Why Performance Matters: Scaling the Next Billion Users

Transcript

What's up, everybody? Um, we are talking about performance and a billion users, but I thought it'd be a little more interesting to just talk about what's going on with all these chains. We got a lot of chains. Um, we've got Monad, we've got Mega ETH, we've got Polygon. So, um, I'm excited for this conversation. I actually want to read uh, a tweet from, uh, someone to kick off this panel and I want to get you guys' take. So, we're going to talk about Ethereum before talking about your guys' chains. Um, here here's a here's a quote. The ETH pivot now has a tagline, "Scale the L1, scale blobs, improve the UX." If Ethereum can pull this off and buy back some credibility, this may be the beginning of the ETH revival.

Agree or disagree with this? I disagree with that. You disagree? Yeah. I think like, you know, uh because of this current competitive pressure on Ethereum and the market's pressure, ETH ETH as an asset is not doing that great. Uh, you know, that is kind of pushing Ethereum into choosing two diagonally or, you know, orthogonally opposite choices. One is being, uh, you know, settlement layer where which can provide securities to other layers and they can have execution.

And the other side is being execution layer their self. Like, you know, these are two very hard goals, you know, in the in the larger scheme of things if you It's not about for like, you know, 1 million transactions a day. Like, you know, I'm I'm I'm talking about like if you have like hundreds of millions of transactions on blockchain, there's no way that Ethereum can be the execution layer or any chain can be the base execution layer. And, uh, you know, on the other side, uh, you have the store of value or BTC competition. I think Ethereum should stick to its basics where it is, uh, you know, the most decentralized, the most credible value creation and settlement layer and it should allow the execution to to be on layer two. They should continue to be on the current

strategy that they have, but they are somehow being pulled on the other side of the direction that no, no, you need to have execution on the layer you know, on the layer one. I think that's the is going to hurt in the long run. Yeah, I I mean I I disagree. I do think it is extremely important that Ethereum improve layer one performance and basically be a really performant hub with many spokes, but the hub itself needs to be much more performant than what we have right now. What we have right now is about a million transactions per day. That's it.

That's it's such a small number and it has not gone up substantially in spite of you know, almost 10 years of Ethereum's history. What we need is a very clear focus on addressing bottlenecks in execution, addressing bottlenecks in consensus, adjusting some of the base assumptions of number of validators participating in consensus. Right now there's a million virtual validators in Ethereum with about 10,000 actual physical nodes and that million is really slowing things down. It gums up the works like when you have to do a signature aggregation on a million signatures like it's super expensive

and there are just a lot of things that are not really optimized. So I'm really excited about the the pivot in in direction for Ethereum. It's really aligned with what we've been working on at Monad for the past couple years. Absolutely, that's a fair observation, but only thing for me is like you know, the when you want the settlement layer. When I say settlement layer, the fundamental properties of that is it's not only it's like fairly decentralized, but you also want it to be sovereign resistant like that level of which which only Bitcoin provides like you know, I mean if Ethereum if someday Bitcoin said that they are coming into the settlement business or they put like, let's say, op op cat and all that and starts becoming a settlement layer for layer twos, then

Ethereum has a very serious competition because in terms of the decentralization and the widespread, uh, you know, the distribution of the nodes where nodes are contributing into the into the security of the network and which make it like the sovereign resistant to that level. Like if somebody wants to if a nation state wants to hold 100 billion dollars on on the chain, I don't think like except Bitcoin and Ethereum, you would you would want to prefer any other chain right now. So, I feel that that's a big value to have for Ethereum. And if they go into the execution route, then they will have to reduce the decentralization parameters a little bit. And, uh, especially when they have this this big behemoth and they have to change into something completely different. Whereas, like,

let's say Monad, which is building from the scratch to be that like having as many as my distribution of the nodes, still, uh, being highly performant, I think it it could be a very difficult goal to achieve and we can be like Ethereum can be in a place where they are nobody's, Yeah, yeah. No friend. So, I I see you smiling at some of these answers, so. Yeah, I think, uh, the the tweet itself was not saying anything that sacrifices decentralization, right? I think Ethereum's value proposition day one has always been 100% uptime. Uh, I think the tweet itself, I would actually agree with Keone, uh, because I think Ethereum has been lacking a focus and basically a one-liner, right? Like, what is this protocol for? Um, before you had all the

research KLs and influencers and talk left, right, and center. Um, and you have social consensus, no one understood what's going on. But I think that what that tweet does is to rally people under this one goal, right? Scale layer one. And it's exciting. But I also think in the longer term, it does expose some sort of risk because I think Ethereum is notorious for execution. Ethereum cannot execute. So, I think short term is a really good cry for rally, but if we can't execute this, I think it really pose a long-term very bearish signal.

Do you think should be back to you? Do you think this uh pivot or reprioritization of Ethereum is net beneficial to roll-ups and L2s or is it competitive? I think it's very beneficial. I think if ETH as a surprise, like an asset goes up, I think it benefits the entire ecosystem. Don't overthink it. ETH goes up, everyone is happy. Sandeep, maybe you disagree? Yeah, I mean, see, I mean, if if it's the only narrative what what Shaurya is saying and she is right in that that they need to fix the narrative. I am 100% for that. Like, fix the narrative and you know, the token goes Bitcoin or Ethereum goes up, the ticker goes up and and and you know, everything is fine.

Then the ecosystem gets the positivity back. Uh but I'm saying like, you know, what Shaurya said exactly proves my point is that, you know, Ethereum is notoriously bad for execution. And if it takes Ethereum from 13 TPS to go to 100 TPS 5 years, you have like the other players like Monads and Solanas of the world, they will move from 10,000 TPS to 100,000 TPS. So, it's kind of a unachievable goal almost at this point for Ethereum to achieve 100,000 TPS or even 10,000 TPS on layer one. So, why fight for that goal which is very very hard to achieve? Instead, focus on what you have which is the settlement layer and then, you know, kind of this alternative store of value and all that and focus on that. Like, I actually don't subscribe to the

to the notion that you know, Ethereum the worst thing that happened to Ethereum was it was like the better store of value and all that. It should It should focus on the best settlement layer and the best value creation layer instead of focusing on execution which is not its core you know, core area. I think I meant execution as in like Ethereum has a a chronic illness of not delivering, right? Yeah, yeah, yeah, exactly. I am I'm exactly talking about it. hurt you for all these years that made so bad. Um Do you know Well, I think it's um I think it's important to come to Ethereum's defense a little bit. Like it's quite exciting to see the um the clear message from Ethereum leadership about um the priorities which

are layer one scaling, um blobs. I think blobs are also really important topic to touch on because um you know, for the past couple years Ethereum has positioned as a data availability business um and you know, encouraged layer twos to build um but has not actually enforced the requirement that layer twos use Ethereum for DA. Um and so now there's a bunch of you know, alt DA services, Celestia, EigenDA, Avail um that are competing directly with Ethereum. Rollups are using Excuse me, layer twos are using um these alt DAs, but they're still using Ethereum's branding. Um so I think

that that'll be another interesting shift that I would expect is um and Dankrad has been pretty clear about um this this issue that it it's important for Ethereum to state the value prop that it's offering and then also state the rules under which um layer twos can inherit Ethereum's branding and be part of the Ethereum ecosystem. do you think we'll start to see some of the big L2s consider pivoting off of Ethereum? Especially if maybe blobs start becoming expense more expensive and Right. Yeah, so I think that Ethereum is is focused on raising blob bandwidth. Um the the sort of conventional thinking was, you know, this will take a while to

happen and so in the meantime it's okay for um roll for layer twos to use alternative services, but when this is ready, they should come back. Um, and I think that the combination of setting clear ground rules about using ETH for DA, um, consuming the services that Ethereum provides, um, and also continuing to emphasize that, um, ETH should be the token of the, uh, for paying for gas on L2. Those are both things that Ethereum needs to be very clear on and that also I see being contention among some of the layer twos that are starting to crop up.

Well, I'm curious to get you guys' take on who is your main competitor? Because in one sense, I I think I could lay out the argument that some of you guys are actually kind of competing with Ethereum in a way. Other others I would say, I'm sure you guys think of someone like Solana as a competitor. Maybe Shreya, I'm curious I'm curious how you think about this. Yeah, so yesterday or this morning Anatoly just tweeted is that, you know, I'm not naive, uh, to think that Base or Mega is is not my competitor, right? So, I think even thinks about Mega is as a competitor. But, I think from our perspective, the question is everyone because the pie has now grown for the last few years, you know, it's like those 20 app builders there and unless you're building new bringing new ones, you are

competing with other chains in term of in terms of developer talent. So, I think to that extent, yes, you're basically competing with everyone. In fact, you're probably competing with a lot of the interoperability protocols. Um, so that that would be a very competitive angle if you want to look at it. But, fundamentally from my perspective, our focus has always been to bringing Web2 founders or, you know, new college graduates. So, really trying to expand the pie. But, if I were to be cynical today, yeah, then I agree with Anatoly. He's basically competing with everyone.

Yeah. Yeah, I mean, I what uh, with Polygon, uh, what we have like, you know, we are focusing on the ag layer which is basically a you know cross chain settlement layer which is you know essentially what what we characterize it as is that it's kind of the the backbone of the trustless internet right so we I would say that the the you know in a very you know kind of abstract way that the competition we see is this trustful internet and then how much can we bring infinite scalability so that we can we can be the backbone of this trustless internet that is being created. I see all of the blockchains individual blockchains whether they have 10,000 TPS 100,000 or whatever like that TPS but these are execution environments

or computers in my mind and from Polygon's point of view I we see all of these blockchains like you know really complimentary to us in the sense that you know they are those individual computers or supercomputers in case of like Monad Mega Eth and all and then we want to be the connective tissue and that becomes the trustless internet. So you know I mean right now I don't see any individual you know chain competitor to to Polygon. maybe favoring topics and we can stop talking about Ethereum so much um thinking about what you're actually optimizing for the preference of the user and the consumer in crypto so far the last couple years tells us that they don't value decentralization maybe as much as we

originally thought that they would. So you're starting to you know you got Ethereum then you go you know I think everyone knows and the most maybe the latest iteration is hyperliquid and so you're basically trading off decentralization but you're getting very good user experience very quick and things like that. How do you guys think about this evolution and like what kind of the end game of this looks like? Yeah I think that um you know I was watching the Vitalik documentary a couple weeks ago came out pretty recently um it's really good definitely recommend it. Yeah it's great. Um It's a bad documentary I'm sorry.

You don't like it? I thought it was good. But the point is like it's a reminder of the early days of ethereum and the ultimate vision of disintermediating large middle men. Like right now all of finance flows through large payment processors flows through banks all commerce is flowing through a bunch of centralized services and the original vision of ethereum was that we can build a better way of doing this where control is not flowing through these centralized counterparties and I think over the past 10 years we've lost a little bit of that vision but

it's it's a good reminder that at the end of the day there's so much value that can be created by creating decentralized systems with a credibly neutral censorship resistant Byzantine fault tolerant system through technology that enables this decentralization and I think you know nowadays there's been a trend toward as you were saying like data center chains or literal like single server chain and um it's just really strange from the possibility of this decentralized network a mesh network where we have a lot of finance all flowing through a system that is not controlled by one actor.

How do you think about this as a founder though cuz you I so I agree with the vision but also you see something like I don't know like Fogo pop like it's like Fogo Chicago hyper liquid Japan I think right like I I maybe it's a little frustrating as a founder building a a chain. Uh when I was in working in at jump trading in 2021 I remember observing that um you know a lot of the projects that were popping up were were forks basically and the reason why that was happening was because you can launch a fork a lot faster than building something new.

Um and so, you know, if there's a sampling bias, it's the same thing as like going to the gym and seeing that everyone is pretty jacked because there's sampling bias. So, um I think that, um you know, some of the chains that are coming to market very quickly are reusing existing technology, but that doesn't mean that we aren't as an industry producing new technology that does enable that level of decentralization. I mean, uh your your original question was that, you know, the decentralization doesn't really matter, right? And I think like the markets are very clearly telling that, you know, UX matters, but still I feel that the decentralization started from

Bitcoin's, you know, beginnings. Like decentralize Bitcoin extremely decentralized, it's sovereign resistant, you know, store of value, and blah blah blah, right? Even the countries can can't can't control it. But if you see for larger crypto applications, decentralization is a means to achieve three things: self-custody, trustless compute, and censorship resistance. With the advent of ZK today, you can literally have all three of these capabilities on your chain with a single server. You can have self-custody and censorship and trustless compute. Censorship resistance, only thing is you will not have real-time censorship resistance, but you can have eventual censorship resistance by forced transactions. So, what where I am seeing the world going

the world going is, and that's why like for me, trustlessness is now a bigger phenomena than decentralization. Decentralization is needed for Bitcoin or Ethereum or anybody who's trying to be the L1, but then for most of the other applications, the execution environment, as far as they are trustless, they are good enough because the trustlessness benefit of trustlessness is the users can actually see what was originally committed by the application provider, and if they are using large amount of finance, where is the finance sitting? Is it like what's the risk parameters and all that? That you can do with with single sequencer ZK fight, you know, layer twos also. So, trustlessness is greater than decentralization.

Thumbs up. I think Sandeep just nailed it. I I think just the word decentralization has to be banned. I think going forward because it is a heavy word. I think from our perspective, we outsource the real the censorship resistance, the security to Ethereum mainnet and we remain as a permissionless chain and you know, that is pretty enough for our builders for now. To me, I I often think about hyperliquid, right? Like I think everyone has seen hyperliquid success and they were like you know, all these flaws, but then the product is really good. But I think deep down hyperliquid was like the decentralization mattered very little because of the wealth creation effect, because of the the some

permissionless nature in it. And I think there's like a lot of things we can innovate upon hyperliquid. And I think Ethereum's historical mistake has been rather than making incremental improvement, Ethereum think about a world war three technology, right? So, you're actually missing how to onboard the next 100 million users. Like if you can't onboard the next 100 million users, you can't onboard the next 1 billion users. So, I think our recommendation has always been like take meaningful trade-off, really focus on performance and outsource decentralization to whoever does it the best.

Yeah. Sure, maybe we can actually keep talking about Mega ETH cuz you guys have done a better job than most. We've been talking about the user, but maybe talk about the the founder and like the application developer and what you've what what you've seen that they are trying to optimize for and what they actually want right now. I don't think I've done a good job. I think Sandeep has a proven record of of doing a much better job. Our chain is not on mainnet yet, but Well, you're doing a good job with the new the new college students The new college yeah, yeah. Um, I think you know what founders really want is people to use their products. There's really nothing else. That's why I don't believe Grant does any job in terms of onboarding web3 builders at all. I think

what we've been doing is to inspire builders to build things that's novel, that's creative, and more important that actually leverages crypto, right? We are very much against forkware, we're very much against in general forkware or copying other people, but Um, yeah, so I think if you really inspire young builders and allow them to do things outside the box, that's really important. And if I may add one more thing is MagaEase is known as ultra low latency as a chain. So, and so what we're trying to do is to work with builders who want to build application that require very low latency chain, right? So, I'm not interested in

building a MM on MagaEase, like I think Monad would have amazing MM. I think Ethereum layer one and what I really wanted to do is a freaking fast club. So, and you have to be very focused on the type of use case that you're going after. Yeah. Sandeep, what do you you've got more battle scars than most when it comes to applications actually building on the chain and you've seen a lot of stuff like Polymarket and a lot of other ones. What are what are some of the lessons learned from actually like trying to scale some of these applications to tens of millions of users?

Yeah. I mean, one of my realizations have been that I mean, you need like as much scalability if you are an execution environment what MagaEase is trying to be. You need as much scalability, you know, as as you can because the gas fees needs to be extremely low. What I what I have seen is like Polymarket is now very big, right? But before that, there have been multiple multiple applications. And what happens is like the moment they start exploding, suddenly they start asking for gas grants. Their users are saying, "I'm paying too much gas." and all that.

And that's what gave me, you know, kind of early insights. And that's why we pivoted fully into the ag layer is that eventually, the moment a a particular application starts becoming big enough, they want so much capacity that the shared chain or a general purpose chain is not good enough for them. So, they want to graduate into their own dedicated environment where they have local fees and all that all those kind of things like, you know, they have the local fees, dedicated capacity, they can prove you know, approve the SLA and all that. And that has been my, you know, kind of understanding that the general purpose chains will become some sort of liquidity hubs where large amount of liquidity is there, but most of the application activity will move into these dedicated execution environments.

That is what I am seeing and what I think that is going to happen. I think that it's really important for builders that they're in an environment that is succeeding, in an environment where there's growth, where there's growth in users, where there's growth in economic activity. At the end of the day, it's the worst feeling in the world to be working really hard, building something amazing, but then, you know, feeling like you're in a tiny pond that's drying up. And I think what's most important, like my singular focus is really helping to grow the crypto space. And you know, I'm doing that by helping to bring some technology to the space that could support a lot

more users. But beyond that, it is about bringing optimism and a sense of hope and a a sense of excitement back to the crypto space. Like we're all kind of beaten down right now. It's a little rough out there. And it's okay to acknowledge that, but it's also okay to just focus on making sure that the ecosystem is experiencing growth and I think that's the best way to support builders in addition to all the other things that um you know, all of us here are doing. I love that. It's a good message, Keone. It's a good message.

It's a good message. It's good opium. What is your sense Keone, what is your sense if maybe I'd love to get all you guys' take on this. Your most cuz it is it's kind of it's a you can kind of feel it at this conference. It's like there's optimism but it's kind of like everyone's kind of searching for a narrative in a sense as well. Like what is your sense of what the next 12 months will look like? I think the I'm actually extremely excited about the next 12 months because I feel like um you know, there's been a bit of reckoning where um you know, collectively we've realized that meme coins are um you know, while they do onboard users, they're all they also like you know, they're very unequal in terms of the the wealth effect um and we're kind of being down from that. Um

we've acknowledged as you know, within the Ethereum community that there needs to be more focus on scaling L1 and it's just you know, like this focus that we can bring um to this industry to resolve these problems and really bring applications on chain that are onboarding a lot of users. Yeah. Something deeper for you, Adi. Yeah. In terms of like the like the the hope and optimism, I I feel I hope that and I what I have like my analysis is that the you know, in the macro markets like the peak chaos has already is already behind us and we have seen like a big bout of global chaos but I think now there will be less propensity to do like that kind of chaos

and we probably the bottom is in in the in in a bottom is behind us and probably in the next 6-8 months we will have this you know, kind of sideways and all that sideways movement in terms of the I'm talking about this not a financial advice but I am thinking in terms of market because the biggest problem is the liquidity in the altcoin markets, right? The all the the liquidity in crypto is mostly now sitting on Bitcoin and all that. And due to that, altcoins have been it's been really really bad time for the alt projects. And I think like end of this year or early Q1, probably like the Fed starts pivoting into the, you know, reducing the rates and all that, more liquidity comes into the market, and I think that optimism will will will start coming back. In in that time, hopefully, we have more we we

could get like more applications like Polymarket and, you know, what Hyperliquid is doing on the consumer side. And like, I mean, as an exchange and all that, and more DEXes, more, you know, clubs, and more, you know, lending, borrowing, and all that. And hopefully, we get And with this tokenization, also, hopefully, we start getting some network rates. But the biggest kind of like deliverer of crypto can be stablecoins, which is getting immense traction. Every government is looking into it and all that. And hopefully, we'll have the next wave of users joining this. So, yeah, we've got 30 seconds left. So, last last predictions for the next 12 months or thoughts?

Oh, lot of thoughts because give me 30 minutes. I I found it very difficult to answer this question because I thought this conference has been pretty optimistic. It's It's a It's a lovely region, a lot of support. Even DAS, right? Your conference was fantastic. Met a lot of institutional folks. I think the only conference that was so bearish and depressing was East Denver because no one like Denver, no one like the East, right? So, so adding to that extent, there's really I mean, I've been a builder for 7 years along with these people. There's really no bear market when you are focused on building and shipping things. I do think some of the bearish thought there was a reflection of certain ecosystem and

narrative. But it's really not relevant to everyone who is sitting here, right? And a lot of times it's not relevant to me. Like Solana has been doing extremely well for the last 3 years. So, I think my departure word would be focus on things that make you optimistic and hopeful and basically turn blind to things that perish. It's an amazing message. Thank you everybody. Thank you guys. Thank you everyone. Thank you.