Polygon zkEVM updates, ETH staking withdrawals - The Daily Gwei Refuel #529 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily gray refuel where I recap the latest news in ethereum ecosystem I'm your host the internet designer and today the 24th of January 2023. all right everyone let's get into it so Marius from the guest team put out a tweet uh just after I put out yesterday's review actually saying withdrawal mainnet Shadow Fork one is now finalizing it started out with a few issues because the config wasn't correctly applied on Geth uh they disallowed overriding the mainnet config the config is applied correctly and all nodes are in agreement and they are going to start some evil nodes soon in order to test out this Shadow Fork now you remember that shadowfox weren't really a thing until the merge happened right until I guess like the testing for the merge started and they just weren't

being used for I believe any upgrades before the merge and now that's the merge is obviously done the shadow Fork upgrade process hasn't been retired or anything like that we're actually using it for all other network upgrades that come to ethereum so it's very cool to see that we have a withdrawal mainnet Shadow Fork fine analyzing now and the reason why Shadow folks are really cool is because they actually I will main that shadow Fox I should say is because I basically mirror exactly what mainnet is in terms of the state of Maine and obviously it obviously it doesn't mirror things on mainnet such as the infrastructure the activity the validators but it does mirror the state of Maine net so and it gives us better insights because of that now as I mentioned uh Mario said here that they were going to spin up some evil nodes

which they did and I just saw this update before here where they saw 12 bad blocks on the uh the shadow Fork here during the night that they caused on purpose this wasn't done on accident they actually caused these bad blocks or sent these bad blocks into the network and none of them were accepted by any client which is a huge success on the testing side of things because that was the expected outcome uh and Mario says here that he changed the weights a bit so it created more issues with regards to withdrawals let's see if the clients can handle it so this is basically how they do what's called fuzzing so testing uh for these I guess issues with the main match Shadow fork or making sure that none of the clients I guess like change to this Chain by sending bad blocks it basically means that the

client's duty is to reject those blocks and continue on with the chain that uh with the correct chain soda so to speak right uh so great to see this uh is coming along as well and the testing is going very well here so I'm super excited guys I mean I keep getting more and more excited about the I guess ethereum staking what this means for uh with withdrawals and I explained a couple of weeks ago why I actually think withdrawals is bullish for ethereum staking and not bearish for it and there was actually a tweet that I put out today that David Hoffman replied to I want to get to his reply but it was related to staking where my tweet said ethereum staking is a big industry but it's going to get so much bigger than anyone can imagine solo staking centralized slash decentralized lsds

institutional stakers restaking lsds as D5 collateral and more will lead to ethereum staking becoming a trillion dollar industry and you guys know that about all about that because I've been talking about it for pretty much like year is at this point that I'm just super bullish on each and slash ethereum staking and these are just some of the reasons right I mean we have so much competition coming online in the LSD space so much of Defy is is supporting lsds right now and as obviously lsds keep growing more and more of their them are going to get used within D5 and then you have things like restaking like eigenlayer coming along which is going to lead to I believe a lot more each staked it's gonna get crazy right and we're actually discussing eigenlayer a bit in the daily way Discord Channel

today uh because some people are bringing up the I guess concerns and their relevant concerns around how eigenlayer affects ethereum security since it's taking uh I guess like the staked eth and using it for its own purposes I think the overall concern that I see is that some people uh may be misinformed or have the wrong idea about how eigenlay actually works so I want to correct that quickly before I move on to David's tweet here so with eigenlayer it's not actually making any changes to the core ethereum protocol itself it is it is a middleware protocol built around ethereum staking so to speak where it basically just uses your staked teeth as its security right as its collateral now does that mean your ethereum validators

are doing anything different no because eigenlayer is not part of the core protocol it is not changing anything part of the core protocol all you're really doing is saying hey you know I have this staked eth on my validator and I want to participate in whatever eigenlay is doing with that so I'm going to use that while taking on the additional platform smart contract and slashing risk of eigenlayer and give them permission to take control of my staked teeth if I do something wrong on eigenlayer they eigenlayer itself cannot get you slashed on ethereum um mainnet unless you give control to them of your validator which is not how it works from my understanding um and they cannot cause your validator to do something different because a validator can only do what it's been I

guess like told to do by the ethereum protocol and eigen layer doesn't change anything there but there's been a ton of explanations about this and a ton of podcast about eigenlayer recently and there are some Linked In The Daily Word Discord channel that you can go check out if you want to learn more about that but I think that's one I guess misconception that people have about it uh it doesn't actually add um anything to the core protocol itself there's no changes being made there now they also people also bring up I guess like issues with security like does restaking lower the economic security of ethereum under proof of stake and I think that that's a debate worth having I personally don't think it does uh and if it does I think it only does it as much as lsds do it because you can think of it similar to

lsds where people are essentially taking their staked eighth getting an LSD of that steak to eat and then doing something with that LSD now the the I guess like tangible example here is that people will put the LSD in in D5 maybe they use it as collateral on Ave or something and let's say they get liquidated and that eighth is or I guess like that R8 or St the LSD is uh taken by the Liquidator and the Liquidator says well I don't want to hold sta through RH so they can either sell it into the secondary Market or they can go redeem it from the beacon chain post withdrawals um so that's that basically that's basically what happens in that scenario whereas with eigen layer it's a little bit different but the same it's the same concept where if you get slashed on the eigen layer Network they'll initiate a

withdrawal of your staked eth on the beacon chain um unless there's a secondary Market because I expected to be secondary markets but there's none right now obviously and but uh you know they could do the secondary Market thing or they could go through the beacon chain take your staked eth or or the part of it they got slashed automatically via a smart contract it's not it's not going to be centralized at least at least that's the goal right obviously maybe initially it's probably going to be centralized but that's the goal and um and then that's all that happens there so it's basically just a normal exit from the beacon Channel normal withdrawal it's not like they can get you slashed on the ethereum beacon chain um you're basically getting slashed on the eigenlayer network only and that as I said is up for debate whether that law

is ethereum's economic security or not but I'm gonna I think we're gonna have to see how that plays out over time I think it actually strengthen strengthen strengthens strengthens it wow that struggled to get that one out there uh because I think that to services like eigenlayer like restaking services will actually lead to more eth being staked uh and more each being staked uh in a lot of scenarios leads to more security for ethereum not all scenarios because if more it gets staked with a provider such as Lido right now I don't know if that's adding any tangible security to the beacon chain because lighter already has such a massive market share uh Economic Security maybe but there's debates right there is debates to be had there uh but anyway that's the note on that now back to what I was talking about before which was David's tweet

reply to my tweet he said the bookcase for each taking is no longer that ethereum will be the settlement layer for the internet that is now the base case the new bookcase for eth is that it's the security layer for the entire internet e-staking goes from one dimensional to on the omni-dimensional now this has got to do with restaking of course and basically using staked as security for a multitude of different things with eigenlayer they want to do things like Oracle networks and data availability networks uh and and other such things maybe decentralized sequences for layer twos uh but there are going to be other services out there that leverage uh staked eth leverage that security that you can get from staked lsds or solar sneakers or whatever it is for their own use cases

now what what that use what those use cases are and how successful they are is up to I guess the community to to build out and up to the market to decide but I really like this framing from David that each staking is not just one dimensional it's not just staked on ethereum securing the beacon chain or security Network it's now omni-dimensional where it's doing that but it's also going to be doing a lot of these other things and as I mentioned you know before the security implications of this are up for debate we don't know what it's going to look like as time goes on we're only going to find out as as time goes on really I mean it's probably going to take a couple of years for us to see what the landscape looks like there but I think this is the really cool way of

framing it that eth isn't just a sentiment layer for the internet or for I guess like this new Financial system that we're building that is really the base case but it's also this security layer for the this entire new internet slash Financial system that we're building which I think is very very cool so so yeah just uh something interesting there from uh from David and I hope you guys uh maybe I could have some misconceptions there around eigenlayer I think the biggest thing to remember is that there's no changes being made to the core protocol uh to I guess like uh make eigenlayer work or anything like that or to accommodate eigenlayer uh it's going to be working without any changes being made from my understanding at least I mean I've looked that the at the roadmap look at the upcoming changes

for the beacon chain nothing is specifically being built to accommodate uh eigen layer right maybe eigenlayer will get advantage over the upgrades that were already on the roadmap such as a single slot finality uh and and um the secret leader election stuff and any other things that come to uh proof of stake slash the beacon chain uh but those things are already things that have been on the roadmap for quite a while so I don't think they're going to be be favoring one thing over the other all right now a couple of tweets about decentralization so one comes here from I think I should start from this one out with this one from Chase Chapman who said we often talk about centralization risk but never about decentralization risk if a system is so decentralized that it becomes inflexible to respond in

a changing environment that's also a very bad outcome and then he continues uh to use uh spingras framework of or Spencer Graham's framework of anti-captcha if you want to create capture resistance systems we need to not only think about resistance from a centralized party but also we can avoid capture that comes as a result of bureaucracy so I think the obvious example here of what Chase is talking about is Bitcoin where it ossified in my opinion way too early and it is so decentralized that there can't actually be any changes made to the to the base protocol now there are you can debate about this forever about whether this was a good or bad thing in my mind it was a bad thing but I think that the the two worst outcomes for for Bitcoin

for the from this is that they allowed other chains to be spun up and take massive amounts of market share away from Bitcoin because they were so dogmatic about not changing the base layer at all uh they were so dogmatic that they literally had a war basically a crypto War overchanging the block size limit right which was at the time it was quite insane to me uh that that was actually a thing and it's still kind of insane looking back on it but yeah I mean that's kind of how awesome fight it is and that's how I guess decentralized it is that they're in this state of paralysis where they can't actually change anything now where this becomes a real issue uh which I think that people in the Bitcoin Community are burying their heads in the sand about is that the Bitcoin has long-term security

issues that I've discussed before where the block subsidy or the block award is dwindling you know every four years at halves uh and the fear of a new on bitcoin is not me is not going to well it has traditionally not uh been making up for that dwindling block reward So eventually when the block reward gets low enough and it's not going to take that long probably two one two three more hardenings uh and the fear Revenue doesn't go up well Bitcoin security is going to go down because the miners are going to be unprofitable they're going to have to shut down the hash rate is going to go down and bitcoin's overall Security will go down now how to fix this well in my opinion there are only a few ways they can fix it but they all require changes to the core protocol

such as I mean some of these probably very low chance of happening anyway uh even if there were changes being made to the core protocol all but the way to fix it Perpetual issuance that's the obvious way to fix it right like just remove the 21 million cap have a flat Perpetual issuance rate or a curve like ethereum proof of stake has and go from there now you can do that alone or you can do that coupled with proof of stake uh which will solve this issue right uh and I think those are really the only two workable things that you could potentially do but those two things are not only sacrilege in the Bitcoin Community obviously because they treat the 21 million cap as God basically and they tweet the ability uh sorry they treat the um uh their true proof of work

uh similarly so for them to either remove the cap or Embrace proof of stake or do both very slim chance of that happening regardless of them not changing the core protocol at all right like maybe they do at some point in the future change the core protocol via a hard Fork to add a feature in maybe they you know get their heads out of the sand and they add some new OP codes in order to allow them to do things like uh settle ZK proofs for example right which would actually give them a little bit more of a layer to ecosystem that they have today with lightning Network right but in terms of them actually changing from proof of work to proof of stake I just don't imagine that ever happening uh and in terms of them removing the 21 million cap I think that's even less of

a chance of happening so yeah so it's not just about things being too decentralized to change it's also about them being too decentralized to even uh talk about change like changes that actually need to happen because so many people are I guess like so stuck in this dogmatic view of of these things such as a 21 million cap or being on proof of work forever or anything like that now that's up to the Bitcoin Community to deal with obviously if Bitcoin security was to fade away and it was to become insecure that does not actually impact other chains especially not ethereum obviously the market dynamics will be kind of crazy around there I'm not talking about the the market dynamics and the prices of assets I'm talking more about the technical level like

Bitcoin becoming insecure is not going going to have any security or technical security risk for ethereum but there will be risk in that uh if the market is volatile maybe eight dumps in price because BTC is dumping in price and that obviously lowers ethereum's Economic Security but from a technical standpoint it doesn't really matter so we don't really have any incentive to I guess like advocate for Bitcoin to be changed we can just call it out and hope that they come to their senses if they actually want their chain to continue uh but that is exactly what I believe Chase is talking about here now this has also been one of my worries for ethereum for a little while I I'm not that worried about it but it's definitely something that sometimes at the back of my mind in that I know ethereum over time

especially from here on out is going to become slower and slower to do major changes and it's going to get to a point where it actually gets to not ossification but that homeostasis that I talked about that that Domo thee put a tweet out about a couple of weeks ago where essentially we only make changes that are required and we don't make changes that are just nice to have right like things that are literally critical call for ethereum to work uh those are the only changes that we end up making and I think that we're trending more and more in that direction but that's probably not from the fact that ethereum has ossified too early or it's too dogmatic or where you know too decentralized I think it just stems from the fact that ethereum is growing more and more and it becomes much harder to

change things much harder to coordinate things and much less worth it to do it in terms of risk reward uh as time goes on as ethereum gets bigger here so I think right now and historically over the last few years especially ethereum has been in that nice Goldilocks zone where essentially it's not centralized it's you know not it's it's not too decentralized in that it can't change but it's it's chugging along really well it has very good decentralization but we can still make changes to the protocol here so I think that's that's very important now the other tweet that was related to this was one from Martin koppelman who put out a tweet that I actually disagree with he said simple test for whether a chain is decentralized or not there's two points here he says he asked the question can

you run a full node and can you become a block producer I actually don't think that this is it for decentralization these are two parts of it of course but decentralization is much bigger than this just because you can run a full node and become a block producer doesn't mean your chain is decentralized I mean for example you can run a full node on a chain that you create right and you can run a block producer on a chain that you create but maybe there's only you know 50 other people that are running those things on your chain well that's not very decentralized is it so I think that you have to put numbers to this I think you have to include every other facet of decentralization uh that plays into this such as you know core developer decentralization client diversity infrastructure provider decentralization

exchange decentralization all that sorts of stuff it all has to come together you I don't think you could have like a simple test uh like this on whether a chain is decentralized or not um and I yeah I just wanted to point that out because it's not definitely not something that I agree with and it really just Waters down I guess the decentralization test now I I don't know if Martin meant this as these are the only two things you have to ask uh I don't think he does because I consider Martin to be quite intelligent and he's been around for quite a while so he definitely understands how these things work but they are definitely good points to bring up I mean if you can't run a full node or be a block producer uh then I don't think you can even begin to talk about

being decentralized because if you can't run a full node you can't actually verify the Integrity of the chain for yourself uh which means that you're basically relying on other actors to do that for you which basically means it's not decentralized at least in my view and if you can't become a block producer uh at all like if you can't become a validator and actually produce blocks on the network well then uh that means that block production is basically just reserved for I guess like a special part a special set of people or a special set of of entities and that again means that you fail the decentralization test I think these two points even though I said that they're not the only things that matter they're definitely very very important especially running a full node running a phone out is so important I mean this is one thing or that Bitcoin

has got very very right is the ability to run a full node is absolutely critical and I actually would I actually would say that if you don't have the ability to run a full node but you have all the other decentralization ticks that I would uh consider when when measuring something I still would consider your chain not decentralized because there's no way for a regular user if they can't run a full node uh to basically get the the view of the chain as if uh they weren't trusting anyone right doing it in a trustless way which means that you're relying on third parties uh and you can never actually have a 100 certainty or near 100 certainty that uh the chain that you're talking to wasn't tampered with uh and that and you can't verify that for yourself either so yeah anyway to recap

yeah I think there's a couple of good questions to ask but they're definitely not the be-all end-all of decentralization all right so the polygon ZK uh Twitter account here put together a weekly progress report and a metrics for polygon ZK evm which you can check out I'll link it in the YouTube description below there's about 20 tweets here uh the receiving the polygon ZK evm oh it's actually less than 20 tweets um oh this is not one of 20 tweets this is the 20th of the first sorry being Australian I read day month not month day uh I never understood why people do the month day uh format but anyway uh you can kind of uh see all this for yourself with Linked In the YouTube description below but another reason why I bring up this this thread is because some dip from polygon

here uh put together a little tweet where he said just came out of a high level ZK AVM mainnet launch committee can't keep calm folks we have a date for mainnet launch and it's soon now he hasn't given the date yet obviously this is an internal date that they seem to have agreed on uh and soon I mean as soon as a a term that it's always pretty funny because soon could meme in a month or in six months it's relative right but I think that we can have relative certainty that it's it's hopefully going to happen in the next few months which is kind of crazy now what that actually looks like when the zkvm goes live on mainnet is anyone's guess like is it uh it's not going to be decentralized at all I don't think I think it's going to be very centralized to begin with which

is fine because pretty much all the layer twos are like that uh and I wonder what the I guess scalability is going to be I wonder what the developer experience is going to be like we're just gonna have to see right I'm just gonna have to see how that shakes out when they launch this live on mainnet but as I've said about the zkbm stock before the race is on guys okay it really really is and I think that this year there'll be a bunch of them launch if not all of them launched this year ZK VMS uh maybe not all of them maybe there are some of the players that have come in a bit later that may not be ready to launch I would expect the ones like polygon um and uh ZK sync and scroll to launch this year uh whereas something like a

Taiko may be pushed into next jar but as I've said before it doesn't actually matter that much I I think that the race to become the dominant il2 platform is going to last at least a decade I don't think it's going to be decided in a year or two right it's going to last quite a while and the race has already been kind of going on since optimism and arbitrum launched in 2021 and they are the they are the teams to beat right now uh as I've discussed before so yeah but anyway if you want to learn more about polygon ZK VM uh and all their stats around it you can definitely check out this little Twitter thread with this blog post TR uh I guess like um which I'll link in the YouTube description below now I also wanted to just talk about one more thing

before I move on from this uh just about layer twos generally there was a bit of I guess fud around optimisms daily transactions kind of seemingly falling off a cliff recently uh and I think that was due to uh there was optimism quests was finishing and people were just farming that because obviously people love to farm airdrops and I've discussed about this before about how you really need to look at the activity on any chain over long longer periods of time that even a few months you need to look over over years because a lot of it a lot of the time is influenced by these airdrop Farmers right by the speculative activity that may not be lasting activity and this goes back to what I was talking about last week when it came although I think the week before when it

came to Ultrasound money on with your mainnet and getting above that ultrasound barrier in a sustainable way like it's all well and good to get above it for a few days because there's I don't know demand for some scam or some Ponzi but that's not sustainable so that is just a flashing the pan thing I mean it's still positive for Heath because it's burning eth but it is not sustainable what we want to see is sustainable growth not just for deflationary eat but just for sustainable growth for the ethereum platform generally and that's what we want to see on these layer twos as well and even though the optimism's daily transaction count fell off a cliff because of that I guess uh uh the the optimism Quest finishing it's still growing right it still has been growing and that still brought a lot of

attention to projects and the ecosystem on optimism so it's still in my mind and net positive it did what it was meant to do you just can't look at I guess those short-term metrics and get much signal from them because they are definitely influenced by potential airdrop farming or whether that be token farming or nft Farm or anything of the sort you definitely just need to take a longer term view here I believe I truly believe that to get an accurate picture you probably need to take a year-long view and you also need to contextualize that whether it's a bear Market or a bull market because if for some reason you've taken a year-long view and it's been a bull market for that entire year well maybe you best beware best off waiting to I guess like um perform any long-term conclusions and wait for a bear Market

wait for a more quiet Market to see if the growth of that platform actually sustains itself or if it was just a bull market phenomenon and we've seen that play out plenty of times before so I don't think I need to explain what that would look like but yeah I think that's the better way of going about it but anyway uh moving on from that one onto the last thing I want to talk about so finally here speaking of layer twos I just wanted to give a shout out to this newsletter that Liam puts out every week called the layer 2 weekly Roundup now if you're struggling keeping up with everything happening in the layer 2 ecosystem which you probably are because there's so much happening all the time Liam's newsletter is pretty much the One Stop Shop these days to find out what's going on to keep up with everything

besides the refuel of course but Liam goes in even more depth than I do on the refuel uh each week here and links to everything that he talks about links to tweets links to research pieces everything that you need to keep up with pretty much everything happening in the layer to ecosystem so definitely highly recommend subscribing to this which I'll link in the YouTube description below for you to do so uh and yeah as I said it is a Weekly Newsletter so you'll get it freshly in your inbox each and every week I love seeing newsletters like this spun up I mean I used to do The Ether Weekly Newsletter uh but I stopped doing that a little while ago and there is other newsletters like week in ethereum and obviously bankless stuff like that they're definitely very good for keeping up with things but from my experience

the best way to go about them so you don't become overwhelmed you sign up to maybe a couple of them and that's about it I actually think that you could sign up to week in ethereum bankless and delay a two weekly Roundup and get most of what you need covered uh if not all of what you need covered when it comes to the ethereum ecosystem alone I know banklist does some things outside of the ethereum ecosystem uh but they're pretty heavy ethereum so signing up to those I think will get you a lot of that information and then obviously add the refill in there too for a for a nice mix um which will get you even more information uh but yeah just depends on how you like consuming your content there are a lot of people who don't like consuming content via text they'd rather

just listen to Someone Like Me on the refuel or listening to podcasts I mean obviously banklist has a podcast as well uh which you can more you know you can do whatever works for you really I mean I'm personally not a big reader of things I definitely listen to podcasts to learn more about stuff I definitely spend a lot of my time skimming through things I don't have time to read everything obviously um but definitely uh I I that's just the way I learn right so don't feel bad if you can't if you have like a million tabs opening Chrome and you're like oh my God I need to get to these tabs there's so many blog posts I need to read if you're finding yourself doing that maybe reading uh I guess long form stuff isn't for you you're probably more suited to podcast I as I said I

definitely am and I mean I used to listen to podcasts more religiously than I do these days but when I'm going for walks or when I was at the gym or anything like that podcasts were my thing uh obviously let's try and listen to a podcast while you're on the computer doing other things is going to be difficult because you're going to be distracted so for me I've always found that it's best to I guess do something where you're not on a computer such as going for a walk or a run or whatever it is uh and listening to podcasts that way but anyway when I put a little bit of a tangent there definitely go subscribe to the layer 2 weekly Roundup which I'll link in the YouTube description below but on that note 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