The Optimism Collective & $OP Airdrop #1

Hey Bankless Nation, welcome to another State of the Nation. David, you know what? I woke up this morning optimistic. And I was optimistic, yes, about this episode. Okay, because we are talking with optimism today. We originally titled this, we'd booked this a while ago. We had originally titled this Optimism with a bunch of question marks because we had an inkling, we had an idea that Optimism was going to launch something on the 26th of April, which is the date of which we're recording. And indeed, just an hour or two prior to us recording, they have launched something. David, what is the thing or the things that Optimism has launched, and what are we going to talk about today?

Oh my gosh, it is a cannonball of an announcement, which has really, I think, filled the gaps in people's brains about what is the future of these L2s. How are these layer twos going to decentralize over time? Because that is, of course, the whole entire point of this crypto revolution is to decentralize as much as we can, decentralize all of the infrastructure. And Optimism's post introducing the Optimism Collective has given more or less the roadmap for decentralizing optimism and giving over responsibility, Ryan, to the community. And they have uh pioneered a two-house model, a brand new system of governance, one called the Citizen House, one called the Token House, and also a new model for retroactive public goods funding that's going to make the optimism layer two a pleasant place to live. And so we are going to talk about all of these things with the co-founders of the Optimism Layer 2, Ben, Jing, and Carl, the most infectiously optimistic team, I think, that exists in crypto, uh, coming up soon. After this show, right after this show, there is a uh an AMA hosted by the Optimism team. There is a link in the show notes to the tweet where you can get that information that is happening at 1 p.m. Pacific Time. Uh, what is that, 4 p.m. Eastern Time? Link in the show notes. So after we get all of the high level questions out of the way in this show right here, there is an AMA Twitter space that's being hosted by the Optimism team right after this.

Guys, there is just so much going on in crypto right now. Um one other thing before we get in, we have to mention that is going on is Graph Day. Okay, this is a conference that is coming up June 2nd. Half uh actually

Uh three quarters hackathon, really, and one day of learning. So June 2nd to the 5th. And this is happening in San Francisco. If you're not familiar with the graph, the graph is a protocol that is essentially indexing all of Web3. So you know, when you're going to a DeFi user interface, you're probably tapping into the graph at some level. So if you are looking to network with some people, if you're looking to build in the web 3 ecosystem, if you're looking to learn, launch your career, go ahead on over to this conference. Fantastic people. Founder of Connext, Arjun is going to be there. Camilla uh Cammy Russo from The Defiant is going to be there. A whole bunch of other folks are going to be there as well. Jake, um

Ruckman, yeah.

And sorry.

Yeah, he's a guy that peeled us on NFTs. And of course there's also going to be Kevin O'Walkie, the public goods maxi, and a bunch of other people that I find particularly inspirational. Right in that bottom left corner is Reese Lindmark, one of my personal heroes in this space.

You know, I wish when uh Jake pilled us on NFTs we had a bought more, David. That was like that was in 2020. Anyway, that's gone. Now we have new opportunities in crypto, in DeFi. We're about to get into them, but David, gotta start with the question I ask you before every state of the nation, which is this. What is the state of the nation today?

Oh Ryan, what else could it be other than being optimistic? Because there's nothing, like I said, there's nothing that makes me more optimistic about the future of Ethereum than the combination of layer twos and public goods. And that is really the thing that optimism, the optimism team has always emphasized since Genesis is how do we scale Ethereum while also scaling our values? And that is what I think is instantiated, one of my favorite words, in the optimism layer two. The connection between layer two and the value of layer twos and funding public goods and also community empowerment and individual empowerment as we scale out our networks. We also scale out our human values, which could, you know, it was what a little bit of what we need in this world, Ryan, right now is a bunch of scaling of values in an optimistic fashion.

Yeah, absolutely. And I I also wonder the the narrative that we talked about at the beginning of this year is it's going to be L2 2022, the year of layer twos. And

That was what we talked about last year.

we talked about that. We talked about L2 Summer. But now we've got a year later, I feel like the the coming of tokens will usher in a different sort of L2 summer, and it's pretty exciting to see. And I I sort of wonder if this is how Ethereum pushes back on some of the alternative layer one narratives that are out there. We'll have to see what the team thinks about that as well. And we are just about to get into it, guys. But before we do, we want to thank the sponsors that made this episode possible.

Welcome, Bankless Nation, to this very special edition, this optimistic edition of State of the Nation. We are joined by three co-founders of the Optimism Project, the Optimism Layer 2. Sitting in the middle, we have Jing, the executive director of the now Optimism Foundation. We'll have to talk about what that is. Sitting on the right, we have the chief musician of the Optimism Foundation, Ben. And on the far left, of course, the eternal optimist, the guy that got me into crypto in the first place, Carl Flohrsch, the CTO of OP Labs Public Benefits Corporation. Again, going to talk about what that is, because that is also something new. Guys, thank you so much for coming on this episode of Bankless. I'm I'm sure, like you, guy, we are all here feeling optimistic. But you guys just released a blog post. Uh, and in the very beginning of that blog post, you guys say Ethereum sits at an unprecedented moment, and we can't squander this opportunity. Jing, what does this mean? What pr unprecedented moment are we at, and what could we squander?

Uh the unprecedented moment is this migration to L2s. And Ethereum enables these new human coordination systems to be designed. It fundamentally changes game theoretic constraints of what people were able to build before. So we have an opportunity here while creating an L2, creating value, generating revenue to design a new way for all participants of the optimism network to coordinate.

And so we in and you also talk about r not wanting to recreate web two incentives. Can you just elaborate on on what that means and why that's important?

Yeah, I mean I think everyone has seen how the Web2 incentive structures have played out where you have revenue, power, influence continuously accruing to this single centralized source. And Web3 is supposed to reimagine that, yet we still can fall prey to the same pressures of centralization, desires to maximize profit.

Is that something you see in the crypto space today?

Yeah, 100%. Just because you can build new incentive systems doesn't mean everyone is building new incentive systems.

Carl, Ben, uh uh, I wanted you guys to give you guys an opportunity to answer similar questions. Any thoughts about like this unprecedented moment on Ethereum's history? Uh where are we on Ethereum's history when it comes to the network?

Ooh, with when it comes to the network, I mean, we are the modular blockchain revolution, the kind of you know, state of the art of the technology is scaling up so fast. And why is it scaling up so fast? It's because there are so many people building on Ethereum, building the core infrastructure, building these incentive systems. Like this is a movement like we have never seen before. But that is also the case for the entire space at this point. And so we really don't know how things are going to shake up, right? We definitely could live in a world where we do end up recreating Web2 incentives.

Ben, go

Can I hit you can I hit you with my my favorite story on this?

ple please do it.

So have you guys ever read the Declaration of Independence of Cyberspace?

Yes. Uh but I think you might need to refresh my and the listeners, mem memory.

So this was a post written in the 90s by John Perry Barlow that basically was the uh I think you know is very analogous to like the down the crypto rabbit hole aha moment that we all have, where John Perry Barlow said, this new cyberspace that we're creating, these networks of information passing, are a new realm. And he basically says that uh beware ye weary giants of flesh and steel, you have no place here, right? And it's this, it's a super well-written, super moving sort of call to action. But ultimately, what we have to keep in mind when we read this is that just because the internet had the ability to do this doesn't mean that it was going to produce this. And in fact, if you reflect on where the internet has been taken, right, there's a huge amount of negativity about web 2, which is exactly the thing that Perry Barlow there is talking about being very important. So it's important for us not to do that again. We can make something new or we can repeat the mistakes of the past.

And I think to add on to the web two incentives element, we are seeing the what seems to be just like like the nationalizing of the internet. Now we have like this Facebook country that we're a part of. We have this Twitter country that we're a part of. And all of a sudden the web, the values of web one, where power was really pushed to the margin, margins, has been concentrated back into web two. And I think we're also seeing that in our crypto networks as well. And so I think this is what you guys are really getting into with re uh making sure that we can redefine the internet with web three based incentives. Any comments on that before we go on?

Too many, but I know Carl has good ones.

Cool.

I was just gonna say that humanity is important. We need to capture and fight for our rights as people and individuals to make sure our networks reflect our values. And we'll talk more.

Yeah, we're going to illustrate how we are going to get all of that done in the rest of the show. But first, guys, is there a token that's a part of this story? Is a token relevant here? Are we talking about a token today?

Yeah, I mean cars run on gas, but what you want to do is get from point A to point B. So we have a token, but we're trying to get to point B and it's one small part of the story, but I know that people are really excited about it.

Of course, of course.

If you if you look at all the communications we've done on this, we've tried our damnedest because we know no matter what the DJs will get out there, but the token is missing the point of this thing. This is about building a new system of governance and funding mechanisms for public goods. It's not about when token, you know, short term land grab, money grab, you know, pump.

Of course, yeah. And in the words of uh the ENS Dow, you were airdropped responsibility. And I think that rings true here as well. Uh and part of the way that that responsibility manifests is through this new governance structure that you guys have introduced in your blog post called the Optimism Collective, the OP Collective. Can you guys walk us through the OP collective, the optimism collective, and and how that has been structured and what its whole purpose is?

That's got Carl written all over it.

What's up? Alright, so we have been doing governance research. Like we this is public goods specifically, public goods research for a long time, and yes, you brought it up. So the Optimism Collective is a bicameral governance system. We have two co-equal houses, A, the citizens' house, B the token house. Okay, what is the major difference between these two houses? Well, it actually comes down to the transferability or sellability of the governance rights for each house, right? So the token house, you of course have these tokens. They're, you know, out there in the world, they're liquid, they're transferable. Then you have the citizens' house where these citizenships are identities. They are soul-bound tokens, as in, you cannot transfer them, you cannot sell them. Instead, you can earn them, receive them, give them, etc. Right? They're and the importance here is that we balance these two houses, right? If we just had tokens, then governance rights would be viable on the open market for you know for a cost, but that when we're talking about a system which is supposed to protect human values, right? Human values are not reflected necessarily in our markets. Our markets are extremely unequal. There's a very, you know, I can have one vote in terms of one dollar, and you can have a bajillion votes in terms of a bajillion dollars. And that would just ref that would reflect very negatively in how our internet plays out. So we introduce this to the citizen's house. And the citizen's house is roughly, right, one person, one, you know, voting power, right? You're not gonna have this thing where you can have, you know, a million X more voting power than someone else. Maybe there's some gradient, but it's roughly, you know, equal. And that is really critical to kind of check the balance, right? Because it's important. Token holders are important, right? They they they represent the interests of the network insofar as their wallets, right? Everyone wants to not lose money, so there's a there is a valuable incentive system there, but it needs to be balanced by the soul-bound tokens, by these identities, by these citizens. And so what we are creating is a really decentralized, decentralized governed network for the people, you know, by the people, right? This is, we're not ready to just say, okay, token governance, that's it. We're actually going to push this thing forward. Now, I will say, I'll keep going, I will say that it is going to take a long time for us to get to the end state. In fact, in our constitution, which you can take a look at, and our vision doc, which you also can take a look at, but in our constitution, there we have four years to get to a point where this thing is kind of ready to take the training wheels off. Right now, distributing identities and citizenships is an unsolved problem, right? Proof of humanity, like various other things, soulbound tokens, transferability. If you read Vitalik's blog post on Soulbound, he outlines a lot of the problems that exist in the identity space. But if we were to fully get to, you know, try to get to the end state today, we would have we'd be left with just the token house. So what we're doing is we've created this whole system where we have the foundation, and the optimism foundation will actually steward the governance protocol to its final form as a balanced, decentralized, bottom up governance system for the people by the people.

Okay, so I I just want to unpack this uh for a minute. So um yeah that that's really cool and there's there's so many interesting ideas with with this particular um with this particular project and what you guys are doing here. So there's this thing called the Optimism Collective. And previously David and I have talked about on Banklist about layer twos being almost like um

Many countries, city states, states within a federal government, right? So think like California or like Virginia or something like a state within the federal government. And so you at the beginning of your post and the tweet thread have this picture of optimism as this like community, as this sprawling, wonderful city space where people make their homes and live. And that's indeed what we're doing. You guys were talking about the great migration from L1 to L2s. We're making our new homes on these layer twos. And so the optimism collective is this, I guess, state, right? This place where people live. And now what you're doing is you started to introduce words like constitution and governance. Now we have to collectively decide how this state is actually governed. Like how do we, how do the people who live in the state actually make decisions? And what you're proposing, I want to make sure bankless listeners get this because this is super unique, is uh two bodies, right? So in the in the US, you have like the Senate and the House, right? Those are two different bodies. Uh in this system, we have two bodies, one that votes with capital. That's where the token comes in. That is the uh the token house, as you've called it. And the other is a almost like a one person, one vote sort of thing, the people's house, if you will, the citizen's house. So we have tokens as a primitive, which we've had for a while. And now you're introducing people, individuals as a primitive. And together, these two bodies are going to essentially make governance decisions for this state, for this beautiful city that we're trying to create on layer two. Is that right, Carl?

Yes, that is absolutely right. And I just want to say that it is on layer two that we're trying to create this, but it is also on the internet more broadly that we are trying to create this because right now we sit at an inflection point, right? We have Elon Musk buying Twitter. We have like uh you know Dolly Two, you know, painting amazing artwork, right, without a human involved, right? There is this is a moment where the internet is most sorely in need of human representation, identity, and fixing these problems that we that we have. So, like, we need to solve this for crypto because crypto is kind of the ult like the the the governance uh test bed and the fertile soil for all of these experiments, but it is going to be something that affects the entire web, right? This is this is the revolution.

This is super cool. And so this is something you want to export. I want to just camp on the Elon Musk thing for a minute because that is the news today, right? So Elon Musk is buying Twitter, uh, apparently. That that is the thing that's going to happen. And people should realize that Twitter governance is essentially it's just the token house. It's just capital, it's just capital vote. And so who essentially gets to dictate what the rules on Twitter is? The majority of Twitter token holders, shareholders, of which Elon Musk is.

It apparently going to be the majority owner, and he's going to be the guy, right? Our governance for Twitter rests on Elon Musk. What you're proposing is something different. So you'd still have some of that token vote of responsibility. But also, this is as if in the future, right? And not right now, but also individual Twitter users, everyone, every individual human who had an account also got to vote on the governance process. And I think what you're saying is there's a lot of steps to get there. But that is what you're talking about and making this thing by camera. Well, it's not just token vote, it's not just shareholder vote, where someone like Elon Musk can go like buy the freaking like nation the state of optimism. We actually also have the individual users of optimism who have a vote in the system. And you think you think optimism and crypto can export this to the world, like export this governance style to web 2. Am I hearing that correctly?

If it works, well we're about to see if it works, I guess. I think a lot of the issues that people take issue with in Web 2 or just the world more broadly are issues with plutocracy. You have like direct plutocracy like Twitter shareholder voting, and then you have indirect plutocracy where Twitter is governed by its shareholders, and then you know some country's democracy maybe is secretly influenced by uh the stockholders of various companies lobbying for whatever. So we have a place for plutocracy. Um the economy of this digital city is still important, but uh our hypothesis is if we make explicit a place for plutocracy and a place for democracy, can can we draw a cleaner line between the two where you don't end up having this sneaky plutocracy?

Uh maybe it'll work, maybe it won't.

We'll we'll see. We're gonna try though, that's what Ethereum is for.

Got this.

And I think you guys can tell uh Carl's infectious optimism is why me and so many others have been brought into the uh the fold of Ethereum back in 2017. And guys, there's just one more dynamic I want to drive home about this whole system uh just to really really illustrate this for the listeners. On one side, on the token side, we have this fungible token that is freely tradable and has a market price. On the other side of the spectrum, we have a non-fungible token that is soul bound, as in fixed to the address. These are couldn't be more opposite sides of the spectrum. One side, token, probably gonna be on all the DEXs, it's gonna be freely tradable, it's gonna have a market price. On the other side of the things, we have ERC 721 tokens, maybe it's 721, uh, that is frozen inside of the specific Ethereum address of specifically known people. And this like clear barbell, just like pushing out things to the to the periphery of the possibilities of token designs, I think is really interesting. And something in your guys' blog post that has stuck with me is balancing the short term and long term incentives of the system. Can you guys talk about how these two token models uh optimizing for two completely different things, balance the short term and long term incentives of the of the system?

Uh yeah, this is this is um kind of what we were trying to

Examine when looking at how plutocratic systems have shaped out. You have Facebook, for example, making all of these decisions that are great for profit in the short term, but have damaged its reputation, its user base, its just like general ability to succeed sustainably. And if we if we assume that the token holders of optimism can be modeled similarly to Facebook shareholders, then we want a separate house of people who are more aligned with the long term interests of the protocol. And so instead of investing capital in the protocol, we want to give these non fungible tokens to people who have invested time, energy, reputation, things beyond capital.

Yeah.

And and there are there are de there are like fundamental differences between these different kinds of you know assets that we're talking about and all of the you know systems that we're discussing, but like this, you know, we can look in the real world to see where uh uh where identity is sorely needed. And so that is, you know, we had to add in the citizens' house.

Of course, and you guys are experimenting with this brand new system of governments, which makes sense to me. It seems to pull from history from to model out governance structures, but also use the advantages of a liquid democracy structure that one would find with crypto networks and with smart contracts and with tokens that are permissionlessly and uncensorably available across the internet. And if this goes well, this governance structure can be exported to the rest of Ethereum, all of the layer twos, and hopefully the rest of crypto, because the rest of crypto kind of needs it. And this is hopefully the value add that this governance model can export to the rest of the ecosystem. And that is something that has always drawn me to optimism is its uh commitment to exporting its innovations towards the rest of the ecosystem. And that is also relevant when we discuss uh public goods and retroactive public goods funding later in the show. First, though, uh I want to talk about this very funnily titled section of the announcement titled uh check out my only F, or excuse me, excuse me, I messed that up. Check out my OF as in my the Optimism Foundation. Uh, what is the Optimism Foundation and what should we be checking out?

Honestly, we did make an OnlyFans account about a year ago. We were gonna expose our testnet endpoints on the OnlyFans count, but um

Is that a true story?

it is a true story. I saw yeah.

Um maybe we'll put

node setup information on.

Anyways, um the Optimism Foundation is a steward of the community. It's organizing governance experiments, building up the collective, bootstrapping the ecosystem. So if you think of what was previously Optimism PBC, which is now OP Labs, as like the technical right hand executing on creating the best fucking protocol.

ever and then the foundation is

building out the ecosystem, it's the go-to-market, it's um funding teams external to the PBC to build out other pillars of infrastructure.