WEBVTT - The Ethereum Network Just Experienced a Monumental Development 0:00:10.039 --> 0:00:14.160 Hello and welcome to another episode of the odd lots podcast. 0:00:14.200 --> 0:00:18.360 I'm Joe Wisn't all and I'm Tracy. Tracy. Something very 0:00:18.480 --> 0:00:21.440 big is happening in the crypto world and it's not 0:00:21.520 --> 0:00:24.239 about like, it's not about lines going up and down, 0:00:24.239 --> 0:00:26.280 because so much of what excites to me about Crypto 0:00:26.360 --> 0:00:29.040 is that the lines move so much. That's fun. But 0:00:29.080 --> 0:00:33.159 there's something else, and it's not strictly price related. The merge. Merge, 0:00:33.360 --> 0:00:35.320 I feel like someone needs to make like a movie 0:00:35.400 --> 0:00:38.720 poster with the merge written in creepy letter. Doesn't make 0:00:38.760 --> 0:00:40.720 it look like an old horror movie kind of thing. 0:00:40.840 --> 0:00:43.319 But yeah, the merge is happening in ethereum. Yeah, right, 0:00:43.360 --> 0:00:45.520 and so people have been telling us, Oh, you gotta 0:00:45.560 --> 0:00:47.440 have a merge episode. You know, there's so much going 0:00:47.440 --> 0:00:49.960 on we can't always get around to every topic, but 0:00:50.040 --> 0:00:55.200 this is like ethereum is switching its consensus mechanism from 0:00:55.280 --> 0:00:57.560 proof of work, which is like kind of like bitcoin mining, 0:00:57.640 --> 0:01:01.240 very energy intensive mining operation the most pop associate with Crypto, 0:01:01.320 --> 0:01:03.560 to proof of steak, and so it will be a 0:01:03.600 --> 0:01:07.720 different approach to creating and validating blocks and they've been 0:01:07.720 --> 0:01:10.520 working on it for years and years and years and 0:01:10.560 --> 0:01:13.759 it's finally happening. So I'm going to caveat this discussion 0:01:14.120 --> 0:01:18.759 with the fact that I haven't been following this very intently. However, 0:01:19.280 --> 0:01:22.319 I do find it interesting because it gets to something 0:01:22.319 --> 0:01:24.119 that you wrote, I guess it was a year ago 0:01:24.440 --> 0:01:27.160 or so now, about, you know, the crypto world kind 0:01:27.160 --> 0:01:29.360 of splitting into these two different camps and on the 0:01:29.400 --> 0:01:32.600 one side you have people who are very into the 0:01:32.680 --> 0:01:37.240 technology and technology. You know, one aspect of technology is 0:01:37.280 --> 0:01:41.600 that it evolves, it changes, and so in that respect 0:01:41.760 --> 0:01:43.840 this is a theory um evolving and changing in a 0:01:43.920 --> 0:01:46.640 very big way. But the other camp and crypto are 0:01:46.680 --> 0:01:50.720 the sort of Bitcoin maximalists, the fundamentalists who don't want 0:01:50.760 --> 0:01:54.400 to see anything change about bitcoin and the technology at all. 0:01:54.520 --> 0:01:56.400 I'm really glad you brought this up. I think that 0:01:56.640 --> 0:01:59.440 is spot on, because there's this question of like well, 0:01:59.480 --> 0:02:03.040 what is is it software or isn't money? And I 0:02:03.040 --> 0:02:06.480 think there's like these two camps and if it's software, right, 0:02:06.680 --> 0:02:08.680 or if it's if software is a really big component, 0:02:08.720 --> 0:02:11.280 that a part of software is upgrades, right, upgrade cycles, 0:02:11.480 --> 0:02:14.760 and you know, it's like Microsoft might update it's browser 0:02:14.840 --> 0:02:16.800 or something every year or something, and then at some 0:02:16.880 --> 0:02:19.480 point there, like the old browser will not be supported, 0:02:19.560 --> 0:02:22.880 you can't use it anymore, right, whereas this sort of 0:02:22.919 --> 0:02:26.040 like money stands. There was sort of like hardcore bitcoin 0:02:26.160 --> 0:02:29.440 view is, you know, if you're gonna have money, you 0:02:29.480 --> 0:02:31.560 don't ever want to be told this money isn't good 0:02:31.600 --> 0:02:34.000 anymore or there's been a hard fork or there's been 0:02:34.080 --> 0:02:36.240 some sort of change to the network and you have 0:02:36.320 --> 0:02:38.040 to do something, you have to change something, you have 0:02:38.040 --> 0:02:40.560 to update your software to use it, and I think 0:02:40.639 --> 0:02:44.320 these are like fundamentally very big things and I think this, 0:02:44.320 --> 0:02:48.040 this merge, this huge switch from sort of traditional mining 0:02:48.080 --> 0:02:51.239 to proof of steak is really important, sort of culturally, 0:02:51.639 --> 0:02:56.040 setting etherium apart from bitcoin and its willingness to change 0:02:56.080 --> 0:02:58.120 the rules from time to time of the network a 0:02:58.200 --> 0:03:01.360 touchstone moment for crypto. But it also gets to the 0:03:01.400 --> 0:03:05.320 idea of pros and cons of different types of blockchains. Right. 0:03:05.440 --> 0:03:08.840 So ethereum is trying to solve one problem here, which 0:03:08.880 --> 0:03:11.440 you know might, for instance, be energy use, which a 0:03:11.440 --> 0:03:13.280 lot of people have focused on, a lot of crypto 0:03:13.320 --> 0:03:16.440 critics have focused on saying that mining wastes a ton 0:03:16.480 --> 0:03:18.880 of energy. So why don't we try to fix that? 0:03:19.520 --> 0:03:22.720 But on the other hand, does the new design come 0:03:22.800 --> 0:03:25.240 with its own set of problems? And we've already seen 0:03:25.280 --> 0:03:28.760 some noises around the idea of well, maybe you're making 0:03:28.760 --> 0:03:32.239 it less censorship resistant, and we're going to get into that. Yes, 0:03:32.320 --> 0:03:35.320 and so one of the developments over the last several 0:03:35.360 --> 0:03:40.200 weeks is the treasuries sanctioning of Tornado cash, which is 0:03:40.240 --> 0:03:44.360 a way for people to obfuscate their ethereum transactions through 0:03:44.440 --> 0:03:47.640 a mixer, and it's the first time that the Treasury 0:03:47.680 --> 0:03:51.040 has ever sanctioned a piece of software, which is pretty interesting. 0:03:51.400 --> 0:03:53.320 But then it also raised the question will if they 0:03:53.360 --> 0:03:55.880 can sanction a piece of software, why can't they sanction 0:03:55.960 --> 0:03:59.720 ethereum itself? Or can they tell ethereum holders or ethereum 0:04:00.000 --> 0:04:03.200 acres in this new proof of steak mechanisms? Like you, 0:04:03.360 --> 0:04:05.680 you're going to get in trouble if you process blocks 0:04:05.720 --> 0:04:08.560 from entities that are trying to launder money, etcetera. A 0:04:08.560 --> 0:04:11.080 whole new can of worms. It's always evolving. We're always 0:04:11.120 --> 0:04:13.920 trying to keep up here on the podcast. So let's 0:04:13.920 --> 0:04:15.800 try to learn some more about it. Let's do it. 0:04:15.880 --> 0:04:18.520 I don't even know what a validator is versus a mind. 0:04:18.960 --> 0:04:22.000 Let's get a steaker, a validator, a minor or relayer, 0:04:22.080 --> 0:04:23.800 a whole Er. I don't know any of these words, 0:04:23.839 --> 0:04:26.159 so we're gonna be talking to someone who does. I'm 0:04:26.279 --> 0:04:29.760 very excited to welcome to odd lots Christine Kim. She 0:04:29.839 --> 0:04:33.480 has a research associate at galaxy digital and she's been 0:04:33.480 --> 0:04:37.120 writing about these topics for galaxy clients for a long time. So, Christine, 0:04:37.680 --> 0:04:39.599 thank you so much for coming on. How did we 0:04:39.640 --> 0:04:41.880 do there in the introgue? This is like foreign territory. 0:04:42.080 --> 0:04:45.760 Was that? How do we do there? That was excellent. Um, 0:04:45.800 --> 0:04:48.159 I think we've already done you guys have condensed this 0:04:48.360 --> 0:04:50.600 entire podcast and everything I wanted to talk we can 0:04:50.600 --> 0:04:53.000 stop now. A minute. Yes, and we can stop now. 0:04:54.200 --> 0:04:56.040 Tracy and I like we still we we had a 0:04:56.080 --> 0:04:58.320 busy day. We started prepping about the fifteen minutes ago 0:04:58.360 --> 0:05:00.520 and I said Tracy, like we're gonna we talked about 0:05:00.520 --> 0:05:02.440 proof of steak and Tracy turns to be like three 0:05:02.440 --> 0:05:03.880 minutes later it's like, I think this is going to 0:05:03.960 --> 0:05:07.040 like create some centralization them like it sounds like you 0:05:07.120 --> 0:05:13.120 got it, but no, I was really impressed from your perspective, Christine, 0:05:13.240 --> 0:05:16.880 like let's just start, like how significant like is this 0:05:17.080 --> 0:05:19.320 moment for a theorem? And like, what's the real goal? 0:05:19.320 --> 0:05:21.599 We know reducing energy consumption as part of it, but 0:05:21.839 --> 0:05:24.800 why do you put this in context on the ethereum roadmap? 0:05:24.839 --> 0:05:28.440 For us, for sure, I think it's hard to understate 0:05:28.720 --> 0:05:31.640 just how big, or overstate, I should say, how big, 0:05:31.760 --> 0:05:34.680 this upgrade is. The transition to proof of steak has 0:05:34.720 --> 0:05:38.240 been part of Etherorum's original development row, back when the 0:05:38.279 --> 0:05:42.120 blockchain first launched in two thousand and fifteen. Developers had 0:05:42.160 --> 0:05:45.960 thought that this upgrade would be ready earlier in but 0:05:46.200 --> 0:05:50.359 due to the technical challenges of actually swapping out the 0:05:50.360 --> 0:05:55.240 consensus mechanism of ethereum while it's live, um brought forth delays, 0:05:55.320 --> 0:05:59.480 and so people have been asking for this upgrade. Developers 0:05:59.480 --> 0:06:02.320 have been working on this upgrade for around seven years now, 0:06:02.440 --> 0:06:07.279 and it's it's truly it was almost to the point 0:06:07.320 --> 0:06:10.520 where people had thought that etheroum would never transition, that this, 0:06:11.040 --> 0:06:13.320 that this transition to proof mistake was just a pipe 0:06:13.360 --> 0:06:15.760 dream Um. And so the fact that this is the 0:06:15.800 --> 0:06:19.640 week in which ethereum will finally fulfill one of the 0:06:19.680 --> 0:06:22.840 promises that it had made to its users its investors 0:06:22.839 --> 0:06:25.880 back when it first launched. I think is is pretty 0:06:25.920 --> 0:06:29.479 monumental and it's really not just about the changes to 0:06:29.839 --> 0:06:33.320 its energy consumption. I think another big change that people 0:06:33.360 --> 0:06:38.120 are really looking forward to is ethereum's monetary policy switching 0:06:38.200 --> 0:06:43.280 from being an inflationary currency to potentially a deflationary currency. 0:06:43.880 --> 0:06:47.800 The annual network issuance of the network is expected to 0:06:47.880 --> 0:06:51.680 drop from around five to less than zero point five percent. 0:06:51.839 --> 0:06:55.039 And if you add in Coin Burns, which is like 0:06:55.080 --> 0:06:58.120 a new mechanism that that was introduced back in October, 0:06:58.320 --> 0:07:01.320 or I should say August, with the I nine, there 0:07:01.480 --> 0:07:05.240 is this. There is a lot of excitement around ethereum's 0:07:05.279 --> 0:07:07.720 issuance of the issuance of Eth and the supply of 0:07:08.080 --> 0:07:11.679 actually contracting over time. With more activity on the network. 0:07:11.720 --> 0:07:14.280 You're going to see more eth being burned and that 0:07:14.480 --> 0:07:18.160 impacting total supply. So I think that's another big part 0:07:18.160 --> 0:07:21.200 of it. It's like the economics around eat. That's going 0:07:21.240 --> 0:07:23.280 to be changing after the merge. So I just want 0:07:23.280 --> 0:07:25.480 to ask one short question make one point. We are 0:07:25.520 --> 0:07:30.080 recording this on September, the merge. The event is expected 0:07:30.120 --> 0:07:32.600 to happen in about a day by the time you're 0:07:32.600 --> 0:07:35.160 hearing this. It should have happened if it totally blows 0:07:35.240 --> 0:07:37.280 up or something, we might have to re record the 0:07:37.440 --> 0:07:39.680 entire episode, or maybe we'll like put this out as 0:07:39.680 --> 0:07:41.880 an artifact of a history that might have been. But 0:07:42.080 --> 0:07:46.080 just a real quick technical question. This is called the merge. 0:07:46.360 --> 0:07:48.880 Does that imply that the proof of steak, does the 0:07:48.920 --> 0:07:52.480 proof of steak ethereum already exist and now the two 0:07:52.520 --> 0:07:56.600 networks are merging together? Like, is this this other chain 0:07:56.840 --> 0:08:01.480 that has a different consensus mechanism that's already operating? Yeah, 0:08:01.520 --> 0:08:04.680 that's exactly right. So the proof of stake blockchain of 0:08:04.720 --> 0:08:09.560 ethereum has existed since I think it was December. Um 0:08:09.600 --> 0:08:12.320 It's called the beacon chain and right now a very 0:08:12.320 --> 0:08:16.560 small portion of eight is issued on that parallel chain 0:08:16.760 --> 0:08:21.200 and there's individuals and stakeholders that have already invested their 0:08:21.240 --> 0:08:25.240 money into that chain, the beacon chain, and for the merge, 0:08:25.280 --> 0:08:27.480 what's going to happen is that chain is going to 0:08:27.520 --> 0:08:31.120 become fused together with ethereum main net today. But in 0:08:31.160 --> 0:08:34.560 the process of that change, all of the issuance that 0:08:34.600 --> 0:08:39.199 happens on ethereum currently, which goes to miners, will disappear, 0:08:39.480 --> 0:08:42.280 will go to zero, and so the only issuance of 0:08:42.640 --> 0:08:46.040 that you have left is to the validators that are 0:08:46.040 --> 0:08:48.000 on the beacon chain now, and that's really just a 0:08:48.080 --> 0:08:52.199 fraction of the total issuance that's that's being generated today. 0:08:52.440 --> 0:08:54.600 So I have a ton of questions already. I'm also 0:08:54.679 --> 0:08:56.600 kind of hoping that our producer is able to put 0:08:56.640 --> 0:08:58.720 in like sound effects every time we say the merge, 0:08:58.920 --> 0:09:03.600 so it was like merged and I love them. Okay, 0:09:03.600 --> 0:09:05.800 on a serious note, can we back up for a 0:09:05.840 --> 0:09:08.800 second and can you maybe describe the difference between proof 0:09:08.840 --> 0:09:12.240 of work versus proof of steak, and also how ethereum 0:09:12.320 --> 0:09:15.760 got into a position where they have two different types 0:09:15.880 --> 0:09:20.360 of chains, so beacon versus the normal ethereum chain, and 0:09:20.400 --> 0:09:24.559 then also, on top of that, maybe to describe the 0:09:24.600 --> 0:09:27.440 difference between proof of work and proof of steak. Could 0:09:27.440 --> 0:09:31.440 you walk us through, like how will a new ethereum 0:09:31.520 --> 0:09:36.080 be created under this new regime, and what happens to 0:09:36.320 --> 0:09:39.120 the miners in this case? I started by asking two 0:09:39.200 --> 0:09:44.319 questions of a rose. That questions you're gonna have to 0:09:44.400 --> 0:09:46.440 you're gonna have to remind me if that get to 0:09:46.480 --> 0:09:49.120 answer one of those Um, but let me start with 0:09:49.240 --> 0:09:52.040 just giving a broad overview of the difference between proof 0:09:52.040 --> 0:09:55.280 of work and proof of steak and then, okay, yes, 0:09:55.360 --> 0:09:57.200 and then, and then we can go from there. Wow, 0:09:57.200 --> 0:10:00.360 I love the enthusiasm around this, though. I totally agree 0:10:00.400 --> 0:10:02.400 with you guys that, like the merge is a really 0:10:02.440 --> 0:10:05.520 big event, and like educating people around how this is 0:10:05.559 --> 0:10:08.840 actually happening and even the technicals beneath it, which sometimes 0:10:08.880 --> 0:10:12.320 can sound boring, is like really, what's what's exciting. So 0:10:12.360 --> 0:10:14.640 I'm glad we're talking about this. But anyways, so I 0:10:14.640 --> 0:10:16.840 think it's it's useful to start off with what is 0:10:16.840 --> 0:10:20.120 a consensus mechanism or a consensus protocol, because that is 0:10:20.679 --> 0:10:22.280 that is what a proof of work and a proof 0:10:22.320 --> 0:10:25.559 of stake blockchain is. It's basically this is the mechanism 0:10:25.600 --> 0:10:29.479 that defines how nodes in a blockchain come to agreement 0:10:29.559 --> 0:10:32.080 about the state of the network. So what are the 0:10:32.080 --> 0:10:36.679 account balances, the transactions, the updated transaction history of the blockchain? 0:10:37.080 --> 0:10:40.240 There needs to be a way for all the computers 0:10:40.240 --> 0:10:42.920 that are connecting to the network, also called nodes, to 0:10:43.440 --> 0:10:47.600 be aligned about what the canonical history is. And so 0:10:47.679 --> 0:10:51.439 it's really about how do you process blocks on a blockchain? 0:10:51.480 --> 0:10:54.880 How do you finalize those transactions? And with proof of work, 0:10:55.000 --> 0:10:57.640 you do that in a very energy intensive way. You 0:10:57.720 --> 0:11:01.000 have these actors that are called miners, are solving a 0:11:01.200 --> 0:11:05.720 very computationally intensive math problem. These are called Hash functions, 0:11:05.760 --> 0:11:09.079 and every miner is competing to be the first person 0:11:09.480 --> 0:11:12.880 to find the correct solution because that means that they 0:11:12.920 --> 0:11:16.040 get to build a block, include transactions in it get 0:11:16.040 --> 0:11:20.360 the reward from the block. But for proof of steak, 0:11:20.600 --> 0:11:25.880 these actors, these miners, are replaced by validators and instead 0:11:25.880 --> 0:11:32.240 of solving that very computationally intensive puzzle, validators are voting 0:11:32.800 --> 0:11:35.720 on blocks and they're attesting to blocks and they just 0:11:35.760 --> 0:11:39.199 get randomly selected by the network according to an algorithm 0:11:39.320 --> 0:11:42.680 of who gets to be a block proposer. So on ethereum. 0:11:42.720 --> 0:11:45.599 It's not that. When when's the theory and transition to 0:11:45.640 --> 0:11:49.079 proof of steak, I should caveat. These validators are not competing, 0:11:49.120 --> 0:11:52.400 they're just randomly selected to to propose a block and 0:11:52.480 --> 0:11:55.040 they'll get rewards from that. They'll also get rewards from 0:11:55.120 --> 0:11:58.079 voting on blocks and attesting to the validity of those blocks. 0:11:58.080 --> 0:12:01.960 But the question is, why are these validators on ethereum? 0:12:01.960 --> 0:12:04.640 How how do we keep them honest? Because with miners 0:12:04.720 --> 0:12:08.720 you've already expended so much computational energy you've kind of 0:12:08.800 --> 0:12:11.800 input in a very high cost. You're not going to 0:12:11.960 --> 0:12:16.080 lose the chance to earn those rewards after you've sunk 0:12:16.160 --> 0:12:20.199 in a particular amount of cost. With validators, you haven't 0:12:20.200 --> 0:12:25.160 really sunk in anything. You haven't expended any energy to 0:12:25.880 --> 0:12:28.200 vote or a test, to blocks or to propose blocks. 0:12:28.280 --> 0:12:31.120 If you did, it's it's very negligible compared to what 0:12:31.240 --> 0:12:35.600 miners do. So what validators need is we need a 0:12:35.600 --> 0:12:39.080 different way to keep these validators honest, and that way 0:12:39.280 --> 0:12:43.880 is through steak. So sometimes people call validators steakers. They 0:12:43.960 --> 0:12:47.200 try and use that term interchangeably. But at the core 0:12:47.240 --> 0:12:51.480 of that is validators, at least on Ethereum, are staking 0:12:51.920 --> 0:12:54.520 a large amount of ether. They're staking thirty two eight, 0:12:54.640 --> 0:12:58.360 which I haven't checked the prices as of late, but 0:12:58.520 --> 0:13:01.360 it's a significant amount. And if they do try and 0:13:01.440 --> 0:13:03.800 cheat the network, if they do propose a block that 0:13:03.920 --> 0:13:06.280 goes against the rules of the network, that they're trying 0:13:06.320 --> 0:13:08.520 to confuse the network, trying to attack the network or 0:13:08.600 --> 0:13:11.599 change the validity of the chain, there is a potential 0:13:11.760 --> 0:13:13.959 that that amount of steak that they've put into the 0:13:14.000 --> 0:13:16.880 network gets slashed. So it's a very different way of 0:13:17.000 --> 0:13:21.760 keeping actors honest. For minors, you are you are expending 0:13:22.280 --> 0:13:26.240 a lot of cost upfront and that cost kind of 0:13:26.320 --> 0:13:29.800 keeps you honest. But for validators, what you're doing is 0:13:29.840 --> 0:13:33.080 you're you're locking up your capital and you're letting the 0:13:33.160 --> 0:13:37.400 network kind of hold onto it, and the fear of 0:13:37.520 --> 0:13:41.360 having that steak slashed is what keeps you honest. It's 0:13:41.360 --> 0:13:43.920 so you mentioned you have to put up right now 0:13:43.920 --> 0:13:47.600 at around if you're putting up a minimum to be 0:13:47.640 --> 0:13:52.439 a validate, or U S dollars, and I guess it's 0:13:52.480 --> 0:13:54.679 kind of like a security deposit. The risk is if 0:13:54.720 --> 0:13:57.679 you do something untowards to the network, if you vote 0:13:57.679 --> 0:14:01.120 bad if you try to approve in valid blocks, you 0:14:01.280 --> 0:14:06.400 lose part of your security deposit. Exactly exactly. And so this, 0:14:06.400 --> 0:14:09.280 this mechanism for proof of steak is seeing one of 0:14:09.320 --> 0:14:12.640 the benefits of it is that it is more ecologically friendly. 0:14:12.720 --> 0:14:15.840 It has better for the E S G narrative, because 0:14:15.840 --> 0:14:19.680 you're not putting in so much energy just to build 0:14:19.720 --> 0:14:22.200 a block. You're being randomly selected by the network to 0:14:22.200 --> 0:14:25.600 build a block, and the reason why you can be 0:14:25.720 --> 0:14:28.920 trusted to make sure that that block is is correct 0:14:28.960 --> 0:14:31.840 and is valid is because you've already invested, you know, 0:14:31.880 --> 0:14:34.760 a certain amount of state to the network and for ethereum. 0:14:34.880 --> 0:14:38.400 I think the original idea was, okay, we have this 0:14:38.640 --> 0:14:43.560 mining consensus protocol that is already finalizing transactions, progressing blocks. 0:14:43.600 --> 0:14:46.840 We should move all the applications and the users to 0:14:47.200 --> 0:14:50.560 a new consensus protocol, to a proof of steak network 0:14:50.560 --> 0:14:54.280 and blockchain. But the concern, there's a significant amount of 0:14:54.320 --> 0:14:57.920 complexity around that, because what is that moving process going 0:14:57.960 --> 0:15:00.600 to look like? Ethereum over the past couple of years 0:15:00.640 --> 0:15:05.440 has just skyrocketed in terms of active addresses, total value locked. 0:15:05.800 --> 0:15:08.600 I think the the amount of value that has grown 0:15:08.640 --> 0:15:11.600 on ethereum, the amount of activity that has grown on Ethereum, 0:15:11.600 --> 0:15:15.040 has made the vision to just simply move users and 0:15:15.120 --> 0:15:20.400 applications and value to another new chain infeasible, very difficult 0:15:20.440 --> 0:15:23.360 to do so. Instead of moving users on the current 0:15:23.400 --> 0:15:25.920 ethereum chain to a new proof of stake block chain, 0:15:26.280 --> 0:15:30.480 developers have thought of this, this alternative idea where you 0:15:31.600 --> 0:15:34.200 launch the proof of steak version of ethereum and you 0:15:34.280 --> 0:15:38.840 simply fuse that version of ethereum to the existing ethereum. 0:15:39.120 --> 0:15:41.360 So one of the cool things about the merge is 0:15:41.400 --> 0:15:45.480 that it doesn't impact the application layer of ethereum. It 0:15:45.680 --> 0:15:49.840 really only impacts how blocks are finalized. So as the 0:15:49.880 --> 0:15:53.600 current ethereum block chain is progressing blocks, it will communicate 0:15:53.640 --> 0:15:56.200 those blocks to back to the consensus layer of Ethereum, 0:15:56.240 --> 0:15:58.440 which is the beacon chain, and the beacon chain will 0:15:58.480 --> 0:16:01.440 start to take over the response of the of finalization. 0:16:01.640 --> 0:16:04.040 So that question of you know, why is it that 0:16:04.160 --> 0:16:07.120 ethereum has a parallel proof of state blockchain and why 0:16:07.200 --> 0:16:10.000 is it that we're going down this roadmap of of 0:16:10.120 --> 0:16:13.040 merging together the block chains rather than simply upgrading the 0:16:13.080 --> 0:16:15.600 existing proof of work chain? I think it really comes 0:16:15.600 --> 0:16:18.880 down to simplicity and it comes down to how do 0:16:18.920 --> 0:16:21.480 we do this upgrade in a way that doesn't result 0:16:21.520 --> 0:16:25.560 in downtime and doesn't result in disruptions to a network 0:16:25.600 --> 0:16:29.000 that has just grown so much quicker than I think 0:16:29.000 --> 0:16:32.640 core developers had anticipated when they first launched ethereum, and 0:16:32.680 --> 0:16:34.560 I think that's also why we've seen a lot of 0:16:34.600 --> 0:16:38.560 delays to this upgrade, because the value of this chain 0:16:38.720 --> 0:16:41.360 and the amount of user activity on it has made 0:16:41.400 --> 0:16:44.880 it so that, you know, this upgrade, when it happens, 0:16:45.000 --> 0:16:47.400 has to be done in a way that's that's very 0:16:47.440 --> 0:16:51.160 air tight, that's very poses the least minimal amount of 0:16:51.720 --> 0:16:55.480 damage and of risk to the users and to the applications. 0:16:55.520 --> 0:16:58.800 So I think I missed some questions. Actually, any questions 0:16:58.800 --> 0:17:01.000 on that? I think you did. I think you did 0:17:01.000 --> 0:17:04.960 all three. Actually, Um, that was really good. So one 0:17:04.960 --> 0:17:07.760 thing that I find odd about crypto in general is that, 0:17:07.840 --> 0:17:10.080 like the problem that they're trying to solve is the 0:17:10.119 --> 0:17:13.680 problem of like how do you do trust less transactions? 0:17:13.720 --> 0:17:16.720 Like two parties don't trust each other. How can technology, 0:17:17.320 --> 0:17:19.000 you know, get in there and make it so that 0:17:19.040 --> 0:17:22.080 people can transact with one another in a, you know, 0:17:22.680 --> 0:17:25.880 in a way, that in a protected way? But at 0:17:25.880 --> 0:17:28.880 the same time it feels like so much of it 0:17:28.920 --> 0:17:31.360 is like or at least especially in the ethereum case, 0:17:31.480 --> 0:17:33.840 so much of it is built on consensus. It's like 0:17:33.880 --> 0:17:36.760 two parties can't trust each other, but we trust the 0:17:36.800 --> 0:17:41.440 system as a whole to reach a consensus, and that's 0:17:41.480 --> 0:17:44.920 basically how you know proof of stake is working. How, 0:17:45.200 --> 0:17:47.600 how do they actually get to that consensus and what 0:17:47.720 --> 0:17:53.359 happens if, like one validator in a transaction rejects a block? 0:17:54.520 --> 0:17:59.360 Consensus really is at the core of of these technologies. 0:17:59.440 --> 0:18:02.840 It's a really question because these systems are meant to 0:18:02.880 --> 0:18:06.040 be trust less. It's meant to uh cut out the 0:18:06.040 --> 0:18:09.359 middlemen Um, like you said, and for proof of work 0:18:09.600 --> 0:18:16.320 consensus protocols, that trust less uh interaction between miners validating 0:18:16.480 --> 0:18:21.040 and earning rewards from block production is actually much simpler 0:18:21.560 --> 0:18:24.880 than proof of state consensus protocols, because proof of state 0:18:24.920 --> 0:18:29.159 consensus protocols don't rely on an external good, it doesn't 0:18:29.200 --> 0:18:36.200 rely on energy, it just relies on an internally created 0:18:36.359 --> 0:18:39.679 asset like like. You have to assume that E is 0:18:39.720 --> 0:18:43.560 a worthwhile asset for proof of stake to work. So 0:18:44.000 --> 0:18:47.119 that question of you know when a validator rejects a 0:18:47.160 --> 0:18:50.920 transaction or when a validator creates a block that all 0:18:50.960 --> 0:18:55.159 the other validators think is false or or goes against 0:18:55.160 --> 0:18:59.960 the rules of the network, that's something that the protocol 0:19:00.119 --> 0:19:03.280 level of Ethereum, as a proof of stake blockchain, is 0:19:03.400 --> 0:19:06.800 automatically checking for. So there are certain rules around how 0:19:06.880 --> 0:19:09.520 you can propose blocks. So one of the ways that 0:19:09.600 --> 0:19:14.760 you prevent against double spends, basically like somebody saying that 0:19:15.160 --> 0:19:18.080 I spent five dollars and I can spend another ten 0:19:18.160 --> 0:19:21.840 dollars from the same address and and not change, like 0:19:21.880 --> 0:19:26.240 the account balance. That is prevented by the network. Basically 0:19:26.359 --> 0:19:29.639 checking for double block proposals, like if a validator to 0:19:29.840 --> 0:19:33.160 were to propose two blocks at the same time, that's 0:19:33.240 --> 0:19:35.440 like a slash double event. That's something where the state 0:19:35.520 --> 0:19:38.480 that they've put into the network gets reduced. And there's 0:19:38.560 --> 0:19:41.399 also other ways in which validators can keep each other honest, 0:19:41.480 --> 0:19:44.959 even if those automatic rules aren't able to catch all 0:19:45.000 --> 0:19:47.320 the activities. So this kind of goes into the censorship 0:19:47.400 --> 0:19:49.560 question of like, let's just say we've noticed that a 0:19:49.560 --> 0:19:54.360 certain validator continues to reject transactions from an address that's 0:19:54.359 --> 0:19:58.960 on the o FAC sanctions list. validators can coordinate to 0:19:59.760 --> 0:20:05.760 the sally like blacklist those malicious validators, because when you've 0:20:05.760 --> 0:20:09.119 put your stake into the network, you've also told the 0:20:09.280 --> 0:20:12.480 entire network that hey, this is my validator, I d 0:20:13.080 --> 0:20:16.040 this is my address. You are no longer like an 0:20:16.040 --> 0:20:20.880 anonymous uh stakeholder, whereas for, I think, miners, when you're 0:20:21.119 --> 0:20:25.000 dedicating hash rate or hash power, to basically computational energy 0:20:25.040 --> 0:20:28.840 to the network, that kind of labeling system is is 0:20:28.880 --> 0:20:31.960 harder to do. But for validators, once you've put locked 0:20:32.000 --> 0:20:34.800 in your thirty two to the to the network. It's 0:20:34.840 --> 0:20:37.399 held by the network and it's also identified by the network. 0:20:37.480 --> 0:20:39.679 So another way in which validators keep each other on, 0:20:39.720 --> 0:20:43.720 it's outside of these like automatic rules, is this ability 0:20:43.800 --> 0:20:47.439 to kind of put bad behaving validators out of the network. 0:20:47.440 --> 0:20:51.080 Now this requires social consensus, this would require some sort 0:20:51.080 --> 0:20:54.000 of an upgrade, some sort of a way for everybody 0:20:54.080 --> 0:20:57.560 to coordinate against those those validators. But that's kind of 0:20:57.560 --> 0:21:00.800 like another final resort where I think it helps to 0:21:01.720 --> 0:21:04.680 to understand like how is how is this network coming 0:21:04.680 --> 0:21:08.040 to consensus? Like initially it's like these rules, these pre 0:21:08.200 --> 0:21:11.960 programmed rules that are part of the protocol, but sometimes, 0:21:11.960 --> 0:21:16.080 like rules can't always catch all of the malicious behavior. Um, 0:21:16.200 --> 0:21:18.919 and in the case where you're not able to catch 0:21:18.960 --> 0:21:22.320 the malicious behavior, there's also this additional step that you 0:21:22.359 --> 0:21:26.240 can take. Um, sometimes it's called social slashing, Um, where 0:21:26.359 --> 0:21:31.159 validators can basically like remove certain bad acting validators from 0:21:31.200 --> 0:21:34.240 the network and slash their steak, even though they haven't 0:21:34.280 --> 0:21:37.199 necessarily drawn against the technicalities of the rules, that they 0:21:37.240 --> 0:21:39.280 can just kind of like coordinate to do that. So 0:21:39.320 --> 0:21:41.480 I think this really gets to what was going to 0:21:41.600 --> 0:21:44.879 be my next question, and it's one of the criticisms 0:21:44.960 --> 0:21:49.280 of proof of steak is okay, most people, probably, I 0:21:49.359 --> 0:21:52.280 assume most people who own some don't have thirty two 0:21:52.280 --> 0:21:55.200 of them or don't have but doesn't mean they can't 0:21:55.240 --> 0:21:59.200 participate in steaking. And if my understanding is like, okay, 0:21:59.520 --> 0:22:02.399 take some random person, buys a few eth leaves it 0:22:02.440 --> 0:22:06.000 on coin based, coin base can then be itself a 0:22:06.119 --> 0:22:09.879 huge validator of youth. But talk to us about the 0:22:10.000 --> 0:22:13.480 risk of a few mega validators, because I think when 0:22:13.840 --> 0:22:18.600 the essentially the undermining of decentralization such that, okay, there's 0:22:18.640 --> 0:22:21.480 I think there's something called Lido, there's coin based, probably 0:22:21.480 --> 0:22:25.720 a few others. But the the risk of everyone just 0:22:25.720 --> 0:22:27.479 putting their money with a couple and then you just 0:22:27.480 --> 0:22:32.280 have a couple public, well known entities who are, in theory, 0:22:32.400 --> 0:22:34.520 like have you know, dealing with the laws of their land, 0:22:34.560 --> 0:22:37.000 the law enforcement of the countries they operate in, and 0:22:37.040 --> 0:22:40.840 the executives of these companies, a handful of entities with 0:22:40.920 --> 0:22:45.200