Ethereum PoS vs DPoS, L2Beat milestone feature - The Daily Gwei Refuel #518 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily gray refuel where he kept the latest news in the ethereum ecosystem I'm your host Ian lisasano and has the fifth of January 2023. all right everyone let's get into it so a bit of movement here on the Celsius bankruptcy today so cut him here a reporter at the financial times put out a tweet saying significant moment in the Celsius bankruptcy as Judge Martin Glenn rules that 4.2 billion dollars of crypto deposited by customers to earn interests but long interest belongs to the estate and not the users uh and this was not a surprising ruling but it does reiterate the fact that these bankruptcy processes uh not fun at all for anyone they are going to take a long time as I've said before but they also result in rulings like this where essentially you really

don't know what money you're going to get back so because from my understanding because the assets belong to the estate so to the Celsius to Celsius uh then it's up to Celsius once they obviously uh are able to account for all the assets that they have to distribute that to users but in Celsius is terms of use uh that everyone every user agreed to all of the assets that were deposited into earn accounts uh their the assets became at Celsius property which is insane but that's how it worked and if obviously a lot of people don't read the terms of service in terms of use of things that they sign up to I'm definitely guilty of that but I think you probably should when putting your money into things and this is why I mean this is just one reason why I've

said countless times and and why it's such a big Mantra in crypto not your keys not your coins yes I understand people want to use these services to custody their assets and I understand that even Hardware wallets are still too complicated for the average kind of investor to to use to custody their crypto assets but the the problem is is that these centralized exchanges and centralized crypto Services they may look like a bank they may be regulated like a bank but they're not a bank right and Banks I mean aren't innocent either there's a lot of uh stuff that Banks do that yeah that obviously yeah they've been caught for in the past and obviously been great there's been a lot of instances of Bank runs in the past but they're not Banks they're like as I said they're regulated like Banks but

they're so far removed from that and the thing is is that the reason why so many people use Banks uh in the real world I mean even today where there's not really any reason to keep money on there uh sorry that really uh anyone who gets paid in cash or anything like that most of the transactions are digital um the reason why we have Banks is because they give us access to that digital economy right except with crypto we have a parallel Financial system a parallel digital economy where you don't have to at all give your assets over to these centralized uh entities right even if they're offering some sort of view especially if they're offering some sort of outsized yield because as we know if you don't know where the yield is coming from you are the yield and look I take issue with that saying sometimes because

it's not always true like strictly true but it is for a lot of these centralized Services where essentially they'll offer you a yield on your assets but that's only because they take them and give them to someone else I lend them out to someone else or and usually that party is not uh is not probably regulated by the uh the same people that are the same entities that the centralized service or centralized exchange is regulated by uh they can turn out to be complete frauds like three hours capital for example uh you know the alleged fraud there uh and and then everything just goes to basically once the I guess the bull market starts because this stuff can be hidden in Bull markets as we've seen but once the tide goes out as the saying goes uh we see who's swimming naked so just reiterating the point here that

there is no reason unless you are like so technically incompetent that you can't actually consider your own assets there's no reason to put large amounts of assets on the centralized exchanges and services unless you are using them for something like trading and and the thing is is that even then I think that the vast majority of people aren't doing this and aren't trading the size that's required to leave these assets here now in saying that like when you custody your assets you also have to be careful about which default five protocols you interact with with Which smart contract you interact with on chain because if you are say putting assets into uni swap for example well unitop is fully decentralized there's no admin key there's no multi-sig there's no governance that could take your assets

away from you and really the only thing that could happen to your assets is the is a bar Gora or a hack of the um the unit of smart contract which is obviously a low chance but other D5 protocols don't have that and even these layer twos as I've said before uh the layer twos today they still have uh admin keys they still have upgradable contracts and multi-sigs and all that stuff there and even the bridges that you use a lot of them still have that so if you want to be and and follow the Mantra of not your keys not your coins you really just want to either keep your coins in cold storage or if you've got eth you want to stake it because you can stake using self-custody obviously as a solo State gun and even spinning up a mini pool you retain full custody of

your assets and no one can take them from you unless they get the seed phrase of course which is I guess like the usual way these things things go but yeah I just thought it was worth reiterating here that you don't ever want to be on the other end of this process where you essentially have to wait in limbo for your coins for any of your assets to get to be get given back to you and you have no idea when that's going to happen you have no idea what assets you're going to receive whether it's going to be dollars whether it's going to be the assets that you um that you deposited there whether it's going to be 100 or 50 or 10 you just don't know and it's that excruciating wait time that a lot of people that that would get a lot of people uh quite uh

quite upset and it would make you feel pretty shitty about yourself right um and the perfect example of this is Mt gox which is going into its ninth year of bankruptcy process and even then I'm pretty sure that a lot of um people are taking a massive haircut on the BTC that they had in the uh Mt gox exchange once the once the blow up happened uh because of those of you don't know the history they a lot of their BTC was uh was traded away or was siphoned away and then it was traded away there's a lot that went on there but essentially yeah just not your case not your coins uh go buy a ledger go buy a ladder Swan go buy a hardware wallet that's from a kind of like a trustworthy company of which I only really recommend Ledger and Ladder

spawns because I really only use those uh you know over the years um there are have been others that I've tried but generally like I've only personally used those two Brands so I I can only recommend uh those two Brands but there are other ones out there that aren't bad but definitely look into reviews of them before you purchase them but generally uh it's much better to do that than it is to uh either I mean even keeping your assets on a hot wallet like metamask uh is is pretty bad um and obviously keeping them on centralized exchanges or Services as custody is not the recommended play here um but in saying that if you don't feel comfortable enough to to custody your own assets it's fine to leave them on these platforms but just understand the risks and in that case you're better off

just living it on a much more legit platform that's based somewhere like the US so for example coinbase uh then leaving them on some offshore Exchange range or some offshore centralized service that may or may not be legit right but yeah anyway we're going to leave that one at that for today moving on to a tweet thread that I did I don't do many tweet threads these days I find them kind of exhausting to do especially because I talk a lot about uh just uh things on the refill anyway but I did this tweet thread because there is this common kind of sentiment that I see on uh crypto Twitter a lot and this comes from snapcrackle.eth where he put out a tweet where he said there is currently more than 15.7 million each staked this accounts for around 13 of the total eat Supply this is well below the average

steak rate for POS networks which is 61 now the reason why I think this retire goes around a lot is because people like to to position it as like a bullish case for ethereum and that in the future there's going to be I don't know 50 60 of each staked and that much eth locked up is going to be better for the eighth prize blah blah right um whereas they fail to mention pretty much every time I've seen this uh kind of rhetoric uh talked about they failed to mentioned that ethereum proof of stake is very very different to pretty much all other flavors of proof of steak out there right and as I said in my tweet none of the other state networks work like ethereum almost all of them are some flavor of dpos which is delegated proof of stake which has soft

delegation rather than hard delegation like ethereum and I expanded on this in the second tweet where I said when you delegate your tokens in a in a deposit Network a new validator is not spun up you are just adding stake to an existing value that validator that may or may not have a cap this is why you typically see dpos networks with a very small active validator set so what I mean by this is that with a network like cardeno for example I'm just using this as an obvious example here it is a dpos network there are validators that basically say Hey you can delegate your stake to me to my validator and it adds more stake to me and then you can earn this percentage of reward and all's well and good but every time someone does that up to a cap there are no new

validators spun up right it's the same validated instance are being run by that person or by that entity there's just stake being added to it and in my opinion it doesn't really do anything for security of the chain it doesn't really do anything for the asset if it did some of these networks that have like 70 80 90 of their uh um of their coins locked in staking would be worth a lot more than they are but they're not and I ended the Tweet thread by saying that uh in terms of dollar in dollar terms ethereum crushes every other network because 20 billion eth is currently at stake which is greater than the entire market cap of every single proof of stake alt L1 the entire Market not the staked market cap the entire market cap

by more than double for the majority of the networks uh for almost all of them I think so and then I continued on about this delegation thing where I say you know in ethereum you can delegate your stake to an entity like coinbase for example so climax will let you stake with as little as I think 0.018 or something like that but for that it actually be quote unquote at stake and needs to be tied to a validator which requires a minimum of 32 East to activate so what coinbase does is that they activate that validator on your behalf but that is still being activated there is still a validator being added here this isn't the case for dpos networks as I explained in saying this it's still debatable how much actual security each validator instance adds to the ethereum network considering you can

run many validators off of one full node so for example there are currently almost half a million validators but only 8 200 fully synced ethereum nodes so obviously there are many validators running off many of these fully synced ethereum nodes because it doesn't really make much sense to run one fully synced ethereum node uh per validator that just it wouldn't scale very well you will be buying so much Hardware to uh to allow that to happen because a full ethereum fully synced ethereum node uh is it can be up to terabytes right depending on what client you're using depending on if you've refreshed your database I mean there's a few technical things in there but essentially uh if you had to do that for every validator you had that quickly

doesn't become very scalable especially for these large entities so for example if coinbase have to do this they have 10 of all stake they would have to have lots and lots of Hardware to back this up it wouldn't make any sense right um so and obviously we could we could debate the merits of ethereum proof of stake and dpos and whatever other flavor you want to um but it was out of the scope of of this thread here so I just really wanted to make that clear for people now one thing that I also didn't touch on in this tweet thread which is critically important as well is that if he's not just a staking token right it's not just some kind of asset that has been created uh in a proof of State context for the sake of staking it and that's a big

reason why a lot of Eep is in staked and as I said in a tweet here eth is more than just a dumb staking token it's a store of value a money a collateral in defy a fee token that actually gets used in millions of dollars worth burnt every day and more and then Paul and I are replied here uh with a list of of things reader adding my points but also adding some of their own and then saying a 61 staking rate just implies the asset isn't very useful and this is a critically important point it implies that because basically the only thing you can do with that asset or the only thing people want to do with that asset is to stake it and the reason you stake it a lot of the time is so you don't get diluted because a lot of these dpos

networks have very high uh uh kind of like dilution rates on them so you stake so you don't get diluted there so in turn we have both evidence that a more staked token doesn't doesn't equate to a more valuable token right and we also have evidence that uh the reason why a lot of the a lot of eth isn't staked is because it's being used in other contexts now lsds can change this obviously if lsds keep getting adoption which we think they will people would rather use an LSD as a collateral in D5 for example rather than vanilla eth or they would rather use that as a form of money rather than ether a story value rather than eighth but people have their own reasons for doing things but this isn't a say that the the eve stake is

going to sit at what it is now almost 16 million each staked it can grow quite quite uh quite a lot from here and uh someone I think Davey in the Discord Channel brought up a good point as well is that we have uh this restaking uh with um with projects like eigenlayer as well coming online that will add more demand to each staking but that still doesn't take away from the point that ether's an asset is much more than a staking asset which can't really be said for any of the other proof-of-stake networks whether they're dpos or lpos which is liquid proof of stake which is just a form of dpos and whatever other flavor you want to talk about that can't be designed from a technical perspective that has to be basically uh wheeled into existence by the community by the network and it has to be tied to a

useful Network so I just thought this was a something very important to point out to people and also when you really compare the marketcast between networks it doesn't matter like eth is way more valuable than the closest Ulta one look people will point to uh BSC as the um the next most valuable altel one and then point to B and B as the token associated with that but I don't think that's the right thing here I think BNB as a token accrues most of its value from binance not from BSC so if we look at bnb's market cap right it is uh fully diluted 50 billion dollars ethereums is 150 billion dollars so even still even if you count B B and B as the BSC asset so to speak which it is I mean it is the I guess like money of BSC but in my

opinion most of its value is not derived from that it's derived from the exchange even still it's worth much less than eth as an asset and then you go down the list and the next one the pop-up is cardano which has a I'm just looking at the list here has a 12 billion dollar fully diluted value so it's it's like 15 times or a bit less than 15 times um away from being as valuable as eat still so and I and a lot more a day Stakes than each state so if you look at that if you look at the Hard facts it doesn't make much sense to say that um there's going to be a lot more eat Stakes because of uh because of the fact that the other network have more staked and it also doesn't really add you know more value if there's more each state I

think that up to a certain point it does and then it maybe just has diminishing returns as we've seen from other networks already uh and I really do think that the majority as I've said before the majority or the primary driver of value for eith is it's used as a store of value and money and you can look at Bitcoin as the perfect example of this Bitcoin is still worth more than double eth right even though in my opinion like each should be worth more than Bitcoin uh and Bitcoin only has one use case it doesn't have proof of stake right it doesn't have a fee burn it's still worth a lot why because people view it as a store of value they view it as a money it has money next to it it has Lindy it has a network effect right uh whereas if you don't optimize for

that if your network is not optimized for that the asset is going to reflect that in its value and there can't actually be that many stores of value and and things with a monetary premium in crypto I believe really there can only be two or three there it really doesn't seem to be a third one yet maybe USD stable coins can be counted as that that but if you're talking just native crypto assets it really is just basically in East today and I think that maintaining that monetary premium maintaining that story value status over time is even harder and long periods are like decades worth is even harder Bitcoin is the longest running one so far eth the second there has been no Contender for third yet excluding USD stablecoin which as I said they're not crypto native so it doesn't really make much sense to include them uh but yeah

anyway I'm gonna leave that one at that because I have come I've gone uh over time a little bit on how long I want to talk about that one but you can go check out my throat for yourself if you want to and check out some of the replies I'll link it in the YouTube description below all right so L2 beat has a new feature out today called uh Milestone so basically you can now see on the tvl chart of each layer 2 or each L2 project uh the different Milestones uh that is associated with them so if we click on arbitrine one for example we can look at the tvl chart here and see the different Milestones so Milestone one was obviously mainnet going live in August of 2020 2021 for everyone and then you can see their growth uh catapulted from there obviously and then you can see

here uh Odyssey started so that was that uh initiative they had and they stopped only a week later because of the fact that arbitrary of nitro wasn't out yet and they were getting too much activity uh and then you can see here that Nitro upgrade came at the end of August and unfortunately Odyssey hasn't been uh restarted just yet uh but their growth or I guess like in measured in tvl not in activity is quite steady now you can change the activity kind of view here and the Milestones actually uh are there as well activity is actually a better view than tvl I believe because as you can see like tvl has remained rather stagnant because TBR is obviously tied to token prices which obviously went down last year right uh but you can see in the in the activity thing it's just been trending up the activity uh um a

metric has just been trending up over time but yeah I really like these uh this Milestone uh kind of indicator here I think it's really great I think it really does differentiate the projects from themselves as well and shows that uh these Milestones actually do add to growth and actually do resulting growth for these networks uh so kudos to L2 beat for releasing this feature today uh you can go check it out for yourself at l2beat.com all right speaking of l2s a Terence from uh the arbitrim uh I guess like prylabs team here has a thread about arbitrim's research on L2 batch posting optimizations uh by akaki here and Ed Felton uh hopefully I said your name right there akaki I don't know if I did I'm really bad with pronunciation so

apologies uh but you can go check out this story for yourself with Willington YouTube description below but I thought it was a pretty interesting read it's not just a thread it's also a research paper yeah I didn't read the paper I just read the thread which is very very short but I thought it was quite interesting because optimizing batches in order to lower fees or for layer twos is obviously going to be very important even with 4844 because the more you can optimize the batch the lower and lower and lower you can get the overall fees for that batch and the lower the fees are for the end users so you want to keep optimizing even and this is what I've been talking about before about how layer one is going to be upgraded and optimized to help these layer twos out but layer twos themselves have plenty of

things they can do to up to to a lot of the fees improve the experience for users and make the network more make Network healthier overall and one of these big things are those optimizations especially for things like batches so yeah as I said you can go read the research paper for yourself or this little thread from Terence it'll be linked in the YouTube description below all right so Tycho has announced their ambassador program today so you can play a part in scaling ethereum and bringing ZK evm to the world uh they are looking for developer focused Advocates and Educators but also have room for a wider range of skills you can read the short article and apply in this application form which I'll link in the YouTube description below for you to do so now I said the other day that I think that the

highest leverage thing you can do in crypto right now if you're not working in crypto is join a layer 2 team or do something with a layer 2 team this right here is a perfect example of something you can do even if you're non-technical because as they said they are looking for educators if you are more technical you can be a developer focused Advocate but they are looking for educators and also have room for a wider range of skills so maybe you're a marketer maybe you like doing business development maybe you like doing Community Management well you can apply using the form which is linked in the blog post to do any of that and I I mean I I think it's worth reiterating again this I believe is the highest leverage stuff you can be doing layer twos are going to be where the majority already of the

growth in this ecosystem going forward happens I believe I think they're going to take the place of a lot of the altar ones that we saw go kind of crazy in 2021 uh because they're going to be able to handle that demand and if you are looking for a good start in crypto looking for something interesting to work on these are the projects that you should be working on in my opinion now obviously you don't just take my opinion for it talk to other people about it see what they say but definitely I think that it's the highest leverage thing you can do all right so I think this is the last thing on Layer Two is David Schwartz from the polygon Hermes team put out a tweet thread today saying the polygon ZK VM testnet was designed from the engine uh the engine being the ZK prover uh

they created the public uh zkvm testnet back in October once they had a complete auditable ZK proofs with evm equivalents after 50 000 proofs uh the team now knows how they can scale ethereum uh working to speed it up and you can check out this thread for a bit more of an explanation of that but just more continued improvements on the polygon ZK aevm Frontier still extremely early days still expecting many many more improvements to come to both polygon DK VM and The Wider ZK VM space in general but man the amount of work happening right now is crazy and the amount of I guess progress being made is even crazier because as I've said before people didn't think this was going to be a reality until like 2025 2026 sort of thing and we have public test Nets in

2022 2023 and we're probably going to have a lot of these eke VMS on mainnet by the end of 2023 with real usable applications with real users on there which is going to be amazing I I think so go check out this thread from David Schwartz I'll link it in the YouTube description below for you to do so all right Hill Dobby posted one of his great Dune analytics dashboards today where he says you can easily make out this past year's most notable crypto events by looking at ethereum gas usage and he picks out three events in particular one uh being the biggest spike in ethereum gas price in Gray was the other side meant this was that metaverse project as part of the board ape Yacht Club ecosystem we all know about that that was by far the biggest I guess like day for ethereum in terms of

gas fees on the network then you can see the lunar d-peg another Spike there and then you can see the FTX Bank Run Spike as well I think the first two obviously are much more pronounced but still I've talked about how the ethereum gas usage on chain especially sustained High usage during a sustained low usage period uh is a very uh is a very good way of kind of I guess like uh um highlighting events happening within crypto whether they be nft mints whether they be uh price crashes obviously when the price is crashing down all the amms go crazy uh all the um the DFI platforms go crazy people get liquidated Mev goes crazy of course so that all uh contributes to gas prices going up and that's exactly what we see here with the lunar d-peg even

though it had nothing to do with uh the ethereum network or ethers the asset there was still that contagion so what ended up happening was that people were blowing up on Terra and Luna uh There Was Fear everywhere the eighth price was falling which as I said makes amms go crazy makes uh Mev go crazy makes all the default platforms go crazy with liquidations and then you also had uh a lot of the gas spiking because of the Ste uh unwind during that period too from thierras Capital which obviously put down a lot of downward pressure on E if you remember there was like 10 or 11 weeks it was just straight red candles on the uh weekly chart um and you know that was the same or a similar thing with the FTX Bank Run where a lot of fear a lot of uncertainty

eth dumping BTC dumping the whole body ecosystem dumping and then we see that happening there now the reverse is true as well when things can get crazy that's I guess why we saw ethereum gas from basically the second half of 2020 during all of 2021 just being really really high because there was so much money coming into the ecosystem there was so much activity happening um but yeah you tend to not take too many spikes during that because the the level is is generally higher but during low kind of gas usage periods like 2022 the spikes are a lot more obvious and they're a lot more obviously tied to specific events which you can see in this dashboard here but anyway uh you can go check out this dashboard for yourself I'll link it in the YouTube description below all right the privacy and scaling

Explorations team at the ethereum foundation has put out a blog post about something called uni rep protocol which is uh short for Universal reputation uh and adds reputation to anonymity allowing people to provide relational context without revealing specifics of their history in plain English terms it uh unirp is a universal reputation system powered by a ZK proofs it's built on the base so it is a base layout for building interoperable reputation systems now I've talked about this a lot on the refill before about how ZK proofs can actually help us build a decentralized private identity system for every single user that has a public private key pair AKA and ethereum wallet now the reason why this is incredibly

powerful is because it means that we can do kyc without doing kyc what do I mean by this it basically means you don't have to give any of your information over to any service at all all you have to give them is a ZK proof proving that you are who you say you are using either an on-chain reputation or an off chain one so for example a government can issue you a uh you can get sorry you can kyc or with the government say I don't know let's use a passport as an example here say the government or a nation state issues you a passport and that is your identity right that is your uh uh a form of identity that you can use to kyc with a centralized exchange for example so in this instance or sorry using ZK proofs you would not have to show your

passport to the centralized exchange you don't have to take pictures of it you wouldn't have to take a selfie with it you wouldn't have to do any of that all you would have to do is basically use the ZK proof that the nation state issued you to prove that you are who you say you are because you tied your ethereum address to your passport right and that and I issue it as EK proof nft say they issue an nft that is your pass passport like a ZK badge like what sizmo does and then you can prove that you are who you say you are on chain uh to this uh I guess like uh centralized exchange or service or any one that requires kyc how cool is that how amazing is that when you really think about that and think about how powerful it is and how

scalable it can be for everyone in the world and how everyone can own their data by doing this and they can do it in a very low-tech way it doesn't have to be high tech people already do this with a lot of the um products that Apple uses right where they allow people to authenticate themselves using um uh I guess face ID that's that's what I was going for there then authenticate themselves using face ID it's a similar context where you essentially have one third party in this case it was Apple in other cases the nation state where you give the data to initially but then all the other ones you don't have to give your data to just give them a ZK proof which I think is very cool but anyway enough ranting about that you can check out your new prop your new rep protocol

for yourself I almost said uni swap there the name is uh I guess as a nod to UNI swap but still uh funny that I'm getting mixed up there but yeah you can check out the thread the accounts uh the Twitter account and the blog post I'll link them all in the YouTube description uh below all right so finally here we have Aztec where they've put together a thread where they said a new Grant season means new requests for proposals here are a few Aztec connect use cases Aztec grants is funding this year such as wallets tooling front ends Aztec connect Bridges and fully fledged fully fledged Aztec native applications so if you're interested in applying for a grant for any of these things you can check out this thread from Aztec which I'll link in the YouTube description below but

this speaks to what I was speaking about before about getting involved with layer 2's Aztec is obviously a layer two a privacy preserving layer 2 on ethereum this is just another team that you can get involved with I mean you can get involved with any and all of them whichever one uh suit your suit your fancy here but if you want to get your feet wet if you don't want to go full time if you don't just do a grant or a bounty or something like that you can they usually have these programs they being the layer twos and the details about Aztecs one is are in this thread which will be linked in the YouTube description about low but I think on that note that's going to be it for today 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 newsletter join the Disco Channel and I'll catch you all tomorrow thanks everyone