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Speaker 1: Hello and welcome to another episode of the odd lots podcast.

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Speaker 1: I'm Joe Wisn't all and I'm Tracy. Tracy. Something very

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Speaker 1: big is happening in the crypto world and it's not

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Speaker 1: about like, it's not about lines going up and down,

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Speaker 1: because so much of what excites to me about Crypto

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Speaker 1: is that the lines move so much. That's fun. But

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Speaker 1: there's something else, and it's not strictly price related. The merge. Merge,

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Speaker 1: I feel like someone needs to make like a movie

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Speaker 1: poster with the merge written in creepy letter. Doesn't make

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Speaker 1: it look like an old horror movie kind of thing.

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Speaker 1: But yeah, the merge is happening in ethereum. Yeah, right,

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Speaker 1: and so people have been telling us, Oh, you gotta

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Speaker 1: have a merge episode. You know, there's so much going

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Speaker 1: on we can't always get around to every topic, but

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Speaker 1: this is like ethereum is switching its consensus mechanism from

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Speaker 1: proof of work, which is like kind of like bitcoin mining,

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Speaker 1: very energy intensive mining operation the most pop associate with Crypto,

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Speaker 1: to proof of steak, and so it will be a

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Speaker 1: different approach to creating and validating blocks and they've been

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Speaker 1: working on it for years and years and years and

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Speaker 1: it's finally happening. So I'm going to caveat this discussion

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Speaker 1: with the fact that I haven't been following this very intently. However,

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Speaker 1: I do find it interesting because it gets to something

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Speaker 1: that you wrote, I guess it was a year ago

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Speaker 1: or so now, about, you know, the crypto world kind

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Speaker 1: of splitting into these two different camps and on the

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Speaker 1: one side you have people who are very into the

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Speaker 1: technology and technology. You know, one aspect of technology is

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Speaker 1: that it evolves, it changes, and so in that respect

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Speaker 1: this is a theory um evolving and changing in a

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Speaker 1: very big way. But the other camp and crypto are

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Speaker 1: the sort of Bitcoin maximalists, the fundamentalists who don't want

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Speaker 1: to see anything change about bitcoin and the technology at all.

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Speaker 1: I'm really glad you brought this up. I think that

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Speaker 1: is spot on, because there's this question of like well,

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Speaker 1: what is is it software or isn't money? And I

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Speaker 1: think there's like these two camps and if it's software, right,

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Speaker 1: or if it's if software is a really big component,

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Speaker 1: that a part of software is upgrades, right, upgrade cycles,

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Speaker 1: and you know, it's like Microsoft might update it's browser

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Speaker 1: or something every year or something, and then at some

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Speaker 1: point there, like the old browser will not be supported,

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Speaker 1: you can't use it anymore, right, whereas this sort of

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Speaker 1: like money stands. There was sort of like hardcore bitcoin

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Speaker 1: view is, you know, if you're gonna have money, you

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Speaker 1: don't ever want to be told this money isn't good

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Speaker 1: anymore or there's been a hard fork or there's been

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Speaker 1: some sort of change to the network and you have

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Speaker 1: to do something, you have to change something, you have

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Speaker 1: to update your software to use it, and I think

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Speaker 1: these are like fundamentally very big things and I think this,

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Speaker 1: this merge, this huge switch from sort of traditional mining

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Speaker 1: to proof of steak is really important, sort of culturally,

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Speaker 1: setting etherium apart from bitcoin and its willingness to change

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Speaker 1: the rules from time to time of the network a

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Speaker 1: touchstone moment for crypto. But it also gets to the

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Speaker 1: idea of pros and cons of different types of blockchains. Right.

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Speaker 1: So ethereum is trying to solve one problem here, which

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Speaker 1: you know might, for instance, be energy use, which a

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Speaker 1: lot of people have focused on, a lot of crypto

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Speaker 1: critics have focused on saying that mining wastes a ton

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Speaker 1: of energy. So why don't we try to fix that?

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Speaker 1: But on the other hand, does the new design come

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Speaker 1: with its own set of problems? And we've already seen

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Speaker 1: some noises around the idea of well, maybe you're making

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Speaker 1: it less censorship resistant, and we're going to get into that. Yes,

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Speaker 1: and so one of the developments over the last several

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Speaker 1: weeks is the treasuries sanctioning of Tornado cash, which is

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Speaker 1: a way for people to obfuscate their ethereum transactions through

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Speaker 1: a mixer, and it's the first time that the Treasury

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Speaker 1: has ever sanctioned a piece of software, which is pretty interesting.

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Speaker 1: But then it also raised the question will if they

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Speaker 1: can sanction a piece of software, why can't they sanction

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Speaker 1: ethereum itself? Or can they tell ethereum holders or ethereum

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Speaker 1: acres in this new proof of steak mechanisms? Like you,

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Speaker 1: you're going to get in trouble if you process blocks

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Speaker 1: from entities that are trying to launder money, etcetera. A

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Speaker 1: whole new can of worms. It's always evolving. We're always

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Speaker 1: trying to keep up here on the podcast. So let's

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Speaker 1: try to learn some more about it. Let's do it.

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Speaker 1: I don't even know what a validator is versus a mind.

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Speaker 1: Let's get a steaker, a validator, a minor or relayer,

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Speaker 1: a whole Er. I don't know any of these words,

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Speaker 1: so we're gonna be talking to someone who does. I'm

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Speaker 1: very excited to welcome to odd lots Christine Kim. She

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Speaker 1: has a research associate at galaxy digital and she's been

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Speaker 1: writing about these topics for galaxy clients for a long time. So, Christine,

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Speaker 1: thank you so much for coming on. How did we

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Speaker 1: do there in the introgue? This is like foreign territory.

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Speaker 1: Was that? How do we do there? That was excellent. Um,

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Speaker 1: I think we've already done you guys have condensed this

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Speaker 1: entire podcast and everything I wanted to talk we can

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Speaker 1: stop now. A minute. Yes, and we can stop now.

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Speaker 1: Tracy and I like we still we we had a

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Speaker 1: busy day. We started prepping about the fifteen minutes ago

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Speaker 1: and I said Tracy, like we're gonna we talked about

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Speaker 1: proof of steak and Tracy turns to be like three

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Speaker 1: minutes later it's like, I think this is going to

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Speaker 1: like create some centralization them like it sounds like you

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Speaker 1: got it, but no, I was really impressed from your perspective, Christine,

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Speaker 1: like let's just start, like how significant like is this

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Speaker 1: moment for a theorem? And like, what's the real goal?

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Speaker 1: We know reducing energy consumption as part of it, but

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Speaker 1: why do you put this in context on the ethereum roadmap?

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Speaker 1: For us, for sure, I think it's hard to understate

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Speaker 1: just how big, or overstate, I should say, how big,

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Speaker 1: this upgrade is. The transition to proof of steak has

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Speaker 1: been part of Etherorum's original development row, back when the

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Speaker 1: blockchain first launched in two thousand and fifteen. Developers had

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Speaker 1: thought that this upgrade would be ready earlier in but

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Speaker 1: due to the technical challenges of actually swapping out the

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Speaker 1: consensus mechanism of ethereum while it's live, um brought forth delays,

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Speaker 1: and so people have been asking for this upgrade. Developers

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Speaker 1: have been working on this upgrade for around seven years now,

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Speaker 1: and it's it's truly it was almost to the point

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Speaker 1: where people had thought that etheroum would never transition, that this,

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Speaker 1: that this transition to proof mistake was just a pipe

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Speaker 1: dream Um. And so the fact that this is the

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Speaker 1: week in which ethereum will finally fulfill one of the

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Speaker 1: promises that it had made to its users its investors

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Speaker 1: back when it first launched. I think is is pretty

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Speaker 1: monumental and it's really not just about the changes to

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Speaker 1: its energy consumption. I think another big change that people

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Speaker 1: are really looking forward to is ethereum's monetary policy switching

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Speaker 1: from being an inflationary currency to potentially a deflationary currency.

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Speaker 1: The annual network issuance of the network is expected to

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Speaker 1: drop from around five to less than zero point five percent.

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Speaker 1: And if you add in Coin Burns, which is like

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Speaker 1: a new mechanism that that was introduced back in October,

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Speaker 1: or I should say August, with the I nine, there

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Speaker 1: is this. There is a lot of excitement around ethereum's

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Speaker 1: issuance of the issuance of Eth and the supply of

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Speaker 1: actually contracting over time. With more activity on the network.

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Speaker 1: You're going to see more eth being burned and that

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Speaker 1: impacting total supply. So I think that's another big part

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Speaker 1: of it. It's like the economics around eat. That's going

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Speaker 1: to be changing after the merge. So I just want

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Speaker 1: to ask one short question make one point. We are

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Speaker 1: recording this on September, the merge. The event is expected

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Speaker 1: to happen in about a day by the time you're

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Speaker 1: hearing this. It should have happened if it totally blows

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Speaker 1: up or something, we might have to re record the

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Speaker 1: entire episode, or maybe we'll like put this out as

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Speaker 1: an artifact of a history that might have been. But

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Speaker 1: just a real quick technical question. This is called the merge.

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Speaker 1: Does that imply that the proof of steak, does the

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Speaker 1: proof of steak ethereum already exist and now the two

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Speaker 1: networks are merging together? Like, is this this other chain

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Speaker 1: that has a different consensus mechanism that's already operating? Yeah,

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Speaker 1: that's exactly right. So the proof of stake blockchain of

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Speaker 1: ethereum has existed since I think it was December. Um

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Speaker 1: It's called the beacon chain and right now a very

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Speaker 1: small portion of eight is issued on that parallel chain

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Speaker 1: and there's individuals and stakeholders that have already invested their

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Speaker 1: money into that chain, the beacon chain, and for the merge,

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Speaker 1: what's going to happen is that chain is going to

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Speaker 1: become fused together with ethereum main net today. But in

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Speaker 1: the process of that change, all of the issuance that

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Speaker 1: happens on ethereum currently, which goes to miners, will disappear,

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Speaker 1: will go to zero, and so the only issuance of

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Speaker 1: that you have left is to the validators that are

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Speaker 1: on the beacon chain now, and that's really just a

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Speaker 1: fraction of the total issuance that's that's being generated today.

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Speaker 1: So I have a ton of questions already. I'm also

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Speaker 1: kind of hoping that our producer is able to put

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Speaker 1: in like sound effects every time we say the merge,

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Speaker 1: so it was like merged and I love them. Okay,

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Speaker 1: on a serious note, can we back up for a

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Speaker 1: second and can you maybe describe the difference between proof

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Speaker 1: of work versus proof of steak, and also how ethereum

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Speaker 1: got into a position where they have two different types

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Speaker 1: of chains, so beacon versus the normal ethereum chain, and

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Speaker 1: then also, on top of that, maybe to describe the

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Speaker 1: difference between proof of work and proof of steak. Could

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Speaker 1: you walk us through, like how will a new ethereum

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Speaker 1: be created under this new regime, and what happens to

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Speaker 1: the miners in this case? I started by asking two

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Speaker 1: questions of a rose. That questions you're gonna have to

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Speaker 1: you're gonna have to remind me if that get to

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Speaker 1: answer one of those Um, but let me start with

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Speaker 1: just giving a broad overview of the difference between proof

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Speaker 1: of work and proof of steak and then, okay, yes,

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Speaker 1: and then, and then we can go from there. Wow,

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Speaker 1: I love the enthusiasm around this, though. I totally agree

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Speaker 1: with you guys that, like the merge is a really

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Speaker 1: big event, and like educating people around how this is

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Speaker 1: actually happening and even the technicals beneath it, which sometimes

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Speaker 1: can sound boring, is like really, what's what's exciting. So

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Speaker 1: I'm glad we're talking about this. But anyways, so I

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Speaker 1: think it's it's useful to start off with what is

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Speaker 1: a consensus mechanism or a consensus protocol, because that is

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Speaker 1: that is what a proof of work and a proof

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Speaker 1: of stake blockchain is. It's basically this is the mechanism

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Speaker 1: that defines how nodes in a blockchain come to agreement

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Speaker 1: about the state of the network. So what are the

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Speaker 1: account balances, the transactions, the updated transaction history of the blockchain?

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Speaker 1: There needs to be a way for all the computers

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Speaker 1: that are connecting to the network, also called nodes, to

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Speaker 1: be aligned about what the canonical history is. And so

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Speaker 1: it's really about how do you process blocks on a blockchain?

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Speaker 1: How do you finalize those transactions? And with proof of work,

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Speaker 1: you do that in a very energy intensive way. You

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Speaker 1: have these actors that are called miners, are solving a

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Speaker 1: very computationally intensive math problem. These are called Hash functions,

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Speaker 1: and every miner is competing to be the first person

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Speaker 1: to find the correct solution because that means that they

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Speaker 1: get to build a block, include transactions in it get

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Speaker 1: the reward from the block. But for proof of steak,

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Speaker 1: these actors, these miners, are replaced by validators and instead

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Speaker 1: of solving that very computationally intensive puzzle, validators are voting

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Speaker 1: on blocks and they're attesting to blocks and they just

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Speaker 1: get randomly selected by the network according to an algorithm

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Speaker 1: of who gets to be a block proposer. So on ethereum.

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Speaker 1: It's not that. When when's the theory and transition to

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Speaker 1: proof of steak, I should caveat. These validators are not competing,

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Speaker 1: they're just randomly selected to to propose a block and

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Speaker 1: they'll get rewards from that. They'll also get rewards from

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Speaker 1: voting on blocks and attesting to the validity of those blocks.

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Speaker 1: But the question is, why are these validators on ethereum?

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Speaker 1: How how do we keep them honest? Because with miners

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Speaker 1: you've already expended so much computational energy you've kind of

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Speaker 1: input in a very high cost. You're not going to

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Speaker 1: lose the chance to earn those rewards after you've sunk

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Speaker 1: in a particular amount of cost. With validators, you haven't

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Speaker 1: really sunk in anything. You haven't expended any energy to

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Speaker 1: vote or a test, to blocks or to propose blocks.

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Speaker 1: If you did, it's it's very negligible compared to what

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Speaker 1: miners do. So what validators need is we need a

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Speaker 1: different way to keep these validators honest, and that way

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Speaker 1: is through steak. So sometimes people call validators steakers. They

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Speaker 1: try and use that term interchangeably. But at the core

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Speaker 1: of that is validators, at least on Ethereum, are staking

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Speaker 1: a large amount of ether. They're staking thirty two eight,

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Speaker 1: which I haven't checked the prices as of late, but

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Speaker 1: it's a significant amount. And if they do try and

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Speaker 1: cheat the network, if they do propose a block that

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Speaker 1: goes against the rules of the network, that they're trying

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Speaker 1: to confuse the network, trying to attack the network or

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Speaker 1: change the validity of the chain, there is a potential

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Speaker 1: that that amount of steak that they've put into the

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Speaker 1: network gets slashed. So it's a very different way of

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Speaker 1: keeping actors honest. For minors, you are you are expending

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Speaker 1: a lot of cost upfront and that cost kind of

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Speaker 1: keeps you honest. But for validators, what you're doing is

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Speaker 1: you're you're locking up your capital and you're letting the

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Speaker 1: network kind of hold onto it, and the fear of

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Speaker 1: having that steak slashed is what keeps you honest. It's

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Speaker 1: so you mentioned you have to put up right now

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Speaker 1: at around if you're putting up a minimum to be

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Speaker 1: a validate, or U S dollars, and I guess it's

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Speaker 1: kind of like a security deposit. The risk is if

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Speaker 1: you do something untowards to the network, if you vote

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Speaker 1: bad if you try to approve in valid blocks, you

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Speaker 1: lose part of your security deposit. Exactly exactly. And so this,

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Speaker 1: this mechanism for proof of steak is seeing one of

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Speaker 1: the benefits of it is that it is more ecologically friendly.

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Speaker 1: It has better for the E S G narrative, because

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Speaker 1: you're not putting in so much energy just to build

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Speaker 1: a block. You're being randomly selected by the network to

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Speaker 1: build a block, and the reason why you can be

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Speaker 1: trusted to make sure that that block is is correct

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Speaker 1: and is valid is because you've already invested, you know,

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Speaker 1: a certain amount of state to the network and for ethereum.

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Speaker 1: I think the original idea was, okay, we have this

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Speaker 1: mining consensus protocol that is already finalizing transactions, progressing blocks.

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Speaker 1: We should move all the applications and the users to

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Speaker 1: a new consensus protocol, to a proof of steak network

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Speaker 1: and blockchain. But the concern, there's a significant amount of

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Speaker 1: complexity around that, because what is that moving process going

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Speaker 1: to look like? Ethereum over the past couple of years

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Speaker 1: has just skyrocketed in terms of active addresses, total value locked.

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Speaker 1: I think the the amount of value that has grown

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Speaker 1: on ethereum, the amount of activity that has grown on Ethereum,

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Speaker 1: has made the vision to just simply move users and

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Speaker 1: applications and value to another new chain infeasible, very difficult

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Speaker 1: to do so. Instead of moving users on the current

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Speaker 1: ethereum chain to a new proof of stake block chain,

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Speaker 1: developers have thought of this, this alternative idea where you

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Speaker 1: launch the proof of steak version of ethereum and you

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Speaker 1: simply fuse that version of ethereum to the existing ethereum.

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Speaker 1: So one of the cool things about the merge is

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Speaker 1: that it doesn't impact the application layer of ethereum. It

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Speaker 1: really only impacts how blocks are finalized. So as the

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Speaker 1: current ethereum block chain is progressing blocks, it will communicate

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Speaker 1: those blocks to back to the consensus layer of Ethereum,

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Speaker 1: which is the beacon chain, and the beacon chain will

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Speaker 1: start to take over the response of the of finalization.

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Speaker 1: So that question of you know, why is it that

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Speaker 1: ethereum has a parallel proof of state blockchain and why

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Speaker 1: is it that we're going down this roadmap of of

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Speaker 1: merging together the block chains rather than simply upgrading the

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Speaker 1: existing proof of work chain? I think it really comes

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Speaker 1: down to simplicity and it comes down to how do

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Speaker 1: we do this upgrade in a way that doesn't result

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Speaker 1: in downtime and doesn't result in disruptions to a network

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Speaker 1: that has just grown so much quicker than I think

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Speaker 1: core developers had anticipated when they first launched ethereum, and

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Speaker 1: I think that's also why we've seen a lot of

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Speaker 1: delays to this upgrade, because the value of this chain

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Speaker 1: and the amount of user activity on it has made

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Speaker 1: it so that, you know, this upgrade, when it happens,

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Speaker 1: has to be done in a way that's that's very

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Speaker 1: air tight, that's very poses the least minimal amount of

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Speaker 1: damage and of risk to the users and to the applications.

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Speaker 1: So I think I missed some questions. Actually, any questions

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Speaker 1: on that? I think you did. I think you did

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Speaker 1: all three. Actually, Um, that was really good. So one

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Speaker 1: thing that I find odd about crypto in general is that,

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Speaker 1: like the problem that they're trying to solve is the

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Speaker 1: problem of like how do you do trust less transactions?

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Speaker 1: Like two parties don't trust each other. How can technology,

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Speaker 1: you know, get in there and make it so that

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Speaker 1: people can transact with one another in a, you know,

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Speaker 1: in a way, that in a protected way? But at

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Speaker 1: the same time it feels like so much of it

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Speaker 1: is like or at least especially in the ethereum case,

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Speaker 1: so much of it is built on consensus. It's like

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Speaker 1: two parties can't trust each other, but we trust the

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Speaker 1: system as a whole to reach a consensus, and that's

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Speaker 1: basically how you know proof of stake is working. How,

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Speaker 1: how do they actually get to that consensus and what

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Speaker 1: happens if, like one validator in a transaction rejects a block?

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Speaker 1: Consensus really is at the core of of these technologies.

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Speaker 1: It's a really question because these systems are meant to

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Speaker 1: be trust less. It's meant to uh cut out the

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Speaker 1: middlemen Um, like you said, and for proof of work

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Speaker 1: consensus protocols, that trust less uh interaction between miners validating

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Speaker 1: and earning rewards from block production is actually much simpler

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Speaker 1: than proof of state consensus protocols, because proof of state

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Speaker 1: consensus protocols don't rely on an external good, it doesn't

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Speaker 1: rely on energy, it just relies on an internally created

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Speaker 1: asset like like. You have to assume that E is

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Speaker 1: a worthwhile asset for proof of stake to work. So

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Speaker 1: that question of you know when a validator rejects a

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Speaker 1: transaction or when a validator creates a block that all

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Speaker 1: the other validators think is false or or goes against

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Speaker 1: the rules of the network, that's something that the protocol

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Speaker 1: level of Ethereum, as a proof of stake blockchain, is

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Speaker 1: automatically checking for. So there are certain rules around how

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Speaker 1: you can propose blocks. So one of the ways that

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Speaker 1: you prevent against double spends, basically like somebody saying that

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Speaker 1: I spent five dollars and I can spend another ten

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Speaker 1: dollars from the same address and and not change, like

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Speaker 1: the account balance. That is prevented by the network. Basically

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Speaker 1: checking for double block proposals, like if a validator to

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Speaker 1: were to propose two blocks at the same time, that's

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Speaker 1: like a slash double event. That's something where the state

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Speaker 1: that they've put into the network gets reduced. And there's

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Speaker 1: also other ways in which validators can keep each other honest,

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Speaker 1: even if those automatic rules aren't able to catch all

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Speaker 1: the activities. So this kind of goes into the censorship

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Speaker 1: question of like, let's just say we've noticed that a

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Speaker 1: certain validator continues to reject transactions from an address that's

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Speaker 1: on the o FAC sanctions list. validators can coordinate to

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Speaker 1: the sally like blacklist those malicious validators, because when you've

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Speaker 1: put your stake into the network, you've also told the

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Speaker 1: entire network that hey, this is my validator, I d

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Speaker 1: this is my address. You are no longer like an

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Speaker 1: anonymous uh stakeholder, whereas for, I think, miners, when you're

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Speaker 1: dedicating hash rate or hash power, to basically computational energy

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Speaker 1: to the network, that kind of labeling system is is

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Speaker 1: harder to do. But for validators, once you've put locked

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Speaker 1: in your thirty two to the to the network. It's

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Speaker 1: held by the network and it's also identified by the network.

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Speaker 1: So another way in which validators keep each other on,

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Speaker 1: it's outside of these like automatic rules, is this ability

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Speaker 1: to kind of put bad behaving validators out of the network.

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Speaker 1: Now this requires social consensus, this would require some sort

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Speaker 1: of an upgrade, some sort of a way for everybody

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Speaker 1: to coordinate against those those validators. But that's kind of

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Speaker 1: like another final resort where I think it helps to

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Speaker 1: to understand like how is how is this network coming

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Speaker 1: to consensus? Like initially it's like these rules, these pre

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Speaker 1: programmed rules that are part of the protocol, but sometimes,

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Speaker 1: like rules can't always catch all of the malicious behavior. Um,

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Speaker 1: and in the case where you're not able to catch

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Speaker 1: the malicious behavior, there's also this additional step that you

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Speaker 1: can take. Um, sometimes it's called social slashing, Um, where

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Speaker 1: validators can basically like remove certain bad acting validators from

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Speaker 1: the network and slash their steak, even though they haven't

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Speaker 1: necessarily drawn against the technicalities of the rules, that they

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Speaker 1: can just kind of like coordinate to do that. So

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Speaker 1: I think this really gets to what was going to

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Speaker 1: be my next question, and it's one of the criticisms

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Speaker 1: of proof of steak is okay, most people, probably, I

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Speaker 1: assume most people who own some don't have thirty two

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Speaker 1: of them or don't have but doesn't mean they can't

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Speaker 1: participate in steaking. And if my understanding is like, okay,

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Speaker 1: take some random person, buys a few eth leaves it

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Speaker 1: on coin based, coin base can then be itself a

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Speaker 1: huge validator of youth. But talk to us about the

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Speaker 1: risk of a few mega validators, because I think when

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Speaker 1: the essentially the undermining of decentralization such that, okay, there's

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Speaker 1: I think there's something called Lido, there's coin based, probably

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Speaker 1: a few others. But the the risk of everyone just

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Speaker 1: putting their money with a couple and then you just

397
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Speaker 1: have a couple public, well known entities who are, in theory,

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Speaker 1: like have you know, dealing with the laws of their land,

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Speaker 1: the law enforcement of the countries they operate in, and

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Speaker 1: the executives of these companies, a handful of entities with

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Speaker 1: an incredible amount of steak deef and therefore network power

402
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Speaker 1: under their control. It's a bit concern. I definitely have

403
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Speaker 1: to say that it's always been known this potential for

404
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Speaker 1: a lot of state to become controlled by centralized entities

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Speaker 1: like coin based like Lito. But I think the recent

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Speaker 1: sanctions against Tornado cash we're just like a wake up

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Speaker 1: call for the community and because of that there has

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Speaker 1: been a lot of conversation around what would happen if,

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Speaker 1: you know, these entities started to sensor transactions. I think

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Speaker 1: first it's not totally clear that these exchanges and the

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Speaker 1: centralized staking providers will need to but in the event

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Speaker 1: that they do, we shouldn't, I guess, like understate the

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Speaker 1: role of independent validators in the system. So if, by chance,

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Speaker 1: there's a transaction that coin based Lido starts to censor,

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Speaker 1: they're not going to include it in a block. Eventually

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Speaker 1: the network will pick a independent validator to propose a block,

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Speaker 1: and that independent validator will not be judging transactions by

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Speaker 1: are they on the o fact sanctions list or are

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Speaker 1: they not? They'll just be picking it from the public

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Speaker 1: men pool. But let's just say, you know, for the

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Speaker 1: sake of argument, that a hundred percent of validators, that

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Speaker 1: not even five percent, not even you know or fifteen

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Speaker 1: percent of validators, are even in pendant. In that case

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Speaker 1: there can be changes to the protocol made so that

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Speaker 1: a certain amount of transactions are kind of enforced by

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Speaker 1: validators to include into their block. This comes back down

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Speaker 1: to another kind of area of discussion, which is around

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Speaker 1: o fact compliant relays. I don't want to get too

429
00:24:19,720 --> 00:24:22,959
Speaker 1: technical to this, but that's here. I don't I think

430
00:24:23,080 --> 00:24:25,239
Speaker 1: we said at the beginning, I think relay was one

431
00:24:25,280 --> 00:24:27,240
Speaker 1: of the words, that I don't know what it means.

432
00:24:27,440 --> 00:24:31,160
Speaker 1: Let's go for it. Okay, well, great. Um. So relays

433
00:24:31,359 --> 00:24:37,159
Speaker 1: are basically a third party software that validators will connect

434
00:24:37,240 --> 00:24:40,840
Speaker 1: to in order to earn additional rewards on the blocks

435
00:24:40,880 --> 00:24:43,000
Speaker 1: that they create. So you get a certain amount of

436
00:24:43,040 --> 00:24:46,240
Speaker 1: reward for just producing the block. You also get rewards

437
00:24:46,280 --> 00:24:49,600
Speaker 1: through transaction fees. These are additional amounts of beef that

438
00:24:49,720 --> 00:24:53,359
Speaker 1: people can add to their transactions for greater priority. There

439
00:24:53,400 --> 00:24:57,600
Speaker 1: sometimes called priority fees, and there's also MTV, maximal extractable value,

440
00:24:57,680 --> 00:25:00,840
Speaker 1: which is what happens when transact s are ordered in

441
00:25:00,840 --> 00:25:04,800
Speaker 1: a certain way that allows for arbitrage, allows for sandwiching,

442
00:25:05,000 --> 00:25:10,879
Speaker 1: basically profits from positioning trades, usually decentralized finance trades, in

443
00:25:10,880 --> 00:25:13,960
Speaker 1: a very specific way. So, if so, validators are not

444
00:25:14,600 --> 00:25:20,200
Speaker 1: super savvy and identifying decentralized and identifying opportunities for MTB.

445
00:25:20,400 --> 00:25:23,240
Speaker 1: validators are really, you know, operators that we want to

446
00:25:23,240 --> 00:25:26,240
Speaker 1: assume are just running a piece of software. They're they're

447
00:25:26,280 --> 00:25:31,000
Speaker 1: just running the consensus protocol of Ethereum as is, and

448
00:25:31,040 --> 00:25:34,000
Speaker 1: they're just sitting back like earning the interest on their

449
00:25:34,080 --> 00:25:36,360
Speaker 1: thirty two e Um. But if they wanted to earn

450
00:25:36,400 --> 00:25:39,480
Speaker 1: additional they can connect to a relay, which is this

451
00:25:39,520 --> 00:25:43,960
Speaker 1: third party software that connects block builders to validators. And

452
00:25:44,000 --> 00:25:47,120
Speaker 1: block builders are the ones that are interacting with searchers,

453
00:25:47,160 --> 00:25:49,919
Speaker 1: which are very highly specialized users that are able to

454
00:25:49,960 --> 00:25:52,919
Speaker 1: look at the men pool and bundle transactions in a

455
00:25:52,960 --> 00:25:56,000
Speaker 1: profitable way. And these block builders they construct a block,

456
00:25:56,080 --> 00:25:59,920
Speaker 1: they construct a very profitable block that gives more our

457
00:26:00,160 --> 00:26:03,120
Speaker 1: of rewards than just a regular block that validators would

458
00:26:03,119 --> 00:26:06,400
Speaker 1: create on their own. So some of these relays are

459
00:26:06,480 --> 00:26:12,159
Speaker 1: operated by entities like flashbots, and flashbots has publicly and

460
00:26:12,280 --> 00:26:15,800
Speaker 1: has been for a very long time compliant with regulatory

461
00:26:15,960 --> 00:26:18,840
Speaker 1: laws and has said that, you know, we are an

462
00:26:18,920 --> 00:26:22,360
Speaker 1: entity that will be censoring transactions that are on the

463
00:26:22,440 --> 00:26:24,840
Speaker 1: o fact list or transactions from addresses that are on

464
00:26:24,840 --> 00:26:26,720
Speaker 1: the o fact list, and they're kind of a major

465
00:26:26,800 --> 00:26:29,200
Speaker 1: they're going to be one of the major relay operators,

466
00:26:29,240 --> 00:26:32,399
Speaker 1: but there are other relay operators, like blocks route that

467
00:26:32,520 --> 00:26:35,280
Speaker 1: have said that, you know, will operate relays that validators

468
00:26:35,320 --> 00:26:39,080
Speaker 1: can can connect to that won't be censored. And going

469
00:26:39,119 --> 00:26:42,120
Speaker 1: back to the to the hypothetical that, like all these

470
00:26:42,160 --> 00:26:45,919
Speaker 1: relays are suddenly censored, like, let's just say there's not

471
00:26:45,960 --> 00:26:51,000
Speaker 1: even one, then validators can enforce something called the CR list,

472
00:26:51,119 --> 00:26:54,200
Speaker 1: like censorship resistant list. This is a technology that's still

473
00:26:54,240 --> 00:26:57,400
Speaker 1: in the works, but it's something that developers could potentially

474
00:26:57,480 --> 00:26:59,879
Speaker 1: roll out if they see that, you know, all the

475
00:27:00,040 --> 00:27:04,040
Speaker 1: validators are all relays and MTV extraction is just kind

476
00:27:04,080 --> 00:27:08,639
Speaker 1: of going to a specific relay like flashbots. That's, you know,

477
00:27:08,680 --> 00:27:13,200
Speaker 1: censoring transactions and it's very difficult for validators to include,

478
00:27:13,240 --> 00:27:16,720
Speaker 1: even independent validators, to to stay competitive, to earn MTV

479
00:27:17,280 --> 00:27:20,080
Speaker 1: UM and to do so in a way that's censorship resistant.

480
00:27:20,160 --> 00:27:24,200
Speaker 1: What developers can release and what they're considering as a

481
00:27:24,200 --> 00:27:28,480
Speaker 1: as a potential solution is implementing CR lists, which are

482
00:27:29,160 --> 00:27:33,040
Speaker 1: a portion of the block that validators stuff with transactions

483
00:27:33,080 --> 00:27:36,040
Speaker 1: directly from the public men pool. So instead of receiving

484
00:27:36,160 --> 00:27:40,680
Speaker 1: from a relay an entirely pre built block that's already sensored,

485
00:27:40,720 --> 00:27:44,639
Speaker 1: that validators themselves can only accept or reject. They're able

486
00:27:44,680 --> 00:27:47,719
Speaker 1: to enforce, you know, a portion of that block you

487
00:27:47,800 --> 00:27:50,760
Speaker 1: must include these transactions. So it takes away the power

488
00:27:51,119 --> 00:27:54,919
Speaker 1: of block building and of censoring transactions away from the

489
00:27:54,920 --> 00:27:58,480
Speaker 1: block builder Um, because there is this assumption that, because

490
00:27:58,520 --> 00:28:02,320
Speaker 1: the validators, the value a database of ethereum Um won't

491
00:28:02,359 --> 00:28:06,840
Speaker 1: be completely completely controlled by these like centralized entities. We

492
00:28:06,920 --> 00:28:10,200
Speaker 1: want to keep the power and keep the the ability

493
00:28:10,280 --> 00:28:13,919
Speaker 1: to like include transactions more in the hands of validators

494
00:28:13,920 --> 00:28:17,960
Speaker 1: than in the hands of these other, potentially more centralized entities.

495
00:28:18,400 --> 00:28:20,840
Speaker 1: By the way, Tracy, you know, in addition to the

496
00:28:21,000 --> 00:28:23,679
Speaker 1: merge itself, I know like for at least like a

497
00:28:23,720 --> 00:28:27,120
Speaker 1: couple of years or year, I've been getting tweets about

498
00:28:27,119 --> 00:28:30,080
Speaker 1: how we had to do an episode on MTV and like,

499
00:28:30,320 --> 00:28:32,239
Speaker 1: which I kind of think is like might be like

500
00:28:32,280 --> 00:28:35,400
Speaker 1: the crypto version of payment for order flow or things

501
00:28:35,440 --> 00:28:38,960
Speaker 1: like that. Christine's answer there was reminded that that's probably

502
00:28:38,960 --> 00:28:41,560
Speaker 1: gonna have to be a whole separate episode at some point.

503
00:28:41,880 --> 00:28:43,840
Speaker 1: Maybe we should just do an all thoughts series where

504
00:28:43,840 --> 00:28:48,320
Speaker 1: we go through like every term one by one. Some

505
00:28:48,360 --> 00:28:51,600
Speaker 1: of these terms are kind of like weird like I'm

506
00:28:51,640 --> 00:28:53,320
Speaker 1: going to ask you. I have to be careful how

507
00:28:53,360 --> 00:28:55,400
Speaker 1: I pronounced this at some point, but Christine, I'm going

508
00:28:55,480 --> 00:28:59,480
Speaker 1: to ask you about chardon Um later in the conversation.

509
00:29:00,160 --> 00:29:03,880
Speaker 1: But okay, before we move on, just on the censorship

510
00:29:04,160 --> 00:29:09,560
Speaker 1: centralization issue, I'm curious what the ethereum people have said

511
00:29:09,600 --> 00:29:12,400
Speaker 1: about this, because one of the unusual things about ethereum

512
00:29:12,560 --> 00:29:15,560
Speaker 1: versus a network like Bitcoin, is that you actually have

513
00:29:15,920 --> 00:29:19,840
Speaker 1: a figurehead in the form of metallic Peuterin, and I'm

514
00:29:19,840 --> 00:29:22,160
Speaker 1: curious what he's what he said on this issue, because

515
00:29:22,200 --> 00:29:27,480
Speaker 1: I think most crypto people are ideologically opposed to centralization

516
00:29:27,760 --> 00:29:32,680
Speaker 1: and middlemen and aligning themselves with government requirements like sanctions

517
00:29:32,720 --> 00:29:35,120
Speaker 1: and things like that. But at the same time, the

518
00:29:35,160 --> 00:29:36,960
Speaker 1: more we talk about this, more you can kind of

519
00:29:37,040 --> 00:29:41,680
Speaker 1: argue that ethereum is sort of going mainstream and maybe

520
00:29:41,840 --> 00:29:45,760
Speaker 1: refining itself so that it better fits into the existing

521
00:29:45,800 --> 00:29:49,360
Speaker 1: financial and legal system, and that could also be a strength.

522
00:29:49,560 --> 00:29:52,840
Speaker 1: So I'm wondering what they've said on this issue. That's

523
00:29:52,840 --> 00:29:57,480
Speaker 1: a great question. I think that the community, especially in

524
00:29:57,480 --> 00:29:59,920
Speaker 1: in the aftermath of what happened of the sanctions and

525
00:30:00,000 --> 00:30:02,720
Speaker 1: it's tornado cash we've seen a lot more. I've seen

526
00:30:02,760 --> 00:30:07,080
Speaker 1: a lot more like segmentation, a lot more disagreement, I think,

527
00:30:07,080 --> 00:30:10,760
Speaker 1: in the ethereum community about what is the best way forward.

528
00:30:10,880 --> 00:30:16,160
Speaker 1: There are people in the ethereum community that are a

529
00:30:16,240 --> 00:30:20,040
Speaker 1: lot more cipherpunk, a lot more to the vision of

530
00:30:20,080 --> 00:30:23,640
Speaker 1: what the Bitcoin community is that even the slightest amount

531
00:30:23,640 --> 00:30:26,760
Speaker 1: of censorship on ethereum should be condemned. If if, even

532
00:30:26,760 --> 00:30:29,800
Speaker 1: if it's only coin base, even if it's only Lido,

533
00:30:30,000 --> 00:30:34,080
Speaker 1: those entities should be punished and should be removed from

534
00:30:34,080 --> 00:30:36,440
Speaker 1: the network. I think that's a very extreme view and

535
00:30:36,560 --> 00:30:39,480
Speaker 1: most ethereum core developers, and I think I mean I

536
00:30:39,520 --> 00:30:42,680
Speaker 1: don't speak for Vitalic, but I would assume that him

537
00:30:42,720 --> 00:30:46,120
Speaker 1: to most have landed in this middle ground of even

538
00:30:46,200 --> 00:30:50,920
Speaker 1: if there is centralization, even if there is censorship happening

539
00:30:51,600 --> 00:30:55,120
Speaker 1: by these these exchanges, so long as there's even a

540
00:30:55,200 --> 00:30:59,200
Speaker 1: small amount of independent validators that are processing transactions, these

541
00:30:59,240 --> 00:31:03,240
Speaker 1: non compliant transactions will get into the ethereum blockchain eventually

542
00:31:03,680 --> 00:31:07,520
Speaker 1: and that means that ethereum is kosher, that ethereum can

543
00:31:07,520 --> 00:31:11,120
Speaker 1: still be considered like a censorship resistant network. And then

544
00:31:11,160 --> 00:31:13,880
Speaker 1: I think you can go to the other extreme where,

545
00:31:13,920 --> 00:31:17,160
Speaker 1: you know, very big entities, major entities in the sense

546
00:31:17,200 --> 00:31:20,800
Speaker 1: of like they're huge figureheads, I guess, in the in

547
00:31:20,840 --> 00:31:24,720
Speaker 1: the in the ethereum community, and that's entities like flashbots

548
00:31:24,760 --> 00:31:27,720
Speaker 1: that are very open about the way that they are

549
00:31:28,000 --> 00:31:30,960
Speaker 1: compliant and about the way in which they don't see

550
00:31:31,000 --> 00:31:33,960
Speaker 1: a future in which they're operating, you know, in like

551
00:31:34,000 --> 00:31:36,560
Speaker 1: North Korea or like places in which U s sanctions

552
00:31:36,600 --> 00:31:40,880
Speaker 1: don't matter. So it's just very pragmatic and realistic, I think,

553
00:31:41,000 --> 00:31:43,920
Speaker 1: but not but like not trying to fight the powers,

554
00:31:43,960 --> 00:31:47,240
Speaker 1: like not trying to to really rock the boat by

555
00:31:47,440 --> 00:31:50,120
Speaker 1: choosing a different path. And so I think there's this tension,

556
00:31:50,200 --> 00:31:54,040
Speaker 1: this tension between even the middle ground of developers and

557
00:31:54,120 --> 00:31:57,920
Speaker 1: of individuals that want to preserve the censorship resistance of

558
00:31:57,920 --> 00:32:00,160
Speaker 1: the network. But I have to face the reality is

559
00:32:00,240 --> 00:32:04,560
Speaker 1: of like these big players that our core to the

560
00:32:04,600 --> 00:32:09,479
Speaker 1: infrastructure of etherium, like core too, what ethereum is today.

561
00:32:09,560 --> 00:32:13,520
Speaker 1: Like you can't necessarily just cut off all the exchanges.

562
00:32:13,560 --> 00:32:16,440
Speaker 1: You can't necessarily just like cut off flashbots, because they

563
00:32:16,520 --> 00:32:19,720
Speaker 1: literally built the software for how validators are going to

564
00:32:19,760 --> 00:32:23,560
Speaker 1: earn MTV. So in that future, you know you have

565
00:32:23,680 --> 00:32:27,000
Speaker 1: to negotiate, you have to think about other third ways,

566
00:32:27,160 --> 00:32:30,080
Speaker 1: and there's actually a really great talk by vitallic, who

567
00:32:30,160 --> 00:32:33,600
Speaker 1: recently went to the Stanford blockchain conference, about how he

568
00:32:33,640 --> 00:32:38,160
Speaker 1: foresees different ways to decentralize the block building community. And

569
00:32:38,200 --> 00:32:41,560
Speaker 1: so really I think developers have landed on like how

570
00:32:41,600 --> 00:32:45,720
Speaker 1: do we improve the situation, how do we decentralize ethereum further?

571
00:32:46,160 --> 00:32:48,320
Speaker 1: But just recognizing that in the short term and in

572
00:32:48,320 --> 00:32:51,920
Speaker 1: the medium term there's a high potential that transactions will

573
00:32:51,960 --> 00:32:56,040
Speaker 1: be censored and that ethereum as a staking community, as

574
00:32:56,080 --> 00:32:59,680
Speaker 1: like a validator community, will be controlled majority by these

575
00:32:59,720 --> 00:33:02,920
Speaker 1: bright late identities, which is a pretty, I think, alarming fact.

576
00:33:19,320 --> 00:33:21,320
Speaker 1: So I'm looking back to something you said earlier about

577
00:33:21,360 --> 00:33:26,040
Speaker 1: this idea of like social slashing, such that a theoretical validator,

578
00:33:26,320 --> 00:33:30,760
Speaker 1: even if they didn't technically break consensus mechanism rules, could

579
00:33:30,760 --> 00:33:34,160
Speaker 1: potentially lose some of their coins if the other validators

580
00:33:34,520 --> 00:33:37,160
Speaker 1: voted in such a way. And you know, going back again,

581
00:33:37,680 --> 00:33:41,040
Speaker 1: you know it's like Vitella himself can say anything he wants,

582
00:33:41,080 --> 00:33:44,200
Speaker 1: but vitellic doesn't have to deal with like Gary Gensler,

583
00:33:44,280 --> 00:33:47,200
Speaker 1: and vtellic doesn't have to deal with Treasury, Brian Armstrong

584
00:33:47,240 --> 00:33:49,280
Speaker 1: on the other hand, does right. And so, Brian Armstrong,

585
00:33:49,360 --> 00:33:51,920
Speaker 1: an your shareholders. Are there any attacks? And I use

586
00:33:51,960 --> 00:33:54,160
Speaker 1: attack liberally, I don't listen, I mean a hack, but

587
00:33:54,200 --> 00:33:57,560
Speaker 1: I mean are there any like attacks that essentially worked

588
00:33:57,600 --> 00:34:01,880
Speaker 1: through the social slashing mechanism, such that the government, some

589
00:34:01,920 --> 00:34:04,880
Speaker 1: government somewhere, or the U S government or the Treasury specifically,

590
00:34:05,400 --> 00:34:10,840
Speaker 1: can do something damaging to the ethereum network through these entities?

591
00:34:11,320 --> 00:34:14,080
Speaker 1: And you know, is there a form of social slashing

592
00:34:14,200 --> 00:34:17,920
Speaker 1: that Brian Armstrong might have to do or might have

593
00:34:18,000 --> 00:34:21,200
Speaker 1: to push for, potentially in some theoretical future where it's

594
00:34:21,239 --> 00:34:25,879
Speaker 1: not about penalizing a entity that broke consensus mechanism rules,

595
00:34:25,920 --> 00:34:28,719
Speaker 1: but something that they have to do like sort of

596
00:34:28,760 --> 00:34:32,480
Speaker 1: like at behest of a government? Like would the government

597
00:34:32,600 --> 00:34:39,719
Speaker 1: potentially hey, like could you senors transactions technically possible? Yeah,

598
00:34:39,760 --> 00:34:43,880
Speaker 1: because right, like attacks on any block chain are difficult,

599
00:34:43,880 --> 00:34:46,520
Speaker 1: like it's difficult. It would be difficult for a government

600
00:34:46,560 --> 00:34:50,239
Speaker 1: to attack the BITCOIN blockchain, in part just because it

601
00:34:50,239 --> 00:34:53,040
Speaker 1: would be hard for a government to acquire the hash power,

602
00:34:53,320 --> 00:34:56,600
Speaker 1: potentially to acquire enough chips such that it could take

603
00:34:56,640 --> 00:35:01,000
Speaker 1: control of the network or exectent attack or something like that.

604
00:35:01,480 --> 00:35:04,880
Speaker 1: But again, if, like, coin base ends up as the

605
00:35:04,960 --> 00:35:08,359
Speaker 1: dominant thinker or the dominant validator and coin base has

606
00:35:08,440 --> 00:35:11,600
Speaker 1: to uh go by all these rules, is there something

607
00:35:11,680 --> 00:35:14,600
Speaker 1: that they, the government in the future scenario, could pressure

608
00:35:14,680 --> 00:35:16,560
Speaker 1: coin base to do from a sort of like social

609
00:35:16,600 --> 00:35:20,359
Speaker 1: consensus standpoint, that other members of the community might view

610
00:35:20,520 --> 00:35:23,600
Speaker 1: as being damaging to the integrity of the chain? Yeah,

611
00:35:23,719 --> 00:35:26,839
Speaker 1: I think in that case, like where coin base does

612
00:35:27,560 --> 00:35:32,480
Speaker 1: enforce like these regulations from a government authority that the

613
00:35:32,800 --> 00:35:36,760
Speaker 1: entire community doesn't also agree with, it would cause a split.

614
00:35:36,960 --> 00:35:40,240
Speaker 1: It would cause a split in the chain of Ethereum,

615
00:35:40,360 --> 00:35:44,160
Speaker 1: versions of Ethereum that are compliant and non compliant. But

616
00:35:44,239 --> 00:35:47,120
Speaker 1: I think that would also undermine like the very value

617
00:35:47,440 --> 00:35:51,080
Speaker 1: of ethereum. So it's almost like thinking through, like doing

618
00:35:51,120 --> 00:35:54,160
Speaker 1: this thought process of what a social slashing event could

619
00:35:54,200 --> 00:35:56,640
Speaker 1: look like and the split that it would cause should

620
00:35:56,640 --> 00:36:01,040
Speaker 1: deter any proponent or, like anybody who's thinking of doing this,

621
00:36:01,640 --> 00:36:05,600
Speaker 1: because it it might like irreparably damage like the value

622
00:36:05,600 --> 00:36:08,560
Speaker 1: of the change. So good. An example perhaps I'm thinking

623
00:36:08,640 --> 00:36:11,960
Speaker 1: of is like what if the government said unit swap

624
00:36:12,000 --> 00:36:15,440
Speaker 1: and other defy exchanges are illegal stock markets that are

625
00:36:15,480 --> 00:36:18,319
Speaker 1: unregulated by the SEC? Coin based can you make sure

626
00:36:18,360 --> 00:36:22,399
Speaker 1: that you don't validate any transactions that interact with these

627
00:36:22,480 --> 00:36:25,959
Speaker 1: defy exchanges, which would be like a massive rupture, because defy,

628
00:36:26,040 --> 00:36:28,480
Speaker 1: of course, it's huge for in crucial to how the

629
00:36:28,480 --> 00:36:31,080
Speaker 1: theorym works. But one could imagine say like you can't

630
00:36:31,080 --> 00:36:35,720
Speaker 1: be processing transaction for a rogue stock exchange or something

631
00:36:35,760 --> 00:36:38,800
Speaker 1: like that, which would be a kind of attempted imposing

632
00:36:38,840 --> 00:36:42,399
Speaker 1: in very severe kinds of censorship. What happens then, and

633
00:36:42,560 --> 00:36:45,920
Speaker 1: how would how does the network heal or find a

634
00:36:45,960 --> 00:36:49,359
Speaker 1: way to route around such a big entity being told

635
00:36:49,400 --> 00:36:52,600
Speaker 1: by the government that it can no longer process defy transactions?

636
00:36:53,000 --> 00:36:55,400
Speaker 1: I think ideally, I mean this is very like an

637
00:36:55,400 --> 00:36:58,280
Speaker 1: ideal sentiment. I don't know if this is would actually happened,

638
00:36:58,320 --> 00:37:01,719
Speaker 1: but ideally, use ar is of Ethereum, recognize that this

639
00:37:01,800 --> 00:37:05,719
Speaker 1: is not appropriate or like is not behavior that they

640
00:37:05,719 --> 00:37:10,040
Speaker 1: should support, and they take away their steak from coin base,

641
00:37:10,120 --> 00:37:12,160
Speaker 1: like they don't stake through coin base. Like as a

642
00:37:12,200 --> 00:37:17,440
Speaker 1: staking provider, coin base falls and you know, other decentralized

643
00:37:17,440 --> 00:37:20,600
Speaker 1: staking providers like rocket pool and potentially lie do down

644
00:37:20,600 --> 00:37:23,200
Speaker 1: the road if they do fully decentralize, that these are

645
00:37:23,239 --> 00:37:27,160
Speaker 1: the staking providers that step up but of course this

646
00:37:27,280 --> 00:37:32,080
Speaker 1: requires a great deal of like cohesion among the community

647
00:37:32,520 --> 00:37:36,560
Speaker 1: and like a shared belief and a shared value of hey,

648
00:37:36,560 --> 00:37:40,800
Speaker 1: like we, ethereum only makes sense if it's censorship resistant.

649
00:37:40,920 --> 00:37:46,680
Speaker 1: Ethereum only makes sense if staking providers can't Um, can't

650
00:37:46,680 --> 00:37:50,640
Speaker 1: actually sense for transactions, and I think there's technologies that

651
00:37:50,680 --> 00:37:53,760
Speaker 1: are being looked at, like zero knowledge proofs, to try

652
00:37:53,760 --> 00:37:56,920
Speaker 1: and obfuscate even the contents of a transaction so that

653
00:37:57,360 --> 00:38:00,600
Speaker 1: the power of validators to even know what kind of

654
00:38:00,640 --> 00:38:04,440
Speaker 1: transactions they're validating is completely out of their control. But

655
00:38:04,480 --> 00:38:07,920
Speaker 1: of course I recognize that that's not the reality today

656
00:38:07,960 --> 00:38:11,160
Speaker 1: and that coin base does have the ability to to

657
00:38:11,280 --> 00:38:14,399
Speaker 1: build their own blocks and include whatever transactions they want

658
00:38:14,480 --> 00:38:17,759
Speaker 1: as validators, validator note operators, and in this case I

659
00:38:17,760 --> 00:38:21,120
Speaker 1: think it really is up to the ethereum community too

660
00:38:21,560 --> 00:38:27,240
Speaker 1: to choose staking through providers that they are confident Um

661
00:38:27,400 --> 00:38:30,040
Speaker 1: uphold like the values and the ethos of the community.

662
00:38:30,200 --> 00:38:34,239
Speaker 1: But what complicates even this is that right now you're

663
00:38:34,280 --> 00:38:38,719
Speaker 1: not able to withdraw steak from staking providers. Um. It's

664
00:38:38,760 --> 00:38:42,279
Speaker 1: that functionality is not enabled yet on ethereum. It will

665
00:38:42,360 --> 00:38:45,560
Speaker 1: probably be enabled, you know, at minimum, but like six

666
00:38:45,640 --> 00:38:48,239
Speaker 1: to twelve months after the merge happens, and so that

667
00:38:48,400 --> 00:38:51,439
Speaker 1: interim where, you know, we've already seen a lot of

668
00:38:51,800 --> 00:38:53,719
Speaker 1: state go to coin base and a lot of state

669
00:38:53,760 --> 00:38:56,799
Speaker 1: go to Lido. I think the question remains of how

670
00:38:56,880 --> 00:38:59,319
Speaker 1: users can coordinate, and one of the ways is, you know,

671
00:38:59,560 --> 00:39:02,040
Speaker 1: again like like we talked about social slashing, but I

672
00:39:02,239 --> 00:39:06,440
Speaker 1: I definitely I think that kind of possibility is more deterrent.

673
00:39:06,520 --> 00:39:08,960
Speaker 1: Like I don't think that it ever really comes down

674
00:39:08,960 --> 00:39:11,640
Speaker 1: to it. I think it comes down to coin based

675
00:39:12,120 --> 00:39:15,560
Speaker 1: censoring and users not being able to withdraw their steak

676
00:39:15,760 --> 00:39:21,040
Speaker 1: and basically more independent validators being spun up to try

677
00:39:21,160 --> 00:39:25,279
Speaker 1: and ensure that other trends, that all these transactions that

678
00:39:25,320 --> 00:39:28,520
Speaker 1: are that are non compliance still get included in the blockchain.

679
00:39:28,880 --> 00:39:33,640
Speaker 1: And arguing too regulators that hey, even if I sensor transactions,

680
00:39:33,680 --> 00:39:37,520
Speaker 1: it doesn't mean that ethereum as a blockchain is anymore

681
00:39:37,640 --> 00:39:41,040
Speaker 1: like regulatory, like compliant, that these transactions are still going

682
00:39:41,080 --> 00:39:43,600
Speaker 1: to get included one way or the other and that,

683
00:39:43,760 --> 00:39:46,560
Speaker 1: you know, from like a profit point of view, like

684
00:39:46,640 --> 00:39:49,640
Speaker 1: it doesn't make sense for us to even continue as

685
00:39:49,680 --> 00:39:52,239
Speaker 1: a staking provider. So that kind of argue that as

686
00:39:52,280 --> 00:39:56,480
Speaker 1: a staking provider, it it doesn't make sense for us

687
00:39:56,520 --> 00:39:59,359
Speaker 1: to continue to sensor transactions because they're going to get

688
00:39:59,360 --> 00:40:01,759
Speaker 1: included into the chain one way or another. And I

689
00:40:01,760 --> 00:40:05,360
Speaker 1: think a very similar issue we saw with with certain

690
00:40:05,400 --> 00:40:09,319
Speaker 1: bitcoin mining pools back in the day censoring transactions and

691
00:40:09,360 --> 00:40:13,040
Speaker 1: those mining pools quickly being condemned by the bitcoin community

692
00:40:13,040 --> 00:40:16,840
Speaker 1: and kind of like social of social pressure changing how

693
00:40:16,920 --> 00:40:19,319
Speaker 1: their policies work. But I think, hopefully, you know, a

694
00:40:19,360 --> 00:40:22,640
Speaker 1: similar thing could happen in ethereum. But again, as I mentioned,

695
00:40:22,640 --> 00:40:25,799
Speaker 1: there's like those degrees and those schisms that are being

696
00:40:25,800 --> 00:40:30,399
Speaker 1: created where certain big players in ethereum don't actually, like

697
00:40:30,880 --> 00:40:33,960
Speaker 1: fully subscribe to the Cipherpunk Vision, and I think in

698
00:40:33,960 --> 00:40:37,600
Speaker 1: that case it's it's not a dent clear how cohesively

699
00:40:37,640 --> 00:40:41,280
Speaker 1: the ethereum community will act. Tracy, by the way, zero

700
00:40:41,320 --> 00:40:45,640
Speaker 1: knowledge cryptography. Well, before I forget, another whole episode talk about.

701
00:40:46,560 --> 00:40:49,160
Speaker 1: I feel like every answer you give, Christine, and they're

702
00:40:49,239 --> 00:40:52,000
Speaker 1: very good answers, but like they just throw up a

703
00:40:52,080 --> 00:40:54,520
Speaker 1: billion more questions. So I'm wondering, you know what happens

704
00:40:54,560 --> 00:40:57,960
Speaker 1: like if a bunch of validators decide to kick out

705
00:40:58,200 --> 00:41:01,920
Speaker 1: coin base for Censoring Trans Actions, like the CFTC is

706
00:41:01,960 --> 00:41:06,120
Speaker 1: asking for, then are they immediately in violation of the

707
00:41:06,120 --> 00:41:10,000
Speaker 1: CFTC or u s law or something like that. But okay,

708
00:41:10,120 --> 00:41:13,800
Speaker 1: maybe a slightly less thorny topic. How do you judge

709
00:41:13,920 --> 00:41:18,360
Speaker 1: the success of the merge? Is it like price of

710
00:41:18,400 --> 00:41:22,160
Speaker 1: ethereum goes up, number of transactions go up, gas fees

711
00:41:22,200 --> 00:41:23,719
Speaker 1: go down? I don't even know if this has any

712
00:41:23,760 --> 00:41:26,399
Speaker 1: impact on gas fees. That would be interesting to hear

713
00:41:26,400 --> 00:41:29,960
Speaker 1: from you about, but like it doesn't. Okay. So what

714
00:41:30,000 --> 00:41:32,840
Speaker 1: are you looking at when, when we're deciding whether or

715
00:41:32,880 --> 00:41:37,719
Speaker 1: not this was a successful exercise, I actually take the

716
00:41:37,880 --> 00:41:41,319
Speaker 1: very minimalistic point of view. I only want the chain

717
00:41:41,400 --> 00:41:44,160
Speaker 1: to finalize. That's it. I don't care about the price,

718
00:41:44,320 --> 00:41:48,040
Speaker 1: I know. I'm not looking at ethereum Um, I'm not

719
00:41:48,040 --> 00:41:51,880
Speaker 1: looking at theoreum addresses, I'm not looking at transaction activity. Really,

720
00:41:51,960 --> 00:41:55,560
Speaker 1: for me, like what I deem as a successful merge

721
00:41:56,000 --> 00:41:59,480
Speaker 1: is that after that the proof of steak blockchain fuses

722
00:41:59,520 --> 00:42:04,239
Speaker 1: together with ethereum main neet and that version of ethereum

723
00:42:04,360 --> 00:42:09,200
Speaker 1: finalizes and that it is able to progress through epochs,

724
00:42:09,239 --> 00:42:14,840
Speaker 1: like be able to verifiably create new blocks, come to consensus.

725
00:42:14,880 --> 00:42:18,040
Speaker 1: There's a really this is a shameless plug, but there's

726
00:42:18,080 --> 00:42:20,480
Speaker 1: this report that I've written on how to watch the

727
00:42:20,520 --> 00:42:23,200
Speaker 1: merge Um that you can find on galaxy dot com.

728
00:42:23,280 --> 00:42:26,600
Speaker 1: But it illustrates that what you're looking for is basically

729
00:42:26,640 --> 00:42:30,959
Speaker 1: the progression of two epochs, which are Um that their

730
00:42:31,160 --> 00:42:34,480
Speaker 1: intervals of time, and in order for an epoch to finalize,

731
00:42:34,520 --> 00:42:38,160
Speaker 1: you need at minimum like two thirds of active validators

732
00:42:38,239 --> 00:42:40,800
Speaker 1: attesting to that epoch, saying that the transactions and the

733
00:42:40,840 --> 00:42:43,720
Speaker 1: blocks that were completed in that epoch are all kosher

734
00:42:43,760 --> 00:42:46,520
Speaker 1: and are all good. Once you have have had two

735
00:42:46,520 --> 00:42:49,719
Speaker 1: epochs of that, you consider the network finalized, because after

736
00:42:49,760 --> 00:42:53,720
Speaker 1: that finalization point it's very hard to revert the transactions

737
00:42:53,920 --> 00:42:57,600
Speaker 1: or the blocks that had been created before that finalization point.

738
00:42:57,680 --> 00:43:00,279
Speaker 1: So really what I'm looking for is just to see

739
00:43:00,320 --> 00:43:03,200
Speaker 1: the chain finalized because it means, and the reason why

740
00:43:03,600 --> 00:43:06,840
Speaker 1: is because it means that the merge and the technical

741
00:43:06,960 --> 00:43:10,920
Speaker 1: shift from just swapping out your consensus protocol has worked.

742
00:43:11,960 --> 00:43:15,960
Speaker 1: It doesn't say anything about how, you know popular that

743
00:43:16,120 --> 00:43:21,320
Speaker 1: upgrade was, how traders and the users view this change

744
00:43:21,360 --> 00:43:25,080
Speaker 1: of proof of steake. It just it just says that, hey,

745
00:43:25,080 --> 00:43:28,279
Speaker 1: this swapping of this transition from proof of work to

746
00:43:28,320 --> 00:43:32,000
Speaker 1: proof of steake worked this very risky upgrade that requires

747
00:43:32,040 --> 00:43:36,239
Speaker 1: two different hard forks worked that transactions and blocks are

748
00:43:36,360 --> 00:43:39,520
Speaker 1: continuing to be processed and that, like if you were

749
00:43:39,560 --> 00:43:41,960
Speaker 1: to send a transaction on unit swab, if you were

750
00:43:42,000 --> 00:43:45,319
Speaker 1: to send it to another person, you now don't have

751
00:43:45,440 --> 00:43:49,640
Speaker 1: miners like processing those transactions. You actually have validators doing

752
00:43:49,680 --> 00:43:53,480
Speaker 1: it behind the scenes and that functionality is good to

753
00:43:53,560 --> 00:43:56,600
Speaker 1: go and that functionality we don't have to worry about

754
00:43:56,920 --> 00:44:16,080
Speaker 1: it breaking anytime soon. So I just have one more

755
00:44:16,280 --> 00:44:19,160
Speaker 1: short question and it's a question that I'm thinking about

756
00:44:19,160 --> 00:44:23,919
Speaker 1: a particular twitter user. So Dan, who's under Dan Metaschewski

757
00:44:24,080 --> 00:44:27,040
Speaker 1: at at CMS Holdings, always dms me and he says

758
00:44:27,040 --> 00:44:29,200
Speaker 1: I love odd lods, but you guys are so negative

759
00:44:29,200 --> 00:44:31,120
Speaker 1: all the time. It's always gloom and we've spent a

760
00:44:31,120 --> 00:44:33,840
Speaker 1: lot of time talking about like risks of the merge and,

761
00:44:34,040 --> 00:44:38,640
Speaker 1: you know, centralization and censorship, other than the decrease in

762
00:44:38,680 --> 00:44:42,319
Speaker 1: electricity consumption. Talk to us like, what's the exciting thing here?

763
00:44:42,360 --> 00:44:45,000
Speaker 1: What's the good thing besides that that this is going

764
00:44:45,040 --> 00:44:47,160
Speaker 1: to open up in your view and the long term

765
00:44:47,160 --> 00:44:49,440
Speaker 1: of Theorem Red Matt, what's the what's the positive here?

766
00:44:49,840 --> 00:44:51,719
Speaker 1: This is going to sound very barish, but there's not

767
00:44:51,760 --> 00:44:57,360
Speaker 1: actually too much. Tried to tried. Sorry, if you're listening,

768
00:44:57,560 --> 00:44:59,759
Speaker 1: you better be, because I asked a question just for you.

769
00:45:00,040 --> 00:45:04,560
Speaker 1: I'm sorry. I think one thing is, you know, the

770
00:45:04,640 --> 00:45:07,840
Speaker 1: validators that have been, you know, so faithfully on the

771
00:45:07,880 --> 00:45:11,040
Speaker 1: beacon chain earning this issuance. It's a very small issuance

772
00:45:11,040 --> 00:45:13,680
Speaker 1: in comparison to what miners get, but then again, validators

773
00:45:13,680 --> 00:45:15,600
Speaker 1: aren't expending a lot of energy, so of course you're

774
00:45:15,600 --> 00:45:18,000
Speaker 1: not going to get that much validators. One thing they

775
00:45:18,040 --> 00:45:20,840
Speaker 1: can look forward to is they're going to start earning

776
00:45:21,080 --> 00:45:23,600
Speaker 1: transaction fees, priority fees, and they're also going to start

777
00:45:23,600 --> 00:45:26,880
Speaker 1: earning MTV. So that kind of reward which, you know,

778
00:45:26,920 --> 00:45:30,080
Speaker 1: compared to their the network issuance they yet which is locked.

779
00:45:30,160 --> 00:45:33,440
Speaker 1: They can't actually move that around, they can start moving

780
00:45:33,440 --> 00:45:39,360
Speaker 1: around and and realizing the fees from transaction, from transactions

781
00:45:39,360 --> 00:45:41,239
Speaker 1: in MTV. They can start, you know, sending that over

782
00:45:41,280 --> 00:45:44,080
Speaker 1: to exchanges. They they'll actually start earning that. So I

783
00:45:44,080 --> 00:45:46,560
Speaker 1: think that's kind of a positive for validators and that

784
00:45:46,640 --> 00:45:49,600
Speaker 1: it just becomes more profitable to run one. And then

785
00:45:49,960 --> 00:45:52,759
Speaker 1: the other thing I think about ethereum price is that

786
00:45:53,239 --> 00:45:57,640
Speaker 1: you've got a massive supply drop. You know, all of

787
00:45:57,680 --> 00:46:00,160
Speaker 1: the supply that's going to ethereum is going to uh

788
00:46:00,360 --> 00:46:02,279
Speaker 1: is going to drop from around five percent to zero

789
00:46:02,280 --> 00:46:04,480
Speaker 1: point five percent. And in addition to that, you've still

790
00:46:04,520 --> 00:46:07,200
Speaker 1: got coin burns happening. So that zero point five percent,

791
00:46:07,280 --> 00:46:11,080
Speaker 1: in times of high network activity, will very likely dropped

792
00:46:11,080 --> 00:46:14,360
Speaker 1: to a negative number, where the total supply is actually contracting.

793
00:46:14,520 --> 00:46:16,719
Speaker 1: And and so you've got, you know, a bunch of

794
00:46:16,800 --> 00:46:22,279
Speaker 1: users that are walking up and then you've got, you know,

795
00:46:22,360 --> 00:46:27,719
Speaker 1: issuance of the network dropping significantly. I think the the

796
00:46:27,880 --> 00:46:31,279
Speaker 1: liquidity of of Eth. I'm not really a trader, but

797
00:46:31,320 --> 00:46:34,560
Speaker 1: like that. The supply, the supply going down. I think

798
00:46:34,680 --> 00:46:37,319
Speaker 1: we'll we'll have a positive impact on eth price over

799
00:46:37,360 --> 00:46:39,359
Speaker 1: time and I think that's something that people really look

800
00:46:39,360 --> 00:46:42,040
Speaker 1: forward to and that youth will become, I don't like

801
00:46:42,120 --> 00:46:45,160
Speaker 1: this term, but, quote unquote, ultrasound money. You know, instead

802
00:46:45,160 --> 00:46:50,920
Speaker 1: of having it really is thought of Supply Limit. You know,

803
00:46:51,000 --> 00:46:54,719
Speaker 1: you've got the supply that's drinking over time. Obviously the

804
00:46:54,880 --> 00:46:57,680
Speaker 1: Y S G narrative of ethereum will will continue to

805
00:46:57,680 --> 00:47:00,440
Speaker 1: to thrive and in comparison to bit line, I think

806
00:47:00,480 --> 00:47:03,320
Speaker 1: there's going to be a lot more um narrative around,

807
00:47:03,600 --> 00:47:05,160
Speaker 1: you know, the way that you mint your n f

808
00:47:05,200 --> 00:47:07,480
Speaker 1: t s, the way that you do all these things

809
00:47:07,560 --> 00:47:10,160
Speaker 1: are no longer as energy intensive as they used to be.

810
00:47:10,239 --> 00:47:11,920
Speaker 1: But I think for one of the reasons why I

811
00:47:11,920 --> 00:47:15,439
Speaker 1: say like all of this isn't all that positive, which

812
00:47:15,440 --> 00:47:17,799
Speaker 1: it is, it is very positive, is that I've been

813
00:47:17,840 --> 00:47:21,200
Speaker 1: really waiting for a long time around ethereum scalability and

814
00:47:21,239 --> 00:47:24,080
Speaker 1: the merge really doesn't do very much for Ethereum scalability

815
00:47:24,120 --> 00:47:26,600
Speaker 1: at all. So I'm really looking forward to the fact

816
00:47:26,680 --> 00:47:31,040
Speaker 1: that after the merge, developers will really focus on on scalability,

817
00:47:31,040 --> 00:47:33,000
Speaker 1: and I think that's one of the things. Like developers

818
00:47:33,000 --> 00:47:35,520
Speaker 1: have just been so focused on pulling off this upgrade.

819
00:47:35,960 --> 00:47:38,719
Speaker 1: After this is done and and and out the door,

820
00:47:39,120 --> 00:47:42,080
Speaker 1: I'm really looking forward to developers tackling some of the

821
00:47:42,080 --> 00:47:46,240
Speaker 1: other big issues on Ethereum, like count abstraction and and

822
00:47:46,320 --> 00:47:51,320
Speaker 1: scalability and Um steakty withdrawals, etcetera, etcetera. What is charting?

823
00:47:53,880 --> 00:47:56,680
Speaker 1: We've come full circle. Yeah, well, no, I but okay,

824
00:47:56,719 --> 00:48:00,360
Speaker 1: I honestly have zero idea. But I was a d

825
00:48:00,640 --> 00:48:06,239
Speaker 1: yes podcast pitfalls Um charting. So I see people on

826
00:48:06,280 --> 00:48:08,399
Speaker 1: Reddit talk about this a lot. They're like, Oh, who

827
00:48:08,440 --> 00:48:12,000
Speaker 1: cares about the merger? What I'm really excited about is charting, which,

828
00:48:12,280 --> 00:48:15,920
Speaker 1: again sounds terrible, but could you just explain what that is?

829
00:48:16,840 --> 00:48:18,720
Speaker 1: For sure? I'm going to give a high level overview

830
00:48:18,719 --> 00:48:20,920
Speaker 1: and then I'm gonna give a shout out to a

831
00:48:20,960 --> 00:48:26,480
Speaker 1: really great report around sharting. So shining originally, sorry, starting originally.

832
00:48:27,280 --> 00:48:29,200
Speaker 1: I don't know why, but when you say I've never

833
00:48:29,320 --> 00:48:32,320
Speaker 1: thought of the term charting as weird or as like strange,

834
00:48:32,640 --> 00:48:36,359
Speaker 1: but now that you say strange term, yeah, why? It's

835
00:48:36,360 --> 00:48:39,839
Speaker 1: because everyone, everyone in Crypto. They're not talking to each other,

836
00:48:39,920 --> 00:48:43,560
Speaker 1: they're just writing, and you write charred. It's fine, but

837
00:48:43,600 --> 00:48:47,080
Speaker 1: as soon as you start saying it out loud everyone's

838
00:48:47,080 --> 00:48:50,200
Speaker 1: gonna Laugh about language, how different it is, if it

839
00:48:50,560 --> 00:48:54,120
Speaker 1: is such an insightful point. So charting. Originally, the idea

840
00:48:54,160 --> 00:48:58,440
Speaker 1: of it was, look ethereum. The ethereum blockchain is massively

841
00:48:58,640 --> 00:49:02,800
Speaker 1: has this limited transaction throughput it the block space of Ethereum,

842
00:49:02,880 --> 00:49:06,120
Speaker 1: which is, you know, there's a certain number of transactions

843
00:49:06,160 --> 00:49:08,960
Speaker 1: that can fit into a block and these blocks are

844
00:49:09,000 --> 00:49:11,480
Speaker 1: what get processed and built on top of one another,

845
00:49:11,800 --> 00:49:15,320
Speaker 1: and you can't stuff a block more than its limits.

846
00:49:15,400 --> 00:49:18,480
Speaker 1: You can increase, like the size of a block so

847
00:49:18,520 --> 00:49:20,759
Speaker 1: that it can include more transactions, but if you do that,

848
00:49:21,280 --> 00:49:26,640
Speaker 1: then it becomes more computationally intensive for miners or validators

849
00:49:26,680 --> 00:49:28,880
Speaker 1: to propagate that block throughout the network and so you

850
00:49:28,920 --> 00:49:33,120
Speaker 1: have a higher chance of chain splits occurring. You basically

851
00:49:33,200 --> 00:49:37,040
Speaker 1: increase like the load on validators and miners when they're

852
00:49:37,120 --> 00:49:40,400
Speaker 1: running a node. You have to have very sophisticated software

853
00:49:40,400 --> 00:49:43,560
Speaker 1: to be able to continue to propagate this very, very

854
00:49:43,560 --> 00:49:47,040
Speaker 1: heavy blocks throughout the network. So there's a good rationale

855
00:49:47,080 --> 00:49:49,920
Speaker 1: for why you want to keep the size of blocks

856
00:49:49,960 --> 00:49:53,600
Speaker 1: manageable for an ordinary node. It helps with the decentralization

857
00:49:53,640 --> 00:49:56,080
Speaker 1: of the network. But Anyway, so you've got a limited

858
00:49:56,120 --> 00:49:58,560
Speaker 1: amount of transactions that you can include a pool block

859
00:49:58,760 --> 00:50:03,160
Speaker 1: and if there's very, very high amount of transactions waiting

860
00:50:03,160 --> 00:50:06,640
Speaker 1: to get included, and you know you you have very

861
00:50:06,719 --> 00:50:10,839
Speaker 1: high fees, you've got long wait times. What if we

862
00:50:10,840 --> 00:50:16,040
Speaker 1: were able to partition the blockchain so that, instead of

863
00:50:16,239 --> 00:50:21,680
Speaker 1: blocks being confirmed by this single ethereum Blockchain, you have

864
00:50:21,880 --> 00:50:26,799
Speaker 1: mini block chains, also called shards, that are all processing

865
00:50:26,920 --> 00:50:31,160
Speaker 1: the transaction load of ethereum in parallel together. So you've

866
00:50:31,200 --> 00:50:33,960
Speaker 1: got like, let's just say, for hypothetically, like sixty four

867
00:50:34,239 --> 00:50:37,480
Speaker 1: mini block chains that are all looking at the transaction

868
00:50:37,520 --> 00:50:40,200
Speaker 1: men pool of Ethereum, which is this public space where

869
00:50:40,239 --> 00:50:43,440
Speaker 1: everybody sends their unconfirmed transactions and these miners and these

870
00:50:43,520 --> 00:50:47,719
Speaker 1: validators on these shards are picking out, you know, transactions

871
00:50:47,760 --> 00:50:51,400
Speaker 1: from there and they're all working together to to progress

872
00:50:51,520 --> 00:50:56,000
Speaker 1: the ethereum blockchain as a whole. So that greatly, brightly

873
00:50:56,320 --> 00:50:59,200
Speaker 1: improves the transaction through put of ethereum and the scalability

874
00:50:59,239 --> 00:51:03,800
Speaker 1: of ethereum. How ever, it's an extremely complex design. Sixty

875
00:51:03,880 --> 00:51:08,680
Speaker 1: four many blockchains or even and even like thinking about

876
00:51:08,680 --> 00:51:14,160
Speaker 1: how like transaction automicity, automicity, I think I'm saying that wrong,

877
00:51:14,400 --> 00:51:17,440
Speaker 1: but basically, like how would you be able to communicate, like,

878
00:51:17,520 --> 00:51:21,480
Speaker 1: the finalization of one transaction on a specific chard to

879
00:51:21,640 --> 00:51:25,640
Speaker 1: another Chard, and is their latency between that communication? So

880
00:51:25,800 --> 00:51:28,400
Speaker 1: basically that was the original idea for charting. But again,

881
00:51:28,440 --> 00:51:33,320
Speaker 1: like the complexities around charting, the many unanswered questions around

882
00:51:33,360 --> 00:51:37,520
Speaker 1: how transaction execution would work atomically throughout the whole network,

883
00:51:37,640 --> 00:51:43,719
Speaker 1: those questions started to change how etherium developers think about

884
00:51:43,800 --> 00:51:47,560
Speaker 1: charting and so now that roadmap and that vision is

885
00:51:47,560 --> 00:51:50,080
Speaker 1: is scrap them developers, as a side note, has gone

886
00:51:50,120 --> 00:51:52,880
Speaker 1: through many, many, many different iterations of how they think

887
00:51:52,880 --> 00:51:55,280
Speaker 1: they're going to scale the blockchain and now they've landed

888
00:51:55,360 --> 00:52:00,919
Speaker 1: on this other idea which is very much focused on modularity. So,

889
00:52:01,040 --> 00:52:06,160
Speaker 1: instead of having transactions all execute and all finalize on

890
00:52:06,200 --> 00:52:09,640
Speaker 1: the same chain, what if we abstracted away the burden

891
00:52:09,800 --> 00:52:14,319
Speaker 1: of transaction execution to a layer too, and with a technology,

892
00:52:14,680 --> 00:52:19,080
Speaker 1: technologies like zero knowledge, technology like optimism, which are, you know,

893
00:52:19,160 --> 00:52:21,080
Speaker 1: different types of roll ups. I know I'm using a

894
00:52:21,120 --> 00:52:24,720
Speaker 1: lot of technical but basically we're writting them all down

895
00:52:24,800 --> 00:52:30,439
Speaker 1: for these are these are good for for the good

896
00:52:30,440 --> 00:52:32,319
Speaker 1: for deep dives. But as at a high level, what

897
00:52:32,360 --> 00:52:36,200
Speaker 1: if you abstracted away some of the responsibility of executing

898
00:52:36,239 --> 00:52:39,560
Speaker 1: the transactions to a different network and that network can

899
00:52:39,600 --> 00:52:45,359
Speaker 1: batch together and compress those transactions and then only verify, like,

900
00:52:45,440 --> 00:52:49,880
Speaker 1: the proof of that batch transaction to ethereum, so that, like,

901
00:52:50,120 --> 00:52:53,040
Speaker 1: greatly frees up the transaction and the block space of

902
00:52:53,080 --> 00:52:56,120
Speaker 1: a theory, because now not all transactions are finalizing on

903
00:52:56,160 --> 00:52:58,800
Speaker 1: the theem. You've got batches of transactions that are finalizing

904
00:52:58,800 --> 00:53:01,799
Speaker 1: on a layer two and you're just sending down the

905
00:53:01,840 --> 00:53:05,600
Speaker 1: proofs of those compressed transactions to ethereum. And so dank

906
00:53:05,680 --> 00:53:10,040
Speaker 1: charting is a new iteration of charting that really focuses

907
00:53:10,239 --> 00:53:13,440
Speaker 1: on making the cost of roll ups, the cost of

908
00:53:13,480 --> 00:53:18,440
Speaker 1: these bast transactions, cheaper and introducing a lot more modularity

909
00:53:18,480 --> 00:53:22,200
Speaker 1: to the ethereum blockchain. And I yes, did you say

910
00:53:22,280 --> 00:53:26,799
Speaker 1: Dank charting? Yes, so that's actually the charting roadmap for

911
00:53:26,800 --> 00:53:29,080
Speaker 1: etheroryum now and it doesn't really have anything to do

912
00:53:29,160 --> 00:53:32,200
Speaker 1: with charting, the original idea for charting. And this is

913
00:53:32,239 --> 00:53:35,760
Speaker 1: where I plug in on dram and Charbonneau's hitchhiker's guide

914
00:53:35,800 --> 00:53:39,000
Speaker 1: to etherium, where he talks a lot about this. But yes,

915
00:53:39,120 --> 00:53:44,000
Speaker 1: you're right, Dank charting. But that is that is the

916
00:53:44,080 --> 00:53:46,680
Speaker 1: real version of sharuting that is more likely to be

917
00:53:46,719 --> 00:53:50,200
Speaker 1: implemented today than the version of charting that I explained before.

918
00:53:50,480 --> 00:53:55,040
Speaker 1: Al Right, so we have charting, Dank charting, layer two's

919
00:53:55,040 --> 00:53:59,120
Speaker 1: optimistic roll ups Verse Zero Knowledge Proofs, the ethereum narrative

920
00:53:59,200 --> 00:54:04,279
Speaker 1: versus Bitcoin in MTV. You've given so many future episodes

921
00:54:04,480 --> 00:54:07,480
Speaker 1: for us to now build on. Christine Kim, thank you

922
00:54:07,520 --> 00:54:09,880
Speaker 1: so much. You're the perfect guest for coming on. We

923
00:54:09,960 --> 00:54:11,879
Speaker 1: say that, but that was so clear and so good

924
00:54:12,040 --> 00:54:13,920
Speaker 1: and I know people have told us we need to

925
00:54:13,960 --> 00:54:16,600
Speaker 1: do merge margin and I'm glad we didn't. Just like Russia.

926
00:54:16,880 --> 00:54:19,400
Speaker 1: We got a great guest. So thank you so much, Christine,

927
00:54:19,400 --> 00:54:21,400
Speaker 1: for coming on the PODCAST. Thank you so much for

928
00:54:21,440 --> 00:54:23,279
Speaker 1: having me. You guys. This is lovely. Yeah, there's a

929
00:54:23,320 --> 00:54:25,320
Speaker 1: lot of fun. Thank you so much. Yeah, thanks, Christine.

930
00:54:25,320 --> 00:54:27,080
Speaker 1: That was really interesting and I don't say that about

931
00:54:27,120 --> 00:54:29,960
Speaker 1: every Crypto podcast episode that we do. So thank you.

932
00:54:44,320 --> 00:54:47,520
Speaker 1: Dank charting. The future of all of finance is going

933
00:54:47,600 --> 00:54:50,839
Speaker 1: to be whether whether these voters can make Dank charting work.

934
00:54:50,880 --> 00:54:52,879
Speaker 1: It's like a real word. It's one word. No, I know,

935
00:54:53,520 --> 00:54:55,759
Speaker 1: but this gets to a real point, which is like

936
00:54:55,840 --> 00:54:59,280
Speaker 1: if you're if you're portraying yourself as the future finance

937
00:54:59,400 --> 00:55:01,560
Speaker 1: or the future of money, like can't we get some

938
00:55:01,680 --> 00:55:04,480
Speaker 1: different terms, like things that people could say allowed in

939
00:55:04,520 --> 00:55:07,479
Speaker 1: a meeting? The one that has to go is ultrasound money.

940
00:55:07,560 --> 00:55:10,239
Speaker 1: You can't be talking about that has to go. That

941
00:55:10,360 --> 00:55:12,399
Speaker 1: wasn't really bad. It also begs the question of like,

942
00:55:12,520 --> 00:55:15,040
Speaker 1: if you're going to create ultra ultrasound money, could you

943
00:55:15,080 --> 00:55:18,040
Speaker 1: just like evaporate it, just burn it into oblivion, like

944
00:55:18,160 --> 00:55:20,560
Speaker 1: is that the sound of money? There is just yeah,

945
00:55:20,719 --> 00:55:24,759
Speaker 1: just the one, the one coin. Okay, on a serious note,

946
00:55:25,000 --> 00:55:28,840
Speaker 1: I thought that conversation was really interesting and mostly because

947
00:55:28,880 --> 00:55:31,560
Speaker 1: it gets to that fundamental tension which we kind of

948
00:55:31,600 --> 00:55:34,279
Speaker 1: alluded to in the Intro, which is, if this is technology,

949
00:55:34,320 --> 00:55:37,520
Speaker 1: if this is software, software is supposed to adapt to

950
00:55:37,560 --> 00:55:40,240
Speaker 1: the needs of the people using it or the needs

951
00:55:40,239 --> 00:55:42,719
Speaker 1: of the market using it, and so it throws up

952
00:55:42,760 --> 00:55:45,719
Speaker 1: these questions of like how best to adapt? What are

953
00:55:45,760 --> 00:55:49,960
Speaker 1: you sacrificing as you try to reduce energy usage and

954
00:55:50,080 --> 00:55:53,880
Speaker 1: all those kinds of thorny questions. Yeah, I think ethereum

955
00:55:53,920 --> 00:55:58,880
Speaker 1: is an interesting position, straddling the sort of two worlds right,

956
00:55:58,920 --> 00:56:00,520
Speaker 1: because it was sort of you know, it's one of

957
00:56:00,520 --> 00:56:04,920
Speaker 1: the earlier chains and, as Christine mentioned, it has there

958
00:56:05,000 --> 00:56:08,080
Speaker 1: is still a significant faction that has that sort of

959
00:56:08,360 --> 00:56:12,799
Speaker 1: o g cipher punk, anti censorship impulse. On the other hand,

960
00:56:12,840 --> 00:56:14,759
Speaker 1: it is a more corporate chain in vcs, you know,

961
00:56:14,840 --> 00:56:17,640
Speaker 1: that's what they've put a lot of money and financial

962
00:56:17,680 --> 00:56:21,120
Speaker 1: institutions experiment. Then there is like the purer software and

963
00:56:21,160 --> 00:56:23,520
Speaker 1: you know, some of these newer chains like Salana, etcetera.

964
00:56:23,560 --> 00:56:26,120
Speaker 1: It's like that's just like a company launched that I

965
00:56:26,120 --> 00:56:29,400
Speaker 1: mean technically the company maybe doesn't control it, but there's

966
00:56:29,440 --> 00:56:32,520
Speaker 1: like they're faster, they can probably upgrade even quicker than ethereum.

967
00:56:32,560 --> 00:56:35,480
Speaker 1: They already like started on proof of steak, etcetera. So

968
00:56:35,520 --> 00:56:39,759
Speaker 1: the question is Kenneththerium sort of like navigate this sort

969
00:56:39,760 --> 00:56:44,080
Speaker 1: of like the two tensions, the sort of like community,

970
00:56:44,200 --> 00:56:48,359
Speaker 1: decentralized cipher punk tension with the software world, and this

971
00:56:48,480 --> 00:56:52,760
Speaker 1: is a big moment in terms of, I guess, navigating

972
00:56:52,760 --> 00:56:54,920
Speaker 1: those two worlds. Yeah, it really seems like that's what

973
00:56:54,920 --> 00:56:57,360
Speaker 1: they're trying to do, right. So it'll be fascinating to

974
00:56:57,400 --> 00:56:59,759
Speaker 1: see what happens. And then, of course, if you know,

975
00:57:00,040 --> 00:57:03,040
Speaker 1: if someone like the CFTC, to use your example, were

976
00:57:03,239 --> 00:57:05,239
Speaker 1: to come in and say something and you were to

977
00:57:05,239 --> 00:57:07,560
Speaker 1: get a Validat or like coin base who has kicked

978
00:57:07,600 --> 00:57:10,360
Speaker 1: off the network like it would just be fascinating to

979
00:57:10,480 --> 00:57:13,799
Speaker 1: see how that consensus mechanism actually worked and then what

980
00:57:13,960 --> 00:57:17,760
Speaker 1: happened to all the other validator. It really is interesting

981
00:57:18,280 --> 00:57:22,120
Speaker 1: that the merge is happening so soon after the tornado

982
00:57:22,240 --> 00:57:25,640
Speaker 1: cash sanctioning, because that's like the first time, right, like

983
00:57:25,760 --> 00:57:28,120
Speaker 1: governments like no, we're like going after a piece of software,

984
00:57:28,800 --> 00:57:32,600
Speaker 1: and so you know, it does raise the stakes potentially

985
00:57:32,800 --> 00:57:35,640
Speaker 1: for you know, the government has done all kinds of

986
00:57:35,640 --> 00:57:38,960
Speaker 1: things with crypto, but it's usually like at the Fiat

987
00:57:39,000 --> 00:57:41,160
Speaker 1: on ramp level. Right they're like, okay, you need to

988
00:57:41,200 --> 00:57:43,800
Speaker 1: apply K Y C M L to the money you're

989
00:57:43,800 --> 00:57:46,720
Speaker 1: bringing onto the exchange. But then once you're on, once

990
00:57:46,760 --> 00:57:49,080
Speaker 1: you have the coins, then the government has basically been

991
00:57:49,120 --> 00:57:52,640
Speaker 1: pretty hands free and this is potentially a change right

992
00:57:52,680 --> 00:57:55,400
Speaker 1: at a moment in which some of these big centralized

993
00:57:55,480 --> 00:57:56,960
Speaker 1: entities are going to have a lot of power over

994
00:57:57,000 --> 00:57:59,480
Speaker 1: the network. Yeah, I'm also just interested in the sort

995
00:57:59,520 --> 00:58:02,160
Speaker 1: of like the PR aspect of all of it. If,

996
00:58:02,560 --> 00:58:04,480
Speaker 1: you know, if the government says like we don't want

997
00:58:04,480 --> 00:58:07,400
Speaker 1: you to deal with North Korea or don't let a

998
00:58:07,440 --> 00:58:11,600
Speaker 1: North Korean entity like mind blocks or make transactions on

999
00:58:11,600 --> 00:58:13,240
Speaker 1: your blockchain, and then you have a bunch of people

1000
00:58:13,280 --> 00:58:17,440
Speaker 1: going like well, no, actually, we're censorship resistant and you know,

1001
00:58:17,640 --> 00:58:21,320
Speaker 1: this is about making, you know, censorship, free money and

1002
00:58:21,360 --> 00:58:24,280
Speaker 1: transactions and all of that. That seems like a difficult

1003
00:58:24,800 --> 00:58:28,560
Speaker 1: position take, or at least a difficult one when it

1004
00:58:28,560 --> 00:58:32,840
Speaker 1: comes to broadcasting that message. Speaking of PR I suspect

1005
00:58:33,560 --> 00:58:37,360
Speaker 1: that the crypto industry is going to really turn on

1006
00:58:37,400 --> 00:58:39,760
Speaker 1: Bitcoin fast and they're going to say, look at this

1007
00:58:39,920 --> 00:58:44,720
Speaker 1: electricity guzzling blockchain, we have something that doesn't guzzle electricity anymore.

1008
00:58:44,920 --> 00:58:47,160
Speaker 1: Penalize those proof of work people. I think that that

1009
00:58:47,200 --> 00:58:49,440
Speaker 1: battle is coming. This sort of the E S G

1010
00:58:49,600 --> 00:58:53,800
Speaker 1: ification of Crypto and the vilification of change that don't

1011
00:58:53,840 --> 00:58:55,680
Speaker 1: move to proof of steak, I think will be a

1012
00:58:55,720 --> 00:58:59,080
Speaker 1: big story. Oh, I totally agree. But it's also really

1013
00:58:59,120 --> 00:59:03,480
Speaker 1: interesting to see bitcoin kind of embrace that position in

1014
00:59:03,520 --> 00:59:05,240
Speaker 1: the system. And I think I wrote about this at

1015
00:59:05,280 --> 00:59:08,640
Speaker 1: one point, but bitcoin proponents are positioning themselves basically is

1016
00:59:08,640 --> 00:59:11,840
Speaker 1: the anti crypto. Now right, that's the foil off of

1017
00:59:11,920 --> 00:59:14,360
Speaker 1: which they are playing and I don't know, it's just

1018
00:59:14,400 --> 00:59:18,640
Speaker 1: been it's been fascinating to see that narrative be created.

1019
00:59:19,080 --> 00:59:22,000
Speaker 1: All right, well, okay, yeah, we can talk about this forever.

1020
00:59:22,200 --> 00:59:24,240
Speaker 1: Shall we leave it there? Let's leave it there. Okay,

1021
00:59:24,360 --> 00:59:27,080
Speaker 1: this has been another episode of the all thoughts podcast.

1022
00:59:27,160 --> 00:59:29,520
Speaker 1: I'm Tracy alloway. You can follow me on twitter at

1023
00:59:29,560 --> 00:59:32,400
Speaker 1: Tracy Alloway, and I'm Joe Wisn'tal. You can follow me

1024
00:59:32,520 --> 00:59:36,040
Speaker 1: on twitter at the stalwart. Follow our guest Christine Kim

1025
00:59:36,120 --> 00:59:40,919
Speaker 1: she's at Christine Underscore D Kim, follow our producer, Carmen Rodriguez,

1026
00:59:40,960 --> 00:59:44,200
Speaker 1: at Carmen Armand and check out all of our podcasts,

1027
00:59:44,320 --> 01:00:02,400
Speaker 1: Bloomberg under the handle at podcasts. Thanks for listening to