Arbitrum's BOLD New Bet with Ed Felten & Raul Jordan

Transcript

Bagless Nation we have a bold episode ahead of you because arbitrum just released Armstrong bull don't shake your head David that was a good pun we're uh talking about the decentralization of layer twos it's a process it's a continuing journey to make our layer twos more and more decentralized over time and uh this has been the next bold step don't kill me David [Laughter] covering today you know you said it we're covering armors from bulb yeah I think I'll call this a gym badge for arbitrum arbitrum has won a gym badge uh who is a gym badge for people who don't lift David that's a that's a Pokemon reference brother oh um and so uh Layer Two beat

layer2beat.com it's a site that uh kind of gives um a grade of security across all of the layer twos and arbitrum uh it's not live yet it's going to be sent for Dow proposal and you would imagine that the Arboretum Dow would approve it and uh on Pawn approval there is going to be a yellow Slice on layer 2 beat that turns into a green slice this is the level of analysis that listeners come to bank list for um so we're going to open up yeah so we'll talk to Ed and Raul from arbitrum about the show about this particular risk Vector to layer twos as well as the rest of the other slices that need to turn green but arbitrum importantly not only is getting a green Slice on a particular variable that makes up a layer two a critical component but they

are also the first layer two to get this green slice which is why we're doing the show today that seems pretty important I think we're also going to talk about this idea of staking maybe not staking eat though which we love to talk about but maybe the ideas of staking the ARB token what does that even mean what could that look like when could that happen David what's the overall context for here for for this um I feel like we're very much in kind of Layer Two season right now what's uh what's the meta around layer twos yeah I'm making a claim but I claim that this incoming bull market is layer two lead and there are only such only a few players that are really pushing that Frontier arbitrum being being one of

them certainly and so paying attention to layer twos that are pushing the frontier that are developing first get that are collecting their Layer Two beat gym badges uh I think are is the thing to pay attention to that is the signal amongst the noise all layer twos have their own SD case we've talking about the op stack frequently arbitrum has their orbits uh and then in an additional Innovation out of the arbitrance for your stylus all of these things fit together there are there's a story to be told here so while we unpack the story about arbitrum bold and what it means for the arbitrum uh Layer Two uh there's also other peripheral topics at hand that all induce a conversation about the growing influence of the layer

2 ecosystem but first before we get into this episode we disclose as we always do at the beginning of bankless a podcast arbitrum is currently a bankless sponsor I am an investor in arbitrum both David and I own assets and lots of layer twos just a reminder we're long-term investors we're not journalists we don't do paid content there's a link to all bankless disclosures in the show notes David we're going to have Ed on the podcast who is a co-founder of offchain labs I'm not sure if we mentioned that also Raul Jordan they'll be on in a second but before we do we want to thank the sponsors that made this episode possible including maybe most importantly our strategic exchange partner for 2023 that is Kraken go create an account Kraken Pro has easily

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bro welcome back to the show hey good to see you all so it's always good when Layer Two comes back onto Bank list because that means something's happening the devs are doing something uh are you all feeling extra bold today or what how does it feel to be inside the arbitrum ecosystem lately Ed I'll start with you Super Bowl there's uh there's a lot happening we've got bold we've got uh stylus which is uh evm plus technology we've got arbitrary orbit chains uh getting built and a lot of amazing things in the pipeline so it's a fun time to be doing this stuff certainly yeah and one of the main reasons why I wanted to do the show with you guys is the uh there are two worlds in crypto right now the pro layer 2 world and the anti-layer 2 world I think it's pretty

safe to say that Ryan and I firmly fall in the Pro layer 2 camp but from the critiquers of layer twos they'll say that they are not decentralized that they are centralization and and their ethereum is as centralized as are layer twos so with this uh bold announcement this starts to actually progress into that Frontier of layer 2 decentralization so I really just want to start there because that is the bulk of the excitement that I'm feeling today and maybe we'll start with you again and then we'll get into Raul but at the highest of level what is bold what does it do for the arbitrum tech stack yeah bold is the next step in decentralization for our return arbitrum is already the leader in decentralization um but what bold does basically is it um

once it's deployed it will allow chains to have fully permissionless validation and so what that means from a security standpoint is that any one participant in the protocol meaning basically anyone in the world can force correct can force the correct outcome of the arbitrim chain even if everyone else is against them so it basically means that you yourself as a participant in in the protocol can force the correct Behavior you don't have to trust anyone else so that just means that if there is one honest person that wants to force arbitrum to be correct then uh that's all it takes is one person that's right right so right now the situation in arbitrim is there are about

a dozen uh validators it's a permissioned role and if any one of those is honest then the chain guarantees correct outcomes so the big change with bold that bold makes possible is to open that up to make it permissionless so anyone can force correctness I have a follow-up for you here Ed So This this term decentralization gets bandied back a lot and has been bandied about for a very long time across crypto and it's almost become kind of like a purity test are you decentralized or are you not and what I've always struggled with that particular word is it's um it's often poorly defined it's very um subjective and not objective one thing I've really appreciated about this cycle

at least with respect to layer twos is we have a bit more of an objective measure and I don't know if this is the perfect measure the only measure I will say that it's it's kind of my measure because it it's it feels like it works and that is the measurement on layer 2 beat layer 2beat.com if thankless listeners want to go check that out and you will have heard it referenced multiple times so when you said something like when you said the the words arbitrim is leading on the decentralization front for layer twos um I think the the confidence that you bring in saying that is kind of some level of the objective measurement on something like a layer 2B which actually like stages out the level of decentralization of various uh layer

twos and this is um this is the gym badge I think you were talking about David in the intro right is we have an actual like pie chart and uh for bankless listeners who are listening to this and can't see this again go to layer 2B go go click on arbitrum or go click on the you know Layer Two look at the um risk analysis here there's five slices of the pie here uh that we need to turn green essentially so right now in green arbitrum has data availability proposer failure sequencer failure in yellow Arboretum has upgradability and state validation okay um you are ahead of some of the other layer twos uh so arbitrim right now is

in stage one some of the other layer twos are still in stage zero of achieving those slices of the pie can you just set the context for this pie first of all do you think that this is a reasonably good measure and can you tell us about these various slices of the pie sure um I do like this measure a lot the l2b team I think um they do a really rigorous job of examining these systems uh they give us a hard time when we mess up is you know which which it which is fair and um uh I I think they are sort of the most authoritative Source about the security or decentralization state of um of of various l2s um so yeah so there's there's five

slices in this pie um and these are five different areas uh in which we as a uh you know in developing the arbitrum technology has driven to to provide decentralization or security I really think of you know as you said decentralization there's a lot of words said about that um at the end of the day it comes down to security what who are you vulnerable to if you use this technology and how um and that's kind of what these five slices are about these are different ways in which um different ways in which a technology might make its users vulnerable or might fail to provide enough protection to its users

um and each one is rated by l2beat as red yellow or green um yeah and so we can run through sort of what the five um what the five areas are yeah and I'll start with the sure great okay and I'll start with the ones where arbitrim is Green the one on the top is data availability right so basically what that means is is there some party who can withhold information from you about what actually happened on the chain in a way that could put you at risk and that's green on arbitrum because arbitrim posts your data on ethereum as call data and because ethereum call data is available to everyone in the world always arbitrim gets agreeing on that so

the mere Act of posting to ethereum turns this green because of the properties of ethereum since no one can exactly or turn off ethereum you automatically just get this green slice and this is also why uh just a quick note why 4844 is so important because that call data is a big cost to the Arboretum layer 2 and 4844 makes that cheaper and so arbitrum already has the green slice and that green slice is about to become cheaper with 4844 exactly right right so this and this is the case for most Roll-Ups right most Roll-Ups will have this slice green because they mostly do put their data on ethereum and as he said it'll get cheaper for all of us

so um let's see um if we move around to the lower right to propose her failure proposer basically is a party who is um uh proposers are the parties who are um uh who can who basically make blocks in this system um and the question there is is there is there something the proposer can do either by being malicious or just by crashing that can stop the chain from being correct or from making progress and again here arbitrim is green because we have built the system in a way or designed the system in a way that um that's not subject to those sorts of problems um lower left is sequencer failure a lot

of these systems have sequencers these are parties who receive transactions from users and then sort of produce the official list of which transactions have been received by the system in which order and so again the question here is is there see if there's a sequencer if the sequencer fails or stops what's the worst thing that can happen to you or if the sequencer is malicious and again this is green and arbitrary because there's nothing too bad the sequencer can do to you the sequencer can't censor your transactions it can't forge a transaction it can't take money out of your account or force of false uh result so this one again is green before we move on here is is there a

relationship between the proposer and the sequencer it depends on which chain you are on um on some chains proposer and sequencer are the same um uh are the same component um are it I it's probably fair to say an arbitrum that the those roles are both played by the arbitrary sequencer and how did Arbitron earn its green slices in these two slices um one of the most important essentially by designing the protocol so that the sequencer is trusted for only one thing and that is to say which transactions it has received then in what order that's number one so the sequencer isn't trusted to handle

anyone's money it's not trusted to assert what the result of the transaction is just saying I received this signed transaction from David or from Ryan or whoever um so that's all it's trusted for and also because arbitrim is designed so that even if the sequencer just stops or refuses to uh or pretends it didn't see your particular transaction there's still a backup method you can use to get your transaction included so arbitrim guarantees there's no censorship by any party including the sequencer uh no matter what the sequencer does so it's that combination of not trusting the sequencer to do anything more than sequencing um and um and also having uh having a

censorship proof way of guaranteeing of forcing your transaction into the system that's how that went that's how those got green beautiful all right congratulations let's talk about yourself yep and let's talk about the yellows yep so it's first state validation this is basically what this is about is um uh and this is about uh how it is that we guaran how that the technology guarantees uh that the results of transactions that are settled back to the ethereum chain are correct um and currently arbitrum uses fraud proofs with a permissioned set of validators and as long as one of those

validators is behaving honestly then you're going to get the correct result but why didn't need to be permissioned uh well basically it's because there's a certain category of attacks against the settlement protocol that are eliminated by the Bold protocol this is one of the things that bold will improve um basically the what bold will allow us to do is well so this slice of the pie is Yellow by L2 beats uh uh criteria because although we have although arbitrum has fraud proofs the participation is permissioned and so when this becomes permission less to participate in the fraud proof protocol

then uh then we expect this to turn green of course and so for that to happen that would mean that the arbitrum Dao would would have to choose to adopt the Bold protocol and also choose to make validation permissionless um so that is what bold is doing right okay so so that's exactly what bold is for yeah the purpose of bold one a very simple way of of saying the purpose of bold is it is to make permissionless validation safe so that this Pi slice can turn green right and it's not just of course it's not just changing some pixels right it's the fact that the green signifies that you are safer and uh that permission this validation

actually does protect you and that's the way it is that's what bold is yeah okay and we're close to that but it's not there yet so here is the uh I believe this is a blog post and the proposal as well but then what needs to happen does this need to be voted on by the Dow it actually implemented after that yeah so let me talk about where we are in this process right now um this blog post went up uh just recently um and the code is available there is an academic style white paper about the protocol and all the details of it and also with security audit done by trail of bits which uh is also which is all published so that's all there um within a few weeks we expect to

um uh to release a capability so people can run uh run devnets that use the bulb protocol for their own testing and then after that we we expect to launch a uh a special uh test net that uses arbitrum Nitro stack with bold and at that point then someone can make a proposal to the Dow to to adopt uh bold also at that point anyone who has is running or wants to start an orbit chain will be able to use bold so that's kind of the process that we expect to happen over the coming uh over the coming weeks to months so I want to unpack bold with uh Raul

here but um just to really tie off this pie slice we have one more slice which is the upgrade ability one and that's it that's simply just because Arboretum can be upgraded but it is delayed which is why you get a yellow one and so right yeah this is the explanation right uh Ed exactly right so there are two ways that there are two main ways that upgrades can happen the Dow can vote to do an upgrade of the software um and that is going to happen with the delay basically after the Dow approves an upgrade then there's enough delay that anyone who has assets or positions on the Chain will be able to unwind those and fully withdraw before the change takes effect arbitrum also has a security Council which is a set of 12

people who are elected by the Dow and um they and nine of 12 of those can take emergency action if it's if it's deemed to be needed and so that exists the existence of that trusted Security Council is why it's uh yellow not green uh yes I believe that's the I believe that's the case cool is there a way to make this one green do we ever want to do that gotta take away the multi-sick well so this is the there's a trade-off here right so if they're if there should be a security emergency people will appreciate having a security Council that can act act quickly before a vulnerability gets exploited and push an upgrade

um because you wouldn't want to have to react to a Security emergency by having a big public debate on the Dow and then approving the fix and then waiting 13 days for it to take effect right um and so the existence of the security Council it's really there as a stop Gap in case of Security emergency yeah and I feel like in my head whether I would feel better about this being green or if I bet like if I'd rather it stay yellow for a while yeah I kind of feel like yellow is the color of preference right now but at some stage maybe it turns green yeah I was thinking about that well it's really up to the Dow um the the Dow has the power to change

or completely revoke the power of the security Council to do to do an upgrade or do anything the Dow can choose to abolish the security Council my sense right now is that people are kind of where you are on this mostly that they feel like it's um you know it's a comfortable enough situation that the the balance of risks the risk of a Security emergency with no response against the risk of the nine of the 12 Security Council Members turning evil um is people are comfortable enough with that I think um but yeah l2b deems that to be a yellow okay Raul I want to bring you into this uh conversation because I want to turn

into uh now that we have gone around the sphere of the pie slices we want to dive into bold because again like I said in the intro this is the frontier of layer twos right now is permissionless validation and so well can you just unpack bold for us like what what is the mechanism and what problem does it solve and what does it provide to arbitrum absolutely so I guess I want to take a take a step back as well because you know we're talking a bit we're talking a lot about you know Badges and kind of you know things that things that we kind of want out of a protocol but like why do we want these things really like why is it really important and uh you know I think you know basically uh summarizing many many years of ethereum scaling efforts the way we started is is

basically okay you want to scale ethereum there's a few different ways you can do that right layer one is slow and it needs to be slow for many reasons needs to be secure decentralized sensitive resistant and you can start by you know building side chains where maybe you bootstrap your own set of validators or your own kind of consensus mechanism so over the years the research uh you know very smart folks including Ed here they thought that hey like why don't we just use the security of ethereum that's provided to us instead of bootstrapping our own chain to kind of do something so instead of people launching their own brand new chain with a small group of validators we can leverage ethereum's decentralization and security and over the many years we realized okay how do we actually uh reduce trust as much as possible can we get to a sweet

spot where uh we're really depending on ethereum for almost almost everything right and I say almost everything because you can't get a hundred percent uh you know the security of ethereum but you can get pretty close and uh basically bold is a combination of all those years of research it's really important that I think the reason why l2s are so valuable to people is you know is twofold right like first of all there's this ethereum equivalence that's kind of going on but also uh that people can Bridge basically assets uh from ethereum to L2 right so if I have if I have you know erc20s if I have nfts if I have different things that I want to bring over to L2 and use them over there I know I can do that but most importantly I know I can get it

back on ethereum right and and that process of getting things back from L2 to ethereum is really the tricky one right that's the one where a lot of trust assumptions occur so in the past we've had you know many situ many systems where you have to trust a set of participants that you'll be able to get your assets back um and with so much you know so much value being bridged over to these l2s you have you know multi-billion dollar uh you know tvls you have uh you know people that are relying on this and relying on they have some trust in the system that they can get it back and how can we reduce that how can we move that trust from humans into math and computers and and really good software uh you know and my spicy take is that I

think if we don't have that uh kind of trustless way of getting your assets getting your liquidity back on ethereum it's basically just a side chain with extra steps right and that's why we think that fraud proofs are really really important uh because they guarantee this and for people that are using it you know if you're an end user if you're using arbitrary and you're listening to this uh like when you're using the chain uh you know like what secure what gives you a strong guarantee of being able to get those assets back is this validating bridge and this validating Bridge has security properties that are really important but the security is not up to the the best we can possibly make it and with bold we'll finally be able to remove those extra steps and make it a lot more secure

okay so this means basically rather bold means basically rather than just the whitelisted people uh the whitelisted groups who can watch the chain and then uh you know do these kind of these these fraud proofs anybody can so does that mean like I could does that mean David could in a post-implemented world and like how do you go about like actually doing that I wouldn't know where to start is there a website I I plug in or is there some code I download and then kind of run how does that work practically that's an excellent question so when you're you know so what does it mean to actually like you know secure the chain like with fraud proofs and do that kind of stuff like is it a manual action people have

to take and no the answer is uh uh if you're running if you can run arbitrum Nitro software in the future you can run it you can even you know you can try it today on testnets you can do all kinds of things but an arbitral node software has this thing called the validator and uh and its role is to basically be watching for states that are being posted to ethereum and challenge them if it disagrees so you know you're running a local node and running a local node is the best way that you can be sure of the of the history of the chain right like I know that you know the latest block number is this I know the latest block hash is this I can then uh you know if somebody says something different on ethereum I can challenge that and the node software

will do that for you right the Bold software that we built is constantly scanning it's constantly taking actions it does everything it can to guarantee that it can win against any number of evil claims right and if everyone else in the world is evil and saying that saying things that are wrong about arbitrim on ethereum uh you know if you're a loan validator that's running your own software at home you'll be able to challenge that and win against any number of entities okay go for it running go ahead David oh I was just gonna act that that they the actual task of challenging and winning is just simply a matter of running some software and I could run that on my consumer laptop and then what happens if I spot some bad behavior I'm like oh look there's fraud committed does the

software actually the software spots it automatically and then what happens right does it automatically kind of reverse those transactions or like what um you know how does this finally settle that's a great question there are there are multiple steps uh towards what's going on on the L2 node and what's going on with arbitrary and ethereum right so um what what what this bold protocol is doing is helping the settlement process on ethereum so um you know transactions are posted uh to ethereum from arbitrum via the the you know the proposer the bat poster all the time so there's constantly data being pushed to ethereum but it's only after a period of seven days in which basically uh these transactions can be

confirmed on ethereum as being valid right and there's a period of seven days in which anyone can challenge these claims and say that hey I think this was wrong uh you know we need to we need to do something about it right so the node does not you know during the settlement process the node does not necessarily like roll back transactions it doesn't affect the state of the L2 node it affects what ethereum sees as the correct arbitrant State um yeah sorry if I can jump in here the um yeah if somebody makes a false claim about the outcome of um what happens on on an arbitrim chain um and and and your um your hypothetical uh validator uh thinks differently your

validator will post its own claim and then essentially the arbitrim chain will have forked now everyone who's every all the other validators will know that your fork is the correct one and they'll just use your fork and keep on going but meanwhile um the arbitrum the Bold protocol will figure out that your fork your branch is the correct one it will prune the other one off it will take away that other person's stake and then everything goes on so basically nothing gets rolled back or undone uh it's just that if there's a disagreement um the Bold protocol will operate in the background to identify all the bad uh branches of a fork prune them off take the and take those Staker steaks

and guys why am I doing this would I am I doing this out of the goodness of my heart I just want to kind of keep the streets clean and protect the crypto networks I care about uh is there like so is it a public good or is there some sort of other incentive at play here I mean there's a bunch of reasons people might do it right one is that you might just want to be a good citizen if you're running an arbitrary node already for whatever you know reason you might have then it's really cheap to be a validator um because all all the validator does is the validator is already Computing along and figuring out what's happening on the arbitrim Chain all it needs to do is make sure that the claims that people

are posting about that are correct um and so in the normal case um uh being a validator costs almost nothing if you're already running a node um so you might be just doing it for that reason yeah there's no additional work right yeah that's right um so you might be doing it for uh for that you might have some skin in the game maybe you are um a company that's running an application on arbitrary or you have some assets there that you care about and you want to be able to act to protect them just in case everyone else in the world turns evil it also may be the case we expect it to be the case that in that the arbitrum Dow will pay some parties to uh to act as validators as well

okay uh so all of that makes sense then and all we need importantly is one person one single node to kind of sound the alarm and that's all it takes we're not talking about as in with ethereum where we have like a one-third kind of threshold we have a two-thirds threshold different things can happen with the amount of ether staked in this case because it's you know proving uh something true or false all it takes is one honest participant in order to sound the alarm that's correct that's one of the best security properties you can get I think in crypto and and that is really nice um you know you don't need this you don't need this consensus assumption you don't need all these kinds of things

um and the nice thing also I like to add is that um if this honest party like let's say that you know you're the honest you're the only honest person in the world is defending arbitrum and uh maybe your computer dies or you go on vacation or something right uh that doesn't matter because um you know every every other node that's any other honest note in the world can take can take your role and can help uh help you win against an evil participant so um it's not like you know Ryan is is the only honest person Ryan must defend Arbitron uh you know uh David or Ed or anyone else that wants to pick up your work and come in and also help so it's it's that's really one of the secret sauces of gold is that it's uh it's not it does it's not tied to a particular

Staker or participant anyone who's honest can help defend the honest State that's very cool and you know I would be one of the honest ones I'd be one of the good guys in this in this scenario as as as you guys know um but you know what it's just uh it blows my mind sometimes like cryptography is really magic when it works in these types of of situations and you get that sort of you know uh trust assumption guys there's more to discuss including what shared sequencing actually means inside of arbitrim we also talked about um the ability to stake ARB and what would that actually mean and then I want to talk to you guys about the the future roadmap of arbitrim and what's coming next as well as like more broadly what's coming next for layer twos but before we do we want to

thank the sponsors that made this episode possible including metamask in their portfolio application this is if you're preparing your bull market battle station as David says use the metamask portfolio app to scan all of your assets and know what's happening where go check them out are you a metamask user well you're listening to bank lists so of course you are the wallet you know and love just got a whole lot better metamask portfolio is the ultimate One-Stop shop for all of your crypto needs it gives you a holistic view of your crypto portfolio across multiple chains and multiple addresses all at once you can easily View and manage all your coins tokens and nfts in one convenient place just by connecting your wallet metamask portfolio goes beyond just viewing your portfolio though

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does this reduce mantle networks gas fees by 80 but it also reduces gas fee volatility providing a more stable foundation for Mantle's applications the mantle treasury is one of the biggest dow-owned treasuries which is seating an ecosystem of projects from all around the web3 space for mantle mantle already has sub communities from around web3 onboarded like game 7 for web free gaming and buy bit for tvl and liquidity and on-rails so if you want to build on the mantle Network mantle is offering a grants program that provides milestone-based funding to promising projects that help expand secure and decentralize mantle if you want to get started working with the first dowled layer 2 ecosystem check out mantle at mantle.xyz and follow them on Twitter at Xerox mantle arbitrum is accelerating

the web 3 landscape with a suite of secure ethereum scaling Solutions hundreds of projects have already deployed onto arbitrum 1 with a flourishing defy and nft ecosis arbitrum Nova is quickly becoming a web 3 gaming Hub in Social dapps like Reddit are also calling arbitrum homes and now arbitrum orbit allows you to use Arbor from secure scaling technology to build your own layer 3 giving you access to interoperable customizable permissions with dedicated throughput all of these Technologies leverage the security and decentralization of ethereum and provide a builder experience that's intuitive familiar and fully evm compatible faster transaction speeds and significantly lower gas fees arbitrim empowers you to explore and build without compromise visit arboretum.io where you can join the community dive into the developer

docs Bridge your assets and start building your first app on arbitrim foreign bankless Nation we are back with some of the folks from arbitrum Ed and Raul we're talking about the decentralization of arbitrum and a uh a new gym badge as David called it a new slice of the pie was added and Arboretum is in the process of becoming more decentralized uh which is great news through the introduction of this bold protocol I want to ask you guys a question about maybe this this other slice or question in general it's been kind of a conversation piece across the layer two ecosystem in crypto that's this idea of sequencers and I think as you said earlier a sequencer and a proposer in arbitrim are kind of like one in the

same um okay so um can you talk to us about this idea of shared sequencing so sure and other participants be invited inside of the arbitrim network and start to take some of that sequencing type role I I understand that arbitrum sort of does that in some respect now you guys are the only sequencer talk to us about the the path forward there and why you might want to do that sure yeah there's currently a centralized sequencer that is run by off-chain labs for for arbitrim1 um and of course the Dow could assign that role to anyone else if they wanted to um and basically you know this is part of the story about the uh as I think you

said earlier the the progressive story of decentralization um or the road of decentralization um the sequence are already uh plays a very limited role in the system and really the the only uh significant harm that the sequencer could do to someone if it was misbehaving would be things something like front running so the arbitrum sequencer is trusted not to front-run user transactions user transactions get sent to the sequencer the sequencer publishes a feed of the transactions that it is seen and that's kind of the official canonical story about which transactions have arrived at the chain and then the settlement part of the protocol which is what bold is

doing is happens after that to determine what are the correct results of executing those transactions so the sequencer is this kind of note its job is kind of to notarize the transactions that have arrived and in what order right and so um that's its only role um so there's been there's there's been talk about and a lot of research about decentralized sequencing which basically means instead of having one party that does that you have there and there are many different ways of doing it some kind of Committee of parties who collectively register which transactions have arrived and sort of collectively um publish a sequence of transactions

um and if you do that carefully and then cleverly and and in a well-designed protocol it's possible to reduce the vulnerability to things like front running or other forms of malicious Mev extraction so does arbitrary with arbitrum Dow the whole ecosystem have a plan to move towards a shared sequencing it's it's interesting in that on at least l2beat it doesn't seem to be a requirement for turning those pie slices green um right and yet there is this centralization Vector around front running around what you know what we've called the industry Mev right which could be a source of centralization so what is there a plan to decentralize this and like what would that even look

like I need to divide this kind of into two pieces one is where's the technology going because you know our team at off-chain Labs is developing doing research and developing technology that will be available but in terms of what actually gets deployed on say the arbitrum one chain that's really up to the Dow so our team is doing research we're developing Alternatives and we're working toward implementing decentralized sequencing and when we get to the point where we have a mature protocol that we think is um uh is is ready to go if you will um then I think you end up with something much like what's happened with bold which is that we announced that we make it ready we make it available and then the Dow could choose to do it

um so I mean that's kind of where we are on that decentralized sequencing is uh just like a decentralized validation is a complicated technical problem um which we've been working and thinking a lot about um we don't have a solution that we're ready to unveil at this point I do want to hop backwards in the conversation I had some technical difficulties and so I lost my uh lost the uh the finishing of the Bold conversation but well I want to throw this one back to you Ed here he said the Bold protocol and also like we have this new thing that we're implementing into into arbitrum that allows for permissionless validation but like at a cursory glance yeah anyone can validate the chain that

seems like such an easy thing maybe you can talk about like why was this a hard problem what what is the hard thing about this problem that you're trying to solve and and when you take a peek under the hood of bold what does that system actually look like why did Ed call it a protocol absolutely so the problem that we're trying to really solve is how do you settle um the correct arbitrary states to ethereum and uh and in in optimistic roll-up protocols uh this process is there's there's a there's a period of time in which people can come in and challenge claims posted to ethereum so playing once again the game of Good and Evil let's say we have an honest party let's say Ryan who mentioned he's the

honest validator here is making claims is checking that things are right and then I post a malicious assertion or somebody else posts a malicious assertion Ryan can call me out and he can be like hey like this is wrong and uh Ryan his his node will run the Bold protocol which is a set of instructions on how to resolve this disagreement um so that's the whole idea we want to be able to narrow down okay who is right and who's wrong and ethereum will be basically the final Arbiter uh which is you know one of the reasons why arbitrary is called arbitrum of of this Challenge and it's a protocol because there is a series of steps that needs to be taken um and and for participants will follow that the honest participants Will Follow That protocol

um the reason we we built this is because it's really difficult um you know to to create a protocol that is safe against a an important category of attacks known as denial of service so we mentioned that there's seven days in which things can be confirmed from arbitrim on ethereum and in that seven days anyone can challenge if there's a challenge there's an additional seven days in which that challenge will be resolved however today uh evil parties can continuously spend money they can basically spend spend spend and and basically spam and cause a lot of problems so that so that conf things are never confirmed so the challenges go on forever the seven days just never run out they just they just submit another

proposal and then all of a sudden it's the seven days just resets and then we were seven days until the end of time yes so there will be a there will be you know they can continuously you know deny service so you know basically they can deny confirmation of arbitrum States on ethereum for as long as they're willing and that's really not a good thing okay so that that is the problem that is why permissionless validation is not just this trivial thing we have to solve this one problem which we're all just articulated right they had to in in the prior protocol and and as far as we know in all of the settlement protocols that have been published by anyone so far um you have these delay attacks where an

adversary who's willing to sacrifice a lot of stakes can cause a lot of delay and the thing that is new that the thing that the Bold protocol achieves that other ones haven't is the ability to uh eliminate all false claims in um in essentially constant amount of time and essentially constant bounded amount of time no matter how many false claimers claimants there are so if it's just um Ryan's collect correct claim against like Raul and his 999 civils all making separate claims um the uh um with bold

um Ryan will be able to defeat all of the raouls in uh with only one extra week of delay one extra challenge period of delay um and that's the thing that is unique about bold and that's why it is safe to allow permissionless validation because you don't have to worry anymore about these sort of civil attacks where or just like a swarm of evil stakers previously protocols tended to use a sort of tournament style where if there were a bunch of competing claims you would pair them up and they would sort of fight each other one by one and then the winners would advance to the next round and so on and here instead of using a tournament style you

have just like one giant fight where they all fight against each other and just as quickly as a one-on-one fight would have been before this is an all against all fight where one will be left standing at the end and that's something that's unique about about the Bold protocol is the ability to have that all against all fight that gets over regardless in the same amount of time essentially regardless of how many combatants there are I'm fearful that if I ask for more technical details we're gonna start to get really nerdy really fast that was a fantastic oh yeah we can't uh a metaphor though uh a metaphor ad well is there anything else you want to add on to Ed's metaphor there yeah it's a battle royale

basically and it's really it's really easy to win if you're honest if you if you if you follow the honest data of the chain you're gonna win at the end and and and that's it and I think that's also there's two sides to the coin it's really nice because that property discourages evil parties from even participating at all right like why would you participate if you're always going to lose against somebody who's honest so a dispute about Arbitron State should be rare right unless you're unless you're willing to uh to lose something right when you make when you make a claim when you participate in a challenge you have to put up some stake and that can get taken away if you're wrong so why would you participate in the in the game that you will always lose um and yeah it's basically a battle

royale and honest party always wins yeah so the the mere threat of the Bold protocol the existence of the threat of the Bold protocol is the threat that likely deters perhaps the majority of attackers that are interested in attacking Arboretum um what is there like um a licensing conversation or an open sourcing conversation of of the Bold protocol is this um a system that other layer twos can incorporate what's the conversation here Ed yeah the the Bold code is licensed as the same as arbitrary Nitro um which means um that um it's a business source license that means you can use it for any non-production use but also that you

can launch an arbitrary orbit chain that settles to uh one of the Dows chains uh permissionlessly so it's the same as any other arbitrary code so um with arbitrine bold right we will have once that's implemented we'll we'll have collected another pie piece for um layer TB and so that's great we're going to wait for a while on the upgradability thing is that it are we done have we decentralized our layer twos I know there's some shared sequencing um you know stuff to to do but we actually got this question recently um from the bankless community which is how um secure are my assets and activity on

a layer two and the question is is that equivalent security to ethereum mainnet is the overarching question I I feel like that's what the community uh really wants to know is are the things that I'm doing on Layer Two is that equivalent from a security perspective to um layer one to mainnet how would you answer that I'll throw it yeah first and then Raul sure so let me talk about what assumptions you need to make in order to in order to uh get to the point of deciding that your assets are as secure as ethereum well so first of all you need to assume that ethereum is secure because layer twos are built on top of ethereum ethereum goes bad then the

layer twos have a problem anyway but you ask when will it be as secure as ethereum so let's talk about other assumptions so one assumption you need to make is that in for Arbitron is that or is that there's at least one validator who is honest participating in the validation protocol currently or the Bold protocol once that is put in place um if what you want is a guarantee of non-censorship and correct outcomes and progress then you you're there but with the caveat right the caveat is that the L2 is

consists of a bunch of other software and um you you need to worry about whether that software has bugs right just like any software that you're relying on um and so you know as a development team we we do we do our best in this area um we do tons of testing we do we work on formal verification of some of our things we uh we had we have a lot of security Audits and uh and due diligence in in all the ways we can um but I think once you get um other than once once bold is deployed um then I think the remaining areas that you might worry about are one this

upgradability and do you trust this Security Council and then to uh is there a bug in the software in any Layer Two system you have to ask is there a bug in the software that operates the layer too because it's additional software on top of ethereum software right and there was a take in the last week's weekly roll-up that I gave out that I want to perhaps uh I'm the one who's known to fire from the HIPAA Bank list between me and my co-host here and so this might have been an instance of that and so I wanted to check my take against an actual layer 2 Team uh the take was um after the news that um uh metamask portfolio integrated a stake button for the Matic token for the polygon Network so you can stay here

Matic and be part of Maddox taking for the layer two and my take was that well this is going to become true of all layer twos like you're just gonna be able to stake your token for the particular Layer Two and participate in network in the network in that particular way now I want to check that take against you is there a world in which the arbitrome token is a staking token that people can stake their ARB tokens in a not too dissimilar way and that they stake their East to the layer one and maybe you could paint a picture of for where that is true and then also talk about the instances and why that wouldn't be necessary sure so if you look at ethereum or you look at some other some other chains where staking is integral to the process

of validation right on ethereum there's a large number of validators and you stake to become a validator and the fundamental reason why ethereum validators need to stake is ethereum uses a consensus protocol which is kind of like voting and you need every voter to have skin in the game in order to make sure that people have incentive to behave in an honest way within the protocol right um with arbitrum validation it works differently a party who makes a claim about the outcome has to stake but if you're a validator and you see someone staking honestly you're good you don't need to stake yourself it's only in the case where someone Stakes on a false claim that under bold

you need to make sure that someone also Stakes on the true claim right so but it's not the case that everyone needs to stake in the normal case in arbitrum only one party is staked in the validation process so it's not inherent to the way that arbitrine validation works that there needs to be stake um someone needs to be staked that stake is currently in eth the arbitrum Dow could change could decide to make it be staked in ARB if they wanted to maybe they will who knows um and of course on an orbit chain if you're running your own arbitrim chain you can decide how things are going to be right you could have staking on your chain if you wanted to launch an orbit chain and the arbitrim Dow could decide

to introduce a staking element into the protocol but it's not something that's currently required by the design of the protocol as it stands now right okay yeah this is one of the reasons why we do layer twos is that actually you don't need 33 or 66 consensus over your layer 2 Network in fact you just need an N of One Trust model as in just one honest actor to power the networks that's why we like layer twos where my mind goes my if I want to put on my token Speculator tokens are awesome hat I want to stake my ARB token and have a share of the economic activity of the network go to my share of the ARB token right the sequencer revenues and so again I don't

know if this is uh on the arbitrum path if this is the path that arbitrum is token but like if I wanted to just make a broad sweeping vanilla token model for layer 2 tokens it would be stake your arm tokens and receive some proportional share of the arbitrum sequencer model does that model make sense to you and is there of the many potential futures of the arbitrum roadmap is that one of them well currently the way it works on arbitrum one is that the um is that the fee revenue of the chain minus the part that's needed to pay for the L1 posting costs of the sequencer right um right um the rest of it goes to the arbitrum Dow so if you hold if you're a member of

the arbitrum Dow if you hold arbitrine tokens that money goes into your treasury already okay so you don't necessarily need to receive the dividends to your own hands it's a pot that we all collectively govern and so it goes into the debt it goes into the Dow treasury right right okay I mean what what will the arbitrary of Dow decide to do something else in the future maybe those revenues go to them and they can decide where where they go but currently where they go is into the Dow treasury so they in effect go to the um to the control of the Dow already okay okay this makes sense that's interesting and it brings another path for exploration we won't have time for today this this idea of Layer Two is kind of um

these like um in making sequencing um permissionless and decentralized um like I wonder if that's going to come to fruition or not because like with the arbitrim Dao actually care about that uh because they're receiving all of the sequencer Revenue inside of their treasury anyway and so long as the arbitrim um sequencers are not um I guess selling off Mev or doing something nefarious or doing something outside of those those parameters would they even care enough to kind of decentralize sequencers to to various other parties you guys don't have to answer that question unless you have a take but

that's a curiosity in my mind I mean it's really up to the Dow right whether they are whether they want to stick with a centralized sequencer and just assign that role to someone that they trust um I think they're and and there's a few different issues here that you might disentangle right one of them is can that role be done in the distributed kind of committee way um and the answer to that question is yes it can be done that way what is the best way to do that that's the topic of current research so the Dow might decide well we don't want one centralized sequencer we want to have a committee of 15 sequencers and you know assumed that some majority of them will be honest

um there's other approaches as well um yeah so it's it's kind of an open field and it's really the Dial's decision as to what they want as a research team we are figuring out how to do committee based sequencing because that's what we do we develop Tech and then because we think that at least some orbit chains will want it okay I'd like to say it's also you know there's a latency trade-off like you know if you allow like thousands and thousands of sequencers that's probably not going to work right you want transactions to be as fast as possible and you know what's the purpose of a sequencer really one of the main purposes is to help spread and lower the costs uh for users of L2 on ethereum L1 right

um you could imagine a chain that just every transaction is posted individually to ethereum and that's it right it's going to be very expensive it's pretty unreasonable might as well use L1 right like a sequencer makes it so that you can batch a bunch of L2 transactions into into a into a you know you roll them up basically into this structure that you post to ethereum and it helps people save on costs and spread those costs across you want you want that process to be as efficient as possible you want it to be economically efficient you want it to be fast and there's a limit you know you don't want you know that's that's really the main purpose you wouldn't want like thousands of people running sequencers yeah and you care about latency right people want that fast response time that they've gotten used to and that's one of

the main uh functions that a sequencer can provide is it can provide um it can provide sort of soft finality very very quickly um and you wouldn't want to lose that in going to uh uh in going to decentralization or at least it would be a drawback if you did certainly yeah Rel this has been a great exploration into one of the very important frontiers of layer twos and as we come to a close here I want to pull out just a tweet that I saw from a Stephen goldfedter also on the Albert from Team he says let's put some of the arbitrums recent pieces together orbit stylist bold orbits are of course the arbitrum or SDK chains like you want to spin up an upper trim chain you call that Norbit stylus

where you want to talk about what Stylus is and bold is the topic of this episode Ed can you just weave these pieces together because it seems to be these are the frontiers of Arboretum these these three different Endeavors how do these things all relate to each other and how do they make garbage from the best the best chain that it can be absolutely um this is really uh these are a bunch of ways in which arbitrim is a leader among l2s um bald is our third generation um dispute resolution protocol um it's our third generation fraud proof protocol right we were the first to ship fraud proofs um and we think it's an important Advantage for security that's why that Pi slice is uh is yellow instead of red right now and is going to

turn green um Stylus is another really exciting uh step forward what it allows you to do is write smart contracts in any programming language you like c plus c c plus plus rust or whatever compile them into wasm web assembly code and then put them into an evm equivalent chain so the the cool thing about Stylus is not just that you can write contracts in whatever language you want but you can run them alongside uh EVMS solidity contracts you can run them on an evm compatible chain and uh and it's a smooth experience they can interact with

each other they can do all the things that other contracts can do except you can write them in the language you want which means many more developers will be able to uh to write these things number one number two is that you can bring in Legacy code like Legacy cryptography libraries really important for security that you don't have to rewrite everything in solidity um and of course much better performance because um because webassembly has inherently better performance than um than evm so without giving up all the benefits of being ethereum compatible this just opens up a whole new uh whole new front in the task to make really

general purpose programming on blockchains possible so we're super excited about stylus and you'll be hearing a lot about stylus coming up soon from us um and then of course orbit is the uh is the the technology that allows you to have your own chain to customize it the way you want and to take advantage of everything that arbitrim has to offer this stuff is available on arbitrim1 and the arbitrum Nova chains right from the Dow chains that have a lot of a lot of usage a lot of liquidity but you want your own chain great you can have this too and that's kind of the uh the orbit piece so it's all about sort of making this technology safer making it more General and flexible and making it

available to everybody this is so cool guys and just one final question as we close maybe this one for uh for Raul I I I'm wondering Rel if you could kind of zoom out for for a second and give us some perspective on ethereum's overarching roadmap the scalability roadmap I remember when you first popped on my radar it was like 2018 there's this existential question for ethereum it felt like our uh the ethereum road map was kind of floundering like we weren't going to make it like sharding what was happening there and then you and some co-founders stood up and you said I got this we're going to build the beacon chain we're going to call it prism we're going to you know deliver on that and now here you are you've done that delivery and now you're working on scaling ethereum

in a new frontier which is this kind of Layer Two Frontier how we doing how's ethereum doing according to like its overarching uh road map like radar progress where are we ethereum is way bigger than any one-person ethereum core development is at this point which is amazing you know it's not something that I could have said confidently even like you know say four or five years ago uh but you know the state that we're in right now with so many different teams so much quality stability of software that's gotten better you know we've gone through proof of stake it's awesome and you know I think you know the prism client which runs still a large portion of ethereum mainnet today is a project here at Octane and uh off chain labs and it's really cool that you know we get to you

know have all kinds of discussions about ethereum L1 road maps and L2 road maps under the same umbrella you know we've learned a lot mutually and I think it's been really good um we like with with what's coming up next would say like erp4844 making things cheaper for Roll-Ups like that's the first upgrade in which ethereum really enshrines like like the things that it's doing for Roll-Ups because it sees Roll-Ups as the way forward it sees l2s as the way to scale uh you know not just execution but just like end user activity and cement itself as kind of like this Premier like censorship resistant like you know data availability chain that's you know the the biggest out there the most secure out there um and yeah I think ethereum is really

figuring out um its identity uh I'd say since the Advent of these upgrades that are enabling l2s and we'll see that a lot more I think a common criticism you know even that I had was you know what is ethereum's identity four years ago and I think now it's becoming a lot more clear in my eyes um so that's you know we're in a good direction um you know really happy with you know obviously with how the merge went with how things are running and uh we'll just you know we'll see what comes next very exciting uh you guys are doing that statement from urologist now should hit extra hard as somebody who is was formerly and actually still is a layer one client Dev and now also a layer two Dev as well so rel's been around the layers

um well great uh I'm ending this episode with a smile very very bullish on uh what we're doing on across the ethereum ecosystem and scaling this out so Ed Raul thank you so much for joining us today thanks for having us yeah thank you thankless Nation risks and disclaimers of course gotta let you know crypto is risky you could lose what you put in including on layer twos there's bugs out there be careful 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