Visa building a layer 2, NFTs on Twitter and more - The Daily Gwei Refuel #220 - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daily gray refuel where recap the latest news and ethereum ecosystem i'm your host anthony sosano and today's the 30th of september 2021 all right everyone let's get into it so just announced actually i think this was like 20 minutes ago visa just announced that they are building an ethereum based layer 2 payment channel network now there's this article from the crypt that came out and a few other kind of like media organizations covered this like the block uh and coindesk but essentially what visa is building here there's a white paper for it and everything but they're calling it a kind of like a universal payments channel basically i think it's based on state channel technology from what i saw from the white paper as i said this came out 20 minutes ago so i've just been trying to

kind of like uh kind of get across all of it so i could explain it to you guys on the refill today um but the reason why i say it's built on ethereum or ethereum base is because at the end of the decrypt article you can see here that uh they say visa for instance says the proposed base layer for its universal payments channel is ethereum now that doesn't mean that it's not going to work with other networks i think from what i can see what they're wanting to do is build an interoperable payments network so that it can obviously have ethereum as the base layer so it's like hq for example it's like home base and then have the other networks all kind of interoperate with it and connect to it and all that good stuff so i think from that perspective it makes

perfect sense right i mean visa has been talking about this for a little while wanting to kind of like uh create a i guess crypto based payments network obviously they already have uh their existing payment network that they call visanet internally but that's you know running on the old rails completely centralized completely closed off there's no openness to it at all whereas something like this i guess like the the potential maybe it doesn't end up like this but the potential would be to have this completely interoperable payments network that maybe it's still permissioned maybe it's still centralized but have it between all these kind of like different merchants and tapping into the crypto rails so all of these uh i guess everyone that uses visa and uses their existing visa net can tap into the crypto ecosystem and

this is kind of like you know some people argue and be like well this isn't uninteresting because it's centralized it goes against what we're trying to build with d5 and blockchains and all this sort of stuff but i've explained plenty of times on the refill before is that this is kind of how we get adoption like i'm i'm going to just be honest and most of the world aren't going to be interacting with the i guess blockchain networks directly with metamask with you know other kind of wallets out there they're not going to be going to the unix up front end and topping tokens on there directly they're going to be going through different intermediaries and the real the real innovation or i guess like the real revolution within crypto is that yes you can go through an intermediary but you can also go and do it yourself whereas

with the existing financial system you can't do most things yourself you have to go through an intermediary there is no choice so really the revolution is the one of choice and that's what i you know i'm most excited about when it comes to crypto is the fact that we now have a choice when it comes to our financial transactions and it also i mean it's not just choice it also brings a lot more transparency to the financial system um it allows a lot more people to kind of like be on board into it it's going to just vastly improve and it's permissionless as well that's for rapid rapid iteration rapid innovation at the uh kind of like financial level which has not been possible traditionally in the past so there's all that but at the same time that means that visa can build like a

totally centralized permissioned uh payments network on top of this technology and no one can stop them from doing so but what's really cool is that if they're still using ethereum as their home base if they're still settling to ethereum if a ethereum is their settlement layer then they're giving a lot of value to the ethereum network not only because they're going to have to pay fees in eighth right even if it's a layer 2 network they still have to pay fees and ease to secure their layer 2 network if they want to tap into ethereum security which means each gets burned which flows onto eth but also i'm sure they're going to want to interoperate with all the defy apps on ethereum they're not just going to want to sit in their own silo and basically be like okay well our payment channel network can't actually

interoperate with any of the dfi apps out there and we're just going to build a closed closed garden and then you know we're going to hope it gets adoption and i think that's what's going to happen i think they're going to build this thing to be completely interoperable with uh different kind of like crypto networks out there and also all the different default apps and maybe even nfts and stuff like that so from that perspective it's quite exciting but i guess like one thing that i would temper expectations about is kind of like the timeline of when this is going to be coming out because the funny thing is with with these sorts of things is that you can never really predict uh i kind of like the timeline here but you can always i guess like assume that it's going to take much longer than what you would think they've

they've said i mean visa said that this is still in early stages uh they've just kind of like announced as they put a white paper out everything like that and just unveiled it to the world but this is probably going to take years to to kind of like come into a i guess like production capacity i think i saw a tweet where they've already got like a smart contract live on it on an ethereum based test net but that doesn't really mean much it doesn't mean that visa is going to deliver this thing in like a month right for example i actually think it's going to take some years to do this but it depends how far along they already are maybe they've already built a lot of it and they're just unveiling it now but at the same time for them to roll it out and for them to get adoption

of it and to integrate it with all the different products is going to take a while so i would expect to not hear about this again for a little while to be honest uh you know these announcements always kind of kind of create a lot of fanfare people get excited about it maybe the price of eighth goes up a little bit which i think it is right now off the back of this announcement maybe but not really anything to to kind of like um write home about but uh you know it's still kind of like cool to see more of the kind of like old world blending into the new world especially visa i mean has been a big proponent of ethereum they bought a crypto punk you know the other day uh it was a few weeks ago now um and they've also kind of like

uh i think they teamed up with crypto.com to settle usdc payments through their network and all those sorts of things and they obviously have um a crypto division kind of like working on all this sort of stuff so exciting to see um and i think it's just like another step on uh i guess like crypto's journey to dominance i think like it's not just visa i mean all these other enterprise companies all these other financial companies they're going to be forced to use these these networks for whatever they want to build because they're just much better than the existing infrastructure which i you know i personally get very excited about um and the block also has an article on this if you want to go read it i mean the decrypt and block both have articles and coin desks as well i think but they

both have kind of like different sets of information on here um in the blocks article that focuses on i guess like cbdc's and how visa wants to target you know cbdc's or central bank digital digital currencies with this sort of thing which again like cbd says is a whole another topic that i'm not going to get into today it is a bit controversial at times because people kind of wonder well you know what's what's a cbdc actually going to be is it going to be just like a tool for surveillance for the government and all that sort of stuff so we're going to have to see how this evolves but still cool to see more i guess layer 2 stuff being built on the ethereum network especially all right so another big piece of news over the last 24 hours was that justin taylor who is the head of consumer

product marketing at twitter uh put out a video of a sneak peek on what they're working on with nft profile verification this is so cool i mean as you can see in the video here you go to edit your profile you collect you select your profile picture you select nft connect your wallet look at all the wallet options they have here i mean coinbase argent metamask or like awesome amount of wallet options um you sign you know with your wallet then you have your nfts displayed you'll select the nft that you kind of like want to display as your profile picture uh and then it pro displays but what's really cool is that it actually displays the logo of the network that's nft is on so you can see the little eth logo on the profile picture here or like i guess like a check mark that's

awesome i mean obviously it's not just going to be a theorem if they integrate with other networks that have nfts on them they're going to um have those logos there as well but how awesome is it that uh twitter is integrating this like twitter isn't just like a crypto thing twitter is an everything thing like there's more to twitter than crypto but i think crypto twitter has played such a massive kind of like role in in twitter they did the tipping with like bitcoin and i think they're adding ethereum as well and obviously they're doing this nft stuff that it's just really cool to see them getting more involved here but i don't know i thought this was awesome like that's just crazy the fact that not only will you be able to kind of like set your nft directly as your profile picture uh on twitter there's also going

to be a check mark there to to kind of like i guess show off to what network it's on and i've always believed that an nft on the ethereum network actually has a premium to it um you know that might be because it's it costs more in gas to kind of like buy and sell nfts on ethereum and it's it's kind of like more of a kind of like uh a premium thing but again like there's gonna be layer twos that also have nfts and they already are like immutable x and stuff like that so is that gonna be an ethereum check mark for the layer twos are they even gonna allow layer two um nfts to be kind of like put as their pro is your profile picture here they probably will but yeah i thought this is just awesome like seriously awesome and i

can't wait for this to come out because i mean my current profile picture is actually an nft the wazzy that i have um the old one the penguin was also an nft um but i can't wait to see like everyone else doing this like i mean a lot of people already on twitter have nfts as their profile picture even justin taylor here has a cool cat as his profile picture so being able to kind of like have a verifiable link um directly on twitter with a little eighth check mark there is absolutely amazing so really cool to see this i'm looking forward to seeing this come out and hopefully in the near future all right so a bit of a exploit in uh in compound lands over the last 24 hours so compound labs announced that they had unusual activity had been reported

regarding the distribution of comp rewards um so essentially what this exploit was is actually a great thread here from the nft billboard if you want to check this out it'll be linked to the new description but the tldr of the exploit was that i think about a week ago maybe um a a new kind of like controller for the comp token or for like the comp rewards was put into the protocol and i think it only went live over the last couple uh sorry over the last 24 hours and it had a bug in it and the bug was literally in two places in the code where instead of a um a greater than an equal sign uh they had like just a greater than sign so if they just put like the equals uh on on it then this bug wouldn't have existed so you can see how sensitive

these things are but um compound itself is fine like the supplied borrowed funds aren't at risk the bug that actually happened was that people were able to claim way more comp they were entitled to and i think one person claimed 27 million dollars worth of comp and then sold some of it into the market and there are other people claiming more confident they should have and the worst part about this is that there's a fix but the fix won't be able to go in and be live on on as part of compound smart contracts until a week from today because there's a time lock on compound governance that they aren't able to implement something once it's passed until seven days as once it's past governance until seven days has elapsed which is funny because this is something that's been talked

about a lot and it's not haha funny it's funny because of the fact that um i've seen this as i said talked about a lot where people were debating whether things should have time locks on it or not because the time locks are a double-edged sword because on the one hand it means that the team or governance can't do anything malicious without people realizing so if something malicious happened with compound and you know something past compound governance and some wacky code got in that would drain the entire compound system there would be a seven day period where the community could react people could withdraw their funds from compounds and and you know and and and and save themselves from from this happening but on the other side of things when an expert like this happens you also have to wait seven days for a fix to be put

in place so that's been a big debate over whether time locks are a blessing or a curse i think they're both like it can go either way and there are some ways you can get around this where you have like um a veto over the time block where you can have like a super majority so say you need like you know a large a much larger percentage of the network or at least the token holders to come together to be able to override a certain change and things like that and to override the time lock but that also introduces kind of i guess like uh a tricky stuff into the mix as well because what if you know just a bunch of whales banded together and did this and were able to kind of like drain funds from a contract or whatever so yeah it's it's definitely a bit of a

hard line there but definitely read this this um twitter thread by the nft billboard uh it gives a great little breakdown with a bunch of links and kind of a timeline of what happened as well so because i work up to this today and kind of like i was just trying to piece it all together and i was like okay is is compound safe like is the are they are the supplied and borrowed funds safe and yes they are but like the fact that um anyone can mint way more not anyone but like a a certain amount of people or or the people that were kind of like supplying and borrowing funds from compound could mint uh much more comp tokens that they were would ever get is really bad for the comp price and the comp price of course dumped because you had these people minting tokens that

they shouldn't be and then dumping it into the market who knows if they'll kind of return the funds or not um we'll have to wait and see if something happens there but still really really shitty for for compound here and you know as i said the fix is in motion right now but we're gonna have to wait a week until the fix is live on uh the net on the compound network or the compound protocol i should say so yeah all right uh so polynei has put out another kind of like post this time on reddit under here under their name libero zist here uh this one hits home again like i've spoke i think i've spoken about pauline now on the refill like uh every day for the last week at least but anyway this is a post about modular versus monolithic sharding and zk

monolithic as well so i'm not going to give you a tldr because you're going to need to read the post it's it's kind of like it's not dense like as as polynei does they have a really great um a great way of kind of like translating complex technical stuff into basically ways that uh me you know you and i can understand it so definitely go give this post a read but as i said it focuses on kind of like sharding and how that plays into things how shared security plays into things how layer twos play into it data availability all the buzzwords i guess you can say that i've been talking about a lot on the refuel lately i just wanted to highlight this and make sure that you all saw this so definitely go check it out it'll be linked in the youtube description

and speaking of polynya dabing.ether has put together a kind of like table or two tables uh based on paulina's writing which basically splits these things up into kind of like you know what's the type of blockchain is it monolithic is it a rollup is it a volidium what exit execution like where does it do the execution does it do it at chain zero which is basically the base layer does it do it at chain one roll ups etc where does it store its data so where's data availability for rollups they have the data availability at chain 0 for example so the base layer or layer 1 where does it derive its consensus and security from again chain 0 an example is arbitrary 1 of course and then some notes here so execution on arbitrary one security and data availability by

ethereum and then in this in this table uh the bean goes through basically the rest of the um the the solutions here and then there's a second table as well which is like uh kind of i guess like uh i guess it's an extension of this one where it's um uh it's got like multivolution volition like monolithic security chains zk monolithic basically talking about the other posts that uh that that kind of polling i put together today on reddit so these tables are great it's a really great mental model because in the in writing like it's different than a table right writing is more of a kind of like just blast you with information and it's it can be structured but it's it's definitely kind of like in bits and pieces throughout the piece and you have to read it holistically whereas at the table you

can split each things up into different sections and easily get like a tldr of the whole thing so definitely go check these out as well it'll be linked in the youtube description all right so lido announced that there's now more than 7.8 million each being staked which is more than six point six percent of all circulating heath at current prices that is 22.2 billion dollars which is a lot of dollars right um so i wrote the daily grade newsletter about this today but two things i wanted to talk about when uh with regards to i guess like not the number of eighth being stake but just like staking in general in the community right now there's the discussion around client diversity and i've been talking about it on the refuel a lot lately how prism has kind of like prism one of the one of the four clients

has too much share of the network i think around 64 share and the other three have 36 percent share of of the network uh with lighthouse at about 22 so obviously we would love to get prism to be you know just 50 like i'm not saying we should get them you know uh to like 33 we shouldn't or we should have like 25 across all clients but getting uh prism down to like way less than 66 which is the danger threshold um is a really good idea and on that note prism actually put together a blog post today on their view on client diversity and how to kind of approach this as a community i think this is a great little piece i suggest going to and reading it because the discussion around client diversity shouldn't be framed in such a way where

we're demonizing any one client for being the majority it is not prismatic labs's fault that prism became the majority client they didn't go out of their way to say hey you should use prism and you shouldn't use any other client because we're the best blah blah blah what happened was that the prism client is really really good but um and also they have a really simple onboarding process and they're the most well-known e2 team um at least at least they were at the time especially when um people were kind of like staking earlier earlier on and kind of like the first few months of staking going live uh and they also had a windows native or native windows implementation of prism as well which the other clients i don't believe did at the time they do now but they didn't earlier on in in in kind of like the

staking life cycle so from that point of view that's exactly why prism has gotten so much market share but the pro labs team does not want to be the majority they don't want to uh be the reason that the network is in an unhealthy state and they describe that in this blog post here where they basically say we shouldn't demonize any client for for being like the majority or being a large part of the network but what we should do is we should collectively encourage people to respect client diversity and to understand that that uh that client diversity is very important for network health and we should leave it up to the users to make their own decision on what clients they want to use but also i guess like make sure that they understand that they should use uh you know if there's one

client that has way too much of the of the network share they should use a minority one from there as well and you know it's it's funny because i think getting existing stake is to change is going to be more of a challenge than getting uh new stakers to just uh use a different client and there's various ways you can do that and there's various initiatives going on right now you're going to see more about this going into october as well i believe um and you know with rocketpool going live as well it's definitely going to be a bit better there so that's kind of like one thing when it comes to staking that i that i i'm gonna be talking about a lot more going forward and i spoke about in the newsletter today the second thing is around stake distribution so what i mean by this is the amount of

stake kind of like concentrated into you know i mean not just concentrated but like where is the eighth being staked from and if you look at the stats today and this is again a pro an approximation this isn't actually an exact number we don't we won't ever actually know the exact number of like how much it is being staked on centralized exchanges versus how much it is being staked by um you know just individuals like you or me um but with the you know with the approximations that we have we can see that the current top single staker is actually lido they have 11.68 eleven point eight percent of the total eighth stakes um yeah of that seven point eight million e-state tier but that doesn't mean that uh like it's concentrated all within i guess like

lighter as a single service provider what lido does is they distribute the stake amongst uh different staking service providers i think nine or ten of them so uh from that perspective they aren't a single entity that has all the stake uh it's just spread out um but they do have a derivative token st which adds additional kind of like risks and and stuff there as well and and additional trust assumptions but you know i guess when looking at the just distribution of stake looking at lido as like a single entity is is missing high like the ferraris for the trees because it just boots at stake out but in saying that in the current um i guess like form of lighter and the current kind of instance of lighter it is centralized still so probably not a not a bad thing to look at it as kind of like a

central entity just for i guess like approximation perspectives but uh you have to dig deeper sometimes as well but then if you want to look at something and and say okay well this is a single entity that has a lot of stake you look at something like kraken kraken has 11.6 percent of the total eighth state they're just one exchange so and they control all their validators as a centralized exchange and the thing is they're so far ahead of third place third place is finance at 3.8 percent so that's you know that's fine um but they're really far ahead so obviously you know kraken the funny thing is about kraken is that they were the first ones or the first exchange to list eighth back in 2015 when the ethereum network went live they've they have a massive eighth stash and they also have a lot of

long term i think eighth um people that use kraken uh even the ethereum foundation uses kraken when they sell off eighth or want to do anything with their eighth so from that perspective it's not really a surprise that kraken's leading but as i said then you have finance at 3.8 percent and then you have a bunch of other providers underneath it i think the non i guess like or the other section um the non-centralized exchange non-state centralized staking service provider is at 60 so 60 percent of the staked eighth uh hasn't been identified as belonging to a centralized exchange or a staking service provider but in saying that uh the charts that i've looked at haven't identified coinbase's staking and we don't know how much is being staked with coinbase i would say it's probably about a million

eighth so that's actually probably a large chunk of the eighth being so maybe it's not that much but coinbase definitely is going to have a lot of eighth being staked so i would say that we could probably safely say that 50 of the or maybe 40 to 50 percent of the 8th being stake belongs to individuals and solo stakers and people just doing their own operations whether that be in data centers or on their own hardware and then the remainder is in exchanges taking staking service providers and all that sort of stuff there i don't think that that's a big deal uh and i actually have a blog a deadly way newsletter piece about this which is linked in today's newsletter so you can go check that out um where i argue that uh centralized exchange staking is not a critical threat uh unless it's

like takes over the majority of the network which is like 66 percent and unless it's kind of like a handful um for a number of different reasons i describe it in in the post so you can go check that out i'm not going to go through it today um but yeah those are the two major things that i just wanted to kind of highlight on the refill today and then in the newsletter i also go into like the merge and how that's coming up and altair coming up on october 27th and stuff like that but i went over that on the refill yesterday so i won't rehash that for today uh moving on so uh the dex aggregator one inch has blocked us traders in preparation for a separate american platform so uh i mean this is just another i guess like app in the long

i mean maybe not maybe not a not long string of apps yet but it's going to be the longest string of apps that geofence us ip addresses from being able to access their official front ends we saw unisop do some censorship unit top labs do some censorship on their centralized front end we've seen i think loopering do it with for china users and now we've seen uh i'm saying through idx tool for us users and now we're seeing one inch do it for us users as well and one inch has actually gone a step further where it actually requires you to sign a transaction when you connect to one inch saying that you don't you don't live in the us or some other jurisdictions uh which is you know a bit bizarre but i guess the thing is one inches contracts are kind of

unaffected by this uh you can still use them uh through kind of like third-party apps or directly uh you know interact with the contracts just them yourself but the way one inch works is that it actually hasn't from as from my understanding it has an off-chain uh kind of thing where they basically have their own algorithm that does the matching on a centralized server and that can be restricted uh so you know if you're a us user you won't be able to use that because you can only use it through the official one-inch app now of course you can get around this very easily by using a vpn uh and i don't think the kind of like the one-inch team is going to be monitoring the vpns they even encourage people to use um vpns in uh uh in um in the messages that they display

to users so there's that as well but this is kind of like a debate that we're gonna have to have as a community going forward and it's going to be ongoing and i mean the debates already been started around kind of like uh and i spoke about this in my newsletter on the refuel about having to decentralize all this sort of stuff as fast as possible because as i as i've said the regulators are going to go i mean not that a regulator went after one inch here maybe they did behind closed doors but i think this is more of a kind of i guess um i guess like proactive measure or like defensive measure but the regulators are always going to go after the lowest hanging fruit and i've said before that includes centralized exchanges centralized stable coins and centralized front ends for the different default

apps out there and also centralized teams that have admin keys that are very you know that can be kind of like coerced into doing something on the app to do whatever essentially right it doesn't have to be kind of like blocking users but it can be certain other things out there so uh i think more and more people are kind of like coming into this now there's gonna be more and more solutions coming online for decentralizing out the front ends and i'm looking forward to seeing that uh that happen so yeah uh clinton bembry jr from slingshot put an interesting tweet today where he said username plus password equals bad correct wallet equals good and this is a very simple explanation of basically saying we want to get rid of username and passwords as authentication devices in

return in in place of a public private key pair which is an ethereum wallet for example like i've talked about signing with ethereum before on the refuel you know plenty of times but and i've talked about the merits of it before and why it's actually more secure but i mean this is just like a very simple way of putting it right like we all know that uh there's been like i mean it's funny over the years and decades username and password has kind of been like a cat and mouse game between i guess like ease of use for the end user and security obviously a lot of users reuse the same password they set insecure passwords then password managers came along and people were able to kind of like have a master password with two-factor authentication um for for all their different accounts out there and they're able to store it

on there and all that sort of stuff uh and then now we've come along with connect wallet or sign in with ethereum where essentially you have like your metamask or your ledger whatever ethereum wallet that you use and you're able to just sign a message and connect to a website and then it authenticates you uh through that so through like a web through authentication flow which is obviously the better model and i'm just really looking forward to seeing this kind of like make waves here and i know that i've mentioned before that ens has teamed up with spruce to build a full kind of like signing with ethereum flow to make this a reality i'm looking forward to seeing kind of like what shakes out of that and i'll keep you guys updated on that too all right uh the final thing to talk about here is just a note that uh end of

an error gas now which is a very popular website for i guess kind of like gas related metrics and tracking gas prices and things like that has announced that they're shutting down ending all services on the 15th of october 2021. that's unfortunate i mean i used to use gas now all the time i have since switched to block native's gas extension which is an amazing little extension that basically i mean i've gone through it on the refill before but it basically allows you to uh a kind of like uh see crpr that gas estimator you can see on the chrome store here uh by block native basically uh where's the screenshot here you go basically shows you kind of like the priority fee the max fee the base fee and it gives you a bunch more information about uh about gas prices and things like that so definitely go

check this out if you're looking for a replacement for gas now and they also have a website too the website is um is what's the i can't remember the exact name sorry the exact url for the website but if you go to blocknative.com i think you'll be able to find the kind of like gas estimator on here somewhere uh products yeah gas estimator so it's blocknative.com i think it would be forward slash gas that gas dot estimator this website here is basically what the extension does it pack it packages up this little um this little kind of like graphic here puts it there and you'll be able to kind of get really really good estimations of gas prices and what you should set your priority fee and max v2 if you want to get into like the next block at a near certainty as well so and there's also a

bunch of other metrics and tools on here that you can use too so definitely go check them check those out but on that note i think i'm going to end it there for today so thank you everyone for listening and watching be sure to subscribe to the channel if you haven't yet give that video a thumbs up subscribe to the newsletter join the discord channel and i'll catch you all tomorrow thanks everyone