Circle CTO: We Are Building Our Own L1

Transcript

in terms of like thinking about stable coin finance. Circle has been thinking about it for for close to a decade. >> I don't imagine that these other bureaucracies, these other countries that issue their own currencies are just going to bend the knee. >> What are the set of kind of competitive variables here that circle wants to win with ARC, >> right? Like so we need like the ability to say like look, if I make a payment to you, it's done. And we would like to achieve that payment finality in like in less than a second ideally. Welcome back to the Ruleup. >> This is your home to learn from the biggest guests, the brightest minds at the tip of innovation.

>> Our goal is to help spread the collective knowledge of everyone in our community. >> We are breaking crypto out of its echo chamber and taking it to the real world. All right, we got Nikquille in the back. Let's get him up. Uh let's talk all things uh circle arc and more. Uh Nquille, good to have you on and uh thanks for being here, man. >> Yeah, good to see you guys. >> Indeed. Indeed. There's a lot going on. There's a lot going on in the space. Uh notably, not notably with Circle, with ARC, with payment chains, Hyperlids, USDH. It's just it's it's moving at a million miles an hour. Uh lots to cover, but first we just love a quick intro, man. It's first time that we've met you.

What do you do at Circle? What is your uh you know, what is your favorite thing to do in crypto? What's your what's your background? Yeah, man. >> Yeah, I'm happy to spend two minutes on it. Uh I am chief product and technology officer. So in simple words it means I run the product engineering data teams uh at circle. Um I have been here this is my fourth year at circle. Uh so I joined um in early 2022. Um uh I came to circle to work on stable coins because I thought they were the most interesting piece of technology as I was changing jobs. Uh before this I was at Meta. I was, if you've ever uh worn those Ray-B

band sunglasses with uh cameras in them and audio, that's my project. Uh so I used to run all all AR glasses at uh Meta. Uh, and I when I was done with that, I wanted to work on something that had more scale and I think stable coins were just super interesting because um you know there was nothing that I could obviously see that had uh that was uh that was not going to scale to every internet user. Uh and so it's just like it was just magical like I worked on I like things that scale massively. Early in my career I was at YouTube. I used to run YouTube music. I used to run YouTube gaming. I started a lot of those projects. Um, and again like you know I

love things that are on the internet off the internet by the internet and and like I think like in 2009 like when I would tell people we were going to watch games on YouTube they would be like why why don't they want to just play them? I was like no no no they want to play them and they want to watch them. And so but that format only exists on the internet. Like I think if you are like offline and you're used to watching cable TV you don't understand it. you're like, what is this? And so for me, stable coins are the same. Like look, it's a superpower. Like anywhere in the world, if you have USDC, you have a, you know, dollar bank account. And I think as Americans, we don't quite comprehend how much of a superpower it is. Uh, but for the rest

of the world, it is it is a magical experience to be able to earn 6% yield on your USDC. Um, so not only can you have a dollar bank account, you can earn dollar yield on your bank account and not pay intermediaries fees. Uh, so as a tool of financial empowerment, it's massive. Uh, as a tool as like, hey, this is a massive upgrade to the internet. Uh, like I said, I was at Google in 2005. I've been working on internet for basically my whole career. And so I love the internet. So anything that makes the internet better, I'm in.

So uh on crypto like I I read the first paper in 2009 when it first came out. I just I have photographic memory of reading it. Um I have a masters in computer science. My uh first distributed systems class was CIS- 675 at the Ohio State University and they teach you about the Byzantine general problem and and you're told it's not solvable. uh and and then this paper comes out in 2009 and all it says is like look if you create the right incentives and within six pages the answer is pretty obvious and you and if you're a theorist in distributed systems you're like what that is not possible and then as you as like most people are in this space you sort of like invest in Bitcoin you sort of get buy into

Ethereum uh you sort of uh buy into the dream a little bit and so did I and yeah the idea of like Bitcoin was amazing to to me. The idea of a world computer was amazing to me. Uh the idea of stable coins is amazing to me. So I've had a long journey getting here. U and I think it's just a really exciting time to be working on it because everybody's now interested in it like you said like u it's one thing to be interested in it yourself. It's another to be when everybody else thinks it's a cool idea too. So >> pretty fascinating just to see the distributed system from like you said like it's almost an exercise in in patience and practice and seeing it out and you kind of it's probabilistic right

it works a little bit in theory and then just over time that answer gets more and more lindy and it's like okay well I guess over time I think actually this paper is actually right. Um, >> yeah. I mean, the paper is not obvious at all. When you first read it, you're like, it's not supposed to work. And like, Bitcoin is not supposed to work. And and and then it just worked. And then it kept working. And then at every time you would like wonder, you're like, hey, is it going to work more? And is is this going to end? And like even today, you have people questioning it. Uh, so yeah, I mean, there is no there is no uh sound theoretical way of like achieving uh consensus. you can only do a statistical solution. So, here we are.

But >> yeah. >> Yeah. >> Well, Nquille, there's a lot going on in the stable coin space on chain right now. You know, just an example from this week, uh a a team, Mega E teamed up with Athena to basically launch the first L2 stable coin native to a chain, right? >> You have this hyperlid USDH governance battle ongoing, which is obviously firmly a part of this. Um and then and then just in the last two weeks we saw the the launch of of a lot of these um kind of payments chains. So we had you know quite a few different things to touch on. Um notably one from your side of things is Arc. So ARC is the Circle uh payments chain. I'm I'm just curious

about the origin of ARC. How long has Circle been working on this? Why was this decided to launch now? Like how did this whole thing come together? Yeah, listen like uh circle launched USDC seven years ago and uh so in terms of uh so if it launched seven years ago people working on it two years prior to that and so uh just in terms of like thinking about stable coin finance circle has been thinking about it for close to a decade. The company itself is 12 years old but uh thinking about stable coins is is almost a decade old.

In all of that time, there were many discussions about like whether uh circle uh should have an L1 or or an L2 for that matter. And like the timing never felt right because uh look we're we're a customer focused company like we are we want to make sure that our customers are getting what they want from us. Uh with the passage of genius I think it is a particular moment in time. I think we are about to see a significant rewrite of financial infrastructure around the world. Uh and so uh we were like all right like if we want like all of this financial infrastructure rewritten what do we need? And I'll give you just a small example. Last year we were

onboarding uh a partner uh with 10 million wallets and this was a large partner and we went to a public chain and the cost for doing that for for us was like over $100 million and so we we didn't know what to do and like eventually we sort of like struck a deal with the foundation and like you know we'll keep I won't name names but like it was just a incredibly difficult thing to do and and so uh now if we are to say like look there's going to be this massive rewrite of this financial infrastructure and we have to onboard let's not say five and a half billion people who are on the internet but let's just say a billion people on the internet what do we need and so we think we need three things we need like

payment finality right like so we need like the ability to say like look if I make a payment to you it's done and we would like to achieve that payment finality in like in less than a second ideally uh we want to make sure that gas is uh is payable in a stable coin and we're starting with USDC and and saying like look you don't have to rely on like variable token values to sort of like uh uh for for gas payment. And the third thing is we need is we need configurable privacy. And so configurable privacy because most people are very uncomfortable with the idea that their wallet balances are fully visible to everybody on chain. The fact that they're transacting with other people are fully visible. How much they are transacting is fully visible. So if

you want to bring on big B2B flows, consumer flows even like I'm sure both of you don't want the world to know like you know what your bank balances are and like your custodian is giving that benefit to you. Um so how do we solve all of that and so for these I mean those three things those three features fe uh features uh being core and then the timing like you know is like look it's the same thing you've said which is there's all of this activity in the market and there is a lot of interest and that interest is interest makes sense I don't think it is um uh it is uh fraud because everybody understands like if you are a developer today trying to start a new uh app and and it's going to be a financial services app. A you can

build on stable coins and you can skip a bunch of steps and then B you can now go after a global audience, right? Like so if you are a user and the user benefits because if you're a user any part of the world now all you need is a browser. So five billion users can now access the same financial services that uh you and I can uh sort of experience sitting in the United States. So that is just such a powerful thing. Um, we need a chain to be able to do that. That's why we're building one. Ours is not going to be the last one that gets built. Uh, there are going to be many many uh that get built. Um, and the existing ones will also thrive. So, yeah.

>> And I I think as you start to proliferate USDC further, uh, you built a custom chain that is specifically purpose-built for USDC. You know, one one thought thought that crosses my mind is that, you know, the the US is currently pushing stable coins hard. You mentioned genius. The Treasury Secretary Besson has also said three billion uh excuse me, trillion. We're talking trillions here uh in stable coins by 2028. What do you think happens to the other currencies around the world? Like people are understandably so going to switch to stable coins. They're going to get access to dollars and even yield on those dollars. I don't imagine that these other bureaucracies, these other countries that issue their own

currencies are just going to bend the knee. I'm just curious. I hadn't really, this had really crossed my mind before, but what do you think those other countries doing with those other currencies once th those citizens start to transition to a dollar-based economy and probably a stablecoin dollar based economy? Introducing Extended exclusively on Stark, a nextg per trading platform live today with 50 plus trading pairs from crypto to tradi. You get the best experience on chain today. Deposit in the community vault for attractive returns compatible and engage in unified margin spot trading lending and per trading.

>> What we have built is infrastructure right like for the dollar. That same infrastructure can be used for any currency anywhere in the world. So going back to my point about um uh that look we have this infrastructure if you are a developer today building financial services if you're a company building like financial services if you are a government who wants to stand up financial services how are you going to start like you should start uh with an onchain solution right so I think it's kind of I liken it to how like the internet first came to the US and then it sort of spread to the world and and and then it thrived in the rest of the world like the first part first decade of 2000s like I think the

internet was a very US concept right like you had Google in the US you had uh then Facebook in the US and like all of these other big Yahoo was in the late 90s was a big deal and it was a very US focused uh infrastructure very US focused internet economy but I want to say like after 2010 all the way to now like there was the rise of China there was the rise of uh other countries countries who have like large internet uh uh b large uh user bases of internet and they got the same apps and sometimes they got better apps right like I think like on messaging uh they got uh I would argue that the rest of the world got better apps than we did and and now we have really good apps as well so I think of it as the same thing I don't think of

it as like currency dominance I think of it as like look uh sort of uh distribution of this infrastructure and and a lot of lot of times times what we do in the US is sort of show the world how it is done and then a lot of the world copies it u and and and sort of like localizes it to uh to good effect right and I think that has been sort of what the US has invested in all these years in globalization saying like look we do things a certain way it makes sense for the world to do things the way the US does it and that's good for us and it's good for the world and I think stable coins are the same thing like I think it's good for us it's good for the world um but different people will different countries will come at it like

at different pace uh and and maybe Scott Besson's right that like you know we will have three trillion in like uh stable coin money but look there's M2 supply which is north of 20 trillion >> so I think like it's still a small percentage percentage of like the dollars in the world right like and so I think we have a long way to go we're I think we're in like 99 internet or 2002 internet and like trying to imagine the future and it's very hard to imagine in 2025. Yeah. Right. And so there's just no way.

>> Yeah. And and I appreciate that kind of uh connection to your previous experiment uh experience, you know, building out a lot of the internet uh you know, just early stage things from YouTube all the way through into now internet money. Um when you've not, you know, now that we understand like the global scale of what's possible here with with stable coins, I think that the entire world has really woken up to that. I' I'd like to draw a co parallels to your work in the uh you know previous era let's call it web 2 into the current era where right now there's a lot of push back from Ethereum people as to why these payment chains didn't launch as L2s why they launched as L1's and so I'm curious if you can

draw any parallels to the early internet days where network effects or the way that certain things were built out or decided had a like a lasting impact on the future of certain companies or entities or really just I mean answer the question of why build arc as an L1 and not as an L2 on Ethereum. >> Uh we can do both like so maybe I'll start with like uh maybe I'll start with the analogy and I I don't think we have to go all the way back to uh like early web 2 days. I think we can just look at uh GPUs and CPUs and AI workloads. uh you can run a matrix uh multiplication on a CPU uh but like uh over the last like five years seven years we have like

realized that uh running those computations on GPU is much more much more valuable it's much more efficient and and so you can argue that uh like we were running these computations on CPUs before and then we created like these very custom architectures for like AI computations which is why Nvidia is a is is such a big company Google has TPUs There are other sort of like ARM has an architecture in the market. So as markets mature like markets do start off like building something that totally horizontal like uh and and I think um it may be the case that um that we started off in chains being like completely horizontal. Look the chains are like tingmp complete you can run any computer

program on it. Uh but when you look at payments, you have like these specific needs around like payment finality. You want you don't your users don't want to hold a native token that have um that have variability in in price and they are looking for that configurable privacy. So we don't think we can get those things by going down an L2 path. And that's why we're building an L1. Um we hold like a lot of our USDC is on Ethereum. So I think it would be impractical for us to not support the Ethereum ecosystem. It would be uh sim the similar case for the other chains including Solana and others like there is a ton of USDC on these chains. Uh we

connect these chains using what we call CCTP which is our native bridge for moving USDC across these chains. Uh every new chain we launch we connect onto CCTP. And so I think we cannot like I don't think the growth of our chain can come at the cost of uh of like harm to USDC right like it has to be accretive and I think that's our challenge is to do that and do that well and so I think we chose an L1 architecture because of technical choices uh like I think those technical choices most people uh will agree with.

Um I think we should have we should expect more uh custom chains based on uh use cases just likening to like what happened in the past like look you have custom architectures that do get built out u and then yeah and just because we've done uh a custom investment doesn't mean that uh we will not be we will not keep investing in the existing ecosystem. Uh and we have good incentives to do that is all I'm trying to point out. Like even if you don't believe me you should look at my incentives. We're in crypto. >> So, you should look at my incentives as well. Like uh our existing distribution is north of $70 billion and that is none of that is on on any uh circle chain.

>> Yeah. Yeah. Just a a quick one there for you from our uh last two days on the show has been very hyperlquid USDH special kind of oriented but USC is not yet native on hyperlquid but has been argued by some very strong community members that you know USC has been live on chains like um you know natively on chains like um Cardano or chains like Hyera or chains like Ripple or kind of chains that perhaps have a lot less current uh you know action on the for lack of better term. What is the ETA?

>> Yeah. What is the ETA on native USDC on Hyperlid? >> So, we announced it in July, right? Like we said like, hey, we're going to bring USDC native uh on uh Hyper EBM. >> Yeah. >> Uh and uh we'll also connect it to CCTP v2, which is the fast HCTP. Uh it's going to be soon. I cannot give you an exact date because uh like I don't want to like you know put a gun to the head of my engineers uh uh but like look it's going to be soon like uh uh uh we've been working with the teams uh we understand there is eagerness uh we announced in July so we we announced in July because we had a plan and so we've always had a plan and uh and we'll get it out

>> so you don't feel threatened by this US situation. Look, it's a new situation. I don't think it affects USDC. >> Uh that's my that's my take and the situation is constantly evolving. Uh and it is hard to follow uh fully 100%. Uh so far my assessment is uh USDH will be a thing uh right like it'll go to boat and it'll it'll be a thing. I don't think it is consequential to the way USDC operates uh in the hype ecosystem.

>> Got it. Maybe you just more generally could you explain why native USDC is so important to any ecosystem you know in hyperlquid specifically right now it's going through the arbitrum bridge contract to to ultimately get to hyperlquid at least that's how it was working. How how do you envision it working going forward once native USDC is implemented? So if you are somebody who is uh deploying a lot of capital right like on in on any chain for that matter uh you're worried you're calculating your risk right so your risk you're like making you are assigning a risk score to that investment and from every uh capital allocator that we have talked to uh bridge risk is significant

to them right like so it is non-trivial amount like it is it's different to sort of uh just rely on circle versus rely on circle and then like the bridge operator and I'm sure they're good operators uh on the bridge but like it goes into the risk calculus of like whoever is doing the investing on that chain and so that's why chains one native right like uh so um chains want native for that reason and then when we do native on the chain we also connected to CCTP right like so if you want to move like liquidity between Ethereum you want to move liquidity uh to your chain like from anywhere. Uh it becomes almost instantaneous. And so um for folks who care care about their capital

efficiency, their capital is not locked in your uh locked on your chain, right? So then they're more likely to deploy capital on your chain. So uh so so reducing risk uh making it so that capital can move to it uh very very easily. Uh and then like I think like those are the main reasons uh folks care about. And like then remember we also have like all the off-chain onoff ramps. So when we do like a native implementation on a chain >> you can send money to a bank account and you can get uh USDC on that chain.

>> And so that is massive. I think that is one of the most difficult things to do and and so and you can do that at least with circle you can do it in like the countries around the world like you can do it in Singapore you can do it in uh Brazil you can do it in in the EU. you can do it in the US and there are more countries that you can do it in. So if you're going and trying to boot up boot up a real marketplace on your chain and you need liquidity and you need good rails and so having a bridge on arbitum is not enough uh to be able to do that or having a bridge it's a great way to start it's a great way to get scale. It's a great way to like you know um uh go build your

application uh and you know and make it and get users and and then like it becomes uh obvious that there is you're going to you're going to want native so because you want to attract this capital you want this users you want the capital and then you you talk and like we'll keep doing it we'll keep adding there will be more announcements from us on uh native implementation because like I said all our business is not on uh circle chain on is not arc and it would be foolish for us to ignore that. >> Yeah. Nikim, I'm curious what your perspective is on the uh on the broader stable chain landscape, right? Like there's a number that come to mind. You got like the more tether oriented ones, plasma stable, then you've got uh Arc

obviously oriented around Circle and then you've got Tempo with Stripe. Uh and then even rumors that Google is coming out with its own kind of L1 chain. Um when you look at this landscape, do you see these things as having geographical distribution edges? Do you see this landscape of being different types of countries that or different types of user bases that make an edge? Is it a tech differentiator? Is it a distribution via payment processing systems and POS systems and uh you know the app store? Like when you're looking at the landscape, what is the what is the differentiating factor across the board for these? What are you guys ultimately competing on with each other?

Like what are the set of kind of competitive variables here that Circle wants to win with ARC? >> It's a really good question. So like yes, I agree there is a lot of uh there's a lot of activity on on these chains uh on new chains as well. Um it might my take is that it is uh it is sort of trying to tell trying to figure out like if there's going to be like one website or there going to be many websites on the internet right like and there's going to be a head and then there's going to be a long tail and I think the head may be small uh in that like there may be like a Google and a Facebook and an Instagram and maybe like

20 properties that like dominate traffic and then there will be a long tail after that. Uh the cost of like bringing up a chain is going down like you know this like to bring up an L2 is not very difficult but to get the incentives right to go to market with the right application builders to get to get everybody aligned on the vision to build something that is performant that does not go down that and and to do it globally is very difficult. So that last 20% the first 80% is easy I think the last 20% is incredibly hard and I think for those teams that can solve that problem that last 20% is that is where I think like the chains will be able to differentiate and will be able to solve

real user problems like I said like I was going to my example about those 10 million wallets yeah you can go create wallets and when you're doing it subscale you don't care uh but suddenly when you're doing it at like massive scale you're like I can't afford this and like uh and and so um it's unknown like what the future will look like. I mean I I can't make a prediction. Um I think we will be there. There will be few others who are there. Um I think the existing public infrastructure will be there because that's valuable uh for a majority of use cases. Um yeah I I don't I don't know I don't know I don't know the future. Uh it's very hard to predict. I I wouldn't have

predicted 2025 like is how I'll say it. >> Uh Andy, I think you're on mute there. >> Sorry guys. What What is the development timeline for ARC? >> Uh we should be in uh public test net soon. Um and then uh and then we'll get out of test net when we're ready. Um and that should also hopefully be soon. >> Beautiful. Um but we're working very aggressively on it. We acquired a team uh uh last month who to help us with the consensus uh part of ARC and uh so we have uh really smart folks on the team like working on consensus. We have smart

folks working on applications. We are uh yeah we'll get the we'll get the public test net out. We'll get the feedback. Hopefully we don't get bugs and then we'll go. >> Yep. Nikquille, thank you for your time. Uh, great work on ARC. I think the entire crypto community is excited about the rise of of of these more kind of payments institutional type chains. I think the Ethereum community is upset, but happy that you guys are using EVM. Uh, you know, if that remains and I think that there's just a lot to come in the stable coin race, guys. >> There's a lot. Yeah. Thank you guys. I really enjoyed the conversation.

>> Thanks for coming on. See you next time. >> Yeah. See you soon, man. Cheers. Bye.