The Great L2 Migration | Cross-Chain L2 Panel

We think 2022 is going to be a huge year for Layer 2 scaling solutions. Cross-Chain protocols will be a crucial infrastructure for the great migration to L2s, allowing users to bridge assets across platforms. Composability and user experience is the glue of modular blockchains, which optimize for decentralization, scaling, and cost. The projects and representatives each present cryptographic solutions for building a web of liquidity across the many suburbs of DeFi, where average users will live and engage. GUESTS: Ben Jones - Optimism https://twitter.com/ben_chain?s=20 Hart Lambur - UMA https://twitter.com/hal2001?s=20 Arjun Bhuptani - Connext https://twitter.com/arjunbhuptani?s=20 Chris Whinfrey - Hop Protocol https://twitter.com/WhinfreyChris?s=20 Vaibhav Chellani - MOVR https://twitter.com/vaibhavchellani?s=20 ------ ONJUNO | Crypto from your Checking Account! https://bankless.cc/OnJuno ------ SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ ️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: ️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum MATCHA | SMART ORDER ROUTING https://bankless.cc/Matcha SLINGSHOT | LAYER 2 SOCIAL TRADING https://bankless.cc/Slingshot GEMINI | TURN FIAT INTO CRYPTO https://bankless.cc/Gemini BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants ----- 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.

• 0:12Ryan Sean Adams?

  Hey Bankless Nation, it is panel time today. Panels are some of my favorite discussions we have on Bankless, a great cross-section on a specific topic. And today, we are talking about bridging, bridges, cross-chain bridges. This goes into a theme we've been talking about in 2022, which is the great layer-two migration. I think there are a few reasons we're doing this, we'll get into them, but before I do, David, we've got Ben here as a co-host for this topic. Ben, it's great to have you. Can you explain why Ben is joining us for this conversation?

• 0:48David Hoffman?

  Yeah, we did this expert panel for EIP1559, and that was co-moderated by another technical moderator, Tim Baker. And that was really, really useful, because some of the developers out there just ask questions that I think are really, really smart, that I wouldn't have thought to think myself. So Ben, we're bringing you in as a member of the optimism team, as somebody who can ask some more technical questions than what Ryan and I would have thought about. And so we're gonna, first off, before we get into the content, we're gonna have just a little bit of a discussion, some questions that five panelists don't need to ask, like, what are bridges? But before we get there, Ryan, we have some things that we need to talk about, such as our friends at Onjuno.

• 1:30David Hoffman?

  Onjuno is our new checking account for the crypto natives. And so for those that are frustrated that things like USDC, or BTC, or ETH aren't in your Wells Fargo account, Onjuno might just be for you. It's a checking account that loves crypto. So inside of Onjuno, you can get 4% on your USDC, you can also buy crypto assets with zero fees, and you can also get your paycheck in crypto. So when you get paid by your company, it can go straight into your Onjuno account and automatically get converted into crypto, reducing the amount of time that you need to hold the inflating dollars in your bank account. So, big fans of there. Anything you want to add to that, Ryan?

• 2:09Ryan Sean Adams?

  David, I've heard that, you know, that dollar is inflating way at 7% per year. I was just like, as of this morning. So you definitely want to get a crypto native bank account. So you're not using a legacy Wells Fargo bank account that's giving you like 0.01% interest rate. This is a way to do this. They also give you a fantastic card as well. So a debit card, it's metal debit card. Really nice, really enjoying this. I set up my accounts recently. Excited to get started. So if you're interested in doing that, use the code BANKLESS. $50 on your first crypto paycheck. You can do that at onjuno.com. David, you know, I just want to say a few more things about why we are doing this topic on bridges today, because I think it's important.

• 2:51Ryan Sean Adams?

  And there's really three reasons we're doing this. The first reason is there's really no future world in crypto that doesn't require a massive amount of bridges. Okay. No matter what you believe about the future, whether it's going to be a multi-chain future with all sorts of different layer ones. Okay, you need bridges. Whether this is going to be an Ethereum dominated world with a bunch of layer twos. Okay, you also need bridges. So bridges are this nascent infrastructure and a massive opportunity, I think, both for users or end investors who are listening to Bankless. The second reason, something that we've talked about in our modular blockchain thesis, is there's really no future for users on layer one, on Ethereum layer one.

• 3:35Ryan Sean Adams?

  I want to say that again, because I think that's a hard pill to swallow for a lot of people. There is no future for users on layer one, unless you're some kind of a whale. Okay, the main chain is actually not for users anymore. It's for chains. Okay, this is a layer two rollup centric world. You can get caught up on Bankless past episodes. If you want to school yourself on that, including the one we released in early January with Vitalik. And the third reason is this, we've simply never done a full episode on bridges. And it's like, it's about damn time, okay? Because bridges are going to be a huge topic in 2022. And I feel like the panel structure is the perfect way to get just a variety of different opinions and ideas and projects to the table to educate us.

• 4:19Ryan Sean Adams?

  On this subject. So we have a bunch of people on the panel. These are some of the biggest bridging projects. They bring, you know, different flavors, different approaches, different trade offs, different design decisions. But this is a fantastic cross section. A few more housekeeping items for you. As usual, if you have a question, a burning question you want us to ask, this is a live stream. Okay. So go to YouTube, hit us up with those questions, use the troll chat box for that. We'll look at them, we'll filter them, we'll find the best ones. We'll bring that to the panel if it makes sense. And with that, you know what, David, I think we should get to Ben to give us a quick overview on bridges. So what do you want to lead with for like our 101 on bridges, David?

• 5:00David Hoffman?

  Yeah, let's just start with the most basic question. Ben, what is a bridge? Because, you know, most people think bridges as like the thing that you drive your car over, over a river, but not in the world of crypto or cross chains, cross L2s. Just at the most basic level, what is a bridge and why do we need them?

• 5:16Speaker 02

  Indeed. And thanks for having me on, by the way, guys. These are my first words and I feel like I'd be remiss if I didn't start there. So, hi, everyone. Okay. What are bridges and why do we need them? Great question. So fundamentally, a bridge and bridging refers to the, at the deepest level, the passaging of communications between two different chains. So basically taking information from some authenticated source on one chain, sending it, sending it across to be authenticated or received on another chain. So that at the, you know, most fundamental level is usually what it is. What is being communicated? Now that is most commonly movement of assets, right? So when you're moving your tokens from one chain to another, you've got to bridge them somehow.

• 5:59Speaker 02

  So that's, you know, technically there's actually, when you're moving those tokens around, a sort of more fundamental thing that you might call bridging, that is like sending a message that says, hey, Alice has just decided to bridge over X amount of funds. This is the ERC 20, this is the amount, this is where the destination is. But, but most importantly, I think for users, this is talking about moving assets between chains. That's the most common form of communication. And, well, we have a lot of great panelists trying to help facilitate.

• 6:27David Hoffman?

  So diving into that a little bit more, what is technically going on behind the scenes? And I think this question actually might unpack some different kinds of bridges. There are cryptographic bridges and there are multi-sig bridges. Can you just unpack what technically happens when you bridge an asset? And how that is different based on what kind of bridges out there?

• 6:48Speaker 02

  That's, that's a great question. So I'll ignore the details, you know, we could obviously get into nuance of kind of the details of those messages that I was talking about, right? Because you have, you know, the messages got to express who is depositing, where they're depositing to, or it could be withdrawing, right? Where the, where the assets are being bridged to? What is the asset that's being bridged? And so on and so forth.

• 7:09Speaker 02

  I think what I would say is that there is a, like, what is actually going on when you're bridging is really dependent, honestly, on what bridge you're using and what chains you're bridging between. And also what chains you're bridging between may have an impact on what bridges you can use or what fundamental things that you can do. So in general, I mean, to speak to my expertise on, on rollups, right? Because that's what we're building with optimism. Generally, generally speaking, we, there is a sort of native bridge that is sort of treated as the canonical, secure way to move assets back and forth between the chain. And so when, what, what's going on behind the scenes when you use that, which is, for example, you know, maybe the default, if you go to like gateway optimism.io, right? Usually what's happening there is basically on L1, right? On the source chain, if you want to generalize, right?

• 7:53Speaker 02

  Assets are being locked up and they're being locked up and they're emitting some sort of message, or in the case of a rollup, an event or some sort of storage that says, hey, you know, Alice has locked up 100 ETH on L1 and Alice wants to use that ETH on L2. Please credit Alice 100 ETH on L2 for this money that she locked up on L1. And the only way to unlock those funds is if you bridge in the opposite direction, which says, hey, somebody who had those funds on L2 decided that they wanted to get it back out on L1. So they're trying to withdraw these assets. Please unlock those assets on L1. So that's usually what you're doing at a sort of native layer. And depending on the construction of the two different chains you're moving between,

• 8:36Speaker 02

  those might have different properties. So in the case of a rollup, we would consider this very secure because you have these fault proofs, right, that are basically a dispute layer that are going to keep those funds secure in all cases. But in general, what you can do is build on top of these chains and build on top of those native bridges, bridges that have different properties that might be more compelling or more economically efficient and make a different set of trade offs in terms of things like security or user experience or what's going or what's going on. So when we talk about bridging, we're talking about locking funds in one place and unlocking them in the other. There's a lot of details that go on there. There's native bridging that can very tightly couple this in a very secure way that forms the basis for rollups. And then there are layers of applications that you can build on top that accomplish the same goals with some different sets of assumptions or trade

• 9:21Speaker 02

  offs that you might want to make. So that's sort of what's going on in a bit of a ramble there.

• 9:27David Hoffman?

  No, that makes it makes a ton of sense. And just to reiterate with rollups and also with multi-sig bridges going from across L1 to across L2 or across from L1 to L1, there is what you call the canonical bridge, as in ultimately, all things that are built on top of this canonical bridge use. And it's the conversation what we're going to have today is how different implementations can use that canonical bridge in different ways to make things a little bit easier for users. And so there is the the slow bridge, the canonical bridge, and then there's like fast bridges that I think most of the users of these L2 cross-chain ecosystems will ultimately use. And that is who so many of our panelists today are what they are building. And so Ben, we have you from Optimism, who's building a

• 10:11David Hoffman?

  rollup, which must include a canonical bridge, or else how else would people get there? And then we have many of these panelists that we're about to bring on after this, who are using your canonical bridge to make different flavors of bridges that make different trade offs. And so Ben, my last question for you before we turn to our panelists, just what are you excited to hear about from these panelists today? What do you want to learn? What are you interested in hearing about? And what should listeners have in their heads is what they should be paying attention to in order to get the most out of this panel?

• 10:41Speaker 02

  Most definitely. So I hope you all are ready for some gardening because I want to get into the weeds. So I definitely think we have an incredible lineup of different bridge projects here. And like I said, every bridge project makes different trade offs, has different designs, and the implications of what the bridge gives you and what you give to use the bridge change. So I think that's going to be an absolutely fascinating thing. And I think for people listening that are trying to use, you know, these bridges, that's incredibly important. It's really important to understand the properties of the system that you're using because there are bridges that may have weaker security assumptions, they may have stronger security assumptions, there may be ones that are more expensive, there may be ones that are cheaper. So I think that's one thing. And then I think the other part, for me at least, that I'm personally

• 11:23Speaker 02

  excited about is hearing a little bit about the future and sort of the more, you know, next, next year or two years of bridging, what's that's what that's going to look like. Because now that we're starting to see many of these different chains coming online, we're really starting to see these bridge markets actually play out. And I think it's going to be really fascinating to hear what our panelists are cooking up in the background for the next releases and that sort of thing.

• 11:45David Hoffman?

  Well, I think with no further ado, we should go and get right into this panel because they have so many things to talk about. We have a list of questions that we're going to get through. So let's go ahead and get our panelists on the scenes right after we talk about some of these fantastic sponsors that make this show possible. Slingshot is a decentralized trading platform that combines the performance and ease of a centralized exchange with the openness and transparency of DeFi. Slingshot aggregates liquidity from all of DeFi in order to find the best price on thousands of crypto assets. Every token on Slingshot comes with a price chart and trade logs to give you insights into the market's activity in real time. Slingshot is available on Polygon, Arbitrum, and Optimism, saving you from the high gas fees and low transaction speeds of the Ethereum L1. There are no fees to trade on Slingshot, and any positive slippage is given to the users. Trading

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• 13:12David Hoffman?

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• 13:57David Hoffman?

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• 14:30David Hoffman?

  All right, guys, we are back with all of our panelists. We have Hart from Across Protocol, also part of UMA. We have VC from Mover. We have Chris Winfrey from Hot Protocol. And we have Arjun from Canext. And you can see that order moving from left to right, but with Arjun at the bottom. Guys, thank you all for being here on this panel. And you can all answer at once, or all say hi at once, because we'll also introduce you guys all individually. But everyone, thank you for being here. Cheers.

• 14:56Speaker 03

  Thanks for having us.

• 14:57Speaker 04

  Thanks a lot. Thanks for having us.

• 14:59David Hoffman?

  So we're gonna start with this very basic question and we're gonna go one by one. What is your project? What makes it unique? And what's its flavor? Does it have a flavor? And let's start with heart from across Protocol.

• 15:12Speaker 03

  Totally. Well, thanks for having me, guys. And yeah, our project is unique. Because across started as just a demonstration of what Uma's been building with our optimistic oracle. And so sidebar here. I actually know Ben from back in 2019, sitting in a conference room screaming at me about how I need to be more optimistic. And this actually-

• 15:36Speaker 02

  Never be too optimistic.

• 15:38Speaker 03

  Never be too, literally what he was saying. And this is a form that is on the act of this oracle. We call an optimistic oracle that has a really simple concept. Where we can say, hey, anyone can say, ask a question on anything. Anyone can propose and answer that question. And that question is taken as truth if no one disputes it. And so this is an optimistic approach to ask getting data. And we realized we can use this optimistic oracle to do cross-chain messaging and cross-chain to look at what's happening on other chains. And so that's what Uma's been focused on with our optimistic oracle. And you know, about four months ago, the idea came to us that like, holy shit, this bridging thing is a big issue.

• 16:21Speaker 03

  Specifically, the specific question we're looking at is fast withdrawals from optimistic rollups or from rollups to layer one. And that's actually where we're focused. And we realized that we can come up with a design that uses our optimistic oracle to quickly, securely, and in a capital efficient way, actually move assets back from L2 to L1. And across itself is this side project that the team behind it, it's called Risk Labs, built. We built it very quickly because it's using our oracle. And we built it as a demonstration of this optimistic oracle technology with this specific focus, just focused on L2 to L1.

• 17:06Speaker 03

  And it turns out it works really well, which like gets me really stoked. It's like, it's capital efficient, we'll get in those details later. But that's, that's our origin story and that's how we got here.

• 17:17David Hoffman?

  Awesome. Thank you, Hart, for that. That was Hart from Across Protocol, again, a product out of UMA. And now we are going to go to VC out of Mover. That's M-O-V-R. VC, can you just tell us about Mover? How, what's, does it have a flavor? What is it optimized for? What makes it unique in the world of bridges?

• 17:34Speaker 04

  Yeah, for sure. So like, Mover is like, probably quite different than, you know, all the flavors here. Like, Mover, essentially, we call it like a meta bridge. Our approach here is like, taking the modular approach that we saw with, you know, like, scaling L2s, you know, having like different settlement, different DLA. So we are trying to take like a modular approach. We have like a standard bridge building framework that can be plugged into any sort of bridging mechanism, be it optimistic, be it STLC-based, be it like Oracle or something. And that allows us, or like, you know, developers to like, build this like hybrid sort of applications where, you know, like, movement between L2s could

• 18:18Speaker 04

  be trustless, but if that app also wants to go to somewhere like Solana, they could use like a more, you know, trust minimized solution. So we are, we are trying, trying to like go in this like modular phase where people can build their bridge applications without, you know, kind of thinking of like what the exact bridging mechanism or like, you know, message transmission mechanism would be. So, yeah, that's kind of like the unique thing and the direction that we are taking with Mover. And, you know, hope to showcase something really soon.

• 18:47David Hoffman?

  Absolutely. Thank you. Thank you, VC. Moving into Chris, Chris from HOP Protocol. Chris, tell us a little bit about HOP. What's its unique feature? What's its flavor of bridge? What's it like?

• 18:59Speaker 04

  Sure. And then, thanks for having us on the show. And, yeah, so we're building HOP Protocol. We're very optimized for Ethereum's ecosystem and Ethereum scaling solutions. So we actually use Ethereum as, as a hub to kind of bridge between all the different layer twos and scaling solutions. And previously, our team was working on a wallet called Ethereum. We actually built HOP just out of pure necessity to get our users onto layer two, have them stay on layer two, and just never touch layer one at all. And, yeah, so it's very optimized for Ethereum's ecosystem.

• 19:36David Hoffman?

  Awesome. And then last but not least, we have Arjun from Connectst. Arjun, Connectst has been around for a real long time and it started actually as payment channels before it turned into bridges. Arjun, can you tell us about Connectst and what flavor of bridge it is? What makes it unique?

• 19:52Speaker 05

  Yeah. So yeah, as you mentioned, Connectst has been around for a very long time. We actually built the first ever like non custodial S2 system on Ethereum. It was pretty cool in partnership with Spanx in like 2018. Obviously, things have changed quite a bit since then because that was a very simple like micro tipping system using payment channels.

• 20:15Speaker 05

  Connectst is an interoperability network that lets you basically transfer funds and then also do some forms of message passing between chains. So like calling contracts and things like that. We're working towards like more general purpose interoperability. That's completely chain agnostic. What we focused on is two things, trust minimization. We are extremely, extremely, extremely passionate about making sure that like Connectst has the exact same trust trade offs as you know, using Ethereum itself or at least as close as possible. And like generally speaking, the the security model of Connectst is effectively the same as the security model of the roll up itself. And then, or potentially better in some cases.

• 20:57Speaker 05

  And then, in addition to that, we also have focused a lot on extensibility. So like, the idea there was that we don't quite know yet what the what the right mechanisms are going to be, are going to be in the future around like how else is we built. And of course, we also have this like world right now where there are Ethereum compatible or even Ethereum friendly chains that are not actually like tied to the base L1. And there may actually be a room for for those to exist as like a lower trust environment, or a more trusted environment, sorry, in the future as well. And the goal with Connectst is just to make it one simple interface that allows you to connect to all of all of these different systems, allows you to have like a true kind of internet of Ethereum.

• 21:41Ryan Sean Adams?

  So Arjun, maybe sticking on this for a moment, could you tell us a bit more about how we compare these various bridging solutions, like sort of the trade offs of them? And also get into, if you're thinking about like the perfect bridge, the success criteria for a bridge, what are the KPIs that you really look at? Is it number of users using this thing? Is it amount of capital flowing through it? So first, how do we compare these bridges? And secondly, what are the success criteria and sort of KPIs?

• 22:13Speaker 05

  Yeah, so there's a, there's a mental model that we've been using. And of course, all mental models are simplifications, but I think this is a good simplification. And the mental model is something that we like to call the interoperability trilemma or the bridging trilemma, which is similar, similar in concept to the scalability trilemma, where all interop systems can only really have two of three properties. And those properties are extensibility, so being able to like go to multiple chain, multiple different, you know, L2s and chains very easily and work the exact same way in all of them. Generalizability, so the ability to do arbitrary data passing and then trust minimization. And what we've seen is that all bridges kind of like pick, end up having to pick for, for

• 22:55Speaker 05

  just because they have to end up picking like two out of those three properties. Everybody that's on this call has selected trust minimization and extensibility. So that's why you're able to like run the system on L2 and then also on, on Ethereum and also do it without, without, you know, introducing a lot of trust. But the, you know, we've, we've talked earlier on this call about multi-sig bridges, that, you know, multi-sig bridges pick generalizability and extensibility, but they're obviously more trusted. So yeah, generally we've seen that there's like three overarching flavors of bridges. And then of course, a lot of other subcategories within them. Can you repeat the second part of your question?

• 23:31Ryan Sean Adams?

  Yeah, so like success criteria for a bridge, what makes, what makes a bridge successful? Is it amount of capital? Is it, you know, users? What, what's, what are the KPIs?

• 23:42Speaker 05

  Yeah, this one's a bit more difficult because it's like it depends on what the bridge is being used for, right? So like if if your system like hop connects across, I guess, everybody that's on this call. Your KPI is going to be like transaction volume to the amount of value that is flowing between chains. Because the vast majority of what you're doing right now is like helping users transfer value from one system, one L2 or chain to another. Whereas, you know, if you if you, once you start moving towards like more generalized data passing, where you're allowing people to build like actually cross L2 apps that are fully generalized. Then it becomes a little fuzzier because it's like now you're running this like, you know, system on top of on top of these L2s and like the purpose of that system may not be to move funds. It may be, you know, just to pass arbitrary messages.

• 24:26Speaker 05

  So in that case, it would probably be something more similar to like Ethereum where it's like, you look at number of transactions that the chain is doing. Or perhaps even like the amount of fees that are being earned by the by the actual service providers.

• 24:38Ryan Sean Adams?

  So Chris, wondering if you could kind of build on Arjun's definition here. So we're talking about comparing different bridge projects. And yeah, I'm struck by all the time how how much surface area for education there is here. Because now we we need to do something with with kind of the community. And we need to make make sure the community understands the difference between like multi-sig trusted bridges and these like more trustless bridges. And it sounds like all of the panelists participants fall in the the trustless category. But even within that, that, you know, trustless category, what are the other trade offs or differentiations you you would make between these bridging projects? How can we, how can we compare them?

• 25:20Speaker 04

  Yeah, it's a great question. So so there's definitely kind of a few trade offs within this trustless design space of bridges. And so I guess kind of the the main types of bridges would be like, you know, I think us and across share very similar properties where we kind of have both passive and active liquidity providers. I know we're going to be talking about that stuff a little bit later. And basically, you know, have these active or yeah, have the active liquidity providers fully verify different chains and facilitate the bridging. And then have kind of the passive liquidity providers take on longer tail risk of of stuff breaking or challenge windows not being long enough and stuff like that.

• 26:07Speaker 04

  But yeah, and then the other side of things is kind of like atomic swap type of bridging. And you know, that can be trustless, it can be extended to chains outside of the Ethereum ecosystem, you know, which can't necessarily happen with HOP. And you know, this will, you know, UX wise, you do have to wait for kind of like two steps of finality. So if you're thinking about like an optimal bridge, an optimal bridge will be able to do a transfer within just one step of finality. So you wait for the source chain to reach finality and then you receive funds at the destination. And so like an atomic swap setup, you do have to kind of wait for two steps.

• 26:52Speaker 04

  So that's kind of one of the trade offs. But then there are big advantages around capital efficiency and stuff like that that are worth taking a look at.

• 27:01Ryan Sean Adams?

  So VC and Mover, you guys touch a whole bunch of different bridging solutions. And I'm trying for a minute to put us back in the headspace of a typical user who's like, I want to get from here to there, from this chain to that chain. And they're looking at the landscape and they see all of these different bridge solutions. You know, one's a two lane bridge, one's, you know, a one lane bridge. One is kind of just like, I don't know, built out of wood. The other is like a nice, you know, suspended bridge, all of these different bridge solutions. How do they evaluate the differences and make a decision on which is the best bridge to take? Is like safety and security the primary concern? Is it how much the toll is, how much it costs?

• 27:46Ryan Sean Adams?

  What are the primary concerns from a user's perspective?

• 27:50Speaker 04

  So like from a user's perspective, I would say, you know, like it, you know, kind of depends a lot on the user profile. So it's like a Digi, you know, they could like prefer a really centralized bridge that allows them to just, you know, kind of operate on a single database and just like move things around before the block on the sending side even receives finality. Because like the liquidity provider here can take the risk of the source side kind of rolling back. So like. It definitely kind of depends on like the user. So we've like kind of built out this thing called Fundmore, which is like a bridge aggregator that kind of like allows to just like see what all options are there right now.

• 28:32Speaker 04

  There, you know, like different security properties, the different like outputs, gas fees and so on. And you know, kind of judge from there. So like a user, depending on his preference, can just like see what what he prefers to, you know, kind of move his funds from one chain to the next. So.

• 28:48Ryan Sean Adams?

  You know, Hart, I'm wondering if you could weigh in on this, this, you know, conversation so far. So is it, it seems like there's so many different bridge solutions. Is it good that the ecosystem has a plurality of different solutions? Or is that, is that more confusing? What types of bridge solutions do you think the ecosystem needs to develop in order to get us where we need to go in this, this great migration from layer one to layer two?

• 29:18Speaker 03

  Yeah, Ryan, I'll give a controversial answer here, I think.

• 29:23Speaker 03

  Which I hate, I think the number of solutions is problematic. And I think the different security properties they have makes us a shit show and actually exposes users to a lot of risk that they don't know they're taking. And so again, this panel, we're all aligned in that we at least are closer to the trust minimization side of things, or the trustless side of things. And we value that. There's other people that are not on this panel that like are more generalized in support of the chains that aren't on that. And there's some really scary shit going on out there. The problem in my view is that users are ultimately going to pick a bridge based on price and mostly based on price alone, or let's say price and speed.

• 30:07Speaker 03

  So I think that's going to end up being what we have happened. And that could be very scary if people pick up the cheapest bridge, but that has the worst security assumptions and then something goes wrong. So I think that there's this, I think what we all got to do as like on this group of people, we got to get to be the cheapest. And I think price really matters here. That's kind of my view. And we've got to be cheapest, well being, trustless. And that means iterating on a, and I got a lot to say on that, too. But you look like you're right to say.

• 30:44Ryan Sean Adams?

  I want to get to, I want, I do want to get to Arjun and some of the others really quick, but, but like scare us straight for just one second here, Hart. Okay. So like, when shit goes wrong, how, how could it go wrong? If we're depending on centralized, more trusted solutions for bridging? Like, why, why is this so bad? What is the iceberg that people don't see in the water?

• 31:06Speaker 03

  In some ways, I think Ben's big brain might be actually best to answer some of the really scary shit here. But generally speaking, it's just like, you don't get your money or the tokens you think you have, you just don't have, right? And like, you know, 100% losses are a bad thing. And then people providing liquidity, like losing out on that are a bad thing. And I think it's a reasonable expectation, a reasonable expectation to think that in 2022, some of the biggest hacks will come from bridges or bad bridging solutions. That'd be like my, my thesis.

• 31:45Ryan Sean Adams?

  Ben, what would you add here?

• 31:47Speaker 02

  Yeah, I mean, well, definitely to Hart's main point, like, yeah, what do we need as a community? We need like the thought leaders and people with successful podcasts and Twitter followers to tell those users about the dangers and trade offs that they're making. So I feel like we're doing the right thing.

• 32:04Speaker 02

  I would say that bridge security is an interesting problem. There are these trusted bridges, which effectively assume the same security assumptions as sidechains, right? So if you want to see a multi-chick bridge, right, a sidechain is kind of like a multi-sig chain. And for some use cases, maybe that is the level of security you want. It's definitely less, but it's interesting.

• 32:25Speaker 02

  And once, but one thing to add to that is that for the perspective of people that are bridging, there is one difference, which is that the funds that are in transit are the things that are currently at risk of being locked. So it's not like, once you bridge your money, the bridge collapsing an hour later could affect you, right? Like, I think good bridge designs, even that are centralized and do have trust assumptions, they at least give you that. So like, one thing I always tell people when they're bridging, if they want to use a, you know, sketchier, more custodial bridge is, literally, you should be going to the Twitter immediately before you bridge and look if they went down. Because realistically, if they're going to go down to some point in the next week, you might be fine using it right now, right? So you need to understand that risk and you need

• 33:06Speaker 02

  to be informed. I think the question that I would actually follow up and ask this panel, because I really liked Hart's comment, that it's our responsibility to make the safe bridges and the, the trustless bridges as cheap as possible. I actually am curious, though, I think this is at least a bit of an open question on my mind. Do we think that's possible? I think there is some intuitive argument that tells me trustless, trusted, trusted bridges by making trust assumptions can exercise some capital efficiency that gives them an advantage. So I'm really curious if we think that we can get those bridges as cheap as possible, or do we think it's an impossibility result that there's a trust cost trade off? Because I am worried that that's the case.

• 33:50David Hoffman?

  Who wants to take that one first? Hart, you just unmuted, so go for it.

• 33:55Speaker 03

  No, Chris, go ahead.

• 33:56David Hoffman?

  Okay, Chris, go for it.

• 33:58Speaker 04

  Sure. So Ben, I think you're right. Like, I, I think that there are trade offs that, that you can do in a more trusted way that we could just never compete with, in terms of, of capital efficiency. That being said, I, I do think that there are trustless models.

• 34:15Speaker 04

  You know, including where we're approaching, where, where, once you scale up, the fees just get so, so, so cheap. And, and so like right now, we're, you know, bridging across hop, you're probably looking at 10 to, to 20 basis points. More like nine basis points if you're, if you're bridging with beef. But you know, as that scales up more and more, the batches get bigger, the, the fees really go through the floor and, and you know, it might be that, that users are willing to kind of stay within this, you know, more trustless environment. Because, you know, one or two basis points, I just don't really care about.

• 34:49Ryan Sean Adams?

  Yeah, I, I just have a question on this to just help me understand, because this, this new world hasn't yet come yet, right? It's still being developed. But do you guys think that like, you know how everyone complains about gas fees today? You know, as they should, I understand it's very expensive to transact on, on layer one. Do you think tomorrow they'll be complaining about bridge fees? Like the toll to cross from, from one chain to another is like too high and that'll be a, a pain point for users? Is that the future we're looking at? What do you think, Chris?

• 35:17Speaker 04

  I, I personally think we'll, we'll only see high bridge fees when there's, you know, a huge net flow in just one direction from like one chain to, to Ethereum or one chain to another chain. But when things are pretty balanced, I, I think, you know, as we scale up, these are just going to go through the floor.

• 35:36David Hoffman?

  Ben, you've got to, so go ahead.

• 35:38Speaker 03

  No, I was gonna say, David, it's just to add like to Chris's point. I think that there are designed to, to Ben's question around just are there trade offs here with capital efficiency versus trust assumptions? I think there are designs that get more specialized that actually solve for this. And even get a little bit in the weeds and compare what we're doing versus what Chris and Hop are doing.

• 36:02Speaker 03

  We, right now, we don't support L2 to L2 transfers, but we are highly capital efficient on L2 to L1 transfers. Whereas Hop, just on the flip side here, is less capital efficient on L1, L2 transfers. It takes about twice as much money just from like funding a pool side of things, but they can do L2 to L2 things. And so there's sort of like a trade off here in our own designs that. Highlights to me, if you get pretty specialized, you can actually get really capital efficient. And like right now, for for context, um, a cross can bridge a million bucks, a million USDC. Our average fee on that over the last few days is about four basis points.

• 36:46Speaker 03

  Um, so it's like four cents per hundred dollars uh to do that. And that's not, um, Ryan, back to your original point, that's not a cost that goes up with usage. That's like an interest rate fee, that's like a cost that only uh so so unlike unlike uh L ones where the cat costs get more expensive as more usage happens. This isn't exactly the same thing. It's like it's about a capital availability.

• 37:16Speaker 04

  Yeah, to like add on what Hart just said, I think we are like kind of missing out on a, you know, uh on a mechanism for for bridges that are like, you know, mint and based uh mint and burn based. So like, you know, kind of like, imagine a world where there are, let's say, only ZK rollups that settle, you know, every five minutes or so. Uh, then we can actually have like, you know, L two to L one and L two to L two, you know, like fast movement of assets, you know, within five minutes. Or, you know, like, uh, adding like L one latency, like twenty minutes or so, without the need of external capital. So I doubt there's like a, you know, trade off between trust assumptions and costs. I think there's a trade off between trust assumptions and latency.

• 38:00Speaker 04

  Uh, I think like that's much, much more likely. Uh, and yeah, I heard this first from James Bestrich, yes.

• 38:09Speaker 05

  Yeah, um, just to follow on that, because I think I like completely agree. Like, I don't think the capital efficiency of the bridge is necessarily directly related to the trust considerations. Because like, if you think about, you know, systems like any swap or Thor chain, what they're doing is uh utilizing a multi-sig bridge that is backed by stake and the staked asset is the token. And so like, the the capital efficiency of that bridge is not like, while you're normally thinking of the liquidity available in their liquidity pools, the capital, actual capital efficiency of the bridge also includes the staked assets, because that's like the fallback mechanism. The the benefit that those bridges have is not that. They are more capital efficient, they're not. It's just that because they're using a multi-sig as this like cross-chain oracle,

• 38:53Speaker 05

  they are able to have fully passive liquidity provision for like the system. And or they're able to like mint and burn tokens without really any recourse. So, you know, it's almost like you don't necessarily, it's like less of a consideration around how capital efficient it is and more just around how difficult it is to build. And of course, like it's the same as like sidechains versus L2s, like L2s will get cheaper than sidechains at some point. It's going to take more work to get there, but they will get cheaper. It's just that sidechains are very readily available. They're very easy to build and roll out.

• 39:30David Hoffman?

  It's going to take more work to get there should be the hashtag of Ethereum, I think. So it makes sense, makes sense that all the people with trust minimized bridges are all kind of aligned on that. Ben, I want to tie off this section of our questions with this question. And hopefully that can lead us into the next phase of this panel. But we have so many different flavors of bridges here and so many different trade-offs. And from, at the end of the day, if we want crypto to take over the world, like users are just not going to care. They're just going to want to press buttons and have things happen. So, and we've started to see some of this in the decentralized exchange landscape where first there was Uniswap. And then there were other decentralized exchanges and now there's more decentralized exchanges.

• 40:14David Hoffman?

  And then there became decentralized exchange aggregators. Some of these aggregators are built right into MetaMask and also things like Matcha and One Inch. They're just making it a lot easier for people to just route around different liquidity in DeFi to get what they want. Is the future of bridging something like this where just an aggregator just says, hey, we'll take care of all of these complexities and trade-offs? Is this a logical conclusion? Can we take a page out of the history of DeFi to extrapolate into the future of bridging?

• 40:44Speaker 02

  Yeah, I think that.

• 40:48Speaker 02

  What Hart said is probably accurate, which is that users are probably most reactive to price. So that argument would indicate that bridge aggregation is a very strong potential future. I'm sure, I'm sure that I Bob agrees with that.

• 41:03Speaker 02

  What I would say to build on that is that ultimately it's not quite the same from a technical perspective as these, as these exchange aggregators. Because in the example of a one inch or a matcha, the trust assumptions of the DEXs that are being aggregated are completely homogeneous. Right? So at the end of the day, no matter what new bridge, pardon me, no matter what new DEX that one inch chooses to integrate next, the fundamental contracts that are a part of the one inch system will enforce that the exchange rate is only, you know, held if it was agreed upon by the user and the money came from somewhere.

• 41:46Speaker 02

  This is not the same as these different bridges because you are relying on more than smart contract security. It depends on what, you know, details and those trade offs that we just talked about are made. But I do think that it's worth noting that that's a fundamental difference. An exchange aggregator, it's all contracts on L1, it's all 100% composable, all of that stuff. That's not the case for bridge aggregation. So I think what will play out will definitely be dependent on cost. I think it will also be dependent on the same

• 42:17Speaker 02

  depth of reaction to security trade offs that users will have actually with using chains as well. So definitely a world that I've imagined is one where like in my wallet, I can kind of say how trusted I am. And then maybe the aggregator will only aggregate the top, you know, 10% of most trustless bridges or whatever. Right? So I think those questions are just general like crypto UX questions that apply to sovereign chains as much as they apply to the bridges between them. And I hope that as we get more sophisticated software, it'll all disappear in the background, but we'll be able to keep being trustless.

• 42:52Speaker 03

  Yeah, Ben, I'd just add to you that I think there are a lot, a lot of parallels to what has happened with DEXs here too. And then there are the differences you pointed out, but parallels, for example, like it was Ryan or David, but you said you kind of started with Uniswap, but they weren't the first. It was like 0X before that. And 0X was like active liquidity provision, which is kind of like connects and some of this other stuff. And then it became really useful in other ways in the future, once it got aggregated. And then like Uniswap V3 was super capital efficient in this one thing. And Uniswap V3 is winning on volume things because their capital efficiency. And then it's getting aggregated up. So if you kind of want another view, I think there is going to be this pattern of these different techniques will have their strengths and weaknesses.

• 43:37Speaker 03

  There will be a strong focus on capital efficiency and fees. And then somebody will aggregate this all together. But then you add in the complication like what Ben talked about is that they're not homogeneous trust assumptions. And so here, the role of the aggregator, I think, actually becomes all that more important because the aggregator is now the gateway that's going to pick which bridge solutions are actually safe and which aren't. That would be my thesis for my hypothesis for how this world plays out in the next three years.

• 44:13Speaker 04

  And I just wanted to add something to what you were saying earlier about like the the, you know, whether we can achieve kind of the same fees that a trusted bridge can achieve. And I think what you were saying, Arjun, makes a ton of sense, like, like basically the the trusted bridges can have just purely passive liquidity. And their, their active, you know, what, in our cases would be liquidity providers, they're the active piece of their bridges are just multi-sigs. They don't have any kind of capital requirements. And so like, you know, what you were saying, Har, I think the way across is able to kind of achieve like more capital efficiency is just by, by shortening that, that challenge window.

• 44:53Speaker 04

  So, you know, outside of the passive liquidity, the, you know, the capital efficiency comes down to like, how long do these active liquidity providers need to lock up capital? So, so with, with HOP, we have a full day challenge period. And I think with the cross, you've, you've taken it down to three hours. And so like, while, while that is, you know, eight times shorter and eight times more capital efficient, it is, you know, it could be argued that it is kind of.

• 45:20Speaker 05

  Trending into that that more trusted territory by by having that shorter challenge window.

• 45:29Speaker 03

  Do a response to that, but we can come back to it later.

• 45:32David Hoffman?

  VC, do you want to add in any thoughts?

• 45:35Speaker 04

  Yeah, just on the aggregator thing, I think like for Dex aggregators, we could like, you know, pretty much black box the whole thing because like, you know, everything's atomic, you know, you don't care what what Dex you are going through until you get, you know, X amount of die at the end of the transaction. But kind of bridge aggregators are more like, you know, this this like Skyscanner way, where you need to like, you know, kind of select, do I want to go via Lufthansa or do I want to go where it's like, you know, some new that I've like never heard of flight, which is cheaper, but I, you know, kind of trust Lufthansa more. So it's like going to be there where like users have to like, you know, make like a manual selection or like what security properties they are opting into.

• 46:20Speaker 04

  But yeah, we can like kind of abstract all of that out by, you know, having this like, we are like still working on this, but having this sort of like a security score per bridge that like aggregator or like, you know, us as a community can decide on. And then people can just be like, hey, man, just give me all the business with security for a security score for and above and so on. So like, I think like, you know, by working on some like UX stuff, we can make it happen.

• 46:50David Hoffman?

  Arjun, you want to add in some thoughts? Yeah, go for it.

• 46:52Speaker 05

  Yeah, I like the Skyscanner analogy a lot and and I mean, it's a little dark because basically what you're saying is like the trusted, the trusted bridge equivalent is like, you know, your plane crashes because it's less trusted. But I do, I do like the analogy because you're right that like. You know, users users will eventually, in theory, learn to like base their choices on more than just just price. I wanted to touch on capital efficiency a little bit. Because I think that's a that's a really important point, and I think that's like one of the ways that like we try to differentiate as well. And, you know, I one thing to note is that like, like, capital efficiency is largely ends up being determined by like the constraints around your protocols.

• 47:34Speaker 05

  So in the case of like, hop, the capital efficiency comes for like, you know, the capital usage comes from the need for passive liquidity on both chains. And then the lockup. In the case of a cross, it comes from, you know, the the the shorter lockup and then like the the like.

• 47:49Speaker 05

  The money that is kept in reserve in the event that like fraud occurs and disputes happen.

• 47:54Speaker 05

  And so I think like, in the in the interest of kind of talking a little bit more about capital efficiency, I think it's important to remember that like. While it's true that capital efficiency is super important, it may not actually end up being the case that it results in like the best possible price. And the reason is that like, the overhead that you end up going through to be able to ensure high capital efficiency and all doesn't always end up being valuable. So like a good counter example to this is like, you know. So like the way that connects works, for instance, is like, you have a set of LPs and then you and then like. You basically just directly swap with the LPs, the LPs take no capital lockups, their lockups are like less than two minutes.

• 48:31Speaker 05

  And and so it ends up being a really capital efficient system and like the the idea behind it is very similar to like RFQ systems or clearinghouses. And the problem is, in many cases, those RFQ systems, you know, like those RFQ systems didn't actually really work out that well for DEXs. And the reason is just like the additional overhead and complexity involved in having order books to like match trades with between people. Ended up costing a lot more money than than like using a slightly less capital efficient system like Uniswap. Right, like Uniswap doesn't have, didn't have great capital efficiency. Eighty plus percent of the liquidity was just never used. It was just sitting there. And but at the same time, like you, because you had this really easy system, which is really predictable and nobody had to deal with like on chain order books.

• 49:15Speaker 05

  And nobody had to deal with all this other complexity. Users ended up saving a lot of like cognitive costs and also ended up saving a lot of costs in terms of having to wait for things, having to like. Post their data upfront on chain. And I think like those things are also pretty important to consider as part of this like larger conversation around cause.

• 49:32David Hoffman?

  Guys, this has been such an amazing conversation. I'm gonna have to listen to this again once we are done here. We're gonna come back with a question out of Ben about Vitalik's cross-chain commentary, a blog post that he wrote in the past that has predictive components, perhaps, about the future of a multi-L2 world versus a multi-L1 world. I think that's a topic a lot of us want to unpack. So, we're gonna come back with that right after we get to some of these fantastic sponsors that make the show possible. When you shop for plane tickets, you probably use Kayak, Expedia, or Google to compare ticket prices. So, why would you limit yourself to just one exchange when you trade crypto? When you make your trades, you want to make sure you're getting the best possible price on your trade, and that's why you should be using Matcha. Matcha has smart order routing that splits your trade across all the various liquidity

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• 52:12Speaker 02

  All right, welcome back, y'all. Okay, so I wanted to kick off this next question prompted by a post from Vitalik. I think it was in an AMA, but he also tweeted it. By the way, Vitalik's back on Twitter this year, very exciting. That was talking a lot about some of the trust-related conversations that we've been talking out here. So I'll try to very briefly, it's a longer post, I'll recommend you check it out as listeners if you haven't, posted on January 7th. But I think that maybe a bit of background which I would share is that originally when we were thinking about bridging or these cross-chain scenarios, the actual first thing that came up was something called an atomic swap.

• 52:53Speaker 02

  And this is actually not a direct messaging, there's actually never really a in-protocol way that one chain talks to another, but it was a way that two users with assets on two different chains, oh my god, adorable Doge, Arjun, two different users on two different chains could agree to a price and trustlessly swap, you know, I mean, what was in the beginning, like Bitcoin for Litecoin? I think that's Dan Robinson's classic joke, is like, what is Litecoin's use case? It's for being the example of the other coin in a cross-chain swap. So in any case, that's sort of a different form of swap in some sense than what we're starting to see in more advanced ecosystems. And it actually is very similar to this analogy we were making right before the break, where

• 53:33Speaker 02

  ZeroX and EtherDelta were DEXs that had order books, and then we moved to Uniswap, which had this more passive form of liquidity. So there's actually a similar thing that's emerged in cross-chain discussions, which is basically whether you Which basically comes down to wrapping one asset on another chain. So before, we had these protocols where you could exchange ETH for Bitcoin. And there were different protocols to do that, and you could do that fairly trustlessly between two people. Later on, we realized that there were these UX advantages of having something like WETH, well, I mean wrapped Bitcoin, where you would, or keep, right? Where you would actually take Bitcoin and sort of express it as an ERC20 token on Ethereum. And Vitalik's kind of argument here is that that's less secure.

• 54:16Speaker 02

  Because imagine that you take one asset on one chain, and then you wrap it and express it on another chain. Then you wrap it and express it on another one, and you wrap it and express it on another one, right? You have all these hops, no relation to hot protocol. You have all these hops of connected wrapping and wrapping and wrapping. And there's a risk that if any step in that wrapping process fails, you wouldn't be able to unwrap. So if any of the chains along the way were able to unwrap, were able, were to go down, then you risk, you know, the entire sort of chain of wraps. So this is the sort of term he used was arguing that the future will be multi-chain, but it won't be cross-chain because this wrapping exposes security. So I'm just really curious. Honestly, I saw a lot of great discussion about this online.

• 55:00Speaker 02

  I think there were strong points for and against. But you guys are the cross-chain experts. So I'm curious for your takes, if you guys have any spicy opinions, thoughts, agree, disagree. I don't know, it's a bit of an open question, but hopefully someone has something interesting to say.

• 55:13Speaker 04

  I think it's super interesting. Like, a lot of people were thinking about IDC as kind of like holy grail. You could do L1 to L1 bridging and, you know, not have a lot of trust assumptions. My biggest takeaway here was that we kind of think about 51% attacks as these like, end all, be all, like worst-case scenario. And I think what Vitalik is saying here is that, you know, we shouldn't necessarily optimize for preventing a 51% attack in like all absolute cases. And that, you know, that there are good ways to recover from 51% attacks. And that your only kind of, like, the only things that are at risk are kind of the in-flight transactions during the 51% attack.

• 55:55Speaker 04

  And that, his point is that, once we kind of get into this like cross-chain world, not just a multi-chain world, where you're using assets based on one chain on another chain that has, you know, a completely different consensus layer, that now all assets are at risk. And this is much, much less secure than if everything's on the same consensus chain and we can, you know... Do our social recovery from a fifty one percent attack. So that I thought that was a big insight for myself.

• 56:27Speaker 05

  Yeah, so we've we've spent a bunch of time thinking about this as well because, you know, like I said, we're we're sort of this open system that can be kind of permissionlessly deployed right now to EVM chains, but it's also possible to plug us into anything. And and that definitely brings up a lot of complexity, right? Because it's like, what happens if someone is, we we sort of inherit all of the security properties of like the chain and tokens that were that are being used in our system. But like, what happens if someone plugs us into like XYZ chain that has zero economic security and that XYZ chain has their own representation of USD, USDC or or DIE or something.

• 57:04Speaker 05

  You can you can basically use that that really, really centralized, very, very insecure chain as a way to like spoof US fake USDC or fake DIE back to Ethereum. Take it from this very low security environment to very high security environment. And it's it's unclear how that should be handled, right? Because like, you know, if you want to get to the to the ideal case where like bridges across chain bridges are like fully trustless and they're permissionless and nobody can really stop them, then how do you stop this from happening? I think like, my my my personal view is that there are there are a need to like bridge over blue chip assets and like have them exist in rat forms on different chains. That does add to security risk. I think we'll probably have to.

• 57:49Speaker 05

  The the sad reality is like, even even if we like in a closed room environment, say that's not the most secure option and that adds a lot of tail end risk, it's going to happen. So I I almost think that the the discussions should more be should more be around like, how do you mitigate the risk of of these of these potential cases rather than stop them? Because there really is no way to stop them. And from a mitigation standpoint, I think there is some really interesting things that you can do using models like connects top. I'm actually not sure about across. I would need to think about it a little bit more, but like, in the case of things like connects and hop, you're you have like pricing on a chain changed dynamically based on demand for that chain. And that pricing can reflect this risk in a decently realistic way if like a black swan event happens.

• 58:34Speaker 05

  And the other thing is that that pricing can actually adjust, like, you know, we talked earlier about like what happens if everybody is going from one direction to another on a given chain, like, you know, through HOP or through Connect. Well, at a certain point, the price is just going to get incredibly expensive and it's going to become unfeasible for people to continue trying to move more liquidity out. I think there's some, I think you can use those sorts of things as like interesting risk indicators. But yeah, go ahead, Hart.

• 59:04Speaker 03

  No, Arjun, all I was gonna say is like, I actually think one way we reduce the bridging of blue chip assets, like cross-chain. Like, for example, take like blue chip DeFi tokens on Ethereum, like, how do we reduce the bridging of that cross-chain? Well, we make it such that there's no need to bridge it to another chain, which we do by making L2s really fucking awesome, right? Excuse my language. So I actually kind of put this all back on Ben, where like

• 59:33Speaker 02

  Music to my ears, baby.

• 59:35Speaker 03

  But, but I'm actually dead serious. Like, to me, it's never really made sense to take like an Ethereum-based asset and put it on Solana. Unless Ethereum's ecosystem is so expensive to use, there's like, you can't do the thing you want to do on Ethereum. And that's like not maybe always true. Maybe you want to use it as like collateral to lend in the slot ecosystem or something. But I generally speaking think that if like L2s are really, really good, the need to like leave the Ethereum bubble goes down.

• 1:00:08Speaker 02

  I could, it would be a whole separate, separate discussion if I started rambling about how L2s need to address the real concerns that Solana poses that Ethereum.

• 1:00:18Speaker 02

  Tries to stick its head in the standabout sometimes, but we'll save that for another day.

• 1:00:22Ryan Sean Adams?

  Well, I actually have a follow up on this because so one of the implications, I think, of this post is so Vitalik used this term zones of sovereignty to sort of define kind of the difference like for people who aren't tracking. So on Ethereum, if you have an ERC 20 on Ethereum and you put that on a layer two chain, you inherit basically the asset inherits the economic security of layer one. But when you bridge that ERC 20, that token from Ethereum to say Solana or, you know, Tezos or Avalanche or something like that, then you lose those security properties and it actually becomes

• 1:01:02Ryan Sean Adams?

  a different asset, right? It's like an asset that has different trust assumptions and you can't, you don't have the same security guarantees that it's actually backed by the things you think it's backed. Okay. And so the implication of this, I think everyone going into 2022 from a macro perspective, and that's why I want to throw this question to the bridging panel, but from a macro perspective, investors, users, everyone is looking at like two different paths to the world. One is this multi-chain path. And by multi-chain, I'm not talking about the way Vitalik's using it, but multi-chain meaning like there's Ethereum and then there's all sorts of other L1s and it's this universe, kind of like the cosmos vision, the IBC type vision of things. That's sort of the multi-chain path. And then there's another path where you have Ethereum as a settlement

• 1:01:47Ryan Sean Adams?

  layer and it is kind of the dominant settlement chain. And then you have a bunch of layer twos and it's kind of an Ethereum ecosystem and that's sort of the dominant player. I think investors, users, everyone is trying to figure out what's going to happen. Is it going to be A, like multi-chain universe, or B, is it going to be layer two Ethereum ecosystem dominated universe? I'm wondering if this zones of sovereignty thing provides a clue here, like if bridging is actually the clue here, because it strikes me if you have a multi-chain world, you have a completely different set of trust assumptions here and it might actually break down when we start trying to bridge assets from chain to chain to chain. I don't know if anyone on the panel has a thought on that, but

• 1:02:32Ryan Sean Adams?

  like it's something that has consumed me very much, like in 2021 and going into 2022. How do you think bridges play into that? Throw up Arjun, maybe you have a point on this.

• 1:02:45Speaker 05

  Yeah, so there's like, there's sort of like an objectively ideal solution and then there's like, what's probably going to happen because the world is messy and people hate standards. The objectively ideal solution is always going to be to have one settlement layer, right? Because like, the whole point of this ecosystem, the whole point of the work that we're doing here is to move towards a world where you have the maximum amount of cryptoeconomic security associated with this like base layer. And so it makes sense to concentrate all of that into one chain, because that provides the best kind of long-term economic guarantees against what could potentially and probably will potentially one day be like sovereign level, state level actors attacking chain.

• 1:03:27Speaker 05

  In that vision, yes, you know, data availability shards, L2s, that is, that is the best world because what you're saying there is like, everybody is leveraging Ethereum's cryptoeconomic security, no one else needs to think about bootstrapping a validator set anymore because bootstrapping validator set is hard and it's expensive and in, you know, it fragments liquidity. And instead, you just focus on like execution and other, other pieces built on top. Unfortunately, as I mentioned, people hate standards. Like even, even in a non-bag holder environment, like the internet itself, like is made up of a ton of protocols. And of course, we know that, you know, we know about TCP IP, we know HTTP, like we know these things have been generally adopted at standards, but also there are a ton of

• 1:04:12Speaker 05

  other protocols that people don't know about that that get used all the time. And like, we actually have to build adapters to all of them. It's, it's a huge mess. And in those cases, like, none of these were, you know, like, community funded or VC backed companies trying to issue a token and create their own communities like that. Nobody had any, any stake in the game except for ego. And so I, I think like, the reality is that, you know, we'll probably have some combination of the two. We'll probably have this like Ethereum universe, and then we'll also probably have a Solana universe and a Cosmos universe and a, and a, you know, XYZ polka dot universe. And, and they'll sort of follow this like long tail pattern. And we'll have to kind of figure out how, how it should work once we get there.

• 1:04:57Speaker 04

  Yeah, I totally agree with the kind of power law distribution, like, you know, having kind of probably Ethereum captured the majority of high-value use cases, just because it is optimized for decentralization and security. And then, you know, I do think we'll see other chains that, you know, where use cases, you know, might not make sense on Ethereum. You know, even if we can get Layer 2s to be like the theoretical maximum efficiency, there's always going to be use cases where you need, you know, sub 1 cent transaction fees, sub 1 basis point transaction fees. And, you know, I think it's, you know, while it's important that we like capture as much as we possibly can

• 1:05:41Speaker 04

  and drive those fees as low as we possibly can on Ethereum Layer 2, I think it's also important to kind of recognize that there's use cases that, you know, should be very interoperable and close with Ethereum, where users can like go on another chain and play a game where they make 100 transactions and don't have to pay, you know, $1,000 to play that game and then can always retreat back to safety to Ethereum. And so like chains like Polygon and stuff like that, I think have kind of provided that more of like a playground where users can, you know, keep their secure funds on, say, optimism, where they know that they have this like absolute strong, like I can keep my life savings here, you know, maybe one day, maybe today.

• 1:06:26Speaker 04

  And then they can also take, you know, say like 100 bucks or the amount of money you keep in your wallet, your actual wallet, and go play games and then come back to safety.

• 1:06:39David Hoffman?

  Alright guys, I think we're going to start to wrap up some of the questions here. Ben, do you have any last questions that you want to hear from our panelists before we come to our closing questions?

• 1:06:48Speaker 02

  Oh, man. I mean, I do because I could talk with hours and do talk with hours for hours with all these folks. I think none without opening up a big new thread of discussion that maybe we don't have time for. I think the name of this game, though, was trade offs, and that would be what all my questions are about. And if there's one takeaway for the the audience is trade offs.

• 1:07:07David Hoffman?

  Always, and not just about L2s, but about all things crypto, but then also about all things life, just trade offs all the way down. There's one last question that Hart brought up during the break, and it's about how are bridges going to be used? And I think that Hart, you might even be able to ask this question yourself better to yourself. So can you go ahead and ask that question and then also answer it?

• 1:07:31Speaker 03

  Sure, the ask my answer my own question thing. Yeah, no, David, my point here is I think it's useful to have a thesis for how we think this bridge usage is going to get played out, and I'd actually really want to hear other people's opinions and perspectives.

• 1:07:49Speaker 03

  And I want to be opinionated here. So in my opinion, our goal as kind of Ethereum maximalists ish, right? Is we want people to stop using L1. I think Ryan made this point earlier. Like users stop using L1, get to L2. And our goal from a consumer perspective is to have people bridge in one direction and not go back to layer one. That's like something that is good for the Ethereum ecosystem. So then my question actually becomes like the question I ask myself is like, who actually does the bridge in the other direction? Like, maybe the whole optimistic roll up withdrawal window isn't a problem if nobody's moving back to L1.

• 1:08:32Speaker 03

  And I think actually for the vast majority of users, they're not going to be moving back to L1. That's the whole point. The people that will be moving back to L1, though, are arbitragers. And I think that's where this real use case comes from. So you're going to have people that are like seeing price differentials on the Uniswap deployment on optimism versus the Uniswap deployment on Ethereum. And you have arbitragers that need to move back, need to balance these trades across assets, and that's the thing they got to do. So from a process perspective, just to share insights and have what we're thinking here, we're trying to be really hyper efficient and really, really low cost for big transfers from L2 to L1, specifically to help arbitrators do that job.

• 1:09:16Speaker 03

  Because I think that the core user is going to go in the direction to L2 and not move back. And that's, that's, I'm kind of want to know what other people think of that. There is then one other like sidebar, which is what about going L2 to L2? And that's something that like we don't do right now. And that I think is a strong use case where then you could have consumers that are on optimism, but want to use Arbitrum or whatever else. And so there's a bridge case there. Um, but I think I'm talking too much. So a question to the panel, how do you think people will use L? Like, how would you think people will use bridges? What do you think the future is? And like, what are your comments there?

• 1:09:53Speaker 04

  Hmm, yeah, I'll, um, I'll, you know, probably add at some point here. So like, most likely arbitrators are, you know, like, not, not going to be, you know, like, heavy bridge users to like, you know, capture like this like arbitrage opportunities. Because like, at the minimal, we have to like wait for a finality on the source side, you know? So like, at the minimal, it's, it's like, you know, going to be two seconds, five seconds, and arbitrage opportunities are lost in that, like, you know, like a minute of milliseconds, right? So it's like, most likely going to be arbitrators like having two different liquidity pools and, you know, kind of using and like their own like satellite system and kind of, you know, you using their own liquidity pool between these two, you know, chains? And rebalancing via Layer 1, yeah?

• 1:10:38Speaker 04

  And apart from like, maybe like the users won't directly go to Layer 1s, but I think like conditional transfer protocols or repayment protocols like HOP, so like, you know, other like bridges could, you know, just like batch all of these user transactions and, you know, just like do a single on chain transaction for them. So, you know, most likely will be rebalancing across the, you know, different arbitrage pools across, you know, different chains and like, you know, other, other bridging protocols and so on. But yeah, most likely, hopefully, you know, things remain on it, on it, the L2.

• 1:11:15Speaker 04

  Yeah, like that was kind of our approach was really optimizing for layer two to layer two stuff because like you're saying, our majority of users are kind of moving to layer two right now and then not necessarily moving back. And what we're seeing is this like really diverse and rich set of layer two solutions kind of come up. And so, you know, like obviously, optimism and Arbitrum are big ones. And then the ZK rollups are starting to get traction. But you know, I kind of expect the ZK rollups maybe to have a slower start, just because a lot of them are requiring a custom language or something like that. But there still might be use cases where a user wants to jump over to that chain. They want to use those

• 1:11:59Speaker 04

  applications and they need to be able to kind of move across this rich layer two ecosystem very fluidly. So, you know, I kind of see that as how users are using these bridges to go from one app to the next, depending on what underlying L2 solutions. It's built on.

• 1:12:19Ryan Sean Adams?

  The ability to fluidly move from one layer two to another layer two feels like table stakes, feels like a necessity. This is core infrastructure. If we're going to get to where we started this panel with the episode with is the great migration to L2 from L1 to L2, something that is in process now, happening in 2022. But I'm wondering, as we close with this last question, from the perspective of the bridging projects themselves, how long do you think this great migration is going to take? Like, how long until we are fully off layer one into this glorious layer two world? The bridges are in place. People, you know, new users onboard onto layer two, they use bridges to, you

• 1:13:04Ryan Sean Adams?

  know, hop from place to place and do their work that way. And they never, they never even need to touch layer one. That is the end destination. But how long is it going to take to get there? Chris, what do you think?

• 1:13:16Speaker 04

  Yeah, I kind of think it's gonna be slow and then all at once. You know, one thing we're really looking out for are token incentives. And so like Lido Cohen from our team has been working on a proposal with Uniswap to incentivize, you know, more liquidity on layer twos. And then there's this really kind of, I don't know if it's called like a, if you would call it a network effect, but it's kind of, as more people move to layer twos, the more the layer twos take up the block space on layer one, driving the cost up, forcing more people to then move on to layer twos. And then it kind of has this flywheel effect where now all of a sudden, you can't really afford to transact on layer one because the layer twos are taking up all of the block space.

• 1:14:01Speaker 04

  So you have to move.

• 1:14:03Ryan Sean Adams?

  Arjun, what do you think timeline? How long is this great migration going to take?

• 1:14:08Speaker 05

  So first of all, I just want to say like there, it is fully 100% possible to use Ethereum right now without ever touching L1. Like that is already available to everybody. We have users in our ecosystem, for some reason, and I don't know exactly how this happened, but a lot of the users that enter into our ecosystem are like fresh, fresh users to crypto who have never really even used MetaMask before. And we end up having to debug a lot of that, which is sometimes kind of challenging.

• 1:14:39Speaker 05

  But what we're seeing though is that like a lot of these people are kind of jumping headfirst into, you know, the Ethereum L2 ecosystem and some of the Ethereum friendly sidechains. And they are never touching Ethereum because they're completely priced out. And they're only interacting with L2 applications. And that's created this like massive L2 applications that don't, never really exist on Ethereum, would never really have deployed on Ethereum, but they're just, they're just L2 native. I think like. You know, as Chris mentioned, it's like a flywheel effect, like it's going to happen. And like it's like sort of every hockey stick where you know, you sort of see this kind of like growing like this. And then all of a sudden it shoots up because like the exponential effects

• 1:15:19Speaker 05

  just kind of kick in more and more. And we are rapidly approaching that. I would say for me, the biggest barrier is really just going to be like token incentives, really big one. And then, you know, it'll, it'll be the like the, the things that drive down the cost of roll up via like bigger batching. So, you know, arbitrary nitro, I think optimism, you guys might have just on this, but basically things that push down those gas costs even further.

• 1:15:52Ryan Sean Adams?

  VC, what would you add to this timeline? What do you think?

• 1:15:56Speaker 04

  Timelines are definitely hard, you know, being a dev like I, I have extremely bad estimations. So like, you know, definitely wouldn't comment on that. But yeah, like the graph definitely agree. It's, it's like going to be hockey stick growth whenever it happens. There is, there's still a lot of work to do as you all, you know, kind of got to before. So yeah, here's to just like, you know, hoping it, it happens sooner than later. And, you know, I think everyone here is, is like, you know, a hundred percent confident that it's going to happen. And we are all here, you know, just like trying to empower that thing whenever it happens.

• 1:16:35Ryan Sean Adams?

  Art, anything to add here?

• 1:16:37Speaker 03

  Yeah, my very cheeky answer is tell me when optimism and arbitrary beliefs are token, and I'll tell you when that hockey stick can happen.

• 1:16:49Ryan Sean Adams?

  Well, this is a, maybe we should end with Ben then, you know, final thoughts on this discussion, Ben, and maybe your perspective on timeline too.

• 1:17:00Speaker 02

  I mean, we set up the hashtag guys, we set up the hashtag guys, it's L222, baby. You know, you know, it's coming. No, I feel like similarly to VC, I've gotten enough trouble for for trying to predict timelines over the years. I think that definitely the most important point, and I'm really interested to hear you, Arjun, having this from a bridge perspective as well, because I almost think of bridging as being like an advanced thing. So it's really exciting to hear that you are getting like new crypto users using it. For what it's worth, Fiat on and off ramps are live on optimism today, and I think other L2s as well. So like, it already is the case totally that you can move straight into L2. So I am hoping, and I would think I would make that prediction,

• 1:17:42Speaker 02

  that that is going to drive usage. And depending on what happens with the fee markets as well on L1, I think that will just naturally continue to drive that usage. So I think big things are coming this year. VC is right, we should never, we should never put timelines on things. But all the pieces seem to be in place. The bridging is super nice. You can buy the ETH on L2 directly. All the pieces are really coming together. You know, the jigsaw is almost complete.

• 1:18:07Ryan Sean Adams?

  L222, we are building that jigsaw. Panelists, thank you so much for the work that you're doing in the bridging infrastructure. We've learned a ton. Thanks for joining us today.

• 1:18:18Speaker 04

  Thanks for having us, guys.

• 1:18:19Speaker 02

  Thanks, guys.

• 1:18:20Speaker 03

  Thanks a lot, guys.

• 1:18:22Ryan Sean Adams?

  Bankless Nation, the great migration has begun. It's going to start slowly at first, but it is headed towards hockey stick growth. That is the prediction of the panelists. I heard at least three of them mentioned tokens as well. And I would just echo, these are my words, not the panelists. You should start using these systems. You should start using everything in crypto, because you never know how users are going to be rewarded in the future. Risks and disclaimers, guys, let's close on this. Of course, crypto is risky. Bridging is risky, too. Ethereum is risky. Everything we do in this space comes with some degree or another of risk. You could lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.

• 1:19:07David 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, podcasts, and community as a Bankless Premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our Alpha Leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless Premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings, and weekly rollups, where we summarize the week in crypto and other

• 1:19:52David Hoffman?

  fantastic content. Thanks, everyone, for watching.