L2s: Scaling Ethereum in Practice - Panel Talk

Hello everyone. Hello to my fellow colleagues on the stage. I'm Andre from LeFi. I'm the head of Defi there. I basically lead the go to market and the expansion team.

I am Yan from Zirket. I'm a co-founder and technical lead. Uh we are uh D5 protocol and we had a zero knowledge roll up.

I'm Sinkas from Arbitum Dow Opico. It's an operational company on Arbitum and we represent the Arbitum DAO. Uh Arbitum is a layer 2 built on Ethereum and we're going to talk about it in a few.

Hi, my name is Chris and I'm from L2B and Alto is a community watchdog that oversees Ethereum Al2 um space. Thank you guys. Um I kind of want to kick it off with a with with a question. Um why do you think are most new applications choosing L2 today instead of L1's?

Do they you go first?

I I think they do. Uh and um cost I think cost is is you know still cheaper on L2s. Uh which L2? That's a harder question. I don't know what necessarily why someone's picking arbitrum over base or vice versa.

Um but uh yeah, I think cost still it's a short answer but I think it's accurate.

Yeah, I'm just going to add speed as well but mostly cost and speed I would say.

So I would say that there are various reason why one would like to to choose L2. And I agree like I'm not sure if uh if today like a year ago that would be true that they they they usually do choose L2s. However, today it's not such an obvious question. There needs to be there needs to be something that L2 offers that makes it better choice for a protocol than than L1. However, this is the the unique feature of L2 is that they can actually have those differentiating features from L1.

So one of these differentiating feature it could be like for example arbitrum has this different um ordering mechanism uh which is called time boost like if this is something that you can utilize you you can um you can make use of it is um another thing is that you know uh L2s are much more predictable in terms of um like predictable in terms of spikes uh I don't know how many of you remember cryptokitties but this is the this is the PTSD that still lives with us and the same with D5 summer like there are these are like two things that that still hunt us to this day even though L1 matured significantly from these days but during crypto kit is craze Ethereum was unusable during um DeFi summer I remember paying $100 for transaction and while one could argue that today we are in a we live in a different place like the the basic promise of L2S is that this is not going to happen on our end and also something that L2s can implement again arbitrum has this mechanism that uh significantly balances out any spikes. So even if there is a huge spike in activity on arbitrum the cost of transaction is not going to spike as well. It will be balanced out to to be more predictable. And so these are the features that that make it or like the another sorry for using arbitum as an example all the time. But another example is like arbitrum is offering this um remind me um stylus uh arbitum stylus which uh is a multivvm um technology that allows you to write smart contracts in rust for example that will run on arbitrum in the same environment that that traditional smart contracts uh write wrote in solidity for example work.

So these are those unique advantages, unique features that L2 can offer that makes it a better place to to host your app. Another example to not use just arbitum as an example like Zik sync previdium like they created this whole infra like the whole architecture that allow you to have isolated private secure environment that you control which integrates with um L1 and and promises the uh seamless interrupt with uh with L1. And again if this is something that you want to like if this is the environment that you require uh for compliance reasons or for business reasons that's your unique advantage of going for L2. Uh so yeah like the I would say that when it originally the premise was cost and and speed. Uh I would say that today and even if you look into recent Vitalik's uh comments posts and even the Ethereum Foundation um vision for how L1 and L2 should cooperate.

It was published like a month or two months ago. uh they they directly say that the future that we foresee for L2 ecosystem is that it needs to provide differentiation from L1. It cannot be just Ethereum but cheaper or Ethereum but uh faster or Ethereum but something because Ethereum is fast, Ethereum is cheap and it will only get better. you need to provide things that Ethereum will not provide simply because this is a unique feature that that that has this niche target base. I speak to a lot of applications, a lot of new tabs and I think that initially it was speed and cost and people were taking everything a bit more serious tech-wise.

However, what I see today and we're getting asked a lot, you know, about our opinions about, you know, using different uh bridging systems about the L2 versus L1. However, I think that many many applications unfortunately or that's just how economics work are incentivized more to deploy on L2s because of bigger treasuries and because they want to get more traction and because L1's have stopped giving grants or such big rents to for for their deployments and this kind of takes me to the conclusion that incentives are aligned or not really aligned for the end user. one and second point is that after the deployment of you know choosing their home base as an L2 they all want to be crosschain or multi-chain so they all want to have multi-chain capabilities so it's one you know how much money am I am I getting from base or incentives from optimism and then I'll anyways look for ways to make it interrupt to grab the market share from or like users and volumes from the other chains because you don't want to be locked down into an ecosystem Sorry if I can relate to that uh quickly. Uh I well I agree with you. I also think that this is like this is coming to an end for two reasons.

One is token treasuries are no longer the what they used to be. Like if you look into token treasuries or of of the major world to are like just a shadow of the of the great past. uh but also like especially after recent incidents what we are observing is that many protocols are actually winding down their crosschain deployments they start to realize that every crosschain endpoint becomes a potential vulnerability it's becoming becoming a cost that they have to sustain you know they have to maintain um in order to see if there is no no weakling in this endpoint so well I agree with you that that this used to be the I think that this narrative u is coming to an end or already ended.

So I I don't know if I agree with the interop winding down. In fact, I was going to say the opposite. Um they choose a lot of L2s to get back to the original question because they want the network effects and they don't know which one they're going to capture. Uh so they go multi-chain and just sort of spray and prey on anyone that'll give them a grant. Uh and then if no one gives them a grant, they'll go to anyone else who has a sufficiently large ecosystem.

So these network effects are actually really important. Um I think the bridging concerns especially as as of late um will will be there but bridges have been hacked for five years seven years since as long as bridges have exist unfortunately they've been hacked um and people are still building new solutions and new interop and I don't think that's going to go away. I think it's just going to make it easier to target all of the L2s that are relevant until we converge on those specific features that you specifically need for an app or a consumer base. Yeah, I'm just going to jump in and offer slightly different perspective. Uh I do agree that incentives on one part at least they used to kind of like uh provoke protocols towards that u that direction but I think the reason is also a different thing like if you're a builder you'd care about the technical differentiations but if you're a user not that much like what matters is can I use the app that I want to use is it fast and is it cheap and there has to be some kind of like agreement between the builder and the user in the solution that they choose like a builder will take into account the considerations of the technical differentiators that a chain is offering.

But at the end of the day, if that is not enough for the users that they want to attract, they'll have to move on. So I think one of the reasons that builders are still selecting L2s and will continue to select L2s even if the incentives are not there from like grants or from treasuries or whatever they may be they will continue to do so simply because the L2s will uh for the time being at least are faster and cheaper than Ethereum mainet for a lot of uh heavy use and intense applications. If you're something like much smaller or you don't need as much activity. Let's say I don't know an NFD protocol that you just hold maybe Ethereum is still the place to be. Uh as for example NFDs uh they never went very big on L2s but Ethereum mainet was the place to be.

So yes I think like for builders it makes sense to try and differentiate between the chains and see which is chain is offering the best tech and the things that are most meaningful for you as a builder. But you also have to think from a user perspective, does it make sense for me to be there? Uh can the users come to the chain that I'm building and can they use the apps that I'm building for them?

But but how much does it matter? Because nowadays you have protocols like Lei which make your life in interop way easier orchestrating all the bridges and all the dexes and now intentbased systems and so on so forth. So how much does it matter for the protocol and also for the end user when you can seamlessly go from you know hop from chain to chain because the user if it's an L2 they're anyways going to pay you know peanuts for gas and they don't care about that so how much does it matter

so on that two things one and it relates to the the overhead that Kristoff mentioned about the security of being interrupt uh so one is like will the protocol that I'm using on the chain that I'm using it on will that chain continue to exist this in the year or two years, three years from now. For most protocols like especially EVM, they can it's easy to redeploy as you mentioned. Um I think something that a lot of people downplay and uh I'm I'm a big proponent of that is just the human factor of the the the place that I got into first, the community that I'm used to, the user experience that I'm used to. So yes, like in theory it's very easy, you know, switch the network from your wallet, connect to the same app, it's the same flow, but in reality it's not as simple and that has to do with just human behavior. It's not just the tech um underneath it.

Another thing is that um L2, you know, L2 offer you to like this is some L2s are some kind of like uncharted territory. So if you launch on on Ethereum a lending protocol, it's really hard to you know to get traction and to to have anything that is worth talking about. But if you launch a lending protocol say on Mega Eve, it's you know it is possible or at least it's easier and at least possible for you to be the biggest lending protocol on on um Mega Eve. This is for example what uh Velodrome did on optimism and later on base. you know, they were a lending protocol, but they were consciously not going for Ethereum because they wanted to be the biggest lending protocol on um sorry, not landing protocol, like the biggest um decks on um optimism and then the default decks for for base and that was their unique advantage and unique value prop and they were kind of successful in doing that.

So that's one thing and another as as Sans mentioned like those chains have their own communities like if you if you are building on arbitrum and if you um if you do something significant on arbitrum you have a chance of being actually you know when they organize those open houses and and hacker spaces you have a possibility of being actually featured you know on so so that somebody builds on top of you because then they can you know be in the arbitrum hackathon which is not the case if you are building on on on Ethereum. Ethereum doesn't have those you know those opportunities um as much as as as they used to. So yeah, there are like certain advantages of going for a different specific niche even even if it's possible technically using lei to to be everywhere

then why do you think it's so complicated for as a startup or like a new protocol to like choose which chain to go on? if you keep talking about like how easy it is to tech and like the community and the the incentives and so on. But I'm asking you this because like a lot of founders that I'm meeting all the time, they're all struggling to figure out like where to go and then they decide to chain and then they have to switch again because of like whatever happened or because they're not getting supported or because they don't feel like it's really the technology is not really where it needs to be or etc etc or like it's not fit for their community. Like why do you think like why do you think it's so complicated?

Yeah. So I think this does go back to the network effects that that we're we're talking about uh and the challenge that Kristoff was actually mentioning of being the big fish in a small pond or a small fish in a big pond, right? You can either go on Ethereum for example and be one of many DEXes or you can go on a new chain and try to be the DEX uh or whatever protocol or whatever app it is, but then you really you really need that ecosystem to buy into it. You can't go in there sort of without talking to the ecosystem without prepping that you're going to be that big fish because they may not like you. Uh, you know, not necessarily because of any particular reason, but you know, if you're just some person trying to exploit money, they may not, you know, want to use you as a system or they might prefer a different technical solution because you didn't build a deck properly or something like this.

Um, so getting over the hurdle of becoming the biggest fish on the new chain is actually really tough. It's I think a lot easier to choose some of the bigger players in the space to be a small fish because then at least while you can get a little bit of a big piece of a pie rather than all of a small pie which may not exist yet, you have to do all the work and if the community you build with doesn't provide you with these opportunities like features at um events or co-arketing or whatever it is, it's really difficult to overcome that. Like launching an L2 is almost as hard as launching an L1 if you don't have a bunch of these players from the ecosystem point. The tech side is a little bit different. Um but going onto an existing L2 is just Ethereum but faster and cheaper and you know that that helps a lot.

Yeah. But also like from my perspective this is not unique for uh L2s or crypto in general. This is like the the general startup dilemma you know uh back in the days when you know right now we have only two mobile operating systems just Android and and iOS. But 15 years ago, there was a multitude of those systems and there was a dilemma and and no not a single one was really at the place where you were it was a clear clear winner that like wait today deploying iOS is a no-brainer. But back in the days it wasn't that obvious.

And you know it was a hard choice like do do I go for iOS and fight with these big guys that have the support or do I go for Windows phone and try to be the best app for Windows phone? But you know if I did it I was risking that as it materialized that Windows phone simply disappeared and suddenly my like if if I build my business on top of this like my business is in shambles right now. The same goes for you know what what market do I address? Do I like if I start building from Romania like do I address Romanian market that I know very well and I probably have connections with or do I but but it's really hard to grow from place like Romania and Poland even if these are like significant markets like building really successful startup from here is is super super tough. So do I do this which is easier for me or do I go straight up like you know fly to Silicon Valley and try building there where I have much bigger competition.

So this is the same in my opinion for L2s. The the reason why it's hard is because you need to know this environment and it's really hard if if you are not working in L2B. It's really hard to be really following what's happening at every single one of those ecosystems and really hard to you know you you you don't have the resources to really pay attention to what's happening and what's different. So yeah like it is challenging that that's why

I generally believe that it's not really difficult to make a decision at least nowadays. Uh sure the options are many and there's like many different chains pulling you from you know with different lures let's say um but most of them have like ample documentation there's foundations and labs you can talk to about the technical side uh there are incentives or there might not be I think the difficult thing is figuring out whether going into a chain like makes sense for your business model from the perspective of again like is the chain going to be around what kind of security risks like Albid is doing great job surfacing those even for the people that do not have the time to go review each chain one by one and then lastly it's thinking about the long term because yes you can easily migrate your code base your liquidity whatever in another EVM chain but you cannot migrate those network effects like I'm in arbitum I'm not a builder but if I decided to build something it only makes sense for me to try and build it on arbitum because I know people from the foundation I know uh investors I know content creators in arbitum who potentially help me distribute like all the networks effect that I have personally most of them are on arbitrum right so if I want to try to build I don't know on base I don't have any of that and you cannot migrate it easily so I think there's many decisions uh there's many options sorry but the decision has less to do with the options available and more so with the builder themselves and what they're trying to build and uh what they're going for especially on the long term Okay. Um I think like fragmentation was like one of the one of the questions that I had actually and um one of the things that I don't know what you guys think about it but like in my opinion is as you were saying like right now there's iOS and there's like um Windows

Android sorry. Yeah. Um yeah you can I mean you can see I'm not a technical person. Okay. Um but basically the question is like right there were like so many LTOs that like came up and then like um my question is like do you guys think like it's going to be a time where like things are going to merge somehow and then it's going to be a lot easier to to build because then maybe it's going to be a lot easier for like new users and for like um or and all the types of transactions and to to maybe fulfill like Ethereum's uh vision of like mass adoption.

I'm going to let this guys hash it out on the interrupt side. The only thing that I have to offer as like a a user let's say more so and a less technical person is at least on the fragmentation side and especially on like the liquidity side of the fragmentation maybe the users like as a small user you anymore like you don't really notice the difference like if you're you know I don't know like using apps and using 100 200 bucks on different apps you you don't really notice the issue of fragmentation. Yes, it's a hassle to bridge between these different L2s and the risks that come with it, but nowadays you don't really notice the fragmentation as much as you used to. But yeah, many more to discuss on that thing and I'll I'll leave this.

So, I think the fragmentation is real. Um I I think for a lot of users because of the network effects, they don't feel it. But when you start a new chain, uh or you're looking at the whole ecosystem, you can definitely still see it. Um in October, I think there was 131 rollups or L2s listed on L2 beat. uh most of them did not talk to each other in terms of um business also but on bridges you could not get to some of them I know because we were one of them and so some people say I want to put money on your chain and XW wallet doesn't support you and it's like oh actually you did notice that I couldn't move $200 onto your chain I just lost a user so now I got to go talk to that wallet and say hey why didn't you add add the RPC it takes you 3 seconds please put it in there you know we're costing users and they'll say okay sure give me $5,000 and you're like what this is wild I I thought we were decentralized.

I thought we were beyond that. Um, but that was part of, you know, how some of these things worked. And when you have 131 roll-ups, I think actually until we get to the vision that I think the Ethereum Foundation should have been pushing a little earlier about diversifying um technical um feature sets for for L2s, I think we're going to enter an area of contraction. Um, even Zircuit, you know, we're focusing on the D5 protocol, not our L2 right now. I think we're going to see 131 drop to 50 70 over the next year uh or two.

Maybe maybe not so quickly. Maybe not so so impactfully like you know maybe some of them are already dead and they're just not delisted. Uh but I think you will start to see some some contraction in the space until feature sets become useful and diverse. uh maybe not so quickly, but 131 doesn't seem necessary right now for Ethereum, especially because Ethereum did get cheaper and faster relative to cryptocurren days. Uh but in 10 years, maybe we'll be back to 131 and and they'll be all be useful.

But do you know why there are 130? Why do you think there are 130?

I mean, people wanted to to build out their own solutions.

People wanted to raise cheap money building shitty solutions. So incentives are not aligned with the end user because the end user don't need 130 rollups they need two or three maybe. So given that the given the fact that the incentives are not aligned, it only benefits a couple of protocols in the space like us because we have to pick up all the broken pieces and basically glue them together with the you know fragmentation of the bridges of the dexes of everything into a unified you know crosschain experience and the whole multi-chain versus crosschain dilemma. You we probably have read that famous post from from Vitalik. I don't think we're ever gonna go into a true true crosschain experience in which there can be like thousands of rollups and L2s and users don't even know or care how they're jumping from one to other because right now liquidity is still fragmented and exper UX is still very fragmented.

You still have to go on, you know, jumper. exchange or on a bridge like Stargate to bridge your funds and if you want to do more actions on top of that like getting yelled from uh I don't know you have ETH on ETH and you want to get yield on on arbitrum it's like six signatures that you have to go through so incentives are not aligned with the end user they're aligned with the people building stupid raising money and then depleting the treasuries so well I agree to some extent I think that this is a unfair uh framing framing of of what's happening like I I truly believe that there are people like there are people that just want to build stuff and when I you know I I've been in startups for more than 20 years I remember startups in 2000s and you know the amount of stupid that build that was being built back then you know it's beyond your imagination like if if you think that stupid is being built in uh crypto like you know Google yourselves like yo app um that raise uh for example like there are like six people if I remember correctly that invested money in in an app that allows you to send yo to other person and that's it uh yeah so so you know in terms of crazy things being built we you know in crypto we are kind of conservative I would say because we are actually dealing mostly with kind of reasonable financial um solutions and there is like there is this craziness beyond imagination that is still uh to be explored. But um in terms of um fragmentation, I I also believe that fragmentation is um is real. Uh and the issue is that to like it's not in the interest of the biggest players to actually solve the fragmentation because you know it's it's the small protocols that would be tipping into their liquidity not the other way around. So they are not interested in actually solving this issue.

They are interested in not solving the issue. There is this in terms of incentives I would say that there is an incentive in actually creating a moat from liquidity. The because this mode is real that's why Ethereum is still you know when we say about builders and like random builders and yes like they do consider different chains and different L2s which which they want to use. when we say about big funds for example when we talk to them uh the the question is not about L2s the question is Ethereum Solana maybe and you know and then the the you know the the short list is very very short actually of the chains that they are willing to build on because the reason why they are building on the chain is that they want to be able to access the capital that is on this chain and the only reason why we are still meeting on those conferences is because Ethereum is still the most valuable chain out there. Uh maybe apart from Bitcoin, that's a different story.

So Ethereum is the the most valuable programmable chain. So there is kind of like non-competition in out there like Salana is much much smaller. So yeah like in terms of addressing this I believe that if we you know this Ethereum economic zone um that has been promised and ZK interrupt seamless interrupt that is being promised for for years. I think that it will ship one day or another and this will this will solve many issues and this was actually this will make Ethereum with its own ecosystem uh a really real a real ecosystem where being on Ethereum apart from aside from being like you know on Tempo or ARC or Salana will be an advantage but we need this seamless interrup right now the interop is there like it's not costly but for many people bridging funds like simply bridging funds is a complicated uh topic and it cannot be fully abstracted away because if we abstract away the nuances of interrupt then we are abstracting away security um security aspects of it but you're still going to have the L1s like tempo arc Salana and liquidity is still going to be fragmented it's got it's just got to be a bit more concentrated the fragmentation has got to be more concentrated within you five to 10 big ones. So, you'll still need orchestration from one chain to the other.

So, we're we're solving only part of the problem. And I I I'm not sure if I agree with the whole Ethereum interop is going to be as seamless as you present it right now because they've tried on many many times and I know that they're pushing this and you know the Ethereum Foundation is doing great great work on on in that direction but right now you know I'll give you an example. We work with offchain labs and we power the arbitrum uh page on the bridging side. It took them years to put external bridges and realize that you know the native bridging that Ethereum is offering us is absolutely great is the safest one. However, our users are asking for something a bit different which is faster cheaper transactions.

But that's that's actually something that I was strongly opposing back then and I think that like today I have my glory days when you know yes like for example the the the bridge the offshade like arbitum bridge that you mentioned uh if I remember correctly it shows three bridges and one is uh one is called the cheapest the second one is called the fastest and the actual one that everybody should be using is called secured by Ethereum which is you know if I'm a user like do I want to choose fastest, cheapest or secure by Ethereum. Of course, I'm going for faster than cheapest. But the the issue with this faster than cheapest is that they're really not good bridges. Uh if I remember one of them is relay, which basically is a new way that you send money to and you expect it to send money somewhere else. And the issue with that approach is that you know if like this is not a really a real bridge or it's not a secure bridge and at some point I think that regulators will come in and they will say see okay how does this differ from Western Union like really these guys are doing exactly the same but we are keeping them to these standards and Western Union to this standards how about we extend Western Union standards to to the relay bridge and suddenly we can end up in a world where the only bridge that we will be able to use is Western Union because they will be the only ones who will be able to adapt to regulatory requirements and any really good technical solutions that are being built right now will be out of business by the time because they weren't fastest and they weren't cheapest.

So the issue with this uh this thing that you say that the only thing that users care are uh you know cost and um cost and speed like tell me if really if users care only about cost and speed like are they really happy that the hackers were able to extract all their money in 47 minutes and it was all gone poof like do they really are they happy with the fact that this was the cheapest solution out there?

Yeah, of course not. And you know on on the relay point I I agree they took a lot of compliance risk and that's how they grew to what they are today is basically just two EOAs on two different chains than them rebalancing uh with other DAX aggregators is something which is uh well known but the experience the user experience is great I I assume you've tried relay many times it is very fast and in some cases very cheap but my point is that we shouldn't be promoting them really like I I agree this is fast and cheap. You know the the guys that are handling money in Argentina on the counter are also fast and cheap but they are not exactly reliable. You cannot you cannot build this new financial industry on top of things like that. So if we are promoting that we are actually taking a step back instead of pushing industry forward.

So what I would you know yes we do have a lot of fast and cheap solutions but these are exactly not the things that we should be promoting and we should be using as you know conscious informed users and we should do better in framing those solutions like if you put on the description of relay not fastest but the the riskiest one the most dangerous one you know the the one that use at your own risk then it would be a different different But but no, you are you are labeling it the fastest.

You said conscience informed users. The problem is the users are not that conscious like you are.

But we are that's our job. So we are and they trust us. They rely on us. So it's our job to provide them information that they need. So they I don't expect any random guy to really dig into the nuances of interop and and you know crosschain security, but I would expect you guys to do this.

So I would expect you like I would like to keep you to to to to high enough standards that when you are presenting bridges you are not labeling them as cheapest but risky ones. You I'm okay with cheapest but only if you add that this is use at all your own risk. you are literally trusting some dude on the other side of the world that they will send your money elsewhere and that everything there is working and that you know North Korea hackers are not somewhere in their computers because this is exactly what we are doing there. But as as you said like random people here, random people in Romania, they will not have the knowledge and they will not not have the skills to to make their own informed decisions. But we do have like we spend enough time and we are being paid to actually understand those protocols.

So it's our job to inform others what is risky and what is not.

Sorry for

Yeah. No, of course. I I agree. But and I'll tell you why we can't do that because we're building a business and they're building a business. If we cut them out, let's say we don't feed them any more routes or we label them as risky, relay will just go to all our clients and say, "Hey, you know, Lei is is actually blacklisting us, but we have the fastest and the cheapest solution."

Okay, sure, it's centralized or semi-entralized. It's two EOAs and us rebalancing manually, you know, every few hours. But do do the clients care? In most cases, they don't. and then they're gonna start undercutting a solution like Leifi in which we try or we strive as much as possible to not pick winners here.

Yeah. You know I I agree and disagree as in yes like you you I I understand that you do business and you are making your own choices and where you draw the line between ethical and unethical you know um solutions and I don't expect you to to blacklist them you know that there is no reason for blacklisting them but I expect you to provide information to the customers so they can make informed decisions and not just promoting them because they are paying or they are you know good customer of like I I understand you know I'm I'm running a business as well so I understand that that's tricky but after all it's our you know it's our um responsibility for some reason if there is like some obvious scammer and would come to you you would not like if I created a you know uh ragbridge to tomorrow uh and I would say hey let's see how bad how big of a honeypot we can make uh you know in three months and I came to you and said hey guys like we are not only the cheapest. We are actually paying people to bridge using our our solution. You know, we will be not only the cheapest, the most affordable and you know we will be sending money right away like before even you can think about it. So we are the fastest but you would not lease me if I was called you know the Kim Jong-un bridge.

Um so so yeah like we we cut the line somewhere we draw the line somewhere and it's our responsibility ultimately to to do this properly because we can we can like we are literally deciding on the future of this um of this industry

but I love the conversation but I want to ask you guys as well um what kind of like projects like protocols would you like to see being being built more on well too I know you're more technical I know you're from the DA side. So um I would like to hear a perspective as well.

Yeah, I would say we are at a point where I feel like all the protocols being built in uh in the ecosystem at large, they're kind of like recycling the same concepts and the same audience. Um I feel like sure we've grown compared to the past years but at the same time we're kind of like stagnating in the sense that there's no real innovation happening in the space and I think innovation is comes in two ways. One is like the new flashy shiny thing that you see and uh is doing something exciting and the other kind of innovation is the boring stuff that's just using the new technology to have like marginal improvement. I think we're lacking more of that. I feel like we don't like I'm a I'm a I'm I'm in blockchain since 2018.

Nowadays, I don't find myself using it as much as I used to. I'm not as excited by it as a user, right? And the reason for that is because there's not a lot of things for me to do like actively do. If you're not trying to farm protocols, if you're not trying to trade, if you're not trying to do financial stuff, maybe there's a few games, there's a few like gamified concepts and casinos, but it's all like the same thing. I want to be able to use apps that are using blockchain as the tech uh that have a real use for blockchain, right?

Not just packaging it because it's a new thing. um that actually I have a use for that I want to log in or use or actually solve a problem or uh uh offer me a solution that I I need.

Do you foresee more like um uh consumer apps coming up or not yet?

I think we're like slowly starting to see more of them. Uh prediction markets were one thing but again like gamified financial concepts. Uh I think we're we're still trying to figure it out both as an industry but also as like users like what does it make what what does make sense to have on blockchain but not be financial. Uh I think we we're not there yet and there's going to take some time because the the incentives don't really align that clearly but at one point yes like otherwise is it just going to be maybe the answer is just the blockchain uh attack is just financial rails right and that's it and maybe that's that's not a bad thing but at one point we need to be able to understand where it's at and if we're not experiment with it uh beyond that scope then we're not gonna have an answer.

Yeah, I mean I think I agree with almost all of that. um to take the easy way. Uh I think we've stopped innovating in terms of breadth of of of applications and we've focused really on improving the depth of like financial rails and that that is good but like you unless I am um investing daily I don't have a need to touch Ethereum very often unfortunately and that's really sad for someone working in the space because I want to use it every day but I don't want to use it just to burn gas fees even if they are low. Um, so it would be great to see some apps that uh do use blockchain under the hood. Ideally, you don't even know you're using a blockchain.

Uh, maybe, you know, gas is sponsored if it's if it's a game or something like this and you can still have a nice source of truth. But I think the next way we can move out of just finances is um to leverage zero knowledge technology to put something like um decentralized identities or age verification or a lot of this tech that we built up in large part to scale the ecosystem um to other places because now we can take a lot of this off-chain stuff and use Ethereum or another chain um as a single source of truth using these very concise proofs and I think that's underutilized. It's a very boring tech in the sense that most users also aren't going to use that every day. You're not going to log in and create a new zero knowledge proof of your ID. But I think uh it is something that does have a lot of potential um where you can leverage this this decentralized source of trust.

Well, one of the questions that I'm getting very often is like where do you work in crypto? If you work in crypto, I'm like yeah, I'm at this event so I guess I work in crypto. And the second question or like most asked question is uh so do you do you farm? Do you trade?

And that's kind of boring, right? Like yes, probably. But also you probably want to do something else.

So from my perspective, uh I think that I would like to see more of this boring stuff really uh because it was too exciting for for for a long time. like simply we're so excited by being able to reproduce the things that we know from the traditional finance on on chain that we forgot that we we actually need to make them exciting. Um, so I would like to see more of this, more of like more of looping, more of farming, but on on regular traditional assets that make sense like I don't want memecoin farming and I don't want memecoin looping, but I would like to see treasury bonds looping for example. Uh, because this is something that that could be done and I see no reason why it should like it's inevitable at this point that that will move traditional finance into uh into digital ways. we call it crypto.

Um, so, so I want to see more of that because we don't see enough yet. We we are just getting started. But on top of that, like I would love to see more games, but not blockchain games. I would like to see games that I've been playing long time ago, farming stupid, you know, resources and and getting points in order to trade with for for something else, but actually utilizing this interconnected um economy that I could, you know, build that I could build my game on top of something else. I I think that there is a huge potential out there.

And again as our technology is getting more and more boring and simply you know transparent that I believe that finally you know people in gaming can start building on top of it because they are they will not be building on crypto they will be just you know building games and they will not be blamed for building crypto games. Um so so this is one of course identity like I would love to see any advancements in identity solutions especially that the current ident like in my opinion we are on the verge of bankruptcy of the of current identity and KYC systems they are so stupid and so exploitable that that we will need to uh figure it out especially in the AI um economy and ah so I would expect a lot of innovation coming soon but at the same time simply those things need to get boring.

I'm not even going to ask you anything about like mass adoption because I think that's a whole like new discussion for another hour but I want to see if there's any questions from the audience regarding L2s or anything of like uh this um gentleman here have expertise on.

Okay. Um first of all thank you for participating of course and your your views on the uh the current uh um landscape of the L2s. Um so you do not have to answer. I'll preface it with that. Um so L2s came into existence for a need uh regarding the uh Ethereum landscape uh and to to you know to grow and maintain its user base and to provide more functionality etc.

speed. We already went through that. Um majority of these are of course backed outside funding um and v to contribute to the network and to the ecosystem as much as possible and potentially potentially become a dominant uh actor in this sector. Um my question would be as L2s nense depend and are formed thanks to the L1 um which is maintained and uh roadmapped by the EF with a limited runway as we all know. Are there any views on how um future contributions could be made from the L2s to sustain this main development from EF side?

I know this is more of a political question which is also sad. If you cannot answer, feel free to say so of course, but it is something that worries me as an end user and as a builder in the space.

Okay. So, I don't have a good answer and I'm not going to answer all of what you said there. Um, at the end it sort of sounded like you want direct financial contributions from the L2s back to the L1. Uh, I don't know if that's what you were exactly asking. That sounds really difficult for a lot of teams to do.

Um, L2s also have limited budgets. There are some big players obviously with larger budgets. There are a lot that don't have big budgets. Um, this is very difficult. I would like to take the time though to point out that a lot of the L2 work has been recycled or repurposed or reinovated back into the L1.

I don't think the lean proofs initiative from Ethereum would be nearly as far ahead if we didn't have a zero knowledge rollup or six or 12 or whatever um advancing the zero knowledge proof systems that we had today. I think that road map would be five or 10 more years away if it was just the Ethereum foundation. not because um you know of of any incompetence there but because there were dozens of zero knowledge roll-up teams all you know trying and failing to do certain things and these types of innovations can still be cycling back down into the L1. Similarly, if arbitum decides to pick up an RIP that's really cool because it reprices gas or add some new feature type or transaction type or something Ethereum can watch that success and be like actually look everyone seems to like it on arbitum. we can take that innovation and push it back into the into the L1.

And I bet you're going to see some some stuff like this for postquantum as well. Uh where you'll see L2s try it first because there's a little bit less on the line if if they get it wrong. And then Ethereum say, "Oh, actually you did it well or that didn't work. Let's learn from these lessons." And that will expand um the EF's ability to innovate at their own pace.

I can only agree and you know there are initiatives like protocol guild and uh ethereum foundation is trying to figure out like how to provide sustainable funding but it's a tough challenge in my opinion as L2 like I wouldn't expect L2s to just voluntarily fund L1 development we need to figure figure out different mechanisms Yeah, more or less I agree. So I don't have much to add.

Yeah, can Yeah, I have a question. How often L2s considering to to run their own stable coins to actually um work with institutional clients? I know you have infrastructure and you provide for institutional clients, but how about your own token as a stable coin?

Yeah, I think that's a good question. uh especially like nowadays I feel like there's this run for stable coins in general because it makes sense for a lot of people as a business model but at the same time it's a very difficult business you have to have a broad distribution you're going up against uh folks like circle and USDT who are very well established and have like market dominance and it's kind of like a different playing field altogether I think it makes sense after a certain point uh because especially in layer 2 is that you have this this inherent like counterintuitive thing where for example in arbitum the sequencer revenue that arbitum generates flows into a Dow treasury but at the same time the builders and the users of arbitum who also many cases happen to be delegates of that DAO and in control of the treasury they need to be able to transact on arbitum cheaper so there was they used to there was a proposal some time ago to reduce the base fee on arbitum um by by a portion and then by extension the sequencer revenue also was reduced. So basically the chain revenue starts going down the cheaper you make the chain obviously. So there's little twos if you have significant traction uh a lot of users a lot of liquidity it might make sense to create your own stable coin because that could be another business line that could create tremendous revenue opportunities and also make you rely less on your sequence of revenue. Um, I think it does make sense and I think we're going to see more teams going into that direction.

It's going to be probably difficult to, you know, get market share from Circle and and USDT, uh, most prominently, but, you know, uh, and a few others, but I think depending on on the size, let's say, of the L2, I think there is a market for it. If you're a small L2, it's going to be very hard for you to bootstrap your own stable coin because you have to you have a few blockers. First of all, Circle has a whole business unit that is going to try to convince you that that's a bad idea and they're going to try to sell you to use USDC. But let's say that you know you don't care about that. It's hard if you're a small chain or a new rollup because you need a lot of money to bootstrap a stable coin because first of all and I have chains which are coming to us and they're trying to to do this but you need to you need to answer a few questions.

Is that going to be the gas token? If it's not going to be the g token you're going to have a separate gas token. So it's going to be even more expensive and thereafter how are you going to provide the liquidity from the other chains? And for us, we're like, there's a solution, but it's not going to be cheap. The solution is that you're going to have to give a credit line to solvers to basically solve and have interrupt towards your chain because, you know, you could use like a native bridge, fine, and then use uh uh and then swap on the destination chain, but it's going to be a pain.

So, you're and this kind of, you know, derails a bit to what what we were talking. it doesn't make sense because in incentives are not aligned and because you're gonna promote or push forward more centralized solutions. Um, one question. Um, what is your opinion on the rollup versus ZK? Um, L2s like we mentioned the the the the n the native bridges and rollup you like have like I think two weeks period or security something like that.

With ZK rollups you will have like a more security. The ZK rollups seem to be at at at least on some high technical level should be easier to interrupt between themselves. Um why do we see so many more rollup L2s rather than uh ZK more like optimistic roll-ups L2s? Uh there's still a technical lift in in building out the ZK and there's also operational costs when you do that. Uh and people don't know which ZK proof systems they want to be using.

This has converged quite a bit um with some ZKVMs that have become really popular, but certainly like 3 years ago there were a lot more diversity. I think we're going to see it. I think still the endgame for every roll up out there will be ZK over optimistic. Uh I don't know that for a fact, but I have a suspicion that the interop will start to outweigh some of the other um downsides of not adopting ZK. So I think it'll all just happen.

But people want to trust the systems. A lot of the ZK systems are new. They're very complex. there's probably a bug in one or all of them because it's a very complicated piece of software and if you're a big chain uh you maybe don't trust it yet and if someone can forge a proof that can attack your canonical bridge it stops being the most secure option that Kristoff was saying it becomes a real liability and people want to you know grow but they don't want to do it super super quickly they want to do it quickly but not super quickly

yeah I agree so like first of all it's it's hard to build ZK systems and also like something that We like we got used to the fact that ZK is already so advanced. But like if you ask anybody three years ago when will we where will we be today? Nobody would have even tried to to you know to predict that we'll be here so fast. So it happened kind of like it's it took us by surprise that we advanced so fast in um in Zik technology. So it still needs some time to be adopted.

I absolutely agree that like ZK is the end game and uh and also like the instant settlement is the end game but it's it's super hard like instant settlement is not something that is easy to obtain you know the the T+1 T plus2 settlement in Tratvi exists for a reason there is it's not like that it's technically not possible to do instant settlement in traditional financial rails like those those delays case are there for a reason so that if something goes wrong there is you know there is this window of opportunity where you can step in and like halt something or like you know reverse transactions. We need to so the technology is not enough. We need to figure out like how to solve those operational issues as well. And and mostly like the ZK benefits uh show up in at scale like if you do not have enough scale for your system, ZK can prove to be super expensive and cumbersome. You need a certain scale to see the network effects and network benefits of using ZK.

So it will take us some time to get there but like we'll we are going much faster than we anticipated three or like five years ago. It was like we completely did not foresee advancements going so fast and like three years ago we were seeing already progress but like it took us by by surprise that we are already thinking about moving straight up straight away to to ZK. We weren't thinking about it two years ago. So it just takes it just needs to take some time.

Okay. Well, if you you have a qu have a question. Okay. I'll give you a minute.

Yeah. Super simple question and thanks for the heated discussion. I loved it. U super simple question. is the time horizon you're referring to it's moving much faster but where do you see this end game coming um to fruition and not only ZK but maybe a bit earlier in trop that Vitalik promised natively I I I I actually don't know like I I'm I'm more pessimistic than optimistic about it for all the reasons that I I mentioned here mostly because And so far incentives are just not aligned with the end user and they're more aligned with the VCs and with people that are launching new unnecessary scaling solutions.

Many of them are good but most of them are not necessary. So for the next 5 years I don't think that much is actually going to change. But if we're looking at history and what Kristoff mentioned, there are probably going to be there's going to be be a concentration and there's going to be a few big winners like Android and uh and iOS and I do expect that to happen but over many many years. Yeah, I to like in this case I totally agree like incentives are misaligned there like there are like there are those projects that invested a lot in securing their mode of liquidity and they need to you know they need to make like their money back before they will push on the innovation and also like it would be crazy to really give predictions like I think that your fivey year timeline you know if I remember where were we five years ago then it seems that we should be able to to to advance in five years to to be there already. But so so anything between one and five years would be my prediction, but anything more precise is like crazy to to to give prediction.

I mean I think like we they be more than happy to continue the conversation like uh at lunch right now. So I want to I want to ask you to like give him a round of applause and thank you for being with us today um and answering all this question from the audience.