See all Uncommon Core 2.0 transcripts on Youtube

This is Uncommon Core 2. Whether you are an old or new listener, I want to spend a few minutes on what you can expect from this show going forward, what's going to change

and what's going to stay the same. Uncommon Core has always been a passion project of mine. It was a podcast that was about me taking the position of a student who asks simple questions about the big and timeless ideas in crypto. Sometimes I did that with expert guests from the industry, but usually with my former co-host Sue Su. Now, I don't know whether Sue's firm, 3arrows Capital, has misrepresented their solvency in 2022, nor if they have borrowed money while already insolvent.

I was never close with Su personally, nor did I have any insights into 3 Arrows. I just know that we did some great episodes together for you guys, and that I learned a lot from them. By late 2021, Sue and I had been drifting apart for a while, as my interests were increasingly moving away from markets and investing towards technology and becoming a builder myself. I made a big leap by joining Flashbots, an organization formed to mitigate the harmful effects from MEV on public blockchains, as well as becoming an advisor to the Lido DAO. And now I am completing the circle by bringing Uncommon Core back with a new concept and a new co-host.

The new focus of Uncommon Core will be on exploring the technology and incentives that make public blockchains work under the hood, with a special attention paid to the 3 big fields of MEV, blockchain security and the roll-up ecosystem. I will be joined by my new co-host John Charbonneau, the co-founder and managing partner of DBA, a research-driven crypto investment firm based in New York. Like me, John is deeply passionate about understanding and improving the infrastructure that makes crypto work. Together, we will speak with some of the incredible builders and researchers who are continually pushing the frontier to make the mass adoption of crypto possible. What won't change is the values that made Uncommon Core successful for 37 episodes and way over 1 million downloads.

Deep curiosity, intellectual honesty, and the desire to break down complex ideas together. We hope that you will join us on this journey into the heart of the machine. What is a good way to start a podcast after a 1 and a half year hiatus. John, it's really good to have you and to be doing this with you. How are you doing?

Good. It is weird to be on here on the other side of this now, considering this was the podcast that I was listening to and I just got into crypto.

I had been thinking about restarting the podcast a few times and you were 1 of the very few people I could imagine doing it with. I was hinting at it in the intro, but my interests had been kind of shifting gradually more and more away from investing and trading and kind of market psychology and DeFi as well, frankly, much more to the infrastructure side. And so I'm really glad that we have the opportunity to dive deeper into these topics together.

Yeah, should be fun. I was the person who was always liking those tweets of waiting for you to restart the podcast.

Let's talk about you for a second. You're the new kid on the blog. What do you spend your time on in crypto in an average week?

So average day, I probably spend way too much time on Twitter. That is honestly a lot of actually how I found a lot of stuff at first, particularly early on. You just kind of find that as like you start to filter through and find all your information there. I'd say a lot of my day is honestly just Going through stuff that I find on there different research and reading probably less than I would like Like during the meet during the week. You definitely have a lot more busy work than you like to I like generally My weekends are the times that I get to do the work that like I actually like to do Like All of the types of work that I like, all of the longer form writing and stuff like that in particular, you just kind of really need to sit down and just block out time to do that kind of stuff.

You need to have a few days aside to just be able to turn everything off. Usually during the week is when I'm doing a lot of just talking to people about different ideas that I'm working on. And then the weekends slash end of the week are the times where I'm just gonna go into a rabbit hole for 3 days and not talk to anyone and have 100 tabs open in my computer and just start writing and reading through everything.

Is writing for you an important part of processing whatever you're reading, connecting the dots?

Yeah. I like it's that it's 1 of the things that I actually figured out pretty early in crypto. It's not something that I actually used to do. When I was in school or my previous jobs, I wish I kind of knew this in hindsight, but writing works just incredibly well for me. So much of what I would do starting out when I was like crypto was like a hobby kind of thing.

It was just, you just read stuff, you listen to podcasts and you listen to it. You think you understand stuff really, really well. Um, and then the second you try to go explain this to someone else, like right after the fact you realize, Oh, I understood probably 1% of that. Like It just did not stick at all. It makes sense as the person is saying it, and when you try to say it back, none of it's stuck in there.

Writing is the only way, in particular, really long-form stuff. I really need to just build an idea and force myself to go through everything to learn it. It just forces you to turn over just every leaf possible in whatever this idea is. When you just, you are looking at everything possible on this topic and then you send that out to a bunch of people before I finish it. Most of the stuff that I write, I'd say I do 95% of it like by myself.

And then the last 5% that changes when I send out the report to like, a couple dozen different people, that last few percent probably 10x is my understanding of the topic. It makes the and makes the reports significantly better at that 0,

wow.

Yeah, it just like makes a huge difference

that

last little bit.

Yeah, for those who don't know John, John is 1 of the most prolific technical writers in crypto, you know, you've written about Ethereum's roadmap and rollups and sequencer decentralization and MEV and so many different topics. And so you're saying when we read 1 of your reports then we are basically going through the, we're basically replaying your thought process while you were exploring these topics on your own?

Yeah, more or less. Like I think it's actually helped me a lot as far as being able to write decently that I've come into crypto pretty recently and just don't have a lot of background. I think it is just inherently really hard to write about a complex topic and explain it simply. If you just know this thing too well and have a really dense understanding in 1 area. And then what you write comes off as very academic and for experts and in a specific way.

It's much easier to write, explain it like I'm 5 type stuff on complicated stuff if you have to, When I'm writing it, I'm just learning it from beginning to end. That is 90% of the reason that I write stuff is it is entirely selfish and personal. It is because that's just like how I learn the thing. I think it's just so helpful for people to try to do more of that. Like For me personally, that has been the majority of how I've learned everything in crypto.

Are you using ChetCPT or any other models yet in your writing?

No?

Okay. No, never. I hear a lot now that actually the rise of AI and the kind of the democratization of the availability of it is making writing a less important skill. I feel like that may not be something that you would agree with, right?

So it might lessen the impact of putting it out there, particularly if, like, if chat GPT can start to write, you know, something like I'm writing, then yeah, less people will read what I'm writing because there'll be better stuff out there. So that certainly seems plausible in the longer term. That being said, if I had to, at the end of all of my reports, just click Delete, light them on fire, and throw them away, I'd still write every single report and do them the exact same way. The getting to put it out there and have people read it and meet people is the extra bonus. That's really nice.

90% to

95%

of it is just do the work to learn it yourself. That is the only way to force yourself to make sure that I have looked at everything on this topic that I possibly want to look at and processed it and looked through all the holes and put it together. Yeah, ChatGPT will probably be better than me at writing 1 day, but just reading what it writes is not going to help you learn the thing in the same way as just like actually just going through the motions yourself. Like you've got to go through the motions at least personally.

Yeah, for me, writing is thinking. That's what I mean. I can't think without writing. Like if I have to think through some topic in a structure, it doesn't matter at all what it is. It's whether it's personal or it's professional.

It can be any number of topics. I probably write on the order of like

20

to 30 documents per day, and they can be very short, right? But it's just like putting different ideas on paper and connecting them together. There's this idea, of course, I mean, now, by now, it's almost like a part of pop culture, this idea of like the second brain having this, you know, archive where you put all of your notes and you can connect them to each other. You kind of write these small atomic nodes that are self-sustaining, and then you link them to each other. And by the process of actually linking 2 nodes together, you also start linking them in your head.

And it's crazy how that can form kind of new neural connections and kind of increase the neuroplasticity of your brain. So I would say writing is the number 1 important part of learning. I mean, there is a reason why I want to talk about this topic. I mean, you actually joined crypto relatively recently, right? When was it?

So I started in crypto is like right at the end of March, just over a year ago. So 2022, that's when I

started talking about crypto.

I basically started reading about it over the year prior. Like I was part of the COVID generation of crypto. Prior to COVID, I just never looked at crypto seriously. It was just my only experience with it was friends who were really bad at day trading on it and managing to lose money and like bull markets on it. And I just kind of ignored this thing.

Then like early COVID was when I started to pay attention to it. And then over 2021, by the end of the year, it was just like an obsessive hobby. So then I quit to go, finally go do it in

22.

Yeah. And it's funny how some people can, you know, just come into crypto and drink from the firehose, an insane amount and go to the top very quickly. And you are definitely 1 of them. I think I was 1 of them as well when I joined. And That's why I see so many parallels, because I think we have a very similar style of learning.

And it's 1 that has a lot of feedback loops built in, at least for myself, right? Because when I learn, I write. And when I write, it allows me to publish. And when I publish, it allows me to A, get a big dopamine boost, which is 1 thing, but it also allows you to build a brand and a network. And having that network, you were saying earlier, like 90% of your learning happens when you send your article to a dozen different people after it's already done.

And having this network allows you to do that, right? It allows you to ask any question to anyone. And for me, my, I think my research process is a little different. Like I schedule like interviews with people way earlier and ask them questions way earlier because I'm not as technical as you, I think, primarily. So I can't chew through these topics as far myself as you can.

So I have to ask earlier. And so network for me was always super important. And that's why this virtual cycle between learning and writing and publishing and network and then repeat. This is basically what my whole kind of crypto career was built on in the first couple of years.

Yeah, like this is realistically the whole reason that I got into crypto and like, at least as a job. It was a lot of fun throughout 2021 as like clearly a fun hobby. I just wasn't at the, okay, I'm going to go quit my real job and go do this magic internet money job for like the first year. The main thing that did convince me is that I started to realize a little bit of like what we're talking about now, like kind of gets to is I think the main thing that particularly as a new person that like makes you able to like get by reasonably well in crypto, it's not like a background of 10 years of experience and a depth of existing technical knowledge and whatnot. It's honestly just understanding how to make the process work in your favor, of just understanding the workflow, particularly for a field that there's just so much, there's always just too much information.

The thing that is going to get you to stay on top of that is not 10 years of pre-existing knowledge, it's understanding just what is the process that works for me to be able to process this, and focus my time and resources in the right place, and work on that, and get ahead on that thing quickly. And that's just a personal process, and using the people around you, that kind of thing. It's not like any existing technical knowledge for the most part, which is like, it makes it a lot of fun. As someone who is coming in, it's just completely new. You legitimately can come in and just like actually be pretty good at what you're doing, which is just like a lot of fun if you focus in the right places.

How do you do that? How do you pick on a topic and then focus on that?

So sometimes it's like oddly obvious to me. Like the first big report that I did, it was shocking to me that it just didn't exist. It was like right after I had started at Delphi at the beginning of last year, and it was like the big Ethereum report. That was the thing that I wanted to do right away. I had just joined crypto.

It was very clear that, OK, Ethereum is clearly the most important thing that everyone is building around, everyone is building on top of. And yet it also seems really clear that when you speak to like 99.9% of people, the roadmap is just too big at this point for most people to fit it inside of 1 brain. It's kind of scattered in different places. If I understand the MEV side of things really well, I probably don't understand what's this whole new Dank Sharding thing. And it was kind of scattered all over the place.

As someone who just like, I came in from the outside, this is the most important thing. And there's no way for anyone to just like have a comprehensive understanding of this in 1 place. Like it was the thing that I knew that I wanted to read really, really badly. And I was like, this is helpful for a lot of other people if I'm coming in and it's the most important thing and I really want to read this thing. Like it was that, it was like, this is the thing that I would have loved to have in front of me right now.

Like it was very simple, it was that. So that 1 felt like very obvious to me. I would say from there going forward, some of them kind of just like naturally follow on like what you're already working on. And that's when it becomes easier to like find things that are on the edge of like, what is the interesting new idea? Like, you're probably going to be more likely to find that if you are a quote unquote expert, whatever focus in an area.

The next new interesting NFT, PFP project, whatever that pops up, I'm not going to be the person who finds it because I don't understand the first thing about any of those. But To the extent that there's an interesting new idea in restaking or MEV or whatever it is or shared sequencing, I'm reasonably likely going to be 1 of the first people to be on top of that kind of thing because it just naturally follows from what you've been doing. But sometimes it's just the very obvious thing like the Ethereum report. It was like, I would love to read this.

It's the

most important thing. There's nothing on this. It was like shocking to me it didn't exist.

And it's funny, right? Because when an outsider comes in and learns about crypto, they can see these things that are very obvious to an outsider, but not to the people who are already in crypto. And I mean, that there should be a certain report is 1 example of that. Another, I actually had the same realization when I came into crypto And I thought, I mean, why is nobody talking about how kind of this whole Bitcoin and Ethereum system, I mean, it's basically all a social contract between different people, you know, and the technology is just an instantiation of this social contract in this community. And there's clearly the social layer that, you know, decides what should happen to the protocol.

And also when there's a bug that kind of determines, you know, how it should be fixed. And if there's a fork, it determines which chain is canonical and all of these things and it was like when I came into crypto still in in 2017 you know it was heresy to say that there's a social layer in Bitcoin. I mean and if you think about it today like to anybody who comes in new and they just look at the facts, you know, that are laid out, it's so obvious, right? And so I felt almost like a fraudster, you know, just like writing this stuff down, you know, because It was so obvious. And you know, that the narrative also behind, you know, that kind of make up the community and the composition of the community can change and that way, like different narratives can dominate.

And that was kind of the other big article that I wrote in the beginning, visions of Bitcoin with Nick Carter. And yeah, some of the stuff was so obvious that it's, it's really funny that that it doesn't exist. Yeah, it's a kind of blindness that you develop when you're too deep in crypto. And that's why renewal of communities and like fresh blood coming in from the outside is so important. The other thing that I wanted to dive in, John, is how do you how do you do the research process for an article like, for example, the 1 that you wrote on Ethereum's roadmap?

Because are you using, are you working a lot with kind of primary sources? Or are you, you know, reading a lot of kind of secondary sources? Are you talking to people? What is your personal approach of working?

I'd say the timing of some of it has changed since I started to now, thankfully. Like I can just generally do them more quickly. But I mean, for the Ethereum 1 and the kind of 1 or 2 after that in particular, I would say the majority of it was go into a hole for a month and ignore everyone around me and try to ignore like every other responsibility I possibly have and just go into this thing and put all like get every last thing possibly checked. I mean, for that, I was starting from absolutely, like literally explain it like I'm fives, to understand stuff like KZG commitments in there. Like I was looking up what is a polynomial when I started that.

I was like, oh yeah, it's this equation thing that I remember learning in high school or whatever, literally watching Khan Academy videos and stuff like that. So starting from absolute ground up, you end up with 1, 000 tabs open on your computer. And I would say That is the normal, what my computer actually looks like, is Google Doc on 1 side and just 1, 000 tabs open on the other side. And this is everything that I need to go through on this topic. It will take me however long it takes me.

And it is going through that and then just synthesizing and building as I go. And then once you're most of the way of, OK, I've kind of checked the boxes, thought through most of the stuff that's out there and that I've gotten to where I want to get to, there's always the edge of the map of, OK, I understand the stuff that's out there, but the stuff that makes it really interesting and adds that extra understanding is talking to the people at the end to the stuff that probably isn't written down yet and is still floating around in their heads. And that's the stuff that makes it really interesting is having all of those conversations at the end of the report. So I have a very similar workflow now. I would just say it's generally a little bit shorter usually, where usually I won't need to like pull myself off for a month or so to make 1 of those reports now.

Like usually it'll be like a week or 2 or something like that. But I very much split up my time into when I'm trying to, when I'm doing 1 of their ports, it is I will spend 90% of my time on that thing for a week or whatever it is. And just try to just ignore everything around me and the world outside. And then the next few weeks I go back to, okay, I have a job and I need to do all these other things that I was ignoring for the last couple of weeks. And I was like, go on those.

And then after a few weeks, I just have an itch to like, okay, I want to sit down and just like, go all the way in on something else and then like, pick the next thing.

What did you do in crypto that you are most proud of?

It was the first Vitalik 1. It was the Vitalik quote tweet on the Ethereum report that I did.

You're most proud not of the report, but of the quote tweet.

Yes. And that is still the pin thing on my Twitter, is that. Particularly at the time that I was the most proud of was I'd been in crypto for a month. And all of the people that I was talking to about that, they were like celebrities to me at that point, in the nerdiest way possible, those were the celebrities to me. So having been in crypto for a month, and I just spent a month on this big Ethereum report and then Fatal1k retweeted it and was like, oh, this is really good.

Yeah, I was rather excited after that. That was definitely the most excited I was, especially right after starting. Yeah, I was super excited.

It is a very good meme. I recommend everybody to check it out. So I want to kick it into second gear here. Okay, we covered a lot of kind of the personal. I think we are getting a sense of who you are and what you're interested in.

And now I would like to talk a little bit about the topic of this podcast. So we got together because we both love thinking about crypto infrastructure. And that's because of a broad term. So I would like you to just map it out with me. What are the things, what are the key areas in crypto infrastructure that exist today that you are excited about?

Sure. Yeah, there's kind of a few, I'd say, big buckets that most stuff falls into. And the boundaries of all of those things are really loose and they kind of all overlap with each other. 1 obvious 1, particularly for you, is the whole MEV slash supply chain. And it gets fuzzy because there is still no definition of what MEV is, and everything is kind of MEV or not, and we're not really sure.

So a lot of the protocol level, like thinking about like enshrined PBS, like, okay, how do we address this thing? Obviously for you guys with Suave over at Flashbots, like trying to approach it very differently than everyone else's today. And then kind of applying a lot of that logic over to roll ups is a lot of what I'm spending my time on right now. So thinking about, OK, we've got all these new blockchains that we've kind of decided, like this is the way that everyone is going to use blockchains for the most part of the future is kind of the Ethereum vision. And it's still super early stages of, okay, what do these things look like?

Like, should they look like Ethereum when they start thinking about decentralization and per-proposal builder separation and whatnot? Or should they look just completely different and have completely different trade-offs? I lean more in the latter camp. But like, that is a super interesting area and that like obviously plays in with MEV because if you try to, you know, do sequencer decentralization, you just ignore MEV. Well then you're going to end up with all the same problems that all the blockchains had like a few years ago and then you end up with all the same problems that Ethereum had.

So that is a super interesting area. Obviously the scaling that goes along with that. And then kind of the last large bucket, I'd say broadly, is kind of around the consensus and security of that. So in particular, a lot of around staking, liquid staking obviously for yourself, and then restaking where we're still trying to decide if this is the best thing ever or if it's going to break everything, still DBD. So that is kind of a whole fun area.

Yeah, and all of those fit together very well. And that's another thing that again makes crypto fun is you kind of have to piece all these different things together to like understand 1 thing, like decentralizing the sequencer. It's not 1 problem. It's like 6 different problems from everywhere. And then you kind of like try to put them all together, which makes it a lot of fun.

Which of those are you thinking the most about, you think, right now, spending your time on?

I mean, I think the most about the MEV slash the transaction supply chain, because I spend most of my time working on on flashbots. But it's like you say, right, they are all so closely connected. So there's basically no way to not to work in MEV and not think about rollups. Why? Because rollups also need their sequencing needs met, right?

So they, and I want to talk to you about this in a minute here, but they rollups today are quite early. And that's the quite centralized. They have a lot of their training wheels on. And they are looking to take them off 1 by 1. And 1 of these requires basically decentralizing their leader election mechanism, and whether they want to form a proposal builder separation or not.

And thinking about what is the best mechanism for them, whether they should, you know, what they should adopt, how we how they can become compatible with the future and maybe supply chain. I think these are definitely topics that we're thinking a lot about at Flashbots. We recently put out a job posting as well for a layer 2 researcher and engineer. And then of course there's the whole staking area. I think Lido is of course a protocol that is the biggest liquid staking protocol and liquid staking is the most dominant form of staking I believe to the point where there will only be liquid staking protocols in the future.

And it will completely crowd out regular staking. And the kind of the market dynamics of liquid staking, and I actually just did an episode on that with Mike over at Belcroft, a good friend of both of us. And we talked about kind of the market dynamics of liquid staking and whether it's, you know, what kind of market outcomes there may be. And I was arguing that this market has a ton of network effect. And I think it's very likely that there will be a winner take most outcome.

And so when you are here in this, in this field, so we're talking about core infrastructure. So Ethereum couldn't work without staking protocols at scale. Yet we say this is an area where there's actually like competitive dynamics that dictate that there will be 1 big winner. What does that mean for Ethereum? And that raises so many follow-up questions.

So my personal view is that we basically need to make sure that the best staking protocol wins and that staking protocol is as decentralized as possible and as close to immutable trustless infrastructure as possible. And that's the kind of, I think it's a very similar line of logic that also attracted me to Flashbots because block building and MEV and kind of, you know, this whole like, I have the thesis that the mempool and the auction for preferences that come into crypto and then get turned into blocks and executed on different chains, that this would also turn into its own shared infrastructure layer. Very similar to liquid staking in that sense. And so the challenges in both are actually, it's not just they are connected in the sense that liquid staking providers are the biggest customers of the MEV supply chain. It's also that they face very similar structural challenges that we have to think about.

Yeah. OK, so I think that gives us a pretty good overview. I think just starting with these 3 topics, MEV, rollups and scaling and staking, we loosely discussed how they relate together. And in crypto infrastructure, everything is related together. Why is it that you care so much about infrastructure?

What is it about this? Why not, you know, why not NFTs? Why not, you know, building applications on crypto? Why not identity or DAOs? What is it about this that kind of, you know, scratches your itch?

So a lot of that is probably personal. A little bit of regretting my previous career choice and this giving me the chance to look at something more technical. So I had a pretty traditional finance type background. I did economics in college and then I was working in finance for the last 2 years. There were parts of it that I liked, but I definitely had meaningful regret that I didn't do more of a technical background, that I didn't do something along the lines of engineering that I had seriously considered.

And then I kind of just followed what all my friends in college were doing for the most part. So a lot of the infrastructure stuff appealed to me in particular because that's just where a lot of the more technical side of things just naturally came in, getting the chance to finally understand like, hey, this is how a computer actually works. Like a lot of that side was just very interesting to me on just like the simple technical level. Whereas a lot of the NFT stuff was like, it was fun. Like that was like hobby kind of stuff for me, but it wasn't what I was going to get super excited and wake up at 8 a.m.

On a weekend and start reading about. A lot of that was the technical stuff that I felt like I'd missed out on for a number of years. So a lot of it was just personal interest. The other part of it was also just honestly where most of the interesting innovation has been over the past year and a half has by and large been on the infrastructure side. So I came from a finance background, so a lot of the DeFi stuff was, that was what was super interesting to me after Bitcoin, was that was the first thing, like Bitcoin was what got me in the simple macro stuff.

And the first stuff that I got really interested in was DeFi as like a hobby kind of thing, because like it's just a natural, this makes sense. But I didn't want to go work in it until I got into the infrastructure side of things. And a lot of it in particular is a lot of DeFi over the past call it year and a half, 2 years. I don't think that there's been nearly as much rapid change in innovation as there has been compared to the infrastructure side of things. I think that it has just naturally been significantly more interesting on the infrastructure side.

And while I think that a lot of really simple DeFi primitives are going to be incredibly successful in the long run. I think that a lot of them are incredibly simple DeFi and they're just like inherently less interesting at this point to spend time on for me of like, what is the tweak to this decentralized exchange versus the last 1 that makes it like a little more capital efficient. That has just naturally been a little bit less exciting to me. Versus the infrastructure side of things over the past 2 years has been like, hey, what if everything that we built over the last 5 years was just all wrong and we built this all completely differently? That is basically what roll-ups and this whole scaling roadmap is.

It's like, hey, sorry, all of that stuff that we said for years about, everyone was like, oh, we need a new consensus algorithm, and that makes us more scalable, or we're going to do execution sharding and whatnot. Rollups and this whole vision was very much as I was coming in and like, it was at the point where it was really starting to become like, okay, this looks like the direction and it was just a completely new thing that was just like, this is not what anyone was talking about years ago. So like, naturally it's just, hey, you know, what if we rip everything out and start again from scratch and like build it completely differently? Like that's super exciting. And that just has so many follow on effects, which is just like, it makes it a lot more interesting just from a personal perspective, like to spend time on when everything is just constantly changing.

Yeah, I think it was the same for me. I think I came into crypto and I saw, you know, Bitcoin proved crypto to me. But then DeFi proved that crypto is more than Bitcoin in the sense that, you know, you can actually build useful things with smart contracts and you can actually build really cool and really powerful applications. But then when I looked at these applications a bit more closely, I thought they are still extremely limited in what we can do. And so this actually sent me down then the infrastructure rabbit hole.

I thought, well, you can't really build competitive decks while there's still MEV, you know, our transactions are not private, and not efficiently routed, and all of these things, for example, right. And so that was 1 of the rabbit holes definitely for me, you know, in terms of, it doesn't, you know, we can't have people build applications on these systems that we want to rival existing CIFAR applications if we don't first solve infrastructure problems. And I mean, MEV is a huge 1, scalability is a huge 1, and security was another 1, right? So I think all 3 of these problems mev roll up staking um if we don't like if if we don't solve any of them like if there's any of them that we don't solve crypto will not succeed I think and so we need to be you know pushing the frontier on all 3 of them at the same time. If we want crypto to kind of be a place where you can build really, really good applications.

In terms of...

Yeah.

If you have a follow-up question or something, always feel free to jump in.

I was going to say, I think that some of them we could have pretty simple solutions to and still get by, even if it's not the perfect solution that we want. And I think it will still be an improvement that's worth making. But yeah, in general, we do have to get all of them reasonably right.

Yeah, I mean, we have some great applications already, right? I think like a Unisub, like a Mercadero, Aave, I think these are all working really well, in spite of their simplicity. Yeah, but I want more. I just, I just want more. And so okay, um, let's walk me through a little bit.

Let's let's zoom into 1 of these topics. Why don't we choose roll ups. So walk me through where we are right now. What is the state of roll ups? Where are they in kind of their adoption, but also in terms of their decentralization roadmaps?

What steps have they taken and which steps have they yet to take?

Yeah, this is the part that I'm excited for. Finally dig in on a topic. So, yeah, I've been spending a lot of time on this lately on rollups. And so I, and particularly on the decentralization stuff. And broadly, I would still say that there are a lot earlier than I think a lot of us would like them to be, particularly on the decentralization side of things.

It like it definitely has been slower than I mean, certainly that I expected it from what you would have heard coming into crypto a couple of years ago, where I remember that was like when I was coming in, a lot of it was like ZKVMs are like about to be here, like this is the year, like they're right around the corner. That kind of thing was always just like push back, push back, push back, like now they're kind of here. But like was certainly slower to get to that over the past couple years. And now like you're seeing a lot of the same thing on the decentralization side where it's been, oh yeah, like we're gonna have a decentralized sequencer like ASAP. Like That has been a conversation for a while.

And a lot of it, realistically, in my mind, is that's probably a lower priority, as it should be for most of these rollups, because I don't think that sequencer decentralization or a certain proving system makes a gigantic difference when the biggest problem is still who holds the upgrade keys to these contracts. If you have a multi-sig controlling this thing, then obviously all the other details are a lot less important. So seeing rollups that are finally transitioning on that to, okay, we have a much broader multi-sig that's outside of the team itself. You need a high threshold of it to make any changes. But that is still the most important thing in my mind, by far, is just actually handing over the control and figuring out what we're going to do with this.

I feel like most of the sequencing decentralization stuff, most people haven't done it yet, but I think it is in large part because of prioritization of, I don't think that you actually need to decentralize the sequencer if your rollup is implemented well. So I think it's just a much lower priority. I think a lot of the decentralization on the, you know, How do we actually control the contract itself of having arbitrary upgrades? That's not a question of importance. That is very important and should be done ASAP.

That is a question of, I still think that there's a lot of open area and a lot of open thoughts on what is the right way to do this? I think that there is a reasonable answer that all of these contracts need to be immutable and there's no acceptable outcome where they're upgradable. All of these royal contracts need to be immutable. I think that is a reasonable position to take. I think it's also a reasonable position to take on the other side of token holders should fully control these things or some other complete governance mechanism.

Like, that is the direction that I think things will go in, is like there will be upgradability. But then the question is like, okay, there's upgradability. Like are you just going to have it be like token holder governance? And now, okay, now you just ended up in a situation where the majority token holder's gonna upgrade the contract. So you start to have just like very difficult questions on that of, okay, if we do that, but like what if we give them a really long delay So they can't upgrade the contract anytime soon.

It takes a month, then in that time, you could presumably exit from the rollup if you don't like the changes. Obviously that's not super ideal. And the question is obviously, what if there's a bug in the contract? Do we need instant upgrades to be able to fix something like that? These are very just thorny questions that like, this is where I think a lot of time should be spent on is like, what is the governance and control side of rollups?

As much as I have loved spending time on shared sequencing and all these other interesting mechanism designs. That is the stuff that nerds snipes me and I love talking about, oh yeah, how do we get atomic cross-chain transactions using Suave in a shared sequence? It's a ton of fun to do that. I think most of the important questions though are actually on just the very simple fundamental questions of who controls this role? What is the governance of it?

Should we have staking or not? Who is the person who controls who's the sequencer? Has been a lot more of my conclusion as I've worked on recent reports and thought about it more, is probably a meaningfully more important question than what is the exact sequencer mechanism that you have, whether it's 1 sequencer or it's a consensus set of 10 or whatever it is. The person who controls that governance mechanism or a centralized company who just holds the upgrade keys is a much, much more important question in my mind. A lot of the incentive and reason that people really want to decentralize the sequencer is like, okay, we want like real time censorship resistance.

And we want to make sure that like, you know, you don't have monopolistic operators. The problem with that is, is just like decentralizing the sequencer, quote unquote, like doesn't actually fix that in my mind. Um, you could put a consensus set in there, but if your governance token holders who control the roll up and they set the rules and they pick who the sequencers are, they're going to be able to implement if they want monopolistic pricing or whatever rules they want such that we filter different addresses. That is ultimately up to them. Sequencers just have a much, much more kind of constrained role compared to like what we think of with player 1 validators today.

So I think that much more of the focus needs to be on like, how do we constrain their powers such that like, even if it is literally 1 person who's doing this, we're totally fine with that, as opposed to just like, how do we rush to get this thing as quote unquote decentralized as possible with many operators doing this thing? And then we just kind of throw it out there and we assume it works. Because I think that there is generally going to always be active governance on these things. And I think that rollups should lean into that a lot. I do think that rollups need to make very different trade-offs on thinking about MEV compared to Ethereum.

A lot of that stuff is going to look very different in my mind.

Okay, there's a lot to unpack here. So I want to zoom into 1 point first. So you were saying sequencer decentralization. This is not really a priority for roll-ups right now. I would agree, I think, but it's not only not a priority, I think it's also very difficult.

So even if you wanted to do it, it's not really clear how to do it in a decentralized way, because this is 1 thing I highlighted in like previous talks and such, but by having a centralized sequencer for so long that is operated by you know the kind of the these foundations or companies behind these roll-ups they were able to give users a incredibly low latency and b privacy And this is not something that you can just replicate in a decentralized setting. And so it is a big challenge. So it kind of depends what trade offs are you willing to make and also what technology is available. I think we're trying to get there with SWAV where we would have, you know, just kind of builders execute, builders run in inside trusted execution environments. And I think this is clearly the most viable and pragmatic path how you can decentralize the status quo.

You just take what currently runs in a centralized server and you put it into a TEE. And if you want, you can also rotate, but that's almost like the easy part of the problem, right?

Yeah, so particularly in the absence of, like something like Swap is not yet live today. And I agree that decentralizing the sequencer, if we give ourselves the same constraints as something like Ethereum, I do think is a really difficult problem. If you assume that this has to be a completely permissionless role and we can't trust any of them and all of that kind of, you know, the stuff that it makes sense for Ethereum to optimize for. I think if that is the optimization, then I think it's a very difficult problem. I think that rollups are in a significantly safer place that it probably makes sense to make meaningfully more tradeoffs in my mind on the decentralization and trust side of things.

Because again, fundamentally, these rollup sequencers just have a fundamentally very different trust requirement compared to Ethereum validators. It makes sense for us to optimize for Ethereum validators that we want to try, at least, to have this super long tail, permissionless, incredibly censorship resistant. The whole point of roll-ups is they're already paying the layer 1 for those guarantees of enforcing censorship resistance and whatnot. So like, the sequencer fundamentally doesn't give that anymore. So in my mind, they can make significantly more trade-offs and we can just pick, you know, we can have governance decide that like, hey, here are the 10 sequencers that we're picking or pick your number, whatever it is.

And we trust them. And we say, hey, you 10 sequencers, you do the same thing that like Arbitrum or Optimism was doing today of, you guys run a private mempool and we trust you to abide by that. And you don't front run users. That is a clear improvement from having 1 person do it today. Like, no, it's not Ethereum, it's a permissionless open validator set and whatnot.

I don't think that that's going to be a practical goal for most rollups, nor do I think it's necessary. Like, I think it's going to be difficult from an economic efficiency standpoint, like let alone just getting that many people to run this kind of network. I don't think it's necessary. And then quite frankly, like if you look at rollups today, They don't want to give away that part of particularly fast confirmations and private mempools. That's not going to be an acceptable thing for arbitrary monoptimism to say, in my mind, of like, oh yeah, we decentralized the sequencer, and sorry, it's a public mempool now, and there's no other options.

And you get front run now in a couple seconds. Realistically, though, I think that you take a step in between there and you say, okay, governance decides, these are the people that we trust. And if you act maliciously, you're out. That is what governance needs to have the power to do. So if a sequencer does start acting out of term, then you boot them out.

That's a very fundamentally different dynamic than Ethereum, where if Ethereum validators are censoring you, there's no other chain that you can send a message to and be like, hey, force my transaction into this chain. If Ethereum is censoring you and you're based on Ethereum, then you're being censored. That is the whole point of rollups, is they get to inherit that from Ethereum. If their sequencer starts to extract MEV, censor, I force an exit. I bypass them and slash governance just kicks them out.

So I think that they can make meaningfully more trade-offs, particularly today where we don't have this perfect world yet of this perfect private mempool with something like Suave Envisions where I just kind of throw my order in there and it comes out the other side of everything is handled in between with privacy preserving technology. Like that doesn't exist yet for these rollups. And like, I think particularly in that period, like it makes sense for them to make trade-offs in that interim and have trusted operators that like governance does have meaningful control over.

Okay, so I think I hear you say we have on the 1 hand a chain like Ethereum and it has specific requirements or goals, you know, and these are to be a very neutral, very kind of censorship resistant base layer. And so it, it has a kind of way of decentralizing or it has a way of selecting its well data in form of PBS and like a mempool policy and so on, that allows for these things to work, right. And that's 1 of the reasons why privacy today, like front running protection is so difficult on Ethereum today, why the block time has to be very high. Because again, like you want to be very geographically diverse entities to be in consensus with each other. And you don't want latency to become the dominant factor in who makes money in validation, right?

And, but then on the other end, you have these Cosmos chains or App chains, where 1 application is basically its own chain and they have their own valid data and maybe they share it with someone else but they have a governance and unlike Ethereum they are not too shy to say our governance can decide whatever we want. It's like we have no problem slashing someone socially, which would not happen in Ethereum today. So I think even the DAO fork was a very long time ago, and kind of reverting that state transition, I think already that's proven extremely controversial and will not happen again. But for these app chains, it's quite common to say, for example, on a chain like Osmosis, to say, if we see any of you validators front-running a user then we will slash you or whoever you delegate it to right and I think dydx actually came out the other day on Twitter as well with a new version and they said, by the way, guys, we have a solution to MEV. It's social slashing.

We're monitoring the chain. And if we see anyone, any validator misbehaving, we're going to slash them. And I don't know, I mean, I hear you. Okay, so like your thesis is roll ups, they are already quite decentralized, because they post their data and their proofs to Ethereum. And so they cannot make any invalid state transitions.

Also, they have these bridge contracts and users can always get a transaction mined through the bridge, like through Ethereum layer 1. Okay, so that's your position. And you think that makes it okay, basically, for rollups to go with the kind of the more cosmos-y route of, okay, do you have any concerns that, like, A, do you think this is a middle step? Or do you think this is a potential endgame for rollups as well?

I definitely view it as a middle step. And I think it's very possible it's an end step, particularly not, I wouldn't say for all of them, to be fair. Like I certainly do think that there's going to be a place for rollups that want to be on the far end of the spectrum of like, possibly they do have an immutable contract and we just want to have this super decentralized, permissionless mechanism, that makes sense. I also think that there is going to be a place for the absolute extreme end on the other side of we have a decentralized exchange, we run a centralized sequencer, we do private mempool, first in, first out. They might even do co-location rights, whatever it is.

The thing is, that's not a replacement for Ethereum, that's a replacement for Robinhood, the way it works today. I think that there is going to be, even in the end game, stuff on that far end of the spectrum where this works because, unlike something like Robinhood, or using Coinbase as the simple example, there is a market difference between I use Coinbase decentralized exchange and I use a roll up where Coinbase is the centralized sequencer for this. If that is properly implemented, Coinbase is not custodying my funds anymore. There's no possibility anymore for this exchange to be literally just taking my money and sending it to a hedge fund and doing whatever with my money. That's fundamentally not possible anymore.

They do have the power to, okay, they can censor you on a very short time span or start front running you. I'm willing to put trust slash, I think most people will realistically, in a large company to be accountable for they're not going to do this kind of just unrealistic, very short term profit seeking behavior of like, yeah, they could start front running all of their users. They could, It seems highly unlikely that they're going to do that if the result of that is everyone just leaves the roll up and like, okay This business is dead now and they made a few dollars like front-running people like anyone can do that in theory. Sure Like that is why it's it's significantly more important for for those types of use cases to be viable, to have all of the backup type stuff in place, for these systems to have like real user opt-out, like there has to be the exit button right away of I am a user, I get my money out, slash if there's a malicious sequencer, we have governance upgrades on this thing and we just immediately, you know, goodbye. Like that person is gone.

So like having that opt out is the fundamental thing that is like a large difference in my mind. Like that's the thing that makes a lot of traditional tech entrenched. It is because they are just built, their whole business model is built around the idea of how do I make sure that people basically cannot leave my platform possibly. I'm okay with a person who's literally running the box of operating this thing, being kind of centralized, if it is fundamentally the opposite premise of they basically have no power over me and I have free opt-out at any point in time. I think there's going to be a place for both of them, but yeah.

Is that realistic though? I mean, a roll-up never exists in a vacuum, right? If we talk about Optimism or Arbitrum, I mean, what they've been doing, I mean, 1 reason why they have been launching so early And with their training wheels on, they've been using decentralized sequences to provide users really good user experience is because they want to gain an early advantage in building that network effect. So isn't it unrealistic to say that users can leave at any time, for example, if the Arbitrum ecosystem becomes very popular? Isn't that at that point like saying, I'm going to leave Ethereum?

I mean, it could be difficult if it's a place that you like to use, but on a fundamental level, I mean, there's no comparison between something like that and something like Twitter, basically, where that is the whole point of it's really hard to bootstrap any kind of decentralized social media because I fundamentally cannot carry over my network to somewhere else. It's like you are going to start from scratch. Like using Arbitrum, like, yeah, I have to move to another roll up. But I mean, your assets are your assets. You could sell them, you could move them, you could go deploy this thing on another chain.

That is just like, yes, I mean, there's a minor, the user has to literally do something. But if it is a very clear and easy opt out of like, I own all my own funds, I own my data, et cetera, for whatever this use case is. That is a clear opt-out that keeps operators in check in my mind. That's what actually prevents the more monopolistic type activities in my mind, rather than saying, we have a decentralized sequencer, and then all of a sudden they're going to behave. You could have a decentralized sequencer.

If your governance for your rollup is run by token holders who just want to extract a bunch of value, well, then they're going to increase the prices and try to extract value. The thing that will keep them in check is, okay, can users actually opt out of the system immediately? And hey, we can go do the exact same thing, like right over there on the other roll up and we just go move over. Like that, that's what actually keeps it in check in my mind.

So how would this play out then? So let's say we have, you know, governance, whitelists. So right now we have 1 centralized sequencer, right? Okay, So let's take it to the next step. Maybe there's 3 centralized sequences.

Would you envision that these sequences outsource their block building, or is it something that they do internally? Like, would there be PBS? If yes, will it be permissioned PBS, which we've never seen, by the way? Um, you know, how do you think about that?

Yeah, having some form of PBS auction is 1 of the clearest things that I think they need to do, regardless of whether they have a centralized sequencer or a decentralized sequencer. This is already a problem today for centralized sequencers, that they should be running some form of auction. You don't want to end up in the place where roll-ups are already in today of, there's no way for me to express my preferences, everything is private first, like all the problems that everyone saw with the Arbitrum sequencer in recent months. Spam, yeah. Like this is the obvious conclusion if you do private first in, first out, and you have no way to express a preference over, hey, I want to be the top of the block.

I want to get in fast, whatever it is. So in my mind, there certainly needs to be. You can have this trusted mempool that the sequencer runs on the side, and we have a block. And they also say, we're running a PBS auction. If you want to bid for the top of the block or whatever it is, you can bid for that slash other preferences.

They just won't be able to see the user orders, assuming that the sequencer keeps those trusted orders private. Which is effectively what? I mean, block builders, what services like Flashbots Protect and Mevshare are trying to do. There is an amount of trust in there today on 1 operator to keep it private. And you'd be trusting some of the sequencers.

Hopefully, obviously, that gets more decentralized over time. But in my mind, that is a very clear improvement over what we are doing today still, where we have a number of operators and they're actually accountable to governance, rather than we have 1 operator and the team who deployed this thing decides who that operator is. And we're getting towards that stage of governance having more power and being able to decide. And I do think that that is going to be the natural next step of, if governance decides on, these are the operators that we trust, they will very intentionally pick, we can pick a geographically distributed set of sequencers. They start to do the kind of thing that someone like Lido is doing, hopefully.

And this is 1 of the problems with proof of stake without any form of delegation like someone like Lido in between. If you just assume that liquid staking doesn't exist, which obviously it approaches like taking everything over, but if you just do delegate a proof of stake by itself without that, most people are gonna pick, like, hey, I'm just gonna give my person the biggest validator, I trust them. And you end up with everyone giving it to the biggest 2 or 3 people. In the same way that Lido alleviates that under the hood of, hey, we can purposely pick, we pick a bunch of geographically distributed operators very intentionally, which users would not pick if we left the choice to themselves. Governance could do the exact same thing here.

Yeah, it probably doesn't make sense for them to pick 10 sequencers that are all operating in the US and using the same AWS center. That would probably be a bad idea. They should probably very intentionally pick, we want 10 or 20 operators or whatever that are very intentionally geo-distributed, that are using different infrastructure and that we keep them accountable to that. You actually end up with... That's why it's interesting.

People view the proof of stake, permissionless, decentralized, it sounds nice. I think most of the economic forces, if you just let them run out like that, end up more centralized than if you had this, quote unquote, POA or proof of governance or whatever you want to call it. We very intentionally pick, these are the people that we want to be running this thing. That's the kind of process that LIDAR runs under the hood. And this is the interesting part.

Like this is what I was starting to like tweet about a little bit the other day. I was like, Sonny had tweeted out from Osmosis, like proof of stake was a mistake. That we should just do like POA, like let governance pick.

Was that his point? Was that his point? Was he saying that we should do POA or was he saying that we should go back to proof of work?

Oh yeah, it was for POA. It was for like, we should just let governance pick operators. And this is where I think we'll have some interesting debate on this. So for something like Ethereum, I don't agree with that. Ethereum needs to maximize for, we need a completely permissionless way for people to join this validator sets.

That makes sense in my mind. We need proof of stake to do that. Because inherently, if you rely on governance to pick these people, that is the exact opposite of what Ethereum is optimizing for. Ethereum does not want, we pick a set of operators and we have centralized-ish governance that's trying to manage all these people and is very active governance and it's not permissionless to join. That's the exact opposite of what Ethereum should be doing.

Obviously, it doesn't make sense. They need proof of stake. The question in my mind that I'm starting to increasingly think is actually very viable is for rollups, Is there any need for us to do proof of stake at all for these types of constructions where if we're saying that governance Can do this process themselves Because like this is where it'll be interesting is like it depends on what government what roll ups decide to do with governance Because if you if you're a roll up and you decide that like hey we're immutable and we want to be like Ethereum, like we're going to burn the keys, no upgrading the contract. And realistically, everyone is stuck to the contract. And like, we basically have no governance.

You probably want like a decentralized permissionless mechanism, like proof of stake, throw it out there and like that kind of works because you don't have active governance to like keep selecting these validators. My general opinion is that most rollups are there on the other end of the spectrum of, we just need to figure out better governance than like multi-sig upgrade keys. It's the type of stuff that optimism is experimenting with. We're like, we have 2 houses and there's different forms of identity and there is a real governance process. That governance process, in my mind, can manage a set of sequencers in the way that Lido picks delegates under the hood.

So then the question is, if we're optimism or some other rollup, and we actually implement a robust governance mechanism where we have multiple houses, we have interesting forms of identity or whatever it is, and we're able to confidently pick like, hey, here are the 30 geographically distributed sequencers that we like. What is the reason at that point to implement proof of stake if it seems in their benefit to actually keep the set closed because they want to trust them to enforce certain things? If you implement proof of stake, my assumption is whenever you implement proof of stake, liquid staking tokens becomes 100%. We will just approach 100%. It is better than delegating your stake natively for like very obvious reasons.

So the difference between the 2 scenarios is if you implement proof of stake, you end up with Lido or someone like that. They end up effectively running all of the stake and they pick the delegates for you under the hood and they presumably do a good job of picking these geographically distributed validators and whatnot. The obvious problem with that, which Lido is looking to solve, is the principal agent problem with this of like, okay, now you have LST governance that's picking all of our delegates. This is our chain, we want to pick the delegates. So to make that viable, you need something like the dual governance in my mind.

Otherwise, I think it's crazy. You need to have- Can

you explain what dual governance is?

Yes. Yeah. So the simple way to, you know, the way that Lido more or less works today is like, okay, LDO token holders control the DAO. So now you end up in a situation where, okay, we're Ethereum. If all the stake ends up with Lido and they're picking all the delegates, well, that means that LDO holders are picking all the delegates instead of like Ethereum and like we're very misaligned now.

So dual governance, the way that like Lido is proposing it is to give like Steath holders potentially like veto rights in a lot of circumstances, because they are presumably obviously ETH aligned, like they are ETH stakers. And so if LDO token holders start to have some malicious proposal that's against Ethereum's interest, Steve holders can veto that. So that helps greatly mitigate the, okay, this LST governance is just going to go do their crazy thing. That's bad for us. For proof of stake to be viable at all in the long run, I act under the assumption that liquid staking tokens, they end up cannibalizing most of the stake.

And if that ends up cannibalizing most of the stake, you need to have a way for them to be aligned with the protocol itself. So something like dual governance is just an absolute necessity in my mind. So I assume that's where you would end up if a rollup implements some form of proof of stake. Is liquidity tokens would arise, they would hopefully implement some form of like dual governance such that like, you know, staked OP or staked ARB token or whatever has like veto rights or whatnot. The question is that like that point is the big difference between the rollups and Ethereum is I don't think the rollups, if they don't need to care about a permissionless validator set, so they don't care if, you know, Ethereum validator number 1000000 can join this thing.

So we don't need proof of stake for that. And if we end up in the spot where realistically most of the capital is delegated, this whole like slashing thing kind of loses its punch when like it's not your money. Like I am using someone else's money that was delegated to me. So like I question how honestly valuable that is. You end up in the best case scenario where you have this liquid staking token that they're picking the delegates under the hood for you.

And then your rollup governance has some form of veto rights. Does it make sense at that point, if we have active governance and we don't need a permissionless validator set to just say like, hey, our rollup governance will just decide ourselves and we don't have any staking. We don't have a staking token. It is just whatever the form of our rollup governance is. It's like we just pick the 30 sequencers as opposed to Lido, whoever else picking them for us and like having the staking tokens.

Like, why do we need that kind of middle process in there? I think the particularly interesting way is if someone like Lido or whoever else, they're basically delegation slash picking of these people as a service. We will do a better job of picking these geographically distributed people. We are ready to go of bootstrapping. These are the 30 people who fit your needs and we can set this up for you, etc.

That becomes very interesting versus a lot of Governance is hard. Most rollups are going to have a very difficult time of picking, these are the perfect operators that we all want. And repeating that process over and over again is difficult. It's become interesting in my mind, what is the reason in this scenario? If I'm a rollup that has an active governance that I trust, and I don't really care about having like validator number 1000000 be able to join my validator set, what is the point of staking at that point versus just like let governance decide directly and do away with staking?

Yeah, I think the argument that I find convincing is that the rollup already inherits a lot of decentralization from Ethereum, and so it doesn't need to be as secure. And so it doesn't need to, you know, basically incur so much overhead, you know, both in terms of cost, but degradation also of user experience from having this decentralized sequencer selection mechanism. And why couldn't they also exert some amount of power through governance? I think the argument I don't find convincing is that liquid staking would be the end game for roll-ups. So I think liquid staking works really well on Ethereum for a few reasons.

So the first 1 is that ETH is actually used as money and is used as collateral very actively, but no roll-up token. I don't know that that's going to change because already roll-ups today support fee payment in ETH. Several of them have account abstraction, just topic we didn't talk much about today, which is also super fascinating. And I think I mean, we are going to a place where people can pay their fees in any token. I don't think really there's any much demand to use, for example, the Arbitrum token, the Optimism token and so on for anything.

So I don't Like for me as a strategic advisor to Lido, I would not green light, not that we have a process for green lighting, I'm speaking metaphorically, but I would not support an expansion of Lido, for example, to a layer 2 for that reason, because I think it's basically completely futile to go into that market. So I don't think you're actually skipping that step. I think if you went to proof of stake, I think it would stay, you know, non liquid probably for the most part. But that, I mean, that's like a minor part of the argument, right? I think the main part is actually that it's already pretty, pretty trustless, even if you have governance in the mix.

And I would largely agree with that. I wonder what do you think for chains that, let me take a step back, because we have seen, 1 thing that we have seen like 1 and a half, 1 year ago is a lot of the rollups, rollup layer twos actually saying, we want to be the place where you can build layer threes and you can settle, you know, the data and the proofs and so on to our layer 2. And so, and they kind of retained the option, I guess, over the longer term to kind of untether from Ethereum itself. And either, you know, don't post the data anywhere or, you know, post it on some off-chain data availability solution, right. But I think everybody wants to be the settlement layer, if you will.

And so for a chain that has these ambitions, and I mean, you would have to think like Optimism, Arbitrum, Starknet, ZK-Sync, I mean, they all are dreaming big, and they want to build, you know, an ecosystem of chains, whether that's, you know, many layer 2 chains. And you have a kind of super chain, you have like a sequencer in the case of optimism, or whether it's a kind of layer 3 ecosystem, like in the case of ZK-Sync and StarkNet and Scrawl. Would you think different then about the need for sequencer decentralization?

I think it is significantly more important for them to figure out their governance in that position than figuring out the maximally, supposedly decentralized sequencer mechanism. That is in my mind, what's going to be more important. And so, I mean, like using optimism as an example, so like base won't be deployed as an L3, like settling to optimism. They're not doing that. It'll just be like, it'll be another L2, which I think is very reasonable.

Um, the benefits of L3s are like kind of fuzzy in a lot of cases.

For optimistic rollups, they're pretty fuzzy, right? Because the, The layer 3 would have to post the data to the layer 2, but then the layer 2 has to post the data to the layer 1. And so, is it fair to say that that's different for validity proof rollups? Because they can actually bundle all of the proofs together.

Yeah, the clearest, like simplest benefit would be if you're a ZK roll up and the proofs that you would be posting to Ethereum, particularly if you want to post them frequently, if those are really expensive to verify on Ethereum. I mean, you could do different forms of like aggregating those and like converting them to different proofs that are cheaper to verify on Ethereum. But in general, like if you'd be posting a lot of proofs and expensive to verify them on Ethereum, it probably makes sense to like, yeah, we could just dump them on an L2, you aggregate a bunch of them, and then we settle them back down because like it's cheaper to use there. Like that 1 makes sense. There are other random benefits of it as well.

But yeah, I think it's like clearest in that case. But in any...

Do you think Ethereum will add any pre-compiles for, you know, solving, you know, verifying these proofs?

Not anytime soon. It would be my guess. Like, none of, Like, most of them are just pretty political. And like doing anything that would be seen as favoring like any of the more targeted ideas that are like, that would be seen as potentially favoring like 1 type of ZK rollup over another, I don't think like, I don't think it's going to make sense for them.

They should all, I mean, work together and like, first agree on 1 opcode that they want, right? And then get it to them to do that, because wouldn't they all benefit tremendously if that was the case? I feel like the answer is yes.

I mean, based on particularly, like, I mean, they already have such divergent plans at this point that like, oh yeah, we'll all go back to doing this would be kind of, it would be kind of difficult. But yeah, I mean, in theory, yes, if everyone did the same thing, like it would be nicer, but I think they're just like so divergent that like, it's probably hard to coordinate that. But yeah, kind of, kind of back to the original, like, I do think that optimism in this scenario, figuring out their governance is more important than what is the sequencer? Do we have 10? Do we have 20 sequencers?

Is it 100? Whatever. Their governance is going to be really important, in particular when everyone is using the same bridge contract in this whole super chain vision. And there's 1 governance that is supposedly going to control that in the long run as they have full governance power. That governance is going to matter a lot.

That is going to be very, very important. And chains that basically want to outsource their governance to optimism, that's very interesting. Base can effectively outsource governance to optimism should they want to. That is going to matter a lot in my mind. Like what are the upgrade mechanisms?

Like who is in control of this system? And like those are the people who pick the sequencer. Like that is still the most important problem in my mind. And that is like a very, very hard problem. Figuring out just like how do we do roll up governance and like think about this problem.

That is very difficult.

Can you explain just briefly the vision behind the superchain?

We'll see if I can. I mean, the very general idea is, I'd say every rollup ecosystem has a very similar idea at this point, whether it's them or CK Sync or Polygon, talking about Polygon 2.0, they all have similar visions of we're going to be building our whole ecosystem of rollups. And we want within our kind of ecosystem to have enhanced interoperability and shared standards and whatnot across them. So having very fast bridging between them, potentially having a shared sequencer between them, having forms of standardized messaging between them, having potentially shared governance, to the point where it starts to feel like in this like super chain that, you know, I'm not using 20 different rollups. It kind of feels like I'm using 1 single rollup.

The like super extreme end of this would be the kind of post that UMA from Sucinct had put out, I want to say like a week or 2 ago. It's called shared validity sequencing, where you have a shared sequencer for multiple chains, where in theory, like base and optimism could have this shared sequencer, that if you go all the way to the extreme end, they have shared validity conditions across them where a fault on 1 reverts to the other chain and they're actually fully tied together to the point where they are basically a form of sharding of you're basically on 1 chain at that point. I don't think most things are gonna go to that extreme. So that's gonna be like the interesting question is people build out these ecosystems and in particular with shared sequencing is there is kind of this whole spectrum of, you know, on the 1 end is you have a monolithic chain, you put everything on 1 chain. On the other end is, you know, we have a million chains that are a million different standards.

And then like, you like, Hey, what if we have a, you know, a shared sequencer, but like people have different standards and they're kind of flexible. And like a little bit further over is what if we have a shared sequencer that's fully stateful and is like checking the validity of all these chains. Then it's approaching 1 chain at that point. There's this spectrum of trade-offs that will depend on what is your application. How much do you care about being basically on the same chain as the chain next to you?

Versus, hey, we want to have our own governance. We want to be able to hard fork by ourselves and make our own decisions. So there's going to be this interesting spectrum. And that's going to be a very political, social thing for them to figure out, and then also just emergent based on what are the applications that actually use these things and how much interoperability do they need between them? Like Scott from Argus had a really interesting presentation, like at the, I'll show the research day videos of like, he was talking about this in the context of like gaming, where there is no need for this shared sequencing for a bunch of different game shards to have this perfect synchronous composability between them.

They're different games. They don't need that. We don't need to optimize for that. They can be just completely basically different shards that share some infrastructure behind the scenes. So there's gonna be like different trade off spaces for like different applications, which will be like really interesting to see.

John, we have to wrap up soon. But do you would you like to summarize what are the main takeaways for our listeners today?

Yeah. So on the roll up front, as people start to think about their decentralization roadmap, I think that there is a lot of natural tendency to draw parallels and lessons from Ethereum of we're in a theorem roll up. This is what Ethereum is doing for PBS for its validators. We need to be doing the same thing. I think there's a natural tendency to do that.

And in general, I don't think that is usually going to be the right spot on kind of the trade off spectrum for most of these roll ups, because they are very inherently used for a different thing. Like Ethereum is being made to serve these rollups and give these times that we are in T's. These rollups are being made for users to be used on a shorter timescale. They are fundamentally trying to give different properties. And so I think it makes a lot of sense for them to design themselves very differently in reflection of that.

In particular, I think a lot of it might look a little more Cosmos-y than it does Ethereum, where Ethereum, it makes sense to be the most permissionless and try to be decentralized as possible, whereas I think that rollups are going to have to think a lot more about opinionated governance, whether they like it or not. I think that is naturally going to arise. And with that naturally going to arise, probably need to lean into that and figure that out very, very strongly. I think that is potentially going to be the more important and the driving factor between how do these systems play out in the long run? Like, how do we figure out the incentives in the system?

Like, how do we keep everyone in check? It's going to be figuring out a lot of very different points on the kind of trade-off spectrum versus Ethereum.

Okay, so, I mean, 1 thing where you said this in particular, it would be the sequencer. And so you think sequencer should be determined by governance. And so I hear from 2 directions that you think governance will actually become an incredibly important topic for rollups to figure out on the 1 end, because they, they're actually the biggest thing that they all need to decentralize is kind of the stewardship of their smart contracts. So who controls that? Who can update it?

What are the guardrails? How do you also mitigate? And it's not just as simple as just making it immutable, because things can go wrong and we may need some mechanism for upgrading it. But then also, sequencer decentralization. And you said you were basically arguing governance is kind of the focal point where both of these ideas meet.

And so governance is a really under-researched, underdeveloped area right now in roll-up land. Is that right?

Brian D. Rieser Yeah, broadly, yes. And I think that most roll-ups are going to be forced into this decision. Ethereum doesn't have to think about this because there's no smart contract on Ethereum that controls most of the money on Ethereum. Rollups all today and many in the future are going to have this 1 smart contract that controls a hell of a lot of the money on the rollup.

And that contract governance may de facto be the roll up governance. So if they hold a ton of power over the chain that we're not used to thinking about on something like Ethereum, where we have this committee that controls most of the money, they're going to have a lot of power and be driving the decisions in large part. So thinking about that is going to be very important. Because it just fundamentally changes the way that you have to think about all this in my mind. Because I think a lot of stuff has to be way more opinionated.

When you said we probably won't have a contract on Ethereum that has a lot of money in it. I had to think about liquid staking and kind of the outcome from that market. That's probably the closest 1 that we may get. And it's no coincidence, I think, that the challenges faced by liquid staking protocols to find ways to, you know, marry immutability and, you know, security and to decentralize their governance. I think you and I, we agree that there's a huge overlap between, for example, the roadmap of a LIDO and the roadmap of a roll up.

That there's much more here to discover than, you know, typically meets the eye. Okay. Yeah. That was a very interesting perspective. I've not heard this before.

Thank you, John. And I think in terms of cadence, we may do this every every 2 to 3 weeks, right? I think that's, that's what our listeners can expect. And so yeah, we'll see you all there.

It'll be fun. See everyone.

See ya. Thanks for joining us today. As always, nothing we say here is investment or legal advice. The views expressed by the course are their personal views alone. Please see our podcast description for more disclosures.

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