$ARB Airdrop and Arbitrum's L3 Solution | Steven Goldfeder, Harry Kalodner

Transcript

[Applause] [Music] [Applause] hey everyone welcome back to another episode of Empire today we sit down with Harry and Steven founders of arbitrum we are recording this at about 11 pm at night super long day for them they just announced their air drop today this episode This is actually there's going to be two arbitrary episodes today this episode is all about two things one is orbit um and two is their airdrop that they announced so really interesting episode I think you guys will enjoy this stay tuned later today we're gonna drop another episode with Harry and Steven that we recorded a week or two ago all about their thoughts on arbitrum versus optimism uh the ZK competitive landscape Mev on arbitrums

that's a really interesting episode that we recorded before I even knew the airdrop was coming so that'll drop later today but this episode right now I think you guys are going to enjoy it it's all about the air drop um all about the decision making behind kind of decentralizing Arbitrage and what that looks like as well as orbit so yeah without further Ado let's jump into it Harry and Steven welcome to the show thank you great to be here absolutely um big day for you guys uh you announced the airdrop obviously you also announced orbit so two huge announcements in one day uh I just want to actually start with the why and I remember I think maybe a good place to start is like I remember actually a couple years ago you guys being pretty aggressively like anti-token

um and that has obviously changed so I just want to get your guys's view into like why embark on this super tough journey of launching a token maybe I don't know who to throw that to but I like all I want you guys to take this tough question yeah I think Stephen you normally uh yeah all right um yeah you definitely uh you're on something there when there definitely was a time where um and actually I've seen I saw people post like screen screenshots here from I think an old uh medium comment that had made and basically it was like from 2019 maybe early 2020 where someone asked is there or will there be a token and basically I'd answer it truthfully which shows that our thought at the time that uh there are no plans to have a token

and I didn't think there would be one um so definitely um as a company and as individuals I think our thoughts have evolved on this and the thing I'll say is our opinions have always come from a place of technical uh Merit and Technical considerations first right when uh the question was does it make sense to have a token technically is there a technical reason to have I have a token they are in the Arboretum uh Network and I think that's where our thoughts evolve that's right you know I speak it for myself I think speaking for Eden Harry as well that's where um our thoughts have always been on so so initially we said hey we thought hey arbitrim doesn't need it doesn't need a token that was probably our thought in 2018 or 2019 but also our our thoughts

of what a layer 2 is and what a network what this network looks like and what a processes change as well if you go back to the early earliest descriptions of arbitrum like we thought about it basically as an app chain model where everyone has sort of launched their own chain and on their chain they have their own application and it was almost like a per application per um per you know one application per chain and then like you know it makes sense that you know to not have a token necessarily because it's sort of you know each one is very contained and and you you don't need that but like in the model where there are these big public chains and the question is who controls who controlling These Chains uh the case for a token the case of these centers because it's much

more much clearer right it's either you don't want centralized control but there's common ownership so that the case for a token becomes much much clearer so I think um it really was uh over time as we understood how people are going to use this technology that um the idea started simmering our head of maybe a token does make sense and I think over time that uh really uh coalesced in our minds but it was never uh it was always a technical consideration from from the beginning so is it fair to say decentralized just further decentralization of the chain of the ecosystem is that the kind of core decision that would have been the concise way to say what I just rammling let me ask the much more important

question how much sleep are you guys running on these days um not so much I'm looking forward to uh to the uh to the weekend I had a lovely sleep between 3 45 a.m and 5 45 a.m last night Stephen are you over under that uh under that right now yeah I had to imagine Okay so yeah the the why here makes sense um a little bit just like the other kind of just to put a concrete point on it like I think kind of uh the linchpit of all of it is upgradability well instrument

of all of it is basically like you know well okay we have the system either it freezes forever or there's some way to change it if it freezes forever it won't be the best tech forever um I think like we for a long time believe that like no roll up Tech around today is gonna look particularly good in five or ten years like all of all all these projects Are Gonna Keep innovating keep growing um and like the flexibility for like projects to sort of improve and adopt new technologies is critical uh but simultaneously sort of having it be centralized is just like not feasible like kind of having it be sort of if you want to be able to change you need to

choose who can do that changing and fundamentally at a system of kind of the kind of insane scale that arbitrum is running at like it it has to be widely controlled it can't be sort of tightly held and kind of come through on on the Promises of what it should be and by the way when it comes to upgradability it's not just you know I think I agree with Harry that you want uh for a future set perspective you want the ability to upgrade a chain and indeed arbitrum upgrade it to our the arbitrary one network upgraded the arbitrary Nitro stack earlier this year and that was you know in a world where that that capability didn't exist and was sort of stuck in time um I think it'll be very very different and um I think that the chain would have a lot more difficult a lot more

difficulty succeeding long term but also even if you disagree with that like no it's okay we don't need any new features on this chain just from a security perspective let's say there's a vulnerability that's covered in the code um and the chain it doesn't have upgradability you won't even be able to to fix that vulnerability so fundamentally it's like uh to upgrade the chain to new features and also to protect it in case of any bugs discovered in in the code the code of the chain this thing is very important to have the ability to upgrade but as Harry said you have this cash 22 okay so we want someone to be able to upgrade this but we don't want there to be a centralized party and the way out of that is to say okay so if the community literally the Dow it's everyone that has the ability

to upgrade it so you sort of have both the upgradability but also not uh that don't have that in the hands of any centralized or single entity or individual hmm okay so the Y makes sense here why why now um basically if you look at the history of of the of the chains this launch and the upgrades that we made it kind of makes sense you know the the goal is getting rid of points of centralization and getting rid of um um single points of failure or single points to control that rely on one entity or one individual and there are a few points uh you know if you look at the system there are in the abstract

there are a few important parts to decentralize one is it's important to have fraud proofs on the Chain these are the sort of proofs that connect the the glue the the chain to ethereum right that actually give it a security ethereum it's critical to have those frog proofs um live in the system because if there are no proofs um the chain can operate by itself they require a centralized intervention you know it doesn't rely on the security ethereum but that's step one so arbitrary movement arbitrim has been fortunate since day one of his test that launched I always have frog proofs you also need to have the uh bandwidth to actually meet the demand on the Chain um I think two nights ago um there was a sustained period of time

where there were 40 TPS on arbitrum um there was some sort of uh um unusual behavior going on to get it to get it that high but the idea being the Nitro software has the capability of handling both the traffic today as well as significant traffic um over time as well and it also reduced the cost so Nitro was an important upgrade that was necessary for the for the long-term health of the chain and then um so the question is so okay so we have and then the the the next thing that that we announced was that there were about a dozen uh 10 to 12 institutional validators including big names like uh unit 410 and coinbase consensus Google Cloud um the ethereum foundation were actually

participating in the uh decentralization and the validation of average one that's another point of of uh centralization that that arbitrary had gotten past right for our boots are nice but the second part is who's running these fraud proofs and so in November just a few months ago was announced that now uh but many independent organizations are now have the capability have been whitelisted to run these drop groups so naturally if you look and say okay so so what's after after we have the Nitro upgrade and fraud proofs run now not by one or two uh nodes but by uh adulthood or so independent nodes now what's next what's the biggest point of centralization that is clear the biggest point of central position is the

ownership at the ownership of the chain is the ability to upgrade the chain and that's what today's launch solves it takes the base you know there is a progressive process where I lost these different points of centralization have gone away over time and some remain it so continue it's a continuing process the biggest one left was liberally the centralized control over the chain ownership and uh with the launch of today's token that has been given over to the Dow so um from that centralized uh chain ownership of Arbor 21 no longer exists and we're significantly further on the path to decentralization I haven't had a like complimentary I guess uh Point here Point here which is basically that I think I'm really really really happy that we didn't do something

like this a year and a half two years ago that like fundamentally it it's interesting the degree to which kind of decentralization is great from a sort of security perspective and and from kind of an inclusiveness perspective but in terms of kind of efficiency it's you know not the best I mean I think this is you know where we we look at you know where you look at like ethereum itself and it both simultaneously takes a long time to get there and a lot of coordination but the result is amazing and that's the sort of thing you kind of have to do when you are established when you actually sort of have a a sort of polished product and are just sort of improving on it and iterating it as opposed to sort of in that like early flexible sort of young startup

um that is kind of you know moving fast and and sort of developing in a kind of much more controlled way where there's kind of an enormous benefit to sort of having centralization from the level of being able to kind of develop faster and so like having something that sort of I think that like to me one one thing I yeah one thing I looked at a lot is the the kind of rate of upgrades to the system that we've been deploying has massively slowed down since Nitro um and the longer it gets the less often we've upgraded which is really to me kind of symbolic of the fact that it just doesn't need as many rapid changes anymore which is kind of the right time to move over to a more deliberate process which is the goal of a protocol that's great

um how did you guys decide but you you guys should fact check these numbers here but the numbers I'm looking at are uh the treasury got 43 the team got 27 investors got 18 and users got 12 percent um how did you guys decide on the on the allocation so I think principle number one for us was that it should be a majority owned uh by the community um and that's um you know the rough breakdown um is like uh 55 points something almost 56 to the community and 44 percent to to to insiders um when you look at the at the larger

chart so that was uh probably the most important um aspects of that for us just the the overall Community dominance of this and again as you pointed out so there's there's the elect there's the user um airdrop there's the Dow air drop so those together are like what's been given to the community immediately and that goes together are 12.75 but then there's that Dow treasury part which is also belongs to the community but um it's controlled by the community and in the in you know in the in the end will uh have opportunities to be to be uh distributed by the community and by the Dow um in the long term so that's um you know the most uh important uh one to us and then um when it comes to the airdrop right there was some Freedom so there's

there's sort of three different criteria when it comes to the airdrop that are like I don't know which I feel like we just should Define another trial that may or um are three things you could do right you can give way too many tokens right you can you can you can you can you have freedom over the size of the airdrop you have uh Freedom over so how many users of arbitrim anyone who ever used arbitrum yeah eligibility or is it more selective than that and then you have freedom over and how much how many tokens is each person's eligible for the airdrop get and you sort of you know these things are intention with one with one another right if you sort of if you want to if your goal is to preserve not not to give the entirety of the user um of the community allocation out in

day one then you're limited and you can't make the airdrop too large and then you have to say Okay so if you want to give everyone and give everyone very very little or do you want to sort of select on a more power set of users or users that are more committed and give them a little bit more and then you know users who use the original one for twice or have some civil behaviors uh they'll get eliminated and that's basically um it's part of the set of of constraints uh when when doing that so we work very closely at off-gm Labs with the arbitrum foundation and with Nan on this over the course of many many months analyzing the data or working working on this and really try to optimize for um getting a reasonable a reasonably large amount of the of the tokens to the

community for preserving songs with 12.75 that would sound like that you know that in the right ballpark it's a lot of the tokens going out of the door on day one but there's still a significant treasury remaining and also trying to focus on giving finding the real users of Arboretum and eliminating the symbols and the airdrop farmers and giving them more representation and just trying to Flat give everyone his Dutch Armature because I think about arbitrary of is you know the airdrop happened there's a lot of users right there are millions of active addresses it's it's uh you know the trainers already have already had significant introduction and that's um that's great but also ended defining when designing an airdrop it makes it a little bit tricky because again you really want to focus on that set of users you don't want to just give

everyone yeah you know some dust you want to basically socialize their users and I think you know we um together with Foundation I think we did find um a good a good medium there but that's basically that you know there's no exact science but those are sort of the factors of that went into um determining the size of the airdrop yeah do you have any projections on like I guess short obviously medium to long-term usage of arbitrum both of your visions that it skyrockets do you have any sense of like short-term usage of arbitrum because obviously there's a lot of use our arbitrary is ripping in terms of like on-chain usage recently but obviously some people are just trying to farm for the for the airdrop uh do you

have any sense of like short-term uh usage what that could look like so you know it's hard to know exactly to be to be honest um you want to make a confirmative so they are dropping eligibility were announced earlier today and our workers traffic did not you know go down there's still a lot of real real unsustained use and one thing one thing which is important to notice is the traffic is is elevated on many metrics right there's arbitrary is now um I think last time we recorded I said it was number two but now it's sustained number and then we looked it was number three that day but I would sustained number two index volume right behind ethereum um you know it's it's it's uh the number one uh TBL uh Layer Two um you know it's it's it's it has the most Ethan arbitrim than any other uh

that all the other scan the solutions combined many metrics are up simultaneously which is indicative of real and actual use and you know people are building protocols Arboretum that have product Market fit and people um want to use so um I don't think we'll see uh a decrease in traffic I think we'll see an increase in traffic because I think a lot of that is is real and and legitimate traffic although we don't have um other than like you know generic growth projections we don't have any anything specific that will tell us you know in the short intermediate term like what uh you know what uh Factor increase we expect of the traffic um but you know we did have a few weeks ago for the first time our mission process more transaction say ethereum uh in a single day and I expect that over

the course of the next weeks a month to become the norm to the to the degree that they're like is artificial usage which like you know I'm sure there's been some of them out and I mean we know from the simple elimination work that was done for the airdrop certainly that there was you know you know a good chunk that was detected like I I personally would be really excited about like that dropping off because I think fundamentally like one of the things that that like Arboretum I think has been pretty successful at is like finding real product Market fit which is incredibly hard to do when you can't tell what usage is organic and what isn't and like given that like the goal is to grow the pie the growth the goal is to like onboard more users more developers trying to understand like

what people actually want as opposed to kind of what they're doing because they have sort of some sort of side is just so important and valuable I hadn't thought about it like that yeah I guess if people were listening to blockworks podcasts and like opening blockworks as newsletter simply because they were trying to get a reward from it it'd be really uh from a product perspective it would make it very tough to actually tell like well are we putting out good content do people actually like this show or are they just interesting I hadn't thought about it from that lens yeah um why did you guys decide to make the ARB token only use for protocol governance instead of uh uh being used to pay for fees as well like what was the thought process there

so an arbitrary roll up there's a very good technical reason why um eth is the natural fee token for for arbitrum and the reason this is simple um the majority of the cost of an arbitrary transaction is actually to post the the ethi theorems what I mean is if your arbiting one transaction costs you five cents you're roughly three or three cents are actually just being paid to ethereum to store your to store your data I remember roll up in the roll-up mode arbitrine puts all of the data on ethereum and that's a you know linear per transaction cost and not something that uh you know goes away it might go down over time with Innovations like eib 48404 but there will always be a linear cost

um and what that means is you know if you think about it you could charge you can charge fees or whatever token you want but fundamentally you're taking money in one currency but your costs are denominated in each and so eth is is the obvious currency is The Logical currency and if you took funds in another currency you'd have to do an immediate conversion to Eve or you'd hold the risk of that convergence so um considering that that the currency of layer one is Ethan arbitrine pays uh ethereum for its security it's a very natural um and this is just from a technical perspective and the second one is you know in in the in the Constitution we also have um you know the the the Constitution lists uh several values of of arbitrary in its ecosystem and one of them is

ethereum alignment I think from an ecosystem alignment perspective um it makes a lot of sense to use eth now the goal here is to scan the solution that's um that makes it easier and simpler for users to uh for users and for uh developers to use and it's clear of that because again considering that you users are bridging from Youth and users have eth you know just by nature of Archer being on top of these the the least friction thing um that that one can do is to have our East be the DT to open an Arbitrage so again we're always about tech and and what is the you know what is best technically first and it's clear to us uh from both a tactical perspective and

from an ecosystem alignment perspective eth is the right uh call so adding something artificial like saying oh yeah or let's have the artichoke token because artificially that'd be good like that's not something which you know we consider we do we just say technically eth is the best community value-wise each is the best so eth is uh you know that's enough this way also we believe that that the token should it should remain uh the fetal Minister remained East on Arboretum one and Arboretum Nova or anything else out there or not no no sorry yeah okay uh I think Steven summed it up pretty well nice uh because it's it I mean it's super clear you guys uh super clear you've been very uh just

just really thoughtful with how you've done all of this from spending time with nanson for months on on identifying different uh wallets that are like actually participating just the whole way that you've gone about it what were the toughest decisions that you guys had to make like what were the things where it's 10 p.m you're at the office you're whiteboarding you're just like you're just disagreeing and you got to sleep on the decisions and you can't come to agreement what what were some of those take a class you're both laughing and smiling so I know that there are some you gotta oh yeah yeah you know the the truth is um one of them and I don't think was a point of disagreement but

as you said we work together with the Arbiter Foundation now with Nancy for many many months on these criteria and our goal was to create a set of fear criteria uh set of open and transparent criteria as well right so users can go ahead and verify them and and all the data as their users can say okay these are the points that I deserve that can go and check that myself this is correct this is fair um you know we spent you know we had we put entire list efforts to to uh to really optimize for that but the truth is you never really know until until you until you do it how you know how people will be receptive to it and whether or not people will appreciate the work you you've done people with your criteria so um definitely you know um those were scary uh decisions uh to

be involved with and it wasn't you know obviously the arbitral foundation was the ultimate one to make to make those decisions um but you know those were um there are no it's not yeah it's somewhere in between in order to science there's no exact answer to this and you sort of uh put in the best efforts and that's what that's what we did we all did together and um but it was uh definitely um you know a scary process and we were just hoping that the community would appreciate it and you know to be very honest it wasn't like we were sure that okay this is perfect everyone's gonna love it we're like we've done our best here sometimes I mean sometimes that's all you can do right people forget that at the end of the day you know they're just people build building building

startups and Technology here so you just try to put your best foot forward absolutely and yes I think people assume that there is a scientific answer but um I don't think that anyone's cracked it and and um you know one thing is as you know uh we were on uh um it becomes harder over time right as everyone as the more air drops calm and the more of these simple uh Farmers or the airdrop Farmers or symbols they they adapt yeah it becomes more and more and more difficult over time to identify the Behavior Uh to separate them from real users and you want to go too much into doing this because then you end up just uh catching some real users together with the uh you know with them so it's it's a very very tricky problem and um unfortunately yeah there's no uh

oh and it's correct answer there's a there's a best effort uh job there I I think the the other sort of big element I think I could like I think I could call out is basically just like the core the core kind of like getting over the concept of sort of like handing off sort of control of this thing to to the arbitrary Foundation which like Stephen and I are are very much not a part of um and just kind of coming to terms with like what it really takes to kind of make a system really decentralized and independent this was a really you know significant mental hard to look at through yeah that's a good point I mean I can

imagine that I I was talking to Harry before you jumped on Stephen and I think it'd be really tough like you know Mike and I have been running block works for five years and I think uh you know we're still pretty there are decisions that we don't make anymore but it's by choice I'd say it's because we've removed ourselves from decision making it's not like there's decisions that like we're actively not supposed to be involved in those because those are the foundation and like I'm not push um like how do you think about that almost from like a I don't know like psychological interesting like barrier and hurdle to get over I feel like yeah it's a very strange strange feeling to you know have a lot of control over the ecosystem and literally give it up

even in the security Council I'm not a member of three Council but so yeah and then the foundation has created the security Council exactly the foundation the Security Council is part of the foundation um but the company you know it's in it's a nine out of 12 signature if you do anything fast on the security Council the company uh doesn't not only doesn't have the ability to unilaterally push something through option that doesn't even have the ability to veto something often has three seats there so if everyone else disagrees live stream labs they can't even doesn't even have a veto so option Labs really doesn't have um any uh significant power at all over the direction here and it's a it's a it's a big departure um of course and um it's it's definitely you know so so you know I was uh I've been doing a few

of these press interviews so someone asked me yesterday like yeah why would you do that like and and the answer is simple like you know you one can argue we can argue theater tomorrow the benefits are centralized systems and the better service to a decentralized system then I'm wondering by the way who thinks there are benefits to both yeah Central not one is better the different ones are better for different for different opportunities centralized systems have their places right web 2 and web3 aren't in competition they complement each other sometimes for some problems one two are better for some web two are better for some a combination of the two are better at least at least that's my vision I think that I think we can't do is to have a have a centralized product with quality decentralized products so in our mind the only way to decentralize

is actually a decentralized and giving up control and actually decentralizing that that that's it you can't have you can't decentralize but also keep keep that control and for us um you know it's ironic we're we're we're excited we're celebrating today we're celebrating the the lack of power and giving up of that power because it's not about us it's about the ecosystem and empowering the Dow and empowering the community and you know that's a very exciting moment even if it means that we no longer are in control of the chain um the Dow is in control of the chain and that's the correct and the next exciting development for the community and you know we are very excited to see um this thing that we initially created um really um Fly by itself and go beyond our control

yeah um I'm guessing you're not well I don't know how much you can comment on this but one thing I just have to ask on ask about is a uh I don't even know that I would ask it but like okay so I'm looking at optimism on our price on our price chart right now and uh well talk about low flow uh okay so you have 800 million market cap and 11 billion fdv what do you think uh Arbor I guess uh how much do you know about the numbers for like when arbitrum launches and like what are the uh what do you think this does like comparably in the markets so we don't know or even like really

consider uh you know what the price will be that's that's it and not something we have any information on or really went into any of the of our considerations one thing we do that one can say is um in terms of I think the the ratio you said it was like uh 800 to 11. um we are is part of the airdrop on day day one uh we'll we will you know uh the arbiting foundation will be giving out 12.75 of a token of the token Supply which is I think significantly more than um you know they gave in their airdrop so that you know the percentage of the uh the float and the the token available on day one will be significantly Higher by the way investor and team tokens um I imagine in their case as well in

our case have a four-year lock with a one-year Cliff so they uh gradually start unlocking after one year over four years but they'll be absolutely none of that liquidity for the first year um and you know that that uh um so really but but one yeah one important thing is I I think the the size of the airdrop is is sounds like uh larger than what than what they have uh put out yeah how does a so like when you when you IPL when a company IPO is the banker set of price right and they want to kind of like talk to a bunch of Institutions and like find the supply and find the demand like set the supply based on the demand and kind of find this price that's like gets the company a lot of money but is also going to like rip on on day one how

what are the mechanics when you launch a token how like what is the first price this might be a really dumb question but so the probably the answer is it depends on the team and and that and how they engage or what they engage we have no idea we didn't engage with anyone around the price we didn't actually even engage with any layer with any uh uh centralized exchanges on this thing uh the token either uh this wasn't what we're optimizing for we're watching The Token because we believe in the technical uh merits of the government of governance um and so I can't speak for other teams but they do have what I can't confirm in our case um you know literally have never had a conversation or been in a conversation of what the price would be and um I will be uh you know uh sitting watching just

like everyone else and saying you know uh you know what happens on Thursday when the token uh goes live but that's never been our Focus there's I don't know if you guys saw the coinbase documentary that uh coinbase dropped like two or three months ago um the hired a filmmaker and they dropped it on Amazon right so it's actually it's actually I mean it's a little bit of PR obviously but uh it's a fun little look and you know inside their IPO and stuff and like the story of Brian arms is basically the story Brian Armstrong the NFP videos for a second sorry oh no no no no no no no no no no directly about Stephen what are you saying about Stephen how I'm good it's not even Harry it's up to the foundation

uh but there's a fun vid uh video of Brian just like on the day of their IPO like sitting behind the computer just like all the rest of us just being like all right there goes the price out of my hands now okay so um so yeah I wanna I wanna actually move a little bit away from token airdrop stuff because obviously that's exciting but I would uh a part of me feels like the other news of the day is like just as exciting but really got swapped under the rug which is you guys just launched orbit um so my understanding is like this is you guys getting into the L3 space and like this is this permissionless L3 solution for developers to build on top of the arbitrum L2 super exciting um have a bunch of questions here but

maybe Harry can I pick on you just to give a a succinct overview of it oh absolutely I mean so the the really kind of the really big change with with it it's interesting kind of most of the things we we announced and we do are oftentimes kind of technical changes uh whereas orbit like fundamentally comes in the form of a licensing change uh at it at its core which is that before now um off chain Labs had just had arbitrary Nitro code licensed under the BSL um two big changes happen today um one being the Dow gaining the ability to vote to allow other chains to launch

using Arboretum technology as to l2s on top of ethereum um the other is orbit which you mentioned which is that the license now just allows anybody to launch it or to use arbitrine code to launch an L3 on top of an L2 arbitrum chain so that means today that means on top of Arbors one on top of arbitrim Nova um as the Dow spins up and and potentially votes do allow for for kind of other Arboretum layer 2 Chains to be created uh that might mean on top of those and so that it's really it's really the start of something um and it's really I'd say in some ways like I think there's a fair amount of medicinal technical work to be done to actually figure out even what the like

Optimal L3 structure of the code is uh it works today but it's certainly not at a place where I would say it's like completely polished but but what's cool and what's really powerful to me and really you know appeals to me personally is you can do whatever you want with it um there is this massive growing ecosystem of companies that are kind of building and involved in this space of of kind of roll-up chains and layer three chains and kind of are building on Tech and expanding it and changing it and innovating um and sort of with this change that is kind of fully embraced by the Arboretum ecosystem um but in a way that base will essentially Drive value into the core

Chain by coming as build as layer threes on top of arbitration one as opposed to building on kind of completely unrelated layer twos where they could instead be kind of competitive hmm it's really so it's really a framework for creating l3s that's settled to these arbitrine based Roll-Ups yeah yep yeah and it's just it's fundamentally I think there's a lot of kind of development and tooling that we will do over the course of the coming months to sort of make launching l3s easier I think that's an area that kind of like um you know around around off-chain Labs we're really excited about um and I know we're going to be interested in kind of expanding out and making it sort of more accessible and easier to do um yeah but like for now it's kind of

this sort of raw Cambrian explosion where even if it's not polished and ready to go to kind of launch your own L3 tomorrow from a sort of like figuring out all the tech and infrastructure and all the complexities around it perspective uh I fully expect to see hackathon projects springing up left and right that are building on this Tech stack deploying l3s because it's good who are good candidates right now to go build an L3 two questions so there are different profiles you know we over the course of the minute past many months you have the opportunity to speak with different projects and I would say there are three different profiles of projects that want to build an ll3 one is a highly successful project so one example of one

that like you know there was a lot of public discussion around so whether you know yoga Labs did the other side launch and you know ethereum congested and people were paying thousands of dollars for these and the robotics that people publicly saying back then and the conversation has been continued a lot you know since then in the public forum as well which is like hey you should have your own uh all three of it again and the idea is is a lot of these are projects that want to remain on E3 and want to secure you ethereum want the community of ethereum they want a priority later ethereum so this is one project they're just successful projects um that need their own capacity and want to have more control over their capacity and not be in the shared capacity network but around the public network

because the nice thing about all three is our if you build an all use the arbitrary code base to build an L3 on top of the R1 one of the arbitration layer twos that L3 has the same capacity as the layer 2 itself right so it's really like you're creating um more capacity right so you can have two or three or five L three sitting on the layer two and each of them have their own uh same you know capacity um which is uh you know really really compelling uh really compelling reason to get that priority Lane so that's one profile project that has success a second profile on this side we see a lot interestingly it's a project that a lot of projects don't have that success today but they have a vision uh for that success so they you know they'll say okay we're going to launch on the

arbitrine one public network but is there a path for us that if we get you know runaway success uh is there a path for us to launcher on the R3 and that gives a lot of people at ease so they're like I'm not going to build the layer 3 today but I like the fact that I know that should we become Ultra successful and have really that capacity the code is available the license is there but we can migrate tool there if we should become available uh it's sort of like a fraud proof to go weird analogy it's not something you intend to use right now but it's good that it's there and it allows you to build it in Comfort cause you know that mechanism is there should you ever have to go ahead and build only or three that's there and the third one

I think um from from speaking with different uh uh Protocols are chains that really want to enshrine their brand or their token in in inside the chain itself so for example if we spoke a lot about R values for our public chains being eth is the fee token but other protocols may may have a different a different opinion there and say hey uh you know we're some D5 protocol with a token and we want to run a chain in which the fee token is that token right that is definitely something which we've seen over time or they want to run a chain in which um maybe their contracts are somehow enshrined then others can't launch contracts or they have some chain that's that's basically application specific

and focused on their protocol so again an ecosystem which is um connected either by the token or by the contracts to the to their protocol this is uh another another um another another sort of that type of chain that we've seen But one important thing is one important thing to say is definitely not for everyone some of the benefits I think people underrate of the public chains is public infrastructure they ether scan or Alchemy and Fiora chain link uh you name it all this public infrastructure exists on arbitrome one and geese man it takes some time and some effort to get it there it's not like given that that and you know these infrastructure providers aren't going to support hundreds of new chains right they might support that one or two or three really successful one

but they're not going to support those so I think developers need to think critically about hey do we have a Reliance that's public infrastructure will we be able to get this public infrastructure on our own chain um did that require a certain level of success and also which other applications do I want to be on shame with like there are definitely you know we've come across projects all the time and say I want to be in the same chain as uniswap I want to tap into you to stop liquidity um and that's another uh you know thing which projects have to consider uh can I live in an island because uh even as uh you know in the layer 3 world there are things that you can do to sort of make the communication with different layer of Threes better than just two separate blockchains but there's still going to

be some tensions not the same as being in actually the same environment the same blockchain so I don't think there's a silver bullet here it really depends on the use case uh whether you know it makes sense for a product or developers but those are some of the profiles of projects that want to deliver three is that we've spoken to over uh the past many months what's the etk so uh when dydx moved over from announced that is leaving uh startware I think it was and going over to Cosmos to build their own app chain that was a big moment for like the app chain thesis and Cosmos when do you think that there will be a dydx like moment for arbitrum L3 so we know of

um you know just by nature of uh conversations we've had people come to us say hey can you have a layer threes and our answer uh has been um there will be a path to do that and now that path is clear we know that there is a significant interest um the nice thing is also we don't know you know uh there's probably a lot of interest we don't know about right and that's the nice thing about permissionlessness people will go ahead and build with this technology and do things that we don't know about we don't we can't guess and it just enables that Innovation um but but even just based on the ones we know about I think um I'm aware of one project that's going very very strong in this direction or probably in the next few weeks announce um that they're going down this this

path um but I would be not surprised at all considering the permissionless nature if that announcement is front run and we wake up tomorrow or two days or three days from now um where there's some uh layer three that that's uh are using our technology that I know front run the front runs any other ones that I know about foreign Stephen Harry do you have anything else out there well I mean just yeah I definitely second that uh the idea of kind of the uh the idea of the uh unknowns that you know the unknown projects that arise out of no out of nowhere being one of the coolest sort of facets of the blockchain space where sort of you know you can make a lot of plans but then sort of something out of the blue happens and and kind of you know changes

changes all of it I think the other kind of like I I'm from a technical perspective I'm kind of extremely excited about the idea of sort of l3s as a kind of test bed for new tech for new for new ideas and new technology around dips um that kind of fundamentally I mean I think there's been a it's interesting because there's been a lot of Hope for a while on like well l2s can kind of lead the way in terms of you know ahead of ethereum development which has always been a kind of interesting thesis to me I've never been the biggest fan of it because if an L2 adopts a and ethereum adopts B you're in a horribly fragmented situation

um if a chain kind of like our that was you know that could lead to like arbitrim diverging from ethereum in some way that would cause sort of you know all sorts of tooling that need to support both if arbitrim were to kind of lead the pack but then deviate from but you know have ethereum not follow whereas for l3s where you have this flexibility if somebody can kind of start up a new chain that's meant to be experimental that's not meant to sort of you know collect you know not meant to host billions of dollars of value that's instead meant for kind of developers and users to kind of experiment what with what the next generation of technology looks like there's there's so much cool that can happen yeah why would someone okay let's say I'm an app chain Builder

um why would I not build on orbit is it because you wanna like get if you wanted to own like more of the stack I guess you could say would you'd probably maybe build a nap chain in Cosmos land is that like the reason to not use orbit I'm trying to what's the what's the counter to orbit essentially Harry it's a good question I mean it's certainly I mean I think or I think Orbit's pretty great um never you know my my kid is cuter than those other people's kids exactly exactly well I do know your T-shirt uh if for anyone watching on YouTube your

t-shirt is better than anyone else's so I love this shirt yeah um but no I mean I think you know there's like I think there's interesting balances I think that like um that kind of uh Arbor term Tech and L2 Tech is is is best in cases where kind of you want sort of a real degree of decentralization whereas I think kind of in many cases like a a kind of Dap You know a sort of like Cosmo style chain you can kind of have you know much more arbitrary degrees of kind of sovereignty which is also possible in in in kind of in orbit chains um in arbitrome Chains but it's kind of almost against the point of what the technology achieves which is sort of to have kind of like a a broadly uh a broadly

decentralized system and I think that there are like definitely use cases that are kind of better in one way or or kind of for one you know but with one solution or better with the other yeah uh what how do you see this being different I so there's uh for anyone who didn't hear the intro of this there's an episode two coming out later today we talk uh all about like different like the L2 ecosystem and kind of thoughts on optimism and stuff like that but I think Stephen I would throw one optimism question at you right now which is like how do you view this being different than the the aop stack here yeah it's a great question so I think the fundamentally important thing is you know arbitrim is fully built out and has um those front proofs available to them

and has a full technology available and I think that's um you know something which someone could build on the Chain today and the technology is fully there and the the tools to decentralize are are there so I think that's uh definitely important um and probably the the the largest difference um in terms of you know there are probably a lot of small differences as well but I think you know um fundamentally um in the goal of what I think what we're trying to to to achieve they're probably very very similar um and um I think that there's also a lot of unexplored territory which will probably both explore around how you can build ecosystems and connect These Chains both connective tissues and the L3 ecosystem in ways that you can

connect all threes closer um than different l2s and we have some ideas there and I know that they do as well well so it'll be interesting to see how that generally technology technology-wise developments but I do think that in the vision they're probably more similar than they are different in in many ways the technology the technological maturity is probably in my view though largest difference and you know we're excited to make um the arbitrum stack Arboretum orbit available for people to use uh in this current state and one thing actually which we said as well so we we've um orbitrum stylus will become available to these chains as well our working stylist um I think we discussed it in the next

episode um um I think is uh is the ability that uh We've developed at Option labs to write contracts in C C plus plus and rust um you know the Dow will have the opportunity as well to introduce that to his chains should it choose to do so uh later this year and as will um or any arbitrum orbit chain will have the you know it's it's decision it will have the opportunity to introduce that technology into its chain and another another thing to mention I think with the license here it will be a Perpetual license so um you know chains have the comfort of knowing that if they choose this technology the license is theirs and there's nothing that well and decentralized entity can do to to take that license away for them once they

start building on it yeah the other the other thing we've known here is kind of cool is just like it's it's all this it's funny because I mean you you mentioned you mentioned optimism and then certainly the you know they've been they've you know done a lot in this regard but sort of ZK sync is uh is is open for as far as I know starkware has announced that they are planning on open sourcing polygon um I I think has is there's eke via I think the zkevm is is open source as far as I remember it's really kind of a very cool Trend I would say kind of across the role of space but also just across sort of the the broad blockchain space which is really exciting uh to kind of see that you see the value that's created by sort of having having the

kind of Open Source flexibility um and I know that like for in terms of arbitrub I think the kind of balance of allowing kind of you know allowing this sort of broad ecosystem to evolve in ways that kind of Drive value kind of into the ecosystem rather than sort of having value Escape was is a really kind of appealing idea yeah well is it I mean open source is not just a crypto thing right now I feel like there's a broad movement in Tech with I mean block works for you I mean if we look at our open source stack you're like next.js and react and MySQL and word even WordPress with our website and tailwind and ghosts and like all I mean we even we leverage a bunch of Open Source stuff so absolutely

yeah um any last thoughts guys on orbit airdrop upcoming arbitrary stuff I I'm just really excited for kind of like obviously for like our team this an enormous amount of thought and energy has has kind of gone into all things associated with uh with kind of arbitrub and and kind of the hand of the kind of launch of governance and the handoff to the foundation so I'm just really excited for kind of like us to be able to really sort of like get our kind of mental capacity and kind of focus back for sort of the broader technical

um you know growth of of the of the roll-up ecosystem which is something I think that we're we're extremely fascinated with and excited about and kind of this plays into it I don't think we got to mention earlier but one thing we've been talking about some today which I think is really exciting is basically this idea of sort of stages of roll-up decentralization um and and with the with the announcement of the Dao and particularly the security Council um based on this post that vitalik made a few a few months ago which kind of lays out this idea of kind of stages of decentralization we become kind of the first evm rollout to reach sort of the second stage out of three um and I think that there's a I'm I'm really excited about sort of various research project boats that will kind of get

Roll-Ups to actually kind of fulfill this sort of fully and completely decentralized and kind of trustless future that that we're all looking for Stephen you want to bring us home are you ready for bed sure um no I I always I always have thoughts um a little bit a bit of both I guess um yeah I got I think Harry said it really right and one thing that I'd add is you know it's kind of a weird feeling because on the one hand today feels like a celebration and the culmination of something where um you know we've been working I've personally been working on on the arbitrum since about 2017 with Harry uh Ed's been working on it for a few years

prior to that and um even in the company context we're approaching five years where we've been working on arbitrine so it's a very exciting moment to see the tech reach the level of maturity that we're able to take at this level and I really let go but from the other perspective it's really the beginning of something new right there it says uh this is the moment where it develops its wings and it flies and I think this is an opportunity for the tech to fly and reach New Heights Heights that it's never reached before and wouldn't be able to reach uh until it was really um you know decentralized in this way and more decentralized and and going down this path of decentralization and I think you know uh um we ready you know uh made these points before but the community will

innovate there's opportunities now for the community to be evolved the fact that we're not in control means that that was in control and I'm excited to see uh what the Dow does how people innovate with the new uh technology staff that's becoming with the new availability I should say of the technology staff that's going live with Arboretum orbit what people uh and how the community members become involved there's now more than ever uh you know we've always said even you know going back years hey the community should get involved there are ways the community can have evolved that now that's true more than ever there's a doubt that controls the future of arbitrim and community members can become part of that next week uh Community will be you know thousands of community members will um get a piece of that to get a say in

that and over time more and more uh community members will will have a say in that governance and say in the future of the orbital chain uh community members can nominate themselves now to be delegates and those delegates will be live in the token claiming process next week actually that's why so the reason why we have a one-week delay in between the eligibility announcement and the claiming we're not doing anything actually the smart contracts are already launched uh we've given control to the Dow already there's just this one week delay built into the smart contracts and that's just to allow delegates the the the the um arbitrary Foundation to process application for delegates so delegates can be already in the user flow when users want to go ahead and claim tokens and delegates up for those who don't know are that the ability for users not

to vote themselves if they choose not to but to delegate their votes to someone else during the claiming process so there's delegates there's a security Council the security Council the initial Security Council has been set up uh on launch but uh in six months from now there will be the first Security Council vote that's another way where community members uh can become involved um just by voting as well community members can become involved and there's just so so much opportunity and you know one thing which is again counter-intuitive today so what is the role of off-chain labs off chain Labs is a service provider to the Dow if the Dow wants uh technical features um at the direction of the Dow off-chain Labs uh how to be contracted to build them I'm excited because I'm pretty sure then the next few months it won't just

be off chain lab for the other really great technical teams that are also become service providers to the dial but also say hey we want a grant to uh to build the rushroom ecosystem and in some sense you know this is this sounds competitive but you know from the ecosystem perspective this is the absolute best day for the ecosystem and watching the ecosystem go from a company to a foundation to now hopefully a constellation of companies that are all working together on the same goal that's really exciting and it's connected back to how he's played before there are times when the text not mature the last thing that you want is too many cooks in the kitchen like this thing doesn't exist you just need people to close the door and actually build it but arbitrum has reached that level of maturity where the core Tech is stable and exists and

now we can actually have a process where others can come involved and take you know actually build processes and it might you know be a little slower than it would be if there's one you know developer behind the closed or building it but that's that's a you know a relic of its own success and that's sort of the next stage here and I'm excited for the community portion of arbitrum to start and I can't wait to see the Innovation that will this will enable nice I think that's a good place to end it guys if you enjoyed this episode we have an episode coming out in a couple of hours arbitrum round two we recorded a couple weeks ago before actually I even knew there was an airdrop coming um but Steven and Harry were generous enough to give us another hour of their time that

episode that drops in a couple hours we went really deep on their thoughts on coinbase L2 deeper thoughts on the op stack how they're able to pass uh eat in some key metrics uh what's going on with Mev on arbitrum competing with zk's uh and a whole bunch of other things so definitely tune into that drop some a couple hours and Stephen and Harry uh guys just really thank you for your time I know uh how tired you are and how crazy of a week it's been uh so appreciate it thank you for having us [Music]