DeFi By Design EP#31: Solving the Ethereum Scaling Crisis in 2021

Transcript

welcome to d5 by design where we talk all things blockchain and cryptocurrency while striving to educate empower and enrich what's going on guys real quick break for the d5 by design podcast sponsors and a defy slate sponsors who make this all possible first we have ave a money market protocol that allows you to borrow and lend and leverage your assets to earn interest uh right so if you want to deposit some stable coins in there currently you can get three four five six eight percent apys on stable coins which else any bank in the world uh as far as we're concerned you can deposit uh any uh ethereum based asset that is listed there borrow against it you can borrow stable coins you can borrow other assets like ether wi-fi link even the ave token itself ave is

the go-to protocol for any sort of borrowing lending check it out at app.com the next one we have is access auxis is a new crypto wallet auxis.com you can store all of your crypto there they have quite a few options uh they're integrating new dex features soon um and allow you to have a non-custodial way to store your crypto safely off of centralized exchanges and also just not in a meta mask or in your own ledger a bit of extra security there next we have mcdex mcdex is a decentralized perpetual swap protocol basically allowing you to trade on leverage uh on the ethereum chain right they're coming out with v3 very soon by the time you're listening this might already be out they are super solid team um and they're pumping updates and

allowing you to trade decentralized perpetual swaps on eth link and a few others all on ethereum all decentralized so that is mcdex next video ramify ramify is a decentralized stablecoin it's an algorithmic stablecoin that is pegged to the purchasing power of commodities and then basically it measures what value one dollar buys in terms of a commodity index each week and then it provides you with essentially a store value that allows you to continuously evade inflation while maintaining you know a stable aspect as if it was a dollar and that is the ramify protocol check them out on twitter finally we have diversify it is an l2 decentralized exchange they allow you to basically trade in a gasless and feedless manner

big volumes whatever quantities you need it's almost like a centralized exchange on ethereum but you are the custodian they do not hold your coins as a centralized exchange would you have full control full power so really it's almost like centralized exchange capabilities on a decentralized exchange and that is diversified all those sponsors make this possible i know it's a lot to take in but thank you very much for listening and let's get back to it [Music] welcome to episode 31 of the d5 by design podcast it is tuesday morning and aetherium gas prices are over 300 what a great way to wake up i actually went hunting this morning it was it was awesome uh maybe i'll talk more about that later but we are uh

here today with ben ben it has an interesting story to tell you guys um about how you got into d5 what he's up to now um and kind of we're gonna go into so many different things here that are prevalent in the current ecosystem and in in with the times i'm here with co-host robbie clages what's good robbie how you doing buddy yo yo yo happy 420 hope everyone is having a great time listen to this podcast um yes so uh i'm super stoked to talk to ben um he's right around um our age group so it's interesting to always talk about people that are um kind of you know peers when it comes to the d5 lifestyle yeah as always it's a beautiful day in florida

everything's going well markets maybe not so hot but the gas fees are basically holding everything up and no one can trade and no one can sell and no one can buy so we're gonna talk a lot more about gas fees layer two um and all that good stuff with ben and i will kick it over to him how's it going today ben ah it's going great thanks so much for having me guys really pleasure yeah man uh so what's your elevator pitch for uh your story how did you get into d5 you know what's your skills kind of where's your interest lie you know who is ben simon who's ben simon well i guess i mean i got into d5 relatively recently um i guess a lot of people have been getting in even more recently so i'd say this past summer around well may

or june i had recently on lockdown gotten re-interested in bitcoin specifically i'd actually learned about bitcoin in late 2016 early 2017 while i was on my gap year before college and it was pretty interesting to me at the time learned about ethereum as well um really focused on those two didn't really get so much uh into any anything else besides that got all the sort of icos and things that were being built on ethereum weren't necessarily so useful um but was really drawn into the economic potential of bitcoin specifically and then ethereum was this sort of really cool concept of you know the smart contracts but i didn't really i don't think i understood it but then i guess like fast forward a few years to march april i sort of got re-interested in bitcoin during lockdown and we was reading a lot about bitcoin

and the having and i think at a certain point when you're interested in bitcoin you sort of get bored uh because there isn't that much there aren't many new things that are written about it and there's there's of course a lot to be done in terms of institutionalization and building sort of infrastructure around it and i think there are like a few really good people who write about bitcoin um in novel ways you know my friend nick carter among them but for the most part i think a lot of bitcoin writing and thinking is really just like oh this new billionaire about bitcoin or this institution about bitcoin there isn't that much new stuff and so when i learned about d5 first it was actually on a podcast when i think there was a debate between alex peck formally of dragonfly and pomp and they were debating ethan's

money and that point wasn't really so interesting to me but the point that was interesting was this point that alex peck made about um about decentralized exchanges and the point was basically this you know bitcoin is awesome as this monetary asset this decentralized uh permissionless monetary asset that provides you know a good store value similar to gold but what good is it really if it's sort of plugged into this centralized financial system where you have these banks that are too big to fail and there's a lot of moral hazard and a lot of centralization and corruption that doesn't really allow players like us to have a fair shot and you know bitcoin is great but but does it really solve all the problems and i was like huh and that's a good point and then you know alex brought up the even even just sort of the the

simple point of decentralized exchanges like why do we want to trust coinbase and binance with our with our keys and you know i've actually come around since then a little bit more to the idea of custody being important to have centralized but like this this was sort of a a i guess a light bulb moment a watershed moment for me because i was like yeah it makes sense to have you know why do we just want this monetary acid to be decentralized why not have the whole financial system sort of follow under this ethos and that was sort of this main turning point for me after which i started exploring d5 pretty pretty deeply with really all my spare time go down the rabbit hole dude and you just don't come out exactly you start trading a little bit on unit swap you start you know getting your first

loan on ave or compound it's just like it's it's totally mind-blowing and then you know once you once you start playing with these these you know actually working applications which to me was really important because i remember from 2017 2018 reading some white papers and thinking that these things were cool but they were just white papers but i was actually able to use you know unit swap and compound ave one inch and that was very cool to me and then also just digging into the incentive design the mechanism design behind them um that was that was even that was even cooler frankly um there's just this wealth this oasis of information of bitcoin is awesome but it's really kind of a desert of new things happening and then you know defies this oasis of you know new information new incentives new data to just play around with so that was

what that was what drew me in frankly as much as like dentacoin and some of these other like just fake utility coins that claim to have utility like you're never going to really use them you know they need they need a super wide network of adoption to even get some sort of use case um so yeah i i agree with you that like it's only been recently that um these decentralized applications have had really any utility value once you know tangible people can start using them and they start generating transaction volume and then that's been defy um and we we've seen a little bit of a different industry takeover with um the nfts and that's not so much d5 but it's still a more a more valiant use case than

some of the other uh you know just just icos that wanted to have a use case so that they weren't considered securities um back in 2017. for sure yeah and i think like the question of you know needing a token and you know what the the purpose of utility tokens the purpose of government tokens i think these are still actually somewhat unanswered i think it's clear that a lot of the d5 boom uh you can actually thank you know comp and balance are launching governance tokens for a lot of the sort of interest that has poured in because of the monetary you know the sheer upside that you that you could get from yield farming and from sort of speculating on these tokens so i think like really you know these are one of the some of the things that kickstarted but the long-term viability of having you

know tokens and their value accrual and um you know fees for governance tokens or utility tokens which you know for networks for example i think those are still not necessarily closed questions they're still somewhat unanswered i think we'll see you know down the line what happens from like a regulatory standpoint what happens from a value accrual standpoint whether we see sort of fee undercutting you know one one interesting thesis with regard to like amm specifically is you know what happens when some maybe maybe the technology will always be somewhat different between the amms um but with open source you know it's possible uh it's conceivable that in some future state um the amms will sort of converge to some some sort of like unified technology and then what happens is basically fees will probably uh

equilibrate across the different platforms because you know if if one platform is charging you know x number of fees and other platforms just undercut that and then if that's the case potentially fees could be driven to zero and i mean that's that's the that's the potentially the naive case because there's also the argument that well you know you need communities you need sort of incentive alignment between communities um and there really is stuff that needs to be voted on by governance that is like a real service um but i mean there's i think still debate in the sort of crypto space among very smart people about the need for tokens versus uh i mean i think tokens are necessary but the question is sort of the ubiquity of tokens and like how uh you know does every single protocol need to be token does every

single you know primitive indeed require token i think those are still yeah as i said sort of unanswered um and we'll sort of see in the long run i think they're really important now especially for incentive alignment and for sort of drawing speculative interest into the space but we'll see in the long run like um how necessary they actually are yeah well you mentioned kind of um different protocols undercutting each other um and then that that competition driving fees all the way to zero and that's pretty much what we've seen in the traditional broker dealer space robin hood came out with commission free trading and then all of a sudden every broker ended up offering commission commission free trades so i think that's definitely a possibility and one of the one of the paths to get

there could be unit swap 3.0 um i haven't dove super deep into into what those possibilities um are and what they unlock but um my understanding is that they would act as an aggregator and start to um kind of bridge trades across a bunch of different dexes and if that's the case you can always route trade to the to the cheapest scenario and i think that's a real possibility is um the competition between decks is pushing fees all the way to euro yeah i think it's a good point i think you know even there already exists you know matcha one inch uh power swap all these aggregators and you know even though it's it's more costly to use aggregators right now for example if you're just trading something

that has relatively similar slippage on unit swap or sushi swap versus on one inch you're better off using nina service which stuff because of the gas the gas fees that come from you know aggregator routed trades but that might change going forward with l2s such that you know aggregators are going to become really the the primary front end for almost all trading i think it's interesting to look sort of right now if you put this in sort of traditional economic terms you don't really have like pure competition when it comes to the dexes you have sort of monopolistic competition in the same way that like you know apple can price their iphone above an android phone because there are these specific differences among it it's not like they're just pure substitutable goods i think you know uni swap versus sushi swap versus band core versus balancer

they're sort of minute but also very important differences between them you know bancor has this sort of impermanent loss uh uh i guess insurance platform that they can do because of the fact that they have a network token bnt that they can inflate at will um to sort of subsidize uh liquidity providers that might suffer in permanent loss in the short term and then use fees to fees and you know burning uh bnt in the long run to make up for that um and that's different than for example unit swap is offering with v3 which is sort of this sort of dynamic liquidity provision which i think is gonna be really interesting to see how it works um in the market making that's gonna that's sort of gonna be done with it uh and that's also different from you know sushi swap which is building bento

and it's maybe more potentially more retail focused um so there's still sort of slight differences between them and so i think this long-run thesis of convergence is probably i like that's also like i think a questionable thesis i think i'm just like sort of throwing out potential ideas for how these things happen i have no real conviction though that ultimately like all these decks are going to converge among on one design but i do think you're right to say they can look looking at the aggregation layer especially as we sort of move to you know layer twos and sort of more layer ones with more throughput um that the aggregation layer is gonna be even becoming even more important and that will probably push fees down and you know you'll have this sort of similar trend that you're just talking about in terms of the sort of

uh traditional brokerage uh undercutting and sort of pushing things down like with robin hood et cetera yeah hosuh wrote a pretty dope piece about amms he's starting some new series it's it's a writing series affiliated with some some pretty big company in crypt i forget what it is yeah yeah yeah and he was writing about three tips to lower your uh your expenses basically with gas and one of the biggest ones was the aggregator especially if you're a bigger trader um definitely helps because the the cost of using those of using ethereum is obviously it it reflects in a linear way so it doesn't matter if you're at a thousand dollars trading or a million it's still going to cost you the same to get that block space

so basically being able just to pay a bit more in gas to get much less slippage on these aggregators is huge um for you know anybody who's trading with a decent bit of size um and honestly another serious point that he made was uh and and ben hit on this earlier about the custody of assets and i've kind of had this same turnaround after being so fully like defy only and now i'm like wait um you know trading on centralized exchanges you will get you oftentimes very the lowest fees and the best rates compared to what what is offered in d5 um so there's all sorts of arbitrage opportunities available again usually if if you have size um you know they can bounce back and forth from um super interesting point

uh and the last thing that i want to bring up because i waited so long this was such a good conversation about the token uh and the non-token protocols b protocol is probably the most successful protocol in d5 right now without a token um you know there might be one that's obvious that i'm missing but i truly believe with over i think 100 mil 200 mil total value locked a metric f ton of users and activity on the governance form and d5 or sorry in discord and in telegram um guys b protocol will help you with your make your dow uh loans basically they they act as like a liquidation engine uh if you will for defy and specifically for your maker loan so

you can actually transfer your maker loans to b protocol and earn yield and effectively be less uh i i don't i don't want to say less risky but you could you could hedge some of your maker dow risks using b protocol um which all in and of itself entails more risk but i i think it's good to highlight that protocol as one of the key protocols that has not launched a token quite yet i mean i think they're about to but um you know they've done a very good job up till now um of just having a fully fledged protocol for sure yeah i mean i i also just just briefly going back to a couple of points you made i think it's really funny like i have friends who depending on the size of what you're trading

they'll actually prefer to use uniswap over curve for for their stable stops um it really depends on like whether you're trading like a ton of size and like what the liquidity looks like on curve versus uniform at that time but because curves transactions are more gas intensive and depending on the price of gas you might actually be better off when you sort of factor in gas trading on uniswap even though the even though curves curve is as much more friendly to stable swap trades um and that that goes for other things as well it's kind of this ironic thing people people just assume that curve is the best place to trade to trade stable coins and that might be true in a vacuum but when you factor in the price of gas and you know that has been well factor in the fact that factoring curves

uh you know gas intensive trade mechanism and also the rising price of gas it actually almost uh sometimes comes out to be cheaper on on sort of uh unusual product and um yeah exactly guys just heads up like it's probably about two and a half times the cost on curve from my experience than uniswap you know it's it's obviously it varies but curve is definitely a gas intensive place like yeah i'd say and this is also an interesting point because it actually it really does depend on the size that you're trading and this is something that i think people know intuitively but gas prices what they do is they pose a regressive tax on users so you know the the higher size that you're trading and this is obvious but it's like i think worth spelling out because you'll see a lot of people um a lot of

the big whales who actually aren't as bothered by high gas prices and that's because gas gas transaction fees are a regressive tax they hurt smaller users when they have bigger users because they are they basically form a larger part of the smaller larger proportion of the smaller users trades um so for example when when arthur from defiance is talking about he actually had a podcast on up only i think it was like a month or two ago he was talking about you know uh like the trade-offs between ethereum and other l1 and he was like look like um you know if ethereum is basically like this big metropolis that's like you know manhattan or singapore or hong kong and you know you like you want to pay more because yeah it's going to be more congested but there's more going on and you pay

you pay more for decentralization you pay more for um for you know all these you know attractions i guess that you could get while living in the cities and to be i mean he was right it's like a pretty good uh analogy like to compare ethereum especially with its congestion to sort of maybe smaller rural areas or other cities but i think it also it's kind of ironic because arthur is obviously a whale and you know he can pay more but it's for him it's like you know not even thinking twice about it he doesn't have to he doesn't have to think about gas prices but for the smaller user you know when i when i got this friend of mine from stanford who's this really incredible uh cs student he picked up d5 really fast he understood it he understood the value proposition very

fast but i sent him like an ether to play around with and it was it was just wild to see um how how much he struggled to find like gas efficient ways to transact and to experiment and i was almost at the point which just was just you know with just to tell him like just go play around on bsc instead it was uh it was really difficult and i think so so for people like arthur uh for whom you know gas prices not only are they regressive in the sense they don't hurt him as much um proportionally but he also just has a lot more money to spend uh like he doesn't necessarily care about doesn't actually affect his day-to-day um but i don't think we want to enter a world where you know we just have this segmented you know wealthy people transacting on

ethereum and then the rest of the people transacting on other l1 i think that would be you know that kind of network gentrification for for lack of a better word is really not what we want it's like sort of uh undermines the entire promise of like having having ethereum having sort of defined general so i think this is really like a crisis you know you've been talking i think a lot about this on on prior podcasts a lot of people are talking about this on twitter right now but it really is the the issue of the day and i think for a good reason like ethereum is uh it's you know as great as things are it's also kind of in a state of crisis with these with these with these gas prices ben you brought up the analogy of uh kind of metropolis cities living on

ethereum um you know kind of big cities there's more to do so you're willing to pay more and i i i've heard the same analogy people to east 2.0 um so right now we're in the beacon phase right phase zero but we're we're transitioning into that sharding phase and my understanding is that once these validator nodes are set up we're in phase one and then phase two is ultimately splitting up the ethereum chain into shards and i think vitalik said there's going to be 64 different shards the number is kind of irrelevant but you'll have one shard that'll be really this major metropolis and it's only for like flash flash loans really high gas intensive contracts that need to get

transactions through very fast and they're willing to pay extreme amounts of gas and keep in mind 1559 here um basically if that goes through everyone would pay a base fee and then these gas intensive transactions um we would see a tip to these miners ramp up so basically on on these uh shards these metropolis shards we have very high tips and and the transactors are willing to pay that but then you know on all these other shards you're you're kind of scaling down um the gas because you don't have as much necessity to push those transactions through very fast so yeah i completely agree with you that ethereum right now is kind of one major

metropolis and then you have these other l ones that are more you know they're kind of like the shards for now if you will right right the other ones are kind of like those lower charts but i think once we kind of hit each 2.0 we might be able to see all of that scale into ethereum where we have for sure and then um so some you know not major point is once we hit 2.0 which at this current point it it's probably i mean god knows could be six months two years three years right the point is there's being development happening and and what you're saying is exactly kind of how i think we should think about using funds in blockchains you know if we can use if we can put funds that have

uh you know that are in blockchains that have less throughput less decentralization but are cheaper and we can risk x percentage of of of our funds there right then boom it it it becomes you know a profitable thing and a way to decentralize your funds um so ben i'm kind of curious what you at uh at your current position with which we haven't even touched on yet guys is uh i take it you are an analyst and a sort of big time role player at the is it mechanism capital yeah it's a mechanism yeah so i do i have i wear different hats at mechanism we're not a very large team which is which is great it means that we all do a lot of stuff and i think it's it's allowed us to be

pretty nimble um i like to i guess i sort of head the research side i mean andrew is you know prolific in terms of coming up with research but he's he's involved in a lot of different things you know like like the venture deals the trading side and i sort of i would say take most responsibility for for the research although even though we all contribute to it and even eva actually who recently joined our team put out a piece on pancake swap last week um but so i do a lot of research and then i also also help on the private market side as well sourcing deals and uh evaluating deals um so those i'd say are my two main roles less sort of on the um i guess also on the public market side when we do take sort of venture-esque positions in in publicly

traded tokens you know roon is a great example esd in the past wi-fi cream those are sort of some of the sort of core positions that we've taken that are sort of venture stage um and so you know we treat those as in in some ways you know even though we could theoretically trade around them oftentimes we treat them more as venture holds um we also do some trading as well like catalyst driven events or event driven catalyst whatever the proper lingo is yeah like more short term and whatnot yeah exactly but we like to focus our sort of core competencies uh our core competencies are sort of on the venture side um and so we do a lot of private market investments and we also do you know a lot of a lot of research as well we like to try to do

a lot of research so i like to move into specific verticals you know whether those algorithms stable coins amms uh insurance and then i think more recently l2s which i guess are not really defy specific but i think are really really crucial for d5 big time l2s you're exactly the guy for the question which thank you for explaining kind of how you guys view um you know your i guess your your portfolio there is some knowledge to be taken for that for somebody who's trading with five thousand dollars or somebody's trading with five you know 50 million right there's there's kind of a shared uh there's way different strategies for those amounts but there's a shared way to kind of look at it um and i appreciate you sharing kind of your mental model and i'm kind of

curious what we have with the mechanism capital team and outlook as far as the current issue that we were just touching on so rob just told us all about what e 2.0 looks like in the future we've hit on some other l1 um we've we've talked about a bit uh prior to recording about all sorts of roll-ups and even on the loop ring front so the question is i'm curious what is the mental model kind of of facing the problem of ethereum l1 scaling and basically what is the what is your and your personal and it could be also tied to what the mechanism team is doing you know what's the solution for active investors in default you know how

do people get around gas fees and like what is the you know what's the mental model for it of course yeah i mean first of all it's a good question and i think actually one of the things i love about mechanism is that there's a lot of um there's a lot of vibrance vibrant debate among among the team so for example like i would call myself something of a roll-up maximalist i'm very interested in roll-ups the more i dug into them the more i become bullish on them i think the i'm particularly interested in optimistic roles because i think those are those are sort of network-ready and we'll be seeing them rolled out um no pun intended uh over the next few months versus zk robs which i think also have a lot of promise more long term but i think from everything that i've read uh are

sort of not i think for gas spec like gas i guess computational reasons they're sort of not really network ready uh in terms of you know actually bringing down gas fees and the amount that optimistic roll-ups can even though i think there's some specific advantages of zk rolls that we can get into um but i guess you know as much as i think a roll-up maximalist you know there are others on the team i think we disagree and so we we i think we we sort of have um some consensus i think andrew and the rest of the team are also sort of see the value in roll-ups but i think you know we disagree sort of on the timeline we disagree specifically on also potentially um you know whether chains like buy and smart chain for example are going to be long-term viable

and i think you know it's been really helpful to to sort of uh debate discuss and and sort of uh bounce ideas off of the rest of the team because we have these different perspectives and it doesn't actually i don't think impede our ability to invest if anything it actually i think helps because we have sort of this internal running debate about you know the future of a theory is going and if we just had this sort of tunnel vision approached like okay we know it's going to be you know roll ups and everything is going to be ethereum there's nothing to do on any other l1 i think that would actually probably um be you know that probably hinder our our ability to actually invest optimally and so uh yeah i mean i guess broadly speaking i'm i'm a roll up maximalist i i do

think there's actually going to be a place for sort of other l1s um i think that i guess i would put i would sort of split this this question up into short medium and long term um and i think this is also sort of how we think about it as well so yeah so like yeah like like like sorry what can be done now i suppose and then yeah and then what do you foresee you know in the next few months and then as you're seeing long term um yeah sure of course yeah and i think like you know this this is these are sort of where we converge as a fund i think we sort of agree on the short term that you know the there are these other chains specifically binance smart chain has achieved real traction and usage um i think first the reasons why are actually kind

of interesting if you want to look really deeply into it so for example avalanche has you know been live for a little while uh you know solana's the live i've used avalanche i've used solana but by far the best user experience is is binance smart chain i think for for like actually kind of funny reasons part of it is is the throughput part of it is the low fees but you get actually on avalanche and you get that on solana too but i think there's also um an ease of use that you can access um by smart chain through through binance there's like sort of an easy centralized exchange bridge i think there's also um bsc scan is sort of underratedly one of the the main drivers of of sort of the stickiness of binet smartchain because i don't know if you've ever tried using

avalanche or solana or or for example even uh matic polygon but the explorers on on those are really to me they're at least unfamiliar they're kind of foreign and so it's much more intuitive for me to use buy net smart chain but i think bse has managed to attract a lot of real usage and i think it's not going to go any uh go away anytime soon i think we'll probably also start to see liquidity migrate though as as polka dot as solana um start attracting more developer interest and more projects start launching i'll bet we do see some kind of liquidity migration away maybe partially from ethereum but also probably from binance smart chain to those other chains i think like liquidity is fickle if we've learned anything from d5 summer and i think also we're seeing that we

saw that with the migration from ethereum to finance smart chain i think it's true that a lot of new users to d5 are actually going maybe straight to binance margin but i think a lot of liquidity that's there actually did migrate over and i think you know if it happened once with ethereum to binance smart chain i think it's also um more than conceivable that it will happen again from binance marching to other chains and i think you know the people that say that um this is actually not bearish for ethereum but actually potentially bullish i think that's actually right because one of the reasons why this is actually possible is of course the evm compatibility of binance smart chain the fact that there are these bridges back to ethereum and that everyone ultimately wants and you know this is going back to something rob was saying

um maybe similar to the shards like binary smart chain it is a layer one but it's not really a silo layer one it really is connected to ethereum because of its evm compatibility because of the con because of the sort of ample bridges that you can use and um that that in a way reinforces ethereum's strength um you know there are going to be interesting differences with other chains you know solana is not for example evm compatible um uh but so we'll see how those play out in terms of whether they can actually attract true liquidity migration away away from ethereum but i guess you know getting into the question of roll-ups and and sort of ethereum native scaling to me i think this is the long-term stuff guys this is the all right so bsc was the guys if you're on unit swap right now and you're

struggling go to go to go to bsc use pancake swap use the cheap fees enjoy it it'll be there you know it'll work right midterm you know we're looking at some other l1 but this is the good stuff this is what this is what we're here for long term here yeah and i think like there's there's sort of um like the question is why why long term do we want to look at rollups and ethereum native scaling and i think the answer to that before i even dive into why i'm like specifically bullish on rollups um but the answer to that i think is that ultimately i think rollups will probably start off a little bit clunky i think the user experience will be won't be like extremely seamless um to start sort of cross-chain solutions like connects and hop sort of as generalized cross-chain

infrastructure and then more specifically like makers bridge from ethereum to optimism rari capitals working on conditional withdrawals that's what their nova their nova protocol is um but i think those solutions all these sort of very specific you know cross-chain um fast withdrawals for roll-ups specifically for optimism these things are going to take a little bit of time to actually be usable and roll-ups themselves are probably going to have some sort of clunkiness in the initial um rollout i would imagine however like we have to i think it would be my optic to say that because there will be some ux issues with rollups inevitably that that will hinder its long-term adoption i think it's true that bsc is very usable now but eventually we'll be able to say all things being equal what would you rather use and i think

eventually like all things being equal will be that you know the scale the throughput will be this will be pretty similar on roll-ups to bsc and you know other l1 the the low fees and i think the usability will also be relatively equal between sort of competing l1 side chains and then roll ups and then ultimately what it's going to come down to are the security considerations so i think it's true right now like you know there will be differences in usability and there will be these other differences in the short term and that will sort of i think give these other l1s and side chains a sort of fighting chance to to stay ahead of rollups i think ultimately any kind of usability problems will be sort of smoothed over especially as we sort of migrate to heath 2.0 and roles become sort of more

entrenched and i think eventually sort of in the long term um a lot of the main development i mean usage is going to stay on ethereum and i think also here i i put a thread at this thread out there about this the other day but i think a lot of people like to ask the question okay what does the what does the average user think about when it comes to you know you know using x y or zt5 app and you know that's that's a question that people ask they say well of course the user wants to think about you know throughput and fees and so for that reason they don't really care about decentralization which is the sort of you know buzzword but doesn't really mean anything so they'll be willing to go to bsc that's fine first of all i think there

are plenty of users who i i wouldn't fully see that that answer i think there are plenty of users who do care but even if i were to just see for the sake of argument that you know users really only care about low fees and like you know and time and usability like those those three things if that's actually the case um that still isn't the case that developers and the best developers care about that because the developers actually do care about security and decentralization they don't want their protocol to be sort of on a chain that theoretically could be corrupted and hacked and taken over maliciously you know if they're building on a chain that has 20 validators for example there's a lot more security risk you know systemic risk and then by you know by extension risks that specific protocol and even if individual

users don't care about that because that's sort of the second order risk that is sort of down the line to them and they're just they just want cheap transacting i think the best developers will care about that um and sort of that i think will inhibit a lot of the best development from happening on chains that are pretty centralized um i don't know so that's sort of my broad thesis about why i think roll ups eventually um will will take the sort of will will win and sort of over probably these all these other chains i think it's possible you know it's always possible i don't want to be dogmatic about ethereum i think there are a lot of ethereum maximalists and nationalists i do think it's possible that we could see migration to another chain i think if it happens i think it actually won't

be something like finance march i think it will actually be just something that has higher throughput something like solana um but you know i think for now it seems like ethereum's gonna stay in the lead and i'm not actually worried that that sort of these other l1s even if they remain um competitive ahead of rollups in the short term i'm not i'm not super worried at this stage that that will be the case in the long term um and i think there's also a lot of you know just to keep going on the roll up here i think there's a lot of sort of misinformation floating around about what roll-ups are i don't think there's a lot of i don't think people have been able to build up a lot of intuition as to why these are so important and so revolutionary and for me like it took a

long time to you know there are a lot of articles out there a lot of them are pretty technical i'm actually i'm trying to write one right now that's like a non-technical introduction to roll-ups with the main purpose of building a lot of intuition as to what roll-ups are i think the main the main key point to understand with roll-ups is that transactions lack finality on rollups and you know i'm sure you guys already know this but this is just like for the sake of anyone listening like transactions on rollups lack finality there is this built-in review process for any roll-up transaction that happens it can be reviewed and then overturned by ethereum such that you know whatever happens on the roll-up chain uh is it sort of the isn't isn't the i guess beyond end-all versus for example a competing l1 or even a side chain there is

finality so you do rely in sort of a very uh important sense on the security apparatus of those other chains um and if for example there is some malicious validator or some 51 attack and you happen to lose money well tough luck that's the end of the day versus on a rollup if if a validator you know basically makes a bad either erroneous or or intentionally malicious attestation that's the future state of the of the chain so basically make a mistake or or try to corrupt it that can still be reviewed and overruled it's almost like the supreme court ethereum the supreme court and that's like so like that's such a key point i think for me like the code is law ben but the people are able to have a say in a as you say supreme court

way of good for the community based if if there is bad actors at play or if there are things that happen that are are negligible to you know the better outcome right and so it basically takes away that ability of uh it or it allows the ability for uh community judgment of of certain things if you will exactly so ethereum has this like massive network of nodes right now and obviously this is going to be shifting over with with eip1559 but there's like i think over 8 000 nodes on ethereum network versus you know like ufc has about 20 right that's like a massive difference in decentralization and what it would take to you know to corrupt the network um 51 of the network being 4000 versus

you know 10 um or you know side for side chains it's a little bit different too but still i think that the point remains that ethereum has the sort of best consensus of proof of i mean i guess it's still proof of work but like sort of non-bitcoin blockchain ethereum is like sort of the reigning king right now um and so like with rollups the key point is that like people people say this a lot i don't think like it's it's known exactly what this means roll-ups benefit from and contribute to in a sense ethereum's security they don't they don't exist separate from ethereum's you know decentralized security and consensus mechanism they they are sort of subordinated to it and because of that they are inherently safer roll-ups are limited roll-ups can't process transactions with finality and they can't um

if you know if on a rollup chain you you happen to sort of like a validator makes a mistake then like that is basically reversed because uh either it's not going to be accepted within the roll up into ethereum um or or you know it'll be it'll be re-computed by the evm by the ethereum virtual machine so i mean i don't want to harp on this point specifically because i think it probably you know your you and your your listeners understand that at this point but it's it was such a big breakthrough to me because there's there's such an important difference between that and between a separate blockchain whereby you know you fully rely on the consensus mechanism of that blockchain um and you are fully sort of at the mercy of whether that chain remains decentralized and whether it remains secure so i think

ultimately people talk about this scalability trilemma you have security and uh decentralization and uh and and scalability and that's sort of this classic trilemma but i think it's actually a bit misconstrued here so the classic thing is like okay well well ethereum has security and decentralization but it lacks scalability um and then you have something like binance smart chain for example that has scalability but it doesn't it doesn't have decentralization i think and then rollups for example also have like arts are said to have like security and scalability but they lack decentralization because what happens on a rollup is like there's like the sequencer that's the centralized with entity that process transactions and then you have these

other validators that are almost like referees that can basically dispute the claims this is specifically an optimistic role um and uh that that trilemma sort of implies that there's always something lacking in any of these solutions but i think the funny thing is that with a roll roll-up actually you do get decentralization too because the roll-up doesn't have this finality and so it does tap into ethereum's decentralization um and i think also this idea of like decentralization being an important sort of third part of the trilemma on its own is also kind of misguided haseeb qureshi who's at dragonfly he's really like one of my favorite writers and researchers in the space he wrote an article about a year ago about why decentralization inherently on its own is sort of overrated um it's a really interesting

piece i think if you're a decentralization maximalist it probably challenges a lot of your your biases for me it was interesting to read um but the sort of overarching point is that decentralization is only important in so far as it makes other desirable qualities possible and so in this case decentralization on its own isn't desirable it's desirable if it makes security possible um and so you know the fact that a rollup is you know built with having the centralized sequencer that is processing transactions and then having other validators basically that can referee and call it out if it's making a if it sort of process transactions wrong that itself isn't a problem because it doesn't create specific points of failure or attack surface it can always be overruled again by ethereum's consensus

so i don't think the fact that this decentralized is actually a problem inherent problem i think it's actually um sort of it's a it's not factually wrong to say that roll-ups are more centralized than other sort of side chains or l1 but it's sort of logically wrong because people who say that roll-ups are centralized and there's this guy actually i think his name is kevin from avalanche he put out this tweet saying that roll ups are centralized databases um it's not that he's so wrong i mean i think that's like a very poor way of phrasing it's more that he sort of misunderstands the purpose of rollups rollups aren't these databases that are centralized and if they're centralized they're centralized because they're limited and can be overruled by ethereum and so that's like such an important sort of distinction i think to me into my mind um

that it really puts rollups above all these other l2s and frankly i wouldn't necessarily even call this maybe this is maybe controversial but i wouldn't even call side chains l2s because side chains don't really have these same limitations and can't sort of be overruled by ethereum consensus the way that rollups can i think also that's why you see people like vitalik and other sort of ethereum researchers gravitate more toward uh roll-up solutions as opposed to side solutions at least from from what i understand from what i've been saying yeah and when it comes to that scalability trilemma it's it almost seems like um you know you you mentioned decentralization is only good in so far as that it supports security and gets you there so um you know maybe you don't have all three pieces of that trilemma with one

l1 or rollups or any one of these technologies in particular but once you start to link together ethereum plus roll-ups that's when you can start to hit all three of these these uh precisely the trifecta essentially exactly that's i think that hits the nail on the head yeah l2 is going to be the term that's going to be used for everything though like at least for now l2 just if you're talking about anything scaling on twitter or anything everybody just says l2 well i think that's because people don't really have like the insight into the different kinds of l2s right because now right on this podcast we're starting to distinguish between side chains which is polygon finance smart chain they don't they

lack the supreme court rule ability that can tap into ethereum's security and decentralization um so you have you have side chains like that and then you have um roll-ups which are kind of a completely different animal because they allow for the finality to be placed on ethereum and not exactly not within their own like entity like a side chain would i think that's exactly true and i think people miss a lot of these really important distinctions um you know and we could also potentially get into the differences between optimistic roll-ups you know between even some of the different solutions you know i've been diving into that a lot um you know we got to get you on a cast with uh matt

he used to work a lot with loop ring matt yeah he's a uh he loves rollups he's he's really good with it man if you haven't talked to him we'd love to make the intro you should just shoot him a dm on twitter he loves it for sure yeah this i mean this stuff is fascinating and i don't want to talk your heads off so i mean is one of your personal goals to like you know try to bring rollups quicker more effectively and bigger to ethereum like is that something that that you would say you know out of all the community objectives that could be had you know you could try to stick your head into a million different things or is it something that you'd like to for sure you know you know kind of go down that path for sure i think like i mean

i don't have the kind of technical expertise to be contributing on the code side but what i do think is is really important you know crypto twitter and in general the crypto community um i think you know for all of its uh for all the pitfalls and as much as you know there are some times when when when things are sort of like a cesspool it really is also like a place where there's open dialogue and debate and i think a lot actually can be you know there's a lot of value that comes from people discussing and debating um different ideas and solutions you know it's john stewart mill has this idea of like the marketplace of ideas and i think you know the crypto community crypto twitter um you know on the different governance forums all these things i think there really is a place for sort

of spirited debate about you know the best l2 why for example roll ups might be better or why they might be worse theoretically than than other other alternatives and so for me like the main goal for me when these are the roll-ups specifically is to make these ideas that i was discussing as clear as possible because i think there are some articles that have been written there are some good ones uh i could even point metallic vitalik wrote one of the best articles on rollups but even you know the italics article i don't know if it's fully geared toward non-technical people he talks about miracle roots a lot he talks about you know specific throughput measurements and and like a lot of sort of more technical things i think you know a lot of people might read that in their eyes michael is over so my goal for roll up first and

foremost is to and in general for ethereum scaling is to try to make this issue as crystal clear as possible to try to clarify without losing some of the nuance and complexities that we were just discussing but make it as crystal clear and then i mean you know i believe this i'm open to being you know proven wrong very much so i i'm happy to sort of change my biases i hope i hold my opinion strongly but also somewhat loosely in the sense that if you know i'm presented with better information i'll i'd like to think that i'd change my mind but as as of now you know to me this these are clearly the best the best path forward for scaling and this in this problem you know ethereum scaling really is i think what's holding back you know when we think of what the next

real stage is for you if i can think of two different things like the first is um i think actually usability outside of like just crypto native people so i think you know to think that people like normies are going to be using metamask and you know putting gas limits and understanding what announces and you know like having to deal with failed transactions and like you know 40 40 character long ethereum addresses i think that's like a little bit crazy i think to think that like eventually normies are gonna be using something that looks like defy today um that's i don't know that's that's a bit fantastical i had like this my family friend and my dad he was like he called me up he was like oh like you know i want to send my bitcoin to yearn and like he almost gave me a heart attack

because you can't sit on your bitcoin a year and you're gonna lose your bitcoin like that you know please don't do this bill like like that would be really bad and i wanted to help him but like it also reinforces me we're so deep into d5 we understand it's really like the back of our you know the back of our thumb we know d5 so well but for people who are coming in to defy it you know um especially older people and people who don't really have a lot of experience sort of with with the internet in general like there's no way these people are gonna be using that so that's one and then the second thing of course like i think holding back d5 is what we've just been talking about it's you know scaling it's the fact that a lot of these applications just are

just prohibitively expensive uh to use and so um you know for me it's like well people ask me are you a d5 phone like why are you focusing so much on l2 people don't actually ask me that but i could see someone asking me that and the answer to me is like well like d5 isn't going to keep you know expanding and innovating and evolving in ways that we wanted to unless we actually solved this sort of crypto-wide uh problem first which is which is scalability um so it's not really just it's not a non-d5 problem it really is a default problem um so somebody in our telegram ch chat after i told them that we were talking to uh a whale from a crypto phone i said yo we're talking to one of the biggest whales in d5 right now they said oh my gosh we need to get some

free alpha so i said okay fine so this is the question that they sent in live we're talking we're live so we're talking i think it's going to be an easy answer for you here based off about the last half hours we've seen the nft wave and now the meme coin wave what's the next wave ben can you tell us what the next whale wave is you big whale definitely not a huge whale but i guess look you know we've just been talking about it but i really do think like i do think that the like uh yeah like you know scaling ethereum scaling will open up a lot of opportunities and so i think there are some teams for example that are already looking into it's you know this sort of uh mid iq understanding is that like you know a lot of the protocols are going to

benefit from you know speed and throughput but the sort of higher giga brain iq uh approaches to say that you know it's not just that these um these solutions are going to improve throughput and they're going to make transacting less costly it's actually there's there's some second order effects of of uh and trends that are going to sort of take place when you have these roll-ups so for example a classic one that people talk about is like well thinking about amms and other decentralized exchanges and one of the reasons why for example order books are not very popular to use ethereum is simply because of of gas prices and so it's true that i think like that optimism is going to bring a lot of benefit to to unisoft in unison v3 and you know others are going to be moving on like bancorps going to move on to arbitrary

and there will be others as well um so that's going to be really interesting but i think you know if you want to look for trends what you want to do i think is think deeply about how scaling changes the game not just sort of how it you know improves protocols in terms of what they already do but think about new trends so i think like for example we're going to see an order book resurgence on on you know on layer twos i don't think it's actually going to be the case that ams are just going to fade into the background but we might see some interesting new protocols that are sort of looking at hybrid and order books um there are already some that are sort of in the works and building but i think like keep paying attention to sort of the uh

paying attention to teams that are not only building for the current state of ethereum but that are building for uh four roll-ups for layer twos and thinking about thinking deeply about how those actually change the nature of the game they don't not just how they make things better sort of in terms of the current state but how they actually totally reset the table and rearrange the sort of the the playing field i think that's like a really i'm mixing all my metaphors here but but i think you understand what i'm saying like like things will be different on rollups and i think you know also thinking about um there's going to be a lot uh a lot of alpha and thinking about the solutions that are cross chain and also in terms of withdrawals because there will be some as i said there will be

some some um i think some kinks to be smoothed out in terms of uh uh like you know withdrawing from one roll up to another uh withdrawing from rollup back to ethereum withdrawing from sidechain to roll up a drawing from l1 to other rollups and like going all between these i think so there's some you know there are already protocols that are working on bridging um but i think you know thinking about value capture on that on that level um and sort of which protocols are going to be doing that the best that's another sort of thing to look for so i mean yes broadly speaking what changes you know as a result of uh of the scaling right and then exactly like have your let's have had your fingers in those pots if you will and be able to see that like what the future of scaled of scale

blockchains look like and then okay once we have this then what's the next thing that becomes super important like second order yeah i think that's a that's a super interesting point and honestly my perspective has changed just while we've been on this call i was kind of of the mindset like i don't know if um you know roll-ups are going to be super um impactful when each 2.0 comes out and we have these different shards that people can move between between like you know kind of what we were talking about at the beginning if fees are driven to zero why do we still need to roll up things off chain to reduce fees further um but that that isn't so much the case as i see it like even when we're on east 2.0 there's a bunch of different shards laid out here

you're still going to need to move between shards and to do that is almost going you're not going completely off chain but you need to be able to roll up transactions to deploy them between different shards and i i think that's going to be um something that that's kind of uh unpacked as we get closer to east 2.0 but um yeah i i you know i think roll ups are not going anywhere and it's super interesting to see how they're gonna play into um kind of the long-term uh realization that we that we have on ethereum for sure and i think also i mean i think that's a great point rob and i think also you know i want to be clear to me like in terms of my investment thesis on rollups and how i'm thinking about this as an investor like as i said i don't necessarily think once

arbitrary launches for example you know i think it's going to launch before optimism does that there's going to be this immediate wave of people moving over to arbitrage it's going to be this sort of like massive migration and it's going to be arbitrary that's taking the lead over by inspection i think that's not going to happen frankly i would put my money on that not happening not because i don't want it to i think it should but i just think this is going to take time this is more of a mid to long term thesis as as as as the usability improves as um as developers start to move over piecemeal um so that's you know it's not that this is gonna happen overnight at all um that's not i think that would be unrealistic to expect i think also it's important to say like someone might someone might poke a

hole in my thesis and actually rob what you were just saying and say look like regardless of what happens with rollups and with east 2.0 it's clear that there's going to be some sort of fragmentation of liquidity and protocols across these various different layers whether that's across roll-ups whether that's across shards i mean i mean metallica has already said that like grubs are going to play an important role as sort of the the the computation execution layer um but but you know regardless with this new uh paradigm that's going to be ushered in by rollups plus 2.0 um you know regardless of how long that takes there might be some there will be probably some fragmentation of liquidity and i think you know i've heard a pretty good argument from people who are sort of bullish much more bullish on finance smart chain on solana and and

sort of other other l ones or you might call them side chains or ones i would say i guess l1 but that you know this fragmentation on ethereum is actually going to weaken ethereum a great deal um and it's actually going to allow binance marching to continue flourishing it's going to allow solana to continue flourishing um and that ethereum is going to sort of have its network effects weakened because of the fragmentation of applications uh i think also potentially some people some people think that we're going to be moving towards sort of uh sort of broadly speaking uh industry based like uh like applications or sorry not applications industry based like blockchains or roll-ups so like there's gonna be one that's one roll-up or one like sidechain that's gonna be specifically for nfts and that's sort of

it's gonna be focused on nfts and then the others can be focused one other one's gonna be focused on you know d5 specifically or maybe one specific part of d5 that's i haven't i don't have actually a strong opinion as to whether that's correct or not it doesn't strike me immediately as what's going to be happening first um it's also hard for me to think that like these specific rollups are going to be specifically tailored or these specific you know scaling exclusions are going to be tailored for uh you know specific types of applications uh that's another feature i guess the other thing like you know and this is the point that andrew makes i think he's right about i mean you're thinking about like roll-ups and usability um one thing you know and you know you were saying this to andy like i think um

like uh the fact that you can like centralize exchanges are really an important sort of uh i don't know if they're i would say bottleneck but they really are sort of still a linchpin of the entire d5 ecosystem even if people don't use centralized exchanges a lot like the fiat on ramps are primarily through centralized exchanges and so it's really it's really easy for example for binance users to use you know to to withdraw their fiat from binance specifically like non-us users into um into finance smart chain and you know for andrew says you know this is i think a good point that he makes that you know as until rollups have sort of native on-ramp solutions where you can go from let's say coinbase to a roll-up or from binance to roll-ups or ftx or

whatever it's going to be more difficult if you have to go from you know binance to ethereum to ethereum to roll-ups versus uh you know binance to smart chain um that's just like one x one less step uh and you know my counter as well i think like you know hop and connects and uh some of these other sort of cross-shaped solutions are actually gonna be able to sort of plug that hole um and eventually and maybe eventually even integrate with with uh exchanges themselves um but this is sort of an open question too and so there's i think a lot of granularity and these are sort of very specific points and these are these are sort of this is the nitty-gritty stuff that we get into when we debate this because we have to sort of come up with an investment thesis and um

for our own fund and we still serve in the process of refining it sort of always constantly refining it um but these are some of the questions that we think about you know not just sort of the broadly speaking you know decentralization but also really just like um very very my new usability details um and uh and i think you know those are those are really important to think about as well yeah our our last podcast actually uh we were talking to agni from dgate and she was she was working on that exact problem is how to plug a solution from uh a fiat on-ramp directly to a roll-up without hitting an l1 in between um so it's gonna be interesting to see if they can pull that off gotcha yeah i have to have to listen to that that sounds awesome if you just

pump eth to the moon then all the problems will be solved right because uh ben and rob are big are big eath whales yeah um well well i think we're a bit almost out of time but one one thing you mentioned um that you know i i don't know i would it would it would start a whole other conversation so i don't think we can get too deep into it but um the the fragmentation of liquidity that you talked about that is a result of these different scaling solutions um yeah yeah like i'm you know it's positive to ethereum and and kind of ux overall because you're decreasing gas fees so you think that there's more usability

but i i hear what you're saying about um kind of the the fragmentation of liquidity and and being spread across um you know different shards or different roll-ups and how that could um hurt ethereum's value proposition to me it you know does that hinder composability or um is really the the detriment here that fragmenting liquidity um starts to reduce incentives because it's not all cooped up in one composable place just maybe a quick thought parting thought yeah i mean i think i mean i think it does both i think it reduces composability because well i mean if you don't have liquidity um then composability is almost like an

empty thing yes you can like have you know compound usd plugged into you know unit swap on arbitrary whatever it is but if there's no liquidity for you know any of this stuff or if you can't you know if you can't use if there isn't any liquidity on these essential exchanges then doesn't really matter that like the applications themselves are composable so i think you know in terms of incentives and liquidity i think that's sort of what's key for composability um and what's i think we'll probably see also and this is maybe again you know back to the the question of alpha i think we already are seeing a lot of incentives ramp up for example on polygon you know abe has launched their their liquidity mining program i think curve actually just today recently unless i'm mistaken about that but there's going to be a big ramp

up of liquidity mining and yield farming incentives i believe on these these roll up solutions side chains in parts polygon yeah get over there and get on ave yeah because peop because these applications realize and rightfully so um that it's that just putting their application out there if they learned anything from defy summer it's that these applications need to bootstrap usage and they need to boost off liquidity and so it's going to be key for these applications to have war chests they can use to incentivize liquidity on their on their new on their new solutions for example i would not be surprised maybe this is a prediction but i would not be surprised to see uniswap uh maybe turn back on their liquidity mining incentives on optimism i think that's like a pretty good bet to think about i mean i don't

know exactly what they're planning on for it's also i guess a decentralized governance platform so they've had their own problems oh the giga whale ben knows what's coming so this is i have no idea this is this is purely a prediction um but i would not be surprised if uh unison i'm sure like you know sushi swab has already had sushi incentive so i would not be surprised that if and when sushi moves to a layer two they're gonna also have you know uh some sort of uh sushi incentives on that on that way too again i'm just throwing up predictions but back to you you know ave's never real quick has never done any sort of liquidity mining in the last like say six eight nine months that i've ever used it may be prior to my experience but i don't think so now they have liquidity mining on

polygon that i was just hollering about um where you you're currently getting paid to borrow um in matic yeah it's been addictive api is outpacing yeah yeah it's similar to compounds like recursive like when you're borrowing a little bit i think they capped the recursion for ave i'm not positive but you were going on about how uniswap was and then yeah and also i think so onto the on the question of like fragmentation you know i think in this scenario where there's like all these different roll-ups and their applications sort of spread across roll-ups and there's liquidity spread across the world i think the fragmentation thesis and that sort of bearish thesis i think because i think it probably would be bearish for uh at least for the usability of d5 and exposability but i think that comes into play

but i think you know even though people say that among the applications it may not be a sort of winner take all race i think you might actually see that among roll up solutions and among layer 2 it might be look more like winner take all that than it does currently between different applications you know which is to say that will it really be the case that they're going to be sort of three or four or five optimistic roll up solutions each with their own you know liquidity you know i think probably more likely there's going to be one or two uh and maybe just one and then maybe when dk roll ups they're sort of our network ready they're going to be challenging uh and i guess to clarify executes are sort of already network ready but for example if you look at dydx which launched

darkware uidx is currently subsidizing gas feeds which they can do because i think they have enough money too but a lot of protocols don't that's an important like that's an important caveat to what i'm saying in terms of like being network ready i'm saying i i mean being network ready in terms of having low gas fields without having that subsidy come from either the stark or treasury or from the uidx treasury or whatever is using it um but to go back to this you know question of like winner take all versus not i do think that um things eventually might look more like winner take all than they do they do on the roll up level and on the sort of layer two left layer sorry the roll up level or the layer two level than they do on the sort of application level um which might still continue to see a

proliferation of sort of competition in different applications in which case i think the fragmentation thesis maybe doesn't come into play as much as as we've been talking about and i guess the question of sharding is uh is separate from there but that's i guess just with regard to roll ups and to go on the second order of that then the the investment thesis uh can be okay let's find these cross-chain uh compatibility projects and solutions and ben's got a smile on his face which you guys can't see right now but uh but i'm sure he's been balls exactly i'm sure the past month about this stuff yeah and it's i mean personal again but i i should have said this earlier that none of what i'm saying is investment advice like do you understand this is definitely not investment advice

but i do think like i do think also and it scares me a little bit about this because i think this this thesis about roll-ups um especially optimistic roll-ups and in general this thesis of sort of remaining dominant and sort of keeping its uh sort of you know lead and it's very it's still even with bsc's liquidity it's still very vastly as if you look at the applications and the quality of the applications on ethereum i think a lot of this does hinge on the success of these cross-chain infrastructure at least at the beginning um if you know at least at the beginning while there is this sort of uh sort of i guess proliferation of multiple different roll-ups and like there is going to be some fragmentation i think so it's going to be interesting to see whether these actually succeed um in practice and what they're usable whether

they're capital efficient um i'm hoping that they are i think that they are we've dug into some of them um but i i do think like you know you talk about optimistic roll-ups and i tell people yeah optimistic grow ups have like a one to two week withdrawal wait time and people sort of laugh and they and it's true they should laugh because if there's no way crypto native users are going to put up with wait times longer than like swift banking or something like that um but you know first of all like that's the finality that we're talking about it exactly gives people like the supreme court you know rules necessary because that's like the review process as you if you will it's the challenge it's like the challenge uh the challenge period for for disputes for to arise and for like evm to

resolve any disputes if need be but uh it's also the case that these that's a solvable problem because anything that happens on a roll-up is essentially transparent so you can already see if something is challenged on a roll-up and this is another really key point for how a lot of these roll-ups work if any any transaction is challenged on a roll-up and it triggers this sort of dispute resolution process which takes a week or two you can still know like me and you and any other validator can run the transaction or we can sort of know ahead of time before that actual resolution that finality happens what is going to be the proper what is going to be the outcome of that and what that means is that market makers or if it's maker dow or anything else they can essentially provide um a fast withdrawal solution even if

they're a dispute because you can sort of know ahead of time what the outcome of that dispute is going to be now the outcome isn't finalized on ethereum for one or two weeks but it means that if you really want to get your you know die off of ethereum um and there's a dispute it doesn't necessarily matter you can still uh like or i guess and there's this sort of dispute possibility it's it's still possible for you to take your die off faster um because market makers and anyone else who's sort of like surveying or sort of monitoring the chain can see what disputes are arising like whether the transactions that were processed are valid and so those market makers can almost extend your line of credit i guess in this sense because they know that the the transaction will be final in one or

two weeks and like there's no question that it will be final it's just that it takes that time because you need to have that built-in review process like you're saying so this this i guess to me that was an important point and maybe i didn't explain that super well i'll try to explain it better in my in writing but but the point i guess is like this one to two week withdrawal time as rob said you know perfectly it is necessary for obstacles this is what allows for this you know supreme court you know judicial review process but it's also the case that it's that this problem is solvable from a user standpoint because there will because fast withdrawals can be provided um because of the transparency of these roll-up chains because any transaction that happens you can sort of know immediately whether it's uh whether

it's valid or not and a market maker will sort of not uh like market makers can provide sort of liquidity uh when they want to um so that's like i guess that's the basic reason for why like one to two weeks won't be prohibitive they won't like if you truly want to withdraw your liquidity from um from like a layer two you will be able to i think utilize some of these fast withdrawal solutions and it won't take one or two weeks yeah yeah and you know like you said it's pretty much instant that you can determine what the outcome of that solution is even though it's going to take a week to finalize on chain exactly but but that still leaves room for uh zk roll ups right because they they don't have a review period yeah so zk roll-ups are really interesting too

because you like you said they don't have a review period like it's this almost like this guilty until proven innocent or innocent until proof of guilty so so like the the fraud proofs meaning like the optimistic roll-ups assume every transaction is fine unless there's a dispute and you can dispute anything but otherwise they're just sort of going to be included in the blocks without dispute um and versus like zk rollups have this guilty until proven innocent uh uh like ethos or mentality whatever it is in the sense that like ethereum will only include uh transactions processed by zika role if it could be if those transactions can be cryptographically verified and so these there are these quote unquote validity proofs that are sent back that accompany these uh you know zk process transactions and these validity proofs are cryptographic i guess they're snarks or starks for

starkwear and these can be run by by the theory and virtual machine and can be sort of used to instantaneous instantaneously validate the transactions that happened that work that occurred in the rollup so you don't need this review process and it provides actually potentially even more cryptographic validation again the ultimate problem here is that these are gas and efficient and that's like a you know they sound perfect in um in theory and i think they ultimately might be the long-term future but they're not the i don't think they're they're ready to be the future right now right they sound great from a security standpoint um i mean you know it's great and also from the usability exactly because there's no there's not like this withdrawal time too yeah but but you don't want to get too far away from like why why you're even

rolling up to begin with which is to reduce the gas fees exactly i totally agree all right ben this was awesome uh ben you're the absolute man uh you're a we're all gigging whales in in spirit here uh we seriously appreciate you uh coming on man it was it was an absolute pleasure um and yeah man let's absolutely crush it uh keep doing uh keep keep kind of trailbasing your own path and you know sooner than later you'll be able to look your mom in the face and say mom i dropped out of harvard not mom i'm going back all right i promise you it's coming soon maybe you can have that conversation with her on my behalf uh yeah this is great thanks so much robin i need such a pleasure yeah ben this was awesome thanks for coming on

thanks for listening to the d5i design podcast until next time defy slate team