Ledger Connect exploit, Layer 2 chat and more - The Daily Gwei Refuel #706 - Ethereum Updates

Transcript

hello everyone welcome to another episode of the delway refuel where up the latest news in the Thea system I'm your host Ando to the 16th of December 2023 all right everyone let's get into it so yes it is a Saturday episode today a very special episode because I missed yesterday there was two rug fuels in a week I felt really bad about that and I was like no way am I going to let these guys go without a uh you know go with two rug fuels in a week so I'm making up for it by doing a Saturday episode and a lot has happened over the last 2 days so let's just get into it um so the biggest thing I think over the last two days that happened was the whole kind of I mean it wasn't a hack or exploit of Ledger but it was a very scary thing

where uh basically what it's called is a supply chain attack uh ended up happening on uh a a kind of like um a toolkit that uh that ledger kind of provides for dap developers to use on their front ends um and uh this account here noar I think that's how you say their name put together a really great summary of exactly what happened so you can see here that some front ends use an mpm package called Ledger connector and that's the package that I was just talking about that package had been compromised in a supply chain attack doesn't matter if you use a ledger or not if you connect and broadcast a transaction on a compromised website like revoke docash you will be drained whether you use metamask or rabby or Etc so yeah this wasn't Ledger uh exclusive this wasn't a problem with Ledger Ledger

wallet itself or anything like that it was just this Ledger connector piece of software that uh dap front ends in the ecosystem use so doesn't matter what wallet you were using uh unless you you kind of like uh had those warnings that pop up like in rabby it'll warn you about certain things but if you approve the transaction doesn't matter if it's on a ledger on a on a metamask on you know rabby rainbow whatever wallet you were using it would be the same result if you were interacting with the compromised Ledger connector here um and if you use a website that isn't compromised uh you you were safe now this lasted I think the changes uh to this package were made the malicious changes were made about 3 to 4 hours before they were actually noticed and it was made I think using a compromised

account of a former Ledger employee so obviously Ledger's security practices here is pretty bad just generally because they they um a former employee still had access from from what I could tell uh and generally this uh this shouldn't happen at all obviously like this shouldn't be able to happen and this is obviously one of the scarier attacks because a supply chain attack is is something that happens where uh the like for example with the mpm package if someone changes the the code there and injects something there it just automatically gets Downstream uh pushed to all of the I guess um applications are all of the the the things that rely on it and that's what happened here basically so all in all Zack xbt tweeted out the addresses that there was around $610,000 drained from this attack not as much as could have been drained you know

I think that the crypto Community really rallied around making sure that everyone was aware of this immediately like as soon as it was it was picked up on everyone was was made very aware of this uh and I I guess like that definitely saved a lot of people a lot of money and save them from getting drained obviously uh a lot you know some people still got drained but the thing is is that it was very easy to get drained by this if you weren't really I mean you didn't even have to not be paying attention it was just something that uh unfortunately like you wouldn't even know was happening cuz you can see here what this actually looked like so the the malicious connect wallet popup would open on top of the actual wallet popup so essentially what would happen is that you know when you go to connect your

wallet on one of these websites it would ask you which wallet you want to connect with there is in the background the real one the one that's not malicious and then the foreground is the malicious one so if you were a user who thought maybe this is just like a glitch or something or just a bug and you connected using this modal that's on top using whatever wallet it is you would have no indication that something was wrong uh unless you know something like rabie uh told you um and warned you of this but really if you were using uh you know most wallets you would have no idea that something was wrong at all because it would just feel like a normal flow to you but in reality you would connect and do a transaction and that would just drain uh your funds so obviously this is

a really scary kind of thing here and this is something that should never happen uh and it really is Ledger's fault here for allowing this to happen in the first place like they should have much better security practices around their around their packages and around who can update the software and also as an Eco system we really need to build like alerting systems around this the fact that it took like 3 to 4 hours for this to come along is is not great we should be able to alert around this pretty much instantly and I don't think there's been enough um enough eyes put on the supply chain attack uh kind of vector here because this is a big attack Vector you know all over the place not just within crypto I mean when I used to work in cyber security it was definitely one of the things things that people

worried the most about was these supply chain attacks because so many uh pieces of software rely on these packages right on these Upstream packages that can be injected with malicious code and that can be loaded in without you even knowing uh and that could lead to uh you know not just loss of funds loss of private data um you know database leak stuff like that so definitely um something that is uh is pretty dangerous and as I said like it's on it's on Ledger here for allowing this to happen and you know it's kind of sad because Ledger has done this multiple times now in terms of having poor security practices right like they had the the whole thing where they leaked everyone's uh you real address tied to their real name in their database leak they had the whole thing about The Ledger recover

Fiasco uh which basically was I mean that was a complete show right we all know that and there was one other thing I think as well in including this this latest thing uh and it's sad because like I actually think that they make decent Hardware wallets like I honestly um yeah enjoy using them like I've used them in the past I use other Hardware walls as well like lce one things like that I enjoy using them right they they're fine to use uh yes they could be better obviously it'd be nice to have on the screen like it has on the latest one a complete breakdown of what you're signing you know what the transaction is things like that but generally you know I I I I I don't think it's a bad product but their constant kind of fumbling of the ball here in

terms of security practices just cast a lot of Doubt on their actual Hardware wallets like I'm not saying there's anything wrong with their Hardware wallets at all right I'm I'm not saying that and I don't want to imply that obviously but at the same time you know people get get get kind of doubtful they're just like you know if they this is their security practices here then what's it like for their hyro walls could a malicious um Ledger uh uh update be pushed like firmware update be pushed uh by some malicious actor because the Ledger wasn't paying attention right so these are real concerns uh so when looking at these sorts of things as a whole we shouldn't expect the end users to be able to actually look at these things and and and and kind of check everything themselves it's on us as an

ecosystem and on the developers to make sure that this stuff never happens and obviously some things will through the cracks but at at the same time like we need to put in place a lot of different protections a lot of different kind of risk uh risk measures mitigations to make sure that this doesn't uh happen again uh because this was yeah a very scary attack this this could have led to a lot more funds lost if uh if it wasn't um I guess like uh if the alarm wasn't sounded as quickly as it was so it was great to see that the alarm uh was sounded there now of course the issue was fixed pretty pretty quickly by Ledger once they discovered it um but if you I mean I don't think you need to do this by now but uh if you didn't if you

wanted to kind of like use the your websites again or use the um the daps again uh usually what happens is you'd have to refresh your your cache here so you would basically just like hard refresh the um the website or clear the site data which is uh outlined here by mudit but yeah I mean I don't think it should be an issue now but uh yeah unfortunately it was and and and I I hope this doesn't happen again because it's a scary thing like I myself might have not even picked up on this right like that that double modal thing that I see here like I I don't even know if I would have thought that that was weird um well I thought I maybe thought it was weird but I would have looked at that and being like hm okay maybe it's just a

glitch right because looking at this picture in front of me it doesn't have any obvious signs that it is U malicious right at all it just looks like a normal popup yes it's popping up on top of another one but then uh looking at that um even as an experienced user you may just assume that it is a bug in the website it's a front end bug and you're like okay whatever who cares it's a front end bug I'm used to this in crypto you know crypto ux isn't the best right um so like it's kind of scary that like even myself I I I don't know if I would have uh would have picked up on this and there was no other indication as well so I think that in the future maybe you need to just be more I guess aware of these things and more alert of these

things but also it's on the developers to make sure this doesn't happen and it is impossible to happen obviously you can't make it impossible to happen like that's that's impossible right but making it as hard as possible for for this to happen because the way it happened with Ledger from what I saw it happened way too easily and it was way too easy to do and uh it shouldn't H it shouldn't have happened that way uh to begin with but yeah anyway that was The Ledger thing in a nutshell as I said The Ledger devices are fine your wallets weren't compromised it wasn't an approval uh approval hack or anything like that or approval exploit or anything like that it was just a new form of um of uh not not a new exploit but it was like a new kind of thing that we hadn't really seen before in crypto

and now I think everyone's aware of it so we should see better security practices uh going forward here all right moving on So Christine Kim has another update about the latest all core devs calls uh and just kind of um latest update on denune generally so devet 12 now hosts all of the execution layer and consensus layer uh client combinations including prism uh Dev say they're on track to launch a girly Shadow Fork before the end of the year so this is the shadow Fork not the test net so it's a shadow Fork of girly then obviously the test net will happen test net Fork will happen in in January here there's also some other updates you can read in in the blog post but I think that was main that was the main one um I think I mentioned that uh last week's

allore devs call was the last one uh no uh next week's uh will be the um the last all cor devs call so I read it wrong last time when I when I when I said that so yeah next week will be the last call they've obviously canceled the call that was going to be on December 25th because that's Christmas and they may cancel other calls or substitute things obviously because of the holiday period here but generally I mean they'll be back you know stronger than ever in the new year as we March towards getting Denon live on the ethereum network which from what I've seen Still Remains March April Remains the date here guys like I haven't seen anything that would indicate that that would be pushed back further but you guys know I'll keep you keep you all updated on that but you can

go check out Christine Kim's post I'll link it in the YouTube description below for you to do so all right so meal Labs have uh tweeted out a little tweet thread here um yesterday where they said we happy to announce the deployment of a new version of the monitor reth do oh sorry monitor E.O dashboard packed with new powerful insights providing a comprehensive display of ISP distribution and staking entities distri distribution so I mean I've showed you guys this before uh this website that that migal laabs have created i' showed it on the refill but they have updated it and they've got a lot of different metrics here so obviously they've got the the client diversity client type distribution this is for the consensus layout side of things they've got node hosting distribution so is it unhost uh sorry is it is it residential is it Cloud keep

scrolling down you've got like Beacon nodes per ISP Beacon nodes per Cloud ISP which is metrics that I haven't actually seen uh displayed before which is pretty cool to see and then you can just keep scrolling down there are so many metrics here guys like I'll link this in the YouTube description you can go check it out for yourself um but it's really really great to see that uh that this is being tracked and and we're able to kind of like check uh you know uh all these kind of different informations of uh sorry different information from different entities here and you can actually see uh they've got like a a heat map here of active validator entities across the entire Spectrum now there is a rather large others section here which haven't been attributed to any uh entity before so you can see here that others accounts

for around 37% uh I would say that maybe 5 6 7% of that would be solo stakers the other 30% not sure where it would fall into um I think it would fall into things like coinbase because it seems that their percentages here are quite low it says here coinbase is only 8% but coinbase is almost double that according to raid. network um so yeah I guess you could take like 8% out of the other section give it to coinbase but the rest of it seems to be pretty on par with what raid. network has here and then they've got Lio obviously on the side here with 32% but then they've obviously broken up Lio into each individual node operator that you can go check out there as well but yeah just a bunch of really cool metrics around the consensus layer that you can go check out for yourself

I'll link it in the YouTube description you can also check out meal labs's thread which highlights the updated changes there all right so EIP 7251 that is going to be one of the main eips uh that is hopefully going to be included in the Petra upgrade which is the upgrade that's happening after the uh denune upgrade now what this EIP is basically um is the one that I've spoken about quite a bit on the refill before but it's the EIP to increase the max effective balance of validators from 32 e to 2048 e now what this would do it was it would basically allow you to have one validator with up to 248 eth on it that would all be earning Rewards or all be earning staking rewards so let's say

you have 10 validators today that's 320 eth uh and you have 328 per validator you could consolidate that into one validator with 328 on it now there's a few reasons why this is cool one is because consolidation of validators means less node on the ethereum network it does not mean less security because it's still the same amount of eat Stak and we don't actually need lots of validators anymore because we pivoted away from uh the original sharding design so having too many validators as we have right now is actually technical debt so changing that is going to be really healthy for the network overall and it will actually have Downstream effects such as allowing us to increase the blob sizes because the network overhead goes down from the amount of validators on the network we can increase the blob sizes um uh which increases avability for L2 so there's

some nice kind of benefits here but the other benefit especially for solo stakers is that they're going to be able to compound their stake much more efficiently now so instead of having to wait till you have another 32 e to spin up another validator or another solo validator now you can just add it to existing one as you go you can actually there's actually a second Point here about one of the main features of this EIP is that you could allow uh that they're thinking of allowing validators to specify a custom stealing in their withdrawal credential for the sweep to kick in so essentially you would say okay well I want my ADD uh I want my validator balance to be sweeped at this this amount right and then that would sweep it and and essentially kind of restake it in your validator for you

there and there's a few other kind of things that go in here as well such as execution layer triggered exits and partial withdrawals which is an extension of erp72 which would basically allow um the withdrawal credential to specify either a full exit or a partial withdrawal as long as the effective balance stays above 32 e and there's some changes to slashing here as well but yeah I and I'll link this document in the YouTube description you can go check it out but this was uh posted by Mike new who about 3 days ago who was the champion for this EIP to be honest but I am uh very much in favor of this I think it's going to be a huge boom to the network generally I think that the concerns around um you know increased risks of slashing are mostly unfounded but also addressable and that's what

they're doing with with this EIP here so yeah this I think will be like the flagship EIP of Petra to be honest in terms of the one that gets the most amount of people excited because of all those Downstream effects and all those positive externalities that come from it and that's the one I'm definitely most excited about because right now I mean if I want to spend up another solo validator I have to wait for 32 e yes I could do it with Rocka pool for example and and and spin it up again but with Rocka pool at least right now I would have to buy more RPL in order to spin out more mini pools which is which is a bit frustrating and yes there are other Solutions out there too but I'm talking about being a pure solo Staker which you guys know that's my whole thing right I

love being a Pure Solar Staker but for me to do that you know if I buy eth say I buy like a couple of eth and then I'm like okay well I can't stake this right now because I don't have another 20 you know I don't have another 30 e to create another validator I have to wait until I get to that obviously the price keeps going up over time and it becomes harder and harder for me to get to 32 e uh or get another 32 e it doesn't happen very often let me tell you that um but in this world with with this EIP live on the network I could just add it to an existing validator that I have and it would all be good and and I'd be able to beginning earning rewards on that immediately so it wouldn't just be eth

sitting in in my wallet I'd be using that eth and obviously contributing to this overall security of the ethereum network as well so I'm I'm just super excited about this EIP um I'm you know what I'm actually not just excited about the um the solo Staker efficiency for for reaking or I guess like for compounding their stake here but I'm also excited about the fact that the network load will go down and that will make it more accessible for people because it means bandwidth requirements go down to be a validator to be a full node and also it will allow for us to do more cool things on the network such as increasing the size of blobs and uh just scaling out the layer one because there's a common misconception that layer one scaling is not happening at all but it actually is like it's it's

happening for layer 2os um but it also is happening for layer one generally too it's happening in different ways it's not going to happen in the way that it happens at layer 2 where we have like massive scalability increases and and boosts but it is happening and that scalability is is really happening with the goal of essentially making delayer twos more scalable but also uh having a byproduct effect of making the layer one uh more scalable secure and and reliable generally as as well all right moving on so arbitrum sequencer went down again overnight so uh obviously this has happened I think I think once uh before as well but this time it happened not because their I guess uh um sequence or guess like the way they pay gas fees to ethereum ran

out of eth that's what happened last time this happened because people were spamming inscription transactions on arbitrum and these are these are trans transactions that submit some hex data on chain such as images and metadata mostly and this obviously caused the sequencer to fall over I do want to State before I jump into to this because I think this is a pretty interesting discussion but I do want to state that I think that if there were multiple sequencers this wouldn't have happened because there is only one sequencer right now and that means that the liveness guarantees aren't as good as they can be because there's only one right if there were multiple sequencers that means that if offchain labs's sequencer went offline some other sequencer could have picked up the slack right so that's what basically happened here but even though uh the sequencer kind of went offline here it wasn't

offline for very long um but uh it was offline just generally so I think it's worth pointing that out and I was overwhelmed um by these kind of inscription related transactions which has actually been going from blockchain to blockchain if you actually look um I think that polygon POS chain was spammed with it uh Avalanche was um their C chain was spammed with it as well and that actually caused fees to go up a lot on Avalanche funny enough and I think it caused fees to go up on on arbitrum as well during this where fees actually I think went up really really high because people were just trying to get their transactions in here and because the sequencer was was struggling to get transaction through obviously um it works the same way as ethereum L1 where you pay more in priority fees to get

your transaction included here so uh yeah that's that's essentially what happened and um obviously incription started on bitcoin but you can do this on on on basically any evm chain from what I see uh and it kind of begs the question of okay well if if this is happening on these l2s and all these spamming happening like how how do we kind of like not stop this but how do we prevent uh I guess like this kind of stuff from just clogging these things up because I think that inscriptions are fine but if people are just spamming the kind of chain and and and and spamming the chain with like useless stuff like from a sustainability perspective and from running like a full node and from running a validator on on these things like yes those transactions should be able to go through because the system is

allowing it but you need to think of like sustainability here you need to think of like the fact that it'll become harder to sink a full node if it's just like all this spam on the chain and this is what etherum Alan has been dealing with for quite a while and this is part of the stateless road map where essentially it wouldn't require everyone to hold all of this state because essentially most of it is garbage state right most of it is just Spam and really in reality like no one really cares about that spam it's not and and and and and being stateless where someone isn't storing your spam like you want them to uh is not something that needs to be guaranteed right uh and there's different debates on different sides of of the aisle here but that's kind of what it comes back to there um but yeah

you can read saiger's uh tweet thread here for just more of an explanation around this but that was the TDI basically fell over because it was getting spent basically got dossed essentially right and the fees went up um and and uh and then the sequencer came back online as you can uh as you can see uh here yeah so basically the sequencer came back online the the spam started again to be honest right uh for with the inscription spam uh and the funny thing is is that arbitrum became the number one um payer of eth fees today on on the ethereum L1 Network I think they were paying around 25% of all ethereum fees on the network today which is an insane amount for for arbitrum here and I think that they were doing uh around 300 TPS 300 transactions per second at one point which is crazy I

mean we're actually seeing the l2s um stress tested now we're actually seeing them get a lot of usage but as I said as Yushi goes up on any chain fees tend to go up because there's priority fees that kick in and there is still a risk of the chain going offline because it gets dossed right doesn't matter uh I mean how much you do there is still a chance of of a Dos Vector here especially if you if you only have one sequencer like as I said if you have if you had like 10 sequences um all processing transactions the the the chance of all 10 of them going down is zero in really I mean not all 10 of them would get dossed the same way they'd be running on different Hardware right they'd be running run by different people so the chance of all of

them going down at the same time is is pretty much zero uh and the thing is with an L2 and with a rollup is that it's a one of n trust assumption where basically you only need one sequencer so even if nine of them went down and only one was still Al your transaction would still go through and everything would still be fine right and even on top of that as um as was mentioned here by Average Joe's crypto uh because arbitrum is a layer two doesn't matter if the whole thing goes down you can still get your transactions in on layer one so you could still actually exit back to ethereum L1 from the L1 you could submit transactions to L1 like you would submit them on arbitrum L2 yes they would cost you more but you could still get your funds back from that so that's a very

important point about l2s and rollups that people just don't talk about enough in my opinion that's the that's the whole selling point right but to go back to what I was saying about sequences so this is the difference between like a this is the key difference between a layer one and a layer two especially a layer one that has liveness threshold of um of of of basically 30 33% um so essentially what happens is that if uh you know most of the network it can't come to consensus um or no not most of it if 33% from my understanding of the network can't come to consensus and basically gets dossed the chain halts because of that right whereas with uh with the alus here if you have like 10 sequences instead of just one and nine of them go offline which again is I mean

I'm not going to say it's impossible but it's an extremely low chance that that's going to happen you still have that one and that one doesn't need to come to consensus on anything right that one can post the batch to ethereum L1 just fine and that's that's exactly how l2s work so this is a temporary issue once the sequences U start getting uh decentralized and anyone can run sequences we get better liveness guarantees obviously better censorship resistant guarantees and logically the l2s should never go down really again because as I said like do dossing becomes uh really a non-issue because you have multiple parties running sequences now of course if your al2 isn't very popular and you've only got one person running a sequencer or one one sequencer then uh it's the point is moot but I think that with services like

igen layer going live which will encourage people to run sequences for these chains and basically get rewarded for it in various different ways and and then the Shar sequences as well I don't think this is going to be an issue even for the smaller l2s I really don't I really think that we're going to have like a very robust and strong sequencer Network for all of these chains um and this will be a nonissue at some point in the future but as I said good to see the l2s getting stress tested here good to see that arbitrum once they come back up is able to process this and I don't think they've gone offline again from what I've seen fees I think I don't know if fees actually went up again cuz I I wasn't using it at the time I'm just going to to L2 fees. info here to see

what the fees look like um yeah I mean no the fees are the fees are pretty normal still on arbitrum one there but I don't know if the spam's kind of going on right now uh but yeah it was processing 300 TPS and I think if you actually add arbitrum to the other l2s and to ethereum L1 TPS I think all together ethereum was doing 5 to 600 TPS which is on par with what salana does right and I know uh uh TPS is is not a great metric I mean I've said this plenty of times and I don't think any metric is actually great but it's kind of funny how you know this narrative will be pushed that oh you know ethereum can't do this but it can ethereum can it's just doing it in a different way ethereum does it at L2 right you know

salana for example it does it at L1 it's just different ways of scaling and I don't think it should be a thing where we kind of say that you know this way is um uh this way is wrong or this way is right but I've always talked about what's the most sustainable way and that's my bull case for ethereum's kind of modular road map is that I think it's much more sustainable from a technological perspective and from an economical perspective um and I think that uh l2s can just scale a lot more as well generally and we're going to see that play out as demand comes online as l2s continue to get more usage as they continue to scale out with other upgrades that they do to their own networks and obviously things like 4844 going live we're just going to see a really really I think like beautiful

scaling ecosystem flourish and the narrative will shift back guys like I was talking about this in the daily gr Discord channel before you can actually go check out those conversations for yourself it's actually pretty interesting cuz I I love having these conversations because I tend to think of of things that I hadn't thought of before but really if you if you kind of look at the ecosystem as it exists today and what people pay attention to I mean I talk about this all the time right narratives versus reality but then you have to kind of go to the core of the narrative and see okay what's what's actually pushing this narrative forward what is actually forming this narrative and it's always price right it's always where people are making money so right now people are making money on on speculating on random things you go to

coin gecko you see all these random things pumping and you're think to yourself oh is my thesis wrong you know am am I wrong about the fundamentals you know should I sell all my e for this thing or that thing that's up to you I'm not going to give you investment advice on this but what I want to make clear to you is that the price going up of some random asset doesn't mean the fundamentals improved at all right it doesn't really mean anything because if you look at a lot of this stuff they're basically the same as they were when the price was lower it's just that there was a narrative formed and the price goes up and then obviously people make money and then they get more excited about things things and the narrative becomes a a self-perpetuating thing so ethereum had this in 2020 and 2021 defi summer into

eth going up a lot into tokens going up into nfts right going up um and now over the last I guess like it has really only been like two to three months guys I mean I think that uh crypto warps us our perception of time but in the last two to three months you look at something like the salana ecosystem and you say okay well you know soul went up and then these other tokens got air dropped and and this bnk token went up and people were making money there and that's good like that's fine I actually I'm really happy for the people making money but the the mistake people make is that they fall into the Trap that the market forces them into which is the narrative trap of um uh you know they they start thinking that uh all these weird narratives and they start believing in

all these weird narratives and they start thinking that these things are are more than what they are and they start saying things like oh ethereum is dead um you know ethereum l2s are dead the ethereum thesis is wrong when in reality if ethereum al2 were doing all the air jobs and people were making money on there which they will at some point right that's inevitably going to happen then the narrative would shift back and you'd see immediately people being like I love this L2 I love that L2 and it's because narrative tends to follow the price right of of things it's just the way the crypto ecosystem works and and and and that's and that's definitely going to happen I think again I think I mean I think next year is poised for the narrative to shift back to ethereum and l2s for sure I mean we have multiple big

uh projects doing their airdrops we have uh exciting things happening with EIP 4844 going live obviously people going to speculate on the E ETF uh this and and and obviously like um you know these these apps maybe doing air drops of their tokens stuff like that and and really narratives go stale over time as well like things get boring it may not feel like it in the moment but things do get boring over time and as I said this has only been going on for around 2 to 3 months in in the salana ecosystem and that's what happened actually in defi summer in in 2020 it went on for literally 3 months it felt like years if you were there I was there I was on the front line so to speak it felt like years right but it was 3 months really and then uh a lot of the most popular

defi tokens at the time they went down like 70% in a couple of weeks and these things went up a lot of course but then they just absolutely destroyed everyone and I remember the the poster child for this was yfi or the yearn token mate if you guys were around back then you'll know what I mean but if you weren't let me just describe to you what this token was it was basically the equivalent of Bonk in terms of people thinking that this thing was going up only forever right literally forever it was everyone was hyper bullish on it they thought that it was going to cure world hunger go cure cancer they thought it was going to be the best thing ever and it went to 100K it started off at zero basically and it went to 100K what did people say it was going to go to when it was 100K

they said it was going to go to a million right guess what happened coinbase listed it that was the Pico top it never went back to that uh to that price against eth it only briefly went back a bit higher I think against uh USD uh uh around the the top of everything of like May 2021 but it went down against eth today 97% from there it is still down against eth 97% and this is an asset that was the most bullish thing in the world or in the crypto world at that time like I I I quite literally I remember this very vividly because I was pretty bullish on this asset back then honestly I mean I kind of fell into this trap because I was I was rather nbish still back then um but it's the same thing I'm seeing now and it it doesn't

matter what ecosystem it is guys doesn't matter if it's ethereum doesn't matter if it's salana doesn't matter if it's if if it's Avalanche or whatever other ecosystem it is market dynamics are always the same Market forces are always the same same narratives always play out the same way um and it doesn't matter what the text's like doesn't matter what the fundamentals are like if it's a narrative it's a narrative if it's reality it's reality and I know I talk about this all the time but I thought it was just good to sit back and and kind of like just just talk about this stuff especially on on on on on a weekend episode maybe you guys are are kind of like sitting around speculating on things and thinking thinking about these things as well because I know a lot of you talk about in The Daily way Discord

channel so I just wanted to outline it the way I think about it and the way I think about these things and and the way and also highlight to you guys that like the the crypto markets and crypto generally will will completely warp your perception of time because it may feel like it's been years of this stuff going on but really the bulk of this stuff going on and by this stuff I mean like just random going up in value and you promo thinking you missed out on it whatever the bulk of it has happened in the last month and if you look at uh one of the poster Childs of this which is the Bonk kind of meme coin it did the majority of its move in in two months right basically and uh the thing is it just got listed on coinbase right so

what's going to be funny for me and the funniest thing for me is going to be in a few months or maybe it doesn't even take a few months maybe it only takes a few weeks I I revisit it and look at okay did it do the exact same thing WiFi did because I saw so many parallels between it I saw like I yes WiFi was tied to an actual project as far as I know Bon isn't actually tied to a project it's it's like a meme coin and there's absolutely nothing wrong with that but but yfi was also a meme coin I remember at the time there were plenty of memes around it there was a meme that we would would all go to Tokyo and have a party with blue Kirby who was like this is this is ancient history now but for those of you who around Blue Kirby

was an account on Twitter that was chilling the hell out of WiFi um all the time right and and they ended up getting doxed and I think they ended up just like leaving crypto basically but essentially WiFi was actually a mem coin at the time even though it had a project attached to it and the Project's fine there's nothing wrong with it it became a meme coin just by sheer will of the narrative and sheer will of the people speculating on it and I see so many parallels between these two things right um and I see so many parallels with other things so I'm not going to say that uh you know uh I guess like um I'm not going to give investment advice on this sort of stuff here I'm not going to say that these things can't go up again or can't pump again or anything like

that but when I see these things playing out and as someone who's been around for a while and when I see history repeating itself I I tend to think that okay hist's repeated itself on the way up there's no there's no discernable reason why it can't repeat itself on the way down um especially because markets always tend to play out in Cycles tend to play out the similar way and then when you actually step back and look at everything from a holistic perspective you kind of come to to this conclusion here but anyway I think that was a long- winded way of me saying that don't fall into the Market's tricks the market will always try to push you into a trade it will always try to get you to fomo it will always try to push you into narratives if I've learned anything from

investing that is like the worst thing to do because I fell into those things as well myself and I've lost money falling into those things or I've held on to things way longer than I should have and so on and so forth and it happens in every ecosystem this is not an ecosystem specific thing this this is a crypto specific thing this is a market specific thing so if you think that you found something and you think that it's a new paradigm and you've forgotten what a bare Market feels like I would caution against thinking that's a good thing to feel right um because at the end of the day if you start thinking like that I think it's near the top of of of of what you're thinking it about because I remember in 2021 it was the same thing in 2017 it was the same thing new

paradigm things going up forever well blah blah blah um and I remember even on eth where eth in 2017 in January to 2018 in January went from $10 to $1,420 right it went up 142 times and at that point people were still saying that it's going up more new paradigm you know we're going to go higher what do you mean we're going to go higher we just did 14 2x in a year and you're saying we're going to go higher and of course what do you think happened eth went down 94% in less than a year right so it just setting those expectations knowing what's a narrative knowing what's reality knowing how markets work is how you save yourself yeah and it's how you save yourself from feeling bad about things too because I know people feel

bad about things like I should have bought this I should have bought that well as I also described in the daily way Discord Channel today if you actually look at how this works you what you're looking at is you're looking at oh I should have bought the bottom and then held till now and I would have made like 10x my money that's not the way to look at it the way to look at it is not what you should have done what you have done and what your p&l your profit and loss looks like because I guarantee you that you wouldn't have put it all in at the bottom on anything that you bought doesn't matter how bullish you were on it at the time guarantee you would not have put it all in at the bottom so let's say you buy it at the bottom but

then it goes 5x and you buy more well now you your average entry price is up right and now your your average profit is is is going to be less because your average entry entry price is up now when you kind of look at it over over the long term and look at how much money you netted out and that profit and then you compare it to buying other things most of the time you would have actually netted out the same because it's not about buying the bottom and selling the top no one does that no one buys the Pico bottom and sells the Pico top like ever if they say they do they're lying to you this is not something that happens right or at least it's not something that happens consistently could happen on an off random chance but what you have to look at is your average

entry price versus your average exit price and then look at the profit that you made from that and then you can uh compare that to other assets did you outperform this asset did you outperform that asset but even then it's kind of pointless because you can't prove accounter factual you can't basically prove that you outperform this asset because maybe you would have bought that other asset at a different price you know maybe you would have made more profit on that because you sold it at a different price so really the only thing that ultimately matters at the end of the day when it comes to investing in crypto or wherever else is how much money you make that's all that matters and if you want to play it on hard mode it is the way I like to play it these days is that what matters more is have

you outperformed eth over the over the long run over that period of time that you kind of held that did you outperform eth that's hard mode to me but generally most people don't want to do that they just want to make dollars which is completely fine right they just want to make make more feat but again it comes back to what you need to look at is your average uh kind of uh purchase price and Al and and the profit that you make over that period of time and then that is all that matters right nothing else matters anyway gone on a rant there this is going to be a longer episode today but uh it already is a longer episode uh but yeah I'm going to move on from that one you can check out the tweets that I spoke about I'll link in the YouTube

description below and if you want to get involved with these discussions I'm always active in the daily great Discord Channel discussing this with people we have a lot of great discussions in there and I just love educating people about this stuff all right so L Lyra's V2 roll out has begun so you can now start trading at lara. Finance there is currently a competition that started which is their BTC ETF PVP competition um you can learn more about that on this blog post which I'll link in the YouTube description below but I did mention this the other day but essentially what it is is that they're trying to concentrate liquidity on a single asset which is BTC and expire it on Jan 12th they want to create the highest ever BTC options open um interest expiry in Defi and make V2 the most liquid venue to trade uh the

quadruple wiing and BTC spot ETF news so there's a competition running as I said it started already which Co coincides with this quadruple witching event which is a a term that refers to um the uh uh expiries of these options uh around the date of the ETF um and it obviously leads the market Market volatility and the competition will end on January 12th here and you can earn PVP points and win Lyra so yeah I mean the full details about this are in the description here I'll link this in the YouTube uh description sorry in the blog post here which I'll link in the YouTube description for you to check out and just a friendly reminder that Lyra is live on their own chain they're also on optimism and arbitrum but I think this competition is taking part on their own Lyra chain actually I'm not 100% sure if

Lyra chain is live yet or not but I do know they're live on arbitr and optimism um but yeah you can go check it out at ly. Finance yeah I'll link that in the YouTube description below all right so update from Igan da today so Igan DA has announced support for optimism's op stack which is available now against the debut Igan da testnet rollups will have the option of persisting L2 transaction data to end da enjoying negligible L1 gas costs while maintaining a security budget on part with ethereum so great to see that op stack is now supporting IG da or IG da is now inter cre with OP stack which means that all of the op stack chains can if they want to store their data on Igan DA's test net right now but then in the future their main net I believe IG

da is is um targeting a q1 launch window for their uh for their for for mainnet here so not too far away uh but it's going to be interesting to see how all of these different chains handle their data availability right or sorry handle where they post their data to because obviously as you guys know ethereum L1 is the gold standard for data availability but it is also it Al comes at a cost right it costs more uh whereas I da you know Celestia Nia I mean in the future Avail and and a few others out there they're obviously going to be cheaper than ethereum L1 is going to be but they're not going to give you anywhere near the same security guarantees as ethereum L1 is of course and persistence guarantees as well remains to be seen how each of them

persists their data and uh and guarantees around data availability generally right um but then I think that as I've said before there are a lot of use cases where this makes sense because you don't need ethereum security for things like gaming nfts right I've said this before there are a lot of use cases that don't require ethereum security I do believe that defi chains or defi l2s should definitely have their data on ethereum L1 because one they can probably afford the the cost uh well they can definitely afford the cost because uh defi tends to produce a lot more economic activity than anything else does right so they can definitely uh afford the cost and also they they definitely should get that security guarantee there because uh defi handles a lot of money right handles a lot of

economic activity but for most other things social apps gaming you know payments apps even to be honest like small payments and microtransactions things like that do not need the data guarantees of ethereum L1 because I compare it to ethereum L1 is like the US Military and you wouldn't use the US military to protect your you know trading card collection right so it's the same with when it comes to where you're store your data here and then really the the I guess like endgame of this is is allowing people to store their own data because if you're allowed to store your own data then you can just have to trust yourself uh and then you can basically use these things with the guarantee that okay they're posting this data to this data availability layer and if if the data becomes unavailable on this da layer well then I've still got

the data available to myself and I can still access my funds and also these um these l2s will give you the option to store your data on ethereum L1 if you want to but you just pay the fee yourself instead of the L2 paying it for you so there's multiple different ways that this can happen here and I think that the apps themselves will decide where they want to store their data or the l2s will decide and the users the bigger users of the l2s will decide where they want to store their data but it's going to be a a bit of a I guess like U filling around seeing what works over the next few years and I'm excited to see it play out so yeah you can go check out uh the details about this there's a thread I'll link it in the YouTube description below

for you to do so all right so speaking of where L2 store their data you can see here that coffee shared today uh what rollup spent on posting data to ethereum in November so you can see that they spent a lot AR 1 spent $4.4 million posting their data to ethereum in November linear 3.7 million optimism 2.5 million ZK sync 2.5 million and the and so on and so forth which equals a total if you look at the chart here of about $20 million So ethereum l2s Paid $20 million to secure themselves or to post their data to ethereum in November and I believe this number in December is going to be higher because just over the last 24 hours arbitrum has post uh posted I think like over 2 million or spent over $2 million

uh on on posting their batches to ethereum L1 here now of course this is going to change for two reasons um over the next couple years especially one is that some of these l2s are going to opt to put their data off chain as I was just discussing and two the costs are going to collapse at least over the short term with the introduction of 4844 AKA blob style transactions because the l2s will now be posting their data to blobs which should be cheaper than um than the normal kind of uh kind of call data fees or the normal L1 fee Market market for a little while remains to be seen because there is a there is actually a risk now that inscriptions actually flood blob cell transactions and we get spamed there for a little bit so it remains to be seeing what happens

but yeah those are the two things that could affect this but still if you assume that demand for these things are going to go up like 10,000x from here which which obviously we all um we all kind of like assume and we all hope that that happens because obviously we want to see this this stuff keep growing then that extra demand is going to offset the the I guess like uh the C in in costs and basically get us back to where we are today and we just got to keep scaling and scaling um and then obviously cumulatively it'll be at the same point as it is today if not more and I mean I have said to you guys that I believe at some point in the in the future if ethereum is successful with its L2 road map which I think it will be

obviously uh we could be generating um I mean I I know I said tens of billions of dollars of daily fees on on ethereum L1 that's like a far future thing but there exists a future where hundreds of millions of dollars of daily fees on ethereum L1 is is not too far away uh from l2s from L1 activity uh and that's obviously really really bullish for ethereum activity generally it's really bullish because U we we still have cheap fees on these l2s it's just that collectively there's a lot of transactions happening so obviously it's cheap individual fees but cumulatively it adds up to a lot which gets posted down to ethereum L1 which of course increases the L1 Revenue which of course increases the burn which obviously should flow to e value over the long term which increases the security of

ethereum it really is a beautiful system when you think about it right and that's that's the way I think about it and that's the way I think about economic sustainability of these systems and that's why I always talk about economic sustainability of these systems over the longer term um and it's kind of frustrating sometimes because I think a lot of people operate on like the shortterm cycle whereas I operate on like the 5 10 plus year cycle and there's no way I can talk to these people in about these things because they just aren't operating on the same time frame which is completely fine but it is a little bit frustrating sometimes but anyway uh I think that's going to be it for today's extra long episode so yeah hope you enjoyed a Saturday episode and so thank you everyone for listening and watching be sure to subscribe to the

channel if you haven't yet give that video a thumbs up subscribe to newsletter join the Discord Channel and I'll catch you all on Monday thanks everyone