Zero Just Made Blockchains 100x Better | Bryan Pellegrino & Raz Zarick

Transcript

The big unlock with zero is that everything is part of the same system. It's all owned by the same chain. There is no separate entity that's deploying a layer 2 or owning the DA or or owning um any part of the stack. The whole stack is one unified blockchain. 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 Block Works. Our hosts, guests, and the Block Works team may hold positions in the companies, funds or projects discussed.

>> Welcome back everyone to Empire. Uh I'm really excited to have this pod. I was with Brian and the Layer Zero team last week in Europe. They announced zero. I've known about this coming for a while. When I first heard the pitch, I was blown away. I mean, I I've been in the space long enough so that my my you know what really excites me is the bar is higher now, but when I had that conversation when Brian came to me, I was I was generally blown away as someone that is now trying to build and bring businesses on chain. I think it just opened up my mind. So, Roz, Brian, welcome to the show. I'll let you guys introduce yourselves for the context just for for the audience and then we can go from there. Before we get started though, full disclosure, I am an

investor in layer zero. So, of course, a lot of this discussion will be just objective and and and gloves off really because I think it's but you know, obviously I'm biased. So, anyways guys, welcome. >> Thanks so much for having us. Um, quick intro Brian uh Pelgro uh co-founder and CEO of Layer Zero Labs. And Raz, >> yeah, Raz, co-founder and CTO of Layer Zero Labs. >> Awesome. Well guys, why don't we just get started? I mean, you announced Zero last week. I think the the reception of that was pretty amazing. I was in the room with Citadels of the World, your existing investors, which is probably the most like non-crypto set of investors, you know, Sequoia and PayPal and a bunch of other folks. Uh give us

the origin story and the thesis behind building zero. Um you know, what was the initial conception and what was like going into zero? like what gap did you see um focusing on from the in the messaging layer that you said okay we need to build a we need to build like the more foundational piece here which is zero like walk us through that journey >> yeah I think uh one thing obviously we sat in the middle and continue to sit in the middle of of all the different chains all the different architectures right so we I don't know that there's another group in the world who's gone as deep in every different VM and architecture uh as we have because when we build a new endpoint on salana we have to rewrite it from scratch match with the SVM and we have to, you know,

figure out how you deal with dynamic dispatch and memory, all of these different things that go into it. Then when you build on ton, you have to figure out like how ton deals with sharding and like what that looks like. And so we had gone really really deep uh in that. You know, again, I think we're we are deployed on the most nonvms out of any org uh that exists. We found crits in a huge amount of these systems. We've gone very deep. We've worked very closely with many of these teams. So we understand the trade-offs that people have made. But really the origin story of like how this happened was was Raz was really generally just frustrated with this space in general. I uh I lean a little bit more pragmatist sometimes.

I I've been in the space since 2011. I've seen lots of evolutions. He came in um a little bit after that, but really really I think both of us like believed deeply in the the early vision of Ethereum. And so he was complaining like every day, every single day about the state of the world and the Ethereum basically saying layer 2s inherit the security of the layer 1. And he was just like that's just like fundamentally not true. And like he didn't understand why this basically is being propagated. It's not like layer twos can exist. They can be they just like didn't in the state of the world like inherit the security. So he was like complaining every day and I was dude chill out. like all the layer 2s are like our biggest cousins where

all of our volume comes from like settle down. Um but ultimately it just came to me being like you know like all right like what what would you do like just how do you solve this problem? What would it actually look like? Uh and it was interesting because back then I mean ZK was still like really nent uh but he had this really early architecture that he went and he whiteboarded that really said like hey who who knows when this technology is going to be ready what it's going to look like but like as soon as it's done this is the way that you solve this right like the underlying beacon chain should own all of these things it should be 100% one system you have trustless community like drew out this whole thing but it was like it was you know some futuristic like 20 years out, like who knows what

this is sort of going to look like. Um, and so once he did that, I think we're very early on we were just like, oh, like that's that that is like like clearly correct, right? That is 100% what the world is going to look like. And then just like I think we had conviction that okay, like we we have to build this, but we no clue how long it's going to take, no clue what that's going to look like. And then it was just like just like grinding away piece by piece. It took two and a half years, right? was uh I think substantially faster than the rest of the world thought that it would happen uh for solving a bunch of these problems but still like a very meaningfully long time of just being 100% stealth in the lab like solving all of these bottlenecks along the way. Ros,

before I go to you, I mean like just just for zooming out a little bit in context, like you built what I think like objectively I think the most widely adopted messaging protocol like across crypto, right? You started off saying, "Look, there's going to be a plethora of chains. Let's connect them all and there needs to be a common like connective tissue, right?" So I actually in my journey of building conversion, you guys are one of the first ones I called because from my perspective, I care about onboarding users and and you know, so I I care less of if I'm going to tap into different ecosystems, I got to make sure that the end customer, the user doesn't see degradation, right? And and I think you guys have been super helpful in that journey. We've seen other folks like Circle Launch Arc and you could

argue that that may or may not be the right move because you're basically undercutting your customer in many ways. In this case, like talk us through like the decision to kind of pivot to launching your own L1 like you're you're isn't that competing against like some of the chains that you serve as as you said? >> Yeah. So uh one thing that we've learned that I think is very interesting is I mean we work super closely with a bunch of chains or a couple of chains that we're just have gone very very deep with. We've done a ton with arbitrum. We've done a ton with like all of these different environments that we've worked in developing native solutions for developers. There's a bunch of chains that we are close with. There a bunch of chains that we're not close with at all.

And at the end of the day we thought early on that our relationship was with chains and like that's who we served and that that was the customer. We're just totally wrong. like in in isolation chains don't want layer zero. They don't care. What they want are the assets, right? And so like our customers are USDT0 and WBTC and Athena and Etherfi and PYUSD from PayPal and all of these things. And ultimately what the chains want is they want the assets. They want USDT0. They want PYUSD. They want uh Athena. They want all of these things, right? And so what we I think learned over time is at the end of the day, it's fine. There were some chains even even prior just they just outright don't like us that much and it still didn't matter because they

want the assets and >> like when the goes into the chain not when it leaves. So it's almost >> Yeah. Yeah. Exa exactly right like >> actually just make it easier to move across chain. So the the barrier to exit is lower when layer zero works. And that fundamentally is sort of you know why they wouldn't like you. >> Yep. And so our customers we've realized over over the many years is the asset issuer. Our job is to make their product as compelling and as seamless as humanly possible that you know they want to drive aumum. They want to be everywhere. They want to do these things and at the end of the day they they are the pull to the chain. So like the chains don't care about us. They want the assets and so we just build and do what's best for the

assets and then we're you know we're going to be in the chains anyways. >> Yeah. I heard you say like when you announced zero that you moves the industry's roadmap forward by at least a decade. Um, I think that's an extraordinary claim claim. Um, like walk us through Roz or Brian like walk us through like what is this like generational leap like what is how does this improvement really show up? >> Yeah, I mean the the problem like I guess when to go back to what you were saying with Brian uh about like why are we doing like doing this is the centralization is become like a a a footnote and now everybody's focusing on expanding in terms of how fast it could be. uh what kind of throughput they can

do uh and how cheap, right? And Ethereum has was for a while going after the L2 the like having other people expand uh and h have them uh scale that way, right, which was a more centralized approach. And we felt we like they're getting like that the the person who's fighting the most for decentralization has kind of put that that down and said at the time uh and said uh let's let's have a more centralized approach to to expansion so that we can compete. Uh and so what we realized is the only way to do that to make an like to make a blockchain uh I guess competitive with Salanas and

everything like that in the world is it has to and still have those those features is we have to build um I guess a ZK approach, right? That the the only way to have it is to have these validators do less least work less amount of work. And so um this design that we drew I guess you know two and a half years ago was like endstate imagine we have zk that can do unlimited scale. Um and if we could do that then we can have validators that are lighter than what Ethereum has. So imagine something like a smaller than a Raspberry Pi a watch something that's like just incredibly easy. Anybody could just pick it up and run it. Um and the work is not being replicated. Like that was the big

unlock that we saw uh when we were as layer zero. One of the things Brian left out is like we seeing all these other chains and seeing what was wrong with them. We also saw what was special about ZK which was rep elimination of replication where you could generate this proof. One big actor could build a proof and then everybody else would have to replicate that work. And like that's the expensive part of a blockchain. And so if we could remove that like that's Salana's problem that's every blockchain's same problem over and over and over again. So if you remove the replication um there's other bottlenecks still and so we went through and solved all of them.

We listed them out and said okay this is this is where every every part of the stack is broken right there's a storage problem with MPT. There is a scheduling problem within the VM. So how do you parallelize all the transactions? There is a network problem where how you disperse all this data and still retrieve it uh verif verifiably. And then obviously the zk problem. So we limited to those four issues that exist and uh we solved all of them beyond our wildest dreams. Like our original goal was let's make something as fast as Salana uh so like 2,000 TPS 2 to 4,000 TPS and as decentralized as Ethereum. So something that can actually compete uh with the with the principles we cared about. And then when we did QMDB we just

blew that away. We're like 2 million TPS like we could achieve. Now that was like uh well that's a new benchmark. Let's try to if we can do 2 million T if the bottleneck now for storage is 2 million TPS uh that's the ceiling then what can we do uh with everything else like let's just start shooting for that instead of 2k TPS. So then after the scheduling and FAFO we were able to do uh well 1.1 million TPS on EVM and even 2 million TPS if there wasn't an EVM. Um and so then just keep walking down that with that new goal of okay >> just to be clear at the time of FAFO like common wisdom that was like the the EVM is slow right like the EVM is just the EVM is the thing it's slow it's like that's the problem um you know EVM

itself that's why you need SVM that's why you need move you need these other approaches because the EVM is just inherently bloated it's bad it's slow and so this was like proving a million TPS on like a on a single node with all of the overhead of the EVM so that that alone was like a very massive breakthrough. Sorry. Go on. >> Yeah. So, uh, and then the ZK side, uh, we we thought it wasn't there yet, but we thought everybody in the world is working on ZK. There's like a 15 ZKT TM teams. We're just going to evaluate them all, pick one off the shelf, plug it in.

We solve these other things and we're good to go. Uh, and then we realized they weren't really, they're actually trying to solve Ethereum's problems, which is like 15 TPS. And the goal is for them is drive price down, not become high throughput and as do as much as uh TPS as possible there. And so they're all trying to solve this one problem and not the problem that we want. And uh and then they're also reaching this like ceiling of what they could do. This technology is older, this math is older, their approaches are like all they're all just pre-ompiles now to the point to try to get edge out every little um performance gain they can get. Uh and so then that's where we you know started looking at other other new research that was coming out and that's where we found Jolt and we're like this is you know

green field this actually scales this is the this is where we have to go but this is obviously just research how to let's make a production team and build that um and we know what we want to do is 2 million TPS so let's drive towards you know a terahertz cluster uh a G like proven cluster and and that's what we're building um >> before we before we go to your four what I think four proprietary systems like QM MBD, FAFO, SV, Jolt. I want to just go back to like say you're a trafficy allocator coming into and say you talk about what is this heterogeneous architecture, right? I think most people would understand like there's always a trade-off and in crypto we we've talked about the scalability trillemma. You know, whether you believe it to be true

or not in today's world, different story, but you know, you've kept hearing that. Um so if you're like a put yourself in the seat of a tray allocator who's like never used a blockchain but cares about performance what uh why does like I guess separating execution ver from verification matter. So there there's two thing I want Raz to give like a slightly more technical side of this but there's I want to just double back on you. You had asked why does this bring the industry forward 10 years and I I just we started diving in the specifics. I want to be very clear there like ultimately Ethereum laid out a lean lean Ethereum road map and they said 2035 they hope to hit sort of 10,000 transactions per second and like 10 megabytes per second um of of

throughput, right? And so uh that was like the goal for 2035, right? And so when you look at the zero side and again the the the reason is all of the rest of the world and that's one of the benefits of being able to start from scratch is just go back to first principles the core insight was assume ZK is solved which nobody thought at the time everyone's taking ZK and they're retrofitting it to existing systems and how do I how do I use this go back to the start of the world ZK is solved what do you do and what you do is ultimately this once you do that that's where so now instead of you know now you're at 10 gigabytes per second and millions of transactions per second so um when you're talking about the performance trade-off, right? Most blockchains, the bottleneck is twofold.

There's two real constraints in a blockchain. One is that if you have a million nodes, every single node in the network has to download all of the transactions and run the same computation, right? So, if your node is a MacBook, you you can only do as much compute as that MacBook can do. And all 1 million MacBooks download all of the transactions and they all run the compute. So, you have a huge inefficiency factor. you're doing this computation a million times, a million times more expensive to do a simple set of instructions. Um, and then the second thing is once you start to scale up the transactions per second, you really get bottlenecked by bandwidth. And so like actually being able to download all of the data and transactions from a lot of a lot of transactions per second, a lot of throughput becomes like you can't

pipe it over the internet, right? You actually can't do it. And so this is like Salana is rolling their own fiber. You have double zero, you have like all of these things to try to solve for that. So uh if you want maximum decentralization and you want all the nodes there you have a huge replication factor and you're bound by by the weakest link right so your your smallest node in the network if you want the person to be able to be homestaking that is the most powerful the network will ever be because that person needs to be able to download everything and run the computation or you scale up the transactions per second you get bottlenecked by the internet. So Zero does two things and before we go into the breakthroughs, one is it still has this beacon chain and so if you think

about most blockchains, there's this chain that runs and again they all do the work and they all download all of the transactions. ZK is really all ZK is for the most part is compression. That's like one of the largest unlocks. And so now you have the ability to say if you have Ethereum and you have a bunch of validators on beacon chain, they're just fully saturated. They're doing as much as they can possibly do of data that's coming down from the EVM and just running these transactions. They're at absolute capacity. Now with ZK, you compress all of the compute and with SVID and ZK, you compress all of the data. And so now you go from like the pipe being totally full to the pipe being like almost nothing, right? You can support so much more above. And that really is like the really big unlock. So

what is the trade-off? The trade-off is you still have all these really light nodes. They can be even lighter now because they they're not at capacity. They don't need to do this. So you you can actually be much more decentralized. But if you were going to run just that chain and they were going to run like every blockchain, they would be constrained. You'd be constrained at 20 50 some small number of transactions per second because these are like Raspberry Pies or little MacBooks or nothing. What zero does and that's why we describe as a heterogeneous architecture is allow you to have really big nodes. We call them block producers that can do a lot of the really heavy lifting, right? And so they can run this is like the servers that run nicely today. Okay, this is anybody can run these systems are large or sequencer level. Um they they take

much more stake but permissionless anybody can run them and they can do all of the work and they can do millions of transactions per second and then they just generate the proof and all that the verifiers need in the network is a transaction commitment um you know a slice of the data uh in the in the proof, right? And so then they can validate and then they do everything just like it would be in a normal network. And so if you had no block producers, this would look like a normal blockchain in many ways in terms of the constraints. The whole point is you get to have these really big nodes or like these two tiers of nodes. And Ethereum does this a little way, right? There's proposer builder separation. The nodes who actually build the blocks and the searchers and everything. Those are like

way bigger and larger and much more computationally heavy than like the tiny nodes that run the network. This is just taken to the the absolute extreme. And again, they had a vision for this kind of 10 years out. U but that vision is is really only because you're retrofitting the system to to about 10k transactions per second and about 10 megabytes per second. So this is just taking it to the absolute extreme saying rebuild the whole thing from first principles and this is you know this is what a system will look like 50 years from now. Let's solve the way to it. So >> curious on that like as I was hearing you say that someone might say wait a minute I've heard this idea before I again this idea of like uh having every node do the same work other people have tried to do it before um you know the

the the forcing full replication is like something a lot of people moved away long time ago um where where do you diverge in like versus like someone else like I da like I think they use like a razor code which >> everybody's just doing a piece of the stack, right? So everybody try to modulize and L2 just does like execution or IGEN's just doing DA. We built the whole solution, the whole stack that works uh together, right? As as a single blockchain. Um it is uh what I think closer to what lean Ethereum wants to be uh in their like five to 10 year road map. um obviously with a far less throughput um and all of that but that that we built the whole system uh and we built it like Brian said from first

principles uh and and built it at the question like you know make questioning every every decision we make is like is this does this need to be here does this not be be here and so we've made like even our validators they're just verifi like validating the blocks verifying the state transitions with the ver with the proof they're not uh like any of the logic for like how votes and all that stuff happens actually happens in its own zone. Uh so we've made it so light uh that uh they don't do almost anything uh and which allows us to have multiple zones that are like 2 million TPS if we want uh many uh which is crazy. does re talk about though like very specifically like a system built on a different DA right you have a DA layer you're rolling

up to Celestia you're rolling up to like some other DA like what is the difference between between zero and holistic >> system that modular style right you don't inherit there's no secure >> those validators of ien or celestia don't secure anything right they're a place that you can point to and look at your data um but they you don't it's not a holistic system just like an L2 doesn't inherit the security of the layer on uh it's a sovereign blockchain that kind of posts its data there. Um you know the DA has no requirement to do uh to secure your data or do anything like they they are not uh going to be slashed by your network for doing something malicious to you. They're they're they're an external resource. Um

and so the big unlock with zero is that everything is part of the same system. It's all owned by the same chain. There is no separate entity that's deploying a layer 2 or owning the DA or or owning um any part of the stack. The whole stack is one unified blockchain. Got it. I want to go back to this TPS. You guys I think went out saying, "Hey, we can achieve 2 million TPS." Uh which is massive. To put it in perspective, Ethereum does 20 to 30. You said 15 earlier. Salana does what 3,000 TPS. Um what's the asterisk here? like is that like theoretical across all zones per zone under what conditions? Because I

think you know I think crypto as a whole not to discount that of course but I I think it's it's reasonably normal to assume like be skeptical when someone says everyone can manufacture TPS in a vacuum. It all comes with certain conditions. I'm curious what those are if any in in your case. >> Yeah. So there there's two sides right? There's like what can you actually scale to? Where does where does the system break? um cost overall and then the other side is is there actual demand, right? Being being like scalable to 2 million TPS. Uh it doesn't mean you're going to provision at 2 million TPS in terms of like prover networks and all of these things that are doing it because you're just like wasting a ton of resources if the network has 100k TPS, right? Uh so the point is that the

system itself can scale to many millions of transactions per second where like Ethereum layer one like can never scale, right? Salana is not going to do. Again, this is why they're they're struggling at the bandwidth layer. There there's just a bunch of constraints on the actual network. This network, the pipe has become so large that you can easily easily now have the capacity up to millions of transactions per second. But you have to actually be able to fill in the other side. And that's why we've talked a bunch about this. This is why we've aligned with a bunch of the partners we have. This is why we're doing the things that we're doing. Uh it's not enough in 2026 to like just build the technology. No, nobody cares about just like a an incremental and not that this is incremental at all, but

there's so many been so many incremental layer ones and it's just like it doesn't matter. The demand is what matters. And the one of the driving forces for us is that again almost 15 plus years now, right 2011 forward for me for that entire time, crypto has been a pool of capital that sits over here. Sometimes very big, you know, up to trillions of dollars and the rest of the world has lived over here and they have never intersected. you had exchanges and a couple other things that allow people to go back and forth, but for the first time ever in the last kind of 18 months, you are having like a real real convergence of these two systems. And what happened is we're very happy in this land to be at like a th00and TPS, 2,000 TPS, like we've done it. Uh the

systems are cheap. You're paying a penny per transaction or maybe 50 cents per transaction or whatever the number is. Um, but now you have this like behemoth of like guess what like if the new if ny comes on like NY is like two million transactions per second right like modern systems it's just like a joke compared to what we have and so what happened is everybody started making these like last mile tradeoffs to try to get like we waited our whole lives we built the system we've proven the value and now the rest of the world has sort of been forced into into acknowledging the power of like global permissionless systems right and like Tether is one of the largest holders of US debt in the world and the largest non-s sovereign holder of gold in the world and like this is just from like permissionless

access to these things and so now when you have this convergence happening everybody's now saying oh well just like you know they'll just have their own centralized blockchain or they'll do this and there's all these really centralizing trade-offs that are made at the last mile that like really kill a bunch of the underlying value of the whole system itself and so like you have to be able to solve for the demand side and you have to be able to say how can you bring that entire existing world into an environment that is still like neutral and decentralized rail and can meet the demand because they're not going to wait for you for 30 years to catch up with the demand. They're just going to replplum the back end of their existing systems with some permissioned stuff and like that's it. That's that's

the end of it. So like we we should we are so fortunate that we have you know 14 trillion dollar black rock saying every day like that public change like there actually is real appetite for using public chains and for driving this and they like there is that everybody has seen the value of what the system can do and we have a chance to do that but we have to actually be able to like provide the supply side from the technology in a way that upholds the you know the the principles of the space. The thing the only thing that really makes it valuable >> also the the the asterisk that you wanted uh there's no asterisk on the network the proving proving is just a cost function. Uh QMDB there's no asterisk because QMDB is best case is

its worst case. Uh so they could always just do that. Uh and the asterisk would be kids state contention. So imagine if the only app on the chain was after the same piece of state uh and everybody was doing transactions on that state. then yes that that is a that is not a web three problem that's not a blockchain problem that's just like everything problem uh any any type of systems problem um so we are limited by that so that is the asterisk but imagine there are many applications and there's not and the state contention is not all on one thing uh then there is if 2 million is 2 million is kind of just where we stopped that's what QMDB can do on a on a a modern SSD now if we choose moved to QMDB to run on uh you know a RAM drive

uh that the TPS PS could go even higher. It's just like why at that point. Uh so 2 million TPS is not even our necessarily our ceiling. Um but we think it's it's high enough where we can talk to it. >> So before we round out the I want to go to kind of the institutional side of the house and demand side. I think about that constantly, right? Um and it's where I want to go next. Rounding out the technical architecture kind of chapter here. It's like okay like validators download a very small subset of the the data the block data. Um, are there any like decentralization trade-offs? Like can this realistically be run by anyone or or eventually like in practice does it like centralize around like wellresourced no operators or or is that just not going to happen?

>> We built it that is a concern like with every blockchain including Ethereum, right? Like you have all these like anyone can run a Raspberry Pi but let's just assume that's not in practice. most people are lazy and are not going to do it. And so you have >> it's also scary, right? Because you can get slashed. There's like a bunch of things that make it like man there's a lot of incentives not to do this and just put it in a pool. Um so many people are skeptical of salon like higher hardware requirements. I came at the big pivot saying wait a minute if I to your point on demand it's like well what's the ROI of someone that is provisioning resources in the same way that you have proof of work like you eventually do the calculus of I'm going to spend all this

in compute and bandwidth. Well, am I going to get compensated for that? And the calculus for that was very much so. Yes, for Salana, but you still have centralization. >> Mhm. Yeah. Um, yeah. So, we try to attack that with the like to how how do we tack this problem, right? And and we see that Ethereum has it and everybody else has continued to have it. So, our approach is uh we've built and are building a client that's easy to download and run without like a terminal. Like you don't need to be a we want to make it as accessible as possible. So anybody who cares about decentralization wants to participate in the network can run it. Uh we've removed slashing at the validator level. Uh so only the block producer but the block validators don't do it. So we want it to be easier to do and participate in the

network. Um we wanted uh to just make it accessible in that way. So like those are the approaches things like governance right. So right now it's kind of opaque uh from my perspective at least like how are decisions made on these blockchains? things seem to be kind of be done in a in uh private chats or whatever. It's just not open. So, we want to we put this governance also part onchain. So it's within the valader network that like within your app you know proposals to add new zones add change configurations add increase the TPS for a zone all of that will pop up in your in your application that's running the client the validator and you can participate in it or you can delegate your decision to somebody you think is an expert that represents your

your beliefs on what where the change should go and so it allows we're trying to make it very a easy and active to to to be an active participant if you care about it. Um, right now it's just scary. Like even like if you're not if you don't have technical background and you don't and you're not like really into this stuff and you're okay with like the risk like if you lose internet at home like if your snowstorm happens or something you're just getting slashed like that's crazy. Uh and that that definitely a barrier to entry where it makes everybody wants to run it in the cloud uh and running in the cloud puts you salvages and stuff like that right it's brutal.

>> So there's there's two two sides. One is ex extremely anybody will be able to run a verifier like the goal of the beacon chain the goal of ver like validators is to be hundreds of thousands to millions right as small as possible super accessible anybody can run and then when you talk about so you talk about Salana like big node requirements much more limiting factor in terms of who can actually run them who can afford to run them etc that will be 100% um the case for block producers right you're just going to need bigger servers or so you're going to have a smaller set of block producers. But all the block producers do is boost, right? They they are not they cannot affect the security of the underlying chain. They cannot censor the beacon chain. They cannot do

anything like the beacon chain is the chain of the thing itself. These are just providing a boost to the network by creating this transactional throughput and generating the proof down and doing that right. So you will have a smaller set of these big nodes. The whole point is, you know, imagine you can have these big nodes in Salana and then you can still have a million node decentralized network that actually is like moving the state of the chain forward. And so that's the delta is like that is why we call it a heterogeneous network. That is the unlock is that you can have a lot of the work put off. Uh but everybody everything just like you said proof of work backs out to cost of energy.

everything is going to be. There has to be economic incentive because it is so cheap to run the chain because you can do millions of transactions per second at a fraction of the cost of you would do it with every node doing this in a traditional sort of full replication setup. Um the economics are are just much eas they make much more sense uh than they do in most structures. Coinbase cryptobacked loans powered by Morpho empower users to borrow up to $5 million using Bitcoin or $1 million using ETH as collateral. Loans originate in seconds with no additional credit checks and competitive rates typically between 4 to 8%. Use USDC for down payments, debt refinancing, unexpected

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make sure to use code Empire 200 for $200 off at checkout. when I first heard it and look I don't pretend to be technical but um when I first came to crypto zero knowledge proofs even explain in in sort of layman's terms like Zoko I heard him describe it and it was early me Zcash it's very fascinating um we're at a time in crypto where I guess a lot of people would say the in you've heard people say look the innovation between Salana and Ethereum was very much zero to one and then Salana you had other like parallelization and you had zooies a you know a number of other different

protocol with similar architectures and monad but you could argue it was very marginal relative to what perhaps Salana like innovated versus Ethereum layer 1 I think if Vitalic were to start Ethereum today he would very much use kind of similar your architecture like Solana's architecture some variation thereof but it's pretty interesting to see you guys say wait a minute let's just forget about what Salana and some of these other high throughput blockchains say we don't accept the premise that we figured out and solved you know innovation on the ex you know as an L1 and let's just build it with some open source stuff right I think you use like a couple of different systems I think jolt was you know I think there was the AC

team was very involved in that I want to make it more of a discussion not so much on the technicality of these systems but more on what does this mean for a space that obviously is open source and you guys are building something pretty unique here. Like how do you think about the defensibility and modes of the system that you're building? Yeah, I think there's two I mean I think one thing is we're we're pretty fortunate in that well Jolt is definitely on the ZK piece for like the ZKVM that that is something that like originated Justin Thaylor Michael Zoo like they uh were the origin of that work and we've sort of taken that and together productionized it in full and then we br built out our own prover and again moving to this terahertz proving

cluster and like all of these things right so that is one but every other component of the stack so QMD B we invented we originated like we built from scratch. Fafo same thing. SV same thing. Uh and then the the proving um the GPU prover on the Jolt side. Jolt pro 100% ourselves. So like there like part of the defensibility is is in is in the innovation itself like and just knowing that but then also like the world is changing a little bit. It's very interesting. I think there's been a lot of a lot of discussion. So like optimism just had this happen yesterday or whatever where base uh basically like forked uh the OP stack code and are like

running it on their own thing. I think there's a lot of conversation to be had about that. Um it was the same thing with layer zero ultimately, right? Layer zero came out. We had other people sort of copy the architecture. There is it is very hard to retrofit an existing system to do this. This is why again ETH is like in 10 years we'll be able to get like you know 1/100th and sort of 1/200th of the way there. Um so it's very hard to retrofit an existing system. So we are first we have in we have created from scratch 100% of the underlying infrastructure and one thing that we have been very good on the layer zero side is like you know we have hundred billion plus dollars assets built on top of us hundreds of billions of dollars moving across us like we

understand how to bring real usage how to bring something to market how to how to actually I think people get really trapped in the noise I talk about a lot of people get stuck in in PC hell people get stuck in wanting to have a a big name that's not actually going to move any messages. I remember at the time that the huge there was a huge governance forum in layer zero for for unis swap. Um and we went through this battle with everybody publicly. Everyone wants unis swap to be built on top of the end of it. We realized like that is going to send one message ever. It's literally going to be turn on the fee switch. That's it. That's a whole thing.

like all of this everything would have just been for like a single point of name brand whereas like we go and we build out and like help build USDT0 and now you move $70 billion in you know nine months and grow AUM by 10 billion and are driving like hundreds of millions of dollars to the bottom line we build out stuff with Athena we build out stuff with Ether 5 with sync pools all these things and like that drives like real value and real usage and so I I think people are going to be very surprised obviously ly we we stood on stage with the announced partners of of you know uh DTCC and the intercontinental exchange and Citadel and Tether and Arc and Google and Nexon and on and on right all of these groups

across the board have already announced that GTE is coming and GT is building there like >> I think people are going to be really really surprised of how focused we are on having like real meaningful use cases very early on in the life of it and so it is again technology is not enough. I think the moat is actually creating like ETH is just ETH is amazing at the decentralization side. Again, there have been centralizing forces over time. I would say that has has waned some, but in general, that is still the thing they have, but what they have is they're they're early and they got a bunch of sticky stuff and it has like stayed there. And it's just very hard to replicate that for most new things

unless you are net new. And like you said, Salana was like this almost zero to one moment and they were able to bootstrap a bunch of really sticky stuff. Like you have to be able to bootstrap something that cannot exist in the world, right? Like at 110,000th of a penny per transaction at something that can serve the institutions where nobody else can serve them now for building some of this stuff. Uh you just have to focus on like how do you build out those things and take them to market because nobody else can do it. And that's like the feedback from a lot of the institutions was we didn't think that this was possible and now it is and that's like a huge unlock for them. Um yeah, >> I think what you what you talked about is as much as we have like a two3

trillion dollar asset class, you still have seen very little of tradi or the real world come on and use decentralized um you know public public infrastructure decentralized blockchains and I think it goes back to this idea that like just the scalability the throughput was not there. um uh and as much as Salana's you know you you have some primitives and you have the tokenization like figure is an interesting example for me and I think when I've heard you guys announce or disclose it to me I was curious of like from my side I think about okay if I go and acquire business or try to bring a business that we through want to bring on chain like what's the footprint of that business on chain and certainly like citadel and dt dtcc or I have you

know that that's a very different animal than like figure bringing helocks on chain different value creation different you know both interesting in their own right what would you say to someone that's listening to this and say guys like I hear you talk about 2 million TPS maybe the upper bound is four or eight what does actually matter like in practice like are you just saying look I take the strong position that like we're replacing traffic everything's going to come on chain and we need this type of TPS and and and we Finally, when we went and talked to Citadel and showed them what is possible, they just finally are coming and saying, "Okay, yeah, we want to build it. We want to build a zone."

Um, is that real like or or where do we see most of the builders come like I guess the question is like where do you see really the industry growing and what type of demand right is it the citadels and the DTCC's or is it just more figure type of implementations that are more lightweight perhaps could go to salon or somewhere else it you know it's totally fine >> yep yeah so I think there's like three main portions so one like I I very strongly and I I think it's very hard to disagree with uh this at this point like markets are moving from 75 to 24/7 like that is happening broadly right and it has been proven outright that like

permissionless global access to markets is just an incredibly powerful force tether tether and hyperlquid are literally like the two most profitable per employee or per headcount companies on the planet right and they are providing permissionless access to dollars a permissionless access to like trading through a bunch of different instruments, right? And so like this is happening. No, like there it is too large to ignore when they're like creating more profit than Goldman Sachs and from a bunch of other you know a bunch of other organizations uh that that is happening and like I will come and I will take that stance and so really the question is like there's only a couple of reasons that institutions care right now still today and there's there's really just a

couple. One is fear of being disrupted. And I think fear of being disrupted is like a very powerful motivator. Uh and it it's not always like a pure fear. Sometimes um you know jobs maxim like you you have to be willing to like disrupt yourself or somebody else is going to do it. Like just seeing that there is something that could be a disrupting force and either one wanting to get ahead of it or two realizing that in a changing landscape maybe you can go from six to first or second, right? like that you can actually capture a bunch more uh in this like changing world order regime regime etc. So that's one is fear fear of being disrupted. Second is just pure P&L and I would say every asset issuer in the world views it

purely through this. So this is I have some asset um you know high yield um fund from Apollo whatever this is and like crypto as a whole just as a pool of capital is bigger than like all of high yield credit. I think high yield is like high yield credits like one and a$ 1.5 trillion dollars or something like crypto is bigger than that in general like to be able to launch a bill or one of these things and have like billions to tens of billions dollars of inflow is like extremely attractive right so asset issuers just want AUM they're driven B that's all they care is just P&L and they view it largely as distribution and then you now have the banks behind them so the merchant banks and all these other banks who do services for these groups who say hey I want to be able to

provide our asset issuers, our customers a way to issue their asset. They want to have it out there. They want to chase the AUM. We need to create a structure to do that. And so you have a lot of these huge institutions who are saying we must have a strategy for for this for giving distribution to our customers because we risk losing our customers, right? Uh and then I think the third is this sort of like appetite of we want to own what the next chapter is. So if the world is moving to global permissionless markets in 24/7 markets and they're trading across all asset classes and all of that, I want to be like front and center in owning that. So there's sort of a race of who is going to be the one who tokenizes all of the equities and provides trading rails for

that. Who is going to be the one who establishes the end platform for where all of these thing trades and what it looks like? Stable coins have been in this, you know, death fight for a very long time. And there's just like the incentive is far far too massive and like that's not lost on organizations. Uh you know Tether making 10 to 15 billion dollars a year is just like not going to be ignored and then seeing what like the rest of the world's markets actually look like. Um and so I view those as the three major drivers. All of the institutions that we talk to are driven for the most part by one of those three things. Uh but I I think the general thing that I was told forever is like institutions like this are they

move so slow this like multi- multi-year sales cycle like everyone is so slow it's so hard to do anything and like we started talking to groups not that long ago like people moved heaven and earth to be like involved here because they are driven by one of these forces and are moving way faster than people think. And like that's not to say immediately on day one you're going to see 100% of all of these businesses on chain, but like they they are like very very actively pursuing out of self-interest what that looks like.

>> Yeah. I mean look, businesses are rational economic beings and Citadel is certainly one of the smartest guys in the room and so they see an opportunity to run markets 24/7 365. I mean, I just saw a note they paid like a billion dollars to get retail flow. Like they'll move if they the money is there if they can all of a sudden imagine what a market 24/7 365 does like like yeah certainly there's like after hours and there Asia markets but like increasing two days of the week is not trivial. I mean [ __ ] there's a lot of value that I think the human brain can't comprehend >> like exponential concepts. This is very much one of them and it's like you know you basically expand what is that you

know 30% you could theoretically have 30% just more active days in the year trading days and then that on top of that the assets that are coming come on and the composability of that and this new primitives like you know just let let alone like that is a huge component but now you're talking about like we just barely got T+2 to T+1 and that was like a mass massive like imagine going from like T+1 to like real time net settlement, right? Like people have no concept as like what that actually means and what that unlocks from like a capital perspective for every single instit, you know, for for all of these things. The knock-on effects of some of

them are just are unbelievably large and people just like don't understand the the real again rational. This is not somebody nobody is benevolent. They're not doing it because they love uh permissionless systems and they're like decentralization max. There are like are people in these orgs who actually care and like do care about decentralized systems and like actually care about that, but they are purely in general acting as out of self-interest. Something that's better for their business, something that's better for their customers. And you just like you cannot ignore the effects of of what that will actually do.

>> Yeah. I want to make an I want to go to like I think I think you said look we're not going to launch until later this year in the fall. Uh um I'm curious like take us into the future. But before we go there I mean I do want to underscore like when I when I made an investment you guys when I again I'm not technical enough but I do make bets on teams and I think you guys in my estimation have grown to like what a 150 160 plus team. What was interesting that I've heard from you Max and others in the team is like you kind of forced everyone to be in the office like in Vancou in New York and I was talking to

Michelle and the event and stuff but I want to like maybe take a breather on the technical and like on zero and just kind of focus on that because I think about it constantly at building inversion but also I think it was very opinionated and and from what I've heard in engineer here is a you have very little turnover. Um I think you hire exceptionally well and you hire your acceptance rate similar to ramp is very very low. So I've relied on you guys from like a as I want to bring in a few engineers but yeah like walk us through that like I'd be very curious. I think other folks would benefit from hearing like how opinionated you guys have been on that front. Yeah, I I will I will say Raz Raz has been the driver of of a lot

of that, which is like amazing. It's been uh he's been the strong force, but uh we started we were 100% remote when we were early on. We're you know, seven people. We went and we sort of all lived in the Bahamas for 5 months and we grew from seven to 25 together. And we shipped more in that couple of months than we ever could have done. And when we left that group, these are 25 people from all over the world, everywhere. and we said we can't lose this. That matters more than anything. Every single person either you you move to Vancouver or like you won't be here anymore. And this was like said like this is what we're going to do. And like you said extremely opinionated stance

>> and all of them thought they could go back to being remote too. We had we had we had hired them and said we're remote company and so that was like their and every single one of them >> packed up their lives like nobody right everybody came and so then it started to I actually love it now because it is just an embedded litmus test right like 85 plus% of the company is not from here most of them are from the states they're from Europe they're from other places 85% of the company has packed up their lives moved here and chosen to do this and like that level of conviction early on like they are bought in to the mission. but they are totally restructuring their life to come and work on this one thing and like when people get here and the culture is

intense and like all of those things but like they have chosen consciously chosen to like take that leap and I think the type of people that do that are like the type of people that we want here and so yes of course I think that means one we've been able to much harder to hire in general so much easier to hire senior talent x and y and z But once you find somebody who's willing to do that, like this is really really something. It's we care about, they care about, and like that just does an unbelievable amount for the organization as a whole.

>> Raz, I want to go over to you because I think you guys have managed to hire some of the leading ZK engineers, especially for this endeavor. Um, like walk us through that. I mean like I think you didn't announce who they were or they sort of just for a variety of reasons but what was the ultimate driving factor for them to come join you guys when they could be doing a million things. I was told by people who recommended us these people is you'll never get them. Um but I guess what but the the real thing that drives people a pitch like the pitch is we're we're trying to change the world.

We're trying to build this new internet. trying to build um something decentralized, per permissionless, censorship resistant that that view uh that pitch of like what this looks like and we have a real path to do that, right? Like the the original goal of Ethereum um but like that they weren't headed they weren't going to get there fast enough and like centralized chains were going to win and that this was the chance this was the the shot to do something meaningful. um that vision and like being able to pitch that to them uh and and then see right cuz they they heard from people they knew like that we have the amazing engineering team. We have the part of it is like we have this crazy culture of um we spent a lot of time like myself and Isaac our chief

architect spent a lot of time um going through this interview process of how we ask how we figure out who was a good engineer. like we we engineered our engineering process over months so that we know like based on how long it takes you to answer this question whether you're an A, B or C uh and we filter out engineers so fast uh early because we're so good at that at this point that uh by the time you hit to the third or fourth round you are exceptional uh and it's just about how do we convince you to move your life uh to come here um and we'll we'll bring them here and show them what it's like but like people who are exceptional and like great at something want to be around other people who are great at something right you want you don't want to be the guy

carrying saying everything you want to be like um surrounded by people like who are better than you and that's what you hear constantly is like we bring in A's and they're like oh my god I'm a be here and they they don't know that they they love it but uh it is it is a shock for them and then they tell their other a friends like you got to come here like this is like lightning in a bottle um and so has been like referrals internally of like engineers saying hey I'm bringing in people I worked with because I think I think that's good hire right >> yeah so every A you get they bring in like a few other A's and it kind of just goes out, right? Uh, not all A's know each other. A lot of them are like lone wolves, too, where they're the because

the thing about it, most companies are built around like a few A's and then B's that surround them. The A's are carrying it, right? So, they don't know too many other A's, but the ones that do, we bring them. And >> one thing that's really helpful too is we we >> we've gotten a chance to work with a bunch of like really really brilliant academics and people on the other side and like >> they have gotten so bought in and have like formed this relationship over time where like every incredible like one out of ex PhD who's coming out of their labs or or wrapping up there like almost all of them come and talk to us very early on in that life cycle. coll because we've pulled people out of there. I think our research team uh at one point I think we

were like 13 people with 14 PhDs, you know, it was just like we we were just pulling in all of these brilliant people from all of these different labs from Stanford from all over the world. Uh and I think that too while some of them like didn't know each other directly like they were bound by like the leading expert in this thing is saying like this is the group that you like if this is something you care if you care about ZK if you care about this like this is the group you want to go uh sort of work with and that has been a really strong driving factor as well is like having that stamp of approval from these people who sort of like everybody are looking up to as as they navigate that. Yeah, it's interesting that uh I heard it from uh when I was like looking at it later

like um Zcash early on. It's like there's like a handful of cryptographers and everyone knows who they are like they really understand this tech like you can count them with two hands at most. Um they all kind of operated in their own silo. They're at Stanford and then they're in Germany. like is is what you've done just kind of centralize that and put everyone in one room and align towards this objective to your point everyone in person or just collaborating more closely. And I guess someone could say there's been plenty of examples in crypto where people raise a bunch of money and just run like a research lab and they don't really put stuff in a production. I mean, God knows the Ethereum Foundation spends a lot of money, but for a variety of reasons

hasn't really it's just constrained, right? Because they were first and I guess if they were to rebuild it from scratch, you guys just found yourself in a position to rearchitect it from first principles and use a lot of stuff out there. >> We had we had an objective. We knew what we were going to build. >> Yeah. Yeah. Yeah. >> It's not enough to just It's not enough to just be a researcher here. You have to be both researcher and engineer. Like there is no pure research position. every single one of our incred like incredible researchers are writing like are writing code. Everybody must be both. It is only people at the intersection of the two. Um so yeah I mean ve like very opinionated very very focused in what we're looking for on that side. Um but yes I I I said the other day actually one of the ETH ETH ZK

researchers reached out like hey in this podcast you you said you uh you know you've assembled the best ZK team in the world. And I was like, "Yeah, like I I am extremely extremely confident in that statement and like I will plant the flag and I will say that." And I said, "But does it matter? Like it's on us to prove that statement and we have until the fall and we're going to publish everything along the way." And like I I I there is zero doubt in my mind that this is the single best collection of ZK talent on on the planet. Um and that's like a very bold statement and I rarely make like pretty absolutes. extremely confident in that statement.

>> Uh as an aside, I want to get back to just kind of the the later this year what happens and just tying it all together. I'm curious uh AI like how are you internalizing AI in the organization? How are your engineers like using it? Like does that influence who you hire and for what? Um but walk us through that. It's something I think about constantly and I think others as well. So different parts of the organization use it more frequently than others. We're uh we're not where I want to be, but we will be uh in terms of how we're using it. Um but uh it is amplified especially our best engineers and our best people they become they were 10x and then add another 10x there where the

things that they finish in a day. It's like what the uh but um besides that uh it's trying to have that trickle down to every single engineer. Um I think some people in general and generally um veteran engineers are like you know I'm uh I I know better and I don't need to depend on it. Uh but I think that's just not the that's not where things are going. Like everybody needs to be using it and they need to be more of a conductor than uh like the person who's writing everything. Um and being better at prompting and and having multiple agents working on things and reviewing and like not just because like you could have AI do everything for you and they'll just create junk. you actually have to uh verify that that stuff is

incredibly good and and tweak it and give it feedback and iterate with it to make uh great work. >> Yeah, I mean obviously Res and I we spent a bunch of our prior life in AI on like counteractual minimization published with Nome Brown did all of this. So it's very interesting to see the application side. My intuition was that it would raise the floor across the organization and you'd say raise the floor 50% or whatever and every engineer will get better. I think it has raised the floor some, but like Rez says, it is actually the ceiling on the absolute best engineers like night and day difference. Like uh I remember when Isaac was really diving into ZK and Isaac is like he's brilliant. He's unbelievable. He's incredible at a bunch of different fields, but like really new

to ZK. He said, "Listen, as I'm diving in like early side of Jolt, like this would take me three years working side by side with Justin Thaylor every single day to be able to do this. And in three months like just with relentless AI and sort of how he is diving into this he then found like six errors in a 90page math theory you know like he like he un he's the speed that he is able to grow and the speed that a bunch of our best engineers have been able to grow uh is just like night and day. We had incredible incredible researchers who are turnurning out progress on the GPU side or on other side on like actual in production that like never would have

happened before. So again I think the best it is elevated a ton and we've seen a huge huge progress but across the or it is something you just have to is changing constantly and you have to like get as much as humanly humanly possible out of it. So we always we always want to do more. >> Yeah, I definitely agree with that. I always think about that like you've always seen like the 10x engineer like it's even Steve Jobs to say like the difference between a a B engineer and an A engineer is like definitely not linear like you get like you know a 10x output I think with AI you have even more discrepancy where the 10x engineer is doing 100x output but the 1x one and a half engineer maybe does five uh and it really comes down to like do you have

field knowledge do you have like the ability to architect and think in the system and like I think what you guys from what I'm hearing just everything I've heard you kind of envision the end state and work backwards and have used not just your team but tools like AI to just really drive towards that. Um, which is really impressive. Uh would you say like did did in in this building of zero if you were operating a couple years back I guess without AI like do you think you would have been able to get to where you are in the speed and the quality or did AI not come into >> who's the most helpful in the ZK ramp up so like studying and becoming like really good at ZK ourselves so we can

evaluate all the ZK VMs and come to the conclusion that Jolt was the best and become really great at Jolt. Um it was that was like the supercharging part. Um but it didn't like it wasn't really like impactful on QMDB or any of the other stuff like that stuff was happening kind of pre that all that. Um it was really just probably the last six months it it probably had a big impact on how fast we can get the GPU tuned uh and all that other stuff. >> Maybe when I think I heard you guys pitch it to me once it was like do you think that you guys were able to see the future more than others? Um because you come at it from to your point Brian you said earlier which is from your standpoint building layer zero as this crosschain communication layer. you kind

of saw the limitations of some of the other chains and came to the conclusion okay if we were to build one a we have to build it we understand where a customer is and this is how we would build it having because again the reason why I went to you first when I thought about launching my own is like we from your vantage point you actually have the most amount of insight into this disperate set of systems that are increasingly more connected but you understand where it breaks right >> yeah I mean I think it's made again the huge. You talk about like right to win and what that looks like. A huge amount of early insights of why why are these systems like where do they break down?

What are the trade-offs between this approach to sharding versus this approach to sharding? What is the break uh like the breakage in this scaling system like Apto Shardines did a million TPS with a move uh VM. Um so like rip out the EVM overhead. we hit a million TPS, but when you break it down, it was still like a bunch of nodes that were really large supercomputers that were coll-located in like a single data center. So like why like why why can that not be why was that only hitting like 33,000 transactions per second per node? It's like oh it's actually like the physical storage layer in that and so like every one of these things you start to see like what are the constraints of the system? where are they making trade-offs and and where do they break as they're scaling along one of these vectors? And again, one of the

first realizations outside of the core insight of like ZK being the unlock for like the completely new architecture was like, hey, it is actually like the physical storage layer and then you start to rethink that layer and it's like okay well actually like why do you need tries like why why is that the thing right like why does why do we need MPT? Why do we need to base this on on you know hardware that was like 15 years ago when everybody has SSDs now and like then you get to like of course it's a log based database and like of of course this like solves all of the things and so part of it is seeing what is the constraining factor of many other systems and then part of it is just being willing to say I think people are so man I love again I've spent 15 years of

my life here so it's like hard to neg this space a little bit but for the most part like a lot of the people here for very a long time were sort of like the rejects or like people who like didn't make it in other, you know, it wasn't like the best and brightest in the entire world. Maybe it was like the most principled or the people who cared a lot about this thing, but it wasn't like the best engineers on the planet from every other discipline because crypto has always had this like sort of bad aura over it around different ways. It's not always been super cool to work on unless you were like chasing money in some way. And so I think there was just like a huge amount of hero warship on just the way that these things were done like must be the

right way or like of course because like this thing has MPT we must have MPT even though they're trying to transition to vertical and then seeing now new approaches like QMDB like there's just so many decisions that people were not willing to rethink either because rebuilding the whole thing was too difficult or because like people don't get past that like that that is the way it's done and so that's like a fixed requirement and I think like questioning the requirements matters a lot >> culturally it's from Brian and I from the beginning have always just we don't trust experts and we challenge each other on everything so we're always just like why why why is that the right approach um which has served us well in the company >> why just basically on end >> yeah that's what we do to each other and

we just argue and argue and get to ground truth uh and like that's part QMD gets solved right it's like why did we need an MBT is there a vibe is this like a vibe property that you have to have it the uh the order matter or anything like that like we start going through all of these questions and realize oh there's no reason for MPT like that's that is just because they did it before and everybody just thinks that's how you're supposed to do it in the future um but we came to that every every step of the way is why why is that why is that the approach can we do something different >> yeah it's important to put it in context like I I feel like it's important like I always tell my team look if you're going to have a strong opinion fine just

document it like and if you want to change your mind Right? Because I think a lot of times in the crypto like you've seen this like tribalism, this die hard loyalty because you you made money with a particular token and um I think it it just is very it's it's very weird to see someone come into the space with intellectual curiosity and that curve just degrades over time for a variety of reasons. Um where if you truly understand the space, we're still very very early. So you it's sort of like the worst assumption you can make is that we've solved it all or that you've like stayed constant to like a particular set of parameters because they've worked to some extent. But the reality is to your point Brian like we haven't really the work hasn't really begun yet. Like we haven't really brought on the real

institutions or the real workflows on chain. Um so anyways pretty amazing. I I think like just to kind of wrap up the the towards like closing out the closing out the discussion, I do want to bring it back to I think you mentioned launching three zones, right? And one of them was an EVM, the other one was privacy payments and then sec the last one was trading. Um kind of walk us like high level like these three interesting on the privacy side. Um my first I just go how is this compliant because we've seen iterations of this not be compliant. um uh and you know so so anyways I if you could just spend a moment talk about these three zones and what that looks like.

>> Yep. Yeah. I think there's we just view crypto really a bunch of different things you can do. Uh but the three things that have product market fit more than anything else is like general purpose smart contract zone. You we want people to be able to come and deploy. But the things that we think the chain itself zero needs to like have an opinion and internalize and like build the underlying infrastructure for is global markets. Again, it is just this very very strong thesis that the world moves from 75 to 247, moves from local markets to global markets, has permissionless access, trades across many different asset classes, all of those things. And then payments and obviously payments we did 138 billion last year across layer zero. Um, you know, at one point, I think in November,

we did $ 38 billion, which was like five and a half times Western Union, two and a half times Wise, like what literally moving more assets than some of the largest payments companies on the entire planet. And so, um, like that is just something that we we know extremely well. We have the partners around like we have these things. And it's just like how do you if you believe and I I think like you talked about opinionated. I think it's very important to be opinionated. I think that there's like only a couple of things that we are super opinionated on. We are super opinionated on the fact that markets are moving in this direction. Like that shift is happening. It is there is a move from tra traditional markets to these global permissionless markets.

payments. Again, you need these especially now like this has been so hyper accelerated from like aentic stuff like the difference between paying 30 cents per transaction and like one 10,000th of a penny per transaction is like a very very you know you're talking like many many orders of magnitude and what that can actually like look like and even that when we talk to some of our like large payment partners are like listen long term we don't even think like doesn't matter 2 million TPS 10 million TPS like it won't actually matter like you have to actually like side channel a bunch of there's like a bunch of optimizations you even need to do past that to present like the longtail scale that that that is going to require. So like our our stake in the ground is that you must

like the world is changing in this way and we are going to build for that the things that are invariance for us is like permissionless decentralized censorship resistance like care very deeply and I will come across in all of the code and all of the way that the systems are built. So those are like the invariants for how you build. And then you talk about the privacy side like yeah it's it is a sort of like you need in order to bring any of this institutional stuff on chain you need to be able to have some form of privacy like you must it is it is a like hard requirement for a bunch of this stuff whether it's corporate payments whether it's anything. Uh and obviously we believe from like a fundamental human right like people should have a right to privacy anyway. So it is like tricky and

nuance into like what the end state of that looks like. Uh but there is like both a clear requirement from needing to bring the markets over and then also just like a clear um imperative uh broadly and and biology talks about this a lot is like ZK being the the counter to all things AI uh and sort of like what AI exposes like ZK gives you back um from a bunch of these things. And so I think that's that is a interesting decision point that we have not talked a lot about publicly yet that we certainly will closer to launch but but there is a you know is a whole very nuanced conversation around that side.

Yeah, I would argue that's whether people are public or not, but I think that's one of the reasons that is holding back a lot of institutions for coming on chains like hey, I don't want my counter my competitor to look at and and it's um it's a real thing and I think it was sort of it's weird that we've come to a state of the world where privacy demiring privacy is seen as a red flag of doing something nefarious or obfuscating when the reality is privacy is just a right to be private and be left in peace, you know, and there's and the beauty is the technology allows it to be, you know, have a semblance of privacy where you can be compliant. I think like other iterations of it didn't require

it. And there's like little issues like Monero was like a a laundry mat that you put all the coins and it would just like shake it enough so that you could bring take out the coins back, but there's ways that you could kind of it wasn't truly private. And then you had Zcash in the early days where you'd say, "Hey, we're gonna you could shield your transaction, but it wasn't by default." And anything whenever something's not by default, then you know if only 2% of the network shields, then you can always kind of bring it back and anytime you shielded something, you'd get a call from the IRS or the government. Um, but I think and then there's tornado and other instances like but I do think that one of the things that most people don't appreciate is that you can have privacy and you can be regulatory compliant.

Like we've had that for a while now. Like you could you could go back to Coinbase and say, "Hey, here's actually like you can you can open up the door if if it's required by reg regulators or just to be compliant, but you could be private by default." And uh I think that's one of the areas that excites me the most candidly just having like a payment a truly private payments network that is high throughput um you know doesn't have a lot of the bottlenecks or limitations that historical chains of privacy focused chains have had. But it's exciting to see you guys do that. Hopefully maybe I'll later time we can talk more about that as it gets closer to launch.

>> Definitely. >> Um what else guys? I mean I think we've covered a lot of ground. hopefully useful for just people that are less technical. But I I do I do think we've done a good job just going through some of the breakthroughs here that are important to recognize. Uh I I think the fact that Citadel some of these larger institutions are building zones is is very instructive and I don't think this is like death by a thousand pilots. I think it's very real. What is uh walk us through like what are the next 12 18 months look like from here? You've been down zero last week with very good partners. What does the future look like here?

>> Yeah, I mean I think the last 10 days, how many days have it been? Nine days. Like I've spoken to many of the, you know, we we were even internally 24 people out of, you know, 165 were even aware of this until like right before the launch. So just like extreme stealth. There's probably eight or nine external conversations that we had. And so post that I I I've had conversations with like a huge number of the largest institutions on the planet. We've had uh conversations with like a huge number of the largest sort of like current crypto D5 protocols uh asset issuers etc.

Right? So interest has been like incredible. Our only focus right now is launch like again there is there is technology alone doesn't matter. You have to be able to do both things and you have to be able to pull this all together and you have to be able to like generate real economic value and utility like that is the only thing that matters. And so our only focus is how do we build the systems in these zones to the spec that sort of allows for that? Like how do we actually get in all of the utility and all of the value to make it maximally useful for the broadest number of use cases uh and to be able to deliver value. Same thing we've done

with layer zero. Same thing we've done in the past. And so like we're just laser laser laser focused when it comes to the zero side. Obviously on layer zero we're still doing all the things we've been doing but just laser focused on that. And so uh you know what you should expect to see from us is is for a launch to not just be like here's a chain hope people use it right. It is it is like real things partners usage like all of it. Like we're very focused on solving both sides of the equation. >> Yeah that's good to see. If for instance someone like us, you know, we're focused on the other side of the demand, right?

Like bringing making businesses more efficient with this tech. We we've talked a lot about like for me it's like okay, I've historically thought that I could buy this type of business because that's sort of the limitation which is which is still like a massive universe of companies that similar to figure you could bring on board on chain with the existing in tech and feel pretty good over the next five years that you know it can absorb that. You and I have talked about that at length of like, okay, there's there's a lot of wood to chop even with existing tech, but then it begs the question, okay, what else could we be buying because these zones allow for just something quite more powerful? Um, how do you as a builder like what is this what does this mean for other

chains? Like you know of course you built the messaging protocol for other chains but do you take the position that look this is the dominant architecture like everything eventually just doesn't get as much scale and therefore everyone just should build zones or is there still a place for other chains to exist that are application specific or just something else? >> Raz, you want to go? >> Sure. I mean um w >> without crushing your >> I think I think no I'm not trying to crush them. I think like long term this is the approach that everything will kind of go towards like there's just no reason to have replication of of this compute everywhere. I think that a lot

of the chains will probably have to wait to see the ZK mature, right? We're getting our stuff formally verified. They'll need to see that stuff be in the wild enough because they have a lot uh riding on their current approach. But I think like this is like we say it's the last blockchain. It's the last blockchain architecture for sure. This is where things are going. um like there just does how do you compete on price when you're spending 10,000 times more on compute than we are just because you're duplicating it, right? Or it doesn't make any sense. Um and so I think like they'll go this way >> understand that. So I think of it like the the printing press like before the printing press you had a block and then you had to copy that like the assembly line was super inefficient then you had

the printing press and then so the proliferation of books just kind of did that. >> Yeah. Anyways, when I hear you say that, that's how I internalize it in my lizard brain. It's like, okay, you basically >> good analogy. >> Yeah. >> Yeah. Uh >> you can't reason by analogy, but you know, the human brain needs to comprehend it through analogies or >> for sure. And so we think this is where things will go. I I mean Ethereum's uh like we came up with this and we started working on it two and a half years ago thinking that the reason why we did it is we thought no one was going to build this and we wanted it to exist. We wanted, you know, something to compete with the high p the fast chains but be as decentralized as Ethereum. Um, but Ethereum is since kind of their lean

roadmap that's over the next five to 10 years is headed in this direction. So I think like you're seeing them go there. I think others will slowly start to follow. This is the way things will go. Um and like in terms of like unlock one of the analogies that Isaac used to use us is uh he says you know currently we have like edge network like for like phones right and like what we're bringing is 5G and like the things that you could build on 5G versus edge right you couldn't like back then you wouldn't even thought of right uh and so if we just put out 5G phones when you everybody had edge like we I can't tell you what's going to be there but uh we've unlocked something that couldn't been done before right you could like viably But things that aren't finance

related, uh things that you want to be decentralized, you could put a new DNS there. Um a new internet, like the whole internet could run off of something that's decentralized and not controlled by uh the state or some actor, right? A single actor. Um and that's a future we want to build. >> If you're if you're an investor listening to this, I think where I've um you know, I think it serves you well to update your priors. Um, if a category in crypto has not worked before, when you look at something like zero, immediately your brain should be like, okay, what has failed before with the current architecture and infrastructure and and why did that fail? And if it was a dependency or a technological constraint to your point, if you were operating on

edge, well, maybe Uber would have gone off the ground. >> Mhm. >> YouTube wouldn't have gone off the ground. And because you have 3G or in this case 5G to your point, then it serves to revisit, you know, a bunch of categories in crypto that have just not been able to get off the ground for that particular constraint. Um, and so I think if if you're if you're listening to this and thinking, okay, I think that's where your brain should be going. It's like what are some of those use cases that just haven't worked because to an example like prediction markets couldn't work uh like Augur for instance or some of the other prediction market like Nosis, they they I was an investor in them. I don't think they work because you didn't have a stable coin to settle and if you don't have a if you have a volatile

instrument like ETH um it just it just degrades the user experience right but if you have a stable coin and you have a more performant you know chain then yeah you know you could you could see how you know poly market would work under that environment. Um, do you guys have an opinion on beyond like these three zones of the type of maybe financial workflows or type of market that really gets off the ground when you go to this like 247 365? Like is it just what exists in Wall Street like on steroids or are there new primitives markets or type of instruments that get off the ground uh that like more of the what Chris

Dixon talks about like skumorphic okay like we understand that but like what are the non-skeumorphic things that I think you will be able to see in zero just kind of if you guys have an opinion on that. Yeah, I mean I think it's I think there's there are a bunch of there's a bunch of things, right? And so uh I mean when you talk about you talk about prediction markets, there's just the you know the article that the Fed wrote about like Cali predictions being like lower margin of error than you know like the Fed prediction thing. There's there's all these crazy things of just like information sets that basically get leaked through these alternative markets that get built around it, right? And some of that is like access, some of that is ability to like create these markets uh anywhere. Uh, and some of

that is like viability of actually having them. Um, and so I think I think you're just going to see like payments is just a natural I mean we payments has been talked about like ad nauseium everywhere in terms of like what that looks like and there's all of these pieces to solve right there. There no really great um there's no really great like FX settlement on chain. There's no really great like way to actually go from stable coin to merchant directly and deal with settlement windows. There's like all of these things that are happening that people are trying to solve. So, a bunch of stuff again agentic side like let's take that out of it because the the area of what that could look like is just like an insanity uh at the rate that things are moving in terms of like what that actually looks

like around but but I think you're talking about ideally every market that involves anything that can live on chain. And so again, I think I think metals have been really like the zero to one uh of of metals on chain over the last little bit of like Tether going from like nothing to like the largest non-s sovereign holder of gold in the world from Hyperlid doing like many billions dollars a day of silver, you know, all of these things like happen like that, right? And so you're talking about like the more that these markets are open and the more that there is like a convergence of how these things trade

like capital just wants to be um there's like a couple of side you you want to be able to be you know whether that's protected in a way and in like the way that markets are structured now with prime brokers or like whatever that might look like but it's also like you you don't I don't want to nobody wants to have to like deposit to somehow move money into here to be able to trade this market and and go over there to be able to trade that market and then like withdraw it to a bank and to send a wire to trade this market over there, right? So like the more of a convergence that you have on these things, I think is like a massive compounding knock-on effect of just like what can actually be served because liquidity is just like there and available and it is like much easier to

take these incremental positions in a way that just like makes zero sense to do when they're really really desperate by platform. >> Yeah. I think like we're going to be sitting here maybe five or 10 years time and said gosh yeah yeah it was pretty obvious like the financial system was like predates the internet and all these current workflows t plus three t plus you know five all the friction that exists in the system a was not built for the world of AI and if you think that you know agent commerce or whatever like you know AI can't interact as easily in the current financial system and so it's like sort of the direction of travel was very clear. Um the nuance is like how do you actually implement it, right? And

the the the thing that I have always felt when people talk about like for instance real world assets, it's like okay well yeah like you're bringing a real instrument on chain. It's not like digitally first and and that I think is where friction continues to exist will probably continue to exist like you have to trust someone when you're tokenizing real world assets like someone needs to verify that someone needs to inspect it. So there's I guess like certain businesses that like continue to survive in this world like an oracle like Moody's and S&P phenomenal businesses because they sort of put their stamp of approval into things. So um uh >> and intercontinental exchange brought a $2 billion check in a poly market

largely driven uh you know because of like data like that's like their express like the data itself is is valuable and fascinating and they they do they have a huge business through data right like Absolutely. Uh most of the these things do not just disappear overnight. One one perhap parting question that I just obsess about is like in this technological like disruption creative disruption of AI certainly what you guys are doing like who stands who in the old guard stands to benefit the most because you could argue there's like a whole slew of companies that just die naturally because that's sort of the effect technology has but there's some other businesses just become more

durable or just continue to compound because they have a moat uh goes back to the Morgan household concept like there just things just certain things never change even though technology comes and rebounds the experience. I think you could argue the financial system is just due for a massive massive disruption within the financial sector. Are there like legacy firms that you say hey these guys are like they're going to use zero they're going to be made vastly more efficient? Um or does it allow for like a hyper liquid to just crush Wall Street as we know it? like what where do you stand in that like you know opinion?

So I think a lot of it I think we'll know little play on words I think we'll have a lot more clarity after clarity right like like a lot of this is like h how much like where where does the world move in regards to our like in a world where it is just open systems and anybody can sort of like compete in any of these environments whereas right now it is like deeply entrenched in many ways um versus a world where like there's you know mar like stable coins can't pay yield and this and that and this like you know this marginal change in the system um there there's like just a natural push and pull and I think that is like sort

of going to define how quickly that disruption comes I think again you will have groups like a tether or like another group who who sort of like take something to I mean prediction markets are sort of a form of this anyways of like taking a possible vector of a of a intersection of things to to an extreme and maybe getting so much adoption early on that like the world reshapes itself around these things. Like the world has kind of now started to reshape itself around stable coins, right? Like it was a small idea and arguably like a lot of the stable coin issuers got chased for many years.

Uh but now the world is totally reshaping itself around stable coins itself and around the technology. Um, and so I think I think it really depends on how some of that stuff develops and on the application side like certainly there are parts of Treadfi that are like much more exposed than others. Um, but but I don't think it's just like an immediate switch overnight. I think you're going to see like our view has always been like and people there's a natural question of of hey you guys say you care about like decentralized neutral systems and yet you're working with like all of these huge large trady players and it's like that is like a totally reasonable thing to ask. Our view is what you don't want is the way the world was headed where like again

you're making all these centralizing things and everybody is moving to their own permission chains because nothing can service what they actually need. Like what you want even like we we have stable coins. Stable coins are just fully centralized things, right? Like it is permissionless access, but they they they have the ability to seize funds. They have the ability to enact enforcement. They can do all of these things. There's a central issuer who is holding the collateral. There's like all of these things that happen. Um and yet like we still would way rather have them built on neutral permissionless rails than anything else, right? What you want is the rails themselves to be neutral to centralized permissionless. And if you put all of these things in that

environment overall, like the freest option is going to like you want them to be able to compete on that playing field versus it just being like, "Oh great, new backend. Plug in the new database. we all have an upgraded system in Tradfi and like nothing changes or that you do it in a way that is super centralized and we end up with just like an even worse system that we have now for the end consumer in many ways um slightly more efficient from the banks their P&L goes up but like everything else is is worse you want to have something that is as credibly neutral as the internet itself that is has this multi-jurisdictional decentralization that has a sensor you know that has these things built in if someone builds a centralized system on top of that.

Like that's totally fine. That's actually so much of a better outcome than a centralized system like existing in a vacuum because the adjacency to those rails and the natural competitive forces that are going to happen there are going to drive disruption and are going to drive better systems and like more embedded value and long term. So like we should fight at all costs to keep the rails as free as possible. Um and then what gets built on top of those and like again stable coins being a prime example now I think it is like only a positive factor in the in the long run to bringing things to those rails and allowing competition and freer options to exist over time. Yeah, I

think that's incredibly well said like and that's a point that is constantly lost in the space which is let's decentralize everything and you're like well no because a stable coin like a technology is incredibly centralizing force and I think in many ways what you guys have done here with zero is a reset to introducing not only credible neutrality decentralization but also e throughput in the execution layer because to your point like a lot of people were saying I'm interacting in Ethereum it's like no you're interacting in a layer 2 that doesn't have fraud proofs. It introduces way more security. You're better off not working within crypto because you have a bunch of degradation the minute you go to a decentralized system. So the question is when you're moving billions

of dollars, yes, it matters to have a credible execution environment. And the biggest bottleneck has been just the execution. Like you know, you just couldn't have. Um but I I'm I'm incredibly excited and fired of what you guys are doing. I think um you know people are going to want to have a dollar dollar you're trusting the US government and their ability to service that and then you're trusting a counterparty like circle and and their auditor to make sure that that represents dollars in the bank account. It's like turtles all the way down. There is still going to be trust but I guess like you do want to have at least the transparency that these systems provide even when you have privacy but you still have a transparent system. So

I guess a lot of times I mean we've been in this space long enough and I think people get lost when they want to be perfect in the execution. It's like no a marginal improvement is still a marginal improvement and this is a reallying big marginal improvement because go anyone that comes from from tradi you could tell them hey imagine a system where you have perfectly auditable collateral 24/7 365. Wouldn't that be a wonderful financial system? Wouldn't you have avoided the global financial crisis in many ways? Wouldn't you at least be able to price risk better in real time? Uh, you know, move money faster. Like that's like again I think like people are just lost in that and that don't really to your point I think a lot of people came into crypto didn't come from Trafi initially and just building a

vacuum of like look the technology is really cool. Zero knowledge proves is amazing like it's hard prompts to solve. we can attract eight players like you guys have done, but they lack the the practicality of saying, "Okay, what does that actually mean in practice?" And and try to build for a perfect state and you never do that. But I think what you guys have built here is I'm really fired up. I think most people are going to be surprised that in a year or two, you're going to see this amount of volume, this amount of traction, but you know, you're always going to be discounted, right? So, I was like, "Oh, you know, these pilots, how many times have we seen these financial institutions, you know, from Facebook and others announce these partnerships?"

But I'm rooting for you guys. I don't know if there's anything that Raz, you've been quiet for a minute. Um, is there anything that you guys haven't talked about either publicly or like in, you know, a lot of the podcasts you guys have been on, um, that you guys want to just underscore in this discussion? Uh I guess the one thing that uh to to to add to Brian's thing on clarity is like regardless of when that happens uh the institutions that will do well I think are the ones that embrace and try to do it with the technology like we found some partners that are like he said moves incredibly fast because like they want they they see a value in it.

They want to do something with it. uh and the ones that stay behind and are conservative and don't want to embrace the new technology. Like this is just for financial from a financial system, blockchains are just better in the same way that you go from a pen and paper ledger to a centralized computer uh database like a blockchain is just that next leap. And so if you stay behind and use the pen and paper uh someone's gonna eat your lunch. Um, so it's uh it was incredible to to work with those teams and see them be so excited about it and like you know they're they're clearly leaders in each of their respective fields and being like bought in and and and wanting to do something means uh I think that they're going to be a formidable force to the other existing

like DeFi applications and all that because they're they're taking it seriously. Um and the ones that don't will be left behind. >> Yeah. Brian, anything anything else to add? No, I think this uh I think I think this has been great. I liked it's we say a lot. It's not enough. This is what we say internally all the time. Like we we talked about um we built layer zero. Like nobody knew who we were. Zero adoption, zero anything. We had to grind our way from zero market share to 80 plus percent market share to you know hundreds of billion dollars all these things. And we did it by really focusing on just like not not PC's, not marketing announcements, nothing. Find the people who actually want to build

something and decide what you can build together to meaningfully make their business better. And those things that we've done with those people have generated the the huge bulk of our business today, right? The huge bulk of the value. And when we went to Treadfi and I still think even just from purely interoper I think people are going to be shocked um at some of the stuff that is you know even just like FCAT Fidelity just announced that they're running DVNs and they're like doing stuff like I think people are going to be shocked at the amount of institutional uh involvement that we've had on that side and obviously a bunch of the zero partnerships sort of like highlight this but it was the same thing I told the team like listen it doesn't matter that we have you know super majority market share in crypto it doesn't matter it's

day one again over there and We have to go and we have to like do exactly what we did before. Find out who is serious, build real things and meaningfully make their business better. It must do one of those things. It has to be real and that is the only thing we focus on and we'll put all of our time and effort. And it is just like repeat and replay again here. It is like it is not enough to just build the technology in a vacuum. It is not like a logo doesn't matter. None of that stuff is going to make your business. you have to go and you have to build and solve for real use cases, drive real economic value and that is what we're going to do. And like again, like you said, people write it off. A lot of skepticism. It's fine. We're

going to do the exact same thing that we've done. That's how the team approaches it. That's how we approach it internally. And we're going to build the things that drive real meaningful volume and sort of shift the way that the world works. And like that that is the only goal. >> Amen. such a timeless kind of advice that applies to crypto and everything else. Just go build something useful and then uh so but no, it's great to see you guys do this. I was blown away when I heard it, you know, uh early on and uh I'm I'm incredibly excited to see what's possible here and I think it's going to be much faster than what folks uh probably on the sidelines are looking at. But um thanks for coming on guys.

This has been a great discussion. Really enjoyed it. And uh uh I guess um where can people find you or learn more about Zero? Yeah. Well, first of all, thank thank you for having us. Uh, obviously you can follow uh Layer Zero Core is still the account for everything. So, Twitter um obviously we're on a bunch of different social channels. Uh myself and Raz are both there, but uh we will have a continuous stream of um technical partnership and sure go to market from now until the fall when we launch on mainet. And so, uh there'll be a lot to see, >> right? We'll definitely have to have you guys on before that happens or when that is happening. So appreciate you guys are super busy. Appreciate you guys coming on at Ros Brian. Thanks so much guys.

See you next time.