The State of Optimism | Ben Jones & Karl Floersch (SotN 8/10)

Optimism is scaling Ethereum with its open-source Optimistic Rollup. Uniswap recently deployed on Optimistic Ethereum, officially kicking off Ethereum's Scalability Summer. Where does Optimism stand now? What's next? Optimists Ben Jones & Karl Floersch join to talk about working on Ethereum’s hardest problems and pioneering a better future for humanity. ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: 💰 GEMINI | FIAT & CRYPTO EXCHANGE https://bankless.cc/go-gemini 🔀 BALANCER | EXCHANGE & POOL ASSETS https://bankless.cc/balancer 👻 AAVE | LEND & BORROW ASSETS https://bankless.cc/aave 🦄 UNISWAP | DECENTRALIZED FUNDING http://bankless.cc/uniswap ------ 📣 PoolTogether | DeFi's No-Loss Lottery Protocol https://bankless.cc/PoolTogether ------ Topics Covered: 0:00 Intro 7:00 Ben Jones & Karl Floersch 9:10 Is Ethereum Scaling? 10:03 The History of Optimism 16:20 A Scaled Ethereum Chain 19:26 A Mental Model & Theme Parks 27:24 Governors & Contracts 29:29 Infrastructure & Use Cases 37:07 The Optimistic EVM 41:32 How Much Scale is There? 49:04 Latency & Liquidity 58:59 Layer 2 to Layer 2 1:06:29 Understanding Tradeoffs 1:09:18 MEV & Sequencing 1:19:17 Power & Responsibility 1:27:08 Saving Humanity 1:29:48 Fire Round Questions 1:34:54 Closing & Disclaimers ------ Resources: Optimism: https://optimism.io/ Ben on Twitter: https://twitter.com/ben_chain?s=20 Karl on Twitter: https://twitter.com/karl_dot_tech?s=20 ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:07Ryan Sean Adams?

  Hey guys, welcome to another episode of State of the Nation. Today, I am psyched to have the Optimistic team on Bankless State of the Nations. David, this one's been a long time coming. I think optimism is maybe the most hyped scalability tech in crypto, definitely. And optimistic rollups are as well. And I don't know what to say about these guys, but they're incredibly optimistic about both their technology, Ethereum, but and also the future of humanities. This is really insightful episode for me.

• 0:38David Hoffman?

  Yeah, these guys are some of the deepest pioneers of the Ethereum space. They've been working on the same, the same problems, sustainability and scale for Ethereum. Carl and Ben from the Optimism team, they understand the relationship between actually scaling throughput and the ability to actually scale out Ethereum to more and more people. Those things are connected. And one of the, these are my, some of my favorite conversations where we bring on the developers who are actually coding the code and then they can connect it out to the more significant meanings of what it means for humanity. And so this is kind of how that this podcast goes. The first half of the show, we all talk about the details and the specifics of the optimism L2 rollout, what applications are going to be there, who the infrastructure provider is going to be there, what kind of bandwidth there is.

• 1:23David Hoffman?

  And then we go into the MEV problem and then that leads us into a more broader conversation as to why optimism has chosen the design choices that it has. And what does that mean for humanity down the line as Ethereum grows and grows into the world's financial platform that we all see coming ahead of us?

• 1:40Ryan Sean Adams?

  Guys, we're going to bring on Carl and Ben in just a minute. Before we do a quick, a couple of quick announcements, the first is we released an epic episode on China's central bank digital currency. Basically, digital currency revolution that's going on in China. I think this is a must listen, particularly as you're listening to this, so much regulatory news in the US is in the headlines. Is Congress going to allow crypto to flourish or is it going to try to strangle the baby in the cradle? Well, China is not stopping. They are going gung ho. Into a digital future, more centralized digital future, but they're completely replacing their banking system with the digital banking system.

• 2:18Ryan Sean Adams?

  And I think it's a story that's never been told really well in crypto. Richard Turner, our guest on the podcast, explains it super well. I think everybody in crypto should give this episode a listen. It's definitely eye opening, definitely a wake up call, I think, for the US. Forward it to your senators, forward it to your lawmakers. That came out on Monday, guys, so make sure you check that out.

• 2:39David Hoffman?

  The amount of a juxtaposition, I think, that this episode brings, I think, is really, really crazy and it's worth noting. First off, people think or are underestimating the Chinese CBDC. No, it's a force to be reckoned with and it's one of the biggest battles that our industry is going to have to face. In stark contrast with this perhaps embarrassing amount of legislation coming in into Congress that is just uneducated and uninformed about what crypto really is. That juxtaposition, China understands crypto and the CBDC revolution and the American Congress is floundering. Meanwhile, we have China pushing forward on development and we have people like Carl and Ben from the optimism team who are pushing forward on DeFi development and these are the two

• 3:22David Hoffman?

  tracks of innovation that I see going on right now. China's doing, pushing forward in the centralized development and optimism and Carl and Ben are pushing forward in the decentralized development. But they're the same story of how crypto has impacted the world. And so, like Brian said, this podcast is an absolute must listen.

• 3:39Ryan Sean Adams?

  Speaking of announcements, David wanted to mention to our listeners that Pool Together is now taking deposits. The banks took off last weekend. Pool Together never takes off. You got to get in the pool, use Pool Together. This is a spot where you can deposit stable coins in a no loss lottery. So it's like a savings account where you never lose your principal. Pretty magic. Like 50, 60, 70, 80, 90 K per week in drawings. Really awesome protocol. Get in the pool with Pool Together.

• 4:13David Hoffman?

  Pull Together is also expanding into Layer 2s as we are talking about on this show today. They are on the Polygon sidechain and they have the future Layer 2s of Ethereum on their roadmap as well. So if you are currently living in the L2 world, the pool is coming to you.

• 4:29Ryan Sean Adams?

  All right, David, before we begin, I want to ask you the question I always do, which is what is the state of the nation today?

• 4:35David Hoffman?

  The state of the nation today is optimistic, Ryan. There is not a better time to be optimistic about the future of Ethereum and where we are in this industry. And we brought on the two guests that could only exude the most amount of optimism for this space, Ben Jones and Carl Florish of the optimism team. And so I think we should just go ahead and get right into the show. But first, a moment to talk about some of these fantastic sponsors that make the show possible. Bankless is proud to be supported by Uniswap. Uniswap is a new paradigm in asset exchange infrastructure. Instead of a cumbersome order book system where trades are matched with other humans, Uniswap is an autonomous piece of software on Ethereum, which is what Ryan and I call a money robot. No human counterparties or centralized intermediaries,

• 5:19David Hoffman?

  just autonomous code on Ethereum. Input the token you want to sell and receive the token you want to buy. Something brand new in the Uniswap ecosystem is the Uniswap Grants Program is now accepting applications for grants. We have been saying this for a while and we'll say it again. DAOs have money and they are in need of labor. If you think that you have something to contribute to the Uniswap DAO, apply for a grant to Uniswap. Just look at the size of the Uniswap treasury. It's almost $3 billion. This mountain of capital is looking for labor. Do you have something of value to contribute to the Uniswap DAO? No matter how big or small your idea is, you can apply for a uni-grant at unigrants.org and help steer Uniswap in the direction that you think it should go. That's exactly what

• 6:04David Hoffman?

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• 6:46David Hoffman?

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• 7:31David Hoffman?

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• 7:39Ryan Sean Adams?

  All right, Bankless Nation, we are super excited to talk with Optimism. Our next guests are Carl Flor. She is the CTO of Optimism. He's a new age cypherpunk who's been working on Ethereum's hardest problems for like six years. You've probably heard this guy speak at Ethereum conferences, full of energy, full of optimism. While at the EF, he implemented the first Proof of Stake testnet for Ethereum. Now, we actually have Proof of Stake on mainnet, which is awesome. Among other notable contributions to the inception of ETH2 research is Proof of Stake. Other things, he has taken his creativity and relentless desire for working code into the frontiers of L2. That is Layer 2, that's what we're going to be talking about today. Carl, great to have you. I'm also want to introduce you guys to Ben

• 8:24Ryan Sean Adams?

  Jones. Ben is the co-founder and chief scientist of Optimism. He's worked on solving novel problems in crypto economics with the CBC Casper team, you may have heard of that consensus protocol and he did all of that prior to co-founding Plasma Group. He was behind many of the industry's early forays into smart contracts on Layer 2 such as Optimistic Game Semantics, Generalized Plasma and a whole lot more. Together, these two have co-authored a whole bunch of groundbreaking research. They are Layer 2 gurus. We are so excited to have them here to talk about Optimistic Rollups and Optimism. Carl, Ben, welcome to Bankless. It is great to have you guys.

• 9:05Speaker 02

  Why, thank you. Hello.

• 9:07Speaker 03

  Thanks, guys. Good to be on.

• 9:09Ryan Sean Adams?

  All right. Look, I got to start with the question here to both of you. Is Ethereum finally scaling? What do you think? Carl?

• 9:18Speaker 02

  Ethereum is always scaling. It is scaling people. It is scaling ideas. It is scaling research and technology. It is very exciting, though. It is finally scaling transactions as well, so.

• 9:30Ryan Sean Adams?

  Absolutely agree on that broader definition of scaling, by the way. I love that. It's not just we, so many people focus on transactions per second as the sole scalability metric, but we've been scaling all these other things along the way, including economic bandwidth, as you talked about so often on Bankless. How about you, Ben? You think we're finally scaling?

• 9:48Speaker 03

  Oh, man. I mean, I got to echo Carl's answer, which is that it's an ongoing process. Definitely, it does, though, feel like at the moment, we are at a very exciting inflection point where we're moving up a hockey stick, things are coming live. We're super excited about it, most definitely.

• 10:03Ryan Sean Adams?

  An interesting piece of Ethereum trivia that is one of my favorites is that optimism had this like eureka moment back at the Scaling Ethereum, Scaling Ethereum event back in 2019. And just to provide listeners a little bit of a history lesson, can you guys kind of tell us about that eureka moment and how it relates to the overall story of optimism? Who wants to take this one?

• 10:25Speaker 02

  Sure, I'll go for it. So first off, all research ideas are more of a bubbling up of collective consciousness that, you know, occurs. And so it's not surprising that it came out of a conference. And it's not surprising that a lot of people had these thoughts. In fact, what happened was, we were just kind of talking with specifically Uniswap, Hayden in particular. We had been going after one after another, design after design, saying, Hayden, please, does this work to scale Uniswap? And then the question was, or the answer was always, no, it was not quite there. And so we just kept iterating, trying to get it to scale Uniswap with just the right properties of Ethereum.

• 11:09Speaker 02

  And finally, boom, it came together at that conference. And when it came together, Hayden was excited, you know, a bunch of other people were excited. And then I ran into another room and I was like, Vitalik, what is this idea? This is a great idea. It's going to scale Ethereum. And then Vitalik was like, oh, that's my Shadowchains idea from 2014 or 2015. That's, you know, I'm glad that that has a use. And I was like, oh my God, why does this always happen? And then, of course, of course, there was a Bitcoin Talk article on it, you know, even earlier or something. But nonetheless, it was, it was still an exciting moment. And that was like a kind of rebirth of the plasma community, the fraud-proof community,

• 11:50Speaker 02

  the, you know, all of this like optimistic community is really the best term for it. And, you know, pushed forward, I think, a layer two technology. And that's really thanks to like tons of researchers in this space. And now we're optimism.

• 12:07David Hoffman?

  Ben, you were there for, for that moment. How would you describe that moment in your words?

• 12:11Speaker 03

  Oh, man, I mean, it's so funny. I don't know. The funny thing about research is that these ideas sort of swim around for a while. And often like the eureka moment is just being able to communicate them concisely, right? Like usually it's not something that's brand new out of the blue. You came up with it that day, but there was like a hundred other things that were going on and you finally, the eureka moment is really like. Putting those together in the right way that makes sense and it's easy to communicate. And it's usually that communication that is like the aha. So we definitely had that and that was definitely very, very exciting. And then of course, Vitalik had communicated it years earlier and whatever. But I think that there's nothing quite as satisfying as that moment where the new thing is that all the other new things you had going on

• 12:56Speaker 03

  finally makes sense in one shared unified vision. So yeah, it was awesome. It was fun.

• 13:01David Hoffman?

  So to provide context for our listeners, maybe you guys could expand on what was really unlocked in this moment? And then how did it lead into what is now optimism?

• 13:13Speaker 03

  So yeah, I think the core, well, there's a few things. I think the core insight of these layer two scaling solutions in general, and like honestly, this kind of leads to like our namesake, is basically optimistic execution, right? And so there's basically just a general design philosophy that where you say, how are we going to make these transactions cheaper and more efficient in our sort of global source of truth? This court, this consensus protocol. And calling it a court is actually the most, I think, apropos way in this context. In one line, it's like you don't go to court to cash your check. You go to court if the check bounces. And so a lot of these ideas have been floating around with plasma and even with state channels before that.

• 13:58Speaker 03

  Like all of that really boils down to we have something that we want to happen and we want it in the happy case to be cheaper because you don't, because you don't have to dispute it. But the fact that it could be disputed is what makes it cheaper, right? So it's this sort of back and forth between the ability to adjudicate, making it unnecessary. That gives you a lot of throughput in these, in these, these things. As for like the real eureka moment that was going on there, really it was basically just taking all of those concepts of where things can be disputed and how they can be disputed and understanding a design that would fit into the smart contract design patterns that existed for Ethereum. So rollups are not as scalable as plasmas, right?

• 14:40Speaker 03

  They're actually more expensive because you have to do something with these transactions. But we found something that we could do with these transactions that was cheaper than what you normally do with transactions on layer one and still afforded that unstoppable censorship resistant property. So it was it was really about taking all of those concepts around dispute resolution and finally having a way that you could combine them and have something that would, like Carl said, run Uniswap because it had the uncensorable, unstoppable decentralized property that you wanted.

• 15:11Speaker 02

  Great. And I want to just say one thing, and that is it was the birth of a new design philosophy that has propelled us and continues to propel us throughout our endeavors. And that is that we want to minimize the diff between our protocol or the optimistic protocol and the Ethereum protocol. So that's why we're calling it optimistic Ethereum. Of course, it's optimism as well, but just this idea that we can take Ethereum and we can make it natively compatible for layer two. That was this like moment where we're like, okay, we're trying to get Uniswap to work. Why?

• 15:51Speaker 02

  It's because Uniswap is on Ethereum. And why? Because Ethereum is really cool. And why is Ethereum really cool? Well, we need to like build everything to kind of upgrade Ethereum, not like go against reinvent the paradigm, all of that stuff. So that was one of the first moments where we're like, smart contracts can work on layer two. And then we've been going further and further, and I'm sure we'll talk about that design philosophy.

• 16:17Ryan Sean Adams?

  I think, Carl, that's a really interesting distinction, right? So like optimism is an Ethereum chain. It's part of the wider Ethereum ecosystem. You're nodding your head, yes. Yeah. So is that what you're talking about?

• 16:31Speaker 02

  Yes. So I, the, like Ethereum is this very expansive term and we are definitely, you know, both working at, worked at the Ethereum Foundation beforehand. So this is like, you know, our, our baby and we want to see it, you know, progress. And so the idea of collaboratively and cooperatively building on top of Ethereum, both from an

• 16:54Speaker 02

  Ethos perspective and a technology perspective. So I'll just give one little thing. We are trying to minimize our diff from get as in the lines of code that are different in our get implementation to less than 1,000 lines of code. So that means that we are getting so close to the normal Ethereum software that is running in layer one. And so it's this kind of idea where you take, okay, this Ethereum thing is great. Let's just, you know, add functionality and add capabilities on top of it.

• 17:29David Hoffman?

  Ben, you illustrated how if we want to scale things, we need to kind of model the legacy world that we come from where like if I write Ryan a check, he really only has a dispute with me if it bounces, right? And 99% of the time when I'm engaging with Ethereum or writing checks in the TradFi world, I'm not writing malicious checks and I'm not writing malicious transactions. I just want them to be treated as normal. But it's really that 0.1% of the time where there is a dispute. Then that's when the technology of optimism comes in. And how would you actually relate that to why it's called optimism? Can you connect those two things for us?

• 18:06Speaker 03

  Yeah, most definitely. I think, well, I have one comment on what you just said, which is actually that it is amazingly true as time goes on, how being aligned with Ethereum across the board is really important. So what we've realized is that because those disputes don't happen very often, actually a whole big chunk of the other architecture, which for us at first we weren't as concentrated on, actually ends up being really important to stay aligned with Ethereum too. Ethereum as well. No disambiguation there. But yeah, I mean, we're called optimism and obviously, obviously I think that's like a reflection of our team core values. You know, Carl can amazingly effectively go crazy and talk about the future of society and the world and it's incredible. But it did also come from an architectural perspective, right?

• 18:51Speaker 03

  Which is like I said before, this notion of optimistic execution, right? Like the reason that you use the word optimistic is because you believe that the execution is going to go well. And in that happy case, it's much cheaper. And interestingly, it's the ability to fall back if it doesn't go well that makes you optimistic, right? So the fact that there is a dispute mechanism means that people means that people won't want to cheat it. So that's like a very deep fundamental sort of optimistic scaling phrase term, and we love having it as our ethos because it also means happy fuzzy things.

• 19:26David Hoffman?

  Guys, when we have been talking about rollups and all these different scaling solutions that are becoming unlocked with Ethereum, we have a couple of different models. The one that I like to use is this theme park model where, you know, Disneyland, when it came out in the 50s, it was just Disneyland, right? And now it's kind of evolved into Disneyland is like the hub, and there are a bunch of different spokes going off into new, different theme parks. And now we are unlocking these. And there's so many people just like behind the red tape, like waiting for that red tape to get cut and to get flooded into into the ecosystem. The other model that we have is kind of like a federal versus state relationship, where you have the federal main chain of Ethereum, but then you have all these different states, which is, you know, we have the optimistic state, which has its own rules and parameters

• 20:11David Hoffman?

  that are a little bit more specified towards its specific environment. And we have the, you know, ZK sync and the polygon states, which are its own land, its own territory. What metaphors you guys use to kind of illustrate how the how optimism fits into the broader Ethereum ecosystem? And what do you find most useful to explain to people?

• 20:30Speaker 02

  This is a very tricky and abstract question, but I would say that it is

• 20:40Speaker 02

  hmm, so hard. You go.

• 20:44Speaker 03

  You go, Carl. No, you go. I just, I just, having had conversations in the past, I can't tell if we're gonna go the universal consciousness route, the social operating system route. There's so many directions I know Carl's gonna take this one. I can't wait.

• 20:58Speaker 02

  Yeah, I think that there's, okay, here's, here's what I, here's how I visualize it. It's a little different, and I'm sorry for being contradictory to your vision. But I'm seeing those, those, those like, those spinoffs in the states. Those are more a social and a coordination game, right? That is the, that is the manifestation of these technologies. Just like Ethereum is the manifestation of the Ethereum protocol. The, you know, various theme parks are the manifestations of, you know, various Layer 2 technologies. So what I'm really like thinking about is everyone who's building rollups, they're all contributing the, the designs for the roller coasters,

• 21:40Speaker 02

  or maybe the roller coasters themselves, that can be copied and pasted to various theme parks, and can build up those various, you know, communities and states and all of that. So it's really like, when, when I think about where, what we are doing, like, I'm thinking about, you know, optimistic Ethereum, the protocol. And that is like, open source software that anyone can read, that should be as easy to understand as possible, that makes it really clear, okay, this is how you run an Ethereum client in Layer 2. So that's why, you know, it's not a state in, in the, in the kind of traditional sense necessarily. It really feels like a technology.

• 22:25Ryan Sean Adams?

  And you have anything to add there?

• 22:28Speaker 03

  Ooh, I think one of the things that, that I have to fight myself on thinking is thinking about these things as evolution, at least in like the traditional sense. I think one of the cool things that has just, I mean, the rate of return for us as we like incorporate more and more of this ethos and like really internalize it and understand it, is the additiveness of these systems. So where my mind wanted to jump to at first was, oh, it's like evolution, we're coming from single-celled to multi-celled organisms, right? But I think actually what's interesting is like, there's a lot of basis for like competition in that, in that scheme, right? This is like, sounds very Darwinian, but I think the cool thing that's going- Going on is that it's much more collaborative and open source than that.

• 23:11Speaker 03

  So like Carl was saying, a lot of what the problems that rollups face are the exact same problems that we're going to face on L1. And I mean, they're almost identical. And from an architecture side, every time that we have decided to change our system to make it use code that runs on L1, the better and better returns those have been. So I think it's kind of like evolution, but without the competition. It's like a collaborative, open source evolution.

• 23:39Ryan Sean Adams?

  That's super cool. And totally no analogy completely fits what we're doing here in Ethereum. Like this is net new undiscovered, you know, country. I guess it's another analogy. Undiscovered territory. This is a, this is a new world that's opening up. I guess, you know, two other analogies we might, might go to is the idea that this is increasing the bandwidth. No, the internet had its 56K days and now we're going broadband. We have all of this additional transaction throughput. Another analogy metaphor we've used is this is almost like if, if main chain is kind of Manhattan, it's busy and expensive. What we're starting to do with these layer twos is we're building out the suburbs here. So we've got like an early Brooklyn going on in layer two.

• 24:21Ryan Sean Adams?

  Anyway, let's not get lost in analogy, although I do want to return to the, um, the theme park analogy for just a minute because this sort of fits with, uh, release timing and details. So let's say we're all waiting at the theme park. We've been on Ethereum, um, for a while. Everyone loves Ethereum. We love it so much that it's getting crowded. It's getting expensive. Now we've caught in wind of this, this new sub theme park that is opening up called optimism. And what part in, in the process are we with, with the opening of optimism? When we're going to cut the red tape and, and have everybody, uh, crowd in? It feels like we're in an alpha phase. Maybe there are a couple of rides open. You take us there. Ben, what do you think? What, what phase are we?

• 25:05Speaker 03

  Yeah, so definitely, definitely, I would say we're in the, oh, man, I don't know if there's a term for this in in theme parks that I can draw on. I think one of the things that I would say that's a little bit different from what we're doing from theme parks is that theme parks are a very well established and rigorously engineered thing that has been around for many, many, many decades. And now I'm very curious what the first theme park was. But I'm sure it was, I'm sure it was quite a long time ago. One of the different things that we're doing is we're marching into uncharted territories with this layer two stuff. So something that we've been trying to be really careful about at optimism is making sure that those, that there's not a floodgate moment, but there's an incremental onboarding of projects and users that sort of more coincides with the risks that entirely

• 25:50Speaker 03

  new software stacks and entirely new, you know, designs have on the world. So we put out our first mainnet release, right, which was with Synthetix in January, and we've basically continued to ramp up usage and ramp up the projects from there. As we have done so, we have been gaining confidence both in our stability and in our security, and that continues to grow. So I'm very excited to say that we are very, very close to like a real red tape open moment. So it's within sight. Well, our last launch that we just had was, well, it was obviously Uniswap, and then right after that was Quinta with, which had Chainlink coming fully online, as well as Synthetix Exchange Quinta. And

• 26:35Speaker 03

  we're very, very, very close, like maybe on the order of two months from having basically all the projects be able to come in. Now, even when we're at that point, we still think that ramping things up slowly is the responsible right thing to do. So I don't know, maybe Carl can speak about this later on a bit more. But one thing that we've done is we have imposed a throughput limit that is artificially low. So we know that our system can handle more, but we don't think that it's right for the just the apes to descend en masse and suddenly flood that once and for all. So another thing that's going to be happening is like, we will double our TPS at some point soon and make sure that things are still running smoothly.

• 27:17Speaker 03

  So hopefully that's a good, that's a good answer that touches sort of on our philosophy throughout this process of incrementalism and pragmatism that we've been through.

• 27:23Ryan Sean Adams?

  Yeah, so optimism is open, but it's got all of these governors on them. So we've got Uniswap and Synthetix, but they are more like, they have governors on them. They're sort of more muted versions of what their final forms are going to be, both in terms of transactions per second and in terms of functionality of these applications today. Is that accurate?

• 27:44Speaker 03

  That's right. That's right. And we're sort of opening up those floodgates and giving, giving more permissions as time goes on. And we are very, very, very close to removing the big one, which has been contract deployment. And that is the most exciting one. So I think we have a lot of confidence now that you can run all, pretty much all the contracts that exist out there pretty smoothly. And that's going to be the big next moment, which we're calling like our community launch, which will be when a bunch of projects can deploy, even with some repressed throughput.

• 28:13Ryan Sean Adams?

  Just to expand on that, contract deployment, does that mean that you are kind of taking off the permissions around deploying contracts to optimism? So any development team can come and deploy their contracts onto optimism? Is that what that means?

• 28:26Speaker 03

  Yeah, so I want to be careful with, with framing there and also give us time to like write it up in a way that's like sort of more accessible to everyone and universally recorded. What I will say is that in line with our incrementalism philosophy, the next step, right now, we have a whitelist that we maintain that allows certain keys to deploy. Our next step will be just very, very liberally giving out that whitelist because it gives us a closer connection to the devs that are building on top. And it's extremely important. We've learned that talking with the projects that are running on Optimistic Ethereum, you know, as the protocols in early days is incredibly important. So we don't want to lose touch right away to be able to say, oh, anyone can, any random token, you know, any random address can deploy and we won't know who they are. But there will be some very clear

• 29:09Speaker 03

  cut guidelines that say, show us that you have a GitHub repo and some responsible security practices in place and we'll give you the green light right away. So.

• 29:18Ryan Sean Adams?

  This, of course, is the big difference between theme parks and rollups is like, anybody can go create a ride.

• 29:25Speaker 03

  Exactly.

• 29:25Ryan Sean Adams?

  You can't do that in Disneyland, right?

• 29:29Speaker 03

  Yeah, exactly. And all the kids at Disneyland would be very impressed by the 2,000 foot roller coaster, but it might not end so well.

• 29:35Ryan Sean Adams?

  Exactly. We've seen a few of those in DeFi already.

• 29:40David Hoffman?

  I want to touch on the infrastructure that you guys are working on at Optimism. You already mentioned Chainlink, so Chainlink is up and running, which is a prerequisite to applications like Aave or Compound or anything that has collateral inside of its applications. But then there's also the conversation around infrastructure, around things like EtherScan and Infira and just other all just explorers and all this world. What other infrastructure are you guys teaming up with to have launched and have that out to gate?

• 30:13Speaker 03

  That's a good question. I think, yeah. One thing I would say to that, that's been very exciting for us, has been,

• 30:21Speaker 03

  again, I will just keep coming back to this. I think Carl and I are going to sound like broken records by the end of the podcast, but that's all right, because we are broken records. The ability to do that has become so drastically clear, dependent on being connected with the stack. And so you brought up examples like infrastructure providers, and I don't think it's more true anywhere than it is in that stack. So like when we had our first optimistic EtherScan link and we got to click on a transaction and like see transaction subcalls, just like we did, like that was just like an aha, so, so satisfying moment.

• 30:58Speaker 03

  As far as specifics on what's coming up, I don't want to get into too much there. And I also don't want to speak for other projects as they have their own comms plans and things like that. I think we're going to be seeing, I know that we'll have online all three of the big providers, like QuickNode, Alchemy and Infira. So that's something that we're extremely excited about. Something that we learned very quickly was that the value that they provide to Ethereum is just incredibly, incredibly important, which came from a time when we launched Synthetix and realized, oh, man, a lot of people want to read the state. Reading the state is something that people like to do. And of course, we've got more projects coming online, coming online shortly.

• 31:37Ryan Sean Adams?

  I'm curious, just while we're on the topic of projects that are coming online. So we've talked so far about Uniswap and Synthetix, and there's probably a slew of other projects that are working with you guys, some of which, you know, you probably can't disclose right now, some of which will be launched in the future. But so far, everything we're kind of envisioning is DeFi-related, or these are things that have been deployed on Ethereum already. And it's kind of like the idea of like, well, we need to migrate DeFi to a more scalable environment. And NFTs also fit that mold. I want to ask maybe beyond that, though, right? So like, part of how we're curious about how this is going to shape up is what new use cases might this Layer 2s unlock

• 32:22Ryan Sean Adams?

  beyond like what we've seen on Layer 1? Even if they're like DeFi-related, what sort of things are you seeing? You could imagine like the Web 2 world getting really interested in some of this now that block spaces is much cheaper. You can imagine FinTech getting interested about this, in all of this. You need to even imagine, right? There's so much talk in, you know, regulatory world about a central bank digital currency, right? So a central bank digital currency on Layer 2. I'm curious what sort of use cases you think this will unlock? And also, if you could weave this in, does that all happen on one optimistic roll-up chain? Or is there a world where we're going to see a universe of optimistic roll-up chains and a universe of optimism-type chains that serve different use cases?

• 33:07Ryan Sean Adams?

  So I'm curious about the use cases, and then also how this shapes up in the future. What do you think, Carl?

• 33:14Speaker 02

  All right, great question. So first off, I just want to say that y'all should all watch Vitalik's ECC talk. That has some of the great, you know, great ideas about, you know, other than DeFi, what are the applications that we need to see? And generally, the reason why we got into L2 was because there is so much that you can do in the world of trusted computation that we are unlocking by reducing those barriers of entry. And even things, I will say even things, not even just in terms of throughput, even things like low latency really changes the game and the way that you interact with a blockchain in general. Because you're like, oh, I actually get this, you know, real-time feedback.

• 33:59Speaker 02

  That means I can perform many actions in a row and have it feel good. So The kind of, the space is huge. I am personally very interested in what Vitalik said around kind of upgrading our social media platforms, upgrading our, you know, upgrading DeFi and to kind of be a more cohesive experience around like how you interact and show your value and appreciation with each other. So I could go into crazy stuff around there. But back to practical stuff, we are building this thing one step at a time. And so that means that the main things that we want to do is like fit in a bunch of infrastructure projects that work well together. So that means like, you know, Uniswap, Synthetix,

• 34:43Speaker 02

  various lending platforms, you know, various DeFi protocols. That's a really important, you know, market that is obviously there and obviously needs to be served. So that is like for sure, the kind of initial rollout. As for whether or not there are many rollups or, you know, just one. Okay. So first off, it is very clear that there are more than one rollup. I mean, you can see there's many rollups that are out there.

• 35:08Speaker 03

  L2B.com, quick plug. L2B.com, quick plug.

• 35:14Speaker 02

  And so the, so that is obviously the case. But the thing that I will say is that there will probably be with, as with many other things, a power law distribution of rollups. So we'll probably see, you know, various, you know, very heavily trafficked rollups and, you know, a bunch of less trafficked rollups or less value locked or whatever. That doesn't mean that they are any less important. Now, I will say that the concept of application specific is really important in this case. So it turns out that the more you spread an application across these rollups, the more actual computation that you need to do to keep those rollups in sync. So that means that there is this actual need to kind

• 35:57Speaker 02

  of co-locate rollups, rollup infrastructure that is like one application. And I know that, you know, there are many applications in DeFi, but one very important application is just kind of finance and expression of that kind of value in a kind of the mainstream. Form. So I do think that there will be some like really heavily trafficked rollups. And the reason why I'm kind of calling that out is because it's obvious the case that there will be many rollups. But it is also the case that we need to scale up the performance and the throughput of each individual rollup as well. And that also goes for the Ethereum L1 technology as well.

• 36:38Speaker 02

  So because we're trying to build kind of core infrastructure for Ethereum, that means we need to solve the things that are limiting throughput on Ethereum as a whole. So things like state expiry, that is a problem all rollups are going to face. How are we dealing with all this state? We're increasing throughput? Where are we going to put the data? Right? It's a very simple question and it has very hard answers that we need to work on. So it is this, it's going to be both. It's always more complicated. That's my, you know, view into the complexity.

• 37:07Ryan Sean Adams?

  Definitely want to touch on state expiry and some other issues. I'm curious, like you mentioned this idea that, hey, having applications co-located on the same rollup, there are inherent advantages of this. I'm like wondering back to kind of that, that city analogy, if it sort of evolves like a city where you have like the financial district and you have the art district and you have the, the commercial district. And some of this, like a lot of this wasn't centrally, you know, pre-planned or organized. It just kind of happened organically and network connections were made and sectors were kind of born. Do you think it will play out like that in the world of all of these rollup chains, Carl?

• 37:41Speaker 02

  I think that is a very apt, apt analogy and I do think it will play out like that. This is an emergent phenomenon, an emergent process. And it is the case that there are some hard to quantify, but quantifiable. And if you want to be a researcher, you can quantify reasons for co-location. And so it will happen.

• 38:01Speaker 03

  I just, I just want to build on what Carl was saying here too, to touch on the, uh, the, um, the populist urban environment analogy. I do think it's worth saying, it, I think it is selling crypto short to be imagining that the, to be saying that the things that we are seeing today are cities. I think if anything, they're towns or maybe villages. And so like, this is kind of what Carl's alluding to, that we need to do both. Like, yes, we'll have a lot of cities, but also cities need to grow. And there are like huge metropolises which have huge benefit to and utility to the, the folks that live in them. So it really is a matter of doing both. Unfortunately, there's not one. We haven't reached the scaling pinnacle yet. It will need to keep going.

• 38:44David Hoffman?

  I do actually want to get into the actual metrics and details behind the Optimistic Rollup Chain, the first one that you guys are pioneering. And so I want to get into some of the more technical details there. And I want to start with the O E V M, the Optimistic Ethereum Virtual Machine. This goes to the conversation of developers coming on online to Optimism. What is that process? They have code on Ethereum, it works well on Ethereum, they've already optimized it, it's going, growing great. Now they want to go on Optimism. How does, how does that process look like? Is this a simple process? What changes need to be made in order to become O E V M compatible?

• 39:22Speaker 02

  Great question. So this is more of a journey than a single, you know, answer. And so this is a snapshot in time. In, you know, months ago, it was a horrible process. And, you know, thanks, thank you to Synthetix and U2 Swap and various other integrators that have dealt with our terrible user, developer experience. But the iterative, the goal, the very explicit goal is to reduce that friction to near zero. And so we know how to do it. We are not 100% there yet. There are contract code size issues, there are various other problems that we have faced. But this is why it's so important to actually do that onboarding, feel the user pain for the, for

• 40:03Speaker 02

  the user. And so, for instance, we had a big difference where we didn't have native ETH. And it turns out that native ETH is used by us in the non-trivial portion of the DeFi projects. So we added native ETH. And so there's a, there's a whole kind of list. And for that, you know, the most comprehensive list and the best thing is just check out our docs specifically for like, what's there now. But it is definitely trending towards a one-click deploy. Now that said, there are differences in that if you have an application that, that, you know, communicates between L1 and L2, or, you know, deposits or withdrawals, there are standard bridges. But if you want to do something fancy, you can do some, you know, fancy trickery and send, you know, to implement something there. So things like hop exchange would obviously need

• 40:48Speaker 02

  to be, you know, re-architecting their system around the interfaces. But for normal applications, it should be pretty close to one click.

• 40:57David Hoffman?

  The gist that I'm getting, because you said that this is an iterative process, the gist I'm getting is two Venn diagrams that are overlapping, and these Venn diagrams are actually becoming more and more overlapping. They're approaching each other. Perhaps it's impossible for them to actually become one-to-one, but that is regardless the goal. Is that a good illustration?

• 41:15Speaker 02

  Yes, that is exactly the goal. I do have hope that they will eventually become one-to-one, but that is definitely a Nirvana point. And that Nirvana point will be, we have an Ethereum protocol that works in Layer 1, Layer 2, and various contexts.

• 41:32David Hoffman?

  Very cool, very cool. Okay, so with regards to actual block space capacity, can you guys kind of put into a frame of reference for how much actual block space there is on the optimism chain that you guys are building? How much scale is there?

• 41:46Speaker 02

  Great question. Okay, so when in Ethereum, you have one resource. It is called gas. When in any Layer 2 protocol, there are now two resources. Sorry, any roll-up protocol, there are now two resources. There's Layer 1 gas, and there is Layer 2 gas. So it gets a little complicated. Now, first, I'm going to start out with Layer 2 gas, because that is 100% analogous to Layer 1 gas. We have implemented an EIP 1559-like restriction. It is not yet EIP 1559, but we're going to get there, which restricts it to about 50,000 transactions per day. This is 1/20 of Ethereum L1. This is nothing like it needs to be.

• 42:30Speaker 02

  And we can double it on a whim. That's what Ben was alluding to earlier. And so we are going to be pushing that number up, up to 1-to-1 with Ethereum, and then pass it. So that is on that trajectory. Now, the way that we get there is just tuning our parameters and making various changes. And then, boom, we can even push past Ethereum. Now, notably, when we push past Ethereum, we have to stay grounded in the universe of problems like state expiry that do come online. So like, there's no free lunch here. There are reasons for Ethereum. Ethereum's block size. And so you just have to like get it, get it, you know, make, make your way around that.

• 43:12Speaker 02

  Now, the second thing is Ethereum itself as an L1 is scaling its gas. So that is what ETH2 Phase 1 is about. Right now, we can support across all rollups about 5,000 transactions, and I mean the simplest transactions, like ERC20 transfers per second. That is based on, you know, Vitalik's calculations a while and a little bit adjusted based on block size. So then ETH2 comes along and we can about 10x, you know, 15x that number. And we can get up to, you know, 100,000 transactions per second on these very small transactions. Now, depending on what you're doing, you get more or less scalability.

• 43:52Speaker 02

  It turns out these small transfers are actually less scalable in our context for reasons I won't go into. So anyway, that's the L2 gas scalability. It's basically just ramping it up, removing differences between Ethereum until we can supercharge. And then L2, L1 gas is ETH2.

• 44:09Ryan Sean Adams?

  So I want to make sure I heard those numbers, Carl. So you said 5,000 transactions per second, just with ETH1 as it is today, would, would maybe be close to an upper limit of optimism. Is that correct?

• 44:23Speaker 02

  That is an upper limit of all rollups in aggregate.

• 44:28Ryan Sean Adams?

  All rollups in aggregate. Okay, perfect. And then once ETH2 comes along, right? That introduces some additional like data availability space?

• 44:37Speaker 02

  Exactly.

• 44:38Ryan Sean Adams?

  Rollups. And then that's going to get you what? From 5,000 to what?

• 44:43Speaker 02

  To like 100,000.

• 44:46Ryan Sean Adams?

  Okay. And that is with ETH2 post-merge that we're talking about where people floated, who knows what the timeline is, but you know, let's say QQ 2022, Q1 2022 or Q2 2022. Is that, that's what we're talking about?

• 45:02Speaker 02

  Exactly. That is what, yes. Interesting.

• 45:06David Hoffman?

  And, and let's just, I just want to hash out the actual bottlenecks for optimism scaling and how they are different or the exact same for Ethereum scaling. Can you kind of just hash that out? Like what was, why aren't we at 10 million transactions every microsecond? Why can't we do that?

• 45:23Speaker 02

  Okay, great. So the first bottleneck is the most, you know, clear cut, and that is the ability to sync a chain. So in Ethereum, you need to download the, all the transactions, you need to execute them. So we need to make sure that L, that nodes can actually execute those transactions. That is the most fundamental. That is what Ethereum has been dealing with quite, quite frequently, and that is currently the big bottleneck. We are about to enter a phase where Ethereum can now split into multiple rollups. And so we are going to make it so that you can run the Ethereum software in layer two and execute all those transactions exactly the same way that you would do in L1. Only bottleneck there is like getting to one to one to Ethereum. That is really, that is really the only thing there. You can

• 46:08Speaker 02

  actually, there are justifications for ramping up those numbers in L2, but I won't get into that exactly. That's the first kind of scale, you know, scalability, it's kind of computation. The second limit to scalability is bandwidth or availability. That is how many transactions you can actually put onto the Ethereum network and it can actually process. And that is what we're scaling up, up and up and up with ETH2. And you know, you can parameterize, you know, ETH2 even, you know, to the max if you wanted to, but that's what, you know, there are fundamental limits to scalability in blockchains globally that we have to take into consideration here. And so you can, that is the bandwidth and availability limits. Then there's a third limit that's a little bit funky, and that is essentially a bomb

• 46:52Speaker 02

  that is going to explode on L1 or any L2 that is implementing an Ethereum-like protocol. And that is the state explosion. And this is what we were talking about when we say statelessness or state expiry. As these chains accumulate more and more state, it becomes harder and harder to hold that in a database. And so eventually you get to the point where nodes fall off The network because it can't hold on to everything. So this is a problem where you have to basically tune your parameters so that your state grows at a rate that is uh, slow enough that you can solve the state expiry problem to basically unleash the release valve and let the state expire. And so this is something that Ethereum one, I mean, L1 needs to uh, uh, solve.

• 47:37Speaker 02

  This is all, this is something that all L2s need to solve and it's very critical. Anyway, um.

• 47:42Ryan Sean Adams?

  Do you think we can solve that last one, though? The state expiry one? That's a pernicious problem. You think we can solve that one, Carl?

• 47:47Speaker 02

  Yes, we definitely can. There are really nice proposals by Vitalik. There have been for years. It's really about trading, uh, picking trade offs at this point. It's really not problematic. In fact, generally, I will say that the scalability problem in Ethereum is caused more by resource allocation being messed up than it is about actual research solutions to hard fundamental problems. We've known about solutions for years. We just don't have the manpower to, or women power, or people power to implement them.

• 48:19Ryan Sean Adams?

  I just want to round off one other quick thing. You were talking about two types of gas, ETH1 gas and optimism gas, right? Basically, so ETH1 gas, you pay for that in ETH, it's nominated in ETH. Is that true of optimism gas? Is that also paid for and denominated in ETH?

• 48:34Speaker 02

  Yes, everything is denominated in ETH. You pay the maximum of the two gas costs. So if it's more expensive to submit to L1, then you, then you pay that gas cost. If it's more expensive, there's too much congestion, then you pay that gas cost.

• 48:48Ryan Sean Adams?

  I think that's what's interesting with the kind of the federal government versus the state analogy too. It's like both in the, you know, federal level and the state level, they're all using the same currency and that is the currency of the, the national economy, which is Ethereum in this case. Very cool.

• 49:03Speaker 02

  I like that.

• 49:04David Hoffman?

  Carl, earlier you talked about the latency upgrades that optimistic rollups gives. And when I was tinkering around on Uniswap on optimism, I would hit submit transaction and then it was done. It was already, it had, I got it, the website responded back with like, the transaction is complete. And it was so incredibly fast that I was suspicious that the Uniswap website was actually just telling me it was done without actually knowing that it was done. I was wondering if you have any insight into how the Uniswap website works? Or if it is actually that fast?

• 49:36Speaker 02

  Okay, so I'm gonna have to let you in on a little secret about our universe. There is a probability that everything will be reverted at all times. So that means that the finality is not just, it's not just clear cut, right? And that even goes for proof of state. Like what is final is a consensus protocol that we all have to agree on. So what happened instantly is that you instantly got an enormous amount of guarantees that your transaction was finalized. If you go into EtherScan at that moment, EtherScan maybe takes one second more to index, but once it is indexed, it will say confirmed by the sequencer. And so that means that the entity that is saying, that is ordering the transactions

• 50:20Speaker 02

  said, hey, you got this particular transaction indexed and this is the result of your transaction. And that happens near instantly. And then there is, there are probabilities that the sequencer lies or that Ethereum L1 reorgs or, you know, there's a whole host, well, really those are the two. But they, those two things are pretty pernicious in that they could technically happen, but you get really good guarantees that they won't.

• 50:47David Hoffman?

  And so, and this was, this was kind of my, my question is like the, the promise of guarantees informs the Uniswap team that they can just tell me that my, my transaction got included regardless of whether they know or not because the strengths of the guarantees are so strong. And so my, my question was, did the Uniswap website actually check anything? Or did they just tell me that it got in, included?

• 51:11Speaker 02

  Yes, they did check it. They got a response from the sequencer that said, hey, your transaction was included and confirmed.

• 51:17David Hoffman?

  And so, and so that I think should, if listeners haven't actually transacted on Uniswap optimism or synthetic optimism, that should be the big takeaway is that it is so incredibly fast that you don't even know if it actually, or I, I did not know that it was actually a response coming from a server saying that this transaction actually got included. I kind of thought that they were just doing some pseudo jujitsu on me and saying like, yeah, the, the finality guarantees are so incredibly strong that we're just gonna tell the user that it got in. The, the amount of latency, the, the lack of latency is so incredibly impressive that I think people aren't really like, uh, aren't understanding that this is what's coming.

• 51:55Speaker 02

  Yeah.

• 51:56Speaker 03

  These are kind words. Oh, I want to show one thing. I want, you know, you go, Carl. Fine, you go. Okay, okay. I want to show one thing real quick, which is that what you are seeing there is not just a transaction confirmation in the sense of a guarantee that your transaction will go in. That is actually a state update that is applied to the L2 state. So it's not, in other words, it's not just that your transaction is coming in, has been selected, and is going to go into the chain. The Uniswap price actually just updated based on whatever slippage you incurred based on that. And that is a property that is unlike L1 that is very powerful that we might get into later. So it's more than your transaction going in. It's actually getting applied, which we're super excited about.

• 52:39Ryan Sean Adams?

  That's very cool. I want to ask another question. So some people are worried that what might happen in a multi-layer-two universe, where we have all of these different layer twos and rollups included, is that we start to fragment liquidity. So we even think about Uniswap, right? So it exists on main chain, but then it also exists in optimism and perhaps other rollups, other layer twos as well in the future. Are you guys worried about that? We've also heard about some, maybe some protocols like Bridges that are starting to help there, like Connects and in HOP protocol and these sorts of things. But frame the liquidity siloing problem for us. And I want to ask if you're worried about that. Ben, what do you think?

• 53:24Speaker 03

  Yeah, so that is a great question. So maybe just to start with some context and sort of frame what you're getting at. So of course, the way that these rollups work is that you deposit funds into them, and then they are locked up on L1 while they're doing things on L2. Now, the rule that we have of L2 is that you have to dispute the check that bounces as opposed to guaranteeing and verifying all checks on L1 upfront. What this means is that you have to afford some window on L1 before someone can take their money out of the rollup, which is a period for which people can dispute. So that's sort of the raw framing of the question that we're talking about. And this is called like a withdrawal time. Sometimes it's like a common term for it, right?

• 54:09Speaker 03

  We also call this the challenge period. So you have to wait the challenge period to pull your funds out. So how does this manifest? What are the effects of this?

• 54:21Speaker 03

  So there's basically two effects. One effect is simply that that time has to be awaited. And so notably, that's by someone, not necessarily you. So somebody has to wait that withdrawal time for you to move your funds out of one rollup and into another. So what's really, really cool that we're seeing is projects like HOP Exchange, like you mentioned, and Connects and others, that are working on ways to offset that UX problem to liquidity providers. So the core idea is that if someone else is verifying the chain and they want to be making some fees, one way for them to do that is if they see that you just started a withdrawal,

• 55:05Speaker 03

  the chain has to wait to afford a dispute if there was one. But anyone verifying the chain knows immediately that there is no such dispute going to occur, and therefore that the withdrawal is going to go through. And so you can think of it as someone else is almost willing to buy that withdrawal from you in exchange for a small fee, so that you can get your funds immediately. So I would say that probably our number one most frequently asked Discord question is, "Hey, guys, how can we not have to wait a week to get my money out?" These projects are the answer, and so that's extremely, extremely, extremely exciting.

• 55:39Speaker 03

  Now, as far as your question of framing this as a concern, so there are reasons to be concerned with this. I think in the context that we just talked about, the main concern is capital inefficiency. So basically, the fact that someone is going to be taking a fee means that the system is less capital efficient. And it means that the more you have to divide up your rollups, the more fees are going to be paid, and the more money is going to be spent moving between rollups passively, instead of actively engaging in economic activity.

• 56:07Speaker 03

  Right, so that is one framing, and I think that is the core framing that you're probably getting at.

• 56:12Ryan Sean Adams?

  I'm getting at that. Also, I'm getting at the issue, Ben, of like, I just, I want to trade ETH for DAI, and I just want the best price on Uniswap. And so like, Uniswap on mainnet is going to have very deep pools for me, whereas Uniswap on an L2 might have less deep pools. And so I have more slippage, I don't get best price, and liquidity is fragmented that way, too.

• 56:38Speaker 03

  Yeah, most definitely. So I'm not as much of a decentralized finance expert as to be able to give you great numbers on how all the arb of that is going to work and how things are going to balance out. Hopefully, we have some good things that are bridging liquidity as actively as we can. Now, I want to shout out one project in particular that you've reminded me of here, which is Nova, created by the Arrari Capital team, because they are doing some of what I think is the more groundbreaking, cool research that comes to my mind when you say, "I want to do a trade somewhere else." So basically, the one question that you might have is, "Well, if I have my money on L2, why can't I go immediately use it and trade on L1? Right?

• 57:21Speaker 03

  Why can't I just take that and execute the trade of my funds?" And the reason is because that withdrawal time, more generally, is an asynchronous delay. It means that contracts communicating with each other across different chains do not have to send a message one way, and they do not immediately get the response that they're looking for. So I think another example of this is, that's really apropos, is flash loans. So if you have money on one chain, anywhere on that chain, you could do a flash loan that transfers all that money, execute some behavior, and then reverts based on whether or not something that was desired happened. You cannot do this across a chain in the same way, because sending the money in

• 58:05Speaker 03

  one direction does not immediately afford you a response. There's this asynchronous delay. So one thing that I do think that we'll see is cross-chain projects that are all about moving funds into a contract on the other chain, basically to do your bidding over there. So you might not be able to trade on Uniswap immediately, but you and a bunch of other people who also want the better price on L1 might all aggregate your funds and send them to a contract on Layer 1 that will execute the Uniswap trade on your behalf, and then send the money back to L2, and then disperse all the funds to the people on L2. So are there fundamental things that have to be done differently? Yes. Am I concerned about that?

• 58:48Speaker 03

  No, I'm more excited because it is an opportunity for innovation, and there are people really innovating there.

• 58:53Ryan Sean Adams?

  That's super cool. As always, we just get the robots to do all the dirty work.

• 58:56Speaker 03

  Exactly, that's what it comes down to.

• 58:59David Hoffman?

  Guys, this has already become one of my favorite shows out of the Bankless Podcast. I'm so excited to have gotten Ben and Carl on the show. In the second half of the show, we tap into Carl and Ben's more philosophical, more expansive mindset and illustrate the connection between cheap transactions and transaction sequencing, and how that can actually solve some of humanity's biggest troubles. This has been one of the biggest through lines of the Bankless show, if you have been paying attention for such a long time. And I was so grateful to be able to finally have the opportunity to ask Ben and Carl these sort of questions. We also go through a lightning round of so many different questions, such as, does optimism have a token coming? What's the relationship between shards and layer twos? How did EIP1559 impact the development of optimism?

• 59:44David Hoffman?

  And what's next for optimism? And also, therefore, what's next for Ethereum? All of these questions and answers are coming in the second half of the show. Before we get there, the optimism team wanted me to let you know that they are actually hiring, and so they have a job boards out there. You can go to that job board at jobs.lever.co/optimism and see the jobs that they have available. They have a DevOps engineer, Senior Front-End Engineer, Senior Geth Engineer, Product Manager, Technical Product Manager, Executive Assistant. If you guys have these skills and you guys can help out the optimism team, go ahead and apply for those jobs. They are hiring. All right, guys, we're going to get right into the second half of the show, but first, a moment to talk about some of these fantastic sponsors that make this show possible.

• 1:00:29David Hoffman?

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• 1:01:09David Hoffman?

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• 1:01:54David Hoffman?

  Aave version 2 has a ton of cool features that makes using the Aave Protocol even more powerful. With Aave, you can leverage the full power of DeFi money Legos, yield and composability, all in one application. On Aave, there are a ton of assets that you can supply to the protocol in order to gain yield. And all of those same assets can also be borrowed from the protocol if you have supplied collateral. Here you can see me borrowing 200 USDC against my portfolio of a number of different DeFi tokens in ETH. I'll choose a variable interest rate because it's a lower rate than the stable interest rate option. But I could choose the stable interest rate option if I wanted to lock in that interest rate in permanently.

• 1:02:35David Hoffman?

  V2 also features the ability for users to swap collateral without having to withdraw their assets, trade them on Uniswap and then deposit them back into Aave. With Aave, users can do this in one seamless transaction, saving you time and gas costs. Check out the power of Aave at Aave.com. That's A-A-V-E.com. Does this conversation change at all when we start to talk about L2 to L2 transfers? As in, we're on one optimistic rollup and we want to go to a different optimistic rollup? Or perhaps even a ZK rollup, or perhaps a sidechain? Do you guys have opinions as to how this like mesh network of L2s are all going to become a little bit more easy to traverse?

• 1:03:16Speaker 03

  Yeah, so in all of these cases, for the most part, the asynchronous property that I was talking about is maintained. So basically, you have to send messages between these things and those messages are going to take some non-finite time some finite but not infinitesimal time to evaluate and so you don't get a response immediately. So that imposes some hard limitations, but certainly what we do see a difference in is the time at which those messages take. So a prime example of this is when you deposit into a rollup, that is much faster than a withdrawal.

• 1:03:54Speaker 03

  Because the rule is that the L2 nodes all know exactly what's going on in L1 and it's sort of trusted is the wrong word, but it's synced. So when you do a deposit into an L2, that happens right away. What this means is that if you were to do a round trip of taking some money on L2, sending it to L1, doing something on L1 and bringing it back to L2, that's going to take approximately, you know, a small finite amount longer, but approximately the withdrawal time for that round trip. Because you withdraw and then you do the thing and then it's deposited back in and that's really fast. And you can even have nested rollups where going downwards down the nest is similarly fast to depositing.

• 1:04:36Speaker 03

  When you're going from L2 to L2, it's going to be a little bit different because now the L2, to do the round trip, you have to do two withdrawals. You're effectively withdrawing it into the one L2 and then withdrawing it back to the original L2. So there are going to be differences in there, mostly in terms of latency and that gets into like a suite of capital, you know, efficiency questions. So the answer is it's not really that different. You're just sending messages and doing the contracts do whatever they want based on those messages. But the timing of those messages does change between these solutions.

• 1:05:07David Hoffman?

  The image that I'm conjuring up in my brain is we've talked about the different cities and all these different rollups are different cities dispersed across, you know, this massive land that is Ethereum. And I'm envisioning like the sky, these sky bridges between all like the downtown areas of each city, depending on the different routes. My question to you guys is, over the long term, are we ever going to go back to the Ethereum L1? Or are we just going to take these sky bridges from rollup chain to ZK chain to side chain, back to the rollup chain? Like, do we just live in the sky now? Live on these L2s without ever having to go back to the L1s?

• 1:05:42Speaker 03

  It's utopia. Of course, we're living in the sky, baby. I think only time will tell. It may be the fact that there are classes of users which are definitely only ever living in that world and not. I do think that in general, the argument that I've heard about crypto that I like a lot, that was an argument about the internet, is these things should all move to the background and really, and really, people shouldn't be thinking about what layer they're on. And so, in that regard, to me, it's the strongest way to do that is have really good robots for moving the funds between these sky bridges wherever else, and people won't even know. And so, that makes me think that the answer is probably yes. Do I think there will be some crazy alpha leak experts out there that are being more precise about how they use this global sediment layer? Probably.

• 1:06:27Ryan Sean Adams?

  Do you know what's funny, Ben? Is like, I'm so divided on what you just said there, which is like, there's a huge part of me that, like, I want to have users not think about what chain they're on, right? Like, I totally get that. It's a better user experience. We have to onboard the world. That's super important. And yet, I also want them to know about the trade-offs that they are making with respect to, like, where they're living, right? And there are some solutions in crypto that are not nearly as decentralized as a rollup, right? So you might take sidechains as an example. And if a user can't tell the difference between a sidechain and a rollup, and the security guarantees that one offers versus the other, is that going to be a problem? What do you think about that?

• 1:07:13Speaker 03

  Carl, it sounds like we need a universal technology stack which allows users to make their own trade-offs on a sliding scale.

• 1:07:21Speaker 02

  We wanted that. Optimistic game semantics. Shout out to what Ben was talking about, or what you introduced Ben with. It's essentially what you described.

• 1:07:31Ryan Sean Adams?

  Yeah. So what is that? What are you talking about here?

• 1:07:34Speaker 03

  Oh, so you want to go, Carl? I'll take it away a little bit. So at one point in time, we had this idea of something called optimistic game semantics, which was basically when we realized, once we had the rollup realization, it kind of came to the forefront that, ah, it really is the case that you're piecing together these fundamental dispute building blocks into a, into a particular system. And those building blocks really are the same. You're just depending on how you fit them together, you get different properties. So we came up with basically a scheme that lets, there's basically a language that was based on like a predicate logic, like first order logic, and would allow you to describe both

• 1:08:14Speaker 03

  a rollup and a state channel and a plasma in a sort of shared language. I think as it relates to our thinking now, eventually what we realized is that it was more important to build rollups first because building everything all at once was not the way to go. I think where some of the lessons there we felt have come to the forefront is basically in that wherever you can reuse code, you should. So I'm much more bullish about being able to give users the choice between a side chain and an L2 and a plasma and a state channel and L1 in the world in which the underlying infrastructure that they're all running is still the EVM. That's what I think is going to be incredibly important because as long as there's not some big paradigm shift in how they have to think about signing

• 1:08:56Speaker 03

  things and how they think about the transactions getting executed, then being able to inform and educate users and tell them where their money is living and what the properties of that thing has is going to be a lot easier when they don't also have to think about what it's like to use that thing with a different trade off.

• 1:09:12Speaker 02

  And so we minimize the diff between Ethereum and Layer 2.

• 1:09:17David Hoffman?

  And that actually is a great transition into my next question, because when you minimize the difference between Ethereum and the L2, you get all the magical properties that Ethereum has that we all know and love, and you also commit to its baggage as well. And we've talked a little bit about this. We talked about state blow and the increasing state size. But what we haven't talked about, and what is a very fundamental component of the overall optimism story is MEV, the inevitable

• 1:09:43David Hoffman?

  Problem MEV. And so each, every chain that has blocks is going to have to tussle with the MEV problem. And the way that optimism, from what I've heard, has approached the MEV problem is unique and intentful and precise. And so I would like to actually go into how, what is the optimism ethos for solving the MEV problem? How do you guys handle it? And what is the sort of the design ethos that has gone behind these, these decisions?

• 1:10:12Speaker 02

  This is a great question. Glad you asked. So first, our philosophy, our ethos is number one, reduce MEV as much as humanly possible. This is critical. But there is MEV that is fundamental to blockchains that cannot be avoided. And so for that MEV, we should extract it and spend it intentionally. Don't just give it to some random party miners, eh, you know, name your party. We need to be intentional about where we are spending our money as a protocol, as a community. Okay, so what does that mean? The most, the clear example of MEV that is fundamental, that cannot be changed, is transaction fees.

• 1:10:56Speaker 02

  Transaction fees, specifically priority fees, they are fundamental because it's like, I want to get my transaction in first. Oh, you want to get your transaction in first? Well, there's a sequencing problem. And, you know, lo and behold, there's a term called a sequencer, which we have talked about, and a specific design which we have talked about in the past called MEV auctions. So I'm just gonna, we're kind of trying to move away from MEV auctions because it's a little confusing because there's, you know, a bunch of people talking about random things. Instead, I'll just say sequencer auctions, because that is specifically what we are talking about. So a sequencer is a person who is able to order the transactions.

• 1:11:38Speaker 02

  This is very important for giving low latency, and in fact, it exists on L1. Block proposers are sequencers. But block proposers on L1 currently do not pay for their privilege to create the, the sequence that they want to, you know, produce. So the auction part of it is just saying, hey, block proposers or sequencers specifically should be, should be paying for their right to sequence transactions. Now notably, This is essentially a reduction of MEV. It is literally taking MEV from the minimal you can get it with, you know, the fundamental constraints around transaction ordering and priority fees and, you know,

• 1:12:23Speaker 02

  whatever it is. And then, once you've minimized it, then you extract the rest. And you may want to give some back to miners, because obviously miners deserve a lot of, you know, rewards for doing their thing. But it can also be used to fund core infrastructure. Now, think about it this way. We pay like, you, oh, I wish I could show you the graph, but the graph is crazy and I don't know what the X is, but it's at least 20X more, I mean, it's probably 100X anyway, more on miners than we do on protocol development in Ethereum. This is a real problem, because scaling Ethereum is a public goods problem. That is, that is like, uh, one of the weird realizations.

• 1:13:05Speaker 02

  I talked about it, I alluded to it in the past, where I said, uh, you know, really, the problem is not the research, it's the implementation. We just haven't been spending our protocols money on improving the protocol. Think of a startup that's not investing in itself to get better, you know, just, and the reason why is just because we don't have the coordination mechanisms. So anyway, what we're, our philosophy again is like, okay, let's, let's reduce MEV as much as possible. We'll, you know, we'll still have transaction fees, but then let's use the rest to fund protocol development, fund public goods, fund open source, and, you know, we can talk about the crazy stuff later. Um, and, but notably, one, one thing I'd love to dive into specifically is just the,

• 1:13:47Speaker 02

  um, you know, why there, it's a non-trivial problem to reduce that MEV. So anyway, I want to give that to Ben.

• 1:13:57Ryan Sean Adams?

  Ben, why is it a non-trivial problem to reduce that MEV? Because that's the first thing Carl said, where you're actually reducing MEV.

• 1:14:04Speaker 03

  Indeed. So I think what Carl's basically getting at is it is incredibly hard to define extraction. And it is incredibly, more importantly, it is incredibly hard to define a solution to that extraction. That's going to be universally accepted, extremely, extremely, extremely challenging. One of the words that's tossed around in this, in this particular field a lot is fairness. But the reality is there is no such thing as a universally accepted definition of fairness. So I'm, yeah, I'm super glad you guys asked about this too. Like, I think definitely. We put out this post about two years ago on MEV auctions. And at that time, the dark forest was in a very different state than it was now. It's a lot darker.

• 1:14:45Speaker 03

  It's, it's, it's perhaps a lot darker. And when we wrote that post, we didn't focus on shedding light on the darkness. So much as we focused on what we saw as a new light, which is like what Carl said, the ability to take basically revenue from something and give it to public goods. Because at that time, we had all these great things going on. We had, you know, quadratic funding was all the rage. We had Bitcoin grants and they were all based on donations. And Carl and I, you know, and others were running a nonprofit that relied on donations. And so we were very, very, very excited by the ability for a protocol to distribute revenue. And we saw Layer 2 as an opportunity to do that. Now we see that that revenue is exploding and many people are not happy with how it's being, being taken.

• 1:15:28Speaker 03

  So this is an incredibly important area of research for us and honestly, for the entire crypto community. And it is not, not entirely solved yet at all. And part of that is because it is so darn hard to define a version of fairness that everyone's going to agree upon. So right now, the way that our sequencer works is basically first come, first served, right? That's why you see those interesting, those transactions on Uniswap popping right away. Is because you come and you, you are in a line and you get served. And that's just first come, first served, first come, first served. And so that, that's why you get that very quickly. Now, one interesting note is that already, right, we said before how that affects the price immediately. Already, that means that the properties of MEV on L2, on Optimistic Ethereum, are

• 1:16:12Speaker 03

  different from how they are in Uniswap on L1. Definitely for the better. Because on L1, what we've had people say is, okay, I either pay a high priority fee to get my transaction in right away, or I have to increase my slippage because in the time between now and when my transaction gets included, the price is going to move up and down, and I don't want to pay pointless gas for a reverted transaction. So you basically have to choose either to pay more upfront, or you have to wait longer and then get more front run. So already, what we have in this first come, first served sequencing is removing that. And so we think that that's beneficial for MEV, and we're really excited to have more numbers on that, as the protocol's been out for months and months. On the other hand, I guarantee you that that is not sufficient, and we are not satisfied with that answer at all.

• 1:16:54Speaker 03

  And a lot of the academic research right now around sequencing and sequencing fairness comes from basically variations in different flavors on first come, first served. But I guarantee you that people with high pings and bad internet connections are not going to consider it fair that they are always a second-class citizen to right access, that their rights are always coming later than others. So, yeah, there's definitely a lot more to be explored here, and we're happy with what we're doing now, but more needs to happen, and it's definitely one of our open areas of research.

• 1:17:25David Hoffman?

  So who currently are the sequencers? Is this in optimism's current form? Is this a permissioned environment, or can anyone with the skillset, like, become a sequencer?

• 1:17:35Speaker 02

  This is a permissioned environment. We are running the sequencer. However, this is actually a really nice all you in terms of one of the things that we talked about recently called retroactive public goods funding. And so we are running a point of centralization. This is a problem, right? We are Optimism PBC, that is Public Benefit Corporation, and our mission is to enshrine fair access to open source software, and that means not maintaining points of centralization. And so to make sure that that is in line with our incentives, we are donating all of our profits. As a sequencer to actually public goods funding.

• 1:18:16Speaker 02

  So this means, and in particular, retroactive public goods funding is the most, you know, top of mind experiment. So that is like how we are simultaneously maintaining a point of centralization, but also making sure that it is incentive compatible from like a mechanism design perspective, that it is not persistent.

• 1:18:36David Hoffman?

  In the future, will this become a permissionless system? As in, anyone can be a sequencer? Or will there always be some sort of guardrails on it?

• 1:18:44Speaker 02

  There will, it is, it is really, the future is unknown, to be quite frank. However, my, I would say that we must, sequencing must be, you must be a good sequencer, to be a sequencer. So like, I don't know really what that means, but there will be definitions of things that you need to do, protocols you need to follow. Like, it will be permissionless, it will be permissionless, but it will be permissionless within constraints. And that's how you get permissionless. You define your market around the specific thing that you are trying to incentivize.

• 1:19:17David Hoffman?

  Carl, this is more of a philosophical question to you, which I know that you like and I think are good at. So you say when optimism collects MEV, it does this retroactive public good funding. But more broadly as a topic, when you as an entity capture all of this value with great power becomes great responsibility. So more generally speaking, why are you optimistic that the optimism entity can actually allocate funding in ways that are aligned with the broader incentives over the long term? Because as we know throughout, throughout history, power tends to corrupt. Why are you optimistic that this story is different?

• 1:19:55Speaker 02

  Well, it's a game of hot potato. You can't hold the ring. You have to destroy the ring. And so you go venture, sorry, Lord of the Rings reference. You have to go venture and throw it into Mount Doom, right? Like, the only thing that is going to get us over this hump. We, okay, let me just say right now, we are in a very key moment in history that will potentially bring us to good things. Potentially bring us to absolutely terrible things. And I will, I really want to make sure people know this. Ethereum is not all good. I am so sorry. Ethereum has the capability of creating a terrible, terrible, terrible equilibrium, terrible, you know, problems.

• 1:20:40Speaker 02

  And that, the reason why we are in this like inflection point is because we are building all this open source software. We're all ideologically motivated. We're like moving towards this one direction. But there is a corrupting force and that is money that is short-term profits over long-term profits. And that is a real issue. So what are we going to do about it? Well, one, we as an organization are, you know, very clear and upfront. This is a power that we have. This is a corrupting force that we have. We are trying to get rid of it. It is terrible and we hate it. And so one of the big things that we need to do as an ecosystem, as a community,

• 1:21:20Speaker 02

  is recognize the fact that we have created DAOs that are now operating on their own and, you know, kind of thinking on their own. And so there is a serious, you know, a serious thing that all of us as the collective individuals, we need to use our bargaining, you know, rights to essentially push the entire ecosystem into pro-open source, pro-human directions. And so I am personally concerned about us using these mechanisms to enshrine, like literally you can enshrine closed source software using Ethereum. You can build closed source software using Ethereum. Little known fact. So like, we don't want to do that because it's very much against our literal, you know, public benefit charter. And so that is thankfully a little bit of mechanism design that we've, you know,

• 1:22:05Speaker 02

  done on the org scale. But it is also something that we need to do as an ecosystem and really internalize. This is, if we're going to get to that, you know, slaying Moloch moment, we need to literally be saying every day, I am slaying Moloch. I am not going to try to do funny business. And get together, you know, make sure people don't do that funny business, you know?

• 1:22:30Ryan Sean Adams?

  Oh, Ben, I love like, everyone loves how optimistic you guys are about this and like, you're, you're, you know, you're certainly thinking about it in the right way. Your hearts are in the right place. I want to throw out a critique that Hasu threw out recently about this, which is like, he basically said, hey, there's two options for MEV because MEV could amount to you a whole lot of money. Basically, that whole ring of power corrupting influence, like, that's real, that is embodied in MEV. And so you've got option A, which is optimism, and you guys are giving it to public goods, right? So we love that. Option B is you give it to the token holders, the governors, the corporation, the entity, who, whatever it is, behind the rollup itself, right?

• 1:23:14Ryan Sean Adams?

  And so his argument was basically, hey, what users care about is getting money, right? And like, cheap transactions and like, getting money. And they're not necessarily altruistic as individuals. So if they're going to pick an optimism chain or some other, you know, rollup X, where they're getting a cut of that MEV profit, you know, Hasu would say, what's to prevent them from picking rollup chain X? And what's your answer to that? I know you're optimistic. I know like, I would rather support the public goods chain. But there are a lot of people out there that are just chasing that short term. And we have to design these crypto economic systems in a way that is,

• 1:23:58Ryan Sean Adams?

  well, that can, that can scale public goods. So what's your, what's your answer to that critique?

• 1:24:03Speaker 02

  That is an incredible question. And unfortunately, I am much less optimistic in this regard than in any other regard. So here is the specific thing. We are making a choice, and it is a choice that we are making today. And that is a choice between open source software and closed source software. Fundamentally, if you play that game down, we're talking about, you know, all of these little, you know, these little economic zones, the different Brooklands, the different Manhattans. The question is, Are they in a zero-sum game? Or are they in a positive-sum game with each other? The way that you create a zero-sum game is you create closed-source software for your roll-up, for your particular software stack.

• 1:24:48Speaker 02

  And that is the fundamental question. So this is the only defense that we have against something like the logical extension of what you are talking about, where people are acting only in their short-term interests, is a universe where you have three, you know, Google chain, Facebook chain, Amazon chain, that are all incentivizing closed-source software being built for their specific walled gardens. And that is literally where we will go. Like, I am not even kidding. Anyway, the hope, the pray, you know, like, please, please, Lord. This unfortunately, please, please allow us to be in an open-source utopia. Now, notably, we failed last time. We had a chance, maybe, I don't know, maybe not,

• 1:25:31Speaker 02

  but we tried earlier internet to create a open-source, you know, radically free, decentralized space. And where are we now? We are in Facebook, you know, Google land, trying to reinvent those incentives. So like, clearly, there's a consciousness that is like bubbling up that says, no, these points of centralization are bad. And that consciousness is, I think, our best hope for building that future. And I do have one more tiny little hope. And that is, we're fighting, here's my own take on the Moloch thing, is like, Roko's Bass, oh, I shouldn't say. But anyway, you know, the Moloch, where we're all, you know, you know, what's it called? We're all attacking each other. I can't think of the moment.

• 1:26:15Speaker 02

  But anyway, we are all defecting on each other in The Prisoner's Dilemma, in The Tragedy of the Commons. That is like, that's one strategy. And there, we're creating closed-source software that's not benefiting, you know, anyone other than ourselves and our vested interests. Or you have that, that's the Moloch, or you have Ether's Phoenix, which is a world where we actually believe that cooperating is going to reward us in the future. And so, in fact, that future state can reward the people who cooperated earlier. So I'm hopeful, here's where I'm optimistic, is that we can form coalitions, collective consciousness, organizational governance systems that propel us towards a cooperative environment and keep us away from closed-source evil taoists taking over the world.

• 1:27:00Speaker 02

  Sorry, yeah, that's.

• 1:27:02David Hoffman?

  Wait, are you sure you have opinions about this? I can't really tell.

• 1:27:08David Hoffman?

  Carl, this was going to be our very last question, but I think since we are already touching on it, I want to ask the last question of this podcast right here, right now. And as the listeners might have just listened, Carl feels very passionate about this, as does everyone on the optimism team. How this technology helps scale Ethereum and helps relieve transaction fees? That's what it does, maybe the first pitch that it has. But maybe the last pitch that it has is that it elevates humanity into some sort of like global consciousness. Carl, can you take us from point A to point B? How do increased scale of Ethereum transactions allow us to elevate ourselves into a new era of what humanity can bring? How does this technology help save humanity?

• 1:27:53Speaker 02

  So, one of the biggest things that people say is the existential risk to humanity is the risk of super intelligent AI. What are we going to do? This super intelligence is going to come in and it's not going to be values aligned with our incentives. Okay, that's the existential risk. Well, guess what? Hmm, what are we actually building? We are building a network which defines our values, literally programmatically on the internet in a global thing. So, how are these questions not entirely tied up with one another? They are. They are literally the definition of our human values is expressed in Ethereum, in a collective mass.

• 1:28:36Speaker 02

  That is what, you know, all of us, we're all these cells creating an organism and then we're humans creating a city and then we're cities creating a what? We are creating a global consciousness, a kind of expression of human intent going in a direction. Right now, Google, Facebook, whatever, fighting these zero sum games, no reason. It's really hurting us. And so, we need to get together and actually move in a productive direction. And how are we going to create a super intelligent AI that doesn't fight ourselves and kill ourselves? If we can't even get around the same vision. And so, the way that we can do that is we stop defecting and we build open source software. Like, I, you know, it's not that I'm optimistic that we're going to build open source software.

• 1:29:20Speaker 02

  It's that I'm pessimistic that we're going to kill ourselves if we don't. I mean, that's a little extreme, but like, I'm riding the adrenaline, so I'll take it.

• 1:29:28David Hoffman?

  There's a fun piece of trivia that I listened to while I was researching for this podcast, but Ben actually found Carl, from what I heard, at a party doing a rap battle. And I think somebody who's a creative artist could actually take what Carl was just saying and overlay it with a beat, and then might actually turn it into a rap battle. Guys, as we come to the close of this podcast, I want to just get through some pretty important questions that I don't think will take too much time, and so we're gonna burn through these pretty quickly. Shards and Layer 2, how do these things impact each other in the future?

• 1:30:02Speaker 03

  Okay, okay, I'll give Carl a break while his adrenaline dives down a little. We'll give him a second to breathe. Shards and L2s, how do they relate to each other? Ah, great question. Very complementary, it's super great. One way in which it may not be complementary, which is still a good thing, is that if rollups really, really, really take off, we may not need E2 Phase 2, which is basically doing the execution part, not the data availability part of sharding. That becomes less important when we have a different way that execution has already been moved off of the beacon chain, because it's been moved into the rollups. Other than that, what shards give you is what we already talked about, which is a massive amount of data throughput. More throughput means more transactions. We gave the 100K number before. That's what the known parameters will only go up from there.

• 1:30:46Ryan Sean Adams?

  Okay, next question. Is there going to be an optimism token, Carl?

• 1:30:51Speaker 02

  We have no plans to have an optimism token.

• 1:30:54David Hoffman?

  All right, next question. EIP1559, has this changed any, like, of the construction of Layer 2 when it submits a transaction to the Layer 1? Did EIP1559 change anything?

• 1:31:06Speaker 03

  It does make it more predictable, which is good, because more predictable L1 fees means more predictable L2 fees. It also informed our protocol in that we have basically an EIP1559 implementation in Optimistic Ethereum, which is how we meter congestion. And last but not least, there are some very cool sequencing, MEV-related properties, actually, that we can get out of this, basically because EIP1559 lets you be much more confident in being able to frequently and immediately submit transactions to L1. So there's some cool research there, stay tuned.

• 1:31:40Ryan Sean Adams?

  ZK rollups, will they supersede? And are they better technology than optimistic rollups? Carl, what do you think?

• 1:31:48Speaker 02

  They are great technology. They will be complementary. ZK rollups that express the EVM will come. They will come in a few years. We need the EVM in the near term. And so when they come, we'll use them. And it's great.

• 1:32:02David Hoffman?

  One more question. Can an optimistic rollup be implemented on top of an optimistic rollup? Is that even a sensical question?

• 1:32:11Speaker 03

  Absolutely, it can. Yes, so you could totally do that. And in fact, you can implement an optimistic rollup on an optimistic rollup, on an optimistic rollup. You can also implement a state channel, a virtual channel on a state channel, on a plasma chain, on a rollup, on a rollup. And these things are all great. Whether or not they make sense for the next year, who knows? But in the long-term future, totally, totally.

• 1:32:32David Hoffman?

  More of a question of figuring out why we could do, why we should do that more than that we can do that. It sounds like we can do whatever we want. We just need the reasons.

• 1:32:40Ryan Sean Adams?

  Guys, as we close this out, we have just two last questions in summary. The first is this, what is next for optimism? Carl, what are you guys cooking up next?

• 1:32:49Speaker 02

  We are getting our diff from Ethereum to as small as possible. And we are innovating in funding public goods and open source software like Retroactive Publicis Funding.

• 1:33:00Ryan Sean Adams?

  That is hot. All right, last question for you. And this is a broader, you said optimism is Ethereum, like it's all part of the same ecosystem. I want to ask you the broader question. Ethereum seems like it has some serious momentum lately, right? So ever since, I don't know, December 2020, it's felt like that. We shipped the beacon chain, right? Now we're scaling on layer two. EIP 1559 was deployed. The merge is months away. The community seems to have momentum like I have probably never seen in my history of being a member of the community. I'm curious, what do you think is next for Ethereum? High level, like where's Ethereum going? What's next? Ben, do you want to start?

• 1:33:39Speaker 03

  Oh man, I'm still Carl's thunder. I know, we know, we both know what we want to say. I'm gonna do it. I'm gonna do it. The next thing for Ethereum is to upstream L2s into itself. That is the next big thing. What we have realized is that the more and more that we build these L2 protocols and we try to build EVM compliant things, the more that we realize, and the more that we try to address those bottlenecks, which are the same as L1 on the way, the more that we realize that these code bases really need to be the same thing. And it's just going to be beneficial for everyone. So I don't know, you said L2 is coming. What's next? L2 is on Ethereum? No. Ethereum on L2s or L2s in Ethereum?

• 1:34:17Ryan Sean Adams?

  Wow. Carl, you get the last word there. Maybe Ben stole your thunder, maybe not. You get the last word. What's next for Ethereum?

• 1:34:24Speaker 02

  What's next for Ethereum is a combination of massive scalability, diverse communities, government, governance experimentation, and a whole bunch of open source software, y'all. Don't you dare. Don't do it. It's open source. Make it open source. That's what's next for Ethereum. And hopefully it continues and the momentum grows and we can all, you know, collaborate on a shared computation layer for humanity.

• 1:34:54David Hoffman?

  Carl, Ben, I want to thank you guys so much for coming on to the show. And just a quick shout out. When I was first getting into the world of Ethereum, I was confused. It was 2017. I was just learning about Bitcoin for the first time and Ethereum was even more complicated. Yet I managed to find my way to a certain subset of the Ethereum community, which I then later realized was perhaps closer to the core of the Ethereum community. And we had this guy named Carl with his crypto economics study page, and he was using these cute little like gerbils as like animations for helping us and helped me learn all about crypto economics. And just the optimism and excitement for what was going on was how I got Signal in a very, very

• 1:35:38David Hoffman?

  noisy part of crypto's history, 2017 crypto. That's kind of how I tapped into the Signal of Ethereum and what's really going on in this industry. And it was people like Carl and it was people like Ben that showed me the way. And so you guys are my personal rock stars and that's why I consider you guys the new age cypherpunks. So thank you for coming on the Bankless Show and it's an honor to have you guys.

• 1:36:03Speaker 02

  It's an honor. Thank you.

• 1:36:05Speaker 03

  Thanks, guys. It was a pleasure.

• 1:36:06Ryan Sean Adams?

  Guys, plus one on that. Optimists are the ones who build the future. We had two optimists on the Bankless Podcast here today. Risks and disclaimers, of course. None of this was financial advice. I don't know why you'd even think that. Eth is risky. DeFi is risky. Crypto is risky. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:36:31David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast, and community as a Bankless Premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless Premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings, and weekly rollups where

• 1:37:14David Hoffman?

  we summarize the week in crypto and other fantastic content. Thanks, everyone, for watching and being on the journey as we build out the Bankless nation.