Good afternoon. I'm Kevin, the founder of ETH Gas. Hmm, where to start? As for experience, I have experience working at Trifi, but also in the technical field. So technical field.
So , Trifi, I started as a V- , Trifi, I started as a V- trader. I started as a currency options trader, then moved into interest rate options and structured lending. After all, I led Morgan Stanley's structured credit group for a few years until 2008, uh, the Lehman era, and then eventually I got into regulatory compliance, because that's what happens when the world explodes in lending, and I didn't really like it like it . So I, uh, created a separate technology company. So I got into technology, and now I'm at the heart of Ethereum's infrastructure.
So today we're going to discuss Ethereum, and you know how to make it much faster, much more productive, much more fair, so that we can benefit all users and bring the broader ecosystem into the blockchain. This is just a brief overview of where we are from two perspectives. One perspective is artificial intelligence, and the other is profitability. So, uh, like right now, you guys have probably heard some of the presentations about agents, and really, uh, it's probably outdated even from last week. Uh, but we see a significant amount of flow, uh, driven by agents.
There is currently no way to definitively verify to definitively verify whether it is an agent or not. Right? Whether it's a bot or an agent is, you know, a moot point. But, uh moot point. But, uh , for the most part, basically everyone uses agents.
But the point is , it comes down to the average person with, you know, cloud code and codecs, and, uh, everyone has access to, uh everyone has access to, uh , you know, high-speed, uh high-speed, uh , micropayments, actually. Uh, X42, I'll skip, uh, but basically from a yield perspective, we also see that, I think, in storage and yield. And so, even last week, the New week, the New York Stock Exchange held a yield summit hosted by Morpho, and it seems like almost every institution or regulated entity that I've talked to has one of their first steps or entry points into this storage space. So, uh, we're seeing a lot more different types of curation or strategy, and it's not called asset management asset management , it's called curation. But, hmm , it's called curation.
But, hmm , this is a really exciting space that's evolving. The problem, however, is that, well, Ethereum was created, you know, 10 years ago, a little more. And it was built for people or users, and, you know, it was built for machines to trade every millisecond or two? And that's why Ethereum is very slow. He is very vague.
You know, when you're trying to make a deal on the blockchain, you think blockchain, you think it might take 12 seconds, but it might take 24 or maybe 36. There's a lot of this uncertainty about whether I can make the deal? When will this happen? And this becomes extremely complex because it involves, um, multi-agent coordination. So if I have an agent trying to make a deal on the blockchain, you know, it's kind of a probabilistic approach.
There is no certainty that this will actually happen. And how do you manage that, how do you get around that? How do you create backup options? And this is a complex process for a person, because they are an agent. But when you have multiple agents who use different strategies or, uh, have different functions, whether it's reporting, compliance or something else, it also gets complicated.
So, uh gets complicated. So, uh , you know, how can we get more certainty, uh more certainty, uh , on the annual interest rates of ETH, I'll skip that, but on the algae and the part that I'll also touch on a little later. Hmm, but the point is, uh, like , what's this new title Mythos just came out with? What is this? Fable, right?
Yes. Good. Um, so with that in mind, you know, AI will definitely break some things, but it's important that they break before we get trillions of dollars on the chain. And so, you know, it would be great to get through this, but the thing is, there are going to be a few, um, unfortunately, minor attacks in the near future before we can get that kind of high-velocity, high-volume business. Um, finally, one point is that many agents, as they are now, are pretty predictable, as are our strategies for storage.
And if something is predictable, you can be ahead. And that's one of the problems, also, is that, um, you know, the more predictable, the more autonomous things are, um, you need to keep them unpredictable. But, um, I'll get to that a little later. The solution to many of these things, as stated below, is block space. And I want to take you through this experience of how block space changes, and how reordering and restructuring block space changes that.
And you know, for the last 10 years, we might have viewed Ethereum blocks as just being built every 12 seconds. So you had the previous era, you know, Proof of Work, and now we have Proof of Stake. But for the most part, we just take it for granted. OK. Last year we did something pretty cool.
We essentially said: let's access this block space and let's do something with it. Um do something with it. Um , so we've got access to this blockchain space, and now you can buy, sell, and trade it, like oil and gas or crude oil gas or crude oil . And yes, you can speculate in oil and gas. Secondly, we have also been able to improve the block space for performance and other purposes.
And so I'll move on to that now. Ethereum. Ethereum's core business is the production and sale of blockchain space. That's all he does. This is a very high-quality type of block space.
Um, because there is unlimited block space on other blockchains, but Ethereum has few and it is very high-end. Um, as I mentioned, you know, we created this ability to trade it just like a commodity. You know, you think, you think, you think that 10, 10, 20 years in the future, global finance is running on Ethereum, we have trillions of dollars, and here, here's the pipeline, here's the structure that actually controls the network. So will there be different actors trying to control this or manipulate this? You know, we need the ability to trade the ability to trade , manage or, uh, manage the risks of this type of instrument, and so we created the ability to trade these instruments.
Now I'll talk a little about how blocks are created. So we actually have multiple blocks here, and blocks are being built every 12 seconds. 12 seconds is super slow, super boring slow, super boring . What's happening now is that deals are being spread across the broader ecosystem. You know, generally speaking, some deals end up in the public meme pool where everyone can see what's there.
Other agreements fall into a specific constructor or another constructor. They just seem to move around like Ethereum. And then slowly, over time, and then, boom, they fit in here. Now what's happening at this point in time from the previous slide to this one is that you actually have these block builders that are reorganizing transactions to maximize the amount of mining, uh, effectively, uh, in a block effectively, uh, in a block . And you compare it almost to a nightclub almost to a nightclub , where it's like: hey, you're pretty, you're pretty, you guys go in first, you guys go in last.
This will take some time. It's very crowded there. But it's something like that . You take, essentially, the most profitable, the best deals and rearrange them in a certain way. And is that fair?
No. Right. Mining? Yes. Uh, and again , you know, we need more certainty.
We need more speed. We don't want people waiting at the front door of this club. We want to let them in right away. So, um, we created these quick and exciting blocks. And this is how it works: whenever transactions appear, they are immediately inserted into the next block.
Okay next block. Okay , they are immediately inserted into the next block, and every 50 milliseconds we actually broadcast the state of the block. So if someone used Unis swap or curve and it moved prices a little bit, then every 50 milliseconds you will get a new price update when that happens. And so , in effect, you can trade multiple times during that 12- during that 12- second interval second interval , not just once. And so, I think I'll get into this a little bit later, but actually later, but actually , when you can trade multiple times in the same slot, then you're going to pay more commissions because potentially you can make more money.
Hmm, you know, validators will earn more will earn more , protocols will earn more will earn more . The entire Ethereum state is richer simply because it is now much more convenient to use in this environment. And that's why we call it pre- confirmation or real-time pre-confirmation. Hmm, now we can subsequence a block in about 50 milliseconds. We can simplify this a bit, but for the most part, it's a pretty good start.
Hmm, and finally start. Hmm, and finally , of course, it brings, you know, much higher speed and much greater confidence in execution. Now, you know, I hinted at this a little bit, but do you know what this means for DeFi? And so, as I said, you know, when you can trade multiple times, we make the process more than a hundred times faster. This does not mean that we have 100 times more deals.
Practically, we have maybe three or four times as many transactions, but when you put it all together, you know, Uniswap LP alone is actually making $2 billion to $3 billion a year. And this is just sex trading between Binance and centralized exchanges, and, so to speak, the platform itself. So we did this research earlier this year. It's, uh, based on empirical data. It is also based on theoretical data, and both of these two indicators coincide indicators coincide .
So, uh, actually , if you did a real-time exchange of UNI to Ethereum alone, LPS would make somewhere between $2 billion and $3 billion. Uh-huh $3 billion. Uh-huh , okay. Secondly, there are fewer of me. There is less production, so currently production is around 250-300 million per year, and that's bad, right?
Uh, should I tell you more about this? Uh, where this leads, as I said before, if you use strategies in the vault, then every time you make a deal, you get an advantage, you get exploited. So if your storage yield is 6%, without me it should be 7%, and that's what we want to create on that side. Um, yeah, just less of me, less of a fairer extraction. Um, extraction.
Um, secondly, it's uh, the risk of an event. And so I define event risk as something that you want to, uh as something that you want to, uh , be able to mitigate, perhaps, large price swings, right? Um, most of the time in financial theory you assume that prices move with some continuous temporal behavior or some kind of diffusion. But in fact, when there is a big price jump or a risk of a breakout, you can't hedge and there's nothing you can do. And so now, with the liquidations, you have this 12-second interval where Binance went down, you know, 10%.
And the price on Uniswap for ETH is still 2000. And so during this period you essentially have a mass liquidation. This creates risk for borrowers. This also poses a risk to the protocol. And, as we saw with kelp and this situation, it creates systemic risks for the entire ecosystem with much faster lock-in times.
You see lock-in times. You see that the price jump is much smaller. So much smaller. So , the price will not jump by 10% in those 50 milliseconds. Maybe it will jump by 2%.
So the bottom line is that the risk of events is significantly reduced. This is good for individual users, it is good for the protocols, and it is good for the system, for the entire ecosystem as a whole. So, um, here's where it happens. Um, finally, there's this initiative that we call the institutional blockchain space, and you would think that a very small portion of the world's finance today is actually on Ethereum. That's how it is, you know, on Wall Street.
Um, with this, um, how should I say, with this framework, we've created the ability to almost whitelist validators, block validators, block assembly, everything from start to finish. Um, I won't go into it, just give it time, um, but basically how it works is that we have, traditionally, anyone can make a transaction on Ethereum. Um, you will have a block assembly built by different designers. These constructors will make, um, me, and you will have a validator, which can be which can be anyone. But on this side of the equation, let's say you're BlackRock, Fidelity, or Franklin Templeton; you want to buy about 10 million of some asset, hmm, onchain.
You don't want to buy an asset for 10 million and be the first. You 'll be more than happy to pay a hundred dollars, $500, whatever, just to not be the first. You are bringing together a whole world of people at TradFi who don't want to be first. Hmm, and there you have to pay an incredible amount of money to prevent this. So currently, within the traditional financial system, intermediaries are paid $10,000 to $15,000 in commissions every 12 seconds.
This is something like a TAM or an upper limit on how much can actually come into Ethereum. So, it's $50 per block right now, but can we get higher-paying players who are eligible to stream in the first place ? So, in this institutional blockchain space, you have a validator at the bottom you have a validator at the bottom , which is, uh, known and has an address. You have a block construction process that is not extractive. It is a "first come, first served" principle.
And then a set of rules about it. Perhaps for these regulated entities you can't touch the Tornado cache. So in this example, imagine Tradfi saying something like, “Hey, now I can join the chain. There is no front running front running . Uh, no one will touch the Tornado cache.
" Uh, this is a validator I know." And so all the controls, the procedures that they are used to in the traditional financial world, they can now apply to Ethereum. You can access all of Ethereum's liquidity. They don't need to create another L2 or, uh, another L1. We had this session yesterday where we basically talked about this, but about 70% of about this, but about 70% of Ethereum validators overall agreed to move forward in a certain direction.
So expect more information from us in the near future on this matter. So where are we now? We have, uh, about 5% of the network, but that will change very quickly. Towards the end of this year, I thought we would have maybe 20-30%, but I think we will have a lot more going through us. And the key point here is that many people are scaling Ethereum; It's like us and a whole bunch of other people, right other people, right ?
The block size increased from 30 million last year to 200 million this year. As we expand, for example, the size of this channel, we can't have MEV and these blockers up front just to prevent people from using the chain, for example, how to [] use the block space that's there. So, uh, yeah, that's where we are today. I'm Kevin, the founder of ETH Gas, and thank you for inviting me.
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