In today's episode Dan and Sam are joined by host of Bell Curve Podcast & Blockworks Co-Founder Michael and Blockworks research analyst Matt. The team dives into their key takeaways of the EthCC and converse on zkEVM problems, the bull case for centralization, scaling solutions, interoperability, and much more!
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Timestamps:
(00:00) Introduction
(01:37) EthCC Vibe Check
(08:25) Discussions on zkEVM Problems
(14:04) Takeaways for Interoperability
(22:49) The Bull Case for Centralized Builders
(38:36) Enshrining Eigen Layer in Ethereum Protocol
(45:10) Are Scaling Solutions Too Much?
(54:38) Lido Bribe Mechanism
(59:29) Web2 Interactions
(1:02:24) What Does Institutional Adoption Look Like?
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Resources:
LayerZero
https://layerzero.network/
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Disclaimer: Nothing said on 0xResearch is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only, and any views expressed by anyone on the show are solely our opinions, not financial advice. Dan, Sam, and our guests may hold positions in the companies, funds, or projects discussed.

I see this growing acceptance that the escape hatch or being able to force include your transactions and account to the L1 make it okay to be a centralized sequencer.

1, because I would never be able to figure that out.

I think realistically what's going to happen is the big guys, the hedge funds, the exchanges, all the elite players that are actually very tech savvy will understand how to do it.

And then me, a little minnow, I'm going to be caught up there.

I'm going to be hauled onto the boat and I'm just going to be laid out to dry.

Welcome back to another episode of ZeroX Research, brought to you by the Atom Accelerator.

If you're a developer looking for a home in the industry, the Atom Economic Zone welcomes you.

You'll hear more about the Atom Accelerator a little bit later in the show, but today is July 24th, and we are switching things up, doing an ECC recap, and we're joined by Mike and Matt.

We were lucky enough to be in Paris last week, spent a little bit of time over there, and it was honestly a very refreshing thing to go do.

The vibes in the conference were a lot better than I think a lot of us expected.

But Before we jump into that, we did want to take a second to shout out our own conference, Permissionless 2, which is the world's largest DeFi and crypto native conference, bringing builders, researchers, investors, and thought leaders all into 1 place in the heart of Austin, Texas.

You can use code 0x30 for a 30% discount.

And if you do end up coming, be sure to hit us up on Twitter or on Telegram so we can go and grab a beer.

But yeah, I think this would be a good time to just kind of start like what did you guys think the overall vibes were at ECC in Paris?

Yeah, I mean, I was like you mentioned, I was pretty surprised that the vibes were like positive, you know, when you spend all day on crypto Twitter and, you know, in the depths of random protocols docs, like if things can get a little bleak at times.

But I just want to like echo the sentiment that that doesn't seem to be the case with the people that you actually want to be in a positive mood, right?

And that was very much so how I viewed the average participant of this conference.

9 out of the 10 people you talked to were very, very high signal who are like building a meaningful part of the crypto ecosystem.

It was really, really cool, really, really refreshing.

And like, yeah, everyone was just excited about things, which feels like a huge sentiment shift from the last 6 to 12 months, honestly.

There's just such a discrepancy in between Twitter, which I got to actually put my hand up.

I still don't even know what the hamster joke was.

I just completely missed that on my feed.

But now my whole feed's referencing hamsters, and I don't even know what people are talking about But there's that going on on Twitter and then there was the reality of what happened in Paris this last week And I just want to add you know, we we've been hosting conferences for a long time I've been to plenty of bull market and bear market conferences.

This was a large outlier in terms of usually 18 months into a bear market, you're like deep into apathy.

You know, conference attendance and excitement tends to be a lagging indicator in crypto.

So like by way of example, I remember consensus in 2018, like 6 months after the bull market let off and people were still like, yeah, might still be a bull market.

And then the year after, attendance dropped 90%.

It went from like 10, 000 people to 1, 000.

And it was really, you were just in the doldrums.

So that was my mental framework going into this conference and it just could not have been further from the truth.

It was like more people, more excitement, solving real problems.

Then yeah, it was just like, that's just very abnormal for this space.

And I just think very, like it bodes extremely well for the current moment in time.

The left curve was racing hamsters on crypto Twitter.

Everyone there was looking at the right stuff, you know, as account abstraction, MEV, looking at infra, how do we support the next billion users on chain, and it was really refreshing having, you know, so much excitement around that.

I heard the attendance at the conference was double what it was the year before.

So I thought that was kind of surprising and, you know, fun fact.

And overall, I was really surprised by how much also money was being spent.

I don't know if that was surprising to any of you guys, but there's a lot of parties, a lot of events, a lot of great conferences, a lot of money being spent.

So I thought that overall, even though the emotions and sentiment in the industry is so low, it isn't being reflected in reality, at least in Paris last week.

I also thought just the collaboration between the different factions of people was kind of interesting.

Dan and I had the pleasure of hosting the ZK Unconference that Matterlabs helped put together, the team behind ZK Sync.

And it was just kind of wild seeing Jordy from Polygon and then Alex from ZK Sync and other people from cross-chain interop protocols using ZK to actually just sit in a room, not talk shit about each other's protocols on like they do on Twitter.

And instead like, be like, how do we like make this work?

Like, how do we actually make it so our ecosystem of L2s and L3s can actually interoperate with your ecosystem and L2s and L3s without it being like a 1 token wins all scenario.

So I thought that was super cool to see like live in person go down.

Yeah, yeah, no, that's interesting as well.

And I think 1 of the interesting takeaways that I don't know how I feel about this yet, but everybody there was building infrastructure.

Literally nobody was building an application on top of that infrastructure.

And part of me is like, you know, I guess like the optimist in me is like, okay, good, because the current infrastructure can't even support like true usage, right?

If a billion people like we're looking for, or wanna come use an application on chains, it's just not gonna work.

So, you know, we do need to keep building this out, but it would also be nice if we were luring some more people into our industry and like building things people actually wanna use and like not just forking another perp decks and you know, putting some more DGN assets on there.

Like there's a definitely a long list of things that could be getting built that like that crowd wasn't necessarily there.

So I'm a bit torn on that, but I'm curious if you guys can relieve me of my pain in any way.

And there's like, I've got like, I could put my cynical hat on and give you an answer for why I think that is, but then like a more realistic sort of maybe empathetic, empathetic hat.

But cynical hat, Mike, you know, would say, you know, infra is very hard to value, right?

So you need a token, always in infra, and it's very hard to value, so it's a pretty good thing to build.

You can pretty much just point to the TAM and say, look at how big this damn TAM is, you know, launch token.

The actual like empathetic hat Mike is to say, you know, there is a bit of a real chicken and egg problem when it comes to, you know, apps and the infrastructure that they're built on.

And this isn't like wildly unlike other tech cycles where info gets built and then there's a lag of like 6 to 18 months where it takes apps like a while to figure out how to build on that.

But the chicken and egg problem being, you know, in order to have good apps you need good infrastructure to support those apps.

But also at the same time, we don't know what these apps are going to look like yet, and really the infrastructure should support the needs of the application.

So there needs to be this virtuous feedback cycle that just hasn't kicked in, in between the development of apps and infrastructure.

And I think a couple of the interesting solutions that you're starting to see crop up is actually teams building an app at the same time that they're building kind of like an SDK supporting set of infrastructure.

So I would actually point to on the gaming side of this, Scott Sonnardo at Argus Labs actually developed a game called Dark Forest, but they're also building a supporting rollup SDK for gaming, which is pretty interesting.

And actually, Most of the L2s are kind of doing this too.

Like ZK Sync or Optimism, they all have their stacks along with 1 sort of general purpose, like ZK era, and then there's also the ZK stack and there's sort of a broader framework with different modular components that you can plug in to build in their ecosystem.

So I thought that was actually like the closest thing that we saw to kind of exciting apps getting built.

But yeah, that's kind of my opinion on it.

It was also a little bit sobering just to hear some of the problems like these ZK AVMs have like live, like they're nothing like, you know, safety critical problems, but like, I don't want to call anyone out here, but there's reasons some of the major blue chip DeFi protocols aren't actually over there yet, despite having already signaled support to go over there yet.

And I think we're just heads down building in a bear market right now.

And that was very much the vibe and everyone's just trying to fix them.

So that way when next cycle comes, we can actually launch all these dApps.

So ZK Sync is working to fix 1 problem with error.

And so when you post a block and there's a timestamp, it's usually associated with that block.

And this allows things like, say token incentives.

Cause you know, if you give token incentives on a pro rata basis to LPs in the pool, for example.

You need to know how long the LPs were in the pool in order to actually have them accrue the proper amount of rewards.

And so with most L2s, the timestamp that you call when you're on the L2 will return the L2's timestamp, meaning L2s generally have faster blocks, so they need to have the appropriate time for each block.

Well, in the case of DK sync, when you call the L2 timestamp, it actually returns the L1 timestamp, meaning the last time a proof has been posted to the L1.

So therefore there's like a 20 minute gap in between or like a couple minute gap in between actually getting a new L2 timestamp.

And this is like a critical issue for getting, you know, as Sam mentioned, like these large DeFi protocols on chain.

And so it's I think it's like an interesting problem to kind of see 1 of these ecosystems have.

But again, like they know that there was going to be like, you know, it's a problem, they're building out a solution for it.

I honestly think this just had to do with like, there was a huge race to get to production between a lot of the largest players.

And this kind of feels like 1 of the things that I was like, Okay, well, yes, we've made it there on time.

But you know, we have still have some things we need to build out.

And so I think there's just some dev tooling things that really need to get built out around not only just like zk sync, but zk EVMs more broadly, when you have like this new infrastructure, again, you need to keep building out the tooling.

So it's like step 1, build the infrastructure.

And then step 3, build the applications that people actually use.

And it feels like we're in between step 1 and 2 right now.

How often do proofs get submitted to L1 for most of these chains?

I think it's like a matter of like minutes right now, just because ZK, well, at least with Boojym and speaking specifically towards ZK Sync, you know, they've really optimized their prover.

It's something they've spent a lot of time doing.

Right now, Boojim's running in like, I think they call it shadow mode basically.

So it's like running in the background, not affect, it's sort of like a test net in some way.

And so it's a matter of like, it's going to be a matter of minutes at scale, but which is pretty in contrast to optimistic L2s, where more transactions can be more expensive.

It's like more transactions will actually mean that proofs get posted more often because you kind of need to hit that threshold where it becomes affordable to kind of dissect the cost amongst the active participants in that specific proof.

Something I thought was interesting was I went to Arbitrum Day and I agree with you.

You know, I met very few builders the entire time that I was in Paris.

Literally, I think outside of Arbitrum Day, I met maybe 2 or 3 in total.

And there I actually met, you know, people building the gaming space, DeFi space.

None of these were ideas that I would say are particularly innovative or maybe going to bring a ton of people who aren't currently on chain on chain, kind of no catalyst, nothing like that.

But at the same time, there are these, you know, There is way more building going on on Arbitrum than on any of these other L2s.

And it's interesting that I hear so often from, for lack of better words, like GigaBrain, crypto people that ZK Rollup is the way to go.

I've even heard a few times people say that Optimism is a better place for devs to build than on Arbitrum.

But at the same time, Arbitrum has this huge dev community and it's growing.

And it's like, well, you can build this great ZK rollup in theory, but if you're not attracting all these devs to come build there, is that where it's going to settle?

And that's something that I definitely have been thinking a lot about, like, you know, do I care more about the tech stack?

Or am I going to focus on arbitrum where today devs are actually building?

See for me this goes and to clarify, like in the last comment, Like I'm not shitting on ZK Sync.

I'm actually the most personally bullish on the ZK stack as a whole.

Yeah, I got pilled pretty hard on that actually this trip.

And so like, but I was wondering, like when I saw the ZK stack announcement, we talked to Alex and Anthony a couple weeks ago on the podcast.

And like, Sam and I finally discovered that answer.

And it's like, okay, that's like a small trivial problem that will be fixed.

And then we'll see these large applications get over there.

Then you'll see, like, start to see like, okay, does this actually scale?

The question then becomes, what does the future look like?

Is it more of this AppChain thesis where you have hyperchains plugged in as L3s on top of ZK-Sync error or some other chain?

Or you have some more centralized Validium type solution using like a ZK Porter that they offer.

Like we don't really know yet because 1 of the questions I am still like trying to dig into the answer to is like, who is going to build these L2s that, or these L3s that have these custom solutions.

Is it going to be a large payment processor like a Visa, MasterCard or like a Stripe or someone of that nature?

Or is it going to be like still someone more crypto native focused, like somebody who wants a more customized DEX or something like that, for example?

And that is still very much an open question in my mind.

Yeah, some thoughts on just interoperability.

1 key takeaway for me, I'd be curious if you guys agree with this idea or not, but I thought this was sort of a bullish and bearish conference in terms of interoperability.

Like bullish in the sense that I think interoperability is going to be solved on the L2 layer between different app chains within 1 sort of platform, but I don't see there being a lot of interoperability between different big roll-ups or layer 2s.

So, like, for instance, these sort of hyperchains, I feel like they'll solve the interoperability problem within sort of the ZK sync stack or the ZK stack.

So all of those AppChains that the ZK stack supports will be interoperable.

But I think an app chain that exists on ZK, like using the ZK stack will not be super interoperable between like an app chain on the OP stack.

And my thought process is that the most likely outcome is going to be like 2 or 3 big winners.

And there are a whole bunch of reasons why I think that's actually the case.

But I see 2 or 3 big winners of these layer 2 ecosystems where all these things are interoperable.

And then there's shitty, longer term inoperability where there's some kind of like you can get these 2 things to talk over like a longer, more expensive timeframe, but won't be good for day to day sorts of interactions.

So That's how I sort of see it playing out.

I'd be curious what you guys think about that.

Yeah, I think that ultimately we're going to all be ZK rollups to be honest.

And I think that there's going to be a certain design that everyone kind of converges on.

And I really do think it's going to converge on 1 design.

It's really hard to guess the timing, but I do think that's ultimately what's gonna happen.

So that way this composability across every ecosystem is kind of like within 1 hood and 1 tech stack.

And I guess just another takeaway, like on the same vein of, you know, optimistic versus ZK is just, I'm convinced these optimistic chains are going for adoption first, like arbitrum and optimism.

And then they're just going to implement ZK stuff as it gets further developed.

They want those developers and builders to come over there and get the users.

And I even saw, I think it was Optimism the other day, awarded 2 RFQs for ZK interoperability.

I think 1 was to Risk 0, who actually was at the young conference that Dan and I moderated in Paris.

And then can't remember who the other 1 was, but nonetheless, it's just kind of a testament to the thesis I hold.

Yeah, I think we really forget how important BD is in this industry.

Like, oh, we just made this amazing thing that will change the world, but we're not gonna tell anyone about it because they're just gonna find it, because we're the best.

That seems to be like this idea that a lot of dev teams have.

And it's like, you gotta tell people you have a product or else you gotta distribute.

But yeah, Mike, I definitely agree with you.

Like I got a good, I got a good a new crypto vocab word for you.

So these like ecosystems of L2s will be constellations.

So you'll have like ZK's ZK syncs constellation, polygons constellation, maybe scrolls constellation.

Constellation sounds a lot better than walled garden, doesn't it?

And this probably goes back to what I was just saying, like distribution, maybe that was where their pitfall was and they built this great tech, but couldn't get it in the hands of people.

I think wallets have a lot to do with that.

I'm almost positive we'll get into that later in the show, but yeah, so the idea of like how to get interop between constellations actually came up at the ZK on conference and they're like, okay, if we were going to do this, like, what would it look like?

And basically to interop is enabled within like a single constellation.

So say the ZK stack hyper bridges exists because of a shared bridge contract, the contract that's actually on the L1 that holds the assets and a shared prover.

And so if you have those 2 things, so you're using the same ZK circuits and have all the assets in the same contract, that gives you this interop.

Like you can blindly trust hyperchain A and hyperchain B because they're built using the same tech stack.

But you can't have that between say Polygon ZK EVM and ZK Sync Era, let's say.

If I was trying to bridge between the 2, they're different circuits, so I can't just blindly trust them.

And we're using a different L1 bridge contract, so the assets aren't actually in the same contract.

So to get around this, let's say like in a couple of years out from now, Polygon, ZK EVM and ZK Sync Era both have insane provers, their circuits are great.

They're simply built in 2 different models.

Well, then, at that point, maybe the ZK Sync community and the Polygon community can be like, OK, we both have great tech.

I don't want to switch to yours because I like mine and vice versa.

But we do have, like, I trust your system.

But you still wouldn't be able to have the actual bridging take place because the Assets are in different contracts on the l1.

So the only way to make this possible would basically be the zk sync ZK Stack constellation and the Polygon constellation, combining assets within the same shared contract.

But this opens up like this whole can of worms of, okay, now our assets are together.

So your governance can't like mess with my assets.

And I don't want, I'm sure your governance doesn't want to mess with our assets either.

So basically this was kind of like 1 of the themes of the conference was like that would need to be enshrined and basically ungovernable.

And you basically just have to have this like ZK EVM shared liquidity bridge contract that holds all these assets that get blasted out to these ZK EVM constellations.

And if you'd have to trust all the circuits there, it gets into this like whole messy, messy thing really, really quickly.

How do they determine who gets to plug into this?

If you don't get in this cartel, then your EVM doesn't have, or your ZK stack constellation doesn't have interop with everyone else, gets into this whole mess.

So I strongly, strongly agree with what you're saying, Mike, in that there's just not going to be interop for quite a while.

That is just so far down the list of things we need to build.

If David were on this podcast, you know what he would say?

Yeah, so I have a lot of thoughts to unpack on all these subjects.

Like we started off with Mike's point of, you know, is it going to be these off-chain builder, off-chain market makers who are just creating some sort of unified liquidity layer, even though it's not really unified, but that's bringing liquidity from 1 network to another or kind of are we going to have interoperability similar to how the ZK stack works and hyperbridging.

But 1 thing is hyperbridging is async composability, meaning it's like, you know, it's interoperability, but over a period of time.

I don't necessarily think that that's the best solution.

It's not bad, but it's not great because, you know, like, you can't really do it.

What if, For instance, what if you're trying to buy Pepe on Arbitrum or some coin that only exists on Arbitrum?

And you have ETH on mainnet, it's going to take you like 8 to 12 to 15 minutes to actually get that transaction to go through.

So I'm not sure how I feel about the async or synchronous composability.

And that kind of goes back to what you were saying, Dan, it's like the, this this idea of a shared bridge on L1 is kind of how these EK-RELPs would talk.

But there's also the idea of like, you know, sharing a sequencer, which would allow for atomic composability or atomicity.

So like immediate ability to, within the same block, have communicated between these different ecosystems, which to me sounds better.

Obviously, it has a whole slew of its own problems associated with it.

And then kind of to your point, Sam, it's like, this is this BD knife fight between L2s is about to come into production.

Like we're going to see Optimism, Arbitrum, ZK Sync, Skrull, Starknet, etc.

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Centralized Builders Bull Case, Bear Market Conference, zkEVM Problems | EthCC Reflection