Bankless - EVM Equivalence | David Reads

Episode Date: April 30, 2022

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If you write code once, but it works seamlessly on a thousand compatible chains, then the value of what you have just produced is far greater. EVM equivalence takes the EVM network effects to a whole new level. Bankless Nation, today on the newsletter and now also on the YouTube and podcast, we are going to explore the concept of EVM equivalence. And in my opinion, the paradigm of EVM equivalence will unlock the next phase of Ethereum's growth. DeFi Summer 2020 hit Ethereum's limit. scale. Since then, the network effects of the EVM has fractured into different directions.

New layer ones and even many layer twos have broken from the EVM standard in order to produce scale. But the era of EVM equivalence is upon us and it will allow Ethereum to pick up where DFI some are left off. A new Cambrian explosion of innovation is on the horizon. We just need EVM equivalence to unlock it. This is an article that I wrote on the bankless newsletter and I'm reading it aloud for those that prefer audio or video content. A big shout out to Ben Jones from the optimism team and also David Mehow for their invaluable help in helping me go through this very challenging topic, this concept of understanding EVM equivalence and the network effects around the EVM has been extremely challenging. I'm not technical. And so this is a

very technical concept that I've worked really hard to get into what Bankless is really good at, which is abstraction and metaphor and meaning and significance without having to go in the nitty details. So thank you to those guys for helping me get through this. I hope that this is an extremely digestible, albeit a little bit long piece that teaches us a very critical lesson about how this industry works. All right, let's go ahead and get right into it. First, I'm going to read out the table of contents, but it's also a T-L-D-R. So this should actually help map out the future the future of this article. So you can get inject a little bit into your brain now and then unpack the whole thing later. Part one is going to be understanding EVM equivalence.

There is a difference between scaling on Ethereum and scaling Ethereum itself. The EVM is this emergent structure produced from thousands and thousands of developer contributions. Forking the EVM limits the ability to access these contributions. If you change the the developers that keep on contributing to it, you aren't getting all of those contributions because you've changed the standard. There's this line, if you want to go fast to go alone, but if you want to go far, stay together. And so I'll rephrase that and saying, if you want to go fast, fork the EVM into something else. But if you want to go far, stay EVM equivalent. Replication and emergence are necessary properties for a self-propagating system that

Blankets the globe. Evm equivalence allows us for replication at the two layers of Ethereum, the app layer and the protocol layer. Evm equivalence with layer twos allows for the copying and pacing of defy-code across all EVM equivalent roll-ups. Anything new of value discovered on one optimistic roll-up that's EVM equivalent is immediately reproducible on other roll-ups. It also allows for individual roll-ups to implement an EIP upgrade before the main Ethereum layer one, which allows for a live production test bed for Ethereum improvement protocols before they are safely and securely implemented on the layer one. Next, there's this term called horror vacuai, vacui,

basically means nature abhors a vacuum. Nature hates a vacuum. It fills all voids. Nature, if there's a void, nature fills it. If there's some dirt there, a plant is going to figure out how to grow there. And crypto is like nature. It slowly comes to fill every void that it discovers. There's also something called the last mild distribution problem and how EVM equivalents can

solve this. Under an EVM equivalent paradigm, EIPs turn into genes. EVM equivalent enables layer twos to merge EIPs asynchronously and independently from the choices of other layer two. And that allows each layer two to adopt the EIP that its community desires the most. This produces an Ethereum that can adapt to the signals and desires of its layer two users. Each layer two represents an antenna for data for user preferences. All layer two is adopting a single EIP, a shared EIP, signals to the Ethereum main chain that is desired by the community, and it's safe to adopt.

And lastly, scaling public goods. Optimism's retroactive public goods funding is this novel incentive mechanism to inject Silicon Valley type financial incentives into projects that build public goods for the layer two. Layer two public goods are funded by collecting block space fees, collecting the economic energy of the layer two's, and directing them into public. goods. Public goods research and development, which is what optimism is pioneering with retroactive public goods, allowed to replicate and propagate throughout the EVM, throughout the ecosystem due to EVM equivalents. And so all of these, all of these pieces, cheap fees on the layer two, EVM equivalents, and retroactive public good funding are the ingredients to produce a network that has motivated outworth growth into the frontier of what crypto-economic

networks can do. All right. That was the table of content slash TLDR, but it's a robust table of content. The rest of this is going to take about maybe 15 to 20 minutes to read. But first, before we get there, a moment to talk about some of these fantastic sponsors that make the show possible. The era of proof of stake is upon us, and Lido is bringing proof of stake to everyone. Lido is a decentralized staking protocol that allows users to stake their proof of stake assets using Lido's distributed network of nodes. Don't choose between staking your assets or using them as collateral in DFI. With Lido, you can have both. Using Lido, you can take any amount of your ETH to the Lido validating network and receive STEth in return.

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Just go to alto IRA.com slash bankless. That's ALTOIRA.com slash bankless and start investing in crypto today. Let's go and get right into it. Starting from the top. EVM equivalence, understanding EVM equivalents. The find. EVM equivalence means complete alignment with the Ethereum virtual machine specification. The EVM equivalence design philosophy.

is to produce an optimistic roll-up with minimal diff, that's minimal differentiation to Ethereum. EVM equivalence extends the properties of Ethereum into the layer two's. It blurs the lines between when the Ethereum layer one stops and when the layer two roll-up begins. This is the difference between scaling on Ethereum and scaling Ethereum itself. Optimistic roll-ups that are perfect clones of the Ethereum EVM don't just share in Ethereum security. They share every aspect of its network effects. Other layer two design constructions do not have the same privilege of accessing all of Ethereum's network effects and will always be more specialized than their EVM equivalent

counterparts. So there's a barbell here to think about where on one side of the spectrum you have EVM equivalent optimistic roll-ups or EVM equivalent roll-ups where it's a perfect one-to-one clone of the EVM standard. And then something completely different, like a completely rebuilt. The EVM is baggage. Honestly, if we rebuilt the EVM from scratch today, we do it totally differently, but we can't because there's already network effects.

But anyways, the other alternative to EVM equivalence is just completely redo the whole thing. A very specialized execution environment is built for your specific roll-up that's optimized for you. You don't get the network effects of the EVM, but you can recreate something that's just perfect for what you need to get done. But it's not EVM equivalent. It's something completely special. Okay. my claim is that EVM compatibility is dead.

EVM compatibility is the middle of those two things. Like you still have the baggage of the EVM, but you also recreated a bunch of new things, but you've really getting whatever is the opposite of the best of both worlds. Either optimize for generalizeability by adhering to the EVM standard and therefore picking the same standard as everyone else, or build something completely different that's highly optimized for your use case. In order to fully extend the full might of Ethereum to the layer 2s,

we're going to need more than just mere EVM compatibility. We need EVM equivalence. Next section, compatibility versus equivalence. When the optimism team introduced EVM equivalence last year, they uncovered the technical difficulties between equivalence and compatibility. Roll-ups were hailed as our scaling savior. Finally, a layer 2, which we can run uniswap in. The earlier roll-ups accomplished this by completely,

recreating uniswap with custom code on top of a custom built optimistic roll-up. And that just wasn't enough. The network effects of the EVM extend far further than just solidity. A massive supporting cast of tools give Ethereum devs their superpowers. Because these tools are meant to run on the EVM standard, they broke for custom-built roll-ups, not to mention the massive effort required by protocol devs to create something solidity compatible. With EVM equivalents, the EVM equivalents, the EVM.

EVM itself is copied and pasted into the layer two. Everything under the hood is the same. The EVM is a city. David Mehow, who helped me understand all of this, gave me this metaphor. Open source code is like a city. It's emergently created bottom up from the contributions of many developers who see problems and build solutions. Over time, the city becomes optimized, robust, and efficient.

EVM chains are, EVM-ish chains, are that like the vagus version of Paris. They're trying to artificially replicate something that came organically. Open source software is a public good, maintained and upgraded by its respective communities. Developers that use open source software run into all sorts of problems while using it, some trivial, some critical, and everything in between. Some developers spend time fixing these problems and then lobby the community to accept their inputs. If the community sees value, then the contribution is merged. A new standard is created, and the piece of software grows in utility and robustness. Like an emergent city, builders come and produce things that the surrounding

community needs and values. Shared resources and utilities are produced and since its code, it never decays. It's a one-way street of increasing value so long as everyone is working on the same foundation. Each developer builds in their own direction and discovers their specific contributions to add to the collective. Over time, a highly robust public good is produced by the shared contributions of thousands of developers. This is the story of Geth, or Go Ethereum. Geth has slowly absorbed the meaningful contributions of ETH devs over the years and produce a piece of software that has some of the strongest network effects,

both inside Ethereum and beyond. For the listeners out there, there is a picture of Kirby wearing the Geth helmet, absorbing EIP-1559, EIP-488, EIP 2718, EIP-8-484, and the other bagillion EIPs, have all slowly got integrated into Geth by the community over time. This is why Geth has become a reference point for the foundation for such a large part of this industry. Changes that have forked to Geth and produce a non-Etherian blockchain are still contributing to the foundation that Ethereum stands on. Geith forks that deviate from the reference version are deviating from the largest network effects in Web3.

The further that one-off copies move in a different direction, the more labor and resources are required to keep up and progress and keep up and progress, with the core network. The Evian Peloton. A Peloton is a group or pack of road bicyclists. Writing in a group saves energy by drafting behind other riders. The reduction in drag is dramatic.

Riding in the middle of a well-developed peloton, drag can be reduced to as little as 5% to 10% of the total drag that otherwise would have been experienced by the rider. The exploitation of this potential energy savings leads to very complex cooperative and competitive interactions between riders, and teams in race tactics. That last line hits real different when you think about the Alt Layer 1 wars,

and even the Layer 2 wars, for that matter. If you want to go fast, go alone. If you want to go far, go together. The Peloton grows in efficiency and speed the larger it gets. Air resistance is distributed across a wider group of people, and as the group scales, the efficiency of the group increases. Being in the middle of the Peloton is basically effortless because you're able to draft in the wake of the entire group.

group. The leaders of the Peloton frequently cycle out as the leader takes the full force of the headwind resistance and must expend extra energy to set the pace of the peloton. But when the leader is tired and the pace slows, there are plenty of fresh contributors who have been drafting inside the peloton to take their place. For the podcast listeners, I am pausing for the video, or excuse me, pausing for the image. There's also an image of like caterpillars all crawling over each other, but the caterpillars that are crawling on top of the other caterpillars are going twice as fast. Because, like, you know, network effects, re-network effects, speed, breed speed. Open source communities will always outpace the development of centralized teams. The reason why this industry moves so fast is that it's a collaborative flywheel. We build off of each other's successes, and when one of us progresses forward into the frontier, they bring us all with them, kind of like the caterpillars. EVM equivalence is a bottom-up, emergent city-like public good. EVM compatibility, on the other hand, is a one-off copy from that.

There are infinity different ways to deviate from the EVM, but there is only one way to adhere to it. All right, getting into replication. Replication at the application layer. Reducing an EVM equivalent layer two ecosystem is critical to retaining the network effects of composability and interoperability. EVM equivalent roll-ups allow for instant copying

and pacing of code bases across chain. Development and innovation on a single EVM roll-up is seamlessly transferable to any other EVM equivalent optimistic roll-up, and also Ethereum itself. Since everything is being developed on the EVM standard, the network effects of the layer one are extended to the layer two's, and innovations on a layer two reverberate back throughout the holistic ecosystem.

A single line of code means more when it's deployed on an EVM equivalent roll-up. If you're an open-source developer and you want your code to be used far and wide, you would naturally want to use an EVM equivalent roll-up as your code is instantly compatible with all the other EVM equivalent roll-ups. If you write code once, but it works seamlessly on a thousand compatible chains, then the value of what you have just produced is far greater. EVM equivalence takes the EVM network effects to a whole new level. Non-EVM equivalent roll-ups will not benefit from these shared network effects.

The lack of a minimal diff design philosophy in non-EVM equivalent roll-ups breaks the relationship between the network of Ethereum and those that are not equivalent. The gigantic wave of Ethereum's network effects is compounded by every, every new edition of an EVM equivalent roll-up. And if you're not surfing on this wave, you're going to have to swim hard to catch up. Replication at the protocol layer. These EVM network effects don't just apply

to the app layer of Ethereum. It also applies to the protocol layer itself where things get really interesting. Because EVM equivalent roll-ups are minimally differentiated from Ethereum, they offer Ethereum a testbed for new IPs to be tested in a live production environment. Right now, EIPs are tested

with Ethereum test nets. They are tested many times on many test nets to ensure nothing breaks, and then it can finally integrate it into the Ethereum L1. There's always risk with this, because test nets are not minimally differentiated. Implementing an EIP into Gorley or Coven is not the same thing as implementing an EIP into Ethereum. The difference being the size, significance, and nature

of the economic activity on Ethereum and that the test nets just cannot emulate. There's always some unknown when implementing an EIP into Ethereum. EVM equivalence offers a solution. When an EVM, when an EIP gets successfully implemented into an EVM equivalent roll-up, it gives strong assurances to the base chain that the same EIP could be successfully integrated without bugs. Roll-ups give a live production environment with real economic activity and real capital at stake for EIPs to be tested. EIPs can be tested at the roll-up layer without the risk of something breaking and impacting the rest of the entire ecosystem.

When the L2s ubiquitously adopt the same EIP is signals to the Ethereum layer 1 that is desired by the community and it's safe to integrate into the layer 1. EVM equivalent roll-ups enable Ethereum to sense the desires of the participants on its layer 2s, making each layer 2 an antenna attuned to the wants and desires of its users. The command and control governance of Tradify and Web 2 gets translated into the sense and respond paradigm of Web 3. because each roll-up is its own sovereign economy, it will implement various EIPs independently and asynchronously from the rest of the ecosystem, according to the wants and the desires of its users. Over time, the best EIPs will come to dominate the layer two roll-up landscape,

as more and more independent roll-ups see the value of the same IP. And when an EIP comes to dominate across the entire landscape of roll-ups, it will signal to the Ethereum layer one, that is a good IP and it's safe to implement it at the same. the layer one level. So here's a graphic I made with three phases. One, you have Ethereum at the center and you have all these optimistic roll-ups on the periphery. And two of them have adopted the same IP, EIP 6789. In the second phase, you see Ethereum at the center, but instead now five of them have adopted EIP-6789. And then lastly, you see seven out of the eight roll-ups having all

adopted EIP-6789. And so because so many have adopted it, it's been adopted at the layer one. But also there's this eighth optimistic role that doesn't have to integrate EIP, 67, 88, because that's the choice that that particular EIP made. It can do whatever it wants. EVM equivalents summarized. All right, here's the significance of EVM equivalents. It allows Ethereum to break free from being bound by its layer one shackles. What is Ethereum becomes capable of extending outwards into the layer two's.

The dividing line between the L1 and the EVM equivalent layer twos becomes extremely blurred. There isn't any point in which the Ethereum layer one stops and its EVM equivalent layer two's begin. It's all just Ethereum. All right, guys, coming up in the second half of this piece, we're going to talk about the way that EVM equivalence creates biomimicry and the claim that I very much believe that the crypto-economic network that exhibits biomimicry the most will come to fill the voids because that is what nature is good at.

Nature is good at filling voids. And you know what's got a lot of voids? the crypto industry, the whole thing. And so we are going to use, Ethereum is going to use biomimicry. It's going to use EVM equivalents to replicate and propagate all of its layer 2s to fill every single void that can be filled.

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Horror vacuai. Nature abhors a vacuum from Aristotle. Nature is really good at filling voids. The more evolutionarily fit in organism is, the more space it fills. Animals consume food and reproduce to the maximum extent the environment allows. All plants are expressions of fractals

because fractals are algorithms that maximize surface area. Increase plant surface area adds to its ability to capture sunlight on its leaves, and nutrients from its roots. One of the most biodiverse areas in the world is the Amazon rainforests where 2% of the light reaches the ground because the trees are so efficient at capturing sunlight.

Here is the last mile problem defined. The last mile problem is the last leg of a journey comprising the movement of people and goods from a transportation hub to a final destination. The last mile describes the difficult last part in the transportation of people and packages from hubs to final destinations. Some challenges of last mile deluxe.

including minimizing costs, ensuring transparency, increasing efficiency, and improving infrastructure. Nature is really good at solving the last mile problem. This is a natural consequence of the survival of the fittest. The organisms that can replicate and propagate the best come to fill the voids in which it lives. Even inside an individual organism, fractals are fundamental patterns for increasing scale and efficiency of the organism itself. Lungs are responsible for capturing oxygen and distributing it to the bloodstream. And the circulatory system is responsible for distributing this oxygen and other nutrients to the furthest reaches of the organism.

For the podcast listeners, I have these images of hearts and lungs, and they just look like trees. And so does the entire circulatory system of the body. And so do the neurons in your brain. Everything that needs to have bio, everything biological has this like fractal pattern, because fractals are just efficient. and the replication of DeFi app layers and EIPs across layer 2s is what I'm getting at here, this easy replication, along with the low fees of the layer 2, allow for this organic biomimicry.

And if something has got biomimicry, you know it's going to work. Fractals are structures in which each substrate has the same properties as the holistic structure. Fractylals can be thought of never-ending patterns, and the replicatability and reproducibility is what makes a fractal a fractal. Only structures that are replicatable and reproducible can efficiently fill the voids found in nature. And crypto is one massive void. There is so much left to build. But in order to fill all this empty space with new structures, we need systems that can replicate and reproduce.

EVM equivalents produces the foundation needed to produce these properties. With an EVM equivalent roll-up ecosystem, EVM can replicate and reproduce at breaknet speeds, zeroing in on the desires of its users and updating its code to refreferral. those desires. Every layer two can progress in its own unique direction, specializing on whatever it wants to specialize in. Successful layer twos that onboard many users and lots of value will signal to the other layer two is that it's discovered something of value.

We all know that the crypto industry is really good at copying and replicating something once it's been proven to be useful. See the 2013 to 2015 proof of workfare launch era, the yield farm copycatting of DFI summer in 2020, the L1 Gethforx of. 2021. And if you are interested in the subject matter, please read my article coordination and defection. It's another good one. As soon as in layer two finds a new source of value, that source of value can be replicated and shared across the entire ecosystem and eventually brought back to the center of the ecosystem. I have here a little aunt who's got a bit of an apple,

and I have a funny little caption titled David Attenborough Voice. This app developer has found some food. Watch, as the EVM equivalent brings it back to the layer one to be shared. This young developer is sure to receive infinite funding and a bunch of Twitter followers. EIPs are the new genes. Richard Dawkins' book The Selfist Gene discovers how each gene of an organism is the smallest unit of life, and its inherent self-interest in its own preservation and replication offers the foundational pattern for which all life stands on. Good genes survive and bad genes die. As organisms, adapt and evolve, genes that enable the well-being of the organism are propagated via replication reproduction across the entire species over time. Beneficial random mutations in an individual

organism can help it survive and thrive better than the rest. And as a result, this gene goes from existing in not just one instance, but in existing in all possible instances because it was a good gene. In the world of modular Ethereum, EIPs are the new genes. Good EIPs propagate, bad EIPs, die. Ethereum is a responsive, adaptive system, and the EVM equivalent roll-ups allow for genes to be implemented into the organism first at the margins, and then after the EIP proves its viability, it propagates outwards to the rest of the roll-ups. And if the EIP is good enough, it will make it back all the way to the beating heart of

Ethereum, the layer one. Ethereum becomes an organism that can respond and adapt to its environment, even as the environment changes over time. where biological organisms have their set of genes fixed from Genesis, Ethereum has the ability to invent and integrate new genes as needed in order to stay up to speed with the changing demands of the world. Discovering the value in an EVM equivalent paradigm turns that value into a public good that can be shared across the entirety

of the Ethereum ecosystem, not just for that one specific layer too. Retroactive public goods. Building infrastructure for the entire ecosystem. Retroactive public goods funding will take Ethereum from a system that responds to its users to a system that can take proactive action. Optimism is pioneering a new model for funding public goods, one that injects Silicon Valley-type financial incentives into projects building public

goods. They integrate the upside potential of a tech startup, but with public goods as the product. Revenue generated from the layer two block space feeds gets directed towards innovators and founders who build something useful for the optimism. layer two. Retroactive public goods funding commits money towards the future, giving public goods builders the ability to build with assurances that there is money waiting for them if they build useful public goods. Here's a tweet from optimism that talks about the purpose of the optimism collective that was announced yesterday. If you produce strong public goods infrastructure for optimism,

you increase the utility of the layer two, and this creates a useful economy to build on. As public demand for optimism block space goes up, this increases the amount of funding available for public goods, which creates further investment into more public goods, which makes the optimism layer two a nice place to live because of how much, how strong the public goods are. And there's a feedback loop here. This cycle continues. Retroactive public goods funding takes web to incentives, but has Web3 profits, and impact becomes profit. The combination of retroactive public goods funding and EVM equivalence means that when the optimism layer 2 builds something useful, it becomes immediately available for the entire rest of the EVM equivalent ecosystem to use. Blockspace sales on optimism on optimism, turns into infrastructure not just for the optimism layer 2, but for all layer 2s, and eventually Ethereum itself.

Lockchain ecosystems are famous for underinvestment into infrastructure and public goods. This is a reference to one of Italics articles. the most scarce resource is legitimacy. The graph that is shown here illustrates how much money that these blockchains are spending on security versus how much they are spending on research and development. It's basically, or many, many, many orders of magnitude. You can barely see the research and development spending versus how much is spent on security. These are block rewards and fees, etc.

The one-two punch of retroactive public goods funding and EVM equivalence gives us the first promising path towards solving the tragedy of the commons, not just for optimism, not just for the layer two's, not just for Ethereum, but for the entire planet. And here's how this works. Step one, fund public goods on optimism. Step two, expand these public goods for free to all other layer two's. Step three, integrate those public goods into Ethereum. And step four, begin to expand the scope of the public goods that are built beyond Ethereum and into the world. Step five, solve global coordination failures and unlock a Star Trek future. There's an article I wrote on this called How Transaction Ordering Can Save Humanity.

I finished this up with a tweet. The coming Layer 2 tokens truly marks a new chapter for Ethereum. Optimism's livestream view account on Bankless was our second highest ever after Mark Cuban. The release of Layer 2 tokens will put attention back on the Layer 2's. The combination of that and retroactive public goods funding will lead Ethereum into legitimacy, as the Ethereum for the innovation of public goods funding is something that I think will be extremely appreciated by society. And meanwhile, Layer 222, L222, Layer 2, 2022 will lead us right into the Ethereum merge. And so it is time for Ethereum to shine.

Thank you for listening. I really hope you enjoyed this piece. I really think it's going to be a foundational component of the rest of this year and moving forward as we expand this crypto-economic frontier. As always, Bankless Nation, ETH is risky, crypto is risky, D-Fi is risky, and you can lose what you put in. But we are headed west. We're on the frontier.

It's not for everyone, but we are glad you are with us on the frontier.