Debating Ethereum’s Big Decision | Roundup

We've been really in Ethereum land myopically focused on the hardware requirements for the validators. And so we just keep unbundling things that validators have historically done and saying, hey, we can have our cake and eat it too. We're still decentralized. Look at how many validators we have. Look at how low the hardware requirements are. But then we just keep giving more and more things to relays and builders. Hey, yeah, this network is super decentralized. We've got hundreds of thousands of validators, but we've got 3 builders that build all the blocks, right? Like, at some point that has to be a factor.

This episode is brought to you by Sei. Sei's V2 upgrade introduces the first high-performance parallelized EVM already live on public devnet. Mainnet comes later in Q2. You can follow along with the Sei journey on X @SeiNetwork. Sei is spelled S-E-I. Go follow Sei on X, @SeiNetwork. Hey everyone, Santi and I have been talking about Solana a lot recently and we're excited to have a Solana sponsor of Empire, Marinade. Marinade is a staking protocol on Solana and the only stake pool that delivers auto-rebalancing, MEV rewards, and automatic downside protection with their new protected staking rewards. Optimize your SOL stake with Marinade by hitting the link in the show notes. Big thanks to Marinade. We'll talk more about them later in the show. Hey everyone, the Polygon Community Grants program was launched with 1 billion tokens, all for Polygon builders. Really excited to share that on today's episode of Empire. Season 1 of the Polygon Community Grants program is now live. It features $35 million in MATIC to support the next generation of Polygon projects. Join the aggregated future today by applying at polygon.technology/grants. Big thanks to Polygon for sponsoring Empire. Mantle LSP is a permissionless and non-custodial ETH liquid staking protocol deployed on Ethereum and governed by Mantle. Mantle restakes 100,000 mETH to generate massive Eigen Layer Points every day. Basically your chance at being part of the Eigen that will be given out to mETH holders on Mantle's L2. You can check it out, mETH, that's m-e-t-h.mantle.xyz/campaigns. That's a mouthful. We'll put a link in the show notes for you to check out and learn more. Big thanks to Mantle. All right, what's up everyone? We are back with the roundup. We got a whole squad today. Uh, YouTube comments clearly are not enjoying Santi and me. So we brought on Mark, a new research analyst at Blockworks Research, came over from CoinShares, and then founder number 2, my lesser half, Mr. Michael Ippolito.

Yeah, I'm actually— Jason and I actually played a game of ping pong for the rights to founder number 1, and your boy's founder number 1. So it's great.

The only— I didn't know the only sport Mike is good at happens to be ping pong. I was JV his senior year. But yeah.

Yeah. Well, none of you guys are good at weightlifting unlike me, but yeah, sure.

Santi, how's the lifting been?

Fucking cranking.

Great.

More creatine, less lifting. But yeah, I just came back from a 5-hour bike ride and I'm absolutely cooked. So I'll let you guys talk while I, uh, figure out—

Mark's like, I thought we were talking about some intellectual conversation out here.

No, we never do. We never do, by the way. I mean, none of this is legal or intellectual discussion as people already know. So if you're listening, then you probably We're gonna be dumbed down in this conversation.

Yeah, so we got to start with the YouTube comments. Zero Zero X Alex said, uh, Yano looks like he's about to launch a vampire attack on Santi. So that was not super kind. I don't know if they're commenting on my—

I don't even know what that actually means.

What does that even mean?

And I don't even want to explore it or entertain it, but please elaborate, sir.

Santi gonna blow a disc in his back trying to show his Show his dog when he should have Jason match his runtime. Oh yeah, no, I'm not gonna do that. Um, yeah, these are— we got some kind comments. We got some kind— oh, I guess you got to get a better mic, Santi. Yeah, that's it.

Is this—

is this better? Testing.

It's better.

Oh, well, the mic. All right, Mark, I think they were calling you pale, you know. They are calling me pale.

That's the—

yeah, yeah, yeah, look, I didn't want to say that, but yeah, that's what I was thinking. Not from how it looks, from the comments.

Mark, I'm glad you already feel comfortable enough with Blockworks. I'm glad that you're— I'm glad you're enjoying it.

Mark, is this your first and last appearance at Empower? Yeah. You will lose all access to email upon the start.

Mark's like, been a good run. Mark just got kicked off of Slack. That's weird. My Slack just got shut down.

Oh, with it.

Santi, I saw you just invested in MegaETH. MegaETH just had their— announced their fundraise. It seems like ETH, but fast chain ETH. What is— tell us about why MegaETH is like so freaking hyped in the last couple of months.

Look, I always love talking to teams that are very opinionated. In the first like 5 minutes of a conversation with these guys, they were like, we want to push the limits. We're going to run a centralized sequencer and run it hard so we can get the most performance out of the EVM. I'm like, great. And so you either like that or you don't. But the fact that they're very opinionated about that, I like. And it's something that I've been thinking about. Like, I also had a conversation with like Logan and shout out to the Frictionless guys because he's obviously very bullish on Solana, like next-gen high-throughput chains. And he's like, we were talking about like if you were to re-architect or do something with the EVM, like how would you do it? And he was describing this. I'm like, you're basically describing MegaETH. And he's like, oh, interesting. And so then he went out and talked to them. And so that's how I see it. And it's a great team. They're cooking hard. I went out to Berlin to meet their batch of like first set of first cohort of projects that are building on top of Mega. I would invest in like, I think there were 8 teams. I would invest like 7 out of the 8. Yeah, super impressive. So, um, yeah, quite excited. Mike, we're gonna have him on the pod so, uh, people can learn more about it in the next couple of weeks.

Yeah.

Mike, what do you think of the Mega ETH?

Um, I like Mega ETH because it just makes a lot of sense to me from like the trade-off that Ethereum made is we're gonna have a, you know, pretty slow, relatively non-performant mainchain, but we're going to push a bunch of people up to rollups. And I think that Ethereum can and should basically push the limits up there, right? Like, that's the whole point of rollups. So yeah, I really like it. It's sort of a— I think the other reason I kind of like it is it's accelerating to the endgame of where rollups are going. Like, rollups are competing on cost and speed and performance and all of the stuff that MegaETH is leaning into super hard. So it's kind of like, remember how retail brokerages were, you know, it used to cost, you know, $50 to make a trade and then everyone kind of just slowly undercut each other by a couple bucks until Robinhood just said zero fees, screw it. Everyone trades for free. It feels like that's what MegaETH has kind of done and they're just skipping to the inevitable conclusion of how rollups are going to design themselves. So I don't know the team personally, but I like it from a strategy standpoint.

Yeah. Feels like that's a good lead-in actually for this first conference. So I want to talk about a few things. One is Solana blinks. Two is like there's actually a lot of movement on ETFs this week. There's Solana ETFs and ETH ETFs. But actually this first place to start and the reason I want to bring Mark and Mike on the show is around what Mike was saying about like the endgame of rollups and like it feels like the kind of conversation around ETH is changing and there are these decisions that ETH made that are different than the core decisions that Solana made. Like it does feel like the ETH camp might be reevaluating that. And there was actually a Charlie Noyes tweet that I'm going to use to kind of kick off this conversation. So just to read this. So Charlie is one of the founders of Paradigm. He said, he said, here's what I basically think we should do. One, make L1, make the L1 more hospitable for apps. Two, max DA, or I can break this down, max EB to drop validator count tons, raise the gas limit substantially, 3, cut block time. So that's under make L1 more hospitable for apps. Number 2, max DA. So breakdown of this is fix the blob pricing and gossiping, scale the blobs, peer DAS ASAP. And 3 is stabilize MEV. And the second tweet under this was actually maybe the more important one, which he said, this means recognizing that solo staking is not sustainable. Timing games aren't a big or urgent problem. The dominant form of MEV is LVR, which is sublinear in block time. So cutting block times will actually make this situation better and deprioritizing other stuff. So the reason this is such an interesting tweet from Charlie is what he's talking about are a lot of the— he's saying ETH should go in the direction of— I think that some of the decisions that someone like Solana maybe has made or some of the other— I think Logan from that Santi called out from Frictionless was calling the high throughput chains have made these decisions. So, Mike, let me tee you up for this conversation. You've been pretty active in the Blockworks Research subscriber chat. Like, why is this so— why is this such an interesting tweet from Charlie here?

Um, yeah, I can, I can, I guess, get— go at it at a high level, and then Mark or Santi would love to get maybe a more in-the-weeds take from either of you guys. But I think the— zooming out, there are the scaling, uh, problem in blockchains. There's only really two big frameworks for how to approach that, which is to layer it and say, okay, we're going to keep the computers and the bandwidth requirements on like ETH main chain static, and we're going to move a bunch of the computation up to another layer. Or you just make the boxes bigger on your main chain. And like, those are the two different routes that Ethereum and Solana have gone. And so there are frankly challenges with both of those, with both of those approaches. The Ethereum approach to Solana has always been, well, when are you going to stop making the boxes bigger? How big is too big? At one point, are you participating or preventing people from participating in consensus? Et cetera. And that's the, I think, pretty valid knock on Solana. But I think there's been, um, this you can have your cake and eat it too approach in Ethereum, which is not actually accurate. And a huge part of that has been the PBS design philosophy. And the PBS design philosophy basically says, hey, in consensus, we're going to recognize that there's a lot of work that goes into consensus, and it's okay to have specialized parties participate. So historically, the proposer would do everything, and we've been just unbundling the roles that the proposer does, and we've been giving them to builders. Now, the challenge, as ETH's roadmap has gotten more complex, and as we're trying to actually ask the L1 to do more again, which is the preconf part of the story, is that the builder centralization part of the story is becoming more and more of a problem. And there is a trade-off there. And so I, I think maybe where this is coming to a head. I don't want to speak too much from Paradigm or Charlie's standpoint here, is that we're saying, hey, there's actually some issues with the ETH scaling roadmap today. There are some real technical problems like interop, but also we're centralizing builders to a real extent. And maybe if we want to solve the interop challenge, we can actually make some improvements to ETH mainchain and make some pragmatic changes instead of like precomps, which are extremely complicated. Have a lot of negative externalities and are going to take a long time to implement. So, you know, Paradigm's been super deep in like Ethereum infra builds for a long time, and they're kind of invalidating a lot of the sacred cows, or like speaking against some of the sacred cows I think that the Ethereum community's had. So it's just interesting to hear them come out and comment like that.

But yeah, Mark, what do you think about Paradigm talking about some of these sacred cows that Mike mentioned?

Yes. I mean, I don't know if it's more like let's move more towards high throughput and abandon the existing roadmap. I think it's more like let's shift our priorities because I mean, right now a lot of people, you know, I don't like having to use Ethereum at 2 AM just to get the lowest transactions if I want to do something, right? That's not fun. And I think it's really about like reprioritizing the UX, just like kind of borrowing from Solana. So I think like Solana has actually been really good as for competition for ETH. Like, it's the first real alt L1 that I wouldn't even call it an alt L1 anymore. And I think a lot of the people in the community are kind of getting fed up of these deep research, long-term goals that are deemed as very high and secret and need to come first before everything above UX. So I kind of agree with most of that tweet. But there are some aspects of it I have mixed feelings or might not agree with at all. But then I still do agree with Ethereum's— how you broke down the two scaling parts. I still do agree with Ethereum's vision because, I mean, the only kind of analogous example I have is the current internet, and that is not all on one layer, and that is not fully synchronous and doesn't work like that. And yet it's one of the, if not the best thing that we've created and nobody's having an issue with 200 millisecond response times when you buy something on Amazon. So I think if you're really bullish on crypto in general, you can't imagine that one chain can handle it all.

Santi, agreed or disagree?

I don't like making analogies to the internet because if you're going to do it, then just stick to the internet, you know? So like, I appreciate analogies are really good to like, I don't know, get people to understand things, but we're building something fundamentally different. And so I don't know, I still agree in a multi-chain world. But yeah, that's just a caveat. I don't have a particular opinion on It's interesting to see Paradigm like tweet about this. Obviously they've been more Ethereum focused and centric. But let me ask you a question, Mike or Mark. Even if you were to like implement a lot of these changes on the margin, like how competitive do you think it is to something that is just built from scratch? Because like a lot of the discussions that we've had here in the pod is like integrated versus modular. That's like one. Set of debates. And the other one is if Vitalik were to re— like build Ethereum today from scratch, he would do a lot of decisions that you, you can't do. Like these are like marginal improvements, but there are more fundamental, like parallelization that like you're just not going to get. So I'm curious, like even if you were to implement the, the things that you agree with here the most, one, what are the things that have the most amount of impact? And two, what does it actually mean for the end user? Because that's, I think, the most important thing, or the developer that is like deciding whether to build on Ethereum or just, uh, go somewhere else.

Yeah, it's a really good, it's a really good question. I think there are, I think one of the challenges about this debate is that there are multiple debates and issues that are getting conflated into one here. And I think to maybe respond to actually something that Mark said and, and to respond to you also, Santi, is I think there has recently been sort of a change in the zeitgeist of what people want to talk about in crypto. Um, and I think people are frustrated with solutions that feel kind of Rube Goldberg-y or very complicated or have very long timelines, um, when there are simpler solutions that are available. Like, what do users really want at the end of the day? They want transactions that are fast and cheap. And there's been an enormous amount of effort, um, to maintain the decentralization properties of Ethereum while delivering that to users that is the rollup scaling roadmap. But yeah, I think I'm just on record saying this, but like, I'm kind of a hater of precomps for this reason, because I don't think, to your point, Santi, like, I don't think users care about that. I don't think users, I don't think users are like begging for L1 proposer precomps. This feels like a top-down push from Ethereum, right? And there's just, there are easier, like way less complicated solutions, like This isn't going to be a challenge on Solana because the block time is so much shorter. Like you could sidestep this entire infra debate just by having shorter block times and slightly higher requirements for bandwidth and hardware for proposers, which Ethereum should probably do.

You know, this has been like sacrosanct, right? Like Mark, I know you want to jump in here, but like this, this coming from someone that was more Ethereum aligned, a big part of my journey of really appreciating Solana was actually a conversation I had with Logan. Again, Logan keeps coming up from Frictionless. Um, it's like the people in Ethereum historically were like, oh, Solana has higher hardware requirements and that's an issue for decentralization. And at the end of the day, it's very philosophical because no one, like in Ethereum, like if you look at concentration, like no one's really running a Raspberry Pi in like their kitchens, you know? And like the reality is, um, the idea of higher hardware requirements used to be an issue that I had in my mind. And then I look closer and it's like, people should go listen to the pod that we have with Anatoly, the second one, like after the year in after FTX collapse. And it's like, when you actually look at the P&L of blockchains, like, it's like, you either believe you're going to make a lot of money by running a validator and like you front the capex and you believe that this is where a lot of fees are going to come through, or you don't. And if you don't, that's a more fundamental problem. But I actually think that like hardware, the higher hardware requirements are not, it's sort of like ETH bot to Solana. And I don't see it as an issue. At the end of the day, people are going to front those higher hardware requirements because they can make a lot of money with fees. And that's just the state of things. If you believe that users and activities can happen in that blockchain, then you don't have a problem. Like the same with the Bitcoin miners are willing to front huge millions of dollars in ASIC chips. It's just the reality of things.

I'm going to agree with you there because even on that same point, one of Charlie's comments was talking about raising max EB, the effective balance. It has some other benefits, but one thing I think we're going to see out of that is the validator count drop drastically, which is the point. But there's something like 10,000 full nodes on Ethereum, whereas there's a million validators. So we're kind of like 100 to 1. And I think if it drops down closer to like 10,000 validators and then we see Solana has, what, a couple of thousand validators running already, I think the difference between the two doesn't start to look as drastic. And then you start to question how much is hardware really a factor in that decentralization game.

Yeah.

I think there's probably like, here's the thing about this design philosophy of PBS that I actually agree with is there's going to be like, if you look at the transaction supply chain, either of Ethereum or Solana, it's really complicated and it's only going to get more complicated. So I agree with this high level. I agree with this high level idea of specialization of labor and trying to be strategic about which actors are doing which things. But I just, I think that we've gone too far in PBS and my perspective or diagnosis, and anyone listening can feel free to push back, is that we've been really in Ethereum land myopically focused on the hardware requirements for the validators. And so we just keep unbundling things that validators have historically done and saying, hey, we can have our cake and eat it too. We're still decentralized. Look at how many validators we have. Look at how low the hardware requirements are. But then we just keep giving more and more things to relays and builders. And so at some point, it's not really— it's only if you're going to talk about one network being more decentralized than the other, you have to do it holistically. You can't only, you know, cherry-pick one metric because it just doesn't really make that much sense from my perspective to say, hey, yeah, this network is super decentralized, we've got hundreds of thousands of validators, but we've got 3 builders that build all the blocks. Right. Like at some point that has to be a factor.

So can you explain for folks who maybe don't listen to Bell Curve every week and they're stuck listening to Santi Niemera on Empire, can you explain maybe this PBS design philosophy and specifically, you know, you and I have talked about like it being compared to maybe taxi medallions in a sense. Can you maybe get into this a little bit? Or the proposals, I guess you could say, are compared to the medallions and taxes.

So if you run a validating node in Ethereum, you get to participate in consensus. So you put up a certain amount of collateral, you put up 32 ETH in collateral, and then you invest like some minimal amount of ongoing energy costs, and then you also invest your time, right? So you're like, but then what you're, what you're allowed to do is participate in consensus. And your reward for doing that is you get some amount of issuance. But you also get, you can build blocks. And people in Ethereum land figured out first and a long time ago that you can actually, depending on how you order those transactions within blocks, you can actually make, like some money or quite a bit of money if you're really smart. And that actually the building those blocks and trying to optimize profitability on those blocks is actually something really well suited for very it's a very sophisticated activity that's really best suited for like hedge funds, um, specifically, or people who are very, you know, crypto capital markets savvy. And so that along with, in the beginning of, there used to be these things called priority gas auctions, which was searchers kind of bidding against each other to front run, and they created all this gas. Was this was kind of like a, an early version of this, this idea of saying, hey, there are going to be a bunch of blocks that are built in this off-chain auction, which is MEV Boost, which was created by Flashbots at the time, um, and then that's going to be transmitted to proposers who basically just get to sign off on the highest amount that, that they're going to get paid. And so that was the beginning of this kind of like MEV boost was kind of an unofficial like non-spec'd version of proposer-builder separation where initially you had one entity which is the validator and they built the entire block themselves And then you had two entities because this one entity has the right to propose a block. They have a block monopoly. They have the right to propose that block to Ethereum. But then you actually have this other entity, which is building the block in a profitable way, which is the builder. So that's like the design, that's the design philosophy here. And, and recently what's been happening in Ethereum is like, well, actually, what if we want to give more rights and flexibility and create more financial, like financialize this, this very valuable contract, right, that proposers have. So what if I want to be able to sell the right to propose in the future, right? Or— and that's basically what, what preconfirmations are. So you're actually adding financialization to this, this like contract, right? And, and at the same time, you're unbundling a lot of the responsibilities of participating in consensus. So if you push that all the way over to the limit, What proposers really have is this really valuable right, which is granted them by the protocol, which is to have a monopoly on building a block at, at some given point. And then they farm that out. They outsource the actual building of the block to, um, like to the, uh, to the builders. So I think what this kind of looks like is something really similar to what the medallion service in NYC taxis look like. Which is if you're a medallion, like if you drive a cab in New York, you have to put up a bunch of money. You pay for this thing called the medallion, and that gives you the right to drive around and pick people up and make money. And in Ethereum, it looks pretty similar. What you really have as a proposer is this protocol-enforced right to make a block, and then you have to put up collateral to effectively purchase that right, and then you farm it out to someone else that actually does the work for you. But the— but that's the challenge as we financialize, as we increasingly financialize that right and try to grant more ability to the people that have the monopoly, but they can't actually perform that work themselves. You're just giving all the execution around that stuff to builders. And that's what's causing this whole big issue and problem. But that's like my take on— and so I think proposer-builder separation is right. We just need to have a more nuanced thought about like, what the division of labor should be. Should it be 1% of work is the proposer and 99% are builders, or should we move it back a little bit?

Yeah, and I think tying that to the thing you said before that question, you, you would argue that, look, we're all super focused on validators right now and how many validators you have and how big are the validators, but nobody in Ethereum land is talking about the maybe builder centralization that's happened as well.

They are behind Closest.

For sure. Yeah. Like people are— maybe not that no one's talking about it, but people should be more focused on it and talking about it.

What do you guys think, Mark and Santi? The, so this is coming to Solana as well. Like if you listen to Zano and Lucas from Jito, they're also looking at it and being like, we also are heading towards proposer-builder separation. So do you think this is an ETH thing? We've been, we're knocking ETH quite a bit here, but this is also going to come to Solana at some point as well. What do you guys think about that?

It's kind of fitting from this talk from Research Day. We're all building the same thing and there's always a box in the middle that does all of the work. I'm of the philosophy that it's okay to have some centralization in terms of the execution and the specialization of certain tasks once the verification of it is decentralized. Like once the verification of it is decentralized, once there's an alternative fallback option and once there's like no censorship resistance, I don't see why there's an issue. I mean, PBS has been running externally out of protocol for the past few years now and its users, it's more or less the same thing. The only issue there is like MEV with AMMs and front running. But apart from that, I don't really see an issue with it. I don't know if you have any thoughts, Santi.

Nope. No, I would agree with that.

Also, there's one— there is a difference as well. I feel like the ETH research community is taking a lot of knocks for being like, why are you focusing on this stuff? I think a lot of the stuff that they're actually explicitly focused on in the roadmap is the right stuff to be focused on. But there is a there's almost like an out-of-band channel as well, which is like, especially around these precomps, these are like privately funded infrastructure companies and people are kind of cheering them on and moving them towards this solution. And we haven't talked about some of the negative ramifications of something like— I think that's what happened, by the way. I have no idea, but I think the reason Paradigm is being more vocal about this stuff is because there are huge— there are really negative drawbacks to preconfirmations. You just, you are further incentivizing, uh, like vertical integration between relays and builders. You're creating multi-block MEV, which just makes censorship and MEV extraction much worse. Um, and so I think, I think honestly, I think the Paradigm guys are kind of being like, hey, this, you know, private market infra stuff that, you know, some people are pushing forward here is going to create way more negative externalities than benefits. That we're— then we're going to see in Ethereum land.

Like, also, I think people are just fed up. Like, precomps— who, uh, someone was on a podcast talking about precomps, talking about it taking 2 or 3 years. Like, we just don't— and, and if someone's saying it's going to take 2 or 3 years, that means 3 or 4. Like, when you compare that to what's happening in some other ecosystems where it feels like things are shipping on a quarterly basis, I think people are just fed up with the long shipping times, honestly.

But I mean, the thing is, we have precomps now. Like, all centralized sequencers and all the rollups do pre-comps now. And I think everybody's talking about decentralizing the sequencers. So then we're going to get this new decentralized marketplace of sequencers that will be the big block in the middle. It will actually allow rollups to say, okay, look at us, we don't have a centralized sequence anymore. And it could possibly allow for them to capture some of the MEV that's happening in their own systems that right now is probably happening by people who are placing their RPC nodes closer to the centralized sequencers. But I think the thing is, if we're going to have decentralized sequencers in a shared marketplace already, and it seems like that's inevitable, why not give them the role of precomps to do in the meantime? Because I think that what Ethereum is doing with PBS, with restaking, with precomps, it's It's letting the free markets decide what is the best outcome for this trial and error accelerationism. And then when whatever we converge on as the best outcome, Ethereum is just going to enshrine it and say, okay, this is the best solution, we'll do this. But I think the problem is that they're just taking long to do that.

Well, listen, Mike, I think you bring something really important. It is difficult to, like, from especially where I sit, I'm not as technical, but like, Things take a long time to build. So like to be critical of like certain things at the Ethereum Foundation or like the Ethereum, there's multiple people, researchers, right? It's hard, right? Because sometimes like you have to do the difficult stuff that is not immediately going to impact users to then, you know, in 2, 3 years' time have a really meaningful impact. Like EIP-1559, right? It took forever, but ultimately like, you know, hey, you know, I think it was a really good thing. Solana is going to at some point have to implement that. So Um, it is kind of like, I appreciate it's really frustrating, but I think it's just important to like take a longer term view. But like on the, I want to play a game. Okay. Like, uh, because this, this relates by the way for, for Mega, right? These narratives are really interesting, right? Like we, we talk about like decentralizing the sequencer is something that is constantly talked about. Let me ask you a question. Okay. If you're an L2 user, what's the most important thing? Like, for blockchains, if you're going to use a blockchain, what's the one or two most important things?

Transaction settles quickly and your transaction goes— yeah, transaction goes through, something actually happens.

And cheap.

Mark, you said it is, is the validity. I don't know, Mike, if you want to take a guess.

I mean, I think you want strong settlement assurances, you want to make sure your shit isn't going to get censored, and then you want it to be as fast and cheap as possible.

Are those the—

Yeah. Yeah, I think you all said a combination. It is validity and like verifiability of the execution. Like you can, you know, it's settled, but also you can verify it, right? You can contest it, right? So when it comes to L2s, the most important thing is fraud proofs. Like that's one thing. If you're going to use an L2, it is fraud proofs. If it doesn't have fraud proof, run away. Like, and so like, The question becomes like, why is decentralizing the sequencer such a hot topic? Because for me, it doesn't— it can impact liveness and censorship, but it doesn't compromise verifiability. Like, you can have your money stuck in the L2, but like, at the end of the day, you can take it back if you have fraud proof. So you can prove, hey, this is malicious, like, and you can bring it back to the other one. It might take time, and there might be an issue, right? You might get liquidated or whatever, but you're not gonna get rugged. And so I think like, for me, it's like, yeah, you decentralize in sequencer, I get it. It's sort of more of a hand-wavy thing. And the reason I bring this up is because I think it just tells you the big disconnect between what the market and market participants think is important and what is actually important for blockchains. It's a big gap. Like Mike, you probably know this better than anyone. Like, it's just like, why are we talking about decentralizing the sequencer? Build goddamn fraud proofs. Like, you know what I mean? Like, there's one thing that is super important, and there's another that is not important at all. Like, at all.

Also, there's a multisig, and the contracts are upgradable, you know? Like, right, right.

So yeah, I don't know. I don't know if you guys want to opine in any of that, but it's just, for me, it's just like I appreciate that some things like need to take years, and I'm willing to be patient, but I'm not willing to be patient when you don't have fucking fraud proofs. Like, why did you raise $50 million and don't have fraud proofs? I'm sorry, ridiculous.

Mark, what are you— what were you gonna say?

I think— I mean, yeah, I, I get the whole thing. I think people— I think we're in this new trend of shipping things before they're built, but just because we have to, otherwise, where will the users be? And then when you ask what's important for users, I agree, validation and verification. But I'm thinking of it as that's like second tier of users. I'm thinking like first tier of users, people who don't worry about their Amazon purchases, don't think about all of that backend stuff. They just want cheap and fast transactions. And I think that's why we have centralized sequencers right now because we had to skip a couple of steps. To give a certain type of users. And I think possibly the most important, if you want mass adoption, the users who are not supposed to be caring about the backend stuff, we want to give them that kind of the, that same Web2-like UX, right? Sorry to hit you with the internet analogy again. And then I think—

Well, would you agree? This is what Megha's super opinion. I'm like, they're going to run a centralized sequencer.

And that's okay. And so now I think there's a third type. Who's more like an investor user. And this is where I think decentralizing the sequencer is nice is because you can, for instance, Arbitrum can sell its sequencing rights to this shared marketplace and now they can give that MEV back to token holders or rebate gas or whatever their implementation of it is. But the point is they can use it to benefit the token holders or the users, but they're tapping into new financial resources that wouldn't be possible with a centralized sequence.

So I've got a question for you guys, uh, related here, but it's something that's sort of interesting is that, okay, the Ethereum L2s, they've been— most of them have been— the big ones like Optimism and Arbitrum have been live for a number of years. There's a bunch of experimentation on distribution, like what Blast did, and on the actual architecture, which is what MegaETH is doing. Bitcoin L2s are just getting started. They're in the very early days. There are no clear winners yet. I would be curious, what lessons have you guys learned from how ETH L2s have played out? Then how would you advise Bitcoin L2 teams both, A, to get the best outcome for, like, what is just the best outcome for what Bitcoin L2s could look like? But then also, how would you advise teams? Like, what mistakes would you tell them to avoid?

I just have one point here. I think it's not a very, not the best take, but Bitcoin L2s are calling themselves L2s now without truly being L2s. They're still trusting a multisig at the end of the day. But Ethereum L2s aren't true L2s either. None of them are like stage 2s. So I think one thing from a marketing side, lean on that, lean like we're going to build this and ship it probably before it's finalized. I'm sorry if that's a really bad take, but it seems like That's how you're going to get the most competition and accelerate the movement further and actually get what might be the best L2 for Bitcoin.

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Right.

So, Mark, you're saying the recommendation is just look at what all the ETH guys did without fraud. Like, they basically just launched like sidechain secured by multisig, not technically an L2, but they were actually able to get market share. So like they got market share even though they're just this little sidechain secured by— you're saying go do that or you're saying learn the lesson and don't do that.

I'm saying, that's what I'm saying, it's not, it's not a good take, but if you want to get the use, like if you want to get users, go do that. Or you can wait until everything's fully shipped and you can be the 20th L2 like Tycho who has everything running and no users.

It's, I mean, I'll take the opposite of that because the, I think people are, you hear this in pitches, right? I've been pitched a 10 Bitcoin L2s. And they're like, yeah, we're going to do basic— basically that. It's like the Ethereum roadmap. People don't care about fraud proofs. I don't care about— I'm like, I get it, degens are going to chase yield, but you fundamentally don't understand your customer. Most Bitcoin holders probably will be a bit more different than your Ethereum degen, I think.

Um, Santi, what about BlockFi though? Just out of curiosity, because—

well, true. Yeah, I mean, like, this is the paradox of the Bitcoin maximalist brain. Yeah. Which unfortunately, what you're— what Mike is saying is they were very critical of like bridging over to using WBTC, or, you know, but then they ended up putting their money in, uh, BlockFi. And, uh, you know, The rest is history. So you're right. I mean, I think it's a really important point. I think on the margin, it's sort of a psychological subtle thing when you're like people are always in crypto, the double standard, right? You're critical of stuff that happens on chain, but like you're using centralized exchanges. You kind of have to in many ways. I think the infrastructure and security off chain has like improved vastly. Like, um, but it was like sort of, I think, a different era. I wouldn't point to BlockFi as a thing to suggest that like people are not going to care about what they're doing on-chain, is what I'm trying to say. I think, look, the most important thing is being very— the thing that I tell all teams is just be very transparent in where you are in your roadmap. Like, if— and, and people should go listen to Arch. Arch. So I invested in them. And when they're going through it, I'm like, let's just accept the fact that like when you're interacting on L2, there is some security trade-off. There is some trade-off. Just period. Don't like, if you're a team, just don't say there aren't because you're going to be chewed. Like Blast learned this the hard way when they launched and then they retracted. They're like, look, they, you know, that the fact risk-free, nothing is risk-free in crypto, period. Full stop. Nothing is risk-free ever. And so I think like the more you are transparent, if it's a multi-sig, then just say it's a multi-sig and we're working on fraud proofs. And I think users, I think, appreciate that. And, you know, if you have issues as a user, go to L2Beat. But yeah, the recommendation is ideally in a perfect world, you know, get fraud proofs when you launch. And I think you play the long game. You want to build the best reputation. And I think it's one of those things that it's really hard if you have an incident or you have an issue. You know, you want to be known as the most kind of technically competent, secure L2. There's a reason why Arbitrum is number one.

Arbitrum used to say we inherit the full security and decentralization of Ethereum on their homepage.

Do they say, is that still on their homepage?

I think it was last month when I checked. I did a whole Bitcoin L2 piece. And so I was looking at the marketing of these different L2s. I mean, I'm not faulting them for it, by the way.

Right.

And I think they're a great team and they're honest actors and all of that.

But I'm just, I mean, there's a, I think there's a through line to what both of you guys are saying, which I'm on Santi's team in terms of you should just always be as transparent it's really obvious when teams aren't transparent and then they have to double down and they're aggressive founders and nobody likes that. Um, but there probably is some, I think there's an element of truth, Mark, to what you were saying as well, that yeah, if you get, you get, be honest about it, but just get what the market wants out there as quick as possible because there are these big network effects. And I would be curious, Santi, your perspective as an investor here, like you look at something like Arbitrum or Optimism. And then you look at the investment opportunity behind one of these new L2s, maybe a mega ETH.

Mm-hmm.

And what I see as the competitive advantage that Arbitrum has is network effects. Liquidity isn't really a problem on, you know, people talk about liquidity fragmentation all the time on L2s. It's liquid enough on Arbitrum. That's basically, it's more liquid than many, most L1s. So they've got this network effect. They've got, uh, apps, they've got a bunch of ETH, they've got deep liquidity, all that stuff. but then you look at something like MegaETH, they've probably got better tech, they've got incentives, and they'll have a lower valuation. So how do you as an investor look at like new L2 like MegaETH versus like market leader like Arbitrum?

Yeah, I mean, I, for me, I think it's worth, it's a way to express like these two. For me, it's worth backing teams that are willing to experiment at the L2s. Like L2s are here to stay, so you, I think Arbitrum is not going to go the direction that Mega is. And for me, I want to see Ethereum be great again in the sense of like, yeah, I'm going to back Mega because it's just a different type of design choice and I want to see that play out. I think it's worth for the ecosystem to like experiment across multiple parameters. So for me, yeah, the valuation is lower, but more fundamentally, like the different kind of use cases that might be, you know, I think Mega will lend itself for different types of apps that perhaps may not be well suited in Arbitrum. I've always been of the mind that it's going to be a world of multi-chain. And that includes like different L2s. So that's how I think of it. You know, if it's a really good team that is willing to experiment on something that a particular L2 is not going to, then why not, right? You could argue that Blast in the same way, like Blast was just native yield. And it was built by a team that understood, because they built Blur, the opportunity cost of capital where you can stake it. And so it's just different things, right? And so, you know, I've just sort of accepted the fact that it's going to be, we're going to have hundreds of L2s. Perhaps the thing that we don't have to talk about it here, but you remember like in DevCon, like it was composability was a thing that like, when there were zero L2s, it was like, oh, composability is going to break. What's going to happen? Like, this is going to be really bad. And then I spoke with like a systems engineer who was like really old and like, I guess senior. And he'd been around like the '80s of the internet. And I'm like, and I asked him the questions like, hey, I don't have that perspective, but like someone like you, like, didn't the internet go through this kind of problem as well? Like where, you know, not composability, but in the sense of like just stitching together just different standards or whatever. He's like, absolutely. Like, he's like, I'm not worried about composability. I think this will be fixed. It's just a matter of like, you know, composability is not a kind of like— I think it's a spectrum. So anyways, like, what I'm trying to say is, um, I think we should probably be more focused on Mark to something you said, which is always bringing it back to the user. So if there's going to be hundreds of L2s, well, how do we make it a very seamless experience? Someone like Kyle out there saying like, hey, when you look at the wallet, Like the user is definitely going to notice that like his money is in like different, like if you have USDC on 10 different L2s, how can we make it so that liquidity moves seamlessly across these L2s? And whether that's bridges or something else, right? Layer 0 or chain, whatever. But I think that's where, that's where I think we should focus more resources and attention and into like accepting the fact that we're going to have multiple L2s. Each with their own thriving ecosystems and liquidity, and how can we make it super easy for the user to either abstract that away or to make it seamless to hop around? And, you know, you know, so I would like to see more of that. I think we're under-indexing in terms of attention and resources there. Yeah.

Let me ask you guys a question that I think the answer is— I would assume you all think no, but I'm curious if anyone thinks yes. So we're talking about Ethereum, like, you know, maybe moving towards this like decreasing block time for faster confirmations and increasing the bandwidth to pipe through more transactions and things like that. Do you think that apps will come back to building on the ETH L1 or has that ship sailed?

I think it's sailed personally. What do you guys think?

Yeah, I agree.

I don't, I don't see that unless some drastic changes.

Okay. I do too, but I didn't know if anyone would take the other side of that.

It's the cost thing. Okay, here's a, uh, maybe to get back to the Bitcoin. So here, here's, here would be a really interesting challenge for, like, if I was in, if I was in charge of a Bitcoin L2, I'd be thinking about this. What is interop going to look like in between Bitcoin L2s? And here's the challenge, is that we as users are all like, hey, if Bitcoin or Ethereum or any of these chains are going to scale, you need L2s that are not like probably synchronously composable, but they're composable. Like there's good interoperability between them. But if I was the CEO of a leading L2, I also know the network effects that you get. And actually, if I'm the biggest one, what's my incentive to be interoperable with smaller L2s? Because then I'm literally just churning users. Right. So, yeah.

Well, this is a very great question when you've put it in context into where Blast is trying to do, right? And for people that are, may not be as familiar, like obviously they announced their airdrop claim. When you went out and claimed the airdrop, like they announced like they're basically trying to vertically integrate and just build a super chain, build a wallet, build and just own that customer through and through. So I think these wars with L2s, yeah, I don't think there's any incentive to perhaps if you're a builder of an L2 to have interop. You may want to vampire attack another L2, but there's, but it's just, it's one directional. It's like once you're in my L2, like you're sticking around here and I'm gonna make everything possible to have you stick, stay around. And I think that's clearly what Blast is doing. I mean, and I think others will follow suit. As well.

Yeah. If you're a smaller L2, you just have to hope that you can, and you realize there's no path forward to becoming one of the major players. You just have to hope that other people join this composable network, whatever form that may be. And hopefully that aggregate of L2s grows larger than some of the majors. But then that also gets into this thing, even with the shared sequencing and Polygon's AggLayer or these extension stuff, I think a lot of people think they're like L2 exclusive. Like L1 chains can join a shared sequencer network. And then I start to wonder, is there even any advantage of being a rollup in terms of composability there? So I don't know, it's messy. And I think the incentives are in play for the major L2s on Bitcoin or Ethereum to maintain their siloed network effects. Yeah.

As we round out, I want to maybe ask you guys a question. Um, it has felt that the interest in Bitcoin, L2s, and NFTs like Ordinals has like faded recently. Uh, did we get far too ahead in the narrative? Um, or what are you guys seeing there? And are you equally as excited as you were 3 months ago?

Oh man, I think this is, this is such a good question, Santi. All right, so I guess it depends on that BlockFi question that we were talking about and how much are people going to want to use their Bitcoin to do other things on-chain. Like, what are the cultural— like, how culturally do people think differently about ETH versus Bitcoin? And I could see it really going either way. I, I've waffled on this a lot and Part of me is like, you know, the culture there is you put your Bitcoin in your cold storage, you're buried with your ledger, and that's a good life, you know. And that's the attitude of the Bitcoiners. And then there's also— but also a part of me, like, red meat and animal organs and shit. Red meat and Dr. Austrian economics. Jesus, moving down to Miami. And, uh, and, and then there's, uh, and then there's another part of me which is like You know, it's Bitcoin is over $1 trillion of wealth. That's a huge step up from Ethereum, which is $300 billion. That's a huge step up from Solana, which is $80 billion. And there's nothing to do. Like, you can't do anything. This is part of the challenge that ETH suffers is the fragmentation of I go to this L2 or that L2, or I could stay on, you know, I could get a loan through Maker or Aave, or I could buy an NFT or like there's so many things to do with your ETH that actually fragments it. I kind of think I've actually heard one of the, uh, the Bitcoin L2 guys give me this phrase, a virgin ground. Like, there's just nothing to do with your Bitcoin, and even a smaller percentage of people with fewer things to do, it could hit. So I, I have— I don't really have a ton of conviction on Ordinals, but I would— I wouldn't be surprised if this was just the beginning. I, I think it could get—

Mike, what's your take on Bitcoin restaking after talking to, uh, you had the episode with David? On Bell Curve? David from Babylon, for those who aren't familiar.

Yeah, I think it's going to come down to how functional a platform built on Bitcoin versus something like ETH can be.

Like, isn't Karak trying to do this as well?

Yeah, Karak is really leaning into multi-asset, and that's a whole other dimension to this. Like, I'm not really sure if the— like the way liquid staking, for instance, has played out. Is that it's very ecosystem-specific. And there has— Lido initially tried to expand onto Polkadot and Solana, and it just didn't work. Um, maybe there's like an alignment issue there. Staking operators are really close to like the metal of the protocol, but it's kind of been very ecosystem-specific. It could be different in restaking, but restaking is also really close to the metal of the protocol. So it wouldn't surprise me if the same dynamic played out, that there was like the ETH restaking, the Bitcoin restaking, the Solana restaking. So I just— I'm not sure about that dynamic. But then also, you know, you can't smart— there's no smart contract functionality on Bitcoin. You know, they use this script, which is pretty non-performant. And my sense from the Babylon guys is that they've been really clever in terms of how to build that mechanism. But I just don't know. I, to be honest, I'm kind of waiting to see it in production and try to get a sense of the demand. I don't have a lot of conviction around it yet. What do you guys think?

I get that people want to do more with their Bitcoin. Like, we're seeing TVL on some of these other Bitcoin L2s rise up, activity kind of rising up, kind of fading. But then just because it's that Bitcoin mentality, how many people are going to want to put their Bitcoin at stake, risk their precious Bitcoin to secure some other chain? I find that one a little bit harder to believe.

But, you know, this was my— that's what I was thinking too, Mark. But never underestimate a crypto person's desire to get an extra 3 to 5%. Like, I have this with ETH. I'm like, why are you— like, in the early days of staking, like, why are you risking all of your ETH on these random websites just to get an extra 3.5%?

Because you're shooting for a 10x plus. That's the counterargument. Of that. And it's an insurance policy if you're thinking about Bitcoin right now. I think— no, no, but because I've talked to a lot of funds, I'm like, yo, I'm not going to stake for another extra percent. Some people don't even like valid— you know what I mean? Like, right, they're not even doing it because I'm like, you know what, I don't care about that extra 8%. Again, people don't understand compounding or being inflated out. They're like, this is either going to be a 10x plus, or it's going to be a zero. And that's how I size it and how I think of it. Now, the question is, we're making generalizations, right? I don't think we fundamentally— it's hard to build for the current set of users because I think that one changes over time drastically as you onboard millions, which I think will happen at some point. If that doesn't happen, then none of this matters. We're going to fail as an industry. So I kind of go back to something that like Toli's been kind of really pushing for. It's like more value should accrue at the app layer. And if we're not— if that doesn't hold true in the next 5, 10 years, crypto is going to be very much on the fringes. Because one, I don't think Bitcoin's like a digital gold. I'm sorry guys, I'm going to say it. It's a social construct, I get it, but not enough. It's nowhere— gold took centuries to ossify as a store of value. And I think Bitcoin continues to be a risk asset. That's just how I think of it. I get all the properties in Austrian economics. I don't think the normal user is buying Bitcoin necessarily for that reason. So I kind of think, uh, I can't think of any industry where like where you have the possibility to make, to bring on more capital efficiency and that hasn't been tapped on, like that hasn't been like, uh optimized, right? Which is what you're saying, Mike, which is there's just, uh, this— Bitcoin is— Bitcoin dominance is like 50% of the entire crypto market cap. That's just like a sleeping dragon. Is it gonna be 100% of it? No. The same with it— it's not for Ethereum or Solana. There's always a subset of users that are just going to be like very pure. But for the most part, I think people are going to want to, you know, given the choice, to make a— you know, capital wants to go in places where it can be more productive. Fundamentally, I'm trying to think of the counterargument of that. It's like maybe gold, but even gold, like with ETF and some other things, like it's been like hype. There's been on the margin, like, uh, it's been made more productive, I guess. Maybe this is— this is—

this is literally the— you know, you hear gold bugs talk, like bemoan the fact that more institutional investors don't own gold. That's part of the argument, that eventually everyone's gonna have to buy gold. The reason people don't do it is because they can't model the cash flow.

That's like, they'd rather buy a real— a REIT or whatever, you know what I mean? Like, yeah, I, I don't, um, I think the other can of worms is like, well, for Bitcoin, I think you want L2s and Ordinals to work because of just fees. The minute you have more fees, I think one, you— like, miners already appreciate how lucrative that can be. And if you don't have fees, then I really question the security budget for Bitcoin long term. And I think at some point that comes and bites you in the ass. And it's not in 40 years. I'm sorry, guys. It's like you discount it back. And at some point, that— an asset like ETH, an asset like Solana becomes far more interesting because it has— it's productive. It has cash flow attached to it.

So I've got a question for you guys, or maybe a statement that I would love to get your guys' perspective on. You know, everyone loves to say now that all these different designs of blockchains are converging. It's like, okay, Bitcoin looks a lot more Ethereum-like now. It's going to have rollups to kind of a, like, a slow non-performant base chain, some other execution environment that inherits some of the properties of the base chain, and then proofs are going to get posted, and that's where the base chain is going to be. And That's what Bitcoin looks like. That's what Ethereum looks like. Celestia, even Solana. And in some sense, you can, if they get something like PBS, you kind of see everyone moving in like roughly the same direction. Uh, although I do think Solana and Ethereum are meaningfully divergent from one another, but then I do think that once we all accept, okay, these things are all going to look really similar. There are some important design decisions that are going to be really hard to, um, the devil's in the details on some of these small design decisions. Like, the, the fact that you can't do much on the Bitcoin main chain just from like, doesn't have smart contracting, is like really difficult. Um, and my understanding is that Celestia doesn't have that either, but they are, uh, their, uh, language, um, is just much more accessible for like ZK stuff. Um, whereas on Bitcoin everyone's trying to jimmy everything in and it's just going to make shipping way more difficult. Block times, like Solana block times versus Ethereum block times feel really significant because you don't have to do anything like base preconfirmations. You can just start. If Solana rollups are a thing, you can just go boop boop and it's going to be 400 milliseconds. So no one cares. Honestly, even chains like Avalanche, which get a lot of shit, they built for interop from day one. Cosmos built for interop from day one. Celestia has got an interop plan from day one. I get why Ethereum is trying to do the base precomp thing. It needs to be state-sponsored because there's no incentive. And so I sort of feel like we're gonna— we started, everyone like went off into these directions, then we're all going to come back, but then we're going to realize that the decisions that each chain made, like the devil's in the details, and it actually is going to matter a lot. Do you guys agree with that? And if so, what do you think the most important like changes are between them?

I do agree with that. And I think the final goal of all of them is, or destination is really going to be path dependent. Like what did you start off prioritizing first is going to really shape the outcome of your end goal. And I think that's, I mean, obviously that's why Solana is so popular. They optimize for the execution and for the UX. I mean, even the small things like the team bringing out that phone, which was a Success by luck, or even this Blinks application that's coming out. All of that shows you where their head is at and how they think about bringing on to mass adoption versus how Ethereum thinks with deep research and censorship resistance. And yes, I think it's really a path dependent. And if one thing I can see is that Cosmos' path probably wasn't the best one.

Well, let me ask you a question. Um, well, first of all, I would agree a lot with what you said about Solana. Just, it's just very refreshing. It's like the integrated experience. The user really appreciates it. This Blinks thing is huge. Like most teams talk about tapping into Ethereum for liquidity and that's where the users are. I think it's like thinking in very small scale. I think Solana says, I'm going to go where the action and the users are. In the internet, like across the internet, not in web, in blockchains. And I think that's super interesting. Most teams try to build distribution. Solana just was like, nah, I'm just gonna try to embed and make it super easy. Hayden had an interesting tweet like that Uniswap tried to do this and like it didn't kind of work. We could try to like have theories as to why. But the question is, So like, if you're an L2, you're incredibly successful. And I've— we've asked Steven this question and he had an answer, but like, at what point do you think we're going to have an L2 that is very successful and then branches off away from Ethereum? I get like the L1, the security properties, and like, you don't want to recreate that, but like, imagine a world where like you have millions of users on an L2. You can argue maybe that's possible, but just imagine that. Wave 1, like, shit, you have an L2 that is incredibly successful. Wouldn't they be hyper-incentivized to just like be like, adios Ethereum. Yes. Let's, uh, we're just gonna go like the Monad route or the Aptos route.

I think, I think we'll see that, Santi.

And then like, cause if you're an L2, you're like, I'm thinking of Blast here, guys. If Blast doesn't grow, I'm like, and you've already seen Monad and Aptos and Avalanche and be like, In 5 years' time, Mike, to your point, you're going to probably have a really, really good understanding of what's like the kind of the best execution environment. And then at that point you're like, yeah, I'm just going to fork that. Boom. Adios, Ethereum.

Okay. So I think the answer is yes, Santi. And to answer Mike's question and your question at once, I think all of these things are building towards one. And then like Mike said, it's going to— you're going to kind of converge and then diverge and then converge and diverge. And that'll be like over the years we'll see that.

Maybe Telegram, because I, from my understanding, is like, we haven't talked about Telegram. That's kind of the elephant in the room. Like, we're all salivating about their distribution, but it's really hard to build. The tech is kind of shit, I think.

Here's the difference. Like, I don't, I don't think it has to do with what Mike— Mike, I, I agree with you in one sense, like the block times and all that kind of stuff. We're gonna wake up and realize that these little details did matter. I think it comes down to the culture, actually. Like, no, no, no, not the culture.

It's a soft thing.

No, no, no, no. Santi, as someone in the investor seat— no, no, let me just push back on you. The culture of— you can have 3 identical companies building 3 identical things.

What Jason wants to say is, as a founder—

no, no, no. Okay, Santi, we talked to someone. We talked to someone deep. I guess I shouldn't blow it who it was, but we talked to someone and after we stopped recording, he said, I'm thinking about changing chains. And we said, why? And he said, look, all the tech is commoditized at this point. Yeah, you've got these little differences. This person's ZK, this person's got bigger blocks, smaller blocks, whatever. But the culture of this chain that he wants to move to has a bigger focus on consumers. And he said it's the culture of the founders and the people who work at the labs and the foundation. He said all the tech is all the same at this point. And I genuinely believe that. And like, if you talk to—

I don't think the tech is all the same is what I'm trying to say. I think the tech will be it will be much the same. It will be. Yes, it will be.

Uh, I'm not saying the culture of the community. I could give a shit about that. I'm not saying the community. I'm saying the culture of the— no, I know that, but I'm saying that, but that stems from the culture of the, of honestly the founders and the early team.

I know. I agree.

Yeah.

Here's, here's what I'll get. I'll, I'll give Ethereum— the problem that Ethereum has is it's far too decentralized at like the shipping level. There are— when we're talking about Ethereum versus Solana, it's very difficult to compare because people should just appreciate like Solana right now, like it's a Solana Foundation, Solana team, like it's just one organization. Yeah, there's a lot of teams like Blink actually wasn't built by the foundation, it was built by what's it's Dialectic. And like the ZK stuff was built by like Helios and Jito and a bunch of teams. So like there are like different dev shops out there that are like, which is actually pretty impressive, but it's nowhere near like Ethereum's kind of like this huge organization that it's so hard to coordinate. And actually one of the things that I'm, I think is going to be interesting is once you have Firedancer, like Solana's going to kind of move more in that direction, right? You have two clients, like you have to now just kind of, just becomes harder. And so like I sympathize with Ethereum. It's like actually really hard versus like top-down directive. Like if any other chain is like very much top-down and that makes it far easier to like make changes, you know?

Okay. I agree with that, Santi. Here's another thing as well that I think, um, this is, and again, I don't want to knock Ethereum too much here, but the reason I never liked the ultrasound money meme was because it just, Bitcoin had already won that brand. Like think about it from actually less of like a, I agree with you, by the way, you know, I think the culture stuff is important. But also there's a branding element that I think people don't appreciate as much in crypto. Bitcoin is a really easy to understand, quick brand, and brands only really get like one word, right? You can't— if you have to use a sentence to describe your brand, you've already lost. And so Bitcoin has like, you know, safe, secure, immutable, like it has those words, like money. Um, and Solana, if you look at the recent marketing things they've done, payments, blinks, They're like fast, fast, cheap consumer. And that's, that's really easy to understand. And it's a huge category. Um, and I think that's the challenge for all the, like, I think if you're an L1, you need to have a good understanding of like, what is your word and what is your culture? Um, and I don't know that part of like Ethereum's decision to focus on money and the ultrasound money, I didn't like that because I thought they had a really great brand. It was like, technology platform, tech platform, Optimist. But now it's gotten dragged. Are they money or are they tech? Is it about credible neutral? It's like there are all these words. It's very fragmented. Um, and this is Cosmos's challenge too. Like, this is literally what took down Cosmos is that they don't have a common shelling point. You actually have a lot of successful Cosmos chains. Celestia is a Cosmos chain. There are chains, dYdX, but everyone's like, the Cosmos is dead because there's not this common shelling point brand umbrella thing, which has been really critical. Um, and I think that goes, Santi, to your— because I actually have also thought for a while, like, why wouldn't Arbitrum just launch its own L1? For as long as an L1 is able to create this huge cross-current that apps can draft underneath, then there's not much reason to— like, why would you leave the distribution? You know, the light is shining on you. But as soon as that gets fragmented, then there's no longer that incentive to stay.

I think it's one of those things where it's inevitably going to happen at some point by one chain, one L2, and then it's going to really incentivize others. But that may take, uh, that's dependent on usage. I think when you actually hit the limitations, right? Because right now no one's hitting, we're talking about TPS and all that jazz. That's not the main critical issue right now. The issue is like, customer acquisition, building useful apps that people want to use. We're not hitting the— TPS is irrelevant. We're not hitting these like limitations. It's more of the user experience. And then I think, I think it might happen.

I think a major L1 might happen. Major L2 might leave, but I think it might disincentivize because it might be great. You might get that L1 premium in terms of your market value, but your costs to run the chain are going to go up substantially. and then you, I mean, the whole point that, isn't that the same argument with hardware that we just had incentivizing the validators? Yeah. So now you have to do, do that.

Think about that for a second.

Yeah.

Why was Solana, Solana, it was chicken and the egg. Everyone has this problem too, but the L2 right now is punting this decision because there's no reason to do it. Now you have hundreds of millions of users or 100 million users base. The user loyalty doesn't land with the L1. It stays with the L2. Why wouldn't they just kind of detract? They will. It may not happen now. It's not going to. There's no incentive. But like convincing validators to join, look at dYdX. They were successful.

I'd argue not, but I mean, they were successful in convincing validators.

Yeah.

Yeah.

You can't, but I think that's—

Anyway, but I more see it as like, as these chains are going to be backend stuff. Like, it's really about which of the Web2 or Web3 developers are going to put, link this protocol on the backend of their Web2-looking app. I mean, and I think that's like when Stripe did their demo, they live demo, they chose Solana because they just thought that would be, that was most likely to go through, would be quick and fast. A nice demo and it worked to their credit. And so I think when we think mass adoption, I don't think it's going to be as dedicated to one chain or the other. I think it's going to be which major app decides to integrate this protocol into their backend. And then for that, I don't really see any point of you leaving an L1 like Ethereum for liquidity and potential to get to get to that point.

Can I make an observation about the apps that have been successful so far? Most apps that have been successful so far solve a problem that an L1 creates. So like, what I mean by that is, what are the big apps on, on Ethereum? Lido, Maker, Aave, Uniswap, right? It's, uh, for people that wanted leverage on their ETH. For people that wanted a way to hold wealth in a stable way on-chain. Uh, Uniswap basically exists to— because of, uh, like MEV and arbitrage, right? It's not because people want to trade against some, you know, smart contract counterparty. It's Sextex arbitrage is why volume flows through that. And so I actually, like, I used— I am in this phase of going through thinking of apps and like the L1 commodity money thing platform as being really separate. But I actually think they might be more intertwined than you'd think. And maybe this all changes when we get some Miniclip-style game, but I think they're pretty related, actually. What do you think, Santi?

Does that— that's a good observation for Ethereum. This is why, like, the whole Eigen thing, like, was the saving narrative for Ethereum this cycle. I just questioned, like, how much are we going to push this financialization narrative for Ethereum? It's like, okay, take your ETH, restake it 100 times, and then what? There's only a subset of users that like, at some point are like, hey, maybe I should just go and try the Solana stuff because you have Deepin, you have AI, you have— it's not to say that it can't work in Ethereum. This is why it's important to experiment different L2s that might create a Solana-type environment. Like, uh, just like when I say that, a far superior user experience than the L1. Um, no. Now the question is like, yeah, like you could look at Arbitrum. Arbitrum was a pretty good experience too. So like, I'm just kind of like, I have these conflicting views in my brain because I invest in—

I do too.

I don't know what the answer is. I think we're not supposed to know the answers to any of this, by the way, because it's so goddamn early that we're not. I think we'll look back and be like, what the hell were we thinking? Okay. Like, to be fair, Solana, who was it? Mert had a good tweet about like what Solana and Ethereum have gotten right. Right. And it was, I think it was something to the effect of like Solana has been very good with DePIN, has been very good with perhaps AI, uh, certainly memes. Um, and Ethereum is farther ahead on social. That's like a missing gap with Solana. Maybe that's a culture thing, Yana, that you're trying to get at. But like, if you look at, uh, fantasy, uh, pumped up fun. Forecaster, like they're all on Ethereum. So maybe that's the culture thing you're trying to get at. Hmm.

Someone, uh, I was, did an episode with, uh, Lucas from Jito like a year and a half ago. And he said like the irony of, so liquid staking adoption on Ethereum and Solana are like inverse of one another. Solana has a super high stake rate and really low penetration of liquid staking. Like 3 or 5%. And on Ethereum, it's got a much lower stake rate. I don't know what it is, around 30%, something like that, but a much larger percentage of liquid stake. And it's because there are a bunch of reasons, but it was because the— there was the merge in the beginning and there was such a large UX challenge that Lido came in and solved. And so Solana built a lot of infrastructure into the actual chain. Like, you can natively delegate in Solana, which you can't do in ETH. And as a result, you have a smaller infrastructure company, but does that mean it's better for users? I don't know how to answer that question, but it was Lucas who made the observation that like, ironically, the really poor staking experience in Ethereum is what gave birth to the rise of this massive company in the form of Lido. Um, so it's kind of what you're saying. So I don't really know which one is better or worse. Um, but It's interesting. You guys want to talk about Blinks for a couple of seconds? Because Blinks, I do think are super— Yeah, yeah, yeah. You know, what do you think about them?

I'm curious to hear your take. So I guess just to tee up the conversation for anyone who missed Blinks, basically what I didn't even know it was not Solana who launched this. It sounds like it's Dialectic who launched this. Blinks allow you to plug, to do, to run a blockchain transaction on any like Web2 frontend basically. So imagine you're on— I think the examples I saw on Twitter were like you're scrolling your Twitter feed and like you can, let's say, stake directly through Helios or you can— what was another example? You could like make a swap directly on Jupiter, directly in your Twitter feed. So it's an extension of what we saw on Farcaster. If people were paying attention to Farcaster Frames, It's basically what it looks like they're trying to do is bring like kind of these Farcaster frames to, to the whole web. Like you can do it on Twitter and you like think even things like LinkedIn and stuff like that. I think people are building for, but like, like Blockworks could use this, like Blockworks could if we wanted to run a transaction on our, on our website, like instead of— it basically allows you to run a Solana transaction on any site is my, is my understanding. I saw a couple of examples from like Helios and Jupyter. I think it's cool. I think it's like I do remember like Santi was saying, so Hayden tweeted this out like, look, we tried this in 2019. It didn't really take off. I think the counter to that is just like there was no one here in 2019. Like that was like the pico depths of the bear. Like that wasn't just the bear. Like that was the, that was the dark time of the bear. I don't know. It's brutal. Yeah. Yeah. 2019 sucked. I don't know.

What do I— someone should create an app like, where were you in the darkest times?

Where were you?

Yeah, exactly.

Where were you in March 2020? Yeah, yeah, yeah, exactly. I was taking a shit. I don't know.

I think they're cool. I, I'm, I'm like less thinking about Blinks as a product and more just like as someone who likes marketing a lot. Just like, I, I feel like we've been too like shitting on ETH and liking Solana here, but like it is just a phenomenal— like, Solana has just done such a good job of like everyone's— we're talking about this infrastructure fatigue. They've just gone like, they've just hit the consumer stuff at the exact right time and they're just like, everything they do is just like speed, speed, speed, consumer, consumer, consumer, apps, apps, apps right now. And like, if you're a chain, like the number one thing you need right now is founders coming and building on you. And like, Solana is a pretty enticing place for people. So I feel like we're being too overly hype you on Solana and anti-ETH on this podcast here, but like, I think Blinks is a very cool product at the— with the only reason of like the base layer reason of just like someone needed to try this. Will it work? Will it not work? I don't know. But like someone had to go try this.

We talked about Farcaster, uh, you were in, you guys did a big push and like trying to see if it worked or not. Is this, uh, just better? Like how would you compare Cast to Blinks.

I mean, it kind of reminds me of like, so I don't know, I haven't even used Blinks to be honest. I haven't tried the product or anything like that.

But you remember when Clubhouse was booming during, uh, I ran, I ran a, I think it was like a 24-hour hackathon. You, you influenced her with Stani. No, with Stani, we ran this fucking room.

I actually remember that. I do.

I do. It was like wild. Stani fell asleep. I think he was snoring. I'm like, Stani, And he was like, yeah, remember Clubhouse?

And Clubhouse was booming. They raised like a $4 billion valuation.

Now it's a zero.

And then Twitter launched Spaces.

Spaces.

Yeah.

And then Clubhouse died overnight. And I'm not saying that's actually going to happen to Farcaster because I think Farcaster and Dan are like too damn good to let that happen to them. But seeing this, I was like, this is the same product. Just like they're allowing you to do things in the feed. Basically. So I think it's cool.

I remember when Clubhouse came out and I didn't have an iPhone, so I wasn't too upset when Twitter just cloned them and I was like, yeah, now I have a chance to be cool. But yeah, I think I thought the same thing when I saw the little ad, little 1-minute video for Blinks. I thought it was like an interface agnostic version of Frames. And I haven't used it. I've just seen like little examples online, but I'm hoping it doesn't push Solana too much, or at least you can change that out. And I hope that you can pay for it using regular fiat because I think those are the kind of things I want this to abstract away all the complexity of like a blockchain in the backend for like regular users. I want it to be on a LinkedIn scroll feed and you can buy tickets for Permissionless using one of those links.

What's LinkedIn?

Oh my God, wait, I actually have a funny story about LinkedIn. So we talked about— Jano and I actually did play like 3 years ago for a ping pong game for the title of founder number 1 and founder number 2. And this was at an offsite and I had a couple drinky poos and after I won, I changed my title on LinkedIn. Yeah, change it all. I was like founder number 1, like commander in chief or something. Ridiculous.

And then a couple of drinks, Mike's like 9 beers in.

Yeah.

How many drinks you have? 2? More like 7.

And then, and then Janno, you like a couple months ago, you were like, dude, is this actually your LinkedIn? And it had been there for like 3 years.

It was like the commander in chief at Blockworks. I was like, dude, I think you got to change that.

Your sales rep's like, hey, uh, someone pointed this out. I think we're not a serious organization. All of a sudden your sales conversion ratio goes up like by, by a couple of percentage points because people take it seriously because you're like, yeah, God, that was, um, can't remember the last time I checked LinkedIn.

No, no, me either. Uh, so here's the, I think that to answer your original question there, Asante, is I think that Farcaster, the advantage that Farcaster has is if Farcaster had real adoption, it's mobile, right? It's like mobile first, which is the big thing. And this is desktop, which most people don't use. Twitter on desktop anymore. Um, and I, I guess like one thing I was, so I think it's a hugely positive thing and I think it's very cool, but then I was really thinking, I was like, do I wanna do these actions on Twitter? Like, what am I used to doing on Twitter? I'm, I'm mostly just used to reading and posting and writing. And I was like, maybe I could, I could learn to do these other things, but it's kind of a new learned activity.

Um, But imagine, Mike, let me push back. Imagine it wasn't just financial tracks. Imagine it wasn't just financial tractions. Like, imagine we had a link to Permissionless and it was like, buy a ticket. And it was just directly in the feed.

Yeah.

And that was the original idea of why we were leaning into Farcaster. And the problem was, no, we didn't have any users on Farcaster. So what Blinks allows you to do is these actions in-app, like mint a tweet or mint an NFT or buy a ticket to an event. Doesn't— or make a swap or do some financial traction, but you're meeting the users where they are. And that's the—

and the intent is—

yeah, like I looked at the— I was looking at—

what are Blink's intents, Santi?

Wait, did I just say that? Oh my God.

No, man.

Like, listen, Solana had a 2-year high in daily transactions, like the day they rolled out Blinks.

Like, I think this is going to be explosive. Like, I think most people are underestimating this thing. People— SOL rallied 8% because of the ETF. I'm like, Again, I'm more way, way more excited about Blinks and what that does for conversion. And people don't appreciate this, but like, like cart abandonment is a multi-billion dollar, like, like market. Forget about Stripe, like just these are the things that like people, because they don't have a good appreciation for these things. Like I've invested in a company that like try to fix cart abandonment, and try to do faster checkout. You don't have that problem with stablecoins. Now put that exact— like, most people now shop through it like Instagram. They see a thing, they have to like open a browser, and it's like still 3 steps. Like, my hallmark for investing is like anytime you remove friction from a flow, it creates nonlinear results. That's Blinks in my mind, and it's meeting it. You're not like, it's not push or pull. It's like, it's like, oh, come to crypto and create a wallet and do all this crap. Like, no, you want to buy a ticket to Permissionless, click this thing, done. Like, it's just better than a Web2. It's better than putting your credit card info. That's it. Like, you know what I mean? Like, Synagogue with Apple Pay, whatever. Like, it just, um, for people that are still critical that like the web, the flow of Web3 is like inferior to Web2, I think they're in for a bit of a surprise. When they go and try Blinks.

You know what? Um, I agree with that, Santi. You know what people, uh, well, I guess if I were in charge of the Blinks product, you should dogfood some use cases here. Like go instead of— this is actually something that I see in crypto a lot because there's so much infrastructure. They're like, hey, we're a permissionless marketplace. Anyone can do anything. Here's this menu of stuff for you to do. And people just come and they're like, I don't know what to do with this.

And paradox of choice.

The paradox of choice. Exactly. So, oh really? Okay, good. Put on the list. But I, it would be, you know, Solana, I don't know if they could just go to a couple influencers and be like, hey, we'll like work with you. Like, what are your, you know, what's your little influencer business? Like, we'll help create some custom things for you. Or go to Blockworks and be like, hey, we want to, um, so help us guys. But yeah, set something up custom or cool for permissionless tickets that you couldn't do otherwise. Like, I don't know, like dogfood it a little bit.

Uh, well, Solana Summer just kicked off in Lisbon. So instead of having hacker houses, maybe you should have these hacker elite units, Navy SEALs drop into companies and be like, all right, give us— if I, if I were them, I'd be like, I'd go to these companies and give us 3 weeks to prove how we can meaningfully sandbox it, meaningfully improve, be more productive. In your sales organization. We'll work for free if you like it.

Boom.

Great.

Yeah.

I mean, actually, I know we're, I know we're almost close to time here, but we haven't actually talked about the biggest news of the week, which is that the Bell Curve guys are forming a pickleball team and we're gonna smoke the Empire pickleball team.

Pickleball.

Let's play pickleball. Them fightin' words.

Oh, okay. I like that Santi asked that. I feel much better about our chances.

We gotta start practicing, my man.

Have you not played pickleball, Santi?

Never.

That's great.

I play real sports, guys. I appreciate pickleball as the fastest growing sport in the world, but I mean, Santi, you're a runner.

That's not a real sport.

Okay, well, not a real—

not a real athlete.

Uh, my frustrated dream is to like be a professional athlete. Never gonna happen. Listen, um, we're gonna— can we address the biggest elephant in the room here? Is, are we gonna have a, uh, uh, like, weight room booth in Permissionless? I'm happy to sponsor part of it. I'm happy— Techno Gym or whatever.

Like, my pitch to you is we have a sponsorship sales team. You should buy your own booth. You should literally buy a booth and call it— and just literally put your face all over the booth and put the only thing in the booth— there's no, like, you know, selling things. There's no merch. It's just a squat rack or a bench.

That is honestly all I'm willing to do. That I, I, someone like weights would have a squat rack, a treadmill, and like a Peloton or whatever.

Yeah, I got— I don't know how much you squat, Santi. I, I was actually— yeah, I'm proud of you for making that 800 club. I was going to tell you, I— because my back's been all messed up and I got finally got back over like $200,000 and I was going to brag that to brag to you about that. And then you were like, oh, Mr. $800,000 Club over here. So I don't know what you're squatting these days, but it's all right.

It's all an elaborate sale.

We give you out on NFTs.

You get Santi to buy a fucking booth at Permissionless. It's all a big sales pitch.

Tell me we're in a bear market. I want to fucking have all these funds buy a booth. Come on.

The lengths I'm going to to sell sponsorship booths is very creative.

Pretty creative. Part of the reason why I invested in this. Um, but anyways, if you're a fi— I'm actually— shout out, if you're a listener, you want to sponsor a booth with me, honestly, if you're going to sponsor a crappy booth and give stickers, or you're going to have a booth with like the weight racks, and guess where people are going to show up? You know, the Peloton, the weight rack, and the, and the, and the treadmill.

Mark, I know where I'll be. I regret joining this episode. Oh, I'm there. How long have we been doing this for, Yano?

How long have we been doing Empire for?

I don't know, but I know, I know, I think 3 years, and Mark is the first one to flex on Empire.

We have, we have never flexed in this past 3 and a half years. We might have to change that.

Yeah.

I guess we gotta wear a different shirt for that.

But anyways, yeah, okay, all right, good, good. I just got verified.

Can you DM me your—

yeah, Mark, tell me your— tell me your trading program, man.

Yeah, send me some soul.

All right, yeah, post your soul address. I'll, uh, blank, blank, blank, tip link. Yeah, yeah, yeah.

All right, uh, listen, Good pod.

Yeah. Thanks for coming on, Mike and Mark. Pleasure. You guys are welcome back anytime.

All right.

You heard about Sei a couple of times. Just want to give them one last shout out. Big thanks to Sei for sponsoring this episode of Empire. There are a ton of reasons to build on Sei. If you want to get in touch with them, you can reach out to me. I'll put you in touch directly with the team. You can also get in touch with them on Twitter @SeiNetwork. You can follow the journey @SeiNetwork. They are currently live. They've got Sei V2 on public devnet today. Mainnet goes live later in Q2. Really excited to have Sei sponsoring and partnering with us on this episode of Empire.