Why Arbitrum's UX Problem Is Actually Crypto's Biggest Opportunity

Transcript

Let's be honest, we're not going to get to Robin Hood scale with everyone managing their seed phrase and knowing all the technical details of of every, you know, which wallet and even which chain they want to use. >> People just take it for granted today that if you want to use a app on another chain, you have to first bridge tokens to that chain, right? You know, and sometimes you have to bridge more than one tokens because again, you have to bridge both the guest token and the token you actually want want to spend. >> When you're thinking about building for the next wave, h how does your approach change? is does it go from the 10% to the 90%.

>> How will I feel this from a user perspective? What is the timeline for me to feel this? You know, how do you guys what is the vision for the end users to feel this? >> Welcome back to the rollup. We are your hosts. I'm Andy. >> I'm Robbie. And this is your home to learn from the biggest guest, the brightest minds at the tip of innovation. >> Our goal is to help spread the collective knowledge of everyone in our community. We are breaking crypto out of its echo chamber and taking it to the real world. Stephen, Derek, pleasure to see you guys. Thanks for coming on.

>> Hey, it's great to be here. Nice to meet you, MDN Robbie. >> Welcome, guys. Stephen, good to have you back. Uh Derek, welcome to the show. And guys, congrats on the uh on the acquisition. Uh and uh all of the success so far. uh you guys get a big confetti burst and uh we're gonna we're gonna get into it. Um there's a lot of uh M&A happening uh not just in the crypto markets but in in in the industry in general. And so maybe we'll we'll cover a little bit about what's happening on the timeline now. But before we do, um guys, would love to hear how this went down and why it went down. Um, you know, Stephen, maybe you could start and tell us a little bit

about what you saw in Derek in ZeroDev and why it was such a uh a great fit to bring that into the arbitrum family. >> Absolutely. Uh, there are two ways that I think about what we do here at Offchain Labs. One way is viewing the people and you know we are the most talented technical and nontechnical people in the space. Um really an incredible group of people, amazing minds and what we try to do is really work with the absolute best and there's no question when you look at that lens Derek and team uh you know really u not only fit well with the team but also extend our capabilities and are super smart, super talented but also bring a wealth of experience in areas that you know we are are you know are only venturing into now. So that's like one

one viewpoint. But the second one, you know, Offchain Labs is interesting as a scaling company at least primarily as our as our first uh um you know our first uh endeavor. And the thing is if you look at all of our competitors, the they're kind of built scaling into their name and built sometimes even the word optimistic or the word ZK or Snark or Stark, right? Very very like focused on one mission. Offchain Labs is kind of like, you know, a little bit more generic in its naming. And it's not accidental because I never thought of ourselves as, hey, we're the company that's going to scale Ethereum. I thought of ourselves as, hey, we're the company that's going to solve the hardest problems facing Ethereum and more broadly facing the adoption of blockchain systems today. If you fast forward, if you rewind, sorry, seven or

eight years ago, that problem was scaling and I think we uh contributed heavily to that, but we as an ecosystem have largely solved that. Um, but what happens is, you know, we're never done. Like when's the last EIP? Never. When's the last, you know, AIP? Never, right? We're always, what happens is you solve one problem and then what was previously the second largest problem is now your biggest problem. And you have to solve that as well. And that's how I think of it. If you look at offchain labs, we started off, you know, at layer two, right? And the rollup scaling layer layer. With our Prismac acquisition a few years ago, we moved down to layer one and said, "Okay, hey, we need to like build these things together. We need to solve things like, you know, blobsp space and data availability in Ethereum." and we wanted to contribute

heavily to that and just do Ethereum development and now we're actually moving up in the stack and saying okay we've solved you know this problem but now first of all the second problem is larger but also we've created some problems problems of fragmentation right now there's all these uh which I don't think is like the largest problem in the world but the idea is that we have to solve that and um so naturally you know you're seeing us expand above the you know higher up in the stack to uh a integrate these things and build them together but also to really tackle some of the hardest problems. You know, Derek and team are the foremost experts and pioneers when it comes to smart accounts and the things that you can do from a UX perspective uh from an interop perspective both you know within the

chain uh UX but also different chains together are really um you know I think incredible today but we're only scratching the surface and naturally as we don't just focus on one part of the stack but build these things together I think we can ultimately do so much more. Right? If Dererick's sitting in his own company and I'm sitting in my company and we're not coordinating, then you know there might be features that we could build together that are ultimately going to going to not connect as well. But as we build the entire stack together, I think ultimately it's going to be better for users, for arbitrary users, for Ethereum users, and for crypto users generally. >> Introducing extended exclusively on Stark, a nextg per trading platform live today. With 50 plus trading pairs from crypto to tradi, you get the best experience on chain today. Deposit in

the community vault for attractive returns compatible and engage in unified margin spot trading lending and per trading exclusively live at extended.app on starknet today. Derek when I think about um some of the largest issues that we face on chain you know you you think about having multiple USDC balances across different chains. Uh you think about uh the the approve function on EVM based chains when you do transactions. So basically two signatures or two ledger taps. Uh you think about gas fees. Um you know as you guys have pioneered smart accounts bringing them into off-chain labs. How are like you know what is your focus on uh you know

these problems or other kind of user experience uh improvements that you aim to bring here to offchain labs as well as the broader uh ecosystem at large. um you know, how are you going to help the end users, the developers uh to you know, kind of help make this a more unified experience? >> Yeah. Yeah, that's a great question, Andy. You know, so so I think uh to Stephen's point, um I I think like one thing that people don't realize about UX is that when it comes to web 3, UX is is not something you can solve at a single layer, right? right? You know, so so for example, if you think about like the problems you mentioned, the issues with the fragmented balances, the issues with for example just like really uh slow crosschain transactions, the issues with

for example like gas fees and whatnot um those things that actually require fundamental support not just at the wallet layer but at every lay layer of the stack such as like the solvers such as such as the trend itself. Um so zero death like as a company like we have been focusing singularly on the smart account layer right and you know I think it's fair it's fair to say that we have become one of the most successful solutions in that in that layer but you know before before I started talking with Stephen with Steven and offchain labs I think we really started to feel the limits of how much we can do by just innovating at that layer alone right so this so this why like why why connected when I connected with Stephen uh we really I think like um resonated on that vision of like solving web through UX

through one single unifying stack, right? you know, so at Offstream Labs, my biggest like my biggest um mission is to really innovate not just at the wallet layer, but really across the stack and think about UX holistically, you know, and essentially just like drive updates from like every layer of the stack like the like the chain layer, the intense layer, the solver layer, the bridging, the wallet UX, the smart accounts and you know by doing so I think that we have the opportunity we have the opportunity to to offer the most compelling UX solutions, you know, to to the to the most valuable, you know, to the most valuable companies in the world.

>> Yeah. I think I think to put it more kind of uh uh tangibly for our audience, for the users of arbitrum or orbit chains or just EVM L2s in our community, how do you guys foresee this uh collaboration, this acquisition, this merger to directly impact my experience using arbitrum one or using an orbit chain or using an L2? How do you how how will I feel this from a user perspective? What is the timeline for me to feel this? You know, how do you guys what is the vision for the end users to feel this or you know on the contrary for developers to feel this? How h how does that timeline look? So I think I think like really tangibly right you know so I think uh you can expect first

of all cheaper transactions secondly you can expect that uh a lot of like the complexities around transactions will be abstracted away such as like gas fees right like like very soon you know when you use most of the the applications that you use uh you won't really like either you won't really be paying for gas or you'll be paying for gas in the token that you are already using meaning that for example if you are trying to for example like using uh if you are trying to use USDC to buy NFT, you won't have to own both USDC and ETH, right? You can just do a USDC transaction and the gas fee will just be taken out of the USDC, right?

You know, so so that general category is what we call gas abstraction, right? And and then the second thing is that you will find crosschain transactions to be way more seamless than before, right? You know, because like because right now people just take it for granted today that if you want to use a app on another chain, you have to first bridge tokens to that chain, right? Right? You know, and sometimes you have to bridge more than one tokens because again you have to bridge both the gas token and the token you actually want want to spend, right? So very soon all the EVM chs at the very least, you know, but we but we but we even have the um have the idea to expand that to non EVM ch. But basically like all the chains will feel like one unifying chain, right? Like you can like

if you're on USDC, you're on USDC, right? It doesn't matter if you're only on on arbitr or on on some other chain, you can spend USDC where wherever you want, right? You know, so that's at the inter layer. Um secondly like just you know and then just on the um the wallets authentication layer very soon like managing get managing seed phrases will be like a thing of the past right like it would be super super common place for people to manage their >> uh what is through things like social things like phone numbers email pass keys and the really important thing is that's we can achieve that without sacrificing security meaning that um like like you can you can literally set up like um recovery /gardian setups that are as advanced as you need, right? You

know, so for example, you know, like a large like the the users of a large banking application might set up like you know their like their safe like some you know or some some other multic you know as a way to recover their bank wallets whereas like the the user of a consumer app you know might just be using like their Google to login right you know so like so we so we are also implementing you know authentication recovery in like a very granular way such such that it's going to fit all types of of applications right you know So because it's not good enough to just be to you know to make what is easy it also has to it also has to be secure right you know so we so we're really trying to essentially achieve both ease of use and security when it comes to the

when it comes to the world UX yeah so those are those are kind of the top examples >> Stephen you you have this saying that I that I'm uh that I'm blanking on that that this is just hitting on it's like Derek's ex he's your chain your rules >> Derek is saying your chain your rules right now >> absolutely and by By the way, you know, one of the things which I I think is important um you know that Derek mentioned is with zero deving pro projects and actually also more broadly we're not only thinking about the arbitrum ecosystem. Um you know I like to give this other example is in my town there are two pizza shops. um they hate each other but I like both of them right and like I'm not in any like I don't believe that users or even developers you know want to limit their

interop or limit their user experience to the set of chains that also made the same technical decision as they did right maybe like to orbit chains right like I think they're your average user is going to want to cross these uh boundaries all the time whether it's uh using an orbit chain and also using base or also using an OP chain or also using dare I say Salana right the idea is that um and And our goal is actually to create a unified uh experience certainly for all arbitum chains, certainly for all Ethereum chains and even more chains, you know, more broadly. So, we're viewing this as really a way to create, you know, better UX uh for for the entire uh crypto ecosystem. And um there's already so much that you can do.

You know, to Derek's point, if I'm a a user on say Arbit One and I and I have USDC and I want to buy say an NFT on APC chain and the and the gas steer is an Ape, there's just a lot of steps in this process. And if you're a savvy user, you'll know, okay, I can use a cross for this or layer zero for this and I can do you can you can figure out the steps, right? There's there's ways there are tool there's tooling that helps that, but ultimately it's at the UX layer that a lot of this just doesn't uh exist today and it's complicated. If you're not a Savvy user, not enough know, you'll just look at this say, I don't I don't even know what to do. I don't know how to get those assets there. And there's really no reason that we can't

simplify this. I think this is actually a mistake we make sometimes in the Ethereum community. Um, and I come from a research background, so I'm comfortable saying this because I put myself included. Uh, sometimes we look at things more from a research perspective and think, okay, all we need to do is get the smartest people in a room for a couple of hours and get a whiteboard and we'll build a protocol that solves interrupt or solves fragmentation. But the reality is I would say that 10% is the D protocol. 90% is the work that Derek and team are doing and will be doing more of is actually packaging this up for smart wallets and smart accounts packaging this up and delivering it to users in ways that they can actually use this and over time we'll improve that 10%. So we'll swap out some of the underlying

infrastructure as you know we have better intent protocols or better other protocols to actually fill some of these needs. But there's already so much that we can do today. Um but it lies today in the realm realms of you know different tools that s you need to be savvy to know how to use. We intend to do is package this up for users and give you these abstracted experiences. You don't actually need to uh worry about these details or be in the know of exactly what tool to use for you know what the specific workflow that you want to do today. >> This is a very forward thinking approach. Um, Stephen, you mentioned uh thinking about what is the 90%, right?

And I think this is increasingly more and more important as we're starting to onboard the next wave who may not be as cryptonative as some some of us as power users or early entrance that were, you know, farming and DeFi and all this all these things back in 2020. Congrats again your partnership with Robin Hood. They're bringing in all of their distribution channel uh and now putting a lot of that onchain and on arbitum. And so Derek mentioned custody, self- custody with pass keys. This is convenient but also secure when you're thinking about building for the next wave. H how does your approach change?

is does it go from the 10 percent to the 90% when you're building for people that were were in crypto and DeFi protocols very early on and now we're just used to these more consumerf facing financial applications does your approach to what you're building and what you're focusing on change more to that 90% generally how are you thinking about this >> yeah the way I think about it is you know the fundamentals cannot change and shouldn't change right so we're not going to make things less secure and for the power users that want to know the specific details and all the technical details and want to manage their seed phrases, for example, that experience isn't going to go anywhere. You know, good a good um analogy is gaming. Back in 2018, a blockchain gaming, uh the games were pretty terrible. And the

reason is the only people excited to play these games were Ethereum people that were excited about Ethereum, right? It's like, "Oh, cool. I can now play a game on Ethereum." And that was their their goal. It wasn't try these games weren't trying to appeal to mainstream gamers. Today we see actually really really good games you know being built on chain and there are still benefits of building those on the blockchain but as a prerequisite in order to build these for a broader audience what you have to do is make all that stuff added but optional to go into the details right so you don't need to actually like set up your metam mask to play the game but hey if you want to take self- custody of your assets that's an option that's available so I think it's actually solving these two together it's getting

giving an excellent UX to to users and also giving optionality for users to go deep more deeply if they want to. But for those users that don't want to or can't because let's be honest, we're not going to get to Robin Hood scale with everyone managing their seed phrase and knowing all the technical details of of every you know which wallet and even which chain they want to use. You know, I give this other example which is imagine you go to YouTube and you have a uh you know, you want to watch a video and this popup, you get this popup that says, "Hey, would you like to watch your video today on AWS, Amazon servers or GCP, Google servers?" And you as a user are just like, "I don't know what that means. I really just want to watch my video." And I think today there is this

ultra focus on back-end infrastructure. And maybe it's ironic for me to say it because, you know, I represent some of that backend infrastructure, but I'm also realistic that in order for that backend infrastructure to to succeed and get past the point of the saturated crypto insider market, you know, as you will, those who, as you said, were around and know how to uh, you know, use the blockchain, you know, uh, intimately, we actually need to, uh, build abstracted experiences that attract others as well. And hey, if they want to go deeper, it's it's absolutely available for them. But the key is, and this is what Derek said, we have to give them an experience that doesn't sacrifice their security. Right? So, we have to build good UX around what we're building in ways that it's accessible, but still doesn't sacrifice their security. If they just want to stop

there and say, "Hey, I don't actually want to go deeper and dive into the technical bits of of, you know, uh the exact uh transaction uh hash detail level of what I'm doing." >> Yeah. You know, and to to maybe like, you know, give another example to what Stephen was saying, right? You know, so just recently uh maybe last week, we launched a three-way collaboration between Germanite OCL and ZeroDev, right? You know, so like we are ZeroDev is powering the the past key logging for the Germanite news for the for the new Germanite wallet. So that's a great example of a very easy logging method that anyone you know with any you know with access to Face ID to iPhone can can use but it's actually also fundamentally secure in the sense that like there's

like there's no middleman sitting between the user and the blockchain right you because you know because we came up with a technology they essentially allowed the user you know they essentially allowed the blockchain to directly verify Pasc login through smart contracts and that's also another by the way like a great example of a something that's only possible because of the chain level innovation. Right. Right. Because uh during that flow, the very reason why the blockchain is able to verify past keys efficiency is because arbitrum actually implemented this new uh roll up improvement technology that allows the blockchain itself to to validate pass key signatures in a very gas efficient way, right? You know, so that's like a great

example of a very easy logging that's entirely non-custodial, super secure, and yet it's also only enabled because of of innovation at both the wallets and the chain level. >> Could could you maybe just elaborate a bit on the verification process? Just super curious. >> Yeah. I mean I mean >> you can get as technical as you like. Just Yeah. >> Sure. Sure. Yeah. So basically like up until recently, right? you know like the EVM can only verify a few um signature a few signature types right you know so like the the you know you know when you hear terms like like ECDSA you know so so so that's like the the signature algorithm that EVM is able to write so Arbitum is one of the first rollups to implement a support for a different

signature algorithm uh you know P25 P26 that is also the algorithm that powers pass keys so it just means that the signature generated by your, you know, your pass devices such such as your your iPhone can now be validated natively inside the EVM as opposed to a much less gas efficient approach which is to you know implement that verification algorithm through smart contracts because so before so before this arbitrum updates it's it was also possible it was also possible to validate passive signatures onchain it it was just really expensive like like validating a single a single signature will cost like a million more than a million in gas which translates to maybe

like $10, right? Right? You know, so obviously like no one's going to send like a, you know, $10 transaction just to, you know, just to validate the signature, right? You know, but after the after these updates, you only cost a few thousands in gas, which translates to maybe like one cent, right? You know, so that's like a literally a thousandfold a thousandfold improvements. That's made it possible for the first time to, you know, for you know, for users to use a consumer device to manage their wallet fully on chain in a fully non-custodial way without any middleman. >> Thank thanks for the explanation, Derek. Guys, we only got a few minutes left before uh we have to let you go. I I'd like to quickly zoom out um and speak about crypto uh M&A in general and and how this process went down. We were we

were talking a little bit earlier on the stream about the back and forth that Layer Zero and Wormhole are having in acquiring Stargate. And I'm just curious, maybe there's a piece of advice, you know, you your process seem to go so smoothly. what what would you guys recommend uh to to layer zero wormhole and stargate when they're going through this M&A process? >> From my perspective, it all comes down to alignment. Alignment of vision, alignment of people, and working with people you want to and everything else follows from there. You can have two fantastic products, but if the people aren't going to get along and don't have a shared vision, like ultimately it's not going to work out. Uh and on the other hand, you can have uh two teams that might be vastly different, but if they're aligned on a vision and what

they can accomplish together and excited about that, which uh you know, as Derek said before, uh I think we had very early on, you know, from the first meeting, you know, Derek uh you know, I don't want to speak for Derek, but he wrote recently in his blog post that they've had many acquisition offers in the past. Um but ultimately kind of, you know, when there's chemistry and you're excited and uh something's going to work together. And I think that's what we had from the very beginning. And um you know obviously these processes take long. There's legal diligence. There's a lot that goes into them. But ultimately if everyone's rolling in the same direction and aligned things tend to work out. We had that with Prism. We had that with ZeroDev. And so we're we're two for two in our case. At least that's from the

offchain labs perspective. >> And Derek from the founders perspective then like is this what you thought that you were going to do when you created ZeroDev? You know I I I think in crypto the question is like launch a token sell out build un you know reach product market fit profitability etc. there's different kind of venues or they kind of come together you know what was this what you expected what was your experience >> I think like I you know I expected to revolutionize web 3x when I studied zero death and I really think that offchain labs will amplify that that that ambition that ambition right right you know so I think my advice to other crypto founders that that might be looking to be acquired would be that um join a company that you will actually be

excited working at right you know because I think when you are getting acquired there are many different things you can you can optimize for right right you can obviously obviously optimize for profits you know just like how much money you are personally getting and that's certainly like very that's certainly certainly certainly certainly very very important but I think like ultimately you know I think when we decide to join offchain labs we are trying to make zero dev 100x better right you know right you know that's you know that's what what I'm saying to all our customers right now which is that with the backing of offchain apps zero death will be 100x better so I feel like you know my advice to crypto funders is just to you know if love your product, join a company that will actually make your products 100x better, you know, and

it's very hard to find an acquire like that. But when you do, I think you will know it. >> It's got to make you feel good there, Stephen. Thanks, guys. >> Um, yeah, it's been a pleasure and uh, congratulations on the collaboration. I look forward to it. I you know as as onchain users of some time even small things like shifting from you know MetaMask to Rabby it was a was a big step small things to using pass keys on Infinex using Face ID things that Privy brought things that zero dev like it's just really been fun to be a part of it and see it grow and I just keep looking forward to using more and more of these innovations that teams like yourselves bring to market um and make it and make it better for all of us. So genuinely

appreciate your efforts in making uh all of our financial experiences which are now you know crypto is no longer plan B for a lot of us. It is it is very much plan A and so uh we appreciate all the efforts. >> Thank you so much for having us on and likewise more definitely more of that to come from us together. >> Thank you Indian for for having us. >> Yeah. Cheers guys. See you guys again soon. Congrats. >> Best of luck. Bye.