Can Rollups Save Humanity? Optimism Says Yes.

Transcript

hey guys welcome to another episode of state of the nation today i am psyched to have the optimistic team on thankless state of the nations david this one's been a long time coming i think optimism is maybe the most hyped um scalability tech in crypto definitely and optimistic roll-ups are as well and i don't know what to say about these guys but they they're incredibly optimistic about both their technology ethereum but and also the future of humanities this really insightful episode for me yeah these guys are some of the the deepest pioneers of the ethereum space is they've been working on the same the same problems sustainability and scale for ethereum carl and ben from the

optimism team they understand the relationship between actually scaling throughput and the ability to actually scale out ethereum to more and more people those things are connected and one of the these are my some of my favorite conversations where we we bring on the developers who are actually coding the code and then they can connect it out to the more significant meanings of what it means for humanity and so this is kind of how that this podcast goes the first half of the show we all talk about the details and the specifics of the optimism l2 rollout what applications are going to be there who the infrastructure infrastructure provider is going to be there what kind of bandwidth there is and then we go into the mev problem and then that leads us into a more broader conversation as to why optimism has chosen the design

choices that it has and what does that mean for humanity down the line as ethereum grows and grows into the world's financial platform that we all see coming ahead of us guys we're going to bring on carl and ben in just a minute before we do a quick a couple quick announcements the first is we released an epic episode on china's central bank digital currency uh basically digital currency revolution that's going on in china i think this is a must list and particularly as you're listening to this so much regulatory news in the us is in the headlines is congress going to allow crypto to flourish or is it going to try to strangle the baby in the cradle well china is not stopping they are going gung-ho into a digital future more centralized digital future but they are

completely replacing their banking system with the digital banking system and i think it's a story that's never been told really well in crypto richard turn our guest on the podcast explains it super well i think everybody in crypto should give this uh episode a listen it's definitely eye-opening definitely a wake-up call i think for the u.s forward it to your senators forward it to your lawmakers that came out on monday guys so make sure you check that out the amount of a juxtaposition i think that this episode brings i think is really really crazy and it's worth noting uh first off people think or are underestimating the the chinese cbdc no it's a force to be reckoned with and it's one of the biggest battles that our industry is going to have to face in stark contrast

with this perhaps embarrassing amount like legislation coming in into congress that is just uneducated and uninformed about what crypto really is that juxtaposition china understands crypto and the cbdc revolution and the the american congress is floundering meanwhile we have china pushing forward on development and we have people like carl and ben from the optimism team who are pushing forward on d5 development and these are the two tracks of innovation that i see going on right now china's doing the pushing forward in the centralized development and then optimism and carl and ben are pushing forward in the decentralized development but they're the same story of how crypto has impacted the world and so like ryan said this podcast is an absolute must

listen speaking of announcements david wanted to mention to our listeners that pool together is now taking deposits the banks took off last weekend pooled together never takes off you got to get in the pool use pool together this is a spot where you can deposit stable coins in a no loss lottery so it's like a savings account where you never lose your uh principle pretty magic like 50 60 70 80 90k per week in in drawings really awesome protocol uh get in the pool with pool together pull together is also expanding into layer twos as we are talking about on this show today they are on the poly the polygon side chain and they have the

future layer twos of ethereum ahead on their roadmap as well so if you are on currently living in the l2 world the pool is coming to you all right david before we begin i want to ask you the question i always do which is what is the state of the nation today the state of the nation today is optimistic ryan there is not a better time to be optimistic about the future of ethereum and where we are in this industry and we brought on the two guests that could only exude the most amount of optimism for this base ben jones and carl flores of the optimism team and so i think we should just go ahead and get right into the show but first a moment to talk about some of these fantastic sponsors that make the show possible bankless is proud to be supported by uniswap uniswap is a new

paradigm in asset exchange infrastructure instead of a cumbersome order book system where trades are matched with other humans uniswap is an autonomous piece of software on ethereum which is what ryan and i call a money robot no human counterparties or centralized intermediaries just autonomous code on ethereum input the token you want to sell and receive the token you want to buy something brand new in the uni-swap ecosystem is the uniswap grants program is now accepting applications for grants we have been saying this for a while and we'll say it again dows have money and they are in need of labor if you think that you have something to contribute to the uni-swapped out apply for a grant to uni-swap just look at the size of the uniswap treasury it's almost 3 billion

this mountain of capital is looking for labor do you have something of value to contribute to the uni swap dow no matter how big or small your idea is you can apply for a uni grant at unigrants.org and help steer unit swap in the direction that you think it should go that's exactly what we did to get uniswop to be a sponsor for bankless and you can do the same for your project thank you uniswap for sponsoring bankless balancer is a powerful platform for flexible automated market makers typical amms just have two tokens inside of one liquidity pool which can lead to fractured liquidity across the many pairs in d5 with balancer you can access the full power of multiple tokens inside of one single amm which unlocks an entirely new playing field of

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sacrificing liquidity in the pool using balancers asset managers balancers of vault architecture lets you trade between balancer pools at a fraction of the cost versus trading on other platforms balancer's mission is to become the primary source of liquidity in d5 by providing the most flexible and powerful platform for asset management and decentralized exchange dive into the balancer pools at app.balancer.fi all right bankless nation we are super excited to talk with optimism our next guests are carl flores he is the cto of optimism he's a new age cypherpunk who's been working on ethereum's hardest problems for like six years i've you've probably heard this guy speak at ethereum conferences full of energy full

of optimism while at the ef he implemented the first proof-of-stake test net for ethereum now we actually have proof of stake on main net which is awesome among other notable contributions uh to the inception of eth2 research is proof-of-stake other things he has taken his creativity and relentless desire for working code into the frontiers of l2 that is layer two that's what we're going to be talking about today carl great to have you i'm also want to introduce you guys to ben jones ben is the co-founder and chief scientist of optimism he's worked on solving novel problems in crypto economics with the cbc casper team you may have heard of that consensus protocol and he did all of that prior to

co-founding plasma group he was behind many of the industry's early forays into smart contracts on layer two such as optimistic game semantics generalized plasma and a whole lot more together these two have co-authored a whole bunch of groundbreaking research they are layer two gurus uh we are so excited to have them here to talk about optimistic roll-ups and optimism carl ben welcome to bangla it is great to have you guys why thank you hello thanks guys good to be on all right look i got to start with the question uh here just both to both of you is ethereum finally scaling what do you think carl ethereum is always scaling it is killing

people it is scaling ideas it is scaling research and technology it is very exciting though it is finally scaling transactions as well so absolutely agree on that broader definition of scaling by the way i love that it's not just so many people focus on transactions per second as the soul scalability metric but we've been scaling all these other things along the way including economic bandwidth as we talked about so often on uh bank list how about you ben you think we're finally scaling oh man i mean i gotta echo carl's answer which is that which is that it's an ongoing process definitely it does though feel like at the moment we are at a very exciting inflection point where we're moving up a hockey stick things are coming live we're super excited about it most definitely

[Music] an interesting piece of ethereum trivia that is one of my favorites is that optimism had this like eureka moment back at the scaling ethereum and a scaling ethereum event back in 2019 and just to provide listeners a little bit of a history lesson uh can you guys kind of tell us about that eureka moment and how it relates to the overall story of optimism who wants to take this one sure i'll i'll go for it um so first off all research ideas are more of a bubbling up of collective consciousness that you know occurs and so it's not surprising that it came out of a conference and it's not surprising that a lot of people had these thoughts in fact what happened was we were just kind

of talking with specifically uniswap hayden in particular we had been going after one after another design after design saying hayden please does this work to scale uniswap and then the question was or the answer was always no it was not quite there and so we just kept iterating trying to get it to scale unit swap with just the right properties of ethereum and finally boom it came together at that conference and when it came together hayden was excited you know a bunch of other people were excited and then i ran into another room and i was like metallic what is this idea this is a great idea it's going to scale ethereum and then vitalik was like oh that's my shadow chains idea from 2014

or 2015. that's you know i'm glad that that has a use and i was like oh my god why does this always happen and then of course of course there was a bitcoin talk article on it you know even earlier or something but nonetheless it was it was still an exciting moment and that was like a kind of rebirth of the plasma community the fraud-proof community the you know all of this like optimistic community is really the best term for it um and you know pushed forward i think uh layer two technology and that's really thanks to like tons of researchers in this space and now we're optimism ben you were there for for that moment how would you describe that moment in your words

oh man i mean it's so funny i i don't know the funny thing about research is that these ideas sort of swim around for a while and often like the eureka moment is just being able to communicate them concisely right like usually it's not something that's brand new out of the blue you came up with it that day but there was like a hundred other things that were going on and you finally the eureka moment is really like putting those together in the right way that makes sense and it's easy to communicate and it's usually that communication that is like the aha so we definitely had that and that was definitely very very exciting and then of course vitalik had communicated it years earlier and whatever but i think that there's nothing quite as satisfying as that moment where the new thing is

that all the other new things you had going on finally make sense in one shared unified vision so yeah it was awesome it was fun so to provide context for our listeners maybe you guys could expand on what what was really unlocked in this moment and then how did it lead into what is now optimism so yeah i i think the the core well there's a few things i think the core insight of um these layer two scaling solutions in general and like honestly this kind of leads to like our namesake is basically optimistic execution right and so there's basically just a general design philosophy that where you say how are we going to make these

transactions cheaper and more efficient in our in our sort of global source of truth this court this consensus protocol and calling it a court is actually the most i think apropos way in this context in one line it's like you don't go to court to cash your check you go to court if the check bounces and so a lot of these ideas have been floating around with plasma and even with state channels before that like all of that really boils down to we have something that we want to happen and we want it in the happy case to be cheaper because you don't because you don't have to dispute it but the fact that it could be disputed is what makes it cheaper right so it's this sort of back and forth between the ability to adjudicate making it unnecessary that gives you a lot of

throughput in these in these uh these things as for like the real eureka moment that was going on there really it was basically just taking all of those concepts of where things can be disputed and how they can be disputed and understanding a design that would fit into the smart contract design patterns that existed for ethereum so roll-ups are not as scalable as plasmas right they're actually more expensive because you have to do something with these transactions but we found something that we could do with these transactions that was cheaper than what you normally do with transactions on layer one and still afforded that unstoppable censorship resistant property so it was it was really about taking all of those concepts uh around dispute resolution and finally

having a way that you could combine them and have something that would like carl said run unit swap because it had the unsensorable unstoppable decentralized property that you wanted great and i want to just say one thing and that is it was the birth of a new design philosophy that has propelled us and continues to propel us throughout our you know endeavors and that is that we want to minimize the diff between our protocol or the optimistic protocol and the ethereum protocol so that's why we're calling it you know optimistic ethereum of course it's optimism as well but just this idea that we can take ethereum and we can make it natively compatible for

layer two that was this like moment where we're like okay we're trying to get uniswap to work why it's because uniswap is on ethereum and why because ethereum is really cool and why is ethereum really cool well we need to like build everything to you know kind of upgrade ethereum not like go against reinvent the paradigm all of that stuff so that was one of the first moments where we're like smart contracts can work on layer two and then we've been going further and further and i'm sure we'll talk about that design philosophy more i think carl that's a really interesting distinction right so like uh optimism is an ethereum chain it's part of

the wider ethereum ecosystem you're not in your head yes yes is that what you're talking about yes so i the the if like ethereum is of this very expansive term and we are definitely you know both working at worked at the ethereum foundation beforehand so this is like you know our our baby and we want to see it you know progress and so the idea of collaboratively and cooperatively building on top of ethereum both from an ethos perspective and a technology perspective so i'll just give one little thing we are trying to minimize our diff from geth as in the lines of code that are different in our geth implementation to less than 1000 lines of code so that

means that we are getting so close to the normal ethereum software that is running in layer one and so it's this kind of idea where you take okay this ethereum thing is great let's just you know add functionality and add capabilities on top of it ben you illustrated how uh if we want to scale things we need to uh kind of model the the legacy world that we come from where like if i write ryan a check he really only has a dispute with me if it bounces right and 99 of the time when i'm engaging with ethereum or writing checks in in the tradify world i'm not writing malicious checks and i'm not writing malicious

transactions i just want them to be treated as normal but it's really that with that point one percent of the time where there is a dispute then that's when the technology of optimism comes in and how would you actually relate that to why it's called optimism can you connect those two things for us yeah most definitely i think um well i have one comment what you just said which is actually that it is amazingly true as time goes on how being aligned with ethereum uh across the board is really important so what we've realized is that because those disputes don't happen very often actually a whole big chunk of the other architecture which for us at first we weren't as concentrated on actually ends up being really important to stay aligned with ethereum too um ethereum as well no

disambiguation there but yeah i mean we're called optimism and obviously obviously i think that's like a reflection of our team that core values you know carl can amazingly effectively go crazy and talk about the future of society in the world and it's incredible um but it did also come from an architectural perspective right which is like i said before this notion of optimistic execution right like the the reason that you use the word optimistic is because you believe that the execution is going to go well and in that happy case it's much cheaper and interestingly it's the ability to fall back if it doesn't go well that makes you optimistic right so the fact that there is a dispute mechanism means that people it means that people won't want to cheat it so that's like a very

deep fundamental sort of optimistic scaling uh phrase term and we love having it as our ethos because it also means happy fuzzy things guys when we have been talking about roll-ups and all these different scaling solutions that are becoming unlocked with ethereum we have a couple different models the one that i like to use is this theme park model where you know disneyland when it came out in the 50s it was just disneyland right and now it's kind of evolved into disneyland is like the hub and there are a bunch of different spokes going off into new different theme parks and now we are unlocking these and there's so many people just like wait behind the red tape like waiting for that red tape to get cut and to get flooded into into the ecosystem the the other model that we

have is kind of like a federal verse state relationship where you have the federal uh main chain of ethereum but then you have all these different states which is you know we have the the optimistic state which has its own rules and parameters that are a little bit more specified towards its specific environment and we have the uh the you know zk sync and and the polygon states which are its own land its own territory what uh metaphors do you guys use to kind of illustrate how the how optimism fits into the broader ethereum ecosystem and what do you find most useful to explain to people this is a very tricky and abstract question but i would say that it is um hmm

so hard um you go you go you no you go i just i haven't had conversations with you in the past i can't tell if we're gonna go the universal consciousness route the uh the social operating system right there's so many directions i know carl's gonna take this one i can't wait yeah i i think that there's okay here's here's what i here's how i visualize it it's a little different and i'm sorry for being contradictory to your vision but i'm seeing those those cis those like those spin-offs in the states those are more a social and a coordination game right that is the that is the manifestation of these technologies just like ethereum is the manifestation of the ethereum

protocol the you know various theme parks are the manifestations of you know various layer two technologies so what i'm really like thinking about is everyone who's building rollups they're all contributing the the designs for the roller coasters or maybe the roller coasters themselves they can be copied and pasted to various theme parks and can build up those various you know communities and uh states and all of that so it's really like when when i think about where what we are doing like i'm thinking about you know optimistic ethereum the protocol and that is like open source software that anyone can read that should be as

easy to understand as possible that makes it really clear okay this is how you run an ethereum client in layer two so that's why the you know it's not a state in in the uh in the kind of traditional sense necessarily it really feels like a technology and you have anything to add there ooh i think one of the things that that i have to fight myself on thinking is thinking about these things as evolution at least in like the traditional sense i think one of the cool things that has just i mean the rate of return for us as we like incorporate more and more of this ethos and like really internalize it and

understand it is the additiveness of these systems so what where my mind wanted to jump to it first was oh it's like evolution we're coming from single cell to multi-celled organisms right but i think actually what's interesting is like there's a lot of basis for like competition in that in that scheme right this is like sounds very darwinian but i think the cool thing that's going on is that it's much more collaborative in open source than that so like carl was saying a lot of what the problems that roll-ups face are the exact same problems that we're going to face on l1 and i mean they're they're almost identical and from an architecture side every time that we have decided to change our system to make it use code that runs on l1 the better bet and better returns those have

been so i think it's kind of like evolution but without the competition it's like a collaborative open source evolution that's super cool and it's totally no analogy completely fits what we're doing here in ethereum like this is net new undiscovered you know country i guess it's another analogy it's undiscovered territory this is a this is new world that's opening up i guess you know two other analogies we might might go to is the idea that this is increasing the bandwidth you know uh the internet had its 56k days and now we're going broadband we have all of this additional transaction three put throughput another another analogy metaphor we've used is this is almost like if if main chain is kind of manhattan it's busy and expensive what

we're starting to do with these layer twos is we're building out the suburbs here so we've got like an early brooklyn going on in layer two anyway let's not get lost in analogy although i i do want to return to the um the theme park analogy for just a minute because this sort of fits with uh release timing and details so let's say we're all waiting at the theme park we've been on ethereum um for a while everyone loves ethereum we love it so much that it's getting crowded it's getting expensive uh now we've gotten wind of this this new sub theme park that is opening up called optimism and what part in in the process are we with with the opening of optimism when we're going to cut the red tape and and

have everybody crowd in it feels like we're in an alpha phase maybe there are a couple rides open yeah take us there uh ben what do you think what what phase are we yeah so so definitely definitely i would say we're in the um oh man i don't know if there's a term for this in in theme parks that i can draw on i think one of the things that i would say that's a little bit different from what we're doing from theme parks is that theme parks are a very well established and rigorously engineered uh thing that has been around for many many many decades and now i'm very curious what the first theme park was but i'm sure it was i'm sure was quite a long time ago one of the different things that we're doing is we're marching into uncharted territories with this layer two step so

something that we've been trying to be really careful about at optimism is making sure that those uh that's there's not a floodgate moment but there's an incremental onboarding of projects and users that sort of more coincides with the risks that entirely new software stacks and entirely new uh you know designs have on the world so we put out our first uh mainnet release right which was with synthetics in january and we've basically continued to ramp up usage and ramp up the projects from there as we have done so we have been gaining confidence both in our stability and in our security and that continues to grow so i'm very excited to say that we are very very close to like a real red tape

open moment um so it's within sight our last launch that we just had was um well it was obviously uniswap and then right after that was cuenta with which had chain link coming fully online uh as well as um synthetics exchange uh quinta um and we're very very very close i'm like maybe on the order of two months from having basically all the projects be able to come in now even when we're at that point we still think that ramping things up slowly is the responsible right thing to do so i don't know maybe carl can speak about this later on a bit more but one thing that we've done is we have imposed a throughput limit that is artificially

low so we know that our system can handle more but we don't think that it's right for the just the apes to descend and mass and suddenly flood that once and for all so another thing that's going to be happening is like we will double our tps at some point soon and make sure that things are still running smoothly um so hopefully that's a good that's a good answer that touches sort of on our philosophy throughout this process of incrementalism and pragmatism though yeah so so optimism is open but it's got all of these governors on them so we've got uniswap and synthetics but they are more like they have governors on them they're sort of more muted versions of what their final forms are going to be both in terms of transactions per second and in terms of functionality of these

applications today is that accurate that's right that's right and we're sort of opening up those floodgates and giving giving more uh permissions as time goes on and we are very very very close to removing the big one which has been contract deployment um and that is the most exciting one so i think we have a lot of confidence now that you can run all pretty much all the contracts that exist out there pretty smoothly and that's going to be the big next moment which we're calling like our community launch which will be when a bunch of projects can deploy even with some request throughput just to expand on that contract deployment does that mean that you are kind of taking off the permissions around deploying contracts to optimism so any development team can come and

deploy their contracts onto optimism is that what that means yeah so i want to be careful with with framing there and also give us time to like write it up in a way that's like sort of more accessible to everyone and universally recorded what i will say is that in line with our incrementalism uh philosophy the next step right now we have a whitelist that we maintain that allows certain keys to deploy our next step will be just very very liberally giving out that white list because it gives us a closer connection to the devs that are building on top and it's extremely important we've learned that talking with the projects that are running on optimus ethereum you know as the protocols in early days is incredibly important so we don't want to lose touch right away to be able to say oh anyone can any random token uh you know any

random address can deploy and we won't know who they are but there will be some very clear-cut guidelines that say show us that you have a github repo and some responsible security practices in place and we'll give you the green light right away so this this of course is the big difference between theme parks and and roll ups is like anybody can go create a ride yeah exactly and all the kids at disneyland would be very impressed by the 2000 foot roller coaster but it might not end so well we've seen a few of those in d5 already i want to touch on the infrastructure that you guys are are working on at optimism you already mentioned chain link so train link train link is up and running which is a

prerequisite to applications like ave or compound or anything that has collateral inside of its applications but then there's also the conversation around infrastructure around things like etherscan and infira and you know just other all just explorers and all that all this world what other infrastructure are you guys uh teaming up with to to have launched and have that out the gate um that's that's a good question i think yeah one thing i would say to that that's been very exciting for us has been um again i will just keep coming back to this i think carl and i are going to sound like broken records by the by the end of the podcast but that's all right because we are broken records um being the ability to do that has become

so drastically clear dependent on being connected with the stack and so you brought up examples like infrastructure providers and i don't think it's more true anywhere than it is in that stack um so like when we had our first like optimistic ether scan you know link and we got to click on a transaction and like see transaction sub calls just like we did like that was just like an aha so so satisfying moment um as far as specifics on what's coming up i don't want to get into too much there and i also don't want to speak for other projects as they have their own you know you know comms plans and things like that um i think we're going to be seeing uh i know that we'll have online all three of the big improv providers are

like quick node alchemy and fura so that's something that we're extremely excited about um something that we learned very quickly was that the value that they provide to ethereum is uh just incredibly incredibly important which came from a time when we launched synthetics and realized oh man a lot of people want to read the states reading the stage is something that people like to do and of course we've got more more projects coming online uh coming online shortly i'm curious just while we're on the topic of projects that are coming online so we we've talked so far about uniswap and synthetics and there's probably a slew of other projects that are working with you guys some of which you know you probably can't disclose right now some of which will be launched in the future but so far everything we're kind of envisioning is uh d5

related or these are things that have been deployed on ethereum already and it's kind of like the idea of like well we need to migrate d5 to a more scalable environment and nfts also fit that meld i i want to ask maybe beyond that though right so like part of how we're curious about how this is how this is going to shape up is um what new use cases might this layer twos unlock beyond like what we've seen on layer one even if they're like defy related and what sort of things are you seeing like you could imagine like the web 2 world getting really interested in some of this now that block space is is much cheaper uh you can imagine fintech getting interested about this and like

in all of this need to even imagine right there's so much talk in you know regulatory world about a central bank digital currency right so central bank digital currency on layer two i'm curious what sort of use cases you think this will unlock and also if you could weave this in does that all happen on one optimistic roll-up chain or are there is there a world where we're going to see a universe of optimistic roll-up chains and a universe of optimism type chains that serve different use cases so i'm curious about the use cases and then also how this uh how this shapes up in the future what do you think carl all right great question so uh first off i just want to say that y'all should all watch vitalik's ecc talk that has some of the great you know

great ideas about you know other than d5 what are the applications that we need to see and generally the reason why we got into l2 was because there is so much that you can do in the world of trusted computation that we are unlocking by reducing those barriers of entry and even things i will say even things not even just in terms of throughput even things like low latency really changes the game and the way that you interact with a blockchain in general because you're like oh i actually get this you know real-time feedback that means i can perform many actions in a row and have it feel good so the the kind of the space is huge i i am personally very interested in what

vitalik said around kind of upgrading our social media platforms upgrading our you know uh uh uh upgrading defy and and to kind of be a more cohesive experience around like how you interact and show your value and appreciation with each other so i could go into crazy stuff around there but back to practical stuff we are building this thing one step at a time and so that means that the main things that we want to do is like fit in a bunch of infrastructure projects that work well together so that means like you know uniswab synthetics various uh lending platforms you know various d5 protocols that's a really important you know market that is obviously there and

obviously needs to be served so that is like for sure the kind of initial rollout as for whether or not there are many roll-ups or you know just one okay so first off it is very clear that there are more than one roll-up i mean you can see there's many roll-ups that are out there l2b.com quick plug quick plug um and so the uh uh so that is obviously the case but the thing that i will say is that there will probably be with as with many other things a power law distribution of roll-ups so we'll probably see you know uh various you know very uh heavily trafficked roll-ups and you know a bunch of less trafficked roll-ups or less value locked or

whatever that doesn't mean that they are any less important now i will say that the concept of application specific is really important in this case so it turns out that the more you spread an application across these rollups the more actual computation that you need to do to keep those roll-ups in sync so that means that there is this actual need to kind of co-locate roll-ups roll up infrastructure that is like one application and i know that you know there are many applications in d5 but one very important application is just kind of a finance and expression of that kind of value in a kind of the mainstream form so i do think that there will be some like

really heavily trafficked roll-ups and the reason why i'm kind of calling that out is because it's obviously obviously the case that there will be many roll-ups but it is also the case that we need to scale up the performance and the throughput of each individual rollup as well and that also goes for the ethereum l1 technology as well so because we're trying to build kind of core infrastructure for ethereum that means we need to solve the things that are limiting throughput on ethereum as a whole so things like state expiry that is a problem all roll-ups are going to face how are we dealing with all this state we're increasing throughput where are we going to put the data right it's a very simple question and it has very

hard answers that we need to work on so it is this it's going to be both it's always more complicated that's my you know view into the complexity i definitely want to touch on state expiry and some other issues i'm curious like you mentioned this idea that um hey having applications co-located on the same roll-up there are inherent advantages of this i'm i'm like wondering back to kind of that that city analogy if it sort of evolves like a city where you have like the financial district and you have the art district you have the the commercial district and some of this like a lot of this wasn't centrally you know pre-planned or organized it just kind of happened organically and network connections were made and sectors were kind of born do you think it will play out like that in the world of all of these roll-up chains

carl i think that is a very apt apt analogy and i do think it will play out like that this is an emergent phenomenon and emergent process and it is the case that there are some hard to quantify but quantifiable and if you want to be a researcher you can't quantify um reasons for co-location um and so it will happen i just i just want to build on what carl's saying here too to touch on the uh the um the populists urban environment analogy i do think it's worth saying it i think it is selling crypto short to be imagining that the to be saying that the things that we are seeing today are cities i think if anything there are

towns or maybe villages and so like this is kind of what carl's alluding to that we need to do both like yes we'll have a lot of cities but also cities need to grow and there are like huge metropolises which have huge benefit to and utility to the folks that live in them so it really is a matter of doing both unfortunately there's not one we haven't reached the scaling pinnacle yet it will need to keep going i do actually want to get into the actual uh metrics and details behind the optimistic roll-up chain the first one that you guys are pioneering uh and and so i want to get into the some of the more technical details there and i want to start with the oevm the optimistic ethereum virtual machine and this goes to the conversation of developers coming on online to optimism

what is that process they have code on ethereum it works well on ethereum they've already optimized it it's going growing great now they want to go on optimism how does how does that process look like is this a simple process what changes need to be made in order to become oevm compatible great question so this is more of a journey than a single you know answer and so this is a snapshot in time in you know months ago it was a horrible process and you know thanks thank you to synthetics and uta swap and various other integrators that have dealt with our terrible user developer experience but the iterative the the goal the very explicit goal is to reduce that friction to near zero and so we know how to do it

we are not 100 there yet there are contract code size issues there are various other problems that we have faced but this is why it's so important to actually do that onboarding and feel the user pain for the for the user um and so for instance we had a big difference where we didn't have native eath and it turns out that native is used by a non-trivial portion of the d5 projects so we added native v's and so there's a there's a whole kind of list um and for that you know the most comprehensive list and the best thing is just check out our docs specifically for like what's there now but it is definitely trending towards a one-click deploy now that said there are differences in that if you have an application that that you

know communicates between l1 and l2 or you know deposits or withdrawals there are standard bridges but if you want to do something fancy you can do some you know fancy trickery and send uh you know to implement something there so things like hop exchange would obviously need to be you know re-architecting their system around the interfaces but for normal applications it should be pretty close to one click the gist that i'm getting because because you said that this is an iterative process the gist i'm getting is two venn diagrams that are overlapping and these venn diagrams are actually becoming more and more overlapping they're approaching each other perhaps it's impossible for them to actually become one to one but that is regardless the goal is this is that a good illustration yes that is exactly

the goal i do have hope that they will eventually become one to one um but that is definitely a nirvana point and that nirvana point will be we have a ethereum protocol that works in layer one layer two and various contexts very cool very cool okay so with regards to actual block space capacity can you guys kind of put into a frame of reference for how much actual block space there is on the optimism chain that you guys are building how much scale is there great question okay so there when in ethereum you have one resource it is called gas when in any layer two protocol there are now two resources in uh sorry any

roll-up protocol there are now two resources there's layer one gas and there is layer two gas so it gets a little complicated now first i'm gonna start out with layer two gas because that is one hundred percent analogous to layer one gas we have implemented an eip1559 like restriction it is not yet eip1559 but we're going to get there which restricts it to about 50 000 transactions per day this is 120th of ethereum l1 this is nothing like it needs to be and we can double it on a whim that's what ben was alluding to earlier and so we are going to be pushing that number up up to one to one with ethereum and then past it so that

is on that trajectory now the way that we get there is just increase you know tuning our parameters and you know making various uh uh changes and then boom where you know we can even push past ethereum now notably when we push past ethereum we have to stay grounded in the universe of problems like state expiry that do come online so like there's no free lunch here there are reasons for ethereum's block size and so you just have to like get get you know make your way around that now the second thing is ethereum itself as an l1 is scaling its gas so that is what eth2 phase one is about right now we can support across all roll-ups about 5 000 transactions and i mean the simplest

transactions like erc20 transfers per second that is based on you know vitalik's calculations a while and a little bit adjusted based on block size so then eth2 comes along and we can about 10x you know 15x that number and we can get up to you know 100 000 transactions per second on these very small transactions now depending on what you're doing you get more or less scalability it turns out these small transfers are actually um less scalable in our context for reasons i won't go into so anyway that's the l2 gas scalability it's basically just ramping it up removing differences between ethereum until we can supercharge and then l2 l1 gas is ev2 so i i want to make sure i heard those

numbers carl so he said uh 5 000 transactions per second just with eth1 as it is today would would maybe be close to an upper limit of optimism is that correct that is a upper limit of all roll-ups in aggregate all roll-ups in aggregate okay perfect and then once eth2 comes along right that introduces some additional like data availability space exact roll-ups and then that's going to get you what from 5000 to what to like 100 000 okay and that is with uh eth2 post merged we're talking about where people floated who knows what the timeline is

but you know q let's say qq 2022 q uh uh q1 2022 or q2 2022 is that that's what we're talking about exactly that is yes interesting and and let's just i just want to hash out the actual bottlenecks for optimism scaling and how they are different or the exact same for ethereum scaling can you kind of just hash that out like what what's why aren't we at 10 million transactions every microsecond why can't we do that okay great so um the first bottleneck is the most you know clear cut and that is the ability to sink a chain so in ethereum you need to download the all the transactions you need to execute

them so we need to make sure that l that nodes can actually execute those transactions that is the most fundamental that is what ethereum has been dealing with quite quite frequently and that is currently the big bottleneck we are about to enter a phase where ethereum can now split into multiple roll-ups and so we are going to make it so that you can run the ethereum software in layer 2 and execute all those transactions exactly the same way that you would do in l1 only bottleneck there is like getting to one to one to ethereum that is really that is really the only thing there you can actually there are justifications for ramping up those numbers in l2 but i won't get into that exactly that's the first kind of skill you know

scalability is kind of computation the second limit to scalability is bandwidth or availability that is how many transactions you can actually put onto the ethereum network and it can actually process and that is what we're scaling up up and up and up with eth2 and you know you can parameterize you know eth2 even you know to the max if you wanted to but that's what you know there are fundamental limits to scalability in blockchains globally that we have to take into consideration here and so you can that is the bandwidth and availability limits then there's a third limit that's a little bit funky and that is essentially a bomb that is going to explode on l1 or any l2 that is implementing an ethereum like protocol and that is the state

explosion and this is what we were talking about when we say statelessness or state expiry as these chains accumulate more and more state it becomes harder and harder to hold that in a database and so eventually you get to the point where nodes fall off the network because they can't hold on to everything so this is a problem where you have to basically tune your parameters so that your state grows at a rate that is uh slow enough that you can solve the state expiry problem to basically unleash the release valve and let the state expire and so this is something that ethereum one i mean l1 needs to uh uh solve this is all this is something that all l2s need to solve and it's very critical anyway um do you think we can solve that last one though

the state expiry one that's a pernicious problem you think we can solve that one carl yes we definitely can there are really nice proposals by vitalik there have been for years it's really about trading uh picking trade-offs at this point it's really not problematic in fact generally i will say that the scalability problem in ethereum is caused more by resource allocation being messed up than it is about actual research solutions to hard fundamental problems we've known about solutions for years we just don't have the manpower to or women power or people power to implement them i just want to round off one other quick thing you're talking about two types of gas eth1 gas and uh optimism gas right basically so eth1 gas you pay for that

in eth stamina and eth is that true of optimism gas is that also paid for and denominated in eth yes everything is denominated in eth you pay the maximum of the two gas costs so if it's more expensive to submit to l1 then you then you pay that gas cost if it's more expensive there's too much congestion then you pay that gas cost i think that's what's interesting with the kind of the the federal government versus the state analogy too it's like both at the you know federal level and the state level they're all using the same currency and that is the currency of the the national economy which is ethereum in this case very cool i like that carl earlier you talked about the latency upgrades that optimistic roll-ups gives and when i was tinkering around on unit swap on

optimism i would hit submit transaction and then it was done it was already it had i got it the website responded back with like the transaction is complete and it was so incredibly fast that i was suspicious that the unit website would it was actually just telling me it was done without actually knowing that it was done i was wondering if you have any insight into how the uniform website works or if it is actually that fast okay so i'm gonna have to let you in on a little secret about our universe there is a probability that everything will be reverted at all times so that means that the finality is not just it's not just clear cut right and that even goes for proof of stake like

what is final is a consensus protocol that we all have to agree on so what happened instantly is that you instantly got an enormous amount of guarantees that your transaction was finalized if you go into either scan at that moment either scan maybe takes one second more to index but once it is indexed it will say confirmed by the sequencer and so that means that the entity that is saying that is ordering the transactions said hey you got this particular transaction index and this is the result of your transaction and that happens near instantly and then there is there are probabilities that the sequencer lies or that ethereum l1 reorgs or you know there's a whole host well really

those are the two um but they those two things are pretty pernicious in that they could technically happen but you get really good guarantees that they won't and so and this was this was kind of my my question is like the the promise of guarantees informs the uniswap team that they can just tell me that my my transaction got included regardless of whether they know or not because the strengths of the guarantees are so strong and so my question was did the unifop website actually check anything or did they just tell me that it got in included yes they did check it they got a response from the sequencer that said hey your transaction was included and confirmed and so and so that i think should if

listeners haven't actually transacted on uniswap optimism or synthetics optimism that should be the big takeaway is that it is so incredibly fast that you don't even know if it actually or i i did not know that it was actually a response coming from a server saying that this transaction actually got included i kind of thought that they were just doing some pseudo jiu jitsu on me and saying like yeah the the finality guarantees are so incredibly strong that we're just going to tell the user that it got in the the amount of latency the the lack of latency is so incredibly impressive uh that i think people aren't really like uh aren't understanding that this is what's coming yeah other kind words oh i want to show you one thing i want now you go carl fine you go

okay okay i want to show one thing real quick which is that um what you are seeing there is not just a transaction confirmation in the sense of a guarantee that your transaction will go in that is actually a state update that is applied to the l2 state so it's not where in other words it's not just that your transaction is coming in has been selected and is going to go into the chain the unit swap price actually just updated based on whatever slippage you incurred based on that and that is a property that is unlike l1 that is very powerful that we might get into later so it's more than your transaction going in it's actually getting applied which we're super excited about that's very cool i i want to ask another question so

some people are worried that what might happen in a multi-layer two universe where we have all of these different layer twos and roll-ups included is that we start to fragment liquidity so we even think about like uniswap right so it exists on main chain but then it also exists in optimism and perhaps other roll-ups other layer twos as well in the future um are you guys worried about that we've also heard about some maybe some protocols like bridges that are starting to uh to help there like connects and hop critical and these sorts of things but but frame the the liquidity siloing problem for us and i want to ask if you're worried about that ben what do you think um yeah so

that is a great question so maybe just to start with some context and sort of frame frame what you're getting at so of course the way these roll-ups work is that you deposit funds into them and then they are locked up on l1 while they're doing things on l2 now the rule that we have of l2 is that you have to dispute the cat the check that bounces as opposed to uh guaranteeing and verifying all checks on a one up front what this means is that you have to afford some window on l1 before someone can take their money out of the roll-up which is a period for which uh people can dispute so that's uh sort of the raw framing of the question that we're talking about and it's this is called like a withdrawal time sometimes it's like a

common term for it right we also called this the challenge period so you have to wait the challenge period to pull your funds out so uh how does this manifest what does what are the what are the effects of this so there's basically two effects one effect uh is simply is simply that that time has to be has to be awaited and and that that and so notably that's by someone not necessarily you so somebody has to wait that withdrawal time for you to move your funds out of one roll up and into another so what's really really cool that we're seeing is uh projects like hop exchange like you mentioned k'nex and others that are working on ways to offset that uh

that ux problem to liquidity providers so the core idea is that if someone else is verifying the chain and they want to be making some fees one way for them to do that is if they see that you just started a withdrawal the chain has to wait to afford a dispute if there was one but anyone verifying the chain knows immediately that there is no such dispute going to occur and therefore that the withdrawal is going to going to go through and so you can think of it as someone else is almost willing to buy that withdrawal from you in exchange for a small fee so that you can get your funds immediately so i would say that probably our number one uh most frequently asked discord question is hey guys can you how can we not have to wait a week to get my money out these projects are the

answer and so that's extremely extremely extremely exciting now as far as your question of framing this as a concern so there are reasons to be concerned with this i think in the context that we just talked about the main concern is capital inefficiency so basically the fact that someone is going to be taking a fee means that the system is less capital efficient and it means that the more you have to divide up your roll-ups the more fees are going to be paid and the more money is going to be spent moving between roll-ups passively instead of actively engaging in economic activity um [Music] right so that is one framing and i think that is the core framing that you that you're probably getting at i think i'm getting at that also i'm getting at the issue been of like um i i just i want to

trade eat for die and i just want the best price on uniswap and so like uniswap on mainnet is going to have very deep pools for me whereas uniswap on um an l2 might have less deep pools and so i have more slippage i don't get best price and like liquidity is fragmented that way too yeah most definitely so i'm not as much of a decentralized finance expert is to be able to give you great numbers on how all the orb of that is going to work and how things are going to balance out hopefully we have some good things that are bridging liquidity as actively as we can now i want to shout out one project in particular you remind me of here which is which is nova created by the the rari

capital team because they are doing some of what i think is the more groundbreaking cool research that comes to my mind when you say uh i want to do a trade somewhere else so basically uh the one question that you might have is well if i have my money on l2 why can't i go immediately use it and trade on l1 right why can't i just take that and and execute the the trade of my funds and the reason is because that withdrawal time more generally is an asynchronous delay it means that contracts communicating with each other across different chains do not have to send a message one way and they do not immediately get the response that they're looking for so i think another example of this is that's

really i propose flash loans so if you have money on one chain anywhere on that chain you could do a flash loan that gives that transfers all that money executes some behavior and then reverts based on whether or not something that was desired happened you cannot do this across a chain in the same way because sending the money in one direction does not immediately afford you a response there's this asynchronous delay so one thing that i do think that we'll see is base cross-chain projects that are all about moving funds into a contract on the other chain basically to do your bidding over there so you you might not be able to you might not be able to trade on

uniform immediately but you and a bunch of other people who also want the better price on l1 might all aggregate your funds into it and send them to a contract on layer one that will execute the unit swap trade on your behalf and then send the money back to l2 and then disperse all the funds to the people on l2 so are there fundamental things that have to be done differently yes am i concerned about that no i'm more excited because it is an opportunity for innovation and there are people really innovating there that's super cool as always we just get the robots to do all the dirty work exactly right exactly that's what it comes down to guys this has already become one of my favorite shows out of the bankless podcast i'm so excited to have gotten ben and carl on the show in the second

half of the show we tap into carl and ben's more philosophical more expansive mindset and illustrate the connection between cheap transactions and transaction sequencing and how that can actually solve some of humanity's biggest troubles this has been one of the biggest through lines of the bankless show if you have been paying attention for such a long time and i was so uh so grateful to be able to finally have the opportunity to ask ben and carl these these sort of questions we also go through a lightning round of so many different questions such as does optimism have a token coming what's the relationship between shards and layer twos how did eip1559 impact the development of optimism and what's next for optimism and also therefore what's next for ethereum all of these questions

and answers are coming to the sec in the second half of the show before we get there the optimism team wanted me to let you know that they are actually hiring and so they have a job boards out there you can go to that job board at jobs.lever.co optimism and see the jobs that they have available they have a dev ops engineer senior front end engineer senior guest engineer product manager technical product manager executive assistant if you guys have these skills and you guys can help out the optimism team go ahead and apply for those jobs they are hiring all right guys we're going to get right into the second half of the show but first a moment to talk about some of these fantastic sponsors that make this show possible gemini is the world's most trusted

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property that i was talking about is maintained so basically you have to send messages between these things and those messages are going to take some non-finite time or some finite but not infinitesimal time to evaluate and so you don't get a response immediately so that imposes some hard limitations but certainly what we what we do see a difference in is the time at which those messages take so a prime example of this is uh when you deposit into a rollup that is much faster than a withdrawal because the rule is that the l2 nodes all know exactly what's going on in l1 and it's sort of uh trusted is the wrong word but it's it's synced so when you do a deposit into an

l2 that happens right away what this means is that if you were to do a round trip of taking some money on l2 sending it to l1 doing something on l1 and bringing it back to l2 that's going to take on approximately you know a small finite amount longer but approximately the withdrawal time for that round trip because you withdrawal and then you do the thing and then it's deposited back in and that's really fast and you can even have nested roll-ups where going downwards down the nest is is similarly fast to depositing when you're going from l2 to l2 it's going to be a little bit different because now the l2 to do the round trip you have to do two withdrawals you're effectively withdrawing it into the 1l2 and then withdrawing it back to the

original l2 so there are going to be differences in there mostly in terms of latency and that gets into like a suite of capital you know efficiency questions so the answers it's not really that different you're just sending messages and doing the contracts do whatever they want based on those messages but the timing of those messages does change between these solutions the image that i'm conjuring up in my brain is we we've talked about the different cities and all these different roll-ups or different cities dispersed across you know this massive land that is ethereum and i'm envisioning like this sky these sky bridges between all like the downtown areas of each city depending on the different routes my question to you guys is over the long term are we ever going to go back to the ethereum l1 or are we

just going to take these sky bridges from roll up chain to zk chain to side chain back to the roll-up chain like do we just live in the sky now live on these l2s without ever having to go back to the l ones it's utopia of course we're living in the sky baby um i i i think only time will tell it may be the fact that there are classes of users which are definitely only ever living in that world and and not i do think that in general the argument that i've heard about crypto that i like a lot that was an argument about the internet is these things should all move to the background and really then really people shouldn't be thinking about what layer they're on and so in in that regard to me it's the strongest way to do that is have really

good robots for moving the funds between these sky bridges wherever else and people won't even know and so that makes me think that the answer is probably yes do i think there will be some crazy alpha leak experts out there that are being more precise about how they use this global settlement layer probably do you know what's funny ben is like uh i'm so diff what divided on what you just said there which is like there's a huge part of me that like i want to have users not think about what chain they're on right like i totally get that um it's better user experience we have to onboard the world that's super important and yet i also want them to know about the trade-offs that they are making with respect to like where they're living right and and there are some uh solutions in crypto that are not

nearly as decentralized as a rollup right so you might take side chains as an example and if a user can't tell the difference between a side chain and a roll-up and the security guarantees that one offers versus the other is that going to be a problem what do you think about that carl it sounds like we need a universal uh technology stack which allows users to make their own trade-offs on a slight scale we wanted that optimistic game semantics shout out to what ben was talking about or what you introduced ben with um it's essentially what you described yeah so what is that what are you talking about here oh so oh you want to go carl i'll take it away a little bit so

at one point in time we had this idea of something called optimistic game semantics which was basically when we realized once we had the roll-up realization it kind of came to the forefront that ah it really is the case that you're piecing together these fundamental dispute building blocks into a in into a particular system and those building blocks really are the same you just depending on how you fit them together you get different properties so we came up with basically a scheme that lets it was basically a language uh that was based on like a uh predicate logic like first order logic and would allow you to describe both a roll-up and a state channel and a plasma in a sort of shared language i think as it relates to our our

thinking now eventually what we realized is that it was more important to build rollups first because building everything all at once was not the way to go i think where some of the lessons there we've felt have come to the forefront is basically in that wherever you can reuse code you should so i'm much more bullish about being able to give users the choice between a side chain and an l2 and a plasma and a state channel and l1 in the world in which the underlying infrastructure that they're all running is still the evm that's what i think is going to be important because as long as there's not some big paradigm shift in how they have to think about signing things and how they think about the transactions getting executed then being able to inform and educate users and tell them

where their money is living and what the properties of that thing has is gonna be a lot easier when they don't also have to think about what it's like to use that thing with a different trade-off and so we minimize the diff between ethereum and layer two and that actually is a great transition into my next question question because when you minimize the difference between ethereum and the l2 you get all the magical properties that ethereum has that we all know and love and you also commit to its baggage as well and we've talked a little bit about this we talked about state below in the increasing state size but what we haven't talked about and what is a very fundamental component of the overall optimism story is m-e-v the inevitable problem m-e-v and so each

every chain that has blocks is going to have to tussle with the mev problem and the way that optimism from what i've heard has approached the mev problem is unique and intentful and precise and so i would like to actually go into how what is the optimism ethos for solving the mev problem how do you guys handle it and what is the sort of the design ethos that has gone behind these these decisions this is a great question glad you asked so first our philosophy our ethos is number one reduce mev as much as humanly possible this is critical but there is mev that is fundamental to blockchains that cannot be avoided and

so for that mev we should extract it and spend it intentionally don't just give it to some random party miners a you know name your party we need to be intentional about where we are spending our money as a protocol as a community okay so what does that mean the most the clear example of mev that is fundamental that cannot be changed is transaction fees transaction fees specifically priority fees they are fundamental because it's like i want to get my transaction in first oh you want to get your transaction in first well there's a sequencing problem and you know lo and behold there's a term called the sequencer which

we have talked about and a specific design which we have talked about in the past called mev auctions so i'm just gonna we're kind of trying to move away from mev auctions because it's a little confusing because there's you know a bunch of people talking about random things instead i'll just say sequencer auctions because that is specifically what we are talking about so a sequencer is a person who is able to order the transactions this is very important for giving low latency and in fact it exists on l1 block proposers are sequencers but block proposers on l1 currently do not pay for their privilege to create they the sequence that they want to you know produce so the auction

part of it is just saying hey block proposers or sequencers specifically should be should be paying for their right to sequence transactions now notably this is essentially a reduction of mev it is literally taking mev from the minimal you can get it with uh you know uh the fundamental constraints around uh transaction ordering and priority fees and you know whatever it is and then once you've minimized it then you extract the rest and you may want to give some back to miners because obviously miners deserve a lot of you know rewards for doing their their their thing but it can also be used to fund core infrastructure now think about it this

way we pay like you oh i wish i could show you the graph but the graph is crazy and i don't know what the x is but it's at least 20x more i mean it's probably 100x anyway more on miners than we do on protocol development and in ethereum this is a real problem because scaling ethereum is a public goods problem that is that is like uh uh one of the weird realizations i talked about i alluded to it in the past where i said uh you know really the problem is not the research it's the implementation we just haven't been spending our protocols money on improving the protocol think of a startup that's not investing in itself to get better you know just and the reason why is just because we don't have

the coordination mechanisms so anyway what we're our philosophy again is like okay let's let's reduce mev as much as possible we'll you know we'll still have transaction fees but then let's use the rest to fund protocol development fund public goods fund open source and you know we can talk about the crazy stuff later um and but notably i'll one one thing i'd love to dive into specifically is just the the um you know why there it's a non-trivial problem to reduce that muv so anyway i want to give that to ben and why is it a non-trivial problem to reduce that mev because that's the first thing carl said we're actually you're actually reducing mev um indeed so i think what carl's

basically getting at is it is incredibly hard to define extraction and it is incredibly more importantly it is incredibly hard to define a solution to that extraction that's going to be universally accepted extremely extremely extremely challenging one of the words that's tossed around in this in this particular field a lot is fairness but the reality is there is no such thing as a universally accepted definition of fairness um so i'm yeah i'm super glad you guys asked about this too like i think definitely we put out this post about two years ago on mev auctions and at that time the dark forest was in a very different state than it was now it's a lot darker it's so it's it's perhaps a lot darker and when we wrote that post we didn't

focus on shedding light on the darkness so much as we focused on what we saw as a new light which is like what carl said the ability to take basically revenue from something and give it to public goods because at that time we had all these great things going on we had you know quadratic funding was all the rage we had bitcoin grants and they were all based on donations and carl and i you know and others were running a non-profit that relied on donations and so we were very very very excited by the ability for a protocol to distribute revenue and we saw layer 2 as an opportunity to do that now we see that that revenue is exploding and many people are not happy with how it's uh being being taken so this is an incredibly important area of research for us and honestly for the

entire crypto community and it is not not entirely solved yet at all and part of that is because it is so darn hard to define a version of fairness that everyone's going to agree upon so right now the way that our sequencer works is basically first come first serve right that's why you see those interesting those transactions on units happening right away is because you come and you you are in line and you get served and that's just first come first serve first come first serve and so that that's why you get that uh very quickly now one interesting note is that already right we said before how that affects the price immediately already that means that the properties of mev on l2 on optimus ethereum are different from how they are in unison l1

definitely for the better because on l1 what we've had people say is okay i either pay a high priority fee to get my transaction in right away or i have to increase my slippage because in the time between now and when my transaction gets included the price is going to move up and down and i don't want to pay pointless gas for a reverted transaction so you basically have to choose either to pay more up front or you have to wait longer and then get more front run so already what we have in this foursquare for serve sequencing is removing that and so we think that that's beneficial for nav and we're really excited to have more numbers on that as the protocol has been out for for for months and months on the other hand i guarantee you that that is not sufficient and we are not

satisfied with that answer at all and a lot of the academic research right now around sequencing and sequencing fairness comes from basically variations and different flavors on first come first serve but i guarantee you that people with high pings and bad internet connections are not going to consider it fair that they are always a second class citizen to write access that their rights are always coming later than others so yeah there's definitely a lot more to be explored here and we're happy with what we're doing now but more needs to happen and it's definitely one of our open areas of research so who currently are the sequencers is this in is in optimism's current form is this a permissioned environment or can anyone with the skill set like become a sequencer

this is a permissioned environment we are running the sequencer however this is actually a really nice alley-oop in terms of one of the things that we talked about recently called retroactive public goods funding and so we are main we are you know running a point of centralization this is a problem right we are optimism pbc that is public benefit corporation and our mission is to enshrine fair access to open source software and that means not maintaining points of centralization and so to make sure that that is in line with our incentives we are donating all of our profits as a sequencer to actually public goods funding so this means and and in particular retroactive

public goods funding is the most you know top of mind experiment so that is like how we are simultaneously maintaining a point of centralization but also making sure that it is incentive compatible from like a mecha mechanism design perspective that it is not um persistent in in the future will this become a permission list system as in anyone can be a sequencer or will there always be some sort of guardrails on it there will you it is it is really the future is unknown to be quite frank however my i would say that we must sequencing must be you must be a good sequencer to be a sequencer so like i don't know really what that means but there will be definitions of things that

you need to do protocols you need to follow like it will be permissionless it will be permissionless but it will be permissionless within constraints and that's how you get permission lists you define your market around the specific thing that you are trying to incentivize carl this is a more of a philosophical question to you which i i know that you like and i think are good at uh see you say when optimism collects me it does this retroactive publix good funding but more broadly as a topic when you as an entity capture all of this value with great power becomes great responsibility so more generally speaking why are you optimistic that the optimism entity can actually allocate funding in ways that are

aligned with the broader incentives over the long term because as we know throughout throughout history power tends to corrupt why are you optimistic that this story is different well is the game a hot potato you can't hold the ring you have to destroy the ring and so you go venture sorry lord of the rings reference you have to go venture and throw it into mount mount doom right like the only thing that is going to get us over this hump we okay let me just say right now we are in a very key moment in history that will potentially bring us to good things potentially bring us to absolutely terrible things and i will i really want

to make sure people know this ethereum is not all good i am so sorry ethereum has the capability of creating a terrible terrible terrible equilibrium terrible you know problems and that the reason why we are in this like inflection point is because we are building all this open source software we're all ideologically motivated we're like moving towards this one direction but there is a corrupting force and that is money that is short-term profits over long-term profits and that is a real issue so what are we going to do about it well one we as an organization are you know very clear and upfront this is a power that we have this is a

corrupting force that we have we are trying to get rid of it it is terrible and we hate it um and so one of the big things that we need to do as an ecosystem as a community is recognize the fact that we have created dows that are now operating on their own and you know kind of thinking on their own and so there is a serious you know a serious thing that all of us as the collective individuals we need to use our bargaining you know rights to essentially push the entire ecosystem into pro-open source pro human directions and so i am personally concerned about us using these mechanisms to enshrine like literally you can enshrine closed-source software using ethereum you can build

closed-source software using ethereum little-known fact so like we don't want to do that because it's very much against our literal you know public benefit charter and so that is thankfully a little bit of mechanism design that we've you know done on the org scale but it is also something that we need to do as an ecosystem and really internalize this is if we're going to get to that you know uh slaying moloch moment we need to literally be saying every day i am slaying molag i am not going to try to do funny business and get together you know make sure people don't do that funny business you know ben i love like everyone loves how optimistic you guys are about this and like uh you're you're

you know you're certainly thinking about it in the right way your hearts are in the right place i want to throw out a critique that hasu threw out recently about this which is like he basically said hey there's two options for mev because mev could amount to you a whole lot of money basically that whole ring of power corrupting influence like that's real that is embodied in mev and so you've got option a which is optimism and you guys are giving it to public goods right so we love that option b is you give it to the token holders the governors the corporation the entity who whatever it is behind the roll-up itself right and so his argument was basically hey uh what

users care about is getting money right and like cheap transactions and like getting money and they're not necessarily altruistic as individuals so if they're going to pick an optimism chain or some other you know roll up x where they're getting a cut of that mev profit you know haas is saying what's to prevent them from picking roll up chain x and what's your answer to that i know you're optimistic i know like i would rather support the public goods chain but there are a lot of people out there that are just chasing that short term and we have to design these uh crypto economic systems in a way that is um

well that can that can scale public goods so what's what's your answer to that critique that is an incredible question and in unfortunately i am much less optimistic in this regard than in any other regards so here is the specific thing we are making a choice and it is a choice that we are making today and that is a choice between open source software and closed source software fundamentally if you play that game down we're talking about you know all of these little you know these little economic zones the different brooklyns the different manhattans the question is are they in a zero-sum game or are they in a positive sum game with each other the way that

you create a zero-sum game is you create closed source software for your roll up for your particular software stack and that is the fundamental question so this is the only defense that we have against something like the like logical extension of what you are talking about where people are acting only in their short-term interests is a universe where you have three you know google chain facebook chain amazon chain that are all incentivizing closed-source software being built for their specific walled gardens and that is literally where we will go like i am not even kidding anyway the hope the prey you know like please please lord this unfortunately

please please allow us to be in an open source utopia now notably we failed last time we had a chance maybe i don't know maybe not but we tried earlier internet to create a open source you know radically free decentralized space and where are we now we are in facebook you know google land trying to reinvent those incentives so like clearly there's a consciousness that is like bubbling up that says no these points of centralization are bad and that consciousness is i think our best hope for building that future and i do have one more tiny little hope and that is we're fighting here's my own take on the moloch thing is like roko's bass oh i shouldn't say but anyway um you know the

moloch where we're all uh uh you know uh uh you know what's it called we're all attacking each other i can't think of the moment but anyway we are all defecting on each other in the prisoner's dilemma in the tragedy of the commons that is like that's one strategy and there we're creating closed source software that's not benefiting you know anyone other than ourselves in our vested interests or you have that that's the moloch or you have ethers phoenix which is a world where we actually believe that cooperating is going to reward us in the future and so in fact that future state can reward the people who cooperated earlier so i'm hopeful here's where i'm optimistic is that we can form coalitions collective

consciousness organizational governance systems that propel us towards a cooperative environment and keep us away from closed source evil doubts taking over the world sorry yeah that's wait are you sure you have opinions about this i can't really tell carl this this was going to be our very last question but i think since we are already touching on it uh i want to ask the the last question of this podcast right here right now and as the listeners might have just listened carls feels very passionate about this as does everyone on on the optimism team how this trend this technology helps scale ethereum and helps relieve you know transaction fees that's what it does you know maybe the first pitch that

it has but maybe the the last pitch that it has is that it elevates humanity into some sort of like global consciousness carl can you take us from point a to point b how do how do you uh increase scale of ethereum transactions allow us to elevate ourselves into a new era of what humanity can bring how how does this technology help save humanity so one of the biggest things that people say is the existential risk to humanity is the risk of super intelligent ai what are we gonna do this super intelligence is gonna come in and it's not going to be values aligned with our incentives okay that's the existential risk well guess what what are we actually building we are

building a network which defines our values literally programmatically on the internet in a global thing so how are these questions not entirely tied up with one another they are they are literally the definition of our human values is expressed in ethereum in a collective mass that is what you know all of us we're all these cells creating an organism and then we're humans creating a city and then we're cities creating a what we are creating a global consciousness a kind of expression of human intent going in a direction right now google facebook whatever fighting these zero-sum games no reason it's really hurting us and so we need to get

together and actually move in a productive direction and how are we going to increa you know create a super intelligent ai that doesn't fight ourselves and kill ourselves if we can't even get around the same vision and so the way that we can do that is we stop defecting and we build open source software like i you know it's not that i'm optimistic that we're going to build open source software it's that i'm pessimistic that we're going to kill ourselves if we don't i mean that's a little extreme but like i mean i'm riding the adrenaline so i'll take it there's a fun piece of a trivia that i listened to while i was uh researching for this podcast but uh ben actually uh found carl from what i from what i heard at a party

doing a rap battle and if i think somebody who's a creative artist could actually take what carl was just saying and overlay it with a beat and that might actually turn it into a rap battle uh guys as we have come to the close of this podcast i want to just get through some some pretty important questions that i don't think will take too much time and so we're going to burn through these pretty quickly um shards and layer two how do these things impact each other in the future okay okay i'll give carl a break his adrenaline dive down a little we'll give this time to breathe um shards and l2s how do they relate to each other ah great question very complimentary it's super great one way in which it may not be complimentary which is still a good thing

is that if roll ups really really really take off we may not need e2 phase 2 which is basically doing the execution part not the data availability part of sharding that becomes less important when we have a different way that execution has already been moved off of the beacon chain because it's been moved into the rollups other than that what shards give you is what we already talked about which is a massive amount of data throughput more throughput means more transactions we gave the 100k number before that's what the known parameters will only go up from there okay next question is there going to be an optimism token carl we have no plans to have an optimism token all right next question eip1559 has this changed any like of the construction of layer two when it

submits a transaction to the layer one does it did the ip1559 change anything it does make it more predictable which is good because more predictable l1 fees means more predictable l2 fees it also informed our protocol in that we have basically an eip155 m9 implementation in optimisk ethereum which is how we meter congestion and last but not least there are some very cool sequencing mev related uh properties actually that we can get out of this basically because eip1559 lets you be much more confident in being able to frequently and immediately submit transactions to l1 so there could there's some cool research there stay tuned uh zk roll ups will they supersede and are they better technology than

optimistic roll-ups carl what do you think they are great technology they will be complementary zk robson express the evm will come they will come in a few years we need the evm in the near term and so when they come we'll use them and it's great uh one more question can an optimistic roll-up be implemented on top of an optimistic roll-up is that even a sensible question absolutely it can yes so so you could totally do that and in fact you can implement an optimistic roll-up on an optimistic goal on an optimistic role you can also implement a state channel a virtual channel on a state channel on a plasma chain on a roll-up on a roll-up and these are things are all great

whether or not they make sense in the next year who knows but in the long-term future totally totally more of a question of figuring out why we could do why we should do that more than that we can do that sounds like we can do whatever we want we just need the reasons guys as we close this out we have just two last questions in summary uh the first is this what is next for optimism carl what are you guys cooking up next we are getting our diff from ethereum to as small as possible and we are innovating in funding public goods and open source software like retroactive public goods funding that is hot all right last question for you and this is a broader you said optimism is ethereum like it's all part of the same ecosystem i want to ask you the broader question ethereum seems like

it has some serious momentum lately right so ever since i don't know december 2020 it's felt like that we shipped a beacon chain right now we're scaling on layer two eip1559 was deployed the merge is months away the community seems to have momentum like i have probably never seen in my history of being a member of the community um i'm curious what do you think is next for ethereum high level like where's the theorem going what's next ben do you want to start oh man i'm gonna steal carl's thunder i know we know we both know what we want to say i'm gonna do it i'm gonna do it the next thing for ethereum is to upstream l2s into itself that is the next big thing what we have realized is

that the more and more that we build these l2 protocols and we try to build evm compliant things the more that we real and the more that we try to address those bottlenecks which are the same as l1 on the way the more that we realize that these code bases really need to be the same thing and it's just going to be beneficial for everyone so i i don't know you said l2 is coming what's next l2s on ethereum no ethereum on l2s or or l2s in ethereum wow carl you you get the last word there maybe ben stole your thunder maybe not you get the last word what's next for ethereum what's next for ethereum is a combination of massive scalability diverse communities government experi govern governance experimentation and a whole bunch of open source

software y'all don't you dare don't do it um it's open source make it open source um that's what's next for ethereum and hopefully it continues and the momentum grows and we can all you know collaborate on a shared computation layer for humanity carl ben i want to thank you guys so much for coming on to the show and just just a quick shout out when i was first getting into the world of ethereum i was confused it was 2017 i was just learning about bitcoin for the first time and ethereum was even more complicated uh yet i managed to find my way to a certain subset of the ethereum community which i then later realized was perhaps closer to the core of the ethereum

community and we had these these this guy named carl with his cryptoeconomics.study page and he was using these cute little like gerbils as and like animations for helping us help me learn all about crypto economics and just the uh optimism and excitement for what was going on was how i got signal in a very very noisy part of crypto's history 2017 crypto uh that's kind of how i tapped into the signal of ethereum and what's really going on in this industry and it was people like carl and it was people like ben that that showed me the way and so the you guys are are my personal rock stars and that's why i consider you guys the the new age uh cypherpunks so thank you for coming on the bankless show and

it's an honor to have you guys it's an honor thank you thanks guys it's a pleasure guys plus one on that optimists are the ones who build the future we had two optimists on the bankless podcast here today risks and disclaimers of course none of this was financial advice i don't know why you'd even think that uh eath is risky defy is risky crypto is risky you could lose what you put in but we are headed west this is the frontier it's not for everyone but we're glad you're with us on the bankless journey thanks a lot hey we hope you enjoyed the video if you did head over to bankless hq right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence we recommend joining our

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