WARNING! Ethereum to Have BAD NEWS Later This Year!?

Scaling Ethereum…no longer, can it wait. It needs to happen, and it needs to happen
this year! Not only for the sake of our crypto wallets
due to gas fees, but for the sake of decentralization. Decentralized needs to show it can compete
with centralized, or centralized is going to take over decentralization. So are you ready to find your center? I hope it starts with a D, because it’s
time for Chico Crypto! The base layer of Ethereum is about as decentralized
as you get.

In its current form it’s just behind Bitcoin
based on hashpower. But hashpower isn’t everything…Combining
the distributed network of proof of work miners, and the ever growing number of nodes due to
proof of stake, ethereum is getting close to flipping bitcoin in node count… The switch to proof of stake, is going to
be a fateful time in crypto. It promises to be more secure than proof of
work, while providing Ethereum the base layer in needs for scaling into the future… Can Ethereum do it, can it scale? Well we need to start questioning everything,
and to begin, we need to look into the past… Well where do we begin…where Scaling Ethereum
started. With Plasma. Ethereum Plasma was hailed as THE scaling
solution, the one to bring Ethereum to the next level. The solution was drafted & proposed by of
course the man Vitalik Buterin, but another character. Joseph Poon. Poon, was actually the 1st person to present
the solution to the community at large publicly, in October of 2017 Buttttt Plasma failed, January of 2020 Coindesk
put out this article “Did Ethereum Silently Give Up on Plasma?” with the subheading
“Previously touted as the holy grail of Ethereum scalability, Plasma’s significant
weaknesses appear to have made the developers quietly drop the technology.” So what was the problem with Plasma? Well you just need to look at an Ethereum
Layer 2 solution, still relying on it to this day.

OMG network, formerly OmiseGo! Plasma’s idea was to take the ethereum main
chain, as the source of truth. And create a series of blockchains on top,
aka sidechains. These side chains would execute and store
transactions their own transactions, which were confirmed as truth by the mainchain in
the case of a dispute. This child chain concept, could build on top
of itself, and theoretically scale to infinity using the same concepts.

So what went wrong? Well with The OMG network, there is an intermediary
to the child chain, called the operator. This is controlled by a single block producing
node, which validates all the transactions on the child chain before submitting them
to Ethereum. A single node. A single point of failure. How could you trust this Operator?? Well any funny business was supposed to be
stopped by the watchers! Watchers were nodes, which anyone could operate,
they would monitor the Operator and the network for suspicious activity.

And if they found it, they could submit a
“fraud proof” stopping the fraud! Well, the OMG network went live on the mainnet
in June of last year. And in conjunction with the go live, one of
Ethereum’s big gas spenders, and congesters! Tether, USDT, announced they would be deploying
on OMGs childchain. Tether said in their announcement article
“USDt holders will obtain the benefits of transacting on the OMG Network, which is built
to reduce Ethereum congestion and gas fees with improved transaction speeds. The integration will result in a reduction
of confirmation times delivering faster payments while fees will be reduced without compromising
on-chain security.

The OMG Network will also facilitate USDt
deposits and withdrawals at Bitfinex. This will allow traders to react faster to
trading opportunities and take advantage of arbitrage more efficiently between exchanges
as the network grows” Did this work out? Did this save Ethereum and gas fees like the
news outlets were claiming?? Well let’s just go check out the OMG block
explorer today. Over 24 hours, not a single block was produced. The last blocks were 6 days ago, and held
a total of 4 transactions combined. OMGs child chain is not being used, whatsoever,
and not being utilized at all by bitfinex. Why? Something wasn’t right, something was still
fully centralized!! And if you guys didn’t know. OMG had a full on breakdown, the originals
sold off the company, in December, and now it’s being run by new entities, backed by
a VC firm…. The new entities, put out their first developer
update in early March of this year and as we can see, they speak of the child chain

V2? So obviously v1 had some issues, which they
list below like “Improve Chain to Watcher communications protocol. The watchers were not working!!! So now we understand why Plasma, didn’t
plan out. What are the next scaling solutions for Ethereum? And which are the most decentralized?? Once again there are sidechains. There are Roll Ups, with 2 main flavors. Optimism and ZK. And there are statechannels. Out of this group, rollups are getting the
BIG freaking look! Rollup is hailed as the solution, until sharding
is ready. But, question everything….I love Ethereum,
and I love decentralization. Are these rollups going to be decentralized? Well we will find that out soon, but first
it’s time for a short sponsored segment of this video, supported by our friend over
at yAXIS. First, what is yAXIS? Their goal is to make DeFi easy, through a
decentralized application where users can create a set and forget continually optimizing
yield portfolio. You get the y in yAXIS now? They are all about making yield returns, easy
for the user by finding the best performing ones for you! So how does it work? Well let’s dive into their dapp to understand.

At the overview page, let’s dive into product
#1. The Metavault. This is their flagship product. A pooled yield farming portfolio that secures
some very attractive returns, as we can see over 81 percent APR and over 113 percent APY,
for a pool that over 186 million TVL in it. Not bad, and the Meta Vault is simple, you
deposit what it wants for the currently best selected strategy. In this case it's with Curve finance, and
it needs their LP token. Don’t worry if you don’t have that asset,
it can convert from stablecoins within the app too! Once deposited, this is when you can see it’s
power..it tells you your future balance, if the returns stay the same.

That 501 bucks we deposited, would grow to
over 1200 in the future. This is in 12 months, but you can change your
future scale to 6 months, or even just 1 month. So how does it perform this high APYs and
APRs? By just accepting deposits of 4 tokens? USDT, USDC, DAI and the 3CRV LP token? Well by what they do with the tokens. The strategies are picked and chosen by strategists. Their strategies are voted and approved by
the DAO, the token holders. Who can also vote in and out strategists. Aka the tokens go into other DeFi protocols,
where harvest and token rewards are sent right back up into the flow of funds. WHich results in higher than normal total
yields for the pool as a whole. Although the vaults are soon moving to v3,
a Canonical Vault with delegated strategies. It's the same concept of v2, but applied to
any ERC20 token. What that means in practice is: BTC, ETH and
LINK vaults to begin, more assets to deposit, more strategies, and a much higher TVL. The next product with dapp right now, is the
staking vault, and this just had a major update. The governance token YAX migrated with a token
swap to yaxis.

From an erc20 to erc677. So if you haven’t done the swap, do it…link
is in the description Why did they do this? Well for staking! You can “transfer and call” in one transaction. This means you don’t need to first approve,
before actually staking. You can both approve and send tokens in the
same transaction…much cheaper gas for the stakers. Which a deposit is intriguing, their APR for
staking right now is over 383 percent, and APY is over 4,400 percent! And just like the metavault, you can see your
future returns, even based on different time frames. So, the complex taken out of yield farming,
while getting those type of returns, link for the yaxis dapp is below as the dapp has
much more coming! Now back to those Ethereum scaling solutions! What is the most decentralized and what are
the options? Let’s begin with rollups, as they take many
concepts from plasma, but just apply them in a different and supposedly better way. Rollups and Plasma are similar in many ways:
they both scale Ethereum by moving transactions off-chain onto a sidechain.

Ethereum mainnet like plasma is the source
of truth for the sidechain and maintains proof of the sidechain state. The sidechain itself is maintained by users
and operators offchain, separate from the L1 main chain. This means rollups need a sequencer. And looking at one of the popular rollup flavors,
Optimistic and their architecture…its complex, but a small piece of it, is the sequencer. A very important piece…. Which Vitalik spoke of in August of last year. In a reply to Steven Goldfeder, who is working
on another flavor of rollup based on optimism, arbitrum…Vitalikd said: If you attempt to
withdraw, and the sequencer does not accept your withdrawal, then you have to publish
a self-withdrawal to chain, and then wait a week to get your coins out (which is a liveness

So the sequencer can unilaterally cause liveness
failures. And then the question is, is the sequencer
a single party or are they distributed? Aka decentralized… That’s the issue with rollups, there may
be full liveness failures from bad actors. That isn’t good with centralized sequencers! That is why you see a major stop, in bold
on optimism’s roadmap is the Decentralized sequencer! Which doesn’t have a quarter or date, just
maybe sometime in 2022. The sequencer, who can submit a batch to a
rollup, many of the flavors, optimism and the zks, is still up for debate, how to make
it decentralized. Is there a rollup that isn’t relying on
a sequencer? Well Steven actually said that in reply back
to Vitalik. He said “First can we not assume that all
Optimistic Rollup protocols have a sequencer? Arbitrum doesn’t and we believe it’s a
fundamentally bad design.” But if you go to Offchain Labs documentation,
they have a section on sequencer mode and say “Sequencer mode is an optional feature
of Arbitrum chains, which can be turned on or off for each chain.

On mainnet launch, the flagship chain will
use a sequencer that is operated by Offchain Labs” Aka Arbitrum, will be centralized by a single
sequencer at mainnet launch just like Optimism. Which they called a fundamentally bad design. What is going on?? Who is going to release the decentralized
sequencer first? A ZK rollup, we didn’t speak much of, Optimism,
or Arbitrum?? Someone else? I’m questioning all of them, as decentralization
calls for it! Cheers I’ll see you next time!.

You May Also Like