Ethereum’s Path Forward: Aligning Security and Monetary Policy | S8 E6 | Hasu & Justin Drake

Transcript

I think it's futile to try to defend e as the pristine collateral anyway a big reason for that is the rooll up Centric road map of ethereum right so we're already saying we don't want people to use the etherum base layer we want them to use you know other execution environments we want them to use layer twos I think more likely that not like the idea of Eve as pristine coredor will die out with or without staking Rel so that's nothing when you ask me like should this be a goal of E's monetary policy I would say absolutely not I think quite the opposite of if anything right like if we're committed to the rollup Centric road map then we should try to push as many people away like as possible away from Eve on layer one towards e Layer Two hey everyone this episode is brought to you by namada the

shielded asset Hub rewarding you to protect the multichain so not only can you protect your own data across any asset and any chain but you also get shielding rewards for strengthening data privacy protections for everyone so you can check them out at n.net and follow the domain net launch stick around you're going to be hearing all about them like in the program hey everyone this episode is brought to you by Kinto the safety first L2 which is accelerating the transition to the onchain financial system they've got some very cool features like user owned kyc and Native account abstraction which solves a bunch of the onboarding and Bott back problems that many l2s suffer from so you're going to be hearing all about them later in the program but if you want to learn more and better if you want to join their launch program engine

ngn you can click the link at the bottom of this episode go check him out tell them I sent you all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone welcome back to another episode of bell curve uh really been looking forward to this one today we are going to be speaking with hosu friend of the show and Justin Drake another friend of of bcro guys welcome

back to being on the program great to be here yep great to be back yeah guys appreciate it um so I've really been looking forward to this episode I feel like thus far in this season we've spent a lot of time really going in the weeds we've talked to uh different marketplaces both Babylon and igen layer in terms of reaking and we spoken some abss and lrts I wanted to use this episode as opportunity to widen the aperture and zoom out a little bit and try to connect some of the the dots in terms of all the stuff that we've been talking about with reaking this season and how it connects to kind of these big debates that are being had about the future of ethereum and a couple of things that I wanted to talk about is

maybe maybe what we could actually start with is this Dynamic of or this debate around minimum viable issuance and the staking end game for ethereum so Justin I know you've spoken a lot about this H you did a really excellent episode on Uncommon Core with John and uh ongar and Casper so maybe maybe could I actually ask you to to Tee It Up please you know what is this topic of minimum viable issuance what does the debate roughly look like and why are people interested um in this idea of like the staking end game for ethereum okay sure so yeah MBI stands for minimum viable issuance um to kind of take it from real first principles so what is a blockchain is it's like a

piece of State um that's maintained across uh a network of computers and a mechanism for updating that state collectively and the way we update this is through a consensus mechanism and that consensus process must be incentivized and so eum has a like series of kind of fee streams that go to these parties called validators um that update the consensus um but one of them is the isues and it's actually today I believe it's like 85% roughly um of of the incentive for valat us to maintain the consensus so we can see it's a very very central part of um what a blockchain does and then inside that it's like a very important part of how that mechanism works and so um today um

there is a there's a a curve that basically determines like for some amount of valid datas that in the network what is their reward um for staking and um uh the way it works uh right now is that the more people stake um basically the the lower the total reward goes but it always remains positive and so um this has been basically predetermined before the merge it was kind of handwavy um back then the concern was mostly uh you know how can we get people to stake because this was a time before proof of stake was even live and um I from reading back and like remembering some of these debates it was

really about um oh like what if not enough people stake will this network be seen as secure enough and so I think a very conservative uh kind of issuance policy was chosen and now I think um like two years later um I think people are starting to say hm was this actually kind of the curve that we wanted or is this the mechanism that we want and um if no then what should it look like so I think for the first time people are kind of taking like some of the things that we learned since then and asking so what if we could actually redesign the way that issuance works I would we design it today and yeah they are broadly um I

think there's actually many different uh parties here that like all have different preferences and um it it kind of goes to show that this is like a really central part of ethereum right so not only does this touch on you know core mechanism design it also touches on very key outcomes in the staking Market um one that we will probably get into uh around like okay so what kind of valid that are set um do we actually want and like what kind of curve translates most likely to what kind of outcome in the valid that are set but also key questions around you know monetary policy for example you know and the idea of how easy should it be to change ethereum um and so different people like

favor or oppose different positions for like um because they value different things about ethereum and I think that's kind of a good high level overview over why like what is this about and why is this why is this happening now and also like why is this so contentious yeah so you know my I think there are that was really well said and there there are uh just like any really complicated issue there are many different parties and I think also a couple of different issues that are getting conflated as well and my understanding which isn't as deep as as either the two of yours is two of the central uh disagreements that people are having is one are we paying too much for security today and I think you hear this

generally from people who are sort of in this me ecosystem and when they're looking at the different actors that are in the Meb supply chain like there is some amount of agreement that the proposers are getting you know that they're potentially getting overpaid and then the other argument is one that's more related to this this idea of eth as money um and if there are these lsds which are extremely liquid and fungible um and they also are yield bearing then are more people going to consider like the LST are going to want to hold the LST and sort of we lose some of this moneyness idea of of e the asset itself is that your guys un do you agree with

with both of those arguments and and Justin maybe could you give us a sense of of your thinking on this topic yeah I pretty pretty much agree um there is this structural overpayment for for security the way that the the the yield curve is is designed it is it has a shape 1/ x s so sorry one over square root of x where X is the total amount of of e Stak uh but it it doesn't go all the way to zero actually the the smallest value that it goes to is 2% so even if everyone stakes and there's literally zero meev you would still be making the 2% now the cost of staking more likely than not is measured basis points uh is much much lower than than 2% and so structurally we're overpaying

for for security and we should expect the vast majority of of e uh to to be uh staking eventually and this has multiple um negative consequences one is that uh we have an unnecessary amount of issuance uh and that comes with unnecessary cell pressure in the form of of taxes it also uh weakens the the scarcity of of of EA with unnecessary Assurance it um also means that um we are basically forcing anyone who wants to optimize yield to be a a Staker and this is where the the reaking meme comes

in um technically speaking igen layer is just programmable slashing it doesn't mean that you have to be a Staker but um if you're not a Staker you're kind of giving up on this minimum 2% um and and you're you're you're losing out on so much that you're effectively forced to be to be a Staker and that means that there's a strong coupling between between staking and reaking which we don't necessarily need to have so in my opinion the the better outcome would be that the market tries to figure out the the fair the fair yield uh that the the stakers uh should should be earning and it should match

the cost so let's say that um the the true costs are let's say 40 basis points 0.4% well really the market should on its own be able to find this equilibrium at 4% issuance to match the costs and then now if I want to come in and participate in an AVS uh is actually net net neutral for me to participate in in staking because you know it will cost me 40 basis points I earn 40 basis points and so I'm that neutral and so it doesn't mean that there is this Force coupling between the two and another thing that you said Michael is that um when you're forcing everyone to to move into to staking you start to lose uh the pristineness of of e as a collateral

asset and it basically sucks the ER out of defi the cost of money is artificially high above 2% and so there's some applications that just can't compete and one of the best applications is maybe totally trustless uh decentralized stable coins you have projects like liquid for example that can only use e pristine e as collateral because it's governance free and it cannot operate a whit list of different um lsts or lrts and they just can't afford to pay the the 2% uh let alone the 4% that we have today and so what I'm hoping will happen is that we can have the market figure out the true cost of money cost of money

goes way way down the the cost of security for the network goes way down so we have much more scarcity much less sell pressure uh and we have a much more thriving uh defi Market that uses pristine Eve as collateral yeah it's uh you know what this uh maybe my interpretation of having listened to these debates and maybe even to just sum up what the two of you are saying is what we're really having a debate around here is ethereum's monetary policy and there are lots of there have been lots of debates around monetary policy that have been had over the centuries and Millennia and you know lots of different takes on on what it should be and what the objectives of it should be if you look

at the the current instantiation of how we think about monetary policy in the US it's governed by an entity called the Federal Reserve and the tricky part about monetary policies that it touches so many different aspects uh so many different things right and currently what we have it hasn't always been this but there's a dual mandate for the fed and they've said look monetary policy impacts all of us but you know we can't be this you know we don't want to touch everything here and try to do too much and have there be Mission creep so we're going to focus on these two things it's our dual mandate we're going to focus on um price ability and uh employment right those are the two things that we care about and my interpretation of listening to this in ethereum is we're we're trying to figure out what Monet what the

objectives of monetary policy should be as well as I think the governance around it and and how that all works and I think there's an aspect of maybe one of these um one of these objectives could be trying to figure out and pay for an apprpriate amount of security right are we overpaying or proposer set or whatever um then another objective might be uh favoring ethet like what is the correct balance here of canonical eth versus lsds that we think would be a healthy uh amount of adoption in the marketplace one other objective that I might add and H I've heard you speak about this is what should the composition of the validator set of ethereum look like um which I feel like has a big part of this discussion so I I

would just be curious you know if we're talking about East monetary policy here if I had to put you on the spot what are the most important objectives that we should be optimizing for and host maybe could you introduce this idea of how the monetary policy impacts the composition of the validator set um yeah sure so I mean I think as part of a kind of broader answer to some of the things that that Justin said so um I think Justin is completely right that when um you basically introduce a a market where L um people are bidding for the right to be a proposer like in some shape or form it like ends up with a mechanism like this whether we are talking about you know APS um or mvi those are both basically ways of

implementing that and APS is Testa proposal separation something we I think we will talk probably about later in this episode but what you basically um do is you create an intense uh like competition on price to be um a proposal and um what you end up with is uh with exactly that right you end up with competition um on on price and so there is a direct link here between the kind of mechanism that you use to select the next proposal and the outcome uh of who that proposal will be on average and when you look um at so I I think find it very interesting when for example when you said Justin that um the cost of um

of staking is measured in basis points right and this is actually um very far from the truth um when you kind of look at the like how heterogenous the staking Market is in terms of cost and so um when you when you talk about a centralized party like coinbase that's running you know all of their um all of their validators on on a single server Farm then you actually get pretty close to that truth but when you look at decentralized taking pools um like uh like Lio like rocket pool or you look at solar staking um which is also a form of kind of decentralized staking then all of a sudden like in the first case um

those protocols actually spending tens of millions of dollars um per year uh in order to build out that that that infrastructure and kind of the cost of maintaining a decentralized protocol is I don't know maybe surprisingly maybe unsurprisingly is a lot higher than doing it in a centralized way which I guess if you look at blockchains there also this like very kind of cumbersome way of doing something that could be done like a million times cheap on a centralized server right um but you do it with all of kind of these extra checks and balances and you do it in a way that like every single computational step is basically you know um checked 100 times over and so um so the very same thing applies also to decentralized versus centralized taking pools and um

in effect what happens um when you create this kind of intense competition on price now um is that decentralized uh staking pools and solo stakers both um would more likely than not be pushed out of the market and um the cheapest uh you know the cheapest provider actually um like the competition really magnifies the competition on price and rewards basically the the most uh the most centralized and cheapest provider and the one that has the most sticky um deposits and I would say that that's kind of two parties that would benefit a lot from that one is coinbase um the other um you know the next ETF issuer um for ethereum um and yeah more likely

than not that's also going to be coinbase so I think you're really um yeah uh you're really creating an outcome here or you risk creating an outcome where um yes you limit uh you basically limit the role of the proposer to something that is much smaller today and by proposer I mean like both the proposer and the and the tester so limit that to something that's smaller than maybe it is today let's say you know it's kept at 25% of all ethereum stake um but at the same time the composition of that set is going to be highly highly concentrated uh pretty much all inside the us all run by like one at most two very centralized party that have really no checks and balances on their behavior

and that most importantly are beholden to shareholder value Maxim Max imization right so I'm a big fan of coinbase today um you know I'm I'm a big fan of what Brian Armstrong is doing and I've zero doubt that you know coinbase is highly like a crypto aligned ethereum aligned Etc but the way that you know the market works for us companies is that when coinbase you know for some reason is not doing well for a period of time it's you know it can happen incredibly fast also that you know their coo is fired you know and like the culture of the company changes and um or you know you have some

kind of Demands uh you know from US Government three-letter agencies and so on and when you're in that uh when when you're in that environment this is very little that you can do as coinbase and as a result as ethereum to defend against that so I think the composition of the Val that I set especially the the the kind of geopolitical um centralization but also you know the the the kind of diversity of parties participating in this and like having diverse preferences and um yeah being very ethereum line um I think that is very very important and that is the big risk I think if you um if you

were to limit um the the staking Market in this way today right so so hu is right that it's not just about um variable costs that can be measured in basis points but you also have fixed costs and those like uh especially affect the the solo validators and the smaller validators so I do agree that we need to to work very hard to to lower the the fixed cost and there's um statelessness there's uh SN ifying the evm SN ifying the beacon chain that will mean that eventually you'll be able to run on the Smartwatch um I think a lot of the the fixed costs are also uh due to to to knowledge and and devops and the scariness of doing it

the first time but a lot of these fixed costs I think will will commoditize over time um now in terms of what the what the the stakers provide uh there's basically two things one is that they they provide raw e and you can kind of think of this as a crude uh Economic Security uh and then there's maybe a more valuable or like slightly different service that they provide which is diversity and and decentralization in the operator set and one of the things that I'm slightly optimistic about is that the um basically the rewards for providing this crude um if will will go down to to to to zero it will be net

neutral uh but there's going to be plenty of rewards for pro providing diversity and and and and decentralization and and we've seen that actually uh historically ly so uh there's air drops that are specifically targeting the the the solar validators uh for example stocket had one and so it turned out that um you know as as a a provider of diversity and decentralization you made 10 times 100 times basically orders of magnitude uh more yield than than you than than than coinbase um I would also you know highlight that that that coinbase specifically has very high um um you know variable fees uh they have a 25%

fee and so uh it's maybe the opposite will happen like the the solo validators will will will do better than anyone putting eth in eth in coinbase yeah I think this is like all good counter points I think getting like the the fixed cost of staking like as low as possible is very important not all of this is ethereum's kind of responsibility or something that ethereum can help with necessarily I think a lot of it is you know the the the kind of infrastructure that's being built out by decentralized staking pools right this idea of having a staking router um where you can have different modules that like stake is allocated to you have uh the all of the infrastructure around the liquid stake in token um you have uh you know all of the governance kind of the noer

management you know the the kind of checks and balances around that this is all this is all stuff that needs to be built out uh once and then needs to be improved over time and we still still in that buildout phase so I think this kind of gives some motivation for why the costs are so high right now and um so for example Ido um has never made a profit right it's still um it's still in that phase where it's it's investing um a lot of money into fixed cost build out that infrastructure over time um you know to to make it more and more and more decentralized yeah and decentralization is very expensive so um one other thought that I had um I think you like both of you emphasized a lot

this idea of Eve as the pristine collateral and this like asset that we want to defend um a lot right and my counter point to that would be that I think it's futile to try to defend Eve as the pristine collateral anyway um a big reason for that is the uh the the rollup Centric road map of ethereum right so we're already saying we don't want people to use the etherum base layer um we want them to use you know other execution environments we want them to use layer twos um and so what does this mean from the perspective of the layer one it means that all of this money will sit in smart contracts anyway and people will be using some kind of derivative token that's issued in in

another environment right and so um yeah I think more likely than not like the idea of Eve as pristine cror will die out will die out like with or without staking really so that's nothing when you ask me like should this be a goal of E's monetary policy I would say AB abolutely not I think quite the opposite if anything right like if we committed to the rollup Centric road map then we should try to push as many people like as possible away from Eve on layer one towards Eve on Layer Two so there is a counter argument uh to that uh which is actually related to SN ifying the evm once we've SN ified the evm uh we can introduce a new OP code which I call the evm in evm op code where you can verify

evm execution within the evm so it's sounds a little complicated but basically it just means that rollups that want to be evm equivalent which is a large part of the rollups can just use an OP code to get that equivalent for free without having to write their own custom circuits like SN circuits that try and get as as equivalent as they can or try and write for proof games that are as equivalent as they can the problem with circuits and for prooof games is that first of all there's a risk of bugs and so you always need governance uh to kind of Monitor and supervise and two every time that the layer one evm changes um in order to stay equivalent you need governance to

update to the new rules of the evm and so what this op code gives you is exact kind of bug for buug compatibility with L1 evm and you also get the automatic uh uh upgrades of of the evm when when the L1 hard forks and so that means that you can build rollups that don't have any governance and have the exact same security as L1 uh and those are called native rollups uh they used to be called enshrine rollups but people didn't like the name enshrine so they're now being rebranded to Native rollups yeah I I think uh so that's a little bit of a New Concept for me in general and frankly ZK is a bit of a a

blind spot which will be remedied in a future season but um but yeah I think that's the I'm very sympathetic to to both of these viewpoints because you know hu I I um I I really understand this idea of like we're already moving towards this rollup Centric road map we we want new tokens to issue on l2s we want people to interact on l2s we don't want them basically this idea of ethereum is a B2B chain or a bulletin board or whatever analogy you really want to use we don't want users interacting on eth that's a chain for for rollups to build on um and so in in a sense we've already accepted this idea of just like in the regular monetary system there's not a lot of cash dollars that's only like 7% or less of actual cash in circulation it's it's like an

IOU from a bank is what we think of as as um as money and I don't think that really diminishes the value of the US dollar but on the other hand I am sympathetic to the idea that in the extreme uh you know if you were to have 100% of e State then you'd be doing all of this you know some of these ideas kind of um come into question a just with the amount of taxes that you need to pay um and I actually want to I want to start connecting us or like pushing this conversation a little bit to where I think there's a really interesting intersection here between this discussion that we're having and reaking which is this idea of real yield um real yield within ethereum so can can one of you just give an overview of like how we're defining real yield here and how

you see um the role of real yield in eth's monetary policy and maybe some of this idea actually Justin maybe could I just call you to give this example because I know you're a proponent of some of these like burning and smoothing uh techniques and and returning value to canonical raw eth holders so can you just give us like a definition of real yield here within the context of what we're discussing right so I guess real yield is the yield that you make when you discount the the effects of of inflation uh and one extreme example here is if everyone is staking everyone's making the 2% but everyone's getting diluted by 2% and so when you discount the effect of

inflation relative to what you get you you get zero uh but it's actually worse than than a zero real yield do the like the real real yield like the actual true yield where you need to take into account uh taxes and let's say that you know the Blended tax rate is 50% whatever some number then you're actually going to have a a negative real yield and so we're kind of moving with the current monetary policy we're kind of moving towards this this trap we're slowly moving to a position where everyone is staking and everyone is losing um no one is beating out the market everyone's getting equally

diluted and even worse than that everyone has to pay uh taxes on that and so the the much better uh outcome in my opinion is that we dramatically bring down the the the the the the issuance and by bringing the issuance down to to zero we'll be in a position where the the real yield comes from actual value that is created and captured by the affirm Network and there's arguably three different sources so the first one is congestion fees so whenever there there's a fixed amount of block space it's a scarce resource whenever there's more demand than there is Supply congestion fees are are positive and

that gets captured with VIP 1559 and through the the blobs which also have a very similar mechanism and then um there's uh me which is contention fees that today are not being captured but could be captured uh in the future so that is again value that a f is is is is creating and and and and could be capturing and that really contributes to to real yield and then there's this final form of of yield which is reaking yield uh and interestingly this is where the the issuance curve can be designed to also capture that so we have we have several choices one of them is that we could bring the the

yield curve down to zero but we could even be more extreme than that and have it go 10 towards negative Infinity as soon as you start um having the total amount of e Stak close to the the targeted cap and if you do so and you know you can make 2% through reaking then you're willing to pay let's say 1.8% in negative issuance for the privilege to be a a a a a Staker and so like this 1.8% would effectively be reaking burn which would contribute towards real yield yeah and I guess I mean something to add to that is um I mean this idea like when you when you kind of talk about this idea that

hey there's like competition uh between you know who the next proposer is like and it's intense and it's on price like in spite of like I'm very like skeptical of the outcome that this creates but it's it's something that we know pretty well at least like from proof of work right because in proof of work also you know it's a pure competition for how much money you want to burn to make the next block and uh yeah so I think the Dynamics are like pretty well understood improve of work it basically pushes people like lowest like lowest cost source of energy as well as like the cheapest access to C which tends to be in the US for like a variety of reasons um it used to be in China now it's in the US so um um yeah I think yeah that's so far like I agree

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that the mvi stuff if we were to go down this road would drastically increase the adoption of reaking which correct me if I'm wrong but I sort of heard that I heard you make the assumption that reaking is going to be a thing there's going to be some amount of yield uplift I don't know if it's 2% or 0.5% or 7% we're all just guessing about how much yield there really is out there in terms of reaking but it seems like now reaking has just been accepted and is almost like a a core assumption that we're going to start designing eth monetary policy around and I I would just be curious because you know we how would you guys look at the the pros and cons of Leaning into reaking

here because even if we look at something like Lio which I think we're all you know fans of uh you know the Lio that the sort of history of Lio was there was an issue in ethereum's ux right there was the merge there was a period of time where you wouldn't be able to if you staked you'd be locked up for a long period of time um also for certain philosophical reasons ethereum didn't want to do in protocol delegation and so inevitably we were going to have outof protocol staking pools that sprung up um and now we're a little bit concerned actually that that is too successful right or or some people are concerned about that and you know when you look at something like reaking maybe you could squint and see a similar

inevitability or outcome there right where today even though it's not perfect ethereum has a lot of control around its monetary policy right like we're having this debate because we can impact it whereas if we start to rely on something like reaking which is out of protocol as as a core assumption um and the amount of yield that reaking generates then we lose some of the control that ethereum has over its own monetary policy do you do you agree with that disagree with that how do you weigh the pros and cons there uh I can start um I'm generally not very worried about what you're saying um I think you said I mean while reaking maybe it has this this huge yield for Valas and so everybody's going to stake and so yes at the limit like if

you create more competition on price between Valas in the saky market then yes basically you push people to like more risky stuff right so I think you see this when you know the FED lowers uh you know interest rates um you push people out the risk gr right this is just like kind of very very like normal kind of stuff right um but in this case I mean so there's actually like very very we also talked about like overloading ethereum consensus overloading The ethereum Proposal like reaking I think when like seram started talking about it it was like marketed as this oh this is like your way to opt into the ethereum Val set because

ethereum is like so secure and so we can export the security and this going to be so great for ethereum like the reality is um reaking is really just like you know slashing commitments as a service but if you kind of ask then the next question okay who's going to be slash and what is the work that they actually going to do in most cases you know that party there's no reason for that party to actually be an ethereum validator so pre-confirmation are really the only job that is like an actual kind of job to be done that's valuable um that will be done that that can and will be done by you know in eum proposal um apart from that like parties using reaking would just be it's just

like a kind of you know matchmaking protocol it's like Tinder but between you know someone who you know wants to get a validator or like an oracle or some kind of service provider you know if you remember kadal you know from like way back in the day uh it's like you know it used to be this kind of board where you post hey I want you know someone to you know hit that smart contract of mine every hour right and in a sense uh reaking is much closer to that than kind of you know what it was originally marketed as uh so it's just a way basically to kind of match the you know different service providers who are not really Val at us with like people who want that service provided and are willing to pay for it and so if you ask me okay what is the likely effect you

even if like all EAS opt into this uh you know what's the effect on year I mean I'm like 99% plus sure it's going to be below 0.1% real yeld so it's not going to matter really that much um and so I'm not concerned um that we're kind of pushing people towards that I'm not really concerned that we're overloading kind of The Proposal um yeah I think it's mostly actually kind of oversold as a risk Justin you agree uh yes um I also kind of believe like hu that we should try and and separate the notion of of restating and programmable slashing and

really ion layer is of the second type as the the programmable slashing and the reaking is merely a reflection of this this bad monetary policy that uh that we have right now really we want to be in a position where staking is is is net neutral you're you're not making money from from reaking and let's imagine uh just as a for experiment that uh we did have this issuance curve that went towards negative infinity and that we were actually at negative some number let's say negative 1% then now if I a reaker what what is the rational thing to do the rational thing to do would be to unstake and then opt into this like AVS this programmable slashing without

opting into the native uh slashing and I would earn you know one more percent I would have to pay the negative 1% but then there is this one Edge case this one Edge case is called native reaking the idea of native reaking is where the AVS is specifically overloading the op operations of a validator which are either proposing or attesting um and so in some sense if we have a negative yield then that means that there is value to be had from overloading the valid dator set which in some senses is is is a bad outcome right we want to have this clean separation between staking and and programmable slashing or

or or or or or or or reaking and um the the good news is that we can completely prevent the overloading of proposing right as a validator you have these two roles you're either a proposer or an aester and with ideas like execution tickets or execution auctions which which fall under the umbrella of attester proposer separation we can make sure that the the proposer is no longer a validator is it's a role that's opened up to the broader market and so it falls out of the scope of of native reaking and one of the examples that hassu mentioned is these pre-confirmation where pre- confirmations are overloading

the role of the uh of the L1 proposer now the good news is that today we I to my knowledge I'm not aware of any AVS that is actively looking to overload the attester set and and that that is a a a good thing uh because it it means that um there will be a much cleaner separation between staking and restak and if we were to ever go in negative territory anyone who's rational would just on stake and do the pure um non-native uh AVS uh staking okay I wna I want to get into this idea of because I think this is going to be uh like challenge a couple of people's

assumptions about uh reaking and and where it's valuable and I I want to uh really what we're what we're talking about here is pre-confirmation is sort of the useful um use case for Native staking and so hos I want to ask you actually to double click on why um why pre-ms are interesting here as opposed to some of the other like just to maybe tee you up here right there are other things that proposers can do right there's um like the like uh you could have a certain subset of ethereum proposers opt into uh data availability like like Igan da right as as an example of an ABS or you could ask them to do all these other things but well I mean you can do all of that right like all of what we said is like aoral to something

like DDA right I is just like you're opting in okayy I'm giving like my I'm storing like your data on my computer and if I like can't provide basically like the data availability proof I don't know how it works exactly but then I can get slashed right like nothing like this job is like completely autog to ethereum validation so yeah I mean this is an example of something that like is a useful service provided by ier I think it's like going to be very cheap da um but it's it's just AOG to ethereum it's you know some any party can opt into that b exactly right yeah so that's the so any party because I think a lot of people are making the implicit

assumption that it makes sense for ethereum validators to opt into these services but what we're saying here is actually any party can do that and especially if we experiment with something like negative yield or negative issuance then it doesn't make sense for them to First opt into negative issuance and then go perform these Services they'll skip that step they'll just perform the useful services but there's this small subset which is the native reaking part of this which actually they have to be opted into the negative real yield to do this valuable thing which is pre- comps and I think the the reason why uh that's valuable is because they have the block Monopoly right um and this is where we get into a tester proposer separation so C can you just uh so there's a great explanation Justin of like breaking apart the the

two core functions of there's proposing the actual block and then eventually uh some small set subset of proposers are asked to attest to the block we're talking about breaking that up hosu can you just double click on exactly why that avoids this um or just sort of the the implications of APS and how that avoids the U the overloading of consensus and then I'd frankly love to just get your guys take on pre-ms generally and where you see them being useful and what the opportunity set sort of looks like M yeah sure so for me I mean yeah reaking kind of plays into that why APS is interesting but you don't even need to talk about reaking to understand why it's a good idea so you need to just look at uh meev and

basically the idea of proposal Builder separation right so before um there was Flash Parts you could make a reasonably reasonable argument that hey like we're overloading the consensus you could have used also this argument back then um because now mining pools uh you know they had to do you know all of these jobs like finding the best M opportunities and if they were successful at that then they could make much more money than mining FS that didn't and so it was very kind of concentrating force on the mining pool landscape and the hash the hash rate landscape and so in a sense this like job that they were doing previously which was very thin became very thick and very like had much more room for differentiation and as a result also concentration of power and so what we

ended up doing was stripping out the part that made you know one mining pool be better at me than another mining pool and put this into a separate layer and made it so that all of the mining pools could opt into that in a permissionless way and that was me Gap and then later me boost and so on right and the general idea behind this is proposer Builder separation or in other words just division of labor and like specialization kind of around like different uh different jobs right and um I would say APS is is effectively like the end game of PBS it's just that so far we took out the building from the validation but right now validation is

still proposing plus Ed station and so in the end game you will basically move the proposing more towards the camp of building away from the camp of a testing and so it's just like where previously the proposer sorry the the validator was doing two jobs and the Builder was doing one now the Builder is doing two jobs The Valor is doing one so it's like we're kind of stripping out one more thing that is also kind of like being prone to um centralization um and putting this into this box um you know that we were like putting very very far like back in our drawer and saying let's not deal with this right now you know so it's kind of um the Builder is like everything that

we don't want to think about right now and we like in protocol we're just like putting it putting it in there and saying you know um you know this party is quite powerful they have lot of responsibility and um but we're just hoping that the market kind of takes care of that through competition and kind of keeps these builders in check um and we can talk more about that if you want as well but that's the general idea um behind APS and how also reaking Place into that so I I've got a question actually for you guys about before we get into the the the reaking part of this so the the on the PBS side of things um I I would I would curious about I I love that explanation but I

think this comes originally from barnab or he's who I first heard describe it so credit to to barnab for this like division of labor I I really like and the splitting of consensus duties in between different specialized actors I really like that um and I think that you know maybe just to caveat this I'm I'm in agreement that I think PBS is the right move and the right design philosophy but I wonder if it's one of the questions that at least I've been asking myself is what what is the correct balance of specialization in between someone like proposers and Builders um if I was to be like maybe a little bit critical of of the current state of it it's uh hosu I kind of just heard you say this as well which is just say hey we really care about especially like home stakers um

and solo stakers and we we want to make sure that we're not like either overloading consensus or asking them to spend too much money either in the form of Hardware or Internet bandwidth or or whatever it is and so we're gradually unbundling this role of these home stakers and we're giving it to builders and Builders are kind of this like blackbox you know catchall for you know that is needed for the protocol to scale but realistically it's a very small number of hedge funds and if if I was to be a little bit critical I think it's allowed us to myopically say hey we're still extremely decentralized here looking at this this one measure um which is you know we haven't adjusted what it means to be a a hom stick who are actually making their jobs easier

and giving them more yield but we're increasingly relying on this small set of extremely sophisticated actors for core infrastructure in terms of how ethereum sort of works what would you guys say to that maybe criticism or push back and when do you like do you think it's time to have a little bit more of a Nuance discussion of like how much we want to unbundle or what would you guys say to that that push back or am I just we off base with that with that in general I mean I think these these two problems can be analyze pretty separately and I think you know it's a why not both kind of situation um one of the things that uh APS uh gives us is that it cleans up some of the lingering

remnants that PBS hasn't completely addressed so one of them is is timing games as a proposer I still have an incentive to be very clever on when I call get header on the relays and those this is called timing games another kind of remnant of PBS is this notion of meev spikes so me is extremely spiky on like issuance and because I have the right to be the proposer I get all the me and now I have to deal with the spikiness which um is actually arguably bad for for the solar validators and the reason is that the the median spike is lower than the average Spike and so if you take your typical Sol of validator they're going

to underperform the market right I run a validator at home I'm underperforming right uh and so I have this incen to join a pool and and this is uh this is bad for the the sort of validators and then there's the final thing which is the overloading of the proposer if you have this right then now people designing avss can get very very creative and and and try and overload it so I think we can completely uh clean up the um the loose ends with ATT tested proposer separation and then there's the separate question of okay what about the rest you mentioned these three benefits I think the fourth one is getting rid of relay Cas right um because we have this weakness yeah we have this weakness

right now in in the way that PBS works that we're relying on the central escrow between that that like negotiates this handshake and like release of the funds in return for the block body um between the proposer and the Builder and the moment you kind of make it so that the Builder can propose you no longer need this at all and so you losing also one party where things can go wrong one party where censorship can happen Etc right I mean technically there's um designs that are that bring PBS also known as Mev boost to the next level it's called endrine PBS where you you remove the relays but you keep the timing games the Meb spikes and the overloading uh so APS specifically helps with the F three but you're right it

also encompasses and Shrine PPS and and removes the the the the need for relays now in terms of the other part of the pipeline the the building the searching all of that stuff um one of the attitudes that you can have is just assume the worst case assume that it is a super centralized entity just one guy and and he's the devil um and you want to basically limit the the the action space that this one bad guy can can do uh and this is where things like inclusion list come in so even if you were this one entity that controls the the block building you still can't censor um and then you have all sorts of other gadgets uh like like like

encrypted meols and whatnot that mean that you you can't you can't front run uh you can't C liveness failures you can't cuse safety failures and so really it's it's not a big deal uh that there is this this one entity that that that that controls everything um one counterargument to that is that even if fundamentally it's not a big deal mimetically it's a bad look like let's imagine that Citadel were to build 99.9% of etherum blocks and they you know they didn't do anything bad with it but it's still kind of a a bad look from a PR standpoint and that could affect for example the you know the monetary premium or you know the way that ethereum is is perceived um in some

sense the perception might be more important than than than the fundamentals another attitude that you you might take is just put your engineering hat on and trying to actually solve the the problem and this is what flash Bots is trying to do with with with suve like let's try and build these uh these decentralized um uh blog builders that that that use I have a very fancy cryptography or or Hardware enclaves or or things like that and I think the the whether or not we have APS in some sense is orthogonal to whether or not we can build we can build SUV so I think it's good to to hope for the best that SUV will be successful but at the same time we should be we should be

doing a tested propos a separation and then there's a whole other part of the conversation which I'd be happy to expand on but it turns out that pre-confirmation are this kind a very natural design space that so far has been completely uh you know underexplored and um in some sense pre-confirmation gives us a much more wholesome Market structure than we currently have and it basically boils down to the fact that the way that um PBS works today is monolithic in the sense that you have one actor who's the most competitive the most dominant actor could be Beaver build for example and they get to dictate the contents of a whole block so it's kind of this monolithic thing where

in one fail swoop you have you thousands of transactions that are that are being settled at at One Moment In Time with pre- confirmations it's a very different model it's a kind of this real time incremental thing where instead of having one Mega monolithic Builder you have a Searchers that are competing with each other on every single transaction that comes in and so you have this this notion of almost continuous time with Tex and then the block is being built from top to bottom um you know with with you can call them shreds because this is what Solana calls them I'm reusing the Solana nomenclature of of ticks and shreds um so you have this this real time uh block building aspect and that

can be like much more distributed and much more competitive and and and permission list and it doesn't have this kind of big dominant bully effect where if I'm the strongest economically I can dictate my rules and do things like censorship I think also you know to be fair I I want to maybe push back on a couple things that you said but also just be like you know this this is the end I I really do think vitalik wrote the best he wrote the endgame of different blockchain designs and you know he even from the different starting place of like uh like something which is more of a high high TPS chain like salana and ethereum um starting from very different places but sort of getting to this this place of um you know either from the ethereum St

standpoint like more centralized sort of Builders with decentralized validator set and salana you have slightly larger validators U but you also have things like um easy ways for users to like like clients and data availability sampling and verification that users can do that sort of thing and uh end games are verging here there have been a million different podcasts on that um but one of the areas where again I see reaking potentially playing a part here but you guys push back on me is it seems like in whatever endgame different blockchains are going towards we're gonna have some element of like a big box like Josh Bowen did a really great presentation of

this on um in research day I I thought it was excellent we'll link it in the show notes I've tweeted out about it definitely go watch this um but one of the things that my understanding is that people are starting to look at reaking as ways to potentially decentralize some of the necessarily centralizing infrastructure um I know this is being explored a little bit over on um salana which is also by the way going the direction of PBS so this is going to be a challenge that is coming for every chain but you guys see there are being opportunities for reaking to decentralize some of these sort of centralizing components and I I mean I don't want to overload you four

different questions in one but yeah actually let's just start there do do do you see there being uh opportunities for restak to decentralize centralized uh components of the these blockchain end games um I can start with this one I'm generally not very bullish on that um like my general view is reaking is overhyped as a technology and kind of as like the way that it expands the solution space um pretty much everything that you can do with reaking you can do like in your own blockchain um because you know it just uses a committee that's bounded by you know some kind of economic stake right I think where where it gets more

interesting is when you then introduce kind of you know inter subjective stuff right like the the way that the I token is constructed is like yeah you can have that but then you can also have like layer of kind of uh you know social consensus maybe on top top where you know disputes can be resolved but then you can also counter that argument by saying well yeah you can have a smart contract and that smart contract can can of governance like in ethereum and yeah you know it can have the same outcome right so in reality I think like what can you really do with reaking that's novel not really that much because everything that you can secure still must be proven you know on chain in some way and um this is kind of in contrast I would say to Technologies like zero

knowledge um for example because there you can do like a lot of comp computation off chain and then you can just make a proof on chain that the computation was done correctly or um the use of you know trusted execution environments tees which is what we're researching a lot which is the idea that you're running basically um you know you're running inside inside an enclave where um the exactly kind of you can exactly attach to the code that's executed and you're extremely limited by the hardware or like the virtual Hardware itself in what you can even do and they you can you can even like constrain people's behavior to okay what website can you like what what what HTTP address can you even call and like you can make

cred credible commitments towards stuff that's even like they would never be provable on chain for example and so I'm more interested in I think those two technologies for expanding um in particular like this the commitment space um because I think expanding the commitment space is is exactly what we need to kind of decentralize um the the blockchain end gaming and make blockchains more powerful I've got I got a question on that hosu so you know we were talking about I mean one of the reasons why maybe I just uh maybe I'm just wrong on this but one of the reasons why I've been sort of interested in reaking is you know there are all there there's actually frankly a debate right now in

called piscine Paradigm tweeting about this you know but uh you know there's been there's been a little bit of um hey maybe we should be rethinking what the role of either the Bas layer is on the more extreme end of things which is it seems like there's a growing chorus of voices of people saying hey maybe actually we should have some applications on ethereum my personal opinion is that we're too far gone on the RO up Centric road map but there are some folks who are specifically pushing for uh you know maxing out da for ethereum uh for example um and obviously that would represent a massive sea change it would be almost I would guess politically impossible to actually push that through but what would be interesting is is kind of what I da is doing saying hey you know we're not

going to actually you know push this through in one of the the big upgrades that ethereum goes through periodically but instead what we want to do is have a smaller subset of either ethereum validators or this like external group um opt into providing da type services and it allows you to almost it's almost like a canary Network right allows you to test out different um upgrades or things that you might want to do and then you could get an understanding of what works and then make the decision later on to enshrine it in the protocol and the reaking provides some amount of security right that that uh whoever is opting into providing these additional da services or you know you can imagine some sort of finality Gadget or mechanism you know what I mean it almost

kind of allows you to test these things out on the eum road we might want to do I mean you're just you're not arguing for reaking you're just arguing to like some kind of private Market Solutions before we like that we can look at before deciding what we want to enshrine in the protocol and I mean even the fact that it's in shrinal at all shows you that it's really not expanding the design space you know because otherwise it wouldn't be in shrinal without like changing how ethereum works there's no real difference between IG da and Celestia right I mean of course the protocols like work differently but I da is not leveraging any fundamentally like new technology that's l couldn't they just have like slightly different kind of design tradeoffs um because it you know it also works with I don't know

it's it doesn't even like use a consensus it's just like making commitments and then like holding people against those commitments okay I got you so what you're saying is that we don't need this reaking mechanism here where people are you know opting into additional slashing commitments against their eth to provide da services and a private Market solution in the form of Celestia already cropped up we as you know the ethereum protocol here uh could just look at Celestia say hey this looks interesting about their design and decideed to implement it in a fork so we don't really need restak for this I guess in the question mean I I I guess my no my my actual point is like you could have built like something that works exactly like IG da without H layer like you could like I mean you would just like

use like a slightly similar design I guess I I'm really curious what Justin thinks about this because I mean you know IG layer like I mean you know IG layer itself much better than I do but yeah um it seems to me that there's like nothing like fundamentally fundamentally new uh unlocked that would like enable that the creation of of igba compared to something like Celestia or like polygon a veil uh and so on I mean you said yourself like with the exception of the inter subjectivity then sure you could do it but the inter subjective component is is is very important because if we were to to build you know IG da using if for example then we're we're very much

overloading the the governance free nature uh the pristineness of of of of afference governance and so I I think there there is value that that the the inter subjective aspect of of Ian leer can can provide which is to try and and and and and decouple that so all the governance aspects all the social level forking can happen away from the the the social fking decisions of the L1 itself do you know if they want to use the kind of inter subjective working for something like I I thought was actually object like a fault was actually objectively

provable so you don't need it because using the in subjectivity part seems like an extra burden basically that you only want to use when there's no way to prove a fault in any objective way no so um the the the IG token was kind very much a motivation at least that's my understanding for for IG da and you this is why first the token was released and then IG da will be launched um and there there is a uh an aspect of of subjectivity with with data availability which is um you know it a piece of data it's it's unclear whether or not it was

withheld and then later later later made made made public and so there needs to be um some social accountability uh to um make sure that when there are these withholding attacks uh we we we actually punish the the Bad actors okay I see I see okay yeah so in something like Celestia it would default would be objectively provable but I guess that's because they use data availability sampling and they have some kind of consensus over that and so da is saying we don't want to have any kind of sampling or consensus which like is another form of cost so using this other technique that's in the

subjectivity to not have to have that okay and that's how they differentiate okay well you would still have data availity sampling uh but this is not something that is available to the chain itself to dl1 objectively it's only subjectively uh available to everyone running a data Avil sampling node all right guys um I want to um start I I guess with my my only follow-up question here before we kind of move into the the end of the interview here is you know given that framing hosu maybe I'll I'll start with you here I mean currently there's just under 20 billion there's uh about $18 billion of tvl on igen layer presumably all of that tvl is looking for uh a substantial yield uplift I

think there's probably a lot of farming going on and expectations of rewards in the igen token Etc but when you look at reaking as a category I mean I I just heard you estimate that there's like maybe .1% of uh potential for yield uplift so is it going to be a challenge to match all of this uh this sort of rabid uh Demand on the supply St uh standpoint with actual you know Demand on the igen marketplace uh standpoint um or do you think that eventually that's just going to balance out over time or how do you see that do you see a mismatch there and if so um how does that end up getting solved oh I mean yeah for sure I mean I think that there's way more Supply in I

right now than there is demand Ian I mean it's uh everybody like working on this stuff knows that the demand side is the actual hard side because the supply is so fible and so easy to get you just like create a smart contract and you say we do some kind of points program if you stick with us you know and um and that's how you get billions of dollars of Supply so we've seen this book many times nonetheless it's the correct move to start from the supply side exactly because it's easy to get uh and then you say hey we have all of this uh you know Supply here uh now let's focus on bootstrapping the demand side and uh right now what you see I think you see um the Insight that like the power all of the power in the market in the

reaking market is actually with the abss uh are the potentially consumers of this security and like these commitments right and um the what I has done an incredible job at is kind of create this narrative or bootstrap this narrative um where they are really kind of dominating the Mind share um you know in the crypto space and the ethereum landscape in particular um where a lot of people are talking about them and like are excited about it and so they kind of creating this like incentive for projects to become abss even if you know they there's really not much like of a kind of they're not getting much in terms of like objective utility right now but they are getting

to be part of this narrative just by saying hey we're building on IG layer and we're like being this ABS uh and we you know we're getting all of these vanity metrics like a billion dollars of e you know staked um and so on and so I think um The Playbook um that they've been using has generally been working very well so um but of course kind of as this like hype and narrative kind of wains off then the competition between reaking providers on avss would amplify a lot and I think this has already been kind of made True by the entrance of like symbiotic kind of the first actual I would say competitor and you know it doesn't take many doesn't take many players in the market sometimes to make

it already very uh efficient right so I think uh when you're in ABS today I think you're in a very lucky position because you have these two uh reaking providers who both want to fight really hard to get you uh you know on their side and so um yeah the big uh the big big challenge will be to uh for them to basically like expand the demand side um and by this I mean you know they want to create a lot of um awareness or what are the benefits of actually being an ABS like how is this better than the Alternatives they want to make it very easy to to be that uh you know really if if possibly make it as easy as like conduit made launching rollup for

example right you want to make it it that simp simple um then like as we as I kind of touched on already you know you want to make it very like attractive to be part of this this narrative and then you just want to kind of throw money at different um yeah different like use cases and and kind of see if something sticks like some new category that you can create so like a really good example is actually pre-confirmation uh and kind of the idea of expanding you know me boost so I think I saw a long time ago hey me boost there's like things we can do with it that might make it better that you can do with reaking and so I think they've been like trying to throw money at it and and just like either pushing

themselves or like getting people to push basically the idea of kind of different proposal commitment so I think a is very deeply entrenched in like the idea of pre- confirmations why because pre- confirmations would be built on restating and even if it doesn't end up working out for them that you know maybe the dominant like pre-confirmation protocol ends up building on symbiotic or some other protocol that maybe we don't even know yet um they would still say hey this was like the right move because we ended up expanding uh the category U we created a new category of apps uh that uses reaking that didn't exist before and that's you know part of kind of an important area of how ethereum works and so um I think this is the gener strategy

and I would say I mean just as an advis I don't know much you can actually comment so I took some Liberties um in kind of sharing my my thoughts but nonetheless very curious kind of what you can add to that right I mean I I don't have any limitations to to what I can speak about Igan ler and if anything I'm encouraged to criticize Ian ler um I think I think you know from a demand uh standpoint the the it's very much you know unclear what the demand will be uh you know one argument that I think danr has made is that you know programmable slashing with if you know could have been done before igen layer um in some sense what igen layer is is doing is kind of lowering the barrier to entry um

but you know one thing which arguably is is is is newer for entrepreneurs is this this idea of inter subjectivity um and I am personally like quite in excited to see for example you know what what value is provided with with oracles and igen da which both of which you know fundamentally leverage this this new unlock of of inter subjectivity um on the pre-confirmation just as a little bit of of context the the the reason why I was interested in pre-confirmation personally is that it all started with trying to fix airm fragmentation and that led me down the the path of shed sequencing um and then that ultimately led me to this this

thesis that maybe the best shed sequencer for ethereum is ethereum itself uh the base sequencer and that all then led me to to pre- confirmations and so one of the things that's kind of very very important for base pre- confirmations to be successful is this idea of of of of neutrality and uh the the good news here is that the the latest designs that we have don't require any specific reaking infrastructure all you need is raw e pristine e um and you need it in in in very little quantities you need something like one e in order to signal and opt in this this pre-confirmation system it's a very low barrier to to to

entry um and it's is is completely detached uh from um from any particular uh reaking platform okay I've got a question for uh hosu here so hosu I saw that you put together an update to Goose um and I think you called it Rego and the reason I was interested to to talk to you about this uh you know just why we brought up some of these debates around minimum viable issuance and reaking is no Goose has been standing I think you did the first one about a year and a half or two years ago um and these were the two catalysts for updating last year last year last year okay okay cool um and

these were the two catalysts for updating that I've got a question for you like we we did a uh you came on the liquid staking season of bell curve and you you've been very consistent I feel like in your uh definition of like the strategy that Lio but also that many like D5 protocols should pursue which is basically to focus on uh you know to maybe paraphrase a bit stay in your lane focus on your product have very flat surface area when it comes to governance and just have specifically in the case of Lio the LST Ste be dominant but you know there's a when I kind of look one of the big themes that we were exploring during that season actually we called it coopertition at the time is the the dynamic between Igan layer and Lio and

there was question of you know Lido could have the opportunity for instance to do something like a a reaking module within its staking router and I know you've always been pretty opposed to this but when you look at these ideas of um pre-confirmation and you know who has to issue the pre-confirmation the The Operators um within you know potentially someone like lios operator set um at liquid staking it seems like there is actually like definitely you could look some competitor could look at that and say hey it actually makes sense to have one entity doing all of this and vertically integrate um so do you sense like the same pressure to vertically integrate in that part of the market uh I I I I would guess that you probably aren't a fan of that but what would the

arguments if you were trying to weigh the pros and cons of like vertical integration between having different distinct actors in that whole chain and do you think someone else is going to come in and try to do the whole vertical integration thing I mean we've already seen like many players try to to do the vertical integration thing I mean every single LRT that's launched is is the vertical integration thing so I think you can contrast um you can contrast I think what Li is doing with that approach which is if you look at St e then you basically have an asset that you know is extremely close to what Justin described as kind of the pristine ethereum but it's very liquid it's very fible it's accepted everywhere it has an extremely kind of robust and like um

rigid like culture of security around it and if you kind of look at um if if you look at lrts in comparison it's much more you know I I personally like to contrast them more like to Wild Card Banks right so they take deposits um they uh they they put them into different avss uh and kind of stake to those uh service providers and they actually have to negotiate like if you're an ABS you don't want to rent your security on the spot Market where it can be pulled at any time um that would be yeah possibly a very bad idea right like if if let's

say like one LRT decides to pull their their funds and all of a sudden you're losing like half year security so you don't want that right so you're negotiating you know six month onee contracts um to to keep e in there and so all of a sudden those LT providers have to manage not just liquidity between Eve and their sticking token but also uh maturity right so they they also you know have to predict when are people going to withdraw how many demand is there to withdraw like okay what can we get away with and it's really um you know a there's way more risk like across many different areas and it's like a much more kind of actively managed much more engaged um kind of asset really right

and like all of the the kind of tools behind that and so um uh and if you if you kind of look I mean what is the most uh what is the most held asset in the world you know it's it's um you know us treasury bills right and so um I think we are kind of seeing that as a form of validation that the most you know the most demand is therefore the safest asset uh that's still productive and so um I think st e will always be more like trying to mirror like you know I I think if has been at times by like the bankless um folks for example shot up to them being described as you know an

internet Bond and I think um this is something that actually very closely I think you know I think St Eve is trying to be more like um you know like a reserve currency uh of the internet than to be you know some kind of high yield um but like much more risky Bond and and so that's I think the motivation for quote like as you frame that staying in our lane I think focusing on security and really focusing like on very very minimum like Risk and management surface for State e but at the same time of course I mean you can't deny uh you know economic pressure right like if if if there's a new yield firm where you can put in Eve

uh and you can make you know 20 apy from that then people are going to do it right um so I think it's also acknowledging the fact that um people want to put into their assets into different stuff even if it's more risky if it yields enough right so you have to satisfy different people's like Risk and reward preferences and so you were saying what if we added um a a module to the staking router that does reaking okay but then you allocate maybe 10% of Eve to that and so what happens there's not actually any like you know any effect on on the year of like because the year is socialized across all the state holders right and so everybody

opts into the new risk and there isn't even that much reward so what you want instead is everybody's holding the base asset stick Eve and then you can also opt like people who want more risk can opt into more risk and people who don't want more risk they don't have to opt into more risk and so I think this is kind of the motivation for saying if there is something that we think will become um a core part part of proposer duties in the context of ethereum then Lio should add that uh then that's something that where we will say Hey you know this should be within the Mandate of State e uh and pre-confirmation this is I would say the first if not I think more likely also the only candidate I

think where that that that can apply because I don't see any anything else uh that you can really kind of use the stake and kind of The Proposal duties for um and for everything else um it's kind of the same Insight the same Insight being that reaking doesn't actually need a proposer you know you just need capital and then that capital is delegated to some service provider who does some job for you and commits to being slashed and so I da is a good example of that right you're storing your data on my computer and like I commit to if I don't produce the data when you ask for it then I get slashed and so um for these things you just need a good asset that's C efficient and stake e can be that as right so you can

you can basically make Stak e into a collateral that's used by avss and that's also used by lrts so it's the token that kind of goes into an LRT and is then through uh delegation to an ABS turned into an LRT so we kind of the building block that LRT lrts use and um also trying to encourage um yeah basically that that that like stake Eve itself is becoming that that building block across vaults ac across LTS across abss kind of drive a lot of awareness for why it's actually better to use um steak e rather you know than Eve or like stable coins or some other token so um sorry it was like a long kind of a

little bit nuanced answer but yeah so vertical integration I think in tldr has um more downsides here than upsides because of the like socialization effect and and um the kind of different uh yeah kind of Market structure and like active management that that kind of being in LRT requires there's a uh there's a really excellent post on this by hu a m mutual friend of the Pod um uh from from the steakhous adcv I'll link it here in the show notes but um he's got this great post that uh made a big impact on the way that I think about this which is Ste is the decentralized reserve currency

for The Sovereign internet so that in the show notes but it largely agrees hosu with a lot of what you just outlined there as a general strategy uh guys I um you've already been really generous through your time maybe just in in really quick closing um closing here I I think there's a lot to be excited about uh currently with like all of this Innovation that's going on in ethereum land be it reaking uh you know debates on monetary policy uh a lot of this stuff is super super interesting from my perspective um and I know you guys are are deep in the weeds in terms of what coming up on the road map or are some of the changing ways that people are thinking about eth in general like maybe we could just end this podcast by leaving the listeners with something that you're excited about um it could be

something upcoming that ethereum is prioritizing in terms of its road map it could be something like a tester proposer separation like a new feature what what are you guys um just like excited about I guess um for the future for ethereum I mean I'm generally excited about being able to ride this technological wave of of snow um we're at a point where SNS are really getting extremely powerful uh one of the latest benchmarks is uh half a million hashes or proven per second on on a laptop uh without even GPU acceleration just using CPU so this is the kind of uh benchmarks that we like to see and we have all sorts of companies that are building you know Hardware acceleration

uh with with gpus fpgas or or even even ASX and um in terms of um the impact for ethereum we have um the SN ification of the evm uh and the beacon chain and that has huge consequences on the one hand it means that the barrier to entry to be a validator will go way down the meme is that you can run your validator uh on a smartwatch um it unlocks these these native rollups that I talked about previously in the podcast where you have like governance free uh evm uh equivalents and then another thing that I'm very excited about is that you can remove the gas limit or you can like 10 exit or 100 Exit and the reason is that

when why is the reason that we have the gas limit it's because as a validator I have to reexecute all the all the transactions and it shouldn't take too much time but verifying a SN uh is takes about you know 1 millisecond and so it doesn't matter how many transactions and how much gas is used in in the block you'll be able to to reexecute these transactions in in in one millisecond and so we can basically 10x or 100x the uh the the the G the gas limit uh and then related to to SNS becoming this amazing technology is this idea of better uh aggregation of attestations so right now we're using BLS signatures and

and one of the big problems of BLS signatures is that if I aggre if person a Aggregates some of the signatures and then person B Aggregates some other subset of the signatures and there is um intersection between these two sets of signatures then I can't aggregate the aggregate so there is this this kind of this Union problem uh which can be solved if you do your aggregation using SNS um and I'm very excited about the idea of having extremely powerful aggregation which which means that we can you potentially uh either lower the amount of that you need to stake or um potentially even like significantly

reduce the the slot time all all have things like uh like single slot finality much much earlier I remember hearing uh vitalic talk about um signature aggregation at ECC last year um so it seems like you guys are on the same page uh unsurprisingly hu um close us down here my friend uh what what are you excited about in regards to e in the future um yeah I think my first of all I'm excited about everything that Justin excited about and I'm always learning a lot of new uh you know what what's going to be possible in five years so that's always very interesting yeah I I I I don't have the kind of same technical foresight um as that I would say um I think we touched on it actually in the

episode I'm personally very excited about ways to um expand uh the the kind of design space and like the the the space in which like we can allow people to make credible commitments against their actions using new technology so ZK for me a huge driver in that um tees are going to be the other huge driver in that I think and and and yeah reaking I think at the limit will also I would say that's probably like the trifactor of like um kind of like credible commitment expansion in the sense because um blockchains ultimately are like credible commitment devices like it just like is it like smart contracts are like just

tools for people to make credible commitments towards each other so they don't have to trust and they can do you know better cooperation better Commerce across the internet so I think the more we lean into that I think the the the more amazing stuff we can build the more web 3 can start to rise with web two um in terms of usability and and cost and so on um I think those are those are the big ones I think the first thing that I really expect um kind of the new like those things that I describ the first thing that I think they will enable is actually private M Pools so right now we have kind of like private me that relies on trust in De centralized Builders but I think you can have builders that run in a te um that

are credibly private and that actually keep all of the data private and run a credibly fair auction against that and um you know give users the best credibly the best price for transacting on ethereum and other cool benefits and so I think this would be really the first use case that that I'm excited about and I think it's uh you know it's closer I think than than many people think excellent all right guys well tons of reason to be uh excited about the future and if folks want to find out really quickly uh are follow the work that you do or or just or just learn more about you what's the best way to to do that for each of you I'll be at ECC um my DMs are also open on on Telegram and on Twitter um but yeah I'll I'll be

giving many many talks and I'll be on many panels at FCC so do do feel free to catch up there what Justin means is that he's putting the team on his back and speaking about 20% of the content at ECC this year so you're a hero Justin thanks for fighting a good fight and educating all of us they used to be the the the predecessor of twitch twitch.tv used to be called justin.tv you know so maybe it's time to reboot that all right to be clear these are different events that I'm speaking at not the the ECC Main Event [Laughter] necessarily yeah thank you very much guys guys this was a ton of fun I

appreciate both of you I know we went a little bit over time here but thank you so much watch to do it again sometime soon cheers guys hey everyone hope you all enjoyed today's episode wanted to give a final shout out to namada again a team that is near and dear to my heart they are building the shielded asset Hub which is protecting the future multi-chain talked a little bit about how that works in the mid roll but for now what I would highly recommend that you do is go check them out they're in their mainnet launch phase you can follow along with everything at n.net you can start rewarding Yourself by shielding your actions and strengthening data privacy for all across the multichain so thanks again to Mada for all the great work that you're doing