Arbitrum's BOLD New Bet with Ed Felten & Raul Jordan

Thangless Nation, we have a bold episode ahead of you because Arbitrum just released Arbitrum bold. Don't shake your head, David. That was a good pun.

We're uh talking about the decentralization of layer twos. It's a process, it's a continuing journey to make our layer twos more and more decentralized over time. And uh, this has been the next bold step. Don't kill me, David.

Alright, what are we covering today?

Well, you said it. We're covering Arbitrum Bull. I think I'll call this an a gym badge for Arbitrum. Arbitrum has won a gym badge. Uh who is

Gym badge for people who don't blyft, David.

uh

How do you win a gym badge?

No, that's a that's a that's a Pokemon reference, brother. Uh

Oh

Um, and so uh layer two beat, layer twobeat.com. It's a site that uh kind of gives um a grade of security across all of the layer twos. And Arbitrum uh it's not live yet. It's going to be sent for a DAO proposal, and you would imagine that the Arbitrum DAO would approve it. And up uh upon reproval, there is going to be a yellow slice on layer two beat that turns into a green slice. This is the level of analysis that listeners come to Bankless for. Um, so we're going to open up. Yeah, so we'll we'll talk to Ed and Raul from Arbitrum about the show, about this particular risk vector to layer twos, as well as the rest of the other slices that need to turn green. But Arbitrum, importantly, not only is getting a green slice on a particular variable that makes up a layer two, a critical component, but they are also the first layer two to get this green slice, which is why we're doing the show today.

That seems pretty important. I I think we're also going to talk about this idea of staking. Maybe not staking ETH though, which we love to talk about, but maybe the ideas of staking the ARB token. What does that even mean? What could that look like? When could that happen? David, what's the overall context for here for this? Um I feel like we're very much in kind of layer two season right now. What's the what's the meta around layer twos?

Yeah, I would I'm making a claim, but I claim that this incoming bull market is layer two lead.

And there are only such uh only a few players that are really pushing that frontier, Arbitrum being being one of them, certainly. Uh, and so paying attention to layer twos that are pushing their frontier, that are developing first, get that are collecting their layer two beat gym badges, uh, I think are is the thing to pay attention to. That is the signal amongst the noise. Um, all layer twos have their own SDKs. Uh, we've talked about the OP stack frequently, Arbitrum has their orbits, uh, and then in an additional innovation out of the Arbitrum Sphere Stylus, all of these things fit together. There are there's a story to be told here. So while we unpack the story about Arbitrum bold and what it means for the Arbitrum uh layer two, uh, there's also other peripheral topics at hand that all um induce a conversation about the growing influence of the layer two ecosystem.

But first, before we get into this episode, we disclose, as we always do at the beginning of Bankless, a podcast. Arbitrum is currently a bankless sponsor. I am an investor in Arbitrum. Both David and I own assets and lots of layer twos. Just a reminder, we're long-term investors. We're not journalists. We don't do paid content. There's a link to all bankless disclosures in the show notes. David, we're gonna have Ed on the podcast, who is a co founder of Off Chain Labs. I'm not sure if we mentioned that. Also, Raoul Jordan, they'll be on in a second. But before we do, we want to thank the sponsors that made this episode possible, including, maybe most importantly, our strategic exchange partner for 2023. That is

Bankless Nation, I would love to introduce you to Ed Felton, a co-founder of Off Chain Labs, the organization that created Arbitrum and Ed's first time on the show. Ed, welcome to Bankless.

Thanks for having me on.

In addition to Ed, we also have Raul Jordan, one of the co-founders of Prismatic Labs, the Ethereum consensus client, which not too long ago got acquired by Off Chain Labs. Raul, welcome back to the show.

Hey, good to see you all.

So it's always good when a layer two comes back onto banklist because that means something's happening. The devs are doing something. Are y'all feeling extra bold today or what? How's it feel to be inside the Arbitrum ecosystem lately? Ed, I'll start with you.

Super bold. There's uh there's a lot happening. We've got bold, we've got uh stylus, which is our EVM plus technology.

We've got Arbitrum orbit chains uh getting built and uh a lot of amazing things in the pipeline.

So it's a fun time to be doing this stuff.

Certainly, yeah. And one of the main reasons why I wanted to do the show with you guys is the uh there are two worlds in crypto right now, the pro-layer two world and the anti-layer two world. I think it's pretty safe to say that Ryan and I firmly fall in the pro-layer two camp. Uh, but from the critiquers of layer twos, they'll say that they're not decentralized, that they are centralization and the Ethereum is as centralized as are layer twos. So, with this uh bold announcement, this starts to actually progress into that frontier of layer two decentralization. So I really just want to start there because that is the bulk of the excitement that I'm feeling today. Ed, maybe we'll start with you again, then we'll get into Raul. But at the highest of level, what is bold? What does it do for the Arbitrum tech stack?

Yeah, bold is the next step in decentralization for Arbitrum. Arbitrum's already the leader in decentralization.

Um, but what bold does basically is it um once it's deployed, it will allow chains to have fully permissionless validation.

And so what that means from a security standpoint is that

any one participant in the protocol, meaning basically anyone in the world,

can force correct,

can force the correct outcome of the Arbitrum chain, even if everyone else is against them.

So it basically means that you yourself, as a participant in the protocol,

can force the correct behavior. You don't have to trust anyone else.

So that just means that if there is one honest person that wants to force Arbitrum to be correct, then all that's all it takes is one person.

That's right, right. So right now the situation in Arbitrum is there are about a dozen.

Uh validators, it's a permissioned

role.

And if any one of those is honest, then the chain uh guarantees correct outcomes. So the big change with bold that bold makes possible is to open that up and make it permissionless so anyone can force correctness.

I have a follow-up for you here, Ed. So this this term decentralization gets bandied about a lot and has been bandied about for a very long time across crypto. And it's almost become kind of like a purity test. Are you decentralized or are you not? And what I've always struggled with that particular word is it's um

It's often poorly defined. It's very subjective and not objective. One thing I've really appreciated about this cycle, at least with respect to layer twos, is we have a bit more of an objective measure. And I don't know if this is the perfect measure, the only measure. I will say that it's it's kind of my measure because it's it feels like it works. And that is the measurement on layer two beat. Layer twobeat.com, if bankless listeners want to go check that out, and you will have heard it referenced uh multiple times. So when you said something like when you said the the the words Arbitrum is leading on the decentralization front for layer twos, um I think the the confidence that you bring in saying that is kind of some level of the objective measurement on something like a layer two beat, which actually like stages out the level of decentralization of various uh layer twos. And this is um this is the gym badge I think you were talking about, David, in the intro, right? Is we have an actual like pie chart.

And uh for bankless listeners who are listening to this and can't see this, again, go to layer two B, go go click on uh Arbitrum or go click on the you know layer two and look at the um risk analysis here.

There's five slices of the pie here

that we need to turn green essentially. So right now, in green, uh Arbitrum has data availability, proposer failure, sequencer failure.

In yellow, Arbitrum has upgradeability and state validation. Okay. You are ahead of some of the other layer twos. So Arbitrum right now is in stage one. Some of the other layer twos are still in stage zero of achieving those slices of the pie. Can you just set the context for this pie? First of all, do you think that this is a reasonably good measure? And can you tell us about these various slices of the pie?

Sure. Um,

I do like this measure

a lot. The L2B team, I think um, they do a really rigorous job of uh examining these systems.

Uh they give us a hard time when we mess up, as you know, which which it which is fair. And um

uh

I I think they are sort of the most authoritative source about the

security or decentralization state of um

of of various L2s.

Um

so yeah, so there's there's five slices in this pie.

Um, and these are five different areas uh in which we as a uh

you know.

In developing the arbitrum technology, have striven to

provide decentralization or security. I really think of,

you know, as you said, decentralization, there's a lot of words said about that.

At the end of the day, it comes down to security.

What who are you vulnerable to if you use this technology and how?

And that's kind of what these five slices are about. These are different ways in which