US Treasury OCC news, Futureswap v2 live and more - The Daily Gwei Refuel #29 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daily gray refuel where i recap the latest news in the ethereum ecosystem i'm your host anthony sosano and today is the 5th of january 2021 alright everyone what a really really big day uh yesterday uh crazy last 24 hours i guess um both in the markets and also uh this major announcement out of the u.s banking regulator the us treasury occ uh this i pretty much was the talk of i guess like crypto today uh so i'll break down what it is basically the treasury occ um has put forward new guidance that allows u.s banks to use public blockchains and dollar stable coins as a settlement infrastructure

in the u.s financial system this i mean this is probably some of the biggest news in quite a while um you know at least outside of the crypto ecosystem because this is obviously the traditional finance system it is outside of what what we're obviously building on crypto but well in the theory in the ethereum space but what it does is it lets the traditional finance system kind of like legally or like you know um without uh fear of regulators to participate in this new kind of economic system or systems that we're building which is huge right so i mean jeremy does a really great job of explaining here for those who don't know who jeremiah elaire is he is the co-founder and ceo of circle

which is the issuer of usdc um so he goes on you know into it to explain it quite well he basically says that banks can now treat the public chains like ethereum as infrastructure similar to how they treat swift ach and fedwire and stable coins like usdc as an electronic stored stored value and he says the significance of this can't be understated and yeah i mean i repeat that as well this is uh incredibly big news incredibly bullish news uh particularly for you know ethereum right because that's where all the stable coins live now do i think that the banks and all this stuff are going to be settling to ethereum immediately you know maybe not maybe they're going to have their

own kind of like private implementations maybe they're going to do it through um something like comp chain this was actually something floated around about comp chain was that they were actually building this as you know regulatory compliant kind of like you know it's not super decentralized but it allows these players to tap into you know the crypto ecosystem and then go into ethereum and things like that so maybe they'll use something like that but i think you know if they want the the best security guarantees they want the best kind of liquidity they want to be where the party is that's on ethereum right i mean yes the fees are high but these are banks we're talking about they can afford to pay these high fees uh they won't even blink about them sort of thing and it's not like they're going to be doing you know

incredibly complex transactions all the time that if they're just settling to the ethereum network and settling transactions they may only have to do that a few times a day or something whereas they could have their own kind of um you know private system or maybe like a permissioned blockchain or something like that where they run all their other transactions on and then just settle it to the main chain or something like that but the fact that they've got guidance now on this and that they're kind of like not going to run afoul of regulators if they start doing this is is massive um and i think usdc stands to benefit greatly from this because it is the biggest regulated stable coin obviously there's tether but you know the us regulators are not going to just let um all these banks use tether

you know for example um so usdc is perfectly positioned here and i think that we're going to see some tremendous growth from from usdc this year uh the liquidity is going to get like you know it's going to explode basically the the supply of usd usdc is going to explode it's going to become the preferred centralized stablecoin you know it might even overtake tether usdt uh so we'll have to kind of keep an eye on that and see how that plays out um but yeah i'm sure you saw all this all plastered across twitter like everyone had their own thread about it i mean i woke up to the news and i was like wow this is this is just going to be massive um so i'm really really excited to see what comes out of this and you know even you can see here just

based on the likes and retweets i mean this is this is huge for a crypto tweet i don't really see many crypto tweets get this much engagement uh so you can see that not just i guess like the ethereum ecosystem but you know the bitcoin ecosystem and whatever other ecosystem and communities are incredibly excited about this as well you know whenever we get regulatory clarity within cryptocurrency you know the markets love it because they're they're more risk on you know there's more certainty so you know markets hate uncertainty right so they really hate it when they have to trade around uncertainty and like step on eggshells try not to break any rules or whatever or you know if there's some regulations coming down the line um they're kind of spooked and then it kind of trades sideways all down uh whereas uh this um you know this kind

of gives guidance there and helps people a lot so yeah that's that's really cool um and i also think this is going to open the door to uh you know defy in general right um the banks you know might say okay well how can we use this new default infrastructure right how can we tap into this this is this is this is a massive ecosystem it's global you know it's much more efficient it's it's it's much better for innovation there's a lot more you can do on here you know the banks are definitely going to tap into this they just needed the regulatory approval to do so so it's going to start with these kind of like stable coins and then i think it's going to move into d5 um it's going to need to become a lot safer you know the banks aren't going to

be using you know your latest defy app or whatever they're going to be using the established players like compound and ava and things like that and and maybe even maker and stuff but you know that that's probably going to take a little while still to come i think that in the meantime stable coins will be their gateway drug and then once they've kind of like gotten addicted to that they're definitely going to try out defy you know whether internally as it kind of like in their innovation labs or anything like that so yeah it's going to be it's going to be huge so uh we'll keep an eye on this see if there's any other news that comes out of this but yeah i think it's a great day for it was a great kind of last 24 hours for the crypto ecosystem not just the ethereum ecosystem which is

really really cool to see so future swap v2 is now live uh this went live a little while ago where they had kind of caps on how much liquidity you could put in as it was like a beta but yeah basically their v2 is now live and what you can do on future swap is that you can it's basically an on-chain perpetual uh protocol where you can take out 10 times leverage it's got live pricing and you can earn fst governance rewards as well uh so yeah if you're into that if you're a trader definitely go and try out future swap i've heard really good things about them uh you know from people who tested it when they had their v1 out there it's also been audited so you'll you know you'll be safe right it's not just your your latest kind of yield farm that

everyone's aping into or whatever um you'll definitely feel safe trading on here um but yeah do do kind of keep in mind that this is you know a new product still so there might be you know something that could go wrong with it but yeah definitely check it out if you're a trader really funny tweet from hazu uh last night uh or last night for me i guess uh he basically says in this tweet the salt of old chain founders when people rather pay 100 per transaction on ethereum then use their ghost chains for free now this is this is really funny um i mean obviously with the high gas fees and i'm actually going to talk about the high gas fees for most of this refuel because i think it's very relevant right now but basically it's causing a lot of these other kind of chains and

a lot of people to question like you know is activity going to move off ethereum and is it going to move on to these other chains and i just don't see that happening right for for multiple reasons and i'll i'll run through through them quickly basically to move your product from the ethereum ecosystem where literally everything that matters is happening right and to move it onto a new chain where you have to build up the network effects from scratch is really really really hard and doesn't make much sense right the much easier approach and the much easier path to go down for these teams is to just go on layer 2 ethereum you retain ethereum's network effects you retain ethereum security and you basically give the end user an amazing experience where they don't have

to pay these high gas fees and it's much quicker for them to do their transactions and things like that so i just i mean i don't see it happening i really don't and not only that there's also the fact that there's so many chains to choose from right so you have like ethereum at the top by far nothing even comes close really and then you don't even have a second place like if i ask people you know what's second to ethereum i'm going to get 10 different answers right if i ask 10 different people so how did that how does a project choose right say say uniswap for example was like okay you know let's migrate off ethereum ethereum's too expensive for our users even though unistop's use is just going up right as well but let's say they just as a thought experiment they just said we'll

go somewhere what are they gonna choose right i don't know i really don't know i couldn't even tell you what they would choose uh and because there's too much choice out there and and that just fragments things further the network effects are basically kind of um non-existent so you know you're just fragmenting it out and you're leaving it's you know what you're doing you're basically leaving the party that's like you know go you know popping basically like all your friends are there everyone's there you're having time in your life and then you're like oh you know what i mean it's too crowded here i want to go somewhere quieter and you leave the party and you go home and there's no one there that's what it's kind of like right so why would you do that it just doesn't make any sense um so i i kind of feel like we're going

to scale ethereum at layer 2. most projects are going to choose to go on to layer 2 instead of migrating to another chain because it just makes a lot more sense to do that and i think those projects who do go to other chains are going to lose to the ones that stay on ethereum and you know build out the layer 2 ecosystem on ethereum rather than trying to you know start from scratch i i just don't think that's a winning strategy and obviously as hazuno tr this makes the other chain founders very salty right they don't like the fact that ethereum is so successful even though ethereum has all these issues that they're trying to fix right and i think they miss the core point here is that yes ethereum has issues but it i mean it doesn't matter right it doesn't matter most it goes so

far beyond that right where the people in the ethereum ecosystem are going to basically uh stay and work on what we've got rather than migrate across right it just doesn't make any sense uh and it goes you know beyond just pure like i guess like technical stuff and network effects stuff it goes into the values that the ethereum community holds as well um you know for me ethereum basically meets all the values that i hold you know just fully decentralized doesn't sacrifice on decentralization to achieve scale permissionless censorship resistant um you know trying to build out the best decentralized system that we can basically those are the values that i kind of you know um love and you know i know maybe some of you kind of watching listening to this

will have kind of maybe owned coins of other chains and things like that i think that's fine like i mean you can speculate on whatever you want but i i just wanted to make it clear that i just don't see a world in where ethereum loses at this point uh you know it's not like ethereum is is looking you know the community's looking at these high fees and it's like oh okay that's fine whatever let's just let let that play out it doesn't matter what what they're doing is they're innovating right it's not just innovating on layer two we've got eth2 coming as well the ethereum community and ecosystem is pushing forward it is not resting on its laurels uh so i think that's what a lot of people miss as well is that when ethereum is not giving the opportunity to other chains to kind

of like quote unquote take over or take market share around from ethereum ethereum is basically because you know cementing itself and and increasing its network effects while aiming to fix the issues as well with apps that are live and i'll get into that there are actually so many apps live on layer 2 right now so yeah i just i i don't see um this migration that everyone wants to you know to happen happening i see the migration to layer two happening and the other chains you know fighting amongst themselves for some minority market share whatever i just i mean you know given that we're in a crypto bull market a lot of these coin prices might go up because the market loves narratives you know and the narrative of other blockchains when ethereum's gas fees are high uh

you know is really great it's kind of like how in 2017 the narrative of bitcoin cash being cheaper to use than bitcoin sucked in a lot of people and bitcoin cash ended up pumping right um that's i think we're going to see that play out this cycle because we need a lot of new people in and these new people are going to come and they're going to experience these high gas fees and like oh you know these other chains are cheaper like why why don't we just use these chains and they're gonna obviously because they're new they're not gonna know all the intricacies they're not gonna know all these things that i'm talking about and they're gonna buy these coins and these coins are just gonna go up because of that i don't think that's a signal of success at all just because a coin price goes up

doesn't really mean anything i mean you know if it did then xrp you know would actually be doing something rather than just being worth like what it is um but yeah i i i obviously have a lot of strong thoughts here given that i'm very close to the ethereum ecosystem but i think that if you really think about it and really you know try and make sense of it you'll realize that it just makes much more sense for projects on ethereum to migrate to layer 2 rather than migrating to a new chain and hoping for the best it just it's just such a huge risk and from someone who works at one of the companies that works on ethereum like it's it's it's hard enough to build and and and grow on ethereum with its limited user base

than it is to like go to a new chain right i just don't think it's gonna it's gonna happen um but yeah we'll see how what what happens over the next few months i'm betting on layer 2 ethereum all right uh speaking of high gas fees on ethereum i tweeted out this uh kind of um picture today of uh basically the crypto fees site so if you go here to crypto fees.info you'll see a kind of like a table of different networks and apps running on ethereum uh and their fees that they're being paid each day now obviously the fees are very high over the last 24-48 hours and as you can see here ethereum is reigning supreme it generated 20 plus million dollars in fees uh and bitcoin is a distant second at

3.5 million dollars in fees now i wrote about this in today's daily grain newsletter which you can go check out in the description about my thoughts around why this is fine and why this is really great um you know obviously high gas fees are hurting all of us but there's a lot of reasons why this is really great i think and it's even funnier to see that you know even just apps on ethereum like uni swap or generating more fee almost as much fees as bitcoin and that's actually flipped a couple of times in the past as well uh and then you have like obviously sushi swap and a bunch of other apps here and then you scroll down and you see the other networks too right this they're not generating much fees um because the economic activity is just like non-existent basically

and that's what i argue in my piece so yeah go read the piece i i won't kind of rehash it here but the trdi is basically that you know when there's this much demand for ethereum you can't really kind of say that ethereum is dying or unusable or whatever ethereum is very usable if you're paying you know the price right of course but um it's just uh yeah it's it's just a perfect way i think to see network activity too because it's very hard to game fees right because you'd have to pay the fees and it's just very expensive um so it's a very easy way to measure demand for a network while taking into account that people can cyber different things but yeah they you know disable this would require someone to pay you know

even if they wanted to do the whole thing they'd have to pay 20 million dollars in fees and that wouldn't go to them that would go to minors um unless i guess like the miners kind of did it but i mean maybe that could work but i don't think so and also there's this meme here from uh cyber hokey which i thought was pretty funny uh as i said before you know uh these other chains trying to advertise low fees and things like that and no one really cares because they're having too much fun on ethereum right that's where all the activity is where the party is um so yeah i thought that was quite a funny meme to kind of encapsulate that as well speaking of gas phase again and i mentioned before how there's already a lot of apps on layer 2 on ethereum

i put together this kind of incomplete list on twitter today so if you want to experience the future of ethereum basically what layer two is going to be and and how it's going to kind of like i wouldn't say fix everything but alleviate a lot of the issues you can go try out loop rings the centralized exchange which is a both an order book one they also have an amm so like similar to uni swap diversify has a similar uh kind of setup with their order book exchange i'm sure you've all tried out the mata labs as zk sync on git coin during the grants round so you've probably already experienced experienced it curve finance also has a zk sync uh sable coin decks that you can go try out synthetic staking using optimism is also live on test net just for

staking not their actual exchange so you can go check that out as well and i have all the links here i'll of course include this in the youtube description too so yeah it's not like this is like a pipe dream where everyone's saying you know yeah the fees are high but just wait ethereum layer 2 is coming right we'll we'll be fine it's going to fix everything and then there's just nothing to show for it there is plenty to show for it the tech is real the tech is live on mainnet you don't have to wait you can go use this now the only thing we're waiting for is for the major apps to go there right so something like uni swap uh is what we're waiting for and i think uni swap is going to be the game changer here because unisop is the

most used app on ethereum by far i think so once they migrate it's going to be like a snowball effect and we're also going to be seeing the power of it and everyone will be able to see just how awesome layer 2 is and how ethereum is going to scale and then i think that uh you know over time it's going to be like a probably a multi-year thing it's not going to happen overnight but over time you know these high gas fees and people complaining about them you know and people experiencing them will be a thing of the past so really looking forward to that but yeah if you wanted to check out layer 2 today you can links in the description speaking of layer 2 technology vitalik posted this blog post today called an incomplete guide to roll-ups so i've

spoken about roll-ups a lot lately the different kind of versions of zk roll-ups and optimistic roll-ups and now what vitalik does in this blog post and it's a little bit technical but i think he does a really great job of explaining basically the differences between i guess roll ups and state channels and plasma and sharding and all that i'm not going to read the blog post obviously but you can see it's quite quite detailed here he's got a really nice table here actually that shows uh the differences between optimistic roll ups and zk rolls which i mentioned are going to be the two main ways that we scale on ethereum layer 2 and then yeah it just goes on and on here about the computation how it all works i mean as i said this gets technical but i think it's it's a pretty great uh

overview in general if you want to get the gist of kind of where layer 2 is going how it all works why we've chosen roll ups as kind of the vision here so on on that note as well eli ben sassen from starkware which is making zkrollups put together this nice little diagram here which you can see maybe you can't see because my camera is blocking it off here but you can see in the picture here um the the bottom left is blocked off that's okay basically um he's comparing the different uh layer 2 scalability kind of technology kind of the status of them so zeke he's i mean he's obviously biased because starkware is working on zk roll up so maybe take this with a with a little bit

of a grain of salt and don't take this as kind of like uh the the the kind of beyond end all of comparisons here but basically what he's saying is that zk rollups offer the best of of you know of both worlds they offer the best uh in terms of like on-chain data and kind of off-chain data and security as well uh you can see at the top there he's got like a little meter that says you know security is high for zk roll ups right now that what's live is stark x which is diversify exchange loop ring obviously in zk sync uh and then on test net you've got aztec and hermes and optimistic rollups is claiming to be a lot less secure and not on main net yet but on uh test nets right now

uh and then there's a bunch of other things down the bottom uh you can see validium right there which is also stark x and then on the right there's plasma which is on our mesego network and then side chains on the far right there which include matic and extire and obviously the security of them is quite low simply because i mean for those who don't know the main difference is that a layer 2 inherits ethereum security whereas a side chain relies on its own security so if you're on a like an x-dire network you actually aren't secured by the ethereum network anymore your funds are now secured by the xdi network so it's not the ethereum miners validating your transactions it is the ex-die validators validating your transactions and those

validators are actually chosen by a part of something called proof of authority which basically means they're hand-picked by i guess the team in this case that built the network to validate the transactions and if these people wanted to they could um basically censor your transactions or steal your funds in the worst case so that's the main difference there so whenever you hear someone talk about a side chain just know that a side chain can be basically anything because it's not secured by ethereum you know exchanges like centralized exchanges are considered side chains um you know bringing your your ether over to basically anywhere that's not ethereum and is not secured by ethereum is a side chain or any tokens or any kind of value that you're doing

so it's very important to remember that when you're seeing people talk about you know scalability solutions and how great they are uh you really do need to make sure that you know the trade-offs between them and i hope that i mean i hope it's not too technical and that you know the different projects actually kind of warn users and say you know this is why you're secure here in like language that they can understand because i definitely want i don't want to go down a path where the users feel like you know they aren't secure and then like we have like massive hacks happening because there's like 100 million dollars on a side chain and then someone's like well i can just steal these funds bring them back to ethereum and then no one can stop me so yeah we'll uh we'll have to see how

that plays out for sure but i thought this was a was a neat little table again though uh eli here is is is um is biased of course because he's working on zk roll ups but uh yeah i will have to see what optimistic uh kind of i guess optimism and fuel labs and off chain labs comes out with as time goes on uh and and see if they kind of like have their own comparison here between the different roll-up technologies finally uh dc investor put out a really interesting tweet today where he says that he bets that most people won't outperform just buying and holding the above assets through most of the bull market and what he lists is basically 50 8 30 dpi which is the d5 pulse index from index co-op and 20 btc

now i mean i i kind of agree with this to an extent because i think if you look at uh the long-term trends here and you're investing in other tokens over the long term if you look at their price against usd it can actually be misleading because if you look at against usd you know it could be going up right but if you're but then if you look at it against ethan btc it can be going down like down very quickly as well because the usd prices of different assets go up with the rest of the market right because the market caps of all assets kind of get re-rated the entire industry just i mean every coin just basically floats up well not every coin but a lot of them right whereas if you look at it against ethan against btc

it's much harder to outperform that because ethan btc are also going up so this is why dc investor says here that just split yourself kind of like i mean you can split yourself evenly if you want but he's ma he's saying go heavy ethan defy which i actually agree with but basically you know you split yourself between um eth dpi and btc you get exposure to eth obviously you get exposure to all of d fire or at least the top defy apps in the default plus index and you get exposure to btc these these kind of things aren't going anywhere right ethan btsc are here to stay the d5 pulse index tracks the top d5 tokens and they're here to stay um it doesn't contain all the smaller default tokens uh the much more speculative ones it

mainly contains things like comp mkr lrc uh snx you know rv all the top ones that the projects are actually kind of like you know doing have a lot of traction here and aren't very risky uh compared to the other ones so yeah i totally agree with dc here i think that um and it's i guess like the portfolio also has things like wi-fi in it as well so a bit more speculative i guess uh there but um yeah i i'm gonna maybe i should kind of like put together something for this and track it over time you know during the kind of like from inception the dpi only went live a couple months ago i guess three months ago at this stage you know kind of track the inception of dpi um and then from there as well ethan btc

and track their car and track this portfolio over time and then measure it against um ethan btc and then measure it against like if you were to go into individual tokens and hold them for the same amount of time to kind of see what happens here it's going to be very interesting to see for sure uh but yeah i guess obviously not investment advice there but something really really cool um uh to to kind of consider there if you're you know more of a passive investor you don't want to have to deal with the headaches of changing in and out of positions uh and also you know for those of us who live in kind of the western nations we we have to pay like pretty high capital gains tax especially on short-term trades so that's another thing uh to take into account when structuring portfolios like

this for sure all right that's it for today everyone thank you again for watching and listening if you haven't subscribed to the youtube channel yet be sure to do so give the video a thumbs up subscribe to the newsletter join the discord channel and i'll catch you all tomorrow thanks everyone