Preserving Ethereum – The Daily Gwei #79

https://thedailygwei.substack.com/p/preserving-ethereum-the-daily-gwei


Ethereum is going to be in an interesting place over the next 2-3 years as there’s going to be essentially 2 parallel Ethereum chains running – eth1 (aka eth1.x) and eth2 – with both of them being vastly different. For starters, eth1.x is where all the action is happening and it’s important that we as a community continue to to maintain/upgrade it to suit the needs of developers and users. Not to mention that eth2 isn’t even live yet!

DC has a great point above – there are major upgrades such as EIP-1559 that are really important for eth1.x and we should be striving to get this live on mainnet as soon as possible. On top of this, there are many changes that need to happen on the eth1.x side to prepare it for the eth1 <> eth2 merger as part of phase 1.5 of the eth2 rollout plan. This means that, as DC says, we must ensure that eth1.x is kept as a top priority until the merger happens in phase 1.5.

Though the issue that we have in the eth1.x ecosystem today is around the fact that the development process is very slow (for a number of reasons that I’ll detail below) which is unfortunately leading to some ossification of the eth1.x chain. This leads to even major upgrades like EIP-1559 taking a very long time to be implemented even though it’s clearly something that the majority of the community really wants.

Let’s discuss some of the reasons as to why this is happening. Basically, the number 1 reason seems to be core developer burn out. The core developers are the people who are making sure the critical infrastructure such as the Ethereum node clients are running smoothly and without issue. This is a thankless job as almost no one in the ecosystem actually sees what work these developers do – from low-level protocol and node software optimizations to putting out fires that you didn’t even know were there. These people are under an incredible amount of stress to ensure that the network keeps running smoothly so this has led to some burn out which is totally understandable.

There is also a lack of clear public communication from the parties involved in the core development process of Ethereum (and I don’t think it’s necessarily their fault). I bet most of you haven’t even heard of the Ethereum Cat Herders who actually do put out regular updates and have been for a while! I believe the problem here is that there is no one “leading” marketing/public relations for the “Ethereum project” itself – not even the Ethereum foundation – which leads to a “bystander effect” of sorts. What I mean by this is that for Ethereum marketing/PR updates, we pretty much have a situation where there is no “leader” to tell someone to put out these updates so everyone just assumes that someone else will do it. What ends up happening is the community tries to fill the void as best they can but this leaves much to be desired.

So, where to from here? Well from the people I’ve spoken to, it seems like this is an issue that is well known and there are efforts to try and rectify this. I think on the eth2 side we’re in a pretty good spot with Ben Edgington putting out his weekly ‘What’s New in Eth2’ newsletter, Danny Ryan putting out semi-regular ‘quick updates’ on the Ethereum blog, and the client teams such as PryLabs and Sigma Prime putting out their own updates. Though, I believe this is because the eth2 development process is much more centralized and structured than eth1.x is right now.

Have a great day everyone,
Anthony Sassano


If you’d like to support my on-going work to bring you a fresh Ethereum-packed newsletter every week day, feel free to make a donation on Gitcoin here (during the current matching round your donations are quadratically matched).


All information presented above is for educational purposes only and should not be taken as investment advice.


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Ethereum is an Economic Nexus – The Daily Gwei #77

https://thedailygwei.substack.com/p/ethereum-is-an-economic-nexus-the


The Ethereum network achieved 2 new all time highs yesterday – it processed the most transactions ever and generated the most fees in its entire history. When you think about it, this isn’t really all too surprising given that everyone was trying to claim their free UNI airdrop (and sell it using Uniswap). Nonetheless, it was economic activity and Ethereum is a nexus for this activity.

I generally like to think of Ethereum as an economic nexus for the entire cryptocurrency space. It sits in the middle as a decentralized and ultra secure layer while there are spokes all around it that bridge in. These spokes can be other blockchains (“sidechains”), centralized services like exchanges, centralized databases that feed information to the Ethereum network and more. All of this activity increases Ethereum’s economic activity which in turn increases its fees which in turn, once EIP-1559 is implemented, creates an incredibly secure network with a monetary asset that has net negative issuance based on natural supply and demand forces.

The native asset of Ethereum, ETH, is an amazing asset that has incredible properties – the best of which are its non-custodial and censorship-resistant nature. Today, there is almost $3 billion (7.6 million ETH) locked up in DeFi powering many different decentralized economic machines (protocols). These machines are already better than their centralized counterparts with DEXs like Uniswap regularly doing more trading volume than Coinbase and protocols offering much better lending/borrowing rates than centralized services (even without the token subsidies). Not to mention that DeFi is just a much better experience in general (even with the high gas fees).

On top of this, foreign assets are clamoring to migrate to the Ethereum nexus with over $1.1 billion worth of BTC now tokenized on Ethereum. This tokenized BTC isn’t just sitting idle either – it’s being actively used within the various apps that are a part of the nexus. People are providing liquidity to Curve’s BTC pools to earn CRV + trading fees, they’re doing a similar thing in the WETH/WBTC pool to earn UNI + trading fees, they’re borrowing stablecoins against their WBTC in Compound and so much more.

This may come across as hyperbolic but I truly believe that, if we play our cards right, Ethereum will become the greatest economic nexus in history. It will absorb trillions of dollars of value into its liquidity vortex, power an entirely new global financial system built from the ground up, enable new coordination tools to build global communities (arguably it already has) and reinvent the way we do so many other things. We may not be anywhere close to that today, but it’s coming much faster than you may think.

Have a great weekend everyone,
Anthony Sassano


If you’d like to support my on-going work to bring you a fresh Ethereum-packed newsletter every week day, feel free to make a donation on Gitcoin here (during the current matching round your donations are quadratically matched).


All information presented above is for educational purposes only and should not be taken as investment advice.


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Tethered to Reality – The Daily Gwei #70

https://thedailygwei.substack.com/p/tethered-to-reality-the-daily-gwei


Yesterday someone accidentally sent 1 million USDT to the Swerve token contract which meant that it was lost forever – or was it? Shortly after this event was made public, Paolo Ardoino (CTO of Bitfinex and Tether) tweeted out that the affected person could contact Tether support to possibly have the transaction reversed. Paolo’s tweet shows both the benefits and drawbacks of these centralized assets.

Paolo Ardoino @paoloardoino

Please open a ticket to @Tether_to support service app.tether.to
If it’s USDt ERC20 stuck in an address we should be able to recover it, but in order to be sure, please contact our customer support and we’ll try our best.

Platonic NEET @Crypto_Plato

Swerve Discord is savage tonight. Some guy just sent $1 million to the Swerve token contract and LOST IT ALL.

DeFi ain’t for the faint of heart. https://t.co/s1OO84i3dI

Now, reversing a transaction on a decentralized blockchain is not usually possible unless you’re able to gain majority hashpower (or stake) over the network. The reason why it’s possible with Tether (and some other ERC20’s on Ethereum) is because the owners of these tokens are able to basically program in admin control or backdoors at time of creation. Because of this, the Tether team can do things like reversing a USDT transaction to help an end-user out. Though the flip-side to this is that they can also arbitrarily freeze USDT located anywhere on Ethereum (in a users wallet, in a smart contract, in an exchange etc).

This got me thinking – are these centralization points something to be celebrated? I actually think the answer is yes because if you’re using a centralized asset such as USDT or USDC, you should get some level of protection in return. Put another way, if you’re taking on the risks of using a centralized asset on Ethereum, then you should also get the benefits. These risks are very real too – just a couple of months ago CENTRE (the organization that manages USDC), blacklisted an address holding USDC for the first time. I wrote about that here if you’d like to read more.

Other assets such as WBTC (wrapped Bitcoin) are in the same boat here. For example, if you were able to prove that you lost access to your WBTC (by accidentally sending it to a token contract), then I’m sure the centralized issuers would just issue you some fresh WBTC and mark-off the stuck/lost WBTC (because the actual BTC is held in a multi-sig wallet managed by BitGo which means the BTC actually wasn’t lost – just the IOU WBTC token). This is a clear benefit to holding a centralized asset that a decentralized one (such as ETH) can never offer natively. There are of course ways to prevent people sending assets to an address where they’d be lost (such as building various mechanisms into wallets to warn about the transaction).

So as you can see, there are various benefits to these centralized assets if you’re happy accepting the trade-offs of them being, well, centralized. I’ve said it before and I’ll say it again, I always prefer using decentralized assets on Ethereum – whether that is ETH or a stablecoin like DAI. Though, this does come with trade-offs as DAI tends to be less stable than its centralized counterparts and there’s no built in protection in case of user error.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Food Poisoning – The Daily Gwei #68

https://thedailygwei.substack.com/p/food-poisoning-the-daily-gwei-68


Well the SushiSwap saga just gets crazier as over the weekend we saw the creator (Chef Nomi) sell off the dev fund that had accrued over the previous few days (approximately $13 million worth). This obviously came as a shock to most of the SushiSwap community as the Chef had stated he wouldn’t be dumping the dev fund as he’s a “good guy”. Well, you know what they say, nice (good) guy’s finish last.

What’s even more ironic about this is that Nomi (and the SushiSwap community) had been railing against Uniswap for being a “VC backed” project and Nomi even directly went up against the founder of Uniswap, Hayden Adams, claiming that he had “everything” while Nomi had nothing. Well, now Nomi has made much more money from Uniswap than Hayden ever has (since SushiSwap is basically a clone of Uniswap).

Anyway, after Nomi dumped his tokens, he stated that he would continue working on SushiSwap and transfer ownership of the protocol to a multi-sig of community members. But before this could happen, Chef Nomi went rogue once again and transferred control of the protocol to Sam Bankman-Fried (SBF) who is the CEO of FTX and Alameda Research (and also the largest SUSHI farmer and holder). Since transferring ownership, Chef Nomi has been pretty quiet across his various social media channels.

So now the ball is in SBF’s court and he’s currently free to do whatever he wants with the protocol. He outlined his plan here which is to basically cancel the current migration of Uniswap LP’s to SushiSwap (done), initiate a new one (done), and start the process of transferring ownership of SushiSwap to new multi-sig owners (in progress). Though since SBF is such a large holder of SUSHI, giving up control of the protocol via the multi-sig might not matter since he could just swing the vote on governance proposals with his holdings anyway. Whether he will exercise this power or not remains to be seen. It’s also worth noting that SBF has also been pushing for SushiSwap to be ported over to Serum (the “decentralized” exchange he’s building on Solana).

Now, this piece wouldn’t be complete without addressing all of the speculation around the identity of Chef Nomi. As I’m sure most of you know, there is a prominent theory that Chef Nomi is actually Sorawit Suriyakarn (CTO of Band Protocol). This is based on a bunch of evidence (more here) that the community has uncovered in the last 48 hours. Of course, both Sorawit and the Band team have denied these allegations and key people in the community have also come to Sorawit’s defense. Though, Sorawit has admitted that he was involved in the project to some extent (helping with the code) but still denied being involved in any way beyond that.

I’ll be honest, the evidence is quite damning and there are too many coincidences to be ignored. I’m still personally on the fence about it and I’d say there’s a 50% chance that Sorawit is Chef Nomi – I’m sure the truth will come out sooner or later but until then, I would encourage people not to send things like death threats or insults towards Sorawit.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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The Human Greed Tax – The Daily Gwei #67

https://thedailygwei.substack.com/p/the-human-greed-tax-the-daily-gwei


As all of you probably know by now, there has been a wave of new yield farming projects spun up on Ethereum lately that have attracted large amounts of liquidity and are paying out high yields to those brave enough to take on the risk. Many of these projects (or “Ethereum money games” as I like to call them) are basically zero-sum games in that they eventually “death spiral” when the music stops and everyone tries to find a chair before the price of the token crashes. But what if we could turn these things into positive-sum games? I believe we can.

So far, both the YAM and YFI communities have voted to direct 1% of their treasuries to Gitcoin and just yesterday Justin Leroux proposed that the SushiSwap community should do the same. YAM is a unique case here because what the YAM project aims to do is take the zero-sum game of rebasing and turn it into positive sum by directing some of the rebase to a treasury. Then YAM token holders can vote on where they would like these treasury funds to go.

Many of these other money games aren’t like YAM, YFI or SushiSwap and they are what I like to call “flash farms” – that is, they are usually short-lived and have a very low chance of having any sort of future. Due to this, they don’t really produce much value outside of enriching a few people. What I would love to see is these flash farms spun up with a 1% payout to something like Gitcoin from the very beginning. This means that even if the money game only lasts for 2 weeks, it actively helped the ecosystem by directing funds to public goods.

Another way of thinking about these schemes is that they are basically a tax on human greed. The only reason 99% of people are participating in most of the money games on Ethereum is, you guessed it, to make money! So by implementing a “greed tax”, we can effectively harness human greed for the “greater good”. A real world example of this would be if a casino donated 1% of its profits to a charity. The “greed tax” doesn’t just have to go to public goods funding or charities either – it can be directed to a treasury (like in YFI, YAM and SushiSwap) and then token holders can vote on where they would like the funds to go. An example of this is SUSHI holders voting to pay the developer who built a SushiSwap yield farming dashboard.

Even though the yield farming craze has seemed like it’s reached its peak over the last few weeks, I tend to believe that we’re just getting started. There is just so much more space left to explore here and a basically unlimited amount of ways that these money games can be set up. Not to mention that you can gamify these things much more than just having a dashboard with a yield counter. I look forward to seeing what the Ethereum community comes up with over the coming months!

Have a great weekend everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Money Legos at Work – The Daily Gwei #66

https://thedailygwei.substack.com/p/money-legos-at-work-the-daily-gwei


If you’ve been in the Ethereum space for a while, you’ll know all about the concept of “money legos” or “composability” which are basically financial building blocks that are being recreated from the ground up on Ethereum. Each of these building blocks allows for new financial instruments to be built and more rapid innovation to occur.

John from The Block posted this great “DeFi map” on Twitter yesterday that really shows the power of these money legos if you know where to look. For example, the decentralized exchanges that have proliferated on Ethereum would have no where near the amount of use/liquidity/volume if stablecoins didn’t exist. This is because stablecoins (like DAI, USDC, USDT etc) are the dominant trading pairs across a range of other tokens because they are, well, stable! Additionally, something like Curve or mStable wouldn’t exist at all if stablecoins weren’t a thing because they are literally stablecoin aggregators. This also means that something like the yETH vault wouldn’t exist either as it relies on Curve to generate the yield – seeing the picture I’m painting here?

Outside of stablecoins, we have other money legos that needed to exist before certain products could gain adoption. 1inch and dex.ag are liquidity aggregators that require other platforms, such as Uniswap and Balancer, to exist and pool liquidity together so that these aggregators can tap into them. Though, no one would care to use aggregators if the on-chain volumes of Uniswap and Balancer were low so these platforms needed not only stablecoins to grow, but assets that people actually want to trade.

Probably my favorite example of the power of these money legos is basically what we’re seeing play out with all of the yield farming. Let’s take the recent yETH vault as an example – here’s the flow: you deposit your ETH into the yETH vault, the vault takes your ETH and puts it into a MakerDAO CDP/Vault, it then draws DAI against this ETH at a 200% collateralization ratio, puts that DAI into the DAI vault on Yearn, this vault puts the DAI into Curve Finance’s Y pool, this pool issues the yCrv liquidity provider token which is then put into the yCRV yearn vault, then this vault puts the yCrv into the Curve DAO to farm CRV, and then later the vault recycles the CRV and trading fees into ETH.

Now try to do something like the above in traditional finance – spoiler alert, you can’t! This is the true power of money legos on Ethereum – unbounded composability, innovation and rapid iteration in order to create financial products that most people have never even dreamed of. DeFi on Ethereum packs 30 years of traditional finance innovation in months and improves upon it in every way. Yes it’s still clunky, expensive to use, full of jargon and has many other issues but it’s already a major improvement over what the traditional system offers.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Upgrade Your Assets with Ethereum – The Daily Gwei #61

https://thedailygwei.substack.com/p/upgrade-your-assets-with-ethereum


Ethereum is a platform for many different things – DeFi, DAOs, NFTs, coordination games and more. It’s also a platform for upgrading your assets by making them programmable. The most used assets on Ethereum are USD stablecoins which are essentially “upgraded dollars” that can do much more than USD in the traditional financial system. Yesterday, the team behind USDC announced that they have upgraded USDC to a version 2 that allows for gasless transactions and allowing dapps/wallets to charge fees in USDC.

Now, imagine trying to upgrade US dollars/fiat in a bank account – it simply can’t be done because these dollars are not programmable. I like to call them “boomer dollars”. Now, with any asset on Ethereum (not just stablecoins), they can be upgraded or mutated rapidly to do all kinds of different things. Let’s just take stablecoins as an easy example here. Say you have some DAI, you can deposit it into the Curve Y pool to mutate it into yCRV which is an yield-bearing instrument backed by a pool of USDC, DAI, USDT and TUSD. Now, with this yCRV, you can do a bunch of different things. You could provide it as liquidity to a Uniswap or Balancer pool against another asset (such as USDC or ETH) to earn trading fees. Or you could stake it in Curve’s DAO to farm CRV tokens. Or you could put it into a Yearn vault to automate the farming of CRV from Curve. Neat, huh?

Now, imagine doing literally any of what I mentioned above in the traditional financial system using boomer dollars. Where would you even start? I guess you’d go to your bank/credit unions website and have a poke around to see what they offer. They probably have a bunch of services like a long-term savings account to earn a tiny yield and they’ll have some sort of “portal” to buy equities from. I’ve personally done this experiment before using my bank and it was a complete pain and oh so boring – it felt like I had gone back to using the internet in the 90’s. Oh and of course it’s all 100% custodial too – yay!

This goes beyond just dollars of course. We have plenty of assets on Ethereum that can be leveraged in a variety of ways. We can use ETH as trustless collateral to borrow other assets against, use tokens like COMP and CRV to participate in their respective protocols governance, bring foreign assets such as BTC over to tokenize them and much more. We can also easily spin up brand new assets in minutes that can interact with all of the other assets and protocols on Ethereum from the get-go.

The overall point I’m trying to make here is that we are no longer limited by the old world system in what we can do with our money and assets. The design space within Ethereum and DeFi is quite literally limited only by the imagination of humanity. That may sound a bit hyperbolic but I truly believe it – what other platform lets you pack decades of financial innovation into a few months? None.

Have a great weekend everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Ethereum Money Games – The Daily Gwei #52

https://thedailygwei.substack.com/p/ethereum-money-games-the-daily-gwei


Last week, with the launch of YAM, many new people in the community got a taste of what I like to call “Ethereum Money Games” aka “ponzi games”. I’m not going to beat around the bush here – these things have more in common with ponzis than they do anything else but I don’t think that’s necessarily bad thing.

Image source

Although these money games rely on “ponzinomics” to work, it doesn’t mean that they are a scam or not worthwhile – it just depends on how the whole show has been set up to run. For example, with YAM, the project tapped into a bunch of hardcore communities (SNX Spartans, LINK Marines, YFI Waifus etc) and relied on ponzi-like mechanics (rebasing) in order to bootstrap both liquidity and awareness. This resulted in the fastest formation of a global community that I have ever witnessed and it was all achieved via monetary incentives. As I said in my World of Yamcraft piece last week, these money games are very similar to massively multiplayer online games that some of you reading may have played in the past.

Taking this idea further, we can start to look at how the community is reacting to all of the different money games being deployed to Ethereum. With YAM, the community poured in over $700 million into unaudited smart contracts in order to chase an extremely high yield and a hardcore community was formed around this. With CRV, people plowed in hundreds of millions of dollars because the price of CRV went astronomical for the first few hours (though this was a bad thing since price has been crashing ever since). We can also look at pioneers in this space like Synthetix that has had liquidity mining since early last year which basically incentivized people to provide liquidity to the platform in order to earn a reward (in SNX) that was locked for a year. This game is unique in that it plays on delayed gratification rather than instant access to tokens so that instead of speculators constantly dumping, they are slowly turned into community members while waiting for their tokens to unlock – this makes the entire game a lot more sticky for all participants.

A post about money games would be remiss if I didn’t discuss YFI and how even after the liquidity mining program ended for the token, people are still as involved as ever with the project. The community are constantly building out tools to track stats and metrics, the governance forum is extremely active and Andre Cronje (the creator) is constantly shipping new and exciting products. I don’t think the community would be nearly this active if it wasn’t for the original money game that Andre set up with the week-long farming rewards that has now created an army of YFI holders who are deeply committed to seeing the project grow and prosper.

I feel that we’re going to see plenty more of these money games spun up on Ethereum in the coming months. Some of them will be scams and some will be just be outright bad ideas but through all of this wild experimentation I believe that some of them will turn out to be the next billion dollar protocols that deliver real value to Ethereum. One thing I’m particular excited about is seeing a money game spun up that donates 1% or more of its tokens to a “public goods” platform such as Gitcoin.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Ethereum is Not a Scam – The Daily Gwei #48

https://thedailygwei.substack.com/p/ethereum-is-not-a-scam-the-daily


If you’ve spent any amount of time on Twitter over the last few months and years you’ll be very aware of the fact that a large part of the Bitcoin community considers Ethereum to be an actual scam with even prominent figures like Adam Back holding this view. I consider this to be a really crazy view for someone to hold and incredibly dangerous for newcomers to this space.

There are a few reasons why I believe it is dangerous. Firstly, the top followed accounts on “Crypto Twitter” are basically all Bitcoiners which means they control the narrative flow for newcomers. This is because when someone new first joins Twitter and indicates that they are interested in crypto, a laundry list of these top accounts will pop up and this new person will be recommended to follow them. From here on, new people will begin being exposed to all sorts of misinformation about Ethereum over weeks and months and they are really led to believe that Ethereum is a massive scam.

Secondly, by perpetuating this notion that Ethereum is a “scam”, it makes it much harder for new people to evaluate other projects/investments and come to an educated conclusion on whether they are indeed a scam or not. This, of course, leads to people investing into or follow projects that they believe are “legit” but in fact are actually scams. What makes this even worse is that some of these same Bitcoiners who call Ethereum a scam have promoted actual scams in the past to their followers! Some of them even continue to promote things like the Liquid sidechain from Blockstream as being “more decentralized” than Ethereum (which it isn’t since Liquid is a federated sidechain).

Lastly, these opinions from Bitcoiners are not confined to just the small world of Crypto Twitter – they ripple out to other areas such as the mainstream media which then continue to perpetuate these lies. Unfortunately, as Andreas says, it takes 10x the time to debunk bullshit as it does to state it which means that these lies and misinformation can spread like wildfire and then trying to clarify it for people becomes an extremely uphill battle. On top of this, the people spreading these lies usually have much greater reach than those trying to defend against them which makes it even more difficult to rebuke.

This whole thing is actually one of the major reasons that my Co-Founder Eric and I decided to launch EthHub back in January of 2019 – there was just so much misinformation and outright lies being spread about Ethereum (especially since it was a bear market). Since then, the Ethereum community seems to have developed a very strong immune system and has a better grasp on defending itself from these “attacks”. This is obviously a very positive development and I hope that it continues into the future.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Ethereum is So Hot Right Now – The Daily Gwei #45

https://thedailygwei.substack.com/p/ethereum-is-so-hot-right-now-the


Ben Edgington asked this question on Twitter a couple of hours ago and it got me thinking – what actually is the hottest thing happening on Ethereum right now? Well, turns out, it’s literally all of the things that Ben has as poll options and more.

Source: https://twitter.com/benjaminion_xyz/status/1291336365054013440

Let’s start by going down the list by talking about the price of ETH. Obviously, it’s been on fire lately – breaking out of a 2 year sideways trend and heading above $400 (a price not seen since mid-2018)! The ETH/BTC ratio has also been recovering nicely from its low of 0.016 late last year. I gave some more of my thoughts on why the price has been recovering here.

Next up we have DeFi which has obviously exploded in growth over the last few months with things like DEXs reaching record volumes that accounted for 4% of centralized exchange volume in July alone! This comes as no surprise to Ethereum die-hard’s as we’ve seen the DEX appeal for a while now. On top of DEX growth, we now have over $4.5bil USD locked in DeFi, over 4.3 million ETH locked (~3.5% of the total ETH supply), and many of the “DeFi tokens” showing impressive returns for investors. Read more about all of this here.

Layer 2 scaling was next on Ben’s list and this area has exploded in research, development and user adoption over the last few months. I first detailed it here on June 19th but since then the space has just continued to evolve at a rapid pace. For example, the Scaling Bake-Off Competition that Reddit held had submissions from over 20 teams who have mainnet-ready scaling solutions that claim to be able to handle Reddit’s user base – that is insane! Hell, the Iden3 team just announced a new scaling solution for Ethereum as I was writing this piece!

Finally we have eth2 and I think this one is pretty self-explanatory as Madella, the “final” eth2 phase 0 testnet, just launched. On top of this testnet going live, there’s amazing progress being made across the entire eth2 roadmap with things like phase 1 clients talking to eth1 (in preparation of “The Great Merger”), phase 2 progress being made by teams like Quilt from ConsenSys and lots of auxiliary research across all of these phases and beyond. Learn more about all of that here.

I haven’t even touched on all of the other things happening in Ethereum right now – DAOs are growing steadily and maturing, NFT/crypto-gaming/collectibles are seeing record users/trading volumes, people are hungry for education, and to top it all off, The Graph (a core infrastructure provider) temporarily buckled under Ethereum’s load just a few weeks ago!

Ethereum really is incredibly hot right now.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Do More with Your ETH – The Daily Gwei #44

https://thedailygwei.substack.com/p/do-more-with-your-eth-the-daily-gwei


On the EthHub weekly recap podcast yesterday I mentioned that my bet (or “investment thesis”) for ETH is mainly based on the fact that it has much more utility than any other cryptoasset (yes, including Bitcoin). ETH’s utility is also always expanding because of Ethereum’s expressive nature which allows developers to deploy new money legos on a regular basis!

So, what can you do with your ETH? Starting simple, you can transfer your ETH to another Ethereum account then you can quickly ramp this up by trading your ETH for another token on a decentralized exchange like Uniswap. Another simple thing you can do is register an ENS name by paying in ETH which I think is a sometimes understated activity. To put this in context, you can register a human-readable name for your Ethereum address by just using ETH to pay for it. You can even anonymize your ETH by using tools like Tornado Cash!

Now we can take this to the next level and talk about using your ETH as collateral to either leverage your ETH holdings or earn some yield on stablecoins. You can do this today on multiple platforms – MakerDAO, Compound, Aave and more. You simply deposit your ETH, draw out a stablecoin, and then either buy ETH or another asset with this stablecoin or go lend that stablecoin out somewhere on Ethereum to earn 5%+ APY (depending on market conditions).

Taking this a step further again, you have the option of becoming a liquidity provider (LP) on multiple DeFi apps. Using ETH, you can become an LP on Uniswap or Balancer in many different trading pools or if you want to take your stablecoins that you just borrowed against your ETH collateral, you can put these into Curve or mStable to earn an out-sized yield. Does this sound a little too risky? Protect yourself against smart contract failure by taking out cover on Nexus Mutual!

Finally, when eth2 phase 0 goes live, you’ll be able to stake your ETH, run a validator on your PC, and earn an ETH-denominated return for your work in securing the Ethereum network. I imagine that staked positions will eventually be tokenized as well which means that you’ll be able to use your Staked-ETH (SETH?) as collateral in different DeFi projects – possibly to even borrow stablecoins and do the things above – wild right?

The best part about everything I mentioned above is that you can do it all from your own desktop or mobile wallet – no need to send your funds around to different centralized services, no need to trust any one service with all of your money, no need to ask for anyone’s permission or do KYC – your Ethereum wallet and your ETH are the gateway to an entirely new bankless financial system.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Ethereum Scaling is Here – The Daily Gwei #42

https://thedailygwei.substack.com/p/ethereum-scaling-is-here-the-daily


On June 19th Reddit announced that they were having a “Scaling Bake-Off” by inviting Ethereum scaling projects to show how their solutions could bring Reddit’s Community Points system to mainnet. Over the last few days, submissions have started rolling in with over 20 teams putting forward different solutions ranging from optimistic rollups to sidechains. You can view all of the submissions here.

Source: https://medium.com/omgnetwork/omg-network-rises-up-to-the-great-reddit-bake-off-challenge-136026cf2df4

I’ve detailed just how far layer 2 technology on Ethereum has come in a previous piece but with this bake-off, we’re now taking it to the next level because Reddit has hundreds of millions of users that need to be onboarded into Ethereum. Obviously, the Ethereum mainnet cannot handle this kind of traffic (not even close) so we need robust scalability solutions. Personally, I’m a big fan of the work that all of the teams are doing but I wanted to highlight some of my favorites in this piece.

Let’s first focus on StarkWare. This team is really interested in solving the critical pain-points of scaling such as layer 1 <> layer 2 composability. They are also working with teams like Immutable (the folks behind Gods Unchained) to build a scalable decentralized exchange for trading in-game items. For Reddit’s challenge, they used their StarkEx Rollup technology to show that they were able to use just one STARK proof to do 300,000 transactions at 315 gas per transaction in just 8 Ethereum mainnet blocks. To learn more, head to their submission thread here.

Another really interesting submission that got many in the community talking was the one from Connext called ‘Spacefold’. It’s a UI that sits on top of Connext which enables cross-chain communication using state channels. It can be used to enable instant on/off-boarding from the Ethereum mainnet to L2 chains (currently compatible with Matic, xDai and Optimism with SKALE and Arbitrum coming soon). I thought this was really cool because it’s demoing layer 2 interoperability – something that people have been curious about for a while now. I highly recommend checking out their full submission post here.

Lastly, the submission from xDai and Splunk caught my attention because the xDai chain has been around for a couple of years and Splunk is a major player in the big data space. The xDai Stable Chain is a layer-2 sidechain which is 100% compatible with Ethereum. This solution was able to process 300,000 transactions in under 4.5 hours, achieving 25X+ efficiency from the original requirements set out by Reddit. There’s also a fancy Splunk dashboard that was put together – view a screenshot of it here.

I also wanted to give a special mention to Fuel Labs for their submission which included an implementation of “Twitch Plays Pokemon” running on their optimistic rollup technology. Check that out here. I think it’s super important to showcase these new scaling techniques using things that people are familiar with so I was impressed by Fuel Labs’ work here.

All of this is making me even more bullish about the future of Ethereum scaling than I was before. I’m excited to see which implementation Reddit chooses to go with as I think that will really show the world the power of this scaling technology.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Happy 5th Birthday to Ethereum – The Daily Gwei #40

https://thedailygwei.substack.com/p/happy-5th-birthday-to-ethereum-the


Today is Ethereum’s 5th birthday aka the 5th anniversary of the Ethereum genesis block! Obviously a lot has happened in Ethereum since it launched in 2015 – from the DAO hack to ICO mania to DeFi. Unfortunately, I only got involved with Ethereum in early 2017 so I missed out on all the craziness of the earlier years. Though, I do know my Ethereum history so let’s dive into it.

The Ethereum Genesis block (source: https://etherscan.io/block/0)

Let’s start at the beginning. Vitalik first published the Ethereum whitepaper in late 2013 and then publicly introduced Ethereum at the Bitcoin Miami meetup in February of 2014. It’s not a secret that Vitalik came up with the idea of Ethereum because all of the innovative things he wanted to build were not possible to do on Bitcoin. He mentions some of these things in the whitepaper such as stablecoins(!) and DAOs.

The Ethereum ICO was then held between the 22nd of July 2014 and the 2nd of September 2014 and raised ~31,000 BTC (~$18.3 million) – it was the largest ICO raise ever at that time (little did we know how crazy it would get in 2017). Not to cause you deep regret, but ETH’s price at the ICO was a mere $0.30 or, put another way, if you had invested 1 BTC (~$600 at the time) at the start of the ICO, you would of been able to purchase 2000 ETH. Today, 1 BTC only buys you ~34.5 ETH and 2000 ETH is worth $638,000 – quite an amazing return for those early investors!

Throughout it’s 5 year history, Ethereum has had 9 hard forks (“network upgrades”) with most of them being non-contentious. Obviously, the DAO fork in mid-2016 was highly contentious and resulted in the birth of Ethereum Classic. The DAO fork also split the community and (from what I’ve been told) it was a very dark time for Ethereum – people thought it was actually going to die! What made it even worse was the fact that Ethereum suffered a sustained DDoS attack that brought the network to a crawl in late 2016. Though, the attack vector was patched in November 2016 as part of the Spurious Dragon hard fork. Even though 2016 was full of negative press for Ethereum, somehow ETHs price went on to have its biggest run ever – increasing from $10 at the start of 2017 to $1400 in January 2018. I believe this was mostly due to the ICO mania that actually started in 2016 with notable token sales from Augur, Golem and of course, TheDAO itself.

The last 2 years have actually been quite different for Ethereum compared to the early days. For starters, Ethereum experienced it’s first real long-term bear market where the price of ETH went from a top of $1400 to a low of $80 in just 1 year (Jan 2018-Dec 2018). This caused many people to leave the Ethereum ecosystem altogether and only the die-hard fans remained to keep building out this platform that we all believed in. It’s been quite the arduous journey through 2019 in particular as that was really the year that even the die-hards seemed to “lose hope” due to an extremely stagnant ETH price.

In saying that, 2020 has been much brighter as all of the efforts that people have put in building out the ecosystem over the last 2 years are starting to pay off in a big way. DeFi is growing at an exponential rate, yield farming is getting everyone excited, DAOs/community governance is really coming alive and of course, ETHs price is back over $300 (something not seen since July 2019). On top of this, layer 2 tech on Ethereum has come a long way and we’re on the cusp of seeing a proof of stake Ethereum go live with eth2 (something that has literally been talked about since Vitalik came up with Ethereum).

I’m very excited to see what the next 5 years brings for Ethereum.

If you want to dive deeper into Ethereum’s history I highly recommend buying Camila Russo’s new Ethereum book – The Infinite Machine. It covers the rise of Ethereum over the last few years in-depth and has plenty of stories from the people that made it happen.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Not Everything is Decentralized – The Daily Gwei #39

https://thedailygwei.substack.com/p/not-everything-is-decentralized-the


There was a copycat YFI token spun up over the last 24 hours called YFII that has caused some divide in the DeFi community. This divide has led some people to call this copycat token a scam which then led to what happened just a few hours ago – Balancer blacklisted the YFII/DAI pool from its front-end interface.

Now, of course, people are in Balancer’s Discord server saying that Balancer isn’t “decentralized” or is going against what DeFi is meant to be – I think it’s more nuanced that. There’s a key difference between the decentralized smart contracts that live on Ethereum and the centralized front-end that users interact with to access those smart contracts. For example, anyone is able to directly interact with the Balancer contracts via various means (using Etherscan, MyEtherWallet/MyCrypto or a third party app) but obviously the way most users will interact with them are by using Balancer’s official front-end. I actually wrote a guide on how to interact with the Set Protocol smart contracts using Etherscan and MyEtherWallet if you wanted to see what this looks like in practice.

This begs the question – are the protocol creators/maintainers (who also maintain the front-end) expected to remain “neutral” in these cases? Or are they meant to be the arbiters of what is considered a “scam” and what isn’t? I think it’s unfair to expect the maintainer of a front-end to be held to some gold standard of having to be totally “decentralized” and let scams/frauds run free on their platform – that is not what it means to be “DeFi”. If people want to buy a token via a DEX like Balancer, they still can by using the smart contracts but people shouldn’t expect the centralized front-ends to remain neutral.

Though, taking the other side of this, we can also look at it from a user perspective. Imagine that a user was providing liquidity to the YFII/DAI pool on Balancer and they went to check on it today only to discover that the pool is gone from the front-end. Now, of course, this user is going to panic and immediately think that they’ve been scammed or their money is lost. The only choice they now have is to either try to figure out how to interact with the contracts manually or go through support channels. The weird thing here is that those support channels are usually the team themselves so if the team removed the pool from the frontend because they thought it was a scam or fraudulent, would they even help this person to retrieve their funds? Would it be up to the community to help in this case? I don’t think this is the case with the Balancer team/community but it could happen in other communities!

Uniswap has also been struggling with this issue for a while where users were unhappy with the insufficient warnings displayed on Uniswap’s front-end about scam tokens. This is because on Uniswap you can enter the contract address of a token and it’ll pull the ticker (such as ‘ETH’) and display that for the user. Scammers tend to play on this by creating new token contracts of popular new tokens and use the same name so that when a user enters in the fake contract address, they believe that it’s the real one (though Uniswap has much better warnings now). Though, this only happens if Uniswap hasn’t verified and added the token to the dropdown menu themselves.

What I would like to see more of is projects hosting their front-end on services like IPFS or developers forking the front-ends (if open source) and creating a vibrant ecosystem that taps into these contracts. We already do see this happening to some extent with services like InstaDApp, Zerion and ZapperFi allowing users to interact with different protocols outside of the “official” front-ends. This is obviously great for decentralization and gives users multiple platforms to choose from.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Ethereum Has Already Won – The Daily Gwei #38

https://thedailygwei.substack.com/p/ethereum-has-already-won-the-daily


The “Ethereum killer” narrative seems to be heating up again due mostly to 1 reason – high gas fees. Obviously we all know that fees are really high on Ethereum so competitor chains are again trying to advertise themselves as “cheaper, faster, better” to lure developers and users over (which I don’t think is going to work). They’ve even pivoted their strategy to basically advertising themselves as Ethereum “sidechains” in an attempt to misdirect attention away from the fact that they are actually competitors.

Image source: https://ethereum.org/en/

“Ethereum killers” are nothing new – they’ve been around for years in the form of many different chains. In 2017, it was the likes of NEO (the “Chinese Ethereum”), TRON, VeChain, IOTA and of course the mother of them all, EOS. Where are these competitors today? They’re still around and their protocol tokens are traded on various exchanges but the chains themselves are basically dead – “ghost chains” as Evan Van Ness likes to call them. It’s also good to keep in mind things like the fact that EOS reportedly raised $4 billion in their year-long ICO during 2017/18 and still wasn’t even able to put a dent in Ethereum with all of that capital. This is a clear sign that you cannot buy your way into competing with Ethereum (or network effects in general). You also cannot buy a community.

Now in 2020, there’s a host of newer chains vying for Ethereum’s top spot including Polkadot, Cardano, Algorand, Zilliqa, Solana, NEAR and many more. The one thing that all of these chains have in common is that they are actually not currently fighting for Ethereum’s top spot – they are fighting each-other for the chance to fight Ethereum for the top spot. This leads to massive fragmentation across these different chains with the foundations responsible for developing them having to basically try to out-bid each-other for user acquisition, developers, community mindshare and more.

While the other chains have been fighting among themselves for 3+ years, Ethereum has continued to extend its lead over all other platforms – especially with the growth of DeFi (which didn’t even exist in 2017) and the development of layer 2 scaling technologies + eth2. The Ethereum network is even in higher demand than Bitcoin as fees on Ethereum have been higher than those on Bitcoin for almost 2 months now.

I’ve also been noticing lately that these chains recognize that they will all have to build bridges to Ethereum to tap into its ecosystem whether they like it or not. By doing so, they further reinforce the network and liquidity effect that Ethereum has. If I had to use a crude analogy, I’d say that Ethereum is a central hub like New York City or Silicon Valley that other cities “bridge into” in order to tap into their ecosystems.

You’ve probably been thinking while reading this that I sound like some “Ethereum maximalist” which I understand and you’re probably not wrong to think that. But a key point of difference here is that I don’t think any of the other chains are scams or completely useless – I just think the Ethereum has already won given the fact that it has such a massive lead over the competition (and hasn’t stopped innovating). Not only are these “Ethereum killers” competing with each-other, they are also competing with eth1 (base chain & layer 2) and eth2 while trying to build out an ecosystem of their own.

In the end, if Ethereum gets dethroned with such a massive head start, then it deserves to lose.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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EthHub Weekly #124

https://ethhub.substack.com/p/ethhub-weekly-124


Curated by Anthony Sassano (@sassal0x) and Eric Conner (@econoar)


📈 A Crazy Week for ETH

ETH, for the first time in a long time, is up over 30% over the last 7 days which is causing people to ask the question: is it 2017 again? Well, probably not! But it does seem like a “bull market” is starting to form again over the last few months as we’ve seen the so called “DeFi tokens” have incredible runs and now ETH is seemingly joining the party. Eric and I will be discussing more of our thoughts around this weeks price action on the weekly recap podcast here and you can also read this piece I wrote about it here.

Have a great week everyone!

– Anthony


News of the Week

🏦 Banks in US Can Now Offer Crypto Custody Services, Regulator Says

The Office of the Comptroller of the Currency (OCC) is letting all nationally chartered banks in the U.S. provide custody services for cryptocurrencies.

In a public letter dated July 22, Senior Deputy Comptroller and Senior Counsel Jonathan Gould wrote that any national bank can hold onto the unique cryptographic keys for a cryptocurrency wallet, clearing the way for national banks to hold digital assets for their clients.

The letter marks a major development for the crypto industry. Previously, custody was the province of specialist firms, such as Coinbase, which typically needed a state license, such as a trust charter, to offer the service to large investors. Now, large, regulated financial companies that already provide similar safekeeping services for stock certificates and the like could enter the fray.

The letter, which appears to be addressed to an unidentified bank or similar entity, notes that banks “may offer more secure storage services compared to existing options,” and that both consumers and investment advisors may wish to use regulated custodians to ensure they don’t lose their private keys, and therefore, access to their funds.

🤔 NBA Player Spencer Dinwiddie’s Token Sale Hits 10% of $13.5M Goal

Brooklyn Nets guard Spencer Dinwiddie fought the NBA for months over his plan to tokenize his $34 million contract. Now, with the NBA’s concerns apparently addressed and the sale closed out, Dinwiddie’s plan hit a different obstacle: investor interest.

Dinwiddie’s issuer SD26 LLC sold just nine of the 90 available tokenized contract shares to eight total investors as of Wednesday, according to CoinDesk’s review of Form D regulatory filings and the security’s token’s issuance history on Etherscan

With shares priced at $150,000, just $1,350,000 (or one-tenth of the target $13.5 million sale) was sold. Project insiders have previously said the sale would last only until the end of July. It now appears to be closed out for good.

The sluggish sale of an innovative crypto-contract project indicates that Dinwiddie, who has become the NBA’s de-facto crypto hype man, will not succeed in garnering the $13.5 million in tokenization revenue he targeted.


Project Updates

Eth2 Validator Launchpad Released

After months of hard work from the eth2 research team, along with Consensys and DeepWork Studio, the eth2 validator launchpad (testnet version) has been released.

What’s New in Eth2 – 25 July 2020

Updates on phase 0, testnets, the usual great explainers, links to new media and more in Ben’s weekly eth2 newsletter.

Eth2 Quick Update #13

Medalla multi-client testnet gets a date (August 4th), beta attacknets launched, updates on the eth1 <> eth2 merger and more in Danny Ryan’s latest eth2 quick update.

Participtaing in the Medalla testnet? You can get a POAP for doing so.

Yearn.finance v2 Announced

Yearn.finance v2 has 3 main components; yVaults, Controller and Strategies. You can read the full details here.

The official yEarn governance forum was also announced.

Synthetix Releases Galena

Frontend updates to the Binary Options section, updates to the simple search function, Index Synths now have a composition table and more in this update from the Synthetix team.

Synthetix also announced that institional liquidity providers such as DTC Capital, Three Arrows Capital and ParaFi have joined the platform.

New Zerion Launched

You can now track the entire DeFi market from the same place as your portfolio on Zerion. Explore trending liquidity pools, Sets, crops and more.

Rotki v1.6.0 Released

This new version now has support for Aave, balance overview for all DeFi protocols, ENS support and a redesign of the accounts & balances page.

Yield Dollar Now Live

The yield dollar from UMA can be minted by staking WETH as collateral which means that traders can leverage their long positions on ETH with a fixed interest rate.

RAI Now Live on Kovan

The RAI reflex bond is now live on the Kovan testnet for the community to have a play around with.

Gnosis Bug Bounty Launched

Find bugs, get rewarded. Earn up to $100,000 for every bug you report. Head here for more details.


Interesting Tweets


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Exploring Governance in Ethereum – The Daily Gwei #37

https://thedailygwei.substack.com/p/exploring-governance-in-ethereum


Recently, with the launch of yEarn/YFI and COMP, people have been getting really excited about decentralized governance systems again – well, more excited than they have been with all the DAO activity happening lately. In today’s piece, I’m going to explore the different kinds of governance systems out there in the context of blockchains.

Just a note: I’m not going to cover yEarn/YFI in detail in today’s piece so if you want to learn more about it then you can read this excellent piece from Daryl Lau. You can also check out information about Yield Farming both YFI and other tokens here.

When it comes to governance in the context of blockchains, there are two core types – binding on-chain governance and off-chain governance. “Binding on-chain governance” is when a blockchains rules can be changed by token holders (such as in Polkadot) and off-chain governance is when those rules cannot be directly changed by token holders – rather, they are changed by an off-chain process (that can also use on-chain processes as a signal).

The Ethereum blockchain itself does not have any form of binding on-chain governance so ETH holders cannot directly change the protocol rules by all banding together to vote with their coins. For the protocol’s rules to change, it has to go through an off-chain governance process (via Ethereum Improvement Proposals) that involves a number of diverse parties (developers, ETH holders, community members, ecosystem spokes/projects, and miners/other network participants). Ethereum Improvement Proposals (EIPs) are changes that can be proposed by anyone and follow a defined process that eventually ends in the EIP moving to an ‘Accepted’ state. Once an EIP is in the ‘Accepted’ state, Ethereum client developers will code up an implementation of it for inclusion in a future network upgrade (hard fork). A network upgrade date is typically set based on a block number sometime in the future. Once that block is mined (and if everything went well with the upgrade) then that EIP will be live on the network.

Projects built on top of Ethereum can use either an on-chain, off-chain governance mechanism or no governance mechanism at all. For example, Uniswap v1 does not have any governance built in – the smart contracts will simply live on Ethereum forever and cannot be altered (unless someone was able to gain control of the entire Ethereum network of course). On the flip-side, all parameters for projects like yEarn can be changed by YFI token holders through a binding on-chain governance process. Other examples include MakerDAO where MKR holders can change parameters such as the stability fee and add new collateral types as well as Compound where COMP holders can alter things like collateral ratios for assets.

Personally, I’m not a big fan of on-chain governance for layer 1 (aka the blockchain itself). I won’t dive into every reason as to why I’m bearish on the idea but the main reason is basically that I believe on-chain governance systems are just plutocracies dressed up in fancy tech. You can just look at the token distribution of these new on-chain governance chains for proof – the distribution is typically centralized in a few big players hands. Additionally, if the base layer is at the mercy of a small set of token holders then that means every app built on top is also at the mercy of those same token holders.

Speaking of token holders – getting a “fair distribution” of tokens among a wide and diverse set of people is also incredibly hard. What’s even harder is incentivizing these same people to actually participate in the governance process and using their tokens to vote (instead of just speculating). This isn’t even taking into account how difficult it is to get a bunch of people to actually agree on something! The best token distribution that I’ve seen so far was the recent YFI yield farming event that basically launched with no founder or team allocation, no pre-mine, no investor/VC tokens – just a simple fair launch for everyone to participate in. This has actually resulted in an amazing distribution of token holders so far (note that there are currently only 30,000 YFI tokens in existence).

In saying all of this, with different apps on Ethereum now becoming so intertwined, it begs the question: can one app that is governed by token holders be compromised to bring down the majority of the network? Well, we can take Maker as a simple example here. Dai is used in basically every app on Ethereum as it’s a core building block of DeFi so what happens if the Maker platform is messed with in some way by token holders? In theory, MKR token holders could vote to do things like change the oracles so that they reflect a price of $0 (causing liquidations) or directly drain the vault of ETH. Though, in Maker’s case, there is a delay of 12 hours on changes going through once approved by governance. Though do note that this delay can also be changed by Maker governance!

Obviously governance isn’t exclusive to crypto-networks/blockchains – these are issues that humanity has been dealing with since we came into existence. What blockchains do enable are new ways to coordinate using both cryptoeconomic and social incentives in a globally distributed way. Which way is best? Only one way to find out!

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Number Go Up – The Daily Gwei #36

https://thedailygwei.substack.com/p/number-go-up-the-daily-gwei-36


So ETH decided to wake up over the last couple of days and is currently sitting at a ~17% return for the week. While it’s impossible to pinpoint exactly what is driving the recent ETH movement, I wanted to give some thoughts around why I think it’s moving up and why I’m not surprised.

The first and most obvious reason is the recent eth2 news. That is, the news that the “official” eth2 phase 0 multi-client testnet will be going live on August 4th (which was announced ~2 days ago). If all goes well with this testnet over the next 2-3 months, a mainnet date will be set (currently expected to be sometime in November). This will be one of the biggest milestones in Ethereum’s history (if not the biggest) as it’s the first critical phase of the rollout of eth2. Believe it or not, people are still sleeping on this!

Outside of eth2, probably the biggest fundamental (and narrative) driver of ETHs value today is the rise of DeFi. Basically for two reasons – people wanting to use ETH as collateral to “yield farm” and people having to use ETH to pay gas fees (which we all know are at record highs). This puts double demand pressure on ETH and lends itself to a healthy feedback loop (more lucrative yield farming opportunities > buy more ETH for collateral/gas). Obviously the ETH paid in gas fees isn’t locked as it goes to miners who could either choose to sell it as they get it or stockpile it. Though, sometime in future, some ETH paid as gas fees will be burnt.

General sentiment has also been in Ethereum’s favor over the last few months due to the growth of DeFi, layer 2 scaling tech coming online, and of course the steady progress of eth2. Because of this, I’ve seen many people that have been generally bearish on ETH over the years start to turn publicly bullish. There’s many other reasons for this too: they’re trying to capitalize on the hype, they bought ETH and want their investment to go up, they don’t want to be “left behind”, they simply changed their mind when presented with new information and so on. Regardless of the reason, this positive sentiment shift does, in some way, contribute the ETHs price rising.

Of course, a piece about the price of ETH wouldn’t be complete without some technical analysis (TA)! I’m not a trader so I don’t tend to do any TA myself but I have a group of friends that do and they’ve been calling for this move up for quite a while. In particular, ETHUSD broke a very important trendline over the last couple of days that stretches all the way back to June/July of 2019 – I’m told that this is somewhat significant.

Source: https://www.tradingview.com/x/3rg8zlln/

I don’t have a crystal ball so I don’t know where ETH goes from here but obviously I am extremely bullish on ETH and Ethereum – I’m also very bullish on some DeFi tokens. In general though, it’s certainly starting to “feel” like the early stages of a bull market – and that’s a little bit scary.

Have a great weekend everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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DeFi is Going Exponential – The Daily Gwei #35

https://thedailygwei.substack.com/p/defi-is-going-exponential-the-daily


It’s no secret that DeFi growth on Ethereum is accelerating at a record pace and may just be kicking off the next bull market in crypto. Today, I wanted to put into context just how fast it’s growing with some data!

Source: https://defipulse.com/

Capital “locked” in DeFi over the last year has gone from $500 million to $3.4 billion – with growth going exponential over the last month or so. To put this into perspective, there was $3 billion locked in DeFi just 2 days ago which means that $400 million has entered the system since then – it took DeFi ~18 months to go from $0 to $400 million the first time! And as I covered yesterday, decentralized exchanges are now doing volumes that are comparable to some centralized exchanges. It’s also worth noting that there is also now 4 million ETH locked in DeFi which is an all time high.

It’s not just capital and liquidity in DeFi that’s growing – it’s user numbers too (using Ethereum addresses interacting with these protocols as a proxy). My favorite place to track this growth is on Dune Analytics using this dashboard created by Richard Chen. It tracks cumulative addresses that have interacted with different DeFi protocols like Kyber, Maker and more. This number will never go down since its cumulative but you can see how the growth has basically been going vertical for a little while now.

Source: https://explore.duneanalytics.com/dashboard/defi-users-over-time

The so-called “DeFi tokens” have also been having an amazing year with many posting incredible returns as their respective protocols have been exploding in growth. LEND in particular has had an absolutely incredible run as Aave has grown massively this year (from $1 million locked in January to $555 million locked today) and now ranks 3rd on DeFi Pulse (just behind Maker and Compound). Note that the below list doesn’t include every DeFi token and notably SNX is missing (which has returned 290% since January this year).

Source: https://messari.io/screener

People using DeFi protocols are also consistently paying the highest fees on the Ethereum network (besides the scams/ponzis of course). It’s also interesting to note that even though Tether (USDT) isn’t “DeFi”, it is being used within most DeFi protocols so transactions involving USDT would also be included in the gas usage of protocols like Uniswap.

Finally, I’ve been noticing a lot of people pivot to being “DeFi thought leaders” or talking a lot more about Ethereum and DeFi over the last few months which, while a little amusing, is also an extremely positive sign. Many of these people have a large audience which may be into crypto generally (as an investment vehicle) but not really into any particular ecosystem. Who better to onboard them into the Ethereum and DeFi ecosystems than people they already follow and relate with?

After all, to get DeFi to a billion users, we’ll need a lot more than Twitter shilling.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Breakup CEX – The Daily Gwei #34

https://thedailygwei.substack.com/p/breakup-cex-the-daily-gwei-34


DEXs have been growing at an incredible pace over the last few months and their volumes are inching closer and closer to centralized exchange levels. I’ve outlined previously why this growth has been happening and why people are drawn to using DEXs. Now, Ethereans are finally able to break up with CEXs for good.

Chart source: https://www.duneanalytics.com/dex

DEX growth is awesome but what I wanted to focus on today was that I don’t see nearly enough people talking about the fact that we are now in a post-centralized exchange world. That is, new ERC20 tokens that launch no longer need to rely on centralized exchanges to be able to start trading or get liquidity – they can simply utilize decentralized exchange infrastructure with deep liquidity and healthy volumes to create a market.

This whole process isn’t just limited to ERC20 tokens either – it extends to any asset type on Ethereum. Things like NFTs (game items, collectibles) can instantly start trading on Ethereum in numerous ways whether that’s on dedicated marketplaces like OpenSea or general DEXs like Uniswap. This allows teams to instantly bootstrap a market for these items that their users care about without relying on any central parties permission.

Speaking of users – I think we’re going to start seeing more and more users only use CEXs as a fiat on-ramp and then immediately move the ETH that they bought into their own wallet. From here, they can go ahead and use any number of the DEXs available on Ethereum to buy their favorite token because at this point the liquidity has become deep enough to fill most peoples orders (whale orders too on certain trading pairs).

Of course, people are also able to use services like LocalCryptos to bypass the intrusive KYC/AML processes of centralized exchanges and onboard into Ethereum/DeFi seamlessly. The ultimate goal is to have low-fee fiat on-ramps at every corner store or supermarket (which has already been happening for some time but the fees are still quite high).

All of this is a major paradigm shift. To my knowledge, nothing like this has existed in history and been completely global. Someone in a remote village in Africa could create a protocol, issue a token and instantly create a market for it using Uniswap. This gives them the same opportunity as someone in the U.S. who has contacts at a centralized exchange – that’s incredibly powerful.

Have a great day everyone,
Anthony Sassano

To Stake or Not to Stake – The Daily Gwei #33

https://thedailygwei.substack.com/p/to-stake-or-not-to-stake-the-daily


An open question over the last few months in the Ethereum community has been centered around staking participation in eth2 – especially in phase 0. Basically, the community is debating how much ETH we’ll see staking during phase 0 given that it is currently a 1 way bridge and there is no ETA on when that ETH will be unlocked again.

On top of this open question, there’s also another thing on people’s minds lately – why would people stake their ETH when there is another highly lucrative game in town called yield farming.

I’m of the opinion that ETH staking and DeFi/yield farming aren’t in direct competition with each-other because different people will always be attracted to different opportunities. For example, something like yield farming can be very complex, very risky, short-lived, and requires constant care (and expensive gas costs) to earn the amazing returns that everyone talks about. This is simply not something most people will be doing.

Whereas with ETH staking, while the returns may be lower overall, its less risky, less complex and will last as long as the eth2 network lives (aka probably forever). In saying that, the return rate will vary based on how much ETH is staked. If 10mil ETH is staked, then eth2 stakers can expect to earn a 5.72% return for the year – much lower than what we’re seeing play out in the DeFi/yield farming space right now.

Source: https://docs.ethhub.io/ethereum-roadmap/ethereum-2.0/eth-2.0-economics/

We won’t know how much ETH will be staked on the network at any given time until probably phase 1.5 (when eth1 and eth2 merge) because staking in phase 0 comes with a lockup of ETH for an undefined period of time. This will, of course, make many people hesitant to get involved with staking since they can’t exit at their leisure. Though in saying this, the Beacon Chain in Phase 0 only needs about 500,000 ETH staked to “activate” and start producing & validating blocks. I’m very confident that amount will be reached and the Beacon Chain will launch just fine but the bigger unknown is basically projecting how much ETH will be staked say, 6 months into phase 0. It could very well be much less than anticipated due to both the long lockup and the opportunities being offered elsewhere like yield farming.

It’s also worth noting that individuals aren’t the only ones that will be staking in eth2 – many institutions such as exchanges, staking companies and well known Ethereum entities like ConsenSys and the Ethereum Foundation will be some of the first to stake or offering staking services once phase 0 goes live. This means that the first group of stakers will likely be highly aligned Ethereum community members and institutions – I think this is a positive outcome.

Taking a holistically look at all of this, it’s really healthy that ETH can be used for a variety of different things on the Ethereum network and is not just locked down to being a staking asset or only being used to pay for gas – after all, ETH is a triple point asset.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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EthHub Weekly #123

https://ethhub.substack.com/p/ethhub-weekly-123


Curated by Anthony Sassano (@sassal0x) and Eric Conner (@econoar)


[SPONSORED] Kyber Network is a fully on-chain liquidity protocol that aggregates liquidity from diverse sources, enabling decentralized token swaps to be integrated into any application. Kyber Network aims to be the transaction layer for the decentralized economy, powering liquidity for decentralized finance (DeFi) applications. 

Kyber is one of the most used and integrated DeFi protocols in the world, with over US$1 Billion worth of transactions and 1 Million transactions facilitated since its inception. Kyber supports over 80 different tokens, and powers over 100 integrated projects including popular wallets as well as DeFi platforms.

Another DApp powered by Kyber Network is the popular token swap service KyberSwap.com, which allows end users to seamlessly convert ETH and over 80 ERC20 tokens (including DAI, USDC, MKR, BAT, LINK, SNX) in a fast, simple, and secure way. 

Kyber is governed by the KyberDAO, a decentralized community platform comprising KNC holders who stake their tokens to vote on important proposals and protocol parameters, earning ETH rewards in the process.

Discord | Website | Blog | Twitter | Developer Portal | Kyber Tracker


👨‍🌾 Yield Farming Heats Up Yet Again

The yield farming craze is far from over with projects seemingly launching new “liquidity mining” programs every other day. It was just a month ago that Compound kicked off this whole craze with the launch of their COMP token but it already feels like it’s been a year – time move super fast in crypto! Eric and I will be discussing more about yield farming on this weeks podcast recap.

Want to help battle-test eth2? Well you can join Sigma Prime’s new beacon-fuzz initiative which is “a differential fuzzing solution for Eth2 clients.” Yeah, I don’t fully understand what that means either but that’s because I’m not a developer! Though, if you are a developer, you can simply head here to get involved.

I also joined the new Ethereum Entrepreneur Podcast to talk all things Ethereum – listen here!

Have a great week everyone!

– Anthony


News of the Week

💰 PayPal Picks Paxos to Supply Crypto for New Service

PayPal, the fintech giant planning to bring crypto trading to its massive user base, has chosen Paxos to handle the new service’s supply of digital assets, according to two people familiar with the matter. A formal announcement of the PayPal relationship could come as soon as this week, one source said.

The offering would make PayPal one of the most prominent mainstream companies to offer cryptocurrency purchases, joining fellow publicly-traded payments provider Square and unicorn stock brokerage Robinhood.

It is not clear exactly which cryptocurrencies PayPal intends to offer and Paxos declined to comment.

😬 Prominent Twitter Accounts Hacked

A wide array of Twitter accounts owned by popular figures, large companies, and crypto exchanges were targeted Wednesday in a wide-ranging attack on Twitter.

The accounts in question — which included the likes of former U.S. president Barack Obama, reality TV star Kim Kardashian, Microsoft co-founder Bill Gates, and entrepreneur Elon Musk — were used to post bitcoin giveaway scams. Twitter eventually disclosed that the hacker was able to compromise some of Twitter’s employees with access to internal systems and tools and then change the email addresses associated with those accounts.


Project Updates

Eth 2.0 Dev Update #54 — So Close to Official Multi-client Testnet!

Exciting update from the PryLabs team covering the Onyx testnet, the usual code and research updates, upcoming work, and more. The team also published the results of their recent Quantstamp audit here.

Ask About Geth Launched

Team leader of Geth, Péter Szilágyi, launched a new blog post series last week called ‘Ask About Geth’ where Geth client and Ethereum protocol specific questions will be answered in depth. Check out the first post here.

Zkopru Announced

Zkopru is a layer 2 solution for private transactions that uses optimistic rollups to manage blocks and zk SNARK technology to build private transactions.

Reality Cards Announced

Reality Cards is the world’s first NFT-based prediction market where you don’t bet on an outcome, you own the outcome.

Geth v1.9.17 Now Live

This new version of Geth comes with light client database pruning, a lot fewer allocations, fixed ethstats on Görli; and more!

KeeperDAO v1 is Live

KeeperDAO is a protocol that economically incentivizes pooled participation in keeper strategies which manage liquidations, rebalances and arbitrage on DeFi applications spanning trading, exchange, and lending.

mStable Launches MTA Token

mStable launched their protocol token (MTA) over the weekend on the Mesa platform (built by Gnosis). This token will be used for governance, staking and more. The team also announced that they have received investment from Alameda Research/FTX and partnered with them for integration.

Teller Raises $1 Million

Teller is a blockchain project for decentralized lending incubated by A16Z’s crypto startup school. They announced a $1 million seed raise last week led by Framework Ventures, followed by Parafi Capital and Maven11 Capital, to build the first-ever algorithmic credit risk protocol for decentralized finance (DeFi).

Aave Launches New Features and Listings

This week, the Aave team introduced new risk parameters giving more freedom to users, new assets listed, the listing of LEND on Loopringand a brand new fiat onramp for a seamless Fiat to Yield experience. They also raised $3mil from leading investors.

Scaffold-Eth Launched

Scaffold-eth is a stack of existing tools including Buidler and create-eth-app that people can use to get started developing on Ethereum. Watch the video here for an intro.

dHedge Announced

dHedge is a new decentralised asset management protocol powered by Synthetix, which is now live on the Ropsten testnet. dHedge offers non-custodial mimetic trading for synthetic assets, using the zero-slippage and infinite liquidity trading model of Synthetix.

Gods Unchained Update

James Ferguson, CEO of Immutable and Gods Unchained, gave a detailed update this week on where Gods Unchained has been, where it is and where it’s going.

Rari Capital Now Live

Rari Capital is a yield harvesting tool that automatically rebalances your funds between different protocols to earn the best return.

Ethereum Cat Herders Update #25

Updates on account abstraction, network health, EIP-1559, Ethereum 1.x, Eth2.0, ecosystem update, and more.

DUSD Announced

DUSD is a stablecoin that is collateralized by Curve Finance liquidity provider (LP) tokens. It uses chainlink oracles for its stability mechanism. DUSD leverages Curve to handle the logic around integrating with lending protocols and token swaps.


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The Ethereum Scaling War Effort – The Daily Gwei #32

https://thedailygwei.substack.com/p/the-ethereum-scaling-war-effort-the


Everyone knows that gas fees on Ethereum have been consistently high over the last few months due mostly to the explosion of Tether (USDT) on Ethereum, DeFi apps and of course, the ponzis/scams clogging up the network. So the question I want to answer today is, are high gas fees good for Ethereum?

I strongly believe that high gas fees are extremely healthy of the Ethereum network. This may be an unpopular opinion but bear with me as I explain why throughout this piece.

The first reason – it encourages the adoption of scaling/throughput technologies like layer 2 and sidechains (as I’ve written about here). One of my all time favorite pieces is ‘The Myth of the Infrastructure Phase’ by Dani Grant and Nick Grossman of USV. In this piece, they explain that core infrastructure tends to only get deployed and improved upon once the demand exceeds supply. In the context of Ethereum, this means that while gas fees were low (block space supply was high), there wasn’t any real need to deploy scaling infrastructure but now that gas fees are very high (block space is scarce) it’s forcing the ecosystem to deploy and improve upon the infrastructure (via layer 2). To take directly from the piece – “First, apps inspire infrastructure. Then that infrastructure enables new apps.”

The second reason – high fees are an ecosystem-wide issue and it affects every single project (some more than others) so it gives the entire Ethereum ecosystem a “common goal” to work towards. This is really powerful because most of the projects in this space have built up good relationships with each-other over the years and are very ingrained/aligned with the Ethereum community. They all want to work together and push Ethereum scaling forward in order to keep the “competition” at bay – this is what I like to call “The Ethereum Scaling War Effort”.

The third reason – it shows that there is incredible demand to use the Ethereum network (with plenty of apps finding product/market fit). All types of transactions and interactions are happening on the network literally around the clock – it never stops because the Ethereum network never goes offline. This shows developers wanting to build new products that Ethereum is the platform to build on because it has the most powerful network affect across a number of different factors – users, liquidity, integrations, infrastructure etc. Liquidity is a huge moat that Ethereum has because, as I’ve written about before, liquidity begets liquidity which makes this network effect incredibly hard to compete with.

The fourth reason – the high fees are being paid to miners which increases the overall security of the Ethereum network. In fact, fees paid on Ethereum have been higher than those paid on Bitcoin for about 45 days straight now and its showing no signs of slowing down. This also bodes well for sometime in the future when (if?) EIP-1559 is implemented – it’d theoretically result in lots of ETH being burnt. If you want to learn more about this, read my previous piece here.

Ultimately, I see that developers have two paths they can take; stay on Ethereum and work with the solutions available or migrate to another more “scalable” competitor chain. The first option allows developers to retain all of the network effects that Ethereum has (users, liquidity, integrations, infrastructure etc) whereas the second option requires them to wait for those network effects to be built out. The second option also carries the risk that the chain that they migrate to never really gets any adoption and so their project fails (or migrates to the hyper-competitive Ethereum space).

I think high gas fees over the long-term (say ~2 years) without any relief would definitely hurt Ethereum and cause other smart contract blockchains to actually gain some ground. Though, I don’t expect gas fees to stay high for that long – at least, not for the end-user. With projects rapidly working to deploy layer 2 solutions, I believe that high fees for end-users will be a thing of the past in a couple of years.

This is the Ethereum scaling war effort.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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The DeFi Wars Are Here – The Daily Gwei #31

https://thedailygwei.substack.com/p/the-defi-wars-are-here-the-daily


The Ethereum DeFi space has been heating up considerably over the last few months and is now at a point where similar protocols are starting to eat into the incumbents. As Vance alludes to in his tweet, Synthetix is taking a bite out of Maker’s market-share with Aave beginning to give Compound a run for it’s money.

We’re going to be seeing much more of this fierce competition play out over the coming months and years as DeFi projects migrate from being viewed as “toys” to being worth tens of billions of dollars. What everyone is building is not meant to just be for the insular Ethereum and crypto communities but rather for the billions of people who need and want a better financial system. To get there, the ecosystem needs projects to be rapidly building, innovating and growing.

One thing you’ll notice from many of the leading DeFi projects (at least, leading by value locked) is that they have a protocol token. I’ve long viewed protocol tokens as a great way to build a community and I believe that they act as a powerful way for a protocol to “growth hack” itself. The clearest recent example of this growth hack in practice is the launch of COMP – Compound’s native token. I went into detail here about how that works to drive liquidity to the platform through an incentive program. Now, whether that liquidity is lasting or not is an open question but there’s no doubt that a token is an extremely powerful way to get people excited about a project. We may see projects that do not have a native protocol token be leapfrogged or lose market-share to those that do.

Speaking of liquidity, that is literally what all of these projects are fighting each-other for. When Compound launched their COMP token, capital started fleeing other DeFi protocols and going into Compound because that’s where the maximum amount of profit was. Following this launch, many DeFi projects have now rushed to spin up their own “liquidity mining” programs because they realised that the game has now changed and without a carrot to bait people, they aren’t going to put their money into a protocol. The jury is still out on whether this is long-term sustainable but there’s no denying that it is an incredible way to growth hack.

I do think that as protocols and projects mature, they won’t just be competing on liquidity but also competing fiercely on usability. Not everyone is going to be an advanced “yield farmer” who always chases the highest gains with no care in the world for the risk involved. Most people will probably just enter this ecosystem through simple apps such as earning a yield on their USD or swapping tokens on a beautiful interface like 0x’s Matcha.

The projects that we know and love today may not be around in a few years at all because they either failed to find broad product/market fit or were taken out by a team that was able to move and innovative faster. I believe that this trend is healthy because it is a clear sign that the industry is starting to mature.

Have a great weekend everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Meme Magic is Real – The Daily Gwei #30

https://thedailygwei.substack.com/p/meme-magic-is-real-the-daily-gwei


Memes are really powerful. They act as a way to quickly disseminate information to a wide range of people and, because of the internet, a meme can literally spread around the globe in just a few hours. This level of information sharing is incredible and often taken for granted so I wanted to explore how memes influence the crypto space and Ethereum in particular.

My tweet above is basically a simplification of a wider meme – that is, the meme of ETH staking (or “steaking” – get it?). Proof of Stake has been in the works for Ethereum for years now so the community has been rallying around the meme of “32 ETH” (the minimum required stake amount). One popular take on the staking meme is a tweet format that Evan Van Ness is quite fond of using.

So, what makes a good meme? A few things – it has to have broad appeal, be easily understandable, relatable to something that people are familiar with (like “digital gold” for Bitcoin), divisive (optional but gives the meme greater reach), and it needs to be timeless.

What I find really interesting is when a prominent figure that’s part of a project is turned into a meme that the community latches onto. For example, Chainlink’s founder Sergey Nazarov can be found in many of the Chainlink-related memes and is worshiped as some sort of deity by the “link marines”. Similarly, Vitalik is commonly used in memes across the crypto-ecosystem with very notable examples being the Vitalik lambo meme and, my personal favorite, Italic Buterin. There’s really no shortage of these people being used in memes – Ethereum even has its own dedicated meme Twitter account where you can follow along with all of this.

Then there are memes that are borne out of negativity:

  • “No one can run an Ethereum node”

  • “Cryptokitties killed Ethereum”

  • Memes about high gas prices

  • Memes about crypto prices falling

These memes are great because they trigger an emotional response from both the people spreading the negativity and those trying to defend against it. This works to propagate the meme out much quicker than it would normally as humans love drama (whether they admit it or not) and social media algorithms are usually tuned to promote content that gets lots of engagement – and what gets more engagement than playing on human tribalism?

One thing I’ve learnt over the last few years is that trying to “force” a meme into relevance is rarely a winning strategy. You need buy-in from the wider community for a meme to stick and most of the time something only becomes a meme naturally. The best example of this is the “link marines” aka the Chainlink community. As far as I can tell, this community emerged organically from 4chan and then they spread themselves out to Twitter and other forums. Most of their members are anonymous and have continued to grow in numbers as the price of LINK has skyrocketed and the project has grown over the past 18 months. This community not only promotes Chainlink constantly on social media but they are also responsible for creating all of the memes that further spread their message.

When it comes to crypto-networks or individual crypto-projects, I believe a strong community is everything. I also believe that the best tool a community has to spread its message and recruit new members is through memes. The best example of this phenomenon of “meme magic” is, again, Chainlink.

Just look at what meme magic did for the price of LINK.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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Don’t Hate the Player, Hate the Game – The Daily Gwei #29

https://thedailygwei.substack.com/p/dont-hate-the-player-hate-the-game


There has recently been a lot of fanfare around a relatively new token sale/distribution method called Initial DEX Offerings (IDOs) that use either Uniswap or Balancer (AMMs). These “sales” have come under heavy scrutiny from many in the community because of the fact that they are easily gamed by bots and whales and viewed as generally “unfair”.

Source: https://twitter.com/rstormsf/status/1282734073081823232

My general opinion on this is that we shouldn’t be hating the players (bots, whales), rather, we should be focusing on how the game is set up. In the recent sales, the game was basically set up to reward the most sophisticated participants and the bots. With the BZRX Uniswap listing, one actor was able to submit a transaction to buy tokens in the same block that liquidity was added to the Uniswap pool. This immediately drove the initial “listing price” much higher and buyers that came in later were basically at a major disadvantage. The end result is that the BZRX token price spiked really high, the initial buyer was able to offload their tokens to less sophisticated users (at a very nice profit), and then the price of BZRX dumped back down (it’s currently trading at $0.14 and the initial listing price was $0.04).

To me, the BZRX offering was not really a “token sale” and I think the better way to view IDOs on Uniswap or Balancer (or any AMM) is as an initial liquidity event (aka an exchange listing). Just like any exchange listing, there is always wild volatility because the market is trying to settle on a “fair price” for the asset which is generally a chaotic process. And, as usual, the “retail” buyers are the ones who will quite literally pay the price for being less informed, less educated and less experienced than other participants.

So, if a projects aim is to do a token sale where every participant has a fair shot, then they could use this alternative approach that Martin Köppelmann suggested on Twitter. This approach involves using Gnosis Protocol and works to prevent “gas wars” or other sophisticated methods of acquiring tokens. The end result is that all participants basically only compete on price. Though, some may argue that the downside of this is that price discovery for a token could take longer and be less explosive which could lead to less interest in the event.

On the topic of token distribution – I’m personally a much bigger fan of liquidity mining to distribute tokens widely and fairly than any kind of token sale. Liquidity mining is similar to proof of work or proof of stake in that a user will put forward capital in order to receive a reward. In the case of proof of work, a user will buy mining equipment and pay for electricity to mine a certain coin (plus maintenance costs). With proof of stake, they will lock up their capital in the form of the chains native token to be rewarded in that same token (depending on the implementation, there may be hardware/maintenance costs too). In all cases, the distribution of tokens usually happens over a long period of time which gives the token a chance to experience multiple market cycles and get exposed to a wide range of participants.

In general, no matter what token sale or distribution method is chosen, there will always be people looking to gain an advantage – whether that is through exploiting the sale parameters or using novel tricks such as spamming the network to prevent others from even being able to compete.

Don’t hate the player, hate the game.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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My Big Fat Decentralized Protocol – The Daily Gwei #28

https://thedailygwei.substack.com/p/my-big-fat-decentralized-protocol


For those that don’t know, the “fat protocol thesis” was put forward by Joel Monegro in August of 2016 and it basically stated that the market cap (or value) of the protocol (in this case, Ethereum) will grow faster and be worth more than the applications built on top of it. Well unfortunately for Joel, that thesis seems to be dying as the total market cap of the top 5 ERC20 tokens is now greater than the market cap of ETH itself.

I was personally never a big fan of the fat protocol thesis (at least, in the Ethereum context) for a few reasons. Firstly, apps that are built on Ethereum are currently parasitic and do not drive any fundamental value to ETH (as I’ve explained in a previous post). They may use ETH as part of their app (as a form of collateral, or as money) but these apps usually have their own native tokens which tend to accrue the value generated by their respective protocols.

Secondly, since I believe that every asset will eventually be tokenized on Ethereum, it makes little sense that ETH would be worth more than every single asset in existence. For example, Apple’s stock (AAPL) could be tokenized on Ethereum today and would have a market cap of $1.66 trillion – 62 times greater than Ethereum’s current market cap.

People tend to speculate that assets being worth more than the protocol securing it makes the chain “unstable” or too “top heavy”. I’m on the fence about if this is really an issue. For example, these AAPL tokens would have no special privilege on the Ethereum network so the main concern really becomes that they act as a “honeypot” for someone to attack the Ethereum chain in order to steal these assets.

Though, in the case of Apple stock, the ultimate settlement layer will always be the off-chain legal system – the token is simply a representation of the stock (just like USDC is a representation of USD sitting in a bank account). And just like USDC, assets like tokenized stock would also have a blacklist function so the only real way the attacker could “cash out” would be to trade the AAPL tokens for another asset on-chain before someone noticed an attack was happening. This would be difficult to pull off though as I imagine that AAPL tokens wouldn’t be freely tradable like other tokens are.

Ideally, the cost to attack the network should always be higher than any potential profit that could be made. With Proof of Work, an attacker would somehow need to gain access to the majority of the networks hash-power (either via gaining access to existing mining pools or by acquiring the mining hardware themselves) to directly attack the chain. Then, depending on what they’re trying to achieve, they’d want to make absolutely sure that attacking the chain is more profitable than just mining the Ethereum network with this hardware.

There are also second-order effects as a result of attacking the Ethereum chain:

  • The price of ETH could crash (may be able to mitigate this via a short position)

  • The network will become unstable so the attacker needs to account for that in their profitability calculations

  • The “social layer” of the network would kick in and possibly roll back the attack (or make an irregular state change like in the case of TheDAO hack)

  • Since the attack would disrupt real businesses such as exchanges, the attacker may be pursued through the legal system if their identity was discovered

With Ethereum, there are “attacks” happening all of the time on individual smart contracts and these attacks are both easier to engineer and much cheaper to pull off than attacking the entire network. This dynamic, in some funny way, may actually discourage people from ever attacking the Ethereum chain itself.

In saying all of this, there are always going to be actors such as nation states that do not care about profit and may just want to attack the chain in order to destroy it.

As Alfred says – some men just want to watch the world burn.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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EthHub Weekly #122

https://ethhub.substack.com/p/ethhub-weekly-122


Curated by Anthony Sassano (@sassal0x) and Eric Conner (@econoar)


🚀 Eth2 Will Launch in 2020

The Ethereum Foundation’s eth2 research team held an AMA on Reddit a few days ago and let’s just stay it kicked up quite the stir on Twitter. In case you missed it, there was a comment from Justin Drake where he suggested that eth2 wouldn’t launch until January 3rd 2021 at the earliest. This, of course, made a lot of people upset because they were under the impression that eth2 would launch in 2020. A few minutes later, Vitalik followed up with a comment saying that eth2 is still on track for a 2020 launch. Anyway, you can read more details about this whole ordeal in my latest daily gwei piece here. Eric and I will also be talking about this on the podcast.

A quick shout out to a new newsletter that I came across called ‘The Ethernaut Diaries’. If you’re a developer, this will be a good resource for you to subscribe to – do that here.

Oh and the Ethereum.org website got a fresh coat of paint and it looks awesome!

Have a great week everyone!

– Anthony


News of the Week

💰 Coinbase Exploring Stock Market Listing

Crypto exchange Coinbase has reportedly begun preparing to go public.

A Reuters report, citing people familiar with the matter, said Coinbase’s listing could come as early as this year. One source told the news outlet that the exchange is considering a direct listing instead of a traditional initial public offering (IPO). 

Should the exchange receive approval from the U.S. Securities and Exchange Commission, it would become the first U.S.-based crypto exchange to become a publicly-traded company.

🤔 CENTRE Blacklists Address Holding USDC for the First Time

In a first of its kind, an Ethereum address holding 100,000 USDC stablecoin has been blacklisted. 

The transaction, viewed through blockchain explorer Etherscan, shows that a “blacklist(address investor)” function was called on June 16, 2020, by 0x5dB0115f3B72d19cEa34dD697cf412Ff86dc7E1b, an address owned by CENTRE, the entity issuing USDCs.

In USDC’s Contract Application Binary Interface, the standard by which smart contracts interact with Ethereum, we can see the address named “blacklister” matches the one that called the blacklist function. According to Circle’s website, a blacklisted address will not be able to execute transactions (receiving or sending) through the USDC smart contract. Additionally, Circle adds that all USDC balances held on blacklisted addresses may be “wholly and permanently unrecoverable.”


Project Updates

What’s New in Eth2 – 10 July 2020

The usual round of updates from Ben including updates on phase 0, new eth2 explainers, research updates and more. Ben also added a new ‘Media’ section to the newsletter!

Lighthouse Update #27

Various updates from the Sigma Prime team covering their work on Altona, BLST, Peer Scoring and more.

Aave Announces Credit Delegation (CD)

Aave depositors will be able delegate their credit lines. For example, Karen deposits an asset such as USDT to Aave and delegates her credit line to Chad, who draws funds such as ETH from Aave Protocol.

Katalyst and KyberDAO Now Live

KNC holders can stake their tokens on the KyberDAO and govern the protocol by voting on important proposals and parameters, while earning rewards (in ETH) for their efforts. Any KNC holder can contribute to Kyber’s development by participating in the KyberDAO.

TokenSets News Feed Now Live

The News Feed allows you to keep up to date with Social Traders and Sets that you’re following as well as discover new ones.

Meta (MTA) Genesis on Balancer

mStable announced that it will launch its protocol token Meta (MTA) on Balancer at approximately 14:00 UTC on Wednesday, July 15th 2020.

Ethereum Developer Guide Published

Wesley van Heije has put together “The hitchhiker’s guide to Ethereum development” which provides a starting point for developers who’re keen to learn more about blockchain and development on top of Ethereum. Check it out here.

renBTC Liquidity Mining on Loopring Exchange

renBTC is now listed on Loopring.io trading against USDT. This renBTC-USDT pair is being launched with a liquidity mining incentive campaign.

DeversiFi Launches Celebrity Trader

Celebrity Trader is a competition where if you pick the winning trader, you’ll win their entire portfolio (that was initially funded by the DeversiFi team). The trades are made based on the sentiment of each Twitter celebrities tweets.

Muscovite Product Release

COMP, LEND, KNC, and REN are now available as binary options markets on the Synthetix platform.

MakerDAO Approves 4 New Light Feeds For Oracles

Kyber Network, Infura, Etherscan and Gitcoin have all been added as Light Feed’s to the MakerDAO protocol.

Chicago DeFi Alliance Cohort #1 Results

An update from the Chicago DeFi Alliance where they recap some of their work and announced new cohort members including Gauntlet, Three Arrows Capital and Aave.

Gitcoin + Matic: A Staking Partnership

Gitcoin and Matic announced this week that they have formed a long term partnership with Matic to collectively grow the scalability community of Web 3.

MCDEX Liquidity Mining Guide

Users can earn MCB tokens by providing liquidity on the platform to the AMM. This guide will walk you through how to participate in this program. Get started here.

BeaconScan Launched

BeaconScan is an eth2 validator explorer that features email alerts, dashboard sharing, multi-device login and other features, it’s also ETH 2.0’s first independent monitoring service.


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Eth2 Phase 0 Will Launch in 2020… Probably – The Daily Gwei #27

https://thedailygwei.substack.com/p/eth2-phase-0-will-launch-in-2020


Eth2 is currently the most anticipated launch across the entire crypto ecosystem. The main features that eth2 introduces (Proof of Stake and Sharding) have been talked about since the very early days of Ethereum all the way back in 2014. Now, the first phase of eth2, Phase 0, is very close to launching with most people expecting it in 2020. Well, that was the expectation until Ethereum researcher Justin Drake made this comment in the recent eth2 AMA.

The key part of this comment is that Justin said that the earliest that he expects eth2 Phase 0 to rollout would be January 3rd, 2021. This comment sent the Ethereum community into a bit of a mess because as I mentioned, most people are expecting eth2 Phase 0 to launch in 2020. This also isn’t the first time dates have been thrown around by various people regarding eth2’s launch (not to pick on him but Justin has given dates 2 or 3 times now). Though it’s important to note that there has never been an “official” launch date given for Phase 0. All of the dates that you’ve heard of either came from individual researchers or implementers, or general media outlets. Because of this, anyone saying that eth2 is “delayed” is misinterpreting the information.

A few minutes after Justin made his above comment, Vitalik jumped in to offer his own opinion on when he thinks eth2 Phase 0 will go live. Danny Ryan (another researcher) also jumped in saying that he believes eth2 Phase 0 will go live in 2020.

There are a few explanations for why eth2 has taken so long to launch. Firstly, and arguably the cause for the longest “delay”, is that the eth2 researchers decided in June of 2018 to basically merge all of the previous years worth of work on sharding and proof of stake into what we now know today as eth2’s phased rollout plan. This merging of research and development was definitely the right decision but it unfortunately set eth2’s launch back by at least 1-2 years. The first phase of this launch, the Beacon Chain, consists of the original Proof of Stake protocol that Vitalik designed called Casper the Friendly Finality Gadget (Casper FFG). Phase 1 will then bring in the 64 shards, Phase 1.5 will merge eth1 into eth2 as shard #0, and Phase 2 will bring in “state execution” aka smart contracts to the shards.

Secondly, eth2 has been architected to be a multi-client protocol (I explain the importance of that here). This means that a successful eth2 phase 0 launch would, at minimum, consist of 2 different client implementations. The latest multi-client testnet (Altona) consists of 4 different clients (Prysm, Lighthouse, Nimbus and Teku) and has been running quite smoothly over the last few weeks – this is obviously a very positive sign. It’s also worth noting that those 4 clients are all independent of the Ethereum Foundation (though they are funded in-part by grants given out by the foundation).

Lastly, the eth2 project is a massive undertaking and is the culmination of 6+ years of bleeding edge research and development. The reason it has taken so long to get right is because eth2 has very distinct design goals that the researchers and implementers did not want to compromise on. This approach led to many design iterations in order to “get it right” and simplify the overall design. As Justin Drake puts it, “we made eth2 hard for ourselves”.

Source: https://docs.ethhub.io/ethereum-roadmap/ethereum-2.0/eth-2.0-phases/

So, where to from here? Well it is expected that the “official” multi-client testnet will be spun up within the next few weeks and this will (hopefully) serve as the final testnet. The current thinking is that this final testnet would run for 2-3 months and if no critical bugs or issues are found, then an actual, widely agreed upon date for the eth2 Phase 0 mainnet launch would be put forward by both the researchers and implementers.

Just to have a little fun, here’s a list of implementers, researchers, and community members that have publicly stated that they are confident that eth2 Phase 0 will launch in 2020:

Eth2 Phase 0 will launch in 2020 – I bet on it.

Have a great day everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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The Beating Heart of Ethereum – The Daily Gwei #26

https://thedailygwei.substack.com/p/the-beating-heart-of-ethereum-the


This GIF is really fascinating – it’s basically showing net asset flows to Compound from Ethereum addresses (users). Though, what this GIF looks like to me is a sort of “beating heart” of Ethereum. Users deposit and withdraw crypto-assets from various places (DEXs, CEXs, Compound and others) based on market conditions. A healthy beating heart would be lots of activity across the Ethereum network and its apps whereas a dying heart would (obviously) be the opposite.

Source: https://twitter.com/BanklessHQ/status/1281300266080501760

Even though Ethereum has this beating heart of activity, it’s always been difficult to measure the active human users of Ethereum (or any blockchain) for many reasons including: people using multiple addresses, automated activity (bots), exchange address activity, miner activity and more. Most metrics that I’ve seen that try to measure “daily active users” for apps basically just count the number of Ethereum addresses that interacted with an app. This is obviously not an accurate way to measure usage because there is no distinction between a human user or a robot user.

This is why I like to look at other metrics to measure human users on Ethereum such as the infamous USD Locked in DeFi, total new capital inflows (harder to track as it usually comes from centralized exchanges), stablecoin growth and, to a lesser extent, fees paid on the network. Fees paid are generally a good metric to measure overall use of the network but, as I’ve explained in a previous post, a lot of that usage can come from ponzis/scams which tend to be very automated and spam the network with useless transactions.

There are also a bunch of metrics that are opaque that we can somewhat attempt to track such as new user signups to centralized exchanges, growth of Ethereum-based newsletters & podcasts, visits to Ethereum-based websites (Ethereum.org, EthHub), YouTube views and more. I’ve also personally noticed a shift to Ethereum over the last few months from all over crypto and I think this is mainly due to DeFi capturing everyone’s attention (especially since the COMP liquidity mining launch).

Since I have access to the EthHub analytics, I can give some insight here as well. Basically, all of EthHub’s metrics (visits, sessions, new users) are way up over the last few months. In addition to that, I’ve noticed stronger growth in both newsletter subscriptions and podcast listeners. This signals to me that there are new users entering the Ethereum space whether it’s from other crypto communities or they’re just brand new to crypto. I tend to believe that many of them are brand new users because the top 2 pages on EthHub are ‘Intro to Ethereum Wallets’ and ‘How to Buy Ether’.

In the end though, I don’t think it matters if the users are bots or humans. Bots are necessary for activities such as exchange arbitrage (which keeps asset prices in check), automated payouts (mining pools, liquidity mining programs), automated trading (like market making and Sets) and more. Humans are necessary for actually bringing in the new capital, creating the bots, building the apps, creating & maintaining the community and more.

The beating heart of Ethereum will always be its users – no matter if it’s a human or a bot.

Have a great weekend everyone,
Anthony Sassano


All information presented above is for educational purposes only and should not be taken as investment advice.


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