Hong Kong ETFs, Reth to 1 gigagas per second - The Daily Gwei Refuel #770 - Ethereum Updates

Transcript

hello everyone welcome to another episode of delway refu where up the latest news Theos system I'm your host and this is the 25th of April 2024 all right everyone let's get into it so kicking off today we have some news about the Hong Kong Bitcoin and ethereum spot ETF so these things will begin trading on April 30th which is a few days from today and I remember I I covered this I think like maybe a week or two ago and how I talked about how it's kind of funny how Hong Kong has a a spot e ETF before the US does and obviously it's still kind of a coin toss whether the us is going to get one in May it'll eventually get one but you know these things are going live and going to start trading before uh on April 30th which is long before that May

23rd deadline there I mean that I say long before but like it you know it is it is a pretty substantial kind of amount of time when you think about the fact that in crypto time seems to move so slowly and so quickly at the same time but what I really wanted to talk about with regards to this was something that I probably going to be monitoring um is the inflows into these ETFs now I know that people have said that these are basically nothing Burger because mainland China can't access these it's just going to be the Hong Kong market from like a flows perspective but that's not really what I'm interested in what I'm interested in is flows into each of these assets like how much percentage of the money goes into btz versus goes into eth is it going to be a 50/50 split is

it going to be like a 8020 split to btc's way so on and so forth right and the reason why I'm interested in this is because I think it will give us a nice little indication of the demand uh for or I guess like the split of what like an eth BTC ETF will look like in the US because as you guys know one of the Bloomberg guys famously said said that he believes eth is Small Potatoes compared to BTC and I obviously completely disagree with that given that eth is you know onethird or so of of btc's market cap there is a huge amount of demand for for eth I believe in the trafi space and eth appeals to the trifire crowd a lot more I think than BTC does but obviously uh you know they have their opinion the um the the Bloomberg ETF guys I have

my opinion and we won't know who's right until we actually have an eth spot ETF uh in the us but as I said we could use the Hong Kong spot ETFs as a proxy here especially because these are both going live at the same time like both BTC and E spot ETFs are going to begin trading on April 30th so I'm very very curious to see what the split looks like uh honestly and I think we're going to have to wait like it's not just going to be you know look at one days of inflows and get and get kind of data from that I think we're going to have to wait like a month 2 months 3 months see what kind of inflows what the inflows look like and see where they go to honestly I have no idea what the split's going to look like

I mean I would say that it's probably going to be heavier BTC than eth uh just because of the fact that BTC is more wellknown but also BTC has a you know a general kind of like larger market presence I would say but I don't think it's going to be a split like like 9010 or something like that where it's 90% BTC 10% eth I could I could see like 7030 at quote unquote worst where it's 70% BTC 30% e but L than that doesn't really seem uh like something that I think would play out there I'm going off like the market cap ratio here and that's what I could see kind of happening there but I'd be pleasantly surprised if it was 50/50 I honestly do think it should be 50/50 like BJC and eth to me should in in in anyone's portfolio should be 5050 and I believed

this for a long time maybe not anyone's portfolio but but what I mean by anyone is like the vast majority of kind of the mainstream here because they've heard of Bitcoin they' probably heard of ethereum by this point and then they've got all these other assets to kind of bet on but if they want to play it safe I believe that the only safe asset in crypto and by safe I mean things you can hold for the long term and have relative certainty that they're still going to be around and still be valuable and still go up in value over time is BTC and eth and I believe that for normies so to speak or people who aren't really plugged into the ecosystem the best portfolio split for them is probably 50/50 BTC and eth honestly and especially if it's in something like a retirement account where uh you know us

investors buy atfs and put them in their retirement accounts I definitely think 50/50 split of betc and eth is probably the best best play for them there and I as much you know as much as I am bullish on eth and way more bullish on Ean name on BTC I couldn't in good conscious go to a you know Normy investor who doesn't who rarely pays attention to crypto and say to them you should put 100% of your money in eth because what's going to happen if I do that is that they're also going to be watching BTC you know they'll probably watch both BTC and eth and they'll be like oh BTC went up this much but Ethan go up this much in like a you know 3mon period or something and then they'll get fomo over that and they may start overtrading because of that so

as long as they had 50 of 50% of both of those you know 50/50 BTC and E I reckon for most people that would be enough because they'd be like oh okay BDC is going up today I'm happy or okay it's going up today I'm happy and that's how how it usually is and obviously every investor is different here but I'm talking about I'm generalizing but I'm like talking about a wide set of investors here and definitely across different cultural kind of uh places as well because there are some cultures that put much more value on something like a digital gold than they would on on a you know a story of value Tech play which is definitely what ethereum is or what eth is uh BTC is really just like a store of value play and a digital gold play and there are some cultures that

really love gold like much more than others out there and to them it may be a natural fit for them to just buy BTC and that's it but then there are other kind of cultures and other communities around the world that really love Tech so for them it's better just to buy eth I mean I fall into that camp where I'm like you know I understand why BTC is valuable but it doesn't really appeal to me I'd rather buy eth I'd rather get involved with the ethereum community stake my e you know do all these different things with my eth um but these I mean I used to do a lot more with my eth than I do these days obviously as you guys know these days I just basically stay my eth but that's more a function of the fact that I really want to stake my eth

because I believe it's a really great Roi because yes I'm only getting 3.5% or so on on my eth but it's eth and I plan to stack that eth I don't plan to sell that eth so I have that calculus of it being worth more of a time and I get to manage it all myself and I get to have fun doing it you know it's a different calculus yeah so as I said every investor is different um but yeah anyway enough rambling about that I am looking forward to seeing what this split looks like maybe I I I'll actually won't see this until I come back from my break which is a nice thing because as I said this goes live on April 30th and the last refuel for quite a while will be tomorrow um and I don't know if you guys read this in the daily

Weare Discord Channel but I decided that I'm actually going to take a break from the refill until May 23rd starting tomorrow and as you guys know May 23rd is the approval or denial date for the eth ETFs and I thought that was just like a poetic date to come back so I'm actually going to not do a refuel until May 23rd now May 23rd is not a Monday I believe it is a Thursday so I be back on May 23rd after tomorrow as I said tomorrow will be the final episode before I take my break there uh but I just thought it would it be po poetic to come back on that day and it gives me a nice nice solid break I think uh you know from tomorrow till May 23rd uh and then I'm going to do a full cold turkey break after next week so next week I'm

still going to be around on social media no refuel but the week after that I will definitely be cold turkey up until May 23rd and I'm going to come back on May 23rd I'm going to reenable everything you know Discord Twitter everything and check and I I know I'm going to get bombarded with stuff but I'm kind of excited about it to see because as I as you guys know I haven't taken a break in you know the last seven years or whatever it is so I'm excited and I'm very excited to see what happens on the 23rd like if the atfs are approved I'll come back and be like so guys did you uh did you study May 23rd I think that's what I'm going to Tweet out but anyway enough on that let's move on to some core Dev related news so we've got the

latest vocal implementers call that just happened number 17 Josh Rudolph here has a breakdown of everything they discussed from stateless clients and removing ethereum's estate related scaling bottlenecks now this is the usual update that uh Josh usually gives so you can give this a read I'll link in the YouTube description below test Nets are still coming along nicely there was a portal Network presentation given for those of you who don't know portal network is something that's been around for a little while now um but basically it's this initiative to essentially create a decentralized PTP network of ethereum archive data at least from my understanding that's what they're trying to do here especially if we start expiring uh data you know beyond blobs uh so it's essentially that kind of uh Network that that they're trying to to

build there and I believe that it would still apply or could still apply to something like blobs as well not just the normal ethereum archive data but also blobs which would be very very cool there um but yeah just wanted to shout this out for you guys you can go check it out I'll link it in the YouTube description below for you to do so all right there's been a lot of talk around anti-correlation penalties lately and I remember I covered the research that was done by a bunch of people in the ethereum ecosystem and then Tony also put out a research post visualizing what anti-correlation penalties could look like in practice and he put out another tweet today with a nice image saying anti-correlation penalties incentivize staking note operators to enhance their setups those with negative correlation benefit over those with positive correlation a diverse fault

tolerance setup cost more but should payoff through economic benefits from diversification so essentially what this would do or could do these um anti-correlation penalties Beyond just making it so that we can have a more decentralized Beacon chain is essentially Force the bigger node operators to uh Harden their setups and to harden them in a way where essentially they're not running it all on the same you know AWS server for example or they're not running it all on the same uh the same uh data center wherever it is like even if it's owned by themselves uh they're not just running all of their all of their kind of infrastructure there now obviously in a Max EB world this is going to look a little bit different because right now I think like validator they do like a

validator split where you'll have like you know 10,000 validators here 10,000 there 10,000 there but in the future if you're consolidating all that down to only maybe like a few hundred or a few thousand validators uh then from there you'll you'll split it up differently but also you may split it up based on each stake uh you know um except you know each stake instead of validate account there are different ways to do this here but yeah the hope of the anti-correlation penalties is really to incentivize these um these more enhanced setups so that we can basically get the nice positive externality of a more decentralized Beacon chain even if it is the same node operator because for example you could have a node operator that uh is like coinbase uh you know a single node operator that runs all of their validators I don't know if they do

this but let's just say they did this and I'm not trying to pick on coinbase but just illustrate an example here in the current Paradigm let's say that they run all of their validators and all their note infrastructure on the same uh you on the same Hardware on the same in the same data center or on the same kind of cloud-based um uh kind of hosting service here now in an anti-correlation penalty world uh the goal is to make it so that they are forced not to do this so they are forced to split up their setup so even if it's still one single note operator we basically reduce the risks of this cloud service going offline or of this cloud service Banning this operator or seizing these validators and so on and so forth right we're thinking about like the the tail risks here like not the immediate risk

but like the tail risk that could happen a low chance of happening but still could happen and that's what they're trying to to do here with anti-correlation penalties uh there but yeah I figured it was worth just bringing that up today as it's quite interesting research to focus on all right next up we have a fresh blog post from georgos who works on the W execution client at Paradigm so he said we've made great strides in the world of blockchain scaling in the last 10 years it's time to go further re's path to 1 gig per second and Beyond where where we present our road map for scaling ethereum so this is a big blog post not I not too big but like this is a blog post de that basically discusses how W is going to scale up to 1 gagas per seconds um and essentially why they're

pushing for this you know the fact that they're not just going to push for it on eth L1 it's also going to be at eth L2 and this aligns with what Bas is trying to do right now as well with getting to one gigas per second it seems like a Target that the l2s are trying to push as like something to to aim for here and also uh Georg mentions that uh we should stop it using transactions per second to measure performance and we should start using gas per second as well and he expands on that in the blog post here but what I really wanted to focus on was this nice little chart or nice little table that Geor joo's put together comparing the different evm chains and what their current gas per second is so you can see here that op BNB which is a

layer to that on top of the binance smart chain is set to 100 Giga uh or 100 megag gas I should say per second here with a block time of 1 second and 100 million total gas per block then you have BSC which is second at 46.6 megas per second and then from there you have polygon Avalanche arbitrum base optimism conduit and ethereum L1 that are substantially less so polygon and Avalanche and arbitrum are between 7 and 7.5 Meg per second base at 5 Meg per second and then optimism main net conduit at 2.5 and ethereum L1 at 1.25 so you can see that there is a huge order of magnitude increase of op BNB and from my understanding op BNB runs um

using the same infrastructure or the same technology the op stack that something like bass does that something like op mainnet does so I guess what georgos is kind of illustrating here is that we could probably safely push Bas and op mainnet up to that 100 megas um per second without uh compromising too much on I guess like performance or I guess stability I should say because this is obviously performance we need to worry about stability and reliability I didn't actually realize it was that high that's huge guys I mean that's 20 times more than base right now you know that's uh you know almost 20 times more than Arbitron 1 it is 50 times more than optimism mainnet which is crazy uh and even like BSC is is much more as well BC is a layer one but I'm just trying to

focus on the the layer twos here and obviously polygon is the POS chain Avalanche is a layer one as well so just focusing on the layer twos really uh there's no reason why base op main net arbitrum 1 can't scale up to being 100 megag and Beyond as I said like that 1 gigas per second is the target here uh and that's going to bring with it huge amounts of scalability guys I mean I know right now the uh you know the the data is free but there's still some kind of like execution costs but let's just say that base scales another 20x from here and goes to 100 megag per second over the next few months uh that will basically allow for pretty cheap fees up until to like I don't know how many tens

of millions of transactions per day or something like that uh and and then obviously the uh the fee Market will kick in and fees will go up again but I mean that's only one tenth or 10% of where they want to get to they want to get to 1 GHz per second here so there is a lot of scaling to be done and this is just on the evm side guys this is not on the nonm chains either uh and I think that before we get to anywhere probably close to 1 G per second the blobs are going to start being the bottleneck again because there'll be so much data being posted so then we can increase the blob size and the blob count so this is what I mean you know when I've been saying over the last few months around the Golden Age of ethereum scalability

this is what it really is these layer twos are working on their own scalability layer one is already super scalable right now because blobs are basically free but then when blobs are in high demand for long periods of time the community can basically say okay well we need to increase the uh the kind of size uh and count and possible count of blobs here and we can do this uh safely and we know that it's actually going to make an impact because blobs have been at a you know certain price for too long it's too too expensive for lus now so we need to scale some more there but anyway enough of my uh kind of uh uh uh talk on this you can go read this blog post for yourself I'll link it in the YouTube description below for you to do so all right speaking of l2s just wanted

to have a bit of a discussion around them generally so I put out a tweet today reiterating this point where I said the best thing about l2s is not scaling as this is table Stakes but the l2's ability to experiment and push things way harder than we could ever do at ethereum L1 this is the real value of the rollup Centric row map building and innovating without restrictions this is ethereum so you guys know that I call ethereum the infinite garden and I have called it that for a very long time now it's basically this infinite field of experimentation where there's like a Cambrian explosion of things that just pop up now of course ethereum L1 is extremely Limited in what things can pop up now because of the fact that it is dictated by its scalability where essentially the uh chain is not scalable

enough to meet uh you know anywhere near enough demand uh By Design and then also it is very uh low on the experimentation side of things or very kind of like inferior on the experimentation side of things because it's limited to the evm and it's limited to the evm inside that scalability bottleneck and then inside the consensus and PDP bottleneck as well so that is why we've experimented as much as we can pretty much on eth L1 I think uh and then W with l2s we can start experimenting you know a millionfold from here and the reason why I call the scalability table Stakes is because if you're building an L2 you're going to be scalable to begin with like that is already a given that is the bare minimum to being an L2 basically like if you're an L2 that isn't scaling then no

one is going to use your L2 they may as well just use L1 right so the scaling is table stakes and that means that it's boring like to me it's boring I mean like I to me it's like okay you know it's a given that these l2s are going to scale what else can they do right and they it turns out they can do a lot because we know that there's non evm l2s already live today with many more coming that are going to be able to uh allow developers to write smart contracts in languages other than solidity allow more flexibility at the at the VM level and allow for new apps to be born that just aren't possible with the evm uh and I think that this is going to give birth to all of the new use cases that people are like oh you know what's what's to be

excited about in crypto right now what's the new use case it's just meme coins right now so on and so forth but I do think we're going to be seeing a lot of really cool inovation happening across a few different vertical one of the biggest ones is uh basically decentralized social media or social F in general we've already seen a hint of it with like farcaster and lens and a few other things out there but that's definitely going to be a big thing privacy I think is going to be huge as well there's going to be a lot of experimentation around privacy gaming uh nfts fall into that bucket as well that's going to be big uh and then there's like decentralized identity there's uh potentially things like decentralized uh file sharing which you guys know that I'm generally like bearish on because we already have

something like bit torrent where I mean we already have decentralized file sharing but people are doing different experiments with it and I'm all for seeing more experimentation happen but there is just so many things and there are things that I can't even think of at this point in time and and no one can really think of that will come at some point from opening up this new field you know you can imagine that ethereum as an ecosystem is the infinite Garden but ethereum L1 is like the castle in that Garden let's imagine that the garden is infinite but at the center is a massive castle that is ethereum L1 but as big as the castle is it's not infinite right and it is limited in what you can do the Castle's already built you have to uh basically um you know build within the F

confines of the castle maybe you can build a uh you know a new piece of the castle here maybe you can do something in the garden but uh or maybe you can add some more decorations you can add some new furniture but really you you're confined to that where whereas outside of the castle we have this infinite Garden which is the l2s where you can do whatever you want there it's fertile ground so to speak right where you can experiment as much as you want you can build whatever you want you're not limited to uh anything except really the rules of of the the universe really I mean like the physics quote unquote of the universe there which really when it comes to l2s is and and specifically rollups is just posting your data and proofs down to ethereum L1 that's that's really all you kind of need to do uh and

then everything else is pretty flexible and that's what we mean by the modular road map as well obviously but uh yeah I mean this is why we call ethereum the infinite Garden because it allows for this infinite EXP exp mentation and it allows for it to happen at scale uh in a really really big way there but the last thing I'll say on this as well is less about experimentation and more about scalability as I said scalability is table Stakes but not all l2s are created equal you know everyone goes on about ZK being the end game and right now we have both ZK EVMS and optimistic rollups and the most used chains right now the most used l2s are optimistic rollups obviously like arbitrum one bass uh op main net uh like if I go to L2 be.com here and just look at the um the tvl of

of alone you know you've got Arbitron One op main That Base blast uh mantel you know they're all built on um optimistic rollup technology here mantle is an optimium which is diff a bit different there but then you've got the uh Stark net which is ZK rollup uh Manta optimium again ZK sink and linear which is ZK rollups but really the top five is dominated by optimistic rollup technology here by far I mean it's not even close when it comes to tvl and then in terms of activity it's not even close you can see activity base uh dgen chain arbitrum 1 ethereum are the are four here and then you got ZK syn era as the zkm but really in in the top eight there's only two ZK syn era and L here

the rest of it is optimistic rollups so yes while ZK may be the end game and may be the thing that everyone uses eventually right now we still have optimistic Roll-Ups and they're still evolving they're still getting better over time uh and no one's really giving up on them even though the people try to say that they're inferior you know they cost more so on and so forth maybe they do but right now they're winning because they're offering the best user experience they're the things that people want to use that 7-Day withdrawal period that people talked about is not even an issue anymore because we have so many different bridges that you can use right uh and the cheaper uh portion of it hasn't actually played out yet because in order for ZK rollups or ZK VMS to be cheaper that what they need to

do is they need to bring down proving costs and they also need to amortize the proving costs which means they need to get more activity so it's a bit of a chicken and egg problem for them but I do strongly believe ZK is the end game and I do strongly believe that pretty much all of the optimistic rups will eventually become ZK chains but for the foreseeable future there optimistic RS are still going to dominate in my opinion and I've said this for a while now I think I said this back like two years ago when every run was going on about the fact that optimistic rups were obsolete I was like no they're not like it there's more to a to a chain than the technology that it's using it's all about the ecosystem the community the network effect and Arbitron one and and

and base alone have huge Network effects at this point in time and it's only going to continue growing from there so for them they're more focused on growing their user base than they are about the underlying technology and they're not really hitting the technology limits of optimistic rollups yet so they may one day hit those limits and be like okay well now we just become a ZK rollup or something like that but right now they're not and I think that's very encouraging to see because it means we've got a long way to go with experimenting on that Tech side as well but really yeah it comes down to what users prefer Ing and right now they prefer optimistic Wallops you can't argue with the market when it comes to that I believe all right finally here I just wanted to shout out that I did a podcast

with Jesse eel here we did this a couple of weeks ago it was a really fun one about an hour's worth of content here talking about ethereum and we tried to keep it rather high level with regards to ethereum and l2s we really wanted to keep this episode as a as high level as possible because we wanted it to be able to be digested by a wide range of people not just the people that you know watch the refuel I guess like the experts you guys out there who wanted it to be digested by basically everyone uh and Jesse did a really great job of keeping the conversation grounded because sometimes or a lot of the time I can go off into the very technical very deep Dives because that's just my thing um but yeah I really enjoyed this so if you are looking for more content uh From Me

Maybe you want to listen to this on the weekend to tide you over because obviously there's not going to be any refills after tomorrow until May 23rd uh then you can check this out I'll link it in the YouTube description uh below for you guys to do so and now I've got a few minutes left here this probably be a shorter episode than usual again here but got I got a few minutes left I just wanted to discuss uh one thing about the um the eth ETFs in particular so it it's I think between now and May 23rd there's going to be so much conflicting information with the eth ETFs like I saw today that that Reuters did posted an article that Walter Bloomberg or something on um on Twitter uh posted saying that uh you know the uh sources believe that the e FS are getting denied

and then I read the article and it was literally the same information that has been out for at least a month now so that's why you're going to see more of this noise happen because it is topical it gets clicks so you're going to see more of this just regurgitated happening so I would highly recommend you to follow the sources that are actually good sources and like I think myself I think I'm one of them but I'm not going to be around and this is why I'm bringing this up because I'm not going to be around to comment on this stuff and by the time I come back on May 23rd it's going to be approved or denied so you're going to be flying blind for the next month guys like I'm I'm sorry this is the way it's going to be but you know as much as I kind of make fun of or

sometimes joke about the Bloomberg guys they are good people to follow they always got the up most up-to-date information and they don't really I mean I haven't seen them spread any fake news they have their own opinions which I disagree with you know a lot of the time about around eth but they generally stick to the news so they're good to follow um James ciar and Eric balunis who I've talked about a lot on the refuel follow those guys Elanor Tourette from Fox Business as well she's is really great you can uh you can go follow her as well uh but just be very very weary of everything that you're uh kind of uh reading with regards to the E ETFs leading up to May 23rd because I know for a fact there's going to be lots of crap around there's going to be so

much noise around it it's going to you know be Market moving at some point you may see stuff come out uh that I've said that will look as a signal as a positive signal for the eth ETFs but then someone else will say no it's not and then Bloomberg guys will lower their odds of approval to like 5% or something I'm just joking on that one but you know what I mean like you need to stick to the information you need to stick to the facts don't look at this other crap don't follow these clickbait accounts just try to digest the right information here because unfortunately I will not be around to guide you guys on this I will not be around to make sure that you're getting the right information but I think that you guys have the skills to you know to to find the information

yourself and to be skeptical when you need to be skeptical there but I think on that note that's going to be it for today so 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 newsl on the Discord Channel and I'll catch you all tomorrow thanks everyone