Merge checklist done, Flashbots Relay open-sourced - The Daily Gwei Refuel #430 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the delegate refuel where i recap the latest news in the ethereum ecosystem i'm your host anthony designer and today's 18th of august 2022 all right everyone let's get into it so an interesting uh kind of uh tweet here from brian armstrong today uh got to do with i guess like the censorship stuff that we've been talking about lately and the ofac stuff uh so basically on august 15th which was three days ago left terrace here asked a question to lydo coinbase kraken stake 2 s and uh bitcoin swissia if regulators ask you to censor at the ethereum protocol level with your validators will you a compliance sensor at the protocol level or b shut down the staking service and preserve network integrity now brian armstrong obviously the ceo of coinbase

cr replied uh earlier today or i guess like my today so i think this is about 15 hours ago now and said it's a hypothetical we hopefully won't actually face but if we did we'd go with option b i think got to focus on the bigger picture there may be some better option c or a legal challenge as well that could help reach a better outcome now this is a very very strong signal as i've been talking about lately coinbase really was between a rock and a hard place it had the choice to either you know censor and kind of risk the the very real uh kind of um fact that they'll get uh socially slashed as i've been talking about lately or they can voluntarily exit their validators which is basically what brian armstrong is saying here that they would

do now there is kind of like nuance here they can voluntarily exit their validators without suffering an inactivity penalty but the thing is is that there is a cue so the way you exit your validator is that you basically you know issue kind of like the exit command so to speak and then your validator goes into an exit queue but your validator has to stay online until it is processed through the exit queue and you have exited the uh i guess like validator set the active validator set if you are in the queue and you go offline you will you will suffer from an inactivity penalty now the queue is limited each day there's only a certain number of eighth that can enter and exit staking each day or i guess like a certain number of validators that can enter and exit

the chain each other vegan chain each day uh which means that coinbase would not be able to exit all at once they would be waiting probably a month to exit all of their steak uh and that's assuming that there's no other eggs that's happening from other places right this is just assuming you know coinbase is steak so that is a nuance there but i would say that i don't think coinbase would have to shut down their validators in that case if they were being forced to sense out the protocol level they could probably just fight that even if they knew they were going to lose they could just kind of like fight that and keep it tied up a bit um so that they can just keep their validators online long enough for users or for kind of like their stake to to exit from the active validated set

without suffering those inactivity penalties which would obviously be quite high for coinbase considering the amount of eth they have at stake in the beacon chain so i'm i'm really happy that brian kind of like put this tweet out and signaled that they would rather go with option b which is shutting down the staking service to preserve network integrity but at the same time i don't really think he or coinbase has a choice um i think there's someone who replied uh suzuha and basically said that said you know i appreciate this but it's not like you have a choice you will either be an activity leaked or the community will slash you and all your customers if you try anything other than b uh so yeah i mean it's kind of like correct right like you can't censor like i mean you can like obviously technically you can but the

the point is and the point of this kind of like social signaling uh around social slashing is the fact that you don't really give them a choice it's it's a kind of like as i wrote about the newsletter yesterday mutually assured destruction where it's like the ethereum community is prepared to use the nuclear option of uh socially slashing uh even a large entity like coinbase if they decide to start censoring on on the network and i've been through all the reasons of that over the last few days i'm not gonna kind of repeat myself here uh but yeah great to see this from brian obviously like you know it's just words at this point like brian it's a word i don't know like how much you could you would trust it like you don't have to trust it at all it just depends on what they

would actually do under that scenario but for sure this is something that they're talking about internally their lawyers are all over over this uh and the better outcome would really just be to ensure that the you know the us government creates regulations where it enshrines in law or i guess like there's a precedent set in the courts that there is no uh kind of like uh obligation on validators or on miners to censor transactions even if they've been sanctioned so for example there'd be no legal obligation for any validator to censor transactions that go to the tornado cash sanction addresses uh for for example right that would be the better outcome because then we don't have to worry about this sort of stuff and honestly like the us is obviously

the most powerful entity within crypto for better or worse uh across a number of different verticals but as i said like that would be the best outcome in order to kind of like getting something enshrined in law so that we don't have to we still have obviously the social slashing option but so we don't have to enact that and there's no kind of like looming threat of that over these kind of platforms so i think that is the the better outcome there but great to see this from brian and i appreciate him for signaling this but again words are words we'll have to see with when push comes to shove what they decide to do and i think i mentioned yesterday of the day before i really hope that beacon chain withdrawals comes sooner rather than later because i've been talking about this great reshuffling for a few months

now actually i think i've been talking about it for probably at least six months i think i started talking about it with regards to client diversity i really do think we're going to see a reshuffling of stake here especially based on the events of the last couple of weeks because if you're staking with a centralized exchange and you're seeing all these people say uh in the ethereum community say well if the centralized exchange starts such starts censoring transactions we're going to socially slash you those people are going to now suddenly realize how risky it is to be staking with a centralized exchange entity especially one based in the u.s and may decide to go stake with another entity obviously the rocker pool ecosystem as the premier decentralized staking pool has gotten a lot better um in you know in the la especially in the last six months and

that will keep him excuse me and that will keep improving over time uh and you know and by the time withdrawals are enabled it'll probably be much better than it is today so there and there's more options right there's more options you know if you staked a year ago in a centralized exchange well in the last year there's been more options that have come to market for you centralized and decentralized in a year's time there'll be even more options so that's why i think there's going to be that great reshuffling because more options for users and and kind of like these uh i guess like realizations that sticking with these entities are super risky uh is going to force people to want to stake with other entities and maybe someone uh kind of like put their eighth into the centralized exchange staking and then they managed to stack 32 eighth

during the bear market and now they want to while 32 weeks with the ether they have in say coinbase staking and they want a solo stake there's definitely people that fall into that bucket as well so we're going to see that great reef reshuffling of steak once withdrawals are enabled but until then we're just going to have to keep i guess like the pressure on i think um and just generally signal to everyone that the ethereum community is willing to use the social slashing nuclear option if we uh have to if we are forced to and you know that way we can like force these replies or force these kind of like stances from people like brian armstrong which i think is very very positive so and speaking of i guess all of that i put out this tweet today where i just want to be very clear on what the

two properties of ethereum that should be maintained at all costs are there's only two like these are the the two things that go hand in hand without these ethereum ceases to become a useful network and these two things are credible neutrality and censorship resistance and as i said they go hand in hand because to be a credibly neutral network you need to process and execute every single transaction no matter the origin no matter kind of like the person uh receiving the uh the funds if it's a funds transfer it needs to remain uh open to all to basically maintain that credible neutrality if we lose censorship resistance we lose credible neutrality as i said in the tweet this is the most bearish thing that could happen to ethereum and we uh you know

ethereum ceases to be a useful network there's been a bit of discussion uh lately as well about the fact that we have these centralized stable coins in ethereum like usdc usdt and others and people say well you know if we socially slash coinbase wouldn't they just make the coinbase kind of like chain with uh you know the censoring transactions and they'd only own a usdc redemptions on that chain i mean of course that's always a risk but i don't think it would make much sense for them to do that and i think that them doing that is actually less bearish than maintaining ethereum's credible neutrality and and censorship resistance uh even though that would be obviously disastrous it's still less bearish to me and i've used a recent example in the discord channel today of the terra ecosystem if you want to use a

stable coin example ust was pretty deeply integrated with a lot of the ecosystem and it only came out after the fact how deeply integrated it was and not just that there are a lot of big players leveled up on the lunar token uh there was a lot of integrations across kind of like chain and a lot of integrations within terror itself and that blew up that went to zero the entire ecosystem basically was wiped off the face of the earth within three days right did crypto die no did like uh all the people all the um um chains that were connected to terror die no what died was terror the entire ecosystem because they relied on ust alone right so if you're looking at the worst case scenario of something failing i think the permanent example of that is

terror and the reason why terra has not been able to i guess like come back is because their entire ecosystem was centered around the ust stablecoin so that's the worst case scenario in terms of a blockchain failing uh for reasons other than credible neutrality and censorship resistance reasons now within ethereum yes stable coins like usdc and usdt and that are pretty widely intertwined with all the default applications but i don't think that if for example usdc uh or circle decided not to honor redemptions on the ethereum canonical chain and i decided to honor them on like the coinbase chain for example i don't think that would kill ethereum ethereum is much more than these stable coins i do think it would be very messy i do think that it would result in lawsuits for circle to be honest uh and all of that

put together if you really think about the game theory here it makes sense for them to push back on i guess like any form of censorship uh as much as possible uh you know at the base layer not i mean not at the smart contract layout because they already do that with with kind of like black listing addresses but it's it's in their interests especially in kind of coinbase interests to push back against this in order not to suffer any of that fallout so i think they understand this i think they understand the game theory behind this because when you really map it out and when you really think it out you only have to take like 10 minutes to think about all the implications here you can very quickly come to the conclusion of hey we better not screw with the community here we better not

screw with uh with you know risking socially slashing our validators and we better not kind of uh signal to anyone that we're not gonna honor redemptions because it's going to open us up to a lot of legal liability it's gonna open uh us being coinbase it's going to open them up to a lot of uh i guess our customer complaints and their business is going to suffer because of that now obviously you know nation states forcing coinbase to censor at the protocol level with their validators is i guess like outside of the incentives that they have as a business but as i said and as brian signaled they'd rather shut their validators down than do that because i do think that it would harm their business materially if they did that because they'd lose not only their staking business if that happened they'd lose a lot of customers

their reputation would get hit very very hard so the better option for them is to shut down their staking business rather than get all their customers slashed in a social slashing event and then have to try and communicate that to their customers saying hey you know the us government forced us to censor this is why all your eight is gone like that's just not gonna happen right that would that would quite possibly destroy coinbase's entire business which obviously is uh is kind of like the worst case scenario for them so shutting down the eighth staking portion of their business would obviously hurt their bottom line but it wouldn't destroy them uh whereas the other kind of conclusion would so that's why i think that uh you know the game theory checks out there and oh and that's why i'm gonna put out this tweet where i said these two properties are

all that matter to ethereum and that's why it doesn't matter how many other berry scenarios you come up with in my opinion the most bearish thing is if there's a theory i'm losing these two properties if we lose those as i said the other day i would leave ethereum no more daily grey guys right and i'm talking about like permanent censorship resistance censorship here on the base layer and uh obviously that would uh definitely get rid of ethereum's credible neutrality and as i said the other day it would make ethereum a way less interesting network so just wanted to kind of highlight that for you guys uh i think i've got another tweet here if my mouse wants to work there we go uh yes okay some positive news out of uh flashbot so flashbots has now open sourced their flashbots relay this was actually meant to come as part of their

roadmap later on but they sped up the development of this or at least the open sourcing of this because of the recent ofac actions and i quote tweeted this and i said thanks ofac because this is actually a net positive now right they've actually forced the ecosystem not only to try to talk about the censorship risks and kind of like bring them to the forefront of what we're talking about even though we have talked about them in the past it's kind of like obviously more top of mind now but it is also for flashbots which is at the protocol layer to open source their relay now what does this mean it basically means that uh other kind of players in the ecosystem can run flashbots relayers and they don't have to censor flashbox has already signaled that they're going to be uh kind of like

censoring with their relayer uh the the sanction the address addresses but i believe there's blocks route which is not i don't believe he's going to be censoring but he's going to give the option so there's going to be like a flag in there for people to use or something like that and manifold as well which is i don't think going to censor at all and those are only three there can be other relayers out there that that kind of like exist and you can choose which one that you want to be part of now this is a stop gap solution until we get things like pbs where it basically makes it har very very hard if not impossible for any censorship to occur even at the kind of relay level but this is really really awesome to see i'm very happy that flashbots is doing this yes i'm not

happy that they're kind of like going to be censoring those sanctioned addresses but i'm very happy that they open source this because it means that other people can now build and and kind of like operate their own relayers rather than relying on on flashbacks here so very awesome to see that and another bit of good news is something here from david mihal who where he shared a way to block the quote-unquote narc on uniswap and balancer ui so you can add the following urls to your filters in brave or to add block and it will basically a block uh kind of like that i guess like trm lab software and any of the other screeners that are on there uh which are the censorship checks i guess so to speak uh they'll basically block them on your end which is very very cool to see i don't know

how long this would last for you know all it would take would be the url to be changed and you'd have to keep updating it and things like that uh and it could even be done at kind of like a different level not even just like the url level so it might you know it might not work forever but it could work right now for you if you'd like to do this but i don't think any of these finance right now are censoring uh anything but the sanctioned addresses i believe i don't think they're censoring people like me who got uh kind of like sent tornado cash eighth from tornado cash after the sanctions uh so yeah but still even if they do decide to do this you can you can use this and i do want to make another note here i think i've mentioned this on the last

couple of refuels but i really want to make this clear to everyone you shouldn't ever expect decentralization or censorship resistance from a centralized front end your expectation should be that the centralized front end is going to censor you at some point it's going to sense you in some way at some point and in order to protect yourself against that you should look for alternatives and make sure that you know what alternatives exist and are available to you to get around that because like i'm sorry yes it sucks that they're doing this guys but like it's it's it's it's this kind of like thing of expecting the expected like it shouldn't come as a surprise to anyone that centralized front ends are doing centralized front-end things and at the end of the day the front end is like the

least of my worries in terms of censorship because we can work around that very very easily like it's super easy for anyone to spin up a front end like a basic web developer can can do this and even a basic kind of like um a user that's following just like a a simple guide can do this as well it's it's not a difficult thing to do um so i just wanted to be clear there that i don't think it makes sense to equate front end level censorship with base layer censorship or smart contracts or any of the other layers that i've talked about in the past it's definitely very different and definitely the least of my worries at least as well so yeah but i think that's going to be the last bit on the censorship side of things moving on to some merge updates so the

merge mainnet readiness checklist is now all checked out i haven't checked in on this uh for a little while but i remember kind of like highlighting this on the refuel when basically no items were checked out quite a while ago and now you can see every single item on this checklist is checked uh oh well i guess like there's a few items left here which is the uh r d items which i guess like uh is not going to do with the the main items the main kind of like items getting it ready for production here which is awesome because i mean the merge is still less than a month away it's coming on the on main net this recent i guess censorship stuff hasn't delayed the merge or anything like that even though a lot of people are calling for a delay in the merge which is just

hilarious to me it hasn't stopped it there so just a great feeling a historic day as i replied to tim's tweet by saying you know this is a historic day that we're we're we're basically almost there um we're just kind of like counting down the days now and there is an all-called dev call happening this week where the i guess like formalities will be we made we'll you know the merged ttd has already been uh kind of like uh merged into into uh the code so it's all basically official but on the all-called devs call on friday it'll be kind of like that rubber stamp of approval to basically say you know that we're you know we're merging we're emerging right uh which i guess is a huge kind of like uh weight off the shoulders of all the core devs and researchers and all the

years worth of work that have gone into that they deserve a break like i know we want things like bitcoin chain withdrawals and prototype sharing and stuff like that but if anyone deserves a break for a little bit it's the core devs and researchers and it's really cool that devcon is happening after the merge i think about a month after the merge so hopefully they'll be able to kind of like go to that re relax for a bit you know enjoy enjoy their time there but other than that but even still like they deserve time off to spend with their families and things like that as well or because of all the the hard work that they've done to get us to this point and i'm sure the long hours that they've put into this so kudos to all of them for the work here

really great to see that this readiness checklist is all checked off all right so uh speaking of the merge mario havel here shared that the updated merge ready docs are ethereum.org about ethereum nodes are finally published you can check it out at this ethereum.org link which i will link in the description below so this is the nodes and clients page on ethereum.org which has all the up-to-date information and everything that you need to know in terms of running an execution layer note and a consensus layer node to get your kind of like uh i guess like fully self-sovereign uh self ready for the merge so you can definitely check this out i'll link it in the youtube description below i just wanted to highlight it for you guys there uh and last up on the core dev side of things

there is a go ethereum or geth ama happening right now in on reddit uh there's a lot of great questions and answers there i would definitely recommend going and checking it out and giving it all a read i have yet to read it but uh because it was still ongoing i want to wait till it's finished but uh i've already kind of like skimmed through it and seen a lot of great questions and answers here so if you're interested in anything ethereum i mean i don't think it's just kind of like what to do with get i think it's got to do with everything in ethereum or at least most things ethereum you should definitely uh check this out i'll link it in the youtube description below all right so hell press is out with his new i guess is the ea emerge pro is the

emerge priced in article in bankless now this is the i guess article or um report that he's been working on for quite a while i believe it is 25 pages uh so it is very very long it basically pulls together all of his thinking around the merge and why he's so bullish on the merge trade and obviously him and ryan berkman's did a a live stream with bankless recently which you can check out here as well uh and hal has uh i think he'll did another podcast recently with the uh uh with um the person uh squish chaos who did the triple harvening and uh one other person uh i can't remember his name i think he publishes the if you're in revenue reports uh his name escapes me right now but you know hal has been very very busy lately which is cool to see and you guys

know he's he's you know overall thesis but i think that uh this this kind of like process brings it all together and reading it was kind of hilarious because i was like reading through it and i mean i i i kind of like found myself just skipping over the parts that i already knew of course because i'm so kind of like clued into this stuff already but still reading all of it and reading how's view of things i was like wow i'm i'm getting getting bullish again like how has that that effect on me he just makes me more bullish than than i usually am uh and i'm here to listen to these podcasts actually i've been meaning to to listen to it here i'm hoping that's just as bullish as the as the blog post um but i just wanted to put it on your radar everyone you can go

check it out and give it a read it link to the youtube description but the merge is less than a month away now i don't know what the price action is going to look like honestly it's kind of funny because people are saying that we pumped up uh because of the merge narrative right we came off the lows and we came up to whatever price right now 1800 or whatever because of the merge narrative but then other people are saying well no it was just the the market kind of like bouncing off that irrational low and crypto following uh the stock market which is also bounced but then you can kind of point to the eighth bitcoin ratio and how much outperformance has happened there which is not usual for bear markets usually in bear markets eight bleeds against bitcoin so i actually do think there's an album

there's like an element of both of those things where it's just a general market rally um both in the stock market and in crypto but also got to do with the merge type with ethereum specifically where ethereum is re-rating itself against other assets like bitcoin and and kind of like marching upwards and you know the ratio is that 0.08 again uh double from here is a flipping uh right so i mean not like i i do believe in the flipping obviously but like i don't know when it's going to happen right if it's going to happen it's going to happen post-merge probably because of those structural flows kind of collapsing there i mean i don't think people realize that for six to twelve months after the merge issuance is effectively zero because no there's no issuance coming to market obviously issuance is not zero um on the beacon chain it's

still being issued but no new eat can come to market for that period so that might be a narrative in of itself that causes the price to go up i don't know like i honestly have no idea i obviously am bullish on eighth long term but the amount of kind of like narrative trades that people try to do the amount of hedging that's going on as well like that popular trade right now is basically uh to buy spot eighth so just buy ether on a normal open market and then short future futures eight so you're delta neutral so that you know no matter which way the price goes you're not taking on any kind of like risk you're not taking on any losses but you're also not taking on any gains and the reason you would do this is because you want to capture any of the forked

assets that happen uh post merge which there probably will be at least one proof of work chain that has some economical value so it would make sense to do that but then on the other side of things is like when those shorts close like it could lead to another kind of like reflexive uh i guess event in the market that pushes even higher and arthur hayes wrote about this in his recent blog post i know how press has spoken about it before and a few other people as well so it's kind of hard to know what was going to happen and this is why i'm a long-term investor because you can look at all the short to medium term things you can formulate a thesis you can kind of think really hard about it but at the end of the day like you can think as hard as you want

about it but like it's just extremely hard to take advantage of it it's extremely hard to take advantage of it in the short term because uh you know human emotions get in the way things change overnight you know maybe you sold all of your eighth because of all the the tornado cash censorship and and all that sort of stuff and that wasn't a profitable trade from what i can see i think we went up to 2k but we really only went down to 1800 so you would have had to like get you know get the exact top and exact local bottom there it's just it's very hard trading is not an easy thing to do the best traders are there because of like many many years worth of experience and many many years worth of taking on losses as well and you know i guess like if everyone

was a good trader if everyone could trade then no one would be because there'd be no alpha to be had right so yeah but i'm gonna i'm gonna kind of like leave it at that there i'll link this in the youtube description this post and you can go uh check it out from hal here all right so uh speaking of coinbase just before coinbase wallet and users can now bridge assets between ethereum and polygon directly in the browser extension so this is i guess coinbase's browser extension which is an alternative to metamask here and you can see uh that you can essentially bridge directly between ethereum and the polygon pos chain which is obviously a very welcome for polygon users and for ethereum users which i'm sure the venn diagram of polygon and ethereum users is pretty much a circle at this point uh and there's kind of

like no coinbase fee either on this for a limited time network fees obviously still apply so you can see the nice interface here of the bridge you can kind of uh go and use it if you're using coinbase wallet i believe it's live in the extension today all right so last up here i'm going to do a little bit of a rant over something that's come out of canada with new regulatory changes here so apparently uh on canadian centralized exchanges you are now allowed to buy as much btc ltc and bch as you want but any other crypto has a limit of 30k net buy per year um but this is dependent on your net worth so i think the 30k buy limit is depending on a net worth of 400 000 and then you you have like a higher limit

the higher your net worth is and i don't know the exact kind of figures for the other other ones but it's not 30k for anyone but this is stupid for a number of reasons right one it's basically bringing the accredited investor like laws to buying crypto it's basically the government telling you that you can only buy this amount of crypto on a centralized exchange uh per year right which is which is kind of like insane um and i guess like in the name of protecting investors three the government is is sanctioning literally sanctioning or i get not sanctioning in the in the in the kind of like sense with regards to ofac but like sanctioning is in like giving their blessing to btc ltc and bch as the only assets that are considered the gold standard okay

btc and heath fair enough but litecoin and bitcoin cash what the what the hell like seriously that doesn't make any sense both of those assets have severely underperformed the market uh for a long time now they're completely irrelevant so why like where did this list come from i don't know but i find that to be incredibly stupid um and i also just find the limits to be incredibly stupid as well but if i was to still man the argument here i would say that okay most people most market participants don't know what they're doing right they really don't i mean i've said it before and i'll say it again if you need if you want to learn how to properly invest in crypto markets you have to survive a few cycles to get there it's not going to happen in your first cycle so it's really the

government kind of like trying to protect people from themselves which as i said if i'm still manning it i can understand but it's taking freedom away from people like i'm afraid i i don't know if i classify myself as a freedom maximalist that sounds kind of weird when i say that but i'm all about giving people as much freedom as possible um but this just goes against that in saying that it's not like you can't withdraw your crypto to you know uh i guess like defy or something like that or to another exchange and just buy with uh with with kind of that right this is just for canadian based exchanges i believe but still it just seems very i don't know it seems very authoritarian to me like i know that's a big word to use but it's literally kind of like putting these really hard limits

on uh the you know canadian citizens of what they can buy and basically saying to them hey like we don't you know we don't think you should be able to buy more than this amount because essentially we don't think you're smart enough with your money and the net worth requirements are insane too like up to i mean up to 400 000 net worth is only 30k so like i mean after that it gets bigger and bigger but like most people don't have a net worth of 400 thousand dollars right uh or or over so they're going to be limited to 30 000 a year guys like this is annual this is not something that uh is kind of like monthly or or daily or weekly it's yearly yearly that's crazy i mean like what who cares like um okay i'm getting a bit ranty here i'm trying to stay on

topic but like just as an example so why is there a buy limit on this but there isn't a buy limit on other things you can go gamble away all your money right you can go put as much money as you want into gambling no one's going to stop you from doing that you can go buy anything you want with any amount of money there's no limits on on most if not all other things as far as i know in canada that you can kind of like buy here so why like why are they doing this just with crypto i mean as i said i know why because they're trying to i guess like quote unquote protect investors but it still to me just seems very weird and especially weird that they would kind of like select ltc and bch if they're trying to protect investors

because that's definitely not protecting anyone uh and they're picking favorites here so it's not i'm just i'm not just trying to pick on those two assets but they're really picking favorites here which i don't think is something that a regulator should be doing either but uh but anyway i'm gonna leave that one at that i just wanted to highlight it because i thought it was insane uh i hope that doesn't come to australia i really hope it doesn't because like then uh it's kind of like okay well i can only uh buy x and x amount of crypto how am i gonna buy those big dips guys anyway i'm going to leave it at that thank you everyone for watching and listening be sure to subscribe to the channel if you haven't yet give that video a thumbs up if you haven't uh oh jesus i'm i'm

jumbling up the ending here subscribe to the newsletter join the discord channel and i'll catch you all tomorrow thanks everyone