MegaETH in 2026 & Ethereum's L2 End Game | Brett DiNovi & Lei Yang

Transcript

We are trying to have a self-contained ecosystem where we have composability maximally because we have so much that can be done within our our sphere of composability that we do not care if like people can go out like those things will happen but we want to bring people inside of our ecosystem. We want to have the best execution environment. We want to be able to do very very complex stuff like a flash loan that is like novel net new amongst a thriving DeFi ecosystem. So I I'm not pegging my value prop, our value prop on playing nicely with a bunch of other chains. Our idea is to grow the biggest, the fastest, the like the most performant. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only,

and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Blockworks. Our hosts, guests, and the Block Works team may hold positions in the company's funds or projects discussed. All right, welcome back everyone. I am Rob and Yanov decided me to leave me out here. There's going to be an intellectual battle. We have Lelay and Brad from Mega E. I'm very excited to have you guys on. Uh you guys, there's a lot to talk about. Uh but uh for anyone that's been living under a rock, why don't you guys introduce yourselves? Um and and then we'll set the stage.

>> Um I'll go first. Um my name is Lei and uh I'm a co-founder and CTO of Mega ETH. Mega is a layer 2 blockchain that is aiming to be the fastest blockchain ever possible by um I would say strategically centralizing the components and delegating the security to Ethereum layer 1. And I'm bread. I'm here to defend lay. So I don't even say centralizing. I hate saying that word because it's such a trigger word for people, but uh I'm on the >> Yeah, go ahead. Bring it in. What's up?

>> He he's here to chaperone the conversation there. There's some pretty inflammatory stuff. So So full disclosure, guys, I'm going to invest for Mega Youth, but this conversation is, as I told the backstage, it gloves off. I mean, there's a lot happening in the in crypto. Prices are terribly down. People are leaving. Um and Vitalic came out with a pretty saying the quiet parts out loud. He said look the value proposition of L2s like is broken unless you do certain things but most L2s just you know the rollup centric road map is broken in my opinion uh why because L2s capture most of the value doesn't flow back to the L1 and so >> we've sort of talked about that people generally understand that but seeing

Vitalic come out and say hey kind of acknowledging that publicly I think is uh will probably be a very important um I think it is is very revealing. Curious to get your guys' thoughts on that. Um, as someone that is building an L2 on top of Ethereum L1. >> Yeah, I have some very strong opinions on this and actually so like background again again for the intro. Brett, I'm you might know me on the timeline. I'm the dude that has traditionally actually flooded L2 specifically blobsp space. I like I did that for probably a year and a half before joining uh meth, which is November of last year. So, I'm very aligned, frankly, with where or what Vitalic was signaling towards there. And I made a post on that where I think that post specifically kills alignment games

that were being played, right? I was so so critical for so like like bro is Ethereum, arbitrum is Ethereum. Like, guys, no, they're separate blockchains. I think we've acknowledged over the last few years that the value is going to be driven towards execution, right? That's largely what Salana was was pivoting itself on. There obviously is a monetary component to all of this stuff, but you can't you can't determine that stuff. And as this entire industry gets more and more um let's say traditionalized, right? Like we're starting to bring in more parties from the traditional world, which means they're going to lean on metrics that they know and trust and are comfortable with. And most of that stuff is as Santi has pointed out in recent uh weeks too much chagrin is like DCF models, right? you like you want to see

how value is captured by the underlying token if there's a token associated to a network right and that frankly has been going to yeah frankly the L2s I think the execution that's where all the money is right and everyone was hoping that Ethereum with its monetary exporting would appreciate based on just like being used as a denominator in these ecosystems and that frankly was not materializing as much as people were hoping and I think it's just because they lean too far into one direction and I'm have been pushing I'm thankful that they're starting to get back to scaling ing Ethereum mainet because I think you do have to capture some degree of uh execution fees right priority fees whatever on your actual chain then when you can start like banking on the uh monetary premium that you can command

and I do agree that if you're only going to do execution premium right if you do these DCFs even today you look at a Salana Salana with all the value that's captured even though the the block building pipeline gets eaten up by geos and you know everyone else even if you do that you're Salon's pretty pretty expensive. It's pretty expensive even today, right? And I called out maybe a year and a half ago. I said all-time top for all smart contract platforms was Ethereum's top. It was like the $4,000. Then it touched it, kissed it. I kind of had to give in on that, but then I I still think maybe it's going to happen if we're going to continue to go down that path. I kind of deviated a little bit there, but my general position is I think he made the right call. I think

this like you need to scale down one. you need to capture execution fees and then you can try to hit upper echelons. >> To strip off some technicality there, the way I think about it is imagine if you have a company and that company then has divisions within that company and divisions within that company have their own specific stock and that stock is you know Google for instance a good example like these conglomerates. So I like private equity. So back in the 80s there's all these conglomerates and they have different divisions. Some might be wildly profitable because they sell cigarettes and others might be not as profitable because they're, you know, an R&D department that is not very profitable. It's a dying industry. And

that's how I think about Ethereum. It's it's very fragmented. People think about Ethereum as this one ecosystem, but it's very fragmented and value is being captured by these individual subsidiaries called L2s. Vitalic being one of the founders says at some point and I was like why did it take you so long to kind of come out publicly and I think just for context lei this is where I want to get your perspective which is this all started because Ethereum couldn't scale and I remember looking at my addresses interacting in Ethereum and it was I paid for a house in fees uh and and it's and it's disgusting uh you don't see a a path towards you know back in the NFT craze mania and DeFi

yield farming mania you were paying thousands of dollars per transaction but you know there's been a lot of innovation in the underlying L1 I think fees are down like 90%. I think part of the argument that Vitalic now makes is like the L1 is and has scaled. Um, without getting too technical, Leia, I'd be curious, you started this journey, um, saying, "Okay, I believe in that. I think scalability, I think applications are going to be built. I'm going to create this environment that is more performant." And there's some trade-offs. And you talk about this taboo word of centralization. And when I first met you guys, I'm like, well, finally, someone's building in that direction.

Um, and people can go reference that initial podcast that we had with you guys around like why why do you kind of decided to build in that direction but in some ways like maybe ask the the question a do we need L2s when the L1 has scaled to Vital's point and if we do need L2s what is what is the purpose of an L2? >> Yeah, of course. Um so I think first I think according according to Vak's post I think I don't really think that his um his kind of realization or his his new vision on layer 2 is purely driven by um by by by productivity by sorry by uh by kind of aggregating value back to the to

the ETH token. I think it's purely driven by a technical reality which is it's much harder to verify correctness of software because I think in the original vision so I think maybe just take one step back to how the the layer 2 centric the rollup centric road map came into being right it's because Ethereum was trying to build um shards um sharding and um I think back then they thought that okay so build 128 shards for the Ethereum blockchain so that is scaled by 128x but then I think they realized that okay so if it's not very interesting if we build other shards why not delegate the work of building individual shards like the individual departments you were mentioning to other companies to other

entities such that they can do some exploration I think the the main highlight because they could have just done the sharding roadmap themselves right but the reason that they switched to the rollup ccentric roadmap is really because they want exploration so I think exploration is the key word that kind of centers is um the the value of layer 2's even today after his post. I think actually his post even just highlights the the the kind the significance of exploration of like a diverse set of trade-off points being explored concurrently by layer 2s while all anchoring their security in some sense by um to the Ethereum layer 1 blockchain. So I would actually say it's something that is I think it's kind of

an evolution of the original rollup ccentric road map. It's not like the death of it. It's not like we're doing they're doing a complete pivot or anything. And um um why do we need layer 2 today? So I think that's center back to the to the word exploration. Um I think the thing is with any physical system you have to face trade-offs and I think that's the most interesting part you can play in a system designer. You want to strike the best trade-off you think that is good for you and your users by filling a gap in the market by doing something that you think makes more sense to the general public um so that you can serve a better so you can address a better market a larger market right and um I think Ethereum as a layer

one or any individual layer ones Solana other layer ones included they can only strike one particular um trade-off point on this curve between centralization and performance. And the trade-off is fundamental because if you have a few servers around the world um co-producing blocks, then um if you want to communicate between the servers, it takes some certain amount of time because there because information travels in fibers at one/ird of the speed of light, right? It takes time and uh that latency fundamentally limits your performance of the blockchain. the more nodes you add, the more decentralized you get to and um um the slower you become. So you we kind of see

that kind of a difference between Ethereum layer one and the Solana and other layer ones. So I think what layer 2s can serve in this trade-off curve is the far end of the curve which is maximizing performance. So this has always been the north star for me. We just we don't think that we are a a scaling company for Ethereum. Scaling as in 10x at 100x Ethereum performance. We want to address a market that is fundamentally impossible for any layer one to address. And by doing that you kind of capture a part of market that you will never be captured by by any layer one however much scaling they are

pushing. So we feel actually very happy seeing Vitalics post this kind of like a validation to our road map actually that we have. >> I mean in fairness I think you guys started um with like hey we're going to create a super high performant um focus on scaling like that was I think that was the value out of you guys initially >> and say we're going to focus on that because if we do that there's certain applications that can never be built on the L1. Um, if Ethereum gas limit kind of keeps 10xing, like what's your mode?

>> Yeah, good point. Um, I I'll talk a bit first and I think Brad can of course should address the the marketing the the app side. So, I think the mode here, two acts. I think there's two fault. One is fundamentally it's cheaper for a layer 2 to process transactions and there's no I personally I think there's no question around that because fundamentally layer 2 use fewer servers with layer ones you have to get many validators you have to um communicate between the validators which costs quite a bit of money if if one actually runs uh runs applications in a distributed cloud. So these costs ultimately they have to pay they have to be passed down to the users. So the cost basis I guess the the I think the bottom

line is the cost basis for layer ones is just fundamentally higher than co than layer 2. So there's some certain threshold that um the layer ones cannot pass um in terms of scaling in terms of getting cheaper and cheaper um gases and I think the second and more importantly is the latency which I kind of touched on um with layer ones you have to communicate between uh block producers. So one simple example is if I send um Santi say $10 on um on the blockchain on a blockchain and currently it's the New York block producer certifying that transaction and the next transaction will be the next block will be certified

by a producer in Tokyo. Then just the fact that I sent Santi the transaction has to be communicated to the Tokyo block producer in order for it to continue. Right? So this latency fundamentally limits many applications for example online gaming like um high frequency trading and anything that is interactive right because it takes almost 300 sec 300 milliseconds at the least to circle around the world which is something that layer ones cannot bypass if they want to stay the like the globally dis the globally decentralized nature. Yeah an old-timer Brett I want to go to you I know yeah go for it. Um, as an old-timer would say, hey, we've had this problem before in Trafy. I remember people were getting closer and

closer to Wall Street because you could get the information faster. There's always latency when you propagate information. Um, naturally, the skeptic person would say, well, what's a trade-off? It seems too good to be true, right? If you're saying you're fixing latency like and you're faster, do I really want to be moving mill billions and billions of dollars when there's a centralized basically like what is the tradeoff when you when you really go like low latency? Um and and and and are people prepared will they be prepared to accept that trade-off?

Um I think the answer is yeah I think the answer is I think people already um voted with their feet. I think with um the success of I think I would actually say that so far um the layer 2 centric road map has been a success. you have um prominent layer 2's capturing um I would say values and TVLs from the layer one which I think actually prompted your initial question right what about the fragmentation but actually it's I first I don't think it's fragmentation and second I think it's actually the fact that people are moving money to other layer 2s that kind of testifies the fact that people are fine with um centralized block producers and um yeah back to the

point of back to the question of what's the um what's the trade-off? The trade-off here is block production. Um if you want low latency, you have to collocate the facilities for block production into one data center or into um into a few data centers that are close to each other. So this I would say is the quote unquote trade-off you're taking. Um but how does that translate into like actual properties that impact users? I think that's actually the beauty of layer 2s. Um I would say layer 2 preserve most of the security guarantees from Ethereum. So let's just take Mega as an example. um in say a

year of time um mega will give users the escape hatch so that they can um take their money withdraw from the layer 2 back to the layer one whenever they want because users can force their transactions into the layer 2 chain even if the centralized I think with centralization the most >> you can censor the transaction but you still get your phone >> yeah exactly exactly with centralization the the the major risk is central is censorship right but With proper design, you can actually let users post transactions to the layer one and the layer two will have no choice to but to pick up those transactions. So this kind of circumvents the the censorship problem. Yes.

>> So so like Vitalic is pushing this native role of pre-ompile for like trusted TBM verification. >> And so but like so are you guys building like towards that or like does your architecture make it impossible? um because I think like concretely like yeah maybe address that and then I have a follow-up to that. >> Yeah. Yeah. It's not a I don't think it's a black and white question. Um so I think the so okay so the problem they are trying they're trying to solve which I kind of touched on is um making sure the layer 2 software is correct because the layer 2 security mostly relies on correctness of a piece of smart contract that tracks whatever state um route or

whatever layer 2 state the layer 2 chain wants to snapshot and commit back to the layer one because this is What allows people to move money between layer 1 and layer two without any trust assumption, right? It's supposed to be like code is the law, right? If a withdraw from the layer two to layer 1 is green lit by this by this piece of smart contract, then it is green lit. Then the kind of the risk is what if there is a um there's a bypass? What if there's a backd dooror in this piece of code such that people can withdraw money that they do not own right from the layer two to the layer one. So I think Vitalik's proposal is to um is to delegate that work to the layer one more and more in

the sense that currently it's a piece of smart contract and next it can be a piece of code that um those validators run and compare against each other. Then it's not one single implementation of smart contract. It's a spec that different validators can implement themselves individually and compare the notes against each other. So it's less um so it's less um less risky. It's less it's more it's more different implementations you can kind of compare the results against against each other right so we can we are definitely compatible with this vision um but I think the core here the core question is what kind of spec are you going to push um to those layer 1 validators so my guess is they're going to push a spec

that is equivalent to Ethereum layer 1 which means only those layer 2s that behave almost equival equivalently to the Ethereum layer 1 can benefit from it. And in our case, because we did a bunch of optimizations which I think is purely worthwhile. Um, we're not compatible with we're not 100% equivalent to the Ethereum layer one spec although it's code is by code level compatible but this kind of the sorry for the elaborated long I don't know answer but yeah I >> I want to ground it to reality and Brad I want to go to you but before I think there's >> so like why does this all matter because I think in in a lot of these podcasts we get lost in the technicality of TPS and and and technical stuff that the end of the day is like what does it actually

matter for bringing more users on chain and is it actually going to it meaningfully influence the possibility to create applications and bring more users that stick around and do coolit on chain whether they believe whether they appreciate that they're doing it on chain doesn't matter right if you can build stuff there's sort of the cynical argument here which is like I remember in the peak of D5 mania um pancake swap eventually had more activity than unis swap and you're sitting there you're saying well you clearly understand that binance like BMBB that chain is way more centralized and then And you say, well, wait a minute. Like clearly users are voting with their feet. They're going to a place where they can do activity. Why?

Because Binance has all these customers. They create a chain. They can do more stuff. They can make more money. They're going to naturally flow. And I think a lot of times the Ethereum community has sort of been academic in their approach and it hasn't been you need to be savage in the best sense of the word to win in this industry and in any industry. Otherwise, you know, go back to academia and don't make any money. But it's very cutthroat. Before we move over to like actually why does this matter and why do you guys win in in the next 5 10 years like I want to talk about composability because it is an important thing there's two components there's interoperability in the system of chains and then there's composability and composability was one of those things where I remember back in

defcon and Osaka it was you were starting to see the first L2s come out and people were very worried about that because DeFi is pretty awesome the money go analogy is pretty powerful that you can have all of these applications. A core property crypto is you have all these different applications that are composable. So your money in a you can do flash loans you can you know just do not like skumorphic things which is copying what exists in traditional finance but really do just entirely new things because money is real time connected composable. Now when you go to an L2 framework where there's multiple chains and the question really becomes so so say for instance you deploy D5

protocol on and it's a really cool D5 protocol options trading or uh per um can it atomically compose with unis swap in the L1 today or will it ever be able to do that or you maybe the position is it doesn't matter our users are never going to I that's they're never going to leave like like so what you're starting to touch on is kind of what base rollups were trying to do right where you're talking about oh you have a validator that also can perform transactions on meth that can also do transactions on Ethereum because it has awareness of both you can do atomic stuff but frankly what you're pointing at is why I have

been or what metallic has kind of crushed with his recent post right the way described it to people just to take it all the way back of of um simplifying just the road map is like there's Ethereum there was Ethereum and then all of the current roll-ups were being Ethereum plus where they're like it's Ethereum but it's like kind of cheaper right so like because of that because they're still not super scalable they still require a little bit composability because you can't do too much on any individual one so you need them to play nice together you needed to try to like get stuff from Ethereum mainet and the value props were all still very intrinsically tied to each other because like they needed all of that stuff to grow And again taking it a little further, you talk about even with Ethereum scaling like where is mega

mode? I still think people do not fully grasp the the level of difference in in scale between a mega and an Ethereum and or base and you know even some of the other like more performant chains out there right now because you even just said like oh what if Ethereum scales 10x then what? Well, I'll give you some numbers and then you could I'll let you do the math in your head on how long this will take. If you take Ethereum's current throughput, you 10x it, and then you 10x it, and then you 10x it, right? From that starting point, you're still about 50% of what Megith can do today, right? And then you think of the time scale it takes for them to get to that point. Like, bro, we're talking 5 to 10 years, right? It's just like it's just how the systems work. Whenever there's

this much capital at play, it's just going to take a long time. So, it's effectively never going to happen in in this environment. So, okay, that's the paradigm. That's where we're operating in our mindset, my mindset and what I've communicated try to advocate for the ecosystem. We are purchasing a service from Ethereum, right? We are purchasing security. We are outsourcing our consensus. It allows us to achieve a high level of scalability that like today that they will never be able to achieve in the next 5 to 10 years, right? Cool. We give Ethereum the asset a privilege position inside of our ecosystem. Right? Ethereum the asset gets some monetary value from that.

Whatever that is, I don't know. We are going to be a self-contained ecosystem. And while other other ecosystems face may as well be salon at us. I'm being frank. It's an EVM change. Like yes, there's some things that can go back and forth, but we are trying to have a self-contained ecosystem where we have composability maximally because we have so much that can be done within our our sphere of composability that we do not care if like people can go out like those things will happen, but we want to bring people inside of our ecosystem. We want to have the best execution environment. We want to be able to do very very complex stuff like a flash loan that is like novel net new amongst a thriving DeFi ecosystem. So uh I I'm not pegging my value prop on playing nicely with a bunch of other chains. Our

idea is to grow the biggest, the fastest, like the most performant. Well, I'm I'm glad I've always appreciated your your guys' transparency and the I'm always very skeptical when builders in the space just assume that there are not trade-offs with technology. There's always a trade-off. >> There is for sure. >> There's always a trade-off. Security, centralization, whether you believe that Trellm is real or not. um kind of to ground it back to so your re your real-time thesis like requires apps to be natively deployed on Mega ETH. Um that's a walled garden. You're effectively saying we want to create this walled garden.

Sure, users can leave. Sure, you can commit back to the L1. You can't lose funds. But it's a walled garden. In the same way that you can switch social media network, Facebook, you know, you you use Facebook and Instagram, you can go to Tik Tok. Like nothing really stops you from doing that, user behaviors is really interesting because no one really cares about the infrastructure, you know, you don't really care. You don't you don't go to book a flight and say, "Does that airplane have a Rolls-Royce engine or something else?" Maybe now if it's a boing 77 max maybe you might not want to fly that. Uh, how do you >> You say Wald Garden. I I say black hole.

And this is this is cuz I'm this is going down the the same path that you're talking, right? I Mega ETH will be a performance and UX black hole because right now we're in the early stage of all this stuff and people are bicker bickering over consensus mechanisms. They're bickering over like this little stuff. And you know what happened? We observably this last year and a half, everyone went to Hyperlquid. Everyone. One of the most profitable applications in our entire ecosystem. You know what Hyperliquid is? It's 24 validators in Tokyo. No one cares. It's a good experience. Go there. It's got liquidity. It's got it's fast. It's snappy. And what like the reason that happened is because >> you care if you get liquidated and and they're auto deleveraging uh mechanism.

>> That's a layer on top of >> that logic matters if you have >> if you're trading there. >> For sure. >> For sure. And I even man I felt like I got hunted over there if I'm being totally honest which so like you know we can call into question some of that stuff but like let's like abstracted it's just it was a good user experience so you know we can like whatever and I think that is going to continue to happen right so in a world where we are progressing to where everyone is continuously giving less and less of a about what chain you're on what the consensus mechanism how many validators you have whatever whatever apps are naturally going to just gravitate towards the place that gives them the best execution environment because it gives them the best user user experience. And if I can sit there and

say I can take my app from a base, a Hyper EVM, an Ethereum mainet, an Avalanche, and I just port it over to a mega and it's instantly a better experience, like I'm probably going to do that assuming there's liquidity there, assuming there's like right, you need some of those like bones to make sure that the other stuff is there. But if the experience itself can continue to be better, it's they will just do that. And I have already had calls over the last several weeks of apps that have come to me and they say, "Bro, I want you to be my AWS." It's like, I want blockchain. I want liquidity. I want composability and I just know that I want you're going to be there. I'm not going to have to worry about it. My costs as we showed in our our stress test can scale up to tens of thousands

of TPS with a static base fee. Like it never changed. We were we had 50,000 transactions per second. We had people coming on and doing latency in test intensive apps on top of that same time costs were still fractions of a cent. So that's that's predictability for these builders, right? And they can come and they're like awesome. It's a relief. I don't have to worry anymore. So you guys are you said something interesting there which is um you are bringing value to the Ethereum ecosystem. You're kind of you're giving it monetary value because you're bringing all this activity. You're doing the hard work. You're renting security from Ethereum.

>> Yeah. It's a service exchange in the same way that you can go buy infrastructure or decide where you want to live because it's more secure or not. Is that security that you're buying adequately priced? Because my thesis is sec is security and the pricing of security and how you tax it effectively is grossly grossly miscalculated and it's one of the hardest things to figure out. There's all this analogies that you could say of like what is a proper tax?

You live in the US. Well, there's federal tax and there's state tax. Uh, and the composition of GDP tax is a small sliver. And there's always that trade-off of how much you tax. You don't want to go the California route because if you tax people too much, Mark Zuckerberg goes buys a mansion in Miami and then the taxable revenue of California has dropped by a trillion. So, it went from two trillion to a trillion. So, how do you guys think about that? You're effectively buying security from the Ethereum L1. Maybe the lay this more abstract is a hard question to answer. I haven't found like I think about it a lot. I just don't know how to price it. The way I the observability of that is what is the effect of that? Are more people building

on the Ethereum ecosystem? But at what point does that model break? Because because like if you're if you're in New York and you're building Wall Street and you're building, you know, uh these massive enterprises on top of that city, does it collapse? Does New York as a state make more money in the federal government? And then at that point, what's the whole point of the federal government? You might as well just be an independent country. And then, but maybe the perverse the perverse answer to that is don't ever be a federal government. Be a state and then just use federal resources and just keep your head low and be quiet about it.

>> I I I I tend to believe in free markets. So, I I really tend to believe in free markets. So eventually it'll be correctly priced and I I have absolutely no comment on whether it's >> you're saying it's not. >> No no no no no no. So I I I I have to be very honest. I have no idea whether this is it's um I think it can be calculated but I cannot calculate it right now on the podcast. But so this is how I would calculate it. Right. So if you take a look at the um so I think okay so what are the transactions you want to guarantee security for it's the in-flight transactions right it's the ones for example you you withdraw to a

centralized exchange and the centralized exchange is going to wire the it's going to wire you the money right it's the ones it's the transactions that it's the transactions for which the centralized exchange have wired you the money to the bank account which is not recallable but the onchain transactions but maybe the corresponding onchain transactions have not been settled. So it's these transactions that we really make sure that they get settled. So on a layer two um this latency of settling transactions from the layer two to layer one depending on the notion it's 30 minutes to 7 days depending on whether you want to make sure the the state is also settled. So if you just cap if you just calculate the volume of transactions on

the layer 2 within such a time period right and by little's law the the result is the uh the number of transactions or the the amount of money you are sending or everyone is sending collectively on the layer 2 per second times the amount of time you have to wait for the transactions to settle. This is the so-called inflight volume right inflight capital that have not been settled that you really need security from Ethereum. Okay. So take that and um consider how much money you would pay for to guarantee its um its security and that's I think the fair market price of security. Um yeah so this is how I would calculate it. But I think what's quite interesting

is it does not really cost too much for the layer one to um to guarantee security of these kind of inflight transactions. um because all these volume all the volume all the transactions they settle down to the layer one as a single Ethereum transaction. So I guess like I think the conclusion here qualitatively is that the cost basis for layer 1 is actually pretty low to guaranteeing the security but yes I I tend to agree with you that is kind of a big amount of money that you are um guaranteeing. So, yep.

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The Blockworks Digital Asset Summit is back in New York March 24th through 26th. We'll have top speakers from leading asset managers, financial institutions, DeFi protocols, crypto companies, and policy makers all under one roof. Think Black Rockck, Coinbase, Robin Hood, and more. Follow the link in today's show notes to buy tickets, and make sure to use code Empire 200 for $200 off at checkout. >> So, well, let let's kind of ground it a little bit more, which is um how much revenue flows back to the Ethereum L1 from Mega Ethan fees? So like you know um proportionately uh what's a ratio of value that you guys

keep and how much what's effectively the tax rate back to the L1. >> So for every $100 that you guys are making, how much are you posting back to the L1? >> This is really hard to calculate, right? It really depends on the frequency of the settlement, depends on the um depends on the frequency of us posting those transaction batches to the layer one and also I think value flows in different forms. For example, when we um have a large TVL then all those TVL they ultimately come from the layer one. I think these are all values and also I think more importantly when people know that the Ethereum token is securing um an economy like me um the token itself becomes more valuable because Ethereum

itself is secured by POSOS proof of stake and uh the security all comes from the value the market cap of the token especially amount of token um being staked on layer one. So um people will have the incentive to keep the token price high such that um the economy it secures both the layer 1 and the layer 2's are adequately priced against the amount of tokens secured so against the amount of tokens staked so I don't really think it's good I don't really think it's comprehensive to consider that like the gas fees paid to the layer one >> I understand that so look I'm an investor I want to be to successful and I've owned Ethereum in the past. I don't

own it anymore because I fundamentally think that I cannot justify the value proposition or the value capture of Ethereum. I've been very vocal about it. I just think that it is it is a broken bankrupt model and I'm not getting paid enough for the value it provides. It's it's it's infrastructure is a commodity and Ethereum is is very vividly like you're seeing it in real time. uh you know unfortunately the market you know can be irrational like it has a mimemetic component. It has this abstract like security which no one has explained to me how you price that and it's it's a you know >> that's what I was trying to do right >> yeah you know that exactly look and look I actually think it's a it's a

interesting I I I sympathize with what I was trying to do the share security and try to be it's a probably the most >> they're trying to create a market for it that's trying to market for security and it and it makes sense like I actually think that that is pretty interesting experiment. But you know, again, if if Mega is wildly successful, Brad, you're going to tell us why and and you know, what kind of applications are uniquely possible and I've invested in a few projects. I have a ton of bias. I'm trying to just really focus on the critical stuff here, but if Mega ETH is like wildly successful, does ETH the asset benefit or just Mega the token benefits? like what is and and again there's been like a number

of f like if you if you objectively look at the chart of L2s it's been down only like the I'm an investor God knows it most of them um except one they didn't want to have me on the cap table because their lead investor blocked us off but nonetheless I've invested you know and in arbitum um a number of other L2s every major L2 relative to Ethereum has collapsed in value over if you made that trade. We're saying L2s are going to capture more value and activity. Base doesn't have a token. I guess you could buy a Coinbase stock, but it hasn't been a good trade for investors, but but it's interesting because they're collecting a lot of value, but the market for whatever reason seems to still

>> the foundations are. >> Yeah, the foundations are exactly Yeah. Yeah. Good point. Excellent point. So, uh but yeah, like walking me through like if you're a token holder, why would you hold Ethereum ETH the base asset? Why not hold Mega the token? So, I want to I want to make sure I circle around and say like this is the reason I have a conversation and frame megie the way that I do because I see what you see and like if like we're talking margins, right? There actually is margin calculations that are out there and you know base arbitum whatever they're taking 98% of of whatever I think it's that's roughly the margin they have and we would be probably less than that because we're of validium right those those teams have to purchase Ethereum blobs we don't do that use INDA for that right and like this is just objective

fact and this is how it is and that's why I try to frame this as a a service purchases purchase between Ethereum and not this this like symbiotic or not I mean we are symbiotic right we have this mutual agreement like we are purchasing something with them they are giving us something we we give them a privilege position in our ecosystem and they get some monetary premium like from that right like we already have an economy that's starting to spin up right our meme coins are denominated in Ethereum right now there is value with that right people have to acquire Ethereum the asset to trade the recent that just launched from the launchpad right why like like how much that is relative to a $200 billion asset you know like we can have that conversation but that's that's the exchange that we have in order to reach the performance levels

that we have now extending that to like L2s frankly getting merckked on the charts I I think we can all objectively say that and like our unique construction we think is is um not taking the same governance only proposal right we are trying to make sure that if we were to launch a token it would be plugged into our economy in some fashion now whether that drives it in any particular direction like you know the market will decide that but you know we have two unique mechanisms that we think are are novel for us that put us in a privileged position across all blockchains frankly so like the one is you know we have our native stable coin USDM uh you may have seen Like there's a lot of discussion around USDH whenever they came in, right? You you lose a lot of value.

>> I wanted to ask you about that. Yeah. >> Yeah. So like the that's an arrangement we have with Athena. So Athena helped us launch USDM. Uh there are rewards associated to that. So the the actual value that would typically go to a circle or to a um a tether, right, to buy gold bars. Instead of doing that, right, the it the dollars are are the the USDM is bought into USDTB and then we have a little bit of USDC on the back end just for like um some safety and then the rewards that come from that are are collected by the foundation, right? So like that goes to us. It stays within the ecosystem. We're able to deploy that in any way we see fit. We've already committed to saying that like we are interested in purchasing the mega token with the value that we accrete from

that. So in a world where we continue to build up these applications, we continue to try to get them denominated in USDM. And the fact that we're starting from zero with USDM as opposed to again USDH, right? Hyperlid had $5 billion worth of USDC. And you're asking DeFi users to say, "Hey, bro, unwind your position and then build it back up in USD because it'd be really nice for us." Okay, thanks. That's awesome. That'd be really nice. And everyone is going to go tell them to go themselves, right? Everyone. Because it's just it's not like why would they do that? It's they don't have any interest. But since we're starting from zero, right? It's already live.

People are already doing it. It is now being plugged into the ecosystem from day zero. They're like, so if you want to use the you the unique apps that we have, the useful apps, you buy USDM, you plug it in, whether it's a Perfect Exchange or Euphoria or whatever, and then it builds up. And then now we have that 3 to 4% uh rewards on the back end that we can actually use to deploy back into the ecosystem. So it's a a fixed value leak. That was one thing. The other side is the uh proximity markets, which is something that we hope to debut soon. you have a question on the Yeah, on the USDM. So, you guys are using Athena.

Athena is basically a tokenized hedge fund. So, like they're um my understanding is you're you're not paying out the yield sort of like covering opex for the chain. uh I think sequencer fees uh you can correct me if I'm wrong but like >> part of it >> how how should a user think about dependency risk and interest rate sensitivity in that model where it's like in a scenario where treasuries go back to zero what happens there like who subsidizes the cost uh if there's an issue with um these counterparties what what happens to the chain? Do you need to roll back? Uh does it get

stalled? Does um how did you guys think about adding a layer of does the surface area seems to be expanding here of relying on counterparties? >> Um yeah, so the so one like there obvious like Athena is a counterparty so like they're involved in thing but they're talking about the interest rate specifically. The reason that we went with Athena for this is because it gives us flexibility for the mixture of assets on the back end, right? So in a world where USDTB is going to zero because interest rates are going to zero, we actually have the ability to swap into USDE, right? So as you know that's inversely correlated. So we can use that to be a little flexible with how we actually mon the market. Obviously we're going to be very conservative. That's why even to start we have a little bit

of USDC, right? We want to make sure that we're not like overindexing on things, but we have um we have optionality there that to try to to weather a market in any condition. Is this a so like like so let me get a trade. So like USDM yield buys back some mega tokens. Um and mega tokens are >> we call them rewards >> rewards. Uh um and the the mega tokens are logged via proximity markets for like sequence access.

>> Yeah. So we have we have two things that we've announced. Yeah. So the one is the the USDM rewards and and you know it's at our discretion but we have already signal that we are interested in purchasing the mega token and then the other is proximity markets which is effectively because you know lei already earlier very uh accurately described the latency games and you even alluded to some of the traditional market setups that are in place right like people want to get really close to the NASDAQ for obvious reasons. So for us, you know, in in a traditional blockchain, people pay priority fee, right? Regardless of where you are in the world, even if you are physically closer to a thing, the block the chains are so slow that the the block producer has the optionality to sit there and and put people in front of

behind people. That's why you pay a priority fee, right? So base because it's two second block times, you have two second window of people to land and then base to ultimately say like a b c d for whoever pays the most because our block times are basically zero 10 milliseconds. like we don't really have much chance to reorder, right? So priority fees for us would be meaningless in a 10 millisecond window, right? It's literally is just like who is physically closer. So Lei and and he can maybe expand on this a little bit. We've now we are mirroring uh the a traditional setup where we say okay we have this virtual space next to our sequencer. We are then this is effectively would be a priority fee to get physically closer. So instead of you know paying more in that sense you come and you bid to get closer to the actual

sequencer and you bid in the mega token. So effectively the priority value this me value this block building value is derived and denominated in mega. >> Yeah. Does that introduce like reflexivity? Um like it it's a circular flywheel. works well like the stable coin um props ups demand for the token which props up demand for the stable coin like there's more activity. Um we've seen a lot of times the inverse of that where reflexivity can work both ways like um are have you guys thought about what that would look like in this design?

>> Right. Um good question. I think actually the proximity market and the USDM reward is inversely correlated because um when the treasury yield is higher probably um your your money can I guess make more um your your money can can can appreciate more if you just um park your money in say a lending market something that is less active right and in that case um the USDM reward I think they shine and the proximity market probably because of the lower trading volume um it it kind of goes to a secondary place whereas when the treasury yield goes down um probably trading will pick up um less money stays

idle and more money goes into say non-stable tokens so I guess USDM goes into the secondary place whereas the the proxy market and the me it's getting bodies it goes to primary place so yeah I think in that sense it is kind of hedging against each other because ultimately if you think about an about an ecosystem, if you think about an economy, money takes two forms, right? It's either sitting idle when the interest rate is higher or it's actively into investment into into active trades into into speculation, right? So, if you capture both, I think we're pretty fine.

We're pretty good shape. >> Uh last question on proximity markets. Um it's uh so essentially um you know it allows users to lock their mega tokens. >> Mhm. >> To uh basically pay for low latency um and get sort of priority access. Say hey if you're doing a big trade if you see some arbitrage opportunity boom you want to capture that you're going to pay uh other chains solve it differently. Um and that value goes to Agito for instance. Now you're saying hey well let's you know you're effectively selling privilege me access with an extra step here forcing someone to have mega token not goto token. Um is is that

correct or or do other chains like was that characterization correct or >> yes yes that's more or less correct and the I think the only difference between us and other chains is the is like the granularity of the auctions. Um I'm more familiar with Ethereum but with with Ethereum you are basically having very microscopic auctions in the sense that you can literally reorder transactions within a block and uh with that comes the u the burden of running such auctions every block and I think for Ethereum it is okay because um they run a block every 12 seconds so there's enough time for all the so-called builders to for all the MEB searchers to to kind of negotiate in a sense of an auction the the amount of priority phase

each priority fees each transaction wants to pay and then arrive at the final ordering of the block and as correct sorry as Brad correctly mentioned at 10 millisecond block time this is impossible even if you collocate all the potential biders just the bidding process aggregating all the pricing all aggregating all the bids and determine the final ordering it takes time and it's not productive to run it within the 10 millisecond block time because it actually cuts into the time that you can execute transactions right So um yeah, I guess the difference here is really that we want to enlarge with prolong the the length of each auction, sorry, the validity of each auction so that you run one auction and it's kind of valid for maybe a week, maybe half a month or even longer period of time.

That's I think the only difference between us and other um MV builder block builder searching system. Um but I think it's pretty valid. It's um it's kind of tailored to me. I want to say you so like the the key point of both of these things that I've tried to mention is and even lay mentioned here is like these are these are fundamentally value leaks for these chains right like both of them right the whether the USDC on every one of these chains is a value leak you tether is a value leak right in Solana right now today they're losing hundreds of millions of dollars a year out of the ecosystem to buy gold bars for for Apollo right every single year and same thing for for this goto enshrine go which is literally this is like one of

the examples that I used when describing this, right? Like part of our team has like is aware of the the inner trenches of the the Salana ecosystem. And you know what is skyrocketing for them? Physical floor space in these data centers next to geto bundlers. I don't care how decentralized the Salana validators is. If you have 2,000 people all across the world, if the people can physically colllocate next to a goto bundler of which there are five, then that is how you're going to get built into or block or bundled into the Salana ecosystem, right? And that is where the the literal traders, these entities that are trying to make millions of dollars are going to purchase floor space to be able to make money and that money is going to go to a jetto, right? Well, jetto and or latitude and or you know,

whatever data center is actually doing stuff. So we observed this both of these value leaks and we said how do we incorporate this into our ecosystem to try to close it off to make our economics actually you know more sustainable. Um I want to get to more bigger picture stuff around what's happening in the ecosystem applications. Um maybe just let's let's go there. Um I I guess uh you know the criticism again of Vitalic was like a lot of these L1's are just effectively bridges to the like to the L1. There's just not a lot of activity, not interesting activity. The vision for an L2 is hey let's actually create a more performant environment where we can bring different

applications and whether it be gaming or some more DeFi activity. I mean, my my criticism has been we haven't and I Lord knows that I've invested in just gaming, a ton of gaming stuff, a ton of DeFi applications in your ecosystem like Euphoria. And so, I'm genuinely very excited. I I think anyone that's sitting there saying look activity has come down. None of this matters. Gaming's not going to matter. NFTs are not going to matter. I think like that analysis is very incorrect in my opinion. um these things take a long time to build and gaming as an industry outside of crypto has also been in a tough spot and so like if we properly contextualize this maybe I want to start

with like getting your opinion on like I think you guys have been you particularly you joined me you could have done many other things you're someone that is critical of the space and I think some of these design and architecture choices in many ways are like first mover advantage is very overrated particularly in open source systems Ethereum has a moat developer mind share TVL institutional awareness but I would probably guarantee you that if Vitalic were to start Ethereum today he he would definitely not architect it in the way that it's architected today maybe he would borrow some concepts that you have in Monad or in Salana or in other systems that are just more performant from day one without having to have this um uh you know

fragmentation um But Brad, give us some insight into like what is uniquely possible. Like are we finally like what does the ecosystem look like? Um you have the folks of like Kumi says these things are just asset ledgers. They're here to transfer value. Just call it that. Just if we just focus on stable coins that's good enough. Like we don't need to go to gaming. Like just don't overthink it. Don't focus your energy on that. Obviously you guys think of different position but what are like the the top kind of three applications?

What's the activity that you guys are looking at? Like what's uniquely possible in Mega ETH? Um, you know, I'll kind of I'll pick a category for us because like right now the the apps that I'm most excited about aren't live. They're on the on the horizon, but we're trying to pioneer something that we call and have lovingly labeled in our recent ecosystem page um as a category consumer DeFi. and Euphoria would fit in that category. We have another app called Hit One. We have another one that's coming called Blitzo.

And all of these are apps that are on the surface very consumer. And to be very consumer, you have to be very responsive. That's where our low latency block times all like in real time moniker comes from, right? If you were going to tap something on your phone, you want your phone to throw the confetti instantly, right? You don't want to wait 12 seconds for the confetti to happen because it's just a bad UX. Right? If you're going to compete with any other app that you download in your app store, you have to have that in all of these apps. So again, Euphoria is the one that you've called out. Options protocol on the back end. But it's sexy options, right? Because on the surface, it's a game. You see the the bar going up and down. You you play or you hit your little finger and you like try to

predict where the uh the chart is going to go. It's got good music. It's whatever. It's a consumer experience. It's like it's it's fun, right? Same thing with Hit One. Hit one's another one. On the back end, it's pers, right? you you hit a button, it spins up a 250x short on Bitcoin over a 15-second time horizon and maybe you just hit some money, right? Awesome. But it's a on the front end, it's a it's consumer apps, right? Same thing with Blitzo. Blitzo down the horizon is going to be something that is injected into the consumer payment um flow, right? So, if you monitor everything that's going on today in uh I would say just like the the Zoomer circles, right? If you're watching people flipping watches, you're watching people flipping like TCG like like Pokemon cards, anything. You know

what happens at every single transaction? They go, "You want to flip a coin? You want you want to, you know, do 20% above, 20% below, flip a coin. Whoever gets it gets more or less than what they they're trying to do. Blitzo is trying to insert that into consumer consumer flow everywhere." Or like end of the night, you guys are all trying to pay for dinner. Everyone throws their card in the middle, someone picks a card, that guy pays for everything, right? everything is starting to get gamified and whatever. And Blitzo is trying to inject high-end DeFi into those moments, right? So, if you're at the the checkout counter, right? So, and or grocery store, you tap with your little Apple Pay. Apple Pay fires off and then you get a little prompt at the top says, "Bro, you want to double or nothing?" You're like, "Yeah, I know.

Maybe I do this time." So, I hit the little thing on the back end. It's it's taken a a 500x long on BTC and it settles in 5 seconds because it can do it. It's a nice experience. And bro, you just hit like you chose the right direction and you just doubled it. You got your groceries for free. Awesome. >> Or you got liquidated and never want to come back and use mega. >> I mean potentially. Yeah, potentially. >> Yeah. Neo, I think stable coins are very unique primitives. Like I think about them constantly. Um and and and I think the world is not prepared to what real time money does for consumer experiences and businesses.

And I think you want to really lean into that. Um, the consumer experience has been has been tricky in crypto because it's mostly been hyper financialized applications and going a 20x long on fartcoin. I have a lot of opinions on that and I think my opinions don't care. The market clearly likes it but churn is a very big problem. Uh, as it is in trad I think Robin Hood kind of pioneered this like you know making options trading simple. whenever you collapse like trading fees to zero, you get like Givvon's paradox is real, ladies and gentlemen. You know, you're going to get a ton of activity.

But I do wonder um as an ecosystem, are you guys being intentional around like, you know, and this just kind of really summarizes my thinking around like infrastructure and where what are we building towards like are you just the difference between speed and velocity? Lelay, you're the smartest guy in the room, but like I don't need to tell you what that difference is, but for anyone listening, it's speed is just let's prioritize just just rate of change, right? Just let's go, right? Velocity is direction. Speed with direction. So, it's a vector of direction. And I think that intentionality matters when you're building otherwise you're a central otherwise you just go back to building being a centralized database.

Like does security matter? Does latency matter? does what really matters uh cuz I think a lot of times I get it like from from like why you'd want to build a more performant system I think stems from this idea that Ethereum the L1 had a very valuable resource but it was not properly utilized because it's just difficult to interact with it. It was expensive. It was for the UIUX or whatever but primarily this this fees and you're saying you're saying gosh I think like stable coins are pretty cool.

I think people are going to want to use them more and I think people are going to want to use them for payments and if we want to get to that state we want to create a way more performance system. So let me go on leave MIT hire a bunch of smart people like Brad like let's start this but at some point a lot of chains just like lose that intentionality because you know you wave the flag and say we're open and we're permissionless so anyone can come and build. But I just sort of like um and many ecosystems the way they fund grants it's like kind of like a freeforall and let's just get activity and let's just get fees and it's like capitalism you know let's what do I care if uh you know you know you could you could be prescriptive or you could not be prescriptive and you

don't really care about the quality of the economic activity. You think pump is detrimental to Salana? I I was an inst I'm an investor in pump. Um was it detrimental? I think you can argue yes in many vectors like uh around uh like someone I think it was coin gecko that produced a report saying look all these token failures like token launches went up like orders of magnitude and then the failures go up and I think it's an unfair characterization they're lottery tickets.

Um, I will say, um, the idea of like launchpads is interesting but um, I do think that at some point like I I won't go back on my thinking that meme coins are bad. In many ways, memecoins are just memecoins by default. They don't pretend to do anything else other than like this is pure speculation. like and I think the user really under perhaps understands that more and is very clear. Um it's just human nature like I'm not I don't have like a I don't have a would I go back and do the pump investment?

It's a good question. Um I think I'm being more opinionated now as I'm building my own ecosystem and and where I'm focusing on. Um, and it's like it's like a Prometheus myth like, okay, you bring fire to humanity. What the are they going to do with that now? I invest in a lot of DeFi applications. Um, I don't know. I don't know what the answer to that is. Um, I do think as a builder, like how do you guys filter through that? Like it's open. And it's permissionless. But do you have an opinion? Like do you filter? Do you give grants to very specific applications?

Are you going to be higher than DAO? Because that's what I don't want to convey. Like I don't want to convey this higher than Dow because I cut my teeth in DeFi. I yield farm the out of pretty much 99 proto like every single protocol and you test the technology and you say okay well but at some point it's like hey maybe we can do something more than that. Or or then you just go back to the more you circle back to the initial assumption which is it's just human nature and humans don't change. you're going to want to improve their condition. And the underlying the underlying like reason why someone goes to pump is because there's an affordability crisis and you like you know you want to gamble your way out of like affordability and then it's just a more systemic fundamental question that

we don't have enough time to discuss. But is that enablement good or bad? I think the rules are transparent in pump. I think the crypto is a very transparent system. it's it's um you're buying a lottery ticket and that's really it. Whereas if you're interacting with a um as a centralized company and you have like a per pro prop, you know, and the first thing the user see is going 30 times lever long and a memecoin. I have a stronger opinion that the product decision there should probably not be that like like you should have an opinion around like hey do you actually value your user? Do you want to retain them?

Do you want to serve them other products like a savings account? Um, so I I would say pump as an enabler for memecoins, uh, it was gonna happen. Like people like memecoins. They're an established category. I don't I'm not here to have a higher than DAO opinion on it. Uh, would I put my money behind it again? Probably not. Just because I' I've just I'm just less interested in that because I think if we really want to grow up as an industry and want to be taken seriously, we kind of need to kind of start focusing on on the real And the and and the reality is like we have really cool stuff which is stable coins and I think the ne the consumer experience like you know I was just calculating the other day the amount of money that the average consumer in the

United States gives up to their bank because there's trillions of dollars in sitting in their checking and savings account they're getting to your point around stable coins why you've decided to have a tring your chain right so like if you put your money in a bank account they're going to give you maybe 200 300 like no 25 to 30 basis points. So 2 to.3% at best. They on the other hand make 4% on that because you're buying treasuries and then doing other stuff with it. They don't share that with you. Okay. So if every consumer if you move to a system where the consumer doesn't get interest to one where they do what banks keep effectively equal to $1,300 a year which is a COVID stimulus check. You

want to stimulate the economy move everyone to stable coin. Uh but then of course you know shareholders of JP Morgan don't like that. So like that's capitalism right? But I do think that the power of crypto is we can be we can solve around things that have been really hard which is financial illiteracy is never going to change. I think people don't really know how to make their money work for them. And a stable coin is programmable. It has clear rules. It could be regulated and can work for the consumer in a way that traditional checking and savings accounts can't.

So, I'm very focused in what I'm doing where I'm spending 100% of my energy is fixing that. And if people want to then go without money, go invest in memecoins, then you know, at that point, I just, you know, I'm not I'm not necessarily going to enable it. Um, if I were in your shoes, I'd probably be more opinionated in curating the experience and seeing that Apple curates the type of applications that you can see and at least as an initial review process by which like, hey, you know, you're not going to necessarily be able to download certain apps. But what's the difference between Pump and Robin Hood? I don't actually know.

Or Pump and Kshi. People are making money and losing money in in large sums in Wall Street. So speed by which people lose money on a platform like Pomp, how's that any different from Wall Street? Well, I think for an ecosystem, um, censor censoring applications is a bit different from curation. I'm I I vouch for curation. I think curation is good. I I like I appreciate Apple's app store.

It kind of keeps malares out and stuff. Um but I think I think blockchain really aligns better to a computing substrate and um I think censorship can lead to both uh legally and just ethically dubious outcomes I would say. Um but yeah curation definitely we um we are also yeah we have been running we have been kind of pioneering the the idea of um as a chain as an ecosystem kind of incubate and support applications that we actually vouch for. So I think this is something that I've been doing for quite a while and uh we have seen some great success from it. All the applications uh

Brad mentioned they come from this kind of incubation program. Um yeah, and on on your on your thoughts on stable coin. Yeah, I I kind of Yeah, it's quite interesting because um I was in Copenhagen last summer and uh we were having we're having dinner with a pretty prominent um DeFi ME researcher and I think something he said really was really interesting was that he was kind of he he he felt really fortunate that um pal.com did not happen on Ethereum um because if because kind of the memecoin or or I I I want to I don't want to use the the word like on serious. I I actually enjoy memecoin. I I I I I spend quite

some time on Kumbaya these days on me. It's quite fun. It's just pure for pure fun, right? It's not it's not to make money. It's just to kind of see the memes. I I enjoy them. But um for for relatively kind of funny unserious stuff, if people kind of attach the image of a chain to these kind of applications, his point is that it in some sense does limit the cap the like the ceiling of of an ecosystem because once the image is attached, it's really hard for the chain for the ecosystem to to shake it up to to shake it out. So um yeah, in some sense I I do agree that um um yeah,

crypto should aim for crypto should aim for solving even harder problems um in the society in in people's daily life. I I definitely echo that point. >> I think the hardest problem that we can solve in the next 10 years is not technology related. It's it's product and go to market. >> 100% 100%. Yeah. 100%. >> I don't I don't want to demmerit what you guys like. >> No, no, no, no, no. Not at all. Uh no, yeah, no point like that taken. I I I fully agree with you. I think um solving the infrastructure problem is just one step and um yeah, we're pretty much ready to Yeah, in the sense that we think now we have a very interesting chain. It's actually more interesting, more exciting time for me personally because finally we have the chain out,

people can start really building on it. I think finding the interesting applications, curating the interesting applications, I think is far more exciting than building the infrastructure itself really. >> Yeah. Um before we go to parting thoughts, uh curious if you guys were starting Mega East today from scratch, would you what would you do differently? >> Well, many small engineering tweaks, but there are really fine details. For example, the gas model. We probably want to settle down on the gas model sooner than we actually did. Um, we will probably want to arrive at a DNA so that people can start developing and

prototyping with uh sooner than we did. I think it's lots of like microscopic rep prioritization on the engineing department. What do you think, Brad? on the on the BD on the on the marketing department. >> I think I would enshrine more >> and like like I like we we did a good job with >> Yeah, it's curation. Yeah, I would like I would I would think earlier around things that we could own as a team to bring to market to create a net new experience that is good and because like man I care about value capture like I I want to make sure that what we are building is something that is sustainable. I do I I know Sante you and I have been retweeting each other a

little bit the last few few weeks that like man I think valuations are frankly broken in this industry and like I think I see where the puck is going and I think it would be smarter for us to try to think on more things that are not uh um that are supportive of an ecosystem of builders right you see what Hyperlink is doing with the China perplex I don't know that that necessarily is something that I would want to do because it takes a lot of specialized talent for But even stuff like, you know, like aggregators, right? Like if we can own an aggregator inside of our ecosystem because we know that that it's like we know the routes, we have access to the the block building and stuff, we can create things that are actually better and more efficient for people. Like that's just a net better

experience. It doesn't encroach on on net new apps inside of the ecosystem that lets people experiment and just like uplifts everything and then allows us to to continue to build a successful ecosystem. So coming day one with stuff like that I think I wish I would have thought more of but just time energy. >> How much of that um like I remember going to Berlin when you guys had your first mega mafia cohort and I was very impressed. I made a few investments in projects like Euphoria coming out of that. Um, what h how what else can you guys do to convince the incremental builder coming in a are new people coming or are

they all kind of going to tradi or AI? Um, but how do you how do you compete against other ecosystems that are really well capitalized? are you going to throw a bunch of incentives? Um, does that work? >> Do you generally think that like builders make a decision to build on on an ecosystem based on the technology or on something else? Like how do you how do you win in that game? >> They haven't done it based on money to this point. We've given out zero grants to any teams that have been building with us. So like there is a level of of nerd sniping that goes on. And I do think there is a a level of like fafo like you know around find out energy on the Ethereum ecosystem that

has not been able to express itself. We've had a lot of very um opinionated DeFi builders and stuff come to us and like they're very excited with some of the stuff that we're doing. So like there is a little bit of a release valve that we're offering there that is just naturally attracting people and I do think Lelay and Yong have legitimately built something that is world class. So, like you're going to attract people for that reason alone because people can envision that. Now, telling that story and making sure that they even know that that is possible is part of my job to try to attract people. Um, but yeah, I that's my my general position. >> Yeah, pretty much nerd sniping. I think Brad said some some of it. I I think for me the the way I go and talk to builders, potential

builders is 100% nurse typing because I I really I I kind of truly believe in um just kind of impressing people with the the interesting stuff that they can explore and do on the ecosystem because I if I look back at my journey getting nerd snipe into computers into distributed systems, I think it's quite similar. I I have never thought about the money that one may potentially make or not make um by doing one thing. I just I just found digital systems like processes synchronizing with with each other. I just found it pure joy and it's so interesting to think about it and my belief is there are people like that um around the world many of them and um as

as long as we find a few of them I think we're in a good shape >> and I think like talking about the the talent drain to like a AI of the world that's actually something I've been reflecting on a lot recently because I'm I find myself being pulled to it I'm very excited about it it's very empowering to see like what you can spin up in you know a moment's notice uh I do think it'll ultimately boom boomerang back to crypto as a whole, right? Because like if you think about what we actually offer relative to AI, AI is a world of abundance, right? Like it there is so much that is possible. Everything is being created. Cost of production is basically going to zero, right? And in a world where production is is inflating to infinity like you need two things like one like AI agents just like

permissionless rails like that's exciting and like easy for them as someone that's like been working with it recently. it is just much more um compatible to to have them operate on financial rails that are permissionless. That's just a fact. And then the second is verifiability, right? So like in a world of of mass abundance and as these techniques for for replicating and creating things continues to get more and more and more and more and more advanced, you're going to need to be able to verify what the hell is actually true in this world. We're already seeing things that make it are indistinguishable from reality, frankly. And it's only going to accelerate from here. So, you're going to need to come back to blockchain and these verifiable systems to try to make sure that what's actually happening is what you actually like or what you're interpreting is

what's actually true. Uh I we haven't seen that interlink just yet, but I think it'll continue to accelerate. >> Yeah. Speaking of AI, I don't Yeah, I don't really think there's competition between the two ecosystem because I I think it's just fundamentally different skill sets. I think the builders that build applications that depend on AI, yes, I think that yeah, they can choose to build in AI, they can choose to build in crypto, but um um I I don't think there's a fundamental competition or or anything um like between the core talents, I would say. >> Very well, gentlemen. Well, I think this is a good discussion. I really dislike podcasts where we just talk about the fund the the Vitalic criticism.

Vitalic's an investor of Mega E. I don't know if that you know the conversation with your investor is now a bit more awkward but I'm an investor megie too. I think >> he vouched for us if you read it. He we were three of his six points >> basically. >> Yeah. And so I wanted to bring you guys in here to have discuss around that. Um but also answer hard questions u because I think that's what pushes the space forward. So appreciate you guys coming on and uh yeah um I I would hope that I think in five years time we don't have regulation to blame maybe on the margin we don't have infrastructure and limitations to blame it's really now on us to deliver and that's that's you

kind of look at that and say hey maybe this is not for me I want to go to AI but for for serious builders I think that's a really good challenge um and and so you know Hopefully everyone plays a part and I think you guys are well positioned to capitalize on that. So rooting for you guys and thanks for coming on. >> Thank you so much. Really enjoy the discussion. Yep. >> Appreciate the time. It's fun.