ecology
ecology
secondary title
On the eve of the mainnet merger: PoW hard fork impact analysis and public opinion events
https://twitter.com/makerdao/status/1555626931034415104?s=21&t=refHiyVUryOs1H-OxaXH8A
Recently, the community has continued to discuss PoW forks. The DeFi lending protocol MakerDAO released an update on Twitter, analyzing the potential risks of PoW forks to Maker after the merger.
A potential fork could affect Maker in the following ways:
1. Futures Backwardation & Negative Funding
Spot ETH will receive PoW forks, while ETH quarterly futures or perpetual contracts will not.
Assuming an efficient market, after the merger, quarterly futures should start trading at an additional discount to spot ETH based on the expected value of the PoW fork.
In practice, market participants can buy spot ETH and then sell an equal amount of ETH futures to bet on the value of the fork while maintaining a positive-negative balance of the portfolio (ie Position-delta Neutral).
Considering that there will be a large amount of capital pursuing this transaction, it may lead to huge selling pressure immediately after the PoW fork is launched. Alternatively, if the outlook for PoW forks is poor, we may see the value of futures contracts rise back to the same value as spot.
Impact on Maker:
- Decreased notional leverage cost via futures contracts (excluding potential fork coin value), bringing competitive pressure to Maker Vaults
- Users who believe that the value of the potential fork coin will be high will be incentivized to leverage the futures, while those who believe that the value will be low will prefer to leverage with Maker Vaults, the owner of the vault will still receive the potential forked coins.
Responses:
Keep rates competitive to avoid losing too much volume to futures contracts.
2. stETH Discount
In any PoW Ethereum fork, stETH could become worthless. This is because future Ethereum upgrades include unlocking staked ETH from the deposit contract, and there is little economic incentive for forked chains to consider this
Therefore, based on the expected value of the PoW ETH fork, the market price of liquid collateral assets may decline. The direct reason will be that the user converts stETH to ETH, or shorts with leverage.
If the expected value of the PoW fork coin is high, it may cause stETH to face the risk of serious lack of liquidity, because the assets of most decentralized exchanges are kept in stable exchange pools, and their liquidity is concentrated in the same pool as ETH. 1:1 price ratio.
The ever-increasing stETH discount will incentivize those who are not bullish on the value of the fork to leverage their staking. This may increase the deposit rate of ETH on the lending agreement, while further increasing the tail risk of liquidity.
Impact on Maker:
1. It may increase the liquidity risk and downside volatility of stETH.
2. The stETH discount incentivizes users to leverage on pledges, which will increase the risk of negative spreads and increase the supply rate of ETH in the lending agreement
Responses:
1. Monitor the liquidity of stETH, and respond by adjusting parameter changes, increasing the stability fee (Stability Fee) or increasing the liquidation rate if necessary.
2. Monitor competitive rates for using ETH collateral in DeFi lending protocols.
3. External asset fork selection
A wide variety of external collateral assets are hosted on Ethereum. Including cross-chain bridges, centralized stablecoins, and real-world assets.
These assets are backed by external collateral and can only be fully collateralized on one chain at a time. This means that, during a fork, issuers will need to identify a chain as canonical.
There may be one or more external issuers identifying a certain PoW fork chain, which has a degree of risk. This could render assets bridged to mainnet Ethereum worthless (they will only be backed by collateral on PoW forks)
Assets bridged from Ethereum are mortgage assets on the PoW chain, so they will also face the risk of becoming worthless.
Impact on Maker:
The impact is minimal if all externally collateralized asset issuers support the merged upgrade.
If one or more issuers support a PoW fork, this could have a significant impact on DEX liquidity pools and other protocols that accept the asset as collateral.
Responses:
Confirmation of merged support from major external asset providers that interact with the Maker protocol and services that bridge DAI to other chains.
https://thedefiant.io/pow-die-hards-plan-to-fork-and-mine-original-ethereum-after-the-merge
In addition, for some miners who plan to fork Ethereum and mine their own Ethereum chain after the merger, Justin Drake of EF said that important packaging asset providers support the merger, so the possibility of two chains coexisting does not exist .
https://twitter.com/hasufl/status/1555902237548896256
Chainlink, a blockchain decentralized oracle solution, also issued a document saying that it will not support the Ethereum PoW fork chain.
https://twitter.com/ChainLinkGod/status/1556353163820642304?s=20
secondary title
U.S. Treasury Sanctions on Tornado Cash and Its Aftermath
On August 8, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned virtual currency mixing platform Tornado Cash. According to news from the U.S. Department of the Treasury, Tornado Cash has been involved in laundering more than $7 billion worth of different virtual currencies since its creation in 2019.
Brian E. Nelson, Undersecretary of the Treasury for Terrorism and Financial Intelligence, stated:
Despite Tornado Cash's public assurances not to do so, the company has consistently failed to implement effective controls to stop it from laundering money for malicious cyber actors on a regular basis, and has failed to take basic steps to address money laundering risks. Treasury will continue to take aggressive action against coin mixing platforms that launder virtual currencies for criminals and those who facilitate them.
On the 9th, Gitcoin issued a document stating that it has suspended funding for Tornado Cash, and gave a wallet address that has been added to OFAC's SDN list; Circle's USDC project has also added these addresses to the blacklist, through its Blacklist account @usdcblacklist View. In addition, the website Dune.com aggregates these banned addresses, including USDC and USDT banned addresses.
1. OFAC
@BowTiedlguana, the team working on DeFi education, posted a post explaining what OFAC is, the sanctions on Tornado Cash, and what it means for DeFi.
OFAC: The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) administers and enforces sanctions against high-profile individuals, including major international terrorists, drug kingpins, and foreign financial/political elites deemed hostile to U.S. interests.
OFAC ensures that U.S. persons (citizens, residents, and companies) cannot legally conduct business with countries such as Cuba, Iran, Iraq, and North Korea without special government approval. It maintains a list of Specially Designated Nationals and Blocked Persons (SDN List).
2. Sanctions against Tornado Cash
@BowTiedlguana has compiled a list of wallet addresses included in the SDN list for this sanction, holding a combined value of $437M in stablecoins, ETH, and WBTC.
Any U.S. citizen, resident, and company that conducts trade, economic transactions, or "other transactions" with persons, companies, and countries on the list (including Tornado Cash) will be considered illegal, and may face Heavy fines and prison terms.
And this "other transaction" is defined quite broadly. Its government guidance notes that it may include "technical transactions, such as the downloading of software patches from sanctioned entities." Based on this, it may also be illegal for Americans (citizens, residents, and companies) to access the Tornado website.
Among them, WBTC is issued by BitGo. Its entities, located in South Dakota and New York, must comply with OFAC sanctions or face multimillion-dollar fines and prison terms for their executives.
Therefore, we expect them to suspend redemptions of tainted WBTC, rendering these tokens worthless. If liquidity providers don’t pull liquidity from DEX immediately, they are likely to end up as bagholders of locked WBTC (and stablecoin) assets.
3. What this OFAC Sanction Means
U.S. miners and validators of Ethereum could violate OFAC sanctions if they include one of the Ethereum addresses on the SDN list in the Ethereum blocks they generate (or verify) that contain transactions. However, how this will be carried out is unclear.
@BowTiedlguana speculates that the ethereum client software may be updated with an optional patch that would allow miners/validators to skip tainted mempool transactions (i.e. transactions with parties on the list) to avoid violating sanctions. Transaction vetting is not popular, but we may see transaction vetting done internally by large groups of miners/stakers in the US.
This could be a risk for any U.S. fund investing in Ethereum PoS, as voting on blocks containing illegal transactions could be an illegal activity. We anticipate either taking a technical countermeasure (voluntary review) or moving operations outside of US jurisdiction.
For CEXs (centralized exchanges), it is expected that they will use their own chain analysis software to block and report all customer transactions violating sanctions. That is, block and report anyone who withdraws from Tornado Cash, and who attempts to withdraw from US-related CEXs.
Exchanges with non-U.S. branches are separate legal entities, but can also be considered de facto "foreign affiliates" of U.S. entities. Hence, @BowTiedlguana strongly encourages exchanges to ensure their foreign incorporated group companies are also fully compliant with OFAC sanctions.
In conclusion, the U.S. government is happy to use the highest level of economic sanctions reserved for foreign powers and extremely dangerous persons against privacy products in cryptocurrencies.
If you are a US national, any interaction with Tornado Cash may be illegal - including donating to it via Gitcoin, working on the project, running or downloading its software, visiting its website, and depositing/withdrawing from smart contracts.
As of August 8th, all assets in Tornado have been tainted. Tether, Circle and BitGo will refuse to exchange these tokens. Regardless, tokens will likely be withdrawn from Tornado Cash and transferred to liquidity pools. Liquidity providers will be left to take responsibility.
source:
source:
https://home.treasury.gov/news/press-releases/jy0916
https://twitter.com/DylanLeClair_/status/1556708643617312768
https://twitter.com/BowTiedIguana/status/1556683120002314241
secondary title
Technical discussion on NFT privacy schemes
Source: https://twitter.com/VitalikButerin/status/1556548617636556800
secondary title
source:
source:
https://twitter.com/solidity_lang/status/1556697008844447744?s=21&t=xhVu0_-rNMJ-q4nojhiyMQ
secondary title
source:
source:
https://twitter.com/CoinDesk/status/1555210451830677505
secondary title
source:
source:
https://twitter.com/MessariCrypto/status/1554487703252508672
secondary title
source:
source:
https://twitter.com/ethglobal/status/1556735578674270210?s=21&t=xhVu0_-rNMJ-q4nojhiyMQ
secondary title
merge
source:
https://blog.lido.fi/unveiling-the-lide-node-operator-portal/
merge
secondary title
Bellatrix upgrade for Goerli/Prater merger
At the 144th Ethereum Core Developers Conference (ACD) on 8.5 last Thursday, developers reviewed the Goerli/Prater merged Bellatrix upgrade: the participation rate before the upgrade was about 90%, and after the upgrade it dropped to about 81% %. Some of the outages were due to a client team running validators not upgrading them, and others were community-run validators. Since running validators requires some storage/bandwidth overhead, the incentives on the testnet are insufficient, and it is estimated that some people do not pay much attention. But overall the client team is happy with the level of upgrades!
The network needs at least 2/3 of the validators to participate in order to be finalized, so if it is lower than this ratio, there will be problems. If you're running a Prater validator, you can now upgrade and prepare for this week's merge. Related Information: Goerli/Prater Merger Announcement<>source:
source:
https://twitter.com/TimBeiko/status/1555242961029386240?s=20
secondary title
Sixth Goerli shadow fork with mev-boost
According to Pari's report on the Eth R&D discord, the summary of the sixth Goerli shadow fork (GSF6) in 8.4 is as follows:
No client issues, all client combinations are synced and transitions are handled correctly
There are two nodes running out of disk space, the part that explains the drop in participation
The network had 30% of validators running mev-boost to complete the transition, except for one node in India that experienced more severe delays.
Also on ACD, Chris from the Flashbots team made an update to mev-boost. He highlighted the issues seen at GSF6 and said they will be looking into the default batch size for validator registration in the relay, as well as other measures and better documentation for such issues.
source:
source:
https://twitter.com/TimBeiko/status/1555249156599324672?s=20
secondary title
DAG growth or accelerated merger arrival
On ACD, Tim Beiko raised concerns about the growing DAG size of the mainnet and how it might affect the merged TTD. In simple terms, the DAG size determines the hardware requirements for mining, and when it exceeds a certain threshold, mining equipment cannot be used on Ethereum.
According to the data on minerstat (https://minerstat.com/dag-size-calculator), the DAG size of Ethereum will exceed 5GB after a week. When it exceeds 4GB, the drop in computing power is not obvious, but some people say that it will drop more significantly when it reaches 5GB, because this is the configuration of a common ASIC.
So this brings up the question of when and how to plan for TTD on mainnet. Ideally, the value of TTD can be determined after these problems are determined, and when determined, the serious decrease in computing power can be taken into account. The next ACD will do just that.
source:
source:
https://twitter.com/TimBeiko/status/1555250212804763648?s=20
secondary title
Lighthouse released version 2.5.0Galactic Federation President
Earlier this month, Sigma Prime announced the latest version 2.5.0 of Lighthouse, which is a medium priority release.
The new version of Lighthouse contains new features and fixes some bugs:
- Add execution_optimistic flag to HTTP response (#3070, #3374)
- Fix slow eth1 cache sync time (#3358)
- Full support for builder spec v0.2.0 (i.e. mev-boost support) (#3134)
- Retroactively verify optimistically synced merge transition blocks (#3372)
- Refined peer management when execution layer is offline (#3384)
Major changes in this release include:
after the merger
source:
https://github.com/sigp/lighthouse/releases/tag/v2.5.0
after the merger
secondary title
Merged three API change proposals
At the 144th ACD, the developers discussed some proposed changes to the Engine API and Checkpoint Sync (checkpoint synchronization), which were merged before being considered for implementation.
-Remove INVALID_BLOCK_HASH, simplify API semantics: https://github.com/ethereum/execution-apis/issues/270
source:
source:
https://twitter.com/TimBeiko/status/1555244465756942336?s=20
executive layer
secondary title
first level title
source:
https://twitter.com/ultrasoundmoney/status/1555507287606820865?s=20
Layer2
secondary title
StarkWare, a scaling solution team based on ZK-STARK technology, announced that its solution has added recursive proofs to their proof process, which is the key to achieving fractal scaling L3. Added recursive proofs, each proof containing many transactions can be rolled up (packaged) with other proofs into a single proof.
secondary title
Ordinary STARK expansion process:
What needs to be done on the chain: 3) Verify this proof
secondary title
After adding the recursive proof:
What needs to be done on-chain: verify the final proof
secondary title
Benefits of Recursive Proofs
- Realize super expansion, because after compressing many transactions into a proof, the recursive proof compresses multiple proofs into a single proof
- This sets the stage for L3. L3 refers to an environment built on top of L2, the transaction batch of L3 will be verified on L2
(Editor's Note: For a detailed description of L3, it is recommended to read the ECN-translated article "Fractal Expansion: From L2 to L3")
- Latency has been improved. Because you no longer need to wait for all transactions to reach the validator before starting to process them, you can start processing smaller batches of transactions in parallel
Source: https://twitter.com/StarkWareLtd/status/1556670209414635521
secondary title
Arbitrum One mainnet will be migrated to Nitro on August 31
The Arbitrum One mainnet will be migrated and upgraded to Nitro on August 31st. Prior to this, Arbitrum will conduct a shadow fork migration on the 24th as the last rehearsal before the mainnet migration.
Upgrading to Nitro brings:
- Further compression of calldata. Further reduce transaction costs on Arbitrum by reducing the amount of data submitted to L1.
- Ethereum L1 gas compatibility. Make the pricing and bookkeeping of EVM operations exactly the same as Ethereum.
- Additional L1 interoperability. Includes tighter synchronization with L1 blocks, and full support for all Ethereum L1 precompilations."retryable"-safe
, to reduce failure modes in which retryable tickets cannot be created.
-Geth Tracing, for broader debug support.
-etc
Source: https://medium.com/offchainlabs/prepare-your-engines-nitro-is-imminent-a46af99b9e60
secondary title
L2 good article recommendation
-DelphiDigital published the article "The Complete Guide to Rollup", titled as a meme echoing Vitalik's previous article "The Incomplete Guide to Rollup". https://members.delphidigital.io/reports/the-complete-guide-to-rollups"The different types of ZK-EVMs"-Vitalik posted an article
Analysis and comparison of different types of ZK-EVM: https://vitalik.eth.limo/general/2022/08/04/zkevm.html
-Immutable X released a complete guide to zkEVM, EVM compatibility & rollup: https://immutablex.medium.com/ground-up-guide-zkevm-evm-compatibility-rollups-787b6e88108e
- Layer2 Playgrounds by Takens Theorem: https://medium.com/etherscan-blog/layer-2-playgrounds-5a44eed217fa
