Episode 287 - Gnosis catch-up with Stefan George

Transcript

[Music] welcome to zero knowledge I'm your host Anna Rose in this podcast we will be exploring the latest in zero knowledge research and the decentralized web as well as new paradigms that promise to change the way we interact and transact online this week I chat with Stefan George from gnosis he walks us through what the gnosis team has been building over the last two years and we cover some of the projects that have since spun out of the organization we then chat about the evolution of the gnosis chain the work they are doing to make bridging more

secure and finally we talk about gnosis pay their new product focused on the original blockchain use case that of payments through our conversation we get a chance to cover a number of relevant themes such as intense account abstraction Zeke Bridges decentralization and we make a few predictions about what the larger ethereum ecosystem might look like in the future now before we kick off I just want to let you know that the application to attend zk10 is now open this event happens in London on September 20th as always we aim to bring together the top researchers and Engineers working in ZK to share their latest research and new findings check the show notes for the application form and please note spots are limited and only folks who applied will be offered a

chance to buy a ticket so do get your applications in soon and yeah hope to see you there now Tanya will share a little bit about this week's sponsors polygon Labs is thrilled to announce polygon 2.0 the value layer for the internet polygon 2.0 makes Mass adoption possible by offering users and developers unlimited scalability and unified liquidity this mission is fueled by groundbreaking ZK Innovations including a first of its kind ZK powered interoperability protocol and the next generation of the industry-leading and widely adopted plancky II proving system polycon 2.0 will change the way we experience web 3 by bringing the security and decentralization of ethereum to the scale and usability of

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participate as a developer apply for a grant or go for a bug Bounty check out ileo.org forward slash blog for more info that's elio.org forward slash blog you can also find the link in our show notes so thanks again Elio and now here's our episode [Music] so today I'm here with Stefan who's one of the three co-founders of gnosis welcome to the show Stefan thanks for having me Anna so I've already had your other co-founders on the show over the years but I'm very excited to get a chance to chat with you just to give folks a sense though like the first time I spoke to one of your co-founders it was with Frederica and we were talking about the original idea for gnosis that is like his prediction Market I then chatted with Martin about cow Swap and

the Dow work you were doing I had a chat with the Zodiac project which I think spun out from gnosis not yet but yeah okay and I also had a chance to chat with Martin again uh last year just after the fall like we talked about the Fallout of tornado so with members of your team I feel like we've covered a lot of ground yeah but today I mean what I'm hoping to do is do obviously a recap since the last time we checked in on gnosis but also find out you know what are the different building blocks what's spun out what's still inside what are you guys working on the thing is about gnosis is that I feel like you've consistently and kind of quietly over the years shipped some pretty interesting pretty important

pieces of software I think there's a lot of people who are interfacing with gnosis software but they might not know that yeah and this has mostly been in the ethereum community right yes yeah I know thanks thanks for the intro um yeah I think for gnosis uh the interesting story is that we continuously pivoted or we did just many different things in parallel and I think the reason for this is that we have many different interests at the same time um I think we yeah first of all entrepreneurs so we identify problems and we try to find solutions for it and you can imagine at the beginning of ethereum which was also the beginning of noses in some way there were lots of

problems but there were only problems to be solved and so we picked up a few of them that were for us uh interesting and that we also found instrumental to actually accomplish the core mission of noses which was at the beginning prediction markets so for prediction markets to work you have to have wallet infrastructure that's why I started the safe project with the nurses and then of course you need exchanges in order to trade prediction markets so we started very early on researching and building decent as exchange infrastructure yeah for ethereum and so it was just not necessary to build those in order to actually accomplish what we actually want to do at the time which was prediction markets it turned out that less people actually care about

prediction markets people like to theorize about them ethereum like to theorize a lot but then when it's actually finally about to launch then actually very few people cared about it and the many reasons for that yeah yeah um fortunately however everything else that we built in order to make prediction markets work work actually much better than prediction markets so it's almost like the tooling you built to get to your goal became your business exactly that's exactly what happened and eventually those kind of side projects became the main projects and at some points it became so big that it became obvious it would be better off uh growing faster and be more successful by not being part of the core organization

anymore but being independent creating their own identity and grow as they think it would be best understand a little bit why you know even in this early intro this idea of spinning things out so I have a sort of a starting question which is do you now consider gnosis to be a bit of a like company Builder or almost like a studio because you have these ideas you build the product you build up a team and then you spin them out and I know this isn't like the way you started off but do you feel like you could kind of call what you do now something I think that's basically it you're right and I would say it's like some kind of core

fundamental there that can eventually connect all the pieces which I think is also important and that is noses chain so noses chains its own network that came into existence actually the original version of nose chain was X die that starts in 2018 but eventually it merged with gnosis so I feel like that's kind of fundamental layer that can connect all the dots of what has been built as infrastructure components on top of evm blockchains and so ultimately I think all the components that were built and eventually spun off like safe and Cal Swap and now potentially zodiac they all have a role to play in in this like larger vision of noses chain

um that being said we continuously innovate and have new ideas and form new teams that eventually also become spin-offs so I think in some sense you're definitely right like we are kind of a venture Builder effectively or Venture Builder without even ever like having the exact purpose for becoming a venture Builder some people like we originally started in consensus which obviously was a venture build of course a venture Builder and now many people refer to us as actually being more of what consensus wanted to be um so I I think it's just kind of in our nature of being entrepreneurs having many interests and uh yeah trying to align many people with this vision and then eventually those become too big for us to to continuously drive all of them

forward and we find the right people that can take on ownership and become founders of those I think that's the extremely important part that many people completely underestimate of course you can always easily say like okay this becomes no spin-off but you need people that can actually drive this right like you need founder type people like we fortunately had the noses and are having a noses that are able to really Drive things forward that form their own Vision that are able to hire great other people to work with them and if you don't have this then well there's no spin-off I wonder can you share with me some of the projects that you did start that didn't go anywhere because I feel like there's no way it's only home runs we've

talked about some like big ones it's a very big graveyard usually over this but no I'm happy to talk about it I'm gonna ask you about one of them and maybe it wasn't a graveyard one but I do remember many many years ago uh we were talking about like auctions yes you are talking about the Dutch exchange Dutch exchange did that was that a graveyard project yes okay that I can very confidently saying also graveyard project uh and I think it was probably if you compare the like time we invest into it to where it is now like the biggest investment of resources from our side with a little with a smallest like output or success um it was still instrumental for the

call swap so in some sense you can see many things as being continuation of other previous projects because it's the same team working on those they have the same like they gained experience through those failures obviously and ultimately led to actually better products and I think also what we saw is like we hired a lot of people which were great Engineers but they were new to blockchain and so they mostly relied on us giving guidance and making design decisions and I think over time of course it became more and more seniors so they could really much better argue with us which ultimately LED also to better products and I think for the Dutch exchange specifically um the yeah there were many I would say user experience problems where it never

really took off and uh it was also an ownership problem so as part of of Dutch exchange actually we also formed DX Dao if you remember this style so the the problem that we foresaw with decentralized exchange is not only writing the smart contract and writing a nice UI but you also need someone to host this UI and be responsible for the operations of this exchange right and we didn't have any license for this so together with launching The Exchange we also launched a Dao okay and we had one of the first liquidity mining programs

actually that gave those people ownership in the style wow and this is how DX down was formed so it's a very interesting experiment you can think about this like you are in a room that's dark like this room without light you switch on the light and then you see all the other people in this room and those are your co-founders yeah yeah that's kind of how DX down came into existence so suddenly there was a Dao there were people with ownership but no one knew each other until the point where the liquidity mining program was actually done and uh you could really form teams well unfortunate actually this as with every dial is struggle in getting started and so they were not a really able to drive the exchange to being successful so unisop was way more

successful obviously but the external itself had interesting activities so they they really started forming an organization and most importantly they were even able to coordinate the token sale okay for themselves or for someone well for the Dow itself so capitalized the Dao with a significant significant amount of ether I think something like 20 000 either and uh yeah they gave ownership um yeah in DxD tokens and yeah it was very interesting to see for a couple of years unfortunately now it ceased to exist because ultimately they were not able to drive this organization to be successful in terms of developing interesting successful products so actually just a

couple of months ago there was a Redemption process where DxD token holders could redeem their tokens for ether and uh yeah in some sense I would say digital has failed and there's now also cease to exist okay but it's definitely one of the most interesting experiments that we did um did this lead at all to the Zodiac stuff in some sense you can say yes because some people from the Zodiac team obviously worked on the Dao related tooling that was used for the X style to come into existence and but more importantly the cow swap team worked previously on Dutch exchange and then a lot of the learnings about how the auctions would run and

also especially on the user experience side led to the creation of cow swap which then obviously became successful enough to actually become a spin-off Cal swaps it sounds like there's a lot of pieces that sort of like you needed the exchange for the prediction Market that was sort of one driver the other one is you had created this Dutch exchange but it wasn't really the project that people stuck to so did they switch to cow swap or did they really like graduate to it uh so it was more like a switch I would say or like if they use Dutch exchange at all so the problem with Dutch exchange was so the way our Dutch auction works we started a very high price and then the price goes down over time until a time when everyone's bidding and the auction is

finally closed so from user experience point of view it's kind of annoying if I was want to buy a token I don't want to wait like six hours or so to finally have the the price point at the Mark where I want to invest into so that was just not really great and for us it was mostly a mechanism to find a fair price but there are better mechanisms okay but did Cal swap use that does cat like under the hood does cow swap have that so no cost up is using different type of auction under the hood uh it's like a multi-token batch auction design it's actually much much more complex um but the team and that we hired um for Dutch X was I would still say kind of junior in a sense in terms of

experience in blockchain so something as complicated as khalsworth I think could only be formed by a team that already had a lot more experience and I think Dutch X gave the entire team enough experience to even work on something as complicated as cow swap I know that what we want to talk about today is more about like gnosis chain and some of the upcoming stuff but I do I want to sort of stay on Cal swap for a second because just recently we had Chris goes on the show talking about intense yeah I was still silly saying it because I yeah I think I sound like I'm saying intense but yeah when I started to learn about it the example that was highlighted for me if you want to see an intense based system in the world in the wild try Cal swap which I use actually quite often so

I already knew it and I was like oh that's what you mean like you kind of put out what you want and you kind of put out how much you want to pay and then it finds it through some much more elaborate you know going through different tokens that's exactly what console is so if you trade on Console what do you sign cryptographically is you intend to swap one to token for another token for a certain price and a certain price range and you can also Define like a time frame which you want to do this and then this order or intent is out in the wild and what you call solvers in Cal swap they can take those intents and try to match them with other intents to finally settle them on chain so in that sense

it's actually an intent if you would trade on Unison for example are you actually signing a concrete order ethereum order a transaction which directly defines a path of execution on chain so that's very very different here we kind of are abstracting a way of like the concrete way to settle to just Define what's user intent and that of course allows much more flexibility in terms of how this intent is actually materializing in the transaction and but do you think like have you been following the intent conversation then like yeah how do they take what you've done and push it forward so this is like a very complex topic I think it's also kind of related to the general idea of also even account abstraction or like how you

um I would say the more complex the system becomes the better it is to ask user for the intent instead of the concrete execution okay because there can be many factors playing into this and if you just have the intent and you have the most abstract form of what a user actually wants to accomplish in the system and that's only what the user actually cares about totally and allows us to build the underlying systems to fulfill this intent and they can become arbitrarily complex but we don't lock the user into like one concrete execution path that's kind of high level how I would explain it and that's why I think also it's a better way to execute a very simple example of this via related to account abstraction one

fundamental feature that account abstraction also through safe contracts allows to do is to abstract the intent from paying the fee for the transaction yeah so one big user experience issue on blockchain is still people have to understand what's a fee or transaction how do I price this transaction what if there's a gas Spike I have to resubmit this transaction because my gas price was too low you know all of those user experience issues they can all be now abstracted the way because the user only cares about swapping a token they don't care about the transaction fees and the account abstraction allows exactly to do this you just have your content and then someone else like a relayer Searcher solver you name it and many terms for

this uh can pick up this intent turn it into something that's actually executable and make sure it is included and the user doesn't have to worry about it and that's why intents are so important I want to talk a little bit more about account abstraction yeah I you know a while ago I had Argent on the show and we did talk about sort of the smart contract based wallet but isn't safe already kind of account abstraction or is there like what is why is there then a conversation about it now are people trying to get more people to move to these types of wallets or yeah I'm just curious your thoughts on that very good question so yes a safe contract has all the features that are important for

count abstraction and yes it exists already for many many years and we even built first prototypes like almost three years ago or four years ago where a user could actually do an ethereum transaction and not pay with ether but any other token yeah yeah very simple example one feature that is enabled through account obstruction that's massive implications for user experience the question is like why did it came up now um I think it was triggered because it was shifted more into the focus of the ethereum mode map itself vitalik brought it up um the eip4337 was formulated and got a lot more attention and that effectively tries to solve some

of the problems of account obstruction generally I think the reason also why it became more important is because more people realized account objection is needed for us to bring user experience on par with web 2 which in my view is also needed in order to get to a larger level of adoption if you really want to onboard finally this next million tender in whatever amount of users we have to have account obstruction in place and it can't have the name account abstraction anymore no it needs to be so hidden yes it is and actually I would say the save is most likely to be the core infrastructure for this simply because it's a most widely known smart contract so for example every World coin user is

using a safe contract can well different opinions on world coin but I'm very glad with their design decision that you save contracts yeah and now we see more and more wallets implementing safe contracts under the hood to allow account abstraction and yeah no origin is also a very good example of course they have their own system and they are mostly I think focused these days on decasing and Stark net whereas we are kind of agnostic so safe contracts exist on every on every evm Network at this point yeah I bet and a lot of mobile wallets now starting to implement safe contracts because you understand it brings a lot of advantages for account recovery for fee abstraction

and all those things that will be necessary to onboard more users so what happens to the safe when eip4337 goes through like does something fundamentally change for the user so to explain four three three seven so 4337 is actually not an ethereum protocol change it's only something that is implemented on the application layer if you will or you can also be implemented in ethereum clients but doesn't change it doesn't require any hard for a soft Fork right um it is a standard as there are many standards but what it allows to do is to more easily relay transactions so we talked about the intents right and the

intents have to be formed into ethereum transactions and they have to be propagated on the network and that's kind of what 4337 tries to solve by having this built into ethereum clients which can pick up those intents to make them part of the ethereum blockchain that's what it is about there are many opinions on this so one thing is very obvious on ethereum itself it will not materialize because there is significant gas cost overhead attached to this and it would make every simple esc-20 token transfer twice as expensive and people are already complaining about transaction fees so I doubt it will gain any meaningful adoption on ethereum itself got it of course talk about layer 2's we are talking about a different

environment and there it is very viable one thing however uh something that we see on ethereum right now right like we see centralization through searches block Builders and stuff exactly which is because it makes things more efficient and of course intents also include Mev right wait what do you mean like the um it adds more Mev it creates absolutely absolutely like every intent can include Mev right like if I if I want to if my intent is I want to swap a for B and this is a price range then the price range gives you some opportunity for nav and that's why it's just a hypothesy of obviously right now but my

assumption is any network that will eventually have Mev available or I guess enough economic activity will lead to some sort of centralization of this part and then it will probably not be like the similar to how we don't have decentralized mempool right now uh we also not have a decentralized mempool for intense because it kind of falls back to the same principle it's not fundamentally different and that's why I'm kind of not sure if 4367 will be actually as important as people think it is today but I cannot predict the future I mean I can only make assumptions uh we will see what will happen in any case I think the safe contracts will be uh quite important for this because they

are just independent of how the mempool is is just a way how users can set it intense and that's it there's a lot in what you just shared so first of all this idea so I'm realizing and talking to you that I have not visited ethereum land in a while because I mean I've talked to maybe individual l2s or likes but I I feel that the the idea that an EIP does not succeed on the main but only succeeds on the l2s this is sort of the first time I'm I'm realizing that that's possible that really talks about like a like a difference in I don't know if it's like communities or like Builders will have different choices to make if they are building on

an L2 in this case right and that's something I mean I I feel a lot of the altitudes are sort of selling themselves as like one to one as a virtual machine one-to-one but there is different activity actually happening there absolutely so I think it's very obvious that ethereum will not be a place for individuals in the future to operate every more for institutions and layer twos as like a kind of settlement layer and a place to rebalance between different parts of the network but it will not be you or me making a transaction it would just be too expensive and then you also talked about this like centralization of mempools on the different l2s this to me is probably like a whole episode to talk about like the role of the Searcher and what that

means going forward I wonder if now would be an interesting time to also introduce gnosis chain though because I know we mentioned it right but I feel like yeah because that's what you are currently working on in in a lot of ways this is where the project has evolved to I do think we did mention it on the episode with Martin at the last time he came on but yeah let's let's introduce very very briefly um so noses chain previously was called xdi so many of you probably know it from the times when you were issuing props yes also we did an episode on that a long time ago right yeah great so people want to hear that exactly just I think that was the first time I understood

Bridges actually okay that was very much a bridge it was like another Network that was bridged and that was the terminology I think they were exactly like basically noses chain is the let's say original side chain to ethereum okay it was the first one before probably go on buying smarts yeah any of those existed and it was called xdi it was called Exile and it was associated with this burner wallet phenomenon that's right was one of the main applications really nice to use for payments and so it always kind of was associated use case we saw it being an underappreciated ecosystem and we wanted to help xdi to succeed and So eventually gnosis and next I merged it was renamed to noses chain and we changed the technical

roadmap previously we was using POA consensus and we changed it to actually ethereum we can change consensus so we have our own Beacon chain running for noses chain and what makes ethereum consensus very interesting is it allows for a very decentralized validator set so ethereum has about I think 550 000 validators right now notice chain has about 130 000 validators and there's literally not any other networks that come close to those numbers yeah yeah and of course this number also has to be taken with a grain of salt because it's more important how many different entities are actually running those it could be just me running all validators would not be very decentralized so that's why we also focus on

incentivizing lots of individuals companies to actually run validators yeah and yeah we know for sure that we have about 1500 to about 2 000 individuals and companies running validators which is a lot for a blockchain network so there's very few networks that can come even close to those numbers and uh of course the questions are always like why do you focus on decentralization obviously we all know this famous like trilemma coined by vitalik you have to you have scalability you have decentralization uh and security and you cannot have all of this and most of the ethereum competitors they focus on scalability because they saw

um ethereum being fully utilized and they saw the opportunity to create something that's more scalable for us we focused on decentralization instead of scalability because we see a high demand for decentralized Block space right like only ethereum is actually super decentralized Bitcoin as well but all the other networks uh again like they make these huge compromises in terms of ah decentralization not as important scalability more important and by other networks do you mean l2s or do you mean the like other l1s actually all of them okay so layer Layer Two is actually very centralized there's only one one sequencer usually although there there's talk of decentralizing the sequencers every single one has that on the road of

course of course but then you kind of go back to the same problem right and uh so it's just like kind of having a blockchain built on a blockchain so of course everyone wants to decentralize but de facto just looking at what is the state of networks today like layer 2's are very centralized and then you have polygon which of course has a lot more validators but also unclear who's actually running them how decent is this actually then you have we see we see chains like sudana it's very obvious very few parties can collude to actually compromise the network so decentralization is actually a very scarce resource and only ethereum Bitcoin really fulfill the criteria I would say to have a really fully decentralized Network and at the same time we see ethereum block space is in

high demand it is one of the few networks where people have a lot of trust in this network they store their net worth on the network they are willing to operate globally and so we saw an opportunity to create more of this decentralized block Space by offering actually highly decentralized Network following one-to-one dthm roadmap so we are the only like one of the very few networks that is actually running the same stack as ethereum which also allows us to benefit from all the research that is done on ethereum so for example very soon we'll have a proto-denk sharding being implemented and that requires actually Beacon chain so we have a lot of networks that are evm compatible like buying smart chain polygon but they care never implement

this Erp because they don't have a beacon chain you say you're one-to-one you're sort of following the roadmap but are you sometimes able to do things before the ethereum network can do it like for example did you go to proof of stake first that was our intention to be honest I think it's impossible to front run ethereum okay so I think we kind of jumped ahead of ourselves a little bit and to be honest it is just incredibly difficult and even us being very close to ethereum we underestimated the app the insane complexity of the underlying systems and so I think on the on the core layer we cannot ever front run ethereum simply because uh there are too

many complexities and maybe we can eventually activate a heart Fork a week earlier but it's also unlikely okay so so far we've been running behind I don't think this will necessarily change however we can innovate on a layer above so we mentioned four through three seven being one of those erps which are actually not requiring a hard Fork right and on this layer I think we can experiment a lot so we experiment with designs at allow for example encrypted mempools to allow more privacy and those of these those kinds of designs we can innovate on top of ethereum without being directly incorporated into the into the core layer if it proves to be successful eventually we get enough mind share to drive us back to ethereum and

say like here look at this this is something that makes sense it's got adoption and then eventually can be implemented in the core layer but that's a very long journey so I I would dare to say we're gonna front run ethereum okay we're gonna be uh modest and follow and make sure that we're actually on top of things did notices like like idea and I don't know which interviewer when I heard this but wasn't nurses chain kind of early on also meant to be like the place for more non-economic activity sort of like the example that was often given was like voting on a dow you would do some sort of the activity on the L1 but like the voting and that all of those signatures and all that activity would happen on

gnosis chain are you still thinking about it that way it sounds like not really so one way we see um nurses chain is to be sort of an extended version of ethereum so uh as we are very decentralized and we have a very secure connection to ethereum using actually DK technology yeah um we can be used as a space for trustworthy computation that can eventually be relayed to ethereum so that's something really still are very excited about and we are also working with those teams that try to enable us including like Axiom for example um but I was about to say as you said that sort of the extension it sounds a little bit like the co-processor or the exactly what they're doing is so

specific and it sounds like gnosis chain is way more generalized still yeah notice very generalized but Axiom I think is a very great team that can enable some of those use cases and so we are working closely with them to enable them also specifically between gnosis chain and ethereum we're also talking actually to some layer used to use notes chain as a place for data availability whoa oh my gosh so that's such a flip as if you're oh no this is kind of not a flip but I think of it like isn't da always meant to be like oh I mean at least the Celestia example is like data availability is sort of the center and then you have Roll-Ups that come off that and all the execution Celestia Vision okay okay tell me yours wow like uh I mean Celestia yeah great project

um but of course right now ethereum Roll-Ups uh like using ethereum for data availability and now we're talking to layer twos that are considering using noses chain for data availability instead but you would be using in this case they then writing data to gnosis yes the reason you do it on ethereum is you want the like amount of security that ethereum has well that is the right that's the pitch that vitalik is doing okay of course it comes with a very high cost because ultimately your costs are directly proportional to the general fee cost on ethereum so potentially the very high like very costly to operate and for many use cases I think will not be

viable and actually data availability is uh in our view requires much less security assumptions compared to computational integrity right like you want to make sure that uh you don't template transactions by settling on ethereum and you should be able to challenge this on ethereum but where the data comes from and that you have data available for this you can use many different systems it doesn't have to be ethereum it can be celestial if once it's available it can be no sustained so it can be any of those systems and important is that they're securely connected to ethereum to be able to prove that something was available and that's something that you're also developing obviously like a

secure bridge that allows to communicate between ethereum and nurses chain as you're saying all this would eigenlayer also kind of be in that competitive sphere that you're talking about or is it closer to you than Celestia in a way good questions I I think it's a bit closer to us for sure um but it plays in the same yeah in the same field wow I feel like I need to see a map me too I mean even when you when you talk about data availability of l2s like if they're using gnosis and gnosis meanwhile is using the succinct technology to ethereum and they're using their own sort of like ZK I mean not really Bridges but you know the ZK roll-up proof right it's like you see sort of the central ethereum you see all

these chains branching off it and then you see all these things between them and I always thought oh it just be Bridges between them for tokens but now you're talking about like no we're going to abstract this part of what you're doing and we're gonna do it on another L2 I mean it's just orientation yeah it's totally wild I mean for me tokens just like one very simple use case actually can be built around Bridges but of course Bridges um like most of the bridges Implement something called arbitrary message Bridge it's a protocol that allows to yeah send arbitrary messages and this can be can do anything basically crazy do you think okay so as you were describing this scenario too it starts to look a little oddly like Cosmos or something like these like different

things that are all connected and currently there's like one Central one but do you envision this is like obviously no one can predict anything but could you imagine that there's a future where there's these Roll-Ups kind of hanging off ethereum and then they have their l3s hanging off them and then maybe the center of gravity shifts could that happen so it would never shift from a layer 1 to layer 2 or from a layer 2 to layer three and that'd Simply Be that's not possible because uh the higher you go in the layer the less secure it becomes it always depend on the security of the underlying layer okay but in their case you are you're a full-on blockchain it's a token so what

we foresee is a future which kind of combines the idea of Cosmos of having multiple networks running parallel with the vision of having layer twos expanding the blocks like the block space basically of the underlying layer one crazy so effectively you will have multiple networks being securely connected via ZK bridges that can prove State correctness and that you're operating on the canonical chain yeah so this will happen and then those will have layer twos layer threes whatever on top of it to a scale like their specific applications so the other architecture that had this look a little bit would have been polka dot with kusama because I remember when they did those two I

mean ultimately the architecture has become extremely alike yeah so I think it's just it's kind of a mix of horizontal scaling and vertical scaling yeah um that ultimately all of those systems derive towards too yeah and yeah I think it's great it's like it's good to agree sometimes it's fascinating to see it all sort of converge in that way but you can also see like there are different building approaches like how did these systems come to life some were predefined and designed some were sort of like specked and then picked up I put polka dot in the first one I put Cosmos in the second and still figuring it out and then ethereum like like a Serenity had originally also predicted something

like this yeah they were very vague ideas of like how the future should look like and has changed so many times um I think yeah ethereum was kind of like yeah we just launched something and figure scalability out later on approach yeah whereas volcano was more like top down okay we solve scalability this way and Cosmos was I think also more organic with the difference that it was always more app chain specific instead of having a generic environment for any kind of application operating on the same network although a lot of the zones that are successful have had to sort of become football teams anyway because those connection points weren't really there for them to start using the other networks like now they're getting there but yeah it's it's sort of funny it's all converging to the same so something

that I also predict another prediction so um so kind of what we see is ethereum is at capacity right for the last years actually on the other hand we have like the concept of app chains app chains basically you have one network trying to have one application um being run on this network and that's it and I expect actually instead of having this application sharding we rather have user sharding whoa so user sharding for me is a bit similar to how you play computer games actually you know like we have different servers you connect to like the European server us server even if you want to play like an MMO yeah like if you're okay yeah so I'm

talking about not the world not not the CD that I put into my no no no no no no like you back in you play one of those and then RPGs right and those can only scale because they have many different servers in different regions it makes sense because you always play with people many times you play with people in proximity yeah um yeah well it's definitely kind of one way to to solve this problem to have those different servers and that's kind of how I predict also how blockchains ultimately will evolve if you have user sharding so you have like different layer tools they will all have the same applications wow but it will show the users according to How likely they transact with each other and in a way it so it's funny because it is sort of happening but it's happening

because of like the marketing efforts of teams like you'll have some l2s that just worse or or like other blockchains that like went into a single Market Japan or turkey or something and they happen to get a lot of users from that particular it makes sense that's how it grows like every user wants to have everything right like you're not moving to a city where you have only a bakery you want you need everything ultimately to to feel like you can get around and uh that's the most the easiest to accomplish by having everything on the same network because you can have the same Assumption of how costly transactions are and I also like to compare to cities you know like um depending where you live you have different transaction costs and user

sharing will also happen not according only where people live but also what kind of price they can pay for transactions if you live in Manhattan obviously you have you're willing to pay more rent compared to I don't know living in another city in U.S and and that kind of I like to come to compare blockchains to this as well like if you you can be in the expensive chart where you can maybe do like high value transactions because you have a lot of money you can pay a lot but that's basically ethereum and then you have like other districts of the city it can be optimism nurses chain whatever where people with less money want to transact or like other use cases are being developed which just require different

environment you would mention the succinct Bridge just before let's dive into that in a little bit more detail we did have Uma on the show as well it's so funny this episode in particular is going to be like the list of other episodes that people should listen to um this is a very kind of like you know Hub and spoke episode but yeah tell us a little bit about the succinct bridge where where it's at is it already live and are you using it yeah so I will not dive into the details of ZK um was 100 times better at this and you as well but yeah so effectively Bridges connect to different blockchains and they I think are considered the weak part right

now of our ecosystem because they've been hacked a couple of times in the last years and um yeah if you look at the bridge that connecting noses chain and ethereum we see it also as the most important part of the infrastructure because it allows these use cases that it's kind of allow to extend ethereum with no such chain box space can be data availability can be downloading you name it right now today the bridge is still very simple it's a multi-signature wallet that is operated by many different independent entities that are validators on this bridge they they see a transaction coming in they confirm there's actually mine on ethereum and

then they trigger an event on gnosis chain that's kind of how it works today how many multi-sig signers are there so we have seven okay and a fraction of those has to confirm in order to actually make transactions happening and uh now recently just I think last week or the week before we upgraded this with a new validator which is succinct okay so what effectively is happening is succinct can prove that a certain event happened on ethereum by recreating the consensus of ethereum on gnosis chain okay through a ZK snark and when you say it's you've been added

to do you just mean like that is now a new yeah one new entity in the multi-save okay is so we go step by step here right okay we don't want to go all in into the technology that is not in that sense proven of course everything has been audited but it's a very new tag so you have to be conservative and very conservative approach is just making them part of the infrastructure by being one of these validators on the bridge and yeah being able to recreate if the transaction actually happened on ethereum by proving the consensus of ethereum or noses chain through succinct and then using this as a confirmation on the bridge itself what are the other multi-sig agents doing then like are

they also confirming something are they kind of doing the same action they're basically but they are of course much less sophisticated they are just looking they just have an ethereum node running and they see um transaction happens someone deposited something let's wait for this to be actually confirmed uh I think 20 or 30 blocks or whatever I think we had to increase this for succinct because I think can only recreate the consensus I think every 50 blocks or something don't quote me on the numbers um but that's effectively what the other validators are doing and then if they see something was actually confirmed they uh yeah signal this and they sign off on this transaction and then you can trigger this transaction on noses chain

interesting you're all of a sudden making me want to understand what the multi-sig the regular multi-sig person or age like is it just a computer program running yeah yeah like it sounds like you'd have to do a lot of these things no fortunately we have just like Computer Services running okay and that can watch the nodes incoming transactions wait and everything is automated and the reason why it's secure is because we have many parties running infrastructure independently and they're very close to us so and they are also very firm in security so we know their

systems cannot easily be compromised that's why we consider it a very secure system probably much more than many of the other Bridges simply because the smart contract implementation of it very straightforward very secure and uh yeah that's why we think actually is one of the most secure Bridges today now you're adding this the succinct and the ZK but this is exactly but that's only one first step ultimately our vision is a different Vision so ultimately we want to move away from this old multi signature based bridge to a new bridge which we call Hashi Hashi like hashes so no it's like the Japanese word for bridge actually Okay cool so yeah yeah

so like one of our Engineers he is uh quite uh fond of Japan so you point this project Hashi and uh yeah the idea of hush is actually it's kind of also multi-stick if you will what it does it Aggregates information from different Bridges and allows applications and actually a token bridge is an application of an arbitrary message Bridge which can be just built around which basically allows to aggregate the information which is required in order to have these other applications built on top and a very simple example we have multiple Bridges already connecting to noses chain today okay so which happens it's like synced Omni

Bridge Wormhole and a few others are running in a test environment right now okay and if you think about blockchain information we mentioned we need to extract information in order to understand that something happened on the blockchain but ultimately the information is Consolidated in one piece which is the block header and all of these bridges are doing the same thing um they don't they don't they all have the same block header no they don't no so they work very simple like like our multi-signature Bridge they just have Services running out there was a transaction great I confirmed this on the other network that's how they operate okay so they don't even look into the block header at all let's see

okay but the block header is but ultimately everyone can still agree on and to give you an example how we can do this we can use contract on ethereum that automatically when you trigger it sends the ethereum block header of specific block via Wormhole two noses chain okay right so we basically when we have information on those chain we know it has based on the security assumptions of Wormhole we have this information relayed from ethereum to nodes chain now we can do the same using another Bridge Okay like Nomad whatever Omni Bridge succinct right they all can do the same thing and they will all relay in theory the same information with the block header for a specific

block and now on those exchange we can use Hashi to test if everyone reports the same yes and if they all report the same then we basically have additive security of all the different Bridges that's cool and based on this block header we can extract the information like ah token was transferred and uh allowed to build all the other applications on top Hashi though sounds like something you could use could you do something between like I don't know osmosis and ethereum or something if they have like multiple Bridges they could create something like this absolutely so anywhere where multiple ridges are kind of connecting different ecosystems you can use this to relay the same information in the block

header to make sure um we actually have trustworthy information it's very unlikely that you can compromise all of those bridges at the same time although wait do they all have to be ethereum based well they have to be able to connect to if you want to read a sentence it doesn't exactly it doesn't matter that they connected to theorem yeah but they have to be connected to the blockchain that you want to actually transfer the block header from right okay if you want the bridge between ethereum nose chain has to be between those two networks if it's I don't know Cosmos and I know um whatever osmosis or ethereum then has to be on Cosmos and ethereum and so on that's interesting yeah do you need do you need it on both sides well it

depends on how you want to do things so for example if you don't really want to go back to ethereum as it's just about transferring information over from ethereum to noses chain then the one-way bridge is fine but in most cases I guess you would like to have like a full duplex Bridge which allows to go in both directions is it just contract what is Hashi yes it's just a smart contract it's just a standard of how you can aggregate this information and decide on if you actually trust this or not it's a very simple concept but important because ultimately I think right now no one would trust any single Bridge yeah but if you can add security of the different bridge implementations

then it becomes interesting and on the one hand I think we kind of commoditize bridges here which is also a bit tricky because most bridges care mostly about applications like token transfers token Bridges but we just now care only about the block header which is the most fundamental piece of information but there's not necessarily like a business Associated to it and the idea is to build on top of this information a token Bridge so in that sense we commoditize it on the other hand I think for all of those bridges um no one really trusts their security assumptions so in some way it's also a way to gain trust again in any of the underlying systems by adding them all together what happens if you spot one of the one of

them bringing the wrong header very simple then the in our case actually the bridge was Halt and we would have a governance decision of what to do probably would probably disable this one temporarily at least yeah yeah but you'd have to like like you'd have to tell I mean of course I mean the assumptions should never happen right like if this happens and there's something security is happening yeah either technical floor or just a security compromised whatever and then it's better to just hold and see what's going on because otherwise yeah we've I think people have lost enough money let's talk about maybe a new project or the new things that are happening I don't know are they deeply related to the bridge not really right so in some

sense everything is related to the bridge okay because we have a lot of assets which are mirrored from ethereum okay okay for example stable coins like UCC usdt is not natively issued right now on on noses chain but it is coming from ethereum so you rely on the bridge security got it all to use those assets so let's talk about the new project though yeah let's just pay yes yeah okay tell me about it yeah no such pain is a new project um that is launching at the time this airs probably and uh knows the space obviously about payments which we consider one of the most important but kind of underappreciated use cases in blockchain

if you think about the original Bitcoin white paper the Toshi Nakamoto actually described Bitcoin as a peer-to-peer electronic cash system that was kind of it's a title of the white paper something you would use in the real world used for payments payments was the number one use case you had in mind when you say payments now though we also think of on-chain payments but here you're kind of talking about like well yeah generally I would say just like payments how you would do it on a daily basis and I'm not talking about like big transfers of money but rather every day and everyday application um and I guess today even the biggest Bitcoin maximalist would not argue for Bitcoin being used for regular day-to-day payments and of course there

was a time in Berlin what was it called there's like this burger joint that would like well there was this uh Bar 77 no yeah yeah something like that yeah yeah and he accepted Bitcoin exactly actually he probably didn't need to work anymore then he somehow run out of business I'm not sure why but um anyways so that was kind of the original idea of Bitcoin well today we have maybe ideas like lightning network but all of them would never ever scale to to something that would allow actual like day-to-day payments to to work and uh yeah what are the reasons why this never succeeded I think it kind of relates to um one blog post that vitalik also

recently posted about the three transitions that need to happen in order to gain larger adoption which is related to scalability through layer twos which is related to uh user experience through account abstraction and which is related to privacy right right now every transaction is publicly visible and that's just not what you would like to have for your everyday payments so I think we made a lot of progress on all of those topics actually in the last couple of years and now we are in my view at an inflection point where technology is ready to actually enable those use cases finally cool so we are able to develop noses pay as in layer 2 with a counter section

enabled through save contracts on gnosis chain and what is it though what is gnosis pay because what is nose's space the noses pay is the first decentralized payment Network so we are building a layer 2 that is optimized for the use case of payments and by payments you mean like buying stuff in stores I mean really everyday payments like what you are using Visa master account and whatever so how do you how would you do it though do you have your phone or do you have a card so Essie SE kind of first product that is being launched on those pay uh we are launching a card okay yeah so it's like a debit card um that you can also use with Apple pay

and and whatsoever and it allows you to use funds that you are storing on noses pay so you have your funds in a non-custodial environment but whenever you pay you grant the permission to the payment processor to withdraw from your non-custodial account and yeah having your funds always in your own account instead of having binance or your bank or whatever in between having custody of your funds because like there have been credit cards out there like yes crypto credit cards exist but usually behind the scenes what's actually happening on those cards yeah that's very simple I mean binance car triple.com all of those

cards they're just another interface to binance.com or crypto.com so a user has to transfer their funds to binance a centralized and space centralized exchange and then you can directly pay from this balance and binance makes five percent of the spread if he doesn't like they say that it doesn't have any fee but effectively when you start spending they convert your crypto on the fly at the five percent spread so you actually paying a lot of money okay so it's not even great from that perspective at the same time it's still very successful there's definitely high demand for users to not off-board to to their banks in order to start spending on a daily basis and now what we do is we move this from the centralized exchange to

decentralized network where the user can have the same convenience because I think that's very important like users don't want to change their behavior you still want to use your phone or your card to pay everywhere and you want to be able to pay everywhere like a Visa MasterCard I accepted at 80 million Merchants so it's the most distributed payment Network and I think in order for us to actually build a decentralized payment Network we have to build a bridge to the old payment Network Visa Mastercard they're here for a reason and we have to connect to them in order to gain adoption and so that's the question when you say you release a card like what kind of credit card is it is it just one of the more classic cards like it is is it visa it is it has to be Visa card because otherwise you could not use

a Visa Network and then you could not be accepted at 80 million Merchants so they've done that leg work on the ground to get right right so they we still have to at this point we have to work with Visa in order to gain adoption and make sure our users have a great experience at the same time we settle everything also on a decentralized network yeah so you have your funds on decentralized network and at the same time you can use all those funds anywhere and visa and the perspective obviously is to grow this network to eventually allow also peer-to-peer transfers between customers and Merchants because that's the reason why it's so interesting if you look at

we're always talking about removing the middleman right and we are always thinking only about Visa being the middleman but if you look under the hood then between the merchant and the customer there's not only now the acquirer the bank that acquired the merchant and the issuer the bank that's issuing the card for the customer but now there's also a processor the aggregators now there's Apple pay in between so there might be even POS like the point of sale it's insane like the amount of middleman in a regular payment addiction is completely insane it's like in every transfer that you do it's probably likely that about 10 of the men are making a share of the profit it's insane

and that's why it's also so insanely expensive to do those transactions and we see the potential that over time we can start removing some of those and replacing them with extra decentralized technology because ultimately there should not be anything needed between the merchant customer being in the same shop doing a simple peer-to-peer transfer what ultimately is obviously enabled to blockchain already but in the one of like the merchant and the buyer to have on their phones or in their space some sort of like equal wallet with the right tokens that they could transfer and then they have to wait and like make sure that the you know hopefully they're online but here you're talking about just using a card yeah

yeah could you imagine like what's what's the next step then like you sort of mentioned that you would even get rid of more of the middlemen would you create than your own credit card and try to sell like get that into the hands of people well I cannot talk about this um no that's giving me a funny face there or maybe yeah just kidding yes of course let's say the the short-term plans midterm plans long-term plans short term and Midterm is driving adoption and uh yeah we will have to rely on the existing infrastructure in order to gain a lot of adoption and I like to bring the example of Skype so I think it was also one of the first Skype users and I was really enjoying to do

um IP voice over IP cards with everyone else oh yeah well everyone else was still using landline eventually Skype built Skype in and Skype out right about me for my voice over IP account to call a regular landline and landlines to call into my voice over IP account and today every call on this planet goes over voice over IP yeah and I think we have to get to a similar level with financial transactions right now everything happening in the old world a lot of Gatekeepers and a lot of middlemen making money and we have been building a crypto over the last 10 years technology that would enable something else but somehow we forgot to build this Skype in Skype out experience which allow us to actually

seamlessly connect between those two and actually allow a transition yeah and that's exactly what we're building with noses pay so building this bridge that connects the old world in the new world and allows people to seamlessly interact So eventually we can bring more people over and of course the more people on our side the more likely everyone else is going to join I want in the end revolute to operate on those pay I want these Neo Banks to operate in office pay take advantage of the opportunities that we have been building in blockchain over the last decade yeah yeah um but we need to make the first step and that's exactly what this card is about I want to hear a little bit under the hood what's happening though so like yes what I picture is that you have your account on so when you also is gnosis

pay at separate L2 or is it on gnosis chain uh so we're gonna launch our noses chain but this will be it's separate layer too because those chains layer 1 has the same constraints as ethereum yeah okay so we have to operate in a different environment to really allow a large scale adoption so what if you have something on ethereum you'd move to gnosis and then move to the L2 on it on gnosis chain right but of course this can be made really seamless I don't expect any user to do all these hops manually and of course there will be also liquidity directly injected into the data too so it will be very very straightforward to use okay but so but on that you'd have an account correct and then you also create an account for the card or like because how do you go

into the real world how do you connect those things right so this is where our Bridge comes into play so we built a bridge that connects to Visa at the same time it connects to your on-chain account okay okay and Bridge it basically it's like we have we implement the RP that is Implement like is offered by different payment processes that allows us to operate in different parts of this planet to set any kind of transaction okay the crypto part is implemented through safe accounts every user can give these different processes uh an allowance to withdraw from their account a certain amount per day so it can be cryptographically insured easily

through a smart contract okay and now if you're going to pay what effectively happens if user starts paying the POS we get the information via the processor that the Visa transaction has happened the user has authorized this and we can deduct this amount from the user so do you have a like a gnosis pay on the L2 another account that's sort of like yeah of course you have like you have basically the same there's like two nurses pay accounts on this L2 one is yours one is the gnosis it can be one actually it's just one account and we can just withdraw from this account because it's a safe contract no but what I mean is one is the user right and one is the process the process yeah that's

right on on the actual Network and then that processor account is connected it's the one that's sending the signals directly to this correct um exactly okay and it and I guess it's connected to a specific card of course yeah yeah so this mapping is done via our bridge and uh I think what is just to give a good example of how we can innovate and remove middleman in this transaction you probably have never heard of 3DS so basically when you do large online transfers sometimes you're prompted to do like a second Factor authentication okay and now instead of you log into your bank account and eventually proving this we can actually go straight and ask you to confirm uh with the private key okay

do you have to kyc actually that's the next because you want to use Visa you always have to kyc okay um but we don't see kyc as an evil process actually we also try to innovate on this part so there are two companies uh I want to mention one is fractal we are using for kyc and they they are building a new system called idos which allows user to own their data and easily shared with other entities if they want to it's kind of like a distributed kyc platform where I can one time Pro like get QSC information for noses pay but then I can also use this and passport it to other services I want to use on this network they don't use CK though do they uh not yet but it's compatible with it

and there's another interesting project I want to mention called out ID or did sorry yeah you probably know those guys I've heard of them yeah yeah so basically they use the information on the passport to create a ZK proof um that Republic of Germany has has confirmed this kind of information and it fulfills certain criteria like certain age or whatever without revealing this in particular to to The Entity requesting the information but does Visa accept any of this yet probably oh well the good thing is like um we don't talk directly to Visa actually we are talking to the issuer and process and we negotiate with them visas actually exchange insanely smart

like everything that Visa does outsourcing to other parties the Visa is more like the brand okay saying like this is how like you can operate on this network it's a standard body or something it's like a standard basically but many of the other things are kind of outsourced to other parties and so it's us negotiating with them and educating them but of course it's much easier than trying to change the overall like standard enough I think they're very receptive um to innovate on this as well um and of course for us it's very important to have a great reputation especially on this field because crypto didn't make the best headlines true and the recent past yeah compliance is really important to us and that's why we

make sure that uh every fund all funds that are on the layer 2 have to go through a kyt process meaning it stands for know your transaction by the way yeah I wonder if you just said it okay it is it is yeah kyc is know your customer kyt is know your transaction so we know the origin of the funds and we know they can be used in Fiat as well and everyone operating on the layer 2 can accept those funds and doesn't have to worry about that they could not off board by the time this airs can anyone sign up for this how do you do it yes I hope so so you will be able or you you are able to to buy those now as you can go to nosespay.com and yeah you can go

through a simple process to purchase one of those cards and then hopefully yeah the goal is that in about one to two months actually the cards are shipped and made available to everyone and then you can start using them everywhere will this also spin out do you think or is it fun out it will definitely be also a spin-off okay um simply because it's uh potentially at least a very big project that I think it's better to be executed in a separate environment as well what was the hardest part of making this happen it's not technology yeah that's what I was going to say no like it's insane yeah the even the short history I mean at some point

there might be another session just on the origins of this because they're very interesting and they tell you a lot about the payment industry actually but no the hard part is uh making people work together and making sure um that an industry like payments where we talked about middleman yeah yeah where we make everyone happy uh that is not easy because ultimately we obviously depend on this old infrastructure and we have to make sure uh everyone's aligned for us to to scale and actually make it widely accepted and successful product and that involves a lot of politics behind the scenes so the technical part

is we have solved this technical problem yeah for a couple of years now but now I also realize like why did payments not happen before why is real world integration so hard is because you work with humans and I do Wonder like the middlemen that you're cutting out probably don't like that you're doing that and like what do they do in today's world right so we are not cutting them out that's the simple answer right now we are generating more revenue for them so they appreciate it and of course in the long term future it's clear that uh there will be alternative payment schemes so Visa is the number one payment scheme globally MasterCard the second biggest and there are many others actually you would be surprised like how

many alternative payment schemes they exist um ultimately we also would like to establish new ways for people to actually do those payments and I think there's a lot of potential and blockchains already by definition uh kind of The Ledger that is needed in order to do those payments it does have it more make it more accessible and make sure yeah it's actually distributed everywhere yeah sounds good cool Stefan thanks for coming on the show and sharing with us sort of a catch up on gnosis all of the different pieces some of the spin outs and all of this new work you're doing on gnosis pay thanks for having me Anna what's a pleasure cool I want to say thank you to the podcast team Rachel Henrik and Tanya and to our listeners thanks for listening