How Layer-2s Can Unlock Web3 Gaming

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2:31Hey, everybody. Welcome to Real Vision Crypto Daily Briefing. I'm Ash Bennington. We've got a great show for you today to talk about Ethereum scaling and gaming and lots of other things that are happening right now in the market. I want to introduce our guest, Ellie Ben Sassone, president and co-founder of Starkware. And Chris Lexman, founder and CEO of Unstoppable Games, which Starkware recently invested in and which is powering its upcoming sci-fi game, Influence. Lots to talk about there. Welcome to you both. Thank you. Before we get started, I want to touch on a couple of other things happening in the market right now.

3:07First, let's just talk about it. This is not a crypto-related story. This is a TradFi story we're talking about right now. Spider S &P Regional Banking ETF just getting absolutely hammered on the day, down nearly 7 % on my screen. I just want to go through some of these time horizons so you understand how ugly this is. Five days, trailing five days off 15 % on the regional bank index. Year-to-date off, let's call it 39 % year-to-date. This is a pretty ugly series of events that are happening here. Let's talk about these banks that are getting hammered in this PacWest, PACW, first up. It looks like they're off on my screen now nearly 52 % on the day.

3:52Year to date, they're down, let's call it 86%. These are significant, significant losses in terms of the value of the stock. First Horizon, FHN, Western Alliance, Bancorp, WAO, Metropolitan Bank Holding Corporation, MCB, Zion Bank, ZION, and also all selling off on the day. This is something that looks to be a significant and worsening situation. We're going to keep an eye on, obviously, too soon to call, too soon to make definitive statements. But what we can say is these sell-offs are incredibly steep as we look at them on our screens in terms of what's happening to the common stock. I want to transition here to what's happening right now in the crypto space, of course.

4:31Bitcoin on the day, off 1.86%, up a little bit, let's call it, up around 2%. Seven-day trailing down just about 1%, not really material moves there on the seven-day basis. Ethereum, which we're going to be talking about a great deal on this show, I know, off 1.5 % on the day and, excuse me, up 1.5 % on the day and off about 1 % on the week. It's kind of flat relative to the volatility that we see in the space. Nothing really material happening there. Finally, I wanted to touch on this story before we get started, which is what's happening with SEC. SEC removed the definition of the phrase digital asset from its hedge fund rule.

5:11This broke after hours last night, Coindesk and others reporting on this. The agency added a footnote in its report, and I want to read this quote so you can make of it what you will. Quote, the commission and staff are continuing to consider this term and are not adopting quote digital assets as part of this rule at this time. So make what you will of the footnote. It's certainly an interesting one. lots more to talk about. Guys, welcome to the show. Ellie, welcome back. Chris, welcome for the first time. It's great to have you here. Yeah, wonderful to be here. So we were just knocking this stuff around at the opening.

5:45What are you guys thinking about all this stuff that's happening in the space right now? Obviously, some significant headwinds that we're seeing in the regional and small banking sector here in the United States. What are your thoughts? Well, I mean, certainly not my area of expertise, but I was talking about how my recollection of 2008, it's interesting you pointed out how the banks seem to be failing much more quickly on their own, but it seems somewhat slower moving. There's kind of one that will pop up and then a few weeks later we see another one. And when I'm thinking back to Lehman Brothers and admittedly I was just out of college, so probably less aware of the space, But it feels a little bit different.

6:32And hopefully we're not about to see an acceleration here. But it just feels a little bit different than it did previously. Yeah. Go ahead, please. No, no, please, Ash. No, no, please, all of you. I have a few thoughts on this. First of all, it used to be back in the day, it used to be the case that when the conventional markets got hammered, then crypto got hammered twice or thrice more. and some time ago, I don't know what had happened, but like some time ago, well, we noticed, I don't know if it's a trend or just something temporary like this disconnection where some conventional markets are getting hammered and crypto sort of stays flat or does a little bit better.

7:14That's an interesting trend, which I think means that people are managing to see that they're not the same and there's something different about crypto, which is good. I think we all agree there's something different and probably better, more transparent. The base of trust is more transparent and the way the systems work, more transparent. Another thing I want to say is that, you know, my team, we're spending a lot of time thinking about like, often about like the basics of, you know, what are crypto assets and what does it mean in this whole connection to society and values. And as part of that, It's also about studying how the conventional money works, the dollar, the Fed, and so on.

8:02And they're very different. Banks or institutions given a license by the state to print money out of thin air with the backing and all kinds of regulations by centralized parties, the Fed in the case of the United States. Crypto, of course, works very, very differently. Everything is very transparent and based on trust in a very decentralized set of operators that everyone sees and understands their incentives. Remains to be seen where in the long term society will have more faith in. I think all of us, well, okay, I'll speak for myself. I certainly prefer the crypto way of doing things.

8:47You know, it's so interesting to begin the conversation by talking about this. I think Chris is right. This definitely does feel like we're talking about this a little bit off camera, how it feels almost like watching a car crash video in slow motion. You start to see the brakes lock up and the car slides and it hits the car in front of it. They always seem to have this sort of train wreck car crash in slow motion feel. I mean, I can remember going back to the financial crisis, which Chris just made reference to back in July of 2007. There was an obscure fund run by Bear Stearns called the High Grade Structured Credit Strategies Enhanced Leverage Fund that nobody had heard of that failed sometime in July of 2007.

9:29And then you flash forward to the Lehman bankruptcy, which was Monday, September 15 of 2008. So obviously you have this entire year that passes. They always kind of feel like that. And yet, at the same time, the individual bank runs seem to be accelerating here because of, well, you know, because of this, right? Because we all have our cell phones. And if you want to move money, you can do it very quickly. And it is really interesting because, you know, fractional reserve banking, which many people in crypto are obviously very skeptical about, because it does have these problems that crop up from time to time, whether it's the 1930s, whether it's the SNL crisis, whether it's 2007, 2008, whether it's the current thing that we're seeing right now.

10:08And I want to be careful not to exaggerate how serious this is because we just don't yet know. But at the same time, fractional reserve banking, on the flip side of that very coin, built the post-war economy that we saw here in the United States and Western Europe and other places in the developed world that obviously was incredibly beneficial in terms of aggregate economic output, in terms of the standard of living that we saw rising broadly across the board. So it is always this very sort of complex and nuanced mixed bag that we see. In terms of this one, you know, we're just going to have to wait and see.

10:41Right. I think it was when when J.P. Morgan bought the assets from First Republic, there was a quote going around that I saw in a lot of headlines where Jamie Dimon, who's one of the smartest bankers, whatever you think of his views of crypto, he's probably the smartest banker of his generation. There was a quote that I saw a poll quoted in a series of headlines. And it was, you know, Jamie Dimon says crisis, quote, over, close quote. And if you read the actual Jamie Dimon quote, what he said was, this phase of the crisis was over. Again, Jamie Dimon is a very sharp guy, and that's a statement you just can't be wrong on.

11:14You could say on December 8th or 9th, 1941, this phase of the crisis is over. Obviously, there's more to come, but this phase is over. So we're going to have to wait and see, and it's something that we're going to watch very closely here on Real Vision Crypto Daily Briefing and on some of our other shows. But on to the broader questions here that we're thinking about and talking about that I know that you guys spend a lot of time on. Where are we right now, Eli, in terms of the scaling solution process post-Shapella on the Ethereum front? So I think Ethereum keeps delivering on its promises and on its timelines, which is really great and very much needed because we need so much more scale.

11:56And the next big thing, I think, is EAP 4844, which is going to dramatically reduce prices of data for a lot of, basically for all L2s in roll-up mode. So it's a very important update. I think I heard rumors it's scheduled for Q3. This is proto-dank sharding is how it's popularly known. But Ellie, let me ask you this before we get too far into the details that I want you to explain for folks who may not know what you mean when you say we need more scale. Where are we with this? What are the challenges that individuals face, particularly people who are passionate about Ethereum but are still very new to the ecosystem and are struggling to figure out what all these terms mean?

12:43okay so it's a terrific question and let me try to break it down there there are two things i think of ethereum like this really really uh trusted like everyone trusts it computer it's a really great computer you know um it has a lot of integrity in its operation but um it has like two problems in terms of scale one is its storage like just how much disk space does it have uh it has very little and like every cell of it is is is very precious and costly and the second is how fast does it run you know if you're familiar with computers uh the old machines ran at whatever one kilohertz or 1000 clock cycles per second now we're five to five gigahertz five billion so you ethereum as as a computer has this uh uh very slow clock speed or you know slowish so it two problems the disk space and the clock speed however we all love ethereum because it is this extremely important computer that we all rely on for various social functions such as financial transactions and defiant gaming so we really love it and people put immense value in you know data that is written on this computer so um layer twos and rollups uh in particular validity rollups are there to help with the CPU clock speed, basically being something a little bit like a coprocessor or something that just speeds up computation on this slow but loved computer.

14:21But that doesn't deal with the disk space. And EAP4844, known as blobs or protodine sharding, is like adding an auxiliary, cheaper, higher capacity disk to Ethereum. yeah very well said i think it's important to use those metaphors because it gets very abstract essentially what you're saying is it's like disk space and having a slow computer and we're trying to solve those two problems people in the community are trying to solve those two problems and that's really the basis of what we're talking about here and of course this is all in the wake of the chapella upgrade which we must say i went extremely well and the time horizons have been met very clearly and the actual specifications that we're trying to meet the ethereum community the Ethereum developer community, I should say, trying to meet were met.

15:09We've got these challenges, these solutions that are attempting to be implemented in the Ethereum space. How does this open up the world for gaming?

15:20So Chris, who leads Unstoppable Games, is at the forefront of the applications that are going to make this revolution in the way games are run on blockchains. So if you think, again, you have this very slow computer, but very loud, which is Ethereum, and you want to put on some really cool games on it. So you're going to need to put them on something that is able to compute a little bit faster. And that's where validity rollups come in. In particular, we're very happy that Unstoppable Games is deploying on StarkNet, which I'm biased, but I think it's really the best validity rollup. And basically, one of the first use cases for this faster coprocessor for Ethereum is going to be games.

16:09And that's really important. And we'll see some novel use cases and extensions of what Ethereum can offer. All right, Chris, with all that said, tell us a little bit about what you're doing on Unstoppable Games. Why are you so passionate about the gaming space? And why do you think the time is right to do this on the Ethereum network? Great questions. So why am I passionate? First of all, I'm a lifelong gamer. I've enjoyed a number of games in my life. They've made significant impacts in my life. I've joined communities, which I have long lasting friendships that have evolved from those communities.

16:47and in the end I had been kicking around this idea for quite a long time about how we could build games that would ultimately be taken over by the community that the community could run that they could govern and honestly that the developer the original developer couldn't shut off because I think that in the gaming space anybody who has played games and especially when it comes to massively multiplayer games which Influence is community is so important. The community drives so much of the value in the game for each other that when the game disappears, the community effectively ceases to be. And oftentimes that occurs without any intention for that community to sort of dissolve itself.

17:34It just happens because the developer doesn't want to support the game anymore. And I think that's a source of frustration for a lot of gamers. And there's this similar sort of vein that you may be familiar with that you as a gamer can own your assets on blockchain. And I think it's a pretty similar thread there. It gives you as a player of a game, as a player of influence, faith that it can be around indefinitely, which is, I think, a pretty exciting concept. And for us, it's what's driven us. And I think this is an important distinction. It's what's driven us to build games fully on-chain. And so what that means is that all of the game logic settles on-chain.

18:18So anything that you do, and influence for a little bit of background, influence is set in space. It tells the story of a group of humans that led Earth in the future and are trying to survive in this distant asteroid belt. You know, they couldn't find any habitable planets to settle on and so are trying to do what they can to survive on this fairly hostile asteroid belt. And it's a very, again, it's very rooted in realism. And so we have a lot of travel mechanics that are based on realistic orbits. And all of this, including the procedural generation that takes place to build the world itself, it all happens and can be verified on chain.

19:00And in this case, on CirqNet. And I think that it's something that is impossible for us to have done on L1. It just isn't feasible. Like Ellie said, the computer is too slow and it doesn't have enough storage space to manage that much logic and that much data. So it was pretty clear that we needed to move to a scaling solution. I think StartNet, for a lot of reasons, was the best choice for us. And so the great thing is that all of these like heavy computations, verifying that a spacecraft can get from asteroid A to asteroid B in the time allotted with the propellant that they have on board, all of that now is happening on chain.

19:42And so it really drove the need for us to identify the right scaling solution. And that was ultimately StarkNet for us. that's really interesting and it was a much more philosophical answer that you gave and i was expecting this notion that people essentially are going to own the game themselves the community the gamers will own it but let me just see if i understand this correctly because i'm watching some video that we're showing now about the game and the graphics are absolutely gorgeous this is it seems at least clearly too large for all of these the graphics processing to take place on-chain.

20:16So what does settle on-chain and what doesn't? Yeah, that's a great question. So you're right. The client itself, what you see, the immersive piece of the game, the 3D elements, that's not on-chain. But it does all interact with state that occurs on-chain. So anytime you do something, whether you're mining for iron or you're moving between asteroids or you're you're recruiting a new crewmate for your crew, all of that is going to be stored up in chain. And one thing that I think is really exciting about that, and I think that bolsters the case that we can build these unstoppable games, is that our client, while it's obviously a point of pride for us and we put a lot of work into making this really exciting, immersive experience, it's actually not all that special.

21:10Because anybody could build a client for influence. They could go interact with the exact same smart contracts, read the same data from StartNet, and build a client that could interact with the influence world in exactly the same way that ours does. It might look very different, but they could do the exact same thing. And I think that there's a lot of power in that because not only does it empower the community to build tooling, to build alternative clients, maybe more accessible clients, but it also means that the game can live for as long as there's a community willing to support it, which I think is really exciting.

21:47And I think that is up and including firing us if we are no longer well aligned with the community. And I think that's yet another point that keeps us just really well aligned with our community and should result in a really strong, long-term success of the game. That's fascinating. Really fascinating. Obviously, if you don't like the game studio who makes your favorite game today, you can't fire them. They're in control. I mean, it's just such an interesting concept to see how that evolves. Ellie, let me ask you this. Chris has talked about the front end of the gaming experience. Talk a little bit about the back end.

22:29How does Starkware ultimately power this? What is the sort of the speed requirements? And how comfortable are you that you guys are able to get there with your solution? So I want to, again, just compliment Unstoppable Games and Chris and, like, really trailblazers, you know, leading the path on using more and doing more and deploying more with real use case on blockchains. And it's a really substantial thing. before talking about like scaling on StarkNet really blockchains at their core these are technologies that are meant for social activities for social functions for things that require broad social consensus and games are a form of social interaction and that's the way we practice and establish all kinds of things in the social domain so it's really really important to deploy games and build them and interact and create value and do things that are what make us human.

23:36Now, in terms of like on the back side of like or in the back end of what's going on is that, you know, we mentioned this computer that we all love, but it's somewhat slow, which is Ethereum. And now you want to add something that significantly boosts its speed. And the question is, what is the best way to craft this, you know, co-processor or mechanism that will speed up things? And, you know, Starker has been founded five years ago. The math on which it's based has been developed, you know, for more than 30 years. And we took a very, we take a very, we pride ourselves in taking a very long-term view on technology and the arc of technology.

24:17So, for instance, we defined a totally new virtual machine that is very ergonomic and efficient to program in and also leads to safe code, but most importantly, generates extremely efficient Stark validity proofs, much, much better than you can get for any other infrastructure. And this is, again, part of taking this very long view and part of our experience with the StarkX systems that have been scaling Ethereum the most over the past two years. so in the back end there's this very high throughput settlement engine which is Starknet written in Cairo which in a very short time when version 12 comes around in a month or so will deploy significantly high TPS like really groundbreaking throughput in computation and throughput will only increase and this will be put to use by by chris and others who are going to utilize it for things that you just can't do on any blockchain today chris how far are we away from this game actually being playable by users so our our goal is to launch this summer um and it's it's realistic um i will say you mentioned proto-dink charting and i think generally um the concept of off-chain data availability, which if anybody listening or watching is unfamiliar with, is this idea that not necessarily all of the data that is created and stored as state on L2s necessarily needs to be on L1.

26:04There are some pieces of data that are maybe less valuable that you can still verify, that are still valid, it's still 100 % secure, but they don't necessarily need to live on the expensive L1 Ethereum storage space. There's a lot of work ongoing there. We talked about Q3. There's likewise a lot of work going from Starkware and Starknet with introducing off-chain data availability in the near future. And we are debating at the moment effectively launching around the same time that is available because it is incredibly important for the gaming space because it does so drastically reduce the cost.

26:50You know, I think at this point, something like 95 % of the cost of an L2 transaction comes from the fact that you're storing data and call data on L1. And so you can imagine taking these transactions that are already substantially cheaper than they are on L1 and making them another 20 times cheaper now we're at the point where the fees that our players would spend playing our game become almost insignificant. They're not noticeable. And then we can really start to attack the traditional gaming market. So we're really aiming to launch right around that time so that we can really push into a much larger audience that has up to this point not really been exposed or is downright hostile towards blockchain in general.

27:44Chris, quick question. Is that video that we saw actual real-time gameplay or those interstitial chapters? you'll see some gameplay in there and some trailer but certainly if you want to see more gameplay we have several videos up which I'm happy to share and also we have had two already successful public tests on StarkNet and we'll have another during the summer our final look test so if anybody's interested in playing you'll be able to get a full look at the entire scope of the game before jumping in with the main net game. Well, the technology looks super cool. Not investment advice. No comment on the tokens, but really looks cool.

28:30It just looks like an interesting thing. I wanted to wrap up by asking you guys each a final question about the role that you see games playing in crypto adoption more broadly. One of the things about the gaming ecosystem where it's always been incredibly strong is just how elegant and simple and easy the ui ux is which has been just a tremendous problem uh in crypto folks don't want to look at command lines they want to see something like they see on their ps5 i'm curious what you guys each think gaming can do for the broader crypto slash digital asset slash web3 ecosystem first to you ali um several years ago already i said that uh and i still believe this like if i had to uh predict what will be the next big thing that that crypto or the next big real use case that the crypto delivers on if i had to predict i would go with with gaming and the reason is that gamers uh by and large a lot of them are already online and they are very comfortable with associating value to things that are digital and scarce just through the game so they understand um the meaning of ownership of digital values and the importance of integrity um meaning you know that the right thing is being done um fairness transparency um in the context of the game so i think that well you know i my twiddle my twitter handle is StarkMaxi.

30:02I'm extremely optimistic and long on Starks and validity rollups and also on Ethereum and blockchains. I think it's a much better way for conducting social functions. And part of these social functions are gameplay. So I believe it's the next big area for entrance for crypto. StarkMaxi. Chris, we started with Ellie. Let's give you the last word. Final thoughts on how you see gaming having a role in adoption in crypto. Yeah, I think, I mean, to back up, I agree. I think that, you know, if we'll see a billion people in crypto, by and large, they're going to be coming from the gaming space. I mean, it is a huge space as it is.