Bankless - The Great L2 Migration | Cross-Chain L2 Panel

Episode Date: January 13, 2022

We think 2022 is going to be a huge year for Layer 2 scaling solutions. Cross-Chain protocols will be a crucial infrastructure for the great migration to L2s, allowing users to bridge assets across platforms. Composability and user experience is the glue of modular blockchains, which optimize for decentralization, scaling, and cost. The projects and representatives each present cryptographic solutions for building a web of liquidity across the many suburbs of DeFi, where average users will live and engage. GUESTS: Ben Jones - Optimism https://twitter.com/ben_chain?s=20  Hart Lambur - UMA  https://twitter.com/hal2001?s=20  Arjun Bhuptani - Connext https://twitter.com/arjunbhuptani?s=20  Chris Whinfrey - Hop Protocol https://twitter.com/WhinfreyChris?s=20  Vaibhav Chellani - MOVR https://twitter.com/vaibhavchellani?s=20  ------ ONJUNO | Crypto from your Checking Account! https://bankless.cc/OnJuno  ------ SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/  ️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/  ------ BANKLESS SPONSOR TOOLS: ️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum  MATCHA | SMART ORDER ROUTING https://bankless.cc/Matcha  SLINGSHOT | LAYER 2 SOCIAL TRADING https://bankless.cc/Slingshot  GEMINI | TURN FIAT INTO CRYPTO https://bankless.cc/Gemini  BRAVE | THE BROWSER NATIVE WALLET https://bankless.cc/Brave  UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures 

Hey, Bankless Nation, it is panel time today. Panels are some of my favorite discussions we have on bankless, a great cross-section on a specific topic. And today, we are talking about bridging, bridges, cross-chain bridges. This goes into a theme we've been talking about in 2022, which is the great layer-to migration. I think there are a few reasons we're doing this. We'll get into them. But before I do, David, we've got Ben here as a co-house. for this topic. Ben, it's great to have you. Can you explain why Ben is joining us for this conversation?

Yeah, we did this expert panel for EIP-1559, and that was co-moderated by another technical moderator, Tim Beko. And that was really, really useful because some of the developers out there just ask questions that I think are really, really smart that I wouldn't have thought to think myself. So, Ben, we're bringing you in as a member of the optimism team, as somebody who can ask some more technical questions than what Ryan and I would have thought about. And so we're going to, first off, before we get into the content, we're going to have just a little bit of a discussion, some questions that five panelists don't need to ask like what are bridges. But before we get there, Ryan, we have some things that we need to talk about, such as our friends at On Juno. On Juno is our new

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the inflating dollars in your bank account. So big fans of there. you want to add to that, Ryan? David, I've heard that, you know, that dollar is inflating away at 7% per year. I was just like, as of this morning. So you definitely want to get a crypto native bank account. So you're not using a legacy Wells Fargo bank account that's giving you like 0.01% interest rate. This is a way to do this. They also give you a fantastic card as well. So a debit card. It's metal debit card. Really nice, really enjoying this. I set up my accounts recently, excited to get started. So if you're interested in doing that, use the code bankless, $50 on your first crypto paycheck.

You can do that at on juno.com. David, you know, I just want to say a few more things about why we are doing this topic on bridges today, because I think it's important. And there's really three reasons we're doing this. The first reason is there's really no future world in crypto that doesn't require a massive amount of bridges. Okay. No matter what you believe about the future, whether it's going to be. a multi-chain future with all sorts of different layer ones, okay, you need bridges. Whether this is going to be an Ethereum dominated world with a bunch of layer twos, okay, you also need bridges. So bridges

are this nascent infrastructure and a massive opportunity, I think both for users and investors who are listening to bank lists. The second reason, something that we've talked about in our modular blockchain thesis, is there's really no future for users on layer one, on Ethereum layer one. I want to say that again, because I think that's a hard pill to swallow for a lot of people. There is no future for users on layer one, unless you're some kind of a whale, okay? The main chain is actually not for users anymore. It's for chains. This is a layer to you roll-up-centric world. You can get caught up on bankless past episodes if you want to school yourself on that, including the one we released in early January with Fitalic. And the third reason is this. We've simply never done a full episode on

bridges. And it's like, it's about damn time, okay, because bridges are going to be a huge topic in 2022. And I feel like the panel structure is the perfect way to get just a variety of different opinions and ideas and projects to the table to educate us on this subject. So we have a bunch of people on the panel. These are some of the biggest bridging projects. They bring, you know, different flavors, different approaches, different tradeoffs, different design decisions. But this is a fantastic cross section. A few more housekeeping items for you. As usual, if you have a question, a burning question, you want us to ask. This is a live stream, okay?

So go to YouTube, hit us up with those questions, use the troll chat box for that. We'll look at them. We'll filter them. We'll find the best ones. We'll bring that to the panel if it makes sense. And with that, you know what, David, I think we should get to Ben to give us a quick overview on bridges. So what do you want to lead with for like our 101 on bridges, David?

Yeah, let's just start with the most basic question. Ben, what is a bridge? because, you know, most people think bridges as like the thing that you drive your car over, over a river, but not in the world of crypto or cross-chains, cross-L-2s. Just at the most basic level, what is a bridge and why do we need them? Indeed. And thanks for having me on, by the way, guys. These are my first words, and I feel like I'd be remiss if I didn't start there.

So, hi, everyone. Okay, what are bridges and why do we need them? Great question. So fundamentally, a bridge and bridging refers to the, at the deepest level, the passageing of, passageing of communications between two different chains. So basically taking information from some authenticated source on one chain, sending it across to be authenticated or received on another chain. So that at the most fundamental level is usually what it is. What is being communicated. Now that is most commonly movement of assets, right? So when you're moving your tokens from one chain to

another, you've got to bridge them somehow. So that's, you know, technically there's actually when you're moving those tokens around a sort of more fundamental thing that you might call bridging, that is like sending a message that says, hey, Alice has just decided to bridge over X amount of funds. This is the ERC20. This is the amount. This is where the destination is. But most importantly, I think for users, this is talking about moving assets between chains. That's the most common form of communication. And what we have a lot of great panelists trying to help facilitate. So diving into that a little bit more, what is technically going on behind the scenes? And I think this question actually might unpack some different kinds of bridges.

There are cryptographic bridges and there are multi-sig bridges. Can you just unpack what technically happens when you bridge an asset and how that is different based on what kind of bridges out there? That's great question. So I'll ignore the details. You know, we could obviously get into nuance of kind of the details of those messages that I was talking about, right? because you have, you know, the message has got to express who is depositing, where they're depositing to, or it could be withdrawing, right, where the assets are being bridged to, what is the asset that's being bridged and so on and so forth.

I think what I would say is that there is a, like what is actually going on when you're bridging is really dependent, honestly, on what bridge you're using and what chains you're bridging between. And also what chains your bridging between may have an impact on what bridges you can use or what fundamental things that you can do. So in general, I mean, to speak to my expertise, on roll-ups, right? Because that's what we're building with optimism. Generally, generally speaking, there is a sort of native bridge that is sort of treated as the canonical, secure way

to move assets back and forth between the chain. And so when what's going on behind the scenes when you use that, which is, for example, maybe the default, if you go to like gateway.optimism.io, right? Usually what's happening there is basically on L1, right, on the source chain, if you want to generalize, right? assets are being locked up. And they're being locked up and they're emitting some sort of message or in the case

of the roll up in event or some sort of storage that says, hey, you know, Alice has locked up 100th on L1. And Alice wants to use that eth on L2. Please credit Alice 100th on L2 for this money that she locked up on L1. And the only way to unlock those funds is if you bridge in the opposite direction, which says, hey, somebody who had this funds on L2 decided that they wanted to get it back out on L1. So they're trying to withdraw these assets. Please unlock those assets on L1. So that's usually what you're doing at a sort of a native layer. And depending on the construction of the two different

chains you're moving between, those might have different properties. So in the case of a roll-up, we would consider this very secure because you have these fault proofs, right, that are basically a dispute layer that are going to keep those funds secure in all cases. But in general, what you can do is build on top of these chains and build on top of those native bridges, bridges that have different properties that might be more compelling or more economically efficient and make a different set of tradeoffs in terms of things like security or user experience or what's going or what's going on. So when we talk about bridging, we're talking about locking funds in one place and unlocking them in the other.

There's a lot of details that go on there. There's native bridging that can very tightly couple this in a very secure way that forms the basis for roll-ups. And then there are layers of applications that you can build on top that accomplish the same goals with some different sets of assumptions or tradeoffs that you might want to make. So that's sort of what's going on in a bit of a ramble there. No, that makes it makes a ton of sense. And just to reiterate with roll-ups and also with multi-sig bridges going from across L1 to across L2 or across from L1 to L1, there is what

you called the canonical bridge, as in ultimately all things that are built on top of this canonical bridge use. And it's the conversation what we're going to have today is how different implementations can use that canonical bridge in different ways to make things a little bit easier for users. And so there is the slow bridge, the canonical bridge, and then there's like fast bridges that I think most of the users of these L2 cross-chain ecosystems will ultimately use. And that is who so many of our panelists today are what they are building. And so Ben, we have you from optimism who's building a roll-up, which must include a canonical bridge or else how else would people get there. And then we have many of these panelists that we're about to bring on after this who are using your canonical bridge to make different flavors of bridges that make different tradeoffs.

And so, Ben, my last question for you before we turn to our panelists, just what are you excited to hear about from these panelists today? What do you want to learn? What are you interested in hearing about? And what should listeners have in their heads is what they should be paying attention to in order to get the most out of this panel? Most definitely. So I hope you all are ready for some gardening because I want to get into the week. So I definitely think we have an incredible lineup of different bridge projects here. And like I said, every bridge project makes different tradeoffs, has different designs.

And the implications of what the bridge gives you and what you give to use the bridge change. So I think that's going to be an absolutely fascinating thing. And I think for people listening that are trying to use, you know, these bridges, that's incredibly important. It's really important to understand the properties of the system that you're using because there are bridges that may have weaker security assumptions. They may have stronger security assumptions. There may be ones that are more expensive. There may be ones that are cheaper. So I think that's one thing.

And then I think the other part, for me at least, that I'm personally excited about is hearing a little bit about the future and sort of the more, you know, next year or two years of bridging, what that's going to look like. Because now that we're starting to see many of these different chains coming online, we're really starting to see these bridge markets actually play out. And I think it's going to be really fascinating to hear what our panelists are cooking up in the background for the next releases and that sort of thing.

Well, I think with no further ado, we should go and get right into this panel because they have so many things to talk about. We have a list of questions that we're going to get through. So let's go ahead and get our panelists on the scenes right after we talk about some of these fantastic sponsors that make this show possible. Slingshot is a decentralized trading platform that combines the performance and ease of a centralized exchange with the openness and transparency of DFI. Slingt. Slingtrakers aggregates liquidity from all of DFI in order to find the best price on thousands of crypto assets. Every token on Slingshot comes with a price chart and trade logs to give you. insights into the market's activity in real time. Slinghot is available on Polygon, Arbitrum, and Optimism, saving you from the high gas

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But everyone, thank you for being here. Cheers. Thanks for having us. Thanks a lot. Thanks for having us. So we're going to start with this very basic question, and we're going to go one by one. What is your project? What makes it unique? And what's its first? flavor. Does it have a flavor? And let's start with Hart from Across Protocol. Totally. Well, thanks for having me, guys. And yeah, our project is unique because a cross started as just a demonstration of what Uma's been building with our optimistic Oracle. And so sidebar here.

I actually know Ben from back in 2019 sitting in a conference room screaming at me about how I need to be more optimistic. And this actually never be too optimistic. never be literally what he was saying. And this is one that it's on the design we had to this Oracle. We call an optimistic Oracle that has a really simple concept where we can say, hey, anyone can say, ask a question on anything. Anyone can propose and answer that question. And that question is taken as truth if no one disputes it.

And so this is an optimistic approach to ask getting data. And we realize we can use this optimistic Oracle to do cross-chain messaging and cross-chain to look at what's happening on other chains. And so that's what Uma's been focused on with our optimistic Oracle. And about four months ago, the idea came to us that like, holy shit, this bridging thing is a big issue. Specifically, the specific question we're looking at is fast withdrawals from optimistic roll-ups or from roll-ups to layer one. And that's actually where we're focused. And we realize that we can come up with a design that uses our optimistic Oracle to quickly, securely, and in a capital-efficient way, actually move assets back from

L2 to L-1. And across itself is this side project that the team behind, we might as called Risk Labs, built. We built it very quickly because it's using our Oracle, and we built it as a demonstration of this optimistic Oracle technology with this specific focus, just focused on L2 to L1. and it turns out it works really well, which gets me really stoked. It's like it's capital efficient,

we'll get in those details later. But that's our origin story and that's how we got here. Awesome. Thank you, Hart for that. That was Hart from a cross protocol, again, a product out of UMA. And now we were going to go to VC out of Mover.

That's M-O-V-R. VC, can you just tell us about Mover? Does it have a flavor? What is it optimized for? What makes it unique in the world of bridges? Yeah, for sure. So like movers like probably quite different than you know all all the flavors here. Like mover essentially we call it like a meta bridge.

Our approach here is like taking the modular approach that that we saw with, you know, like scaling L2s, you know, having like different settlement, different DLA. So we are trying to take like a modular approach. We have like a standard bridge building framework that can be plugged into any sort of bridging mechanism, be it optimistic, be it STLC based, be it like an Oracle or something, and that allows us or like, you know, developers to

like build this like hybrid sort of applications where, you know, like movement between L2s could be trustless, but if that app also wants to go to somewhere like Solana, they could use like a more trust minimized solution. So we are trying

to like go in this like modular phase where people can build their bridge applications without, you know, kind of thinking of like what the exact bridging mechanism or like, you know, message transmission mechanism would be. So, yeah, that's kind of like the unique thing and the direction that we are taking with Mover. And, you know, hope to showcase something really soon. Absolutely. Thank you.

Thank you, VC. Moving into Chris, Chris, from Hop Protocol. Chris tells us a little bit about Hop. What's its unique feature? What's its flavor of bridge? What's it like? Sure. And then thanks for having us on the show.

And, yeah, so we're building Hop Protocol. We're very optimized for Ethereum's ecosystem and Ethereum scaling solutions. So we actually use Ethereum as a hub to kind of bridge between all the different layer twos and scaling solutions. And previously our team was working on a wallet called Ethereum. We actually built Hop just out of pure necessity to get our users onto layer two, have them stay on layer two, and just never touch layer one at all. And yeah, so it's very optimized for Ethereum.

ecosystem. Awesome. And last but not least, we have Arjun from Kinext. Arjunx has been around for a real long time and it started actually as payment channels before it turned into Bridges. Arjunct, can you tell us about Kinext and what flavor of bridge it is? What makes it unique? Yeah.

So, yeah, as you mentioned, Connects has been around for a very long time. We actually built the first ever, like, non-custodial SL2 system on Ethereum. It was pretty cool in partnership with Spank Chain. in like 2018. Obviously things have changed quite a bit since then because that was a very simple micro tipping system using payment channels. Connected is an interoperability network that lets you basically

transfer funds and then also do some forms of message passing between chains. So like calling contracts and things like that. We're working towards more general purpose interoperability. That's completely genagnostic. What we focused on. on is two things, trust minimizations. We are extremely, extremely, extremely passionate

about making sure that, like, Connects has the exact same trust tradeoffs as, as, you know, using Ethereum itself or at least as close as possible. And like, generally speaking, the security model of Connects is effectively the same as the security model of the role of itself. And then, or potentially better in some cases.

And then in addition to that, we also have focused a lot on extensibility. So like the idea there was that we don't quite know yet what the, what the right mechanisms are going to be, are going to be in the future around like how L2s will be built. And of course, we also have this like world right now where there are Ethereum compatible or even Ethereum friendly chains that are not actually like tied to the base L1.

And there may actually be a room for those to exist as like a lower trust environment, or more trusted environment, sorry, in the future as well. And the goal with Connects is just to make it one simple, interface that allows you to connect to all of these different systems, um, allows you to have like a true kind of internet of Ethereum. So Arjun, maybe,

um, you sticking on this for, for a moment, could you, uh, tell us a bit more about how we compare these various bridging solutions, like sort of the, the tradeoffs of them?

And also get into, if you're thinking about, um, like the, the perfect bridge, the success criteria for a bridge, what are the KPIs that you really look at? Is it number of,

users using this thing? Is it amount of capital flowing through it? So first, how do we compare these bridges? And secondly, what are the success criteria and sort of KPIs? Yeah. So there's a, there's a mental model that we've been using. And of course, all mental models are simplifications, but I think this is a good simplification. And the mental model is something that we like to call the interoperability triloma or the bridging trilema, which is similar, similar in concept to the scalability trilama, where all interop systems can only really have. have two or three properties. And those properties are extensibility.

So being able to like go to multiple chain, multiple different, you know, L2s and chains very easily and work the exact same way in all of them. Generalize abilities, the ability to do arbitrary data passing and then trust optimization. And what we've seen is that all bridges kind of like pick, end up having to pick for just because they have to end up picking like two out of those three properties.

Everybody that's on this call has selected. trusted trust minimization and extensibility. So that's why you're able to like run the system on L2 and then also on on Ethereum and also do it without, without, you know, introducing a lot of trust. But the, you know, we've talked earlier on this call about multi-sig bridges that, you know, multi-sig bridges pick generalized ability and extensibility, but they're obviously more trusted. So yeah, generally we've seen that there's like three overarching flavors of bridges and then of course a lot of other subcategories within them.

Can you repeat the second part of your question? Yeah, so like success criteria for a bridge. What makes a bridge successful? Is it an amount of capital? Is it, you know, users? What are the KPIs? Yeah, this one's a bit more difficult because it's like, it depends on what the bridge is being used for, right?

So like if your system like hop connects across, I guess everybody that's all this call, your KPI is going to be like transaction volumes, the amount of value that is flowing between chains because the vast majority of what you're doing right now is like helping users transfer value from one system. one L2 or chain to another. Whereas, you know, if you, once you start moving towards like more generalized data

passing where you're allowing people to build like actually cross L2 apps that are fully generalized, then it becomes a little fuzzier because it's like now you're running this like, you know, system on top of on top of these L2s and like the purpose of that system may not be to move funds. It may be, you know, just to pass arbitrary messages. So in that case, it would probably be something more similar to like Ethereum where it's like, you look at number of transactions the chain is doing, or perhaps even like the amount of fees that are being earned by the actual service providers. So Chris, wondering if you could kind of build on Arjun's definition here.

So we're talking about comparing different bridge projects. And I'm struck by all the time how much surface area for education there is here, because now we need to do something with kind of the community, and we need to make sure the community understands the difference between like multisical, trusted bridges and these like more trustless bridges. And it sounds like all of the panelists participants fall in the trustless category. But even within that, that, you know, trustless category, what are the other tradeoffs or differentiations you would make between these bridging projects? How can we compare them?

Yeah, it's a great question. So there's definitely kind of a few tradeoffs within this trustless design space of bridges. And so I guess kind of the main types of bridges would be like, you know, I think us and across share very similar properties where we kind of have both passive and active liquidity providers. I know we're going to be talking about that stuff a little bit later. And basically, you know, have these active, or yeah, have the active liquidity providers fully verify different chains

and facilitate the bridging. the bridging and then have kind of the passive liquidity providers take on longer tail risk of stuff breaking or challenge windows not being long enough and stuff like that. But yeah, and then the other side of things is kind of like atomic swap type of bridging, and that can be trustless. It can be extended to chains outside of the Ethereum ecosystem, which can't necessarily happen with hop. And this will, you know, you X-wise, you do have to wait for kind of like two steps of finality. So if you're thinking about like an optimal bridge, an optimal bridge will

be able to do a transfer within just one step of finality. So so you wait for the source chain to reach finality and then you receive funds at the destination. And so like an atomic swamp setup, you do have to kind of wait for two steps. So that's kind of, one of the tradeoffs, but then there are big advantages around capital efficiency and stuff like that that are worth taking a look at. So VCM mover, you guys touch a whole bunch of different bridging solutions. And I'm trying for a minute to put us back in the headspace of a typical user who's like, I want to get from here to there, from this chain to that chain. And they're looking at the landscape and they see all of these different bridge solutions, you know, one's a

two-lane bridge, one's, you know, a one-lane bridge, one is kind of just like, I don't know, built out of wood. The other is like a nice, you know, suspended bridge, all of these different bridge solutions. How do they evaluate the differences and make a decision on which is the best bridge to take? Is like safety and security, the primary concern? Is it how much the toll is, how much it costs? What are the primary concerns from a user's perspective? So like from a user's perspective, I would say, you know, like it, you know, kind of depends a lot on the user profile. So it's like a DGIN, you know, they could like prefer a really centralized pitch that allows them to just, you know, kind of operate on a single database and just like move things around before the block on the sending side even receives finality because like the liquidity provider here can take the risk of the source side kind of rolling back. So like it, it, it, it, it, definitely kind of depends on like the user. So we've like kind of built out this thing called FundMur

which is like a bridge aggregator that kind of like allows to just like see what all options are there right now. There you know like different security properties, the different like outputs, gas fees and so on and you know kind of judge from there. So like a user depending on his preference can just like see what what he prefers to, you know, kind of move his funds from one chain to the next. So yeah. In a heart, I'm wondering if you could weigh in on this conversation so far. So it seems like there's so many different bridge solutions. Is it good that the ecosystem has a plurality of different solutions?

Or is that more confusing? What types of bridge solutions do you think the ecosystem needs to develop in order to get us where we need to go in this great migration from layer one to layer two? Yeah, Ryan, I'll give a controversial answer here, I think, which I hate, I think the number of solutions is problematic, and I think the different security properties they have makes us a shit show and actually exposes users to a lot of risk that they don't know they're taking. And so, again, this panel, we're all aligned in that we at least are closer to the trust minimization side of things, or the trustless side of things. And we value that. There's other people that are not on this panel that are more generalized and support of the chains that aren't on that. And there's some really scary shit going on out there. The problem in my view is that users are ultimately going to pick a bridge based on price and mostly based on price alone. Or let's say price and speed.

So I think that's going to end up being what we have happened. And that could be very scary if people pick up. the cheapest bridge, but that has the worst security assumptions, and then something goes wrong. So I think that there's this, I think what we all got to do as like on this group of people, we got to get to be the cheapest. And I think price really matters here. That's kind of my view. And we've got to be cheapest while being trustless. And that means iterating on a, and I got a lot to say on that too, but you look like you're right to say. I do want to get to Arjun and some of the others really quick, but like, scare us straight for just one second here, Hart. Okay. So like when shit goes wrong, how could it go wrong if we're depending on centralized, more trusted solutions for bridging? Like, why is this so bad? What is the iceberg that people don't see in the water?

In some ways, I think Ben's big brain might be actually best to answer some of the really scary shit here. But generally speaking, it's just, like you don't get your money or the tokens you think you have, you just don't have, right? And like, you know, 100% losses are a bad thing. And then people providing liquidity, like losing out on that are a bad thing. And I think it's a reasonable expectation to think that in 2022, some of the biggest hacks will come from bridges or bad bridging solutions. that would be like my thesis. Ben, what would you out here?

Yeah, I mean, well, definitely to Hart's main point, like, yeah, what do we need as a community? We need, like, the thought leaders and people with successful podcasts and Twitter followers to tell those users about the dangers and trade-offs that they're making. So I feel like we're doing the right thing. I would say that bridge security is an interesting problem. There are these trusted bridges, which effectively assume the same security assumptions as side chains, right? So do you want to see a multi-chig bridge, right? A side chain is kind of like a multi-sig chain. And for some use cases, maybe that is the level of security you want. It's definitely less,

but it's interesting. And one thing to add to that is that for the perspective of people that are bridging, there is one difference, which is that the funds that are in transit are the things that are currently at risk of being locked. So it's not like once you bridge your money, the bridge collapsing an hour later could affect you, right? Like, I think good bridge designs, even that are centralized and do have trust assumptions, they at least give you that. So, like, one thing I always tell people when they're bridging, if they want to use a, you know, sketchier, more custodial bridge is literally you should be going to the Twitter

immediately before you bridge and look if they went down. Because realistically, if they're going to go down to some point in the next week, you might be fine using it right now, right? So you need to understand that risk and you need to be informed. I think the question that I would actually follow up and ask this panel, because I really like Hart's comment that it's our responsibility to make the safe bridges and the trustless bridges as cheap as possible. I actually am curious, though, I think this is at least a bit of an open question on my mind.

Do we think that's possible? I think there is some intuitive argument that tells me trustless, trusted bridges by making trust assumptions can exercise some capital efficiency that gives them. an advantage. So I'm really curious if we think that we can get those bridges achieved as possible, or do we think it's an impossibility result that there's a trust-cause trade-off? Because I am worried that that's the case. Who wants to take that one first? A heart. You just unmute it. So go for it. No, Chris, go ahead. Okay, Chris, go for it. Sure. So, Ben, I think you're right. Like, I think that there are trade-offs that you can do in a more

trusted way that we could just never compete with in terms of capital efficiency. That being said, I do think that there are trustless models, you know, including where we're approaching, where once you scale up, the fees just get so, so, so cheap. And so like right now, you know, bridging across hop, you're probably looking at 10 to 20 basis points, more like nine basis points if you're bridging with beef. But as that scales up more and more, the batches get bigger. The fees really go through the floor. And it might be that users are willing to kind of stay within this more trustless environment

because one or two basis points they just don't really care about. Yeah, I just have a question on this to help me understand because this new world hasn't yet come yet, right? It's still being developed. But do you guys think that like, you know how everyone complains about gas fees today? you know, as they should, I understand, it's very expensive to transact on layer one. Do you think tomorrow they'll be complaining about bridge fees? Like the toll to cross from one chain to another is like too high and that'll be a pain point for users? Is that the future we're looking at?

What do you think, Chris? I personally think we'll only see high bridge fees when there's, you know, a huge net flow in just one direction from like one chain to Ethereum or one chain to another chain. But when things are pretty balanced, I think, you know, as we scale up, these are just going to go through the floor. Ben, you've got to, so go ahead. No, I was going to say, David, is just to add, like, to Chris's point, I think that there are designed to Ben's question around just are there tradeoffs here with capital efficiency versus trust assumptions? I think there are designs that get more specialized that actually solve for this and even get a little bit in the weeds and compare what we're doing versus.

what Chris and Hopper are doing. We right now, we don't support L2 to L2 transfers, but we are highly capital efficient on L2 to L1 transfers. Whereas Hop, just on the flip side here, is less capital efficient on L1 to L2 transfers. It takes about twice as much money just from funding a pool side of things, but they can do L2 to L2 things.

And so there's sort of like a trade off here in our own designs that highly highlights to me, if you get pretty specialized, you can actually get really capital efficient. And like right now for context, across the bridge, a million bucks, a million USDC, our average fee on that over the last few days, about four basis points. So it's like four cents per hundred dollars to do that. And that's not, Ryan, back to your original point, that's not a cost that goes up with usage that's like an interest rate fee that's like a cost that only uh so so unlike unlike uh l ones where the cat costs get more expensive as more usage happens this isn't exactly the

same thing it's like it's about a capital availability um yeah to like add on what heart just said i think we are like kind of missing out on a you know on a mechanism for for bridges that are like like, you know, mint and burn based. So like, you know, kind of like imagine a world where there are, let's say, only Zika roll-ups that settle, you know, every five minutes or so. Then we can actually have like, you know, L2 to L1 and L2 to L2, you know, like fast moment of assets, you know, within five minutes or, you know, like adding like L1 latency like 20 minutes or so without the need of external capital.

So I doubt there's like a, you know, trade off between trust assumptions and cost. I think there's a trade-off between trust assumptions and latency. I think that's much, much more likely. And, yeah, I heard this first from James, Best Rich. Yeah, just to follow on that, because I think I completely agree. Like, I don't think the capital efficiency of the bridge is necessarily directly related to the trust considerations. Because, like, if you think about, you know, systems like any swap or Thorchain, what they're doing is utilizing a multi-sig bridge that is backed by stake. and the staked asset is the token.

And so like the capital efficiency of that bridge is not like while you're normally thinking of the liquidity available in their liquidity pools, the actual capital efficiency of the bridge also includes the staked assets because that's like the fallback mechanism. The benefit that those bridges have is not that they are more capital efficient. They're not. It's just that because they're using a multi-sig as this like cross-chain oracle, they are able to have fully passive liquidity provision for like the system and or they're able to like mint and burn tokens without really any recourse. So, you know, it's almost like you don't necessarily, it's like less of a consideration around how capital efficient it is and more just around how difficult it is to build.

And of course, like it's the same as like sidechains versus L2s. Like L2s will get cheaper than side chains at some point. It's going to take more work to get there. will get cheaper. It's just that side chains are very readily available. They're very easy to build and roll out. It's going to take more work to get there should be the hashtag of Ethereum, I think. And so it makes sense that all the people with trust minimized bridges are all kind of aligned on that. Ben, I want to tie off this section of our questions with this question. And hopefully that can lead us into the next phase of this panel. But we have so many different flavors of

bridges here and so many different tradeoffs. And at the end of the day, if we want crypto to take over the world, like users are just not going to care. They're just going to want to press buttons and have things happen. And we've started to see some of this in the decentralized exchange landscape, where first there was uniswap, and then there were other decentralized exchanges, and now there's more decentralized exchanges. And then there became decentralized exchange aggregators. Some of these aggregators are built right into metamask, and also things like matcha and in one inch or just making it a lot easier for people to just route around different liquidity in defy to get what they want.

Is the future of bridging something like this where just an aggregator just says, hey, we'll take care of all of these complexities and tradeoffs? Is this a logical conclusion? Can we take a page out of the history of defy to extrapolate into the future of bridging? Yeah, I think that what Hart said is probably accurate, which is that users are probably most reactive to price. So that argument would indicate that bridge aggregation is a very strong potential future. I'm sure that By Bob agrees with that. What I would say to build on that is that ultimately it's not quite the same from a technical perspective as these exchange aggregators.

Because in the example of a one inch or a matcha, the trust assumptions of the dexes that are being aggregated are completely homogenous, right? So at the end of the day, no matter what new bridge, pardon me, no matter what new decks that one inch chooses to integrate next, the fundamental contracts that are a part of the one inch system will enforce that the exchange rate is only, you know, held if it was agreed upon by the user and the money came from somewhere. This is not the same as these different bridges, because you are relying on more. more than smart contract security. It depends on what details and those trade ops

that we just talked about are made. But I do think that it's worth noting that that's a fundamental difference. An exchange aggregator, it's all contracts on all one. It's all 100% composable, all of that stuff. That's not the case for bridge aggregation. So I think what will play out will definitely be dependent on cost. I think it will also be dependent on the same depth of reaction

to security tradeoffs that users will have actually with using chains as well. So definitely a world that I've imagined is one where like in my wallet, I can kind of say how trusted I am. And then maybe the aggregator will only aggregate the top, you know, 10% of most trustless bridges or whatever, right? So I think those questions are just general like crypto, UX questions that apply to sovereign chains as much as they apply to the bridges

between them. And I hope that as we get more sophisticated software, it'll all disappear in the background, but we'll be able to keep being trustless. Yeah, Ben, I just add to you that I think there are a lot, a lot of parallels to what has happened with Dex's here too. And then there are the differences you pointed out. But parallels, for example, like, there was Ryan or David, but you said you kind of started with Uniswap, but they weren't the first. It was like zero X before that. And zero X was like active liquidity provision, which is kind of like connects and some of this other stuff.

And then it became really useful in other ways in the future once it got aggregated. And then like Uniswob v3 was super capital efficient. one thing and you saw v3 is winning on the volume things because of their capital efficiency and then it's getting aggregated up. So if you kind of want another view, I think there is going to be this pattern of these different techniques will have their strengths and weaknesses. There will be a strong focus on capital efficiency and fees. And then somebody will aggregate this altogether. But then you add in the complication like what Ben talked about is that they're not homogenous trust assumptions. And so here, the role of the aggregator, I think,

actually becomes all that more important because the aggregator is now the gateway that's going to pick which bridge solutions are actually safe and which aren't. That would be my thesis for my hypothesis for how this world plays out the next three years. And I just wanted to add something to Hart, what you were saying earlier about like the, you know, whether we can achieve kind of the same fees that a trusted bridge can achieve. And I think what you were saying, Ardun makes a ton of sense. Like basically the trusted bridges can have just purely passive liquidity. And they're active, you know, what in our cases would be liquidity providers.

They're the active piece of their bridges are just multi-sigs that don't have any kind of capital requirements. And so like, you know, what you were saying, Hart, I think the way across is able to kind of achieve like more capital efficiency, is just by shortening that challenge window. So outside of the passive liquidity, the capital efficiency comes down to like, how long do these active liquidity providers need to lock up capital? So with HOP, we have a full day challenge period.

And I think with the cross, you've taken it down to three hours. And so while that is eight times shorter and eight times more capital efficient, it is, you know, it could be argued that it is kind of trend into that more trusted territory by having that shorter challenge window. I do in response to that, but we can come back to it later. VCU, do you want to add in any thoughts?

Yeah, just on the aggregator thing, I think like for decks aggregators, we could like, you know, pretty much blackbox the whole thing because like, you know, everything's atomic, you know. You don't care what decks you are going through until you get you get. get X amount of dye at the end of the transaction. But kind of bridge aggregators are more like, you know, this, this like sky scanner while where you need to like, you know, kind of select do I want to go via Lufthansa or do I want to go via this like, you know, some new that I've like never heard of flight, which is cheaper, but I, you know, kind of trust Lufthansa more. So it's like going to be there where like users have to like, make like a manual selection

or like what security properties they are opting into. But yeah, we can like kind of abstract all of that out by, you know, having this like, we are like still working on this, but having this sort of like security score per bridge that like an aggregator or like, you know, us as a community can decide on. And then people can just be like, hey man, just give me all the bridges with security for security score for and above and so on. So like I think like, you know, by working on some like UX stuff, we can make it happen. I would add in some thoughts.

Yeah, go for it. Yeah. I like the Sky Scanner analogy a lot. And I mean, it's a little dark because basically what you're saying is like the trusted, the trusted bridge equivalent is like, you know, your plane crashes because it's less trusted. But I do, I do like the analogy because you're right that like, you know, users will eventually in theory learn to like base their choices on more than just price. I want to touch on capital efficiency a little bit because I think that's a really important point and I think that's like one of the ways that like we try to differentiate as well. And, you know, one thing to note is that like capital efficiency is largely ends up being determined by like

the constraints around your protocol. So in the case of like hop, the capital efficiency comes, or like the capital usage comes from the need for passive security on both chains and then the lockup. In the case of across, it comes from, you know, the shorter lockup and then like that, like the money that is kept in reserve in the event that fraud occurs and this good needs to happen. And so I think like in the interest of kind of talking a little bit more about capital efficiency, I think it's important to remember that like while it's true that capital efficiency is super important, it may not actually end up being the case that it results in like the best possible price. And the reason is that like the overhead that you end up going through to be able to

ensure high capital efficiency and doesn't always end up being valuable. So like a good counter example to this is like, you know, so like the way that connects works, for instance, is like you have a set of LPs and then you and then like you basically just directly swap with the LPs. The LPs take no capital lockups. Their lockups are like less than two minutes. And so it ends up being a really capital efficient system. And like the idea behind it is very similar to like RFQ systems or clearing houses.

And the problem is in many cases, those RFQ systems, you know, know, like, those RFQ systems didn't actually really work out that well for Dex's. And the reason is just, like, the additional overhead and complexity involved in having order books to, like, match trades between people ended up costing a lot more money than, than, like, using a slightly less capital efficient system like Uniswap, right? Like, Uniswap doesn't have, didn't have great capital efficiency. 80 plus percent of the liquidity was just never used. It was just sitting there. And, but at the same time, like, you, because you had this really easy system, which is really predictable and nobody had to deal with like on-chain order books and nobody had to deal with all

this other complexity users ended up saving a lot of like cognitive costs and then also ended up of saving a lot of costs in terms of having to wait for things having to like post their data upfront on-chain and I think like those things are also pretty important to consider as part of this like larger conversation around cause guys this has been such an amazing conversation I'm going to have to listen to this again once we are done here we're going to come back with a question out of Ben about vitalics cross-chain commentary a blog post that he he wrote in the past that has predictive components, perhaps, about the future of a multi-L2 world versus a multi-L-1 world.

I think that's a topic a lot of us want to unpack. So we're going to come back with that right after we get to some of these fantastic sponsors that make this show possible. When you shop for plane tickets, you probably use kayak, Expedia, or Google to compare ticket prices. So why would you limit yourself to just one exchange when you trade crypto? When you make your trades, you want to make sure you're getting the best possible price on your trade.

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and help steer Uniswap in the direction that you think it should go. Thank you, Uniswap, for sponsoring bankless. All right, welcome back, y'all. Okay, so I wanted to kick off this next question prompted by a post from Vitalik. I think it was in an AMA, but he also tweeted it. By the way, Vitalik's back on Twitter this year, very exciting. That was talking a lot about some of the trust-related conversations that we've been talking out here.

So I'll try to very briefly. It's a longer post. I'll recommend you check it out as listeners if you haven't posted on January 7th. But I think that maybe a bit of background, which I would share, is that originally when we were thinking about bridging or these cross-chain sort of scenarios, the actual first thing that came up with something called an atomic swap. And this is actually not a direct messaging. There's actually never really a in-protical way that one chain talks to another. But it was a way that two users with assets on two different chains, oh my God, adorable Doge, Arjun, two different users on two different users on two different chains could agree to a price and trustlessly swap, you know, I mean, what was in the beginning,

like Bitcoin for Lightcoin. I think that's Dan Robinson's classic joke is like, what is Lightcoin's use case? It's for being the example of the other coin and a cross-chain swap. So in any case, that's sort of a different form of swap in some sense than what we're starting to see in more advanced ecosystems. And it actually is very similar to this analogy we were making right before the break, where Xerox and Ether Delta had were dexes that had order books. and then we moved to uniswap, which had this more passive form of liquidity.

So there's actually a similar thing that's emerged in cross-chain discussions, which is basically whether you, which basically comes down to wrapping one asset on another chain. So before we had these protocols where you could exchange ETH for Bitcoin. And there were different protocols to do that, and you could do that fairly trustlessly between two people. Later on, we realized that there were these Ux advantages of having something like Weth, I mean, wrapped Bitcoin, where you would work. keep, right, where you would actually take Bitcoin and sort of express it as an ERC 20 token on Ethereum. And Vitalik's kind of argument here is that that's less secure. Because imagine that you take one asset

in one, and then you wrap it and express it in another chain, then you wrap it and express on another one, and you wrap it and express it and express on another one, right? You have all these hops, no relation to hot protocol, you have all these hops of connected wrapping and wrapping and wrapping. And there's a risk that if any step in that wrapping process fails, you wouldn't be able to unwrap. So if any of the chains along the way were able to unwrap, we're able to go down, then you risk, you know, the entire sort of chain of wraps. So this is the sort of term he used was arguing that the future will be multi-chain, but it won't be cross-chain because this wrapping exposes security. So I'm just really curious,

honestly, I saw a lot of great discussion about this online. I think there were strong points for and against, but you guys are the cross-chain experts. So I'm curious for your takes, if you guys have any spicy opinions, thoughts, agree, disagree. I don't know. It's a bit of an open question, but hopefully someone has something interesting to say. I think it's super interesting. A lot of people were thinking about IBC is kind of like holy grail. You could do L1 to L1 bridging and not have a lot of trust assumptions.

But my biggest takeaway here was that we kind of think about 51% of attacks as these like end all, be all, like worst case scenario. And I think what Vitalik is saying here is that, you know, we shouldn't necessarily optimize for preventing a 51% attack in like all absolute cases. And that, you know, that there are good ways to recover from 51% attacks and that you're only kind of like the only things that are at risk are kind of the in-flight transactions during the 51% attack. And that his point is that once we kind of get into this like cross-chain world, not just a multi-chain world where you're, where you're, you're using assets based on one chain on another chain that has a completely different consensus layer that now all assets are at risk. And this is much, much less secure than if everything's on the same consensus chain and we can do our social recovery from a 51% of time.

So I thought that was a big insight for myself. Yeah. So we've spent a bunch of time thinking about this as well because, you know, like I said, We're sort of this open system that can be kind of permissionally deployed right now to EVM chains, but it's also possible to plug us into anything. And that definitely brings up a lot of complexity, right? Because it's like what happens if someone is, we sort of inherit all of the security properties of like the chain and tokens that are being used in our system. But like what happens if someone plugs us into like XYZ chain that has zero economic security and that XYZ chain has their own representation of USD, USDC or die or something, you can you can basically use that that really, really centralized, very,

very insecure chain as a way to like spoof US fake USDC or fake die back to Ethereum, take it from this very low security environment to very high security environment. And it's, it's unclear how that should be handled, right? Because like, you know, if you want to get to the, to the ideal case where like bridges, across chain bridges are like fully trustless and they're permissionless and nobody can really stop them, then how do you stop this from happening? I think, like, my personal view is that there are a need to, like, bridge over blue chip assets and, like, have them exist in rap forms on different chains. That does add to security risk, I think we'll probably have to, the sad reality is, like,

even if we, like, in a closed room environment, say that's not the most secure option, and that adds a lot of tail end risk, it's going to happen. So I almost think that the discussions should more be around like how do you mitigate the risk of these potential cases rather than stop them because there really is no way to stop them. And from a mitigation standpoint, I think there is some really interesting things that you can do using models like Connects, Hop. I'm actually not sure across. I would need to think about it a little bit more. But like in the case of things like Connects and Hop, you have like pricing on a chain changed dynamically based on demand for that change. chain. And that pricing can reflect this risk in a decently realistic way if, if like a Black Swan event happens. And the other thing is that that pricing can actually adjust. Like, you know, we talked earlier about like what happens if everybody is going from one direction to another on a given chain, like, you know, through hop or through connects. Well, at a certain point, the price is just going to get incredibly expensive and it's going to become unfeasible for people to continue trying to move more liquidity out. I think there's some, I think you can use those sorts of.

of things as like interesting risk indicators. But yeah, go ahead, Hart. No, Arjunal was going to say is like, I actually think one way we reduce the bridging of blue chip assets like cross chain. Like for example, take like blue chip defy tokens on Ethereum. Like how do we reduce the bridging of that cross chain? When we make it such that there's no need to bridge it to another chain, which we do by I'm making L2 is really fucking awesome, right?

Excuse me language. So I actually kind of put this all back on Ben where like... Music to my ears, baby. But I'm actually dead serious. Like to me, it's never really made sense to take like an Ethereum-based asset and put it on Solana unless Ethereum's ecosystem is so expensive to use. There's like, you can't do the thing you want to do on Ethereum. And that's like not maybe always true.

Maybe you want to use it as like collateral to lend. in the salon ecosystem or something. But I generally speaking think that if like L2s are really, really good, the need to like leave the Ethereum bubble goes down. I could, it would be a whole separate, separate discussion if I started rambling about how L2s need to address the real concerns that Solana poses that Ethereum tries to stick in its head,

its head in the standabout sometimes, but we'll save that for another day. Well, I actually have a follow up on this because, so one of the implications I think of this post, So Vitalik used this term, zones of sovereignty to sort of define kind of the difference. Like for people who aren't tracking. So on Ethereum, if you have an ERC20 on Ethereum, and you put that on a layer two chain, you inherit basically the asset inherits the economic security of layer one.

But when you bridge that ERC20, that token from Ethereum to say Solana or, you know, Tezos or Avalanche or something like that. that, then you lose those security properties. And it actually becomes a different asset. It's like an asset that has different trust assumptions. And you can't, you don't have the same security guarantees that it's actually backed by the things you think it's backed. Okay. And so the implication of this, I think everyone going into 2022 from a macro perspective, and that's why I want to throw this question of the bridging panel. But from a macro perspective, investors, users, everyone is looking at like two different paths to the world.

One is this multi-chain path. And by multi-chain, I'm not talking about the way Vitalix using it, but multi-chain meaning like there's Ethereum and then there's all sorts of other L-1s. And it's this universe, kind of like the Cosmos vision, the IBC-type vision of things. That's sort of the multi-chain path. And then there's another path where you have Ethereum as a settlement layer and it is kind of the dominant settlement chain. And then you have a bunch of layer twos and it's kind of an Ethereum ecosystem and that's

sort of the dominant player. I think investors, users, everyone is trying to figure out what's going to happen. Is it going to be, A, like multi-chain universe, or B, is it going to be layer two Ethereum ecosystem dominated universe? I'm wondering if this zones of sovereignty thing provides a clue here, like if bridging is actually the clue here, because it strikes me if you have a multi-chain world, you have a completely different set of trust assumptions here, and it might actually break down when we start trying to bridge assets from chain to chain to chain. I don't know if anyone on the panel

has a thought on that, but like it's something that has consumed me very much in 2021 and going into 2022. How do you think bridges play into that? Just throw up, Arjun, maybe you have a point on this. Yeah. So there's there's like there's sort of like an objectively ideal solution and then there's like what's probably going to happen because the world is messy and people hate standards. the objectively ideal solution is always going to be to have one settlement layer, right? Because like the whole point of this ecosystem, the whole point of the work that we're doing here is to move towards a world where you have the maximum amount of crypto economic security associated with this like base layer.

And so it makes sense to concentrate all of that into one chain because that provides the best kind of long-term economic guarantees against what could potentially and probably will potentially one day be like sovereign level, state-level actors attacking chain. In that vision, yes, you know, data availability shards, L2s, that is, that is the best world because what you're saying there is like everybody is leveraging Ethereum's crypto economic security. No one else needs to think about bootstrapping a validator set anymore because bootstrapping validator set is hard and it's expensive and in, you know, it fragments liquidity. And instead, you just focus on like execution and other other pieces built on top.

unfortunately, as I mentioned, people hate standards. Like even in a non-bag-holder environment, like the internet itself, like is made up of a ton of protocols. And of course, we know that, you know, we know about TCPIP, we know HETP. Like, we know these things have been generally adopted at standards. But also, there are a ton of other protocols that people don't know about that get used all the time. And like, we actually have to build adapters to all of them.

It's a huge mess. And in those cases, like, none of these were, you know, know, like community funded or VC-backed companies trying to issue a token and create their own communities. Like, those, nobody had any stake in the game except for ego. And so I think, like, the reality is that, you know, we'll probably have some combination of the two. We'll probably have this, like, Ethereum universe. And then we'll also probably have a Solana universe and a Cosmos universe and a, you know, XYZ PolkaDot universe. And they'll sort of follow this, like, long-tail pattern. And we'll have to kind of figure out how it should work once we get there.

I totally agree with the kind of power law distribution, like, you know, having kind of probably Ethereum captured the majority of high value use cases just because it is optimized for decentralization and security. And then, you know, I do think we'll see other chains that, you know, where use cases, you know, might not make sense on Ethereum, you know, even if we can get layer two is to be like the theoretical maximum efficiency, there's always going to be use cases where you need, you know, sub one cent transaction fees, sub one basis point transaction fees. And, you know, I think it's, you know, while it's important that we like capture as much as we possibly can and drive those fees as low as we possibly can on Ethereum's layer two, I think it's

also important to kind of recognize that there's use cases that should be very interoperable and close with Ethereum, where users can go on another chain and play a game where they make 100 transactions and don't have to pay $1,000 to play that game. And then can always retreat back to safety to Ethereum. And so chains like Polygon and stuff like that, I think have kind of provided that more of like a playground where users can, you know, keep their secure funds on, say, optimism, where they know that they have this, this, like, absolute strong, like, I can keep my life savings here, you know, maybe one day, maybe today. And then they could also take, you know, say, like, 100 bucks or the amount of

money you'd keep in your wallet, your actual wallet, and go play games and, and then come back to safety. All right, guys, I think we're going to start to wrap up some of the questions here. Ben, do you have any last questions that you want to hear from our panelists before we come to our closing questions. Oh, man. I mean, I do, because I could talk with hours and do talk with hours for hours with all these folks. I think none without opening up a big new threat of discussion that maybe we don't have time for. I think the name of this game, though, was tradeoffs, and that would be what all my questions are about. And if there's one takeaway for the audience,

is tradeoffs. Always. And not just about L2s, but about all things crypto, but then also about all things life, just tradeoffs all the way down. There's one last question that. heart brought up during the break and it's about how are bridges going to be used and I think that heart you might even be able to ask this question yourself better to yourself so can you go ahead and ask that question and then also answer it yeah the ask my answer my own question thing yeah no David my point here is I think it's useful to have a thesis for how we think this bridge usage is going to get played out and I'd actually really want to hear other people's opinions in perspective.

And I want to be opinionated here. So in my opinion, our goal as kind of Ethereum maximalists-ish, right, is we want people to stop using L1. I think Ryan made this point earlier. Like users stop using L1, get to L2. And our goal from a consumer perspective is to have people bridge in one direction and not go back to later one. that's like something that is good for the Ethereum ecosystem.

So then my question actually becomes, like the question asked myself is like, who actually does the bridge in the other direction? Like maybe the whole optimistic roll-up withdrawal window isn't a problem if nobody's moving back to L1. And I think actually for the vast majority of users, they're not going to be moving back to L1. That's the whole point. The people that will be moving back to L1, though, are arbitrageres. And I think that's where this real use case comes from.

So you're going to have people that are like seeing price differentials on the uniswap deployment on optimism versus the uniswap deployment on Ethereum. And you have arbitrageers that need to move back, need to balance these trades across assets. And that's the thing they got to do. So from across this perspective, just to share insights on what we're thinking here, we're trying to be really hyper efficient and really, really low cost for big transfers from L2 to L1. specifically to help arbitrageers do that job. Because I think that the core user is going to go in the direction to L2 and not move back.

And that's, I'm kind of want to know what other people think of that. There is then one other like sidebar, which is what about going L2 to L2? And that's something that like we don't do right now. And that I think is a strong use case where then you could have consumers that are on optimism but want to use arbitram or whatever else. And so there's a bridge case there. but I think I'm talking too much. So a question to the panel,

how do you think people will use Elf? Like, how would you think people use bridges? What do you think the future is? And, like, what are your opinions there? Yeah, I'll, you know, probably add at some points here. So, like, most likely arbitrages are, you know, like not going to be, you know, like, heavy bridge users to, like, you know, capture, like, this, like, arbitrage opportunities.

Because, like, at the minimal, we have to, like, wait for a finality on the source side, you know? So like at the minimal, it's like, you know, going to be two seconds, five seconds. And arbitrage opportunities are lost in that, like, you know, like a minute of milliseconds, right? So it's like most likely going to be arbitrators, like having two different liquidity pools and, you know, kind of using and like their own like, you know, satellite system and kind of, you know, using their own liquidity pools between these two, you know, chains and

revalancing via layer one. Yeah. And apart from like, maybe like the users. won't directly go to layer ones, but I think like conditional transfer protocols or repayment protocols like hop, so like, you know, other like bridges could, you know, just like batch all of these user transactions

and, you know, just like do a single on-chain transaction for it. So, you know, most likely will be rebalancing across the, you know, different arbitrage pools across, you know, different chains and like, you know, other bridging protocols and so on. But yeah, most likely, hopefully, know, things remain on it on it. Yeah, and like that was kind of our approach, it was really, you know, optimizing for layer two to layer two stuff.

Because, you know, like you're saying, you know, a majority of users are kind of moving to layer two right now. And then not necessarily moving back. And what we're seeing is this like really diverse and rich set of layer two solutions kind of come up. And so, you know, like obviously optimism and arbitrum are big ones. and then the ZK roll-ups are starting to get traction. But I kind of expect the ZK roll-ups maybe to have a slower start just because a lot of them are requiring a custom language or something like that.

But there still might be use cases where a user wants to jump over to that chain. They want to use those applications. And they need to be able to kind of move across this rich layer two ecosystem very fluidly. So I kind of see that as how users are using these bridges to go from one app to the next depending on what underlying L2 solutions it's built on. The ability to fluidly move from one layer two to another layer two. It feels like table stakes, feels like a necessity. This is core infrastructure.

If we're going to get to where we started this panel with the episode with is the great migration to L2, from L1 to L2. It's something that is in process now happening in 2022. too. But I'm wondering as we close with this last question from the perspective of the, the bridging projects themselves, how long do you think this great migration is going to take? Like, how long until we are fully off layer one into this glorious layer two world? The bridges are in place. People, you know, new users onboard onto layer two. They use bridges to, you know, hop from place to place and do their work that way. And they never, they never even need

to touch layer one. That is the end destination, but how long is it going to take to get there? Chris, what do you think? Yeah, I kind of think it's going to be slow and then all at once. You know, one thing we're really looking out for our token incentives. And so, like, Lido Cohen from our team has been working on a proposal with Uniswap to incentivize, you know, more liquidity on layer two's. And then there's this really kind of, I don't know if it's It's called like a, if you would call it a network effect, but it's kind of as more people move to layer two's, the more the layer two's take up the block space on layer one, driving the cost up, forcing more people to then move on to layer twos and then it kind of has this flywheel effect where now all of a sudden you can't really afford to transact on layer one because the layer twos are taking up all of the block space. So you have to move. Arjun, what do you think? Timeline, how long is this great migration going to take? So first of all, I just want to say, like, there, it is fully 100% possible to use Ethereum right now without ever touching a loan.

Like that is already available to everybody. We have users in our ecosystem. For some reason, and I don't know exactly how this happened, but a lot of the users that enter into our ecosystem are like fresh, fresh users to crypto who have never really even used MetaMass before. and we end up having to debug a lot of that, which is sometimes kind of challenging. But what we're seeing, though, is that a lot of these people are kind of jumping headfirst into, you know, the Ethereum L2 ecosystem and some of the Ethereum friendly side chains. And they are never touching Ethereum because they're completely priced out. And they're only interacting with L2 applications. And that's created this, like, massive L2 applications that don't never really exist on Ethereum, would never really have deployed on Ethereum.

But they're just, they're just L2 native. I think like, you know, as Chris mentioned, it's like a flywheel effect. Like, it's going to happen. And like it's like sort of every hockey stick where, you know, you sort of see this kind of like growing like this. And then all of a sudden it shoots up because like the exponential effects just kind of kick in more and more. And we are rapidly approaching that. I would say for me, the biggest barrier is really just going to be like token incentives,

really big one. and then, you know, it'll be the, like, the things that drive down the cost of roll up via, like, bigger batching. So, you know, Arbitur Maitro, I think optimism, you guys might have just done this, but basically things that push down those gas costs even further. VC, what would you add to this? Timeline, what do you think? Timelines are definitely hard, you know, being a dev, like I have extremely bad. had estimations. So like, you know, definitely wouldn't comment on that. But yeah, like the graph definitely agree. It's like going to be hockey stick growth whenever it happens. There is, there's still a lot of work to do as you all, you know, kind of got to before. So yeah, here's to just like,

you know, hoping it, it happens sooner than later. And, you know, I think everyone here is, is like, you know, 100% confident that it's going to happen and we are all here, you know, just like trying to empower that thing whenever it happens. All right, anything to add here? Yeah, my very cheeky answer is tell me when optimism and arbitram beliefs are token, and I'll tell you when that hockey state can't happen. Well, this is, maybe we should end with Ben then. You know, final thoughts on this discussion, Ben, and maybe your perspective on timeline, too.

I mean, we set up the hashtag guys. We set up the hashtag guys. It's L22, baby. You know, you know it's coming. No, I feel like similarly to VC, I've gotten enough trouble for trying to predict timelines over the years. I think that definitely the most important point. And I'm really interested to hear you, Arjun, having this from a bridge perspective as well, because I almost think of bridging as being like an advanced thing.

So it's really exciting to hear that you are getting like new crypto users using it. For once worth, Fiat. on and off ramps are live on optimism today. And I think other L2s as well. So like it already is the case totally that you can move straight into L2. So I am hoping and I would think I would make that prediction that that is going to drive usage. And depending on what happens with the fee markets as well on L1, I think that will just naturally continue to drive that usage.

So I think big things are coming this year. VC is right. We should never, we should never put timelines on things. But all the pieces seem to be in place. The bridging is super nice. you can buy the ethon L2 directly. All the pieces are really coming together.

You know, the jigsaw is almost complete. L222. We are building that jigsaw. Panelists, thank you so much for the work that you're doing in the bridging infrastructure. We've learned a ton. Thanks for joining us today. Thanks for having us guys.

Thanks a lot, guys. Bankless Nation, the Great Migration has begun. It's going to start slowly at first, but it is headed towards hockey stick growth. That is the prediction of the panel. I heard at least three of them mentioned tokens as well. And I would just echo these are my words, not the panelists. You should start using these systems.

You should start using everything in crypto because you never know how users are going to be rewarded in the future. Risk and disclaimers, guys. Let's close on this. Of course, crypto is risky. Bridging is risky too. Ethereum is risky. Everything we do in this space comes with some degree or another of risk. You could lose what you put in, but we are headed west.

This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot. Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast, and community as a bankless premium subscriber to get the most out of your bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the bankless community is where you want to be. Click the link in the description to become a bankless premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, ask me anythings, and weekly roll-ups where we summarize the week in crypto and other fantastic content. Thanks everyone for watching.