theCUBE + NYSE Wired: Crypto Trailblazers | Steven Goldfeder, Offchain Labs

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Steven Goldfeder

Co-Founder & CEO

Offchain Labs

play_circle_outline Offchain Labs and Prysm: Enhancing Ethereum's Ecosystem through Staking and Validation Software

play_circle_outline Unlocking Scalability and Decentralization: The Power of Arbitrum for Ethereum's Layer Two Solution

play_circle_outline Ability to innovate with Arbitrum Stylist for smart contracts

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Steven Goldfeder, Offchain Labs

Steven Goldfeder

Co-Founder & CEO Offchain Labs

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>> Welcome back everyone. I'm here in the CUBE Studios. I'm John Furrier, host of theCUBE. We're here as part of our Crypto Trailblazers series. It's a two-day digital event at theCUBE here and with the NYSE Wired community in Palo Alto. We're here with Steven Goldfeder with Offchain Labs, he's the co-founder and CEO. Steven, thanks for remoting in from New Jersey, we're in California. Good to see you. Thanks for coming in.

Steven Goldfeder

>> Thanks for having me. It's great to be here today.

>> So one of the features about this program is really, we say crypto, but crypto encompasses blockchain, all the decentralized innovation, the maturization of the market is good right now, you're seeing years of investment into it, a lot of technology iteration. Certainly, the political climate's phenomenal finally in the US. So you're starting to see, again, another resurgence, wave going of energy around what it means to run a business on the blockchain and how to build apps and all the benefits that come with it, obviously efficiency, more transparency, immutability, all these things set the table. Let's get into it, just for a minute, set the context, what do you guys do at Offchain Labs, what's your product value proposition, and what's your North Star?

Steven Goldfeder

>> At Offchain labs, we're deeply in the Ethereum ecosystem, and we do two things that we're most well-known for. Number one is we actually built something called Prysm, which is the core staking and validating software that you use to run the Ethereum network. So for example, many of you may recall that a couple of years back, Ethereum moved from proof-of-work consensus to proof-of-stake consensus. Prysm is one of the leading consensus clients today and was very instrumental in that event, which is called The Merge, and really all of Ethereum development since then. So we build some of the core software that's used for staking Ethereum and validating Ethereum today and participating in its consensus. But that's actually not the thing we're most well-known for. The thing we're actually even better well-known for at Offchain Labs is our contributions to something called Arbitrum. Arbitrum is what's known as a layer two scaling solution for Ethereum. So Arbitrum is like a blockchain in itself, but it's actually a blockchain that sits on top of a blockchain. And the way the Ethereum scales, Ethereum scales in this layered architecture, so Arbitrum is leading the way to scale Ethereum and bring Ethereum smart contracts and decentralization to users with high throughput and low cost so they can build all sorts of interesting smart contract applications.

>> So let's get to Arbitrum first. What was the benefit of that? What's that do mainly? Does that just give you some policy capabilities? Is it bringing in multiple data sources? What is the purpose of that feature?

Steven Goldfeder

>> Of Arbitrum?

>> Yeah.

Steven Goldfeder

>> Yeah. So Arbitrum actually... So let's back up for a second and let's talk about what Ethereum is. Ethereum is, basically, you could think of it as a computer. It's a computer that everyone can agree on and it can do all sorts of computations and it can hold money. So now, you have these smart contracts that can do really interesting things and escrow money and pay people out. A toy example might be a game, we play chess in the blockchain, or poker, and the blockchain enforces the rules and pays out the winner. The problem with Ethereum is that that blockchain, that computer, has the capacity about the size of my laptop here, and that's global capacity for everyone in the entire world that's using it. And Ethereum is super powerful, and we have some of the largest institutions in the world today, as well as crypto-native protocols that are all trying to use this computer. And obviously, to facilitate the world's transaction volume, you need more capacity than a single computer. So you might say, "Okay, so why don't we just turn the dial up and just make Ethereum better and more powerful? Let's figure this out. We know how to make better computers." And the answer is there is this trilemma, if you will, this trade-off between security on the one hand, decentralization, that's a key word in blockchain, Ethereum is the leader in decentralized smart contract platforms, and scalability. Because what happens is if you turn up the capacity of that computer, it becomes harder for it to participate in the network. So the decentralization becomes less, because in the extreme, if it takes a data center to participate in the network, then you might be decentralized in name, but your average person running an average cloud instance isn't going to be able to participate in the network. So how does Ethereum scale without compromising on these core values of decentralization and security? And the way that it does it is in a two tiered architecture. So you have the bottom tier, which is Ethereum itself. We call this the layer one blockchain, that's providing the security, providing decentralization, providing the core consensus. And then, you have on top of that sitting these other blockchains that leverage Ethereum security and they're able to actually scale much, much further. So Ethereum today has many blockchains that are actually built in it. In fact, even just using the Arbitrum technology stack, there are over 100 blockchains today that are building, and many of them, dozens of them, already live on Mainnet, live in production, that are building blockchains that are rooted in Ethereum. And so, that's what we do, we are able to scale Ethereum's decentralization and consensus so it gets the users at a good price and with capacity to do what they want to do on the blockchain.

>> Okay. There's been a lot of misinformation out there or debate, however you look at it, I call it misinformation, what is the state-of-the-art of Ethereum? Because you're saying efficiency, scale, performance, best smart contract platform. Clear the air here, Ethereum is scalable, give your version of that argument, counter that argument that Ethereum is not ready for prime time. I'm not saying people are saying that. But there's discussions around is it scalable? Will it break? Can it handle the load? Does it meet the performance levels? What's the answer to that, what would you say to that?

Steven Goldfeder

>> I would say Ethereum is not only ready for prime time, it's doing it. You can look at the transaction volume and the use cases that it's supporting together with Ethereum and its layer twos, like Arbitrum. It is already really supporting so many different varied industries in so many ways, and the way that it does it, a good analogy is to think about the internet architecture. So there's famously seven, I don't want to get too technical, but seven different layers of the internet, and it's actually really nice, because what happens is you can have, on the lowest layer, you can swap out components there. If I want to change my website, I don't have to build an entire protocol from the ground up. So I've tapped into these other layers, and as long as I have TCP/IP and I plug into that layer, I'm able to inherit the stack below it. It's kind of the same with the way Ethereum is designed, where it has this core consensus layer at the bottom, and then it has another layer, which we call the execution layer, and that's where Arbitrum sits, and it is able to innovate on the execution layer and actually leverage Ethereum's security, leverage Ethereum's decentralization, and innovate on the execution layer without compromising that. So I mentioned before that about a few years back, Ethereum moved from proof-of-work to proof-of-stake, and Arbitrum, which is a blockchain that sits on Ethereum and is secured by Ethereum, actually also moved from proof-of-work to proof-of-stake that same day, but it didn't have to do anything. And that's the beauty of this layered architecture and that's how Ethereum scales. To some, I guess the disinformation that you mentioned, to some, they say, "Oh, just put it all in one layer." And that might seem nice as a toy project, but if you actually want to grow to world-scale, we've seen this with the internet before, the world's probably most successful protocol of all time, and this layered architecture allows you to innovate independently in different parts of the stack and experiment with better execution environments, with higher transaction throughput, with lower prices, all while keeping Ethereum's security beneath that.

>> I love how you brought the OSI stack into the conversation. I would say that even today, I still hear people say, "Ethernet doesn't scale." Ethernet's being used in all the super clusters, look at NVIDIA, look at all the AI factories coming out. It's still resilient, it's an open standard, you've got more people participating, totally give you props for that great tie in there. TCP/IP, another layer up, provides interoperability. Again, standards make it all happen. I want to tie that back into smart contracts, because what you're getting at here is, okay, you've got the infrastructure, call that the infrastructure layers, okay, check, now you've got developers, huge ecosystem within Ethereum on developing smart contracts, decentralized app, DApps. We built one, like I said, it's fun to do it. But then, once you get it in tests, moving into Mainnet is key. So take me through what's going on on the smart contract developer side, what are some of the innovations you're seeing, what can you point to? Share that key point.

Steven Goldfeder

>> So yeah, Arbitrum is an interesting platform, because there are actually many different options for developers. So Ethereum runs what's called the EVM, or the Ethereum Virtual Machine, and you can launch a contract in Arbitrum today that is an EVM contract. The typical language to write for the Ethereum Virtual Machine is a language called Solidity. So you can write Solidity contracts in Arbitrum and they work perfectly, they work with all your favorite infrastructure. Often though for developers, the core programming language is part of it, but there's also this entire suite of developer tools, there's Oracle's, you may have heard of a company called Chainlink, which is a good example, so sometimes you need to get data from outside the blockchain. There's RPC services, there's nodes, there's wallets, there are block explorers to actually visualize, like Etherscan, to help you see what's going on in the blockchain. So often, the core developer's story is one piece of the puzzle, but you need all these others as well. So the EVM is probably, I would say, certainly the most entrenched smart contract developer platform today. But to explain, to go to one step deeper, what I was saying before about innovation and layers, we at Arbitrum, when we were building Arbitrum, we said, "Hey, can we actually supplement that and make that even better, give developers even more tools than we'd have on the Ethereum layer one?" And we built something called Arbitrum Stylist, which actually gives developers the ability to write smart contracts, not just in Solidity and EVM languages, but also in WASM, WebAssembly-based languages, like Rust and C and C++. And the way we architected this is you can do this all synchronously interoperable, so it just looks and feels exactly like one system. So for example, you have some off-the-shelf cryptographic library or machine learning AI library that you want to bring in, but hey, this library is not written in Solidity, it's written in C or C++ or Rust. You can actually bring that onto Arbitrum today and do it in a way that's actually much more cost-effective. So you can get a 10x cost benefit by doing that than you would if you tried to rewrite this thing in Solidity, even if you did it really efficiently. So that's, I think, one really interesting area, where, again, I mentioned you have, on the top layer, you can actually innovate in ways that are even more expansive than the base layer in Ethereum, and we could do this in a way... And others are innovating in different ways as well, that's the nice thing about Ethereum. You have these execution environments where you can do customized things. And then, the last thing I'll say, there's an interesting push today, there are some developers that want to launch their application on a public blockchain, like on Arbitrum or on Ethereum, and particularly there are reasons where they want to be co-located with other developers. A good example of this, financial applications, liquidity. They want to be next to the decentralized exchanges, next to the stablecoins where all the liquidity is. Well, there are other classes of applications that say, "Hey, we actually want to own our own environment and we want to build our own chain that sits on top of Ethereum." A good example are some games. They don't care that much about being in the same environment as other financial applications, they just want to have a chain that they control. And the cool thing is you can actually, using Arbitrum's technology stack, build your own chain that leverages Ethereum's security, that also taps into Ethereum's security. And that's what I mentioned before, the program is called Arbitrum Orbit, and there are over 100 chain developers building their own custom Arbitrum chains today and customizing in all different ways for their applications.

>> So Arbitrum, you're building, basically, an on-ramp that brings more people in, you get more apps coming in. I'm imagining that's the impact that you're seeing. Is that a correct assumption, that this now opens the aperture of in-migration to DX?

Steven Goldfeder

>> Yes. There are thousands of applications that are building Arbitrum across every vertical today. So you have games, you have NFTs, you have DeFi, which is Arbitrum's core strength, and you have some of the biggest names in the world doing things on Arbitrum. So BlackRock is a good example, together with Securitize, you have Franklin Templeton, Robinhood, all these different applications are partners, or have built things in Arbitrum or partnered with Arbitrum in some way to bring their users closer to the blockchain, to bring some of Arbitrum's features closer to their users, to bring their funds in some cases onto the blockchain. So this is something which is really, really important. And again, the thing here is scale. So you can launch a lot of these applications on Ethereum itself, you'll get that security, you'll get that decentralization, but it's expensive, because computer is limited power. With Arbitrum, you can get that security, get that decentralization, but also have just low cost transactions and high throughput that can actually onboard these large institutions with their massive retail customer bases that exist already today.

>> Yeah. Scale is a huge point there and more commercial aspects. Take me through the business. Let's just say hypothetically, I wanted to launch the CubeCoin and build an app, reputation, can contribute to my network, build a two-sided marketplace, what do I do? I don't want to engage.

Steven Goldfeder

>> completely permissionless and open and anybody can launch an app or a token or whatever experience they want, and it's basically as simple as pointing your developer tools, whatever developer platform you use, maybe it's Alchemy, maybe it's something else, they all support Arbitrum. You just say, "Hey, I want to launch on this chain." You put the chain ID there, you launch your application, and you can launch your smart contract application very, very quickly, launch your DApp very easily and quickly. And from there, basically, it just works like any other blockchain. So users will pay transaction fees to the chain in order to use it. In Arbitrum's case, it's actually pretty interesting. There's a DAO, or a decentralized organization, that takes those fees, so those fees don't come to offset Offchain labs, they don't come to the Arbitrum Foundation, they actually go to the on-chain treasury of the Arbitrum protocol. So it's a protocol that's sustainable, that invests in itself, it has a large treasury, and as all these fees come in and as it's able to provide a product to the world in these execution environments, those fees are collecting on-chain, it's able to reinvest them in the ecosystem as well. So in all levels, not just the technology, but also the funding itself, Arbitrum is very decentralized, and again, is built in a sustainable model that can continue funding itself over time.

>> So basically, that's the steward to the community and the infrastructure. And how do you guys make money at your company?

Steven Goldfeder

>> So at this point, we have several different business lines. We have a staking business at Offchain Labs, together with our Prysm client. But at this point, the Arbitrum core protocol is decentralized and there's a foundation and a DAO, or a decentralized autonomous organization, that's associated with it, it takes all the fees. We provide developer services as well to those fees. We also have other lines of business where we have an incubator and a fund as well, and we also will be introducing new products to market as well. One new product that we just announced the beginning of is a interoperability product, where the problem is you have all these chains, 100-plus chains building on Ethereum today, but if I'm just a user and I want to trade my token on Arbitrum for my token on ApeChain, ApeChain is another Arbitrum chain built by Yuga Labs and the Bored Ape Yacht Club community, one of the biggest communities in crypto, they have an Arbitrum chain of their own, how do I do that? How do I just abstract that away from the user? How do I bridge these assets quickly and cheaply? So we're also building a lot of the core technology that will enable that as well. So we have many different business lines that surround this core problem, to make Ethereum and smart contracts accessible for everyday users so they can just use it intuitively and cheaply as well.

>> That's classic open source model, you build around it, not at the core, let it flourish. Steven, congratulations on what you're doing. Love the focus on scale, the movement to stake, that's great, all good. More developers, solid infrastructure, more apps. Final word, what would you say to folks watching, state of the market, Ethereum, developers, where are we? Are we about to hit a tipping point? Have we already gone through it, have we crossed over? What's your view on where we are? Obviously, in the US, the political climate's better. Vitalik's in the US for the first time in four years, he's in Berkeley right now. Big community action happening in the Bay Area we're at. So a lot of good mojo going on. Where are we? How do you see it?

Steven Goldfeder

>> I think we're in a fantastic time now, where we're beginning to see, and for some time, but in an increasing way, again, the biggest brands in the world, the biggest institutions in the world, all see the value of the public blockchain. So if you go back five or six years, there were these private blockchain projects that were mostly the ones getting the attention of institutions, where today they all understand the power of Ethereum, the power of the public blockchain, true decentralization. And they're saying, "Hey, they're lining up. How do we build on this?" And understanding that this has the ability to disrupt their businesses. So an incredibly powerful time, where the technology is being appreciated by those that actually have big customer user bases and big opportunities to benefit from this technology. We're seeing this with stablecoins, the benefits, even some of these funds. So you have immediate settlement, 24/7 trading, immediate settlement for these on-chain funds, it's a different world with some of the restrictions that exist in the products today. And you mentioned regulatory. I think from a regulatory perspective, it's a very good time. My view might be a little bit different than others. Others are like, "Oh, great, things have calmed down, we can do what we want." I think, actually, now is the time that we need to engage as deeply as possible with regulators. We have an administration in the White House that's looking to engage, that's open to engage, that's embracing crypto. And now is the time not to just say, "Okay, we're safe for the next three and a half years." Now is the time to say, "How do we lock in the frameworks with an administration that's willing to engage and understand it, and how do we actually lock in the framework so we know that crypto is here to stay, not just for the next three years, but for the next decades to come, no matter which way the political winds go in different elections?" And I think that's a generational opportunity that we have today, and thankfully we have an administration that's taking it head on.

>> Well, Steven, that's not a contrarian position. If you look at the United States of America, the internet, DNS, all handled by the Department of Commerce, the government funded the internet, so why not just get on this? So it's very pragmatic, and there's prior art here too, it's not like they didn't do this before, to your point about mentioning the internet.

Steven Goldfeder

>> Absolutely. If you look back in the past couple of years, there was definitely a thought for many of the industry, putting our hands up and saying, "It looks like the United States doesn't want to assume the leadership position that it should have, that it could have," and ultimately, there looks like a big reversal there, so it's super exciting. I think, again, the only point that I make is now's the time, not just to take advantage of the short-term, but to lock it in and make sure that the US will be leading crypto innovation for years and decades to come. That's where we should be, and that's where I believe now we will be.

>> Not to be contrarian myself, but I would even suggest further, that if it wasn't for the United States, DNS probably wouldn't have been as democratized. The US held on before ICANN went fully global. You've got to have leadership at standards, to your point, and having critical mass, super valuable, before all the hands get in there, I think is a great opportunity, great call out there, Steven. Thanks for coming on theCUBE and great insight, and we'll keep in touch.

Steven Goldfeder

>> Thank you so much for having me. Great to be here today.

>> All right. Steven Goldfeder, who's the co-founder and CEO of Offchain Labs. You're starting to see the innovation, open source, open systems always wins. The internet before us is a great teacher. Building on the shoulders of giants is the ethos of all openness. Open always wins. And again, performance, commercial operations, smart contracts, this is the future. Of course, the crypto trailblazers are here at theCUBE in Palo Alto and the whole communities in the Bay Area, of course, theCUBE plus NYSC having this great digital event. I'm John Furrier, your host of theCUBE, thanks for watching.

Steven Goldfeder, Offchain Labs

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>> Welcome back everyone. I'm here in the CUBE Studios. I'm John Furrier, host of theCUBE. We're here as part of our Crypto Trailblazers series. It's a two-day digital event at theCUBE here and with the NYSE Wired community in Palo Alto. We're here with Steven Goldfeder with Offchain Labs, he's the co-founder and CEO. Steven, thanks for remoting in from New Jersey, we're in California. Good to see you. Thanks for coming in.

Steven Goldfeder

>> Thanks for having me. It's great to be here today.

>> So one of the features about this program is really, we say crypto, but crypto encompasses blockchain, all the decentralized innovation, the maturization of the market is good right now, you're seeing years of investment into it, a lot of technology iteration. Certainly, the political climate's phenomenal finally in the US. So you're starting to see, again, another resurgence, wave going of energy around what it means to run a business on the blockchain and how to build apps and all the benefits that come with it, obviously efficiency, more transparency, immutability, all these things set the table. Let's get into it, just for a minute, set the context, what do you guys do at Offchain Labs, what's your product value proposition, and what's your North Star?

Steven Goldfeder

>> At Offchain labs, we're deeply in the Ethereum ecosystem, and we do two things that we're most well-known for. Number one is we actually built something called Prysm, which is the core staking and validating software that you use to run the Ethereum network. So for example, many of you may recall that a couple of years back, Ethereum moved from proof-of-work consensus to proof-of-stake consensus. Prysm is one of the leading consensus clients today and was very instrumental in that event, which is called The Merge, and really all of Ethereum development since then. So we build some of the core software that's used for staking Ethereum and validating Ethereum today and participating in its consensus. But that's actually not the thing we're most well-known for. The thing we're actually even better well-known for at Offchain Labs is our contributions to something called Arbitrum. Arbitrum is what's known as a layer two scaling solution for Ethereum. So Arbitrum is like a blockchain in itself, but it's actually a blockchain that sits on top of a blockchain. And the way the Ethereum scales, Ethereum scales in this layered architecture, so Arbitrum is leading the way to scale Ethereum and bring Ethereum smart contracts and decentralization to users with high throughput and low cost so they can build all sorts of interesting smart contract applications.

>> So let's get to Arbitrum first. What was the benefit of that? What's that do mainly? Does that just give you some policy capabilities? Is it bringing in multiple data sources? What is the purpose of that feature?

Steven Goldfeder

>> Of Arbitrum?

>> Yeah.

Steven Goldfeder

>> Yeah. So Arbitrum actually... So let's back up for a second and let's talk about what Ethereum is. Ethereum is, basically, you could think of it as a computer. It's a computer that everyone can agree on and it can do all sorts of computations and it can hold money. So now, you have these smart contracts that can do really interesting things and escrow money and pay people out. A toy example might be a game, we play chess in the blockchain, or poker, and the blockchain enforces the rules and pays out the winner. The problem with Ethereum is that that blockchain, that computer, has the capacity about the size of my laptop here, and that's global capacity for everyone in the entire world that's using it. And Ethereum is super powerful, and we have some of the largest institutions in the world today, as well as crypto-native protocols that are all trying to use this computer. And obviously, to facilitate the world's transaction volume, you need more capacity than a single computer. So you might say, "Okay, so why don't we just turn the dial up and just make Ethereum better and more powerful? Let's figure this out. We know how to make better computers." And the answer is there is this trilemma, if you will, this trade-off between security on the one hand, decentralization, that's a key word in blockchain, Ethereum is the leader in decentralized smart contract platforms, and scalability. Because what happens is if you turn up the capacity of that computer, it becomes harder for it to participate in the network. So the decentralization becomes less, because in the extreme, if it takes a data center to participate in the network, then you might be decentralized in name, but your average person running an average cloud instance isn't going to be able to participate in the network. So how does Ethereum scale without compromising on these core values of decentralization and security? And the way that it does it is in a two tiered architecture. So you have the bottom tier, which is Ethereum itself. We call this the layer one blockchain, that's providing the security, providing decentralization, providing the core consensus. And then, you have on top of that sitting these other blockchains that leverage Ethereum security and they're able to actually scale much, much further. So Ethereum today has many blockchains that are actually built in it. In fact, even just using the Arbitrum technology stack, there are over 100 blockchains today that are building, and many of them, dozens of them, already live on Mainnet, live in production, that are building blockchains that are rooted in Ethereum. And so, that's what we do, we are able to scale Ethereum's decentralization and consensus so it gets the users at a good price and with capacity to do what they want to do on the blockchain.

>> Okay. There's been a lot of misinformation out there or debate, however you look at it, I call it misinformation, what is the state-of-the-art of Ethereum? Because you're saying efficiency, scale, performance, best smart contract platform. Clear the air here, Ethereum is scalable, give your version of that argument, counter that argument that Ethereum is not ready for prime time. I'm not saying people are saying that. But there's discussions around is it scalable? Will it break? Can it handle the load? Does it meet the performance levels? What's the answer to that, what would you say to that?

Steven Goldfeder

>> I would say Ethereum is not only ready for prime time, it's doing it. You can look at the transaction volume and the use cases that it's supporting together with Ethereum and its layer twos, like Arbitrum. It is already really supporting so many different varied industries in so many ways, and the way that it does it, a good analogy is to think about the internet architecture. So there's famously seven, I don't want to get too technical, but seven different layers of the internet, and it's actually really nice, because what happens is you can have, on the lowest layer, you can swap out components there. If I want to change my website, I don't have to build an entire protocol from the ground up. So I've tapped into these other layers, and as long as I have TCP/IP and I plug into that layer, I'm able to inherit the stack below it. It's kind of the same with the way Ethereum is designed, where it has this core consensus layer at the bottom, and then it has another layer, which we call the execution layer, and that's where Arbitrum sits, and it is able to innovate on the execution layer and actually leverage Ethereum's security, leverage Ethereum's decentralization, and innovate on the execution layer without compromising that. So I mentioned before that about a few years back, Ethereum moved from proof-of-work to proof-of-stake, and Arbitrum, which is a blockchain that sits on Ethereum and is secured by Ethereum, actually also moved from proof-of-work to proof-of-stake that same day, but it didn't have to do anything. And that's the beauty of this layered architecture and that's how Ethereum scales. To some, I guess the disinformation that you mentioned, to some, they say, "Oh, just put it all in one layer." And that might seem nice as a toy project, but if you actually want to grow to world-scale, we've seen this with the internet before, the world's probably most successful protocol of all time, and this layered architecture allows you to innovate independently in different parts of the stack and experiment with better execution environments, with higher transaction throughput, with lower prices, all while keeping Ethereum's security beneath that.

>> I love how you brought the OSI stack into the conversation. I would say that even today, I still hear people say, "Ethernet doesn't scale." Ethernet's being used in all the super clusters, look at NVIDIA, look at all the AI factories coming out. It's still resilient, it's an open standard, you've got more people participating, totally give you props for that great tie in there. TCP/IP, another layer up, provides interoperability. Again, standards make it all happen. I want to tie that back into smart contracts, because what you're getting at here is, okay, you've got the infrastructure, call that the infrastructure layers, okay, check, now you've got developers, huge ecosystem within Ethereum on developing smart contracts, decentralized app, DApps. We built one, like I said, it's fun to do it. But then, once you get it in tests, moving into Mainnet is key. So take me through what's going on on the smart contract developer side, what are some of the innovations you're seeing, what can you point to? Share that key point.

Steven Goldfeder

>> So yeah, Arbitrum is an interesting platform, because there are actually many different options for developers. So Ethereum runs what's called the EVM, or the Ethereum Virtual Machine, and you can launch a contract in Arbitrum today that is an EVM contract. The typical language to write for the Ethereum Virtual Machine is a language called Solidity. So you can write Solidity contracts in Arbitrum and they work perfectly, they work with all your favorite infrastructure. Often though for developers, the core programming language is part of it, but there's also this entire suite of developer tools, there's Oracle's, you may have heard of a company called Chainlink, which is a good example, so sometimes you need to get data from outside the blockchain. There's RPC services, there's nodes, there's wallets, there are block explorers to actually visualize, like Etherscan, to help you see what's going on in the blockchain. So often, the core developer's story is one piece of the puzzle, but you need all these others as well. So the EVM is probably, I would say, certainly the most entrenched smart contract developer platform today. But to explain, to go to one step deeper, what I was saying before about innovation and layers, we at Arbitrum, when we were building Arbitrum, we said, "Hey, can we actually supplement that and make that even better, give developers even more tools than we'd have on the Ethereum layer one?" And we built something called Arbitrum Stylist, which actually gives developers the ability to write smart contracts, not just in Solidity and EVM languages, but also in WASM, WebAssembly-based languages, like Rust and C and C++. And the way we architected this is you can do this all synchronously interoperable, so it just looks and feels exactly like one system. So for example, you have some off-the-shelf cryptographic library or machine learning AI library that you want to bring in, but hey, this library is not written in Solidity, it's written in C or C++ or Rust. You can actually bring that onto Arbitrum today and do it in a way that's actually much more cost-effective. So you can get a 10x cost benefit by doing that than you would if you tried to rewrite this thing in Solidity, even if you did it really efficiently. So that's, I think, one really interesting area, where, again, I mentioned you have, on the top layer, you can actually innovate in ways that are even more expansive than the base layer in Ethereum, and we could do this in a way... And others are innovating in different ways as well, that's the nice thing about Ethereum. You have these execution environments where you can do customized things. And then, the last thing I'll say, there's an interesting push today, there are some developers that want to launch their application on a public blockchain, like on Arbitrum or on Ethereum, and particularly there are reasons where they want to be co-located with other developers. A good example of this, financial applications, liquidity. They want to be next to the decentralized exchanges, next to the stablecoins where all the liquidity is. Well, there are other classes of applications that say, "Hey, we actually want to own our own environment and we want to build our own chain that sits on top of Ethereum." A good example are some games. They don't care that much about being in the same environment as other financial applications, they just want to have a chain that they control. And the cool thing is you can actually, using Arbitrum's technology stack, build your own chain that leverages Ethereum's security, that also taps into Ethereum's security. And that's what I mentioned before, the program is called Arbitrum Orbit, and there are over 100 chain developers building their own custom Arbitrum chains today and customizing in all different ways for their applications.

>> So Arbitrum, you're building, basically, an on-ramp that brings more people in, you get more apps coming in. I'm imagining that's the impact that you're seeing. Is that a correct assumption, that this now opens the aperture of in-migration to DX?

Steven Goldfeder

>> Yes. There are thousands of applications that are building Arbitrum across every vertical today. So you have games, you have NFTs, you have DeFi, which is Arbitrum's core strength, and you have some of the biggest names in the world doing things on Arbitrum. So BlackRock is a good example, together with Securitize, you have Franklin Templeton, Robinhood, all these different applications are partners, or have built things in Arbitrum or partnered with Arbitrum in some way to bring their users closer to the blockchain, to bring some of Arbitrum's features closer to their users, to bring their funds in some cases onto the blockchain. So this is something which is really, really important. And again, the thing here is scale. So you can launch a lot of these applications on Ethereum itself, you'll get that security, you'll get that decentralization, but it's expensive, because computer is limited power. With Arbitrum, you can get that security, get that decentralization, but also have just low cost transactions and high throughput that can actually onboard these large institutions with their massive retail customer bases that exist already today.

>> Yeah. Scale is a huge point there and more commercial aspects. Take me through the business. Let's just say hypothetically, I wanted to launch the CubeCoin and build an app, reputation, can contribute to my network, build a two-sided marketplace, what do I do? I don't want to engage.

Steven Goldfeder

>> completely permissionless and open and anybody can launch an app or a token or whatever experience they want, and it's basically as simple as pointing your developer tools, whatever developer platform you use, maybe it's Alchemy, maybe it's something else, they all support Arbitrum. You just say, "Hey, I want to launch on this chain." You put the chain ID there, you launch your application, and you can launch your smart contract application very, very quickly, launch your DApp very easily and quickly. And from there, basically, it just works like any other blockchain. So users will pay transaction fees to the chain in order to use it. In Arbitrum's case, it's actually pretty interesting. There's a DAO, or a decentralized organization, that takes those fees, so those fees don't come to offset Offchain labs, they don't come to the Arbitrum Foundation, they actually go to the on-chain treasury of the Arbitrum protocol. So it's a protocol that's sustainable, that invests in itself, it has a large treasury, and as all these fees come in and as it's able to provide a product to the world in these execution environments, those fees are collecting on-chain, it's able to reinvest them in the ecosystem as well. So in all levels, not just the technology, but also the funding itself, Arbitrum is very decentralized, and again, is built in a sustainable model that can continue funding itself over time.

>> So basically, that's the steward to the community and the infrastructure. And how do you guys make money at your company?

Steven Goldfeder

>> So at this point, we have several different business lines. We have a staking business at Offchain Labs, together with our Prysm client. But at this point, the Arbitrum core protocol is decentralized and there's a foundation and a DAO, or a decentralized autonomous organization, that's associated with it, it takes all the fees. We provide developer services as well to those fees. We also have other lines of business where we have an incubator and a fund as well, and we also will be introducing new products to market as well. One new product that we just announced the beginning of is a interoperability product, where the problem is you have all these chains, 100-plus chains building on Ethereum today, but if I'm just a user and I want to trade my token on Arbitrum for my token on ApeChain, ApeChain is another Arbitrum chain built by Yuga Labs and the Bored Ape Yacht Club community, one of the biggest communities in crypto, they have an Arbitrum chain of their own, how do I do that? How do I just abstract that away from the user? How do I bridge these assets quickly and cheaply? So we're also building a lot of the core technology that will enable that as well. So we have many different business lines that surround this core problem, to make Ethereum and smart contracts accessible for everyday users so they can just use it intuitively and cheaply as well.

>> That's classic open source model, you build around it, not at the core, let it flourish. Steven, congratulations on what you're doing. Love the focus on scale, the movement to stake, that's great, all good. More developers, solid infrastructure, more apps. Final word, what would you say to folks watching, state of the market, Ethereum, developers, where are we? Are we about to hit a tipping point? Have we already gone through it, have we crossed over? What's your view on where we are? Obviously, in the US, the political climate's better. Vitalik's in the US for the first time in four years, he's in Berkeley right now. Big community action happening in the Bay Area we're at. So a lot of good mojo going on. Where are we? How do you see it?

Steven Goldfeder

>> I think we're in a fantastic time now, where we're beginning to see, and for some time, but in an increasing way, again, the biggest brands in the world, the biggest institutions in the world, all see the value of the public blockchain. So if you go back five or six years, there were these private blockchain projects that were mostly the ones getting the attention of institutions, where today they all understand the power of Ethereum, the power of the public blockchain, true decentralization. And they're saying, "Hey, they're lining up. How do we build on this?" And understanding that this has the ability to disrupt their businesses. So an incredibly powerful time, where the technology is being appreciated by those that actually have big customer user bases and big opportunities to benefit from this technology. We're seeing this with stablecoins, the benefits, even some of these funds. So you have immediate settlement, 24/7 trading, immediate settlement for these on-chain funds, it's a different world with some of the restrictions that exist in the products today. And you mentioned regulatory. I think from a regulatory perspective, it's a very good time. My view might be a little bit different than others. Others are like, "Oh, great, things have calmed down, we can do what we want." I think, actually, now is the time that we need to engage as deeply as possible with regulators. We have an administration in the White House that's looking to engage, that's open to engage, that's embracing crypto. And now is the time not to just say, "Okay, we're safe for the next three and a half years." Now is the time to say, "How do we lock in the frameworks with an administration that's willing to engage and understand it, and how do we actually lock in the framework so we know that crypto is here to stay, not just for the next three years, but for the next decades to come, no matter which way the political winds go in different elections?" And I think that's a generational opportunity that we have today, and thankfully we have an administration that's taking it head on.

>> Well, Steven, that's not a contrarian position. If you look at the United States of America, the internet, DNS, all handled by the Department of Commerce, the government funded the internet, so why not just get on this? So it's very pragmatic, and there's prior art here too, it's not like they didn't do this before, to your point about mentioning the internet.

Steven Goldfeder

>> Absolutely. If you look back in the past couple of years, there was definitely a thought for many of the industry, putting our hands up and saying, "It looks like the United States doesn't want to assume the leadership position that it should have, that it could have," and ultimately, there looks like a big reversal there, so it's super exciting. I think, again, the only point that I make is now's the time, not just to take advantage of the short-term, but to lock it in and make sure that the US will be leading crypto innovation for years and decades to come. That's where we should be, and that's where I believe now we will be.

>> Not to be contrarian myself, but I would even suggest further, that if it wasn't for the United States, DNS probably wouldn't have been as democratized. The US held on before ICANN went fully global. You've got to have leadership at standards, to your point, and having critical mass, super valuable, before all the hands get in there, I think is a great opportunity, great call out there, Steven. Thanks for coming on theCUBE and great insight, and we'll keep in touch.

Steven Goldfeder

>> Thank you so much for having me. Great to be here today.

>> All right. Steven Goldfeder, who's the co-founder and CEO of Offchain Labs. You're starting to see the innovation, open source, open systems always wins. The internet before us is a great teacher. Building on the shoulders of giants is the ethos of all openness. Open always wins. And again, performance, commercial operations, smart contracts, this is the future. Of course, the crypto trailblazers are here at theCUBE in Palo Alto and the whole communities in the Bay Area, of course, theCUBE plus NYSC having this great digital event. I'm John Furrier, your host of theCUBE, thanks for watching.