Are L2s Extensions of Ethereum? | Kyle Samani & Max Resnick vs. David Hoffman & Jill Gunter

Bankless Nation, we’ve got the hottest debate in crypto right now: Are L2s extensions of Ethereum? On one side, we’ve got Kyle Samani and Max Resnick proposing that the current Ethereum Rollup-Centric Roadmap is off-track. On the other side we’ve got David Hoffman and Jill Gunter defending L2s as successful extensions of Ethereum. ------ 📣 GET YOUR ALL ACCESS PASS TO THE PODCAST https://bankless.cc/podshownotes ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🦄UNISWAP | BROWSER EXTENSION https://bankless.cc/uniswap 🪄 MAGIC EDEN | HOME OF WEB3 https://bankless.cc/MagicEden 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🤖 0G | MAKING THE IMPOSSIBLE, INEVITABLE https://bankless.cc/0G ------ ✨ Mint the episode on Zora ✨ https://zora.co/collect/zora:0x0c294913a7596b427add7dcbd6d7bbfc7338d53f/85?referrer=0x077Fe9e96Aa9b20Bd36F1C6290f54F8717C5674E ------ TIMESTAMPS 0:00 Intro 8:54 Defending “Extensions of Ethereum” 16:33 Interoperability Standards 25:36 Are L2s Parasitic to Ethereum? 32:37 ETH Economics & Value Accrual 41:30 Solana vs Ethereum L2s 49:09 Closing Thoughts ------ RESOURCES Kyle Samani https://x.com/KyleSamani Max Resnick https://x.com/MaxResnick1 Jill Gunter https://x.com/jillrgunter ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures ⁠

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

• 0:00David Hoffman?

  I think the market demand for producing chains should be just taken as fact. In this day and age, we know that there is going to be many, many, many chains. Some chain is going to figure out how to aggregate all the chains. Some chain is going to figure out how to make these chains have stronger property rights and composability mechanisms between all these chains. And that one chain is going to incentivize the production and aggregation of even further chains, and that chain will become money.

• 0:30David Hoffman?

  Bankless Nation, for those of you who did not make it to Permissionless this year, there were some pretty hot conversations that were held over those three days at the conference. The spiciest conversation, or debate, I should say, is what you're going to hear right now. It's a debate as to whether or not Layer 2s are extensions or Ethereum. This debate is between Kyle Samani and Max Resnick teamed up on the side of no Layer 2s are not extensions of Ethereum versus myself and Jill Gunter, Jill Gunter from Espresso, on the side of yes, they are extensions of Ethereum. Some people said that this was the panel of Permissionless, not my words. This was a tweet out of the moderator, Westy from Blockworks. It was also the last panel on the last day of Permissionless, about four hours before

• 1:13David Hoffman?

  my fight with Kane Warwick, and I used this panel to get into war mode in order to prep for the fight, and I definitely think that worked. There were also lots of other super hot panels and conversations that were held throughout Permissionless. Ryan's main stage panel with Chris Dixon was super insightful. I did a DeFi main stage with Kane, Samani, and Sam Kazmanian from Frax, co-moderated by Mike Ippolito, and Ryan had an Ethereum Layer 2 conversation with Alex from ZK Sync, Harry from Arbitrum, and Ruchi from Movement Labs. All of those conversations are getting released on the Bankless Premium Podcast feed. So if you're a Bankless citizen, but you're listening to this on the free feed, make sure you go get and download the ad-free Premium RSS feed and then get that integrated into your podcast player so you can get all that good juicy content.

• 1:57David Hoffman?

  If you are not a Bankless citizen, but you still want to hear those episodes, you are in luck because we are doing something that we've never done before. We're offering an all-access pass to all the best parts of our podcasts at a price that's kind of a no-brainer for the value. That you get. This is a price that includes basically everything. It's the private debrief episodes that Ryan and I record after our guest interviews where we say things that we wouldn't have necessarily said on the interview itself. It's also the early access to all of our episodes so you can get the early scoop and stay ahead of the trends. And it's also the private bonus episodes that we keep exclusive to our paid subscribers. Content directly from the best builders that will give you an edge. So you can scan the QR code for wherever it is on the screen, or you can enter the code PODCAST at checkout for that exclusive discount. That's PODCASTS in

• 2:40David Hoffman?

  all caps. And then from there, you can click the premium feed and add your unique link to your favorite podcast player. And if you're in Spotify, we always ship the ad-free video of every episode as well. So you can watch or listen inside of your shiny new premium feed anywhere, anytime. So let's go ahead and get right into the episode. But here first is a word from our sponsors because you're not on the premium RSS feed yet. If you want a crypto trading experience backed by world-class security and award-winning support teams, then head over to Kraken, one of the longest-standing and most-secure crypto platforms in the world. Kraken is on a journey to build a more accessible, inclusive, and fair financial system, making it simple and secure for everyone, everywhere, to trade crypto. Kraken's intuitive trading tools are designed to grow with you, empowering you to make your first or your 100th trade in

• 3:25David Hoffman?

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• 4:08David Hoffman?

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• 4:52David Hoffman?

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• 5:19Speaker 01

  Yeah, how's it going, everyone? I've been excited for this conversation for a while, ever since we said it in stones. I'm Westy, I'm on the Blockworks Research team, most of my research has been around Ethereum infrastructure rollups. And so this question that we're debating today, I've been talking about for a while, and it feels like there have been a ton of conversations on the Twitterverse, on podcasts, but I don't think we've ever gotten people with different views in one place at one time. So I think this will definitely be a super fun conversation. Hopefully we get some hot takes as well. And like I said, end this conference with a bang here. So I guess to start, I'd love to have sort of opening statements, if you will,

• 6:03Speaker 01

  from everyone on the panel, so we can get a quick introduction of everyone. And then if each person also wants to go into, well, I guess their high-level thoughts or what they think of when they hear the question, are L2s extensions of Ethereum? So we'll start with Cal here and make her way down.

• 6:20Speaker 02

  Sure. Hi, everyone. My name is Cal Samani. I'm a co-founder at MultiCoin Capital. We are seven years old, an investment firm focusing in crypto.

• 6:29Speaker 02

  And I do not believe L2s are, in their current form, sorry, generally used widely popular L2s, such as Arbitrum-based optimism, are not extensions of Ethereum. Although there are other configurations that could be.

• 6:45Speaker 03

  Hi, everyone. I'm Max Resnick. I'm the head of research at Special Mechanisms Group. SMG is a Skunk Works organization within Consensus, which is the parent company of MetaMask and Fura. We do special projects. We work with all sorts of things throughout. We particularly specialize in MEV, transaction supply chain, transaction landing. We also do a bunch of work on the Ethereum protocol. And I agree with Kyle that L2s in their current form are not Ethereum.

• 7:14Speaker 04

  I love that you guys are already adding some nuance to this debate. Uh, my name is Jill. I'm a co-founder at Espresso Systems. We're working to solve cross-chain composability, starting with L2s on Ethereum, so very relevant. Um, and I believe that L2s are an extension of Ethereum. I think there's two ways to ask the question. One is based on definitions. The other way is to ask it based on the goals of L2s versus the goals of Ethereum. And I think any way you slice it, they're extensions.

• 7:44David Hoffman?

  Hi, I'm David, uh, one of the two bankless guys. The other one's in this room somewhere. Um, and I think Layer 2s are Ethereum, are extensions of Ethereum naturally. Uh, and I think whether or not that that statement is true or false really depends on, of course, how we define words. Uh, all debates are essentially semantic debates. I think Ethereum, uh, all blockchains are property rights systems. Uh, and whether or not Layer 2s are extensions of Ethereum, uh, is either true or not true based on how strong the Layer 1 can promise, assure your property rights on a Layer 2. Uh, and so this is why we have things like Layer 2B, uh, the different stages, uh, fraud proofs, uh, ZK proofs.

• 8:26David Hoffman?

  Uh, the whole purpose of Layer 2s is to be a one-to-one extension of your property rights on Ethereum. Uh, and I think this debate is being had now because, uh, what is not happening, or at least what is perceived by the market is not happening, is that Layer 2s are not becoming extensions of each value accrual. Uh, I think perhaps that is something that is worth maybe talking about or focusing on, but at the very least, uh, that could also only be temporary.

• 8:53Speaker 04

  Amen.

• 8:54Speaker 01

  Yeah, there's a lot of threads you mentioned that I definitely want to go off of. First, we should certainly define exactly what we're talking about here because I think that's the first question most people have is what does it mean to be an extension of Ethereum or to be Ethereum? And it sounds like you defined it, David, so I'm curious because the people sort of on the anti side here said in their current state. So I'm curious from this side, what would you say? Like, what properties would you say make something an extension that like maybe in their current state or not, but they could be at some point in the future?

• 9:31Speaker 02

  I have a fairly simple MS test for this, which is, is the extension thing. It's an extension if it's doing something that cannot function on main net. And that doesn't just mean like, hey, increase the throughput of an app by like 10x or 100x. Like, that's still functionally the same thing. But if you're actually unlocking like new behavior or new use cases, that to me is an extension and explicitly therefore not a replacement. The mainstream L2s that exist on Ethereum today are explicitly replacing a function that L1 did a year or two ago.

• 10:06Speaker 01

  Would you agree?

• 10:07Speaker 03

  Yeah, I would agree with that. I think my test is also about whether these things are their own siloed state with network effects. And when you're your own siloed state with network effects, you naturally compete with Ethereum, which is a siloed state with network effects. So that's another thing that I would add to my definition. And then I would just add like, go look at what the things Arbitrum DAO is spending money on. And it's basically spending money to take away the lifeblood of apps that are currently operating on Ethereum L1. And another thing, go look at the fact that Unichain just announced that they're launching their own L2. So that's a hugely popular app.

• 10:48Speaker 03

  The Uniswap router is one of the most commonly used, highest gas usage contracts on main net. And they're saying, hey, we're going to go away from main net and make our own L2, which again has siloed state, which is not interoperable with anything else.

• 11:04Speaker 04

  They explicitly have on their roadmap interoperability and composability as a goal. So are we, are we taking Unichain as it exists, or I'm not even sure the state in it exists, that it exists in today? Or are we taking L2s at the word of their roadmap?

• 11:20Speaker 03

  So like, according to your logic, Jill, if we put like 1 million TPS on the roadmap, does that mean that Ethereum is scaling? Like, I, I just think we live-

• 11:28Speaker 04

  You have a viable path to get there. We've been saying Ethereum is scaling for years. I think you would agree with that.

• 11:35Speaker 03

  I would not agree that Ethereum has been scaling for years. I don't think we've done any-

• 11:39Speaker 04

  I guess because you see L2s not as an extension of Ethereum. I want to address what, what Kyle said, though. I mean, I think firstly, we can simplify the definitions. What is Ethereum? It's a world computer. It's a platform for innovation. And what are L2s? They're applications. They're a specialized form of application, but they're applications. And I would contest the statement that L2s are only extensions of Ethereum. If you're doing something you fundamentally can't do on the main net, I'm not sure that I really understand that. But I would say that regardless of that definition, you are doing something on L2s that you can't do on the main net.

• 12:20Speaker 04

  You have a totally different dynamic around transaction costs, throughput, et cetera. I'm surprised to hear that statement coming from someone who's such a big backer of Solana. Because what would be the use case of Solana? What would be the reason for a developer to go over to Solana? If that was not, by your own definition, a fundamentally different experience than you could get on Ethereum? That's what L2s are offering to developers today.

• 12:47Speaker 03

  Solana competes explicitly with L2s. So like, I, I agree with that. The, the, the frame of the question is not base versus Solana, it's base versus Ethereum.

• 12:56Speaker 04

  Yeah, but you, you're getting a, why would any developer choose between these things? Why wouldn't they just go to ETH mainnet, you know, as of a few years ago, which was where all of the activity, all of the users, all of the liquidity was? Because they're getting a fundamentally different experience on Solana? And today, because they get that fundamentally different experience via an L2, which then by your definition is an extension.

• 13:18Speaker 03

  How, how can you have a fundamentally different experience and an extension? Those two are contradictory statements. If it is fundamentally different, it is not the same.

• 13:25Speaker 04

  That's what I'm working off of Kyle's definition, so you'll have to ask him.

• 13:29Speaker 03

  Well, like Kyle is saying that he is not afraid to say that Solana is competing with Ethereum, but I'm not afraid to say that. And I'm also saying that L2s can be competitive with the Ethereum L1 as well. And there are things that I would like to see on the L1 that are only possible on the L1, like censorship resistance and credibility that you cannot expect to see from a US entity centralized sequencer. And you know, you want to see the Canadian truckers be able to use the chain when they want to get their money out of their account, then you probably shouldn't rely on a regulated centralized sequencer on US East 1 or on some box somewhere in a westernized country.

• 14:12Speaker 03

  You need more than one box contributing. You need decentralized sequencing. And you cannot basically provide the same guarantees ETH L1 provides without doing that.

• 14:25David Hoffman?

  I think a large part of this conversation comes down to the competitiveness of Layer 2 chains to the host chain, like the Layer 1 chain. When base grows, does it subtract from Ethereum?

• 14:39Speaker 03

  Which is yes.

• 14:39David Hoffman?

  Probably the answer is yes. It also subtracts from optimism. It also subtracts from ZKSync. It also subtracts from all chains, actually. Actually, there's no really difference between when Arbitrum wins, it's pulling away from Solana too. And so there has been this ongoing development architecture in crypto, even with and without Ethereum. You see this in Cosmos where you have a variety of chains with like no real ropes between them, no real connections. You have Polkadot with many, many chains with like very rigid connections between them, and that really didn't take off. And now you have Ethereum with like, what I think you guys are saying, very loose connections, but connections nonetheless, strong property rights are continued across chains.

• 15:24David Hoffman?

  And at least when an Ethereum Layer 2 wins, it takes away from Solana more than it takes away from the aggregate of Ethereum, because at least it keeps it inside of the Ethereum ecosystem. Can keep value inside of Ethereum? Yes, the layer two, the rollup centric roadmap is designed to have all chains be competitive with other chains inside of the Ethereum centric roadmap. But at least there's some aggregate value created that's retained by the net Ethereum ecosystem that is pulled away from the very disconnected that layer one landscape.

• 15:56Speaker 01

  Okay, but let's, let's kind of take this view. So is Avalanche, which is an EVM chain, L1? Part of the Ethereum ecosystem by this logic? Is Monad part of the Ethereum ecosystem? Do you have to just like, do you just automatically become part of the Ethereum ecosystem by posting state rates? Or do you have to post, use Ethereum for DA? There's no clear line that-

• 16:16David Hoffman?

  There's no clear line. It's a set of concentric circles. But I think there is a clear line as to where property rights are given assurances to. And I think where property rights assurances stop is somewhere like Avalanche, an EVM chain, Monad. And then way further away is Solana.

• 16:33Speaker 01

  Lot of great takes going on right now. Curious thoughts on sort of Interop? Like, let's say Ethereum and all the rollups agreed on one Interop standard. That there was good UX to basically easily switch assets from one rollup to another, to Ethereum L1. And you have this cohesive ecosystem like you did Solana across these rollups. Would that change your guys' mind? Like, would that be? Like, would L2s in that case like sort of be Ethereum and be a part of one ecosystem? Or would that not matter at all?

• 17:03Speaker 02

  I mean, it's like, what does it mean to be Ethereum? Like, David, you can say our property rights, you know, functionally equivalent and like, okay, that's one element. Another element is, do normal people perceive it as the same? Another would be like, is there some general sense of credible neutrality? Another would be, if you want to get late, like transaction latency for inclusions, whether you live in India or the Philippines or in Mexico, like what are those guarantees? So there's like different properties of the systems. Oh, and then maybe the other one of like, again, answering the question, is X Ethereum?

• 17:45Speaker 02

  You know, the most obvious one, in my opinion, is like, is it accruing MEV value to the base asset? And so there's different constructions of various rollup-y looking things, whether they're Espresso, or Arbitrum, or Base, or Unichain, or based rollups, or whatever. And all of these systems have different versions of some of these properties.

• 18:09Speaker 02

  I think in Max's and my definition, none of the proposed systems by any of these groups are functionally equivalent to Ethereum. They may have partial equivalents on some properties, but none of them are 100% functionally equivalent. By definition, if that was the case, then I wouldn't be on stage right now. Like, there would be no debate. Like, very obviously, they're not functionally equivalent.

• 18:32Speaker 03

  Yeah, and I guess like, just to come back to our opening statement, it's like, in its current form today is exactly what we are talking about. We are not talking about what is on the roadmap, because we work in an industry where roadmaps are memes, okay? Roadmaps do not exist. Ship code, the code that's shipped is what the thing is, not the code that you promised to ship in the future. Words on a page are not code on the compiler.

• 18:55David Hoffman?

  But Ethereum has had a pretty coherent roadmap. They had the pivot in like 2019 to the rollup-centric roadmap. But nonetheless, there was some true North Star that it kept when it pivoted to the rollup-centric roadmap. There was one central North Star, we just decided to get there a different way. And so anyone who's like investing in crypto based on current conditions is not going to make it. Like, things are going to change in the future. I think Ethereum was on its rollup-centric roadmap in 2021, when Solana had its big rise, as we realized that the Layer 1 is congested. And we really only had Polygon as a side chain to Ethereum, with no actual strong commitments of property rights connecting there. But now we have, and so this was the era of many independent siloed walled garden chains blossoming out of Ethereum,

• 19:40David Hoffman?

  proving the use case of, or the idea of, a successful rollup-centric roadmap. The Polkadot model, the Cosmos model, but this time actually working and thriving. And so we had the growth of many independent siloed chains. Now we have what is I think the era of the crosshatching between these chains. We have Jill from Espresso doing some of that work here. That is one frontier of the composability of networks. But this one canonical bridge is the first step to producing composability. But then the rest of the shape gets filled in by many different technologies. And I think that is going to define the next two to three years of Ethereum.

• 20:18Speaker 04

  I just want to build on that to come back to this question of what are the goals of Ethereum? And what are the goals of L2s? I think we've named three different goals throughout this conversation so far. One would be to create censorship resistance applications. Now, that's not the goal of every L2. Certainly, the goal of some L2s, there are L2s that include Pernod Cash transactions. There are L2s building explicitly for even more kind of cypherpunk values than exist on Ethereum today, on the Ethereum mainnet. And so I would say that on that front, the goals are aligned and compatible between the mainnet and the L1 and the L2s, at least some of the L2s building upon it.

• 21:01Speaker 04

  A second goal that we've named now is composability. I think censorship resistance and composability are basically the two reasons that you have as a developer to build in Web3 or as a user to use Web3 apps. Composability, to me, is honestly still a big question mark. That is where I think there is a risk that L2s go off to build their own walled gardens. That is why I'm working on Espresso, to work to solve composability. And then there's a third question, which you mentioned earlier, that I think we've all been skating around, which is the question of value accrual. And that is the real reason why everyone is sweating over this is because I think Bitcoin, Solana are each up like 40% in the last few months.

• 21:43Speaker 04

  And Ethereum, that meme where you're poking it with a stick saying do something.

• 21:48David Hoffman?

  I think in the current state of Ethereum, we do have kind of this like blank step of and then and then there's a perfectly composable Ethereum and there's like a missing step there. But nonetheless, we do see signs of internal composability across what Alex Glukowski is calling the clusters, the superchain, the elastic chain. There are, it's a pretty coherent.

• 22:07Speaker 04

  Orbits, yeah.

• 22:07David Hoffman?

  Orbits, yeah, there's a pretty coherent path for having internal composability across these systems. And once the superchain, once the elastic chain fixes internal composability, of which they are highly motivated to do, and they have the war chest to do the R and D to do that, then we learn a bunch of lessons to apply. It's like what worked and what didn't. We have like five different of these frameworks all tackling this problem. Maybe there's five different solutions, maybe there's one different solution, we're gonna find it and we're going to export those lessons learned to fill in the gaps between the frameworks, between the Arbitrum orbit chains and the superchain. And that will take time, that'll take a lot of time, but that is the path that we're on. And I don't think that that's like a crazy incoherent vision of the future.

• 22:50Speaker 02

  It's not defined. Like, yes, anything is possible. Sure, you didn't describe violating laws of physics. So like, okay, it's possible, but like, that's not helpful. Like, you're just saying, I'm not proposing breaking law physics.

• 23:02Speaker 03

  I mean, there's another thing you said, David, which is that it didn't work for Cosmos, that it didn't work for Polkadot.

• 23:10Speaker 04

  This time is different.

• 23:11David Hoffman?

  We have, but we actually have the chains now. Like, it is currently working.

• 23:15Speaker 03

  You know that, like, Arrested Development meme? I mean, first of all, we'll see what happens when the liquidity rewards dry up on Arbitrum and the, these war chests run out. We'll see if it actually works. When the tide comes out, we'll see.

• 23:29Speaker 04

  Max, what would it have to look like for L2s to be an extension of Ethereum?

• 23:33Speaker 03

  What about, okay, also, the other thing David said was that we've been consistent on the roadmap, but then the first thing he said was actually we shifted the roadmap from sharding. And if it was basically sharding, I think that would be like pretty, pretty consistent with being Ethereum, but it's not sharding. It's a separate team building a separate system, which is not composable.

• 23:54David Hoffman?

  With separate economics.

• 23:55Speaker 03

  Has a separate economics and its own token that it's distributing to its team. That does not depend on ETH at all. And it's making money for itself and for its team members and for its token holders and not for ETH.

• 24:08David Hoffman?

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• 25:36Speaker 01

  Yeah, I definitely wanted to go there to the economics and value accrual, which we have been skidding around a little bit. So I guess that brings about the question that I hear a lot, which is RL2 is parasitic to the L1. So I'll pose that question to Kyle.

• 25:52Speaker 02

  In a counterfactual world in which the L1 was otherwise scaling and sequencing? Yes. If that is not your counterfactual world, then no. But like, that's kind of like implicitly, like the question implicitly is being asked against that counterfactual. Otherwise, you'd just say we're scaling the matter of thing. But like, you need to position it against something.

• 26:13Speaker 01

  Would you guys say that the L2s are parasitic, symbiotic?

• 26:17David Hoffman?

  Yes, they are parasitic to Ethereum. They are also net generative of value inside of the Ethereum ecosystem. And so when Arbitrum attracts the marginal user, they attract it to the Ethereum ecosystem.

• 26:31Speaker 04

  And by the way, the dominant asset on Arbitrum and all of the major L1s is ETH. So there is demand in these ecosystems for ETH. And there is pathways to exponentially grow the user base of Ethereum from what we've seen any time historically on any chain. And that transaction volume and the growth of the user base, the growth of holders of ETH, including long-term holders of ETH, who will probably still do that on the L1, all of that is value accretive.

• 27:02David Hoffman?

  There's a, the rollup-centric roadmap will succeed or fail based on the tension between defection of chains away from Ethereum or coordination incentives towards Ethereum. There just needs to be a harmony there, a yin and a yang of like, we need to allow enough flexibility, enough tolerance for these Layer 2s to issue their own tokens, to grow their own wealth, to provide their own utility, but enough incentives for that value generation to stay inside of the Ethereum ecosystem. And this is actually in stark contrast to, interestingly, both Bitcoin and Solana, which are like, kind of like monolithic chains, where Bitcoin is like, don't build any value outside of BTC the asset. Prune everything away from Bitcoin to focus on BTC the asset.

• 27:42David Hoffman?

  And Solana is the same way, which is, in my mind, net stunting is a ceiling on the total value, because you're actually being very rigid on the net ecosystems that can be born. And so whether or not the rollup-centric roadmap succeeds is going to be because it allowed systems to be parasitic of the Layer 1, yet still be contained inside of the broader ecosystem.

• 28:05Speaker 04

  I think you're touching on something really important, which is incentives. There's a reality that developers are incentivized to launch their own chains. And so to the point of counterfactuals, was Coinbase going to launch Base on Solana as an application? If they didn't build it on Ethereum? Or were they going to launch it as their own chain? I'm not part of the Base team, we can go ask Jesse afterwards, but I think in that counterfactual world, they would have launched it as their own chain, instead of keeping it within the Ethereum family, which L2s have enabled them to do.

• 28:40Speaker 03

  So I guess I want to clarify my position, which is I don't believe that L2s are bad for cryptocurrency. I just believe that they are parasitic to Ethereum in their current form. And that-

• 28:51David Hoffman?

  Do you mean, do you mean that they're net parasitic to Ethereum as in they get, they take away more than they give back?

• 28:56Speaker 03

  I think they're currently taking users and giving back nothing. So I think like from a like, how much are they taking away? Well, that is a positive thing. And then how much are they giving back? Well, it's like one cent a month on blobs. I think that's uh-

• 29:10David Hoffman?

  What about their reservation demand of like, how much ETH is on Arbitrum? Like, I actually don't know.

• 29:15Speaker 03

  I looked it up for a hundred days.

• 29:17David Hoffman?

  Hundred, like, yeah, uh huh. Quite a large supply of ETH on Arbitrum. What, what value does that provide to the ecosystem?

• 29:22Speaker 03

  It would have been on ETH if it wasn't bridged to Arbitrum.

• 29:25David Hoffman?

  Sorry?

• 29:25Speaker 03

  It would have still been on ETH if it wasn't bridged to Arbitrum. Would it?

• 29:28David Hoffman?

  Yeah, but it would have-

• 29:29Speaker 03

  L2s have grown the usage of these networks. I'm saying that we should have, the counterfactual is we could have just scaled the L1. That's a roadmap. And-

• 29:40David Hoffman?

  Layer, layer 2s are the largest buyers that will ever exist of ETH because of how big the layer 2s are going to get.

• 29:48Speaker 02

  L2s are not buyers of ETH. What, what? No. Users-

• 29:51David Hoffman?

  I'm sniping the deposit contracts as net buyers of ETH.

• 29:55Speaker 03

  That, that's not a buy. That's a noob. It would have been on the ETH. It was already on L1 by definition previously. That is the only place it could have ever come from. It was already there.

• 30:06David Hoffman?

  The, the net value of these ecosystems, the value that they provide to the world is in addition to the Ethereum ecosystem. And that value is creating reservation demand for ETH assets.

• 30:16Speaker 03

  So the value is in addition to the Ethereum? I thought they were part of the Ethereum ecosystem.

• 30:20Speaker 04

  For, for all that you guys have said in this panel so far, this debate so far, that we can't talk about roadmaps. Roadmaps don't exist. Your counterfactual depends on a scaling roadmap for Ethereum that has never existed. Your counterfactual is that all of that demand for, for ETH would exist on the ETH L1 if it were not for Arbitrum.

• 30:42Speaker 02

  I, I actually, I agree with that statement. I don't, I don't think there was ever a plan to scale L1. I mean, they talked about charting for a while. Uh, I don't think there was ever a serious design skill issue. Um, yeah, I agree with that. But like, that is the counterfactual to compare against. Like, it's just like, it's the obvious counterfactual.

• 31:02Speaker 04

  But that never existed. Again,

• 31:04Speaker 02

  If it's called Solana, it does exist. We are using.

• 31:07Speaker 04

  Would Base have been built on Solana?

• 31:09Speaker 02

  Where do you think Base is just, it's literally a fork of Optimism, it's the same shit. It's not an application at all. It's another app.

• 31:15Speaker 04

  L2s are forms of applications.

• 31:17Speaker 02

  No, they're not.

• 31:18Speaker 04

  Okay.

• 31:19Speaker 02

  It's literally. It's literally a CRM and you copy and you take the same uniswap contract and you copy paste it there. If you just copy paste the same shit 10 more times, like it.

• 31:26Speaker 04

  It's still an application. That's like half the applications in crypto. But if I'm Coinbase and I want a way to bring users on change, as I understand is the fundamental goal of Base, what am I gonna do? Am I gonna build my own chain? Build an L2 on Ethereum? Or go deploy an app on Solana? I'm gonna either build a chain or build an L2.

• 31:45Speaker 02

  None of the above. You can just be a broker and you could, look Coinbase today, you have Coinbase UI, whether it's the retail app or the pro app or prime app or whatever, and you've got a database on Amazon. And like, the front end happens to point at the back end, obviously, because Coinbase owns both of them. And like, the back end is there, but the front end could point at any other place. And that other place or other places it could point to could include Ethereum mainnet, it could include Arbesham, it could include Solana mainnet, it could include fucking Avalanche, who cares? And like, so saying that like, they needed Base to exist is incorrect. They already have the users, they have the KYC, they have the apps on people's phones.

• 32:22Speaker 02

  They can just tap into liquidity anywhere. The base is by definition unnecessary. I mean, they literally forked Optimism, like, it doesn't have to exist at all.

• 32:31Speaker 04

  Can someone let Brian know? Let Brian Armstrong know?

• 32:34Speaker 01

  Yeah, actually, I would love to chat, seriously. So one thing I do want to get back to is you guys mentioned sort of like ETH asset and one thing, yeah, like with this relationship between L2s and L1, whether they're parasitic symbiotic, sort of all comes down to ETH asset, because that sort of is the exchange, right? Like, L2s are paying the L1 to post their data, and in return, they're sort of allowing ETH to proliferate on these L2s. So I guess I want to get your guys' take on sort of ETH asset. Is it enough to have it on these L2s? Is ETH money on these L2s?

• 33:12Speaker 03

  Where does the actual value accrue for the L1 from ETH?

• 33:16David Hoffman?

  I think we're gonna have a very hard time in this conversation because Kyle doesn't believe in money, so.

• 33:20Speaker 02

  There's a very easy limit to this. So the only assets at scale that are quoted in ETH or in Sol are NFTs. NFTs on no chain are quoted in dollars. They're only quoted in native assets. But like NFTs today are down 97, 8, 9%, something like that. And if you look at liquidity pools, the vast majority of quote pairs across both C-Fi exchanges and DeFi are against dollars. There are a couple of pools that are ETH-denominated, like it's not zero. But I bet you across all ETH L1 and ETH L2s, I bet you ETH quotes as a percentage of LP volume, percentage of TVL and as percentage of actual volumes, I'm guessing is on the order of 2 or 3%.

• 34:00Speaker 03

  The number one pair on Ethereum L1 is ETH USDC. The number two pair is ETH USDT.

• 34:08David Hoffman?

  So in this industry, we're gonna just settle for the United States dollar as the unit of account? Because that's not the cyberfunk future I'm looking forward to. What about the fiat currency crisis that has underpinned this entire industry for the last decade?

• 34:19Speaker 02

  Sorry, what crisis?

• 34:20David Hoffman?

  The fiat currency crisis.

• 34:22Speaker 02

  What crisis? What's the crisis?

• 34:24David Hoffman?

  The ones that we keep on printing, all of them, how we printed 16 trillion dollars in 2020.

• 34:29Speaker 02

  What is the crisis? I understand you described a set of facts, but what is the crisis?

• 34:33David Hoffman?

  The devaluation of fiat.

• 34:35Speaker 02

  What's the crisis?

• 34:36David Hoffman?

  People being able to store their wealth, store and maintain their wealth.

• 34:39Speaker 02

  There's an infinite number of assets in the world you can own, saying like.

• 34:43Speaker 04

  We were all in Solana for the last four years, Kyle.

• 34:49Speaker 04

  If only we had been.

• 34:50Speaker 03

  You can buy real estate in New York City, it will go up. You can buy real estate in Dubai, it will go up. You can buy gold, you can buy silver.

• 34:58Speaker 04

  Look, I think the real thing that people have consternation about when it comes to value accrual and the economics, etc. Let's just name the elephant in the room. It's that L2s have tokens too. That's all there is to it. And fundamentally, I think that this is a question of whether you think that on balance, L2s being on Ethereum versus whatever counterfactual you want to pick, even with them having their own tokens. Is that going to be a net positive or net negative to Ethereum, Ethereum's, whatever you want to call it, business model, protocol model, et cetera? I don't see a case why the pie can't grow and those tokens and those tokens having value can't coexist with Ethereum's value growing.

• 35:43Speaker 04

  Granted, that is not what the data shows over the last several months. And so this is a forward looking statement and maybe, you know, my counterparts here will say, no roadmaps, no future, but I think that there is a path towards L2s being value accretive to the ETH asset, even while they have their own tokens.

• 36:04David Hoffman?

  I think arguing that ETH is money in 2024 or 2022, 2024 is harder because we are looking at a very distant future and arguing that ETH isn't money is easy because if we are only looking at today's age, Bitcoiners have done this fantastically well where Bitcoin is actually becoming this new internet currency that is like digital gold. But in the future world, if there is this incentive to produce chains, like there has been the incentive to produce tokens in crypto, and if there is this desire to have these chains aggregated into the same ecosystem, and if one ecosystem captures all of that demand to produce chains, that which we see, yeah, base is just another stack of OP fork.

• 36:47David Hoffman?

  Maybe we should just fork the OP stack 10,000 more times. Maybe people are actually going to go do that for whatever the hell reason.

• 36:55Speaker 04

  Probably.

• 36:55David Hoffman?

  Probably, but maybe there's in addition to other reasons other than scaling. And maybe there's one ecosystem where all of these chains are tied together, however loosely, and this is what we call the internet. And there's one currency that's native to this whole network of chains and that is money.

• 37:12Speaker 02

  Dude, this asset is worth $300 billion, one of the largest assets in the world. The onus is on it to justify its valuation and like all of the valuation, that value capture is explicitly leaking to the other places, to the L2s.

• 37:25David Hoffman?

  I wonder what

• 37:26Speaker 03

  In like the last year.

• 37:27Speaker 02

  What would show up if you looked at all of the ETH L2 tokens and you kind of

• 37:32Speaker 03

  Added them up and put ETH market share with the ETH L2 tokens and then compared it to Bitcoin. Like, I wonder what that would look like, although all these-

• 37:39Speaker 04

  Someone's doing math, get on coin market cap out here.

• 37:41David Hoffman?

  I bet you it's about like 50%. ETH plus ETH layer 2 is probably about 50% of value Bitcoin.

• 37:47Speaker 03

  Maybe I'm putting words in your mouth, but do you think that like optimism token and arbitrage token have taken away value from the ETH token?

• 37:54Speaker 04

  None of this is financial advice, by the way.

• 37:58David Hoffman?

  Like, maybe, maybe in the short term, based off of narrative, but also in the long term, also based off of narrative, I could equally see value flowing back to ETH.

• 38:07Speaker 03

  Sorry, where is that value coming from? Can you please be explicit?

• 38:09David Hoffman?

  Uh, multi-coins capitulation.

• 38:12Speaker 03

  That, that's not value flowing back to ETH.

• 38:15Speaker 04

  Can, can I ask a question genuinely about the Solana ecosystem? Cause I don't know. What are the primary sort of, I don't know, value capture mechanisms, business models, et cetera, of the apps on Solana? I mean, I know that there's like a lot of meme coin generation, so that's an element of it. But, you know, do we see this desire to launch your own chain? That we've seen throughout the history of crypto, at least, you know, since 2016, since 2014, maybe, even with altcoins?

• 38:46Speaker 02

  And the, the business model of Sol today is functionally basically the same as the business model of ETH.

• 38:52Speaker 04

  No, no, the apps on Ethereum, on Solana, I'm sorry.

• 38:55Speaker 02

  Yeah, I mean, again, every app on ETH L1 and on any L2 has a functional equivalent on Solana today. I, I don't think there is an exception to that statement.

• 39:03Speaker 04

  I would posit then perhaps Ethereum is living in Solana's future. Perhaps just by virtue of being more mature, having been along, around longer, having had app devs go through the many painful cycles of the last several years. I mean, Solana, in many ways, I think, had the benefit of launching in a really rough market right around the start of COVID. And it's been not exactly up only, but certainly relative to that. Whereas app devs on Ethereum have cut their teeth over the years and have realized that they need a better model, both in terms of their own ownership of their roadmaps and technology development, also just in terms of owning their own value accrual.

• 39:46Speaker 04

  And that's where this desire to launch their own chains comes from. And I think Ethereum has done itself a service by keeping them at home.

• 39:54Speaker 03

  So let me answer the question. Are there people on Solana who want to build their own L2? Yes, you can go look at them. There's one sitting right there. Yes. Represent? The difference between the way that ETH is approaching this and the way that Solana is approaching this is that Solana is still focused on scaling the L1. And ETH is focused on doing as much as possible to make the L2s happen.

• 40:18Speaker 04

  I'm saying something else, though. I think fundamentally, scaling is part of the issue. There's also an incentive issue.

• 40:24Speaker 02

  Well, I think, yeah, no, I strongly reject. Like, that statement is implicit on the only way to capture value is to be a chain. And kind of implicit in that statement is to control sequencing. And it's just not necessary. There are many apps on Solana today. Camino, Drift, Margin, Drip. Bunch that are all making

• 40:45Speaker 03

  12 fun.

• 40:45Speaker 02

  Oh, yeah. Pump is in the nine figures. All the ones I just listed are well in the eight figures of revenue. And they're all in Solana mainnet. And obviously, like, AVE on ETH mainnet, I think, is doing roughly $50 million, I think, year-to-date, roughly in revenue. So I get that this statement is just, like, not correct.

• 40:59Speaker 03

  Maker has revenue.

• 41:01Speaker 04

  I would say, though, long-term, what is the best way to capture value? Maybe this remains to be seen. But I think the very fact of Uniswap and Unichain making this pivot, arguably, I mean, certainly, I think, no one in this room would argue that it's not the thing that they point their mom and dad to as the app that Web3 has enabled. I think that that's a strong data point on the other side.

• 41:26Speaker 03

  I actually onboarded my mom to Pump to Fun the other day, so.

• 41:30Speaker 01

  Another question I do have, Kyle, is, yes, L2s are being built on Solana, and they're actually called network extensions. Pretty ironically, I'm curious if you think there are differences from like a tech standpoint, or maybe something that points to the fact that those are more extensions of Solana than L2s are of Ethereum.

• 41:51Speaker 02

  Yeah, I mean, again, the term network extensions came about because I was chatting with Austin and Raj about this a while ago. And there's an academic definition of L2s, and you can kind of maybe David's vector of, like, property rights, as you mentioned earlier, may be kind of the academic definition of what makes an L2 an L2. Then there's like the practical thing that the normal people observe. And what normal people observe today is Arbitrum and Optimism and Base are the same fucking thing as ETH L1. It's literally the same contracts deployed, it's the same applications. Like even, Uniswap's copy based, Obi's copy based, but even like Aerodrome, which is like the top decks on Base is a copy of like a 40 years. Like, you know, so it's like literally the same copy based shit.

• 42:37Speaker 02

  And, and also it's the same assets too. And, and so my observation was, okay, the term L2 just means L1, but a little cheaper, a little faster. And there are some people in Solana who are doing that. And I call, sure, call those things L2s, whatever, I don't really care. But then there's a group of people doing things that are off-chain, that interact with the chain, but that are not that. That are, that are not copy paste of the same things. Some examples that include Gras, another example of that would be what Metaplex is doing with their new Aura thing.

• 43:11Speaker 02

  Yeah, there's probably one or two other examples. I saw Medic Blog and Sonic on Solana. And I looked at these things and I was like, okay, they're not copy paste of the same contracts and they're not the same applications. So I thought it would actually be helpful for the ecosystem as a whole to try and create separate vocabulary for that fact. Can you say in like an academic sense of like property guarantees, rights guarantees, it's the same, like sure, but like there's more to it than that. There's like what people today observe as L2s. And, and so the intent was to create separation there.

• 43:44Speaker 03

  But I, yeah, I would just wanna double click, like, the reason that Solana's approach to L2s is very different than ETH's approach to L2s is that ETH has spent the majority of dev time over the past four years on the L2 roadmap. That means making, being an L2 as cheap and easy as possible. And Solana has done the opposite. And we're looking at the fruits of the labor now, and we can make our own judgments on which was a good decision. But to say that there are L2s on Solana and there are L2s on ETH and therefore, both of them have L2 roadmap is wrong because the roadmap on Solana was never to make L2s awesome. It was to make Solana awesome and to increase the throughput to a million TPS.

• 44:28Speaker 03

  And they're working on it. Okay, we'll see if they get there. Fire Dancing is doing some good work, I understand. But there was never a wavering in the conviction that Solana could be a place where a ton, a ton of activity could happen. And there was never a, oh no, we're like not skilled enough to scale it so that we probably should like let Ed Felton do the scaling for us. And I think it's partly a compensation issue. Cordevs, the Jock get paid enough on ETH, they get paid a lot more on Solana. And if you went to like Ed before you started Offchain Labs and said, "Hey Ed, like we really want you to work on scaling the core protocol. And here's a million dollars and you're a really smart guy. Hopefully you can help us with that."

• 45:13Speaker 03

  Would he have launched a token? I don't know. Maybe not. And I think the same is true for a lot of the other talents of people that have started at L2s. If we just compensated them appropriately like Solana is doing for the developers, we could probably have good developers working on scaling the L1 and not working on launching their own L2 token and creating time boosts to attract as much value to that token as possible.

• 45:33David Hoffman?

  I think part of your perspective, Max, is just because I think you're kind of like a layer one maxi, like call it Ethereum, Solana, whatever. You just like, you prefer value captured to be on the layer one and that's your frame of reference, right? I could be convinced that the Ethereum project has over indexed on subsidizing layer two. I could be convinced that the Ethereum layer one, once upon a time, had this DeFi golden goose that is more or less giving up for free to a network of VC funded layer twos that are more than happy to take it because Ethereum is not scaling the layer one. I could be convinced of that. Yeah, also at the same time, the Ethereum network of chains model, which I keep on returning back to. is also under competitive threat as well.

• 46:16David Hoffman?

  So, Lecia would love to take DA consumers away from Ethereum. And I think Ethereum DA is at 75, 80% capacity. And getting filling in that last 20% is going to be relatively easy. And it's why it could be done in the next couple of months or so. And so it's really about, do you believe in a roll up centric roadmap? What do you want your priority to be? Ethereum is trying to do it all. And I know some people therefore invest in Bitcoin and Sol as the barbell. And some people think that Ethereum will eventually do it all because it will eventually have very fast layer one block times. And it will also have a network of chains. And I think it's really just a matter of perspective of where, what design architecture you think is valuable.

• 46:58Speaker 03

  I think we have to decide to be the best at something. We cannot be the second best DA layer or the third best DA layer, the second best execution chain or the third best. Settlement layer.

• 47:06David Hoffman?

  The first best money.

• 47:08Speaker 03

  We cannot do that. We cannot be the second best on everything and expect to win. We have to be the first best on something.

• 47:14Speaker 02

  Yeah, that's my, my comments I've made about North Star over the last couple of months were like, it's like, well, like, what is, what does DeFi mean in the extreme case? And to me, that means there are, you know, thousands of consensus participants, if not tens of thousands, who are all over the world. And those people are synchronizing financial market information, AMM curves, CLObs, Dex positions, whatever it is, payments, whatever, it doesn't matter. And that information is synchronizing around the world at the speed of light to anyone who raises their hand and says, I have a piece of hardware that can deal with that. Because obviously, if you're dealing with global scale financial information,

• 47:57Speaker 02

  like, that's not going to run on a small computer, but there's just no way to do that. At least not to do it in real time. Because inherently, financial market data is time sensitive. And so it's like, okay, well, what are you building? And if you want to just say, look, we're building one server somewhere. And yeah, we get using property rights guarantees based on this other DA thing underneath. Like, okay, that's a thing. It is functionally similar-ish to the thing that I just described. But like, it is not functionally the same thing. And like, the question is like, what are you building? And in my mind, like, if you're not synchronizing the world's financial market information in real time around the world, everyone who raises their hand and says, I have a piece of hardware for it, then like, that's not DeFi.

• 48:39Speaker 04

  We're building the first best settlement layer, the first best property rights engine, as David put it. Most economic security, it's the most in demand from developers. Yes, including the developers on L2s. Not sure what the question is there, but I will say, Max, I think this is something we can all agree on. Hire comp for core Devs, for sure.

• 49:00Speaker 01

  It's my part of my platform, actually.

• 49:02Speaker 04

  That part I'm on for it.

• 49:04Speaker 01

  And we're going to pay teachers more, too.

• 49:06Speaker 04

  Hallelujah.

• 49:07Speaker 01

  And no taxing the tips. So unfortunately, we're already over time. I definitely wanted to see that play out a bit. So I guess to close things out, if everyone could give, I guess, closing remarks based on this conversation. Maybe you found some middle ground, maybe you want to solidify a position. So I guess we'll start with David this time and work our way down this way.

• 49:27David Hoffman?

  I think the market demand for producing chains should be just taken as fact in this day and age. We know that there is going to be many, many, many chains. That's the first thing that happened after we made Bitcoin was we made 15 more chains. And that was the proof of work for Confer Launch Era. There's going to be more chains. Some chain is going to figure out how to aggregate all the chains. Some chain is going to figure out how to make these chains have stronger property rights and composability mechanisms between all these chains. And that one chain is going to incentivize the production and aggregation of even further chains. And that chain will become money.

• 50:03Speaker 04

  What are the goals of ETH and what are the goals of the L2s? To create censorship resistant apps, to create composable apps and user experiences. That one, again, I think is the big outstanding question. That's what we all need to be working on. And number three, to have a sustainable economic engine behind all of this, value accrual. And that sustainable economic engine needs to acknowledge the reality that the best way for app devs to deploy is by doing it as their own chain. That's what we see in a mature ecosystem. And that is not at the expense of the base money of ETH.

• 50:41Speaker 03

  David, you mentioned that you might be convinced that we're giving up our golden goose of DeFi, so that some VC-funded L2s could, you know, take that away and they'll be happy to do it. What more you need to see to be convinced of that when Paradigm has launched two L2s this week? And has more L2s in portfolio than they have venture partners? They know what they're doing. We should recognize it and we should immediately understand it and say, hold on a second. VCs, this is actually E. This is not yours.

• 51:19Speaker 03

  And we should immediately act to stop the migration of financial activity in the lifeblood of Ethereum off of the L1.

• 51:28Speaker 02

  I thought you asked a question today.

• 51:30Speaker 03

  It's not asking a question.

• 51:32Speaker 02

  Yeah, I think it was a rhetorical question. Oh, yeah, just come back to my North Star comment like, these are financial systems. That's what we have DeFi with payments. Like, do you be clear about what financial system you want in the world? Uh, the one I want is one in which anyone can raise their hand, whether they're in India or the Philippines, or in the USA, or in Europe, raise their hand and say, I get to access the information at the same speed as everyone else. Um, I think that is like the definition of the maximally democratized, open financial system. I don't understand even an academic definition that more fully encapsulates that vision. Um, and so like that, that's what I'm trying to build and that's where I'm allocating my capital.

• 52:14Speaker 03

  Awesome. This is super fun. David, good luck with the fight tonight.

• 52:17Speaker 02

  Thank you.