Kraken's 'Ink' - the Newest L2 in the Optimism Superchain | Ben Jones & Andrew Koller

Welcome to Bankless, where today we explore the frontier of the Kraken Layer 2. Ladies and gentlemen, Kraken is going on chain. There's a big announcement today. It's just breaking. A couple of weeks ago, we uh talked about the United, which is joining the Optimism Super Chain. Well, now Kraken is uh announcing the launch of Inc., which is its on-chain Kraken experience. It is a layer two, it's in the Optimism Super Chain, and it's very exciting. We got all the details today. David, I I just gotta say, I'm super excited about this. You know, there'd been rumor that Kraken was going to launch a layer two for a while. We'd been like, you know, prodding our folks uh at Kraken, the people we know, just be like, hey, you got any news? Got any news? Got any news? Apparently this is.

We knew it was coming. We just didn't know when or how. We just always knew it was on it was inevitable.

Well, I was hoping it would be cool is w what what I would say. You know, and this exceeds my expectations. I think they've got a fantastic approach for it and I'm very excited about their um, you know, what they're what they're building, what they're architecting and and some of the the the dates around

You know, I think this actually marks with the advent of Inc., Kraken's layer two. There's extremely few l large centralized exchanges or even medium sized centralized exchanges left that do not have an associated blockchain. Of course, Binance has BNB. Coinbase has base, Kraken now has Inc. Uh, OKX has uh a chain, um Kronos has the ZK Sync chain.

this.com one.

Crypto.com, yeah. Uh huh. Bybit created mantle. Uh so actually, it's kind of cool. We got all the centralized exchanges on chain. It's like one of the best validations of like one of our earliest theses that we had in 2020. It's like all blockchain, all centralized exchanges, which what is a centralized exchange? It is a bank. What's a bank? It's just a ledger.

Well, they're gonna use blockchains, which are just ledgers. And they all it's just one one by one. We're just knocking them down.

And the crypto banks or aka the crypto exchange are going to do this first. And then after, do you shall we make another prediction? Okay. So another prediction after this is all of the uh traditional banks will come on chain too. It won't be long until BlackRock rolls out its layer two. And as crazy as that sounds now, okay, it sounded crazy for us to say back in 2020 that all exchanges would have their own L2s. And uh and so they do. Here's the next evolution of that.

I think that the the next step is so right now they are creating an additional ledger. So they have the internal centralized ledger that they have of who owns what. Now they have also have the layer two ledger. I want to see uh their people's layer twos to start to internalize the business logic, take out the guts of the bank and put that on the chain. Uh we need we need some scalability, we need some privacy, we need some ZK for that. Uh because like people don't want to see have their internal business logic broadcasted. So we need to like make that internal business logic private. But that's that's also the next step. So

the race is on for that one.

It's part of the great migration. All right, guys, we're gonna get right into the episode. But before we begin, we got a shout out and thank our sponsors.

Bankless Nation, super excited to introduce you to Ben Jones, the co-founder of Optimism, and Andrew Kohler, the founder of Inc. But Andrew, uh, what is Inc.?

Inc is a new on-chain unit from Kraken. It started over a year ago. Uh, this really famous kind of long long walk in Amsterdam with somebody I rehired, a very old friend. And we kind of just walked around for like five hours figuring out what the hell are we gonna do with like taking Kraken on chain? So it started with all these different experiments, and we didn't have a name for it. It was kind of like Kraken Innovation Unit type of thing. And then um we decided one day to just call it Kraken Ink because it's like there's cephalopods, you know, tentacles and ink and all that kind of stuff.

So it's like you're you're writing your future with Inc. And you know, we're bringing that like easy to use experience that we have uh on our centralized platform, hopefully all on chain. So Cracking Inc. is, you know, the evolution of all of our ideas and experiments into partnering with Optimism for the announcement today, which is that we are partnering with Optimism and launching our own super chain that is going to be very DeFi centric. And uh the test net is uh at DEF CON.

Uh Ben, give us your uh side of the story here from the optimism super chain uh perspective. Uh what's going on?

Yeah, I mean the story this this Andrew just hit it perfectly, I think, you know, from our perspective, it's obviously a huge honor to have Kraken joining the collective and um hopping on board to build on the super chain. Um

I think that we're at a point in time uh in the industry right now where we're getting lots of another L2 announcements. And I think the thing that, you know, I feel responsibility um to like ensure happens is that that does not lead to like

chaos and fragmentation, right? So

Um, it is an honor to have Andrew and folks like him joining the Super Chain. And it is also critical that in doing so, we don't turn into a big fragmented mess. We have all the people doing the best things that they can do in positive sum ways

that connect together into one cohesive thing.

So,

yeah, what it means is another amazing member of the super chain, another incredible, you know, set of strengths that Kraken is bringing to the table. And at the same time, trying to ensure

that as we perform this journey and we go down the roll up centric roadmap towards many, many, many L2s, that the superchain can play a part in helping unify and standardize those L2s.

Okay, okay, very cool. Uh I I will say that Bankless has long held a thesis that that all of the exchanges would would eventually come on chain. And it sounds like that this is holding true. And this is this is Kraken's endeavor to bring uh a lot of its core business and some of its offerings on chain. So Andrew, I just want to go over what you said, and just by way of recap, so you are uh a representative, uh a leader of Inc., which is this a business unit within Kraken, or is it uh a separate entity? And you are bringing uh some like you're you're you're deploying on chain functionality inside of the Kraken ecosystem. So, you know, some people listening might think of something like a base. I don't know if it's going to be similar to base, different from base, but uh it this is a inside internal Kraken initiative. Is that correct?

That's correct. It's entirely a business unit within Kraken. It it's you can kind of think of it as a separate entity. You know, there's all kinds of structures that, you know, were set up to make this happen. Uh, but it really is, you know, it's similar to

any other exchange or company, I think, that's that's trying to go on-chain and realizing that.

There is the convergence like in the 90s, and this is like a really cliche analogy, and I think it's overplayed, but TCP IP was the convergence in the 90s. I really think that all companies are going to be merging and doing things on chain. Uh, obviously, centralized exchanges are the first to start doing this because we have our central order books and we have all of our users. We're going to start bringing all of the layers that let you authenticate into the centralized order books and you know everything that Kraken has to offer

to on chain. And I think other, you know.

Say Coinbase or Zora and everybody else is kind of doing those like uh immediate layers. But like I'm extremely bullish on this that it's like it doesn't stop at centralized exchanges. It's like thousands of companies are gonna be having their own L2s, banks, whatever it is. Um I hope there's a day we wake up and it's like NASDAQ is joining the super chain. I have no idea. That would be uh really fun. Um but yeah, I mean to answer your question, it is it is an entire business unit within Kraken, and it's

really

Inc. and the wallet together. So we are kind of joining forces with our Kraken wallet, with Inc., and we're we're trying to see just across the whole stack um as it relates initially to DeFi, what we're gonna bring on chain. But then like I said,

There's the authentication of the central order book and KYC and all that. There's no reason that shouldn't be on chain too.

Okay, so can we talk about some of those component pieces? So uh of course, uh you Kraken is most known for being a crypto exchange. So a way, as we say on bankless to sort of, you know, onboard from fiat, cross the chasm, and go into the kind of the crypto world. That's the centralized exchange piece. It's also true, Andrew, that that Kraken has rolled out a wallet. So you have already an on-chain wallet that um is uh like fantastic, great user experience, but that that's basically um starting to expose Kraken users to the on chain ecosystem. So you've got that piece of it, you've got the exchange. You were mentioning some sort of um authentication kind of like credentialing AML KYC. And now you are rolling out ink. And you said, would that be did you say testnet or mainnet by uh DEF CON?

Testnet, DevCon, I think mainnet is what we're targeting for early Q1.

Wow. Okay. So test Testnet, Dev Con, Maynet, Early Q1. So you're bringing all of these things together. And like what is going to happen on Inc, do you think? I mean, is it is it sort of um you know permissionless ecosystem where uh DeFi and other applications are are invited to kind of like um build things in the uh on the platform? Are you taking uh you like a different um you know you know uh is there a different lens on this that that Kraken sees? Like what exactly are you?

putting on chain what sort of apps are you hoping will be in this ecosystem.

Initially, it's it is inviting the world to build like their DeFi applications on chain. It's it's you know helping provide any kind of tooling that uh would make their experience easier. Um

So it's initially kind of like a laying this foundation of that we we are incubating something that is going to allow any kind of builder. Uh we also have a hacker house uh to do a little plug uh for DevCon, um, where people can use our tooling,

work with our partners, partner with us, because we also have a little incubator that we're gonna be doing and um helping kind of like fund some of these projects that might want to build on Inc.

Um But it's really taking like

the

easy to use E UX that we have across Krafin right now and really bring that to the DeFi experience. So instead of having all the

Weird bridging and hops and you know, multi-approvals and things that you know

DeFi users have to like live with. We really want to bring like that crack in OG kind of cypherpunk and privacy and self sovereignty values into the easy to use um UX space.

When you uh pop open the hood, technically speaking, uh can can you talk about the technicals of the actual chain? Like what's the engine? Uh what's it built on? Uh I know we're using the OP stack, of course, because we're part of the super chain, but like can you go into any more detail?

Yeah, I mean,

I mean, right out of the gate, like um

it is OB stack. Uh we do have to, you know,

be

In the super chain and be compliant with that. And you know, we have a ton of ideas for you know improvements. So we we definitely will be giving back to the community and making sure that we're core contributors, proposing anything that we think is is good for our applications that could be going into governance.

But um we will

we will be targeting um less than at least the start for mainnet, less than one second block times. We are leaning into 6783 for cross chain intents. We're leaning into 7702 when that hits mainnet. So we're really taking like our foundation of like the wallet experience too, and moving that fully into smart wallets, fully into 7702 for 337, and um

You know, there's not too much modifications to the stack when we we go live. Really just kind of like the block ch uh the block time and then focusing on the on these EIPs that haven't hit mainnet yet.

And then how is the relationship with the Kraken Exchange going to synergize with uh Inc., the layer two? Um I I know that there's a bunch of moving parts here, right? We already talked about the wallet, but also the exchange is going to be like the big onboarding flow. Uh I'm assuming there's gonna be some special treatment versus all the other networks out there for for ink, right?

Maybe um it's kind of it's kind of undecided, honestly, because

we don't we don't really view it as like compet competition. Like we're not trying to compete with Zora, we're not trying to compete with base or anybody. It's all the super chain, and we just like

Again, kind of cliche, but we do view it as rising tide to all ships, right? It's we are joining into an ecosystem where it is fully gonna be interoperable, liquidity is gonna be shared everywhere eventually. So it's not like somebody trying to hoard everything and say, like, this is the best chain out there. Um, of course, we're gonna make a really awesome experience on our chain. But as far as the rest of like Kraken, I think we want to get our foundation out the door, make that really good tooling in UX, and then ensure that everything at Kraken eventually has like an on chain component to it. We wanna make sure that everybody is thinking of the on chain perspective first.

And, you know, how can we push the limits and make sure that our financial services and products go go on chain?

What would you say are the goals that you're trying to measure? Like what are the KPIs? Are you trying to get uh active addresses? Are you trying to get TVL? Uh is it what what's the North Star that you guys are having uh looking for to grow ink? What does it mean to grow ink?

I mean, to put simply, I think, I think transacting users. Um we we want to, like I said, we want to take our easy-to-use experience and just