Episode 92: Layer 2 Scaling of Ethereum with Arbitrum Founder Steven Goldfeder

[00:00:00] Ben: Welcome to the Alt Asset Allocation Podcast, exploring alternative investment opportunities available to the everyday investor. Here's your host, Ben Lakoff.

Hello and Welcome to the Alt Asset Allocation Podcast. Today's interview is with Steven Goldfeder of Off Chain Labs, the company that's. Arbitrary, You've probably heard Arbitrum lately and scaling Ethereum.

This is high on the topic list right now. And overall, this conversation with Steven was pretty fantastic. It gets technical at times, but we try to keep it pretty high level and a lot of these concepts, it's very difficult not to go at least into a bit of the technicalities, but Steven has a PhD in computer science with a focus on cryptography from Princeton.

So he's obviously big on the tech side, but he's. Very excellent at explaining these things intuitively. Withum, they were talking about scaling smart contracts even before the launch of Ethereum. Talk about a gig of brain. So in this episode we talk about layer two, scaling E 2.0 and how that fits into the, the narrative.

With all of these alternative layer two solutions, we then talk aboutum in detail and why it's so good at providing scaling for e. This one is very Ethereum scaling Focus, but pretty darn key for understanding how the future of Ethereum might. Before you listen, please don't forget, just like or subscribe to the podcast or even better leave a review.

If you're watching this on YouTube, please subscribe to the channel and or give the video, thumbs up. This really helps more people find the podcast and I really, really appreciate it. Awesome. All right, Steven, on our arbitra. Enjoy. Steven. Welcome to the All Asset Allocation Podcast. Excited to have you on today.

[00:01:51] Steven: Excited to be here. Thank you.

[00:01:53] Ben: Yeah, of course. Arbitrum has been in the news right now and you know, as we kind of briefed a little bit before, we talk about a number of different investment options, but this one is specifically about L two s scaling Ethereum, whether it be, you know, layer one or layer two.

But and specifically what you guys are doing, Withum, cuz I get very, very excited about it. So we've. A lot to cover. We'll see how much we cover in about an hour. But before we start, let's start off just with your background, how you got into crypto, cuz I think it's, it's pretty relevant to the story here.

[00:02:25] Steven: Absolutely. So I got into crypto in about 2013, which is crazy. It's soon, I'm gonna say I got into crypto about a decade ago. It's a long time. And I got in doing my PhD at cri Princeton in cryptography at computer science. My interests were cryptography and my advisor, my PhD advisor was.

Getting into blockchain and crypto was Bitcoin at the time, and I sort of went along with him for the ride. This predates Ethereum and predates really smart contracts, really back then it was about Bitcoin, but was fascinated by the technology and really fascinated by the intersections of cryptography and cryptocurrencies or blockchain technology and obviously that those sound obvious, but like crypto.

You know cryptography should have, should have overlap. But really a lot of the early, early people in the space came from different space places. Some came from cryptography, some came from mechanism design, game theory. Some came from the finance side. And it was really a meeting of the minds at different places.

But anyway, fast forward, so I did a bunch of work at Princeton on securing cryptocurrencies around MPC wallets threshold signatures, if that's a term that means to, something to someone. The idea. Splitting your keys and securing them because you know, back then the concern was, you know, your wallet, your, you know, your, your keys, your wallet.

It's, it's a great thing. It means you have ownership and it's also a dangerous thing. It means if you, oops, my computer gets wiped, or something like that happens, then you lose access to your money and building systems where you can split your key and split control. We're, we're very, very important to a mainstream adoption, and we're seeing this today.

With companies like Fire Blocks that are offering these services to, to companies. So I was you know, involved in building the early technologies that companies like Fire Blocks went and used to to implement these on PC wallets Princeton and to some other several interesting projects as well.

One of them of course, was Arbitra Andum dates back to about 2013 from my co-founder, Ed Felton as a professor, was a professor at Princeton at the time, and he was interested in scaling smart contracts. And it's funny because if you contextualize the time, Ethereum didn't exist. There were no smart contracts.

Actually, the first public mention, you'll find Ofum was a class project at the Princeton where Ed was Ed pitched his idea and was leading this project with some undergrads really taking, taking charge. And they ran Withum for a class semester and. If you look on YouTube, you actually find the, the video.

And this video is from January, 2015 from the Fall 2014 Prince this semester. And that itself date predates Ethereum by about six months. So Ed was really fascinating by the problem of scaling smart contracts well before any smart contract platform existed. Ed went off to the White House. Came back in 2017, that's when Harry and I, Harry is my third co-founder, said, Hey, eb, let's pick up that project and build a research paper out of it, which we did at Princeton.

Published that in 2018. That's August, 2018 was when the conference happened, where we published the arbitrary paper also when the company was founded. And it's just after you know, we're at September now, so just over four years later, here we are and our room exists and. Lots of users and is delivering scale to people.

So that's you know, a condensed version of mine and arbitrage background all in one. So there you go. Yeah. Well, I mean, 

[00:05:29] Ben: it's an incredible story, just that like all the stuff you were doing with private key management, I tell people all the time, you're either gonna, like, if you have your own private key, you're gonna design some system that's so complex that you'll forget it and you won't be able to access it.

Or it'll be so simple that somebody will hack you and steal all of your crypto . So either way, thinking about that especially at that time was. Very important. And then thinking about scaling smart contracts before they even existed at the scale that they do today. I mean, definitely want to get into more detail of the, like where you guys think the world is going because you have a, you have a knack for kind of thinking about these things before the mainstream does.

[00:06:09] Steven: Well, you know, the nice thing I'll tell you about building a platform, which is what we're doing today, Atum, is we don't really have to guess that much about, you know, what, what, what, what's next? If you would've asked me two or two, three years ago, hey, is Defi gonna be what it is today? I, I probably would not have guessed it.

Is our NFTs gonna be as explosive as we've seen it today? I definitely would not have you know, guess the, the level of, of excitement and engagement around that we're seeing today. And then, and I'm sure, I won't guess, you know, all the things that are gonna happen in the next six months or a year from now.

But the nice thing about building a platform is, you know, our job is, is relatively easy. Not easy to pull off, but easy to, you know, we know what people want. No one ever says to me, Hey Steven, can you make the fees a little bit higher? They're just too low right now. And no one says, Can you slow down a little bit?

Like, my confirmation came too fast. I need, I need more time. You know, in between when I press the button, when I hear back, like, so we know what our job is, we have to make things the user experience better, onboarding better. Faster transactions, cheaper transactions, and that's really going to enable more and more innovation because the lower you get prices and the better you get usability, the more applications that are priced in and become included and possible on the blockchain.

So I'm very, very fortunate not to have to guess at least on the application layer. What's needed because there's so, so much that you can do with this technology. And I'm glad that there are many people that are a lot smarter than me that are thinking around these things that come up with great applications.

[00:07:30] Ben: All right, so today is September 14th, and it is a historic day within the cryptocurrency world. Definitely the Ethereum world. When Ethereum transitions from proof of work to proof of stake, today's the merge. So there's countdowns every. I'm not sure how you're spending your merge party evening. We're kind of watching dashboards and explorers, but it's a pretty historic day.

[00:07:53] Steven: Absolutely. And I will definitely be there watching watching the, the dashboards and explorers as well. You know, the funny thing is so, so much work has been done to get to this point. There's not that much that people are, are doing today. Most people are just waiting and, and really cheering. And even I was speaking earlier with one of the core developers that was working that really put a ton of work for years and years working on, on making the merge possible and say, So what are you doing today?

And like, Yeah, I'm watching, You know, it's very, very calm right now. And hopefully it'll stay calm and I'm sure that it will. I'm sure it's gonna, The launch is got, the emerge is gonna be, you know, fantastically successful. But I will definitely be. Watching with everyone else and, and cheerleading as well.

Super excited. And you know, the nice thing for, for layer twos, likeum, we will inherit all the benefits of, of the merge, the environmental aspects and benefits. But everything should be extraordinarily smooth, not expecting any downtime. And hopefully things will just continue to, to go really, really.

Which 

[00:08:47] Ben: is incredible in and of itself. So hopefully everything, you know, fingers, cr fingers, and toed and all, all the things. But this is perhaps a good transition. So let's talk about. Your thoughts on the merge and kind of E 2.0 and how layer twos kind of fit into all of this. And actually before, let's, let's kind of broadly talk about scaling Ethereum, whether it be layer one, layer two, but would be curious how, how you think about all of this in terms of layer twos and how they fit into the future of scaling e.

[00:09:18] Steven: So scaling is basically you know, scaling is one of the most important properties of a blockchain, obviously. And what happens is you have this amazing technology and so it enables so much. And then it's limited in who, who you can, who could use it, and then becomes problematic. And the demand, you know, it just becomes so strong.

And then if you don't have the supply to, to, to fill that it, you know, fees get expensive and people don't want really high fees. And for many applications, you know, high fees are just not sustainable. So the question. How do we scale? And you know, to your point earlier on about, about the tri, there are different trade offs you can make.

So the, the tria as, as you alluded to is, is this notion that you can't have sec all three of the centralization, security, and scalability. And Ethereum makes the choice really the you know, the very explicit choice to sacrifice, I'll say not sacrifice, but on the base layer to give up on scalability and really go as strong as possible on security and decentral.

other layer ones say, Hey you know, we're going to scale by limiting decentralization and let me explain why those things are so connected. And the reason is what is decentralization basically means a lot of people are looking at the code. A lot of people are looking at, at the execution. There are a lot of people verifying that, hey, this is correct, Ethereum's correct.

And the more people that can verify and run nodes, right, nodes are the software that people run to actually verify the correct Ethereums. They're not relying. Oh, someone told me that Ethereum is acting directly, but I am actually participating in the network, and if I see something wrong, I will raise my hand, then I will make noise via, via on chain or off chain somehow you know, via some process and I will, you know verify this and, and be noisy if it's wrong.

That's, you know, a really, really critical to decentralization and security. But the problem is, so how does that, that, you know, why is that at odds of scalability and the reason? Well, if you wanna scale, you're gonna increase the capacity, increase the compute resources, increase the storage resources, right?

If, if the chain grows at a gigabyte a day that's gonna be meet problematic for people. And You know, me and my laptop or someone with a, you know, a, a not so well resourced computer won't be able to validate themselves. And so the more you put scalability on this base layer, the more requirements you put on, on these validators or on these node operators.

The harder it becomes to run one. And that's why. So the, the, the more you try to scale directly by just saying, Okay, process more, process more, add more data, do more computation, then the bar to entry becomes much higher. And you can have a fully decentralized system, but asterisk, it requires a data center to participate in the network and develop date.

So, Sure it, in theory, anyone could go and build their data center. It's permissionless. Cause I don't need anyone's permission to go and buy a data center. But most people aren't able to go and buy a data center and do that. And I'm being extreme. Of course, there, there's, there's a spectrum here. You know, there's a long way between a laptop and a data center, and I understand that, but that's sort of why this fundamental trade off exists.

And Ethereum really goes on wanting regular people to be able to run nodes and, and validate the network. And then the question. So then you have to keep the requirements very, very low because you know the network is going to be as slow as the slowest computer you wanna support. Because every machine, at least in the current designs, everyone is fully validating.

Everyone is fully, is validating everything. So I might have a supercomputer, but I want you to be able to, to validate on your laptop that I can't run my supercomputer faster than than your laptop. And that's where this tension comes from. So the question is, How does Ethereum scale if it can't, if it really wants to keep decentralization, it really wants to keep this security.

How does it actually scale? Cause it needs to scale. And the answer is, that's where layer twos come in. And layer two platforms are basically blockchains that sit on top of blockchains. So layer twos sit on top of layer ones. Here are the layer one for arbitrary is ethere. Arbitrary is secured by Ethereum.

It's a blockchain that doesn't have its own consensus mechanism. It actually relies on Ethereum. You could think of Ethereum as the referee. Ethereum validates whatever happens in room, but somehow and happen to get into details or somehow arbitrary, Ethereum is able to validate what happens in arbitrary, even without doing all the work itself.

So Ethereum is able to, you're able to use Ethereum capacity. Much more intelligently and much more compactly I'll say. So you're able to squeeze a lot more in. So Ethereum was validating, was happening on room, and therefore providing security. But at the same time, arbitrary can process a lot more. And that's where the layer two paradigm comes from.

We wanna keep the security of decentralization, but where do you get the scalability? You get the scalability on layer two. So have we solved the tri, the triva? Well, basically, because you have all three in this two layered system, security and decentralization come from layer one. The scalability comes from layer two, but together you have the ideal.

[00:14:08] Ben: Yeah, and fantastic overview. And I'm I won't go into the details on Rollups and how they work and how they differ for some of the other options. I'll link some of those things in the show notes, but I think it's probably a bit too technical for most of the audience. So I'll, I'll brush over those and drop some relevant links.

A surprisingly Ethereum Their section on layer twos is very, very helpful. So I'll drop that one and then you guys, of course have a ton of good literature on it. There's a number of different layer twos. Oh, and what, what I would add is one kind of mental model that I use here is like Ethereums, like a highway. It gets busy. There's a lot of traffic. So these layer twos are like additional highways that kind of plug back into that main highway. But the key is that, that that main highway, is that the main road that you're traveling on? That kind of helps me at times, is that, Because I keep using that, hopefully that's not too bad.

[00:15:04] Steven: Yeah, I mean obviously there's nuances and every time you have an analysis, some nuance, we got lost. But I think it's pretty helpful definitely that you have this yes, this secure base and then you have these sort of additional lanes and you know maybe these additional lanes are higher up and they're built on like pegs that like are all coming down.

So you can you know, I'm getting a little bit carried away here saying, Yeah, it'll always lose a little bit of the analogy, but I think it's very helpful for. 

[00:15:26] Ben: The point is that they're the rooted to that main highway, that L one Ethereum. There's a number of different versions of Layer Twos kind of all working to scale Ethereum and I, I'd be curious how you kind of view these, are they competitors, collaborator, collaborators? Are you working together? Is it all like an experimentation? And there'll be one, one kind of to win them all. So just kind of on, on the multiple L two scaling solutions that exist. 

[00:15:57] Steven: So the answer is it's a little bit of everything. Definitely there's competition here.

At the same point for those who are in, in the community, community, it's extremely collaborative. So even those that you compete with, you know, you're off, you're often friendly with them, and it's a really, really collaborative community and everyone's sort of working towards the same goals. And, and, and, and even, you know, more concretely, there are certain shared goals that we all want to happen that will help us all.

For example, we talked about the merge happening well, today when we're recording it, and there are, you know, Ethere has a long roadmap of things that are gonna happen after the merge. Many of them will help rollups. One is them, one of them is what's called data charting, or, or different forms of sharding.

It will make data costs in Ethere much cheap. Rollups, like arbitrary posts, a lot of data on Ethereum. So if the cost goes down to post that data, the cost of using arbitrary and other rollups will go down. So those are initiatives that we're all very, very much aligned on. And even things like the merge itself we're very, very aligned on.

So we have a lot more common ground than than you might imagine. But of course there are, we are different solutions. Often, you know, experimenting in different parts of the design space. And something you mentioned earlier on you. There are different trade offs and that's okay. You know, and even room itself, we have two chains actually.

We have Theum one chain and Arbitrary Nova. Arbitrary Nova is even lower fees in one and optimized for gaming and social one. It's slightly higher fees but has full roll up security and has optimized for defi and some NFT projects like higher value NFT projects. And that's okay. So I don't think it's even, you know, I wouldn't say it's a winner take all market that there's gonna be one that kills the model.

Cause I think there, there actually will be different chains optimized for different purposes. And even, you know, even if you're a universe own arbitrary, we already have two chains that do that, if that makes sense. Yeah, and 

[00:17:42] Ben: I'll get into the multiple chains cuz I think that's probably its own separate discussion and very, very fascinating.

Looking at TBL numbers, and I'll drop these in the show notes, but there's a lot of e and value locked up on these layer twos. Have you started to notice a bit of. Brand loyalty or L two maxes in the ecosystem, the way that we see kind of on competing L one s and different web three ecosystem.

[00:18:10] Steven: Yeah, there definitely are a lot of excited people out there and people that take very foreign, very strong opinions. Sometimes for different reasons. Sometimes, yeah, maybe cuz they have an economic stake, like they have a lot of money locked on the platform or, you know, there's hundreds of apps in.

So even it might be, you know, it could be like, I have a lot of gmx token, for example. Maybe they'll, they'll say, Right, that's one of, one of an app on arbitrary as an example, right? They might, we might say, I have some of this token. So, and therefore your alleg just can be first, you know, can be primary or secondary, if that makes sense.

It can be because I and those are both fine. You know, we're building an ecosystem which is more than just us. The ecosystem includes you know, all of our partners as well. But you know, fundamentally, another interesting thing about this space you know, which might be surprising to someone, is a focus on the technologies.

And you get pe you have people that become very, very maxi on a particular technology. Like I amer's an optimistic roll up. There's another type of roll up called the zk Rollups. You'll have people that say, I am an optimistic roll up maxi, optimistic rollups are the only way to go. And you all, you.

I am a zk, Max ZK is going to win. And, and, and you'll have both of these opinions. You know, it's funny. So you'd expect me to be here and say I'm an optimistic grow up maxi. And I'll probably say that. I'll say so a little more nuance, which is I am, I do believe fundamentally that arbitrary Nitro, that's our, our scaling stack is the best scaling solution that exists.

And, and it's pretty, you know, it's the only general purpose scaling solution. Out there that's live in production today. And the only I should say general purpose roll up is live in production today. So it's pretty clear that that's the case today. But, you know, just two weeks ago we did the nitro migration where we updated one, which is our main, our our main, our defi chain two arbitrary Nitro.

We are running a different software stack beforehand, then we updated it massively. And you know, that shows I think our ability to, to, to, to change and our ability to, they, they're both optimistic world up, but we're constantly saying to ourselves, How can we do better? How can we make the experience even better?

So I'm not actually a maxy. On any particular technology, I may scaling Ethereum securely maxi, and you know, today arbitrary Nitro is clearly the answer to that. But if in a year or two or three or five it makes sense to include CK proofs, if there are technology matures in arbitrary like. I would be a big supporter of that because, you know, I'm fundamentally I don't come here and say, Hey, I need to use this tool.

I need to fix the, you know, I must use a hammer. I'll say, What is the best tool for this problem today? This is the best tool, but I guarantee it doesn't matter what, because it doesn't matter what you're a max on. Fast forward five years, every single one of these technologies will have progressed a lot.

Everything that we're doing today will look early and primitive. And it's, it's, it doesn't matter. You know where you are. That should be a non controversial, controversial statement. And the ability to adapt is so fundamentally important. And actually that. That's, I think you know what the big lesson of today is?

That's it right there. It's the, the merge is Ethereum's ability to adapt. And that's why Ethereum wins because, you know, in my opinion, because it has a, a community base, but it also, it has a, a strong community. It has strong adoption, but it's also not afraid to continue to adapt and continue to innovate and continue to make itself better.

And I think we have to do the same thing on the layer two space as. 

[00:21:19] Ben: I love that. I love that. And I have two questions, but I'll, I'll start with in terms of like, zk, Rollups is probably the other very like scaling technology layer two that like has the most traction at this point. I'd be curious what aspects of zk rollups do you like the most, like that is the most appealing to that method of scale?

[00:21:40] Steven: Great question. The answer is, so we have to get slightly, slightly technical and 

[00:21:45] Ben: it's okay to get technical. The details here are highly, highly technical, so it's okay . 

[00:21:50] Steven: Okay. Thank you. Fundamentally what is the difference in a ZK roll up and an optimistic roll up? Remember, we all take that, take the data off Ethereum.

We all want Ethereum to validate what we're doing even without doing the work. That's how we scale. Remember, we get the security of Ethereum, but we do a lot more layer to land. And the way we do this is we do things in layer two land and we report back to the, the results to Ethereum. But the critical point, if you wanna get the security of Ethereum, you need Ethereum not to just accept that, but to say, I, I know I accept that and validate that Ethereum validate that it says all that stuff you did in arbitrary or all that stuff you did on your ZK roll up.

That is true. That is correct. I will stand behind that claim. Then the question is how do you convince Ethereum that all that stuff is correct? Because we're not executing I Ethereum. The whole reason we're taking it off Ethereum is cuz we don't want Ethereum to run it. And in, in one word the answer is you prove it to Ethereum.

You say Ethereum, I am proving to you that this is correct. And zk Rollups offer what they call validity proofs. They say, Hey Theum, here's the result. I'm giving you a validity proof or a proof that it is valid. Here is a proof dawned valid, optimistic rollups say here Ethereum, here's the. I want you to optimistically just accept it without proof.

But if anyone challenges it, I will give you what's called a fraud proof. And that's the core difference. And from a modeling perspective, you know, validity proofs are, are, are easier to understand, easier to reason about, and have some nice features. Everything just closes out immediately. There's no waiting period.

That's very, very nice. So there's definitely the theoretical future of a ZK roll up that that's nice. The problem is, No general purpose. Zk Rollups exist today because the. That magical device that says, I did all this, this computation, and here's a proof. It turns out that those are difficult to craft for general purpose.

Languages like evm, particularly hard for languages that weren't designed for proofs, they run in a different computational model called circuits. And they're really, really expensive. Expensive to craft. And remember, we're a scaling solution. So if generating a proof is very expensive, that's a problem. Or if generating a proof requires you to change your tooling and use a different language, is optimize for proving that's hard.

And there are a lot of really excellent teams that are working on this problem. This is where you might have seen zk evm, right? A ZK version of the Ethereum virtual machine. So having something compatible. But having that, that's cheap. And that supports general purpose. It literally doesn't, doesn't exist today.

There are a lot of teams that saying they're close, but it doesn't exist today. And just not to one last point. So it'll confuse anyone. There are CK rollups that exist today in production, but those are not general purpose. Those are usually for payments or I, you can do a single action. It's not that you can go and launch an app, launch a smart contract like you do an Ethereum or like you could do an arbitrary, it's, you could.

A token, you know, to, to a different address. They're very, very what you call application specific. They're, they're made for to do one thing as opposed to a general purpose platform or a platform that supports the evm, the theory virtual machine or any other virtual machine for that matter. So that's, you know, so in a nutshell, you know, and that, that's sort of what I was getting at before there, there are nice things about the model of validity proofs.

It's just, Our goal is not coming in and saying, I must use a ck proof to solve this. I'm saying I'm gonna use the best technology we can to solve this problem. And today that's arbitrary Nitro. But hey, if, if in five years from now we've bid advances, then ck proving as you become cheaper and more compatible, I'll absolutely reconsider it.

And, and I won't eat my words because I'm, I'm excited about that. You know, I'm excited about that future. Remember, I, my background's in cryptography, there's. There's, I'm as excited about the, you know, developments of CK per as anyone else, and, you know, we'll incorporate that whenever it makes sense. Just today we don't believe it does.

[00:25:25] Ben: Yeah, and it's, it's great to have smart teams kind of on both sides, advancing each different method forward. It's the same thing with like e moving to proof of stake. Okay. Now the two major blockchains. One proof of work. One proof of stake, like that's great as opposed to just take out mining globally and you stop 

[00:25:42] Steven: every blockchain

Diversity is, is very, yeah, is very, very important. And you know, there are lots of strong opinions out. You know both ways. I, I agree. You know, I, I still want . Yes. Everyone agrees. There's then you're, then you're, then you're being too simple.

[00:25:58] Ben: Yeah, exactly. Or you, you, Yes. So I talking about evolution and learning and changing arbitrary scaling e and e with the E merge, I'd be curious how you think about other.

Layer ones in general outside of the E ecosystem. So they've seen what we've been doing with Bitcoin and Ethereum. They've raised a lot of money. They've iterated on some of these design choices and relaunched. So I like how these layer two, these other additional layer one ecosystems fit into the whole ecosystem, the multi chain world.

Kind of kind of your thoughts on that in. 

[00:26:38] Steven: Yeah, so it's like I said before, it's a design space. There are so, so many s of the design space that you can explore and some of these alternative layer ones explore interesting or, or different aspects of the design space. But the other thing is, You know, I think a lot of them really bet on Ethereum not scaling Ethereum, not being able to innovate itself.

You know, there's a lot of, as important to the Ethereum technology is the Ethereum community, you know, super strong, super important. All the innovation that you'll see in smart country, or the vast majority of it really happens you know, from, from my vantage point happens on Ethereum. And it could, and that's because.

You know, not only becomes of the technology, but because the community is, is really so strong and when it comes to alternative there, once, you know, that's an uphill battle trying to, to fight with Ethereum community. Now, in a world where Ethereum couldn't innovate in a world where Ethereum was stuck in time and would not be able to incorporate changes and, and, and, and become, you know, better and more efficient.

You know, that might over time push people towards a, a different platform, right? If, if Ethereum fees know stayed high for, for a long time, we had no plan to fix that, then eventually people would say, Well, you know, it's not a principle anymore. It's like, maybe I wanna stay in Ethereum. But if they just can't make it work for their app, they're going to go elsewhere.

But if Ethereum can innovate, I think that. That and, and it, and it's proven, you know, today of all days it's proven that it can, I think that's going to be very, very dangerous for these alternative fair one blockchains. Now there probably will be certain blockchains that have specific communities around you know, certain, certain verticals which, which have grown because a lot of the blockchain is.

The synergistic co-location or being able to talk to other apps directly, That's very, very important. So, you know, it's not to say that you won't see specialized blockchains around certain applications, but I think Ethereum is going to be the winner for a very, very long time for anything general purpose because, you know, it's, it's shown, A, the technology is very strong.

B, the community is very strong, and C, we're not stuck in. We can make those things stronger. So if someone comes with a better design, that's not like, Oh no, it's like, how do, how do we improve ourselves to incorporate these details? And that's not to say these other designs are better or aren't better, but you know, if, if Ethereum researchers believe there's a better design, if Ethereum community believes that there's a better design, you know, we're able to move, we're able to go over proof of work to prove a stake.

And that's you know, very, very important that adapt. Yeah, love that. 

[00:28:55] Ben: And you're obviously super bullish and big supporter of Ethereum Andum, but if you weren't operating in the EUM layer two scaling area what would be the other layer one that would be the most interesting and why? 

[00:29:11] Steven: It's a, it's a very interesting question.

And, you know, I think one, I guess 1, 1, 1 interesting, one community that I think is, is quite interesting in how it works is the is the cosmos ecosystem this idea of giving people the ability to launch their own chains and really interact with them. So, you know, I, I do think we're actually, we're seeing a lot of those in the Ethereum community, even like with rolls.

So you'll think you'll see more, more, and more of. But definitely I think there's some really interesting it's a really interesting model in the way that that model has been built out in a more many chain universe at, in and of itself. But you know, long term, I think a lot of those use cases will probably move to Ethereum.

But definitely I think there's a lot of you know, definitely an interesting model which resonates with many. I agree. 

[00:29:54] Ben: Alright, let's move into ar Arbitrum specifically what you guys are working on cuz there's a lot. And first, kudos to whatever Giga. Brainin marketing came up with Arbitrum Odyssey because this is a.

Like from the outside looks fantastically successful in terms of like marketing and, and getting traction and people interested. So actually let's just start there. Like, do you consider Arbitrary Odyssey successful? And perhaps start by explaining what it is and knowing what you know now, what would you do differently when launching Arbitrum Odyssey?

[00:30:29] Steven: Great question. So yes, I think it's been massively successful. Arbitrary Odyssey is this community driven, really education and exploration campaign where we teamed up with a well known NFT artist rat. Well, and also we had a voting process where the community was able to vote on which projects they want featured.

We had these. We end up with 14 projects and over seven weeks, two projects a week will be featured as well as a week for bridging funds. And the idea is each week we'll encourage users to explore a different project or two different projects in the ecosystem and do a task or two on those projects, depending on, on what the project you know, to find for, for, for their task.

And. It gives users the ability to really explore and learn about the ecosystem, and I think it's been incredibly successful. So, to your question though, so what would I have done differently? So let me, let me talk about the, sort of the current state of, of the Odyssey and, and and how we've adapted over time.

We launched the Odyssey initially, maybe two months ago or so, and we did the bridge week and it was fantastically a successful week. And we started the week with G the second week we started with gmx and yield protocol, which is also incredibly successful. Then we paused the Odyssey.

The reason we paused was because it was so successful and We have a limited capacity. Back then, we were running a one Ethereum worth of, of, of transactions, meaning we were running arbitrary. This was before the Nitro upgrade. We were limiting the capacity of arbitrary in a hard limit that we're not gonna go over this capacity.

Now every blockchain really has some hard limit Ethereum, Bitcoin for sure, like we know about. But it really, there, you know, there always, always one limit. And what happens, you know, in theory where Bitcoin or room, when you approach the limit you don. Turn down transactions you know, transactions, fees get bid off, and there's an auction basically that happens.

So what happens is it becomes more expensive to use to use the blockchain and you know, this was really The system worked exactly as, as as we'd expected to work, but fees were rising based on, you know, the massively increased demand. And we knew that we were just around the corner from the Nitro release.

You know, now with this behind us, I don't think we'd announced the exact date of the Nitro release yet, but we knew that it was coming, you know, very, very soon. And so we said, Hey, let's pause this now and wait till after Nitro when we increase the capacity of arbitrary one by seven X. And now what that means is there's still a capa.

There's always gonna be some capacity where, where fees start to go up. But we seven x that so we can, we can handle seven x more of the demand. Before fees go up. And, and this, by the way, this, this is for users that are interested in the Ossie. They're crossing users that just, that are doing something else on chain while the Ossie is happening and, you know, just wanna continue having their lower fees.

So considerably we knew that was around the corner and we saw so much demand, which to be honest Blue Path, our expectations. We decided to put it on pause and to resume it after Nitro. We haven't announced the date yet, but stay tuned. We will be announcing the resumption date very, very soon, and things will pick up exactly where it left off.

And we will continue the Odyssey and explore parts of the Arbitrative ecosystem. But the, the, I'll say the one last thing, which is the goal is really for users to explore and lure an account due projects. And, you know, we users have to, I've, I've spoken with users who. You know, I used gmx during the Ossu for the first time and I haven't left.

I just stayed there and kept on using it, and that's like, that's a success case right there. That is exactly what we're trying to accomplish. The, the power of these technologies is, is so strong and introducing users to them is often all that it takes. And, you know, through a nice fun program, users are.

Getting exposed to various facets of the ecosystem. These might be users that never tried any of it before. These might be users that only tried one or two apps and now they're encouraged to look at others. And, you know, for a lot of them, hopefully this, it's not about getting this one interaction, it's about introducing them to something which will hopefully you know lead to a lot more than that.

Yeah, and I 

[00:34:07] Ben: love it. I mean, just seriously, the fact that it was so successful that it like blew out the number of transactions and I had to push forward this upgrade. I mean, that, that's a success. Let's let's talk, I mean, you've mentioned a bit with Nitro, but let's talk about you know, when somebody comes toon, they see Nitro, they see Nova.

They see arbitrary one. Let's talk about the different chains, different use cases, why they exist in the 

[00:34:33] Steven: way that they are. Definitely. So let me first start by, and I always do this, clarifying the terminology cuz there are a lot of like one Nova Nitro, like any trust roll up. Like what is all this? So fundamentally we have two different types of chains, two different technologies that we use.

One is called arbitrary roll up and that's what we've talked before about roll up. That they get their security from Ethereum. And we have another set of technology called any trust. This is like a roll up except for it doesn't put all the data on Ethereum and instead uses a data availability committee.

So that's the technology. Then you can imagine, you know, building chains with this technology, these technologies, there could be one or could be one chain, there could be two chains. We currently have one chain with each of, with each of these technology stacks from. One is our roll up chain from Nova is our antitrust.

Soumm one is where you know most of the Defi innovation is happening and your protocols at Hutu Swap, Sushi, Swap Curve Ave Gmx, they're on AR room one. Treasured out. Also, you know, NFTs, a lot of that in one arbitrary Nova is really targeted at gaming and social. It's a much younger chain. It was only launched in August.

And you know, one launch partner that launched with us there was Reddit and they launched their community points on Nova. What is Nitro then? So we discussed roll up antitrust Nova One. What is Nitro? Nitro is our technology stack. And Nitro. Within the Nitro stack, you can actually run any trust chains.

And you can run roll up chains. So Botho one Andum Nova are running on the nitro stack. Before that, we had a different stack, which we call now arbitrary Classic, and that was what was running from the launch Ofum one year ago. Until, until we did the Nitro upgrade, Andum one, and with the migration we swapped out the engine.

You might think so arbitrary Nitro is a new engine, arbitrary classic is an old engine. One is a blockchain that was running for a year with a classic engine and in mid-air we swapped it for the nitro engine. Nova, on the other hand, is also running with the Nitro engine, but that was launched with the Nitro engine.

So we built a new plane with the Nitro engine and we launched Arbitrary Nova last month. And we also took our existing plane that was ready in flight and swapped out the Nitro engine. I hope that that's, that, that clarified things. 

[00:36:44] Ben: No, that's super helpful and, and talk about evolution and growing and evolving.

I mean, if those, those examples aren't, aren't the perfect examples, Arbitrum Nova was pretty exciting. This like specific use can chase chain. Do you see the potential for additional single use or like specific use blockchains being deployed byum in the future, and if so, kind of in what niche or?

[00:37:10] Steven: Soor Nova is actually a general purpose chain, and you can, it's fully evm. You can do what you want, whatever you want in it. It just, it makes a slightly different set. Trade offs. The transactions are cheaper and the security is not quite, not full roll up security. It's a lot more secure than your typical side chain because it does it has the any trust property, but it does rely on this committee for data availability, and you have to trust one or two members of this committee.

Now, in the case of nova, the committee is actually quite strong and includes us Reddit. It includes consensus, it includes p2p, it actually includes Google Cloud. And quick note as well. So it has a ranks varied it's composed of web two and web through players. And the idea is you don't have to trust all them.

You have to trust really that one of them will keep your data around. The things will, will continue to work. That's pretty, that's a pretty strong strong property, but it's not quite the rollup, which puts all the data which puts all the data on Ethereum. So. Now when a project wants to launch, you know, functionally these tooth chains are, are the same in the sense you can launch any app on either one of them, but a lot of it is about community.

If you're a defi protocol looking at the innovative defi, you're gonna launch an and one, because that's where all the other defi protocols with their liquidity that you'll want tap into are already live. But if you're want someone that wants to say build a game, or you wanna do something that ties into Reddit's ecosystem, you'll probably wanna launch an arbitrary Nova.

That being said, we, we, we have no plans right now to launch further public chains. You know, for, for, for us or for public chains, for our users, I should say, because between arbitrary one and arbitrary Nova there we really handle, you know, just about every application and every, every price point.

Now I, we say arbitrary Nova is, ti is targeted at social and gaming, but it's really at what is the characteristic that unites these two. It's high frequency of transactions appealing to a broad base of users that really are likely, many of them price sensitive. You want the prices to be ultra, ultra low, like singled sense or less transaction fees, and that will go to arbitrary nova, arbitrary wonders for those that can tolerate slightly higher fees.

You know, and they also in the sense to tend you. Single sense to maybe 10 cents. Not still, not too high occur, at least occur in pricing levels. But what the full security of the roll up, they'll go there. And, you know, I, it's hard, I'm hard for us to think of an application that will be served by one of those today.

And I think, you know, we have basically the package for, for, for both of them. There is a question and well, Over time when demand comes, you know, when, when there's more and more and more demand, what happens? I think, you know, we'll, we'll take that as we see it, but right now we have excess demand for, for all the excess capacity, for all the demand we see.

And we have a lot of room to grow and we also have a lot of really great initiatives going on that are going to increase our capacity over time. And the idea is scaling is a cata mouse game. Always. You know, there you scale to then more demand comes, need to scale again. And so, you know, we think we can, we have a lot more tricks in us, you know, as I mentioned before.

The key of being able to adapt is, is really, really important. Just like we launched Nitro two weeks ago and seven Xed our capacity, so that's not the last time we think we're gonna do that. Well 

[00:40:02] Ben: fully expected that since you guys were thinking about scaling smart contracts before e even launched.

So presumably you're kind of peering around quarters long in advance. Let's talk about roadmap. Kind of most exciting thing for arbitrar over the next, like, near term, like six-ish months, and then more long term, say five ish years. But you can adjust the timeframes just more near and more like longer term.

[00:40:26] Steven: Absolutely. So we have some really great technical initiatives that are gonna happen in the next few months. One that we've talked about a lot. Decentralizing of a sequencer of arbitrary. So having others participate in the, in the sequencer. Also looking to say, Hey, how can we make this even better?

How can we make fees even cheaper? We have a lot of initiatives going on, but again, the key is without reducing security, if we reduce security we know how to make fees cheaper, But the, the, the key is, making the fees cheaper without reducing security. And the good thing is we have some really good ideas for how to do that as well and making usability even better.

Right. How do you onboard users that are new to crypto in ways that are you know, safe and secure? We are fully EVM compatible as EVM compatible as you can get, but also we ask these questions about how can we onboard new developers that, that you know, So we wanna remain even compatible, remain fully even compatible.

But can we also have afforded to make it easier for other developers to onboard? Now we're seeing like really, really like global adoption, you know, on the horizon. And what we wanna say is how could we create the tools and the And the processes that will make this sustainable for a long time.

And also accessible to the most users possible. You know, cuz long term it's all about the lower you get fees and the, and, and the more you are able to make that process better for users, the more inclusive you'll be both to, to different applications, but to users and different, you know, geographies that might have different considerations.

And that's something which we're really focused on. So that's a lot of technical, a lot of really great technical innovations in the. So in, that's in the short term and the long term. The short term, you know definitely gonna work in the Nitro framework. The nitro framework is very extensible, very adaptive.

We have a lot of really, really great things to go on, but in the long, in the five year term, like I said earlier, Everything we're doing today across the industry is going to look very, very early in five years from now because there are so many smart people. Both, you know, atum, but also more broadly in the community also universities you know, looking at these problems, doing fundamental research, and we're going to come a long way.

And every day, more and more people just come into this space. More and more smart people just come in and really help, you know, push, push the boundary forward and, and, and advance our, our understanding of what's possible. So in five years you know, we will continue to, to do that. But the nice thing is, you know, we're committed to, just as the ethere was doing today to a smooth transition arbitral model will remain is, is community.

Will know, can know. Sure there'll be a ton of innovation in five years, but one, we're committed to supporting the introduction of, of new technologies and new advances to the stack. And two, we're committed to not disrupting the current stack. So this, this, this. Difficult balance, which again, Ethereum is showing that it can do, and we believe we can do too of innovating while making sure that users remain comfortable and know that they're safe and their assets are safe and nothing's going away, I think is, is, are critical.

And that's why users can know that in five years from now, I can't tell you the exact technical, you know, I'm not gonna pretend that I have a five year technical roadmap. Because, you know everything will be, you know, will change in five years. But I can tell you. Users can know that will continue to be at the cutting edge, edge of scalability and innovation.

[00:43:25] Ben: Love that. Love that. Steven, I had a number of other questions, but you know, I think that we covered so much in this short amount of time and we're within the timeframe. Is there anything else that my listeners should know, Aboutum before 

[00:43:39] Steven: we kind of wrap this up? Yeah. The only thing I'll say is a lot of times I get a question of.

Hey, how can I, you know, learn solidity? Can I, I wanna get involved. And the answer is, if you wanna learn solidity, you should. And there are plenty of amazing resources and classes for free available to learn that. But the thing that people, I think people miss is if you, if you don't know solidity, if you don't know how to program, if you don't know how to code, there's probably a lot that you could still do to contribute to this space.

There's, so it's, it's really like a massive. That has so many facets. And you know, you mentioned earlier on you know, the arbitrary marketing group. We have a fantastic you know, community team that really works on these, on these on these initiatives. So I'd encourage anyone that's interested in getting into the space.

And that can mean different things. You know, there are room, there are places for people to contribute. You can be a designer. You you know, there's a lot of design need to the space. You can be a marketer, you can be a business development professional. There's so, so much that you can do. And I encourage people to engage.

And you know, one way is just to just wanna take it in, you know, follow Twitter, you know, the arbitrary Twitter channel at Twitter channel to wanna actually. You know, come through our discord and you can ask questions and answer people's questions. That's even better. And if you wanna take a leap and join the industry, either at Arbor Gym or really at any Web three company, don't get discouraged and say, Oh, I don't know how to write a smart contract.

Trust me, if if everyone in the industry, all they knew how to do was write smart contracts, the industry would not be able to move forward. We'd need every single skill set. So I'd encourage users to jump in and not, not worry about what you don't know, but contribute what, what you do. 

[00:45:07] Ben: Double heart on, on what you just said, cuz I, I completely agree.

the, the industry needs smart people. If you're interested, passionate, you can find some way to like, use your unique skill to propel it forward. And we, we want you, that's for sure. Steven, where can my listeners find out more about you? About arbitrary, Where would you like 

[00:45:25] Steven: to send? Yeah, so I guess the two best resources are are Twitter page.

That's at from on Twitter. That's again, where you can learn about our partnership announcements. If you're going to be at any theory end based events you know, we have a big presence. We're actually running a hackathon at devcon in October. Discord, if we wanna take that leap and engage or just listen there too, but you have questions, wanna answer questions.

We have a, you know, a thriving discord you know, just discord, gigg slash arbitrary, and you can go there. And also Like I said, if they wanna take the leap and really join us and join part, part, become part of the team, that's off chain labs.com/careers. And you know, we would love to to see your application.

[00:46:02] Ben: Awesome. And just a note on devcon for any listeners out there. I just decided a few days ago that I will be doing the hackathon, so I will be putting together team, I've got some awesome devs and starting to think about different problems we wanna tackle. So send me a DM if you're interested, and I'll hold your hand into perhaps your first hackathon.

But it's a great way to get involved. 

[00:46:24] Steven: Amazing . 

[00:46:25] Ben: Awesome. And I'll link up all of those things. So listeners, you can check out in YouTube or the podcast show notes. You'll have all of these. Steven really enjoyed it. Thanks so much for coming on today. 

[00:46:36] Steven: Likewise. Thank you so much for having me.

[00:46:39] Ben: There you go. First off, thank you very much for listening all the way through. I hope you got a lot of value out of that conversation. As always, you can find show notes, links, and [email protected]. Please share this with anyone you think might be interested and derive any value from this conversation.

And as always, you can reach out to me for any feedback or questions. Please give the video a like or even better subscribe on YouTube or your podcast player of choice. This really helps others find the podcast or the video as well. Thanks a lot. Hope everybody has a fantastic day and stay safe out there and invest wisely.

Cheers.

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