E121: Arbitrum Creator: Ethereum’s Future is Brighter than Ever

25:19And that was the motivation that I came to the field of MPC. So with Bitcoin, at the time, Ethereum as well, the ECDSA was the signature algorithm that's used. So there's a particular type of cryptographic signature called ECDSA. And that's what was used to sign things. And the question was, how do we build a protocol that allows you to split these ECDSA keys and sign with them in a way that's cryptographically secure. And to me, it was like an obvious problem. And fast forward to today, like, again, solutions exist and everyone institutionally is using them. But back then, no one was really looking at this.

25:57And I looked at the literature because that's what you do as a researcher. The first thing you do is try to see who has touched this in literature. And no one had touched this problem in a decade. But there was one paper from a decade earlier that had done some early work on this. It was a little more than a decade, actually. So this is a 2001 paper, I think. And this was 2013 when I was looking at this. And really, no one had touched it in the interim or barely anyone. And maybe one or two papers. And I saw, hey, there was this another story how things come together very nicely. I looked. Whose paper is this?

26:29It's this guy named Rosario Gennaro. So who is Rosario? I'm like, oh, I know Rosario because when I was at Columbia last year, Rosario actually was sitting in my class on homomorphic encryption. He was a professor at CUNY, but he came to this class as well. He sat in on this class. So I went over to Rosario's office. I emailed him. I went over to his office and said, hey, I want to solve this problem. And Rosario was like, all right, I worked on this like a decade plus ago, but let's do this. And together, we built some of the core protocols that, again, are used today to secure probably hundreds of billions plus of digital assets.

27:09And again, it's super fortunate to me that I had the random opportunity to meet Rosario. Not random, but really seemed random at the time to meet Rosario a year earlier. And just to make that story even more fun, fast forward to today, Rosario actually is a member of our research team at Offchain Labs as well. I have another fun fact to add to that related to the MPC technology. Before this podcast started to become more serious, about two years ago, where I decided that every week I would have a big person of the industry in studio and we'll have a conversation like that. I was doing during COVID like here and there, some AMAs, like online podcasts, right?

27:49Some meetings. And one of the guys I had on was Alex Mashinsky from Celsius. and he was big into saying we're using this MPC technology to secure your crypto assets blah blah blah blah and he was using that probably as a buzzword to tell people hey the assets are safe etc and it was the first time I basically came across this term right what does that mean concretely when a business like Celsius or let's say Fireblocks which still exists today sure what does that mean concretely when they're using this to secure your crypto assets for a normal person? Yeah. So the nice thing is a company like Fireblocks is they can actually say you're a user and...

28:35Just Fireblocks is a... What is Fireblocks? So Fireblocks is one of the largest... It provides institutional custody solutions via multi-party computation. And what they do is they have a platform where you can store your assets securely and you can transact on chain or sending assets to people, all different digital assets across different blockchains. And they do it in a way that they don't write. So the problem is you say, well, let's say your custodian is hacked. What you don't want is all the funds to be able to be stolen or somehow lost. And you say, okay, so maybe I'll write. So that's the problem.

29:17So you can use a custodian like an exchange, But then, you know, there have been so many different exit scams or rug pulls over the years. You know, I personally, when I first bought ETH on this foreign exchange, it was an eventually exit scam that I lost all my assets that were on that. So I personally, you know, dealt with this back in 2015 or so. I actually had three days after the Bybit hack. I had Ben from Bybit in the studio in Singapore. Oh, wow. Just a few weeks ago. And so, I mean, it's not exactly the same because they're legit business, but like this still happens even today, right?

29:53Right. Yeah. It's not always that sometimes it's an exchange that's not scrupulous and exits. Sometimes it's a really, you know, good people that they're susceptible to hack. The idea is, you know, if there's a single key that sits somewhere, here are your two options. Someone else is holding the key for you or you're holding the key yourself. Both of those aren't fantastic options for many people, right? If someone else holds the key for you, they're susceptible to loss or hack. If you're holding the key yourself, you're susceptible to loss or hack. And for many users, by the way, forget about institutions for a second, for retail users, they don't understand this, right?

30:22A retail user has their key and then they lose it. And they expect there to be this like reset password button. It's like, all right, I lost my password. I go and I press the button. But like, no, no, no, no, no. This is your cryptographic key. This is your Bitcoin. And if you lose this, nobody can reset your password, right? No one has it. And there's like, so the question is, how do you actually build those experiences for people? And the answer is you share the responsibility. The simplest one is among the custodian and the user, right? So the custodian holds one share and the user holds one share.

30:50And together, they can spend the money. Now, if the custodian is hacked, they can't do it by themselves. If the user is hacked, they can't do it by themselves. So now you need to simultaneously, you know, hack two people. You can do this with more people. You can do this with 10 people. You can do this with, you know, five different devices. And you have some threshold that in order to actually steal funds, you need to now bypass the security simultaneously of different devices or different people in the space. And that's the beauty of what MPC technology can bring to custody. What happens if the user loses his part of the keys?

31:22So typically there will be, and this really depends more on the product, exact product of the different custodians. I don't want to speak for any specific product, but typically you'll have redundancy. So it's not going to be like two out of two. It will be two out of three or three out of five and some configuration. and there are these backup shares that sit somewhere. Sometimes those shares themselves sit encrypted. So maybe I'll give it to the custody provider, but I'll hold the encryption key so in a way that we can only together jointly access it. But typically you'll want some sort of redundancy or resilience to those sort of hacks, right?

31:54So yeah, if you have like a two out of two, you have a problem because if one's lost, like if one's lost, no one can access these funds. So typically you'll have redundancy, you know, built into any such scheme. You mentioned before you co-authored a book in 2016, demonstrating your deep understanding of blockchain technology. The book is called Bitcoin and Cryptocurrency Technologies. In a nutshell, probably was a very technical book, my guess would be, because I came into crypto in late 2018, early 19, and the books I was reading for normal people was Bitcoin Standard and the Internet of Money, which was absolutely...

32:33And then you had Mastering Bitcoin, Mastering Ethereum, which was more technical, right? So my guess is your book was more technical. In a nutshell, for someone as simple as me, normal, who is not technical, first, why did you write a book? So this came together, actually started off as a lecture series at Princeton with Ed and my advisor was Arvind and some others at Princeton. that were at Princeton that were doing this lecture series, Coursera lecture series. I actually wasn't a lecturer there. I was helping out. And then they said, hey, you know, it was successful. Why don't we turn this into a textbook?

33:13Right. So the idea is there were different books were in here, but there was no computer science textbook that started from the fundamentals and did a rigorous treatment of, you know, Bitcoin and cryptocurrency technologies, as you'd expect, you know, in a, say, graduate or advanced undergraduate course on these topics. There just simply was no textbook. So that's what motivated us to take take this course material, take the research that was done for that and turn it into a textbook format. And that's what we did. And it turned out that it was very well received because there were at that point, I think it was published in 2016.

33:44There were so, so many different universities that were starting to do courses at the time and needed good materials. And this book sort of just took off. Even to date, it's used in hundreds of university courses, translated into, I think, five or six languages. And I don't think there's actually any competitor to date. We're keeping being pressured to write a V2 of the book. So hopefully that will happen at some point, because it was written in 2016. A thing or two has happened since then. But actually, it went back to the core fundamentals. So you'd be surprised, but a lot of it is still just very relevant today.

34:17A lot of what hasn't changed, the core ideas of consensus and smart contracts, a lot of these things are actually still very, very relevant today. And the book is really widely used today. And I still don't think that there is any competitor when it comes to just a general computer science textbook for cryptocurrencies. So that was the motivation really to build the educational materials necessary to turn this into a rigorous subject that could be studied at the university level, which is a prerequisite for many to actually get into the space and start contributing at the sort of more graduate, advanced research level.

34:52You discovered crypto through cryptography and then Bitcoin. What do you think about Bitcoin? I'm a big fan of Bitcoin. I don't spend much day-to-day time today on Bitcoin. A lot of my early work was on Bitcoin specifically. All the ECDSA, MPC work was initially focused on Bitcoin. That was all that was there. I had some early papers on escrow protocols and other things that were exclusively targeted to Bitcoin. But I became a big believer in Ethereum and smart contracts as, you know, I'll tell you this. I found that a lot of the research I was doing at some point, like on Bitcoin, like these escrow protocols, for example, which is how do you like you hold money in escrow in a secure way so we can you pay me and I only release it if someone else agrees.

35:45This was like one of the early protocols that I did. And I felt that a lot of these protocols just became easy on Ethereum. Right. A lot of the things I was doing were that I was interested in was these protocols on top of Bitcoin. and I felt myself writing papers that were, well, if we constrain ourselves to Bitcoin scripting language, how do we do this? But if you just had Ethereum scripting language, it became easy. And that became less interesting to me because the problems that I was interested in sounded more artificial. It's like, okay, why are we constraining ourselves? We have this other platform, let's use that.

36:17And that's where I began to focus more on Ethereum and said, okay, what can we build on Ethereum? And how can we push the limits there and do research there? And how can we extend Ethereum in really interesting ways? And that's where I became personally interested in smart contract from a research and development perspective. But, you know, my first introduction to, you know, blockchains was through Bitcoin. And I still am a strong believer in Bitcoin, the asset, Bitcoin, the technology, Bitcoin, the community. I'm not a maxi in the way that I'm like, only Ethereum, only Arbitrum. I don't have any respect for Bitcoin.

36:48Absolutely not. I have a ton of respect for Bitcoin. Bitcoin, I think it has a very, very important place in the future of the present and future of the industry. What is Ethereum if you had to explain it to a child? It's a computer that we all share, right? It's a computer. So maybe a child will want to play a game on the computer and say a simple game like chess or checkers. And, you know, today you can go and play chess or checkers with the computer. But now you want to add play with two players. And now you also want to add money to that at a bet. So whoever wins, maybe the child shouldn't be betting, but that's up to their parents.

37:28But for this example, you have some bet on this game. And what you have is you have a computer that follows some set of rules. And it can also hold money. So the computer can say, hey, enforce the rules of chess. We both submit transactions, which are just moves. I move, you move, I move, you move. But at the end, the computer says, okay, this is the result. Alice won this game, and let's pay out the funds to Alice, and the computer holds that. The problem today, or back then, let's say, before these platforms existed, is you can go ahead and do these things online, but you're basically trusting some centralized provider to both enforce the rules correctly and hold your assets.

38:14So you can go to some chess site and you each put down some money and you play. But they could also just say, hey, we're just pretending that Alice won, even though Bob won. There's nothing that's actually decentralized, trustlessly enforcing the rules. And by the way, they can also just say, thanks for the money. We're not really running this game. Goodbye, we're paying nobody. And so what Ethereum is, is a computer that we can all agree on. It's transparent. We all see it's doing what it's doing. We know that it's running correctly. and whatever rules you encode are the rules that it's going to follow.

38:45So yeah, you could encode the wrong rules for chess and that's what's going to be followed. But if you and I look at the contract and, okay, that's chess, that's the game of chess, and you'll know that Ethereum will follow those rules and that's the trustless guarantee that it provides. And by the way, just to extend this analogy, the problem with Ethereum, the problem that Arbitrum addresses is it's a computer, but the capacity of this computer is about the size the same as my laptop. And if you want to do a computer that's going to facilitate the world's transactions, you need more than the power of my laptop, my single laptop for like the global computing.

39:23That's the problem that this has. And how do you then scale beyond that and get more capacity than just your laptop? That's the hard problem that Arbitrum solves. We'll get there. Yes. What does Ethereum success look like to you? Great question. I think Ethereum, there are many different aspects to this. I think Ethereum is actually a very good place in many ways. One definition of success I think we're hitting today is broad diversity and experimentation. The fact that there are so many different teams building on Ethereum independently for so many different reasons. The Ethereum Foundation doesn't pay me to build on Ethereum.

40:09It doesn't pay us to build Arbitrum. It doesn't pay us to build Prism, the leading consensus client. It's an open ecosystem where others have figured out business models and reasons to build independently of someone centrally paying them. That is resilience. That is success. And that is innovation and experimentation. right if you look back five years ethereum and the you know what we believe the scaling technologies everything we thought about ethereum has changed and evolved in five years if you look forward in five years i think our understanding of smart contracts and blockchains and cryptocurrencies is going to change equally drastically again i have no reason to think not maybe even more because so many smart people are entering the space you know at an accelerating rate and the fact that that innovation and diversity is happening on ethereum i think is so important and is what It tells me that Ethereum is future-proof and Ethereum is going to be the beacon of innovation and where the new technology emerges from.

41:00That being said, I think a second metric of success is definitely broad retail branding and understanding and appreciation of what Ethereum is. I think that's a place where maybe we can do some more work because a lot of the core Ethereum people and perhaps myself included are a bit nerdy and like really like to, you know, do the deep dive tech research aspects of it and get into rooms and come out with these like awesome protocol updates and diagrams and descriptions. but we also need to explain to the world in layman's terms of, hey, yeah, Ethereum is all that, but Ethereum is also just the blockchain, you know, where you can build your decentralized application, the blockchain where you can build, you know, DeFi, the blockchain where you can build, you know, NFTs, where you see tokenization of real world assets and really just speak more to that retail language and also focus on the needs of these people and not just, you know, and say, okay, how do we hold your hand and onboard people to this chain?

42:04And that's something which we're trying to do with Arbitrum. One of the things that Arbitrum does is actually make Ethereum more accessible from a fee perspective, from a speed perspective. We're working now from an onboarding and interoperability perspective. And there's a lot that we can offer there. But ultimately, I think we need to not just assume, hey, we're going to build great technology and everyone's going to come. We need to actually make that case very, very proactively. And, hey, you should build on Ethereum. You should be building on Ethereum. It is the leading platform for decentralized applications and make sure that it has the branding to back that up.

42:37Absolutely. That's also one of the reasons I, I mean, I'm not focused on one specific ecosystem, but there's a big problem in crypto in general. It's a very nerdy industry. People don't understand it. It's very intimidating. how do you make all this more accessible to the normal people who don't even understand it by talking to the founders, but in a normal way, like understanding the person. Hey, look, behind each of these protocols or applications that seem and that are complicated, there is a human being with a soul and who is a normal person, right? I mean, relatively. Relatively. Relatively.

43:17I had Gavin Wood on this podcast. Okay. Another nerd. Another genius. The creator of the EVM and Solidity Language. And actually, you know, what does Ethereum success look like to you? Or what does Paul Katos look like? I basically asked him, right? What? And I asked him, what's the best thing that came out of Ethereum? You mentioned CryptoKitties before. And that was his answer. It was like, CryptoKitties, maybe? That seems like someone who hasn't paid much attention to Ethereum in a few years. Then he said that Ethereum created the most millionaires out of any project out there. What's your reaction to this?

43:57I don't know if that's true or not. It's definitely an interesting statement. But I do think actually that, you know, to be honest, like, communities are built around a lot of things. And one of them is like, you know, if there are a lot of people that are heavily invested in the community and that could be financially and that could be, hey, I, you know, they held a lot of ETH early. They believe that it did well for them. That does help to build community. There is no question about that. And I don't think that's something we need to shy away from. It's just it's just facts. It's just facts of life, how people work.

44:28So I do think that many successful communities have, or most successful communities, have a large set of people that are heavily invested in them and have done very well via that investment. You mentioned before, 2017, you go back to your previous PhD colleagues and advisor to build a business called Offchain Labs. What made you decide to take the leap and go all in crypto with the business? so actually the truth is we didn't go all in right right away so it was 2018 and we said all right let's let's build a business it was like the august of 2018 that's when the paper was published that's when i was graduating we're like let's actually commercialize this and and build a business but it actually started off as like a part-time thing that we were only doing you know in our free extra time so i actually went off to do a postdoc at cornell tech that year ed was still a professor at Princeton.

45:26Harry was still a student at Princeton. And actually, you know, we could talk more about my work at Cornell Tech, but that was a fantastic opportunity for me as well, working with Ari Jules there, who's a professor at Cornell Tech, but also the research, head of research at Chainlink. And that's how I got to know Sergey at the time. And a lot of it, if you look at the early, by the way, Arbortum community, it was all the Chainlink community. So there's definitely a lot of interesting things to discuss there, but also actually at Cornell Tech, one paper that I'm very proud of there, I had the opportunity to work with Ari and Phil Dayan, and we wrote the Flash Boys paper, right?

46:05So they have a company, FlashBots. We wrote the paper called Flash Boys 2.0, which was the paper that defined the word MEV, or minor extractable value, that's become a very, very important topic today. So that's a long way of saying, actually. So initially, it started off as something that was like, Like, you know, all right, we're going to kind of launch a company and, you know, do this. But no one was ready to really commit. At some point, you know, several months later, maybe six to eight months later, we said, you know what? We should really do this. Let's actually raise funds for this company and go into this full time.

46:40And so I we did that. I ended up, you know, leaving my full time role at Cornell Tech and ended up actually leaving Princeton. He was eligible to get emeritus status at Princeton at that time. So that's what he did. He left Princeton. And Harry also left and went full-time into off-chain labs. So it was really the, we realized that like at some point, like, you know, we either got to do it. And that's actually probably one of the biggest pieces of advice to give to someone. You can't do like five things at once. At that time, you know, we all had our day jobs and we weren't really focusing on this really very much at all.

47:14So we said we have to go all in. We have to go all in. It means you have to raise funds. We raised funds. We left our other commitments. And we said, okay, we're going all in on this. There are some people, by the way, that can successfully do many, many things at once. But for most of us that aren't Elon Musk, it's very, very difficult. And you have to really, I think, focus on doing something and doing it right. Absolutely. I had Yano from BlockWorks, sure, eight or nine months ago, same seat as you. And he said that what made the whole difference for BlockWorks is when they said, now we just ditch our investment banking job and we just go all in Lockworks.

47:50Otherwise, it would not have been possible to do something of that size. Yeah, and it's very scary at the time to make that decision. We were fortunate to have enough academic pedigree that it wasn't hard to raise that first round of funding. So it wasn't obvious that success was going to be like what success meant, but we had not too much difficulty raising a seed round. But it's very, very scary. You look at the opportunity cost at the time, you have other opportunities in academia and tech and to go all in on this loony idea that other people didn't believe at the time. When we raised funds back then, people didn't believe in it necessarily many didn't 2018 is the bear market right 2018 2019 so yes and nothing was really happening on ethereum yet yes and i remember so well i'll tell you two things coming into these investor conversations uh two reactions that were just like pervasive among our conversations number one is i don't think scaling is a problem right like because like you said there wasn't that much going on in ethereum at the time i basically i remember particularly one investor saying if i I had a list of all the problems with Ethereum.

49:07Scaling wouldn't make the top 10. That's what this investor said to me. Now, ironically, these things change so quickly. So you fast forward to two years later, and all these people come knocking your door and say, hey, have you guys built your thing yet? It's like, oh, the thing that you didn't want to fund because you thought it was important? These things take time. But that was a reaction we got. A lot of people just didn't appreciate scaling as a problem. Clearly, that was not a correct take. And the second one, and this is actually a really interesting one, is often in time, people think they know, like, they don't know, everyone knows they don't know everything, the details, but people think they know the shape of everything.

49:41What I mean by this is, so Arbitrum is, you know, a class of technology we call today a roll-up. Okay, that's the type of blockchain that it is, a layer two blockchain, we call it a roll-up. At the time, though, the idea of a layer two blockchain or a roll-up, you know, this terminology didn't exist. There were two other dominant paths at the time that people believed would be used to scale Ethereum. One of them was called state channels. And this was like a generalization of like the channels, payment channels we see in Ethereum, like the Lightning Network. And the other one was called Plasma.

50:14And this was one, you know, Vitalik had a paper on Plasma at the time. and I remember getting into these investor meetings and they would say, is it state channels or is it plasma? And I would say, ah, it's arbitrum. It's this other thing. And I didn't have a term, like a general term. It's arbitrum. It's kind of, it's neither. And the answer was like, no, no, no, no, no. Ethereum will scale via state channels and plasma and you need to fit into one of those buckets. And we resisted it, but actually we also gave in a little bit. So that year, I went to the Cornell boot camp in Ithaca. This is actually the first time I met Vitalik, I believe, in person.

50:54He was there. And I remember giving a talk on Arbitrum. And I basically said, I'm going to reframe Arbitrum and the terminology that people know. And the name of the talk was Arbitrum, Advanced State Channels. Right? So I took the state channel, like, lingo and terminology and tried to fit Arbitrum into that. And I remember approaching Vitalik and saying, I'd like to tell you about Arbitrum, a really advanced state channel project. And I wasn't trying to, you know, be disingenuous at the time. I was trying to say, OK, I kind of like buying it this little bit. Like it feels like everyone says it has to be state channels.

51:27Let me see how I can like, you know, describe this using state channel terminology in a way that, you know, talks that language. But I think actually, you know, and actually it was at this. I'll tell you one more story. is at that same conference at Cornell that my friend Nicola Greco, he was at Filecoin, had research at Protocol Labs for a long time. He said to me and said, hey, there's all this talk about like ZK roll-ups at the time. It was like very early talk about roll-ups were becoming a term. I think you should like call Arbitrum a roll-up. And I remember saying, I don't think so, Nicola.

52:03Like, I don't think so. And clearly he was onto something, you know, very early. And And a few months later, we actually did come around to that, not only us, but just as an industry. But the general lesson here that I learned, which I think is the most important, is everyone always thinks that they know the shape of what the future will look like. And we really, really don't. And if you have an idea and you're going against that, don't be too discouraged. In fact, the best ideas will be the ones that challenge the status quo and come from outside the box and really expand the box. That's what we were able to do.

52:34and even today, you know, when I have these conversations so many times, people say, okay, fine, but like, you know, the Ethereum virtual machine, the EVM, we know exactly what it will be today. There's no need for any more experimentation, right? I mentioned before, Ethereum has so much experimentation. I think that's fantastic because I think the same way five years ago, we were talking about plasma and state channels and five years from today are going to evolve what we're talking about. But there are those that somehow think that, yeah, history was history, but like, we're at maturity today.

53:01We don't need to like, you know, think about this today. We're ready to just go all in, But I think, no, we actually need that experimentation. We need that innovation because don't fool yourselves, right? You know, the world is constantly changing. Technology is always evolving. And don't be afraid to challenge a status quo of what the best ideas are. You know, those who think they know everything today probably have the best idea given what they know. But, you know, someone smart person is going to come with some other idea that can easily shake up an entire industry. I think Mark Twain says something like, it's not what you don't know that kills you.

53:36It's what you know for sure that ain't so. Exactly. Yes. Very, very well said. See, I had to go five minutes to say what Mark said succinctly. 15 minutes, not five. There you go. Thank you. You mentioned roll-ups, right? We're not going to go that much into like, for me, just for me, and I've been in crypto for seven, eight years, just thinking about hearing roll-ups, all that stuff. I'm like, oh, and probably if I think like that, probably 99.9 % of the people on this planet think like that, right? But you mentioned this thing called layer two. Yeah. What is a layer two if you had to explain it to your mom?

54:11A layer two is a blockchain that sits on top of another blockchain. And what that means is, and actually, you know, it's, as the name layer suggests, it's really a very common way to build protocols. If you look at the internet, the OSI diagram, there are seven layers of the network stack. And the idea is that you sort of separate different functionality from each other and you build them in layers. So we have layer one, which is the consensus of Ethereum. And now we have layer twos, which are like Arbitrum, which are blockchains that utilize that consensus, but can also now do other things, specialize in certain ways.

54:52And I'll give you an example of why this is really important. And so I mentioned we built Prism. Prism was very instrumental in, the Prism team was very instrumental in doing the merge. So Ethereum's move from proof of work to proof of stake. The same day that Ethereum moved from proof of work to proof of stake, Arbitrum also did. But you know what? Arbitrum didn't have to do anything because Arbitrum is at layer two and inherits its consensus from layer one. It latches onto Ethereum and uses its security. It uses its consensus, but it does that via the smart contract layer, via the API that Ethereum provides.

55:28And today we have over 100 arbitrant chains in development, dozens of which are already on mainnet. We also have competitors with their own layer twos and all these many, many different chains with different execution environments and differences. They're not all doing the same thing, are utilizing Ethereum's consensus. There is one consensus that's powering today 100 plus chains. So a layer two is a blockchain inside another blockchain and we're able to utilize the layer one blockchain we don't have to have our own validators we don't have to have i don't have to have our own like layer one stake validators we don't have to have our own consensus protocol we're able to utilize ethereum security we're able to bootstrap so many different chains doing so so many you know different things uh via ethereum imagine otherwise you want every time you wanted to build like a new chain you'd have to go ahead and find new validators like layer ones do it's a very very big process you can spin up a layer 20 ethereum today that's secured by ethereum that has this consensus, that's doing something wacky and wild and like totally different than anyone else has ever done before.

56:25And you can just focus on your layer and not have to worry about building an entire consensus, right? Not reinventing the wheel to do that. We define what a layer two is. I'm not sure my mom would understand that, but - You said my mom. No, okay. Fair enough. Actually, I hear a bunch of people on this podcast saying, actually my mom, my parents are very technical, so - Exactly. Why do we need a layer two on Ethereum? Great question. So I'll give you two answers. Answer number one is you've probably heard of what's called the blockchain trilemma, which is the idea that blockchains can provide two of three things at layer one, at the core layer, security, decentralization, and scalability.

57:09And Ethereum goes very, very, very heavy on the security and the decentralization. decentralization. And what gets traded off is the scalability. And this is inherent. So here's why. What does it mean to be decentralized? It means that anyone with basic hardware or basic cloud instances can go ahead and run Ethereum node and participate in the network and validate the network and secure the network. And that means is, this goes back to our point before, you have to basically make it easy for anyone to do. So the computer needs to stay at the speed of my laptop roughly because you want to make sure that everyone can keep up.

57:43Even people with just a regular internet connection at home with a regular cloud instance can keep up and validate Ethereum. You could turn that up and say, let's actually make it much, much harder to scale Ethereum. Let's increase the capacity of the laptop 100x. But that means that all these validators at the bottom, they fall off. They can no longer keep up with the network. They need to have at the extreme, maybe you need a data center to actually validate the protocol. It might still be open and permissionless because in theory, anyone who has a data center can go ahead and participate. But in practice, who has a data center?

58:16And you get to de facto centralization. So not technically centralized because it's open, but there are only a few people that can actually participate in the protocol. So you see this tradeoff between scalability, which is the ability to crank up the capacity and decentralization. The higher you make the capacity, the bandwidth, the throughput, the less people that can actually participate and the decentralization goes away. So what Ethereum believes is we don't want to compromise on security and decentralization. We also don't want to sit in our ivory tower and say, okay, you still have to use Ethereum.

58:49Pay these high fees because the capacity is low and demand is high, and you should use it. We have to say, how do we actually make it usable for protocols and people building? And the answer is this layer two structure. So we have this rock solid, ironclad, secure, decentralized layer one. That's called Ethereum. And then we have layer two protocols that can tap into that security, but can actually scale more on the second layer. They can scale more than Ethereum could. So that's like the answer number one. And briefly, answer number two to your question is the innovation angle. So there are so many different chains on Ethereum today doing different things.

59:24On Arbitrum Chains, we support something called Arbitrum Stylus, which gives you the ability to write smart contracts in traditional programming languages like Rust and C and C++. You have a team called Phoenix that's building a fully homomorphic encryption, a privacy environment, a chain that uses deep cryptography to get privacy. You have ApeChain, which is building an arbitrary chain for BordeaBioc Club that's building for their community and customizing their chain for their community. You have Azuki building Anime.com, an arbitrary chain that's customized for their community. I can go on and on and on.

59:54You have Kinto, which is building an arbitrary chain for institutionalized investors. Imagine if we were all in one layer. All of these chains would have to, all of these protocols would have to use the exact same infrastructure, the exact same execution environment. They couldn't actually customize it at all. But what we've done is actually by separating in both layers, say everyone can utilize Ethereum's consensus. And now you can build your own customized, opinionated, differentiated environment on top of that. So you can go deep on your home work for encryption. You can go deep on your KYC environment for investors.

1:00:27You can build features for your community, and we can all utilize the same consensus. This actually makes innovation so, so, so much easier, whereas in other ecosystems, you'd have to bootstrap validators, consensus, staking, layer one tokens, tokenomics for every one of these chains. But Ethereum, you can have hundreds of chains that are doing this using one consensus. Let's take an example. Solana what's the problem with Solana Solana takes the very a very difference let's say yeah Solana believes I think something very if you actually if you ask Anatoly and he says it very publicly he says there are six interesting smart contract you know designs you know smart contracts generally that are interesting right and he believes that this innovation on the execution layer is not as important and we basically have a good execution layer, in his case, for the SVM.

1:01:25And there are only these few smart contracts that actually matter. And therefore, he thinks that this uniformity is actually great. And everyone's doing the same thing. It's uniform. And by the way, the argument to that is it feels less fragmented, right? Everyone's doing the same thing. Everyone's building on the same thing. And it works well. And it does that. But I think there are two arguments against that. Number one is the experimentation and innovation aspect. I don't think that we know which six smart contracts are important today. Even if you believe that only six smart contracts will matter, zoom out.

1:01:58We are so early on that the thought that in five or 10 years that won't change drastically, our understanding won't change drastically, to me is just wrong. And if you look back five years, it has, so why wouldn't it in the next five years? That's number one. This is your example that you mentioned before, which is, hey, we don't know what's going to happen. Exactly. And there's so much experimentation and innovation happening in Ethereum, and I don't think we're ready to limit that. In Solana's case, it's much more limited. There isn't much you can do to innovate on the execution layer. You can't build a chain that's secured by Solana that also has fully home work for encryption.

1:02:27You can't build the chain that's secured by Solana that has deep KYC permissioning involved in it. What's an example of concrete application that someone normal could understand that couldn't be built on the top of Solana today? A fully private chain. A chain where out the door, and you can have, or an environment, if you will, that you have people launching applications that have full privacy built in, so you don't see people's balances, you don't see people's activity. You can build certain applications that have privacy built in at the application layer, but to have an environment that's just completely segregated and private, similarly for institutional environment.

1:03:04We have chains on Ethereum and Arbitrum that are gated for institutional customers. You know everyone on chain is KYC'd, right? So you know who they are, and you can interact with them and transact with them. you can't do those things on a single chain. But actually the other half, and this goes back to my two previous arguments, so one is on this innovation, the other one is just on the design and the scalability. We can't do everything in one layer. Look at every other protocol. Look at the internet. Multi-layer protocols allow us to innovate on multiple layers and allow us to scale well past the capacity of one layer.

1:03:42and we see this in practice when a big launch on a monolithic chain often bring down the infrastructure or slow it down or make it unusable. We can't afford to do that for the world's transaction volume. So I think just in terms of pure scalability and by the way, this is the type of thing where it's easier to bootstrap where you have one environment that's monolithic. You sort of at some point take a dive and you have to sort of fragment yourself if you will, if you want to go like Ethereum is doing and have multiple chains. But long term, it's going to pay off largely, right? Long term, as your capacity grows, it's going to be the only way that can actually, you know, scale, right?

1:04:23Imagine like, again, if you want to imagine we had 100 chains, and we didn't have Ethereum as layer one, all these layer twos were independent, we literally would have had to move to go from proof of work to proof of stake, we would have had to move every single one of these chains individually, it would have been an absolute nightmare. So there's a lot of scalability and just, you know, operational efficiencies that come from this design. And there is some short term pain because yeah, it's much easier when there's, you know, one development team and one development cycle and everyone's on the same page.

1:04:49But ultimately, if we're going to the point of world scale that I think we're going, it's just not going to be feasible to onboard everyone. And I have a lot of respect for their team. I think that they're doing things that are very interesting. But ultimately, I think at scale, we need a roll up centric multi layer design. I'm actually talking to him next Monday. He'll probably disagree with everything I said, but... Another one who disagrees. I talked to Evan from SWE, from Miston Labs. Sure. Co-founder, CEO of Miston Labs, the company behind SWE Network. And he said something like, Ethereum doesn't work.

1:05:28And the proof is that these layer 2s are all centralized. False. What does that mean? and what's your answer? I don't know what it means because you have to ask him, but I can tell you it's not true. If you look at Arbitrum today, Arbitrum has decentralized, permissionless validation. It's secured by Ethereum as proofs that are... And by the way, so maybe what it means is if you look broadly at layer twos, there are some layer twos that he's 100 % right about that are centralized, that are not secure. That's not the case with Arbitrum and I think Evan's actually a good friend. I think he'd actually probably agree more than disagree on the Arbitrum point.

1:06:08I can't speak for him. But like, you know, in the case of Arbitrum, that's just not the case, right? Arbitrum is decentralized, has fully decentralized validation. Anyone can participate, can validate the protocol. It's what you call the one honest validator assumption, that all you need is one honest validator in order to make the protocol, you know, plus Ethereum, right? So a one honest validator can appeal to Ethereum and make sure that the protocol operates correctly, which is a very strong security perspective. He's not incorrect, though, that there are other chains that utilize Ethereum L2 branding that don't have that security today.

1:06:39And I actually think it's a problem. And I think Vitalik also does. Vitalik had this thing. He said, come 2025, so there's this three-stage of decentralization that Vitalik has. There's stage 0, 1, 2. We're computer scientists, so we start at 0. So I tell you, the Arbitrum was the first chain that was at stage 1. And And that doesn't sound very impressive, but actually it's pretty impressive. But yeah, the idea is that, you know, I think Vitalik said he's only talking about this year about stage one rollups. He's not mentioning any of the stage zero ones anymore because there is this problem where, you know, people are giving an IOU to security and saying, oh, yeah, we're using Ethereum.

1:07:13But if you look under the hood, they're not actually. That's not the case for Arbitrum. Arbitrum has decentralized permissionless validation secured by Ethereum today. And, you know, I like to say it's like the gun to the head test, right? if you tried to coerce me in some way and said, hey, Stephen, shut down Arbitrum, or hey, Stephen, move funds from my account to your account on Arbitrum, I would say I just don't have the ability to do that because I really, really don't. There are some layer twos. And by the way, if you simultaneously tried to coerce everyone at Offchain Labs and the Arbitrum Foundation, we just don't have the ability to do that.

1:07:48When we decentralized the protocol, we really gave it up and the Arbitrum DAO has full execution power over the future of the technology and can't do that. To Evan's point... I had Jesse Pollack on the podcast and I think he might have been referring more to Bayes and the relationship with Coinbase and probably a lot of other layer twos. So Bayes today, from my understanding, the Coinbase and Optimism have a two of two control where they can make changes to the protocol. In Arbitrum's case, you have the DAO and a decentralized security council of 12 people that's elected by the DAO. I'm not on it, never have been.

1:08:31And nine out of 12 people to do it. So it's a very, very, very different thing. But I believe, and again, if I'm wrong, correct me, but as far as I know, there's a two out of two multi-state that can change things. I don't think that they're malicious. I don't think that they will. But a decentralized guarantee, you don't want someone saying, hey, I'm a nice person. You want someone saying, hey, push comes to shove, you know, the chain is actually decentralized, it's trustless. And no matter what happens, I don't have the ability or power to actually change that. That's what we want. And, you know, Arbitrum is, you know, universally regarded as the most secure and decentralized layer two that exists today.

1:09:04And we take these things very, very seriously. What would you tell a person like me, again, normal person, who, again, I've been in crypto for quite a lot of time, but I'm pretty lazy. I don't want, when I'm using Arbitrum to have ETH Arbitrum, or Arbitrum ETH, or USDC Arbitrum. And then when I move on to another layer two, Bayes, have Bayes ETH. I don't want to do that. And I think, again, if I don't want to do that and I've been in crypto for seven years, I think 99.9 % of people on this planet don't want to do that. So here's what I'll tell you. First of all, I'll say, I don't only view this as an Ethereum problem.

1:09:48I think it's actually an ecosystem problem, right? The fact that you have USD Solana and USDC Ethereum, the fact that Arbitrum is an L2 and not an L1, it's still a problem. If Arbitrum is an L1, we still have this fragmentation. So unless a person is willing to say, oh, you know what? And the solution is I'm only going to use Solana. I'll tell you, okay, here's another solution. Only use Arbitrum. Meaning like, I think there's a problem of fragmentation in the ecosystem today. And it's not really a layer two problem. It's just a multi-chain problem, honestly. And our goal, and we're building this, we didn't talk much about this yet, but at Offchain Labs, so we mentioned Arbitrum, we mentioned Prism.

1:10:21And now we're very, very focused on solving Ethereum and even broader blockchain interoperability. Because I think you're right. You don't want to do that. I don't want to do that either. It's a mess. It's confusing. It's hard to track my assets. The good thing is, you know, we're putting out technology. We've already announced, I don't want to get into details because it's a bit technical, but technology that will allow you to go back and forth between any chain in less than three seconds, any chain that participates. And we're hoping to get broad adoption across not just Arbitrum chains, across EVM chains generally.

1:10:54Because again, my goal isn't to unify Arbitrum, it's to unify Ethereum. That's how we win. And actually, even more broadly, if we can take our technology and help users get back and forth from Arbitrum to Solana, I'd love to do that too. I think long term, that's where we should be headed because that's where the real fragmentation problem happens. And we're building very, very strongly and very committed to building technology for that. The interesting thing I'll tell you, which is maybe goes against the way people think about it. I think this is 90 % a UX problem and 10 % a deep research problem.

1:11:27And what I mean by that is the problem that you described just now is somewhat a reflection of the technology, but more a reflection of your front end and your wallets that are showing you this experience and not just abstracting it for you. Absolutely. And I think we as a community, and we're working with other partners on this, can solve this. And my bold statement today here is we will solve Ethereum interoperability and hopefully beyond. Because like I said, I want to solve interoperability for every chain, even Solana, etc. we will solve this in 2025, certainly for the Ethereum ecosystem.

1:12:00UX. I think I mentioned before I had Brandon from Phantom Wallet on this podcast. The first experience for on-chain users is always a wallet. It's the entry point. So I sat down with Brandon, the co-founder of Phantom Wallet, recently, and he said that he and his team, they were actually deep in the Ethereum ecosystem before starting, I think they were working for 0x, the three co-founders. And they were believers in Ethereum, but they noticed more than five years ago, early cracks in the Ethereum ecosystem, which is why they launched Phantom on Solana. One of these early cracks is the main Ethereum wallet Metamask, which you just mentioned now, right?

1:12:45The wallet. It's a wallet for developers where users sometimes need to copy and paste an RPC code to use a new chain. it's his argument and also I mean I've done it right and I'm not very technical and it's kind of, you can do it right but you don't want to do it and the reason why you have to do it is because it's a developer wallet, it's not an end user wallet but it's the main wallet on Ethereum. Then he said also, Brandon the other early crack that they saw was a potential sea of layer 2s how do we fix the Ethereum user experience to make the ecosystem as exciting as it used to be and onboard a new generation of on-chain users that are mostly going for Fantom and Solana today.

1:13:32Yeah, I agree that probably the reason, you know, UX, that's the point. The reason is, I think Fantom has a fantastic UX and people know they can download Fantom, go to Jupiter. They basically know what to do and how to do it on Solana. With Ethereum, I think there's a lot more confusion, unfortunately, today. I think a lot of it is just, like I said, narrative and even brand on the UX. For example, if I can erase the last hour and a half of our conversation and just forget about the fact that Arbitrum is a layer two, you can pretend it's a layer one and go on Coinbase and withdraw funds there, go on Binance, withdraw every other exchange and just use Arbitrum as a layer one.

1:14:13But there's a mental load on users. There's no question about it. It says layer two, this is confusing, which layer two, any, yeah, I don't know what you use. Yeah, exactly. But a lot of it is a mental load. And I do think, you know, back to the wallet point, that a lot of it is going to be solved at the UX layer, right? So we have really good protocols. I mentioned before, we're building some really fast interop protocols that will support it. But unless those are, and they're already great, you know, protocols that exist today, there's a whole, you know, ecosystem of fast interop bridging protocols.

1:14:41But it's really on the user experience. We need to package that up for users in a way that they just see an aggregated balance, right? They just see, you know, they want to go from chain A to chain B in the Ethereum ecosystem. Their wallet just helps them, abstracts them, and does that for them. And I think it's going to require, you know, different wallets and infrastructure providers and other teams to work together to build this experience. I know we're playing a big part in building the infrastructure here. And this is, you know, like I said, I believe will happen in 2025, but there's no question about it.

1:15:10The wallet is, you know, is a very, very big part. And I think there are two parts here. It's, you know, it's an opportunity for, you know, we see new wallets coming to market all the time that are trying to solve this. And also incumbent wallets that need to understand that, hey, this is an important thing that needs to be solved. And the good thing is, I think the Ethereum ecosystem is, you know, very much waking up to this today and feeling a lot of the pressure to solve this problem, which, you know, maybe you say is a bad thing and scary thing. But I think think it's a good thing. The fact that we're aware of this problem, understand that users need a better UX is good because the good news is we know how to do this.

1:15:47We have the core technology to do this. Again, I think it's a 90 % UX problem, 10 % deep research problem. We're doing a lot of deep research at Off-Chain Labs too and as an ecosystem. And over time, we'll slot in better and better technology into the UX to make this cheaper and more efficient and faster. But we've to just get out the 90 % I think sooner than later, hopefully in existing wallets, but in any wallet that will do this. You say we have the right technology, but do you have the right people? For example, Brandon and his team, there were previous Twitter guys and Facebook guys who built the Silicon Valley startups that scaled massively and were user facing applications.

1:16:26Do you think that's one of the issues of Ethereum that it's attracting much more? As you said before, nerds that are very much more into theory and research? I think we definitely need people that are UX-oriented and product-oriented. I think we have a good number of those in the Ethereum ecosystem today. But to your point, could we use more? Absolutely. And I think the community understands this today. And to the extent that via hiring in companies like Offchain Labs or via incentivizing and encouraging and inviting new players to come into the ecosystem, absolutely. understanding that focus you know it's the user it's the user it's the user is really important the difference of ethereum is we understand it's the user and growth but that's always going to be secondary to security and decentralization we're never going to compromise for that i think that's a good thing but i don't think you have to compromise i think we have our security we have our decentralization we know how to do that and now we need to really really focus on the user and the user experience and to the extent that we need to bring in new people and new voices and new perspectives to help us do that, I think I would welcome that very much.

1:17:32We need to talk about Arbitrum a bit. We're getting there now. Your company, Offchain Labs, launched a layer two called Arbitrum. What's the difference between Arbitrum and all the other layer twos built on Ethereum? So we touched on some of this before. The security and decentralization is fundamentally different on Arbitrum. And this is not just me saying it. There's a site called L2Beat, L2Beat.com that tracks all these, and they have these diagrams, and they show that Arbitrum is the most decentralized general purpose layer two across the categories that they track. So this is like, you know, objectively speaking, but it's also well understood in the industry, and it comes from our focus.

1:18:14When it comes to the other really a few interesting things, the ecosystem, Arbitrum does, you know, primarily really well in DeFi, real world assets, tokenization, stable coins, and also gaming. Those are the core areas of focus of the Arbitrum ecosystem where Arbitrum really, really shines. And the other thing is back to the decentralization. So let me go a little bit deeper in there and talk about the setup of the entities at Arbitrum. So I mentioned I'm at Offchain Labs. There's also something called the Arbitrum Foundation, and there's something called the Arbitrum DAO. And the Arbitrum is an experiment in decentralization in a way that really doesn't exist anywhere else.

1:18:51Certainly, in no other layer too, but really unprecedented in many ways. I'll give you a few examples to illustrate what I mean. So the Arbitrum network has fees. Those fees don't go to me, don't go to off-chain labs, don't go to the Arbitrum Foundation. They actually go into the on-chain treasury controlled by the Arbitrum DAO and token holders. So there's 20 ,000 plus ETH, for example, that are that are currently sitting in the Arbitrum DAO. And you can track this all on-chain. I don't know the exact balance today, but the idea is that all this is on-chain. There's 3.5 billion ARB or so that are in the Arbitrum on-chain treasury, not controlled by the Arbitrum Foundation's wallet, but actually controlled by the token holders on-chain.

1:19:36And this is actually completely, completely different from most other protocols. In many other protocols, there's the governance and the voters, and then there's the people with the keys. And the people with the keys are supposed to listen to the people that are voting. But in Arbitrum's case, that's not true. From a financial perspective, where the assets sit, but also from a technology perspective, from an update perspective. I mentioned before that even if you try to coerce me, you can't get me to push any update on the Arbitrum chain. I don't have the keys. So how do we update the Arbitrum chains?

1:20:04The answer is we at Offchain Labs or anyone else goes ahead and packages up an update. It says, hey, we think this is a good idea. Submits it on chain. and the Arbitrum token holders vote on this and it's self-executing which means the vote itself is what actually makes the upgrade possible to happen, to activate, exactly. And so you don't need this like trust that someone's going to do the right thing or this glue, it's the vote itself. That's true from a spending perspective and that's true from just a core technical update perspective as well. And this is, you know, I think really powerful.

1:20:37And the last part of this also is if you think about Arbitrum, you know, one view that I like to have of Arbitrum is like an on-chain sovereign wealth fund, right? So Arbitrum has this core resource, which is execution, right? So it has its own chain, the main Arbitrum DAO chains like Arbitrum 1, which collect fees. It also has 100 plus other chains and, you know, which use the Arbitrum technology and all of them that aren't sitting on top of Arbitrum 1 actually pay 10 % of their profits to the Arbitrum DAO as well. So it's this business that's really selling execution environment and collecting, you know, fees from diversified resources.

1:21:09Some of these are L2s and Ethereum. We even have L3s on base that are actually paying the Arbitrum DAO for their execution environment because it's the most performant and customizable execution environment today. And the DAO now has the ability to invest and reinvest in the ecosystem in sustainable ways. The Arbitrum DAO has launched a fund called the GCP, which is a gaming fund. It's a 200 million token fund. Other ecosystems also have gaming funds. I think people, and this is going to be a good illustration of the difference, people misunderstand this. They say, okay, say, Arbitrum has a gaming fund and Avalanche or whatever ecosystem, other ecosystem has a gaming fund too.

1:21:44What's the point of the gaming fund? And the answer that probably an average person will give you is, oh, it's to spur innovation in gaming and the ecosystem. And now there's going to be gaming activity. Fantastic. And that's true. But there's also something else. You say, who is the beneficiary of this gaming fund, right? So if the gaming fund makes a bet, an investment and gets 100x return, who gets that? In most other cases, it's the investors or the labs company that's building this, right? So they're spurring the ecosystem, but they're taking the gains. The Arbitrum Gaming Catalyst Program, the GCP, which is the gaming fund, has one LP.

1:22:19And that LP is the Arbitrum DAO, is the Arbitrum token holder. So it's building a business of sustainability in a way that really no other project has done or tried to do. And I think that's a massive differentiator and one that will make it a successful and sustainable project because they're not just throwing up money to grants in ways that, okay, let's hope that we build some ecosystem and network effect. Here it's no. We're actually investing in the ecosystem, reinvesting assets, diversifying assets, getting yield from all sorts of the Arbitrum Dow invests in on-chain RWA projects as in money market funds on-chain, in protocols like Lido and Fluid, etc., and really getting diversified assets for diversifying their portfolio in a way that's completely, completely different than any other protocol that I'm aware of in crypto today.

1:23:06There's a lot of layer twos. How did you establish Arbitrum as a leader, as the leader in a sea of layer twos? So the one answer is it was the first general purpose layer two to launch. And there's always some benefit, right? I remember the energy, the day that we launched. So we launched to developers in March of 2021 and to users in August of 2021. And like the entire ecosystem was sitting on edge waiting for this. Today, another layer two launches every day. No one really baths an eyelash. No one cares. We were solving a real problem, and a lot of it is there at the right time and not making compromises.

1:23:38So we were fortunate to have been there early and to have been able to actually build out our technology stack and not compromise. So a lot of that was the right place at the right time or having the foresight, actually seeing these problems early on when others didn't. In a world where others were saying, build plasma or state channels, we were saying, no, we're building this. And sometimes that early vision pays off. I also think the second part of it is the ecosystem ethos around fair launch. So I mentioned before that we launched Arbitrum to developers in March of 21 and to users in August of 21.

1:24:09And I remember July that year rolled around and some protocol said, all right, we've developed already. We're ready to go. Open up. And we said, no, we're not going to open up. We're not ready yet to open up. We want everyone to be there, have an equal opportunity and be there on the same page and at the same time. And in August 21, on the same day that Arbitrum went live, I believe roughly the same day Uniswap went live, SushiSwap went live, and a little exchange called Swapper by DXDAO went live as well. And we never gave preferential treatment really to anyone on this. We tried to support everyone.

1:24:41We gave great treatment to everyone, but everyone knew that they can have a fair shot on Arbitrum. And the reason why Uniswap was going to win on L2, Uniswap just passed$300 billion in volume on Arbitrum, the most of any layer too. It's not because we rolled out the red carpet and said, hey, Uniswap, we're going to put the thumb on the scale and make you win. It's because they're really good at what they do, and they have a good shot of executing a layer two. But we gave the same opportunity to everyone else. And if you fast forward to today, if you ask us about Arbitrum versus other layer twos, our ability, I think, to get out of our own way and not try to compete everywhere has been very helpful.

1:25:14If you look at stablecoin adoption on Arbitrum, Arbitrum is the only layer two, I think the only chain other than Ethereum, I think, that has more billions of dollars in both USDT and USDC. USDT just announced a few weeks ago an expansion called USDT Zero, where they're expanding to many other chains via USDT Zero. And they chose Arbitrum as the hub for that expansion. So all these other chains are actually doing transactions that are affecting transactions on Arbitrum. And the idea is that all these different protocols can compete and feel comfortable in Arbitrum, whereas there are USDC chains, like, you know, there are USDT chains.

1:25:49But for Arbitrum, it's really, you know, we don't try to compete against everyone. We try to create a fair and open ecosystem where others can compete. We're very content, you know, building at the infrastructure layer and trying to create an open, competitive environment. but where everyone is sure they can get a fair shake and don't have to feel like they're competing against the house or otherwise disadvantage, which I actually think is, unfortunately, a big differentiator against some other chains today. I had Jeff, the founder of Hyperliquid, on this podcast a few months ago. How do you manage to get guys like Jeff or Vlad from Robinhood to build on Arbitrum?

1:26:27So Robinhood is a partner where you can trade any asset on Arbitrum DEXs today, any assets listed on Arbitrum on the Robinhood crypto app today. And we like their team a lot. And I think the answer is they appreciate the technology, they appreciate the roadmap, and we also give really good support and developer support to teams. But really, it's about the ecosystem, where the ecosystem is, where the opportunities are. And they see this as well. You know, Hyperliquid is a good one because there's those that like, don't like our those that like try to fade our which and say oh arbitrum is the is the hyper liquid bridge right that's that's the i don't know if you've heard this uh this narrative around there and i actually say like you know that's completely backwards it's like hyper liquid built their product adjacent to arbitrum sourcing all the liquidity from arbitrum because they understand that arbitrum has a great product that allows people to easily bridge onto that has a ton of liquidity on chain that's going to be a really good propellant for the success of their product And we see this really time and time again.

1:27:27And the answer is it's not like backroom deals or things that we've done. I don't think I ever spoke to Jeff before they launched an Arbitrum. It's more about if the product speaks for itself. Our teams are obviously in close contact today. But my point is it wasn't some sort of private deal. It's the product doing what it does, product market fit. And it's the best place to build your product in crypto if you want to access deep liquidity. That's organic liquidity. You could have sold yourself as like the amazing business developer of Web3. I didn't appreciate it.

1:28:05Who else is doing a great job in the Layer 2 space and why? Great question. I think that there are so many others. I'll mention a few. I like the Starkware team a lot. At this point, I think they're doing things on Bitcoin and Ethereum, but just they're very, very technology focused. And in fact, if you look at all the ZK roll-ups, a lot of the core technology that everyone else is using, they've actually been the ones that have initially innovated that. And I think they're doing incredible things. Similarly, the Polygon team has actually really, really strong ZK researchers there as well, who I have a ton of respect for.

1:28:44And I think if you ask me actually who was one of the best or maybe the best business development people in crypto, so back to that question, I'd say it might be Sundeep, right? fantastic fantastic uh that's at least the reputation they had last cycle right with all the deals they were doing with the instagram and like people were saying these guys have the best bd team sandeep is a powerhouse i think yeah so they pivoted today to be more of the aguilera strategy and that's like a very different strategy but sandeep is a is a very very uh he's a good friend but also just a really really uh effective uh um you know uh leader um and and one that's able to sell the benefits of not only the product or crypto.

1:29:22If you ask me, for example, whether they're on Polygon today or not, the amount of roads that those guys paved in 2021, and that's a very, very hard thing to do. To get all these different institutions interested is a very, very hard task to do. And even if some of those aren't on Polygon today, they did, I think, the entire ecosystem a favor by doing that. So a lot of respect for those two teams, for sure. What does Arbitrum success look like to you? Arbitrum success, Arbitrum is quickly emerging as the default execution environment. I mentioned that's for Arbitrum 1 on the L2 space. That's for L3s that are launching on top of Arbitrum 1.

1:30:00That's even for chains in other environments. We have a chain called Korn that's really focused on Bitcoin. Their fees are dominated. Bitcoin have billions of dollars in TV on that chain as well. So Arbitrum, I think it's a dual success strategy. I think the chain, the core Arbitrum 1 chain has to be successful. And then it's around this, just build a product that builders can customize. How can we support the most builders in the most unique different environments and get out of our own way? The fact that we're comfortable with Arbitrum powering the biggest L3s on base, some might say, hey, why would we allow that?

1:30:33Don't allow the license to do that. It's like, no, understand that some people want to build there and how can we service them? How can we provide the Arbitrum product there? And they're contributing back to the Arbitrum DAO as well as part of that. So I think it's building a general purpose product that people can use and then building the most customizable stack that anyone can use to build whatever they want in crypto. That is success to me. And also, it's about long-term success, right? So I don't view this as like, oh, I need to capture every minute of every cycle. I want Arbitrum to be long-term success and long-term the one that's building in the applications that I think are going to transform the world.

1:31:11And you won't win every short-term narrative. Arbitrum definitely didn't win the meme coin narrative. Three weeks ago, we might have thought that was a problem. Today, that seems okay. You know what I mean? It's okay to take long-term bets and say, we're not going to win every single short-term narrative, but we're building towards where we believe value is long-term. We have a strong focus on DeFi, RWA, tokenization, stablecoin, and gaming. And it's okay for the ecosystem to have that extremely strong focus and to be able to weather the short-term hype cycles and not catch every single one of them.

1:31:44What's something that you believe in that most people would not agree with? So many in our ecosystem today say that there is going to be a gazillion chains and every product should have their own chain. I think that's actually a big mistake. And I think that there are products that should have their own chain, but probably most teams today don't belong having their own chain. There's a proliferation of block space today. Not every team needs to have their own branded chain. If you have a product, if you have a retail product, The institutional product that has users, sure, you might be a good candidate for that.

1:32:15And that's actually one of the benefits that we have, going back to the previous question, is we have, you know, when I go to talk to people about building an Arbitrum, I say, I don't have to say you, try to sell you a chain. I don't have to tell you chains are terrible. I tell you, maybe a chain is good for you. Maybe it's not because the Arbitrum ecosystem has both of these products. But I think there's definitely this, you know, on both sides, I would say in the circles that I'm in, there's, you know, prevalent is most people say, oh, everyone should have their own blockchain. They're going to have a million blockchains in a year.

1:32:41and then you have those that are completely on the other side of this but I think I believe it's a bit both. There will be probably dozens of successful chains but I don't think there will be thousands or millions of successful front forward facing chains. Amazing, thank you so much Thank you for having me. That was awesome I was a bit not worried, not the right word but thinking beforehand this might be a bit too technical etc and I think we did a pretty good job at simplifying everything and I actually found this was a brilliant conversation. So thank you so much. Oh, it was my pleasure to be here and I really enjoyed it as well.

1:33:15Thank you.