103 - Blockchains are Cities | Haseeb Qureshi

First, Haseeb Qureshi was a Texas Hold’em poker player. Then Haseeb learned how to code and worked as a software engineer for Airbnb. He went down the crypto rabbithole and is now the managing partner at Dragonfly Capital, as well as an accomplished writer and coder. He recently published an article titled Blockchains are Cities, expanding on a mental model for understanding the crypto landscape from a high level perspective. We brought Haseeb back onto the Bankless Podcast to dive into this metaphor, which explains how cities (and blockchains) scale. We also explore the question of the decade: Will we live in a multi-chain world, or will there be “one chain to rule them all”? ------ ✨ DEBRIEF ✨ | Ryan & David's Unfiltered Thoughts on the Episode https://shows.banklesshq.com/p/debrief-haseeb-cities ------ 📣 ALTO IRA | THE CRYPTO RETIREMENT ACCOUNT https://bankless.cc/AltoIRA ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: 👀 POLYGON | LAYER 2 DEFI https://bankless.cc/Polygon ❎ ACROSS | BRIDGE TO LAYER 2 https://bankless.cc/Across 🦊 METAMASK | THE CRYPTO WALLET https://bankless.cc/metamask 💳 LEDGER | THE CRYPTO LIFE CARD https://bankless.cc/Ledger 🧙‍♂️ ALCHEMIX | SELF REPAYING LOANS https://bankless.cc/Alchemix 🦄 UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants ------ Topics Covered: 0:00 Intro 6:00 Haseeb and Context 11:35 Why Cities? 17:15 Limitations & Trust 23:27 Scaling Like Cities 31:15 Who’s Building Vertically? 36:27 Application Specific Chains 45:14 Building More Cities 54:23 Goals, Tradeoffs, and Winners 1:01:20 Cross-Chain Bridges 1:05:59 Cities or Nation States? 1:12:36 Security and Military 1:23:20 Individuals vs Chains 1:30:36 Closing & Disclaimers ------ Resources: Haseeb on Twitter https://twitter.com/hosseeb?s=20 Dragonfly Capital https://www.dcp.capital/ Blockchains are Cities https://medium.com/dragonfly-research/blockchains-are-cities-564327013f86 Why Decentralization Isn’t As Important As You Think https://haseebq.com/why-decentralization-isnt-as-important-as-you-think/ I’m Worried No One Will Care About Rollups https://medium.com/dragonfly-research/im-worried-nobody-will-care-about-rollups-554bc743d4f1 The ETH2 Metropolis https://newsletter.banklesshq.com/p/defi-in-the-eth2-metropolis-haseeb ----- 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.

• 0:00Speaker 00

  In every single country, there is one most dominant city, and that city is usually at least twice as big as the next largest city. In a way, this is almost exactly what we see with Layer 1.

• 0:12Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Really excited about this show. This is on blockchains as cities. We use cities as a metaphor to determine how blockchains scale. We have Haseeb on the podcast who shows us what this looks like. The big question here for the guest was, are we going to live in a multi-chain world? Or will there be one chain to rule them all? Haseeb is very much a multi-chain world person. A few things to listen for. Number one, we talk about why networks aren't the right analogy for chains, why cities are.

• 0:56Ryan Sean Adams?

  Number two, how blockchains actually scale like cities. Number three, why Ethereum is New York City, Solana is LA, Avalanche is Chicago. Number four, what this means for Layer 1 investors. Number five, we end with where David and I disagree. David, what were your thoughts on this episode with Haseeb?

• 1:16David Hoffman?

  I mean, you know, Ryan, that I'm a big sucker for metaphors and mental models. And so that's why I thoroughly enjoyed talking with Haseeb today, because metaphors are just a shortcut to understanding. And I think a lot of newer people who are still trying to wrap their heads around the blockchain space, are you really going to appreciate just understanding the relationships between cities and blockchains? And how they relate to each other? And I think perhaps understanding Ethereum's roll-up centric roadmap using New York City as a mental model for that, and then also how Solana is like LA, and LA kind of sprawls very horizontally, where Ethereum builds up very vertically. I think people are going to really appreciate these mental models,

• 2:00David Hoffman?

  but also just talking about why blockchains have scalability issues in the first place. We talk about stuff like this in the first half of the show. But then we go into the second half. The show where you and I take apart a little bit of Haseeb's mental models where he calls blockchains as cities. But we think blockchains are actually nations. And so we unpack all of these metaphors. At some point, at the end of the day, all metaphors break down. And so we really stretch this metaphor, these metaphors into their limits. But I think it was just overall super helpful nonetheless.

• 2:33Ryan Sean Adams?

  Yeah, and this is worth listening, guys, because I do think this is the question of the year, maybe the question of the next few years, maybe the question of the decade. Remains to be seen, which is multi-chain, that means multiple layer ones, or will there be one primary central chain? Like an Ethereum, for instance, that provides settlement to many of the other chains. That is the discussion, the debate today and the context as well. Guys, as always, if you're listening with us, thank you very much. Make sure you like and subscribe wherever you're listening. If you're a podcast subscriber. Make sure you review this podcast. If you liked it, that's how we go top of the charts. Right after this as well, David and I are recording our debrief where we give our thoughts on the episode with Haseeb.

• 3:18Ryan Sean Adams?

  I've got a lot of thoughts swirling around. I know David does too. If you are a premium subscriber, premium bankless subscriber, you can tap into your premium feed and listen to that as well. Kind of a bonus episode that comes out every single bankless podcast. We will get right back to the podcast with Haseeb. But before we do, we want to tell you about the sponsors that made this episode possible.

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• 4:18David Hoffman?

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• 6:12David Hoffman?

  Bankless Nation, we are super excited about our next guest, Haseeb Qureshi. Haseeb is a managing partner at Dragonfly Capital, which is a cryptocurrency venture fund, a pretty fantastic one. He invests in all aspects of crypto, this entire industry. He's one of those investors who's also had a very successful background in poker, which would be a topic for another podcast, but we're not going to get into that today. We've had him on the show before. We were talking about something

• 6:38Ryan Sean Adams?

  Similar, subject of cities, how crypto was going to scale, how it was going to evolve in the future. And we've invited him back to talk more about that today. He published a fantastic post using cities as a mental model for blockchains, which we're going to dive into. Haseeb, great to have you back on Bankless. How are you doing today?

• 6:59Speaker 00

  I'm doing great. Thanks for having me.

• 7:01Ryan Sean Adams?

  Oh, man, it's an exciting time in crypto, of course. We're trying to figure out this scaling thing. We're wondering if there's a bear market going on. And in the backdrop of this, you wrote this post. And I think this post is kind of an analogy for probably one of the most important debates, I guess, in crypto or investment thesis, which is this. Are we going to live in a multi-chain world? Or will there be one chain to rule them all? By multi-chain, of course, I think that means multiple layer ones versus one chain to rule them all is one heavily dominant layer one. That's kind of the juxtaposition. So that's what we're going to be talking about today.

• 7:43Ryan Sean Adams?

  But I want to start with maybe this cities metaphor that we're using. Let's get in the frame of mind where we're... Tell us about cities. What cities have you lived in in the past, Haseeb? Where are you living now? What city are you living in now?

• 7:57Speaker 00

  I'm living right now in San Francisco, actually. Since COVID, I've been kind of floating around a little bit, but San Francisco is usually home base, which it features in the article.

• 8:08Speaker 00

  It's interesting, actually, kind of the genesis of this whole metaphor. Because as you mentioned, I'd written about this metaphor of cities and kind of trying to contextualize blockchain spatially, actually writing about sharding and writing about E2.0. And in many ways, sharding is... The whole idea of sharding is actually very similar in principle to what we think about when we think about a multi-chain world, because you have these logically separate...

• 8:34Speaker 00

  Kind of mini blockchains operating alongside each other, kind of doing different things, but being able to connect up to each other in some way. And almost every vision of how to scale blockchains is directionally similar, right? Like layer twos are sort of these like mini blockchains that kind of spin out from layer ones. Other, you know, alternative layer ones are, so many of them are EVM compatible, so they're literally built on the exact same virtual machine that Ethereum is built on, but they happen to be, you know, totally different validator set or totally different consensus mechanism. Sharding is a similar story, but in, you know, ETH 2.0, which I guess we're not allowed to call it that anymore, whatever. The great future of Ethereum.

• 9:10Ryan Sean Adams?

  We'll censor that out, Haseeb.

• 9:11Speaker 00

  Yeah, sorry, sorry, sorry. Please, please bleep that, please bleep that. You know, the, the vision of sharding is, is kind of similar. And what I found in the last year, so, you know, I'm an investor. In the last year, I've been chatting with lots of folks who've come into the crypto space, who are brand new and don't know about any of the prior art for all these conversations that like you guys and ourselves have been having. And they just come into this world and they're like, okay, I keep hearing all this stuff about Solana, Solana is the future of, you know, crypto, isn't Solana just going to eat everything? And isn't this just like an open and shut story that, you know, Ethereum was like MS-DOS and then like Solana is now, you know, Windows 10 and isn't that just how it works? And I realized that it was very difficult for a lot of folks who are entering into

• 9:54Speaker 00

  the space to wrap their head around a good mental model of why isn't it that a blockchain that's just faster and can fit more people into it and fit more transactions into it, why is that not obviously going to win? And in most technologies, that's the case. The thing that's faster and bigger obviously wins, right? If you just have, you know, if somebody comes along with a database that is, you know, 10 times bigger, 10 times faster, 10 times cheaper than Postgres, it's just going to wipe the floor. Everyone's going to be using it in five years. That's just obviously how it works. And the thing is, I think you and I know, and people who've been in crypto for long enough know, that in crypto, that's the wrong way to think about it. It's, it's, it's correct to an extent, but it's, it's not sufficiently, it doesn't sufficiently

• 10:37Speaker 00

  understand the nuance of why it is that blockchains are what they are. If that were true, then, you know, Bitcoin would have been superseded by Bitcoin Cash and by Bitcoin SV and by Litecoin or whatever, right? Like, we know that these things don't happen in things like Bitcoin. Why don't they happen for Ethereum? And that's what led me to coming up with this metaphor and trying to, you know, I use it informally in a lot of conversations with people when I was trying to explain to them why it's not the case that Solana is just going to eat everything necessarily. It could be that Solana eats everything, but it's not obviously going to happen. And that's, that's why I decided, hey, you know what, I should write this thing up because a lot of people seem to find it a very valuable mental model for understanding their wants.

• 11:18David Hoffman?

  And Haseebah, Bangless listeners will know that we are just a complete sucker for mental models and just the actual concrete imagery, I think, will actually allow people to just grapple on to this concept of using cities and geography as a way to understand a blockchain. So let's just go and get started with, with unpacking this metaphor. Why are cities a good mental model for understanding blockchain? Just setting the context for the whole rest of the podcast. Why cities?

• 11:49Speaker 00

  Yeah. So usually when people describe blockchains, the word they use is network. And the place where I want to start is that network is actually the wrong word to use when you're trying to describe a blockchain. And the reason why is that network brings with it a lot of implications about the other kinds of networks to compare blockchains to, right? So when you think network, you think like the internet, you think like, you know, an electricity grid, you think like, you know, something like Telegram or Facebook. You think of traditional types of networks and traditional networks, when you add another node to the network, you add another server to Facebook, you add another whatever, you can basically scale a network linearly. It's, it's almost this kind of ethereal thing that can grow as a larger, larger cloud over time. But blockchains are not like that. Blockchains,

• 12:32Speaker 00

  when you try to make a blockchain larger, the larger you make a blockchain, the more expensive it is for that blockchain to get validated. And there's a bound on how large a blockchain can be, right? Even something like Solana, which tries to be extremely sort of scaled vertically by just saying, well, look, the nodes that run Solana are going to be super beefy and highly optimized and have, you know, 16 GPUs or whatever it is. Even, even for this, there's a, there's a limit on how big Solana is going to allow its nodes to be, right? There's not arbitrarily scalable the way that Facebook is arbitrarily scalable or Google is arbitrarily scalable. And so the reality is that blockchains, unlike traditional networks, are physically constrained.

• 13:12Speaker 00

  There's only so big that a blockchain can get per unit time. And that's why we have finite block sizes, and that's why we have this fundamental problem of blockchains, that they cannot get arbitrarily big. And that makes blockchains more like cities. Cities are constrained by the land that they're on. They can grow, they can kind of scale out more and more over time, but they can't get arbitrarily big, right? You can't have a city the size of an entire country. When you do, naturally what happens is that the city sort of gets cut off and a new city starts at some point, and that's just the nature of how cities evolve. And so if you think of blockchains as cities, what is Ethereum? Everyone complains about Ethereum, right? Ethereum is super expensive, it's super slow, it's congested, you know, everything's super

• 13:56Speaker 00

  old, things never change, like people are like, oh, what happened to, what about Turbo Geth, what about E2.0? Nothing ever seems to actually happen around here. Ethereum is Manhattan. It's a super expensive, or New York City more broadly, it's a super expensive city. It's super old, it's been around forever, and everyone is annoyed. Anyone who goes to Manhattan will just complain nonstop about how, you know, the trains suck, and the infrastructure sucks, and the homeless are everywhere, everything's too expensive, the rents are crazy, nothing can ever seem to get built, but Manhattan is the most happening place on earth. If you want to be a somebody, and you want to be at the epicenter of the financial activity

• 14:36Speaker 00

  and the cultural activity in America, the one place per square foot that that is maximized is in Manhattan. And ultimately, if you want to find the richest people in the US, they're in New York. If you want to find the most culturally influential people in the US, they're in New York, maybe in LA, but let's say New York. And in the same way, if you look on Ethereum, Ethereum has the most, you know, the biggest whales are all on Ethereum, the most expensive NFTs are all on Ethereum, the biggest DeFi protocols are all on Ethereum, the biggest DAOs are all on Ethereum. Like, Manhattan slash New York is like Ethereum in that it is the oldest and most robust place.

• 15:19Speaker 00

  Now, if you want to go start a new DeFi protocol, the same way, if you want to go start a new bank. If you don't have a headquarters in Manhattan, then you're not serious. Right? You're not gonna be playing in the biggest games. Yes, I know Manhattan's expensive. Yes, I know that everything's crowded and everything sucks. But like, look, if you're not there, then you're just not gonna be playing in the biggest games. And that's also true today on Ethereum. If you're an emerging DeFi protocol, you might say, look, Ethereum's too expensive. I'm gonna go here. I'm gonna get a roll up. I'm gonna go to another little one. But it's obviously true today that the vast majority of TVL that exists in DeFi is on Ethereum. Now, if you're a newcomer and you weren't around in the early days, or you're not super wealthy, or you're not, you know, one of the, one of the sort of rich and famous or part of the intelligentsia,

• 16:02Speaker 00

  then you might say like, look, it's a little late for me to show up on Ethereum. The fees are already crazy high. There's no room for people like me. I don't have a rent control. You know, I don't have a rent control department, so I, if I want to strike out like, look, I can't move to New York. It's just too expensive. I gotta go find someplace where I can build my career. And for that marginal person, that marginal entrepreneur, that marginal user, they might say like, look, this stuff is too expensive for me. Ethereum's for the billionaires. I gotta go somewhere else. So the question there is, how do you scale a city? When, you know, New York is just, there's only so much land and not that many more people can go there. So broadly speaking, there are three approaches to scaling blockchains.

• 16:45Speaker 00

  And in order, they are rollups, interoperability networks, and other little ones. So I'll go through each of them in turn.

• 16:52Ryan Sean Adams?

  Well, can we just pause here before we go through each of those to see? I want, I want to go back to what you said around the physical constraints, right? And make sure that that is hammered home because, you know, what you said is like Facebook, you could just add servers, you could scale, and blockchains, you can't just add servers and scale. Just, just to ground people on that, particularly those who are new. Why are blockchains physically constraining themselves, right? So I'm not sure that this necessarily might make sense to someone, but like, are they doing this because there's a trade off? Are they doing this because our cryptography isn't going enough? Are they doing this because there's some sort of other bandwidth limitation?

• 17:35Ryan Sean Adams?

  Like, why are they even constrained in the first place?

• 17:40Speaker 00

  It's a great question. So the reason why blockchains constrain themselves is not because you can't build a big distributed system that grows arbitrarily big. The reason why is that the core foundational component of what makes blockchains blockchains is the fact that they are trustless. And what does it mean to be trustless? I mean, this can be itself an hour-long conversation. But part of what it means to be trustless is that you, yourself, don't have to trust any third party in order to verify that the blockchain has been executed correctly. No one's cheating. No one's making shit up. No one's creating money out of thin air or deciding to change the rules on the fly. Everything is according to the way that the rules were originally set into place when the blockchain was initially created. That's what everyone wants to know.

• 18:24Speaker 00

  And so, in order for you not to have to trust a third party, you have to be able to run the computation yourself, or verify the computation yourself, that what has happened in your corner of the world, in your blockchain, and everything that touches you, has been executed correctly. Now, if the blockchain can only be run by a supercomputer, because it's so large and it's so big, that all the computations in it cannot be compactly executed or verified on consumer hardware, the kind of thing that you or I could get our hands on and actually run ourselves, then ultimately, you have to trust a third party. You have to trust somebody else who is actually going to go run the supercomputer, who is actually going to check all the transactions on the blockchain. Now, you might think, like, "Look, I'm OK with trusting a third party, because, you

• 19:09Speaker 00

  know, whatever, I want to." But the core philosophy behind Ethereum, and not every blockchain shares this philosophy, but the core philosophy behind Ethereum is that individuals should be able to check themselves, that everything that happened on the blockchain is correct. And therefore, that they do not need to rely on any third parties outside of the kind of things you could run on your own consumer hardware, without relying on AWS, without relying on the government, without relying on anyone intermediating between yourself and the blockchain. Go ahead.

• 19:42Ryan Sean Adams?

  So, blockchains are physically constrained because they are attempting to keep the cost of verification Low while also scaling the amount of transaction throughput. So that's the key there is keeping the the cost of verification low. And that's why they can't just like expand indefinitely. That's why they are more like cities because they have some borders. They have some limitations. They have a set of square miles that um you know they've allocated for themselves. And they can't really expand be beyond that.

• 20:15Speaker 00

  Exactly, that's exactly right.

• 20:17David Hoffman?

  And the the way that I've thought that's a useful way to understand this is that if we want to just, you know, scale up a web two database, right, like a Facebook database, we can just arbitrarily add more CPUs, more more GPUs, more memory, and it doesn't really matter because generally we're adding that physical hardware into the same spaces as all the other physical hardware like you like Facebook only has so many databases, Google only has so many databases. There's a handful of them, you know, five, I don't know, five, five to 10 ish. In blockchains and and when we want to have things be trustless, we have an arbitrary number of databases that all need to maintain consensus. They all need to sync up with each other. And so in a web two world, when you add hardware to a database, because it's centralized,

• 21:02David Hoffman?

  you just linearly add capacity, just resources. But in a blockchain world, because all these locations of these databases are spread out around the world, when you add a new computer to the network, when you add a new node to the network, you on it net actually slow down the network. So it's the in web two, when you add resources, it speeds it up. In web three, when you add resources, it actually slows it down. And the way that the way that it slows it down, just to unpack that a little bit more is that some blockchains accept a certain level of speed with how much data they allow the network to handle. And some networks want to throttle themselves back so that any computer,

• 21:43David Hoffman?

  any reasonable computer that was made in the last five to 10 years can keep up with the chain. And then other blockchains say like, oh, we only want computers that have been made in the last two years and also are super powerful. We only want those to be able to keep up with the chain. And so it's it's a Inversion, in Web 2 world, when you add network resources, you speed up databases. But in Web 3 world, when you add network resources, you slow them down because you need to make sure that every single individual is able to keep up with the chain. And the tolerance for how many individuals can keep up with the chain is a spectrum that different blockchains can tinker with as they see fit. Haseeb, do you want to add anything to that metaphor?

• 22:27Speaker 00

  No, I think you nailed it. So I think the intuition that most people should be walking away with is that, look, different blockchains have different ideas about what that threshold ought to be. How much is it okay to say that this is the kind of hardware or the kind of cost that you need in order to actually verify the blockchain yourself? If you're buying a smart chain, then that cost is very, very high. It's very difficult to run a node for buying a smart chain on any kind of consumer hardware. For Solana, it's maybe similarly quite expensive, but maybe a little bit cheaper than buying a smart chain. And as you go further down the chains with respect to their intrinsic performance requirements, those things get cheaper and cheaper.

• 23:07Speaker 00

  And sharding throws a whole nother curveball into this whole story because sharding makes the story a little bit more complex. But I think it's probably beyond the scope of this particular conversation because it applies in general even across individual shards about, okay, even within the context of one shard, how big is that shard going to be that you can actually verify it on your own consumer hardware?

• 23:27David Hoffman?

  Okay, well, so now let's return to our thread, Haseeb, and where you're going. The question of how do you scale up New York City? How do you scale up, generalize at any city? What are the different paths? You mentioned three of those, and maybe you could reiterate those, and then we could dive into them one by one.

• 23:45Speaker 00

  Yeah, so if Ethereum is New York and Ethereum is too crowded, how do we scale up New York? And the three approaches within blockchain land are first rollups. Second, interoperability networks. And third would be other layer ones. So let's start with rollups. Rollups are the, well, so if you take it to the city analogy, right? Let's say you're in New York and, you know, it's, I don't know, maybe year 1900. And you're like, okay, New York is full. Everyone is here, rents are super high, everything sucks. How do we get more people into the city? Because there are a lot of people who want to live here. And the answer, of course, in urban planning is build up.

• 24:27Speaker 00

  So start building taller and taller buildings until you culminate into skyscrapers. And skyscrapers are, obviously, they're marvel of engineering. They're incredibly complex to actually build and get them to where we are today with skyscraper technology. But the fundamental thing that skyscrapers do is they allow more people to fit into the same city with the same kind of underlying land. Because the fact is, if you build up, yes, exactly, the same footprint on the underlying land. Now, putting more people into a city is a beautiful goal. But when you have skyscrapers, when you have a city full of skyscrapers, the reality is that... So one, although a lot of people have managed now to be able to move into the city

• 25:09Speaker 00

  because they can live up above the underlying ground, each person who enters into the city through the skyscraper, they require less overall land, but they still tax the underlying resources of the land to some degree, right? If you have people living on the ground floor and then you add another, you know, you add another another layer on top, right? And then, great, now you have a two-story building and new people come into that two-story building. The overall utilization of the city has increased much less than it would be if you had to add more, you know, those people on the ground floor. But it's increased somewhat, it's increased very, very slightly, right? And as you keep adding more and more layers, you can add people more and more cheaply.

• 25:51Speaker 00

  But the experience of those people, if I come in and live in a skyscraper in Manhattan, right? It's maybe nice because it's, you know, we've added a lot of headway, a lot of extra rooms. There's a lot of vacancies, rents can go down now that we've added more land, or not more land, but more rooms, rather. But the downside of living in a skyscraper, of course, is that if you live in a skyscraper and I live in a skyscraper and I want to come see you... I have to go down my skyscraper, get on the ground floor, go hail a taxi, get across town, pay the tolls along the way, and come to your skyscraper and go up all the flights of your stairs to go find you.

• 26:24David Hoffman?

  And by the way, in New York, it takes like one hour to go like, you know, three miles.

• 26:30Speaker 00

  That's right. It's a, it's a huge pain in the ass, right? We do not get to escape the fundamental constraints of the city we live in if you and I live in different skyscrapers, which we most likely will if there are going to be a lot of different skyscrapers in the city. So now what's the blockchain equivalent to that?

• 26:48Speaker 00

  It's rollups. Vitalik has claimed that rollups are the future of Ethereum scaling, right? We now, we now have this full capitulation in the story of Ethereum. I want to say 2.0. The, the future of Ethereum, that post-sharding Ethereum is not going to have native execution on its shards. It's instead going to be a rollup centric view of how Ethereum is going to scale. And so what that means is that these rollups, so rollups, I mean, I get probably beyond the scope of this to exactly describe the mechanics of rollups, but long story short, they are scaling solutions. They're like kind of mini baby blockchains that emerge from the underlying blockchain with the security properties of that underlying blockchain. They sort of obey the institutions and the trust properties of that underlying blockchain.

• 27:33Speaker 00

  In the same way, if you live in a skyscraper in Manhattan, you might have, you know, some rules for living in the building, but you're still fundamentally living in Manhattan. All the rules of Manhattan apply to you and all the trust model, all the taxes, all the whatever, you're, you're still a member of Manhattan. Just because you live in a skyscraper, you might have extra rules on top of it, but you fundamentally still live in the same city. The same thing applies in a rollup. A rollup extends out from the layer one. Everyone who lives in that rollup has the same trust guarantees as the underlying layer one that they're operating on, which in this case would be Ethereum. But they're, it, it, things are a lot cheaper. Things are faster. Things are more scalable, right? Now, they're not infinitely cheaper or infinitely faster. And, you know, there's some non-rollup designs like, you know, volition or volidium that,

• 28:17Speaker 00

  that might have very, very, very high scalability properties. For most rollups, it's a, you know, very significant factor increases, you know, 10x or 20x or something like that. But it's not, you know, 1,000x or 2,000x or anything like that for most of the rollup designs that, that exist today. So.

• 28:36Speaker 00

  All that is to say, rollups have the same issue that I just described in a skyscraper. If we're in a rollup, if I'm in a rollup and you're in a rollup and we're not in the same rollup, then if I want to transact with you, I have to exit from my rollup, go down to layer one, transfer across layer one, and then go up into your rollup to go and transact with you. Now, there are other solutions like crossing bridges. You can imagine, you know, there's maybe, you know, kind of like the, you know, those.

• 29:04Ryan Sean Adams?

  Sky bridges?

• 29:05Speaker 00

  Business towers. Yeah, sky bridges. Yeah, that's what they're called. You can imagine like some skybridge type things, type contraptions. But you know, if you want to move an enormous amount of stuff across the skybridge, maybe you can't do it, right? Like, it's somewhat complicated with these crossbridge, these crosschain bridges. They can't bridge exactly everything. There are some things that can't be bridged. Also, without the missile rollups in particular.

• 29:24Ryan Sean Adams?

  Some of the skybridges look a bit more like tightropes, right?

• 29:28Speaker 00

  Exactly, exactly, exactly. It's not quite, it's a very narrow skybridge, at least today. And I think there's some fundamental reasons why those skybridges have to be narrow, because of liquidity that's needed for the different assets that you might want to bridge on each layer two. But at the end of the day, skyscrapers are great. They're a huge improvement on what you can build inside of a city. But skyscrapers are not themselves, I mean, if you think about it, like, okay, we got skyscrapers now in big cities. But not everybody lives in Manhattan or in New York, even though we have a lot of skyscrapers, right? There is a, there is only so much you can get in cheapness from living in a skyscraper in New York, right?

• 30:10Speaker 00

  Like fundamentally, living in a skyscraper in New York is never going to be cheaper than living in, you know, just some random town in Virginia. And that's a fundamental property of the fact that you have to be taking up space in Manhattan. There is some externality for you being there that is imposed by your presence in the city. And if you want to get to the place where basically you're paying, you know, some small town in Virginia type rent, or let's say, you know, some new layer one type fees, which can be, you know, in the fractions of ascent, you're never going to get that on a rollup. Doesn't matter how, you know, doesn't matter how. How beautiful or how well designed the roll up is going to be, or at least to a first approximation. If it's truly a roll up and it actually is posting transaction data on chain, which all roll ups do,

• 30:55Speaker 00

  then you're never going to get it to be that cheap compared to an underlying layer one transaction. And that's why roll ups are themselves probably not the end of the story on scaling. Every city eventually, as it grows, has skyscrapers. But skyscrapers are not themselves alone enough to say, okay, great. Everyone's going to live in one city and that's the end of the story.

• 31:14Ryan Sean Adams?

  Okay.

• 31:15Speaker 00

  And that's why we have to explore other solutions.

• 31:17Ryan Sean Adams?

  So this is the building up approach. This is what you would you would consider, just to classify which, you know, chains you would consider doing this. Ethereum, you would say, is doing this building up method. Any blockchain, maybe that's taking this modular blockchain design type of method where they're scaling up with roll ups like a maybe a near or a Tezos is probably taking this approach. Are there any others that that come to mind?

• 31:43Speaker 00

  I think those are the main ones. And the reality, of course, is that the one that needs it most desperately is Ethereum. Because right now, you know, it's almost like the year is 1850. And New York is the one city that's starting to, you know, kind of push up against the boundaries. But almost everything else is still frontier. And as a result, you know, when prices are so cheap and people are building new housing every single day and like things are growing and and, you know, cities are on the rise. There's not a lot of need to start figuring out how to build skyscrapers. It's only the the demand for skyscrapers, I mean, you can sort of see this, right? Like plasma, which was the first layer two that was seriously considered for Ethereum, that was going to scale kind of general computation. Plasma was first, or I'm sorry, plasma originally was not general computation,

• 32:27Speaker 00

  but eventually there were designs for general computation. Plasma was first announced and explored in 2017, when Ethereum started getting congestion. And of course, almost every other blockchain today is not seriously facing congestion, except, you know, maybe in times of, you know, total turmoil, like what we saw, you know, a couple last weekend during the during the market downturn. But generally speaking, most of these blockchains have tons of headroom. So there's not actually a burning need the way there is for Ethereum today to build vertically. At least not yet.

• 32:57David Hoffman?

  One thing I really appreciate about this metaphor is a couple of things. The subway system in New York, Hesse Bueh kind of talks smack about the New York infrastructure, but coming from Seattle, the level of degree of New York's public transportation infrastructure is just astounding to me. And it's got this fantastic just mesh network of subways connecting skyscraper to skyscraper. And that feels like the Ethereum L1, where you're not supposed to be in, the subways are not where you live. Like, that's not where you spend your time. You just are there while you are going from more desirable place to more desirable place. The more desirable places being the buildings, the ones that are building up vertically.

• 33:41David Hoffman?

  And even though, like, you can build a pretty damn tall building with a ton of apartment units in it, but at some point you approach physics, where we cannot build an infinitely tall skyscraper. We can innovate, but at some point, the laws of physics get in our way. And so that, to me, is like what a roll-up centric roadmap looks like. We have all of these machines that are ferrying people and their stuff from skyscraper to skyscraper, and then the skyscrapers have built up to match the demand as much as they can of the people that want to live in Manhattan and are willing to pay to live in Manhattan. And that's how we get scale. And so we have these very, very vertical skyscrapers that are being coordinated by

• 34:25David Hoffman?

  the roots of the city, which are the subways, which are like the ferrying of value between roll-up to roll-up. That's kind of how I think of Ethereum in this city metaphor.

• 34:37Speaker 00

  I think that's absolutely right. I think in a post-sharding universe, that if we do actually see this roll-up centric roadmap be delivered, that's what Ethereum is going to look like. Now, the big... The big thing, of course, about that vision, if you imagine a vision of a city, where basically everyone either is in a skyscraper or they're in a subway, it sounds like a slightly dystopian vision of a city. And I think part of the reason why you're actually seeing so much demand for some other approach beyond just, okay, we're all in shards and then we like move in between these rollups, is that it's actually very, it's very complex. Because you don't have the composability that right now we have. Like, right now Ethereum is basically like one of these old timey cities,

• 35:21Speaker 00

  where you just like walk down the street and you, there's like horses or and there's, you know, old ladies selling their wares. And there's a park over here and you can walk around to the park. And like, there's an ice skating rink over there. And it has, it has a kind of dynamism that comes from composability. And in this post-rollup world, one of the things that you give up by having a world where it's all these vertical skyscrapers and a subway system that connects them, is you give up that, that composability that is defining characteristic of Ethereum today. So obviously, within a skyscraper, everything's composable because, you know, you can say, oh, great. You know, you can, this floor has the gym and has the swimming pool and has this thing. But in, in the, in the vibrancy that we get from cities, unless we see something like where there's one super dominant rollup, or maybe two super dominant rollups, within which the composability is enough.

• 36:05Speaker 00

  So there's, you know, one giant, you know, sort of snow globe that is kind of one mega rollup. And there's almost like an entire city embedded in that, in that, in that rollup. You know, it's, it's too early to say, it's too early to really know. But I think it's one of the reasons, one of the weaknesses, I'd say, of this vision of blockchains is that, that lack of composability.

• 36:26Ryan Sean Adams?

  Okay, well, uh, let's move to the second approach for blockchain scalability, which you teased and you mentioned. So this is interoperability network. So this is kind of the, the Cosmos Polkadot type of approach, where you have this internet of change, this network of chains, and they're all linked in some way. Can you talk about that approach to scalability? And the pros and cons that you see?

• 36:52Speaker 00

  Yeah, so if you take, okay, so let's take for granted that skyscrapers are coming. But let's see, what other ways are there to scale New York aside from skyscrapers?

• 37:04Speaker 00

  Now, one approach that is, one of the classic approaches to scaling blockchains, I mean, this has been going on since, you know, 2017, 2016, is this idea of, let's create an internet of blockchains so that other blockchains can help scale the, the sort of, the excess, the overage from Ethereum. And this was the original vision behind Polkadot and Cosmos. And increasingly, what you see today is that the way that Polkadot and Cosmos have kind of oriented themselves is that instead of really focusing on, okay, let's connect up Ethereum to a bunch of other chains, what they really focus on is let's create a network of blockchains that all obey the same kind of SDK, that have the same kind of underlying sort of infrastructure, underlying guts. And you can really easily spin up a new blockchain that only does one thing.

• 37:49Speaker 00

  These are often called application-specific blockchains. So you can imagine that someday MakerDAO could have its own blockchain, or Compound could have its own blockchain. In fact, Compound was talking about this with, uh, what was it, Gateway, I think it's. Yeah, Compound Cash.

• 38:02David Hoffman?

  Oh, no, that was, yeah, right, yep, yep, I'm sorry.

• 38:05Speaker 00

  Which is going to be issued on top of Gateway, right? Cash, Cash would be the native, native stablecoin. So there are many, many applications that have contemplated the idea of creating their own blockchains and becoming these application-specific blockchains that connect back to Ethereum. Now, the vision, and this is something, you know, you talk to the folks at Cosmos or the folks at Polkadot, they'll tell you, is that, you know, the, the idea that you're going to have one big super city that's going to encompass everything, that's just never going to work, that's not going to scale, that's not how, that's not how modern distributed systems are built, they're built with lots of individual systems that talk to each other asynchronously, right? And so you will have, according to these people, you will have a lot of small blockchains that do one thing and that talk to each other over some interface, whether that be through

• 38:46Speaker 00

  the Polkadot relay chain, whether that be through the Cosmos, uh, Cosmos Hub, or through Osmosis, or whatever, uh, through, through IBC.

• 38:55Speaker 00

  And you're going to have lots of individual chains that do only one thing. And that's how smart contracts are going to scale. Some things will live in Ethereum, sure. If you really need to be in the metropolis, sure, fine, be in the metropolis. But lots and lots of industry is going to take place in these small application-specific chains. The way that today, most applications on the internet, they don't take place in common servers. Right? You go to CNN.com and they run their own server. And you go to AT&T.com or you go to Apple.com and they run their own server. And everyone has their own machine. That's the vision of application-specific blockchains. Now, the equivalent analogy that I give in the cities metaphor is that application-specific blockchains are kind of like factory towns. Or they're kind of like, you know, sort of a town that just does one thing. So you can imagine a town that's like, you know, just has outlet stores and nothing else.

• 39:40Speaker 00

  And there's maybe a gas station. Or a town that's like, you know, just a mining town. And everyone here is mining. Or everyone here is like, you know, there's an oil rig and everyone here works for that oil rig. And the town exists only to do one thing. And it's not a generalized, you know, cosmopolitan place, the way that we think about a place like Ethereum. So if this is the right mental model for these types of chains, then what I argue is that, look, I think it's very likely that we will see some application-specific blockchains. The application-specific blockchains that we see today are pretty small, though. Right? So, you know, one example of it is something like Osmosis. Osmosis is a Cosmos SDK-based chain that only does one thing. It's just a big, it's basically the equivalent of Balancer.

• 40:23Speaker 00

  It's a big giant balancer thing that exists on Cosmos SDK, connects to other Cosmos chains across this big highway system that is the Cosmos, you know, IBC routing system. It only does one thing. And it does it pretty well. You know, it's pretty good at being this kind of Cosmos balancer thing. But that's it. It's not, you know, there's not a whole universe of things happening on top of Osmosis. It only does one thing. And it's likely that things like this will exist. But I don't think it's likely that this is going to be the lion's share of activity. And if you, if you sort of think about the city's metaphor, it drives you in the same direction. There are, you know, towns that only just, you know, mile, everyone works for some oil rig. Or there are towns that like everyone here works for this one office of this one company

• 41:08Speaker 00

  that happens to have a factory nearby. But they are not the lion's share of where people live. They are not the lion's share of where economic activity happens. They're not the lion's share of economic innovation. They're important, they're a part of the landscape, but it's very clear that cities are really important. Cities is where almost everything happens because of the fact that they're these tightly connected, very dynamic, very interconnected places. And those interconnections is what creates innovation, economic opportunity. And, and you know, if you, if you live on osmosis and all you can do is trade, you know, one different, you know, cosmos based token for another, that's useful, but there's not a lot of creativity that's going to emerge out of cosmos. And it's very clear, the reason why cities and, you know, layer one blockchains have

• 41:50Speaker 00

  become so valuable is because of all the innovation that's occurred on top of them. And that's why I think although these, you know, sort of application specific blockchains exist, they are not going to be the most important part of the scaling story.

• 42:02Ryan Sean Adams?

  So you are bullish metropolises and bearish like, you know, one factory towns?

• 42:10Speaker 00

  I mean, bearish is a strong word, right? It's sort of relative to the price. If you look, I mean, if you look today at the landscape of layer ones, or sorry, the landscape of, of public blockchains, you can see, you know, look at the top 100, there aren't that many application specific blockchains there, which it's kind of like, look, the market is telling you that they don't really value the application specific blockchains very highly. And I roughly disagree with it. I'm not saying that I think osmosis is going to do badly from where it's sitting, or these other application specific blockchains are going to do badly from where they're sitting. I just don't think they're going to be the lion's share of where value is created in public blockchains.

• 42:42Ryan Sean Adams?

  Okay.

• 42:43David Hoffman?

  So when we look around the distribution of cities in the United States or the world at large, we see many, many cities of the type like Manhattan, like LA, like Seattle, like Chicago. But I'm trying to think of a like company town or mining town that I know the name of, and I don't really know the name of one. So perhaps like the distribution, and if we want to take like physical real estate land geography, I think that would equate to block space. And really, what do blockchains do? Blockchains sell blocks. There's not that much physical real estate that is claimed by the world of specific like

• 43:23David Hoffman?

  one use case cities like a mining town. And so perhaps if we extrapolate out to the end game of whatever this crypto industry morphs into, perhaps application specific blockchains only take up a relatively minor portion of the total block space demand. Would you agree with all that?

• 43:43Speaker 00

  Yes. Not just that they're going to take up a relatively small amount of total demand. The demand that they're going to be competing for is going to be valued less highly, which is, which is important distinction, right? You can imagine that actually, a lot of the US is taken up by like wind farms and, you know, just, you know, things that take up a lot of space. But that space is not in high contention. No one is fighting for that space. In the same way, look, trades on osmosis are really cheap. And they're really cheap because not a lot of other people are trying to do things on osmosis other than just trade on osmosis. But if osmosis lived on Ethereum, or on Terra, or on some other, you know, blockchain that had more contention for that same underlying land, that underlying block space, that underlying resource, then you would see things be more expensive.

• 44:26Ryan Sean Adams?

  Yeah, it's like metropolis space per square mile, per square foot is much more valuable than like some rural geography, right? From a real estate perspective. And like, I think you have to go back to why people choose to live in the city that they choose to live in. There are many factors, quality of life, you know, what do they enjoy? Culture, all sorts of things. But also, economic opportunity is a, is a massive driver of where individuals choose to locate, like where are the jobs? Where are the good jobs? Right? And I think that's another driver that that probably comes into play. You're not going to find the same type of job in a small rural town.

• 45:08Ryan Sean Adams?

  As you are in Manhattan or LA or some other metropolis and that factors in. So let's, um, let's talk about the third path then, because there are three paths here. What, what is the third path here? This is more cities, Haseeb. What are you talking about? More cities? We could just build more of these things?

• 45:24Speaker 00

  Yeah, turns out, uh, you know, when, when New York got full, or I guess it was originally Boston and, and, you know, the history of America. When the first city gets full, people know what to do. And the answer is you go build a new freaking city. And the history of cities is obviously that there is not just one city in every single country. There are many cities. And interestingly, what you often see is that the cities tend to be far away from each other and they tend to become very different from each other. And so, you know, the, the two major cities in the US are New York and LA. And LA is really far from New York. It's literally the absolute opposite, as far as you could possibly get from New York. And it's really different. The culture of LA is completely different than New York.

• 46:05Speaker 00

  Now, when you build a new city, the first thing about building a new city is that there's a lot of stuff you have to do all over again. It's a lot of redundancy, right? When you start a new city, you have to start with building a bunch of basic infrastructure. You have to go in, you have to build, you know, there, there needs to be plumbing, there needs to be roads, there needs to be a police station, there needs to be.

• 46:24Ryan Sean Adams?

  The marketplaces, the bazaars.

• 46:26Speaker 00

  Exactly. You need, you need basic infrastructure in order for people to actually be able to live there, right? Like if there are no schools, if there is no, you know, fire stations, if there's no any of this stuff, then people are not going to want to move to this new city. So initially, when you first start a new city, there's a lot of just, you know, infrastructure, plumbing, redundant work that needs to be done that you don't need to do when you're building a skyscraper and you don't need to do when you're building a, you know, uh, like a factory town or like a, you know, a wind farm or whatever. And, uh, so initially it might look that building a new city actually seems really wasteful. Right? We already, we already have great hospitals and great police stations and great roads in Manhattan. Why are we doing all of this all over again?

• 47:06Speaker 00

  But the advantage of building all that infrastructure over again is that you are not burdened by this sort of technical debt, let's call it. Or like the bad decisions that were made by those older cities. And that's why you. Often see when you have older cities that eventually get too big and someone goes and starts a new city. That newer city is much faster. It's much cleaner. It's more efficient. It's better. It's laid out more intelligently. Whereas the older city kind of, you know, it's a sort of process of accretion and things kind of get bolted on. And everything's like, it's got this complicated story of like, why is it that the train doesn't go here? And like it goes, does this crazy loop-de-loop before it can go to this other thing. It's like, look, I, it's so hard to explain. It's something happened like 70 years ago and like blah, blah, blah. Something about World War Two, right? Whatever, just deal with it. And when you start a new city, it's a blank slate.

• 47:51Speaker 00

  You can do everything over again from first principles and with the tools of kind of modern civil engineering and science and whatever. And so when you, when you see the equivalent of new cities in blockchains, those are, that's what new layer ones are. That's what all these new emerging layer ones are. We, New York was full. And so we decided to create LA. We decided to create Boston. We decided to create, uh, you know, Chicago and, and Houston and all these other cities. And now, you know, to my point about infrastructure, one thing that you notice with all these new layer ones, especially when they're new, is that a lot of infrastructure is missing. So it's like, okay, where are the block explorers? Why can't I see the smart contract code on chain? You know, why, why are the RPC endpoints so, so crappy?

• 48:32Speaker 00

  Why isn't there, you know, a good EtherScan or a good Doon Analytics or a good, you know, uh, good security tooling or good, you know, developer experience? All this stuff needs to get rebuilt for these new chains. And you know, some of them can, can kind of piggyback on Ethereum if they use EVM. But, but even still, uh, there's a lot of infrastructure that, that is missing. No matter how similar you make it to, to the original city. And, um, but the advantage of building a whole new city is that you get to start over with institutions. The institutions of New York are very conservative in a lot of ways, right? Because New York is this old, very stalwart city. It's been around for a very, very long time.

• 49:11Speaker 00

  It's, it was built on, you know, this global finance, this, this, you know, the, this incredible pedigree that comes with being, uh, you know, descended from New York. Same thing with London, same thing with all these very legendary massive cities. When you start a new city, you can kind of say like, look. We don't need to be what New York is. We can be more nimble. We can have different values. We can have different perspectives. We can value different things. We can be governed differently. Right? One of the things that you'll notice about California versus New York is that the way in which laws are laid out that govern California are very different than what goes on in New York. And so the way that I liken these cities, and I have these very specific analogies, which I'm sure we'll go back and forth on. But I compare Solana to LA.

• 49:56Speaker 00

  And the reason why I compare Solana to LA is that Solana is like, look, you know, Solana went as far west as you can go. Right? Solana said, look, New York, those guys over in the East Coast, they care so much about decentralization. They're so, you know, up their own asses, constantly talking about how nation-state attacks, blah, blah, blah. But like, look, fundamentally, I know what people want. What people want is they want entertainment. They want fast, cheap transactions. They want everything, you know, straight, you know, fed down the tube of their TVs. That's what people really want, and I'm going to give it to them. I'm going to go to the most beautiful, you know, the most beautiful Manicured. sunniest place in the world. Yeah, exactly. This manicured place where all the, you know, the people who want their 10 minutes of fame, they can come out to Solana. Everything's cheap, everything's fast, and like, we're for the builders. Right? That's what we're all about.

• 50:40Speaker 00

  And if you want to be a gaming project, an F T project, look, we are, we are the best place for you to be. Everything is cheap and fast, and we're going to sit down with you. We're going to help you, help you make it happen. And for those people who are not too fixated on decentralization, and they don't think that that's the be all and all. For a lot of them, they say like, great, that's an awesome vision. I love that vision. And it's almost as polar opposite as you can get within the, within the scope of all the, you know, the kind of big dominant layer ones. Solana is kind of as far as you can get from Ethereum. And in many ways, you can also see it, you know, within New York, or sorry, within crypto. The, the two biggest layer one blockchains are Ethereum and Solana.

• 51:22Speaker 00

  In the same way, the two biggest cities in the U.S. are New York and LA. Now. I keep going down the list and give me more examples. I can stop there. I can keep going if you want me to keep going.

• 51:31David Hoffman?

  I was just gonna bring that up. Yeah, so you list off some other cities and some other blockchains that you think resemble, blockchains that resemble certain cities. And so I think that's just a fantastic game. So let's keep on going with that.

• 51:43Speaker 00

  Sure, sure. So the next on the list that I put on there is Avalanche. It's not literally the next blockchain on market cap, but it's the one that I think is worth putting in this list. So Avalanche, the way that you can, that I like to analyze is Avalanche is like Chicago. So Chicago is the third largest city in the US. And of course, Chicago, you know, it kind of has this, it is sort of a finance-y city like New York. It doesn't have quite all the same kind of cultural sophistication that New York has, but it's an aggressive city. It's a, you know, it's a fast-growing city. It's a newer city and it's one that is ultimately, it's made a name for itself by being really, really good at what it does. And in the same way, I think Avalanche is kind of this, you know, finance-oriented up-and-comer. It's very aggressive.

• 52:26Speaker 00

  It has this kind of very brusque identity, but it's, look, we're going to be the next generation of Wall Street. We're going to take the, we're going to take the wind out of the sails of Ethereum and be the future of what, you know, Wall Street wants to do. You know, it's a little cold in Chicago. Same way, it's, you know, Avalanche obviously is a snowy name. And they like to use a lot of cold metaphors, so I felt like it was very appropriate to brand them as Chicago. And then the next one I put on that list is San Francisco. San Francisco is actually not one of the, one of the largest cities. Actually, they're pretty far down the list, actually. But in terms of cultural significance, I think it's pretty obvious that San Francisco is enormous in terms of its cultural roadmap. Or sorry, its impact on the overall culture and on the overall country by GDP.

• 53:10Speaker 00

  And the same thing is true in many ways for Near. Near is actually pretty low on the list of total TBL chains, at least right now. But you can obviously see in terms of price, it's moved dramatically, especially over the last couple of months. And Near, I analogize to San Francisco where Near is this, Near actually very much embraces this Ethereum 2.0 vision. Is that, you know, look, Near, we are, you know, sharding before Ethereum could ever get to sharding. We are the decentralization maximalist. We're the idealist about what technology. Can accomplish, you know, we're a bunch of like ex-Google and ex-Meme SQL engineers. We're trying to build this next generation of tech. And we're true believers in that decentralization vision. It's not there yet. We're on our way. And I kind of analogize that to like, okay, you guys are trying to build the future.

• 53:53Speaker 00

  It's very, you know, idealistic, much in the way of San Francisco. So those are the blockchains that I threw into the post, but you know, it's a, it's a, it's a game that we can, we can, we can take further if, if, if it makes sense to.

• 54:06Ryan Sean Adams?

  Yeah, I want to know what the random town in Virginia, which blockchain that is, Haseeb.

• 54:11David Hoffman?

  Ryan took that one personally.

• 54:14Speaker 00

  Oh shit, I didn't realize.

• 54:15Ryan Sean Adams?

  I live in a random town in Virginia, Haseeb. Literally, but no offense taken. Yeah, I totally get it, but can I ask you a question, right? Because this, this is interesting. A lot of people frame different chains and bankless has we have in the past as taking completely different trade offs. But I think you're saying a little bit like, yeah, and that's the point. These cities are making different trade offs, right? You're saying LA is going in a completely different direction in New York. But what they're all after is, is sort of the same fundamental things. They want population growth. They want economic growth. They want, you know, prosperity.

• 54:56Ryan Sean Adams?

  They want more, more citizens, I suppose, more GDP for their city. So they're all competing over the same types of resources and the same metrics. And yes, of course, they are all making different trade offs. Would you agree with that? These, these cities are all making different trade offs, but they're all after the same thing.

• 55:15Speaker 00

  Yes, to an extent, right? So the, the classic way that the multi-chain story has often been betrayed, or portrayed, is that it's a zero sum battle. And the zero sum battle is basically that who's going to be the dominant blockchain? And whoever picked the right trade offs is ultimately the one that's going to be dominant, right? That's the traditional network effects model of blockchains, that there's going to be one that's the right one. And everyone else is basically going to die off or be a ghost town. And the vision that I'm painting here. Is a different vision. It's a vision that, look, New York and LA, obviously in some sense, compete over people because some people decide whether to live in New York or whether to live in LA. But when you see that there's a lot of, you know, when you see outflows today,

• 55:58Speaker 00

  not, you know, 100 years ago, but today, from New York or from LA, it's actually not that common that people from LA go to New York, or that people from New York go to LA. That's usually actually not what happens. What happens is that people in New York go to other places in New York, or, you know, they go to Connecticut, or they go to Jersey or City or whatever. And same thing in California. If you don't like LA, you go to San Diego, you go, you know, you go to some other place in California. And the reason why is that ultimately, I think what is going to end up happening in blockchains, this is kind of the prediction, the underlying prediction of this model, is that the different places in the trade-off spectrum actually are going to attract mostly different people. The Venn diagram, there's some people who are going to be, look, I just want to be in the best city. And if New York's the best city, and if it's

• 56:40Speaker 00

  the most happening city, I'm going to go there. And if it's LA, I'm going to go there. And like, I don't really care about the underlying culture, or the underlying values, the underlying whatever. But a lot of people are going to find that the cities are so different. They house such different applications, such different kinds of people, such different use cases, that actually, it's like, look, if I want to be, you know, playing games, then I'm going to be on Solana either way. And if I don't choose Solana, I'm going to choose some other thing that's going to make a similar set of trade-offs. I'm never going to be going on Ethereum to play games. It's just not the place for games. And in the same way, like, look, if I want to go be an actor, maybe actor's not a great example, since they both have acting. But, you know, let's say that I want to, you know, be in-

• 57:19Ryan Sean Adams?

  Hollywood, right?

• 57:20Speaker 00

  Hollywood, yeah, okay. I guess Hollywood is- If I want to, if I want to make movies, right, like, I mean, obviously, there's, there's, there's, you know, the sort of play acting, or like Broadway, which is in New York. But if you want to be in movies, there is one place to be, and that's LA. And if you are not in LA, and you're not making movies, like, you're just, you know, what are you doing? Like, it's just the wrong place to be. And I think in that sense, you will find that as blockchains, as these emerging little ones grow, the prediction from this model is that, one, they will become more distinct from each other. Initially, when they all start, they're all kind of the same, right? Because they all just have a big pile of roads, and a police station, and a, you know, whatever. It's all just, you know, it's a Block Explorer, and then a, you know, a Twitter account that's like talking about how great it is. But eventually, and you've already seen this,

• 58:03Speaker 00

  the, the communities are getting more and more different. They're becoming more and more-

• 58:10Speaker 00

  Variegated over time. And as they do that, they're going to attract different communities, different industries, different kinds of developers, different kinds of applications. And if that happens, then the substitutability of these cities for each other will go down over time. And you won't say, okay, I don't like Ethereum, therefore I'm going to go move over to Near. What you will say instead is that like, hey, Near is like really good for, I don't know, decentralized social media or, you know, some other thing that is not the thing that Ethereum is dominantly used for and vice versa.

• 58:43Ryan Sean Adams?

  Do you think there will be some power law winners here at all?

• 58:47Speaker 00

  Yes, I do. And I think, again, this is another prediction of this cities model, which is why I like it, because it predicts a lot of things simultaneously. What it predicts is that, look, when you look at cities, you do observe a power law. In every single country, there is one most dominant city, and that city is usually, you know, at least twice as big as the next largest city, almost always. Very rare, there are two cities that are almost exactly the same size. And you see that in the US, right? In the US, New York is like something like eight million people, and then LA is like, you know, three point something million people. New York is almost twice as big as LA. And the, you see in, and then it falls down, and then there's, you know, one point, one point something, you know, Chicago's maybe two million, and then, you know, Houston is like 1.5 million or something.

• 59:30Speaker 00

  I'm picking, I don't know exactly the numbers, it's something in this ballpark. In a way, is almost exactly what we see with layer ones. With layer ones, we see that Ethereum is huge, and then after that, Solana is pretty big, and then we see these other layer ones that are somewhat small, and then it really falls off a cliff after you start going further down the list, right? But it looks like the power law distribution looks very similar to what we see with respect to cities. And so, you know, if you take the holistic view of this model, the reason why I like this model so much is that it almost perfectly describes what we actually see. What we actually see in terms of Layer 1 blockchains, their utility, or sorry, I should say their utilization,

• 1:00:13Speaker 00

  their prices and their value is that, you know, the cities, the big cities are where almost all the value is. Right? So like Ethereum, Solana, Near, Avalanche, Terra, et cetera. All those cities are hugely valuable, but it's concentrated mostly in Ethereum and then it kind of falls, it goes down a curve after that. And if you go further and further down the list of cities, those cities are not valuable at all. They're very, very small. Right? Second is that when it comes to rollups or, you know, the skyscrapers, skyscrapers are important. We're seeing lots and lots of investment into skyscrapers, as you would expect, as cities grow really large. But, you know, the largest skyscraper, which today is Arbitrum,

• 1:00:54Speaker 00

  has way less economic activity inside of it than LA, which is, you know, maybe not surprising if this analogy is correct. And then third is that the application-specific blockchains, which are these factory towns, like, you know, something like Osmosis, are tiny. Compared to all this other stuff going on within Layer 1s and Layer 2s, they're a tiny blip in the overall economic picture of what's going on on public blockchains.

• 1:01:20David Hoffman?

  And Haseeb, you make a, you're going through some of the predictions that you concretely write out in your, in your paper, which is basically what we are going through right now on this podcast. But there's one prediction that we haven't touched on yet, and that's the very, very last one, which is that cross-chain bridges will be extremely valuable. Can you unpack this element of your thought and mental model here? Why are bridges so valuable?

• 1:01:44Speaker 00

  So this one, this one, I think, doesn't follow directly from the analogy, but I think it's one that's not a far leap from the analogy. So cross-chain bridges are basically ways that you can connect up between two chains or two cities, or, you know, even two skyscrapers for that matter. And in a world where the distance between those two blockchains is very large and very treacherous, What you actually have seen, in order for us to get the massive sprawling infrastructure that we have in the US, there was an enormous investment into a highway system. And the highway system that was built by the government is obviously very, very valuable. Before we had that, we had roads and railroads. And railroads, of course, were extremely valuable. Some of the most valuable businesses in the world before

• 1:02:27Speaker 00

  the highway system was built and totally made public. And transportation across the US became much cheaper. And of course, before that, it was canals. And canals were extremely valuable. And because they were effectively the choke point for a huge amount of commerce. And in the same way, if there's any good analogies you've drawn here, transportation is one of the largest industries in every developed economy. And transportation in the realm of public blockchains is basically bridges. It's how you connect assets and even potentially smart contract execution from one chain to another chain. If you're going to see more and more distribution across the landscape in crypto, across different layer ones and layer twos and applications of certain blockchains, then the connective

• 1:03:11Speaker 00

  tissue that connects up all this stuff is going to be very, very valuable in the way that railroads are valuable and the way that canals were valuable. So that's, again, it's not a direct consequence of this, but it's a prediction that I think is probably going to, I think, probably going to come true.

• 1:03:28David Hoffman?

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• 1:04:08David Hoffman?

  of a cross. If you want to bridge your assets quickly and securely, go to across.to to bridge your assets between ETH, Optimism, Arbitrum, or Bova Networks.

• 1:04:19David Hoffman?

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• 1:05:03David Hoffman?

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• 1:05:48David Hoffman?

  that you're already used to using, making the Ledger Live app your one-stop shop for all of your financial needs. Go to ledger.com, grab a Ledger, and download Ledger Live to get all of your DeFi applications all in one place. There's a ton of resonance that Ryan and I have had with these mental models, but there's also a few tweaks that we want to make. So we want to dive into how we would tweak these ideas and concepts to the way that we see this playing out. It's mostly the same. I'd say it's 80% the same. But instead of cities, we've seen blockchains, crypto-economic networks as nations, nation-states, not necessarily cities. And the reason why...

• 1:06:28David Hoffman?

  Why we we think that we see um uh blockchains to be cities, especially um ones that take the modular approach. Is that to us, the the L2s, the rollups, take the take the role of of cities. Where the Ethereum L1 takes the role of like the federal, the federal government, right? The coordinating body behind all the cities. And that's why you can drive from New York to LA without ever going through a security checkpoint. You don't actually ever have to cross a border. You can cross state borders, but like no one's there checking in on you saying like, hey, can I see your documentation?

• 1:07:06David Hoffman?

  Uh and and this, the way that this um this works is that because every single city, which I mean, and we're kind of blurring the lines between cities and states here. Every single state slash city is all abiding by the same central protocol. And that is the Ethereum L1. And so you're saying the same citizenship that you have inside of, you know, LA is the same citizenship that you have inside of New York. And uh you you mentioned earlier about how Boston was actually like the epicenter of uh the United States. And then also we have Washington DC where like literally everything is decided. But let's go ahead with and and just a, you know, to discount all the ways that this metaphor breaks down when we make it extremely concrete. We'll just assume that the epicenter of the United States was New York because it kind of is.

• 1:07:50David Hoffman?

  And when people decided to move out of New York, New York was settled in like the 1650 something. And then we made the Constitution of the United States like almost 100 years later. And the Constitution of the United States set the rules for how people can freely migrate across all the states, across all the cities. Or perhaps across all the rollups. Uh and so where Ethereum, the L1, has like this EVM, the the central guiding protocol that allows for all of these different cities to sync up on their central nodes, right? And so all of these states. Collapse down to the federal government.

• 1:08:31David Hoffman?

  And so all of these cities and states inside of the United States of America all abide by the same central protocol, which is the Ethereum L1. And that makes interstate highways free for trades, free trade between states. Like you don't actually have to pay taxes to go trade between states, not to the Federal Reserve. And you also have all of the same rights that you do when you go from state to state and city to city. And this starts to, that breaks down when you go across a border. And so we will have the United States of America be the United States, and then Solana can be Canada. And you actually have, there's friction going across the border.

• 1:09:14David Hoffman?

  Like you actually aren't guaranteed to have, like be able to pass through that. And while users can freely consider themselves like a citizen of any single L1 and all of them simultaneously, assets are the things that actually have prominence, right? If an asset is born on Ethereum, then if you want to migrate that using a cross-chain bridge, a multi-sig bridge, going from the United States to Canada, the United States to Mexico, or to Europe, you actually have to ask permission, and you need to go through a permissioned bridge. And that is the difference between a multi-sig bridge, where you have a set of signers, which is how you cross across blockchains, versus a L2 roll-up cryptographic bridge,

• 1:09:56David Hoffman?

  which has, as far as my understanding goes, much more bandwidth to allow for things on the L1 to pass up to the L2. And so there's friction between these borders. And that's because Canada abides by some certain set of laws. It is a particular protocol. And America abides by a certain set of laws, that is its protocol. And these laws are asynchronous. And so you have to actually go through like some sort of arbitrary coupler in order to have your things in one nation-state go to another nation-state. And some nation-states have really good partnerships. Perhaps like it's actually way easier to

• 1:10:36David Hoffman?

  To go from Ethereum to Avalanche because they abide by a very common set of principles, the EVM. And that's why transportation across things like United States to Canada, it's actually relatively easy because we actually have shared culture. But going from the United States to some country like Iraq gets a lot harder because we do not have shared protocols, shared laws. We operate on different rules. How do you feel about this tweaking of the metaphor? How has this landed with you?

• 1:11:08Speaker 00

  So I like it. And I think by kind of zooming out a level and kind of saying like, okay, we're actually, let's pull everything up one kind of level of size. You end up at an interesting place where, as you were talking about, you can start contextualizing the relationships between layer ones. As like, I like your analogy of like, look, yes, you're absolutely right. There is more interoperability, much easier between Avalanche and Ethereum because they share this common language of the EVM, which is kind of similar to like how Canada and the US share a common culture and common legal norms.

• 1:11:43Speaker 00

  Although it gets, like, I'm, I'm, I think at the same time, though, it is a little bit early to start calling alliances between layer one blockchains. Because I think we don't actually really know how it's going to play out, right? Like, I think it's sort of like, you know, it's, the year is still like, you know, you know, 1790 and, you know, France maybe just helped us out a little bit. But it's kind of like, okay, well, I don't really know what you want to do with us now that you got us out of this war. And I kind of feel like that's a little bit of how the L1s are looking at each other today is that, look, everyone starts friendly because they're like, look, what's the point of not being friendly? But as competition ramps up, we may see slightly less friendliness over time.

• 1:12:24Speaker 00

  It's hard to say. But, but yeah, I think your analogy also works very well and captures some other elements of how the different L1s relate to each other.

• 1:12:36Ryan Sean Adams?

  The other, I guess, question I have about kind of the multi-chain world and the multi-chain idea. And like, we can get a bit more concrete. We don't have to stay with the cities analogy. Although I do think nation-states maybe implies this better is the topic of security.

• 1:12:57Ryan Sean Adams?

  You know, all of these cities, all of these chains, let's say, have to fund their own security budget, their own military, right? And this is, this is more than like a police force. This is an actual military because, you know, a police force is mostly for enforcing the law in a population, you're, you know, your city. A military, you're actually fighting external forces, right? So like, you know, the US might have to fight another country or something, or some other country might have to attack the US, right? And you have to defend against that as a nation state. And that, it seems like, is the, uh, the primary cost of running a layer one, running a blockchain is security cost. And you pay for it in one of two ways.

• 1:13:40Ryan Sean Adams?

  You either pay for it via issuance, so you mint new tokens and those assets are worth something, the layer one assets. Or, uh, you fund it through transaction fees. And the minting of new tokens, the transaction fees, they either go to the military in the form of miners or they go into the military in form of like validators, right? And all blockchains basically work this way. So you have a security budget. Um, and so I guess the question for me, or what I've struggled with, with the multi-chain, uh, thesis is how is a layer one going to compete against a layer two, uh, when the layer two doesn't actually have to fund itself? So the nice thing about being a layer two

• 1:14:25Ryan Sean Adams?

  is you kind of get the military for free, right? So like, you're just, again, if layer ones are nation states, you're in the US, you know, and a, a layer two is a city like San Francisco or LA. The nice thing is, New York City, LA, they don't need their own militaries. They just depend on Washington DC and the federal government, right? Uh, but if you are spinning up your own country, you have to have a sizable military, I think. Not necessarily to take on the US, but to build your network effect. Because I think there is a, an idea here, and I'm wondering if you agree with this idea, that applications and users will go to the highest security blockchain. That will be the chain that wins.

• 1:15:09Ryan Sean Adams?

  So the chain that has the highest security will eventually be the dominant chain. And that may or may not be true, but that I think is an underpinning of this thesis. And if that's the case, then Yeah, I mean, basically, chains that become money, their underlying assets become a monetary asset of some sort, they're able to create the highest security budget, they will attract the power law, the vast majority of all of the value, and other chains won't. And particularly because those other chains will have to compete against layer twos that pay nothing for security. What do you think of that? How does security budget factor into the multi-chain thesis that you have, Ziv?

• 1:15:54Speaker 00

  Yeah, so there are a lot of things there, and I want to make sure I get to every component of them to forge my answer. So the first thing is, I think, okay, the country metaphor here, I think, gets a little bit treacherous, because if we actually want to play out the metaphor, then it's like, okay, well, one's the US, who's China, who's Germany? And I think it starts getting

• 1:16:19Ryan Sean Adams?

  And what year are we in? We're politically messy.

• 1:16:21Speaker 00

  Yeah, it starts getting politically messy. That's one of the reasons why I like the city analogy, that it's more politically neutral, or at least less charged, when we started assigning names. But second, is I do think there are actually some important disanalogies between nation-states and cities, right? So cities still do have what we might call a security budget, right? You need a police force, you need a fire station, you know, you need, there are certain services that must be administered by the municipality in order for a city to function correctly, right? There are kind of public goods that must be administered by each city. And security is just one such public good, right? It's kind of the most principal public good in a blockchain. Now, the question that you

• 1:17:02Speaker 00

  laid out there is, look, if I am choosing a city to live in, am I not going to choose the city that has the best police force? Isn't that just obvious? Because if I go to another city, there's a marginally higher chance that, like, I get robbed, or that I get killed, or that I get whatever. And the answer is, well, obviously not. Right? If you if you frame it in those terms, or the question is, okay, look, shouldn't I live in a country that has the highest, you know, military per capita? Which actually, I don't know if the US has the highest military per capita, but let's say, for instance, that it doesn't. Let's say there's some smaller country somewhere that has even more forces per capita, right? It's like, okay, well, I, no, I wouldn't choose where I want to live based on that. I might go live in Switzerland, because Switzerland is just really nice. And like, it's good enough for me, and, you know, Switzerland hasn't been invaded in

• 1:17:46Speaker 00

  a very long time. And if it's gonna be invaded anytime soon, I can leave and, you know, find somewhere else to go live. The reality is that that's that's just demonstrably not how people choose where they live. Now, there are certain people who are making their choices based on security. Right? There are certain people who are saying, look, I am going to live in New York because I want to make sure that like my real, my assets are protected by the most ironclad, you know, legal framework possible for protecting people's assets. Right? A lot of people do that. A lot of financial assets are, look, I'm only gonna be in New York banks. And I am not going to entrust myself into any other jurisprudence. I'm not gonna have money in in Hong Kong, or in Singapore, or in Germany, because I

• 1:18:29Speaker 00

  never know what those governments might do. But I know what, you know, New York is gonna do. New York is not gonna steal my money. And that that, you know, set of case law is so ironclad that I can trust it. In that same way, some people are gonna say, look, I'm only gonna be on Ethereum, because I don't trust anywhere else not to eventually fuck up. And that's why I'm going to choose Ethereum and nothing else. There are some people who will make that choice. But, one, obviously, the people who do that are probably gonna be the very, very wealthy. So, you know, it's the whales and the kind of billionaires and the kind of crypto elite who are gonna be saying, I'm only gonna choose Ethereum because I don't trust Solana or Avalanche not to have faults, or not to, you know, to actually be able to survive a nation-state level attack, et cetera, et cetera. That's the first thing. Very few people are making their choices based on that criteria.

• 1:19:14Speaker 00

  Second, you can sort of see it by people's revealed preferences is that there are more users on Binance Smart Chain than there are on Ethereum, ostensibly. If you certainly aggregate all the other Leyone blockchains, there are definitely more users on all the other Leyone blockchains than there are on Ethereum, if you combine them all. It does not seem to be the case that people are measuring the security budget of Ethereum. How many people do you know who have asked you, "Can you please describe to me the difference between the security budget of Ethereum versus security budget of Solana?" I have never heard anyone ever ask me that question. That is not how people are determining what blockchains they're going to use. So now, there are important considerations about how long has this blockchain been around? How robust is it? How likely is it to be bug-free?

• 1:19:58Speaker 00

  Those are all things people very much care about. But the security budget, and this is something that I've written about actually a bunch of times. I wrote a piece, I can't remember, I think we may have spoken about it, Ryan, a long time ago called "Why Decentralization Isn't As Important As You Think." And in that piece, I talk about this decentralization S-curve. And the S-curve basically describes that when you are not very decentralizing, you have very little security budget, increasing the security budget that you're spending doesn't matter very much. Because if somebody wants to go and, like, you know, if you're Robston, right, let's say, or like, I don't know, Cheap ETH, you guys know Cheap ETH?

• 1:20:32Ryan Sean Adams?

  Is that another testnet of some sort?

• 1:20:34Speaker 00

  It's like a real testnet, but it's real money, you can go buy it. It trades on like some random shitcoin exchange. It was actually made by George Hatz, it's kind of cool. But basically, it was like, it's like the Kasama for Ethereum, right?

• 1:20:47Ryan Sean Adams?

  Got it, yeah, yeah.

• 1:20:48Speaker 00

  Value laden, real mainnet. So if you go on Cheap ETH and you want to go do a 51% attack against Cheap ETH, it's pretty easy. It's not that hard. If you marginally increase the proof of work on Cheap ETH, it's not going to change that. Anybody who really wants to and wants to go spend, you know, $10,000, or I don't know however much it costs to take it over, you can just go do it, right? It's not that hard. So increasing the spend does basically nothing. But at a certain point, you'll hit this curve where now, okay, now it's $100,000 an hour. If you increase enough, now you start climbing up this S curve, where the amount of extra security spend is really materially changing the number of people who would need to coordinate, or who can single-handedly coordinate to take over your blockchain. Right? And so you start climbing this S curve

• 1:21:31Speaker 00

  and really having an impact on the effective censorship resistance of this chain, and decentralization of this chain. But then, eventually, you're going to hit this point of declining returns. And then it really starts leveling off, right? If I told you, hey, you know what? I think Ethereum should spend a billion dollars more per year on its security budget.

• 1:21:50Speaker 00

  Would that materially change your desire to use Ethereum? No, of course not, right? Like, you probably wouldn't even know. You didn't even know to ask the question of, hey, should Ethereum be spending more on its security budget? You're not even thinking about it, right? You know that Ethereum is safely past the point where it needs to be worrying about how much it's spending on its security budget. And if I told you that, hey, Ethereum is likely to lose 10% of its security spend next year, you would say, oh, okay, whatever. Like, that's probably fine. Because you know that it's safely past that rise in the S curve. And so for that reason, the thing that really matters is that most of these layer one blockchains pass that really high ascension in the S curve. And further marginal decentralization or increased security spend doesn't matter that much, right? If all of the, you know, if you had, you know, Mossad,

• 1:22:33Speaker 00

  or, you know, the FBI, or, you know, these other really concentrated actors coming together and saying, you know what, we're going to go break Ethereum. There's a good chance that they could even do that to Ethereum today. And if, you know, a, you know, a group of script kiddies, or, you know, as one of these, you know, hacker groups came together and said, I want to go break Ethereum, or I want to go break Avalanche, they might not be able to do it today. And so they both actually are not that different in their material respects with respect to how secure they are. Now, I mean, look, you can argue at the margin, whether or not that's true of Avalanche, whether or not that's true of Ethereum, whether or not it's true of Tezos or whatever. My point is that it's definitely not a question of whichever one is the most secure is the one that everyone's going to use. Because it's not even the criterion people are using today.

• 1:23:15Ryan Sean Adams?

  Do you think, I want to get back, I want to get back to that. Because I think the first two points you made are good. But do you think that that still holds true if we assume users are no longer individual people, but they're actually chains? Because that effectively is what the Ethereum roadmap and the modular blockchain thesis is like pushing towards. It's like, no, users aren't going to be using main chain. Actually, other chains are going to be purchasing the block space of main chain. And so The argument would be, well, security actually really matters. Maybe not for individual users, you don't care. Like, I'll use Coinbase all the time. I have assets on Coinbase, like, whatever, I don't, you know?

• 1:23:57Ryan Sean Adams?

  But for chains, if they're planning their entire economy and their entire future, they have to have the most secure chain in order to root themselves, in order to have those settlement guarantees. Does that change the calculus at all?

• 1:24:13David Hoffman?

  And to elaborate on that, the more security a federal government has, the stronger military a federal government has. In the world of blockchains, when we extend this metaphor to blockchains, you are literally making more space for more cities because you can fit more rollups inside of your nation. And so, again, it's asking the question to users, like, yo, like, do you want to go to the most secure chain? They don't really care, they just want to go to where the fun is. They want to pick their favorite city that vibes with their culture the most. But when it comes to a nation or a blockchain, how your level of security is determined, how many cities you can fit inside of your protocol? How many cities you can fit inside of your nation?

• 1:25:00Speaker 00

  So it's an interesting question. And I think I get your point is that chains are going to be, in some sense, they can aggregate the preferences of their users more effectively than users could maybe individually. And it might be that, look, when you're big and giant, you're just going to be more risk averse and you're going to be more conservative. The way that governments are tend to be more conservative than maybe users individually are. That being said, I mean, again, we can, one is, I think, it's very clearly, security is not the only thing that chains care about, right? They also care about composability, they care about, you know, economic value.

• 1:25:40Speaker 00

  They care about also, I mean, one thing that a lot of chains can and do, concern themselves with, is, you know, what is the trajectory of this chain? Am I attaching myself to a rising country or a falling country? And people want to bet on winners, they want to bet on, and there's more returns in many ways to betting on somebody who's rising than on somebody who's flat or somebody who's falling. The prediction that almost falls out of the suggestion you guys are making is that, look, US is the biggest country, it's got the biggest military, right? So wouldn't it be the case that every single other country in the world would become basically a satellite state of the US? And the answer demonstrably is no. Like, it's just not the case that every single country in the world is a satellite state of the US, because there are many other things that matter besides your military might.

• 1:26:25Speaker 00

  And I think that, again, this is where the analogy breaks down, because there's obviously so many more variables in geopolitics than just your military. But I think what we'll find is that it's likely also true in blockchains. And it's also a matter of when. It's not just a matter of this will eventually happen when Ethereum achieves its eventual roadmap. There's also a question of like, okay, well, how friggin' long is it going to take? Because I'm ready to go today. I'm like an entrepreneur. I'm here, ready to build. I have users who are not sitting around waiting for this eventual utopian vision of charting and blah, blah, blah. And I think all this stuff is clearly path dependent. Because if security is not the only thing that matters, which I think we can all agree, it's not the only thing that matters. It might matter a lot, but it's definitely not the only one.

• 1:27:06Speaker 00

  Then if these other things matter and they can be delivered faster by these other architectures, these other chains, then I think it is very path dependent how all this stuff ends up evolving.

• 1:27:18Ryan Sean Adams?

  I think one kind of interesting implication of this, whether we see layer one chains of cities or whether we see them as countries, as nation states. Like, if we look at the world today, both of those things do break down, like, do turn into power law distributions, right? As far as like GDP, as far as like, you know, economic power, that sort of thing. Like, there are generally power law winners at one given epoch in history. And there are other, you know, smaller nation states as well. And so maybe we're also arriving to a similar conclusion, whether it's nation states or cities.

• 1:27:56Speaker 00

  Exactly.

• 1:27:57Ryan Sean Adams?

  Okay, so how bullish are you then on non-etherium chains right now, Haseeb? Do you think that this is where the bulk of the growth and the value will be had for investors moving forward?

• 1:28:11Speaker 00

  I'm quite bullish. I don't know about the bulk of, I mean, that's a very strong, that's a very strong phrase. So I don't know if I'd say that the bulk of value is going to come from these emerging layer ones. But I do think it's the case. I'm not making a bold prediction. It's already happened, obviously. So I'm a little late to the party. But I was, I was also, if you, I think you and I talked about this briefly. I wrote a piece back in, I think it was the summer called, I'm worried no one's going to care about rollups. And in that piece, basically, one of the, I think one of the lines I put, I don't remember if this actually was a line. But basically I said, you know, the, the, one of the reasons why I'm worried about these emerging rollups being this huge story. And people thought like, oh, skyscrapers are going to be the biggest thing and everyone's going to live in a skyscraper.

• 1:28:53Speaker 00

  Which, you know, today is obviously not the, not the case, even in the world, that most people don't live in skyscrapers. And the reason, one of the reasons why I was concerned about the story is that these emerging layer ones can move so much faster than the rollups. It's, it's so much easier to just go build a new city than it is to like go perfect skyscraper technology. And in fact, I was worried that, look, these guys, like, they can iterate. If there's a bug in a rollup, game over. Potentially you lose all the money, right? It's extremely careful engineering. If a skyscraper falls down, lots of bad shit and like no more skyscrapers for a long time, right? That's, that's how bad it's going to be. But with emerging layer one, if something goes wrong, that's cool. Just fork it, fix it, you know? If you need, if you have a Dow fork situation, that's fine, right?

• 1:29:36Speaker 00

  You're still in your infancy. It's all good. Everyone's calling this stuff beta software, even though no one's treating it as beta software. It's all good. You can, you can do that really easily. You have the flexibility. Whereas with, with layer twos, you don't have that. And furthermore, from the perspective of a user, most users who are entering blockchain today, they're just here, you know, they're, they're here to train NFTs. They're here to like liquidity mine. They have no idea what's going on. They have no idea what any of the arguments that we've been, you know, going on about for the last three or four years. And so when they show up and they see a cheap chain, they're just like, hey, this skyscraper is really expensive. This other one is really cheap and both of them, you know, have, you know, Ponzi schemes on them. Great. I'll, I'll go, I'll go on this one, which is way cheaper. And from the perspective of a user, the best layer two is a new layer one.

• 1:30:17Speaker 00

  So that, and you know, that, that was a, a concern that I was voicing back in the summer. And I think the, so far, that's turned out to be the case, is that the most vibrant happening places in crypto today are probably these emerging layer ones. And the layer twos are still relatively anemic in their, in their growth.

• 1:30:36Ryan Sean Adams?

  Haseeb, if you had to, this is the closer question for the podcast.

• 1:30:41Speaker 00

  Okay.

• 1:30:41Ryan Sean Adams?

  What's your favorite city to live in?

• 1:30:44Speaker 00

  In the, in the real world or in crypto?

• 1:30:46Ryan Sean Adams?

  I'll let you figure that one out.

• 1:30:49Speaker 00

  Okay, okay. My favorite city to live in, I would actually say New York, although I don't live in New York. I think New York is probably my favorite city. It just happens that at Dragonfly, we do so much work with Asia that living in New York would just be absolutely brutal in respect to time zones. But New York, particularly in, I'll say, not in the winter, non-winter New York, I'd say is probably my favorite city. And maybe that betrays something about my, my views about Ethereum is that I think Ethereum is amazing, except when it's congested, then it sucks.

• 1:31:21Ryan Sean Adams?

  I also heard winter and hopefully we're not in a, in a crypto winter right now. Haseeb, do you have any thoughts on that?

• 1:31:26Speaker 00

  Yeah. I mean, I, I was just, I was just asked this the other day from somebody who was like a reporter type. And what I told him is that, look, you know, it was like, are we in a winter? Do we know where to, how do you know? And the answer is like, look, you know, when you see it, like the point where everyone's asking the question of where, are we in a winter? The answer is yes.

• 1:31:46Ryan Sean Adams?

  That's what David says. It's like, you know, I'm not convinced we're in a bear market, but he's like, if you're asking that question, then we're in a bear market because it's a bear market is about sentiment.

• 1:31:56Speaker 00

  Exactly. Bear market is when you look around and ask people, are we, guys, are we still, is anyone excited? That's how you know. It's like when you're looking around, looking for, trying to get people hyped up, that's okay. Yeah. You're not there anymore. You're not, you're not in a bull market anymore.

• 1:32:10Ryan Sean Adams?

  Well, this is great. Haseeb, this has been super helpful. Thanks for coming on Bankless again and just talking about cities, man. I really like this analogy. I do think, you know, geography, cities, social structures, all of these things are helpful, very helpful for understanding blockchains. And thanks for laying out the multi-chain thesis today.

• 1:32:28Speaker 00

  Totally. It's a lot of fun.

• 1:32:30Ryan Sean Adams?

  Action items for you, Bankless listeners. Of course, we'll have a few links to resources in the show notes. The first is Reed Haseeb's piece we've been talking about today, "Blockchains Are Cities", is the name of it. If you want to throwback, go all the way back to summer, I think, of 2020. Yeah, it's summer 2020 when we last had Haseeb on, where we talked about DeFi and the ETH2 metropolis. It's another cities analogy to describe sharding and how scalability would emerge on Ethereum. So those are some resources for you. Of course, as always, risks and disclaimers, guys. All this stuff is risky. Everything we've been talking about, none of it has been financial advice. ETH is risky, DeFi is risky. So all those cities and chains out there, you could definitely lose what you put in.

• 1:33:11Ryan Sean Adams?

  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.

• 1:33:18David 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,

• 1:33:59David Hoffman?

  Ask Me Anythings, and weekly rollups, where 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.