DeFi by Design EP#8: L2 Scaling & zKRollups

Transcript

welcome to d5 by design where we talk all things blockchain and cryptocurrency while striving to educate empower and enrich what's up guys just want to take a quick break and tell you about our sponsors for defy slate so first we have acropolis acropolis is an all-in-one defy yield farming platform they actually offer dollar cost averaging into bitcoin and ethereum uncollateralized loans and their mainnet just launched it's called delphi and they actually just filled it up to a cap and they have governance launching soon check out acropolis.io for more and then we have mcdex mcdex is the first decentralized perpetual swap exchange they offer up to 10x on

ethereum perpetual swaps and 5x on link as well as lend and snx completely decentralized trading check them out on mcduck dot io both these platforms are extremely active in the d5 space and their protocols are growing and the users are as well so check those out and we'll get right back to the podcast now [Music] what's going on everybody we are here with matthew from loopering.org loopering is a revolutionary decentralized exchange in the ethereum ecosystem at this time we will explain why what's to come and what it's all about here very very shortly rob how you doing today i'm excited

i'm excited to learn a lot more about the difference between plasma and zk roll-ups specifically because you know as far as my limited understanding of smart contracts and ethereum scaling that that's really been kind of the decision is how to scale is it using you know the this one aspect of scaling or or this other one i think we're going to learn a lot from that here because i really don't know uh the difference about you know each one of them specifically pretty much just we're going to have sharding on ethereum uh i think that might be kind of the the knowledge level of a lot of our audience so i'm really interested in learning that difference in how we're actually going to achieve cheaper gas fees and what are some of the uh

implementations that already in place that are solving this awesome well for having me guys we'll cover all that i hope yeah so matt a brief touch on your background how did you uh get to loopering kind of what's your interest levels all around up to this point real quick just so quick um i come from a finance background i was doing a bunch of finance e-stuff i was a cfa i guess i still am i was trading bonds and then i found yeah found crypto i was just like intellectually curious poking around and then i left the fixed income shop and uh just no real plan at that time was just like learning i was actually writing for a centralized exchange here in canada

and then i found loop ring very early like right after they launched i guess and i was kind of just a big fan and correspond with the team a lot and uh very early on i just joined and that was like two and a half years ago or a bit more maybe and yeah so now i lead like the business side of loopering because we're mostly a team of engineers everyone is much smarter than myself mostly based in shanghai doing the important stuff and yeah i i try to help with everything else so you left the suit world for the djen world huh definitely like i used to think i was kind of crazy

well it wasn't like a dj world back then to be fair like no world or just like weird but uh yeah i did yeah nice nice and what's kind of your day-to-day over at loop ring like versus uh maybe the guys over in shanghai that are doing the important stuff as you say yeah well stuff like this kind of a funny day i was i was telling andy before i did like another little uh chat um just be before uh on another so i never it's really like a back-to-back style day but today is one of those but being like this that just you know building relationships and now that we have i mean for the longest time we didn't have like users users we were just a

protocol i guess we'll get into all that but now we have like a product atop the protocol right that we operate so dealing with just everyday users that say hey why is this transactions but yeah just dealing with um i guess a lot of you know i don't want to say like partnerships it's not really like that anymore but just you know work you need to know what's going on in the space and people that want to you know use player two these you just need to be there and be known and you know what i mean it's uh it's quite intangible but just um it's really it's it's 24 7. uh monday is no different than sunday probably similar to you guys and especially with the team in shanghai 2 p.m is no different than 2 a.m for me

so it's just uh i think just grow luff ring yeah and the discord chats and telegram that they never end yeah and that's a great segue um yeah that i just think that's a great segue into because i only know about loopering the decentralized exchange and i haven't used it too much but just the most attractive and the most appealing thing is obviously the gas fees right there they're just exploding right now what could you explain the difference between the protocol protocol and uh the product and and how that evolved yeah so um yeah since three years ago when we started we were like we were a dex protocol uh back then smart

contracts allowed other people to build decentralized exchanges back then it was kind of just um like an earlier model just like everything was on chain or not exactly it was kind of like the 0x model where order books could be off chain and then you match them and you submit them to ethereum for settlement so kind of the hybrid not like the all on chain model or like the next step um and yeah so that's what we were building and so we've always been dex protocol people a year and a half ago we dove deep into scalability specifically zk roll ups as a flavor of scalability so we became a scalable dex protocol that like culminated in december 2019 we deployed version

three uh version three of loop ring which was does dk roll up version so that was the first zk roll up on ethereum i don't mean to say this word so much since we haven't described it but yeah that was the first zk roll up live on ethereum and it was just like kind of sitting there there was like a team building on it um in china not not our team a different team and then we a few months later like in february released our own decks like our own venue on top of the protocol the protocol is just a bunch of rules about how this thing should work how trades should be signed and matched and in our case there's a bunch of smart contracts on chain like the old way that's based on ethereum but the zk world means there's a bunch of off-chain

stock tree we have to prove in you know these zk snarks so there's a whole so that yeah so the protocol is a bunch of smart contracts and a bunch of zero knowledge circuits but we went up the stack and built our own venue loopering.iao where people could it's pretty cool especially for me you know on the business side it gives me a you know i used to just espouse the um the benefits of what we were doing and it's like oh it's really cool and like check it out but now it's like it's cool to have a product uh to to drive protocol usage so yeah yeah and now it's i mean now there's there's got to be a strong case for actual growth within the user base the amount of transactions per day i know that i've actually used loop ring

before and i actually just checked a few hours ago and you guys had listed a bunch of new assets on there because for a while there it was only about like what like seven or eight coins or something like that yeah true um yeah maybe i'm not even aware they don't tell me everything no but it's um it's yeah we listen we're listing coins with um increasing frequency but the gas as rob alluded to like gas is going crazy we represent this like safe harbor where you could transact gas free right because a zk roll up is this layer two environment where you could transact and like update that state of the world which only periodically gets proven and submitted to ethereum so definitely like a hot topic now because it's actually

scary i find the gas prices like it's not just like unfortunate it's like literally scary about how clogged it could become so we're definitely good a problem is though is to get onto the zk roll up in this current version is decently expensive it's 275 000 gas to create an account it's like kind of map your theorem address to that world and then another hundred thousand to deposit assets and then then you're up and running you're there with your assets and your gas free but it's a dissuading factor to somebody just to get on there they're looking at like 60 bucks right now which is annoying it's really no it's it's really unfortunate luckily our upcoming version version 3.6 in november

um which we just released and reduced the onboarding cost so i won't have to feel you know silly when i tell somebody to come on loop ring and if they're faced with a charge it'll be reduced by like it'll be reduced to under 5000 gas versus 275 thousand gas so i mean we're about like 5 000 users or just uh under um because you could see on chain every user that enters the roll-up that registers it's like 4 800. and so that's good you know for our still relatively small defy world or but yeah we have in our sights especially for like the performance that we could offer to people the type of experience centralized exchanges right when you go into loop ring it feels like it feels like you're on finance or yeah for sure it's not like a unit swap or anything like that but it

kind of has a nicer feel though because one thing about like the unit swaps and and the one inches and whatnot is you don't get that real trading field that order you know type of thing it's just more just like you're just pressing buttons which is cool in its own sense but you know it doesn't bring the the whole feel of being a trader right that's true yeah exactly it's important to specify we are right now an order book based exchange and order book layer 2 exchange yeah uni swap is of course a layer 1 amm but it's really cool i don't want to like go all over the place so that we'll be able to support amn automatic market makers that model on the zk roll up in the upcoming version which is like a really big deal to be honest because everyone loves amms because it's easy to

kind of spin up liquidity right people just passively deposit funds and then you have a liquid pool versus on an order book we need like active people or relating yeah that's right we need their boss to be moving the market so that's a harder sell it's just harder to in the long run we think order books will still rule the world as they do in the normal legacy finance for for several reasons but it's really attractive especially for me again just to bootstrap growth to have amms where we could be like oh you want this pair deposit it here and now there's a liquid pool right just like the beauty of uni swap except no gas on uh on the z so that's really exciting well

and when a user places an order like you might be on that that fancy order book you like it might be filling you with the best ask from the order book and a pool on layer two that is also kind of like better than the next ask so it'll you'll be uh filled you could be filled by both at once so really awesome that's a that's a pretty huge upgrade not only for like order routing in these trades and providing more liquidity but also being able to connect to the automated market makers like you're saying and you meant actually andy mentioned that uh loopering just listed a whole bunch you know more assets what is the process like that because i have seen some different setups where decentralized protocols allow anyone to list any asset right that's

kind of the unit swap model you just throw in a smart contract address so how does supporting unit swap and those assets change that you know what is the listing process like so just to be clear like when we support amms it's not like we're going to port all of uh union swap onto there sushi coin right uh it's just like now we could support amm so it's not right to say like uni swap in particular in fact that might not be the style of curves we support this kind of gets this is even hazy to me i don't know the full design yet but like we might support let's say uh balancer style pools then anybody could create a balance or style pool like using their formula but it's not actually pulling from layer one but anyways

your point definitely stands that's a huge thing about listing uh uni swap for all the reasons we just said you could just you deposit 50 50 of an of an asset an ether now any erc to any erc and there you have your market we cannot do that because a zk roll up lives like the whole beauty how we scale is by doing everything off chain just in a verifiable manner that you don't have to trust us that's right like finance is also an off-chain solution right you send them your money and then you do everything there and you hope they don't run away or that they don't get hacked we do the same thing except we can't run away or we could just not with your funds your funds are in an ethereum smart contract that are mapped you know that are mapped

in a very nice way to an off-chain environment and that link cannot be broken right so i've heard a lot of comparisons to the lightning network in that way right your your funds live in this certain channel but you still have access to them and i think that's becoming a much more familiar concept with d5 your tokens can live in a smart contract and that smart contract is going gonna uphold the regulations the guidelines that you set for it right so could you you kind of explain maybe how zk roll ups are you know similar or different from the lightning network and then kind of how that evolved from plasma because i still have seen plasma as a type of scaling solution um i know lubrin you know has zk roll-ups but

uh maybe if you could also explain that you know why lubrin went with zk rather than the plasma technology yeah sure okay and remind me we'll get back to the listing question after because i didn't really answer it but i think a prerequisite knowledge of zika rollups is helpful to understand like yeah that's definitely lou brings differentiator right is the zk technology what zk roll ups do before we get into the differences is yeah a user deposits funds into a smart contract and that smart contract then maps their address to an off chain world that off chain world lives in a database or a data structure a merkle tree which we've probably all heard about it's just

you know some very useful data database with you know you have one kind of summery root at the top and then little leaves and it looks like a christmas tree except that the root is at the top here but we'll come back to that in in a second just because we'll talk about what that root means but so yeah your funds are so i always say this like so rob you know rob eth and again i don't know if that's him everybody just for privacy reasons don't send rob oh he's a millionaire um like you're all like you'll well now you have to uh it's hard to i don't want to talk so much about like the 3.1 way because 3.6 is going to so much improve this but let's just say like some of these things

get better and cheaper and easier smart contract like i want to go to that layer bring me there so rob eath becomes merkel slot id uh one thousand six or if you did it today it'd be four thousand eight hundred and five that would be like your little markets your user id is just in like and then you're like okay great you have your little house there and then you want to deposit assets so you deposit one each and a hundred die from your address into the layer one smart contract and then our zk roll up like this intermediary this uh this operator or relayer who is yeah we'll get back to that but he updates your

your systems oh i got a deposit on chain now let me kind of update this off chain balance or just like how binance does it there's no real difference yet right um but the point is that like your money is in a smart contract nobody could access it there to like only you rob could withdraw that balance you and that pool so like the loopering deposit smart contract all the funds live there and they're mapped to their respective owners in the layer 2 environment um and right now there's like there's 20 million dollars and um i have to make a tweet later that we passed the 20 million mark remind me there's 20 million dollars in the loop ring deposit contract you have a piece of it and it's displayed in your off chain balance then you are going to now do your thing there

you're going to you know send andy one die for fun assuming he's on the zeke here up right now to send andy.eth he'd have to be pre-registered on loop ring he'd have to come on himself and then you could send him one die for free so no gas nothing just it's going from your branch to his branch right you're not touching layer one um and you could trade transfer we are at dex but just to be clear we also kind of in june expanded to offer just payments simple transfers so not just trading but once you're on the zk roll up there's no reason why you can't just transfer money around right instead of just trading so now we support that so it's also for payments we don't just loop ring is now a zk roll exchange and payment protocol

uh we've kind of expanded our identity anyway so there you are you're interacting in this off-chain world periodically and how z curve scales is the operator says okay 4 000 things have happened in this off chain world let's go re like reconcile it to layer one right like we filled up a batch we're taking all these transactions so it's rob's send to andy andy's trade versus sarah whatever all these things we're filling up a bus or an airplane and we're saying everybody get on board and then we like really compress it there's a zk roll up like as the zk stands for zero knowledge but it it's not for any privacy reason uh people associate zk to

pro to privacy either because it's z because yeah exactly our pioneers and made much of the work that we use uh to be clear zk is just like a branch of cryptography that predated zcash right it's just like zero knowledge cryptography that they really just made amazing for crypto purposes but um so we use it though it should be called a validity proof roll up we use a zero knowledge proof just because it's a sort of validity proof let's say we take these four thousand things compress them well first of all like we execute them like andy's send to sarah it's executed in our state we we aggregate 4 000 things we compress them and we have a proof a validity proof that says everything

that happened in this state of the world corresponded to the rules of the protocol which are like here like any other like anybody could see the rules right like that is looping it's just a bunch of rules the fact that we compressed a bunch of stuff and have like a spit out thumb print of everything's veracity means okay that's great everything that happened there is true then we put this this thumbprint this validity proof on chain back to ethereum to a verifier contract which simply says hmm okay great as soon as the ver the contract sees it that means that it's true everything that happened direct by construction you cannot falsify or forge this proof so when you put this proof on chain you are saying to ethereum okay this is

the new state of the merkle tree after all these 4 000 things happen to it carry on so what we did there is we took computation instead of doing it on layer one like you know like uni swap is doing now and everybody else all these computations bringing up gas we do it off chain in a verifiably correct way aggregate it put it on so that's how uh yeah i'm not sure where i ended up there but that's how azik well first of all should i stop there or should i continue with some of the differences versus plasma and optimistic what do you guys think i think that that would help bridge the context right because it it makes sense that you know right now as i understand rollups they roll up the transaction it's essentially a batching process right but that i

believe is a very similar to like a broker model where you know they have everything in their order book and then they have some sort of recon at the end of the day but it sounds you know really similar can you explain like the differences yeah between plasma optimistic and then ultimately you know does that scale down fees just because you're sending less transactions on chain or is there something else that helps uh minimize the fees and remain decentralized and trustless right so i'll answer the latter part first it's it's scaling by virtue of that aggregation of that rolling up today so we take 4 000 things and we have an overhead cost when the relayer takes a batch

compresses it and puts the proof on chain it's let's call it 350 000 gas that's the cost it's fixed it's like jet fuel right like the airplane it wants the plane to be full so it amortized its cost over more heads that is how we scale like so for your trade we are you don't care about these 500 gas fees that are happening on chain but then when we go to chain and we land on ethereum with our plane we have to pay that overhead cost that fixed cost largely fixed asterisk i'll get back to that but that's how we we scale we've been overhead cost amortized over four thousand together type thing that's how you're getting like buying a group pass right and that's that's how we are that's how

roll ups everything scales uh almost on layer two so now the difference is the zk roll up on the spectrum of of layer two scaling zq roll ups is like right at the right end in my mind or which way you're looking at me the most secure side on the spectrum of like kind of scale or like yeah how fast you could go or how much more scale you could do how much more tps transactions per second versus like security that you're giving up zk roll ups make no sacrifices for ethereum level security they want to stay that's what we like to call it like layer 1.5 it's like so tightly coupled to ethereum and that is because every state transition of the off-chain world

is being proven with a validity proof that is so whenever you see like so zk roll ups the big thing is that it has a validity proof the state is transitioning and it is correct at that moment you it was impossible that the relayer took too much money from andy to rob or did something because when it's going in this black box to make the zk snark proof when the snark is created it means everything that happened followed the rules okay that is so let's call it the validity proof model really zk is a misnomer it's a validity proof model things are valid at the start and then it puts on optimistic rollups are so it takes validity proof and puts

it on chain and there's no questions asked optimistic roll-ups are optimistic it's a pretty good name actually they say let's not like do this like crazy math to make a proof that this compressed batch is correct let me just submit the batch like the updated merkle root which represents the entire state and you know if somebody doesn't believe me challenge me um let's do so that's called like a fraud proof system that's why validity proof is a better name because it juxtaposes it versus fraud proof you know so an optimistic role is optimistic here's the new state of the world here's the new merkle tree if you don't believe me then challenge me uh show me how i'm wrong show me that i tried to steal money or that the operator tried to steal money

and if you're right with your challenge you're gonna like win some of my money i have something on the line right like a a a bond uh an economic security guarantee so so that's it with so i mean there's tons of differences that sprout out of that but that's the big difference one is more strict you're making a validity proof before you submit the other one is you're submitting and then fraud proves to challenge you if you're wrong so if right there you conceptually see that you might want to trust like cryptography better to be like correct by design versus maybe somebody cheated although if your economic incentives are properly constructed you should and you know optimistic roles are going to be amazing for other

reasons they're not live yet but you know they should be secure but there's certain other properties like let's say a zk roll up when i submit that proof on chain it's final right it was already proven to be correct so all of the resultant changes from that batch could be in effect and people could withdraw their money like when andy sent rob one one die so now he has one less die as soon as the that batch proof is submitted and he could you know leave he goes back to he deposited the contract with optimistic rollups because there's a challenge period to find fraud you cannot leave right away when a new state of the world is put there you can't just be like okay i'm out um you got to be like all right let's give

people time to find fraud or you know make sure so that's a big thing like these withdrawal periods could be could be long in an optimistic in a fraud proof model um and by the way what i so what i just said in the optimistic sense all of that basically translates to plasma let's just go right into it the difference the difference there is that in both roll-up designs what makes a roll-up a roll-up either a validity proof roll-up zk roll up or the optimistic roll up model is besides submitting just the merkle proof uh the merkle root uh the summary of everything like

besides submitting that plus the proof a rollup also submits kind of like this interim data specifically it's the deltas of all the little leaves of the merkle tree it is putting that on chain as well so it has like an extra load so actually this is a good analogy i never thought of really you have the plane you also have like extra baggage down below so you have you need even more fuel to get to your destination because like you have a couple suitcases underneath that that we are writing to ethereum call data okay that's what uh zk that's what a zq rope and an optimistic it has extra data what that extra data does per batch is it it's a cookie trail or a cookie come trail it

it allows people to at any point in time say okay if i want to reconstruct the state of the world as it was yesterday or last month or one second ago i have all of the deltas of the state transitions since the beginning of time so i could literally start from zero day to the merkle tree the state of the world as it stood yesterday or just before because so that is the big thing roll ups do everything we just said but they have a bit of extra baggage that baggage is the data availability problem like i don't mean to make it's huge like it is the thing that like that's why we all love roll ups it's because the data is there anybody else could

reconstruct the state of the world because in the back what are we trying to prevent you right in a bad case scenario if loop ring turns malicious or leaves or gets an accident happen regularly like right you want to be sure that you could get your funds from that deposit contract because all of those little cookie crumbs could let you recreate the state of the world as it was five minutes ago you're fine with loopering being obliterated you don't care um because the the roll-up provided you the roll-up puts data on ethereum so if ethereum exists then you can withdraw your funds in a plasma it's basically what we described with the optimistic way but they are not putting data on chain

they're they're not putting that data on change there has to be like the kind of validators or like players involved that stay up to keep that data available so if somebody says hey i want my money from like i know we're in the middle of a new block or a new kind of commitment that's going to come to chain but i want my money from like yesterday or like the state of the world as it was you cannot reconstruct that yourself you are reliant on this plasma operator or this plasma operators for that data you have to say hey i want that data so i could recreate the puzzle myself that is the big difference and let's just extend it one little bit more

you could have a validity proof plasma that is what starkware has done with diversify um so starkware is you know it was like starkware is not by default a zk rob they could do they allow both but they were a validium first and foremost volidium is another word for validity proof plasma that's a new word right it's like only a few months ago like metallic kind of coined it when all this was coming to a head but so validity proof you still so you still validate each commitment with a validity proof but you don't have that extra baggage so you're happy when so so the validity proof updates the state and it was correct by construction

but if you want your data you cannot just rely on aetherium because plasma means it's held by other people not the chain um that's that's the definition of non-roll-up uh plasma if you is that the data is not on ethereum okay all right that that was a a lot of info that you dumped on us but i i think i could kind of narrow it down into this challenger model which is more that optimistic model versus the roll-up model which is the validity model right and it and just like you said starkware or volidium is the continuation or the next logical step because it combines both and that's kind of as you described it

where my mind was going like you could take each of these validity models where they're sending data on chain and then you could add a challenger model if you wanted to increase security or maybe you could start with the challenger model and then add the rollup model onto that right right so really good understanding one little snag and probably my fault um so the two axes here are validity proof and fraud proof like or the choice set is validity proof or fraud proof and data on chain or off chain those are the four quadrants um so a roll up just means the data is there's this helpful diagram but so a

roll-up could either be challenger model or validity model a plasma could either be a challenger model or a validity model that's what validium is so valydium isn't not necessarily um a logical next step it is just a trade-off the reason why volidium is attractive for some people is it's more scalable because you don't have that extra baggage it's not a roll-up right i'll only use the word roll up now if it's a roll up validium is a is a validity proof plasma so the validity proof is there but the data is not so you don't have the guarantee in the worst case scenario that you could extract your funds like

you could in a zk roll up you like let's talk specifics here like in the starkware model like with diversify specifically they're more they're more scalable than us because they have less baggage to commit the chain they are not a roll-up but they are committing everything with an associated validity proof but in the worst case you have to kind of ask this data availability committee this like circle of notaries data guarantors or however you want to call it that says hey just went wrong i need my money back from the last state of the world one of them needs to say ah this is the data you're looking for some people are okay with that that one

of n data guarantors of like respected companies right stark where diversify they will provide you that data but what if what if what if they all you know whatever right not them specifically they're awesome but that model right like the point is do you have to rely on just ethereum or ethereum plus something else that is something in plasma the data is not on chain you have to rely on somebody else in the worst case scenarios right the zk roll up model is nearly as secure as the ethereum and just you know a tad faster in terms of the tps i'm sure there's an exact number there and then the uh the optimistic is a little less secure on the end of the spectrum but also

faster is that correct yeah again really good one slight hitch is starting getting a lot of pings here but yeah so zk roll up is the most secure i'm comfortable you said that correctly it is the most secure i'm comfortable saying it's as secure as ethereum some people could poke holes and say oh you had a trusted setup right that's a whole other point but what if that was corrupted but assuming you let you unders you're fine with the cryptography zk roll ups are as secure as ethereum for asset custody bloopering could leave turn malicious your assets will always be safe and only retrievable by you optimistic roll-ups the trade-off is you don't have the state transition being

valid at that moment which as we said could mean that withdrawals are slow the huge huge benefit though are they're more flexible you will be able to recreate that ethereum beautiful composability and generalizability in optimistic roll-ups better than okay roll up so optimistic roll-ups could be composable with other l2 solutions as well within one protocol per se whereas like say if if loop ring was trying to use zk ropes to integrate with three other protocols on l2 it would be a little more difficult a little more difficult that's right okay it makes sense what's becoming increasingly possible yeah i see you know exactly how but yeah um it's like it's much easier today like yeah not only will

optimistic roll-ups allow let's say something like synthetics or compound to be there itself right it'll be able to be more composable itself it's yeah and that i mean that makes sense when you have like the fully decentralized route which in my mind is kind of what the zk roll up idea is it's like this it's proven by cryptography it's obviously going to be a bit there's going to be some pros and cons versus when you have the optimistic route which kind of has an arbitrator idea inside of it so that kind of brings that ability of composability but also that also has pros and cons so it's just kind of what you want to build on i suppose and like what you're trying to get done within a certain you know time frame or or roadmap about trade-offs no one is better than the other our my favorite is zk roll ups

uh for obvious reasons um but yeah z care loops right now are really good for transfers like just simple payments right yeah and for trades order book trading like we've been doing that for six months so that we cannot do fancier stuff except we announced the other day that we'll be able to do amms but yeah it's a great way you put it andy zk because you have this like black box of like proving a snark it's like more restrictive it's like tighter you can't compose general logic in there just yet starkware is doing great work on that uh matter labs is doing great work on that like these are our peers competitors they're it's kind of they're will like this is my view zk roll ups are the only thing the only roll-ups that's live right now it's us it's um it's diversified zk sync

um optimistic roll-ups are going to come and kind of like leap frog it maybe in terms of notoriety or whatever because you'll be able to do other more fancy things on there but then zk roll ups with advances in cryptography will be able to do all that stuff in a validity proof way um it just we need that like those constraints to relax a bit yeah yeah okay so let's let's let's throw it way back uh i think we're getting a little technical here at this point if you're still listening to this and you're watching i applaud you huge i i think you you just learned something that most people don't have any idea on on crypto twitter hell let alone even on four channel or reddit so congrats to you but

i'm still really interested in kind of what your guys the the process of listing assets is and kind of what if there's a community vote to that if the if there's if there's governance to there or if it's all just kind of like you know like how does that work or yeah what's the process there because everything is happening in this layer to zq roll up environment that environment doesn't know what the hell you know is lrc is our token or any token it it doesn't even really know eth for that matter we have to kind of say maybe by the way i might be butchering this right these are all my conceptions of this no yes exactly like we have to say hey in this world like this

this id of like this piece of data corresponds to eth this one like data bit two like token id2 is lrc three is usdt so just there you see it's harder for us to list things like sure we could mass list every token right now and say okay this is all their corresponding mappings but first of all in the current version we only have 256 slots for tokens um we could fit one million users on the roll up and 256 tokens for reasons okay in the upcoming version we will be able to have a bill i'm not sure it's the user number is it a billion users yeah i think a billion users and 65 000 token slots so we could list all all the

like so but you see right there it's a manual yeah there's a manual thing like there's a manual thing so that's like registering it at the zk roll up level then for loop ring remember we have this monolithic operator that is making sure that this state of the world gets wrapped up and then put here that operator is a human or a set of humans running an instance on aws again this doesn't make it insecure everything is validity proven when everything is being changing but change but it doesn't change the fact that here's this person running a software it's a matching engine it's an order book it's a matching so it has to be registered in the roll-up and then registered on the relayer

saying okay i am making this trading pair uma versus uma versus eth i am making that you it's like a normal thing right like why doesn't binance have every single trading pair right now it's because they have to like do it on their back end right they have to like list the pair and then open it like it's the same for us we have to say okay like it's that simple i won't go in for yeah i guess kind of what i mean i appreciate like the understanding on on how it works but i guess more of what i was trying to get at is kind of what is like the process on choosing the tokens if you will that's fair i'm so sorry in that no i don't know because i mean that does make sense um but yeah it informs this answer so

yeah we have a token listing form and we say hey what do you want to list and why and we're like right now there's no lrc voting lrc will take on a bunch of new properties that that might be something we want to talk about in a bit maybe yeah for sure rc but right now we just choose we say okay what what is this token first we see if it matches we can only support erc20s if it's like something else right now or if it's like erc20 some funky function that's like deflationary we can't support it so is it technically feasible and like do we think it'll do well right like maybe this is a partner of ours and says hey we really want to get this up there and even if it's not the most popular token in the world we'll say sure you know you're our

friend so it's a completely centralized thing as you see here i'm not afraid to say okay this you know the other day we listed wifey right we listed wifey and curve um because i was like all right let's do this so so we listed them right and uh so so so that's it it's we choose we choose based on a technical little a small little requirement and then what do we have time right it also takes a bit of time to do it so we have a huge backlog of listing requests but like a it takes a bit of time to set them up b for that same order book reason that we spoke about at the beginning once we list them it's not liquid on minute one right it's just an empty order book it's quite ugly so we have to say

okay people start padding the books start putting asks and offer and asks and bids so that's another thing that's just a very social thing it's kind of embarrassing when we lit like i listed we listed both wifey and curve with no like concerted effort with like our own market making tool or with a third-party market maker that said okay before we announce we're gonna have like a liquid book that's something like coinbase would never do right they like have like a day of people just like putting in orders before it opens up to the public oh you know we're more casual we're like all right here's the pair let's see what happens i listed it and he knows a slow start but three days later people started populating the order books so uh really cool right like um but yeah it's not that uni swap level of

just passively deposit assets and now everybody has a has a market it has to it takes time yeah i mean that's awesome i mean i i know that if i'm trading wifey or curve and i'm g and gway is anywhere near 400 i'm coming to loop ring to make the trade there's like there's no there's no questions asked you know what i'm saying thank you yeah for sure yeah and it makes sense just to have like capital you know allocated to loop ring just sitting there when something like that happens right because if gas is really really high you're not going to want to execute or fill a trade on any other exchange so um i i'm interested especially when this 3.6 upgrade comes

out so i can get some passive yield while holding capital there and the lower gas fees i mean that it you know there are certain things that i guess defy traders or investors are looking for and that seems to hit on every single checkpoint so yeah i definitely think there's some marketing that could be done in terms of loopering is the exchange not just for the whales to dominate d5 we're here for the minnows too you know it's very true that's a really good point you're you're both higher but actually i like i'd like to say like who is good for like who would use it right now it's really for like professional sophisticated traders who want to like take their coinbase bot

right that's like or whatever right like so high frequency because by the way back to your your point before andy we could do 2000 transactions per second yeah yeah like it's quite high right that's like that's like a thousand x or 700 x depending on how you look at it versus our last version it's like huge scalability corresponding basically decrease in cost but yeah so sophisticated traders could place an order cancel an order you know five times a second do their sophisticated thing that they need that low latency guarantee for and on the other end it could be like the big retail right that right now cannot do a trade for five dollars without losing a hundred um they could place a truck so it's a nice mix you have yeah heated traders and you have retail

traders that is what you want for a market that's what we could support and matt correct me if i'm wrong but it loopering would scale as more traders are are using it right and that's very very different from like a traditional legacy market model where they just want the most assets under management right they just want to get interest on their bank account holding all of that money and they're not really worried about the minnow as andy put it but you know loopring is looking for as many minnows as possible they don't really care how much or you don't you know really care how much money they're moving at once uh it actually helps scalability as more users flock to it that's very true i mean ultimately we want the most assets on there because we want more trades to happen because

we'll take we'll take a fee on that and just in general we can do more with more assets but it's very true we just want actually more user activity right now we will get faster with more users not slower because the airplane thing right when when there's 12 people on the airplane we kind of we literally say like oh let's wait a bit longer so we can get 20 people before we pay the hundred dollars in fee overhead right so more but that's up to a point we like right now our plane is hardly ever full right it's not like there's a million turns out when we hit like our biggest airplane size our biggest batch size is 4096. so for the near term more users more activity equals faster

for everybody then we'll hit that plateau of the batch and then it'll that won't be true anymore but yeah yeah okay so everybody you go ahead i i was just gonna ask one more or i i guess just segue into lubrin's model but it sounds like right now looping is scaling faster than demand which is going to be important right to to just keep up with demand and all the new users i'm interested about kind of loopering the coin and yeah i know you had a question so you can you know take it away yeah that's exactly where i was going i was going to say we uh are about out of time here but i would definitely want to touch on the loopering token the one thing that i'm interested in is what i guess two things is first is the governance so what's that gonna look like for the

token holders or the stakers you know if there's gonna be any what you know if there's progress what the roadmap is on that so if you wanna touch on that and then after that definitely interested and those probably go pretty close hand in hand as to how the loopering token accrues value through the exchange so what tangible elements of of interaction and and tokenomics uh can lead to the evaluation of bloopering token okay great yeah i'll basically just i guess combine those questions they're similar enough in my mind but yeah so the lrc token right now is a staking token for two use cases really users like any old person that never has used even our exchange right because this is

still on layer one could just stake lrc and they get a percentage of the protocol fee the protocol fee is six basis points of any trade that happens on the loop ring protocol right so loopering.io is just one instance of a loopering application on the protocol so any trade that happens on loopring.io six basis points goes into a fee vault that fee vault is claimable by lrc stakers so that's simple enough um yeah by the way there's like another there's another loop ring-based exchange in in in china um called we dex their fees also so it's protocol level fees right six basis points um six basis points is rather arbitrary we

came up with that like at instance and what does that mean real quick what is six basis points well six basis points is six hundredths of a percent so zero six percent so yeah like so yeah yeah six hundreds of percents like not a tenth of a percent but slightly less um um yeah so so that's that to skip to the governance for a second right now lrc does not have governance properties but it could have for things exactly like that what should the protocol fee be maybe we want it to be eight basis points you know eight hundredths of a percent or 20 basis points so lrc could configure things like that but on the other so so

that's it it's a staking token to earn rewards it's also stakeable or must be staked by that the applications themselves loopring.io the operator us has to stake like the decks let's call it has to stake a big chunk of lrc for like a kind of service level guarantee even though as we've just described there's no risk that your funds will be taken right as long as ethereum exists but there is a risk in terms of like a relay like the person doing this being like kind of annoying and they could be slow or like reject some transactions so there's ways that by the lr by the exchange operator staking something let's call it 500 000

lrc is the number right now if they misbehave like if they're too slow to submit a sequential block or if they do some type of reversion they'll get slashed so there is a slashing mechanism not for that base layer security that we sleep at night with that's ethereum but for that like service level guarantee that i'm not going to be like annoyed by my specific application lrc estate so so that's it um to be frank though our model is outdated for where we are it's like over a year old we've come a long way in the past year we now have payments in the system like on those zk roll up so blueprint lrc could be used somewhere else we haven't had governance in it yet

so i'd say like everything i just said is like largely how we're going to continue to think about it but it's very safe to say the mechanics are going to be changed obviously hopefully for the better but um yeah i don't like make any promises here but there's so much we could do to make it better and hopefully even do everything on layer two it's like not staking like right now you have to stake lrc on layer one how annoying is that right you're gonna pay 10 bucks in gas fees uh imagine doing it on layer two or it's just being normal like you holding loopering you holding lrc on the looping zk roll up should be equivalent to staking that's my dream so um yeah yeah and and how is that going to change maybe with 3.6

because you know right now the fees get locked in a vault and then that's claimable by all the lrc holders is that gonna look like a you know a weird combination now that people can provide liquidity in pools and they get a portion of that same fee vault yeah no really good point i mean it's undefined how we will do this we're thinking about it heavily but it's kind of like 3.6 deploys and then we could do all this other stuff 3.6 is just so important to get the usability up reduce cost reduce wait times increase everything then we'll be able to play around with the lrc mechanics but exactly what you said like it should be just so simple holding lrc on layer two is staking that gives you your your claim on the feedball which

will have to be like migrated to layer two or something like whatever i'm rough around the edges but it should be exactly like that it should just be simple yeah awesome well that was absolutely awesome matt we definitely appreciate your time and we've we learned a lot and i know those who are listening most definitely have yeah man that was awesome go loopering that was great yeah i know i learned a lot thanks for coming on man no thank you guys you asked great questions i think you have a good understanding of it and um yeah thank you d5 slate i'll see you on the zk roll up either this version or next absolutely for sure for sure thanks for listening to the defy by design podcast

until next time d5 slate team you