Scaling Ethereum, Part 2: Arbitrum

Transcript

Hello, I'm Jay Jang, co-host of Ethereum Korea One and head of business at Sunnyside Labs. At Sunnyside Labs, we develop and operate Privacy Boost, a blockchain privacy solution built for institutions. In this session, I'm joined by Ed Felten, Arbitrum co-founder and chief scientist, and Byungsun Park, head of LG Electronics' blockchain lab, to talk about how the two companies came to work together. Hello everyone, I'm Jay, co-host of Ethereum Korea One and head of business at Sunnyside. At Sunnyside Labs, we build Privacy Boost, an onchain privacy solution for institutions.

Today I'm joined by Ed Felten, co-founder and chief scientist of Arbitrum, and Byungsun Park, blockchain lead at LG Electronics. Today we'll be talking about how the partnership came about. So, Ed, when the Arbitrum and LG Electronics partnership was announced, a lot of people in Korea were surprised in a good way, because it was one of the first cases of a non-financial conglomerate building onchain.

How did the collaboration first come about? Well, these things take time to develop, and we were in dialogue with LG for a long time about this to understand what it was that they wanted and were trying to achieve. And there was a long conversation to figure out how to put the pieces together effectively. In our enterprise engagements, we work really hard to understand what it is that our partners want and need, and to make sure that the technology can be adapted to a solution that meets those needs. So on our side, we were focusing on understanding how to help LG achieve their business goals.

And as it turned out, they chose to move ahead with the partnership. Thank you. Now, a question for Mr. Park. I'd like to hear about the partnership from LG Electronics' side as well. What problem was LG Electronics trying to solve with blockchain, and along the way, what were your criteria for a blockchain partner, and how did you land on Arbitrum? I'm in LG Electronics' CTO organization, where I lead the blockchain lab. We've been looking at how to use blockchain technology to solve problems in our existing businesses or to build new businesses,

and we kept exploring that. Among those, the problems in the digital advertising market, especially the lack of transparency and trust, drew a lot of our attention. We talked a great deal with the Arbitrum team about this, and because we shared the same view, we signed a partnership. Above all, their developer ecosystem and their team are very aggressive. Another reason: as we keep tackling industry-specific issues, we expect general-purpose mainnets to hit their limits.

So when we asked what would work best if we later considered a specialized chain, Arbitrum's case looked very good to us. So we're continuing those conversations now. Thank you. Thank you. Ed, from your side, how did Arbitrum's unique characteristics help LG Electronics in this project? So, I think it was a few things. You know, the chain is a technology we think is very good in terms of scalability reliability liability and all of the basic technical metrics.

But we've also focused quite a lot on supporting customization and supporting compliance considerations, and thinking a lot about chain governance and what it is that enterprises want and need to see in terms of governance. And I think another thing that I think played into the success here was the strength of our team on the technical side, not only from an attitude standpoint, as Mr. Park suggested, but also that we have a very strong team of world-class researchers who are able to jump in and solve really hard problems when they do come up in these partnerships, and the ability to bring those sort

of world-class researchers to bear on some of the problems, I think, is one of the things that people find attractive about what we're doing. Thank you. Mr. Park, in running this project with Arbitrum, are there any results or insights you can share so far? Yes. The problems we see in the digital advertising market: when an advertiser spends a large budget on a campaign, where and how the ads ran, which audiences saw them, and how that's evaluated — we see that whole process as inefficient.

So we ran an experiment applying Web3 technology to it. We didn't do it alone. We ran a pilot with a major advertising company in Japan, and the results on their side came out very well. Acceptance among participating advertisers and audiences, and in particular the potential of zero-party data that we wanted to validate — both were confirmed to a degree. The visible result so far: that major Japanese ad company decided to commercialize a Web3 ad product and launched it in June this year, and LG Electronics technology is now being supplied to it.

I'd call that a tangible result. I'd like to ask one more question. Often, even if you try to solve offchain problems entirely with blockchain, only part of the problem gets solved, or the existing problem is solved, but blockchain creates new problems. I think that can happen. So as you take this project forward, or more broadly, in LG Electronics' blockchain journey, what challenges lie ahead, and what roadmap are you drawing up?

That's a tough question. First, what we learned along the way: at the start we used smart contracts very aggressively and tried to implement the advertising value chain, but a lot of it didn't work. In particular, targeting, bid pricing, and other issues advertisers want to handle with finesse — we found blockchain has limits there. I can't go into detail, but there are clearly strengths blockchain offers and parts it can't handle.

Designing around that well is, in a sense, the capability and know-how of a technical team like ours. For LG Electronics, the roadmap for now is for our Japanese partner to successfully selling and monetizing more ad products with more advertisers, and for more audiences and publishers to join this ecosystem. That's the roadmap we have in mind. Thank you for that. Ed, now that enterprises or institutions are actually building on layer twos, including LG Electronics or Robinhood, what are the questions that they ask you most consistently?

Well, they ask the obvious questions about speed and reliability and so on. But I think what is distinctive about what enterprises ask is the focus on control. That is, who controls the chain technology, who can change it, and so on. Governance, that's number one. Number two, customizability. And number three is compliance, making sure that their compliance needs can be satisfied at the core of the technology and can evolve as the compliance environment changes. And I think also enterprises think in a longer term than I think some individual users do.

And so questions about the sustainability of the technology, the sustainability of the arrangements around it, I think are very important to them. And they want a partner who they believe they can trust. I see. One more question about that. What is the technical roadmap for Arbitrum to help these enterprises or institutions? Well, it's several things. Scaling is a very important element. We've seen this with Robinhood Chain, where the adoption of the chain was much faster, certainly, than we expected.

And so the demand for increased scalability is really important. And also, if we're going to bring the whole world of finance onchain, it's going to require a level of scale that no blockchain today can approach. And so we're continuing to push on the scaling issue. I think that's really important. There's also continuing work around cross-chain interoperability and on advancing privacy technology in a way that is practical. That is, making sure that we have privacy constructs that are consistent with compliance and consistent with the transparency that people want from blockchain tech. Those things are much more challenging to solve in practice than they are

in theory. Thank you. Finally, Mr. Park, a word for everyone who joined this session — any closing remarks? I wasn't expecting that question. Companies like ours actually face many difficulties in adopting blockchain. But as all of you keep pushing ahead and building many things, I think we'll be able to use blockchain technology in the market more easily. That's my hope.

I'll keep studying, researching together, and talking a lot with you all so we can grow the Web3 market further. Thank you. Any final words to the audience today? Sure. We've heard a lot of inspiring words about Ethereum and the Ethereum stack today. And I think it's really exciting where we are. We are at an inflection point where we're seeing enterprises come onchain in a serious way, to move beyond toy pilots and actually be more committed to blockchain as one of the future technologies they're going to use.

And as we do this, it's important that we work realistically and that we understand how to build governance structures, how to build business structures, and how to build cooperation across the industry. The pie will be getting larger. There's more room for success. And if we focus together on meeting the needs of our customers and our end users, there's tremendous success that we can have as a community. Thank you so much. Thank you to Ed Felten and Byungsun Park for sharing their insights. And thank you to everyone for staying with us to the end.

Thank you. Please give them a big round of applause. Thank you.