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- [00:00]
Brian Pellegrino
I think one thing is we just had very deeply understood the scaling approaches that everybody else was trying. Like what works and what doesn't work right. And again, we believed early on, like, oh, like EVM is just slow. It was just common. EVM is slow. And then once we start working on these other systems, once we went very deep in Aptos, we went very deep in Solana, we went very deep in the other. It's like, oh, it's actually like the storage layer is one of the primary things constraining like almost every chain. And once we had this original insight around QMDB, we made this storage layer that now is 3 million updates per second.
- [00:37]
Laura Shin
Welcome to Unchained, your no hype resource for all things crypto.
- [00:40]
Podcast Host / Announcer
I'm your host Laura Shin.
- [00:42]
Laura Shin
Thanks for joining this live stream. Just FYI, we had to pre record this one before we get started. A quick reminder, nothing you hear on Unchained is investment advice. The show is for informational and entertainment purposes only and my guests and I may hold assets discussed on the show. For more disclosures, visit unchained crypto.com quick.
- [01:01]
Podcast Host / Announcer
Note before we get into today's episode, Bits and Bits now has its dedicated feeds. We're spinning off from the Unchained feed and moving to a new podcast and YouTube channel. So if you want to keep up with our weekly live streams and macro meats crypto breakdowns, make sure to subscribe to Bits and BIPS directly. We won't publish there until March, but subscribe today so you can be ready for launch. Be sure to subscribe to the new feeds and@ Unchained Crypto.com BitsandBips did you know that figure is giving away $25,000 in USDC? They're a decentralized digital asset platform for earning, borrowing and lending. Download the Figure Markets app using our link figuremarkets co unchaineddp deposit into their democratized prime pools and earn about 9%.
- [01:50]
Brian Pellegrino
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- [01:55]
LifeLock Representative
One in four tax paying Americans has paid the price of identity fraud.
- [01:58]
Laura Shin
What do I do?
- [01:59]
Brian Pellegrino
My refund though. I'm freaking out. Don't worry, I can fix this.
- [02:02]
LifeLock Representative
Lifelock fixes identity theft guaranteed and gets your money back with up to $3 million in coverage.
- [02:07]
Brian Pellegrino
I'm so relieved. No problem. I'll be with you every step of the way.
- [02:11]
LifeLock Representative
One in four was a fraud paying American. Not anymore. Save up to 40% your first year.
- [02:16]
Podcast Host / Announcer
Visit lifelock.com podcast terms apply an APY paid hourly. While you enter, every dollar you keep in for 25 consecutive days counts as an entry. Again, the link is FigureMarkets Co UnchainedDP for full details. If crypto taxes feel overwhelming, you are not alone. That's why Crypto Tax Girl, a team that's been helping crypto investors since 2017, is offering $100 off on one on one crypto tax help. To get $100 off your crypto tax services, go to cryptotaxgirl.com Unchained. Again, that's cryptotaxgirl.com unchained.
- [03:02]
Laura Shin
Today's guest is Brian Pellegrino, co founder and CEO of Layer Zero Labs.
- [03:06]
Podcast Host / Announcer
Welcome, Brian.
- [03:08]
Brian Pellegrino
Thank you, Laura. Thanks so much for having me, as always.
- [03:11]
Laura Shin
So Layer Zero has long been a messaging protocol to bridge between different blockchains.
- [03:16]
Podcast Host / Announcer
And today you have a big announcement.
- [03:18]
Laura Shin
About a new blockchain that you're launching called Xero. Tell us about it.
- [03:23]
Brian Pellegrino
Yeah, so Zero really is like this. This whole thing started two and a half years ago, didn't really originally intend to build a blockchain. What happened was Ryan, my co founder, Raz, who's getting extremely frustrated, almost disillusioned with the space of the way that the space was moving, particularly every, every day was ranting, honestly, frankly, every day he was ranting to me about Layer twos. He was extremely upset around sort of the Ethereum moving away from sharding, positioning this as their scaling layer in describing it as inheriting the underlying base. He thought this was like, like really just like a not true factual statement and that it was being propagated was frustrating to him. So I was so sick of this. At the end of sort of six months, I said like, all right, like what would you do? And he started to draw out what he viewed as sort of like the long term architecture. And actually over the last two and a half years, a bunch of the spaces started to converge to some of these things. There was tons of steps you have to solve to get down. What he described really was like, the core problem with any blockchain today is that if you have a million nodes, every single one of those million nodes is reproducing the same exact compute. You're paying effectively a million times the cost of doing the computation itself. And so clearly what you want is to be able to reduce that factor if you're going to make it competitive with real systems, any system at scale. So it's really, how do you actually get core systems that can scale and reduce the amount of replication? And so zero is sort of like built around that the end result you get. We have 400x breakthroughs that led to this in storage, compute, network and then in ZK itself. And the culmination of those four effectively are 2 million, you know, scalable up to 2 million transactions per second per zone in the architecture, about 1/10,000 of a penny per transaction and the ability to write across any further virtual machine or even just compile any Linux binary directly down into an executable. So like a huge transition from the architecture itself.
- [05:21]
Laura Shin
Okay, so yeah, we'll dive into those details in a little bit, but just explain like a little bit more about why you're launching a new blockchain now. And like what problems you think that Xero can solve that you don't feel are being addressed by existing chains.
- [05:37]
Brian Pellegrino
Yeah, yeah, absolutely. So I mean the real promises or the real premise of the original like at us starting was that nothing can scale right now and the space needs to go in two directions. You can either go one direction, which is centralizing so performance blockchain, Solana, et cetera is basically reduce the number of nodes and increase the requirements of the nodes. So get rid of home stakers. Nodes cost, you know, tens of thousands of dollars a month or more to run and have a smaller party, but have extremely high performance. That's one way to scale and you get to about 2,000, 3,000 transactions per second. And the other way to scale is really care about decentralization and home stakers. So keep like Ethel one, keep it as decentralized as humanly possible, but start to scale through effectively layer two. So now you're putting out sort of tens of billions of dollars and changing the trust assumptions into this small set. You have this centralized blockchain that sits on top of a decentralized blockchain and that's the way to scale. And we don't think either of those is the way that you actually want to be able to scale a system long term. So all we really care about, the only thing we care about is decentralized, permissionless systems at scale globally for the world. Like that is the thing that we're trying to solve ultimately. Like that is the thing that we care about that we don't view as happening. So part of this was disillusionment with the existing. I mean we're like, even today we're the third largest donated protocol guild in history. So we love the values of Ethereum. We very clearly love the direction or the principles and don't think the direction has been right. We Think the last couple of years has just been continuing to push on a more and more aggressively centralized roadmap that has been really limiting. And even to all of this, all the layer twos, all of Solana, everything combined, you're at like 6,7000 transactions per second. It's like just not enough for real world systems. So the thing that we think we're solving or we set out to solve is permissionless values at scale, decentralized, permissionless, censorship resistant like as those. Above all else scalable to tens of thousands, hundreds of thousands, hopefully millions of nodes. So broad and decentralized as a whole and yet able to do millions of transactions per second at extremely low cost.
- [07:49]
Laura Shin
Okay, and like basically. So you, you mentioned earlier that you are going to have the zero knowledge proofs, which I assume that's part of how you're scaling. But talk a little bit about how you managed to resolve all those issues without compromising on something like decentralization.
- [08:07]
Brian Pellegrino
Yeah, definitely. So again, core problem with any system, the main primary problem is this cost of replication, right? You run up to two things. Having every node download all of the transactions and all the data and needing to reproduce the compute across all of. So the four breakthroughs that we solved along the way, the first was qmdb which is actually a paper we published a year ago. It's now being rolled out like through commonware into Tempo and some of other chains that are launching now, which is basically a change from MPT structure to like a log based database. It is you know, sorry, 100x more performant than state of the art for database structure for verifiable database that was nomt which was the most performant prior it and it really just allows you to take it changes the cost of the worst case for reads and writes and basically makes it just extremely significantly more performance. So now you have like 3 million updates per second. It's actually eclipsed that now but that was what we published at. And then by doing that by storage layer that is substantially better. Then you move on to fafo which was our unlock and execution, which there was historically like a belief that the EVM itself was slow. And so typically the EVM was slow but like the SVM was designed to be faster. The EVM was slow. But aptos can run shardines and get to like a million transactions per second. But to do that million transactions per second you had to daisy chain roughly 30 supercomputers co located in a data center and each node could actually only get to like 33,000 transactions per second. That's with none of the overhead of the evm. We published our paper fafo, which shows that you can get a million transactions per second on a single node with the EVM, all of the overhead of the EVM. So QMDb on the storage layer unlocks the ability for you to be able to have significantly better performance at the execution layer. And then from there you have to solve a couple of more problems. And this was network and zk. ZK really unlocks this. If you think about. I realize this is getting reasonably technical very quickly, so I'm trying to keep it as plain language as possible. There were two more things. SVID is basically compressing the data on the network and then ZK itself allows you to compress compute. Ultimately what you have is rather than having an architecture where if I need to run some amount of computation, some list of transactions, I'm going to run it on my node. And maybe my node's really small, maybe it's like a smartwatch or something. Right. You have a million other nodes in the network, all 1 million, have to reproduce the same work to come to consensus. Rather you're going to run that computation once, generate a proof, and then all the nodes in network only need to validate the proof. And verifying the proof is, you know, effectively free relative to doing the computation itself. Right. The work is in actually producing the proof. And so in this. So we've gone and we've taken Jolt, which was this research project inside of sort of a 16C crypto research with Justin Thaler, Michael Zhu, and they were working on this and we took that with them and have like productionized this. And so now we have 1 GHz Prover proving cluster. We're able to prove this in real time. We're going to stand on stage tomorrow and show verifying transactions at a million transactions per second in real time. All of these things are things that we've done. So we spent the last two and a half years in stealth, not talking about any of this, slowly publishing the papers along the way. This is ultimately the culmination of all of this. But if you look at, I think your original question is what are you trying to solve? Who needs another blockchain? Right? Like, what is the point? Our view has always been, My personal view is the world has changed very rapidly, way faster than I ever expected, and yet we got to the last mile and we started making a bunch of really bad compromises when all the institutions wanted to come in that continue to centralize along the way. But the only reason we got here was because the whole value of all of the technology was the underlying principles. That is why the institutions who wanted this thing to die, industry to die over the last 15 years are now adopting, right is because like permissionless global markets have inherent value. There has been, I mean Tether is most profitable company in the world on a per headcount, per employee headcount. Hyperliquid is like the second most, you know, there. These are like unbelievable companies that have generated unbelievable value just through decentralized and permissionless access to some of these instruments. So the world is, is like rapidly changing and now we have these systems in this demand that nothing else can meet. And what we're doing in order to meet that demand is just make more and more centralized systems like Stripe had to build their own blockchain, right? There's like a very, it's like a very bad outcome is that like nothing is usable enough for them to build user payments, that they have to build their own blockchain from scratch. Every institution is now like rolling their own centralized blockchain that sits on top of the multisig. And like that is the way that we're sort of like approaching scaling. And you want like if you actually care about what makes the technology interesting as a whole and what actually gives it value as a whole, you have to be able to develop a system that can be broadly decentralized at scale and provide these things. And so we view global permissionless markets like it's just very clear. Markets are going to move from 75 to 24 7. They're going to trade across spot and perps, they're going to trade forex and commodities and crypto and equities and like all of these assets are going to be there and you're going to have access to these things like the rest of the world that now has access to the US dollar is going to have access to a lot of things that they just like would never have had access to just a couple of decades ago. But in order to do that you have to actually be able to scale systems to be able to do that without being three nodes or a small multi saber, you know, whatever this is, you have to be able to do that. This is us doing that.
- [14:04]
Podcast Host / Announcer
So one thing that I'm really curious.
- [14:05]
Laura Shin
About from what you're saying is it seems to me, and again because I'm not technical, maybe I didn't understand everything, but it seems to me like some portion of the transactions or the data is going to be off chain and like only a certain no. So, okay, so explain that.
- [14:23]
Brian Pellegrino
Yep. So again, super, super, super important. So right now every node downloads every single transaction, all of the data and does all of the computation in zero. But what you don't want is have to have any of this off chain. Like that's a horrible outcome, right? So what you actually want is the compute happens in a single place and you generate a transaction commitment and a slice basically of the data and the proof itself and all that the node needs to do to verify 100% that that commits. This is like the beauty of ZK is have those things and so actually nodes, you're able to verify even a huge amount of transactions, something no node today would be able to do with a very small amount of the data and the proof such that you can now do this. So if you say Salah took the approach of really big nodes, you know, processing thousands of transactions per second and sequencers or Even you know, L2 sequencers or even more of this, just like one super node that does everything and then posts the data back to Ethereum and you have the small nodes on Ethereum 0 is that you can actually have that mismatch. But the small nodes don't need to trust the big nodes. You can have, we call it the first ever sort of heterogeneous architecture such that you can have really big beefy sequencers that are rotating set. Anybody can run one, anyone can do this. They cannot do anything malicious because they must be able to verify this proof is bound by the ZK circuit. So these are like right in Ethereum you have proposer builder separation. So you have these big nodes that basically build the blocks. They're searchers, this is flashbots and everything. So you have these things that are building all of this and then they have the proof that is generated from that. And all you need to do is is have the commitment and a slice of the data and the trend and the proof and that is it. And you can like fully verify everything. What you don't want and what you have to protect very like religiously against is that any of these larger nodes should not be able to make up fake data. They cannot for, you know, spoof transactions. They can't censor the network. They shouldn't be able to like make it so that nobody else can actually include their transaction. So in Xero there's like force inclusion directly at the base chain. Every one of the small nodes has a direct slot to be able to put transactions in the Base chain. So there's all of these things that you need to protect against. We are, you know, we've written a lot on this. Hopefully it'll be very clear on, on how those. But like, very much, we have thought through exactly that. And you absolutely do not want any of this to live off chain. There is no point of that. If the nodes have to trust some off chain system or some off chain piece of data, everybody must be able to reconstruct and everybody must be able to verify exactly what has happened in the state of the network.
- [17:04]
Laura Shin
Okay. And it's a, and it's a proof of stake chain, which. Okay, got it. So it seems like you're, you're kind of taking an approach where you're bringing in all these institutional players. You have a bunch of partners from Tradfi, Citadel Securities, DTCC International, Continental, sorry, Intercontinental Exchange, Citadel and ARK are investing. You have an advisory board with Cathie Wood, Michael Balagrand of Intercontinental Exchange, Caroline Butler, BNY Millen, et cetera. Google Cloud's another partner. Just explain, you know, what your thinking was behind the strategy of including these types of players. And of course, feel free to mention anybody. I didn't.
- [17:50]
Brian Pellegrino
Yep. Yeah, yeah, of course. So for us, we think like building that technology is the most important part. Like in layer zero, we built and we built it 100% immutable. It was like we just built to our principles. Nobody. Most contracts now are not immutable. Almost everything that builds today is upgradable. We built 100% immutable. So for us, technology was number one, built it in that way. But you still have to build like technology for technology's sake. Just doesn't matter. You have to build and be adherent to the principles and then you have to go and actually get like real adoption. Right. So when you talk about, again, I have this very strong belief that you are having for the last 15 years, you've been on this space just as long as I have. Right. Like you've had crypto, which is a pool of capital up to even like $3 trillion of capital, but it was totally isolated. And then you had the rest of the world. And like, even like exchanges kind of played the role of like those two things, like money moving from either in or out of the system, but they were really disconnected. And rwas have started to change this a little bit. You have, okay, you have BlackRock issuing Biddle and now you have a little bit of treasury build yield, maybe you have stable coins. You're trying to offer yield or These things happening, they've never really intersected. I think the recent administration change and everything that's happened on the space Clarity bill upcoming, like it's just very clear the world is changing and like institutions are going from. I'm doing a POC over here and like yeah, it's cool. Let me just look at the technology to like actually building systems. So for us we were just super laser focused on like go out. So actually I should preface this with we are launching Zero. And again we haven't even dove deep in the architecture. So by the time people listen to this, hopefully they have gone and read some of the things. But Zero is effectively. I'll start there. Imagine you're a beacon chain. Ethereum has a beacon chain and on top of that beacon chain there is a single application. That application is the evm, right? For Ethereum it is the evm. The EVM is a thing, an application that lives on top of the beacon chain. Zero is effectively that same architecture beacon chain, broad decentralized million nodes, etc. And on top of that are can be many multiple applications. They can be any, they could be EVM SVM movie. We're totally agnostic. It can actually not be a VM because of the 0os paper we just published with Dan Bonet. You could take the exact code that runs Coinbase or Binance or any of these today, boil it down to a circuit and have that directly on. So it is just an executable environment that lives on top of Xero, can have many of them, hundreds. We're launching with three. The three that we're launching with. The first is just a general purpose smart contract zone, exactly as you'd think about most chains today. Come deploy your smart contracts, bring developers. The second is global markets. It is what does the world look like when you move from 7.5 to 24 7. Trade across all asset classes, trade across all of these things. And the third is payments. We view these right now as the biggest problems in crypto. Like these are the things that crypto just has product market fit for, right? It's markets, it's payments and it's smart contract development. And so we're launching with those three general purpose smart contract zone we're very comfortable with. Most people sort of understand what that is. When you talk about global markets and how does the world actually transition from the markets of today to like the markets of tomorrow? Like what does that look like? And so we're just super focused on getting the best partners in the world, right? So we went DTCC holds $100 trillion of assets and processes $4 quadrillion per year in volume. And then like you move up the stack. ICE is the parent company of the New York Stock Exchange, which is the largest stock exchange in the world and has $44 trillion of market capitalization. So you have DTCC sits here, ICE sits here and sort of allows trading of those. And then you look at who actually is using the system. Citadel securities is responsible like 40% of all retail cash equities trading on the planet. Right. These are like the three single largest institutions across the stack. And so as we sort of build out what do these markets like what does this need to have, what does this need to look like to be able to facilitate global markets at scale millions of transactions per second? Those were the three partners that we went and said like these are the groups that we need to talk to and work through. And so that is what they're there for. Our goal is to co build or lean on the expertise of how do you build these systems? They are looking at the technology because I think they had seen almost everything prior and it was interesting but it can do a thousand TPs, ten thousand TPs. And now we showed them something, we said, hey, here's live in production running this demo net, doing millions of transactions per second. And it's the first time we said oh like you could build nicely on a blockchain. Like that might take a very long time but like you could have a system that looks like that. And so that like that is the group that we pulled together to start to build this with. We'll have many more partners moving forwards. I'm sure a ton of people sort of interested on the core technology and on the payment side. And so like as you're building out payments infrastructure and what do you need to have global payments at scale millions of transactions per second, what do you need to have like what does privacy need to look like for this to be used broadly for people, for institutions, for everything. What do all of those things look like? Tether is making an investment into Layer Zero Labs and obviously there is no better partner on payments and what that looks like in the world. So we have a sort of a long standing relationship. USDT0 was this collaboration with Austin Everdon Labs that's now done $70 billion of USDT0 volume back and forth, has created a bunch of AUM for USD and now we're sort of strengthening that relationship and going to be able to spend a lot more time together.
- [23:31]
Laura Shin
All right, so In a moment, we'll talk a little bit more about the partners and the go to market strategy. But first, a quick word from the sponsors who make this show possible.
- [23:40]
Podcast Host / Announcer
Bits and Bits now has its dedicated feeds. We're spinning off from the Unchained feed and moving to a new podcast and YouTube channel. So if you want to keep up with our weekly live streams and macro meets crypto breakdowns, make sure to subscribe to Bits and BIPS directly. We won't publish there until March, but subscribe today so you can be ready for launch. Be sure to subscribe to the new.
- [24:00]
Laura Shin
Feeds@ Unchained Crypto.com BitsandBips Want a chance.
- [24:05]
Podcast Host / Announcer
To win $25,000 in USDC figure? A platform to earn yields, borrow against crypto and access lending markets is running a $25,000 USDC sweepstakes tied to their democratized prime product. Here's how it Download the Figure Markets app using our link FigureMarkets Co UnchainedDP deposit into a democratized prime lending pool and leave your funds there for 25 consecutive days. Every dollar equals one entry, so $1,000 equals 1,000 chances. While your funds stay in the pool, you're also earning around 9% APY paid out hourly. To learn more and enter, go to FigureMarkets Co UnchainedP, which is also available in the show Notes if you're looking for help with crypto taxes, Crypto Tax girl is offering $100 off for Unchained listeners. They provide personalized crypto tax reports and returns and spots before April 15th are limited. Go to cryptotaxgirl.com Unchained to save $100. Once again, the link is cryptotaxgirl.com unchained.
- [25:19]
Laura Shin
Back to my conversation with Brian. So we just discussed some of the different partners and you also mentioned that Tether is going to be investing. You talked about sort of the different kind of features of the blockchain and you're going to be launching mainnet in September. And as we kind of alluded to earlier in the conversation, crypto is a very crowded space right now. There's a lot of different blockchains. There's a lot of new ones that, you know, have just recently launched as well. And with these kinds of partners, I don't know if you are already working on, you know, deals similar to that example that you gave of like you could have NYSE on on a blockchain now. Or at least you're you're saying that on Xero it's possible. So you know, because you have these banks, institutions involved? Are there any kind of commitments to putting certain products or services on Xero?
- [26:11]
Brian Pellegrino
Yeah, I mean, I think I will let them speak for themselves. I think all of them are making their own statements over the next little bit. But the goal is, listen, I think any institution, so we've spent a bunch of time both from layer zero and now with, with tons of the world's largest institutions. I think everybody looks at it through the same lens and one is what can this technology actually do for me? Again you look at, look at Tether, look at hyper liquid most profitable businesses in the world per headcount, right? Tether's making 10 to 15 billion dollars per year. Like naturally, every institution wants to figure out why is that working and how can I sort of like leverage the underlying technology. So that's one part. And then the second part is this is a very disruptive technology globally. You're talking about, you know, centuries of everything in terms of economic mobility and economic freedom, being top down, being nation state driven to a world where anybody with access to like cell phone and access to the Internet now has access to these financial instruments, to these, you know, currencies, to all of this. And it's completely bottoms up. And that's like a totally different world. And so I think every, every institution naturally is at the same time saying where is the risk here in the system for me, right? Like how, how can I leverage this? How can I take advantage of it? What can I do that is like impactful and amazing and helps my business and how can I not be disrupted or like affected by these disrupted, disrupting forces? So I think universally every institution is sort of looking through those lens. I think you will see, you know, again our focus is just exactly bringing adoption on chain and to build the systems at scale. I think you will do see them do lots of interesting things which I will let them speak about.
- [27:52]
Laura Shin
Okay. And then one thing that I realized I didn't fully understand before. So with the ZK proofs, does that mean every transaction is private? Like the whole thing is private or so not.
- [28:03]
Brian Pellegrino
No, not everything is private. So ZK has a couple of interesting pieces of technology or like applications or one is clearly privacy, which I think is what it's most known for. But the other is that it's compression. I think compression is by far the most interesting part of the technology because what it does is as ability to again completely remove the cost or the replication factor in these underlying systems. Right. And so for us, most of the core architecture, you're Talking about ZK is compression, not privacy. Now when you go to payments specifically, a very big focus of ours is how do you tie? Obviously in doing this, we built, I would argue the best ZK team on the, on the planet. Like really have pulled together just an incredible, incredible team. And I think once we start to be able to announce all of the research and the breakthroughs, especially, you know, already gigahertz plus prover, all of these things, I think there'll be a lot more conversation around this itself. But in doing that, we obviously have a very strong background in ZK's application to privacy itself. And so when we talk about payments, you need privacy within payments to be able to do like any form of corporate payments, any form of like payments at scale, let alone the sort of like human right, like the natural right of privacy itself. So we'll be very deeply exploring privacy on the payment side of things, on global markets, on the general purpose smart contract zone. It's not front and center. We're not, you know, our privacy chain. It's not privacy as a whole. Privacy is a feature that ideally will be rolled out across all of these systems, but is not the focus for any other payment zone.
- [29:37]
Laura Shin
Okay. So right now it's just about scaling. So you know, obviously you have been working on Layer 0 since 2021 and I wondered if there would be any way that zero would be connected to layer zero.
- [29:53]
Brian Pellegrino
Yeah, yeah. So of course, I mean layer zero connects 165 blockchains today is really just interoperability. Right. We have no illusions that all of the chains go away. Right? Like that's not even the goal actually for us. The goal for us is again, we care very, very deeply about the core principles like that. That is the reason I've spent 15 years of my life here. That is the reason we built layer zero in the way that we did. All we care about is decentralized, permissionless, censorship resistant systems winning at scale. What we saw in the world, in the space we didn't really love, we thought it was going in a direction that both didn't scale and compromised a bunch of this. Our goal with zero is to bring that forward in the space and if somebody else does it and those principles win in a hole. Great, amazing. Layer 0 is still going to connect everything. 0 will be connected to all 165 chains. We're still going to be bringing asset issuers everywhere. We're still going to be doing all of the things that layer zero did. 100 something billion doll last year of Flow across it. None of that will change. This is not like a pivot, a shifting of focus or anything. Xero will be connected to all of these things.
- [31:04]
Laura Shin
And will 0 use the 0 token or it will.
- [31:08]
Brian Pellegrino
No new token. This was a big part of why we actually, you couldn't talk about it at the time, but like why we wanted to reacquire Stargate, go through that whole process was we really just want this consolidation. There's not going to be any net new token, there's not going to be change. We're not launching knew there's just zero is the only asset and it is going to be the underlying gas asset and staking asset for proof of stake.
- [31:32]
Laura Shin
Oh, got it. Okay. Well, out of curiosity, just, you know, you've been doing layer zero for a while and you said that you've been working on zero in stealth and I wondered like, are there any kind of things that you've learned from doing layer zero that you, you know, would apply to zero or. Yeah, just talk a little bit about like, you know, what your experience you feel would help you with launching zero?
- [32:02]
Brian Pellegrino
Yeah, I mean, so honestly, so much like I think we've done more non EVMs than any other group on the planet. We've had to go, we found crits and almost every non EVM we've ever gone to, we have to go extremely, extremely deep and low level into every system to rewrite the endpoint from scratch. And so this is everything from how Solana deals with dynamic dispatch and memory allocation to how Tan deals with sharding and like their approach to sharding and what sort of pain points you have and distance between shards for contracts and like all of these different things all the way across the board. And so I think one thing is we just had like very deeply understood the scaling approaches that everybody else was trying. Like what works and what doesn't work. Right. And again, we believed early on like, oh, like EVM is just slow. It was just common. EVM is slow. And then once we start working on these other systems, once we went very deep in Aptos, we went very deep in Solana, we went very deep in the other. It's like, oh, it's actually like the storage layer is one of the primary things constraining like almost every chain. And once we had this original insight around QMDb, we made this storage layer that now is, you know, 3 million updates per second. It was like, oh, actually EVM is like very fast. Like here is a single node EVM doing like a million Transactions per second. And so then I think we really were starting to apply, like, what are actually the constraining factors? How is everybody else taking these approaches to scaling and like, deeply, deeply going into the code and understanding, like, this is exactly how this thing is built. Isn't much reason for most people to do that, right? Like, if you're working on Solana, other than like a curious interest on some claim tan makes or somebody else makes, like, you're not going to go very, like deeply understand the code in their blockchain. And that is just we were forced to do through the nature of layer zero. And so I think we built like a very core competence in that. But really the main thing was anytime you have a new technology, right? So ZK is like, ZK has been very apparent for, for 10 years, a decade. It's not, it's not a new technology. Everybody's seen the promise or trajectory of this technology. But like, when most things in new technology, most people take it and they try to retrofit it into existing systems because it was like pretty nascent technology, was not ready yet. And you start to build on top of it, you say, okay, let's take this existing chain and like, we added a little ZK layer here. Can we do something here? And we just like totally inverted the question. And when I was arguing with Ryan and he went and like whiteboarded this architecture was like, assume the technology is solved. Just assume it exists. Who knows if it's going to be 5, 10, 20 years. The technology is now solved. What does the world look like? It was like, okay, like once this component is solved, then this is clearly what the architecture is going to look like, right? Like now, instead of being super bandwidth constrained on every node, all you're doing is verifying a proof and all you're doing is this. And then, and then you can say, okay, you've inverted the world. You see what the architecture will look like. Well, what are like the practical problems? And the practical problems are the storage layer is execution layer is. The network layer is the same thing with any, all modern computing systems. And you start to slowly break those down. And I mean, we thought originally, early on we were like, you know, is it possible to do something as fast as Solana but as decentralized as Ethereum, Right. There was a core question. It's like, is that even possible? Are people right that these are divergent paths? You can be Ethereum and decentralized and slow, or you can be Solana with big node requirements, but fast. And so we're like 2000, 2000 TPS but as decentralized as Ethereum. As we started to go through and we started to have each of these breakthroughs and they weren't 2x breakthroughs, they were like 100x breakthroughs on state of the art. The end result was we now again we will stand on stage and demonstrate a live demo net verifying a million transactions per second in real time. Right. Tiny nodes by the way these are on a Raspberry PI like commercial grade off the shelf Raspberry PI like one tenth of the power of a cheap laptop. And so like really like most things you have a bunch of individual breakthroughs but the compounding effect of those breakthroughs have now been just huge, like many, many orders of magnitude in terms of the, the outcome itself.
- [36:04]
Laura Shin
Okay, yeah, I'm like I'm just curious because so you're going to launch the mainnet in September and I'm sure you're very well. Aw. There are many instances of blockchains that were highly performant and had a lot of technical technological bells and whistles that you know, didn't manage to bring community or some of them launched with great community and then it's still all withered away. So you know, what are your kind of go to market strategies for bringing TVL liquidity dapps staking? Like there's just kind of a whole host of things that you need to to bring, not just the technological pieces. So what are your thoughts around how to ensure that Xero isn't just another chain that launches with you know, great fanfare but then ultimately doesn't actually gain traction?
- [36:55]
Brian Pellegrino
Yeah, so I mean there's a couple of things. 1 I think that is just like an entirely broken model. I think after RTGE I got on with you and I said Laura, like airdrops are dead, you know, you're just like dead and they've been like really dead. Right. Like I think that is just a broken model model this generate community. You know most of this is around like a new token that's coming out. You're building a lot of excitement. You're doing like new token things. We're not launching a new token. Right. This is a piece of technology, is a platform. It is again the embodiment of the principles that we care about. There's not a new token airdrop, there's not like any of these things. So like that building community thing is not something we're really focused on. We're really focused on the ideas like layer zero itself. We started, we had zero percent market share. Nobody cared. We were random, random people that nobody knew. And we went and we spent time and effort and we worked with like the best possible groups. We told everybody earlier, we don't care. At the time, everybody was huge grants and paying to build on us and all this thing. We would just go directly to people and be like, we're not going to pay you to build on us. We don't care about like a vapid, you know, announcement. We want to build like a real thing. So what is like, how can we help you find something that meaningfully will make your business better? And then we will help you go build that thing. We'll build it. If you look at the success of now, Lego Zero is, you know, 80 to 85% market share. Hundreds of billions, you know, $100 billion built on top of that. Hundreds of billions of dollars moving across it. Almost all of that volume is from a very small number of groups. And these are groups that we spent time and this is USDT0 and this is WBTC. You know, BitGo, this is Athena, this is Etherfi, this is Ondo. All of their tokenized stocks are built on top of us. This is Paxos. So P yusd and all of these, right? These are like we spent time and we found what are the real use case, what is the thing that we can actually build. And I remember because USDT0 in the beginning we had no, like we didn't really know what would happen there, right? So tether was had $186 billion at the time. It's on all of these chains, all of the chains that were large, but they were already there. So it had saturated sort of most of where you think the TVL would come from. USDT0 was like, okay, we're going to start going to start expanding to a couple of these networks that maybe aren't, you know, maybe you don't think are worth going to or right away or you know, the technical complexity and all of these things. And guess what, like nine months later, it's done $70 billion of volume. There's a point. It was like TVL had increased $10 billion. The AUM like that's like hundreds of millions of dollars directly to the bot. And so like for us, the only thing that we care about is actually building something that gets real adoption. Don't care about how many people are in discord, don't care about like getting leading AppX to come and like build here, but then not do anything. And it's just like sitting nothing we care about, like real systems that will drive adoption. So this is why we picked a bunch of the partners that we did. The goal is to build real meaningful things on chain at scale.
- [39:59]
Laura Shin
All right, well, it's been super great chatting with you. There's one last question I realized I completely forgot to ask, which is how much investment you received?
- [40:09]
Brian Pellegrino
Yeah. So we're very intentionally. It's not a fundraiser round. We did not. You know, the number of times you've had people approach us for like our next round. Not at all interesting to us. We were not putting the headline story anywhere of layer zero raises new round. Right. We went out and we said, we want to work with the best partners on the planet. And then as we went through and we started to spend more time with them, a couple of these partners said, hey, like, we want to, we want to actually have a meaningful stake, right? Like we, we care about what is happening here and we want to be involved. And so we have investment from a couple of these groups. All of those will be announced, but it's not around. I don't want you to think about it as a round. I don't want anybody to think about it as a round. It really is about the technology itself and that is the only thing that we care about.
- [40:57]
Laura Shin
Okay, well, Brian, it has been such a pleasure and congratulations on your new investment from all these different big name players and good luck with your launch.
- [41:10]
Brian Pellegrino
Thanks so much, Laura, as always, and hopefully see you again soon.