Vitalik Buterin on The Economic Zone (EEZ) Ep. 642

Transcript

The term Ethereum economic zone obviously kind of does a lot of the heavy lifting here, but what makes the easy in your head? What's it take? >> I think for me the core right is an effort to rethink I mean know what layer 2s are. You get more integration and you know you get more power at the same time and uh like at lower cost, right? So it's uh something that should be a win-win for everyone. The fact that we can now allow all of these chains to kind of use Ethereum as the ultimate economic operating system for the internet. I think that to me is the most exciting fact here. This is not far off in principle. This is a very bounded project.

Welcome to Epicenter, the show which talks about the technologies, projects, and people driving decentralization and the blockchain revolution. and I'm Sebastian Kuchio and I'm here with my co-host Fel Ernst. Today we have a pretty special episode. Uh we'll be diving into EEZ or Ethereum Economic Zone. Uh it's a new vision for how to scale Ethereum and bring bring forth a vision that to me kind of looks like the app chain vision for Ethereum but tightly coupled with the Ethereum network in a way that um chains can use Ethereum as an interoperability and proving layer. We're gonna get into all the details of that, but first, here's a word from our sponsors this week. This episode's brought to you by Lido. As Ethereum staking continues to evolve,

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curated DeFi strategies built around SDE. You deposit once, you choose a vault and manage everything from a single interface. To learn more and start building with SD Vaults, go to lido.fi/stvaults and get in touch with lighter contributors today. Hey, Felica, how are you? >> I'm good. I'm good. Almost recovered from Berlin Blockchain Week last week. >> Yeah, Berlin Blockchain News is great. Uh, as always, it's always uh great to be in Berlin and uh see the more uh uh cipher punky uh side of the space. I feel like, you know, in in today's crypto world, there's a lot of suits and uh less and less hoodies, but uh definitely Berlin remains a place where, you know, the blockchain hoodies are

hanging out. Um so this this we're going to we're this episode's actually going to be in in kind of two parts. So, first uh we're going to play a fireside chat that you did at Dapcon uh with Vitalic where you uh went into detail about sort of his vision for Ee and what he would like to see built um in in this new sort of paradigm of Ethereum and then we're going to come back and then we're going to talk about it and we'll get into the details of like what EEZ is and what's the vision and who it benefits and how it works technically. So, by the magic of editing, let's go to your uh fire side with Vitalik.

>> Fantastic. Whitik, thank you for being here today. >> This is the last talk in a in an easy themed block. So kind of I'll I I'll ask you for your take on >> So the next talk will be in a hard block. >> Yeah. So kind of medium first and then hard. So kind of I see. Okay. >> We're still cutting it on the easy side. >> I see. So we're going to do like a tutorial of like circle starks after this. >> Yeah. Absolutely. We already heard Martins's and Jod's and Philip's take of the easy easy. So kind of >> Mhm. >> the term Ethereum economic zone obviously kind of does a a lot of the heavy lifting here, but kind of what makes the easy um in your head. Is it primarily kind of like an economic thing and kind of like kind of like a single

market kind of sense or is it kind of like an economic operating system? >> What's it take? Yeah, I mean I think for me the core right is uh basically it's an effort to rethink um you know what layer twos are um in a way that kind of both gets uh a lot more of their a lot more of the benefits um and at the same time less of the drawbacks of uh all of the approaches that we've tried so far far right and uh to make something which is much uh much more integrated into Ethereum and so it's not just basically a separate you know EVM

chain where like it can be difficult to like see you know like the connection beyond the branding level right and it's uh like actually very deeply integrated in a way that's like very visible to users and developers and at the same time to like actually get benefits from that integration right and uh like to me the benefit of uh being benefits of being in O2 has always been um you know the uh tight integration with the uh Ethereum market um and the uh and the Ethereum user base um and also the uh the fact that you don't have to be responsible for a lot of your own infrastructure right like you don't have to be responsible for having your own

set of nodes to the same level I mean if you have a based rollup you don't even need your own nodes basically your infrastructure load on every level is just much much lighter, right? You potentially if you do it right, you know, you don't even need to convince to convince users to create new accounts. That's also another thing we should work on, right? and uh the possibility of having this like synchronous composability between L2s and uh like having much better forms of bridging on top of that with better developer experience and also having ZK proofs securely enforcing that like it really does accomplish all of those goals, right? And so, you know, you get uh more

you get more integration and you know, you get kind of more power um at uh this at the same time and u like at lower cost, right? So, it's uh something that should be a win-win for everyone. >> Well, that that fits in super nicely with m with what what Martin said. He said kind of like kind of the it extends basically um what the presence is. So kind of what the present is for for Ethereum and kind of like all the zones in the easy essentially they kind of start living in the same now and Jordi said by having differently natured zones you can actually extend Ethereum rather than kind of just adding more block space you can actually see specific um

>> uh you can see use case specific chains or um chains that are specific in some other way. So kind of if you think maybe five or 10 years in the future, if you sort everything that anchors to Ethereum >> into a few buckets. >> Mhm. >> Um what are they? >> I think the um projects that we've seen so far, right, that uh like extend Ethereum in an interesting way that's not just uh like EVM with uh like with more TPS. Um one of them is privacy, right? So you know like Inmax and Aztec are good very good examples there. Um and uh I know there's uh more and more

projects trying to do this. I mean I actually even think of uh things like tornado cache and rail gun and privacy pools as being L2s. Like they're L2s of privacy instead of L2s of scalability but I also think of them as L2s. I mean with rail gun you can even do internal transactions. Those are I think great and uh underrated by a lot of people. Um then the second is uh like very high TPS for specialized use cases right so lighter would be a good example there and uh I think in general like having a a mass scale uh prediction market uh or other type of like D5 primitive but I mean I think ultimately you can sort of define every D5 primitive as a special case of prediction markets in some sense

um then like having that run on an easy roll up I I think feels ideal then if you want if he wants to kind of start going further right then uh and I think like privacy is a dimension we have to keep improving on right and I expect uh I mean as Aztec has already started doing right for and especially as Ethereum L1 um continues improving on privacy natively like privacy focused uh p L2s connecting into Ethereum will have to get into uh private programmability and uh we're seeing that. I uh I hope to see more of that. I hope we'll also keep getting better cryptography that helps

us keep getting even more of that. Um then I I think there's like interesting directions that are underrated and having an integrated oracle I think is interesting like you know the uh the whole oracle space I still think is know one of the sort of skeletons in the closet of Ethereum right like if you compare the level of rigor that people like L2B have brought to the like L2 space with things like stage one and stage two and all of the like efforts that you know like optimism and and arbitr and and tao and others have spent like actually getting getting there and like if you compare that level of

security to uh like what happens inside of many oracles it's like night and day right and uh you know like one of the things I always keep saying is that there's no point in giving reinforced steel doors to your house if the windows are like made of glass that breaks after one hammer hits it, right? And and so like I think we might even be in that kind of situation, right? And uh so I've always been thinking like actually like the thing that's even higher priority than a push to stage two is improving oracles and uh you know the push to stage two will happen naturally especially with native rollups and ZKVM sort of giving us that for free. Um and uh with like integrating an oracle into an uh L2 like I think you know oracles

can't be perfectly economically secure but you know you want the security base to be as big and as diverse as possible. Um so I think uh that approach is interesting. Um then what other things for L2s? I mean just like there's the whole different kind of L2 which is sort of ultra specializing for uh like like enterprise type use cases, right? It's like basically you approach the problem from the other end. You instead of saying we have an Ethereum chain, how do we make it more scalable and user friendly? You start from the other end and you say like here is some enterprise thing that's uh serving many millions of people and like helping a lot of

economic activity happen but it's like totally trust dependent and centralized and like how do you add proofs to that so that you give users better guarantees and that could apply to supply chain things it could apply to finance it could apply to medicine it could apply to voting systems right and uh you know like Orin's interfold work I think is uh one of those great examples of that. So no, I think I know there's a lot of different uh directions from which you can tackle this problem. >> Do you think about um chains that are run by >> nation states or so kind of because I mean obviously nation states are typically extremely hesitant to kind of put any kind of infrastructure >> onto Ethereum. Do you do you kind of um

see Ethereum becoming kind of the ultimate settlement layer even between nations that don't speak anymore as we kind of increasingly see? >> Yeah. You know, it can happen, right? Like uh one of the patterns that we've seen historically is that uh you know there are these government blockchain projects that first try to make their own consortium chain and like they go all their way out in the direction of like satisfying the more conservative people and then that just never ends up actually getting any interesting properties. And so four years later, everyone forgets about it and the thing spins down. And then another four years later, um, you know, the same country just quietly spins up a thing where they

just like dump freaking NFTs on mainet, right? And like it's actually more useful. Um, so I I think it's uh it's use case dependence, right? I think uh you don't want to sort of attach like too many of these uh you know like philosophical connotations to the concept of like being on L1 or the concept of like being on um L2 right it's uh it's kind of like attaching you know like too many philosophical connotations to like being in a house or being in an apartment building right it's uh like you want to kind of view it as a a technical matter of uh like what are things that you want to be close to what are things that you

want to have very easy ability to interoperate with. What are forms of scalability that you wants to have? What are forms of privacy that you wants to have? Um and uh I mean I think sometimes um you know easy something like easy is a good solution. Sometimes you know just dumping a freaking NFT on mainet is a solution. Sometimes dumping a freaking ERC20 on mainet and then letting that bridge into easy is a solution. Right. So you know you want to be open to all of those. >> Yeah. Absolutely. >> Um, so kind of if you look at Ethereum and kind of like how it's developed over the last couple of years, um, Ethereum made a very explicit choice that most or maybe all other chains didn't. Kind of like it put censorship resistance above

everything else. So kind of namely above speed, above cost, above recourse if anything goes wrong, right? Um, so if kind of once kind of the code's committed, it just runs. So that that's a choice and that's a choice with real losers to some extent because most users they don't wake up and and say oh I want to be on um the most neutral chain possible or they kind of they want their payment to clear and they want their money back if they were scammed or something breaks right so should it be the base layers job >> um to serve users at all or do you think kind of it should be kind of more of a neutral ground that other networks then build user experiences on that users are

happy with. >> It's a difficult trade-off, right? I think because there's a lot of attraction to kind of going all the way and basically saying like well the base layer does you know the minimum possible to ensure things like trust and security and then uh everything else happens on top and people can choose. One of the challenges is that often if the base layer provides too little then like you still get certain types of capture that happen at uh higher levels right and you know if you don't care about interoperability explicitly for example then interoperability gets captured by centralized providers um and then uh like you get applications that basically don't think of uh you know like

themselves as serving Ethereum users but think of themselves as like creating identities for users fully inside of their application in a way that kind of really maximizes lock in doesn't really create the benefits of uh a user's account being able to be part of multiple applications at the same time. Um and so there's like there is a balance there, right? where if you don't try to like make sure that things like interoperability, censorship resistance, just like stronger pressures toward having a proper competitive market actually exist at the user layer, then effectively what you get is like

you get these walled garden monopolies just to sort of wrap around the base layer and like use the base layer a little bit basically just so they can virtue signal and say that you know, hey, we're on Ethereum but then uh like actually the thing is not bringing freedom to people. Um and uh I mean I like I actually again you know I give you easy as a a quite helpful effort in that regard because it's uh like really doing that work to make these higher levels of uh interoperability available not just uh kind of in theory but uh like actually create actually creating standards so that uh if L2s get built inside of it that interoperability

exists between them by default. Cool. Let me ask one last questions and then I'll hand it out to you guys. So, if I say I um I had a an extremely specific crystal ball and kind of it would allow me the answer of kind of to one question. Um exactly. And that's kind of whether a specific kind of network exists in the Ethereum economic zone in 2035. Um what network would you ask for to kind of see whether it's there to kind of gauge the the success? >> Huh?

Um I mean I guess one natural use case is like to have at least two you know like high performance highTPS DeFi type things which uh you know again you know could be lighter style could be a prediction market I mean could even be also um something that provides privacy and then like actually see the like easy deposit easy withdraw and like cross composability happening between them and like actually see the uh the value provided by that. Um so that would be one answer. Um I think another answer is like it would be interesting also to kind of see some of these you know like

more non-financial L2s and uh like the the possibilities for having like say Dows that kind of integrate into that and like use one for their governance you know use another one for like managing their internal assets and so on. Cool. >> This episode's brought to you by Near AI Cloud. OpenClaw is one of the biggest stories in AI right now. Rapidly, it gained over 200,000 GitHub stars with adoption from Silicon Valley to Beijing. Why? Because OpenClaw makes it easy to create an AI agent that actually does stuff like manage your emails, browse the web, schedule appointments, and remember contacts across weeks of interaction. But where do you securely store and run an always on agent that

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Um so what did you think of that conversation with him? Did you feel like he nailed uh the sort of things that um do you think that like he was articulate in in describing you know how easy benefits Ethereum and sort of the vision for u for this new paradigm? >> Yeah, absolutely. So, Vitilik is very supportive of the Ethereum economic zone. I think he hit all the marks. >> Yeah. And just to kind of uh jump off on like one of the points that he made here. So, this isn't technically something that's um being actively built by the EF but is supported by the EF.

Can you talk a little bit about like who's leading this project and what support you're getting from the AF whether financial or otherwise? >> Yeah, absolutely. So um it's built by us Nosis and Zisk. Um Zisk is the proving team around Jordi Bina um who is of ZK Hermes and Polygon fame and has been in the ZK space um for a pretty long time. Um the Ethereum Foundation is supporting this financially. Um they're also endorsing it to um which which is fantastic. Um I I would have been happy for them to build it too, but somehow it wasn't in the cards. Um, we

thought it was important that it exists, not just for us, but uh for the wider Ethereum ecosystem. Um, so we set out um and build it. >> Yeah, I mean it does uh yeah, it's it's great that they're they're endorsing it, but as you mentioned, you know, the EF is kind of focused on a lot of things. And I think it's kind of cool that in this particular case, you know, they're sort of letting Nosis sort of lead this project and and have like really high degree of autonomy, autonomy and agency. Um cuz I think like you where you guys are coming from with having built Nosis chain um you bring a certain level of like experience and an insight into how to scale chains that you know perhaps

like the team at the EF doesn't have directly. uh but you guys have done that sort of in practice and so it's it's I think it's great that that nois is uh is leading the charge on this. So let's get straight into it. So like yeah can you describe from your perspective like what is easy what's the vision uh for this new this new scaling paradigm this new vision for Ethereum. >> Yeah absolutely. So if you think back to 2015, 2016, 2017 when Ethereum was new, maybe the most wonderful thing about Ethereum was that you could just build on whatever was there before you, right?

So kind of you could build a stable protocol or lending market or an oracle um or what have you not um and have it interoperate with everything that's that was already there. And that gave you in some sense the magic of an infinitely expansible programmable financial system. In some sense that to me was the magic of Ethereum. Um obviously kind of we all know kind of like how it played out. Um transaction fees skyrocketed um kind of in 2020 2021.

um we paid an average of $10 per per um 100,000 um gas. Obviously, that doesn't work for almost all um financial applications, even financial applications, not to speak of non-financial applications at all, right? Um so we set about to to to solve this via scaling with L2s. Um and this worked. So um transaction fees have since come down extremely significantly. So kind of an average transaction on Ethereum now costs you way less than a dollar which is which looks a lot like uh 2016 2017 again. Um but this has come at the cost of outsourcing most

computation from L1 to L2s. So kind of most compute now happens on various L2s and we have in excess of 200 L2s um today. And what we see is that um these L2s they don't interact as closely with each other as a single network would and they don't interact as closely with Ethereum as a single network um would. So kind of this um composibility that we had beforehand kind of like this this money Lego property um that people loved that's disappeared unless you're on the same network and then this still works.

So the hero economic zone is a way of leveraging real-time proving um um to enable two networks to synchronously compose and by synchrony compose I mean talk to each other like they like they are the same network. So kind of um have a smart contract on one network that calls into another smart contract on another network, get a response, you use that response in the very same block kind of like like you used to do when we only had one one network. Um this has not been technically feasible until very recently because it um >> what what may what makes it technically feasible now? Yeah, basically it's predicated on the fact that you can that

you can prove your state within the same block that you're building. Um, so the kind of blockchains have a very long now and kind of like how how long that is depends on the chain but on Ethereum it's 12 seconds, right? Because every block is 12 seconds long. You don't have continuous time. You have discrete time. So if you can prove within those 12 seconds the state of another chain, Ethereum can um Ethereum and that chain can make a transaction that touches the state of both networks at the same time.

>> Right? So is it um so so essentially what this what this vision aims to build is a network of applications that are independent whereas wherein they have their own state and that state doesn't live on Ethereum. However, um this as long as those chains can prove their state to Ethereum within a block, then they can become composable in the same way that you know you can wrap a uh a contract on say Morpho in another contract and you can you can build a you can create essentially money Legos in the way that we all know Ethereum works.

U that's in a nutshell how people should be thinking about this. >> Yes, absolutely. So kind of it it it takes um disjunct networks of money legos and makes them one big network again and kind of and kind of how this happens kind of behind the scenes. We can go into this but kind of to the users it kind of it looks again like you're on one big big network >> right now. If we just take the the kind of current state where we have, you know, two dozen rollups last I checked and those rollups share, you know, I think like $40 billion worth of TVL, you know, we have, however, we have like interoperability protocols that we have like layer zero and and you like lots of

different interoperability protocols that allow people to uh send transactions and also compose transactions between those um why isn't that good enough you know like what what's the counterpoint to this like why do we need EEZ where we already have you know lots of great startups have fixed the kind of interoperability problem and made it such that we can very easily uh operate across different rollups >> yeah so kind of you you can operate across different rollout uh rollups but kind of if it always comes at the cost of asynchronicity right kind of like when you bridge funds today um what happens if is you go to a bridge um you send your funds there. Um they are kind of then kind of uh chain processing

happens. So kind of uh uh this is the state is it's waited until the state is final. Then a message is created. The message is passed kind of and then eventually on another network um there's a contract that owes you a token. So you go to that contract and you say, "Hey, it's me, Seb. Please give me my tokens." And then hopefully that contract gives you your tokens. That's kind of what bridging currently is. Um and this is for sending tokens only. So kind of if you use the first party bridge, the canonical bridge for for most networks um the bridging times are really long. So kind of on arbitrum and base it's one week. Um on uh on Nosis it's still half an hour on Polygon it's an hour. So kind of like it

it varies widely. Um but uh yeah, bridging is not a great user experience and it lets you send funds across different chains. It's a lot like sending a postcard to some extent, but it doesn't let you um have a conversation like on the phone and kind of like the the the synchronous interoperability. What that allows you to do is to kind of um speak with another network as if it were your own network. So kind of let let's kind of look at the case of bridging. say I want to send you funds from my network to your your network. What kind of um this then collapses to is a single transaction in a single block where my my balance is decreased and your balance is increased. Okay. And because kind of

we we say it happens atomically which means kind of either both happen together or none of them happen. Um you you no longer need the bridge itself, right? kind of like you can now compose across different networks um kind of within the same block. >> Okay. So let's take an example here. Let's say we have US dollar like USD on like Nosis chain and we want to like actually let's say we have like USD and ETH on Nosis chain and we want to deposit that into an AMM pool on uni chain. Mhm.

>> Um we would create a transaction on Nosis chain. That transaction would be included in a block on Nosis chain. Uh Nosis chain sends proof of all the transactions that are minted in that block to Ethereum. And then Uni Chain picks it up and uh is able to read that proof and then execute the transaction on its side depositing the USD and ETH into the lending pool and then presumably sends back some confirmation to to the person uh to to the to to the issuing chain or the the the the sending chain uh such that you know that person's wallet or interfaces can get updated and of of course like balances

get updated on on the sending chain. Is that kind of the right way to think about that transaction flow or is there something else here missing? >> Um so it's it to some extent it's the right way of thinking about it. Um that's kind of like how it would work in the asynchronous way kind of in the synchronous way. Um what would be slightly different is that the block on Nosis chain and on uni chain would be created in parallel by someone who actually understands that there's a um interconnect call coming up um and uh they will make sure that that um kind of both sides of the transaction are included at the same block height. So

kind of there's no before and after. Um kind of the the blocks um the block is included on both L2 networks and Ethereum um at the same block height. Um and uh so you kind of you uh construct the entire transaction in one go and you place them and it only lands if all necessary parts are there. And you can actually do this um in an arbitrarily complex way. So you can you can um bridge tokens from A to B then use it in a liquidity pool then use whatever you took out of the liquidity pool to stake somewhere and borrow against that again and use that liquidity on on a fifth

chain. So in principle you can do as many levels as you want and obviously that can become very complex but you build the block you build the various blocks such um that they land at the same time so there's no consecutiveness here >> okay interesting right okay so I think like for a lot of like you know the way you described bridging earlier where you have this asynchronicity and you know coming also from the the sort of IBC perspective where you have a transaction that gets acknowledged by another chain and there's like an act that gets sent back and everything in this kind of uh almost TCP IP like uh uh data flow here there's like the block is getting built

and um uh and written to all of the participating chains and the Ethereum mainet at the same time as like kind of all landing at once and if none of if one of those doesn't land then like the entire thing gets reverted. >> Exactly. And so there you have so then who are the participants here? So I presume block builders are going to be looking at all the different uh chains in the EEZ and like a block builder will pick up all these uh different blocks and sort of write those proposed blocks for each of the chains in the Ethereum mainet at the same time.

>> Yes, almost. So kind of on most chains um block builders don't actually build blocks. The block builder is typically a sequencer. Um so kind of if you had two uh decentralized networks yet yes then it would be the block builders. Um in most cases with L2 is kind of you have a centralized sequencer um that who can be passed messages to um and um the block builder builds the block for Ethereum um and uh is a kind of yeah and kind of on the other networks um kind of whoever's in charge of block building does it there but kind of the block builder can talk to that party.

>> Okay. So let let's talk about sequencing here because it sounds like essentially Ethereum is becoming the sequencing layer. Is that so is is Ethereum then becoming a sort of decentralized sequencer for all of the rollups that are in EEZ? >> Yes and no. So kind of um it it depends on what transactions you're looking at. So kind of if you're looking at um the transactions that are within a single L2 >> um then the sequencer is still very much in charge of ordering that because that's kind of the only thing that the the sequencer does, right? Kind of like it says this is the order of transactions. Um if you look at um transactions that are um interconnect

calls, so kind of into Ethereum or another L2, then once they are committed to Ethereum, they can no longer be reorged out of the L2. So yes, in in that sense, everything that's been committed to Ethereum is final. That's kind of the one significant trade-off that participating networks need to make. you um when you're in the EZ, you acknowledge that Ethereum is the lead chain. Um so if you kind of look at um at two chains, the example of two chains and none of them kind of gets the final say, you can't make them asynchronously compose. Uh sorry, so you can't make

them synchronously compose. um because um you have no assurance that if one reorgs the other has to reorg too, right? Because kind of like what you now have is you have um transactions that touch the state of multiple chains and if one of them disappears um the others need to disappear too. So kind of if if kind of my transaction sending kind of I'm sending you ether from uh from uh mainet to base um and kind of my transaction disappears you can't be credited with ether on base right because kind of like that would that would be disastrous. So if um uh Ethereum reorgs and somehow my trans my

my um part of the transaction disappears, you're now orphaned part of the transaction also has to disappear. So you need to designate one chain the lead chain and the Ethereum economic zone posits that this should be Ethereum Ethereum proper. Um and because of the recent crops announcement, we also think that Ethereum is the best chain to possibly do this um on because uh uh censorship resistance is the one thing that Ethereum is prioritizing above everything else.

>> Okay. So, so there's still sequencers on the rollup chains, but those sequencers are primarily concerned with uh ordering the transactions as it relates to their state. And then Ethereum acts as the sequencer for anything that has a uh an interconnect call I guess which is what you call it like so essentially where multiple chains are involved. So it's it kind of like splits sequencing into two uh distinct um roles where you have like onchain sequencing and then the kind of uh the uh lead chain sequencing.

>> Absolutely. >> Okay. And um yeah, what's the role of uh validators on Ethereum mainet in this? You know, like so is it expected that each chain has their own uh validators and how do they interact if at all with Ethereum validators? >> Yeah. So in the most vanilla implementation of this um you have a so-called base rollup which is a rollup that builds every um a block every 12 seconds in um full um synchronicity with Ethereum and those blocks are also built by L1 validators. This is something that

already already exists. So for instance Psycho um has built a very nice stack for this. It hasn't found wide adoption. So kind of if you look at um L2s today, most of them are significantly faster in committing blocks than Ethereum. Uh because for many applications, you need asurances that you can make a transaction land faster than 12 seconds. And in this case, you can still synchronously compose with Ethereum. You build your own blocks. So validators on L1 have nothing to do with transactions in most of your blocks. And every now and then, every 12 seconds to be precise, you have a block that synchronously composes with Ethereum and

there you commit to having certain transactions included in your block. You can also constrict what kind of transactions you want to let land on your network. So you don't have to say I take anything good or bad from Ethereum. you can have a um very granular list of transactions that you allow with Ethereum. So for instance, you could say, okay, I have this um I have for instance a per uh protocol um that I run on an app chain with with with a matching engine. Um and uh but I allow uh I allow liquidity to flow in from anywhere within the Ethereum economic

zone. And I also allow liquidity liquidity to fly to to flow out to anywhere in the Ethereum economic zone. So you don't allow arbitrary contract calls, but you need to specify what you allow um in advance. >> Okay. Um so one of the things that uh you and Vitalik talked about during uh during this this this fireside was the types of applications that this would enable and Vitalic mentioned a few. So he mentioned like privacy focused uh L2s uh possibly also with private programmability which I think is is kind of interesting. Um we talked about high

performance chains so things like prediction markets or uh sort of market structure like things um also oracles uh which which I thought was interesting and I'd love to chat a little bit about you know why why an integrated oracle chain might be useful and then a bunch of other use cases that you know frankly have been kind of kept out of the permissionless Ethereum space which is uh enterprise use cases things like supply chain uh voting you know uh I'm sure those of you who have been around the space for long enough will remember you know 2017 when people were trying to build permission blockchains with things like hyperledger corda etc um and none

of that really got like created much of anything in and then in that same vein government chains nation state chains uh possibly stable coins or CBDC's Um, so of those, which do you like which are you most excited about and um which are like kind of best suited for for for EE? >> They're all very well suited and that's what I'm most um excited about, the fact that we can now allow all of these um chains to kind of use Ethereum as the ultimate economic operating system for the internet. I think that to me is the

most exciting um fact here. Um I mean I can walk you through each of them just for a little bit. So for instance um if you think about all the chains that we used to have on Hyperledger and so on like the banking consortium chains the um the nation state PC's and so on. Um what people found is that nation states and banking consortiums and so on typically they don't want to build on permissionless and radically open infrastructure. They want their own cluster of nodes that they have some influence over. And you can now allow these permission chains um to um compose

synchronously with um um things on Ethereum or a subset of things on Ethereum. And I think that is beautiful because you no longer make people you no longer make people choose between the most radically decentralized solution or whatever they're comfortable with but without friends. um you kind of you can now kind of have the best of both with privacy. I see it as a very easy unlock. So kind of if you look at chains like Aztec um they are fantastic in that they allow you private compute but the um the throughput is pretty low. So kind of they have like two or three transactions

per second. obviously don't want to do all of your compute on Aztec, but would you want to have your identity on Aztec? Absolutely. So, kind of if you could have your identity on Aztec and every time you want to authenticate against a protocol um for uh kind of kind of to check whether you're a member of something or whether your reputation school allows or whatever you have >> or they have the ZK passport too thing, right, where you can also authenticate that you're you know >> Exactly. a like an individual that has like ident like a pro a proper government identity.

>> Exactly. And only that piece of information will ever leave the chain, right? So kind of it it kind of like your identity stays perfectly private. It just kind of it it just kind of checks that you're allowed to access um whatever you're trying to access and it exports a proof of that. Um and I think that is that is a really lowhanging fruit right there with oracle chains. what Vitilik um was talking about is that currently oracles post data to Ethereum. Obviously, a lot of this data isn't actually needed, but kind of like it kind of you don't need every single data point that an oracle posts, but kind of if you now do it on your own or Oracle chain um and then kind of you let

you also don't want a time lag, right? Because you don't want to be able to frontr run an oracle, that kind of like defeats the purpose. So kind of if you can synchronously compose with an oracle chain, you kind of you can you can forgo the cost of posting um into Ethereum for every data point that you're posting, but still letting people synchronously compose with the data that you're providing. Um it it's kind of more of a pay pay as you go sort of arrangement then um which um is going to be uh pretty beneficial um for um uh allowing a wider range of oracles um to uh exist because currently providing Oracle

services is um pretty ex pretty expensive in terms of gas and that um constricts um the subset of participants who are willing to partake in this game. Um >> yeah, so kind of there is a huge design space. Um the Ethereum economic zone is extremely permissive in what it allows participating networks to do. Um you have to have a well- definfined state transition function. That is a given for any blockchain. Um you have to be able to prove your state in real time. That's an engineering challenge and we're rapidly um getting better at this. So currently it takes us around 2 to 3 seconds to to prove an Ethereum block

and um the the the limit of that isn't hasn't been reached yet. Um and uh then you have to be willing to reorg and follow Ethereum if Ethereum resum doesn't reoke a lot. So kind of it rearchoks between three and 10 10 times per day and it hasn't had a reorg deeper than a single block in many years. Um, but you still have to engineer for the complexity this entails. And even when you're when you have a transaction that lands in a block that reorgs, it's likely that your transaction will just land in the next block. So kind of it's kind of like what happens kind of like on a network level is um Sebastian's transaction gets included in some block

and somehow Ethereum kind of forgets about this block and then instead of building on this block that includes your transaction kind of Ethereum builds on the block before that. Okay, but your transaction remains valid, right? So kind of um it's kind of more than likely that your transaction would just be included in the next block that's then coming up. um and uh unless unless that is your transaction touched on a state that was changed. So for instance, if you trade it if you if you trade against an automated market maker and the state of that has changed. So that kind of your your transaction in the next block will no longer be valid then yes kind of then then kind of your legitimately

reoked out but um this should be a very small um number of edge cases. What are the implications here for me? >> Oh yeah. Um fantastic question. Um so kind of um me becomes much more powerful. Um so kind of me currently I would just define as um the the amount of money you can make by ordering transaction with ordering transactions within a block and introducing additional transactions between them if needed. Um and obviously now if you have more um transactions to order because you can also order part of them on other networks um you you can extract more me

um mess in in in my eyes has always been um a um design flaw. So I don't think kind of like this is um the um economic defense mechanism that flashbots and some other projects kind of position it as um and I think it should be um on depths to make sure their users are protected from me efficiently. >> Right. So but but but that that I guess was the next part of my question is that MEV protection then falls upon the apps and the apps can decide how they order transactions in their own blocks. Uh for example such that ME becomes less uh

parasitic to its users. Uh and I can probably also a lot it's funny because like a lot of the ideas here I think like are things that we've explored that have been explored in Cosmos. Um and actually I would love to kind of get your thoughts on that too. You know, one of the things that um uh you know, for a while was being talked about in Cosmos and Cosmos Train is that you can essentially um uh so skip had this um this module for the Cosmos SDK which I believe was called Slinky and essentially allowed you to kind of create your own custom block where you know for example you could have uh say like onboarding transactions would be say free and those would be included at

the top of the block. So those will always get included and then you may have like governance transactions and things like that and like you know you can kind of construct your block in a way where types of transactions um uh get get included in the block uh and then like maybe other types of transactions uh fall at a lower priority. I I suppose here this is also something that uh can be achieved with EEZ since you know individual chains will decide on how their blocks get get constructed. >> Exactly. So kind of as as an individual chain you only um outsource um block production to the extent that kind of there are interconnect calls included everything else you can kind of just um include where wherever you want

>> and and even those so the interconnect calls so is is the biggest kind of I mean depending who who you're talking about but like risk or opportunity uh for me on Ethereum mainet in these interconnect calls if if the individual chains have a good grasp on how their blocks are constructed uh and kind of minimizing me at that level. Um or perhaps even you know is tracking me themselves and like putting it in some pool or redistributing it back to users or something. Um is the the risk then mostly at the Ethereum mainet layer?

>> I think I would reframe this. If you look at the networks around Ethereum today and you look at um say the same market, so say something liquid USC um ether or something um then you will find that all of these networks have slightly different prices. Okay, so kind of you can ask yourself then why don't they have the same price if they're kind of if they're trading the same asset pair. Um, and the answer is because bridging between them isn't instant and isn't risk- free, right? So, kind of if you're an arbitrageer and you see, okay, I could make 50 basis points by bridging over Ether to whatever chain and selling it there, you have to factor into your

um calculation that the price could change from under you. So, kind of like while you're while you're executing that trade, you carry inventory risk. And then you also um have a small amount of of uh uh technical risk, right? Because it's not instant, it's not atomic. Um and once you have these tightly coupled networks, this should disappear because arbitrageing is now a single transaction um and is risk-free. Um so I would expect the average execution price for users to be better than what they have today. Um so yes um there is more more

opportunity for um extracting um me on Ethereum level potentially. I mean we'll we'll have to see how this plays out. Um but um there are there it also makes the market so much more efficient um and that typically should benefit the users most. >> Yeah. Okay, makes sense. So of all the you know the the two dozen rollups that I mentioned earlier um you know sort of everything from like bass to arbitrum and like scroll etc. um which you know is is there a case to be made where

rollups should transition to EEZ I guess like what is the process is is it is it what's what's the level of complexity and cost uh involved in making an existing rollup an EZ rollup does it apply to only certain types of roll-ups depending on how they uh whether it's like a base rollup native rollup et etc and um you know are there cases where it just doesn't make sense like let's say base you know like a massive um massive chain like like base and um yeah and and also I guess like for new chains um you know is it considerably easier to launch an easy roll up than it is to like sort of spin up your own

infrastructure and your own chain. >> Yeah, absolutely. So I think kind of you can separate these out into engineering and economic um uh challenges and benefits, right? So if you look at the engine on the engineering side um retrofitting an existing network that's running with any sort of standard um is always overhead. So how much it how much overhead it is depends on what your network is like. So kind of do you already allow reorg? So some some networks actually prohibit rigs then obviously this is going to be a much heavier engineering lift. Um then um kind of do you already have some sort of

proving infrastructure? What kind of what what are your clients um what's your client landscape like and so on. So not every client is equally easy to prove in a ZK fashion and so on. So kind of bunch of engineering questions. Um on the economic side um because the networks were so fragmented and um doing anything across um multiple of them was basically precluded from happening. We've seen the emergence of what I call mini Ethereums.

So kind of if you see if you look at Basu um arbitum basically they replicate everything that's already on Ethereum, right? So kind of users who live on base or arbitrum they don't really have to leave for a lot of things. Now obviously there are sometimes niche protocols that don't exist on on them but by and large um basin arbitum have just replicated what was already on Ethereum. um many networks haven't and this is also a constant um a constant struggle for many L2s and there's not actually 20 L2s there's 200 L2s most of them you don't even know so kind of like it's it's there's there's

hundreds of L2s and most of them are struggling to keep table stakes on the table so kind of um stables deployment stable stables deployments on and off ramps um then um compliance infrastructure, a lending market, um whatever else users um take for granted, um a safe deployment, kind of all of these things cost you. Um and 80% of what these networks do in terms of business development is um for keeping the status quo. It's a rat race to some extent. Um, so once you decide to join the Ethereum economic zone, you no longer have to partake in this because now you don't have to endlessly

replicate things that are already there on Ethereum or other networks. You can just genuinely add new things and whenever whenever a user needs something that you don't have, you just let them use the version on Ethereum or another network in the easy. So you can build a much more differentiated offering because you don't have to replicate kind of uh the 80% of the table stakes that people um have come to expect. Um so I would I would also wager that um the first networks to join the Ethereum economic zones are smaller networks. So Nosis is is the first one. So we will we will be our own guinea pigs here. Um but

I expect the smaller networks to follow suit um sooner rather than later. >> Do you do you expect that the sort of general purpose rollups are least likely? So like you know base or arbitum or >> successful successful general purpose rollups. Yes. Because they are kind of an ecosystem onto themselves and kind of they have um kind of an economic case that you can make for them. So kind of base makes I think around 60 million a year in sequencer fees and so on. So they are they are kind of um economically viable. This is not the case for almost all other rollups >> right but it it it kind of makes most sense for those things that are more app

chainy right >> like it makes >> absolutely 100%. So like Aztec and like uni chain and uh um you know Nosis chain I I guess like is general purpose but it has like a lot of sort of canonical apps there like like uh like cow swap and you know circles etc and like uh um euroe etc. Um, is there a case for those two? Like I guess when does it make sense in the case of Nosis for instance for like cow swap to be its own easy chain and graduate from like the Nosis chain to be

its own thing um as opposed to being part of like Nosis chain that has all this other stuff on it. >> Yeah, a very good question. So for any DAP that isn't extremely computationally involved, I would assume it's easiest to stay on an existing network because there's still kind of spinning up a new zone in the Ethereum economic zone is much easier than kind of um upgrading an existing rollup because there is a well- definfined stack and kind of just like kind of uh you can deploy um a regular L2 um at the click of a button more or less you can do the same for an easy roll up, but there's still a significant amount of overhead. So, kind of you need

to make sure um you have a sequencer, you need to um think about what to do with um data availability in terms of solutions. Um and you yeah, you basically you need a proverb need several provers. So, there there are definitely infrastructure challenges ahead of you. So if you are a um big um DAP then this is may be good for you. So kind of if you're Robin Hood for instance or Poly Market or so those are good candidates um for DAP chains if you are a um fairly thin protocol and kind of cow swap at the core of it is very thin because it outsources everything um

to um the solvers right um it makes most um sense to kind of be colloccated with your users and kind of the cow swap solvers in the background they will understand that if I have a um uh $5,000 trade, I can they can probably very well route me um on Nosis and give me the the best price. If I have a $5 million trade, they will understand that um on Nosis, this will incur a lot of slippage because there aren't as many pools as on mainet. So they will reroute most or all of my trade um to mainet and do this um um in a risk-free manner uh because the solvers can now place a transaction um across Ethereum mainet and nosis chain

in the same block um that gets me um the the the side of the trade that I want at the lowest possible cost. It seems to me like the future here, if we if we take this vision to its, you know, most extreme um outcome, Ethereum just becomes a proving layer and no real applications live or have an incentive to live on Ethereum. They just have an incentive to live on these really fast and cheap L2s or like become their own L2s.

And like do do you think that that is where Ethereum should or you know can be heading where you know we can have like a chain we can have Morpho chain and then like it doesn't make sense for you know a to be deployed across like all these L2s they just have like a chain and it's just like synchronously composable at all times with any other application and you don't have to manage all these different deployments and the bridging and like this whole like complex infrastructure composable infrastructure that we have now like yeah >> yeah um it's super interesting question so I think there's two levels of answers here um the first one is should end users have any business being on

Ethereum and I know this is somewhat of a contentious take um but I would say in the long run probably no so kind of um if you take censorship resistance to its natural um uh to its natural conclusion it also means you can't protect customers, right? Kind of like any sort of um customer protection that we are used to. So, for instance, um you um you engage in some protocol and you were scammed or you send it to the wrong address or kind of you kind of you feel kind of they misrepresented um what they were offering, you have absolutely no recourse on Ethereum, right? Because because they put censorship resistance

first. And for some of I mean currently the user base of Ethereum is really small but will this work for eight billion people probably not right kind of the mo most people will not want to make this a trade-off that they cannot be censored but at the same time um the scammers can also not be censored so so kind of I think kind of there'll always be some people who kind of run their own node and to kind of who who who are willing to kind of um trade that credible neutrality for security they could have elsewhere but I would assume it is a small minority sliver of the global population. Then the question is kind of like how will um DAPs um kind of

be divvied out across different networks. So kind of yes I think the appchain hypothesis has merit. I can see that play out. Um, in terms of gas, I should add um that um I mean the exact numbers don't don't nail me on them, but kind of that I'm just giving you kind of ballpark numbers here, but say I have an L2 and a transaction within my L2 costs one unit. Um then a transaction from my L2 to a different L2 costs 10 units. um and a transaction from my um L2 to Ethereum or from Ethereum to my L2 um or any kind of transaction that involves Ethereum costs 100. Okay, so kind of it's still cheaper to be colllocated with things on the same network. Um, and

kind of calling across networks should be I would make the case that in many sense in many in many in many cases it makes sense to be colloccated with your users or DAPs you use frequently in tandem. Um, but you can always call kind of whatever there is in the larger Ethereum economic zone. I can also see a future where kind of crosschain calls become um cheaper in comparison to um same network calls or kind of the the entire cost goes down so much that it doesn't end up mattering much and then kind of the app chain hypothesis obviously is also um super valid. I mean, all of this also depends on the value that you're transaction that

you're transacting in in every in every in every trade, right? So, kind of like if if your average trade size is $1,000, then doesn't really matter whether you pay half a cent or kind of uh five base basis points kind of like for uh for a transaction. >> Yeah. Yeah. I I think that the way that I I think about this when you know as I've been thinking about it last couple days like I think the vision is one where Ethereum we can kind of borrow the net net neutrality uh u kind of narrative here where like Ethereum just becomes sort of dumb pipes.

>> Yes. And um the application layer is where everything really happens and Ethereum should stay neutral. Um you know should should inherit these crop properties which is an acronym that I learned today. Um and then the applications themselves can have you know sort of different philosophies around how they manage uh things like scans or um who has access to the network. So if it's like a a bank or uh if it's a a government, you know, they may have like, you know, whitelist addresses and KYC addresses, but then at the same time, you can have uh things like Aztec or, you know, unis swap or any other um application live there. Um

just one one last question and and then I think we can wrap this up, but you know, you're you're making a lot of the same noises that like people in the Cosmos ecosystem uh have been making for a long time. So you know um having a shared security layer uh application specific blockchains can are sovereign and can have their own rules um can build their own oracles if they wish can decide you know how their blocks are are constructed uh interoperability between different chains and then like you know uh chains can decide how much or how how close or how far they are from the sort of like main chain and not only Cosmos but like we've heard these noises in polka dot and like Avalanche and all these other ecosystems. Uh I I love the

word I I love Ethereum economic zone because like literally in Cosmos, you know, we have the atom economic zone and like none of these other attempts I think to do something similar have really been successful I think uh we could say by any uh by any metric. What what is different here? like why is it technically different and sort of what does the Ethereum ecosystem you know Nosis and the EF have and uh that you know those other organizations that tried to implement this don't that you know to sort of like point to this being the one uh um attempt to do an economic zone an onchain economic zone

that might succeed. I say this with all the love in my heart for Cosmos and Cosmos. I I have the deepest respect um for all the technology that's been built within the Cosmos. Um love Cosmos, but at the end of the day, it is economically much more relevant whether you're connected to Ethereum mainet or kind of a central zone in Cosmos. Um, and I think that to me is the main differentiator here. So, kind of you access Ethereum liquidity at kind of with with at the action of kind of joining this

Ethereum economic network. That's your upside right there. Um, and uh that wasn't the case for um the atom economic zone. >> Yeah. And I I asked this to it wasn't in a recording, but I asked this to Vitalic uh in the Q&A. And another thing that he brought up was I think this is true. I think uh even even though the Ethereum ecosystem is is much larger, I think the EF has been well, let's let's put it this way. In in Cosmos, there was a real issue with the kind of proverbial cat hurting and getting people aligned. And I think in Ethereum, there's, you know, things take

longer, things are on a much longer time horizon. But in the end, I think we end up getting better social cohesion and uh, you know, the sort of human aspect of it tends to work itself out better than uh, it has in in in some of these other ecosystems. So that might also be something that's uh going forward that uh yeah look this is really this is really cool. I'm really quite excited about this uh as well and um yeah really really glad that you guys at Nosis are leading this I think. Um so yeah what's the timeline here and like what is the call to action for people listening to this who you know are interested in easy may want to build there like what are the opportunities for people to do in this new this new economic zone that is

Ethereum >> absolutely so the mainet contracts are currently under review um I hope to um deploy them end of August um so then >> will you be deploying them are you clicking the button >> I think it'll be ceremony of some kind it'll probably be one of the devs to kind of deploy them and >> it'll be Claude. Yeah, it'll be Claude. >> No, no, no, no, no. Claude doesn't have production access. Um, uh, not that he's not involved. She's not involved, but uh, yeah. So, um, we'll be deploying them um, at the end of August. Um, there's currently already a DevNet app.

So, kind of if you go to e.io um, and click on the GitHub logo, um, you can see what's already there. Um, there's a Telegram group. uh you can join us and we'll we'd be happy to kind of give you updates whenever we have them. Nosis chain is going to move into the Ethereum economic zone in a limited fashion by end of year. So in a fashion that kind of gives us full shared liquidity with Ethereum, but no infinite nested calls. Um but kind of one return call per block. And I mean that that should be good enough for 80% of use cases right now. So this is not far off.

This is happening uh this year and then kind of it'll probably take another nine months or so until um it's feature complete. Uh but in in principle this is a very bounded project. >> Awesome. Thanks so much. >> Thank thank you for having me on on the other side of this. It's it's been it's been weird but it's also a pleasure. >> Cool. All right. See you later. Cheers.