Speed, Security & Scalability: Are ETH L2s A Suitable Solution?
Squad Staking | AI & Tokenizing Agriculture | Iron Fish ZK L1
GM, this is your Daily Bolt briefing.
In today’s briefing, we’re giving you valuable info on the latest in crypto; from ETH squad staking, to AI being used to help farmers tokenize agricultural data.
We’ve included notes on Iron Fish, a ZK privacy L1 that launched yesterday, aiming to solve the privacy issues that plague the EVM ecosystem, and maybe even implement a L2 zkEVM…
And later; read our note of the day, featuring Multicoin Co-Founders Kyle Samani and Tushar Jain to learn why these VCs see scalability, speed, security, and regulatory issues around the current ETH L2 ecosystem.⬇️
Stay alert and informed.
1/ The Daily Gwei Refuel #569 – ETH staking chat, New ENS app and more
Preview: In this episode of The Daily Gwei, Anthony Sassano gives a recent recap on everything new in the Ethereum ecosystem and crypto ecosystems. Click here to listen to the full episode (27 mins).
Read our Note (4 mins) and save 23 mins.
According to the Hildobby Dune Dashboard, the Ethereum staking flow for the past 24 hours is back in the green, with more $ETH staked than withdrawn.
There are still rewards that need to be withdrawn, but some users have not converted their credentials yet.
Rob from the Rated Web team tweeted a graphic showing the data of staking services in the Ethereum execute queue, with Kraken having the most validators in the queue, followed by Binance and Coinbase.
The withdrawals from Coinbase and Binance are likely due to arbitrage between $cbETH (Coinbase staked ETH) and the beacon chain, while Kraken is withdrawing their validators due to legal obligations.
Distributed Validation Technology (DVT) is the future of staking as it leads to more resilience and security for staking operations.
DVT allows for squad staking, where people with less than 32 $ETH can pool their $ETH together and run validators as part of a cluster for added security and resiliency.
2/ Real Vision – Why Blockchain, AI Can Be a Fertile Farming Ground
Preview: In this Real Vision episode, Guest host Santiago Velez, co-founder and R&D division lead at Block Digital, welcomes Jon Trask, the founder, and CEO of Dimitra, to explore how AgTech can help farmers increase productivity and efficiency. Click here to watch the full episode (41 mins).
Read our Note (6 mins) and save 35 mins.
Here are some key takeaways:
Jon launched on KuCoin September of 2021. Jon also built a lot of AI (Artificial Intelligence) tech out in order to help farmers make better decisions.
Dimitra is a platform that’s completely focused on agriculture, working with farmers around the world, and taking products from the soil all the way through the food producers. $DIMITRA is the project’s native ERC-20 token.
The way Dimitra works is that Jon collects data from farmers. He gets to understand how they’re planting, and where they’re planting, and he supplements that data with data that he collects from satellites and IoT (Internet of Things) sensors and other sources.
Dimitra starts with a mobile app, where the farmers enter their data. They tell Dimitra about their soil. Then Dimitra will take satellite reports.
Jon takes that data within their application. They write that to the Polygon blockchain and create an immutable record, creating a certificate for the farmer and for the food company, in order for the farmers to maintain records to show that they’re complying with those regulations.
Dimitra can analyze the data report and compare year-over-year performance on a particular farm, and help a farmer make decisions around what fertilizer they should be using and when they should be planting.
Dimitra’s sales two years ago were literally zero; this year, Dimitra expects to be in that $20 million to $30 million range.
Dimitra signed a contract recently with Ahprocafe in Honduras. They have 115,000 coffee farms.
3/ Crypto Coin Show – Iron Fish Network
Preview: In this video from Crypto Coin Show, Ashton Addison from CryptoCoinShow is joined by Elena Nadolinski, CEO and founder of Iron Fish to discuss Iron Fish’s mainnet launch on April 20th, and more! Click here to listen to the full episode (20 mins).
Read our Note (2 mins) and save 18 mins.
Here are some key takeaways:
Elena Nadolinski has a background as a software engineer at Airbnb and got involved in the crypto community after attending her first Ethereum hackathon (ETH Waterloo).
She founded Iron Fish to address the significant privacy issues in cryptocurrency, which she believes is essential for its future as a payment system.
The Iron Fish team prioritizes privacy and zero-knowledge proofs (ZK), with some projects believing that ZK could be as significant as blockchain itself for achieving widespread adoption.
Iron Fish is a privacy layer for other crypto assets, acting as a collaborative layer to multiple chains. It is a new layer 1, proof-of-work blockchain with encrypted transactions, ensuring privacy.
The mainnet launch was on April 20th, 2023, and the team is working hard to hit the deadline; the first iteration of Iron Fish includes custom assets, and bridges will be developed post mainnet to connect with other chains.
Iron Fish is being built as a foundational layer that can process ZK proofs, with the potential for future extensibility, such as implementing a layer 2 zkEVM.
If you read these 3 Notes on Revelo Intel you would have saved: 1 hour and 16 minutes!
Empire – L2s Wont Scale Ethereum; with Multicoin Co-Founders
Preview: In this episode of Empire, Jason and Santi are joined by Kyle Samani and Tushar Jain from Multicoin to discuss Multicoin’s relationship with SBF and FTX: how they met, their views on SBF, watching the blow-up and the implications for Multicoin’s fund. Click here to listen to the full episode (74 mins).
Read or listen to our notes below to learn more.
SBF And FTX Backstory
Multi-coin was a top-performing fund, avoiding some pitfalls in mid-2022, but was affected by FTX and Solana issues.
Multi-coin initially passed on investing in the FTX seed round but later participated in its investment rounds and invested in Serum ($SRM).
The FTX issue came to light during the Breakpoint conference in Lisbon, and the extent of the insolvency was unexpected.
The lack of governance controls and transparency in FTX’s internal operations was missed by Multi-coin and other investors.
The bankruptcy trustee is working to liquidate assets and pay back creditors, but clawbacks are a significant uncertainty.
The FTX situation was the hardest mental challenge for the Multi-coin team, but they managed to retain their staff and continue operations.
Despite some angry LPs, the majority were understanding and long-term oriented, knowing the risks associated with the fund.
Multicoin’s Solana Bet
Multicoin’s Solana Bet discussed position sizing and managing the position in hindsight.
It is important to focus on the long term and not over-indexing on a cost basis.
There’s a perception that FTX was acting as the BD (business development) arm of Solana, but the speakers disagreed with that characterization.
FTX was pursuing its own self-interest, investing in various projects and making plays in different areas.
BD for blockchains is overrated and a bottoms-up approach (hackathons, crypto-native teams, etc.) is more effective.
It is important to have teams with staying power through market fluctuations, rather than flighty big corporations.
Conviction, Sizing, And Earning Excess Returns
A good investor helps entrepreneurs solve problems and navigate strategy, not just write clear theses on blogs.
It’s essential for a venture firm to be open-minded and invest in weird new things, signaling their willingness to explore unconventional ideas.
Investing in every platform or technology can lead to an index product, which does not offer excess returns; being contrarian and right is crucial.
Larger funds can make it harder to earn excess returns, but they also provide more opportunities and influence over projects.
The most valuable thing a venture investor can do for an entrepreneur is to tell them when they’re wrong about something important.
Entrepreneurs should assess venture firms based on their interactions with portfolio companies, not their online presence or affiliations.
The Intersection Of AI And Crypto
The intersection of AI and crypto has the potential for big winners.
Three areas of focus are Airbnb for GPUs, reinforcement learning with token incentives, and authenticity of digital assets.
Repurposing graphics cards from computers all over the world for training and large computing jobs could be a solution to the GPU shortage in major cloud providers.
Token incentives can be used to facilitate large-scale reinforcement learning with human feedback in vertical domains like medicine, law, and finance.
The authenticity of digital assets can be used to authenticate unedited images and images produced using specific skills.
Other potential use cases include DeFi, NFTs, and gaming.
Good products that people will use are important for success, rather than just relying on marketing strategies like airdrops.
Why DeFi Isn’t Ready
DeFi is exciting but currently has a lot of friction for onboarding new users.
To increase the adoption of DeFi, more users need to be paid on-chain, such as through payroll or other on-chain financial services.
Gaming could be a big catalyst for people to earn and onboard onto the blockchain, but it’s difficult to underwrite the success of a game before seeing it in action.
Decentralized Sequencers And The EVM
There is excitement for Coinbase’s Base L2 but it is tempered by concerns about regulation and centralized sequencers.
Decentralizing sequencers is technically difficult, potentially leading to L1-like engineering challenges.
EVM L2s are not adequately addressing scaling issues, focusing on reducing gas cost per transaction instead.
BNB Chain highlights the limitations of increasing gas limit on EVM without breaking 500 TPS.
In an L2-dominant ecosystem, L1s may be overvalued, and L2s undervalued, shifting MEV and dynamic gas execution to L2s.
If the future is EVM L2s, shorting L1s and going long on L2s could be a strategic play, despite the valuation discrepancy.
Prioritizing Speed And L2 [False] Security
Speed is prioritized over security in early-stage experimental, high-risk projects in the crypto space.
The notion that L2s inherit the security of L1s is too broad, as it doesn’t account for censorship resistance.
The value proposition of crypto is permissionless access, allowing anyone to use and validate the chain without permission.
Comparing Ethereum L1 to Solana L1 validator costs might not be the best comparison, as the vision for Ethereum is transactions through L2s.
Multicoin has allocations in both Ethereum and Solana, with a higher allocation in Solana, but they don’t disclose the exact breakdown.
Multicoin’s Bet On Filecoin
Filecoin has emerged as a meaningful ecosystem on par with Ethereum and Solana, gaining legitimacy and increasing intellectual capital.
The Filecoin Virtual Machine (FVM) launched on Pi Day, introducing programmable payments for storage, retrieval, bandwidth, and computing, making Filecoin programmable.
The native Filecoin retrieval market, Saturn, went live in January, and while still in play-money test mode, will eventually have real payments and enable exciting applications.
There are differences between Filecoin and Arweave. Arweave was initially favored due to its simplicity, but Filecoin now offers a superset of functionalities compared to Arweave.
Filecoin’s FVM provides more optionality and configurability, allowing developers to customize storage parameters such as the number of copies, unlike Arweave’s single parameter.
Both Filecoin and Arweave will likely coexist for a long time, but Filecoin offers greater flexibility and potential use cases due to its higher configurability.
BTC And The SoV Use Case
Bitcoin has a head start compared to other L1 assets, but Ethereum has caught up significantly in terms of liquidity, recognition, and perception of neutrality.
Other smart contract platforms, such as Solana, may join the club of Bitcoin and Ethereum in the future, offering more utility and users.
Advice from Kyle and Tushar for a younger version of themselves entering the crypto space: follow your heart, avoid getting caught up in the drama, be contrarian, and be willing to be wrong in order to achieve excess returns.