208 - Fixing Fragmentation with Justin Drake

the whole internet of value can be in one place with shared security under the hood there's these modules but these are integrated modules and we only buy into one security assumption which is that ethereum is secure and this brings us to you know trying to grow the economic security of ethereum right now we are at $70 billion which is extremely good it's 29 million e times the price of e but you know I'm hopeful that we'll get to a trillion dollar of Economic Security or

even trillions of dollars at which point you know we'll have unquestionable Security even against nation states welcome to bankless where we explore the frontier of Internet money and internet Finance this is Ryan Sean Adams I'm here with David Hoffman and we're here to help you become more bankless fixing fragmentation ethereum rollups have a fragmentation problem all the liquidity is spread out each rollup is starting to feel a little bit isolated that has been the critique of

ethereum the last six months and I I don't think is an unfair critique the question is how do we fix it can we fix it there are certainly ethereum Skeptics out there that think ethereum is destined to always remain fragmented that is the trade off with going to a rollup Centric road map that's what ethereum is on right now but we have Justin Drake on the podcast today who takes the other side of that not only does he think ethereum will fix fragmentation also it will achieve the Holy Grail some something that he calls Universal synchronous composability now

don't worry we explain what all of that is as we get into this episode there are three parts to it number one we talk about the problem fragmentation why is it a problem who is impacted by it number two we talk about the solution that is shared sequencing and what that means and number three we talked about based sequencing why Justin Drake thinks ethereum layer one will become the deao shared sequencer this in itself was an incredible insight for me something I just uncovered the last two weeks or so and seems relatively fresh from ethereum

researchers as well there are a few core ideas that Justin really brought together in this episode first is really how shared sequencing provides the platform not the solution but the platform for achieving Universal synchronous composability really once we achieve shared sequencing in ethereum the game starts that is not the Finish Line the rest of the solution the solution space for synchronizing all the chains is left up to uh accessory Technologies like intense market makers reaking but really Char sequencing

unlocks the door for us to to therefore walk through also another idea why rollups will all inevitably join together via the incentives that shared sequencing brings to the table and once we have this how this unites the ethereum rollup development towards a single unified Direction once again in ethereum we will have a unified direction for all the layer twos because all of the layer twos will start to feel and look and be one Global unified system and then I think lastly one of

the very very big takeaways I had from this episode Ryan is why all of this would result in an increase in scope for ethereum's layer one validators that's if we do get to the based sequencing part of this uh future so if you are a validator uh you could and you might have increased responsibilities and increased yields as well uh so these were some of the three big ideas in this very very big episode that Justin Drake brought to us today yeah and I would say as far as content level this is probably 300 level material 3 plus yeah yeah 300

plus and so we tried to uh break it down for you David maybe we'll talk during the debrief uh in in some layman's terms what this kind of means but the the essential the the 100 level content is ethereum feels like it's many different chains today and it won't in the future that is the bottom line of this episode and Justin Drake explains exactly how so this is Frontier material of course the kind of content you come to know and expect from Bank list we're going to get right to the episode with Justin Drake but before we do we want to thank the sponsors that made this possible

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trusted provider of protocol Labs dydx Foundation Mina protocol and many more get started for free and make token compensation simple at tok.com bankless bankless Nation I'm so excited to bring you Justin Drake a researcher at the ethereum Foundation he needs no introduction but if I were to give him one I would say he's the guy who brought us Moon maath our episode about how ethereum is scaling with cryptography ultrasound money how eth is sci-fi money meev burn and how all me on ethereum will ultimately flow into eth and now today on the show he comes to us with a

new problem and a new solution fixing fragmentation is the topic of today's episode Justin welcome back to bank list it's always a pleasure to have you my man David and Ryan thanks again for having me so Justin people are saying ethereum has a problem liquidity ux wallets chains all of our infrastructure is fragmented uh while one of the beautiful things about the rollup uh Centric road map for ethereum is that we all get to innovate and experiment in different directions these different

directions are of course different from each other one of the costs is that this breaks the universal composability that we used to enjoy on the ethereum layer one it is getting harder to use ethereum holistically today more than ever this is the current state of things is this where we end up is this the future of ethereum what say you about this current uh context about ethereum's uh trajectory well first of all I do want to acknowledge that we do have a problem with uh fragmentation and as you said it boils down to a very

large extent around this idea of composability each layer two is kind of its own little Silo right now um and we while we do have Bridges those are asynchronous they're slow and they're somewhat brittle and and very difficult to to use now the good news is that um you know a lot of people have been thinking about how to fix this and I think we can fundamentally fix it with something called shared sequencing so the the root cause for this

fragmentation of composability originates from the fact that we have different entities called sequence quers that are ordering transactions for little clusters of execution so we have the arbitrum cluster the base cluster the optimism cluster now it turns out that shed sequencing in and of itself is not sufficient but it's a necessary step to get to try and regain this uh Universal composability and when I say Universal composability I specifically mean

universal synchronous composability so synchronous means that kind of things happen at the same time things happen atomically it's as if U you have contracts called arbitrary other contracts in other execution domains um so one of the big upsides of having this Universal synchronous composability as you mentioned is that we get we get things like unified liquidity as opposed to the status quo where we have these fragmented pools of liquidity but that's

just the tip of the iceberg we get so much more with uh Universal sh shed composability okay Justin so you're kind of um we're setting up the problem a little bit and we're going to talk about um kind of the the solution the Holy Grail which is this this um term that you've been using called Universal composability and that for the Normie crypto user is a mouthful Universal composability what the heck does that mean let let's just try to break this down into kind of layman's terms when

we're we're talking about the um the problem of fragmentation today let's call it so in a lot of ways ethereum is like much easier to use than it has been um but in some ways it's like more difficult when you tell someone who's new to crypto yeah just use the ethereum network like they might be like oh I see that one is that the one with really expensive fees I'm not using that and then you say no you can go use um optimism arbitrum ZK sync polygon like on down right and they're

like well which one should I choose how do I get started I remember in the early days of bankless when we were talking to someone about getting on chain for the first time the answer was pretty easy like you had kind of one option you just go to ethereum there's no other network selections inside of metamask you can kind of live there you don't have to worry about bridging assets the only Bridge you had to make was going from a centralized exchange like a kraken or a coinbase uh on chain on ethereum and that like that was it you could kind of live there now uh the to road map has

essentially asked ethereum users including the newcomers to go pick a layer two and that's caused some confusion because what if the app that I want to use isn't on the specific layer 2 that I'm on and I don't want to use ethereum main net because it's too expensive but like what chain what chain do I use and the ux around this the liquidity around this it's um it's difficult so what's happening is I think we've seen this a lot in the second half of uh 2023 is comp like comp competitors ethereum competitors let's call them or

alternative layer ones are seeing this soft underbelly of ethereum and they're basically saying look come to this monolithic chain we got it all here you just go on chain and everything is universally composable so an app from like one place in an alternative layer one like a salana let's say or or an avalanche it's available to anyone who is on that chain so that's kind of what we're talking about just to just to set up the fragmentation problem is the ux

and liquidity uh issues that that exist today in ethereum in its current form and I think you're acknowledging that I'm I'm just like wondering high level as we get into the rest of the episode was the move to the layer 2 road map is it worth this cost because we're feeling some pain right now and I I just want to uh acknowledge that and talk about that right so I'd say the the move to Leo twos was absolutely necessary uh and the reason is that otherwise we move too slowly like the layer one is extremely

slow to move forward it's extremely aifi in some sense uh and you know we have these extremely high standards of quality to ship things at layer one so we could have rollups at layer one actually those are called native rollups uh but in order to to do so we would have for example to have a ZK VMS but not just one ZK VM but multiple redundant implementations of a zkv M that are redundant that are battle tested over years um and and this is

just something that we don't have right now and so in some sense like this ethereum accelerationism in the short and medium term comes from these layer tws that permission asly uh can can deploy things and and and move airm forward um while you know the the the layer one uh gathers what it needs to to to to ship the good news is that a lot of this fragmentation as I said is is temporary and I think there's kind of two fundamental reasons one of them is

that a lot of the details around fragmentation can be abstracted away right like when you use the internet there's a lot of different brands behind it there's a lot of different things but at the end of the day you can wrap everything up and like just present a very simple shiny user interface to to the user that abstracts away a lot of technical details and then there's something else which is something much more fundamental which cannot be like papered away and abstracted away which is the difference between asynchronous

composability and synchronous composability that's like a key differentiator and what synchronous composability means is that if I'm a smart contract I can go call any other smart contract and things will happen atomically so if I'm building a very complex application let's say that I'm building a mock Marketplace a Marketplace needs identity it needs a reputation system it needs payments and escro agents and it needs insurance providers now if all of these

money Legos are on execution zones with different sequences then now suddenly your application becomes extremely brittle because everyone every time you want to interact with it you're interacting with different counterparties and composability starts to break down in a very meaningful way whereas if we have this one shed sequencer which unifies everything and it's this one entrance door to this very complex World which can be you know extremely rich and diverse um but it's

this it's it's a real unlock to go from asynchronous composability to synchronous composability now I used to uh you know be one of those people who would say asynchronous composability is fine and you know part of the reason is that eum previously had this road map with Shing where we had 64 or, 124 shots which were asynchronous and to be fair in hindsite it was kind of cope um you know I was optimistic that we could

paper over with abstraction so researchers get cop too because I know crypto investors get get cope I had no idea that researchers actually get technical cope well you know we have various constraints and then you know we just do the best that we can with you know the laws of cryptoeconomics um I mean dank Shing was a massive unlock right because dank Shing basically says that we can do synchronous data availability we don't have to break data availity down into

these asynchronous shards and not only can we do synchronous data availability we can do synchronous composability and we can do the synchronous sequencing so we can do everything sequencing uh synchronously and in some sense we're getting the best of both the modular thesis and the monolithic thesis right we're getting all the efficiency and the user experience of the monolithic feis but behind the scene we have all the richness and diversity and decentralization of the mon of the modular feis I really want to parse

apart this um spectrum that I see between synchronous composability and asynchronous composability I I see a spectrum that is also a binary at one end so asynchronous composability can be a very large Spectrum where we have like on an optimistic rollup we have a 7day withdrawal window so s days to like perfect finality and so that's a very you know very asynchronous you know seven days worth of multiple networks not being totally in sync with each other you know past that seven days then you know some of the state can become you know permeate across chains after

seven days um then in ZK rollups it's much faster uh ZK ZK proofs are just settle onto the main chain much much faster but still they are not synchronous they're still asynchronous change uh but you know they settle inside of like one to three blocks you know just a few minutes so still a synchronous much shorter amount of time slower uh lower amount of time for these chains to like sync up with each other you know Unis swap trades will take a on one ZK rollup will take less time to affect a Unis swop trade on a different uh ZK rollup but it won't be

instantaneous and then you flip over to the binary which is like perfect uh Atomic synchronicity uh and this is uh what I think you are saying like requires new infrastructure uh that you're labeling as shared sequencing and probably some additional stuff on top of that as well is this is this the the right Spectrum to to illuminate this conversation moving forward yes that's exactly right so on the one hand we have a Continuum of latencies or the worst case is you know s days and then we can try and bring that down and actually one

of the requirements for synchronous composability is realtime settlement and it turns out that the only way to get real time settlement which is the ability to read and withdraw from uh rollups immediately is to have a ZK rollup and not only do we need a ZK rollup but we need a ZK rollup with real time proving essentially being that when the CPU runs uh and executes transactions there's some sort of co-processor running behind it that in real time produces a a snot that proves

that the CPU is doing correct execution and we are not there yet but we know how to do it theoretically and in my opinion is just a matter of pushing the the engineering so two things that we need to do is one improve the engineering of recursive proofs so that allows us to parallelize the proving and two we need to have Hardware acceleration and in the end game even have snar A6 so once we have this real time proving we've B basically brought the latency down to

zero for settlement but if you have two chains that each have zero latency of settlement that's not enough to actually get synchronous compos you need the final step which is you need one single actor who has Monopoly power to do things at the same time synchronously on both sides so let's say that I want to buy you know $10 million of some token and in order to get best execution I'm going to need to get liquidity from multiple different pools um well what

I'm going to do is I'm going to talk to the Shar sequencer the Shar sequencer is going to have a look at all these pools and say yes in order to fulfill your order I'm going to go dip in all these pools and the cool thing is that this one entity this one counterparty can give you very very very high assurances um that it will be able to in one fail swoop kind of complete your order and not only that also give you a pre-confirmation so that's another aspect of Shar sequencing is that you

have this one counterparty that can in real time time gives you Promises of future execution um as opposed to having to wait for the 12C block time or whatever the block time is as I've grown in my understanding about the role of centric road map I always kind of understood like oh uh asynchronous chains going in different directions we get a diversity of different strategies this is good for ethereum because all strategies get to be experimented with let the best strategy win uh we get multiple different solutions to the same problems

and then also in response to the like lack of the fragmentation critique um my answer has generally been along the lines of like well latency towards finality will slowly come down over time and it will approach zero it won't actually get to zero which zero I would consider to be uh Atomic transactions Atomic execution Universal composability but it will approach zero you know chains will get faster uh optimistic rollup settlement times will approach zero ZK rollup settlement times will approach zero and we will get so close

that kind of what you were saying a browser on the internet you know in the back end of a browser you have many different asynchronous systems that compose the internet you know fun fact the internet is an a asynchronous system and the browser just packages it all up and presents it to the user and you know it's so close in terms of finality and settlement and latency that just from the end user it seems good enough and so that was kind of my idea about how the rooll of centric road map will come to be composed together we will just get so close that we can get just like ux

tricks front-end ux tricks to take us the rest of the way but I think Justin what you're were saying was that well that was the cope that you were talking about that was like the the sharding of the ethereum road map and actually it's true Atomic execution true Universal composability that is what we are uh that we ought to be striving for and aspiring to in the ethereum future and I think you are also saying we can get there yes absolutely I mean and I guess an alternative phrasing could be it is

possible that you know very similar to the internet we could do everything asynchronously and just wrap it up but it is a a superpower it is a luxury that you know we could potentially get synchronous composability and I think that you know we as an ecosystem we can't afford to not you know pick up the fruits of this luxury and part of the reason is that we have competition right if we don't do it the competitor will do it and in some sense so is forcing us you know through better ux better

composability to to just move a little bit faster uh so you know had tip to salana for for for doing that but one of the cool outcomes of this accelerationism from Solana is that now we finally realize that we we we can do you know credibly neutral extremely secure with pre- confirmations um shed sequencing for for all of ethereum and basically mimic the user experience that Solana has okay uh um super cool so far you know that that hat tip to to salana is kind of

interesting because one of the my favorite things about the crypto ecosystem is like we're all leveling each other up and like one Chain's Innovation becomes another Chain's area of improvement and kind of their level up potentially we've seen that with so many things and so I just want to establish what we're saying as as we're we're going into this episode so Justin you are saying there are some advantages with this thing that um we're calling here un oral synchronous composability so USC and we'll get into those

advantages and enumerate them a little bit more in just a second but I want to make sure that we are defin definitionally sound on universal synchronous composability because it sounds like Tech techy like words it sounds like e uh researchy words but like breaking this down Universal I take to me across all chains so like everywhere and not just you know like one ethereum it's ethereum plus all of the the rollups all of the layer 2s and all of the layer 3s that's what Universal means and then synchronous

means everything stays in sync so at the same time okay that's what synchronous means I think and then composability means you can Stitch things together so all of these money Legos they're not um you know kind of like across the chasm where you can't Stitch one money Lego with another money Lego all of the money Legos kind of fit together all of the smart contract talk to one another and you can stitch them together inside of another you know uh million dooll word here you can

stitch those together in an atomic transaction so that is atomicity so like one single transaction can stitch all of these things together that's what we mean by Universal synchronous composability and we are saying that is good if we can have that we want to have that now the internet gets by without having that it's an important distinction you you can build something like the internet with just Universal asynchronous composability but we are saying we like Universal synchronous

composability if you can have that that's the cherry on top and you get a lot of benefit from that is that a a good kind of working definition or what would you modify no I think that that's exactly right so if you want to have a you know a look a feel for what Universal asynchronous composability is have a look at Cosmos because that's the whole Vision right its own chain Every Chain is its own asynchronous shot and arguably you know things are extremely

messy in Cosmos land and you know Cosmos people will tell you that and then the other extreme is of course Solana where everything is under one one umbrella but you know Solana has made a lot of shortcuts um which you know eum is not willing to make and what I guess I'm trying to say here today is that we can get the best of Solana without taking shortcuts um so it will take some time it will take several years so that is the main trade-off like we have slower speed of execution but the end game the

North Star is that we can get the exact same user experience if not better than Solana today there's a bunch of um quirks idiosyncrasies I think that people experience when they use ethereum and its rollups today um there's one Unis swap per chain uh metamask has a drop down for all these different chains uh we there's doing this this bridging can maybe you can just tell us a story Justin of uh you know fast forward five however many years that we need to wait until we have this you know the research

and then engineering done on this what does a universal synchronous uh ethereum feel like and look like to a user who knows ethereum as it is today where there's multiple networks multiple Unis swaps uh different like tokens with preflex in front of them like what are the some of the big pain points that would be gone in this scenario one of them is that you have shared liquidity across every single rollup so right now we have a bit of a cold start problem for for rollups right they're starting from scratch and they can't tap into the

half a trillion dollars of liquidity you know on on on layer one they have to start from from from zero and this is very expensive for several reasons like one of them is that they have to redeploy all these contracts which start off empty and then they have to provide incentives for people to move over so you have to pay for for liquidity farming and then you have to set up infrastructure like like chain link right so you have to set up these business deals uh and you need to do all sorts of new Integrations and so the the barrier to entry for new entrance is is extremely high so in addition to having

you know unified liquidity we also dramatically lowering the the friction for for Innovation so one of the consequences for example is that we can expect a much richer longtail of of virtual machines because right now you know the the main rollups are in some sense opinionated they say okay we're going to go with AVM equivalence but what if you want to innovate a little bit more at the virtual machine layer have things that are specialized for one thing or another and also have them you

know composed with the existing ecosystems in in some sense what I expect fundamentally is just much more richness than we would have otherwise um but you know today arguably the the the user experience on any given um Silo On Any Given execution zone is actually pretty good right you have the the the the pre-confirmation on arbitrum and you know you have an existing ecosystem but it would be so much better there would be much less dead weight loss more Network effects if everyone

were to work in in in the same direction now one very important uh distinction I guess is around whether or not we can tap in into the existing you know half a trillion dollars of liquidity at layer one because often times when people talk about shared uh shared sequencing they talk about shared sequencing for the rollups for the l2s so that they have interoperability between them but what about the L1 well it turns out that we

can have both like we can be in a position where instead of playing zero some games with the layer one we're actually boosting the layer one and every time a new entrance comes in that grows the pie incrementally and incrementally this is uh every time uh we have you on Justin it's kind of like a conversation where uh that I love because you always come to us with uh good news like it's kind of like hey guys you can have your cake and eat it too right and like when we did our episode that David alluded to in the

intro you know um about cryptography uh Magic it was it was kind of like that and uh many of the other epis it's been kind of like that uh as well it's just like the theme of all Drake episodes is hey we can use cryptography to get what we want yeah exactly which is why I love it and like one thing I really want right now is what you what you mentioned which is shared liquidity just to put a wrap a bow around that for the user that that basically means that the user experience would be like like one in or matcho or any kind of Dex aggregator