Rollups: Ethereum's Salvation vs Value Extractor

Transcript

You can you can upload. You have the mic there. Ladies and gentlemen, you ready? You got your boxing gloves ready. No. Wait, put your phone away. Come on. No cheating. No notes. Come on. Cheating. No. Thank you for coming, guys. So on my right we have Lane an OG bitcoiner ethereum core dev now working on AI and governance atneir and Marik founder of celo and co-ounder of self protocol 2. We're happy to have him because you have 1,000 talks right now at FCC in many s events. So thank you for coming. So we're talking about

rollups. We already had Ilia and Justin talking about shing this rollup. I heard a rumor that Ilia won on the near side despite the fact that this is a Ethereum event. So, it's pretty pretty good to hear from me. Yeah, I don't think that streak will continue though. So, let's start wide. Are Ethereum rollups or rollups in general parasitic or symbiotic to L1 in their current state right now? What do you think? Is that is that my side of the debate? Your side of the debate? Should we switch it up just to, you know, keep it? You can you can open and I'll close.

All right. Um, so let's rewind a little bit, right? So when I was working on Ethereum back in the day, back in 2017, 181, 19, rollups were a new idea at the time, right? We started obviously with just mainet with just a single namespace with a single network. Apps worked composably, right? You could deploy something. you didn't have to, you know, have many many different um networks in your MetaMask, in your wallet. Everything just kind of worked seamlessly. Um so we could talk about the economic piece, but even before we do that, I would say uh to keep things spicy, you know, one of the main issues is that roll-ups broke composability of apps and I I would say had a very severely negative impact on the user

experience of using Ethereum, right? Because again, now as a user, I have to manage accounts across many different chains, different roll-ups. I have to keep track of where I have those assets. As a developer, I have to deploy my app in many many places. Um, and obviously there is an alternative which is like you know the the the near vision of a sharded network where you don't have to worry about this or the Salana vision of like a single integrated network. So that's the first argument I'd make against roll-ups, right? Is that they break composability and they damage UX. small interation. Just before I forget, you can vote by scanning the QR code and we'll elect a winner at the end. Well, don't vote yet.

Okay. So, on the ballot today is whether or not roll-ups are um good for Ethereum or or bad for Ethereum. Uh and I'm going to argue that obviously roll-ups are are great for Ethereum. Um I think there's been a lot of talk about, you know, are they parasitic? Are they symbiotic? Uh I'm going to argue actually that they are mutualistic. Mutualistic means that both sides benefit from each other. Uh and if Ethereum is benefiting from uh roll-ups uh then clearly they are good for for Ethereum. Um you know certainly roll-ups benefit from Ethereum's unrivaled security, right? Everyone uh loves Ethereum security. There's no other chain out there that can compete.

Uh and then likewise, Ethereum benefits from the increased network effects um from the fact that each chain uh is using ETH uh which then perpetuates the ETH is money meme um and um uh and ultimately also the optionality to earn more fees from these roll-ups down the road. Now, you know, my opponent here today, um, Lane, who was at the Ethereum Foundation back in the day, but left Ethereum to go to Space Mash and now Near, you know, he's going to argue, of course, that Near is the best. There's no reason to use roll-ups because they have sharded designs and that, you know, Near is is the future. Um, but what he

will fail to tell you is that Near has only on the order of 200 validators. Ethereum has 1 million validators. And so to argue that this is somehow in any way better than what exists today, certainly from a security perspective, I think is just ludicrous. Um, okay, let's talk about security. You brought up security. I agree. I think this is a good starting point for this conversation. So I want to make two points. The first is the million validator number that you cite, that is kind of a headline number in Ethereum. And it's true. If you go to um you know look at the beacon chain statistics, you'll see that there's on the order of a million validators running in Ethereum.

But who's actually running those validators? That's the question I would ask. And you know the the reality I mean obviously things have changed with the most recent upgrade, right? But it used to be the case that a single validator could only um support 32 ETH, right? We have the the new max effective balance, right? So that's changed recently. Um, so the point I'm getting at is if you're Coinbase, you know, and you're operating and you you have millions of ETH staked, you're going to be actually operating many many thousands of those validators, right? So yes, while you have this million headline number, um, that belies a much higher degree of centralization on the back end. So I don't know what the actual number is, but in terms of the actual number of independent entities who are actually involved in operating Ethereum validators, uh, it's more than 200. I agree with that, but I

I think it's closer to 200 than a million. And that's the argument I would make, but we don't know. Okay. Second point on security because you mentioned roll-ups and you you you mentioned the fact that roll-ups benefit from Ethereum security. There's some truth to that, right? And I also agree that Ethereum, you know, second only to Bitcoin is the most secure network out there. The issue is let me finish. The issue is actually uh debatable. Come on. If we had more time, we could have that debate, too. Maybe maybe we can make room for that next year. It's a good debate to have, right? Um the issue here is the devil's in the details, right?

And not all L2s are created equal. I think you'll agree with that. Um, you know, we have our friends at L2B who have done a lot of work establishing some um, you know, some criteria, right? You can actually see which roll-ups are are are stage one, stage two, stage three, etc. Um, and the reality today at this moment still after, you know, 5 years of of roll-ups being designed and built and deployed is that most of them are kind of glorified multi-IGs, right? Okay. And what I mean by that is if the if the sequencer were to go offline tomorrow, uh you would have no recourse as a user to like withdraw your funds. Um so yes, in theory roll-ups can benefit from the powerful security of Ethereum. And it's certainly possible uh if they're, you know, designed in such a way to have an escape hatch, to have

decentralized sequencers, etc. But the reality is most roll-ups are not there today. Boring. We know we know that roll-ups can be made more secure. Everyone is working on that. We've all, you know, we've LTB has been pushing everyone to get to stage one. Stage two is around the corner. Uh this is supposed to be a satirical debate. Let's keep this more fun. Keep it more fun. That's fair. Clearly, Ethereum is benefiting from uh from this rollupcentric road map. Um you know, we have this capitalistic model where everyone gets pulled in and um uh they launch their own new uh rollups.

It's very different than this top-down almost communist approach that Nia is taking uh for uh sharding design where you don't get to you know launch your own shard. You're you're forced to uh let the overlords decide uh which contracts run on which shards. Um clearly Ethereum is benefiting uh more from rollups. I mean after all if we didn't have this rollup ccentric uh design then we wouldn't have had yesterday's you know amazing Robin Hood very highly produced uh beach wedding announcement and clearly that's a benefit to Ethereum let's come back to the core of the topic the relationship between the one and the

rollups do you think they are freeloading benefiting from the Ethereum marketing branding uh could they be bringing more value to if than just using some if I think at this moment so we we'll talk about economics a little bit I think from an economic perspective it's clear that L2s are extracting more value from Ethereum from the Ethereum brand the Ethereum community from events like this and from the Ethereum chain itself than they are contributing back to the chain uh I think the math is very simple I think if you look at the fees that are being collected by Ethereum mainet right relative to the amount uh that's being collected in fees and earned by the L2s collectively. I mean, the most obvious example here is base,

which is making millions of dollars every day. Um, it it it seems obvious to me that they're extracting value and that the reason that this is happening, um, quite frankly, is a failure on the part of the Ethereum, you know, mainnet designers uh researchers core developers, etc. to get the economics right. Right. Simply speaking, Ethereum is not charging enough um for you know data availability and it's actually become even cheaper right with the the the intro introduction of blobsp space the expansion of blobsp space recently um and so yeah I think it's it's important that uh you know that L2s pay their fair share right you know I I'm I'm a New Yorker and you know just this is not a perfect metaphor but like we have you know subways and buses we have the MTA in New York and the whole system

is in shambles right it's falling apart service is down you know it's it's a terrible system air conditioning doesn't even work in the summer. Um, it's just a what's the word for it? It's a tragedy of the commons, right? And you know, it's it's it's a hard problem to solve, but it's a similar situation with Ethereum. We have a tragedy of the commons where we have these L2s that are that are quite frankly parasitic, right? That are that are extracting value and they're not paying their fair share. Mutualistic. Um, well, it's interesting that you talk about fees. So it's true uh that uh the base blob fee is quite low right now and but that's you know ultimately decided on by the Ethereum community by Ethereum core developers through rough consensus. Uh and that can change at any time. Uh that

is not uh actually what's at uh what ultimately is um you know on the ballot today. Um but even if it were, Uniswap has been charging zero dollars in fees ever since its launch. The Dow has continued to choose to keep those fees low. They've been prioritizing growth over charging fees. Uh Ethereum is doing the same, right? We are growing uh network effects for Ethereum and ultimately in the long term I have high conviction that that is the right choice. Um but if you go back to Uniswap, you know, are you saying that somehow UniS swap users are parasitic to unis swap? It makes no sense.

I don't I'm not intimately familiar with Uniswap's economics. I mean, I would say that to the extent that you have users on Ethereum. I mean, and they're indirectly, even if they're on an L2, like a Uni Chain L2 or whatever, you know, they're still kind of indirectly Ethereum users, and they're not paying their share for security. I mean, it works until it doesn't. That's that's kind of the problem, right? That it's just it's just not sustainably sustainable economically. Um and I think I think it has to start from the bottom. I think we have to kind of set a sustainable economic you know fee model at the base layer right so that Ethereum itself is charging L2s and then L2s can choose to pass those fees on or not to their users. And so if uni unis swap decides to like subsidize uh the use of

the chain or if bass decides to do that or anybody cello doesn't matter that's totally fine right that's that's up to them but again from the perspective of the core protocol like there has to be uh there has to be a sustainable fee model. Sure. But we can also prioritize growth. Um try to lock in as many network effects. Close Robin Hood, right? Robin Hood came to Ethereum. It didn't go to Salana. Uh all that is good. I came to Arbitum. Is that the same? Of course. Of course. Everyone's going to be paying for gas with ETH. People are going to be using ETH for uh as money on these chains. I think this is all great. Uh you have composibility between these chains. All that creates more network effects. All that is really good for Ethereum. But I want to go back to a point you made

earlier about how, you know, somehow these L2s are taking advantage of Ethereum events like this one. Uh, if you look at the sponsor, uh, page, as far as I can tell, uh, L2s seem to be paying their fair fair share. Uh, in fact, I would argue that because of L2s, uh, there is more capital coming into Ethereum. Uh, certainly more capital coming into these types of events. Certainly more merch, certainly more parties, certainly more fun. Why are you here even? Why are you not at a near conference? I would say it's probably because these are way more fun and I would argue that this is because of the rollup ccentric model. Clearly, Ethereum is benefiting and we're benefiting from having you here too because we like you.

Thank you. I like you too. I'm also happy to be here. Um never want to miss these events. Ethereum events are the most fun. I agree. Look, take it from someone who goes to a lot of Bitcoin events, a lot of near events, a lot of Salana events. Uh I've never been, you know, I've never been, you know, kind of uh married to any one particular chain or community. Um I think Ethereum events are the most fun. I think we I agree with your point about there being more capital. Um you know, more investment dollars coming into the ecosystem. Uh I agree that um you know, the kind of roll-up road map has had a role to play here. But I think there's a bigger question and something bigger at stake.

And that question is kind of like what is it that unites us all together? Um, and the reality today is if you do go to I'll I'll leave near out of it because I'm very biased, but I'll I'll talk about Salana instead. If you go to a Salana event, if you go to Salana Breakpoint, which is their version of Devcon, um, you'll see something very different than what you see here, right? What you'll see is every seat full in in in the events, right? And I don't mean to highlight that as the only example here. Um, you know, but generally there's a lot less fragmentation, a lot less social fragmentation, and there's kind of a a feeling which to be honest, I felt in the early days in Ethereum, right? If you went to Devcon 3, DevCon 4, it felt like that. Or or ECC 1, ECC2.

There's a lot less kind of competition, a lot less fragmentation, a lot less different kind of individuals and companies kind of pulling in different directions and and a feeling that we're kind of all in this together and we need to kind of be in the same space together. And it's interesting because that is also the uh uh the topology of the Salana network, right? That it is integrated, right? Monolithic as some people like to call it. And and you both physically have people in the room together. You have people who agree on a core uh vision and a core set of values, right? which as tool likes to put it in Salana is what does he say anything that reduces latency and and increases throughput is Salana aligned and anyway long story short we're lacking that in Ethereum and I think that uh the rollup

ccentric roadmap has contributed to this kind of social fragmentation and I wonder if you think there's anything we can do to become more socially aligned it's not just about having fun it's not just about spending money that's my point I don't know I I think the Ethereum community is very aligned um but I do think that through the rollup ccentric roadmap uh we do get to have different communities all coming together and I think that is a huge advantage to Ethereum. It it can attract dens who want to transact on you know base and arbitum. It can it can attract regens who want to transact on Cello. All of these different uh disperate communities can all come together and live uh in the same ecosystem and create value for Ethereum. I think that's really really uh compelling. And looks

like we're we're out of time. So I'm just going to quickly close. You know, I think at the end of the day, you know, uh I'm surprised you're not actually, you know, shilling nearmore. Um I would have expected you to talk about, oh, you know, they shed design blah blah blah. Uh but, you know, at the end of the day, you know, near has only 200 validators. Uh and worse yet uh because shards send messages uh to other shards in a way that can only be validated through other uh uh near validators. Um if there's fraud, only near validators can actually contest that fraud. That means that only 200 validators are needed to collude to

with each other to literally steal money from people's accounts. You can forge messages to steal money from people's shards. That breaks the fundamental most important tenant of blockchains, which is that you don't need to trust. You can verify. You can run a full node and see that no one is stealing your money. You can actually do that with near. With near literally 200 validators can collectively together. All right, let me let me respond. That was a vicious attack to respond in 20 seconds. I think I can do that because this is a super easy thing to respond to. So, first of all, with respect to getting 200 270 validators to collude, have you ever tried getting three or four crypto people to even agree on anything? It's harder than it sounds. I think it's

sufficiently decentralized. But even more to the point, my response would be in the Ethereum ecosystem, the alternative to having shards is instead you have glorified multi-IGs, right? You have bridges, which quite frankly are completely garbage and uh it's much easier to collude and steal funds on a bridge. We see them hacked constantly, you know, much easier there than it is in the sharded model, which I think is is sustainable. I'm ringing the bell. Bling ling. All right. All right. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Let's check out the results. Was a lot of fun. Thanks. Thank you guys. That was a great fight. And for the moment, it's a tie. Oh, it's a tie. Thank you. I'll take it. I'll take it.

Thank you so much, guys. I'll let you out of the ring.