Reversible transactions, KZG Ceremony and more - The Daily Gwei Refuel #455 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of The Daily gray refuel where we cup the latest news in ethereum ecosystem I'm your host the Anthony sassano and today's the 26th of November 2022. all right everyone let's get into it so there was this thread from kaylee.ethia who is a uh blockchain researcher at Stanford and she started off the thread by saying billions in crypto stolen if we can't stop the thefts can we reduce the harmful effects over recent months a couple other Stanford researchers and I drew out and prototyped erc20r 72r to support reversible transactions on ethereum now this thread got a lot of attention on crypto Twitter caused a lot of uh I guess like debates and arguments to unfold over the weekend and then I had

my own take on this where I said I'm all for people coming up with the new ideas and putting them out into the ether but I'm not here for tradfy 2.0 thanks but no thanks so I think people took this tweet the wrong way I think my tweet the wrong way um I want to kind of break down what I meant by this this and why I'm not against obviously user protections and reversible transactions and stuff like that but what I am against is doing this stuff at the base layout or doing it on Primitives that are very much Open Standards that have uh kind of proliferated throughout the ecosystem so for example the rc20 and erc721 standards are already very very popular I already have a massive Network effect so we shouldn't be Reinventing the wheel there if you want to have a I guess

reversible ecosystem or sorry reversible transaction ecosystem if you want to build things on top of them then you can do that at higher layers you could do that at the front end you could do that at the at the um with a wrapper around these tokens right you can do them at you can even do them at the roll up level you can create a whole roll-up that just is a reversible transaction ecosystem and you can have that there but the reason why I don't think that there should be like a new token standard spun up is because then it ends up competing with the existing standard so you can imagine a world where we had elc20 and erc20r there are reversible obviously and then they're just competing with each other for liquidity for Network effect for use and I don't think that erc20r would actually go

anywhere because D5 can't actually work with reversible transactions a simple example is imagine if you traded in Arc 20 r on a uni swap for eth which is not a reversible token right and then for some reason the Whoever has the ability to reverse that token transfer enacts that ability it just screwed the entire trade up like the eighth can't can't get clawed back so that erc20 I would be sending in the liquidity pull on uni swap so it would be directly withdrawn from the the liquidity pool and uni Swap and that would kind of um uh uh uh kind of like get it out of balance there and then the person who ended up with it would lose out right the liquidity provider that ended up with them would lose out now

obviously with erc20s they're fungible but if you kind of uh extend expanded this to erc721s which are the nft standard then you could say well what if I sold a crypto Punk uh that had a reversible transaction on it or it was kind of like wrapped in reversible token standard um and then that was reversed first well what if I didn't use a token that was reversible then in that way someone loses right so there's a lot of problems it definitely breaks all of D5 I would have to say you could give like countless examples here so I don't think that that would be very workable I don't think those standards will get any adoption now obviously we need user protection at the higher layers we need to be able to reverse things or need to

be able to do dispute resolution and things like that and I'm all for that but the way you should look at the ethereum kind of base layer and the standards around it is that they're governed by the ethereum network the dispute there's no dispute resolution the ethereum network does not have reversible transactions natively and it shouldn't ever have reversible transactions natively on the base layer Force some of the reasons I just outlined but I want to give a bit of context here around how the traditional Finance system works so when it comes to settlement in the traditional Finance system you never really have guaranteed settlement right you have like optimistic settlement so for example if you you have a I guess like something that's a transaction that's being done

and you maybe you do something with a credit card or with a with PayPal and you buy something online well the merchant has an optimistic guarantee that that money is going to be there is going to land in their account and you have an optimistic guarantee that you're going to receive the item but if there's a dispute at any point in that process that has to go through the dispute mechanisms that's been set up and usually that's through PayPal but you can take it to its logical conclusion if if the dispute fails at the PayPal level you would have to go to some government to sort out this dispute and then you could even go all the way to a court of law to sort it out right and then this is all based on uh contracts that we have whether they're implicit or explicit contracts they exist in the

real world we don't have any of that on ethereum we don't have like physical contracts where you have to go to a court to basically prove who was in the right and who was correct or at least kind of get a judgment on who was correct with ethereum you code up the smart contract and then the smart contract is the Arbiter of what's correct and what it's not as long as it's fully decentralized for example the unusoft smart contracts that are fully decentralized they don't rely on any external entities to say if a trade was settled or not the trade gets settled based on the logic in the smart contract and a simpler example would be if I send it to someone that's not reversible I've sent that eth the only way that that transaction could be reversed is if the actual Network itself reversed it like

the like if someone it wouldn't even need to be an attack if the network agreed to do an irregular State transition and basically say we're going to remove this eighth from the person who sent it to I'm going to send it back to you that could technically happen practically it's not going to happen right practically and that still fits in with what I'm saying about the ethereum network being the Arbiter of that transaction so that's why you have extremely strong settlement guarantees when you're doing that because there's no reversibility there there's no court that anyone can go to I can't go somewhere and basically say hey you need to reverse this transaction like I can't go to a court and say hey can you order this transaction to be reversed I mean maybe they could uh if they wanted to take it to its logical conclusion Force

the person to send me the money back but they can't force ethereum to do it right they have to go to the actual person so for example if I was to accidentally send funds to the burn address and I was like oh damn like I I accidentally sent my Heath to the burn address I want to get my eighth back from there I can't go to a court I can't go to a job I can't go anywhere I can't go to the police nothing like that and say to them hey can you get my eth back no because the only way I could get my Heath back is as I said I'd have to convince the entire network to do an irregular State change for me in order to withdraw that eighth from the burn contract because the rules of the protocol are set and they change

through Network upgrades but they don't change to save someone's eat and we actually had an example of this with EIP triple nine which was uh the EIP that was put forward to save the funds that were involved in the uh I believe it was second parody wallet hack where there was a bunch of eight that got frozen due to a uh a bug in a smart contract they believe the library or something was deleted and there was a EIP to reinstate that Library hurt the funds would unlock and people could withdraw their funds now this is actually a really good example because we had on-chain proof of this there was no subjectivity here it was basically we know what we had to do to rescue those funds but we never did because it's a slippery slope from there

right like if you start basically uh invoking subjective governance every time someone loses money well then the ethereum network loses its credible neutrality uses loses its decentralization properties and those things are very very hard to get back I mean there are a lot of people who don't believe that ethereum is decentralized or credibly neutral at all because of the Dow hack right that was actually reversed there was uh the blockchain didn't get reversed but there wasn't a regular State change to take the ether that the hacker got back and return it to it their rightful owners so we have instances and we have examples and we have precedents that we can all look at but in the in the real world it's totally different like ethereum the network governs what happens on its chain like and the simplest example is each transfers because each transfers

don't require any extra logic it's just built into the protocol but if you build a smart contract that is completely decentralized then uh everything is based on that smart contract logic you can of course build contracts that have functions inbuilt that uh can be changed via social governance and subjective governance and that's all well and good but again like those rules are codified in that smart contract whereas in the real world we have contracts right we have laws we have regulations but they're not run by code they're run by humans like it's it's all human social construct at the end of the day and so are blockchains that they're very I guess base layer where the humans are the ones running the software but the code has certain guarantees behind it just like laws and

regulations have certain guarantees behind them some laws are stronger than others some laws are easier to change than others right some laws are harder to change than others we've seen this time and time again over thousands and tens of thousands of years without throughout human history so I think that's the context that you need when thinking about this sorts of stuff because ethereum as a settlement layer settles whatever like what people can follow whatever rules they want on the protocol so whatever rules are coded into the protocol and then whatever rules are coded into the smart contract now the now Kaylee says here in her tweet that this would this could be used to stop thefts like this reversal transactions okay well let's give an example here let's say you had a hacker drain 100 million eighth from a contract

and then there's nothing we can do about it because that was uh because because the hacker followed the rules of the contract they exploited the contract yes those weren't the that wasn't the obvious that wasn't obviously the um expected behavior of the contract but that was still allowed by the contract he wasn't doing anything that wasn't allowed but that was he wasn't allowed to do so he did it obviously uh we want the hacker to uh we want to take those funds away from the hacker who want to return them to their rifle owners but it's the same thing as the parody wallet kind of hack there right or the the parity wallet bike I shouldn't call it a hack it was actually a bug uh the same thing exists there you're invoking subjective governance when the social layer should always be the last line of

defense here so if you start invoking it for 100 million dollar theft uh then okay all you have to invoke it for the next step the next one the next one okay so that's obviously unworkable what if we did the reversible transactions well then you have to weigh up whether it's worth the trade-off of a D5 breaking or if you want D5 to work you actually have to build in all these new mechanisms that make it just look like Trad fire like if you want this stuff then just use Trad fire like you don't need to reinvent the wheel within crypto in saying that as I said I still obviously think that for for D5 for crypto to scale to mass adoption we need user protections we need ways to do dispute resolution and things like that but they should happen at the higher layers in my

view I don't think it should happen at the base layer uh the base layer should be kept as neutral as possible possible the existing standards that we have especially really popular standards like erc20 and ESC 721 should not be competed with like there's no point I mean yeah there are other token standards that uh potentially could be better not have reversibility but could it be better for other reasons but the problem is is that competing is just really really hard so you're going to waste all this time competing rather than just doing it at higher layers and just wrapping the existing tokens in in these things but I still like pretty strongly believe that if you want to do reversible transactions it's really really hard you would basically have to create your

whole entire own ecosystem before that so for example you could create an entire roll up that had a reversibility ecosystem but you'd have to build it in such a way that default would work inside that ecosystem context and you wouldn't really be able to bridge it with the main chain uh in any kind of like a way that would be efficient or a speedy because you'd have to basically say well okay we have optimistic guarantees that this is uh that these transactions are final because we are waiting for a dispute to happen so let's say you bake into the the every token transfer that there is a week countdown and then after the week has passed no one could do a dispute anymore it's locked that that transaction's finalized okay well that's that's fine it reminds us of how

Roll-Ups work right where you have optimistic confirmations when you do the transaction and then within a couple of minutes that transaction batch gets put on the ethereum main chain and then you have a kind of a guarantee around that you have a fine a finalization guarantee around that um so those sorts of things will maybe we'll see them built maybe we won't I'm not saying that people shouldn't or should or shouldn't build them but I do strongly believe it should be done at the higher layer so hopefully that gives some context there around all of that and you can understand that from at least my point of view here there was a bit of a heated debate in the daily Discord Channel about this as well but we're gonna have to see how it plays out I honestly don't think that it's going to work very well uh if you start doing

these sorts of things at the the base layer I don't think it's going to work at all to be honest and I think it's going to be a hard um thing to compete with the existing standards existing liquidity I mean think about how much liquidity it revolves around the existing standards it's just it's immense right so we'll see we'll see what happens there but yeah I'm going to leave that one at that uh I'm curious to hear your thoughts on it if you want to jump in the Discord you can talk to me in there or in the YouTube comments I'll give them a read if you leave one all right so uh speaking of things that need to be built in ethereum Tim baiko uh was quote tweeting himself here and he said uh uh for ethereum I think we had private we had private eth transfers

by default I think if we had private Heath transfers by default we'd be in a great spot contracts can all be public and making 21 000 gas sends private would be good enough and then Tim baiko says this is the number one problem on ethereum I'd love to see someone come up with a solution to many issues to work through even beyond the Privacy itself but if we got it done it could be completely change what the end state of this space looks like so I've spoken about privacy a lot on the refuel especially when it comes to doing it at layer 2 or doing it through mixes like tornado cache and I've also spoken before about doing it natively on the base layer and the trade-offs that come with that but I think what Tim's saying here is that let's if we could if

we could come up with a way to do it just for each transfers like imagine a world where everything's still public on ethereum except each transfers could that be enough right like obviously doing all of um the base ethereum chain uh fully private would take a long time for us to get there as I said there's a bunch of trade-offs and complications with that but could we just do eth transfers because eth is already the pair sorry the um the token that powers the ethereum network it's already a thing that everyone routes through everyone has that everyone has to use it if they're using the ethereum main chain obviously to pay for fees so if we could make all eth transfers by default private then we could have a much more robust privacy ecosystem on layer 1 ethereum than we do today I don't know

how long it would take for us to get there I don't know what kind of priorities the developers would put behind something like this uh over the other things they still need to get built within ethereum but I still do think that privacy is up there with scaling in terms of importance now it's I think the debate is should we do it at layer one or should we just do it at Layer Two and leave layer 1 as it is we may have to just deal with layer one being super public and and completely public actually uh for years to come and maybe one day we get those private transactions for not just eat but everything but I still think it's worth talking about and thinking about it but I expect to see it happen on Layer Two rather than layer one all right so speaking of upgrades coming

to ethereum so Trent Van Epps here put out a thread on erp4844 and the kzg ceremony so he says for the past six months contributors have been building the z a kzg ceremony a prerequisite for Proto dang sharding erp4844 hopefully in two weeks we'll be collecting a community contribution from the main stage audience at Devcon so this ceremony basically is required to get us to protodang shiding or Erp 4844 it has come under scrutiny because it is what is called a quote unquote trusted setup but within this setup you only need one honest participant so you could essentially have uh I don't know 100 participants total and if 99 nine percent of those participants weren't

honest and only one was honest it would still be secure the thing would still work and it'd still be all good so I think that obviously we want to have like a really large set we don't want just 100 people which as Trent says here the ceremony will be browser-based accessible no large files to download only take two minutes to complete they're aim to have the largest set ever of 5 000 plus contributors uh provide an easy way to audit the transcript script output summary of all contributors which provide approves the ceremony is legit so I'm pretty sure anyone's going to be able to get involved with this and as Trent says here if you're at Devcon on the main stage audience you'll probably be involved with it as well I remember I was involved with it for tornado catch when it originally got spun up by

branding my browser and I was kind of participated in it I think this is really cool because like the fact that you only need one honest participant is crazy to me I mean I obviously calling it a trusted setup is technically correct because you still have to trust one person or you know one entity out of however many you have in the set but like that that's crazy because the chances of every single person in a massive set of people so let's just say the chance of of every person in a 5 000 person set is dishonest is really really small like I wouldn't call it astronomically small but it's really really small um and obviously the issue is making sure that those contributors are legit

uh as as Tran says here but they've been doing a lot of work on this and you know the funny thing is a lot of the people that are going to be participating in this ceremony are going to be ethereans anyway and they really have no incentive to lie here I mean lying uh would would go against the best interest of the ethereum network so that's why I think that something like this uh even though it's called a trusted setup it's technically correct but practically it you're not really trusting uh trusting anyone because the chance of people uh of that one on sorry the chance of there being no honest participants in a massive set of contributors is quite low but you can read this thread for more information on this I'll link it in the YouTube description below for you to check out

all right so there were about 20 validators that were slashed over the last three hours or three hours I mean being two days ago uh due to a tester equivocation so uh Terence said yeah I couldn't find much info with the validator indices and deposit addresses my guess is duplicated setups forgot doppelganger detection these are some really early validators and the way you can tell is that you can see on the left hand side I slashed validators in the validator number so anything in that range like the numbers are like in the 3000s is really really young that's basically since Genesis and I went and looked it up these people had been or these validators have been staking since Genesis now 20 of them got slashed I lost an eighth each which means they lost about 20 so the last 28th total were just over 28th total for uh at a

testification violation as Taryn said here it could be due to duplicated setups and uh I guess like it seems this was part of the same entity because the deposits followed uh you can go back and check their deposits they followed uh or each other and the numbers obviously match up as well in the validator numbers here so yeah I mean these things happen you know I've seen some people fighting this on Twitter saying that um saying that uh people were sorry saying that uh slashing is actually just punishing within the ethereum context and you don't need slashing I think that's completely wrong we spent so long researching slashing and implementing it is because because it actually does work uh obviously there are going to be some casualties along the way of people doing

things they shouldn't but really there's not that many of them and people learn very quickly and the punishments kind of scale with with uh I guess like how many uh validators are doing the same thing at once so you don't actually get punished that harshly just depending on what you do what you've done to get slashed and I remember ethereum polls.info had a really great tweet but about this as you go check out uh I don't remember where it is you can probably just uh search it on Twitter um on on their profile but uh but yeah I mean these things happen I I I think the fight is hilarious because I saw so many people like from other communities other blockchains being like you know our proof of stake doesn't have slashing and it's secure it's like no it's not just because it hasn't been attacked yet or

nothing quite a bad has happened yet doesn't mean it's secure like you don't know that until something bad actually happens and as I've said I think I said this last week ethereum is not waiting around for that something bad to happen it's planning for the worst case scenarios that we can think of in order to be able to recover from them if they do actually happen or defend against them as well all right so I spoke a little bit about Mev and the different Builders last week so the Builder market share and ethereum block building space is actually becoming more diverse now so a lot of more small Builders have entered over the weekend so we've gone from nine Builders to 17 as of September 24th now this is another piece of fun that people were bringing up on Twitter that like

two or three dresses were like the majority of builders on on the network now this is actually not it's a nuanced topic because the whole point of like PBS or proposal Builder separation is that we know in the long term Builders just centralize because of things like Mev so why don't we separate Builders from proposers so that the builders can be as centralized as they want to be but they're just kind of like sending these bundles in the Mev context they're sending these bundles to the proposers and then obviously the validators are still attesting and proposing and and proposing blocks and all that sorts of stuff so the network Still Remains just as secure you just have a I guess like centralization of

Builders which isn't that big of a deal if there isn't really a big deal at all if you have that separation there uh because I guess like the biggest deal would be that the Builder could um send to you but like if you have you can build the blocks yourself still and if you've got like a diverse Builder set if you make it so that we've got a diverse ecosystem of Builders it's not actually that big of a deal and I mean the economics come into this as well if the builders start censoring certain transactions people may just take their uh I guess like validators away from those Builders and say well I don't want to beat build with you because you're censoring just like how um you know I originally was going to run Mev boost and not run it on the flashbots relay because they're

censoring to another cache transactions but I'm not running Mev boost at all but there are plenty of people out there who are running it but aren't talking to the center censoring relayers so that also kicks in as well but good to see that the Builder market share is becoming more diverse here and it's definitely due to profitability because obviously uh the being a builder is quite profitable if you can build if you can be one that uh um that is successful so yeah good to see a bit of a bit of diversity here all right just wanted to hide another thread from Haim uh over the weekend so this is a timeline of ethereum's life since basically late 2013 when vitalik first published the white paper this is pretty cool he's got a little uh logos here

um for all the different upgrades and and Milestones along the ethereum journey all the way up to the merge you can see here that ethereum has uh it was it's funny looking at this because you can see in 2017 and 2018 it was kind of like a dead period for ethereum in terms of things going live so in 2017 we had one sorry in that period we had only one network upgrade and that was Byzantium on in October of 2017 but other than that there was nothing and funny enough people thought proof of mistake was coming in 2018 so it it and that was the most Dead period and then you can see after that starting in 2019 we really sped things up uh especially because the beacon chain went live and we're doing the merge and all that sort of stuff so you can see in February of 2019 we had

Constantinople and then we went to we oh 2019 was basically a very big year for building to begin China focusing on that then we had mirror glacia in January 2020 which was a difficulty bomb delay but just before with that we had Istanbul in December 2019 uh and then yeah through 2020 we had uh the staging deposit contract grow live Beacon chain Genesis and then in 2021 was a big year as well we had Berlin uh London Altair Arrow Glacier and then 2022 was also a big year with um great Glacier balatrix and of course the merge so it's really cool to see this that basically that funny period there in 2017 2018 I think 2017 obviously a lot of noise because of the bull market 2018 uh I think ethereum

was trying to find itself the bear Market came along uh and then we kind of I guess had a rough idea of what things would look like and in 2019 we had a better idea and now we're at where we're at today but you can go give this tweet throw to read I'll link it in the YouTube description below all right so just a shout out here uh Jake chavinsky uh highlighted that Gavin Newsom who is I believe the governor of of California yeah our governor candidate of California uh basically vetoed this uh bill called ab2269 which is basically the bit licensed copycat Bill uh that passed in the California legislator uh legisla legislature by a wide margin 71 to zero in the assembly uh and he says yeah that takes guts he did it for all the right

reasons so for those of you who don't know the bit license uh uh I guess like thing or license uh in New York is really restrictive to what can actually be done and what can be offered in terms of trading crypto New York obviously it happened because of Wall Street but New York is actually a very restrictive place when it comes to trading crypto now I I think this bill was going to bring the same thing to California so what ended up happening was that Gavin vetoed this even though it got a 71 to zero and it passed you know in the assembly here uh which is very very positive so some more positive regulatory news I just wanted to hire that for you guys I'm running out of time here but yeah I just wanted to highlight that it's not all doom and gloom out there it's not all bad I know

the macro environment is still all doom and gloom I know everyone's calling for the end of the world right now but I don't know like I look at Twitter and I'm like I look you know what I do I look at Twitter I look at all these macro people it's always just Doom right and they're posting all these charts and they're posting all this stuff and then they go subscribe to my newsletter and I can't help but think that they're just using this Doom in gloom and and panic and fear to engagement Farm in order to get more people to sign up to their stuff and they're probably making money from it somehow that's why I really hate the internet like sometimes is because it's very hard to get the right information because people are um people uh definitely have ulterior motives a lot of the time especially

when it comes to things like markets and and macro environment and stuff like that because I can't see any level heads on Twitter I can't see anyone saying hey you know this is the situation right now but this is what it could look like uh in in a positive context it's always the negative context you know no one's saying or maybe inflation has peaked or maybe uh you know the FED rates won't go as high as we all thought it will and here are some charts that prove that it's always the world's ending this that everything's breaking currencies blah blah all this like I just it's so hard to actually know what's true and what's just engagement farming so that's why I've avoided the macro environment and not the macro environment but like the the kind of I guess um the uh the macro Talking Heads and I've avoided trying to

follow what they're saying and I've avoided really applying too much on it uh because it's just it's very complicated it's obviously uh spans the entire globe and it's something that I think a lot of people in crypto don't really understand very well but people still have to have their opinions that's for sure um but yeah anyway that was a bit sidetracked there but it's just very hard to get I create information on all that sorts of stuff but I'm going to power through the last set of updates here just because I'm running out of time so there's this blog post here done by Donna which is going through the differences and similarities between optimism bedrock and arbitrim Nitro deposits and this is just part one of this blog post Series so I highly recommend giving this one a read because it was quite interesting and following

them so that you'll see the the other parts that are coming out but yeah I'll link this in the YouTube description below for you another blog post to read is one from Paulina talking about uh blockchain apps now I've talked about this before how I think that we're gonna have you know all these cheap block space but we need apps to fill it up with right we need we need people to to want to use these apps and probably not gives some thoughts here so it's a short read I'll link in the YouTube description for you to read but just wanted to highlight that one and it finishes off for today I come across this really cool app called orb on on Twitter here which is built with lens protocol on polygon so this is a mobile app fully built with lens uh it's they've invited 13 000 plus waitlisted

users to the private beta and it's basically decentralized social network from what I can see in the in the video here so it's pretty cool I mean mobile first decentralized social network built on polygon using lens protocol this is what I like seeing in the web 3 space as I've said before I don't think that Reinventing the wheel is the way to go I think that just using these Primitives that lens protocol has created and building on top of it and building like an open I guess social graph when it comes to social media in a decentralized way is really really cool so you can go check this out uh maybe you signed up to the waitlist already and you've already checked it out but I'll link that in the YouTube description below but I think that's going to be it for today so thank

you 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 or actually maybe not I might not have time to do one tomorrow but we'll say tomorrow being Tuesday if I don't catch you tomorrow I'll catch you on Wednesday day thanks everyone