Market chat, MEV timing games and more - The Daily Gwei Refuel #712 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the delway refuel wake up the latest news in the ethereum ecosystem I'm your host andony s is the 4th of January 2024 all right everyone let's get into it so bit unusual start to today's episode I have a chart in front of me a price chart in front of me you guys know that I rarely talk about I guess like the charts or prices in in crypto because really the channel is all about the tech but I think uh I mentioned yesterday how I said that I think that we're entering a new phase of the market now we' we've kind of completed that transition from a crab market to a bull market phase left the earlier stages of the bull market now progressing into what I believe to be the March towards all-time highs on BTC and eth now of course there are other

coins that have already reached all-time Highs but I think you know obviously th those coins are the market caps are a lot less actually some of them haven't even ever seen a crypto bull market before uh and they just you know they're starting from a different place basically and I think when I look at what the mainstream audience pays attention to they really pay attention to BTC e and that's what the mainstream media are going to report upon so once they reach all-time highs that's kind of when we enter the proper bull market we we're still in the early stages but not we're not in like the earlier stages anymore we're not in that transition period we are definitely in the bull market now of course uh the reason why I bring this up as well is because over the last 24 hours there was a quite a

big dump in the markets that probably scared a lot of people you can see here what it what it kind of looked like we actually started creeping up at the beginning of the year 1 of January I mean this is the BTC chart from the 1st of January if I go from basically here to the I guess like 2nd or third of January or something like that uh BTC went up almost 10% which is obviously a pretty significant move for BTC given its market cap but then I guess like yesterday or I guess less than 24 hours ago the price went from went down about uh 10% uh almost 11% so it went down further and reached its lowest price since 18th of December if you count this like Weck here on the chart uh and that resulted in a lot of other things selling off as well of course e sold off

a lot of the other coins sold off and a lot of people got liquidated now people look at this and they're like you know is the bull market over I like no not at all this is totally normal for a bull market for there to be these pullbacks but also there is an obvious Catalyst now where people are trying to trade around which is the BTC ETF approvals because as I mentioned yesterday no one knows if this is going to be a sell the news event or a you know nothing happens and we just continue up because it's actually bullish or uh you know we sell off and then we kind of go sideways for a little while and then we go up sort of thing so right now the Market's in limbo and it's trying to play it either way I think that the market tried to play it

as a bullish thing obviously from the first to second of Jan and then I guess like this was just a Trader Le move and all the Traders were like okay there's no follow through really here we're still in this kind of like sideways range for BTC you know let let's kind of like take the risk off and then obviously there was a lot of Leverage built up that got that got liquidated in that process now if you if you go to the daily chart on BTC you can actually see that it's been in this range for a little while now I mean for maybe over a month it's been in this kind of range here after having that massive move I mean what what did it do it went from basically in the 13th of October it went from what is it 206 Kish all the way up

to about 45k which is a 70% move on BTC which is obviously huge given btc's market cap but then since then it's kind of peeded out at 45k and gone sideways again and as I've mentioned to you guys before in Bull markets BTC e any asset can go sideways for quite a while before continuing up again because it it hits these these kind of resistance levels if you're into kind of um looking at charts and stuff like that it hits these resistant resistance levels where people basically say okay well you know BTC is safe around here I can kind of scale out of it and go chase some other things while BTC go sideways for a bit and then eventually it just starts moving up again but of course the next Milestone milestone for BTC really is I guess the alltime highs right which is technically

69,000 for BTC uh that was set in November of 2021 uh I expect that to be reached sooner rather than later maybe Q2 Q3 is is kind of my guess at this point and and I know I'm speaking a lot about BTC here when obviously like I'm all about eth and I don't even hold any BTC but it's you know it's not you can't deny that BTC is what leads the market out of of bare markets right it is the least riskiest asset from a portfolio allocation perspective it is the thing that has the narrative around the ETF right now and as I've said that's going to shift over to eth once the BTC ones are approved but that's kind of what we've seen here we've seen BTC lead and then everything pump around it I mean even eth people like to make fun of eth

saying hasn't gone up that much ether's gone up just fine I mean yes it hasn't gone up like uh obviously like a lot of the other things out there because simply its market cap is a lot is a lot um a lot bigger and also it doesn't have the same Catalyst that BTC had so it did lag BTC a bit but if you take E's move from the bottom um and you go like the bottom what was it a long time ago now June 2022 to today eats up 150% right and then you go uh BTC from its bottom uh to today its bottom was a in November of 2022 yeah to today it's up around 176% so really I mean it's only up a little bit more than than eth from its from its bottom right so I think that e just bottomed earlier which means that

it recovered earlier than BTC did but really now the question on everyone's mind is okay once the BTC ETFs are approved and you know if it isn't a sell the news event or and BTC just continues sideways are people now going to go into eth in anticipation of that e spot ETF or that spot eth ETF and that's the open question that no one knows the answer to I think that if you're a Trader you're obviously playing that but if you're an investor you're just buying the assets that you like at the end of the day obviously I continue to buy eth I know a lot of you continue to buy eth and you have a long-term uh mindset you're not trying kind of trying to to trade trade eth or trade around eth I know you know a lot of you would be doing the thing of

trading your eth for other Assets in order to stack more eth and that's totally fine there's nothing wrong with that I mean I used to do that all the time especially during uh defi summer back in the day in my my D gen days as I like to call them uh but you obviously there's increased risk there so I didn't do it with my with my kind of whole stack I did it with a part of my stack and I've always said that if you wanted to play the DJ game what you do is you take 10% of your stack and that is your DJ stack and you're happy I mean you're not happy but you're like you're not you're not upset if you lose that because that and you lose all of that from Bad trades or getting liquidated if you want to take on Leverage and stuff

because it's only 10% of your overall portfolio uh but I guess like what hurts people or what um what what uh what what gets people kind of um ruined is that they keep uh increasing that percentage you know let's say you start with 10% and you you start winning and you're like okay well now I'm winning and now this 10% is more like 20% of my portfolio because it's worth more but instead of going back into eth or back into like stable coins and taking profits people double down and they start trading out of the other assets that are lagging into these assets and then they start overtrading and that's how you get yourself wrecked along with leverage of course but also there's other ways to to make money as well through airdrop farming as I've mentioned before the airdrop hunting channel in the de grade Discord channel

is very very active so if you're interested in farming air drops there is a lot of alpha shared in there honestly so many projects get shared in there that I've never heard of before but people obviously want to farm it for for an airdrop you should definitely join the dead grade Discord Channel if you want to check out that that channel uh in in there uh people are very helpful as well but yeah I mean there's so many different ways to make money in this ecosystem uh and I think that you really need to just think about risk at all times really and you know you can use 10% as a d stack or maybe even 20% whatever you're comfortable with losing basically I mean maybe you're comfortable with losing half of your portfolio if it means that you have a 10% chance of you know tripling it or

something like that from or tripling your e stack or something I know people do that all the time but it really depends on again your risk appetite but also your experience level because the more experienced people are going to know what to look for but like the complete noobs they're not going to know that they have no experience in the market so they're just going to get pump and dumped on I mean that was me in my first cycle in crypto there was a lot of people in in their first cycle and to be honest you probably need that to learn because a lot of people uh they don't believe that that that can happen to them because they're like oh yeah I already know I know all the tricks but it's not it's not just about knowing the tricks is knowing how to handle them and

knowing how to handle your emotions that's what makes a good investor that's what makes a good Trader it's always about keeping your emotions in check like for example you could invest in something and you could have like a really really strong thesis on it and it could be lagging the whole market and then you think to yourself you know maybe I was wrong about my thesis maybe I should trade out of this and I know maybe some of you out there are thinking about uh about eth like this because eth has I mean as I said I don't think eth has necessarily lag the market but eth has maybe not performed as well as you thought it would but the problem is is that maybe it does over the next few months maybe e finally uh kind of starts performing and if you trade out of it

into something else then you're just you're just chasing right so I think that it it comes down to discipline it comes down to controlling your emotions and it comes down to your risk appetite and I think everyone's different in that regard there's not going to be uh you know one size fits all there and it definitely depends on what you're trying to get out of crypto are you trying to preserve your wealth uh by buying you know eth and BTC as stores of value and you don't care you know if they if they go up quickly or not or are you trying to increase your wealth and if you're trying to increase your wealth exponentially maybe you're only starting with a small amount of money and you want to increase that you want a 10x that you want 100x that well then obviously you need to take more risk

because you're not getting a 10x from BTC or eth anytime soon uh you know a 10x on BTC would be $430,000 BTC a 10x on eth would be a $22,000 eth right as bullish as I am on eth and I think that it can get to that point one day it's not going to happen anytime soon so when you go down the risk curve and you're like okay here's this thing that's got a $100 million market cap if it 10x is it's only a billion dollar market cap which which relative to other things in crypto is quite small then you take that risk but but picking the right one and then holding it for the 10x is extremely difficult like I'm not trying to to downplay the difficulty here but that's the kind of game different games people play in in the markets here but anyway

I've spent enough uh time talking about the markets but I just figured it was worth mentioning given that we are on the cusp of the ETFs being approved I'm hearing possibly Friday we're going to get news that the ETFs are approved which is tomorrow uh but we'll see I mean the deadline's next week so it doesn't matter if it's Friday or you know next week honestly I I I I I think that the market is just just ready and and people are just like ready to get get this over and done with because it's just been so long now and it feels like it's been forever so yeah that's going to happen um and also I felt like because of this dump that we saw people were you know doubting the bull Mark they like oh is that it is that over did we you know did we dig too deep uh and

and we kind of like struck the Bell Rog like I use that um analogy maybe I confuse people then I use that analogy with my friends when I talk about the markets I'm like sometimes people just dig too deep like the in L of the Rings and they hit the Bell Rog and then the Bell Rog is like this monster that dumps the market and and and Wrecks All The Leverage because people got too greedy right that's how I I kind of imagine it in my head when people when people talk about these sorts of stuff uh but yeah maybe maybe a silly analogy there but I love Lord of the Rings uh if that isn't obvious but anyway moving on from the market stuff there is a bunch of other things to get through I mean not too many things to get through that's why I

figured it was worth talking about the market uh Market updates because there's not that many updates today uh it was a bit of a slow news day obviously people are still uh on holidays I guess it is still the holiday period but let's kick it off with a announcement from uh Devcon or I guess like from Diva which is the Devcon unicorn uh Devcon is the biggest ethereum conference it is the only ethereum conference run by the ethereum foundation but it is the biggest and we have Devcon 7 happening this year between November 12th and 15th we already knew that but what we didn't know was the location which was announced along with a bunch of other details in this blog post now of course if you haven't seen this yet the location is Bangkok in Thailand so they did tease that it would be in Southeast

Asia people were speculating you know Vietnam or or Singapore or something like that but they have chosen Bangkok uh in Thailand here for that now I am like 90 95% certain I'll be going to this given that it is relatively close to where I am and given that Devcon is the biggest ethereum conference and I mean uh if you're going to go to any Conference during the year it would be Devcon honestly um and I I I mean like by November we could be in the you know Raging Bull market so I can imagine it's going to be very very busy as well which is cool because you get to meet a lot of people um but yeah I've never been to to Bangkok myself I don't know if any of you have maybe you can share your experience of what the cities like in

the um in the dailyware Discord Channel or in the YouTube comments but I'm excited to go because I mean I definitely love traveling I haven't traveled nearly enough I definitely wanted to do more traveling and at the end of the day like if I can travel and do ethereum conferences at the same time that makes it uh that makes it really really awesome obviously for me now also the in this blog post the ethereum foundation details that the reason they picked these locations is because they try to be as inclusive as possible like at the end of the day we know that crypto is dominated a lot by the US market and I guess like by the the European market as well but there are a lot of developing uh markets around the world uh and maybe more developed markets but places where that you you

otherwise wouldn't have thought of like Bangkok in Thailand for example right or or other other similar places like that that have these burgeoning crypto ecosystems that uh deserve to have conferences in their cities in order to be seen and heard in order to get amongst that culture in order to get those people more involved with the ethereum ecosystem and community so that they don't feel disconnected from it because at the end of the day and I always say this I think I think I've said this like hundreds of times on the refills over the years crypto not just ethereum but crypto is a global movement it it should not be limited to the US or Europe or you know or any particular geography uh or a geographic location I should say it should be everywhere around the world because this technology that we're building I mean at the end of

the day we're trying to build it for people that don't have access to it I think that the original I guess like U um values of crypto of basically allowing people to uh essentially be their own bank sort of thing and allowing them to do it cheaply allowing them to access a financial infrastructure that they that they otherwise wouldn't have access to that is the real value prop here now of course that it's it's taken a while to get there and it's still going to take a few years to get to that point because of things like transaction costs and ux hurdles and also regulatory hurdles as well unfortunately like if you want to on get people to on board into crypto they have to do it via Fiat and in order to interact with the Fiat system you have to go through you know the

governments that manage that and you have to go through all the regulatory bodies and it becomes a pretty it becomes like a cluster basically right with lack of a better term there um but the the real end goal and this isn't going to happen anytime soon I think it will happen maybe in the next decade or so but the real end goal is for crypto to be its own native economy where you don't have to on board from Fiat to crypto right you don't have to trade your uh US dollars for a Us doll stable coin you don't have to trade your US dollars or any other kind of fear that you have for eth or BTC it basically just becomes a circular economy where you get paid in stable coins or you get paid in in eth or you get paid in BTC or something like that

right that that's has always been the original goal I think of these things is that to get paid in that crypto native money so that you could just exist entirely outside of the existing system and you weren't beholden to this existing system which honestly is uh is is really a broken not just from an an efficiency perspective but also from an exclusionary perspective where there's so many people that are excluded from these Financial systems uh for one reason or another and that's genuinely what we tried to improve upon in crypto you know and that's what I was talking about yesterday when I mentioned bal's blog post about making ethereum Cipher Punk again um you know we kind of stray away from those ideals a lot because of the fact that crypto is so speculative and the casino side of it just gets all the attention but at the end of the day

if we play our cards right if we develop this technology right we can get it to the point where it becomes a circular economy where transaction costs are negligible and we can service the world in a really uh in a really easy to use fashion and give value to people in in places that are not like the us that are not places in Western uh Europe where they do have access to all this infrastructure even though it's inefficient they still have access to it right we're really targeting basically over more than half of the world at least that doesn't have access to this sort sorts of stuff and trying to help them uh there but anyway enough of a rant about that you can go check out the details about Devcon for yourself as I said I'm pretty much like a 90% chance of being there so I'm hoping to see a

lot of of you there but there are other conferences that I'm going to during the year anyway uh eth Global in Sydney I'll definitely be there in May I'm not going to eth Denver this year uh this year but I will be at most likely be at permissionless uh in Salt Lake City in Utah which is run by bankless and blockworks uh other ones I don't know if I'm going to go to but I will keep you guys posted on that but anyway go check out these blog post I'll link it in the YouTube description below for you to do so all right so you guys have probably heard a lot about timing games recently in the context of meev and I did mention it on the ref I think a few weeks ago and this is basically the games that validators play in order or I guess like

me extractors uh not not the validators themselves but like the me extractors uh play in order to uh essentially um oh I guess Val maybe I should step back yeah the M extractors and the validators together play in order to increase the the the profitability of a block because the later that you submit your block to be proposed on the network uh the more potential profit that you have from these timing games now it is a complex thing when it comes to uh me it is one of the more complex features of M it's not something that I like totally understand I'm not going to say I'm an expert on or anything like that but the reason I bring it up today is because Tony has another one of his amazing websites out today uh called timing.

picks so on this website you can actually track uh different charts and different stats around this if you if you kind of look here you can see what the uh Miss slots look like for each um staking provider you can actually select them up here and the bid selected by that seconding provider so the default right now is coinbase you can actually see the Miss slots percentage has has has gone up here because of these timing games and the bid selected by by coinbase has has kind of changed here and this basically started happening in December because uh you had to play the game now because I think PTP dorg uh kicked this off and the other sing providers were like okay well we're losing money now so we have to play this game so if you actually select the other ones like uh Lio here you can see uh

it's kind of not changed that much honestly ly uh but it kind of like has on the on the bid selected uh but you can select anything you can select largest pools Kraken rocker pool I mean I'm just selecting them on my screen here for those of you who can't see it and you can kind of see how different um how different things have changed here and around timing games but if you want to learn more about timing games you can read tldr on Tony's website which I might read out U for you actually uh it says here timing g games involve validators delaying their block proposals to increase their me rewards this tactic gives Builders extra time to enhance their block leading to more me for the validator as a result those entities engaging in such games might be able to offer higher apis attracting

more stakers and users this site aims to keep you informed at the latest in timing games and how they're affecting the consensus layer so that's what I meant when I said before that it involves both the um block Builders and the validators because the validators are doing the timing games they're the ones that are waiting to that are delaying their block proposals but uh by doing that the me uh block Builders or the block Builders I should say uh what they get to do is essentially have a more profitable block that they submit they have more time to build their block and the validator gets more more profit out of that so it really kind of is a i i show to it a symbiotic relationship but it kind of is I think it's not I want to be clear here this is not something that's necessarily good for

the network uh to be honest it's it's definitely another negative externality from me extraction but it is happening and it does involve both the meev block Builders as well as the the validators here and not all validators are engaging in this I mean definitely I wouldn't expect solo sters to be engaging in this because it doesn't really make much sense for them for them to do that and soloers are not not kind of like a monolithic entity or anything you can see here it hasn't really changed actually on the charts for for solo stakers but it is no surprise to me that that coinbase is is doing it and other big providers are doing it I mean if you look at pp. org which which kicked this off you can see kind of here this is the bid selected uh kind of uh graph here

the seconds in slot so the more the what this chart shows is when the bids are selected in the slot and you can see here that in PT p.org started this pretty early in November you can see that the the bids got get selected later in the slot uh whereas for coinbase it was basically pretty pretty standard um and and I guess like pretty random here but then here you can see that the bids are selected basically in the I guess like um the longest amount of time possible and that has actually resulted in Miss slots for Queen base which means they're missing blocks so yeah I mean it remains to be seen if that it becomes profitable strategy over the longterm missing blocks for uh in order to basically increase your chances of getting a more profitable block but we'll have to see how that shakes out

there now there is another post here from terce Terren which does which he um published on Twitter where he said my latest post offers an early analysis of validator timing strategies post EIP 4844 it explores potential interactions between validators and Builders both as independent and vertically integrated actors this topic is still evolving but worth exploring further so if you're interested in validated timing games in the context of EIP 4844 and how that would affect it this is definitely the post for you it is a bit technical but still very very interesting stuff here from Terren I think it's great that they're already thinking about this because timing games isn't something new it's been around for a while and it's and people have been aware of this for a while and it's been an active kind of research topic for a while but what's

new is a lot of the staking service providers engaging in these timing games now in order to give themselves more profitable blocks because if they don't engage in them the other the other um staking providers will and the other staking providers will take the more profitable blocks and make more make more yield and then potentially get more stake so it becomes a kind of thing of you have to play the game like the the the winning move is to play basically you you have to play the the losing move is not to play uh and you're forced into it which again this is this is basically the the common theme of meev you're forced into it basically because let's for example say that you don't run me boost at all as a staking service provider you're leaving so much uh um so much yield on the table that other

providers are going to take and then your apy that you can offer looks really bad compared to these other staking providers and that means you're not going to get stake and these other providers will which means that your business is suffering and this is a direct result of of me boost right it's a direct result of meev generally but as I said meev forces actors into doing the most financially um uh I guess like uh relevant thing or financially uh kind of logical thing even if there is an expense to network stability or network uh kind of um fairness sort of thing so that's that's why is very hard to I mean I wouldn't say fix but it's very hard to reason about and very hard to come up with solutions that don't actually introduce more negative externalities

into the network because if you do that then it just becomes a cat and mouse game and M really has been a cat and mouse game generally but I think that the end State needs to be something that where I mean m still exists but a lot of the negative externalities are basically minimized that is the ideal end State and that is the whole point of all the M research all the m development and and and potential fixers going into the network but we'll have to see how all of that plays out over the longer term but anyway I'll link all this in the YouTube description below for you to check out all right so I remember I talked about azna on the refill quite a while ago um because it was an interesting defi protocol that I came across and ended up investing in just a disclosure

that I'm an investor in them where they're trying to do an essentially fully decentralized lending protocol or peer-to-peer lending protocol without things like Oracle pools or any other dependencies so they're trying to be fully on chain basically trying to do what Unis swop did but for like a lending protocol uh now unfortunately they had a bumpy start where essentially they had a security issue with AA when they deployed it to mainnet and they had to kind of pause the contracts and basically it's been paused for for a little while now but they are relaunching soon and Greg uh the the founder of ajna H one of the founders of asna put together a great tweet detailing all about the history of azna how it came to be uh where it is today and you know where and and the fact that it's going to be relaunching next week

on on ethereum Main and other layers here so if you wanted to learn all about that you can go read this tweet here from uh from Greg but again as I said like this is something that I consider to be very Innovative within the defi space and I'm pretty excited about it just sad that they had a bumpy launch basically but that can happen to any project obviously with with any kind of security flaws or bugs in in the contracts and the code uh but essentially I'm looking forward to seeing this uh go live next week hopefully without any more security issues so that we can see this kind of play out and see if it actually is is able to live up to all of its promises but yeah you can go read the Tweet I'll link in the YouTube description below for you to do

so right finally here we have something new from Ai and for those of you who don't know who AI is he is the founder or one of the founders of gitcoin uh and now does I mean and basically the king of public goods as well I should say uh but today he has announced something called the regen learnings doxyz research Group which is a group of researchers learning in public public plus publishing insights to advance the cause of web 3 public goods so if you're a public goods maximalist or Maxi like I am this is something that you should definitely bookmark and keep an eye on because it will get you up to speed on the bleeding edge of public goods funding all of the different people that are involved with it all the different initiatives that are going on and the re and the research basically at the

bleeding edge of of public goods funding here and there are a bunch of links in this post which I'll link in the YouTube description below there's also a telegram group group you can join which is here will be in the blog post that I that I kind of Link here and there's also a more detailed post on the gitcoin governance Forum basically covering exactly what this is and how how a wiie kind of imagines it going forward and there's kind of a work in progress backlog as well here now you guys know that I am a public goods Maxi and I am obviously someone who enjoys uh the fact that we have so many public goods uh initiatives now you know we have gitcoin we have optimism's retroactive public goods funding we have the protocol Guild and a bunch of other initiatives out

there but I think that we're at the point now where essentially we have all these initiatives but we really want to research how to maximize the impact because there's been a lot of De debate especially around optimism's retroactive public goods funding which if you look at the optimism price today the op price today and look at the amount of tokens that are being given out as part of round three which finished a couple of weeks ago it is over $100 million that it's being given out to I think about 500 projects that were eligible for for Rewards and that is a lot of money right and that's not just projects it's individuals as well myself I'm I'm one of the individuals on there but that is a lot of money and now obviously people have been debating about which projects are actually public goods which projects

deserve that funding and some of the projects on there actually had massive VC funding so so they should they be getting anything and I did speak about this a few weeks ago when uh it became like a thing that people on crypto Twitter were talking about but my general view is that we we're not going to get to an answer or something that's workable unless we put in the work to research all of the different Avenues and all the different viewpoints on these things and where people are coming from and also creating a standard around it too because on retroactive public goods funding it is an opt-in thing where essentially you have to disclose if you a VC funded you disclose if you've had previous funding but at the end of the day people can lie about this or or or basically just lie by Mission

by essentially not including the fact that they're VC funded and then a lot of the people that are voting like the badge holders maybe they don't aren't aware of this and maybe they they don't do the research because there's so many projects in that they have to that they have to go over that it becomes hard for them to research into all of it and maybe they say okay well I like this project because uh you know I get a lot of value out of this I'm just going to I'm going to vote for them um and not know that these this project actually has massive VC funding but then the question becomes that should these projects not get money just because they they had VC funding I mean maybe they took VC money because they needed it because without it they wouldn't be able

to even build their project to begin with right because public goods funding um is not long-term sustainable yet I would say I think that the only long-term sustainable one that I've seen so far that works at some sort of scale is probably the protocol Guild but the protocol Guild is very specific it's not a general thing right it's only for ethereum cevs and researchers um and and and so the the the the scope of it is very narrow whereas if you blow out the scope to basically cover every public good like gitcoin and optimism does uh with the retroactive public goods funding then you run into these issues basically so I think it definitely is an open question still it definitely is an open discussion and if you want to be involved with those those those discussions you should definitely go check out regen learnings doxyz I'll

link all of that in the YouTube description below but I think that's going to be it for today so thank everyone for listening and watching be sure to subscribe to the channel if you haven't yet give it a thumbs up subscribe to newsletter join the Discord Channel and I'll catch you all tomorrow thanks everyone