Market meltdown, SEC targets Coinbase and more - The Daily Gwei Refuel #204 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daily gray refuel where recap the latest news in the ethereum ecosystem i'm your host anthony sosano and today's 8th of september 2021 all right everyone let's get into it so a bit of a kind of market turmoil overnight last kind of like 24 hours we had a bit of a sell-off um eth went from i think about 3800 or 3900 to 3000 and just below 3000 on some exchanges it seemed to have been a mass deleveraging event because there was just too much leverage in the system uh there was just a massive self massive liquidations um and kind of i think the the liquidations were i think as big as what the may crash that we saw or maybe almost as big so yeah it was it was very similar i kind of felt him i was sitting here at

my computer watching it kind of like fall and i was like wow okay this is starting to feel like what it felt like in may and then it went to 3k and it bounced pretty strongly off that and i was like okay well you know that should be the bottom now and it was and oh well i mean it is for now let's not kind of like say it's going to be the bottom for you know for going forward i don't know what's going to happen going forward but i i don't really have any concerns about this i don't feel like a pit in my stomach i'm not really upset over this at all like i bought more eighth at around 3200 i think i bought um which was nice but uh generally yeah i mean this was just like i mean it was a little bit kind of like

uh i don't think people were was was shocked by it because over the past few days there have been people kind of like warning about this this high leverage in the system um and they're kind of like worrying about all the froth going on i even put out my thread yesterday which i went over in the refill about all the froth going on on um like a lot of the crap that was pumping and that's usually a signal uh or at least a sign of like a short short term kind of local type where everything kind of dumps together because it's just too much kind of froth in the system we wash that out and long term it just ends up being healthy so general like my general thoughts on on that is just basically i'm not worried about kind of what happened i don't

think that we're going into a bear market or whatever um and i hope none of you got liquidated or anything like that i mean i always advise people against using leverage uh leverage is very very dangerous i think a lot of people over a long enough time frame at least most people will give back all the profits that they make from leveraged trading so i would suggest people not not not um not to get involved with that um you know unless you know what you're doing like at the end of the day like i can't tell you what you what to do and what not to do um and and and you know i i've obviously kind of like done some leverage trading in the past as well but uh not anything of size or anything like that it's more just to kind of like

i don't know get my feet wet with it especially with diy dx on layer 2 i put like 500 in there and i went like i think i went like three and a half x long on eighth because you had to do some trading on there to get the airdrop tokens which which is coming out today i'll talk about that um in a bit but essentially that's all i had kind of like done and then i think maybe a few years ago i had done some other stuff with it but generally i stay away from leverage and i think last night is the main reason why right like you could think oh yeah okay it's going to break all-time high like i'm going to leverage our piano and go along uh and then you can get completely wiped out and then potentially you could lose like

a large chunk of your stash just because you got too greedy so there's that aspect to consider as well um but on the kind of like note about i guess like sell-offs and just general kind of like activity happening on the ethereum chain during uh times of volatility because activity always goes up this tweet came uh that i kind of like quote tweeted um from august 2nd that i put out where i said once erp-1559 is implemented every time someone sells ether via a dex it will be bullish for eth why because every dex trade on layer one has to pay gas fees in eighth and most of those fees these fees will be burned uh and we invented bullish selling checkmate bears and it played out exactly like this because pretty much like all i think guay went to like 400 or 500 or

something like that during kind of like the the heart of the turmoil for a couple of hours and we were burning a lot of eight during that that period of time which which i'll go over in a sec um but it's just funny how like just i you know i said this on august 2nd and seeing it play out i was kind of like okay well you know back then it was a little bit of a meme um but with some truth behind it and now more people kind of like seeing this and being like okay well yeah this is bullish selling and i mean just speaking of the fees that were burned six point six million dollars worth of eath was burned in a single hour and that's almost one percent of all eight that has ever been burned in the last month just in the last hour

which is crazy right six 6.6 million dollars absolutely insane and and there's another tweet that the eth burn account put out here basically putting that in context saying that the issuance for the hour was 605 eighth which means that we had like 1968 burned which is a net change of one thousand uh minus one thousand three hundred and fifty fifth uh fifty-five eighth for an annualized uh kind of like percentage here of ten percent ten point one five percent um so yeah i mean what ultra like that that's like a massive ultrasound hour right that's huge so these kind of things is just always funny to me where you kind of like come up with these memes that kind of like turn into truth uh and you know it wasn't just this like while i was sleeping there was some nft

drops as well and you know we're burning just so much eat it's actually just crazy 240 000 ethan before i started recording last time i kind of checked there uh which is an insane amount of money i'm pretty sure it should be up to close to a billion dollars now depending on the price of eighth i guess um yeah 240 000 times yeah yeah it could be could be close to that if the price was to go up a bit more we've earned a bit more ether so and that's only in the first month i mean what september 8th today so that's just a month and a bit since 1559 went live absolutely incredible amount of eighth being burned here but yeah uh just hopefully all you guys are okay after the kind of like a bit of a sell-off last night i don't think that there's

anything uh to worry about going forward i think that we're either gonna do a bit of a slow bleed down maybe to three a keg 3k again or we're just going to continue up from here i'm not sure short-term stuff's always hard to tell but long-term nothing's fundamentally changed so guys like come on there's no reason to be bearish right now we're still uh on the path of of kind of like growing and adopting ethereum there's still a lot of stuff happening uh i haven't noticed any kind of like activity kind of falling off yet maybe it will over the coming weeks but i doubt it uh summer's kind of like over for the northern hemisphere or at least getting close to being over so you know what else are people going to do they're going to be at home on their computers trading crypto i suspect so yeah we're

gonna have to see how that plays out for sure all right so the second biggest piece of i guess news from the last 24 hours was this thread that brian armstrong the co-founder and ceo of coinbase put out and he started this thread with by saying some really sketchy behavior coming out of the sec recently story time now i'm not going to read through the whole thread but basically what's happening is that the they went and asked the sec for kind of like uh i guess like their opinions or kind of like feedback uh on the kind of new lend product that we're going to be offering where you could basically earn four percent apy via coinbase uh by using usdc now in response to this what the sec has done is that they've basically said that they're going to pursue legal

action against coinbase for this and try there was some kind of rumors that they're going to try and classify usdc as a security and just like a bunch of rubbish going on here and brian's thread grows goes through this in detail and basically goes through kind of like how they've been approaching it and trying to open a dialogue and how the sec just really has been stonewalling them and kind of like doing all this really weird stuff so you can read this it'll be in the youtube description but i'm sure you've probably read it already but i wrote the newsletter about this today and i want to kind of expand on it on the refuel here i am not shy about how bearish i am on financial regulations and regulatory bodies in general i think that they generally just exist to protect the incumbents protect

the or the people that are already in power the institutions that are already in power and and kind of keep them in their place and any kind of threats to that uh are something that needs to be shot down now obviously crypto and d5 are a massive threat to all of that and i think we're seeing the regulators move now they've they did it with unit swap labs i'm sure they're doing it with a bunch of other d5 protocols that are based in the us um and now you know they're going after us-based exchanges as well for lack of a kind of like better uh i guess thing to say here i don't want to go on too much of a rant but this is total like this really is total crap at the end of the day the sec has become uh pretty much i mean maybe

always was but i never really paid attention to them too closely they are pretty much like the laughing stock now of crypto they are not a regulator that has anyone anyone's interests in mind in my view they are not protecting investors by doing this they are essentially just protecting the incumbents and uh for that they um are gonna face stiff kind of like i guess uh pushback from the crypto community because at the end of the day this entire ecosystem is built upon disrupting the incumbents so and from that point of view the scc's kind of actions especially actions like this which seem very misguided very kind of like short-term oriented it's just going to push innovation overseas the u.s if it continues down this path is quite literally going to lose out on truly if the billion hundreds of billions if not

trillions of economic activity in the coming kind of like years around crypto and that's going to be a very very big blow to the u.s economy i believe um but you know i'm just one guy saying this they're not gonna they're not gonna listen to me but they will listen to a collective community um and they will kind of and especially politicians will as well we had the whole stuff with the infrastructure bill where these politicians essentially kind of i guess came to realize that the crypto community isn't just some niche small thing anymore it is a massive global community and uh we have a lot of people kind of like fighting for us a lot of people well-funded people as well fighting for us and a lot of big companies around that as well like such as coinbase and kraken and gemini and stuff like that and i think crypto will

become like a single issue kind of um thing that people vote on within the us so these politicians some of them at least are wising up to this and will be appealing to these kinds of people to get their votes and they'll be fighting for them within kind of like congress and stuff like that that's just one angle of it the other angle is of course we can do lobbying efforts as well um you know lobbying is just a fancy way of saying bribing so we can just bribe these politicians and say hey we're going to pay you this money to do this for us like thanks that's exactly how it works right now and i don't think that's going to change just because this is crypto um and and just generally though i guess like the the long term goal here is for crypto to basically just disrupt

everything and not have to kind of like work around these regulators um we just work through them basically we just say you know you can't regulate us we're a decentralized ecosystem we're going to move to wherever the is the most favorable because crypto is an incredibly mobile ecosystem you can work on crypto from wherever you are in the world and you don't even have to register a company you can create a dow issue a token and just pay yourself out from the token from this global community and then as your dow grows as your token kind of like grows in value you know you're kind of like um your contributions are more valued over time and you can you know you can get you can recruit people all this sort of stuff so really we don't need these kind of like uh we don't need this anymore we

don't need these regulators we don't need the real world um to register us as like a corporation or whatever we are basically going to just disrupt all of that and i think that's what scares them the most and i think that there are some smart people within these kind of like regular uh regulatory bodies who see this and are like well i can't let this happen because you know this is going to basically disrupt my my donors my other people who pay me to do this the people who kind of keep me in power um and this is kind of like a vested interest that i have so i'm gonna fight against this we as i said we saw this with the treasury around the infrastructure bill now we're seeing this with the sec and what really gets me about the sec is that they have so

many like literally hundreds if not thousands of rug pools scams ponzis that they could go after but instead they've chosen to go after us-based companies that are legitimate companies that have provided a lot of value that no one's complained about have you seen anyone complaining about uni swap you know the most thing that you could kind of like i guess argue is a complaint is people it's like people like bitcoin maximalist saying that uni swap is uh is a scam or a shady because it's on ethereum but like they're just crazy no one listens to them so in terms of legitimate complaints there hasn't been any uniswap gave their token to everyone gave like a massive free airdrop to everyone the unisop is the most beloved app on ethereum everyone uses it it just it hasn't hurt anyone no one's asking for protections from the sec and yet

they're going after them and same with coinbase i mean coinbase has some issues around kind of like freezing people's accounts because they have to because they're the the law enforcement um orders them to it from time to time or they have to do for kyc aml obligations and their customer support from what i've heard can be could be better but i think just generally i don't know i don't think people have been harmed by coinbase on a mass scale where the sec needs to hop in and basically say hey we're gonna regulate you or we're gonna essentially um you know uh bring charges against you or whatever so really it's just it's total crap and i i really have i mean i didn't have any faith in these kind of like regulators to begin with and i i think that you know i'm not even surprised that they're

doing stuff like this uh i i kind of expected it i kind of i've been saying for a while that we've entered like the geopolitical sphere as well uh and and that includes politics of all kind of like walks of life whether that be in the us or um you know politics within regulators politics within congress politics within local communities and stuff like that that's just going to be a big theme going forward but yeah really really crappy to see this i'm hoping that coinbase can succeed here in pushing back the sec because unfortunately you know coinbase is a centralized exchange they don't have the luxury of just saying oh well we're decentralized you can't shut us down we can just ignore you right uh they can't do that and we need we need people like coin people like clinton's we need companies like coinbase because they're

the front door to crypto for a lot of people and if they kind of get neutered or if something happens to usdc well that's really bad overall for the ecosystem it doesn't matter that we decentralized that would be very very bad over the short to medium term and we would have to rebuild a lot of the ecosystem if something happened there so yeah i'm gonna i guess see how this pans out over time i'm not sure how often we'll be hearing updates about this i guess like the sec move slow being a government government agency but it's funny because they move slow generally but when they want something to happen that favors themselves or their kind of um vested interests then they move faster so maybe we'll see kind of like this play out faster than um that we've seen in the past here and then a final thing i

wanted to kind of note was a tweet from eric connor here who says anthony and i and that's that's me anthony we talked about this on a recent podcast episode um but i think elected officials are extremely underestimating the influence of incoming influence incoming from the crypto community there's a gigantic power culture and wealth shift happening in that that most are ignoring and this is very very true because as i was explaining to um around the infrastructure bill i think the politicians finally realized that we're a very big community so they were like holy like we need to actually kind of like uh shift our stance here we need to go be more crypto friendly if we want to get these voters on board and stuff like that but it's not just with within power it's also in the culture and the wealth like think

about the wealth transfer that's happening right now within crypto there are a lot of people that come as like the late adopters and they've still yet to come and and the late adopters are gonna be uh the i guess like institutions and the institutions like um retirement accounts and stuff like that that have a lot of these this money all this old money in it that's gonna buy these things after they've gone a thousand ten thousand x from from their starting points and that wealth shift is insane uh uh truly like i don't think people realize how insane this bulk shift has been and how many newly minted uh kind of like millionaires there are that are young people that uh are going to fight for this crypto ecosystem until their last breath and this is the kind of like gigantic shift that's happening as eric notes here and we're going to

see it play out over the coming years but yeah i think the final thing on on this one was from chainlink god who basically quote tweeted one of brian's tweets and said this is called legally enforced racketeering um you know you re the sec refuses to publish public guidelines tell companies to work with the sec sue them after they ask for help and profit and so who's the sec protecting the consumers lol no it's a traditional rent extracting prison of our financial system i mean i couldn't put it better myself this is exactly what's happening they're not protecting consumers or investors that's always been a psyop that's always been a lie or narrative that they've told they are protecting the vested interest which are the big big institutions large institutions in the traditional finance space and they

will continue doing this for for for the time being until we get like more of a a power shift there the culture and wealth shift is happening but the power shift takes it i think longer to play out and there's a bit more of a of a kind of like a um a heavy fight there but the crypto ecosystem is ready to fight we're not just going to lay down and let the kind of like these uh bodies that we're trying to disrupt just kind of roll all over us that's not going to happen all right moving on to about something else uh for now so dydx's token is going live today might already be live by the time you've watched this it's kind of unlocking um and antonio the founder of diy dx kind of put out a highlight thread of kind of like what uh the

current state of di dx is so there's 37 a 32.7 k dy dydx holders it's a very even distribution not whale dominated which is cool to see there's been 13.8 billion dollars of total trade volume 256 million dollars of open interest and 141 million dollars of uh maker capital stake now let's not make a dow let's make as in the market make a capital stake there um so yeah and then he goes on this threat to kind of like detail more about this but yeah i mean this is going to be a big token launch i think i mean if you look at kind of like the most successful apps on ethereum uh in terms of like volumes users all that sort of stuff doa decks is right up there and they're a layer 2 protocol as well they have they're built on starquest technology they're they're not

built on layer 1 at all for their perpetuals exchange they're fully layered too and they still have uh incredible trading volumes uh you know in terms of like both 24 hour and total trade trading volumes and and kind of like rivaling their layer one counterpart which is really really awesome to see so in terms of like what the token can be valued at i'm not sure i have i uh i think i have like 1100 tokens that i got in an airdrop um coming to me uh i don't know what i'm gonna do with them i mean i might sell them if the price gets ridiculous from the get-go might hold them you know it's always funny because if the price i mean there's i think the total token supply is like uh i can't remember what the total token supply is but it's something really large so if

the price goes ridiculous if the market cap goes to like 10 billion dollars or 20 billion dollars um on day one i mean may just end up selling it but who knows like it's always hard to tell with these with these things because at the end of the day diy dx has this insane growth and they're just getting started like this is really early days for them uh they're gonna i guess like uh have uh much much bigger growth the perpetuals is a massive market they're taking more and more volume from the centralized space as well so who knows i don't really have an opinion on the value of dydx going forward uh what it's going to kind of open or anything like that but i mean my dydx tokens are at cecil.edu so people can just see when i sell them if i sell

them like on you know on day one or whatever um i probably just would just put it back into eighth anyway uh but it doesn't mean that i'm bullish or bearish it's more so just kind of like taking free money off the table and also taxes because i owe kind of like taxes on that because it's considered income air drops are considered income in australia um and i think the co you know it's funny though the cos this is man this is getting into the tax stuff now but it's funny because like i got my diy dx tokens when the value of the x was zero so technically is my cost base is zero i don't know i'm going to talk to my accountant about that um but i mean tax is always a headache when it comes to this sort of stuff but anyway

uh i don't know what's what kind of like i'm going to do there i don't know what people are going to do i'm sure it's going to be a volatile opening here and i'm sure it's going to get a day one listing on like coinbase i don't know day one or kind of like very shortly after day one because coinbase is an investor in dydx and um antonio is actually coinbase alumni one of the first employees there as well so i would and there's like i mean a lot of investors in in dydx that uh kind of like probably poked coinbase and be like hey you need you need to list this so i wouldn't be surprised to see that but who cares about the centralized exchange listing it'll have incredible kind of like liquidity and volumes on decentralized exchanges anyway and probably on the diy

decks exchange itself so yeah it's going to be interesting to see how that launches today um and speaking of layer 2 optimism over the last 24 hours did 450 000 worth of fee revenue which is insane you can see on the chart here the growth i mean that's an insane amount i mean that's almost as much i mean that that's most more fee kind of like revenue than i guess like a lot of protocols out there and now you know some people are complaining about this saying oh my god the fees on optimism uh are kind of like really high already and i explained all this yesterday on the refill i'm not going to go through it again but essentially optimism currently has transaction limits and there's more transactions that happen the lower the fees for everyone but only once those transaction limits are kind of like

much higher or kind of like removed completely so for now you know on optimism because the market volatility happened yesterday people were willing to pay whatever to do arbitrage transactions between you know uni swap and and kind of like other exchanges or other kind of pairs and stuff like that the synthetics and and like lyra and stuff happening on there uh but you know it was just really cool to see that optimism is already kind of getting them as much revenue and one thing that i should highlight about this as well is that optimism has said that all of the uh the kind of like fee revenue that they make uh that goes to their centralized sequencer uh all of the profit from that so not not the total kind of fear revenue because they have cost obviously they have to post to layer one for batching and they also

have costs of running the kind of like software and hardware and stuff like that but essentially they promised to give all profits to public goods so they could end up having tens of millions of dollars uh by the time they kind of like uh pay that out uh just from these fee revenue alone which is incredible right like that's really really cool that they can give this to public goods funding and you know they can split it between things like git coin and maybe coin center and other sort of stuff like that so it's really cool to see that but yeah i guess on the on the free revenue side of things the the thing with layer twos is that the cumulative or kind of like i guess total aggregate fee revenue can be really high while the individual transaction fees can still be really low

because if you have you know i think optimism and arbitrary can theoretically do what four and a half thousand transactions per second uh or something like that or maybe maybe maybe that's too high i haven't checked the exact numbers here but let's just say for simplicity um it's like 3 000 transactions per second that's per second right like so per day i just i can't even do the math in my head that quick but anyway i think it would be 180 000 transactions if it was at capacity it would be 180 000 transactions per minute minutes right like this is the scalability that we're kind of talking about here and then you know per hour that's obviously you know 180 000 times 60 that's many many millions and then per day you're getting into like the tens of millions territory of tr of

transactions per day probably like hundreds of millions i don't know maybe i'm doing my math wrong there but if each of those transactions are paying like 10 cents in fees well that's still 10 million dollars a fee revenue if it's 100 million transactions or for the day that's still ten million dollars of fear in you for the layer two so in aggregate they're tr that's that's really cool but um for each individual they're only paying like 10 cents or something like that so that's always something that good to keep in mind as well and speaking of optimism uh there is kind of like a forum post here from calvin fickner who works at at optimism he's taking on an evm expert in training as part of the ethernet dao so basically if you are someone that wants to get involved uh i guess like with

optimism with ethereum with the evm outside of maybe the core protocol development stuff then definitely go check out this blog post uh because as um optimism says here if selected you'll learn all about solidity the evm and what makes ethereum tick under the hood you'll know ethereum like the back of your hand if you're a software engineer looking to deep dive into the ether you should go apply and i'll link this in the youtube description you can go apply uh i think this is a really great initiative we need more people kind of like doing core protocol stuff at both layer one and layer two so hop protocol is kind of like asking which networks and tokens they should add next to their bridge here so you can see they currently support polygons pos chain xdi optimism uh with arbitrim coming soon and another one

coming uh is coming soon here redacted and they have support for usdt usdc matic and ethan dyer coming soon as well so i've discussed kind of like the bridges before and how i've kind of said that i think that these bridges should really just focus on supporting i guess things like the stable coins and eth and maybe even wrapped bitcoin just like the most liquid things on ethereum layer one and then kind of go out and go out the long tail on it because bootstrapping liquidity for those critical pairs is is um i guess like very very important and then if people want to trade between things on layer twos they can they can just use unisop or sushi swap or whatever on the layer two and then bridge out um using kind of like these stable coins and i did mention at the time when i was talking about this that

unfortunately these kind of things have tax implications as well so i'm not exactly sure how that would benefit each individual person and it really does depend on the individuals at the end of the day but yeah if you want to kind of like go reply to this tweet for hot protocol and let them know which networks and tokens you would love to see next then you can go either reply to this tweet or go to hop feedback here um this will be linked of course and kind of give your feedback there all right so ta last up here we have taken's theorem with a really great little chart here showing the statistical statistical causal evidence that nfts are strongly moving the needle when it comes to gas prices so this was a case study done on the 2nd of september you can see the open c

subset nfts is time t base fee at t plus 1 granger causality test on deltas p is less than 0.003 i'm not even going to pretend to know what that means but i just read it out anyway um which and i mean taking this all together and it accounts for a 42 variation in base fee so essentially in plain english this is validating the thesis and the hypothesis that kind of like myself and a few other people in the ethereum ecosystem has had that nfts are what's driving the gas fees higher at least the base fee higher over time and i mean all the evidence is pointing to that all the on-chain evidence all the heuristic evidence all the kind of like social evidence there's no doubt in my mind that's what's caused

it so if you see anyone saying one five five nine cause gas prices to grow higher just say no it was network activity going up because of nfts and if you've got some charts and stuff handy you can link it to them because i think that's what's most most important people to kind of like get there to get their head wrapped around but yeah cool to see just another kind of like chart validating this thesis here and i guess like on the topic of fees as well there's one other thing i wanted to kind of talk about here and that's on on the topic of kind of like layer one fees and people asking me you know are they ever going to go down so i can move things that are considered dust now dust assets are considered assets that cost too much to move um in fees so say you

only have like a dollar worth of ether in a wallet and you want to move that well then it might cost you five dollars to move well that doesn't make any sense to move that eighth right so let's just get stuck there it's just dust you can't really do anything with it i'm gonna be honest i don't think fees are on layer one ever gonna get to that point where you can move that that sort of stuff out so and and it's not even just a dollar i mean if you wanted to transfer an erc20 token right now i can't remember the exact cost of it maybe it's ten or twenty dollars depending on the token all those sorts of things i don't know i don't think the fees are going to get that down that far on layer one maybe they will uh eventually when we do kind

of like i guess uh increase the state uh sorry the gas limit and for a short period of time you have a window where gas fees are low again or maybe the market just goes really quiet and you have a short window but in terms of like the average gas fee and over the longer term i don't expect them to fall to a point where you can move kind of like 10 worth of a token um uh with cheaper than you know you can move it for so cheaper than it's worth uh and stuff like that so unfortunately that's the case so i mean that's just another case to just do all the stuff that you can do on layer two now because um if you just have stuff on layer two well then you're not gonna get kind of like i guess uh into this position where you can't move

things because it costs more than it's worth to move it and and this is why i've been saying for a very long time that l1 will just be the kind of like security whale chain or i mean security layer for layer two but also like a whale chain or like a chamber with just like layer two proofs and batches on it and uh everyone else will just sit on layer two that is the ethereum roadmap that is how ethereum is scaling it is painful in the short to medium term for people who are like us who are innovators and early adopters but in the long term it will work very very well for onboarding the world and keeping things decentralized and secure and on that note i'm going to end it for today so thank you everyone for listening and watching be sure to subscribe to the channel if you haven't

yet give the video a thumbs up subscribe to the newsletter join the discord channel and i'll catch you all tomorrow thanks everyone