Welcome to Epicenter, the show which talks about the technologies, projects and people driving decentralization and the blockchain revolution. I'm Sebastian Equity, and I'm here with my cohost, Felika Ernst. Today we're speaking with Sandeep Nailball. He is the cofounder of Polygon, and he was last on the show in 2020, almost three years ago. Back then, the project was still called Matic and was sort of an idea that had not really been
built yet. Obviously, lots of time has passed since then and lots has happened. And Polygon is now one of the largest ecosystems in crypto. And recently they announced Polygon 2.0, a brand new vision for the future of Polygon, which we'll get deep into here on this podcast. But before we do that, Sundeep, how are you? Well, thanks for coming on. And how are you doing? Yeah, thanks. Thanks for having me. And here and you know, I'm. I'm doing very well. Very excited to, very excited
for this chat. Well, so are we obviously, like I said, you know, Polygon has become such a huge part of the broader crypto ecosystem and certainly of the the sort of crypto narratives take us, take us through the last three years, right. When you had this idea which was, you know, called Matic back then, which was so the one of the very early ideas for a Layer 2 on Ethereum, what's you know, how is your life change in the last three years?
So you know before. Going into the last three years itself like you know but the starting of Poly Polygon or starting of Matic network was basically you know I and my other Co founder who founders also we were building apps, B apps actually on our this thing like of course we had some protocol level understanding but we were building B apps and we realized that you know Ethereum is not ready for scale and. You know, I also personally like I am, you know, sometimes I call
myself like Web 3 fanatic. Like you know, sometimes I question myself that you know, am I giving too much of or over indexing on how much the world needs this trustless, decentralized world and all that. But generally, like I've been very, you know, kind of passionate about that. You know this is the this is the world or this is how the the the the next phase of the evolution of humanity is going to. Happen, right. Like, you know, we came from those empire states where the
king was the God, right? Like King can do anything that that he wanted to do. And then, you know, we had, we came into these nation state systems where everything became an institution, government became an institution and people were electing the governments. But then you know, those institutions also. In the last 40-50 years with social media, we started realizing that, you know how much corruption is there in these institutions.
And time and again they have proven these institutions have proven to be prone to corruption. And somebody who gets enough power, they start, you know, misusing that power. And eventually I feel that this is the third, you know, stage of evolution of human systems wherein. You know these trustless applications would be there and then even the businesses will be built in a community owned, you know as we say community owned
businesses and things like that. And and they will you know empower provide more freedom to individual human beings in all the in more aspects of their lives basically. And somebody actually Harvard actually did a case study on Polygon and I was there and somebody asked me what what exactly Web 3 reduces the cost of. Because every big technology reduces the cost of something like you know cars reduces the cost of transportation, Internet reduces the cost of, you know information.
Now that what does web three reduce the cost of And I said that Web 3 reduces or blockchain reduce the cost of freedom, the cost of providing freedom or cost of providing democracy into the system, which is we know that how costly it is to, you know have democracy. So that's where we started Amatic network. You know, we truly believed in this and we realized that the infrastructure is not ready for building those kind of applications and businesses.
So we went into that and at that point in time Plasma was a solution which you know looked like the was the hottest solution in that the space and we committed that we build a Layer 2 using plasma but with an EVM on the layer two. And in 2020 we launched the launch the chain. At that time we launched a working Plasma version. But then most of the people did not use the plasma chain.
People started using the EVM side of the chains even like pure EVM part of the chain and then the chain actually even though the chain had plasma built in layer 2 built into that on that. But most of the people used only
POS chain, right. And then it kind of, you know, was the was the kind of a, you know, this confusion in the terminology whether it is a commit chain or it is a side chain or whatever it is. But then the the, the usage kind of exploded and it became one of the biggest, you know, block chains even now I think by daily active users and you know by the number of applications deployed, it's probably the biggest block
chain. But in the last, But as I said that the vision was to provide this Web 3 scalable infrastructure and that infrastructure can only come in if you have single zones of security, right? Like you know you do not have. Like right now as we have seen in the past like we have so many block chains and we were just discussing before recording also that we have too much infrastructure, not many apps, right, But those infrastructure, when we say too much infrastructure, that
infrastructure is there. But these are all DI separate security zones and to connect them you have these bridges and every other month we keep hearing that you know some of the other bridge gets hacked and things like that. So essentially what I am trying to say here is that even though
we have a lot of block space. That block space doesn't have one single unified security zone like each of the zones or each of the block space has a different security assumption and people need to use this third party tools and all that to do that. So in order to achieve that web scale for web three, we believed once we launched the chain, we also evaluated optimistic roll ups and we realized that optimistic roll ups are kind of the.
Maybe the next stage, but they are not the end stage because you know you are, you have to put all the data back on Ethereum and then you have to have a fraud proofs. It takes seven days to have those fraud proofs fully and it is hard to build also those those fraud proofs. Like currently you know, I do not think any layer two has a you know, fully permissioned fraud proofs only. I think arbitram people have, you know, permission fraud
proofs. But most of the other optimistic roles do not even have any kind of proofs whatsoever. So. That point itself, we had decided in 2021 that ZK is the end game and we wanted to go big on ZK and then by that time like you know we in 2021 we merged or on boarded some of the top most ZK talent in the space must one or two like Hermes, Polygon like the Hermes product project which was building AZK roll up they merged with Polygon network.
Similarly the mean protocol must with Polygon network and today we have 2-3 dire separate teams who were building it. And you know the benefit of these different different teams was that in the last four years there's a multiple projects who have been trying to build these ZK rollups.
But having those multiple teams, they were able to contribute to each other from different different angles and you know trying to were able to tell the teams that where can be some gotchas that you will find 3 months down the line. And the result of that was that in March of this year 2023, we launched our first like first full blown.
ZK VM which is audited fully mature source code and all that and we launched it in March and that is actually the first full blown layer to exist with the validity proofs. And since then we have done a lot of leaps in the ZK technology that we are building some of our ZK technology like Plonky to pill. This is being used by large scale amount of developers all the all all across the space.
Whenever somebody is building on ZK, people are using this technology and you know like Geordie, I think you guys know Geordie Bellina who is one of the Co founders at Polygon. He is built Sercom which is kind of the first you know first programming language you get into when you start to build ZK circuits and things like that. So a lot has happened and now today Polygon is a ZK powerhouse.
And as you as you said that one of the largest ecosystems in the space but the goal from here of Polygon 2.0 is to is the goal is same, the mission is same. How do we get web three to the mainstream. How do you how do we play this role to get in the next evolution of humanity. I call it Web 3.0 as Manatee 3.0. So how do we play a bigger role in that? And the goal is still the same that you know how to provide this infinitely scaling infrastructure for Web 3.
Which also has, you know, same security zones so that the value can move into seamlessly from one place to another. You know, meaning that the entire block space should look like one single block chain, one single block space. Instead of like, you know, you, you kind of, you know, moving your value or bridging from one chain to another and things like that. Kind of getting the similar kind of qualities that the Web 2 today has for information.
It's infinitely, practically infinitely scalable. But it is also seamless. Same case with Web 3. Infinitely scalable block space but seamless moment of value. That is, what is Polygon 2.0? That's the whole journey. Cool. So I think I understand the value proposition for Polygon 2.0. In a nutshell. How will it? Look or how will it be designed just so we can kind of deep dive into the individual bits later, Absolutely great question. So it's very simple, like, you know, so we.
Believe that under the fundamental. Layer of. This trustless you know world web three is Ethereum and that's where the most of the value will be created or more than created. I would say most of the value will be secured right And so that is the settlement layer we where where all the values being. Settle secured and and things like that.
But on top of that, you will have hundreds and hundreds or maybe thousands or millions of chains which will connect back into Ethereum using some sort of a proving mechanism which we believe that ZK and most of the biggest researches in the space believe that ZK is the end game for that. So you know, you prove all of the execution on all of these chains back on Ethereum, and then because every chain is proving the ZK their execution back on Ethereum.
The value can move to and fro between these chains just by relying on those zk, right? So that's the simplest idea about it. And between these chains and now how it will look is that you know you have Ethereum, you have hundreds and hundreds of these chains, all of them are proving back to Ethereum and they can rely on each other and the value can seamlessly move between each other. So all these chains connected to this common bridge or ZK proving
layer which? Currently we call it LXLY bridge, but we are moving it to an aggregated layer. So it will it will be aggregated together and with that aggregated layer, all these chains connected to this aggregated layer will feel like one single value network right? Instead of just like the way Internet feels today like you are sitting in somewhere in Europe, I am sitting in UAE. We can create, exchange, share this information.
Same way you know with Polygon to whatever we believe should be possible for the value. Infinite amount of scaling. More block chains. More applications need more block space they can spin up and dedicated block space. Also not publicly shared block space. They can spin up their own chains. But their value is still secured. Anybody can trust their value because it is being zk proven on Ethereum and then that value can move around.
Cool. So we'll deep dive into the inter probability part of this later. Let's kind of look at the ZK part first, right. So we see there's two different chains that are in principle possible and that you guys also operate, right, or are going to
operate. There's kind of the ZK EVM which is kind of the full, full blown roll up with all costs associated with it. And then there is the so-called Validium, which you're transitioning Polygon POS into, and maybe that's kind of back up for a second. What is a validium? So what's the distinction between a validium and ZK roll up? Essentially when you are doing these layer 2 scaling, what you are doing is you are having some computation somewhere off chain.
So and then you just prove back on Ethereum, so you don't have to do the execution or the computation on Ethereum and then it is happening somewhere else, but Ethereum is getting it and primarily to prove the computation fully. Like you have actually two things like let me take it with optimistic rollers. First in optimistic roll ups you
need to have both two things. The two things are the proof of the execution and then the second is the data like what were the individual transaction data was right. And with optimistic roll up because it is by by nature it's optimistic, it's assume everything is correct. So what you have to do is you have to take the whole data, put it back data on the on the Ethereum. And also put the state proofs and all that. And then you assume that at optimistically everything is
correct. But if something is wrong, somebody from the community can come and you know do this thing called fraud proof, right, and run something about. That's why you have to take, you have to, you have a withdrawal delay of seven days from optimistic roll ups because you need to give enough time for anybody in the public to come and, you know, raise a contest or, you know, raise a fraud
proof on on on material. Whereas with ZK, with ZK what we are doing is and this is the power of the magic. Magical power of ZK is that you can have millions and millions of computations on some off chain layer. With ZK you can have a very concise proof of that computation and justice prove it back on Ethereum. It is called validity proof. It is not called fraud proof, is called validity proof. The moment ethereal smart contract validity, smart contract accept the validity
proof. You can, you know. Everybody can be rest assured. That all the execution. The the the computation that has been done on that layer two has been done as per the rules of consensus right As immediately you are 100% sure. So you do not in case of ZK roll ups. You do not even need data on Ethereum to prove everything right. So you can keep the data off chain which is called validity.
So in case of optimistic roll ups or even ZK roll up, when you want to keep the data also on Ethereum and the proof also on Ethereum, it is a roll up. When you keep proof on Ethereum and data somewhere off chain. That is called a validium and validium in case of ZK because whole computation is being proven on Ethereum, it is as secure as roll up.
In terms of security. Only difference is like there is a one particular attack vector that they say which is a very corner case of an attack vector where a particular sequencer or a operator is running a validium and that validium. You know stops or kind of starts hiding the data that does not show the data to the users because users need data to exit the platform, right? So it is called ransom attack.
So user the sequencer. In case of optimistic roll up, they can steal the users fund but because of the fraud proof. That is only. Protected using the using the fraud proof. In case of ZK roll ups the the the sequences cannot steal the user fund, they cannot touch it. All they can do is if. The data is not on chain. They can hide the data or stop showing the data and try to do this ransom attack to the user where they say you will give me
this much money. If you have $1 million give me 200 K then I give you 800 K back or something like that. So this is a but then there are multiple mechanisms these days where you have forced you know transactions and things like that and it can like you know people are building these solutions where if the sequencer is not giving you your money, you can sequence your transaction first on the chain
and. Even if the ransom attack occurs like you know the the the sequence that has to process your transaction, So there are multiple ways but there is still a very small element of this small data availability but which can be extremely minimized if you have a decentralized set of sequences there. And with ZK that is possible right. So we were even discussing like imagine Nosys chain starts proving back on ethereal, right?
And Nosys chain already has hundreds of like you know, I think 45,000 or like you know some insane number Nossys chain. As like in terms of Nosa's chain has 140 thousand validators, 140 thousand. So you know if these validators are running this chain and they are proving back on Ethereum, the data is also fairly decentralized. You do not need to rely on so that that validium is almost as secure as like not theoretically but practically as secure as a
full blown roller. So that is the only deposition. May I kind of just back up and kind of try to explain the attack in slightly different words. So basically what you kind of need to kind of exit the chain by forced inclusion is you need the exact state of the chain,
right? And kind of if you want to go from checkpointed image to checkpointed image, you kind of you need to know which transactions have happened in since the last state so you can reconstruct the exact state and if if basically at. You know, one transaction from from that entire set is missing. You can't reconstruct the state and you can't kind of force an exit, which is kind of the attack factors, right. So basically it's kind of it's,
it's. I agree that it's somewhat 10 years and it kind of also requires the collusion of 2/3 of the validators, which in your case would be 67. So yeah, so I I totally, I totally understand that and. Also, if you kind of look at the costs associated with being in there too, the majority of the costs actually come from the data availability. So basically just posting everything at its core data at the moment or basically posting everything you know in a in a data BLOB.
As soon as we have tank sharding, it is the lion's share of the cost. It's like 99.9% or so. Of the cost only, like .1% of the cost or so is the actual. Proof of the state, As you said, basically what you can do is you can prove that the state is correct. Malicious actors might still be able to kind of freeze the chain, but basically that's the best they can do. They can't steal anything, Okay. So I think now we kind of have established very clearly the the delineation between a validium
and the ZK rollup. So there's this, there's this diagram that the Celestia team has put out and I think a lot of people have seen. It's like it's this chart where you have on one axis like Ethereum centric applications and Celestia centric applications. And on the other axis you have the different layers of the blockchain stack, so data availability, consensus, settlement and execution. And then there's like the monolithic chain you have roll ups Solidium.
So I'm sure lots of people have seen this graph and short of it sort of shows the different ways that one can construct A blockchain with these different layers. I just want to get a sense of where Polygon sits in this mental model. So for the ZK roll up, execution is happening on the Polygon ZK roll up, but consensus, settlement and data availability are happening on Ethereum.
With Validium the data availability is on Ethereum and then the consensus, settlement and execution are part of the Polygon stack. Is that correct? In case of Validium, the proving settlement is on Ethereum, but then data availability. In case of like you know Validium especially let us say, let us talk about Polygon POS chain which is one of the examples, right. In case of Polygon POS you have 100 validators and these hundred validators can by you know can as well serve as data
availability. You know members of this chain also, right? So these validators are only proving on Ethereum. So settlement is on Ethereum. But the data is is on Polygon PSJ right? But then if you see other Polygon you know chains. For example let us take an example of ZK AVM, ZK AVM. Both the data and prove are going to theorem. It is a full blown roll up right Now the execution is single sequencer but that we want and we will be decentralizing this the execution of the ZK AVM chain.
So there will be multiple ZK, AVM executors, right? So in this case, consensus will remain off chain. But the whole data. And the proof will remain on Ethereum. In case of Polygon POS chain, only settlement is on Ethereum, but the consensus and data
availability is off chain. Similarly, you can have some other kind of. Let's say you talked about Celestia, a kind of chain which is which has single sequencer which puts the proof on Ethereum, the settlement layer, but puts the data on Celestia. Or any other. Data availability chain for that matter, its own data availability layer or its even Polygon ecosystem with that staking hub and you know, and we will talk about that like in multiple. Roles in the theory.
Of Polygon ecosystem. In Polygon ecosystem, the validators will also be offered able to offer this role of data availability. We call them tax like you know they can be L tax local data availability committees because if you are running lets a gaming. App like you know your game is a small game. You still want the value to be fully.
Secured by Ethereum. But you don't want all of your data, you know, being put on to Ethereum, L1 or like you know, some other global layer like even Celestia. That will also become costly if it starts getting filled enough, right? So essentially you might need your own like 5 or 10 validators which are providing very low cost data availability to you and when your scale is small you are happy with that once you start becoming let's say from.
10,000 users to 1,000,000 users to a 10 million users. You might want to change your data availability assumptions and we want like just like on AWS you know when your startup is growing or your product is growing, you change the configuration of your servers and improve it. As per the you know the configuration of the the users need. Similarly, we also want that Polygon for the developers to have a full blown stack where they can change these configurations as they go along.
So. Yeah, these are the different you know kind of configurations where we kind of want to play role is obviously is on the execution layer where the validators like you know, we believe that a lot of like app chains, for example Immutable X which is one of the biggest gaming players, they use all the Matic validators on their chains. So they want their chains to be Matic validated, but still the ZK proven on the theory. So that's a double kind of benefits they want to be, well,
idioms, but. Decentralizable idioms with Ethereum as the final settlement layer you have. Polygon to settle back on Ethereum like Polygon ZK proofs. You know many other chains where they have their own set of validators, but they just. So these proofs. So for that let me introduce this concept of especially as a part of Polygon 2.0 aggregator layer. So the aggregator like in the in the current setting, let's say you have 100 chains, all of them are proving.
On Ethereum, some of them have matic validators, some of them have single sequences, some of them have their own consensus mechanism, own validators, All of them are proving on Ethereum and everybody is proving let's say every half an hour. So everybody has to pay Ethereum gas fees for half an hour. Proof right, Which can be fairly costly, $5200 and then you know they are able to prove only 30 minutes.
So any kind of interoperability, we call it LX and Vibridge needs minimum 30 minutes because once you put the proof. Then you can move your funds around the other chains. So but with the aggregator layer, what we are introducing is because we we have plonky 2 which is the fastest recursive recursion library, right? You know you can combine ZK
proofs into one second. So with this aggregator layer, what will happen is all these chains can submit their proofs to this aggregator layer where it will be aggregated. Like let's say thousand chains, 100 chains, all of them put a proof. Those 100 proofs get aggregated and just one proof gets goes back on it. So the cost of proving to the chains becomes extremely low now and what it enables is now the chains then can prove every 10
seconds 20 seconds. So the cross chain interoperability between the chains become much much faster because the moment you are on chain number, let's say you are on IMX game chain. And you? Are playing a game and you you made $1000 playing that game. On those tokens. And now you want to swap those tokens on to let's say Gnosis pay chain for example, which is let's say assumingly it's connected or you want to swap it
on ZKVM. So the moment your chain, the game chain publishes the proof 10 minutes into this aggregated layer. Now you can take this ZK proof and go to the other chain which has the visibility of the aggregated layer and the proof has come in. They can actually run your cross chain transaction quickly. And then you can take it back in 2030 seconds. And that is the ultimate goal of Polygon Tomato, wherein you are on your own chain wherever you are playing game and all.
You don't even care where where your money is, you just do like OK, swap and then in 20 to 30 seconds, just like Ethereum blockchain main chain kind of finality. Somewhere else you use the liquidity, somewhere else it gets swap and you get the USD back. On your on your chain. So again, as I was saying that all these chains should feel like one single.
And so that's where the Polygon wants to play the role, some on the execution layer, but mostly also on this aggregated layer where all the proofs are being aggregated. And the value as we say value layer of Internet like we want to play the value layer of Internet where all these chains are providing these execution layers And then Polygon is allowing that information or value to seamlessly flow across these execution environments, I think you kind of.
Already touched on this, but spell it out for us. So basically if you kind of talk about like these two different scenarios of kind of user sharding and application sharding. So basically the first being where the user kind of lives on one chain and kind of does everything on that chain. Whereas the 2nd is kind of different applications live on different chains and users kind of seamlessly switch between those two. You fall into the second camp I assume.
Yes, yes. I mean I also see like one important part of Polygon 2.2 is we don't want to be we we try, we have tried to be as less opinionated as possible. Like if you see in the current Internet 2.0 like which we call web two world, the protocol TCP IP which actually ended up becoming the backbone of this whole Internet is the least opinionated platform, you know protocol right. So what we believe is our job is to provide the seamless.
And secure movement of value across these chains, right. So our architecture doesn't put a very strong opinion on that whether all of the things should happen on one chain like all applications would exist on one chain or they exist on other different chain. What we believe, but I believe is more of a more practically what will happen, what will end up happening is that you will have some of these public chains which will have massive amount of liquidity people.
Swapping and doing some very high, high value stuff, but then apps each of the apps because apps want. Dedicated capacity like you guys are. Building this amazing like you know nosses pay you know system where you want users to be able to. Pay within a millisecond, right? So you do a kick and then OK pay and pay payment app, so. You would want. Dedicated capacity for your change.
Like you would not be looking to have a you know scenario where there is a. You know some nft pigment is happening and now my payments are taking you know 50 minutes 50 seconds to go through right? So people need or application need dedicated capacity and. Their own scalability. Space to exist. Some of the. Chains will be like we believe like and this you know imx will be the first kind of we feel it will happen is that they will themselves be a cluster of. Chains.
Because they have 150 triple-A games even of one of them explodes heavily that chain that game will acquire or kind of like you know will occupy the whole chain itself. So what I what we believe is public chains, lot of liquidity, some high value stuff going on, app chains, long tail, short tail, very. Very, very big kind of ecosystems. Plus then you have these ecosystem chains where some of the Ecosys like this is a gaming ecosystem, there is a. Social network ecosystem and all
that. And it's like these will act like more like servers, like Twitter is not running on one single server somewhere, it's running on hundreds and hundreds of these coordinated. Servers and that's what. So we wanted to have that Internet the way Internet has grown today for information. We wanted to have that architecture in mind and that's one of the reasons how Polygon 2 part looks. Like this?
So I don't fall in any camp. Like I believe that the world will look like a very mesh space. Some of them will be kind of dedicated chains, app chains. Some of them will. Be ecosystem there. Some will be high liquidity public chains. Let's talk about toeconomics a little bit. So how does Polygon 2 point O impact the economics of the
network and I guess? Maybe a broader, more high level question is here is how does Polygon make money and you know, fund itself as a chain and as an ecosystem. Polygon ecosystem basically when we started asthmatic network that time the plan was to have one single chain even we had not thought through like you know I mean of course we knew that it will become a multi chain scenario eventually, but we at that time the token economics and everything were designed for
a single chain. And you know now with this hyper block chainized world that we are looking at like you know in next 1 1/2, two years, I feel that there will be hundreds and hundreds of these chain. They are already hundreds and they will keep on growing like this and the token actually should reflect that ecosystem. So how we have you know like what we call pole token which is the you know, upgradation of magic token. It's not a new token.
Magic token will simply upgrade into poll token and you know we call it like this third generation hyper productive token. Why why we call it all that is that you know it started with BTC like for example BTC. As a BTC holder you cannot do anything with BTC, you can't stake it in the network. You can't provide the security
to the network With that this. This was chain with Ethereum where ethereum as a token like you know now you can stake in the network try to provide the the security into the network.
And you know you can earn the yield on that and the kind of token Polygon is is becoming and we believe that you know many of these infrastructure protocols will become like this is the third generation token wherein you can not only validate on one chain you can validate on hundreds and others chain, you can stake once and validate on multiple multiple chains kind of like the you know we call it multi staking mechanism not like restaking but multi stake like one place your circuit stake
then you run multiple chain. So that's one part. So not only you can validate on multiple chains, you can also you can you can also provide different kind of roles. So you can provide definitely a validator or sequencer role, but you can also provide a prover role, right? Like you know, eventually we intend to have a prover layer, you can also provide a data availability layer wherein you, you know provide data availability to different
different chains. And then finally you can also play a role in this aggregator layer where you become an aggregator and you know because this layer also will have to be decent like. So you know these four different different roles on this one. How you know this becomes a sustainable effort like how Polygon makes money South. This Polygon is a is supposed to be a open decentralized protocol. So this doesn't have a revenue
per say, right? But with poll token what we have proposed is we have proposed 1% inflation per year which is like you know almost like Ethereum kind of inflation and less than bit condition. Which goes to the validators, like all the validators who are validating they will get this particular part of the the inflation. But second part is that the the second part is the ecosystem growth tragedy or something like that.
So for that we have proposed for next 10 years or community can decide 2% for five years or 1% for 10 years or whatever. We have decided that, you know, there will be 1% token tragedy, token inflation which will be used to grow the ecosystem back. And eventually there can be mechanisms where validators actually donate some part of their transaction fees, or whoever is making any kind of revenue. Everybody donate, but there is no way to force.
That fees as of now like at least we are not clear right now how we can force or like the net it can be built into the protocol where everybody has to do it and in future like you know. If it becomes exploitative, you are taking 10%. The validators can simply say we are hard forking and we don't want to pay this 10% transaction fees, right? So right now that's the only way that there is this inflation for the growth of the protocol.
But in future there can be some donation mechanisms also where validators will donate all the revenue, makers will donate to the ecosystem. But we will, you know, for 10 years, we believe that this infrastructure walls are going to stay for next three to five more years Max. It's almost kind of over. It's very hard for new infrastructure players to now come and, you know, start a chain ecosystem from day zero. You know, in three.
To five years they are going to be settled and in those three to five years we are going to, you know, we believe that this ecosystem tragedy is good enough and post that it can become a fully community run non, you know, non single party or non you know kind of incentivized growth just like we see Ethereum is almost reaching that there's only one network Bitcoin, which is able to do this. Ethereum also like you know, Foundation has to spend like I think eighteen $100 million as
per their last report. To grow the ecosystem. But eventually like in in 3-4 years, I think Ethereum will reach the place. Where they don't have to spend any money as foundation. Same we also believe that in 5-6 years Polygon or 10 years it will reach that place. What will the staking ecosystem look like for Polygon in the future? So basically currently there's a set of 100 validators. And there's an application to kind of become a validator and there's like some checks and
stuff, right. So is that gonna be decentralized, Is that gonna be opened up? Yes, absolutely. So currently all these validators are not Polygon validators, they are Polygon POS validator. They only validate Polygon PSTN. But now we have multiple chains and what we are going to do is we have, we have, we call it staking hub. So the staking hub will be will live on Ethereum. So you own magic tokens, you stake on Etherea and then once you have stayed. Your tokens into the network.
Now you can subscribe to different different kind of chains. So you can subscribe to Polygon POS, you can subscribe to when ZK EDM becomes decentralized or ion exchange at this and that. So all those kind of sticking logic and mechanism can happen on on Ethereum for you. So that's how it will look like. It will be a permission less ecosystem. Anybody who has any magic they can stick, and then they can choose to validate on any chain
where they can. On their transactions, it's very simple and very open and permission permissionless cool and this mighty staking. I mean, as you said, it sounds pretty similar to restaking, and restaking's been somewhat contentious in the Ethereum Twitterverse over the last year or so, with people claiming that it kind of overloads the consensus. Are you worried at all for a Polygon that similar things might happen?
I think like the the bigger problem with the current risk taking mechanism like Eigen layer and and things like that on a TDM is that it's extra protocol, it's not a part of the protocol itself, right. So it introduces a lot of additional kind of risks into the system which where the system or the base system can lose control of. If the larger amount of economic value is coming from these networks, you know it can create very crazy scenarios where you
know the protocol loses. It goes out of hand for the base protocol. In case of Polygon it is a part, it's an enshrined risk taking like you know you can think of it like that. So the protocol can enforce any kind of socio economic mechanisms like slashing and all that at 1:00 central place in the protocol itself. So it's that's why it's very different. It's like enshrined risk taking in a way if you have to say
that. So where we believe is like you know it's fairly much more secure than than the extra protocol. These take, I like to talk about the protocol architecture a little bit. So in your documentation you have this staking layer, the interop layer, the execution and improving layer. We haven't really talked about interop so much yet. So can you tell us how interoperability will happen between applications in the Polygon ecosystem? Talk a little bit more about the protocols there.
And I'd like to after that, talk a little bit more about interoperability in the broader sense in terms of connecting Polygon to other ecosystems. So yeah, maybe starting with the interop layer within Polygon and broadening it out a little bit outside the ecosystem. Absolutely. So I actually you know use this word aggregated layer before like interop layer is actually that aggregated layer only which I was explaining that you know all these chains currently and
this is already built out today. So all the chains who are using Polygon provers, they can connect to Poly Ethereum and we call it LXLY bridge. So you can move from any chain to any chain once you have submitted your ZK proof without coming back to Ethereum like you, you can directly jump from one chain to another because you know there is a master smart contract on Ethereum with master bridge contract where all the individual chain bridges are connected.
So if you are moving something and you have put in a proof, you can actually directly move the value across the chains. But then this actually chain, this layer exists on Ethereum like currently LXL by bridge which is very costly because all the chains have to put their proofs back on Ethereum and which is you know which can't scale beyond let's say 10/20/50 chains because it will become prohibitively expensive or very
slow to move funds around. So that's why we are introducing this interop layer or aggregator layer we call it, where all the chains can submit their proofs back on this aggregator layer. And this aggregator layer combines all the proofs and just puts 1 recursively combines 1 ZK proof, puts that ZK proof on this one. So each of these chains are still like layer twos, they are directly connected.
Once your proof has been included in Ethereum, you can move your value from your chain to Ethereum or your chain to any other chain in this aggregated layer, right? So the value can move freely without any need any of any external bridges. And as I was saying that because of this aggregated layer, you can now prove much faster because this layer will be much, you know, kind of cheaper. So you can prove every 10 seconds to this layer, this combines and puts up proof back on Ethereum.
But within those 10 seconds, all the chains have a kind of a partial proof of your ZK, right. Even though your proof has not been submitted to Ethereum right now in those 10 seconds, but you know, you know that this proof is here and the chain has provided A valid proof or whatever that chain is. So you can have this interoperability, very fast, Interoperability 10 to 22nd interoperability between these chains. So that's where we believe that the value can move around and across chains.
And notably you can have this level of interoperability also between lower and higher security chains, right, depending on kind of where the, how the data availability is handled for each of these chains because each of them is going to host a ZK proof to this intermediate layer.
So do you foresee a future where kind of depths will kind of separate out components that are high security and components that are low security and kind of build depths that live partially on a high security roll up and partially on ability. I think like you know that kind of complexity going on to the developers is very kind of seems
like unlikely. Like I feel that eventually you will have fair enough data availability, you know, kind of I would not say global chains, but kind of clusters where you can have good enough data availability and everybody. Like that's why I was telling you that we don't believe in a single data availability layer. But you know essentially with the same sticking up, somebody can actually launch a shared
data availability chain right? Which is basically 5 like 100 people come in, you have a descent of data availability and then people are sharing. But also this will be this cross chain value transfer will also you know will also be governed by the individual sequencers of a particular chain like you know they like users do not need to know about it, apps do not need to know about it. If I am an app which has a off chain data availability with one single sequencer.
I know that the ZK, EVM public chains validators are not going to trust my value and they are going to wait for my transaction to go on ethereum proof to go on ethereum and only then you know take my transactions which are coming in right? Or for data availability also there will be some other mechanism so but the base layer of security for everyone is that ZK proof. So you are not cheating on the
ZK proof. All you can do is for some users you can try to you can hide the data and do all the kind of stuff right? But for that those users that the freedom is with the user, right, Like the users who are are willing to rely on the token, right. Let's say there is a game chain and that chain has one single data availability provider and you have $10 million on that chain which you are now bridging and you sold to someone else.
So the other person who bought that token, right, that person is relying on some level or relying on some level of trust on your chain that because he's going to, when he's going to claim he is going to come to this gain chain and ask for those $10 million. So I think the free markets will, you know, generally tend to take care of these things more because a particular chain, a particular app will not grow beyond a certain point unless they decentralize their data
availability bit more. Their communities will put pressure on them that you know, this is this is like not a secure chain and all that. And they will fail to capture more and more value on that on that chain and they will have to, you know decentralize their data availability. But I think for data availability there will be multiple multiple avenues for people to put.
And you know, L2 Beats and these kind of like, you know, catalogs will provide you decent enough, you know, a kind of security on the data availability side of things. Like I feel like for example once Ethereum has this availability like who's stopping Nas's chain also to add 4844 to that right that with 130,000 van liters for a lot of chains they will use simply Nosys chain as data availability or people will launch layer tools or Nosys chain data ability and.
You know it will be on the users to trust that particular how much to trust on that particular chain. So for us interoperability for us the base layer is that Zika proving and then beyond that its we leave it to the free market and you know other kind of social games to solve unless something in data availability, some big explosion happens where you have data availability layer tools and things like that then
then we can we can see. So you were in Paris during ACC week and you attended All Smoke on and and also modular summit. So you know my question is here. You know what? Was the purpose. What was your purpose for attending these summits? And you know what, What kind of I didn't see your target osmocon unfortunately, and I was like looking for it on YouTube, but I couldn't find it. But yeah, curious like how you see Polygon.
You know interacting with these other ecosystems and what is the role you know like you you know Polygon 2.0 build itself is wanted to be the value layer for the Internet that you know when you when you say anything that wants to be the something it kind of feels I mean to be I read it as like it is the definitive thing and all these other things are perhaps going to you know perish or or not be that important.
So, you know, do you think that there is a role for multiple, you know, independent layer ones? The remains of state application block chains and how do you see polygons with interacting with these different ecosystems? And particularly, I'm quite interested in polygons interactions with the Cosmos ecosystem and the ecosystem, yeah. So I think this is a very good
caller. We should not call it the value layer actually value layer of Internet or we want to call it a value network or like you know we have to come up with then a like slightly better name. This is the good color that you know somebody will think the our vision is that these chains that we are talking about like you know on top of Ethereum, Ethereum is the settlement layer.
But then on on the on on this other layer let I'm saying other layers some of them will be layer twos but many of them would be sovereign layer ones also like right now in Cosmos let's say lot of cosmos chains and you know big shout out to Cosmos community like I I think after Ethereum like I always feel that if I could actually join some other community being in web three it will be Cosmos community no doubt And it's it's it's super decentralized super you know cool and intelligent
people over there. But with Cosmos chains what ends up happening is that most of these Cosmos chains in themselves get a lot of traction, but they are still kind of islands, remote islands of liquidity. They are not, you know plugged in into the main liquidity layer of the of of Ethereum where the largest amount of liquidity is
there. So how we see Polygon playing this rail is this aggregator layer is for example right now we have ZK proofs where any EVM chains, EVM ZK proof, any EVM chain can prove back on this aggregator layer. But we are already you know seeing and helping other teams to build let's say Zika WASM kind of provers, right. So where you can prove a WASM chain back on the theory right.
And all of these chains of this aggregative layer then kind of enables free flow of information, a free flow of value between these chains whether it's layer ones sovereign layer ones layer tools, single sequencer, multi sequencer, own tokens, take whatever it is Polygon just wants to provide that central layer of that that layer of value moving across these chains securely in a particular single standard value approval and a value movement across these
chains. And you know beyond that leave it on to the free markets. As I said like instead of we putting in a lot of like this thing, now all the chains should have magic. Like we don't we don't mandate on that. We in fact we believe few like 1020 chains will have magic stickers or you know few more than that or app chains will have it.
But then the larger ecosystem like osmosis, you know a lot of other like you know cosmos ecosystem, other layer ones which might be built on war zones and all that. And right now there is a this thing everybody is trying you know all the layer ones realize that they are in the remote islands of liquidity. They need to be kind of layer twos. We don't we believe that you know they don't even need to be layer twos.
They just need to settle on to its idiom and and you know like that's good enough for their liquidity. Like basically this kind of bridging provides them a trustless bridge ZK bridge to ethereal right. And after that, they have their own sovereignty and they they can keep growing their ecosystem as they want to grow. But the value can move to and fro a very frequently around them. So this idea that everything should sell to Ethereum, I mean, it makes sense I think.
On the face of it, but you know, I I think that there's there's also a case to be made that. You know if. If blockchains are going to secure most of the value in, you know, the economy, that resiliency means also having other other things to settle on, right? Like other blockchains to settle on. And obviously, like Bitcoin and Etherium have the most security and are. Are the the largest say like points to which people can settle.
Do you think that this argument makes sense so that that we need more kind of layer one layers of state in order to have a more robust and and secure world and global financial system running on blockchains. See conceptually obviously you know you need decentralization on decentralization itself right? Like your resiliency like actually the whole purpose of Ethereum blockchain or the Bitcoin blockchain to have be decentralizes that then you do not have to rely on one single party.
So when you are even even though we are saying Ethereum as a collective one layer but it is actually a layer which is highly highly decentralized. Same case with with Bitcoin.
But I feel that how the world or the in practicality how it plays out is they will be always in in today's financial world also like U.S. dollar is the base layer of value right largely but then let's say 7080% but then you there, there, there other value layers also like you know gold, other some of the other sovereign currencies and all that they also have value.
People trust some of their value, but then if you see because finance has this great, like I know there's great saying that liquidity begets liquidity, especially in the larger and larger globalized world. You need free flowing liquidity, you know across these applications or you know across the world across the economies. And I think due to that, you know, the network effects of a single liquid layer become
larger and larger. So even though I can say that yes, there will be like it's OK to have other layers where the value will be trusted and will exist. But I think the large percentage of that will still be governed by one single layer. And which seems to be like right now, like unless like, let's say Bitcoin tomorrow comes up with a mechanism where now you can have validity proofs on Bitcoin and
now you can settle and. As of today, like Bitcoin is like still much bigger than Ethereum in terms of his global brand and all that, then that might be a formidable competitor for Ethereum. But otherwise, like I find it really, really hard for any other layer to become that settlement layer. Fringe settlement layers, sure, but main settlement layer, I think it's like the Pareto rule. One of them will have the largest share, which is Ethereal. Cool.
Seb, you don't like hearing this, right? No I think this makes total sense.
I I think it's like a it's a perfectly you know sound like yeah I think I think do things do aggregate I think like aggregation theory you know exists also in watch chains and and certainly there's going to be aggregation you know to to the largest set of hilarious whether that's between Erythereum and that they're much like you know I do like this nation state idea and you know study talks about there's a lot to like you blushing in the context of something like NATO.
I think one one thing I would love to see happen is this idea of shared security also expanding outside of like what's currently you know a very kind of small network of chains within Cosmos to to you know different ecosystems right. We're like different ecosystems are also layer ones are also securing each other in this NATO like fashion. And I know that we're very far away from that happening, but I think it's like a lot of goal to to want to move towards.
I want to bring this kind of full circle. In the very beginning you kind of you talked about kind of the thing that blockchains kind of lower the price of and you said you think it's democracy. So tell us what kind of applications you foresee having actual, actual, you know, know, me users on blockchains in the, you know, coming years. So what kind of things in the future will settle on blockchains and why? I think like you know for the next three to five years you will.
You will still see blockchain largely confined to the financial sector only. But I also definitely believe that this is the best financial rails that you know humanity has ever seen and eventually most of if not all of finance will move on to these rails. So I personally feel that initially the the the use cases where they require value to be transacted and value to be held, shared, exchanged.
These cases you know will be more So obviously D5 is a is a segment which is automatically we understand but then for example gaming also gaming also like these days gaming is like one like what's the number like I think one $50 billion revenue or something like that in US itself. Like there's a Netflix documentary which talks about like you know the gaming in US is bigger than Hollywood basketball, NBA, NFL, NHL everything combined, right. So and these are like digital only things.
So and value exists over there like people transact billions and billions of dollars in value over there. So they definitely it makes much more sense. Similarly, only one or few use cases that I feel you know for blockchain right now have started emerging is maybe some
form of this. You know your social network use cases, right, like where because people are as I said at the in the starting of the program that what blockchain reduces the reduce the cost of, they reduce the cost of freedom, they reduce the cost of democracy. And you know for these social networks we definitely, you know these are kind of social network apps are kind of the peak of the applications which need this freedom and democracy, you know starting now actually.
So I feel that that could be 1 segment also apart from D Phi and gaming and other value related use cases like Rwas like when we say D Phi is like kind of the niche finance but then? The RWA or traditional finance and you know some of the people you know in the in the canto space like their leaders Scott Lewis you know is coming up with more like you know nice nicer names for this which attracts this traditional finance into
this. But basically that like you know, defy gaming RWA or traditional finance use cases. And you know, even stock markets, you know, moving over to. This thing like right now we
have these stocks and all that. Like there is a large amount of management goes in the background for clearing houses and all that blockchain actually obliterate most of that you know use cases because you you are actually settling real time to the end user itself so so that plus like the only non financial use cases I am seeing is is in the social side so those would. Be the larger like kind of focused applications. Currently one more thing is basically Nft's.
But Nft's, you can argue that they also have value, but I feel that Nft's have a huge, huge potential. I'm not talking about art, Nft's and other things. Nft's have a huge potential. Basic PFP or some other kind of Nfp's have huge potential to get to serve brands because I I talk about this. Term or like, you know, I came up with this term called effective eat, like EAP, effective attention time, right. And for brand, it's super important right now. Brands are like, you know,
fighting for this. Users attention span, right. So you know active attention span for them for brands is super important and that is where I feel that these Nft's can play a very big role like Starbucks Nft's that you see Reddit is doing very well in the FTS are many, many brands will will utilize Nft's to. You know, kind of have brand campaigns which brings them more attention. So these are the only few use cases. Accept finance I have, but in finance whatever you see in
finance that that's a huge huge. Market that sooner or later should you know migrate toward block in based financial wins. What needs to happen for the in order for for that to actually take place? Because I totally agree that kind of these are the use cases where blockchain rates 100% make make sense. I mean we're all on Twitter. We all know it's kind of not gotten better. So yeah, I mean, I totally agree that basically this would make sense, but why isn't it happening at scale, right?
That means basically if you look at actual users in the ecosystem, it's very few, if any. So basically it's most of most of us, we're kind of dogfooding stuff, but no one's kind of you know in earnest move to lens or anything. What needs to happen for that is basically like we keep saying and at the start of the the recording also we are saying and this is becoming very popular amongst the VC is that oh that three has a lot of infrastructure but then not many apps.
But I would argue against that. I don't think that we have actual deterministic scaling infrastructure for blockchains as of yet. We have these separate separate blockchains today. You can spin up hundred of
blocks, hundreds of blockchains. But then the fundamental point is having that aggregated liquidity or aggregated like you know value which then starts getting fragmented and each of these chains or each of these block spaces are ineffective, you know end up becoming ineffective databases where the security assumptions are also separate. So what needs to happen according to me is all these value should have a place to aggregate with each other like
you know. All the value should be aggregated with each other across the chains and the security assumptions need to go down like security assumption you should be have, you should be having one single security assumption across all the chains that you know the value cannot be stolen from me and execution cannot be done in a wrong way. And I think and then I think slightly more slight more thing is basically smart contract security.
Like you know, we know we cannot afford these many hacks that we go through, but I think that is a kind of a learning cycle that you know this whole space is going, right. That's why Ethereums, you know ZK, EDM or Solidity, you know network effects are also very strong because those smart contracts have gone through years and years and years of
these hacks and battle testing. Any new blockchain you will bring in, any new blockchain programming language you will bring in, they also have to go through this and these network effects compound overtime. So I believe that you know, more security or smart contracts, but yeah, like aggregated liquidity, single security zones for everything. It should feel like one single block space and more robust
smart metrics. So Polygon is probably one of the ecosystems in blockchain that has really strong business development and that has been a really big advantage in terms of getting contracts and sort of. Getting institutional and larger brands to come and use the platform, that's not the case in every ecosystem. And I think there's like a gradient of week of you know, kind of centralized coordinated business development and really very decentralized uncoordinated
business development. And I would put Polygon on one end of that and Cosmos and the Interchain on the other. And you know Avalanche falls in there somewhere. You know, like Solana and and Etherium also do to some extent in terms of. Pushing technology forward and having the ability to like build tech that is robust over the long term, you know which approach do you think Will will
is likely to win out. And you know one example, I think like one example for the decentralized, more decentralized decision making paradigm is Linux right. And like Linux has always been a very decentralized government, decentralizing is. And the people who are building on it and also its governance and and also like the business development and it took a really long time.
But you know, in the end, now after 30 years, like Linux is powering most of the world server infrastructure, most of the devices we use on a daily basis. And I think that wasn't obvious that that would be the case like 20 years ago. So yeah, in that context, like, how do you see that playing out? Yes, I think like you know, there are two parts that I can discuss on the Linux thing.
Like first of all I think Linux technology was always decentralized and always like open source which actually you know encouraged a lot of smart or the smartest people in the world to contribute to the operating system levels whereas like some of the other operating systems were very closed source so they could never attract the talent.
In case of blockchain ecosystem the technology that level is actually at par because you know even for Polygon though the technology is open source and it is becoming more and more open source like you know with ZK and all that we are also attracting a lot of ZK talent. So I believe that that gets
compensated over there. But with with, with blockchains also if you see that blockchains which had early mover advantage like VTC and Ethereum, they kind of survived and you know build those network effects, you know in those days because there were very few you know, kind of players in the space.
But then you know now if you see for any blockchain protocol to get any meaningful, you know traction on it, right they will, they need to have some level of distribution because there's just too much noise in the in the ecosystem. So you need some level of distribution, but I also keep saying to to our team like for example Polygon Labs like which is you know one of the largest contributors into this Polygon ecosystem now. Although there is a very large
part like for example. All of these brand, you know brands that keep launching on Polygon, not many people realize that more than 50% or even 60% of them, we don't even know that they were they are going to launch on Polygon, right. So is now. It has become like a kind of a self propagating machine, but I feel that I keep telling to our Polygon Labs team also that our eventual goal is to kill ourselves. Right.
Like we have to take it to a place, but we also keep growing our, you know, community and organic stuff and all that where. Polygon Labs at one point in time cease to exist or remains a very small contributor. Maybe. Maybe it still remains a small contributor 1020% at that and all these models of, you know, these community owned businesses, these are being done for the first time in this world.
Like we don't really know how these community owned businesses right now we're talking about infra, but what will happen to let's say a social media application right, which comes which is a decent as social media application? I think they will always have a nucleus like or set of like one or two teams which are actually contributing to their core development. Like even for Bitcoin you can argue that there is a core developer, Bitcoin core dev ecosystem. Same case with Ethereum.
For development and then even for the you, I think your question is more directed towards the the business development. I think for the application layer, you will see that these community owned businesses kind of business models will evolve where they will be one or two entities in that ecosystem which will contribute to the to the. Nucleus of that you know continuous growth and then you know the community will be contributing from outside.
But at least twenty 3040% you will see these teams.
So that's where like we also don't really know we are also playing this that as this ecosystem involves it will be very wrong to say that we have a exact you know playbook that how they are going to do. But if you see most of the current infrastructure protocols, they are all adopting polygons playbook like they all are trying to play something similar to what Polygon did while we because slightly being ahead of the curve like we are now you know kind of as we say
progressive decentralization. So we are kind of. Continuously reducing the footprint and increasing the organic footprint. But yeah, like, you know, I mean, obviously Ethereum and Cosmos and Bitcoin communities
are super, super. Like organic communities and you know for it's a dream come true for any protocol founder to have that kind of community and we have to also change a lot like see when people say you might have heard also a lot of people saying like you know polygons business development ecosystem has been very. You know, kind of aggressive or kind of very concerted concentrated and everything.
But then if you see that where Polygon came from like Polygon didn't come from this Silicon Valley background like it had no like credibility like people most of for the first 2-3 years people considered polygonic scam like because it did an IEO on finance and things like that, right. So, so it had to fight hard. But now you know, we also realize that we have to make it more and more. Organic and. Community growth and everything.
Great. And then I think ecosystem as a whole is making those changes to become like great communities like Cosmos or the. So it's a work in. Well, I think that's a great note to end on. Sadif, thanks so much for coming back on the show and sharing the vision for Polygon. I think it's really, really fascinating. And also. So impressive, you know the the growth of that ecosystem and what you guys have accomplished in the last three years.
And so I wish you and obviously the Polygon ecosystem lots of success and in building out this vision. So hopefully we could do this again in the next two or three years and Polygon will be even bigger. Hopefully yes. Thanks EV. Thanks. Thank you. Thank you for joining us on this week's episode. We release new episodes every week. You can find and subscribe to the show on iTunes, Spotify, YouTube, SoundCloud, or wherever you listen to podcasts.
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