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- [00:00]
A
Most cross border transactions involve an fx component and so if you are the cheapest place for fx to happen that chain will be a natural magnet for all these stablecoin flows we want to be the cheapest place for t two c swaps you want to be the cheapest place fastest place to do this fiat stable swaps as well this is not what typically happens at a chain company a chain company classically doesn't want to think about fiat why would you think about fiat i'm i'm at a crypto company why would i think about fiat if you think about the reality of these systems like how do you make it so that stablecoins aren't just useful to like people in crazy countries and like crazy situations well you need to make the friction go down to zero you need to make it so that moving between a unit of fiat and stables is frictionless on a cost and speed basis need to delete the border between fiat and crypto so that that's what we are focused on we're staffed against that we we wake up every morning we think about this how do we delete this border make it go to zero.
- [00:58]
B
Bakeless nation i'm with.
- [00:59]
C
How nan the co founder and ceo of codex codex is a stablecoin focused layer two on top of ethereum howden welcome to bakeless hey david good to see you so you are working in a pretty competitive part of the market there's stripes tempo there's circle's ark there's plasma there's stable not to mention the deep incumbent tron competitive are you intimidated.
- [01:24]
A
You know i think there's a ton of competition if you think about it from the perspective of a vc powerpoint slide right if you had a category that said stablecoin chain you would have all these logos i think what that abstracts away is actually most of the reality and the detail underneath and the reality is that these different chains are pursuing totally different directions and i can just say for us i can't speak for others when we are going to market against our customers we don't really hear about any of these other chains we don't hear about plasma and stable because they've taken this sort of maybe more bear chain type approach we don't hear about arc or tempo perhaps they're qu it's perhaps not quite clear exactly what it is they want to do yet and so we just see all these charts going up into the right and we're growing a lot and customers seem to like what we are doing and you know we just want to focus on focus on the customer maybe.
- [02:20]
C
You could teach me and the listeners a little bit about what makes these chains so different from each other because like if you i think you talk to the average person in crypto they're like oh yes there's just this whole payment chain sector where we're all trying to disrupt visa and we're going to put the stable coins on the very fast blockchain and that's going to become the payments chain and that's what all of these all the chains that i just named that's what they're all going after again tempo arc plasma stable tron has been the payments chain the stablecoin payments train is that is that is there more nuance there or like what are the construction the construction differences between all these chains and how they point to different outcomes maybe you could educate us a little bit there yeah i.
- [02:59]
A
Think there's multiple layers to it and there are a lot of differences across multiple layers i think let me start with saying that if such a new category that nobody really knows what they are doing quite yet right they're all exploring this idea maze this giant design space and people have chosen different parts of the maze to start with so you know what is the approach of say a plasma or perhaps a stable right the approach is the bear chain playbook so what is the bear chain playbook right you do you do a token event and you attract a bunch of flows that come onto your chain a corsab will come right you're giving away free money then you try to make it stay because if it leaves you're screwed so how do you make it stay well you fork over a bunch of defi stuff that exists elsewhere the same ten apps that exist everywhere and you sprinkle token incentives on top and you hope to god it stays the problem with this approach historically is that nothing of different differentiated or substantial results from this right end of the day you've got the same defi apps and so what ends up happening is people dump the tokens these are mercenary farmers right this is we are far far away from the days of like the uni airdrop right this is like industrial scale farming type dynamics people will dump the token the price will go down but you still need to keep the money there as much as possible so you give away more tokens to hit the same apy people dump the tokens more the price goes down and then eventually it all goes to zero right or near zero so we've seen this movie play out before with a bear chain or a blast will it play out this way this time around it's not clear perhaps it won't it's just a very different approach from maybe our way of processing the problem when it comes to a tempo or an arc i think both these guys run into a ton of problems when it comes to neutrality so imagine that you are and here i like to say like neutrality is not just like an ethereum prayer right it's not this like religious word that we say to each other at these ethereum parties but like.
- [05:04]
C
Although it might come off like that.
- [05:05]
A
Yeah it comes off like that right it's almost like the word deluxe it just means good to a lot of people like deluxe cheeseburger is just a good cheeseburger right but neutrality means something what does it mean here it means if you are a competing fintech from stripe do you really want to bet the future of your business on stripe chain if you are a competing issuer to circle do you really want to bet the future of your business on circlechain it's hard for me to imagine like imagine the sort of ceo of a large fintech going to his board and saying hey guys like we really fucked up like stripes way ahead of us like we're just going to go use their thing i don't know i don't it's not very sort of credible to me so that would be maybe my first cut at distinguishing all these.
- [05:51]
C
Different approaches isn't that the neutrality aspect isn't that just true for all of these chains all brand new chains in my mind have on day one have the most compromised neutrality that they'll ever have and then ideally they become more decentralized more equitable more spread out over time but ultimately any brand new chain is always just not neutral it's just by the by the truth of the fact that it's like brand new like there's all all of these have vc's all of these have early insiders like ultimately it's the neutrality thing neutrality is not really something that you can engineer.
- [06:27]
A
There'S neutrality and then there's neutrality right there's sort of like compared to say a bitcoin you know some would argue ethereum is not neutral right but i think that's somewhat of a pedantic point i think the neutrality that really matters in the market today instead of like this kind of pseudo religious thing that people might have on twitter the neutrality that really matters in the market today is are you really going to bet the future of your company on a competitor's infrastructure are you really going to see that control to them and does that really sell at the executive level and i think what we are discovering what we are seeing is that it doesn't really sell nobody wants to use a competitor's substrate i think another way of saying this is like let's take us for example codex we don't run an issuer and we certainly don't run a fintech we are not going to be competing against our customers so isn't.
- [07:16]
C
That so that same aspect is probably also true of plasma and stable and you're just saying it's not true of ark and stripe because stripe is stripe or tempo because stripe tempo has stripe and then arc has circle they're the issuer but and then but then what your critique is of plasma unstable is like well they're kind of doing the bear chain thing as well which is separate separate critique but at least they have the neutrality going for them is is kind of like a summary i.
- [07:44]
A
I think that's fair i think like if you dig in like they're mostly focused on tether right so is there a really issue of neutrality there it's you know somewhat debatable but i think you know the the main thrust is.
- [07:55]
C
Correct yeah well you're highlighting the differences that you're highlighting it's kind of like the go to market but ultimately are these all the same things at their end game like do they all converge on the payments chain like landscape and that actually that part is actually the common denominator that there aren't any nuances there they are actually the same kind of outcome that everyone's going for is.
- [08:14]
A
That true it's not clear to me what the end state here will be necessarily i think certainly in this first sort of leg of the race people are taking totally different approaches and they're building different products really right because if you think about it you're like okay i'm going to make a change for stablecoins great what does that mean what matters what doesn't like here here's one thing that could matter right you could say well i think it's really important that people can pay for their gas and all kinds of stable coins so i'm going to enshrine a dex and you know this way i think this is super super important and obviously if i enshrine a dex then i've got to really make sure it's robust and how do i figure out this like the effects mechanics of that and how do i make sure that doesn't break you could do that you could say that you know what i think the most important thing is to build a neobank so i don't keep too close with what stable and others are doing but last i heard they were doing something like this right what is a neobank it's like a payment app with stablecoins in the back and you say that's the most important thing to build and so you're going to pick up these little flows one by one and you put it on your chain do that or you could do what we are doing which we think is much.
- [09:22]
C
Much smarter what's what's that what's that.
- [09:25]
A
Thing yeah so i think what we want to focus on is wholesale fx flows okay why is that well because most cross border transactions involve an fx component and so if you are the cheapest place for fx to happen that chain will be a natural magnet for all these stablecoin flows and so that's what we're focused on right we want to be the cheapest place for t two c swaps we want to be the cheapest place what's that usdt to usdc the the stablecoin people don't want to keep repeating usd say i understood okay those cheap swaps you want to be the cheapest place fastest place to do this fiat stable swaps as well and so this is like this is not what typically happens at a chain company right a chain company classically doesn't want to think about fiat why would you think about fiat i'm i'm at a crypto company why would i think about fiat i want to think about shared sequencing schemes and you know like i'm going to rotate the sequencer and and all these ivory tower stuff yeah like much more interesting from an engineering perspective certainly right but if you think about the reality of these systems like how do you make it so that stable coins aren't just useful to like people in crazy countries and like crazy situations well you need to make the friction go down to zero you need to make it so that moving between a unit of fiat and stables is frictionless on a cost and speed basis you need to delete the border between fiat and crypto and that means like understanding the fiat infrastructure right which again is very contrarian so that that's what we are focused on we're staffed against that we wake up every morning we think about this how do we delete this border make it go to zero.
- [11:08]
B
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- [13:09]
C
Layer two universe is exploding with choices.
- [13:11]
B
But if you're looking for the best place to park and move your tokens make your next stop unichain first liquidity unichain hosts the most liquid uniswap v four deployment on any layer two giving you deeper pools for flagship pairs like eth usdc more liquidity means better prices less slightly slippage and smoother swaps exactly what traders crave the numbers back it up uni chain leads all layer twos in total value locked for uniswap v four and it's not just deep it's fast and fully transparent purpose built to be the home base for defi and cross chain liquidity when it comes to costs unichain is a no brainer transaction fees come in about ninety five percent cheaper than ethereum mainnet slashing the price of creating or accessing liquidity want to stay in the loop on uni chain visit unichain dot org or follow unichain.
- [13:52]
C
On x for all the updates i think the conversation we're drifting into is the golden goose conversation is that's what i'll call it and each one of these chains kind of has like what their perceived value is and i think the most basic way to articulate this value is like kind of similar to like the salana idea of just like a ton of volume at very low fees and stablecoins clearly is the killer app after bitcoin right after like non sovereign store of value and then we get stable coins maybe defi is like our second killer app then stablecoins and so like stablecoin transfers payments you know remittances the same like words that we have used in crypto for like a decade now it's like now we have now now the time is actually here let's put all the flows on chain and then what does tempo and ark and plasma and stable and codex want to do they just want to transfer a ton of stable coins and charge half a bip on a trillion dollars of of of flows and i think that's like the level one like bull case articulation the getting a little bit more nuanced than that it sounds like what you what you're saying is like yes and there's a whole fx market that is extremely large that we are also we want to go for maybe you could just like color in the ff the fx golden goose it was like why is that so big why is that the logical conclusion for you guys just like help me imagine that a little bit better the erc twenty.
- [15:17]
A
Cent of this is the simplest thing like you could throw r and d at it and make it faster better whatever sure but that's not really the problem right the problem is the friction be going from fiat to stables so what you'll hear a lot vc's observers like twitter thread people right is this concept of stablecoin sandwich right it's like you start off in fiat in country a you turn it into stablecoins you send you know it's an on chain send then it comes out and fiat the other side and this is great right this is the story the reality is across most countries today it doesn't make any sense whatsoever because they're too expensive the fiat to crypto conversions are.
- [15:58]
C
Too expensive and so the on ramp cost right that's right because the only people that have truly figured out the on ramp to solve the on ramp problem are exchanges because a they have the ability to lock up your money and be like if you do like a chargeback right if you like like do a transfer and then you like yoink it from coinbase it's kind of like a loss leader so they just kind of like lock up the money and they have some sort of assurances but then they also have like other money generating valid products on the actual exchange to like it's kind of a customer acquisition tool the pure on ramp startups that have just been an on ramp have been a terrible business because they have to deal with chargebacks they can't charge ancillary fees they can't upsell their customers and so the only people that to really solve the on ramp problem are exchanges because of their unique positioning and i think that's kind of what you're saying is just like this fiat fiat to stablecoin pathway is a hard problem to solve are we talking.
- [16:56]
A
The same language that's right i think it's an incredibly hard problem to solve and it's thorny right it's not just like pure research task this is like you got to go figure out the fiat infrastructure you're gonna have to open up bank accounts you have to get licensing you have a deal of all this gunk that nobody wants to deal with we deal with that gunk and for us it seems to me that instead of optimizing the sends which already work quite great what you really need to do is deal the actual problem.
- [17:21]
C
So we talked about the chain fees and you said okay yes all all chains collect the chain fees that's the normal business model is what you're saying is dealing with a gunk the actual way that you guys are trying to like is that your golden goose that's.
- [17:35]
A
Right that's right because you know people get to charge fees for solving customers problems right and so if you are in the business of saying look guys like i'm gonna make your erc twenty cent not ten cents but now like nine cents and the dude sends on average a million dollars per transaction he's going to look at you and go like okay cool like all right that doesn't do anything for me right this is this is i think what not enough people do which is like go speak to the actual customer what does the customer want what the customer wants is for us to deal with this gunk and so we're going to focus.
- [18:10]
C
On this gun isn't that what circle does circle has banking partners right and so i would imagine transferring my money to circle and then receiving stablecoins would be trivially easy compared to any other payment chain how is this different there.
- [18:24]
A
Are all sorts of problems with circle's banking infrastructure i think to begin with like there are sort of volume limitations certainly much imposed by circle themselves even then even if you strip out the volume limitations much of these transactions happening on a t plus two basis because the banking infrastructure is not adjacent it's very ironic right like the the sort of ten thousand foot level view of stablecoins the i don't know jason calcanis's view of what how stablecoins works is that everything is instant and everything is fantastic and everything just works but you dig into the actual details and none of it works like that a lot of this stuff is still happening on a t plus two basis even to mit a stablecoin which is crazy yeah.
- [19:10]
C
But doesn't that also apply to whatever.
- [19:11]
A
You'Re doing no so i think what we are focused on is eliminating all these frictions right we want to make it so that folks can access stablecoins on a wholesale basis on an instant instant basis sub ten minutes and on a extremely extremely cheap basis that's kind of what we're focused on and we want to also have the fx infrastructure so that we can shift fx from being off chain to being on chain on chain fx is this kind of holy grail that people have been trying to pursue for a while and our diagnosis is that we have the pieces today to actually make it happen what.
- [19:46]
C
What are those pieces i i would imagine what you're saying is like okay so you have the banking infrastructure in the united states but if you want on chain fx don't you need to get the banking infrastructure like everywhere across.
- [19:57]
A
The whole world seems hard yeah i think there's some secret sauce there david so maybe i i won't dive into all the details but i think that.
- [20:06]
C
Means i'm pressing on that means i'm going in the right direction you're a.
- [20:09]
A
Good interviewer david i think you know the high level intuition is that the classic problem in on fx historically has been that non us dollar stables have no liquidity so you can't move you can't really move volumes through them right and that's problem one problem two is that you have no demand for it like who the hell wants to move money through this on chain mechanism if the spreads are wider if if it's costlier if there's technical risk like why the hell would you want to do it and so for us we have solutions on on both sides yeah okay.
- [20:46]
C
And i suppose this is where we wrap back around to the neutrality conversation because not only do you want to be neutral for all of the reasons that you talked about earlier but you also need to be neutral because there's going to be a ton of issuers of not just dollar stable coins but i would imagine the if you're going to do onchain fx you need all of the fiat currencies that have volumes in the fx market i would i don't know what those are but i would imagine there's at least six of.
- [21:10]
A
Them yeah there's a number of them i think there's a couple of defining characteristics they have they tend some are run by great people high quality people some of their infrastructure is actually not bad none of them have product market.
- [21:21]
C
Fit the euro japanese yen and what are the other obvious currencies that you need to get on to codex we're.
- [21:28]
A
Really interested in exotics the more exotic the more interested we're in it oh.
- [21:32]
C
Interesting okay so like long tail developing country currencies that's right that's right we're we're really interested those are the ones that want to get out the most the most is that right as in like if i have argentine peso please connect me to some other fiat currencies on a blockchain is that is that kind of the idea well we're seeing.
- [21:51]
A
A couple of things i think to give away some alpha here i think one thing that we are seeing is that you're seeing this shift in how commerce works globally so in trad rails almost all fx transactions go through the dollar so you know you might be going from i don't know malaysian ringgit to singapore dollar and actually you go first through the us dollar right what you're starting to see on chain is that that is not that is breaking down and folks are swapping directly between currencies which is a radical restructuring of how markets work and how commerce works.
- [22:28]
C
Globally so so if the united states dollar is is currency a then people are swapping from currency b to currency c without going through currency a that's.
- [22:37]
A
Right that's right and that actually is all sorts of interesting national security as.
- [22:41]
C
Well as like yes government implications opposite of what scott besant wants that's right.
- [22:46]
A
That'S right and if you zoom out here like what's happening what's happening is that you have this stablecoin so far have been a dollar phenomenon right they've created this wonderful structural buyer of us treasuries it's sort of this kind of modern euro dollar right and it's been really great for us government and i think the genius act was pretty smart right the whole point is let's try to move more of these offshore flows onto stablecoins because again there are structural buyer us treasuries i think other countries see that and well they're like interesting i'm not sure if it's necessarily in my interest that stablecoins be only a dollar phenomenon and i think you're seeing various pieces move around on the chessboard.
- [23:27]
C
Now my imagination is going okay so you said exotic currencies and you didn't really give me too much clay to go on but i think if we're also understanding the concept of neutrality and large fx flows and maybe an alternative interpretation of the word exotic is if we're truly thinking of cypherpunk neutrality here it's like dollar to chinese yuan and russian ruble like the three economic superpowers on the same chain which offends all three of them equally and then the ethereum cipher punk is like oh yeah that's that's what neutrality is you don't have to comment on that but i do want to actually talk about neutrality and like the ethereum context so codex is the only payment chain stablecoin chain that is an ethereum layer two and like right now the broad crypto audience might actually say like oh that actually makes you guys less neutral that makes you guys more opinionated actually because you're an ethereum layer two not a layer one and between the pendulum of valuations that seems to swing back and forth between layer ones and layer twos the premium the layer two premium has given way to the layer one premium and so we are we're currently in the the stance of like oh there's a layer one premium out there and the layer two premium is not really here and so talk to me about like why build as an ethereum layer two what does that give you guys and why make that trade why make that.
- [24:57]
A
Trade off i think there's a logical case and there's an emotional case if i'm candid about it i'll start with the logical case first of all this l one l two premium thing is kind of dumb because it swings and really what drives it is like product market fit right who has product market fit that's what matters if it's in the form of l one and l two is very much a secondary consideration not so long ago you had chains swapping from being l one to being l two s that can swing any day so we don't think like that right we're not going to make choices that don't make sense just try to.
- [25:29]
C
Pump up about satisfy twitter yeah yeah.
- [25:32]
A
I think then the second observation to make is that most of the stable coins are on ethereum this is kind of like a maybe an underappreciated fact right somewhere around sixty percent of all stable coins are on ethereum now they don't move quite as much on ethereum but we can help there right they're.
- [25:48]
C
Like they're like store of value slow defi stable coins whereas like the tron stable coins are like payment high churn.
- [25:54]
A
Stable coins that's right i think there's also higher value transactions on ethereum you know if you're trying to move ten million dollars you prob are using something that's not tron but i think the observation is that ethereum is actually the default choice today among stablecoin users is one way of saying it right it's sixty percent of all the float sixty percent of all the outstanding rather and ethereum in other words is the dominant where stablecoins are and i think our mission at codex is to make sure that ethereum continues to be the dominant place for stablecoins i think what ethereum needs to do here is it needs to keep up it needs to run a tight feedback loop between go to market and product and research and ruthlessly focused just on stable coins this is very hard to execute at the l one level that's where we come in right we wake up every day we think about stablecoins we go to bed we're thinking about stablecoins we're in the bathroom we're thinking about stable coins we just do this one thing and so maybe the broader point here is that i think we need to rethink how l one's how ethereum l one works with l two s and you know we have a model in mind that i think is a win win okay.
- [27:03]
C
So i'm hearing three different arguments as to like why ethereum there's like the technical argument i don't think you really touched on that but i'm i'm sure it's there there's the economic argument which is all the stablecoins are on ethereum all the high value transfers are on ethereum that's the place to be and then there's like the ideological argument which i think you call the emotional argument of just like yeah we kind of believe in ethereum maybe we can kind of like actually run through all three of those again the technical argument so like technically why is a layer two construction what does that benefit you guys as a stablecoin focused chain i think.
- [27:31]
A
The main trade off there that people need to make is are you are you more interested in stability and speed to market i e b and l two right or are you more interested in you know incremental experimental technical properties at the chain level i think that is the fundamental trade off so our view is speed to market matters the most and our view is that stability matters the most i think when they find bugs in geth nowadays they are bugs at the go level that's how robust that code base is this is one of the i don't know what.
- [28:06]
C
That means.
- [28:08]
A
It'S just like deep in the basics yeah the ethereum stack is just so robust right everybody's tried to attack it so many times that when they find bugs nowadays it's like at the programming language level right so it's the bug at a programming language not not sort of the at the sort of ethereum software level long story short like what that means is you're working off this incredibly hardened and robust stack your other choice of course is to not work on not work off that stack and to do something experimental that's probably going to take a long time for r and d and might have all sorts of issues in it so i think that perhaps is the the technical argument there i think there's also strong sort of guarantees that an ethereum l two can offer that no alt l one can offer for instance yeah for l two s users always have the right to exit back to l one in a way where if you're stuck on stripe chain or circle chain there's nowhere to go yeah i suppose.
- [29:03]
C
Users it's like when i when i talk about the exit hatch and l two l two s i'm talking to my listeners right so like yeah users like you can use the layer two because you have the exit hatch for you and i think for broadly like we might also want to talk about countries as well because like if we're putting global fx on chain and like russia wants to put their bonds on codex i don't know if you want me to even say these words but like if one russia wants to put their bonds on codex be like hey country of russia if we do something bad you guys have an exit hatch the whole entire country has an exit hatch and then and then that's actually part of the consideration there yeah i.
- [29:42]
A
I i think just just on the sanction stuff like like we have a great legal and compliance team here my mandate to them is that i want no orange jumpsuit risk please uh huh yes not interested in orange jumpsuit risk.
- [29:56]
C
Right yeah okay so okay with tempo tempo announced itself as a layer one when they did that were you like nice that's good for me that's good for codex what what was your reaction.
- [30:10]
A
To that i think like the tempo saga is really interesting because it's just such a small world you know my friend liam is pretty involved there and one of the reasons i think that liam is interested in stablecoins in the first place is because of a conversation i had with him three years ago and so it's it's really interesting that you know that three years later you know he's that partly convinced stripe to do this it's very interesting what was.
- [30:34]
C
It what was the nature of that conversation well.
- [30:38]
A
Early on stablecoins was quite a contrarian view right because at the time it's payments dude why are you doing payments that fucking sucks if you think about these chain foundations and i was at one you think about who has the most clout it's the defi guy that's the bulk of the product market fit if there's a payments guy around this is not a this is not an interesting guy right this is.
- [31:01]
C
Not you're talking about like back in back in twenty twenty one twenty twenty two back then that's right payments was.
- [31:06]
A
Sort of like the graveyard of you know graveyard of crypto companies but you know i think at the time i was just looking at this information from first principles and i'm like actually i think stablecoins might be the realest product market fit in crypto right and tron in a weird way may have actually some of the realistic product market fit in crypto and this was not a popular view in you know ethereum circles at the time but i think those are some of these early conversations that gave rise to you know a lot of the folks working on the system.
- [31:37]
C
Today yeah yeah so like codex as a name has like arisen alongside of the rise of like the mind share of payment stablecoin chains but you guys got started forever ago talk about maybe we can just interlude we're still in the technical argument of like technical argument economic argument ideological argument but let's put a pin pin in that conversation when did codex just come around when did you when did you guys found it.
- [32:00]
A
I started codex when when i was at i left optimism to start codex i just had this observation that it seemed like nobody was really working on the realest part of crypto in a way and so i went off in search of something that hits three boxes for me the the first box is that it genuinely moves space forward in a way that my grandmother can understand second that it is a massive economic opportunity and third that i had some sort of unique edge to work on and so codex is what came out of that at the time when we were working when we first started thinking about this this was a deeply contrarian view right yeah no more contrarian just.
- [32:39]
C
Came to my mind as well yeah.
- [32:41]
A
Nobody wanted to work on this and you know i i think but if you just stare at the data it was pretty obvious and now you know sort of that idea has gone from contrarian and sort of maybe fringe to like mainstream but that's been good for us i think you know we have maybe more time in the idea maze than others and i think we can see the map perhaps clearer than others.
- [33:02]
C
Interesting talk about why it was so contrarian what what about codex are the contrarian elements again we might have to teleport ourselves back to twenty twenty one twenty twenty two but like why the c word i think the first piece.
- [33:13]
A
Of consensus at the time was that well roll ups ought to be general right we can go into the history of this more i think there's all sorts of interesting counterfactual histories that could have happened but the consensus at the time was well rob should be general and there's no need to focus on any particular use case and let's run these foundations no we i i launched optimism token right so i clapped my hands together one day and fifteen billion dollars appeared from thin air and then the next day we're like well how do we how do we give it away we don't know how to give it away and so you know you spin up all these foundations and all these people are into these foundations and you're trying to figure out well how do i how do i allocate this and it's very clear that you don't really know how to give it away right because you're so you're spread so thin across all these different use cases how are you going to be opinionated in smart ways across all these use cases and so you know i was there sitting and observing all this and you know it just seemed to me that really was room to focus right focus down on one thing and then the question becomes which thing and based off my readings of data it seemed like stablecoins was the way to go.
- [34:20]
C
Wasn'T that kind of the thesis of the super chain though or is still the the thesis of the super chain which is like the cluster itself is very generalized but the optimism organization project doesn't really know where to be opinionated so they kind of leave that up to the to the market and what the market is is all of the individual chains of the super chain how is how is what were what you believed what you saw different from what that thesis is i think even for.
- [34:45]
A
The superchain thesis i think the superchain thesis sort of maybe revolves centers around this idea of interop right so maybe i'll give my take on this i carl will probably have a a sharper and more correct take than me or and carl and jang but my understanding of this was that look you have this problem because you first launched you first launched we roll ups at a time were experimental technology right and you for a time it was just one or two teams who could do it and the moment kind of passed where not all the activity migrated to a single l two and in fact the tech got more and more commoditized and it actually became productized into ras meaning that anybody could go launch to roll up at which point you have this problem which is well if anybody can launch a roll up like what is what exactly is the value cruel for a company like optimism and so then the thinking is well look let's let's stitch them together right we're going to stitch them together it's going to have these wonderful properties it's going to be great that's kind of maybe from my view the kind of heart of the super chain thesis for us today how much does interop matter it's not clear to me how much interop really matters to me individually at codex and so maybe that's that's where those theses diverge.
- [36:03]
C
A little bit so maybe to articulate why codex was contrarian at the time that it got started was a stablecoin payments focused b appchain narrow narrow chain construction rather than a generalized chain just a just a narrow narrow focus chain do you think that's where ethereum rollups are just going generally speaking because like one of the coolest new like rollups that the ethereum community is talking about is lighter and lighter is like just as narrow if not more more narrow than what you are doing which is just like it is a perp dex and it's enshrined in the actual like zk circuits that they've built and it's grown immensely in at least tvl i mean there's incentives there but nonetheless like i don't think anyone's arguing with the product market fit of perpdex these these days so like is there a broad comment to make about the trajectory of ethereum layer two designs yeah i i.
- [36:58]
A
Think we need to wake up as a community and i think we need to recognize some uncomfortable truths the first truth that we need to recognize is that general purpose l two s are parasitic to l one what i mean by this is if you just spin up an l two and it's does everything you know it's defi it's nfts it's something something payments it's something something ai what really is the difference between that l two and l one you are most definitely splitting the user base no and and what is this l two adding to l one exactly now prep four thousand forty four you might say okay well no it's it's it's batch submitting onto l one it's paying all these wonderful gas fees sure okay but post eip four thousand eight hundred and forty four like that set of economics is de minimis so then where where's the value crew it just doesn't work right the the system doesn't work and so like what is the future the future is you need rollups need to be able to work in a way with l one where it's a win win so what is that win win the win win is the rollups should focus on things that l one cannot do well what are things that l one can't do well well it's very very difficult at the l one level to run a really tight product research and engineering loop because it's very hard to focus right it's very hard to focus on specific problems and so the role of l two s is to get deep on one thing and so in our case we get deep on stable coins and in this way we can sustain ethereum's dominance in stablecoins and in this way we can also eventually return economics back to ethereum that i think is the win win that is the future isn't there kind of.
- [38:41]
C
Just like a migrating overton window of what parasiticness is as it relates to the capacity of the ethereum layer one and so i i think now in twenty twenty five people look back on the generalized rollups of twenty twenty one arbitrum optimism polygon and they're like yeah those are actually parasitic to ethereum but at the time there was no choice like ethereum was doing fifteen transactions per second at least we're doing forty five now and we just needed something like that to keep people at least one click away from ethereum while also having like you know a hundred transactions per second plus and now we retroactively judge you know generalized roll ups in twenty twenty five of the rollups of twenty twenty one so like oh yeah there's a parasitic to ethereum and also ethereum in the meantime has kind of like increased in capacity gas fees have gone down and now we're saying like okay the actual right construction of an ethereum world is actually an app chain where we can like zoom in go focus be focused do the product development cycle loops that ethereum will never do but in twenty thirty in five years ethereum is is supposedly going to do a three x layer one capacity increase over the next three years we're going to zk the chain we're going to get to a million transactions per second according to justin drake and then maybe in twenty twenty five we look back on the app chains and be like you know what well how said that the reason why he's building a layer two is because of all of the stablecoin tvl on the ethereum layer one how is that not parasitic and actually just in the grand scheme of things ethereum is just going to become just as monolithic as all this a lot of people said that it was and and we're just going to retroactively judge the options of layer two s as being parasitic to ethereum which is doing the same thing that tempo is doing which.
- [40:23]
B
Is just a theory beating ethereum to.
- [40:25]
C
The punch on scalability and product what.
- [40:28]
A
Say you i think that's an interesting way of cutting at it i think there's sort of a premise embedded in there which is all that matters is throughput do you see how easily people can slip into that whereas most of that the conversation so far david has been kind of me talking about all these other things that matter right that nobody's actually working on because they aren't just some throughput number that people can sort of wave around on twitter so in a world where ethereum is doing a gazillion transactions a second fantastic that's great the set of products and the set of features that codex is building is entirely compatible with that and entirely differentiated from that if we are unable to do that we deserve to die and so when it comes to sort of the overton window shifting over time i think that's right right i think i think for a while i think it was possible that optimism would actually be the only l two i think for a moment it was possible the token launched right mass evaluation you know my own view here would be that we should have done a migration airdrop where you selectively target the top defi apps on l one you move it all over you know the pejorative here would be to say vampire attack right you're kind of vampire attacking on l one and i was an advocate of this you know perhaps like controversial approach but at the time the consensus was look like execution should happen on l two right so that let's do it let's have execution happen on l two let's move it all over but of course you know first of all hindsight's twenty twenty and it's much harder to be in the decision maker's seat than to be an early employee like myself kind of you know just throwing ideas around and you know that that moment passed right and so then what emerged is that there were multiple rollups with some fragment of the ethereum ecosystem on it at which point then we're headed down this ras path that has happened since and so yes the overton window has shifted over i think there are all sorts of these kind of interesting counterfactual histories that are interesting to think.
- [42:25]
C
Through as well so we've already touched on the economic argument i think we've covered the technical argument let's finish up talking about the ideological argument which we've kind of like been dancing around but like why ethereum ideologically speaking why why a layer two on ethereum yeah i.
- [42:42]
A
Think i use the word emotional because i think there are ideological reasons as well let me start emotional i think emotionally like i grew up in the ethereum community right i i i quit my job i i was very lucky to join optimism pretty early i lived in a house of like six seven other people in vitalik you know know i'd come downstairs and vitalika's on the phone of elon musk or something and one day and the next day ashton kutcher's in the kitchen and you know all sorts of crazy shows i remember that house that's right that's right and so like that's how i grew up in this in this ecosystem and so i think if i'm intellectually honest about it i'm probably a bit biased that way i think you know ideologically i think first of all you don't have to reach for ideology quite yet i think the empirics back it up right like most of the stable coins are on ethereum we just have to sustain that dominance into the future and if you think about which which ecosystems are truly kind of true to their values or neutral that are likely to really be a settlement layer globally for the world i think ethereum is obviously that i think anybody who's arguing otherwise is you know maybe raising money for now.
- [43:51]
C
One crypto is risky your sleep shouldn't.
- [43:54]
B
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- [45:33]
C
Show notes there was there's a while i was hosting an episode like a roundup episode with like a handful of different people on it and one of them was bread from mega eth and this one very strong ethereum community discord i was in was giving me shit for hosting bread for mega eth and i'm like what the hell do you guys want like it's mega eth is an ethereum layer two they're doing the logical conclusion of like the ethereum rollup design and all of a sudden like hosting bread from from mega eth is is antagonistic to ethereum so some some parts of the ethereum community have their antibodies very sensitive very turned up and so what would you say how would you address those people who are just like very tuned to be like no you're actually extractive to ethereum what is codex what is codex giving to ethereum what value is codex giving to the.
- [46:23]
A
Ethereum project yeah i think you see this happen quite a bit with communities that become sort of more and more mature right i think you see some these are some times in twenty one or twenty two it would be like these are kind of bitcoin traits right yeah or like any any attempt at changing something about the bitcoin ecosystem is an attack on bitcoin and let's get the pitchforks out and let's string them up let's hang the guy which which which so i think it's a natural human tendency i understand it i think what we need to do as a community is discern between true threats and like progress so like what are true threats true threats are all tau ones attempting to supplant ethereum right tempo is a real threat and we should not engage in motivated reasoning about it right so like one version i've heard about this is well it uses the evm so therefore it is ethereum i mean come on right like that's that's bs like sit down and really think about that for a second right that's that's bs so we need to be able to discern between like true threats and progress what does progress look like progress looks like well what is the future here right we have this problem where now perhaps general purpose l two s are not all that additive to the ethereum ecosystem well then how do we proceed because we have ras right you can't spin up ro ups we have a thriving ethereum community and there are all these threats on the horizon so what should we do let's sit down and think about what we should do well we need to move quickly we need to run a tight product iteration loop and we need to preserve ethereum's dominance and probably the best form of doing that is in a stablecoin focused l two and so i mean obviously i'm talking my book here but you know we are very much not a threat to ethereum we're very much aligned with ethereum and you know we hope to preserve the future of stablecoins on.
- [48:23]
C
Ethereum what about the whole like topic of conversation of like beta based and native rollups what do you think about those in terms of like technical even stronger technical alignments to the ethereum layer one what do you think about that.
- [48:34]
A
Conversation yeah i think those are interesting i think we're happy to explore those things i think again this falls in a bucket of like interesting technical conversations that customers do not care about sure yeah so like if you go on one of these chain websites and all they talk about is stuff that sounds good to like r and d team right i would i would look at.
- [48:53]
C
Right yeah one one theory i have one thesis i have about tempo you know tempo is like you know what what is good for tempo is good for ethereum we're evm we're gonna our software contributions will to ethereum we're going to increase the pie for everyone and and also we're just like stable coins you know so like don't mind we're not we're not coming for defi we're just stable coins and i and i think anyone who says that on the tempo side of the aisle is like probably being true and authentic it's like yeah they're just focused on on stable coins and payments and i don't think anyone in the tempo complex is being dishonest if they just say yeah we're just thinking about stable coins i think as tempo grows in in the future where tempo does get adopted as a payments chain as a stable coin chain and like the the weight of stripe actually gets expressed in the dominance of tempo tempo evolves from just a payments chain just because of the fact of that's how layer ones work it's like why would you not put a on tempo there's going to be an a on tempo why would you not put any sort of defi app on tempo and why would there's no difference between a stablecoin payments focus chain and just like a very high capacity high capability generalized evm chain and so yes everyone in the tempo orbit is like yeah we're focused on stablecoins but tempo as a construct tempo the actual if you give agency to tempo the blockchain tempo's like yeah no i want to become the dominant layer one the generalized layer one what do you think about that.
- [50:29]
A
Thesis that that rings true to me i think the play here it's a very smart team over there right there's a lot of great people i think if i were them what i would be thinking is less salami to slice salami slice the shit out of this what i mean by this is you just progressively and slowly inch through everything so you make no moves immediately that are threatening to others you just slowly and progressively get there under cover of.
- [50:59]
C
Maybe some smart rhetoric my general attitude towards almost everyone in this space is like everyone in crypto is in one of two camps you are either unbund like and this is the perspective from ethereum so again ethereum is the agent here ethereum is the organism anyone in crypto is either unbundling ethereum and this is like the archetype of multicoin capital what does multicoin capital want to do they just want to unbundle ethereum like one by one take all of the different values of ethereum different different value that ethereum produces and like make a faster alternative version of it somewhere else that they invested in it's like the the archetype of of ethereum unbundler so tempo big ethereum unbundler and then there's the ethereum bundlers which is like ethereum is the the chosen open source ecosystem it is this gravity center of open source contributions and that is like naturally accruing of of mindshare it's credibly neutral things just gravitate towards ethereum even even tempo even though it's like an alternative layer one with no material technical alignment with ethereum it's still the evm and that evm grows in the gravitational center and actually is ethereum at the center of the orbit and so i'm interested in growing the ethereum project so i'm an ethereum bundler i will say that you are an ethereum bundler because you're building an ethereum layer two that's focused on bundling up payments and stablecoins into ethereum and so i actually don't really have a question here but like that's how i view the world it's like you're either you're either a unbundler of ethereum or you're a bundler of ethereum from the perspective of ethereum what do.
- [52:35]
A
You think about that yeah i think there's like ethereum's kind of like craigslist right is kind of what you're talking about here yeah i think i think that's interesting yeah i think the thing is is that the ethereum bundle like what is what is the reason why you might unbundle ethereum you might unbundle ethereum to focus right so somebody might focus you know craigslist has rentals and you take out rentals and you just do that and it's airbnb right i think in the case of ethereum we have this wonderful thing called l two s that allow you to do that you can go focus on one thing and yet the whole thing still coheres so it would be like if craigslist had an incentive for people to spin off little sections of it while still being economically aligned with craigslist that's what's powerful here right that this is the model we have to get to and i know there's all sorts of factions inside the ethereum community that have different theses on it i've heard one version of this which is look like sorry fdl two s right fdl two s and let's just focus on l one and let's do that there's obviously another camp which is like don't don't do that like focus on the l two s and i think the truth here is somewhere in the middle like we need to be pragmatic about this yeah right we gotta make sure that it makes sense like l two s need to interact with l one in a way that's additive and obviously l one needs to like there needs to be a reason why you want to be in a theorem l two right so i think again i'm biased but i think the model that we are we are pursuing is the future yeah yeah.
- [54:09]
C
I think i agree with you there it's just like let's split the difference between fdl two s and focus on the l two s and but i'll give a slight bias or like tie goes to the ethereum layer one so we're not i'm not perfectly splitting it down the middle i think like in twenty twenty one the ethereum community over index on layer twos and they were like all layer twos are valid by default ten thousand generalized roll ups they're all they're all valid they're all they're all great that's right and and i want to actually my perspective is like actually by default a layer two is not valid it's not it's not legitimate you can't just spin up a layer two you have to earn your keep you have to do something net additive and being a generalized roll up is not net additive to the ethereum space you have to like earn your place as a valid contribution to like the ethereum landscape and if you're not valid then like you're actually parasitic right and so like the way that you are valid is you have tight product development research loops you do grow the pie and you grow the pie in a way that is additive to the ethereum side not in the tempo way where it's like yeah we're growing the pie but we're also eating it too so.
- [55:18]
B
That'S that's that's my kind of fall.
- [55:19]
C
Is like don't don't discard the layer twos but also they're not valid by default they have to they have to earn their their ethereum logo branding not not get it by default i think.
- [55:31]
A
That'S right i think that's right i i think another way of thinking about it is if a rollup is adding nothing other than existing it is fragmenting the user base that's the truth of it right so it it better either address some use case better than l one it better be attracting new users better be attracting new flows creating new functionality or it really ought not exist.
- [55:55]
C
Yeah there was a previous year maybe a couple years ago where that was like blasphemy but i i hope that this becomes like the status quo like thought in the ethereum community when tempo announced itself and there the rabbling from the ethereum community got really really loud and matt huang had to like answer to the fact as to why it was an ethereum why it was a layer one rather than ethereum layer two he said something to the effect of like not wanting to be tied to ethereum's development roadmap and like a bunch of other things like the the general answer was like if we were at ethereum layer two we would be constrained by ethereum by like ethereum throughput the four thousand eight hundred forty four like blob space growth targets when you read that analysis from matt huang of like we want it to be just technically independent from ethereum what was your reaction.
- [56:44]
A
To that i think matt's in a tough spot right i think matt has to balance a ton of different things i think you know walter's paradigm lp is to balance right why is the gp of this fund starting a portco and how is his time split between paradigm and and this new port company he's invested in much of the ethereum community as well right so is he now adversarial towards those those investments i think he's got a tough balancing act and you know obviously a very smart guy so i think he's doing a good job of it i think again it it has this is r and d fetish that we were talking about right i think it's very easy to slip into like oh well we just all what we really need is just more throughput that's what we really need right we need a gazillion transactions a second and and often that's really not what is actually the bottleneck and so again i'm biased but if you i think if you analyze the situation correctly and you spot the true bottlenecks you would conclude that an ethereum l two is the faster way to win.
- [57:45]
C
How i'm i'm into it i hope the best for you guys for my ethereum side are there any other parts of this conversation that i haven't asked about any stone i've left unturned i think.
- [57:55]
A
It'S just a really exciting time for the space i think i think we're seeing all these sort of geopolitical forces play out on chain as well and i think all this all this will get decided in the course of the next half decade so it's excited to be on the frontier cool well i.
- [58:12]
C
Hope the best for you guys rooting for you not an investor spankless nice and no i just like the ethereum roadmap i like the ethereum project to what degree codex has a firm foot planted inside of the ethereum ecosystem i'm a supporter so helen thanks for coming on the show and just educating me.
- [58:27]
A
About the space thanks david great to chat talk to you soon bankless ation.
- [58:31]
C
You guys know the deal crypto is risky you can lose what you put in but nonetheless we are headed west.
- [58:35]
B
This is the frontier it's not for.
- [58:36]
C
Everyone but we are glad you're with us on the bankless journey thanks a lot.