Is the Ethereum Roadmap Off Track?

Stop waiting for change in Ethereum; it's time to take action and push for true decentralization.

Max, are you trying to start a civil war here within Ethereum? I'm not. I'm just saying that if you're claiming to be Ethereum aligned and stating that you've been working on a decentralized sequencer, then just do it. Don't continue to pass the ball and say it's going to be next month over and over again forever—just do it.

Welcome to Bank List, where we explore the frontier of Internet money and internet finance. Today on Bank List, we delve into a potential new frontier of the Ethereum roadmap. The question we're asking today is: Is the Ethereum roadmap off track? Have we lost the plot? Are Layer 2s running interference, intercepting all of the users' transactions and value from reaching the Ethereum Layer 1? Are Layer 2s extensions of Ethereum? How is the current set of centralized sequencer optimistic Roll-Ups misaligned with Ethereum Layer 1, and what are the consequences if we let it go unchecked? If all of this is real and not just FUD, what should we do about it?

We have Max Resnik on the show today. He is an Ethereum researcher working at the Special Mechanisms Group, and he has some opinions that are contrary to what is typically found in the Ethereum rollup-centric roadmap. Max discusses where Ethereum is breaking down on its vision for bringing the world onto decentralized, censorship-resistant, permissionless blockchains and suggests possible alternatives for directions that Ethereum can take. This is kind of a contrarian type of episode, I would say. David, I have to tell you, I'm a little bit worried about getting canceled again for putting this one out. But when has that ever stopped us? So, we're putting this out, and of course, this is to increase the dialogue in the Ethereum community. Personally, I'm not sure if it's the right direction, but it is definitely an interesting direction to consider. I think Max brings up some points that the entire Ethereum community should consider and debate.

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Bankless Nation is super excited to introduce you to Max Resnik, the head of research at Special Mechanisms Group, a research-focused organization that specializes in mechanism design and was recently acquired by ConsenSys. Max believes that Ethereum's roadmap has perhaps gotten a little off track. Instead of prioritizing layer twos, we should still be prioritizing layer one and other topics as well that we're going to explore in Max's insights today on the show.

Max, welcome to Bankless! Thanks for having me; I'm excited to be here again—twice in a month! It's great to have you in the normal version of Bankless. Let's start with the contrarian perspective you hold about Ethereum. You are working within the Ethereum ecosystem and have for a long time, but you believe a different trajectory is suited for the Ethereum layer one and overall roadmap. How would you summarize this contrarian belief?

I think we've basically lost the plot on the roadmap. We decided that Ethereum L1 was good enough, which it was clearly not. We've been optimizing for optimistic rollups as the main focus of the last few hard forks, and I think we need to start prioritizing the L1 again. This means ensuring that we achieve shorter block times and making sure that the L1 is usable for the most popular app on the L1, which is decentralized finance. This view might be a little controversial these days, considering some people don't even believe that we should pursue DeFi at all.

To clarify, you don't disagree with the rollup-centric roadmap for Ethereum; it's more about the priorities and order of operations, correct?

Yes, that's accurate. There is a reason to have rollups to compress transactions that are not super valuable, such as paying for your coffee or sending micro-transfers. However, the core Ethereum L1 should be where people transact. We shouldn't have places like Uniswap wanting to create their own app chain because the L1 is so unusable. We also shouldn't force people to transact on L2s that don't provide them with any security guarantees when we could make the L1 good enough for those applications.

Would you say that this aligns with the idea of increasing the capacity of what the layer one can do?

Absolutely. I think we need to increase the capacity and the speed of Ethereum. We need to become competitive with some of these other L2s. Even if we're not going to be better than them, we can offer more security and better mechanism design. Ultimately, the package of those elements can win. For example, specifically against Solana, I think we have a lot of advantages in other areas, but if we're refusing to compete on speed and throughput, then we're just going to lose, no matter what.

=> 00:07:55

To win in the blockchain game, we need to prioritize speed and throughput, not just cheap transactions.

To make the Layer 1 good enough for that application, at least, would you say that this is aligned with the idea of not being monolithic or integrated? It still emphasizes increasing the capacity by a pretty wide margin of what the Layer 1 can do.

Yes, I think we need to increase the capacity, we need to increase the speed, and we need to become competitive with some of these other Layer 2 solutions. Even if we're not going to be better than them, we will have more security and better mechanism design. Ultimately, the package of those things can win. For example, specifically against Solana, I think we have a lot of advantages in other areas. However, if we're refusing to compete on speed and throughput, then we're just going to lose no matter what. Those are the two core things that a blockchain should do, and users don't want to wait 12 seconds to get on chain.

So, we can unpack all of these ideas, but maybe we could also spend some time illuminating what corner of Ethereum you operate in. It would be helpful to learn about your perspective and knowledge base. Perhaps you could tell the listeners what you're up to, what you do, and what you focus on.

My research focuses on maximal extractable value, looking into the dark forest and examining the order flow supply chain. These areas are where I spend the majority of my time. Recently, I've been branching out a little bit into the rest of the ecosystem because I feel there are things we need to do to solve certain problems in Ethereum that affect or rely on other areas of the roadmap. I think a lot of times in Ethereum research, one weakness we have is that we don't have different parts of the research stack talking to each other. For instance, we have the consensus people working on orbit single slot finality, while the maximal extractable value people are saying, "Hey, if you don't want billions of dollars a year leaking away from users, you have to do this." The two things are fundamentally in conflict.

So, basically, I've been branching out and saying, "Hey, we're working on really important problems over here on the maximal extractable value part of the roadmap, but we really need your help from the other areas of the research and engineering staff to tackle those things."

If part of your idea is that Ethereum's roadmap has kind of gotten off course, I'm curious. You've been in this space for a long time; when do you think that happened, and why?

I think we've been searching for meaning and have found the wrong thing basically since the merge. The merge was kind of a huge sigh of relief among CEOs, and we accomplished something amazing. However, there was a letdown; the adrenaline started to drop, and we kind of took a step back. We ended up coming back to the table and deciding on the wrong things to prioritize. I would say since the merge, we've been prioritizing changes that are not necessarily bad, but we have a finite amount of resources as an ecosystem. There are only so many things we can work on, and I feel we're not prioritizing the right things.

From my vantage point, since the merge, Ethereum has prioritized making Layer 2 transactions really cheap, essentially focusing on making blob space cheap. That was sort of the main priority—getting blob space out the door. Proto-Danksharding has been the main focus since the merge, and that has been successful from the perspective of now Layer 2 fees being incredibly cheap. Is that what you mean when you say we've gotten off track?

Yes, I think we've achieved that. However, because we waited so long to do other things, we now have a completely centralized builder market. The relay market is looking incredibly centralized as well. We have a lot of areas that are becoming derelict because we have not given them attention. We have achieved one thing, which is making blob space really cheap. By the way, I think this is a good thing for optimistic rollups more than it is for ZK rollups. I would call this part of the roadmap that we've done so far an optimistic Layer 2 roadmap, not a ZK Layer 2 roadmap. It has certainly advantaged one more than the other, and fees are actually cheaper on the optimistic side than they are on the ZK side.

=> 00:11:56

We've prioritized short-term solutions over long-term scalability, leaving ZK rollups in the shadows despite their superior potential. It's time to rethink our roadmap and focus on what truly drives growth.

The discussion revolves around the current state of the Ethereum ecosystem, particularly focusing on the centralization of the Builder Market and the Relay Market. It is noted that while we've achieved certain goals, such as making blob space really cheap, there are significant areas that have become derelict due to a lack of attention. This situation has led to a completely centralized Builder Market, which raises concerns about the overall health of the ecosystem.

The speaker emphasizes that the developments made thus far can be categorized as an optimistic L2 roadmap, rather than a ZK L2 roadmap. This distinction is important because it highlights that the advancements have favored optimistic rollups over ZK rollups, despite the latter being a superior technology. Currently, fees are cheaper on the optimistic side than on the ZK side, which is seen as an anomaly given the technological advantages of ZK rollups.

There is a sentiment that the community has been captured by individuals working on optimistic rollups, while those focused on ZK rollups have been largely absent from the conversation. The speaker recalls a pivotal moment in 2021 when concerns were raised about Ethereum's scalability, particularly regarding high transaction fees. This led to a pragmatic decision to pursue optimistic rollups, as they appeared to provide a credible path to cheap transaction fees.

Reflecting on this decision-making process, the speaker acknowledges that while the optimistic path seemed more feasible at the time, it was based on a misunderstanding of the timeline for ZK rollups. They highlight the work of teams like Succinct, which accelerated the development of ZK technology, revealing that it was not as far off as previously thought.

Moving forward, the speaker suggests that the community should evaluate the decisions made regarding the roadmap, especially in light of the advancements in ZK technology. They propose that if the goal is to continue with the rollup roadmap, there should be a pivot towards making verifying ZK proofs on-chain cheaper, rather than solely focusing on making data cheap.

Additionally, the speaker points out that the current fee levels on Layer 1 represent an equilibrium fee level, but for app developers, what truly matters is the capacity to expand. If an app is successful and attracts a large number of users, the existing fee structure could become unsustainable, making it unfeasible to launch on Ethereum. Therefore, the focus should be on attracting innovative app developers who can bring a significant number of users into the ecosystem, ensuring that the platform remains viable for future growth.

=> 00:15:48

Choosing the right platform for your killer app is crucial; while Ethereum has potential, the real question is which layer two to trust, or if you should just go with Solana for simplicity and scalability.

When considering the equilibrium fee level, it is crucial for app developers to evaluate the fee structure of the platform they choose. If an app is expected to perform exceptionally well, potentially 100x-ing its user base, developers may hesitate to launch on Ethereum. The concern is that, in a best-case scenario, such success could lead to excessively high fees that render the platform unusable. Therefore, what truly matters is not merely the steady state equilibrium but rather the capacity for expansion that can attract talented app developers aiming to bring significantly more users into the ecosystem.

Currently, if you were an app developer with a promising application, the question arises: would you choose Ethereum or Solana? Ideally, one would hope to build on Ethereum. However, a clarification is needed regarding the notion of building on Layer 2 solutions. While these solutions are technically part of the Ethereum ecosystem, the challenge lies in determining which Layer 2 to select. The Ethereum community often suggests building on platforms like Base, Arbitrum, or Optimism, rather than the mainnet. Yet, the question remains: which Layer 2 is the right choice?

There are numerous Layer 2 options available, and the uncertainty about which will emerge victorious complicates the decision. Currently, Base appears to be gaining traction, but it faces skepticism regarding its decentralization of the sequencer, given its revenue model. Similarly, Arbitrum is also focused on monetizing its sequencer, which raises concerns about its willingness to decentralize. Thus, the choice of Layer 2 becomes critical, with only a few contenders possibly leading the way. For instance, Linea aims to decentralize its sequencer rapidly to provide developers with a viable option.

In contrast, Solana presents a more straightforward choice. Developers can simply build on Solana without the complexity of selecting from multiple Layer 2 solutions. There is confidence that scaling issues will be addressed directly at the Layer 1 level, particularly for decentralized finance (DeFi) applications.

This leads to an ongoing debate regarding whether Layer 2 solutions are extensions of Ethereum or separate chains altogether. Critics of Ethereum argue that Layer 2s operate independently, possessing distinct states, transaction ordering rules, and execution fees that are not shared with Layer 1. Conversely, Ethereum proponents assert that all Layer 2s rely on Ethereum for security and are natural extensions of the ecosystem.

From my perspective, this debate is not strictly binary; rather, it exists on a continuum. However, I lean towards the view that many of these Layer 2 solutions currently function as separate chains. To maintain their decentralized trajectory, they must consistently engage with Layer 1, implement fraud proofs, and facilitate forced transactions. As they develop composability features that enhance integration with Ethereum, they may shift closer to being part of the Ethereum ecosystem.

Nevertheless, the most successful Layer 2s seem to lack the incentive to pursue this path. They often assert their connection to Ethereum while neglecting essential features like fraud proofs and decentralized sequencing. Instead, they focus on building interoperability within their own ecosystems, such as through the concept of a super chain.

=> 00:19:47

The biggest risk to Ethereum's future is centralization disguised as progress; if we don't prioritize true decentralization, we could lose the essence of what crypto stands for.

In the current landscape of blockchain technology, it is essential for projects to frequently push stuff to L1. This includes implementing fraud proofs and force transactions. As these projects begin to integrate more closely with Ethereum, particularly through composability features, they move further in that direction. However, a significant concern arises with those projects that appear to be succeeding; they often have no incentive to decentralize. Many of them claim loudly to be part of Ethereum, yet they lack fraud proofs and show little inclination towards decentralized sequencing. Instead, they focus on building interoperability within their own ecosystem through initiatives like the super chain. This raises the question: are they genuinely trying to be part of Ethereum, or are they merely attempting to leech Ethereum users and mind share to establish their own platforms and tokens?

Looking ahead, one might extrapolate potential fears over the next 1, 3, or 10 years. For instance, if Coinbase continues to invest in Base and if Optimism's super chain becomes increasingly self-contained, what might happen if we fail to change direction? In a Doomer worst-case scenario, it is important to clarify that while there are many good individuals working on these projects, the incentives are misaligned. The corporate structure at Coinbase differs significantly from that of Jesse, and this disparity can lead to conflicting interests. At ConsenSys, where I work, we have a corporate governance structure that prioritizes decentralized sequencing. In contrast, Coinbase's interests appear to diverge; they profit from trading Ethereum on their centralized exchange but lack the same commitment to the Ethereum ecosystem.

My primary concern is that if we push users towards an L2 like Base, the financial incentives may prevent the decentralization of the sequencer. This could result in a scenario where all activity occurs on a centralized sequencer, which contradicts the principles of crypto and Ethereum. Such a situation would resemble a centralized server sequencing transactions, regardless of whether they implement fraud proofs. My biggest fear is that market network effects will solidify these projects, making them too large to shift back to a truly decentralized financial system. While we still have time to make changes, in five years, we could find ourselves in a position where it is impossible to reclaim those users.

Conversely, envisioning a more optimistic path requires acknowledging that we need to implement changes. The ideal scenario involves all stakeholders being aligned in their efforts to build a decentralized finance ecosystem characterized by censorship resistance and credible neutrality. If we can collectively prioritize initiatives like fraud proofs and force inclusion, we may also be able to advance ZK rollups, which have been somewhat neglected. The ultimate goal would be to achieve decentralized sequencing across both optimistic and ZK rollups. This vision represents the best-case scenario for the L2 roadmap: if these projects finally deliver on their promises after years of anticipation, we could indeed foster a decentralized ecosystem. However, it is crucial to recognize the pattern of delays; how many times can these projects move the ball before we realize the need for accountability?

=> 00:23:34

Decentralization in blockchain is more than a promise; it's a necessity. If the incentives aren't aligned, we risk stagnation and centralization. It's time to hold the ecosystem accountable.

Stuff for ZK rollups has been a topic of discussion, particularly regarding their current status. I would argue that they have kind of been left behind in the dust right now because we haven't been prioritizing them. Perhaps we can get to a point where we do have decentralized sequencing on these optimistic and ZK rollups. I think that's like kind of the golden vision; the best-case scenario for the L2 roadmap is that these teams finally deliver on what they have been saying for five years. If they do it tomorrow, then we actually end up with a decentralized ecosystem.

However, I must question how long these teams have been saying that they are going to decentralize their sequencer. They haven't done it yet. It's like, how many times can they move the ball on us before we realize that we're getting rugged here? Max, are you trying to start a civil war here within Ethereum? I'm not trying to incite conflict; I'm just saying that if you claim to be Ethereum aligned and assert that you have been working on a decentralized sequencer, then you should actually do it. Don't keep passing the ball and saying it’s going to be next month over and over again.

For instance, if you look at Arbitrum, they are implementing something called time boost, which is probably incompatible with decentralized sequencing. When they move towards a system that seems to be incompatible with decentralized sequencing while simultaneously claiming they will move towards a decentralized sequencer, that doesn't make any sense to me. If you're watching closely, the behavior that they are exhibiting right now is not acceptable. I'm not trying to incite war; I just want to put pressure on those who say they are aligned with Ethereum to actually follow through and put their actions where their mouth has been for the last five years.

Max, I think pressure is good. There are forms of social pressure that Ethereum and the community have put in place. However, I want to discuss a softer landing than the one you illustrate. There seems to be a coordination failure across all of these Layer 2s, and there is a disincentive to cooperate, leaving Ethereum as kind of the federal government. They tend to make their own decisions in their best interest. We should be eyes wide open to that possibility.

The typical Ethereum Layer 2 roadmap advocate would argue that all these Layer 2s start at stage zero. There are training wheels in place, and then they progress by adding fraud proofs as another step before they decentralize the sequencer. Over time, they aim to collect all five of the pie slots on Layer 2B and become fully decentralized. Indeed, we are seeing some progress; for example, Arbitrum has reached stage one. There is still a long way to go, and we are also seeing some progress with Optimism, which shares the same code base. However, I'm not sure if we've seen similar progress on decentralizing the sequencer there.

The overall message here is, "Max, just give it some time." These technologies need to bake; we can't make things fully decentralized before we know it's safe for users. The best-case scenario you are painting just is not going to come to pass.

What do you say to this? I think the problem is that certain ecosystems and rollups may not actually want to decentralize. The issue is whether these organizations, which are profitable and in some cases publicly traded companies, genuinely want to decentralize their sequencer. In their own best interest, it might actually be better to keep the sequencer to themselves. If we allow them to do that, they will, because that's their financial incentive.

My argument is to look at the money and the incentives; they are not aligned towards decentralizing the sequencer. The more power, users, and reliance we have as an ecosystem on these agents, the less we can pressure them to decentralize. I believe I'm not the only one who is a bit unhappy with the speed of decentralization. Vitalik has expressed similar sentiments on Twitter, noting that the progression on the roadmap is often stagnant. We reach level one, and then we just sit there. What really matters to me as a researcher is whether we...

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Decentralization in crypto is essential; without it, we're just recreating the same centralized systems we aimed to escape.

It's actually better to keep the sequencer to themselves. If we let them do that, they're going to do it because that's their financial incentive. This is my argument: look at the money, look at the incentives. The incentives are not towards decentralizing the sequencer. Therefore, the more power, more users, and more reliance that we have as an ecosystem on these agents, the less we're able to put pressure on them to decentralize.

I think I'm not the only one who's a little bit unhappy with the speed of decentralization. I believe Vitalik has said as much on Twitter as well. The decentralization progression on the roadmap is okay; we get to level one, and then we sit there and we sit there. What really matters to me as an Ethereum researcher is whether we get to decentralized sequencers or not. I think the world looks pretty great if most transactions are happening on Coinbase on a centralized server on AWS East1. You know, you can't participate in that if you're Edward Snowden, for example, because you're sanctioned by the US government. I think that's not a great world; that's not a great endgame for crypto, at least not why I joined the space.

Can we just illustrate and get really concrete in terms of what you would like to see from Layer 2 that sort of disproves the idea that they're kind of like discoordinated and in it for their own purposes only, and they're not willing to decentralize? If the Layer 2s today, maybe the optimistic rollups, let's say, all get to kind of like stage two on Layer 2, and they've got fraud proofs, and they're all kind of like permissionless, and that works, and you can force include transactions, bypassing their sequencer, so you preserve censorship resistance. Also, if they incorporate some sort of permissionless decentralized sequencer among their centralized sequencer, would that be in the direction of them doing the thing that is best for decentralization and Ethereum?

If that were to happen, I would applaud that, and I would somewhat call off the dogs, call off the alarm that I'm raising right now. However, first of all, I don't think that forced inclusion on the L1 is sufficient censorship resistance for an L2 to have. I think the sequencer itself needs to have some amount of censorship resistance and credible neutrality. If these apps are going to be there, like if global markets are going to be on-chain, global markets on AWS East1 that can be censored at will by the US government doesn't sound to me like crypto. We might as well just have global markets on a CME or on the New York Stock Exchange or wherever else you might have global markets in London or whatever. The goal is to have global markets operating on-chain, and being able to force inclusion six hours later on the L1 is not going to help you trade if you're sanctioned by the US government or if you're sanctioned by Coinbase because Coinbase doesn't like you. That would be my argument.

So, I think they actually need to get to censorship-resistant, credibly neutral sequencing on the L2. What does that look like? Are there solutions in place, or is this just an engineering task, or is this still a researchy thing that we haven't figured out? I'm trying to get to the bottom of whether this is a matter of not having the tech or if it's a matter of lacking the will and the coordination to do this.

You just run; you have to have consensus with permissionless consensus that is able to make the L2 blocks basically. We have that to some extent on the L1. There's one key aspect which I think is missing, which we talked about last time I was on, regarding censorship resistance, which requires multiple concurrent proposers. I won't get into that too much because it could be a whole episode on its own. However, I think we know how to do it most of the way because it's just exactly what Ethereum L1 does for block building, which I guess you could argue is not exactly super decentralized these days.

But I think the endgame is that you need to get to a block building engine which is permissionless and has multiple entities contributing to a single time step on the L2. I think that's also where we need to go with the L1 as well. But if you want to be part of Ethereum, you cannot say that you're part of Ethereum and then have a centralized sequencer sequencing all the transactions on AWS East1 and charging users a bunch of money to use the service, even though that's not the cost of the L1. So, if there was the will...

=> 00:31:35

Decentralization isn't just a goal; it's the essence of what Ethereum should be. Let's build permissionless blockchains that empower users, not just profit-driven entities.

I think we know how to do it most of the way because it's just exactly what Ethereum L1 does for block building. I guess you could argue that this is not exactly super decentralized these days. However, I believe the end game is that we need to get to a block building engine which is permissionless and has multiple entities contributing to a single time step on the L2. I think that’s also where we need to go with the L1 as well.

If you want to be part of Ethereum, you cannot claim to be part of it while having a centralized sequencer sequencing all the transactions on L1 and charging users a bunch of money to use the service, even though that’s not the actual cost of the L1. So, Max, if there was the will, I just want to be clear on this because you're deeper into the tech than I am. Someone can independently validate what you're about to say, but if there was a will, do you think that all layer twos could achieve the decentralized sequencer you’re talking about in, say, six months?

Yes, you just need consensus on the blocks. We know how to do it; it’s how blockchains work. You can have blocks being built by permissionless entities today. That’s how Ethereum works today. We have a bunch of validators who have the right to propose a block. That’s possible today because the technology is there for all blockchains basically; they just don’t want to do it.

Are you implying that you're looking for more of a fractal of layer 2 to spin off from the layer one? We have the structure of the layer one; we can make that be a layer two. You can stake your OP tokens, you can stake your ARB tokens, and then you also have a permissionless validator set or at least a distributed one. That’s kind of the original map of what I thought the layer 2 landscape would eventually look like on Ethereum. We would have the tokens, and as a user, you could stake the tokens. If there’s permissionless validation of these layer twos, you could participate in the validation of your preferred network. That’s how I imagined the layer 2 landscape looking back in 2019.

That’s not what has emerged. Is what I’m articulating kind of what you’re also asking for? Yes, I mean, you just build a blockchain that can post to the L1 to get additional security. That blockchain is responsible for producing optimism blocks, for example. I don’t think anybody thought that the endgame for Ethereum was for it to become a cheap undifferentiated data chain with a bunch of powerful companies building rollups on top of it and harvesting as much rent as they can from the monopoly they have. That’s not what anyone wanted, and I don’t think I’m the only one who’s a little frustrated with the speed of decentralizing the sequencer.

The reason they say, "Oh, we don’t know if we want to decentralize the sequencer," from what I can see, is that they have some guarantees they want to provide users about execution quality, and it’s harder to do that when you’re not doing the sequencing. That’s one of the reasons. The other reason is revenue.

So, Max, let’s say we have all the tools available for layer twos to become like a decentralized blockchain. What you’re really saying is that we should just look at the Ethereum layer one and take all the tools we have there and copy and paste those tools up to the layer 2 level. There’s a little bit of difference with a ZK proof or a fraud proof, whether we’re a ZK rollup or an optimistic rollup, but that’s kind of the main difference. Other than that, the tech stack is largely the same. We know how to do this; it’s a known science.

Just copy and paste that structure and put it at the layer two level. Why aren’t we doing this? If we do actually get to that structure, that pattern where we have a distributed validator set and sequencer set at the layer two level, does that actually change your opinion as to whether or not those layer twos are extensions of Ethereum? I don’t think there’s any additional change in economics; there’s no different relationship between the layer one and the layer two. The layer two isn’t burning any more layer one block space. There’s not really any change in the relationship there; just the layer twos are now decentralized and more aligned with the crypto ethos. So, does that change if the layer twos did change into this pattern that you want?

=> 00:35:21

Layer twos can only be considered true extensions of Ethereum if their incentives align with enhancing the Ethereum ecosystem rather than competing against it.

The discussion revolves around the structure and dynamics of layer two solutions in relation to Ethereum. The initial question posed is about the potential changes in opinion regarding whether layer twos are extensions of Ethereum, particularly if they achieve a distributed validator set and sequencer set at the layer two level. The speaker expresses that they do not believe there would be any significant change in the economic relationship between layer one and layer two. They argue that layer twos are not consuming more layer one block space, and thus, the relationship remains largely unchanged. However, the decentralization of layer twos aligns them more closely with the crypto ethos, which could shift perceptions about their alignment with Ethereum.

The speaker acknowledges that if layer twos were to adopt the desired structure, they would move closer to being considered part of Ethereum. However, they emphasize that this would depend on various factors, particularly how one measures the alignment. They raise the question of what makes something equivalent to Ethereum versus misaligned with it. For the speaker, as an economist, the focus is on incentives. They question whether the incentive of a layer two, such as Base, is to improve Ethereum or if it sees Ethereum as a competitor. If Ethereum's improvements lead to a loss of users for Base, this indicates a misalignment.

The speaker argues that currently, layer twos are direct competitors to Ethereum, which complicates the notion of them being part of Ethereum. They highlight that both are competing for the same user base and applications, suggesting that a more symbiotic relationship could be developed. They propose that a well-designed layer one could cater to decentralized finance, while layer twos could handle less contentious transactions, alleviating some of the load from layer one. However, they currently view the relationship as parasitic, with layer twos attempting to draw decentralized finance away from layer one.

In a hypothetical scenario where layer twos achieve the desired state of decentralization and censorship resistance, the speaker still sees challenges in classifying them as extensions of Ethereum. They point out that layer twos maintain separate states, transaction ordering rules, and execution fee capture, which creates a significant distinction from Ethereum's layer one. This raises confusion about how the decentralization of sequencers would impact the classification of layer twos as extensions of Ethereum, given their independence as blockchains.

The conversation also touches on the power dynamics between layer one and layer two. If layer one is decentralized and must move slowly due to various stakeholders, this creates an unfair competition for users who may prioritize short-term benefits over security. Users are likely to gravitate towards platforms that appear more advantageous in the immediate term, regardless of the underlying security implications. This highlights the complexities of user behavior and the challenges in maintaining a balanced ecosystem between layer one and layer two solutions.

=> 00:39:18

The competition between L1 and L2 blockchains is skewed; users often prioritize short-term gains over long-term security and decentralization, risking the integrity of the entire ecosystem.

The discussion revolves around the dynamics of independent blockchains and the implications of power dynamics in the context of Layer 1 (L1) and Layer 2 (L2) solutions. If the L1 is a decentralized entity that must move slowly due to the presence of numerous stakeholders, it creates a situation where the competition between conducting decentralized finance (DeFi) on the L1 versus the L2 becomes fundamentally unfair. Users tend to optimize for immediate benefits and often overlook critical aspects such as security, tail risk, and decentralization. As a result, they may gravitate towards platforms that appear more advantageous in the short term, ultimately leading to a mass exodus from the L1.

To create a Level Playing Field, it is suggested that both L1 and L2 operate under similar constraints, particularly in terms of a decentralized sequencer. This would not only enhance the competition but also provide a degree of credible neutrality akin to that of Ethereum. The more features that L2s inherit from Ethereum, including security and finality, the closer they align with Ethereum's ethos. However, a fundamental tension persists regarding whether user activity will predominantly occur on the L1 or the L2. This tension is exacerbated by the fact that L2s are in direct competition with each other and with the L1 for users, which are considered the lifeblood of Ethereum.

As we consider the extension of the Ethereum Continuum, it becomes clear that it is not merely about having a one-to-one extension of the Ethereum block space. The focus should be on ensuring that the feature sets of L1 and L2 are at parity. Concerns arise that many L2s may be centralizing the sequencer and not adhering to the principles of censorship resistance and the broader crypto ethos. This misalignment can interfere with value capture, as these L2s do not possess the same features that define Ethereum, such as decentralization and censorship resistance.

There is also a recognition that there will be substantive differences among L2s. For instance, if Optimism is not Arbitrum, then by the transitive property, it cannot be the case that Optimism is Ethereum and Arbitrum is Ethereum, as this would create a fundamental contradiction. Currently, L2s are competing with each other and with L1 for users, necessitating a scenario where the types of activities on L1 differ significantly from those on L2. Otherwise, the inherent tension will persist.

As we look to the future, the influence of groups of contributors working at L2s on the roadmap raises concerns. While the current environment may appear aligned, with participants focused on building serious projects during a bear market, the inevitability of economic forces cannot be ignored. Incentives will eventually surface, as evidenced by proposals like the time boost proposal and the pricing strategies of certain L2s, which may exceed the costs associated with L1.

It is important to note that Optimism stands out in this landscape. Based on conversations, they seem more committed to not exploiting users and to maintaining a decentralized sequencer in the short run. In contrast, Base and Arbitrum appear to have strong incentives against decentralizing their sequencers, positioning them as direct competitors to Ethereum. The rapid emergence of new projects on Mantle Layer 2 each week highlights its leadership in layer 2 design architecture, raising questions about the motivations behind this growth.

=> 00:43:21

The future of crypto is all about building on solid foundations and aligning incentives, not just chasing quick profits.

Charging above and beyond the cost should be based on the L1 cost. Optimism Super CH, like the Opie main, is actually kind of unique. I don't want to lump them in with those two groups because, from my conversations with them, they're actually more committed to not raking users and more committed to a decentralized sequencer in the short run that has these properties. However, I don't want to group them in with Bas and Arbitrum. In particular, it looks to me like the incentives are very strong not to decentralize a sequencer, which means that they are direct competitors with Ethereum.

New projects are coming online to the Mantle Layer 2 every single week. Why is this happening? Maybe it's because Mantle has been on the frontier of layer 2 design architecture since it first started building Mantle, powered by technology from Igan DA. Perhaps it's because users are coming onto the Mantle Layer 2 to capture some of the highest yields available in DeFi and to automatically receive the points and tokens being accrued by the $3 billion Mantle treasury in the Mantle reward station. It could also be because the Mantle team is one of the most helpful teams to build with, providing grants, liquidity support, and venture partners to help bootstrap your Mantle application. Maybe it's all of these reasons combined.

So, if you're a developer and you want to build on one of the best foundations in crypto, or if you're a user looking to claim some ownership on Mantle's DeFi apps, click the link in the show notes.

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Max, I want to bring up Base Rollups because there's something unique about them. The base part of it is that these rollups are basically tying themselves to the Mast of Ethereum, outsourcing a lot of their power to the Ethereum Layer 1. This creates an informal yet formal alignment with the Ethereum Layer 1 in terms of block space overlap and economics. Do you think Base Rollups are a viable solution? What's your take on this direction for Ethereum rollups?

I think there are two things to consider. First, they are certainly much more aligned from an incentive perspective. For a Base Rollup, if a user goes from the Base Rollup to the L1, either side is sad about that. Conversely, for Ethereum, if a user goes from the L1 to a Base Rollup, neither side is sad about that. This fundamental alignment that Base Rollups offer is a good thing.

However, the downside of Base Rollups is that the L1 block time is too long for feature parity with other rollups. For instance, some of these other rollups have block times of about 1 second or sub-1 second, while a Base Rollup can only produce a block every 12 seconds due to the current Ethereum block time. This raises an argument for lowering the block time down to 4 seconds or 2 seconds.

Another issue, which I keep mentioning, is incentives. What incentive does OP, what incentive does Bas, and what incentive does Arbitrum have to become a Base Rollup when they are extracting a bunch of revenue from the sequencer? Giving away the sequencer rights is like giving away the spice; they are not going to do that. Maybe if we had started out saying we would do Base Rollups, that would have worked. I think we need either a very strong social pressure, which I don't believe we can bring quickly enough, or we need some other kind of solution because the Base Rollup isn't going to get there.

Max, if all of the Layer 2s became Base Rollups overnight, would your concerns be mitigated?

Yes, certainly. I think there are a bunch of aspects that we haven't really explored on Base Rollups because they aren't super big yet.

=> 00:47:08

Ethereum's future hinges on prioritizing user welfare over validator profit; true success means making it a powerful force for good, not just a profitable venture.

Does Arbitrum have to become a base rollup? When they are extracting a bunch of revenue from the sequencer, giving away the sequencer rights is like giving away the spice. They're not going to do that. So, maybe if we started out saying we were going to do base rollups, that would have worked. I think we need either a very strong social pressure, which I don't think we can bring enough social pressure to bear quickly enough to do that, or we need some other kind of solution because the base rollup isn't going to get there.

Max, if all of the layer 2s became base rollups overnight, would your concerns be mitigated? Yeah, certainly. I think there’s a bunch of stuff that we haven't really explored on base rollups because they aren't super big. But if we have certain feature advantages, like we have additional censorship resistance in real-time at the L1, we can kind of maximize an arbitrary objective function for the sequencing role.

Right now, if you try to do a base rollup on the L1, it has to basically maximize validator profit. However, maximizing validator profit is often directly in conflict with maximizing user welfare, and that's the kind of fundamental tension in a single layer chain. But if you had a censorship-resistant L1 that could adjudicate arbitrary auctions, it could make super base rollups that would sequence the block to maximize user welfare.

I think that's the end game I would like to see in the rollup roadmap: every rollup is based, but it is super based in that it's not maximizing profit; it's maximizing user welfare. That's exactly what I think Ethereum should do in the long run—maximize user welfare. When everybody's aligned on that, I think I would be comfortable calling everything Ethereum.

I’m trying to get a sense of the discussions happening around the base rollup vision, particularly from e-researchers like Justin Drake, who has been vocal about this on Bankless earlier in the year. It seems like your take, Max, and your philosophy is about making Ethereum Layer 1 great again, if I were to summarize it in a meme. I'm wondering how close all the rollups becoming base rollups gets to that end vision. Is that enough, or is there still more to discuss?

I think there's still more. We still need to increase the capacity. Like I said, I’d like Ethereum L1 to be the place where decentralized finance happens, and I think we're increasingly at risk of that happening elsewhere because we have not optimized for it. Partly, we haven't optimized for it because some people think it's not important, even though it's clearly the most used app on Ethereum and the reason many of us are here today—because of decentralized finance.

I think we need to make a bunch of changes. Part of the reason I would like a base rollup transition, although I don't think it's possible to happen, is that there are two things I can say: it would be great if that happened, but I don't think it will happen. Both of those beliefs can coexist. In order to make base rollups happen, we would need to improve the L1 a lot. As a side effect of the base rollup roadmap, we would also be making the L1 really good. A lot of the same things that you need to make base rollups awesome are the things you need to make the L1 awesome, which is why I think it's the most aligned path forward.

There’s a tweet you posted not too long ago where you stated, "The goal is not for Ethereum to be maximally profitable for ETH holders; the goal is for Ethereum to be as large a force for good in the world as possible, subject to being sustainable." You mentioned that you do not think the current layer one roadmap is the best way to achieve this. What do you want to see out of Ethereum Layer 1? What is it coming short on, and how would you change its direction to achieve this goal?

There are three things to consider. Some of them are symbiotic, and some have a little bit of tension. First, we immediately need to start decreasing the block time. It's actually ridiculous in the year 2024 to have a blockchain with 12-second block times. We're, of course, going to get outcompeted if we stay at 12 seconds. The second thing is we need to provide much better real-time censorship resistance. This means not just allowing entry if you wait 30 minutes and wait for a solo stake.

=> 00:51:09

Ethereum needs to evolve: faster block times, better censorship resistance, and increased throughput are essential to keep up and maximize user welfare. Let's stop settling for "it's too hard" and start building the future we want.

I think the current layer one roadmap is the best way to achieve this. So, what do you want to see out of the Ethereum layer one? What is it coming short on, and how would you change its direction to achieve your goals?

There are three things to consider. Some of them are symbiotic, while others have a little bit of tension. First, we immediately need to start decreasing the block time. It's actually ridiculous in the year 2024 to have a blockchain with 12-second block times. This is so far from parity with anyone else that we will, of course, get outcompeted if we stay at 12 seconds.

The second thing is that we need to provide much better real-time censorship resistance. This means not just that you can get in if you wait 30 minutes for a solo staker who is not running a meboo to include you. Instead, it should mean you can get into the next block if you pay a high enough fee. Hopefully, this fee is not so large that it becomes impossible to do basic decentralized financial activity.

The last thing we need to address is to increase throughput. If you build a killer app, we need enough throughput to support it. We should be able to support 100x or even 1000x in usage so that when people have ideas for amazing apps, they want to build them on Ethereum and nowhere else.

I think the first two goals are quite compatible with each other. Moving to a multi-proposer system makes it easier to achieve faster block times because there is less need for leader rotation, which is one of the most expensive parts of having shorter block times. However, the third goal, which is increasing throughput, is a bit in tension with faster block times. I believe we are so far from the Pareto Frontier of what is possible with the technology that if we actually tried, we could get extremely far.

The issue I have is with the defeatist attitude in Ethereum research. People often say, "Oh, you want to scale the L1, but we don't have the tools today to process as many transactions as Visa." My response is, "Let's make the tools!" It’s such a defeatist attitude to say, "Oh, you want to do this thing, but right now the technology isn’t there." Yes, I understand that, and that’s why I want to work on the technology to get us there.

I posted a New York Times article about flight, which was published just six weeks before the Wright brothers took their first flight. The article stated that the technology for human flight was not there and maybe in 10 million years we could achieve it, but right now, everyone working on this was just wasting their time. I feel like that attitude is pervasive in the Ethereum ecosystem: "Why are you trying to work on this problem? It’s too hard." I might be too optimistic, but I believe we have a bunch of smart people here, and maybe we could actually make this happen if we tried instead of giving up before we even start.

With these changes that you're interested in bringing to the Ethereum layer one, this would be a boon to base rollups. If we achieve faster block times, all of a sudden, base rollups become much more viable in my mind. I know that this doesn’t fix any of the incentive problems you laid out, but it might also allow for new base rollup teams and frameworks to emerge and be more competitive with their entrenched counterparts. Is that right?

Exactly. And where do you want to be as a user on the chain? Do you want to be on the chain that maximally extracts value from you or the chain that maximizes your welfare? I would prefer to be on the chain that maximizes my welfare. However, if the chain that maximizes my welfare also has 12-second block times and extremely high fees, then that will outweigh the benefits.

If we could get to a point where we maximize user welfare, have low fees, and fast enough block times, I think that would be a winning proposition. When I’ve had discussions with other people in the Ethereum community, I’ve learned that it’s not really the hardware requirements of running an Ethereum node that is the bottleneck preventing us from getting to 2-second block times. Right now, Ethereum has 12-second block times, and getting us to 2 seconds would be a 6X increase in blocks being processed across the internet, resulting in a 6X increase in bandwidth requirements.

This is actually the bottleneck that would kick a bunch of users off the network, which is why it’s often met with resistance. We are essentially reducing the Ethereum layer 1 decentralization, which is generally perceived as blasphemy.

=> 00:55:01

To achieve faster Ethereum block times, we need to focus on improving bandwidth and leveraging ZK technology for better compression, not just hardware upgrades.

In discussions about achieving fast enough block times, it has become clear that this could be a winning proposition for the Ethereum community. From my conversations with other professionals in the Ethereum space, I've learned that the hardware requirements for running an Ethereum node are not the primary bottleneck preventing us from reaching 2-second block times. Currently, Ethereum operates with 12-second block times, and transitioning to 2 seconds would result in a 6X increase in the number of blocks being transmitted across the internet, which in turn would necessitate a 6X increase in bandwidth requirements. This increase poses a significant challenge, as it could potentially exclude many users from participating in the network. Consequently, there is often resistance to this change, as it would inherently reduce the decentralization of Ethereum Layer 1, which is generally viewed as unacceptable.

In response to this, I would say that it is perfectly reasonable to consider bandwidth as the bottleneck. I am particularly optimistic about ZK technology compared to optimistic technology because ZK technology inherently compresses the state. In contrast, optimistic rollups require transactions to be placed on-chain, and while they may implement some compression, it does not match the level of compression achievable with ZK rollups. Therefore, I argue that we need to start utilizing more ZK technology. There is significant potential to integrate ZK compression into Layer 1, which would help alleviate bandwidth requirements.

While bandwidth is indeed an issue, it is not necessarily a massive one, but we are still lagging behind. With advancements in ZK technology and its incorporation into the Ethereum blockchain, we can effectively compress the size of the Ethereum blocks being transmitted over the internet. This would significantly enhance our bandwidth capabilities. However, it is crucial to clarify that optimistic rollups do not substantially reduce the bandwidth required, at least not without improvements in the data availability layer.

Currently, when you download "The Blob," it contains all transactions, leading to similar bandwidth usage from an optimistic Layer 2 as would occur on Layer 1. The primary advantage of optimistic rollups lies in execution, but execution is not the bottleneck we should be focusing on. Even with consumer hardware from the last few generations as the node requirements, we could efficiently sequence all transactions occurring across the network. The real bottlenecks are state growth and bandwidth, not execution.

On the topic of throughput, if I could adjust the roadmap, I would advocate for a 100X increase in throughput. This leads us into deeper discussions, such as those raised by David, concerning the future direction of Ethereum and its scalability challenges.

=> 00:59:15

To unlock Ethereum's true potential, we need to embrace innovative solutions like parallel execution and state siloing—because without pushing boundaries, we risk stagnation.

The discussion revolves around three generations as the node requirements. I think we could easily sequence all of the transactions that are happening everywhere. So, like, the execution is not the bottleneck; there's state growth, which is potentially a bottleneck, and then there's bandwidth, which is potentially a bottleneck as well. However, execution itself, which is the only thing that the optimistic rollups are giving you, and they also provide some siloing, is not really the core thing that I think we need to optimize for.

Regarding your third part of the roadmap that you mentioned, you talked about a throughput increase of like 100x. We are starting to get into the contours of the questions that David asks, particularly the question of whether this sacrifices solo stakers and solo validators. So far, I have heard your answer that it is no; it increases the hardware and bandwidth requirements, but they can be increased, allowing people to still stake at home. I understand that side of it, but can we really achieve 100x in terms of throughput increase without some substantial changes? What are those substantial changes? Do we have to redesign, redevelop, or re-engineer the EVM? Is it similar to what the Monad project is doing, and could we bring that back to mainnet?

Additionally, I have another question or objection to all of this. Even if you can achieve a 10x or 100x increase on Ethereum mainnet, is that really enough for the entire world's compute that needs to exist on Ethereum anyway? There are a bundle of questions, but I think they are all related. What do you say to this?

I believe we do need to take some tools from the newer blockchains. One of them, in particular, is this kind of parallel execution and state storage. This is how we can increase throughput on Layer 1. One of the advantages of a rollup is that the state is very siloed. Therefore, you don’t have to have a big hard drive that stores all the state. Once you get past a certain amount of data, you have to move from RAM to storage and from storage to slower storage, which is the issue with state growth. However, if the state is siloed, then you know which part you have to access. You can store the part that you're working on in memory and work on that part, then take it out of memory and load up a different part that you're working on. This parallel execution and state siloing is important.

Now, regarding whether 100x is enough, I was talking to Vitalik a couple of days ago, and he brought up an interesting point: what if where we actually need to be is 100% and we're currently at 1%, and we could do everything but then cap out at 5%? If that’s the case, we might have wasted all this time trying to get to 100% without achieving it. I think there's some element of truth to that, and I want to acknowledge that it's a reasonable point. However, I also want to emphasize that we don't really know how far we can get unless we try. We also don't know where the threshold is for when Ethereum becomes usable again and where people want to deploy their apps. It might be 100x, or it might be thousand x; we don’t really know where that threshold lies.

There are other types of transactions that I think will occur outside of Ethereum, and I believe we should optimize Ethereum for financial activity. Financial activity isn’t just about sending Visa transactions back and forth; it includes contentious state matters as well. So, first of all, I think it's a reasonable point. I also believe it's a daunting point to say we should not work on unsolved problems because even if we solve them, it might not be enough. We don’t know what solutions we would come up with, and they might take us a lot further than we think they would. For instance, we previously thought that ZK was ten years away, but it turned out to be just two years away. Once people started working on it, they realized it was much easier than previously suspected. If we never work on it, how will we know? I think we should at least give it a try; otherwise, I fear that Ethereum is going to die.

Max, the current Ethereum roadmap includes five swim lanes: The Surge, The Verge, The Splurge, and others. We've talked about this roadmap, which prioritizes some of the things you're discussing but also definitely prioritizes other aspects as well.

=> 01:03:36

Innovation thrives on experimentation; if we never try new solutions, we'll never know how far we can go.

If we solved them, the issues at hand, it wouldn't be enough because we don't know what solutions we would come up with, and they might take us a lot further than we think they would. Again, I said earlier that we thought that ZK was 10 years away; it was actually two years away. Once people started working on it, they realized it was a lot easier than it had previously been suspected to be. So, if we never work on it, how will we know? I think we should at least give it a try because otherwise, I think Ethereum is going to die.

Max, the current Ethereum roadmap includes five swim lanes: The Surge, The Verge, The Purge, and The Splurge. We've talked about this roadmap, which prioritizes some of the things you're discussing, but it also definitely prioritizes Layer 2s and pure D solutions, along with cheap blob space moving forward. Regarding the different tweaks and changes that you've proposed, how different is that from the existing roadmap? Is it like 90% different, or is it more like 30% different? How would you characterize the pivot to make L1 great again?

I think the biggest change would be shorter block times, which is not really on the roadmap right now. I believe that would be a pretty big shift in focus because there was, for a while, a serious coalition of people that wanted to make block times longer in order to achieve single-slot finality. That is clearly a completely different direction than what I'm proposing, so I think that's the biggest thing.

I work on MEV-related stuff, and I am most familiar with the Scourge part of the roadmap. I have a proposal that would achieve the same goals as the Scourge but in a different way. Depending on whether you think the roadmap is about goals or about engineering approaches, the answer to your question would be very different. I would say it's achieving a lot of the same goals, but it's in a very different way of thinking about them from first principles, rather than trying to design a bunch of gadgets and stick those gadgets together. In my estimation, the Scourge, which is the MEV part of the roadmap, is the part that is most focused on L1. Therefore, I think we should pivot that part to something that looks like shorter block times and solve all the MEV issues with multipurpose L2s.

L2s are parasitic; we need to stop outsourcing our execution. If we don't make these changes, Ethereum is going to die. The reason this is triggering for some of the Ethereum community is that they are used to hearing those phrases from some ETH-killing alternative Layer 1s. You have been critical of some of the trade-offs in the current Layer 2 roadmap, such as how they centralize things and how they will never be censorship-resistant.

Throughout this conversation, Max, you've discussed incentives and the importance of aligning motivations. Many Ethereum people who hear about alternative Layer 1s and VCs, who purport to be very excited about these future Layer 1s, know that they have vested interests and potential upside in promoting these as Ethereum alternatives. They don't trust those incentives. I feel like we established this earlier in the conversation, but let's clarify it now: what are your incentives here? Are you preparing to launch the Max version of an Ethereum-forked Layer 1? Are you in it for the tech? Do you care about decentralization? For a lot of folks listening, this might be the first time they've heard of Max Resnik, and we just want to know what your incentives are—what makes you tick?

No, I think, well, partly I am a researcher first before anything else. I like to fix problems when I see them. I see problems, and I like to fix them. I see a problem here, which is that I think we're optimizing for the wrong thing. That's the first primal driver of why I go out and say, “Hey, I think you guys—who are very educated and well-meaning people—are wrong.” I look at it and I don’t agree with that approach; I don’t think we’re optimizing for the right thing. That’s the first thing.

From a financial perspective, I don’t have any financial interests; I’ve never done any angel rounds. I have one advisor position, which is with Espresso Systems. However, I’m working on it, and it’s not a very large advisor position; it’s mostly focused on the research aspect.

=> 01:08:08

We're not just building tech; we're shaping the future of decentralized ecosystems, and it's crucial we focus on optimizing for the right things.

I think it's important to clarify my position. I am a researcher first before anything else. I like to fix problems when I see them, and I see a problem here: I think we're optimizing for the wrong thing. This is the primary driver behind my engagement on platforms like Twitter, where I express my views. I believe that many educated and well-meaning individuals are mistaken in their approach, and I feel compelled to voice my disagreement.

From a financial perspective, I have limited involvement. I have never done any Angel rounds. Currently, I hold one advisory position with Espresso Systems, which is not very large. My role primarily focuses on the auction itself, as I am an auction theorist. This position is particularly relevant because I am working on decentralized sequencing, which I consider to be extremely important.

The majority of my financial exposure comes through Consensus equity and my future career. I do not own any Solana or other Layer 2 tokens, nor am I planning to launch an alternative Layer 1. My work at Consensus is fundamentally tied to user activity and the success of Ethereum. Therefore, the most critical factor for me is whether Ethereum is successful, whether it attracts users, and whether those users remain engaged in the ecosystem. For instance, if users were to migrate to Solana, it would negatively impact my work, as I am involved with a wallet that has a minimal presence on that platform.

My objective is straightforward: to make Ethereum as awesome as possible and to attract as many users as possible to both Layer 1 and Layer 2, as long as they are satisfied with their experience on Ethereum. I aim to increase the overall size of the Ethereum ecosystem. My concerns are not insidious; I am not a "CIA operative trying to break this apart." Instead, I am genuinely observing what I perceive as a slow decline of the ecosystem and asking, "Can we turn this around?" It would be fantastic if the only decentralized smart contract chain could continue to be a force for good in the world.

I recognize that there will be listeners from other communities, possibly from Solana, who might hear my critiques and suggestions. They may think, "Hey, why don’t you come over to Solana?" They might argue that Solana is optimizing for the things I care about and that they are willing to re-engineer their system to do it "the right way." However, I believe that Ethereum is the first ecosystem I started working on, and it is crucial that we get it right.

There are many aspects of Solana's architecture that I do not necessarily agree with, and I think some of these issues are too complex to change at this point. For example, Solana doesn’t necessarily come to consensus due to certain issues with vote censorship. These are problems that are beyond my ability to influence, even if I were to join their community. I am not a consensus researcher, and the amount of research needed to address these issues would be significant.

In contrast, I feel that the challenges facing Ethereum align more closely with my expertise and where I can contribute effectively. I am working at a company that is dedicated to building for Ethereum, and I believe there are plenty of smart individuals with a vision for Solana. If I were to move there, I would question how much value I could add, as they already have knowledgeable people addressing these issues.

It is essential for me to articulate these points within the Ethereum community. There is a risk that people may interpret my advocacy for Ethereum as simply promoting Solana. However, I am advocating for the beneficial aspects of Solana while emphasizing that we are in an open-source ecosystem. We should take good ideas from everywhere and integrate them to create the best possible outcomes. Just because Solana is doing certain things well does not mean we should ignore the potential for improvement within Ethereum.

=> 01:12:17

Embrace the best ideas from every ecosystem to elevate Ethereum; innovation thrives on collaboration, not isolation.

My mind share is focused on where I can help. As I mentioned, I'm currently working at a company that is trying to build for Ethereum. I believe there are plenty of smart people who have this vision for Solana as well. If I were to go over there, I would question how much leverage I would be adding. They already know these things that I'm saying; I would just be another person over there expressing those ideas.

We need people advocating for these ideas here in the Ethereum community because it's important to voice them. There is a threat from those who might say that what I'm advocating for is essentially promoting Solana. However, I am advocating for the good parts of Solana. We are in an open-source ecosystem where we can take good ideas from everywhere and combine them to build the best possible solution. Just because Solana is doing something does not mean it is inherently bad; they have both good and bad ideas. Therefore, we should take the good ideas and incorporate them into our roadmap.

I believe that would be the best way to truly enhance Ethereum. That being said, I am committed to making Ethereum as good as possible. If it turns out that the Ethereum research community disagrees with me and I cannot get anything done, then perhaps the best place for me would be another ecosystem that is more receptive to new ideas. However, as of now, I have faith that the Ethereum research community is focused on what is best for Ethereum. I will remain here as long as I believe that is the case.

I genuinely believe that everyone working on Ethereum is not here to do anything malicious; we are all striving towards the same goal, which is to make Ethereum as awesome as possible. My role is essentially to convince others that the things they believe will make Ethereum great may not be as effective as the ideas I am advocating. I think these ideas should all be prioritized, and we need to reorder them in terms of priority.

There is finite bandwidth regarding what we can tackle, so my argument is that while we know we want to do all these things, the items we plan for five hard forks should be consolidated into one, and those slated for one hard fork should be spread across five. This is more about reorganizing our priority queue.

Speaking of that priority queue, I feel that what I am advocating for represents a slight swing of the pendulum. The Ethereum roadmap initially focused heavily on layer one execution. The goal was to program the EVM—essentially, to create a programmable platform that is not Bitcoin but rather a complete smart contract platform. We scaled that to the extent possible, and then the roadmap shifted towards layer twos. There has been significant focus and development on layer twos, and I think it is undeniable at this point in time, in 2024, that layer twos have achieved escape velocity.

This was not as clear three or four years ago, but now it is evident that layer twos have been a success story for Ethereum. I believe what I am advocating for is a shift back towards layer one. I don't think this is discordant with the overall Ethereum roadmap at the highest level, although it may conflict with some of the details we are discussing.

I recall having discussions years ago with Justin Drake about Ethereum's sci-fi roadmap, where we talked about letting layer twos innovate and build, potentially bringing back some of that technology to layer one to create an enshrined ZK EVM. This has always been part of the vision, even if it is not currently in sight. We know it is something we want to do, and I think I am calling for that type of initiative to become more concrete.

Ultimately, I would argue that there is harmony in this approach. The plan has always been to first focus on layer one, then shift to layer twos to achieve escape velocity, and subsequently return to layer one. If we execute this plan fully, we can achieve our goals effectively.

=> 01:16:08

Ethereum's value lies in its utility; the more we build on it and make it essential for transactions, the more valuable it becomes.

Years ago, I had a conversation with Justin Drake where we discussed Ethereum's sci-fi-like roadmap. We talked about concepts such as how Layer 2 solutions could innovate and build, potentially leading to the development of a ZK EVM. The idea was that we might eventually bring back some of that technology to Layer 1, creating an enshrined ZK EVM. This has always been part of the vision; however, it is not currently in sight. We know it's something we want to do, and I think you're calling for making that vision a bit more concrete.

I would say there might be some harmony in this approach. The plan has always been to first focus on Layer 1, then shift to Layer 2, achieving escape velocity there, and finally return to Layer 1. If we fully execute this strategy, we could achieve the best of all worlds. What do you think? Am I harmonizing things a bit too much, or does that resonate with you?

Let me say, the good thing is that if we have a variety of places where people can try things and we create incentives to build new technology, then that technology will indeed be developed. We can then figure out how to apply that new technology to Layer 1. For example, Optimistic Rollups are experimenting with priority ordering, which might be a great idea to implement for Layer 1. Having these Layer 2 solutions out there serves as a live testnet where real financial activity is occurring. This is something we don't get on our testnets. It provides a chance to "dog food" these ideas and see if they work before bringing them into Layer 1.

However, the issue with this harmony is that there is a fundamental resource we are competing over: bandwidth. Everyone is using bandwidth, and while ZK Rollups use less of it than Optimistic Rollups, we all still rely on it. If we want to scale Layer 1, we will need sufficient bandwidth. Currently, the roadmap seems to focus on increasing the number of blocks, although there has been some pullback now that we see the current amount of blocks isn't being fully utilized. If the roadmap leans heavily into Layer 2 solutions and consumes all of our bandwidth, then someone coming along in two or three hard forks, when we have 10 blobs per block, will find it much harder to advocate for the same things I am advocating for. We may need to consider all these factors, but ultimately, we are competing for this scarce resource of bandwidth, and that might be where our attention should lie.

Additionally, there is the conversation around Ether as an asset and its value. Currently, many ETH holders are questioning why we are underperforming in the market. This shouldn't be the case, especially when looking at the Bitcoin ratio and even the Solana to ETH ratio; things are not looking good. What does your narrative and your tweaks to the roadmap mean for Ether as an asset and its value?

The Layer 2 story has often been framed as a trade-off for some cash flow, a capital asset perspective. However, in exchange, Ether as an asset will propagate across all these Layer 2 solutions, becoming more of a monetary asset. I believe this is true and hopeful, and it is playing out in some ways, but it may not be enough.

If Ethereum Layer 1 becomes the place where people transact, then Ethereum becomes valuable because people want to transact on it. This is the simplest explanation. Everything else, such as Ether being a store of value, is much more ephemeral and harder to justify. The idea that you want to transact on Ethereum and pay in Ether is compelling. Ethereum as digital oil resonates with me as a reason for its value: we need to make it useful. One way to increase the value of oil is to build infrastructure that requires a lot of energy. Similarly, we should build things that require Ethereum, using Ether as a gas token to operate. The more we do of that, the more valuable the asset will become. There is an argument that Layer 2 solutions are about making Ethereum a more valuable asset.

=> 01:20:14

Ethereum's true value lies in its utility, not just as a currency, but as the essential fuel powering innovative applications and infrastructure.

Money, specifically Ether, has a store of value that is much more ephemeral and harder to justify. The idea of transacting on Ethereum, where you pay in Ether, resonates with the concept of Ethereum as digital oil. This analogy simplifies the understanding of why Ethereum will be valuable: we need to make it useful. One way to enhance the value of oil is to build infrastructure that requires significant energy, such as trains. Similarly, by creating infrastructure that needs Ethereum as a gas token to function, the asset's value increases. The more we utilize Ethereum in this way, the more valuable it becomes.

There are arguments suggesting that Layer 2 (L2) solutions are transforming Ethereum into a monetary phenomenon. People will pay for their transactions on L2 using Ether. However, it is not clear to me that this is the long-term equilibrium. There is considerable discomfort regarding the performance of L2 tokens. While the performance of Ether may be underwhelming, the performance of tokens like Arbitrum and Optimism is even worse. This raises concerns, and there seems to be movement aimed at improving the performance of these tokens by allowing them to capture more fee revenue.

One potential solution for underperforming L2 tokens could be to allow users to pay for gas with the L2 token. I find this a significant worry because if L2 tokens start to pay for gas, it would represent extremely unaligned behavior. They might have enough power to implement such changes if we continue to direct users toward them. There have likely been discussions behind closed doors about this at certain rollups, which poses a real risk.

Additionally, the argument that we need L2s to pay for data availability in Ethereum so that Ether can function as money seems strange. If L2s are necessary for this, why not just pay for execution on Layer 1? The notion of Ether as money is not as compelling to me as Ether as a useful asset that allows for transactions, swaps on Uniswap, and loans. The idea of Ether as oil is much more persuasive.

I have encountered what I refer to as San's Paradox. This paradox arises when people claim that L2s are parasitic, siphoning value from Ethereum Layer 1, yet they also assert that L2 tokens are worthless and headed to zero. If L2s are indeed siphoning off all user activity and cash flow, shouldn't one be bullish on L2 tokens relative to Ether?

There are fundamental issues concerning the issuance of L2 tokens and whether people want to hold them long-term. A significant amount of selling is occurring; if selling outpaces buying, the token price will decline. One way to address this is to drive value to L2 tokens. If the developers of L2s, who hold a significant amount of their net worth in underperforming L2 tokens, decide to prioritize their token's value over Ethereum's, it creates a conflict.

Max, this has been enlightening. There is a call to arms here regarding the Ethereum roadmap that deserves more attention and energy. What kind of action do you encourage listeners and researchers to take?

The first thing I would suggest is to call your Senator—by Senator, I mean your core Ethereum developers (CEVs)—and advocate for shorter block times. This is especially crucial for app developers considering moving off Ethereum Layer 1 due to long block times. Many app developers feel helpless, but they do get listened to; they just need to express their concerns more vocally.

The second call to action is for solo stakers. Please share that you likely have an internet connection capable of supporting more bandwidth than you currently use. Often, we hear abstract arguments about solo stakers, but many of them are using good hardware and reliable internet connections. This situation reminds me of discussions surrounding voter ID laws, where politicians claim that certain communities cannot obtain IDs, yet many individuals in those communities possess them.

Solo stakers are typically tech enthusiasts who invest significantly in Ethereum, and they want it to succeed. They are not starving artists; they are individuals who can afford decent hardware and internet connections to participate in consensus. Those are my two calls to action: for app developers and solo stakers.

Max, thank you for joining us today on the podcast.

Thank you for having me; this was a lot of fun.

As a reminder, crypto is risky. Changes to the network carry risks, and not making changes can also be risky. You can lose what you invest, but we are headed west. This is the frontier, and it's not for everyone. We are glad you are with us on the bankless journey. Thank you!