Ethereum/Layer 2 growth, EtherGPT and more - The Daily Gwei Refuel #707 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the delway refu where C the latest news e the system I'm your host Anthony sday 18th December 2023 all right everyone let's get into it so just a friendly reminder about this competition that is currently going on that I am participating in with the eifi team here I spoke about this the other day but basically uh you can read all about it in this thread which I'll link in the YouTube description below but you have until December 24th to get your submissions in here to win some prizes so basically uh the submissions include things like Twitter threads and video where you describe why you love ethereum why decentralization is important for the health of the network and what your P what you've personally done to support it and winners will be chosen um I believe and announced by December 26th

TR so if you haven't participated in this yet be sure to do so as I said like there are some prizes like dap node staked eth Hardware wallets and more up for grab so you can go check this out I'll link it in the thread Below in the in the YouTube description below all right so I think most of today's episode's going to focus on layer twos uh and ethereum usage generally and a bunch of dispelling of bad ethereum narratives because I did an episode on Saturday obviously the only news I have to cover today is from Sunday so I figured that I would cover basically all of the the stuff that I that I saw around layer 2's layer 2 growth and also a thread that I did on this topic because as we've seen on crypto Twitter lately especially over the last 2 to 3 months The Narrative

around ethereum has been uh pretty bad and as you guys know I don't think narratives really mean anything for the long term narratives of narratives real is reality and reality always catches up but at the same time reality doesn't need to catch up when it comes to ethereum growth reality is already here and I've showed a lot of these metrics on the refi before but I just wanted to highlight this thread for you guys because it was just a basic thread that I put together highlighting the fact that all of the metrics that we use to track uh activity and and none of these metrics are perfect you guys know that I actually don't really uh like taking any of the metrics that we use in a vacuum like I like taking them holistically and together and there's obviously lots of nuance to each of these metrics but if

we look at every one of these metrics we can actually see that they're all at all-time highs so I posted this thread and I basically said you know let's look at all of the metrics that we can track and a lot of these came from websites like grow the pie um L2 beat uh ultrasound money and the beacon chain website but basically ethereum mainnet and layer 2 daily active addresses are at all-time highs ethereum mainnet and L2 transaction count all-time highs layer 2 stable coin market cap alltime highs layer 2 tvl alltime highs fees paid from layer 2 to layer one you know well into alltime highs layer 2 TPS and activity is at alltime highs the amount of e Stak is at alltime highs E suppli is at its lowest level since the merge and only continuing to go down and this kind of flies in the face of that

narrative that people were pushing saying that oh once activity on l2's picks up it means that L1 activity is going to go down and that hasn't been the case at all activity has just picked up across the board and you can see all the data sources that I used I've linked them in the in the thread as well here but really what I wanted to focus on was not any particular metric here but more so the fact that different things grow for different reasons right and there's been this kind of meme for a few months that oh people are only using l2s because they want an airdrop or something or or they're getting paid tokens to use it or whatever whatever other kind of you know reason you want to come up with but the funny thing about that is that even if it is true

right which a lot of it is true of course there's a lot of this stuff going on it doesn't just happen on the l2s it happens on every chain right the the most of the use of these chains today is speculation and there's nothing wrong with that but to say that people are using the l2s and are farming an airdrop and are speculating but they're using this other L1 to do serious business and not speculating is ridiculous to me because they're using the chains all the same way basically to speculate right whether it's speculating on on farming an airdrop whether it's speculating on some meme coin whether it's uh trying to to essentially uh uh trade other coins on there whether they be meme coins or others right you know existing projects that have coins you believe to be undervalued all that sorts of stuff it's

all speculation and as I said there's nothing wrong with that that and the financial system is speculative by nature in the you know the existing Financial system and also the the crypto Financial system um but then don't you know I just I I take a big issue with the fact that people will kind of try and fud l2s and fud ethereum saying that it's only a vehicle for speculation it's like well everything in crypto is a vehicle for speculation um in the same way and there is there's not really a distinction here but that shouldn't be something that we uh look at negatively and I don't look at it negatively at all I've always said uh for for for a long time now even back in the um Into The Ether days when I was doing that podcast with Eric Connor we always said that

people who find speculation in crypto gross just don't understand that speculation is the main growth driver of crypto and and it always has been and probably always will be because when it comes to really anything even outside of crypto speculation or not there's always some kind of like Carro or you know on a stick basically there's always some kind of motivation that someone has or I guess like incentive that someone has to do something in the financial system there are so many teaser offers for example from Banks you know let's say you have a mortgage the banks are all going to um give you teaser offers they oh come join with our bank you know refinance with us refinance your mortgage and you'll get a better rate right I know in the US it's it's a bit different because the US is predominately fixed rates but in

Australia we have variable rates which is the predominant um uh uh way people get mortgages so if you come up and you've you know maybe you locked in a fixed rate for like two years and then it's expired and then you you're you go to a variable rate but the bank is offering you a a worse rate than some other bank well then going to another bank because they're offering you a better rate right there's an incentive there um and then there are also things like credit card points right that people you know people use credit cards because they get points there's airline miles you know there's all these kind of different things that really do start to look like tokens if you I mean they're not tokens in the sense that they're not freely tradable and freely speculative on a global market uh you can't

speculate them on on a global market but at the end of the day they act the same way they're this kind of incentive that people want to farm you know people people are literally like if you want to use the same terminology people literally Farm credit card points they Farm airline miles right and the more they get obviously the more they can do with it and obviously um because it's not trading there's no there's no real speculative value attached to it uh for the most part there is some kind of isolated speculative value here uh but then you can look at stuff outside of that as well like look at all the hyped up sneaker drops for example right when if you want to compare it to nfts a lot of people will buy these sneakers and resell them from many multiples it's the same thing that what happens in crypto

you get uh you know you find these tokens and you try to sell them for many multiples you spec at on them so this exists everywhere and I I obviously this is not something that um that is a secret and that needs to be I guess like explained in plain English like I am but I think it's worth adding the context to what I'm talking about here is the fact that like all of these systems that we use within crypto most of the reason people people use them especially new people uh is the fact that they're able to speculate they're able to buy into things that could potentially make them money now speculation doesn't imply that you're always going to win it actually most of the time you will lose speculating I mean that's just the the the the way the game Game Works um but

yeah that bad narrative that I've seen perpetuated around ethereum and and L2 is people saying you know it's just people farming air drops is is ridiculous to me and the other bad narrative that I see also that gets perpetuated is that people saying that l2s aren't ethereum which is completely wrong and makes zero sense to me l2s are of course ethereum yes okay like admittedly uh most of them are centralized today right most of them have centralized um sequences they have multi- uh they you know they they're permissioned um fraud proving and stuff like that but unless you believe that that's always going to be the case which I don't believe at all obviously and unless you believe that like that those controls are Never Getting removed then uh that you can't really say that it's not ethereum because even if those

controls are in place uh forever it's the same as if a smart contract on ethereum for a defi app had an admin key behind it like are you going to say that's not on ethereum right it just it boggles the mind the narratives people come up with in order to basically fight ethereum with so that's another one that's another really bad one that I've seen when it comes to l2s and also people just saying like oh you know L2 suck we should have scaled the L1 it's like okay if you have that opinion like you can go and join other ecosystems that are trying to scale an L1 like it doesn't matter if about my opinion on whether this is wrong or or right way to do it doesn't matter if uh it's you know there's obviously monolithic versus modular it doesn't matter who's right or

who's wrong here if you don't agree with ethereum's modular road map and it's L2 rollup Centric road map then go to another ecosystem you know you don't have to stay on ethereum right you don't have to stay within the ethereum ecosystem but you do because I mean there's not that many other ecosystems out there that will let you speculate at the end of the day like that goes back to what I was saying before about how the main use case of a lot of this stuff is still very speculative and the last thing I want wanted to bring up with regards to I guess like bad narratives that I've seen with regards to ethereum and l2s is the bad narrative around or I guess like the false equivalence that people do where they compare uh you know their favorite L1 to ethereum L1 like for example

I've always been annoyed at the comparison between salana and ethereum L1 because salana is optimizing to be an execution layer right um so when you're and ethereum L1 is not optimizing for that at all it's actually abandoned uh most of the I guess like upgrades that would make it a better execution layer and it has pushed those out many years if if they're going to do any upgrades like let's just say adding paralyzation to the evm on L1 and adding local fee markets right those kind of things it's all being pushed up to L2 that's part of the ethereum road map so realistically you shouldn't compare salana to ethereum L1 you should compare it to the l2s and people do this with the gas Fe comparison they're like oh it cost me $50 to swap a token on ethereum which it doesn't actually cost that most of the

time but people will say that right there's like got $50 to do it on ethereum L1 but it cost me like a you know a penny or or less on on salana it's like okay that that's fine but like at least do a fair comparison here at least compare it to l2s and yes l2s are still more expensive than than salana is right for various different reasons but it's a massive false equivalence to compare it to ethereum L1 when ethereum L1 is not trying to be that right it's so dumb like I I I don't understand like whether these people don't understand that that's the wrong comparison to make or they're just trying to fight ethereum with whatever narrative they can come up with that's always something that's really annoyed me is that people making that comparison there because they're not the same thing you're not doing an

Apples to Apples comparison here and you're really watering down the discourse by doing this because it means that people get confused they don't know what to think uh and the bad narratives just just just perpetuate but as I've shown in this thread here uh on that I'll link in the YouTube description below the narratives are the narratives and reality is reality people are still using the l2s they're still using L1 there's still a lot of demand for ethereum there's still a lot of demand for eth as an asset um obviously eth as an asset is really big so it hasn't performed as well as other assets in over the last you know maybe let's say 6 months or something like that but these other assets also went down a lot more than eth did during the bare market and that's another thing that people miss a

lot when they compare eth to other assets it's like okay if you actually look at the chart I actually did this comparison in the daily grade Discord channel the other day because I was looking at everyone saying oh you know Soul has performed better than than eth blah blah blah but the thing is it depends on where you buy these assets right I went I went over this on Saturday it depends on where you buy these assets so people saying that again it's just just a really bad narrative because uh unless you bought the bottom and and sold the top and uh you know the best Trader ever and and you know out trading everyone and and having 100% hit rate on your trades you most most likely didn't outperform um and and and that I guess like sets a bad narrative for people who are chasing these things

thinking that they're Gods thinking that they can they can um outperform thinking that they can outsmart everyone when in reality you can't and I actually mentioned a few days ago I was watching the markets like I usually don't uh don't speculate too much on short-term markets uh stuff because short-term Market stuff is obviously not my wheelhouse and not something that I play I'm not a Trader but I said like I think three days ago in the daily way Discord Channel that I was looking at all the craziness going on I'm like guys like I feel like this craziness is unsustainable at this point I feel like the the Market's Drew for a bit of a bit of a cool off here and it has it's cooled off over the last 2 to 3 days especially today it's cooled off a little bit but that's a short-term thing

like a long-term thing I I I still think the bull market is definitely intact you know there's no end of the bull market here or anything like that uh but I mean that's markets talk and if I if I start talking about that again it's probably going to go me going on tangents there but yeah hopefully that gives you some extra context around the bad narratives around etherum and l2s and how they're really just all narratives they're all crap it doesn't really match with reality but you can go check out this thread all link YouTube description below but there are a bunch of other things I want to talk about with regards to l2s as well and one of them was uh the fact that we have another L1 becoming in L2 using ZK SNS stack so ZK syn stack that's hard to say um so the

L1 Network Kronos chain uh which is supported by crypto.com is embracing Z ZK stack and joining the ZK sync hyper chain Network on ethereum uh apparently they've got more than $350 million in defi tvl um which obviously isn't big but it's still something and the fact that they're converting from an L1 to an L2 just continues that trend of all of these l1s uh basically capitulating and saying well we think we can work better as an L2 so we're going to become an L2 and that's you know that's exactly what's happening here on the the long taale of l1's as I as I've said before I think that most of the if not all of the bigger l1s the ones that have like more rabid I guess like invisible communities and the ones that have like bigger

market caps are not going to become an L2 anytime soon and those would include something like the salana obviously Avalanche cardano uh polka dot to an extent uh and you know a few others out there but other than that the long taale of the l1s I mean if they want to survive at all if they want to get any attentional traction at all then yeah I feel like it it really makes sense for them to move across to an to an L2 here but anyway you can check out ZK syn's tweet about this I'll link it in the YouTube description below for you to do so all right so over the last last few days inscriptions have really I guess like exploded on evm chains now for those of you who don't know inscriptions started on bitcoin uh it's basically a

way to create nfts on bitcoin really and create tokens on bitcoin it is a really dirty way to do it it is not in any way Superior or even on par with how it's done on um I guess like native smart contract chains like like ethereum but obviously because you can't do that on bitcoin people are doing it through inscriptions and there was a whole kind of speculative Mania around it but as I said lately people have been doing it on evm chains which is totally pointless it makes absolutely no sense to do this because you don't need to do it you can just do it with smart contracts on natively on the Chain but because there's a lot of hype around it because there's a lot of um a lot of money potentially to be made here uh and there's a there's a strong narrative

around that people people are doing this so inscriptions hit a lot of chains over the weekend it hit arbitrum 1 really hard and actually uh as I I think I explained this on Saturday arbitrum one ended up going uh offline briefly because of it sequencer went offline at least because of it uh they also hit ZK sync error which I believe stayed up through all of it but both of these chains ended up peing at a couple hundred I think TPS doing uh processing all of these inscriptions uh transactions but it really I mean I I said on Saturday that uh you know people were spamming the chain with inscriptions transactions and I didn't mean to say that it's spam it's just that like they were hitting the chain with a lot of these lot lot of these transactions right um and and and it

wasn't just like one chain it was many evm chains and as I said because there's a lot of speculative manual uh behind this uh and also I mean it's it's kind of really pointless to do because of the fact that uh you're much better off just doing it natively using the smart contracts here but you can see saiga's tweet threat about this it's actually a really really great tweet threat I'll link it in the YouTube description below but essentially if you don't know what inscriptions are you the the the the Tweet here explains this saying the concept of inscription started with bitcoin's ordinals ordinals allow data data to be inscribed directly on chain this can be text images videos Etc this is the only way for Bitcoin to add support for nfts and other tokens since it doesn't support smart contracts and then of course people realize they could

do the same thing on ethereum and other evm based chains instead of inscribing data on individual SATs or I guess like individual um Bitcoin STS evm inscriptions inscribe data in transaction call data and call data is actually what's used by l2s as well to to um to put their data on L1 and you can see here call data is optional data that can be sent in a transaction most of the uh time this data is used when passing inputs to Smart contract it's also used for rollup data core data is readon and cheap to use especially when compared to storing data in smart contract State now of course uh we have 4844 coming as well which is going to add blobs and I think I mentioned this on on Saturday's episode as well that I think inscriptions are going to hit blobs too which is sad because it means

that at least over the short term blobs are going to get really expensive I I would imagine right uh because people are going to be I guess uh hitting them with inscriptions and people are going to be speculating on it but at the end of the day the l2s are still going to be buying that blob space they can afford it they can they can probably pay a higher gas fee than than any any of the people doing the inscription stuff can but it's it's sad because there's actually no way to really prevent this just the way the Roll-Ups work uh you you couldn't prevent someone from doing inscriptions on on call data and you can't um prevent them from doing it on blobs but at the end of the day it's an economic thing where essentially the L2 or the rollup will have a lot more money

to spend because they aggregating um you know uh lots of users transactions together and charging users for that they'll have a lot more money to spend outbid anyone for the blobs and we do have that blob sharing protocol as well and then with the l2s as well because the um the way they post their data to to L1 is done in an automated fashion it's uh you know it can be done at whatever time they want to do it at uh essentially what can happen is that the the rollups and the l2s can essentially if they want to uh wait for cheaper blobs essentially they can they can do it on the off hours basically when the humans aren't online and stuff like that so there's a lot of that stuff at play there but I'm curious to see what happens there with with blobs now that

inscriptions has become a thing but as I said like it's it's kind of hilarious because there's literally no benefit of doing this on evm chains uh uh you know because you can do it natively already the only real benefit is is a very short-term benefit where because there's so much speculation around these things because the word inscriptions because the word ordinals has led to uh speculative Mania um this is the reason people are doing it and honestly if I had to kind of guess here this may be the end of the speculative Mania here because this is just ridiculous you know usually when you say ridiculous stuff happening that makes absolutely no sense um like meme coins pumping 100% or 200% in a day or something when you see stuff like that it tends to be like a local top on these kind of things because what

happens is that you end up tapping into all of the available liquidity and all of the available speculative kind of energy and you bring it all forward it's like taking on a debt from the future essentially and you bring it all forward now that debt needs to be paid back one way or another and the way it's usually paid back is that things get sold off right uh you know the the very popular mem coin Bon that that um that had gone up a lot is down like 45% in 3 days I think so if you had bought the top you're down almost half of your money in 3 days so this is what I mean by it takes from the future basically and and and and brings all that speculation forward but because and this is how markets work generally this this is why

bull markets have blowoff tops usually because it just brings all of it forward and then um it's unsustainable and then we kind of like sell off and you know you guys know the rest of what happens there but anyway as I said go read this thread from Saiga it is a really really great explanation of what has been going on with inscriptions on evm chains all right uh and actually this is also about inscriptions Hunter here from offchain Labs shared that arbitrum 1 hit an all-time high of 4.3 million transactions uh during this inscriptions event um but cooler numbers uh but but he says the cooler numbers was the incredible support that came from the other l2s and l1s for the arbitrum community obviously uh because their sequencer went offline or briefly went offline because it basically suffered a

Dos attack essentially so so there will be a postmortem here but what I'm speculating on is that the siga just got hit all of a sudden with a flood of transactions from inscriptions it couldn't handle it it fell over and then just came back online shortly after and then was able to process the transactions and has been processing them just fine uh since then and as I said the postmortem will probably be out this week uh but that's what I'm speculating that it was but yeah cool to see that uh they were able to process the transactions once they came back online here all right data always posted a nice little graphic here where they captioned it with the most important ethereum flippening from this year if ethereum is successful long-term users won't be sending eth on Main net now the chart here the graph shows that the amount of

L1 eth transfers versus L2 total usage and obviously this is the kind of uh I guess like um this is the the the thesis here is that most people uh in terms of like number of uh I guess numbers of activity that there's happening number of e transfers stuff like that that's happening will happen will be done on l2s rather than L1 one L1 will be reserved for the large kind of scale operations the large scale kind of transactions stuff like that and L2 will be everything else basically um but but L2 will also be the large scale stuff like for example if you have like $100 million on L2 as a whale you can move it just the same as and and play around with it just the same as you can on L1 um but because l2s uh are still relatively new they got lot a lot less

liquidity and a lot less tvl generally and obviously it's still quite centralized the big players tend to stay on L1 still because they can afford the gas fees I mean if you if you're playing with with even like a million dollars right uh you can afford the gas fees like it's it's completely fine um but at the end of the day like if if if if uh L2 has enough activity on or and L2 has enough liquidity and enough uh stuff to do on it the people will move across anyway but yeah generally I mean the long-term thesis is that L1 will be a settlement layer for high value transfers high value transactions high value uh kind of settlement uh whatever it is and a lot of that will be L2 related but but it could be really anything of of high value because really

your fees are going to be perpetually not perpetually like uh at the same kind of like fee level but if they're going to be like always high relative to what most of users can afford and that really is not that High I mean if you want to take in the entire Globe like Mo most people couldn't even afford uh even even like a few one cent fees or anything like that like when when you really take the whole globe and you want to appeal to like every every every person you have to kind of look at that and most people wouldn't be able to afford that that's why I've said that the future L2 fees is actually free because that's how you appeal to the to the whole world here but L1 is never going to be free it's never going to be anywhere near

free right um that's just the way the L1 works and that's just the way ethereum L1 works I should say other l1s may try and do it you know good luck to them but the l2s the the main goal at least for some of them will will be to be uh you know very very cheap and and and near free in the short term because maybe they they put their data off chain it's not on ethereum L1 um but then there'll be other l2s that are like you know the main defi chains and stuff like that they may be a bit more expensive because they don't want to sacrifice anything they want to have all their data on ethereum L1 which would be a little bit more expensive but then maybe in a few years when we roll out full dank sharting it becomes even cheaper and it

isn't expensive anymore it isn't like a little bit more expensive anymore it basically becomes free as well so we'll have to see how that kind of pans out there but I just thought this was an interesting chart that I figured was worth highlighting on the refuel here and you can go check this out for yourself I don't know if there's a blog post to to back this up um but they have a substack at data. substack do.com that has a lot of really really great insights here that you can actually go and uh subscribe to so they put out a lot of um a lot of a lot of good um datab based insights based on a wide range of things you know such as reaking uh proof of stake generally uh you know L2 stuff um and and so on and so forth not regularly posted but definitely

whenever they post it is a really really great um a really really great read so you should definitely go check that out I'll link it in the YouTube description below for you to do so so aricon here today has unveiled something called ether GPT so essentially what this is is that a custom chat GPT with knowledge scraped from various ethereum research forums and you can go check this out I'll link in the YouTube description below but you can basically uh I guess like ask this this bot or ask this AI anything you want about ethereum and it will answer it for you now of course it's not going to be 100% accurate yet depends on the data that it's been trained on and it will always of course uh uh get better over time hopefully but yeah if you're curious about anything that aricon has kind of listed here such

as layer 2s sharding economics proof of stake ZK Starks and snars then uh this uh chat GPT has actually crawled the E Research Forum for all these things and you can go and ask it questions here so yeah I'll link this in the YouTube description below for you to to go ask the questions if you have some uh and yeah I mean maybe I maybe I should ask a question live here so what is me is my one of my favorite questions to ask these Bots for some reason I always just default to that y straight away me stands for minor extractable value such so on and so forth so I mean this is an easy kind of question to answer I think for for the AI here but yeah you can see how it's just answering it for me here going through everything this is the

kind of stuff that I love um that I love seeing because obviously I want to see more education within the ethereum ecosystem and a lot of the formal stuff is definitely buried in research forums so if we can scrape those and just have a chat bot that you can talk to about these things then obviously that's going to be a huge uh benefit here but as I said like there's not just arons there's also buers which I talked about I think last week There's also one here from Veron which is linked in the replies here to the to the Tweet you can go check that out for yourself I'll link it in the YouTube description for you to do so but I think on that note that's going to be it for today I know it's a bit of a shorter episode but as I said because

I did an episode Saturday there wasn't much news to cover obviously because I'm only really covering Sunday but uh yeah thank you everyone for listening and watching be sure to subscribe to the channel if you haven't yet give it a thumbs up subscribe to newsletter join the Discord Channel and I'll catch you all tomorrow thanks everyone h