Fireside Chat With Sandeep Nailwal and Kartik Talwar

With this, we are ready for our next panel. And for this one, I'd like to bring on Sundep, who's the co-founder of Polygon. Please give him a big round of applause. Thank you, everyone. [applause] I'm taking my phone out as if I have any prep done for this.

So, I don't know, just have it. Um, we decided that we're going to talk about whatever is on his mind today and that's the theme. Uh, but but I will speed this conversation off by uh I mean actually confirming what is actually happening on the internet with Polygon. I keep hearing Polygon is doing a lot of payment stuff. Is that true?

Yeah, I mean we are sitting in LA. So yeah, let's start with the Polygon ship. Uh we are sitting in LA. I think we we have like 60 60% market share here on the payments and u um what is that measuring that measuring uh the daily transactions right and the volume still Ethereum has a large amount of volume because the bigger larger transactions happen on Ethereum but the average uh user transactions P2P transactions uh and the stable coin payments are happening on Polygon and uh you know we just now it will come out soon but we just now probably close the the largest you know uh stable coin activity that is going to happen here. You'll hear more about it

specific to South America

specific to South America.

Okay. Um and uh you know this is the same thing that we are seeing in Southeast Asia for example where we have 80% market share of new stable coin regional stable coins issued number of transactions and all that and uh people don't realize that even for USDT and USDC if you go about unique transacting addresses especially the P2P payments USDC we are number one blockchain even ahead of base most of the days USDT we are polygon is ranked three blockchain um on most of the days like top three.

This is just counting number of transactions.

Yeah. number of transactions like the volume still like Tron has higher volumes and all that and if you see the P2P volumes I think we are doing like overall stable coin movement is around 80 to$200 billion monthly but then at that because it has a lot of AR transactions and all that but if you see P2P transactions when we are tracking this is roughly 14 to 15 billion uh you know that is happening

amazing well I guess you're not revealing what the South American investment is We didn't reveal what the European announcement looks like.

Tell us about tell us about what the Revolute partnership looks like.

Yeah. So, Revolute uh you know already has been the announcement is a little bit late. Revolute has already by this time by the time announcement came they've already processed around $700 million of volume on uh Polygon. I saw some other blockchains like you know being unhappy because they were also integrated. But if you see the volumes there like it's a night and day difference.

uh polygon volumes are much much higher on

so where does that integration come in like what's actually the part that's integrated on

so the the payments and remittances part that's where we are very uh massively focused and uh before that uh you guys saw flutter wave which is the stripe of Africa uh that is also like exclusively on polygon and uh then we also announced the mastercard which is ramping up their everything that they're doing on polygon so they have launched their kind of ENS name equivalent on Polygon exclusively as of now and uh you know similar kind of uh things keep keep happening on that like nice

yeah um

maybe I'll bring up another thing that uh is very popular but I feel like that's not a recent announcement but it is very popular that's poly uh

but but I want to do that how many people here know that poly market is fully fully built on polygon

how many of you knew that that is the poly market know how many people don't know that poly market is built on polygon.

I think few people don't know. Yeah,

that's great.

This is good. Like this is in the ETH community generally like you know in the general public like what like polygon poly market is built on polygon

right? Where do you think the poly comes from?

The shade is very unhappy about that when we rebranded from matic to polygon was very like how did you choose this name? [laughter] Yeah.

Okay. So, walk us through how poly market got started through Polygon and what the early years were.

Yeah. I mean early days at that time we were also lucky because there was nobody there. So, you know, I would not take an unnecessary credit on like we were like special at that time. But what we did is that for a blockchain more important than EVM blockchain like you can fork and create one EVM blockchain in in like next half an hour, right? But the thing is that the plumbing and the integration into the ecosystem is what what counts and I think like because poly market has seen at now by now two election cycles full-blown election cycles which tested the throughput which trusted tested the on-ramps off-ramps tested all sorts of these stable coin market makers wallet integrations and everything and those are the things that actually add network effects to the blockchain that's why we are seeing on payments like polygon keeps on winning because if a large enterprise is looking to do something even with the RWS is the same thing like we we talk more about payments and stable coin but in the last one week itself we have seen I'm forgetting the name like Cassandra or no one particular uh you know fund of funds the largest fund of funds they launch their RWAs and you know you see we we keep seeing some of the largest from black rock to Hamilton lanes and everybody they keep launching their RWS because the for the RWS also of this plumbing and integration and on-ramp and everything is very very strong on polygon.

So that all has contributed to a all round u you know um experience on poly market. The only problem before on poly market was the reorgs like polygon chain was reorgrone even though like you know you know sometimes it will be like 10 20 blocks so there's like 10 20 uh a lot of a lot of 20 seconds and all that uh 20 second reorgs and everybody has built their applications around that so they will show the confirmation time a little bit later but there's bad user experience but this year we have actually made three large upgrades so one that has reduced the reorgs uh by almost like one block which is 2 seconds. So once the moment you get one confirmation uh two confirmations you are you are done and I think we are bringing it down further to like 1 second confirmation one block confirmation single spot finality uh which is practically already there after this vlog and the second thing we did is that uh the the throughput of the chain already went from 200 TPS to right now around 1,000 to 1500 TPS and in next 3 to 6 months the recent upgrade Rio will allow us to go to 5,000 TPS. DPS which will mean which actually we can go even now but the thing is like the indexers and RPC providers and all that that's the bottleneck and once we go to 5,000 TPS we will be higher performant than more performant than let's say Solana which is like very popular for the highest measuring throughut

huh purely through measuring the throughput so 5,000 usable throughput I'm talking about like Solana has like a lot of validated transactions on chain and all that but the actual user usable throughput is around 10% of that let's say 3 to 5k. So we'll go there and uh and then again the all these upgrades have enabled us that in next 12 to 24 months we'll go to 100,000 TPS and that is what is needed for the for the enterprises and the important part for that is is not the TPS like you know we know this TPS games is is is like long this thing the main thing is that all these large enterprises are coming in with the payments and slowly and steadily we can see like if you go and see the number of transactions on polygon like on polygon scan you will see that It's slowly creeping up from 3 million transactions per day to 5 million transactions per day. We see anytime a new enterprise comes in they switch on there is 100 to 200k transactions coming in. This is when they are running stable coin payments in in kind of sandbox mode in their apps, right?

Like a smaller user base.

Smaller user base and selectively going to few user bases. The moment those floodgates open like we are going to need that 100,000 DPS and plus for the payments and stable coin we are razor focused on that and uh and and we have like you know I mean if today goes well we are going to very soon talk about two large acquisitions like you know nine figure acquisitions we have done recently in the payment space. people are going to uh know more about that.

That's a lot of alpha.

Yeah. And uh and then um you know so we also want to then add a lot of payment specific features like priority block spaces and because we have added the vlog as a block builder configuration has has been added and light nodes which Ethereum also of mainet have been trying to do but we already implemented the light nodes so a lot of validators can simply verify with the light nodes and block builders can build at extremely fast uh pace. So that's why these payment specific features and TPS is needed.

Well, that's just kind of what you said you're focused on for the next two years. Um I guess how do you think about the L2 ecosystem altogether though? What does that mean for other L2s and um what's interesting is that you're comparing yourself to Salana as part of metrics. Um are you considering L1 or L2?

No. So

what are the dynamics look like? This question is like the oldest question that keep coming to me that you know and you know I asked this on purpose that that you know why don't you make polygon L1 and and these all these things and the thing is that you know of course like the community can you know put pressure and try to do something and and whatn not on that but it's a it's a but it will be a it will be a marketing change if somebody does that right but for me I am a very strong believer of this I don't want to call it L2 thesis I want to call it execution layer thesis so I'll give you the the explanation for this very simple you can understand Ethereum has like 1 to 1.5% new issuance of ETH every year right that means Ethereum is spending 5 to6 billion to get that decentralization and censorship resistance and all those core features going in right and if I am let's say let's take an example of like you know I mean of course they must have their design choices and but I think let's say tempo right so tempo being an ele one like why would I create one I want to do transactions right I'm Assuming like Tempo and Stripe want to do a lot of transactions on chain which obviously they have supreme power to do that but why would I spend this billions of dollars creating a new blockchain every year in emissions to make sure that all the validators are paid enough and then they are running a high throughput chain like why not simply borrow that trust and decentralization from Ethereum itself. I think the only reason for doing something and I'm I'm guessing like their strategic leadership would have thought that you know because they are big enough so they don't want to be dependent on Ethereum's road map and I think that brings me to the the biggest I think the biggest problem that the Ethereum community has is this constant you know constant push in trying to be at both places like settlement side also and execution side also right like the the number go up of Ethereum community you on the side al also wants a lot of execution to be happening on Ethereum which makes Ethereum antagonistic to L2s because L2s are taking more money.

You mean the mainet Ethereum?

Yeah, the mainet. Yeah. because you know like that's why like wholeheartedly uh some people especially the number go up community I'll say like who doesn't understand the the the landscape and all that all they want is their ETH to go up and they sell and they you know have their uh day but the thing is that due to that Ethereum keeps fluctuating between they they are the best settlement layer where they they are the most decentralized let's say can be compared only to Ethere only to uh Bitcoin um on the other side like on the execution side like Ethereum could wholeheartedly embrace L2s and say that you know the the small TPS transactions high throughput transactions can happen on L2s and Ethereum will have the large issuance and large money movement and everything on them but then that doesn't happen and due to that like L2s today what happened is and that's when L that's where all L1's like took the best uh you know benefit out of it and I the big credit goes to let's say Solana people they were able to bait Ethereum into this fight And so Solana's valuation is pecked to Ethereum and L2's valuation is pecked to to nobody. So all the L2s are completely in the toilet. The price is in the toilet literally, right?

Everybody is like 90 95% down. Whereas like what Ethereum community should have done is that they they should have said that you know we are the the the strongest Turing complete programming language settlement layer where you can we can outsource this trust and decentralization. Of course large money movements will also happen here. large D5 will happen here but then execution layers are these and then have like you know base, polygon, arbitrum, Solana, Aptos, SUI all of these in one category but the fact that Ethereum community got itself baited into competing with Solana, Appto, avalanche all of the other settle execution environments uh I think that's that is what has been terrible for the for the L2 valuations which has now led to the competitiveness of Ethereum going down because because on all of these enterprise deals. It was L2s who were going and fighting for Ethereum.

You know, Ethereum Foundation is not doing that BD, right?

So, so help me understand the gap in in what I just heard. So, is the argument that because of the marketing being were the destination and the settlement for L2s? That's the reason why you're saying the painting is being done incorrectly. or are you saying that even though the L2s want to do the execution instead of log on Ethereum that's not what's happening because from my kind of point of view the L2s are handling a lot of the throughput um like I mean just going by public members have seen like base is doing more than 10 million transactions a day on average and it may not matter what the volume is of those things with just the number of transactions but that is still being settled on Ethereum how is that different from what you're

I'm saying I'm all I'm saying is it's in the narrative the narrative like you see like you know few days back uh I think there was a tweet from Dankrat that you know Ethereum L1 should go to 10 100x it will scale Ethereum L1 throughut 100x okay it scales 100x so what like Ethereum Ethereum L1 become 1300 TPS still oneird of right still will still lose on execution instead of that like allow L2s to say that no the on the execution layer L2s are competing with Salana and all that so that their valuations get pecked to the alt L1 execution uh you know valuations and peg ethereum's valuation to bitcoin which ethereum which ethereum community did very well in the initial days

which is the settlement argu and now we have completely lost that narrative that you know now the the valuation of ethereum is compared with these alt all elements which are trying to catch up and they are much better on execution because they are much less decentralized the ethos are very different based on execution so ethereum has gotten itself baited into the execution fight which is not ethereum's execution you know fight to fight Ethereum's fight is that we are the most decentralized sovereign resistant that's the most important part like that's what Bitcoin's main value proposition is that this is store of value for everybody in the world because it's sovereign resistant so sovereign resistant censorship resistance maximum decentralized that is Ethereum's core value proposition not generating like you know thousand TPS on that sure you go to thousand TPS but the core value proposition of Ethereum is that it provides hard settlement layer and hard money. ETH is hard money. I I still stand by like ETH is money was the right thing to do.

And if you look at the prices, that's true. It's the best stable coin I've seen in a while. Um it's tragic. Um but if you go to sleep for two, three years and come back and say, "Oh, it's the same place." Yeah, great.

Uh we'll cut this out. Don't worry. Um [laughter] um well so so here's the thing right so the way you started this argument or this kind of point you kind of implied that this might be a technical and time spent positioning argument right uh but he feels like it's purely kind of how you kind of communicate this publicly um is there anything else that you feel like is missing on the engineering side where the foundation actually has um anywhere from mis prioritization to just a different focus that would actually help change this perspective. Yeah, I think like um on engineering side there is never like there is never a delivery which is which has been anti-L2 I would say but there has been a lot of planning but it never gets delivered right in the in the first place like I'm sorry to say some of the people

welcome to our last pragma for ETH global [laughter]

like yeah I mean so the deliveries have been very good for like the blobs and all that for L2s but a lot of planning has been that you know this will like oh like the what is that uh enshrined L L2s and all that like this is basically the fundamental I think misunderstanding of how capitalism works like you know they're creating a chain is very easy getting that chain entrenched in every exchange every wallet every enterprise and on-ramp and market makers and all that this requires somebody to put like tireless efforts for years and years then that L2 becomes a viable enough place right you can have all the enshrined L2s you want but you know they probably won't get that that level of uh traction. So, so, so, but I guess you only get to exit that that loop if you get to control the narrative, which I think is like the argument for why people are doing this. So, my kind of question to you is how does Polygon handle this? Because you're an L2, right?

Yeah. Polygon. Oh, yeah. No, no, I when the this this discussion keeps on coming, right? Right now Polygon has you also have to maintain prior par on EVM.

Right?

Let me answer the L2 question. Right? So Polygon has 12 chains in the ecosystem. Ask like what is Katana full-blown ZKL2?

What is X layer? Full-blown ZKL2. Like what?

Huh?

They are settling on Ethereum.

Okay. Everything is katana proposed blobs also on ethereum and like like for example sentient which is a project I help co-ound right is launching a project full-blown L2 and for polygon poss also I've said that again that zero knowledge technology is still not cost effective enough for POS chain like right now POS chain wins compared to let's say base and you know Solana and many other heavyweights it wins because it provides a very low cost environment for the transactions if I add ZK proofs right now on POSOS then it is going to reduce the competitiveness of the chains for the transactions which I have done one time with the CKVM. I'm not going to do that for the technical and the you know the the community alignment again I'm going to provide the chain which is best suitable for the enterprise and the end user use cases and then this technical correctness will come because as I'm saying that I believe in this L2 thesis that you Ethereum has already built this trust and uh uh uh this settlement environment just outsource it and do crank the execution very heavily on the other layers. Um that's a really interesting point. So maybe this is something I'm curious about.

Um uh a lot of Okay. So so there's a big push from Polygon on acquiring Z companies pushing the Z system forward and actually making proofs really good on it. Um but you kind of just mentioned that hey you haven't done that for POS chain because we'll probably 10x the price and currently you're winning on 100 of being.

Yeah. you you go to poly market and tell them that guys we have added zk brews now your transactions are all 10 times 50 times bigger than to take it

but why do you want to add that like

why is it relevant that zoos get cheaper what's the value that you see

I'll tell you like so right now the polygon validators they get 1% of supply so literally even at these huge prices polygon is paying $20 million to the validators to validate the transactions if there is zk proof that fees that 20 million or that in future much higher number than that doesn't need to be uh doesn't need to be going to value there's an extra cost for that that validation services okay that's a good I I understand okay um we are running out of time but I do want to continue this chat is better

fine I'll give you another 60 seconds

I have to interview Tomas in 2 hours

interview Tamas from a um tool security and a list of things that Sundep wants to uh to implement. Uh what else can we ask? I have only one list that help set the L2 narrative properly that stop calling L2 because if it's L1 and L2 it automatically feels like L2s are like second grade citizens call start calling them settlement environment execution environment on execution environment you have Solana base polygon arbitrum and some of these other people trying to do it's all about narrative you they don't need to change anything just come up with a better Vitalik is really good at this also like you know all the purge search all those you know that that terminology

he can he can make like I'm already thinking of a of a terminology eel eel ethereum execution layers [laughter] so uh but like then how would I take solana into that so eel like somewhere e and then this is a e environment and this is a settlement environment ethereum only competes with bitcoin for me and people don't realize like you know when people ask this question I did not come into crypto on bitcoin like I bought bitcoin 30 days before I came I saw Ethereum but I came into crypto dive head head in uh head first once I saw Ethereum. So I am very big Ethereum maxi and I've always believe unless like you know all this happen happening and but you talked about Tomas he's doing an amazing amazing job now it's all up only lots of great insights indeed always controversial and entertaining. So please give him a big round of applause. Thank you. Thank you everyone.

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