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Will The Ethereum Economic Zone (EEZ) Rebuild $ETH Dominance? | Gnosis Martin Koppelman & Friederike Ernst
00:58:11
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- [00:00]
A
Foreign Nation. I'm joined by Martin Koppelman from Gnosis. Martin, welcome back to Bankless.
- [00:09]
B
Thanks for having me.
- [00:10]
A
And we are also joined first time on the podcast. Long time coming. Frederick Ernst Frederike welcome to Bankless.
- [00:17]
C
Thank you.
- [00:18]
A
We are talking to you guys because something cool is happening over in your guys neck of the woods. This was presentation that Fredericke, you release that ETHCC alongside Jordi Bellina from from Zisk. And I want to learn more about it because this has been kind of the. The subject of Ethereum, the main arc of Ethereum and maybe this main quest line of Ethereum has a few next steps that you guys think we should take. Frederic, I, I'll throw this question to you since you were the one who presented this topic. We're talking about the what you guys have dubbed the Ethereum Economic Zone. Love the name. And I want to start the conversation here because Ethereum once upon a time had a dream of just a network of independent asynchronous chains that would compose together in a single unified synchronous experience that had boundless scale, you know, low fees and was just one unified united chains of Ethereum. It kind of seems that this dream has been a little dead for a number of years now. Like we tried it, we made a little bit of progress, we tried some things but ultimately it seems to have stalled out. Frederick, is this dream still alive?
- [01:31]
C
I think it's become resurrected. So kind of I, I do agree that it's been pretty dead for a while. So kind of the idea that kind of you, you should be able to compose from different domains of Ethereum seamlessly. This has been sidelined for the last couple of years. Kind of just as a reminder, kind of it wasn't sidelined for no reason. It was sidelined so we could solve scalability. So kind of like before we actually had any L2s and shards and whatsoever Ethereum composed marvelously, right? Kind of like when there was just one Ethereum we didn't have these problems and, and we, but we kind of we ended up in a place where transactions averaged $50 apiece. And obviously this is extremely unfeasible for majority of use cases. So we ramped up scaling via L2s and that broke the composability between those individual domains. And until recently it also seemed unfeasible to do it for from a technological angle. But this has very much changed with recent advances in real time proving now
- [02:45]
A
Martin, I remember two years ago, a year and a half ago at devcon Bangkok you talked about native rollups and it seemed very parallel similar to what we are talking about with the Ethereum Economic Zone. Talking about a number of different chains being able to talk to each other synchronously share a lot of the state of Ethereum is what we are talking about today. What you guys release at etc. The Ethereum Economic Zone. How is this like downstream of the effort of native rollups related? How. How does these two things couple together?
- [03:19]
B
Yeah, I mean the first one is the term got a little bit overloaded so. So others are using it in a different way saying native rollups are rollups that have some specific pre compile that kind of proves the correctness or where it's more natively proven the where you don't have a separate proof system but kind of that is supported natively by. By. By Ethereum. What I was trying to. Yeah I was already trying to describe this kind of vision one and a half years ago. Although then yeah Real time proving was not. Wasn't clear that this would. Yeah. Would be possible or how fast this would become possible. So basically back then I still described it as something where you could do those transactions that effect stayed on L1 and L2 in the same transaction but you couldn't directly read the result from an L2 transaction and you couldn't do kind of. Yeah fully complex interactions like you could do on one chain and all those things are now possible. So yeah, essentially it's an extension or it's now. Yeah, it's basically one step more than what we described earlier.
- [04:29]
A
So there was buried in there, you said real time proving. Is that why we're going to be talking about this subject today and not like a year ago or two years ago? There is a specific technology that has been unlocked. ZK technology has progressed incredibly fast, faster than most people I think in the industry really ever anticipated. And that's why we are able to talk about the subject today, the Ethereum Economic Zone because there was a tech unlock with real time proving. Is that correct?
- [04:55]
B
For sure, for sure. So there was a tech unlock and I think that unlock. Yeah kind of also brought a unlock in well in interest and in to some extent funding our commitment to build this. So previously it was just an idea, but it wasn't clear is it worth actually building it or investing in to some degree. And now with the promise of actually having all those nice things shared liquidity, fully composability. Yeah we decided it's now worth actually building it and quickly gathered interest around this project and yeah, and the result was the def net at ecc.
- [05:36]
A
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- [06:39]
D
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- [07:28]
A
Okay, so I'm going to ask this next next question twice and the first answer I want it to be non technical. I want it to be like broad pattern matching, able to be understood by the layman. And then I'm going to ask you the question again and we can go into the tech details, the architecture about how it works. Frederica, I'll throw out this one to you. What is the eez? What is the Ethereum economic zone?
- [07:50]
C
The Ethereum economic zone is the domain around Ethereum where transactions feel like you're on the same network. And so kind of, if you kind of if. I mean that was somewhat kind of tech minded. If you look at it from an economics perspective. It's, it's kind of the group of people who acknowledge that Ethereum is the most powerful decentralized economic zone in the world and want to be able to settle on it natively.
- [08:21]
A
Martin, do you want to add something to that?
- [08:23]
B
Yeah, I do. Maybe one more. So. So yeah, in the EEZ you have shared liquidity. So for example you can do a trade and you can in the same trade in the same transaction source liquidity from Ethereum and all other chains that are part of the eez. So. So in today's world you often see it that on different chains you have significant, significantly different liquidity even. Yeah. Different prices, maybe different interest rates. Interest rates on lending protocols and so on. On the same chain you would not expect that because there's can immediately be arbitrage and. Or basically then on the same chain you only should have one price for one token. And in the EEZ you will also have only one, let's say for example, one price per token.
- [09:13]
C
And I think this is, this is super. It's a good example to kind of dig into because you will still have different liquidity pools on different parts of the network. It's just that they stop behaving like separate markets because you can access liquidity from everywhere. They start behaving like a single market without any of the infrastructure actually having to move network at all. So everything stays where it is. It's just instantly, instantly accessible from wherever you are in the easy.
- [09:46]
A
Everything stays where it is. I think that is a very important line to underscore. So the eez, this is not a new roll up standard. This is not like the OP stack or the, the AG layer you guys aren't introducing. It's like oh, all the other layer twos are fragmented. Come to our layer two. It's, it's unfragmented. This is, this is not that. So technically, let's go into the technical definition of what the EEZ is. Frederic, how would you explain it technically?
- [10:16]
C
Technically that's a fantastic question. So kind of if you look at any one network, a network has a perfect Understanding of what its own status. Right. So this is kind of how it knows what the current situation is like and kind of like what transactions are feasible and so on. It has zero visibility into anything that happens outside of it. So if you want two chains or two networks to interact with one another, you need to give them a way of understanding beyond doubt the state of the other network so that they can work, so they can operate on that state as if it was their own state. So kind of that has to be the level of assurance you have to have about the state of the other network. And with real time proving, we actually allow the networks to understand the state of the other networks so that they can act as one.
- [11:23]
B
I would give a simpler or one simpler answer is to say layer 2s right now they process transactions and kind of once in a while, maybe every 10 minutes they commit to Ethereum or settle on Ethereum and then kind of to finalize that it often takes even longer than up to a week with a dispute, period. Chains that are part of the EEZ settle essentially every block. So every 12 seconds. So every 12 seconds they make, I mean they can make smaller blocks, they can be faster in between, but every 12 seconds they synchronize or settle with Ethereum. And so with every Ethereum block they settle with Ethereum and those settlements allow for, yeah, for transactions between Ethereum and those chains.
- [12:10]
C
And it's notable that it's a very thin layer. Right. So kind of like, as you said, it's not kind of like like an entire OP stack and it's kind of like come to our solution and kind of like everything is wonderful here. It can be retrofitted onto existing 2s if you are willing. Kind of like the, the main concession that kind of you have to make as an L2 is, is that you kind of have to acknowledge superior, that you have to acknowledge Ethereum as your superior. So kind of if Ethereum reorgs, you have to be willing to potentially reorg too. If you're willing to do that, you can become part of the Ethereum economic zone regardless of what kind of roll up you are.
- [12:52]
A
I see, I see. Okay, so maybe to zoom out a little bit, the, the thing that separates the, you know, Ethereum network of networks, the network of chains, the L2s, and a seamless united state that's synchronous and composable. The thing that separates those two things is all of the independent chains are slow to understand the state of other chains. So like the Uniswap, USDC ETH pool on Arbitrum is slow to understand the Uniswap USDC ETH pool on base. And if we can get that timing down to real time an Ethereum block, then we start to look like the Ethereum economic zone. And so it's not necessary. It sounds like it's not really like a binary, but it's like if we can get all networks, all of Ethereum networks layer twos to update the state of its knowledge of other layer twos inside of one single Ethereum block, then we produce this thing called the eez. Is that an affair interpretation of what you guys are saying or does something need to be amended?
- [14:02]
B
Yeah, and, but, but the good thing is also it's enough if one one chain starts so or, or at least for that chain, it already gives significant benefit and that is accessing Ethereum's liquidity. So even if you had the first chain and the only chain, but you are part of this or I mean you, you have this, this, yeah. Real time or every, every block settlement with Ethereum, it allows you or your users of the chain already to interact natively with Ethereum. So practical example, you place an order on, let's say carswap on such a chain, then the solvers or the router would dynamically decide is it worse or can I settle this or should I settle this locally with the liquidity on my chain? Which would potentially mean even less gas costs because you don't need to touch Ethereum state. But if it's worth it, the extra gas costs of Ethereum, let's say gas cost on ethereum might cost 20 cents or something like that. So if those 20 cents are well worth it to kind of the price improvement is big enough, then such a chain would decide to create a transaction that both uses L1 and L2 state. Yeah. And that means even a single chain benefits in my view significantly from joining eez. Then of course it can go beyond as soon as you have one chain joining, then in a way the aggregate liquidity is now Ethereum plus that chain and the next chain joining would join both kind of in a way because they already are. It's a shared chain, shared zone. And by that the EEZ overall could become. Yeah. Significantly bigger than, than Ethereum today. So kind of just as a, as a rough idea, if you just look at Dex trading volume, then roughly 50% today are on Ethereum and 50% are on, on the. Yeah. On the layer twos combined. So, so yeah, by that metric you would already double the kind of Liquidity trading volume.
- [16:06]
A
I see, I see. So so it sounds like the what the Ethereum economic zone is today to like kind of extend your guys idea of it. The Ethereum economic zone starts at the layer one. What is the eez? Right now it's the Ethereum layer one. And then with when one chain buys into the EEZ by adhering to the standards, well then the number of chains grows, grows by one. Now there's two, now there's two chains. The second layer two agrees to that standard. Well now there's three chains and there is, there's liquidity interoperability between the two layer twos and also if necessary the Ethereum layer one if the output is more valuable valuable than had it been just the layer twos. And it sounds like there's kind of just like a math problem of just if we're doing cross chain trades, what's the most optimal trade accounting for all the gas fees across all the chains. And then as more and more chains grow in the EEZ then the possibilities of what is the best outcome also grows for the users doing, doing all of these trades. Both of you are nodding your head so it sounds like I'm on the right track here.
- [17:11]
C
Absolutely. But it actually extends beyond even that. So kind of so far we've kind of talked about trading and financial use cases and I mean those are definitely real. So kind of if you have a perp dex on one chain and kind of your eth is on a different chain and kind of you want to borrow against it on a third chain that becomes completely seamless. So there's no bridging, there's no failure risk, it's kind of, it just becomes one atomic transaction. But beyond kind of the financial use cases you also see that chains that are geared towards other use cases. So for instance, if you have a privacy first chain what you could do is you could have your identity on there and this privacy chain would probably be very bad at compute because kind of private compute is expensive. So kind of chains like Aztec, they have one or two transactions per second because of this. But if you kind of, if you have your identity then you want it private. You can, you can send a proof or kind of you, you can, you can have a proof from that chain that you're allowed to access a specific say 5ers document because of credentials or membership or reputation that you have and your identity always stays on the private chain. It's just the proof that kind of leaves the chain and kind of in that way you give individual Chains much more freedom about how, how, how they kind of what they optimize for, what kind of use cases they target. You no longer kind of have to endlessly replicate table stakes, which is what we are saying, what we are seeing in the L2 landscape today. And I think that will be a huge unlock.
- [19:05]
B
Yeah, so actually I think it was at also your bankless summit at well for one and a half years ago last defcon where I think Eric Wall gave a talk about trying to build an application on Ethereum layer 2s and it was kind of impossible because he wanted NFTs and he wanted to use the NFT from one chain on, on or on from one layer 2 on another layer 2. And basically that was more or less impossible to build and that is more or less impossible to build today. But yeah, so, so, so basically, so basically just echoing that goes beyond the financial use cases. Everything where you need composability. Yeah, those, those things will become again
- [19:48]
C
much easier and it goes beyond even. Sorry, sorry David. It goes beyond even that. So kind of, if you, if you look at non public chains, so kind of obviously kind of say you have Aztec or so this is a public chain but you can even go to consortium chains or Provideiums. So kind of as long as you're willing to proof your state and reorg potentially if Ethereum reorg you can compose so kind of as kind of a banking consortium, you can have a private chain that with validators that are run by the banking consortium members but you can interact synchronously with everything that's on Ethereum and if you, if you kind of speak to these institutions and often kind of there they are in two minds of kind of what to do because obviously the liquidity that's very interesting to them is on Ethereum but they do not want to give up all of all of this administrative power they have from running their own infrastructure. They don't want to be at the mercy of kind of Ethereum validators. And kind of you can kind of now have the best of both. I could even see this kind of extend to two nation states. So kind of if kind of for instance you are a nation state and you want to issue someone a form of identity on chain, but you don't want to do it on Ethereum, you can now do it on your own on your own chain and have it compose with everything that's on Ethereum kind of. It's also kind of if you want to issue T bills natively or CBDC kind of all of this kind of gives you a way of having some amount of control but still allowing it to compose with everything that is already out there.
- [21:45]
A
Okay, let me, Let me. There's a lot in there that's definitely worth underscoring. So let me trace over everything to make sure I listen. I understood. And the listeners always keeping, also keeping up with us. It sounds like in the current way of building where, or maybe the 2023, 2024 era of Ethereum rollups, it was all about kind of Ethereum equivalence. Let's build arbitrum, let's build optimism, let's build base, let's deploy Uniswap there. Let's deploy a there. Let's deploy all of the big apps that made the Ethereum layer one successful and deploy on the layer twos. And. And then what did we get? We got, you know, 15 different mini ethereums on top of one big Ethereum and there wasn't that much differentiation there. And so we were all kind of like sucking up each other's oxygen. And ultimately, ultimately we never solved the problem that needed to. That we were trying to solve in the first place, which was scaling at the Ethereum layer one. And so we ended up just like replicating the patterns without producing the solutions here. And so now I think in 2026, we have that recent state of layer two statement from the EFI, which I think Frederick kind of echoed what you just said, which is we need layer twos to be more unique and differentiate between themselves. And I think we can go even further and say, like, there needs to be very narrow roles for specific L2s that they optimize strongly for. And the vision that you were kind of painting that I got in my head is like, there is an identity layer two. Maybe it's Aztec because I want my identity identity to be on the Aztec Layer two. There's Uni chain, which might be optimized for Uniswap. There's maybe there's AAVE chain to optimize for for aave. And if all of these things are in the Ethereum economic zone, I might be able to put my assets in the AAVE chain. And then I could also, using the excess margin that I have because of the deposits, I could swap it on the Uniswap chain. That activity could be tied to my private identity on Aztec and I might need. And then in all one transaction, I might be able to, you know, like buy access to this vial file VERSE document, which is on the. Which is somewhere else. And there's a There's a separation of responsibilities here that we don't have to conflate. And so in the old world, we had all of the same responsibilities, all replicated across 15 different chains. And I think with the image, the idea that you painted in my picture is actually chains can now focus on their individual responsibility, but all of that can be synchronized with real time proving. And this is what we call the Ethereum Economic Zone. But wait, there's more. It goes into the private consortium chains as well. And so you can still have some of the permissioned banking stuff that is very in Vogue in 2026. They can also be a part of the Ethereum Economic Zone, access the same composability, liquidity, everything else that makes Ethereum Ethereum. But they still have all of their private, you know, permissioned networks. All of that is retained, but they can still access the zones for, for what's relevant to them. That's what I, that's what I just heard. Is there again, is there anything that needs to be updated or amended?
- [25:02]
C
I think that was. I wish I had said it like this.
- [25:06]
A
I'm sure, I'm sure we, as we all talk about the EEZ more, I think we're all going to get better at talking about this stuff. Frederica, I want to go back to something that you said. You said it's, it's a very thin layer. The EEZ is a very thin layer. That means like the EEEZ is actually something. It's not just like smart contracts that are spread across all the different chains. There's actually a thing that is the coordinating substrate between. There's not. Okay, maybe you could actually talk about like what that thin layer is and what that role is and like where that actually lives kind of on, on,
- [25:37]
C
on a very high level. It, it's basically a standard for how different networks talk to each other. And that's, that's all there is to it. So kind of there's.
- [25:50]
A
There's a standard?
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C
Well, kind of. It, yeah, to some extent it is a standard. So kind of, I mean we kind of, we have this unlock with kind of real time proving and obviously kind of like with any technology there's different ways of architecting it. But kind of the obviously kind of like you have to kind of, if there's multiple players, you kind of have to agree on one way. The EEZ is one way kind of. We're aiming for, kind of for this coordination layer. We're aiming for less than 1,000 lines of code at least. Kind of like this is what Jordi kind of has in his mind, but kind of it will be. It's free open source software kind of. It's published by a new association in Switzerland. It's all, it's. Yeah, it's all free. It's in the public domain. It doesn't belong to anyone.
- [26:44]
B
Yeah, I would say yes, that is correct. On the other hand, to make it work, there's still. So there is, there is the. There is. There will be some coordination effort needed. So essentially let's start with one chain. So you are one chain and you want to have the synchronous composability with Ethereum. Then essentially you are doing a transaction that might affect Ethereum and your chain. So yeah, again that needs to be tightly coupled. And the way Ethereum blocks are produced nowadays is mainly through builders. Now there can be of course conflicting transactions. So let's say there's an Ethereum kind of regular L1 transaction that touches a specific liquidity pool and then there is this transaction coming from, from L2 that also wants to kind of go through EZ kind of into this specific liquidity pool. There needs to be some. Yeah. Ordering which. Well, ultimately does the, ultimately the. Yeah. Ethereum validator or builder does. But here there needs to be some. Yeah. If, if, if you want to do this efficiently, ideally you have some coordination between the sequencer of the L2 and the builder of L1. And there are ways to start or we will start the EEZ kind of with just submitting bundles. So kind of without additional required protocols or without additional required standards. But as soon as you want to have, want to go beyond one chain, you have multiple chains, then it absolutely does make sense that this. Yeah. Coordination layer, which is implicitly already there through kind of block builders and their protocols that that will become more important to actually build proper blocks that. Yeah. That have all the aggregated proofs. You can have all the chains having separate proofs, but of course it's also more efficient if they aggregate the proof. So long story short, it can be thin, but to make it work well and to make it work efficient, there will probably be some layers.
- [29:01]
A
So what I'm hearing is that there is a naive, worse way of implementing the EEZ that still works and with optimizations and coordinations between the different parts of the stack, there is a central coordinating role that can make everything better and that takes this existence of like some level of something doing some inter party coordination and then we can get even more benefits. Is that correct?
- [29:31]
B
Yes.
- [29:32]
A
Okay.
- [29:33]
C
The good thing is that all major block builders, that's currently Titan, Beaver Build and Flashbots already opted into this. So kind of they will support.
- [29:43]
A
You have the people.
- [29:45]
C
We have the people. So kind of they very much see the upside of this for Ethereum and also for themselves. So kind of they are on board and they will support this from day one. So it's not this kind of. Martin, it sounds a little bit like an uphill battle, but kind of like it's kind of. We are already kind of pretty high up on the. On the peak.
- [30:11]
A
Yeah. I think what you're saying is the incentives kind of make sense for these players. Titan, who are the two block builders? Titan and.
- [30:18]
C
And Beaver and Flashbots.
- [30:19]
A
Beaver and Flashbots.
- [30:21]
C
Together they kind of build in excess of 90, 90, 95% of all blocks.
- [30:26]
A
Right, okay, okay. And. And you said that they see the upside for themselves. Maybe you could illustrate what that upside is. Because if the block builders of Ethereum are getting upside, that means that people like me are transacting more on Ethereum, Right? Like to illustrate what that upside actually looks like.
- [30:45]
C
Yeah. So kind of. I mean, obviously block builders are long eth. Right. Kind of everything that kind of pulls economic activity onto L1 or kind of into the L1 adjacent domain is both good for block builders and validators. And I think this is something that kind of. We. We have deliberately not overemphasized. But if you look at L2s today, often the economic incentives are not well aligned with Ethereum. And I think this is a way of remedying that situation.
- [31:28]
A
I think if you are a classic Ethereum bull, you'll see the Ethereum economic zone and you'll say, okay, synchronous composability, synchronous state, better Dex executions, you know, composable apps. I'm seeing Ether as the money of the Internet. And if you're more in like, kind of the Blockworks camp and you're like, fees are everything. Well, I think the EEZ has an answer for that too, because if we can have composable networks, we can have this like, Festival of the Commons, this synchronized United States chains of Ethereum where all the independent value of independent chains all are composed into one ecosystem. That ecosystem is going to incur a lot of demand because you're aggregating bespoke value into the same place. And so there's going to be fee demand. That's probably why the block builders are in on this. So depending on your flavor of bullishness, I feel like there's something here for. For both Parties. Martin, what do you think?
- [32:25]
B
Yeah, for sure. No, basically on the second one. So right now L2s essentially create relatively little L1 demand. So kind of they, I mean, yeah, they use blobs, but. But they sometimes only settle every 10 minutes. So, so basically just a couple of transactions every. Every now and then, every few, few minutes. In, in this world, essentially every L2 user has the option at any time to, to do a transaction that also uses L1 liquidity. And, and if there's enough interesting things on L1, which they usually are or still are, then then the expectation would be that, let's say, let's say there are 200 L2 transactions in a 12 in a 12 second time, then at least a couple of those 3, 4, 5, 10 will actually also want to access L1 state. So definitely much more. Yeah, much more. But ultimately transaction fees and MEV or kind of just economic relevance of building those L1 blocks.
- [33:30]
A
Certainly, certainly. I want to go to this metaphor that my co host Ryan uses a lot that we've used a lot on the show, which is, you know, we have this united chains of Ethereum. But one of the reasons why this kind of model broke down in past eras was that the coordinating power, the authority of the layer one, was just not that strong. It's like we had these very, you know, fishing lines, loose, weak ropes that are tying together Ethereum's layer twos to the layer ones. They're just not that strong. And while, you know, we all kind of share the evm, there's nothing really strongly uniting these independent factions. It's kind of like NATO, you know, it's like the coordinating might isn't that strong. Like people do their own things. Members of NATO kind of still do their own thing no matter what. Frederica, you said something where in order for this EEZ to work, you have to give up some power to Ethereum. You emphasize the reorg. If Ethereum reorgs, then any chain in the EEZ, in order to be a part of the eez, must also reorg. And it sounds like we're just elevating Ethereum as like the canonical source of truth. And so long as all of the chains in the EEZE see Ethereum as the source of truth, not a source of truth, but the source of truth, that means that they're a part of the eez. Maybe you could just go into that a little bit more like, why is that important? Why must that be the case? And is that the complete story about the chains in the EEZ? Giving up power to the Ethereum layer 1 or is there anything else we should talk about as well?
- [35:05]
C
Yeah, I mean this is, this is correct. So kind of you need to give up some power to the Ethereum layer 1. In practice, this probably is not going to change a lot for you. So kind of if you look at how many reorgs there are on a daily basis on ethereum, there's about 10 one block reorgs. And then kind of as an L2, you only have to adjust your chain if kind of anything that touched your state kind of gets reorged out. So kind of if it's just sending sabers from one place to another, probably not that important. If you kind of touched upon an automated market maker whose state was altered, then yes, it's possible. It's more of a principled thing. So kind of in order to kind of all be able to kind of orchestrate, you need one conductor. Right. And kind of acknowledging Ethereum as the conductor explicitly to actually not just kind of like have the woodwinds on kind of like one side and then kind of the percussionists on the others and kind of the violinists kind of like in the middle somewhere. You kind of. You need the conductor. Right. And kind of like acknowledging Ethereum as the conductor is very much implicit in the. Easy.
- [36:30]
B
Yeah, maybe, maybe you, you had this metaphor of. Yeah. What. What is tying it together? So here it's really the interest of being able to access this. Yeah. State of, of, of of Ethereum. So for example, the liquidity. So if you want to allow your users to do a. Yeah. Trade on your layer two that in that trade also accesses. Yeah. Ethereum liquidity and touch estate, then you need to have this, the settlement kind of with Ethereum in the next block or. Yeah. Or essentially every block. So again, the big benefit is that also kind of for bridging. So essentially you send tokens from Ethereum to your chain and they are immediately available. You can immediately. In that sense there is no bridging. Of course, again, where does practically this reorg thing comes from? So if now something comes out of Ethereum, let's say tokens are sent to your chain and you are immediately using them on your layer two, sending them forward, using them in a Dex. And then it turns out this Ethereum transaction never happens because Ethereum gets reorged. Yeah. Then you have a. Well, then you have to deal with this. And the easiest way to deal with this is to reorg your chain to this level as well. So I would say this is the only downside essentially coming from easy. And I would also say, I would say, well, if I had a wish for an Ethereum roadmap, I would say single slot finality would, would essentially solve that problem.
- [38:05]
A
But yeah, right, that was, that was exactly. My next question is like, what does the EEZ ask of the capacity of the Ethereum layer 1 protocol? Single slot finality seems to just. Frederick said, while, you know, there is potentially a problem, it's, it's not, it's not really the biggest problem. It's a very infrequent problem. A problem nonetheless, but an infrequent problem. And I think, Martin, what you're saying is that if The Ethereum layer 1 introduces single slot finality, then the small remainder of the reorg problem actually just gets eliminated. Is that correct?
- [38:37]
B
Yeah, I would say it's largely a complexity problem. So in practice reorgs happen very rarely, so a couple of times a day and only for one block. So deep reorgs basically never happened in the, in the history of Ethereum. So let's say five, ten blocks that never happened. But, but theoretically it is. It's there and then you theoretically or kind of, if you want to build it properly, you have to deal with this theoretical case. So it does add. Yeah, bit of fair chunk of developer complexity, but once you handle that, practically, yeah, will not have big relevance.
- [39:14]
A
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- [41:19]
B
Yeah, so I think to some extent it will probably be the somewhat smaller ones that start first because they have more to gain because to some extent the bases and, or base and I think it's really just maybe, maybe Base, Arbitrum and Polygon that really have their own ecosystem that's still smaller than Ethereum but, but they have basically they have Dexs, they have lending protocols, they have Oracles, they have essentially the full stack. All all other chains, smaller chains are trying to do this as well but, but are somewhat struggling. So they usually have their niche and then they have other things where they basically can't at all compete with, with Ethereum. So, so for them it will be the initial incentive will be much bigger because finally they don't have to, I don't know, kind of incentivize liquidity for this pair that where naturally liquidity would just not be there or kind of get an Oracle protocol for those things. They could basically just say fine, we have here our niche and if you need anything else you can easily get it from, from, from Ethereum. So that's essentially the first wave I would expect to happen. Yeah. Then I do think those once, once they are successful or that works successfully, I think then the time will come that the arbitrums and basis of this world will yeah, kind of face this decision and yeah, probably, probably. Yeah, we'll consider whether it's worth giving up this. To some extent they're giving up the guarantee of fast, fast block time. So. So currently again, because they don't, they don't essentially have reorgs, they can say after a second or half a second your, your transaction is final. With this reorg possibility, there's still this additional complexity. Yeah, it's kind of final. But theoretically Ethereum might reorg and then your transaction might still be replayed. I think that will be possible. To also give here strong guarantees that, that even if it's reorg'd, you can have protocols on top that still guarantee that the transaction will be executed nonetheless. And then it depends on if it's a simple payment, then it should not in no way be affected by reorg, but if it's a trade that touches liquidity that might change its state, then yeah, it gets a bit complicated. So long story short, eventually I do expect them to join, but maybe not
- [43:50]
C
first, I actually, I think this is correct. But I would also predict these L2s to become much less important in the grand scheme of things because so far, kind of having kind of this full set of table stakes, this gave you a very significant leg up. But as soon as kind of you no longer have to be a mini Ethereum, as soon as it's completely fine to be different and just compose with whatever else is out there, kind of the gravitational pull of a base is going to become much smaller and I think we will see a lot of different sex chains in kind of the eez. I think we will see app chains, I think kind of the kind of like this generalist chain I see on the way down.
- [44:54]
A
One thing we have learned by now, I think in this industry is that we are no longer in the era of building it. And then they will come. I think in order for the EEZ to be successful, somebody has to do the job of pushing it forward, like taking ownership of growing the eez. With the announcement of the EEZ at ecc, there was, you know, inside of the announcement was something called the EEZ Alliance. Who is that? What is that entity who is composing it? Is this the entity that its job is to grow the eez? What's going on over there?
- [45:27]
C
Yeah, so the EEZ alliance is not a formal entity. It's more A group of projects, I mean there is an association that kind of owns the IP kind of it's free open source software. So kind of that entity doesn't matter at all. For the alliance, it's an informal group of projects who have said we will support this from day one, we will leverage this from day one. So kind of, as we kind of explained earlier, kind of it's important that block builders kind of execute to this standard asap. It's also important that dapps know of this possibility. So for instance, say you are an AAVE and what you can now do is kind of you can look at the user deposits across all EEZ chains, have one global balance that you can borrow against rather than having different AAVE instantiations on different chains where kind of the relevant collateral is the collateral that is on that chain with kind of the parameters that kind of are set for that chain. But in order to do that, AAVE actually has to know to look, right? Kind of they have to know to look. These are the chains in the EZ and this is the collateral and has to understand that logic from a business perspective. And this is exactly what the dapps who are in the alliance will do. So kind of AAVE is one of them, Sparc is one of them, safe and cow obviously Monarium X stocks centrifuge. So kind of there's a whole host of well loved applications also outside of the financial realm. So for instance, Fiverse also will adopt this from day one. So from the perspective of depth, this is a fantastic new primitive because you now no longer kind of have to maintain 15 different instances of your protocol. You can just act across all easy chains and that makes operations easier and user experience better and they very much see that. So so far, yeah, we've had only great feedback from dapps. And the good thing is on the DAPP side, integrations are not that heavy. So kind of if you want to retrofit your chain, it can be a larger lift depending on what your situation is like today. But for depth, it's a minor upgrade.
- [48:09]
A
I want to emphasize, I think the point that you're making, Frederica, is that this changes what it means to be a builder. It changes how apps need to be built. And there is, it's just a kind of just like a perspective shift, a philosophy shift of just like what makes an app an app. When one app is built that instantaneously has seamless access to the state of all other apps on different chains, there needs to be a kind of, you know, under this Success scenario of the eez, which we all want, I definitely want, you guys absolutely want. Builders are going to have to think differently about what resources are available to them because all of a sudden the state of other chains is something that's at their fingertips. That's been the whole vision of the United chains of Ethereum, you know, since from Genesis. We've never been living under that context. But in the context of the eez, being a builder is going to have to be a little bit different. There's going to be more, more resources, more tools, more powers that an application has because it can access state on other chains. And this kind of brings, I guess this goes back actually maybe we were living under this context. It was the Ethereum layer one back in. Back in like the pre 2020era where, you know, the state of all things was available to the fingertips of all other app builders. And I don't think there's been a generation of app builders that has been used to that kind of paradigm. Martin, what do you want to say here?
- [49:39]
B
No, exactly that. So people, or at least the previous generation was used to that state. That kind of everything was available and composable. And yeah, we are trying to get as close as possible to that feeling back. So. So essentially there will just be a, that there will just be a translation. So if you have an address on, on another chain, there will just be a translation of how you convert this address to a proxy address. So kind of an. A representation on, on the chain you are at. And then the promise is you can just call this. This. Yeah, this proxy representation, this as if it would live on your chain and kind of everything behind the scenes is kind of then abstracted from you or from the app. So yeah, ideally it will not be that complicated and it works. It doesn't require apps to build or to build from scratch on you. I think that would be a terrible mistake. We have 10 years of smart contracts that, that are available and we want, we want all of this to work with those contracts that are already out
- [50:43]
C
there and to be fair, kind of like it fully does. So kind of like even if you kind of, if you want to do something on one chain, you want to kind of deposit something in aave, borrow against it, use that liquidity on a, on a third chain that still works even if AAVE does nothing. Okay, so kind of the kind of. But what kind of what brings it to the next level is if AAVE understands that kind of it has all of this at its fingertips and kind of that can make it even better. But even if Dapps do not adapt to this at all, which, I mean, they will, but kind of even if they wouldn't, it would still make the state of affairs immeasurably better than it is today.
- [51:31]
A
Yeah, I think maybe there's one illustration that we can make to really like drive this point home is like, you know, say there's AAVE chain, you know, the AAVE the app is now AAVE chain. There is no AAVE app. And I want to, you know, put I want to deposit like a thousand dollars into the AAVE app and withdraw something, but my assets are on like a different chain. They're on the Ethereum layer one. I think in correct me if I'm wrong, in the EEZ context, AAVE can lock my assets on the Ethereum layer 1. I can move money on the Ethereum layer 1 and deposit it into the AAVE contract on the Ethereum layer 1. The Aave chain registers the state of a thousand dollars of deposited money and I can get a withdraw from the AAVE chain, which is on a different chain. And I think that's the illustration of like, this is a new way to build for builders of recent generations where nothing all has to be in the same place. It can be spread out across the ecosystem, yet composable nonetheless. Am I, is this correct?
- [52:30]
B
Absolutely. Yeah. And first, this is correct also saying kind of even this in or in this setup also even if you would have to kind of move tokens or that would also work within one transaction. So kind of theoretically both setups are possible that you keep your tokens there but still kind of borrow against them on this other chain or just within the same transaction, you move the tokens, lock them there, borrow against them, and again, but do it all in one transaction.
- [53:01]
A
Very cool. Very cool. It feels like this unlocks a bunch of possibility. I hope that's the case. Frederick K. Martin. I want this to work. This feels like not. This doesn't feel like a side quest. This feels like the main quest line of Ethereum. And so I'm behind you guys. I want to support you guys. What can the listeners do to help move this effort forward? You know, we have listeners across the Ethereum ecosystem, as I'm sure you guys know. Chains listen to this application. Builders listen to bankless users listen to bankless. Who do we need support and help and buy in from to help grow the eez? Who do you want to hear from?
- [53:41]
C
Yeah, absolutely. So kind of if you have a DAP that can profit from this be in touch with us. So kind of our. The website is EEZ IO if you're an L2 same if you're a user and you want a feedback on this or you just want to look at our GitHub EEZ IO this is where everything is at. You can also, if you are a well resourced project, you can also contribute funding. So kind of we as Gnosis have contributed funding. So has the Ethereum Foundation. Octant Titan is considering contributing funding. So kind of it's. It's very much a community project. So kind of we initiated this as Gnosis together with the group around Jodi who builds Zisk. But it's for everyone. It's kind of we're building it because it needs to exist. So if you want to contribute to it in whichever way, we appreciate it.
- [54:42]
A
How does the EEC actually roll out? So when would I. When would it impact me is this. I don't feel like there's a go live date that doesn't. Doesn't seem like that makes sense. How does it actually come to be?
- [54:55]
B
No, to some extent there is. So, so, so we will or we will. We will work on a. On a new roll up that. That is. Yeah kind of maximally kind of e. Yeah. Or in a way is. This is very similar to this native. Native roll up talk. So kind of it will have. There will be no. No sequencers or no, no no no one has a special role in this new roll up other than kind of Ethereum validators and Ethereum. So so that is at least meant to be a proof of or kind of a first one chain that fully supports is easy but then in parallel other chains and Gnosis will be one of them will. Yeah. Will. Will. Will join. So essentially there will be a moment when a chain in some form needs to upgrade and in some form needs to upgrade their settlement mechanism or bridge mechanisms to enable those synchronous. Yeah. Synchronous composable transactions. And I would say the first chain that, that, that enables that that will be kind of the launch of Easy
- [56:03]
C
and that's in the summer. So it's not kind of a multi year project. Kind of we're well underway and it's coming. It's coming very soon.
- [56:14]
A
Great, great, great, great. Yeah. There's an old meme, an old gif me and Ryan used to reference a lot where there was just like one guy at a concert dancing in a grassy field all by himself for a really long time and then a second person comes and starts dancing and then there's two people dancing. And then. And then a third person comes, and now there's three people dancing. And then everyone else looks around and starts to kind of get it. And then a fourth, a fifth, 10 more people, 20 more people come, and everyone's dancing. And that's kind of what I want the future of the EEZ to be is like, you know, first a few chains buy in, and then everyone else just understands that this is what we need to do.
- [56:56]
B
In a way. The analogy here is that it was always one of my criticisms of the Previous or the L2 roadmap so far, that it wouldn't really create network effect. So kind of this effect of, well, more people dancing makes it more attractive to dance with them. That wasn't really the case. So kind of if there's yet another L2 launched somewhere, that doesn't make. Has not necessarily immediate impact on all other L2s in a positive way. And that equation changes here because. Yeah, well, the more people dance, the more fun it is to join.
- [57:32]
A
That's right. That's right. That's right. Martin, Frederick, thank you so much for joining me on the show today.
- [57:37]
B
Thank you.
- [57:38]
C
Thank you for having us.
- [57:39]
A
Bankless Asian, you guys know the deal. Crypto is risky. You can lose what you put in, but nonetheless, we are headed west. This is frontier. It's not for everyone, but we are glad you were with us on the bankless journey. Thanks a lot, Sam.