwater they would have been underwater briefly during the massive Market sell-off but you can see

here on the chart that he's actually recovered from that and beat this he hasn't really recovered or at least microstrategies Holdings haven't recovered uh and they would have been better off holding it just something fun to end uh this week with uh but yeah I think on that note that's going to be it for to date so thank everyone for listening and watching be sure to subscribe to the channel if you haven't yet give it a thumbs up subscribe to the newsletter join the Discord Channel and I'll catch you all next week thanks everyone