A weekly recap of the most insightful news, analysis, and capital flows in the wild west we call crypto.

Hello and welcome back to the Web3 Rewind! Per usual in this industry, lots has happened this past week. Here's what we have in store for you:

• Pay for gas fees using a Visa card

• EigenLayer restaking

• Akash and decentralized compute

• Coinbase registered FCM

• Slashing validators

The Latest

Centralization dept.

Visa continues its experiments

Last week, Visa announced an experimental solution to allow users to pay for on-chain gas fees using a Visa card. For those who haven’t been following account abstraction too closely, it is something much of the crypto community is working on as part of a push to improve the crypto user experience. In short, it allows assets to be held in smart contracts instead of externally owned accounts. These smart contract wallets open up a world of opportunities such as defining social recovery rules, paying for gas in other tokens, having other people pay for your gas, or sessions keys so you don’t have to sign transactions continuously.

A big headache surrounding crypto is the onboarding experience. Have you ever tried to do something on-chain at a centralized exchange (CEX) before realizing that first, you have to make a CEX account, buy some of the gas token, and then send it to your wallet before you can even start doing anything? Oh, and tough luck if the CEX doesn’t have the gas token you need. Account abstraction resolves all these issues, and Visa, one of the largest financial payments companies in the world has been at the forefront of much of this development.

Without harping too much on the technical details, Visa’s solution uses an entity called a paymaster. This paymaster is a specialized smart contract that can sponsor gas fees. The paymaster service firsts request the transaction fee payment from your visa card, and then once verified, helps to sponsor your on-chain gas fee. This isn’t just all talk; this sequence of events has already been successfully tested on the goerli testnet. As smart contract and account abstraction wallets become the norm, expect to see more exciting developments from financial payment companies as they realize the potential on-chain opportunity within $120B of existing stablecoins and $1T in transfers.

This may not seem like much on paper, but I cannot emphasize how big of an unlock this could potentially be both for users and institutions. Users will likely no longer have to purchase gas tokens through a CEX and go through that cumbersome touchpoint. Visa is also working on solutions that will allow users to pay for gas in tokens such as USDC, instead of the native gas token. And combined with new onramp-offramp platforms that allow users to easily convert USD from their bank account to USDC on the blockchain, new users may think of on-chain wallets as just another Venmo.

On the institutional side, say you’re a company using SAP’s new cross-border payment system that they have been testing. I can guarantee no Fortune 500 company wants to have to make a Binance account and have one employee continuously monitor a wallet for gas and top it up when needed. Visa’s solution would allow them to simply link it up to their company card and voila! Account abstraction and better user experiences (along with building actually useful consumer apps) will be what brings crypto to the masses, and the fact that tradfi companies are driving these efforts is just wonderful to see. — Joseph Cooper, Decential Media

Quick Bits

EigenLayer restaking caps

• EigenLayer, the popular shared security protocol, is raising its liquid staking token (LST) restaking cap. The new cap for a single LST will be ~$200M. There’s currently ~50,000 ETH or $100M sitting in the protocol.

• The funny thing about all these deposits is that the protocol isn’t live yet. So the ETH/LSTs are just sitting there and quite literally doing nothing. Chances are, many of these depositors are trying to get in early, in hopes of an airdrop down the road.

Akash AI

• Akash, a decentralized compute network, has seen its token price jump by 150% since the start of August. It’s no secret that GPUs have been in hot demand as AI tech giants compete to train the best AI models.

• All of this has led to immense pressure on GPU compute power, of which Akash offers at a much lower cost in a decentralized manner. Decentralized networks such as storage and compute remain one of crypto’s most valuable use cases.

Coinbase becomes a registered FCM

• Two years after filing with the National Futures Association, Coinbase has finally gained approval to offer eligible US customers access to crypto futures. The NFA is authorized by the U.S. Commodity Futures Trading Commission as a self-regulatory organization that can approve futures listings.

• That means US users are finally able to get access to leverage. Initial products offered include BTC and ETH futures, and I would watch for positive regulatory developments, especially as Coinbase continues to fight the SEC.

And last but not least

Cosmos slashing drama

In early August, some validators on Neutron, a consumer chain in the Cosmos Hub, double-signed some blocks. This was a result of validators running different node software for their consensus mechanisms. TLDR: the chain halted for a bit as validators struggled to agree on the contents of the next block. In normal circumstances, the validators who double-signed should be immediately slashed, meaning their staked collateral is taken away from them as a punishment. However, in Cosmos, as they are testing a new mechanism called replicated security, they’re still doing things a bit manually. Whether to slash these validators or not has been left to a governance vote, and it has become a hot topic of debate within the Cosmos community.

For one, it didn’t seem like the two validators, Citizen Cosmos, and Pupmos had any ill intentions. In addition, nothing bad happened to the network. No funds were stolen, and it eventually went back online. However, some individuals argue that, even if there was no malicious intention, code is law. Even if you had no intention to mess up, the fact of the matter is that they double-signed a block, and should be penalized accordingly. Intentions cannot be hard-coded into smart contracts, unlike our court system which can discriminate on intent as it sets punishments. This brings up two interesting questions a.) should we be considering an actor’s intent when deciding penalties within a blockchain, and b.) should we be penalizing first, asking questions later, or asking questions first, then penalizing later? We’ve heard the term code is law far too often, and in the case of something as important as providing crypto-economic security for a blockchain, I lean towards penalizing first, ask questions later. — JC

Have you read the definitive history of Ethereum? No? Well then get your copy of Out of the Ether while you can.