Ledger data breach, FinCEN regulations and more! - The Daily Gwei Refuel #19 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daily gray refuel where i recap the latest news in the ethereum ecosystem i'm your host anthony sosano and today is the 21st of december 2020. all right let's get into all the news from the weekend and from friday everyone so this news came out today or yesterday actually i think this was the biggest news from the last few days basically uh for those who don't know ledger the hardware wallet manufacturer for basically the legend no s and legend nano x had a data breach a few months ago in june of 2020 where customer details were kind of leaked out and they were being sold on i guess the dark or deep web whatever you want to call it

over the last few months i saw somewhere that the prices of these kind of databases were ranging anywhere from five bitcoin to ten bitcoin per purchase which is obviously a lot of money right now it's over a hundred thousand dollars um on the f for 5btc so uh it wasn't readily available to everyone um it was kind of being purchased by people who thought that they could use that information to conduct like phishing campaigns or through emails or through sms i personally got a lot of sms phishing attempts from some contact name ledger which i thought was silly because i was like you know i'm not going to obviously um click on that but unfortunately a lot of people do um and you know since since then i guess

it's been a few months now and people kind of gotten over buying it so it just got kind of leaked out onto onto the dark web or the deep web and anyone can kind of like view this database now and the worst part is for those i mean you're probably aware of it by now but i think the worst part of this whole breach is the fact that uh physical addresses were leaked so people's home addresses uh or po boxes if they use them i guess were leaked uh anyone in the world can now see this um and what the kind of like the worst thing about this is that these are physical addresses tied to a purchase made on uh you know a hardware wallet for cryptocurrency so basically you know your address is only on there because you purchased the hardware

wallet obviously because you have cryptocurrency so if you know if someone wants to look at that and check your address they know for a fact that you own some amount of cryptocurrency and that you're someone that could possibly be targeted by them if they wanted to come to your physical location and steal your assets or something like that now i don't think this is like a huge risk for a few different reasons one if someone actually really wanted to target you and come and steal your assets they would be able to get your address through a few different other means um if they like were really intent on on stealing your kind of assets so there's that there's also the fact that the risk of going to someone's physical address breaking into their house or attacking them and forcing them to give up their

you know pin to their ledger or their password or whatever um would be incredibly risky because you don't actually know if they how much money they have for starters right they may only have a small amount of money and they just bought a hardware wallet because they wanted to try it out and or that they figured that you know they wanted to keep it safe and not or not on an exchange or on their pc uh they could have moved all their money into one of the d5 protocols uh for example and not used their ledger maybe they moved it to their metamask and then into a default protocol so that ledger could have nothing on it they could have multiple ledgers so if you kind of take one of them um and then you know uh you get you know you leave and then you kind of

discovered that it wasn't actually the right one you're not going to go back to the same place right because at that point you know the authorities have been alert alerted right the risk of going back is just like really great so i don't know how many kind of like quote unquote five dollar wrench attacks we're gonna see come out of this where people literally go to someone's house with a wrench and say give me your password before i you know beat you to a poll basically i don't know how often that's gonna happen um you know it might happen to the really high net worth kind of individuals maybe i don't know but the thing is though if you know the the the the database link doesn't have kind of like your your um your addresses on there right your crypto addresses so you don't know

who has what and for the people that you do know are high net worth individuals say like the winklevoss twins right you already know that they're they're rich you're right you didn't need this database and you already know the whole crypto you didn't need this database leak to tell you that so if you look at the nuance behind it you know you you feel a bit better about this and i say this as someone whose personal details were leaked completely in this unfortunately um i mean there's no point me hiding that so you can go see it anyway i had so many people damning me about this basically so i must have been one of the first people they looked up but that was quite quite uh quite a thing to wake up to this morning but anyway um yeah i just i don't think it's a

concern for most people on this list uh i think the risk of someone coming to a house is quite low i was joking to my friends that um you know in australia right now the borders are all closed uh the international borders and the state borders are actually closing again due to another outbreak of coronavirus so really i mean i only have to worry about like the people in my general vicinity um so you know it's just it's just uh maybe a maybe a bit of a saving grace there but unfortunately uh that's kind of what a lot of people have to deal with right now and it's unnerving right it's just because there's a low chance doesn't mean there's no chance like you know people don't feel comfortable with the the internet knowing where they live basically um so that that that sucks a lot in that

regard but i think in general yeah i don't know if we're going to see a lot of these kind of wrench attacks happening maybe people get kind of like their houses get broken into and uh people manage to get their ledger wallets or their seed phrases you know if they get the ledger wallet it's kind of pointless without the pin if they get the uh seed phrase i mean you know that that i mean gives them everything right the seed phrase is the kind of password i guess to all of your addresses so i think that the takeaway here for me is that store your seed phrase away from your your wallet if you can your hardware wallet if you can in another residence if you can i think that would probably be

uh the best kind of course of action here um i i also think that if your kind of details were leaked then maybe consider using a pro box next time instead of your home address like that's what i'm going to be doing from now on use a p.o box for like shipments and stuff and stuff instead of my home address and things like that uh so yeah i think uh it's a it's a lesson for a lot of people here a harsh lesson and i'm really disappointed in in ledger obviously they didn't mean for this to happen but this is pretty much one of the worst data breaches that could have happened uh given the the data set here right people who you know own crypto right and their home addresses freely available on the web not a good mix but it is what it is and

uh you know i guess it's out there now not much we can do about it as i said um there's i guess there's more of my thoughts in the delegate newsletter and there's a few other tips in there as well of how to stay safe but basically yeah if you are affected by this know that i'm right there with you i know how you feel but there are you know it's not to me it's like not the world is ending kind of thing that that kind of twitter made it out to be today at least that's my opinion of it i think there's more nuance to that as i just explained and i think in general most people are going to be going to be okay they're not going to get like attacked or anything or or their house broken into whatever um but maybe i'm wrong i mean i don't i

hope i'm not wrong obviously but we'll see as time goes on the other biggest piece of news that came out over the weekend was uh those regulations that i was talking about uh i think last week the week before i think i've been talking about them for a couple of weeks now those regulations out of the u.s around self-hosted wallets and people thinking that they were gonna ban self-hosted wallets uh and all this sort of stuff and you know i never really believed that they were actually gonna ban the self-hosted walls i thought that was kind of like way too far and i mentioned that but basically what actually came out and what the proposed kind of regulation was is that and jake jake travinsky's thread does a really great job of summarizing it here but basically the tldr is that for deposits and withdrawals over

three thousand dollars involving a non-custodial wallet uh vasps which is virtual asset service providers which is basically centralized exchanges and custodians would have to record the name and physical address of the wallet owner uh i mean as i mentioned last week the exchanges already have this data uh they they they literally have that as part of their records on their database they tied to your kyc on the centralized exchange so i think these are really i mean i don't think this is really well thought out regulation i think all this does is basically make it more costly for exchanges to keep track of this stuff um because not only do they have to record uh all this stuff anything over 3k they also need to report

any deposit or withdrawal over ten thousand dollars to fincen in the form of a currency transaction report now this is basically uh gonna increase the compliance cost for exchanges by a lot right think about how many customers they have they have to make sure that they get this right and abide by this law they've got there's no way around it for them they have to do this um it's not law yet but if it was to be law they have to do this and jake goes on to say that vincent says there's requirements are necessary to combat the to quote combat the financing of global terrorism end quote open quote address transnational money laundering close quote and then jake says you get it uh anyway this is always the way that the the government likes to tie things up in right

if it's not you know terrorism it's saved the children it's money laundering it's always the same kind of frankly excuses that they make up in order to rush these things through um and you know if you've been paying any attention to the traditional finance space and all the stuff that goes on there there's tons of dodgy things that go on there um and these banks and stuff get just a slap on the wrist for it a few of you might remember some of you might remember a few years ago there was a massive hsbc scandal with um drug cartels uh laundering their money through there and i i think the fine ended up being less than the profits that were made by hsbc and there's numerous examples of this right um all the time so i just yeah these these regulations are just like

so pointless um for what they're trying to do i think it's just you know obviously the government trying to do what the government does best and assert more control onto the population um but as jake notes this could have been a much kind of worse uh set of regulations here it's not the worst that could have happened they could have banned self custodial was that's like probably the worst um but yeah so i'll link jake's thread because it's quite long here i'm not going to go through the whole thing i'll link his his thread uh it's really great jake is one of my favorite lawyers or within the crypto space he is uh he's constantly on the ball with this stuff and he knows exactly what he's talking about so i'll link this thread for you to go check that out uh jeremy o'lear from circle at the

issuers of usdc also put out a kind of thread here i guess he was more critical than jake was i think in terms of how much crap was in this regulation to put it put it mildly he basically says a lot of the same things but he goes on to he's i'm not going to read the whole thread but he goes on about how uh there wasn't enough time put in for like review of these regulations i think they've only given like 15 days for comment i think until january 4th or something like that until they basically are going to try and you know shove this into into kind of law and to make this a a uh binding um so yeah i'll link this thread as well i'm not gonna i'm not gonna go into it here but another great thread

great three great thread to read on this but tldr if this goes in it's not the worst thing that can happen it's actually just really crappy for exchanges uh and you know custodians and general centralized service providers it doesn't really matter for you as an individual if you already use these services because all this information was already available to law enforcement they just needed to request it um so it's this is just like one less hoop that they would have to jump through i guess um but if they really wanted to come after you for something then they could easily have gotten this information anyway so that's that interesting tweet from hayden adams over the weekend so he goes on to say you joke but legit the coolest thing about this page is not

uni swap competing with centralized exchanges it's uniswap being on the only one with the country's sanction blank um and he goes on to say ethereum is the closest thing to a country that uni swap has now this is what he's talking about for those who are watching the video there's a screenshot here of uh masari's kind of dashboard where they link these centralized exchanges and they have a column for country and you can see binance is based out of the cayman islands coinbase is in the united states hobby is in the seychelles and you know you've got the rest of the countries here then you get down to uni swap and it's just blank right because obviously unisop doesn't have a home country even though the union swap team is based in the us the unisport protocol is not controlled by that team ergo the unicorn protocol

is not controlled by a country now hey it does bring up a good point that ethereum is the closest thing that unisop has as kind of a country and that's true because if ethereum i don't know it was was attacked or something or hacked or 51 attacked that could actually control the outcome of uniswap that's but that's the only way to to control uniswap you cannot do it through an admin key there is no centralized backdoor there is no there is not any of that so i thought that was an interesting tweet from from hayden here and this is exactly what what we're trying to do with default right eventually every default protocol should have a a blank country kind of row there because i think um a lot of them still have admin keys

right a lot of them still have backdoors uh and obviously that doesn't make them decentralized because a lot of the the law enforcement in that country can basically force the the team to do things if they have like a a central admin key or something like that so yeah really interesting tweet from from hayden here so this caught my eye i didn't really get much attention but the reason why it caught my eye was because uh morgan stanley's head of digital asset markets apparently said that defy is poised to keep its momentum in 2021. now you're probably thinking well yeah no you know no right of course this is gonna this is gonna happen right um we all know d5 is gonna keep growing uh it's not slowing down uh it's getting

so crazy that i can't even keep up with it anymore uh which means that i don't think anyone can because i try to keep up with everything and spend all day looking at this stuff but yeah the fact that kind of morgan stanley's uh you know head of digital asset markets says this was really cool i think as i've been talking about on the show i guess the past couple weeks we're gonna see more of these kind of like centralized players blur into the decentralized world and come into it and kind of see how they can make the most of it i wrote a newsletter on this last week in the daily where i basically said you know cfi on d5 was the title of the piece and i went through how you know centralized finance is going to tap into the d5 rails because they're just going to offer them

so many opportunities to make money for themselves and their customers and to offer their customers different experiences too so i think you know we're not there yet in terms of uh getting i guess the mortgage stanleys of the world to offer their customers uh a d5 solution in terms of like saying hey you can get like five percent yield on your dollars through us and in the background the bank's actually using compound or wire or something like that that's not going to happen for quite a while mainly for regulatory reasons i would suspect and security reasons they're not going to put like i mean in liquidity reasons too right they're not going to put billions of customer deposits into iron or something like that or to compound right

um that's just not how it's going to work it's going to be a slow kind of scaling in from these centralized players but it's definitely going to happen i i have no doubt there is no doubt in my mind that we're going to see this play out over the next few years the bankless guys like to call this the protocol sync thesis if you want to google that and check that out and i think it rings true we're not going to have d5 mass adoption without c5 layers sitting on top but that doesn't mean that this stuff still won't remain decentralized it just means we're going to have basically a broader set of users tapping into this stuff without even knowing about it just going through their normal kind of like interfaces that they normally do normal kind of providers that they normally do which i think is totally

fine not everyone wants to be their self-sovereign bank using metamask and you know ledger hardware wallets and all this sort of stuff right some people just want the kind of easy simple thing to do they don't have time to research these things and that's fine and that's i think what these kind of institutions and companies are going to offer to them interesting tweet from chris bernieski here today i thought was quite funny um so he basically says for those that argue eth has underperformed btc remember that in the original permissionless sale one btc bought you 2 000 eth and uh one btc today is worth 24 000 2008 today is one point worth 1.3 million dollars and then he says no wonder

they're so bitter i have brought this up before as well and i actually made a joke that if ethan has been a better story value than than bitcoin since it launched um but yeah the growth here is just insane if you had bought ethe at the sale which was i think it was about 30 cents each at its its original kind of ico back in 2014 i believe in mid-2014 uh yeah you would have basically been able to purchase it for one btc which was around five hundred dollars or six hundred dollars at the time if memory serves me correctly and obviously now it is worth i mean when i'm recording this at six hundred dollars it's dropping a bit quick there maybe it's less by the time this video goes out but it's around six hundred dollars right now so that is an incredible gain on

your capital in just five years right um or i guess like six years if you count like the original 2014 investment um as the start date there so yeah i guess if you were just to hold your bitcoin through all of that you still would have made money right if you bought bitcoin at six hundred dollars i don't think you're bitter about it being at over twenty thousand dollars um or i guess maybe you are because you should have bought eth instead um but yeah this was just a great way to visualize that and you know fun fact i actually um when i first discovered kind of crypto was in 2013 it was just bitcoin back then right i bought some bitcoin i kind of wrote up that first way from a hundred dollars to a thousand dollars and you know i thought it was a genius and everything

haha and then it kind of crashed and i was like uh okay maybe um maybe i'll just kind of sell what i have and then you know this is override i actually fell for the narrative that bitcoin had died back then um for those who ran around in 2013 and 14 it was totally different to what it is today like 100 000 different um you know the biggest exchange at the time was mount gox it wasn't coinbase and that obviously collapsed at around the same time so yeah it was totally different but the funny thing is i sold my btc and kind of exited crypto just as ethereum was going into the limelight so early 2014 um and then i obviously missed the the sale i missed ethereum i actually didn't hear about ethereum until early 2017

even though i had been in crypto beforehand even though i was active online and things like that i was like a huge gamer and stuff like that it's amazing to me that i didn't hear about it until early 2017 still not once um so that's quite i guess funny to think about because you kind of think about the bubbles that we might be stuck in whether that be crypto bubbles or other bubbles and how social media algorithms will tune themselves to your own little bubble and you can miss a lot of things so regret regret from me but you know luckily i bought into early 2017 a bit of ethan kept buying since then and i and you know it's been fine but yeah maybe a lot of the the early bitcoiners who didn't buy into eighth and just held their btc all the way

through are bitter that they could have made a lot more money but that's the aim of the game i don't think you should hate something just because you didn't make money on it uh that's not i mean i don't really hate anything because i didn't make money on it there's plenty of things i missed out on didn't make money on i'm not resentful towards it but some people like that right some people uh get annoyed by that and use that but it is what it is um but yeah interesting tweet from chris today pool together announced over the weekend that they have raised a fresh round of capital uh led by parify capital um and with uh kind of um participation from nascent which is a very uh active d5 venture d5 fund robot ventures which is run by robert leshner from

compound meta cartel which is the dao incubator um kind of platform the lao which is similar to meta cartel hobby defy labs which i didn't didn't even know it was a thing but apparently hobby has a i guess fund centered around d5 now and the usual angels that you see like stani and from arvind came from synthetics these two guys are literally on every race that i've seen these days like pretty much all of them uh especially in d5 so it's quite funny whenever i look at the angel list you know the angel investor list i'm like okay yeah stani you know kane that's fine that was expected and jordan is listed here as well jordan's um the ceo at ave which is pretty cool to see

so yeah for those of you who don't know pull together is basically this no loss lottery platform where you can put in capital um and buy tickets and basically the prize is not from the capital that people put in but it's from the interest earned on that capital so this has been i mean this is one of the really this was one of the really popular d5 legos early on um and i still think it's quite popular now it's not as big as uh as i guess people would hope it would be but i think this is one thing that would actually appeal to mainstream a lot more than people in the d5 space because in the d5 space there's so much like if you're in d5 right and you understand what's going on there's so much kind of stuff you can do with your

capital that not locking it into this kind of like i guess pulled together lottery probably isn't the most efficient thing but it is safe right it's much safer than the other stuff and it's much it's on autopilot you don't have to worry about it whatever whereas people that aren't indeed fine aren't in crypto uh i think this would appeal to them right it feels like a lottery but it's a no-loss lottery and it's like a savings account for them too where they can basically put the money in here save their money right but also have a chance at winning a prize every week so yeah congrats to pull together on raising this money i actually think they're gonna do some really awesome things going forward i hope to see them tap into the more mainstream audience because that's where i think they're gonna get a lot of their users but that's hard

right um i think that's going to take like a whole ecosystem wide push to get out there not just pull together right it needs to defy needs to kind of go mainstream altogether for for this stuff to happen right a new website that was created uh by david mihal who created crypto fees.info as well this one tracks money movers basically what it tracks is the amount of value flowing on each chain over a kind of period of time you can see here that he's tracking bitcoin and ethereum which are on par with each other basically bitcoin's moved 10.4 billion dollars since what is it since july 2020 i think yep yep that looks right i think and

ether is 10.7 billion dollars so i would actually like to see this go back further than mid-year i would like to see it go back like i guess like one year plus uh maybe he'll put that in but i thought this was cool i don't think anyone was tracking this in real time before i think this ethereum value settled only counts ether i don't think it counts um all tokens maybe unless this is like every 24 hours or something i'm not sure or is it cumulative and i think it's cumulative um it looks like it is no no you can see here ethereum's higher yeah it must be must be every 24 hours or something then okay maybe maybe that could be clearer maybe i should give him some feedback on that uh so yeah it seems to be every

24 hours because you can see here ethereum kind of like spiked up here during d5 summons come back down so that means it would include i guess like the tokens on ethereum as well um which makes sense so yeah really cool uh kind of tool from david here he's actually built a few cool things lately like i can click through here crypto fees and ethereum nodes so i've i think i've shown crypto fees on the episode before where it tracks the different kind of fees that blockchain is generating and the apps on those blockchains as well uh and then you have ethereumnodes.com which is basically a way to check for different api providers other than infuria um this was spun up after the kind of inferior outage that happened a couple of weeks ago

but basically uh yeah this is this is good i actually was looking for uh for this like at the time of the at the uh at the time of like the kind of incident and i couldn't find anything and then david came out with this so yeah um kudos to him for for that one all right super fizz from the east staker uh community has come up with uh idea of a staking traffic light system basically what it is is it's it's kind of got the goal to rank staking solutions in a way that benefits users and the beacon chain so he basically ranks them in kind of like i guess you know amazing to not amazing right so good to bad so he says at the top here solo staking on your own hardware as like the green

traffic light um and that and you know that's that's that's really really good and really safe much safer than a custodial kind of staking um the the yellow light here is non-custodial for 32 plus ether staking so you have a couple of service providers on the right hand side there and then non-custodial pools less than 32 ether like rocket pool is also there then orange is custodial pools as evaluated and ranked ranked by this website ddc.org um and then he's just got like examples of pools there he doesn't have any names there and then he has a red traffic light saying that staking vice centralized exchanges like coinbase and kraken are not great for the user in terms of

like uh i guess like what benefits uses the most and not great for the beacon chain as well so he's got a video explaining here that you can go watch i'll link it in the show notes but basically i really like this i really like this idea um superfiz has been amazing within the eighth day community he has helped onboard so many people into staking and into eth2 in general um and he's really passionate about this stuff so he's a great follower on twitter as well and his youtube channel is actually um not just his video he's got a youtube channel called a series on his youtube channel on the east staker channel here if i load this up uh if staker um it's called and he's got a series called state of the state so it's a good way to

keep track of like eth2 and staking and all that so yeah definitely recommend subscribing to his channel there all right uh second last thing is an update about one five five nine that came out this week so this is update number five uh so the tldr here is that the team has opened a preliminary one five five nine pull request against the geth code base uh this is like the first stages of getting it into the go ethereum client which is really really hyped to see and really cool to see um the large state test net that i spoke about last time is growing slowly but surely early results for transaction pool management are very promising uh never mind another ethereum one client is going to release a new r d

notebook analyzing minor collusion very shortly uh and there's lots of new 1559 papers and talks i will link this in the show notes you can go check it out i'm not going to go through the whole thing on this but yeah you can go check it out for yourself lastly a very interesting tweet from proto lambda um for those who don't know proto lambda is a theorem 2 researcher at the ethereum foundation he is constantly praised as one of the kind of like top researchers within eth2 that no one really knows about you outside of like the the the people that are in the weeds like you might have heard of uh like danny ryan um uh before right because he's kind of like in the news and seeing things like that and justin drake and obviously you've heard of vitalik

i'm not even gonna go into that um but yeah so proto lambs are put through together this thread um that eth2 stuff is still happening so there's a lot of stuff that is being worked on um from basically doing code reviews uh for preparing for phase one uh with building blocks uh syncing um the beacon uh state and serving arbitrary state merkle proofs which is ssz which is super technical and i'm not going to try explaining it to you because i don't even understand it um but a lot of technical stuff here but basically a really good little update about where eth2 is right now and all the different things that are being worked on you know now that the beacon chain's live i guess what like the researchers are kind of waiting for

is to see that the beacon chain is running for a few months nicely while in parallel the research and developers and implementers are working on all the stuff that needs to be done as part of the road map sharding right the merge what is it stateless clients and stuff like that and then if the beacon chain's fine we'll just do it we'll just merge it all in so we might actually see the merge happen late next year or early 2022 and then once the merge happens that's basically i mean sharding should be in by then as well so that's basically it that's basically like eth2 rolled out and then we could have a nice to have later on of phase two of eth2 which isn't actually required because with with the merge happening and everything

and with layer two with optimistic rollups and stuff like that we can actually get that full scalability and usability benefit so yeah that's really really cool um and i'm going to be monitoring this closely i think it's the holiday period now right so updates are going to be kind of like scarce on this sort of stuff people are going to take a well-deserved break especially the e2 research and developers are going to take a very very well deserved break after launching this thing that has over a billion dollars of value locked in it um is chugging along really nicely so yeah kudos to proto lambda for putting this thread together uh and i think that's it for this episode this is probably my longest one i don't actually know how long this has been i think it's over 30 minutes now but uh yeah thank you all for sitting

through there was a lot to get through i hope you enjoyed it um give the video a thumbs up if you did subscribe to the channel if you haven't already subscribe to the delegate newsletter and join the discord channel and i will see you all tomorrow thanks everyone