🟣 Ethereum’s Finality Takes a Backseat

If you missed it, we had some late Friday afternoon drama to close out the week. Ethereum failed to finalize for roughly 8 epochs. This is the first time it has ever failed to finalize for this long, and the first time the inactivity leak kicked in. This came on the heels of a smaller failure on Thursday afternoon where Ethereum failed to finalize for roughly 3 epochs.

What is finality? Finality refers to the state where a super majority (>66%) of validators attest to the final state of a blockchain. On Ethereum, once an epoch is finalized, any block in that epoch cannot be changed. This means that as a user you can be sure that your transactions cannot be changed, altered, canceled, etc. in any way.

Finality is important, even in the world outside of blockchains. You don’t want your bank wire sending through and then finding out 3 days later it got reverted. You don’t want to have bought a stock and then your broker suddenly tells you, oops we had a few errors so your transaction wasn’t actually executed.

A short TLDR of what happened was that consensus clients, mainly Prysm and Teku, had to process older attestations from nodes that didn’t have the latest information, while trying to process new attestations. Along the way, it got a little too crazy and the clients couldn’t keep up, resulting in malfunction.

Fortunately, Prysm and Teku have both released client hotfixes that should prevent a similar issue from occuring in the future. There’s a whole philosophical debate around Ethereum prioritizing liveness over safety, and whether Ethereum was truly down or not during those 8 epochs.

In my opinion, Ethereum worked exactly as it should have. The Gasper consensus mechanism decoupled liveness from safety, allowing users to continue to submit transactions while offline validators either catch up to finalize blocks or get penalized enough so the network can achieve supermajority attestations again.

-purplepill3m

Bear markets are for building gambling, which has made transacting on Ethereum mainnet unbearable for the average user lately. While people continue to create an infinite number of memecoins, it seems the appetite for gambling may have slowed, with transaction fees coming back down to a “reasonable” $10-$20 level. You will never catch me paying $50+ in gas to trade memecoins, but degen apes are built different. With ETH going into hyper ultrasound money overdrive with an annualized inflation rate of -1.75% over the past 7 days, it feels good to be an ETH holder right now.

The Cosmos DeFi ecosystem is close to having important primitives required to bring the Interchain vision to life. With liquid staking growing quickly in the ecosystem and native USDC launching sometime this month, many of the historically missing pieces are coming together. Cosmos DeFi is still missing a good decentralized stablecoin, but Agoric has plans to change that.

If you read our report on Agoric back in January, you’d recall that it was a Javascript-based smart contract platform leveraging the Cosmos SDK. Agoric will use IST, a CDP-based decentralized stablecoin backed by Cosmos PoS assets, as gas payment on the network. The signaling proposal above is requesting the Agoric community to launch Mainnet 1b, which will create the first IST vaults, allowing it to be minted against ATOM. Although it is still a very nascent ecosystem, if Agoric can onboard the nearly 14M Javascript devs into web3, it could be a sleeper pick next cycle. I would watch this ecosystem carefully over the coming quarters.

The Kwenta Fee Switch + Update

Kwenta has undergone significant developments since our last report in December, including the activation of a “fee switch,” bringing a mechanism for fundamental token value accrual.

Stride: Unlocking Interchain Liquidity

Stride is leading the Cosmos liquid staking market, which has the opportunity to unlock hundreds of millions in staked liquidity in the ecosystem.

Galaxy: On-chain OTC Options Trade Key to Finance Evolution

Galaxy Digital is working with crypto investment firm CoinFund to alleviate credit risk and boost transparency with on-chain trading

Going Full Bitcoiner: 1 Million Addresses Now Own 1 BTC or More

Last year’s Bitcoin price plunge drove greater ownership of more than 1 BTC — now reaching one million addresses

The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.

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