Specialize or Die: Why Generalized L1s are Weak | KBW2023

be character uh or semi-human on his stage but uh I'm G to head over my microphone to uh Smokey okay cool man uh can you guys hear me okay is this like not too muffled [ __ ] yeah all righty um thanks so much for coming out and thanks for entertaining me in a be mask um we've made this a little bit of a staple at past conferences but that was uh Dev bear kicking it off first with the modular Summit um and now Scott and I are going to talk about a a topic that's you know near and dear to our hearts um you know we talked originally about the topic being around why l1's are bad and the the proposal for the name of the talk was why l1's are cucks um but we figured that was not the right word in Korean in fact it translated into something that uh one of the event planners told us was much worse um so rather we're going to talk about why you know chains as a whole will not win unless they're specialized in some meaningful manner um so Scott do you want to talk us uh through a little bit about what Argus is it's not neither a chain it's an L1 or an L2 is a third special thing yeah so I think like to kind of like quickly um like introduce Argus here um we are a crypto gaming company but uh I would say we're probably the most like I would say like the most like over engineered like crypto gaming company that exists in the space uh while a lot of like crypto gaming companies um they would just basically kind of like build a block they build a game and then they think about the blockchain side as an offer thought uh we think that um the blockchain protocol design and blockchain architecture really goes hand in hand in like what you can do uh with a game and so you can't really separate this two it's like basically trying to separate um like you know imagine like trying to build uh like I don't know like some like traditional computer games back in the 1980s but you say you don't want to build software you don't want to build like you know like you know the existing engine because back then there wasn't any so I think we're in a very similar stage with um like crypto games right now and like one of the biggest things that we do at Argus is we have like a dedicated R&D lab that is focused in cor blockchain protocol engineering and like what we do there is we built our own rollup that is designed um from the bottom up uh for games and games only like well a lot of like the other chains really want to build a blockchain that basically solves all life problems including cancer um we were just like yeah [ __ ] it we'll only just do games and nothing else and that's basically how we are able to build um like games and crypto games onchain games specifically um that a game studios in the space are not able to build um and that's like the tldr yeah you'd have failed the YC interview but we love that otherwise UMES I'm [ __ ] with you Scott love to see it um so okay what is it that makes you guys I guess able to do what other you know platforms like let's say avac subnets or you know any of the 20 other chains that tell me about gaming being the future every day are not able to do yeah so like one of the things that we're able to do is build um like for instance like a fully gamified like blockchain system um like while like other um like you know if yours let's say you're just like using an existing L1 the only thing you can do with that is just basically I don't know like mint a bunch of nfts and like and that's pretty much like if you ask every single uh crypto gaming companies in the space most of them and like you'll ask them like what are you actually doing with crypto on your games and they'll give you basically the same answer and so like how are you supposed to really like stand out um regards to everyone else if you're just doing the same exact thing right um and so that's like the approach that we kind of take very differently we think that a lot of the um kind of unlocks in the novel things that we're able to do exist on a protocol level um that's like why we are um spending a lot of resources in building our our own chain one of the key things that we're able to do as well that most other gaming companies are not able to do in the space is to build fully onchain games and by building a fully onchain game we're able to open up the design space for like platformization that existing um nft onchain only games does not have um and like yeah so you're telling me that my Zed run nfts are not going to make it back um I would say that's uh that's a very challenging pitch I think like a lot of people these days I think like a lot of like crypto gaming Studios um like a lot of them especially in this market have quickly realized that like um building a crypto game with NFD is no longer a viable pitch like everyone's doing the same thing everyone's saying that their game will be fun and their this time it will it will be different um but like that's like it is same thing every everyone is saying and like I think we're at a point where like crypto fees are just like yeah you're just like the same you're not like special and like like yeah yeah so they ran out they're they're like oh I can only burn so much money in a given time frame so I need to to pce this right yeah okay yeah yeah so I think like I want to talk about like actually like very thing like you know sawce in the room here that is be chain and I don't know if you guys heard but the chain does not exist um and so like do you want to tell more about the chain that does not exist Bear yeah yeah so bear chain is sort of an extended social experiment sponsored by one the Harvard research Labs um no um bear chains an evm compatible L1 built on top of the cosmos SDK our whole thesis is that you can effectively actually solve the Traverse incentives that typically exist in Chains nowadays between security and liquidity um through I guess a little bit of interesting validator protocol interaction uh the way that that effectively works for us is that while bar chain is you know its own full VM evm compatible Etc um the only way to gain the governance and staking token of the network bgt is by providing liquidity to a set of core dii Primitives that are built into the chain that starts with effectively an ammex a per Vault and a stable coin issuing lending platform and over time can actually expand to any smart contract on the Chain um so the part that we're most excited about and interested in is the ability to actually have validators and protocols work together uh and have the chain effectively powering the protocols building on top of it um because in Scott and I were talking about this before perhaps it's uh non-pc or you know a controversial take or whatever the you know whatever it is um but I think that the vast majority of cases right now no one actually cares about whether a chain is highly decentralized highly secure or highly scalable they actually just care about where you can find liquidity and where you can find users and I think you can very much see a hot ball of capital going from chain to chain to chain trying to find that that effective user base and they don't really know if it exists um our goal was really to build a network that allows liquidity to serve as a form of security because we really do believe that's you know I'd say the the lifeblood of onchain activity uh and build an environment in which applications that are building on the Chain are actually incentivized empowered to be there right it's not just how many grants can we throw at you how many tokens Can we get you to burn it's do you have a reason to exist there that can be you know unique to that ecosystem and isn't just obsolute by moving to arbitrum in 3 months right so I think that's what we care about most at bechain um and we've been lucky to work with great folks like Scott along the way and they'll be working with us with um I guess using our VM Polaris which we can happily sh at a later Point cool yeah I guess I kind of like I want to double click on like your point um with regards to um I think generalized l1s and like how they really try to kind of like um capture market share or like really even just like getting people buildt on it was like through these like um basically just like flinging like a [ __ ] ton of money at like like often time like non allign developers um and like just like leading up to um like basically having a chain where like oh yeah sure a bunch of people are like trying to like pump it and then like it's just basically gone because like nothing is sticky um pun intended um and then like um and and what do you think like how do you think about these like ecosystem development um and like kind of these like specialized kind of like um chains right like how does like a specialized chain um like allow um like like allow you to attract developers that otherwise wouldn't basically be interested on your chain because it just like does the same thing as like everything else yeah um I think having some sort of entrenched advantage or way that the chain can you know do something for the protocols uh goes a long way and I think that's a very like you know milk toast take um but n out of 10 times I think we hear people talk about you know TPS on one hand um I think we've yet to see many cases in which we actually see TPS making a meaningful difference when it comes to the actual sophistication and volume of onchain players um we've seen probably some interesting stuff in salana defi I know that's been a Meme here and there but I think there's something to be seen there I think we'll probably see some interesting stuff with mon now down the road but I actually think that in very few cases we've seen you know the scaling Solutions actually make a difference in the level of applications that can be built right perhaps you you know rebalance a vault more effectively or perhaps you can trade a little bit faster and perhaps you know your Arbitrage game is a little bit better but I don't think it's been reinvented in the wheel um from our side it's more can you build a protocol that is uniquely reliant on the mechanisms of a given chain in a way that cannot be replicated another one right so I I'll give a relatively standard example of something that would work on bechain um since I mentioned that the validators effectively act as directors of emissions or LP within the chain um you can actually have protocols that work directly with validators to bootstrap their own liquidity so in contrast to the typical cycle that I think you see in a number of ecosystems nowadays where it's like hey I'm going to make a DEX maybe it's a uni Fork maybe it's a camot fork whatever then I'm going to make a ve token that gets some of the fees then I'm going to make an aggregator or sorry a liquid Stak conv version for that token and then an aggregator and then a bribe layer it's like okay cool like five double counted tvl protocols later what do you have you have a way for c for protocols to achieve you know liquidity at a relatively low price point um so we actually build bribes directly into the validator layer such that a protocol that's trying to get off the ground can actually work with the validator say hey I'm going to give you x amount of my token you know bar whatever the [ __ ] it is and in exchange the validator is going to direct y amount of bgt the emissions token to the chain towards that protocol as pool on the Chain deck per you know label stable vaults Etc um and we think that get really interesting because on one hand it aligns the protocol on the validator they're contributing towards chain security uh and on the other hand they're getting Capital at a relatively low cost in the form of emissions from the staking token of a network which would hopefully be you know more deflation over time if we don't really [ __ ] it up so you know I think that areas where the chain can be useful for protocols on top of it as generic as that sounds is really what we think about and what is what can attract the right class of developers and I think you'll have another massive set that's like cool who's going to throw 50k at me uh and that's fine and I'd actually rather self- select that group out because I don't think mercenary Capital has much of a a place in this like non zerp environment cool um I think like kind of like another I think like I would say um like main question with like a lot of these like specialized chains right it's like how do you kind of really um draw a balance between like um your role as like the the like the laps company play um within the ecosystem are you supposed to be like playing kind of like a more like big government role of like basically kind of building out the the protocols or kind of and like or like would you kind of just like basically build the core Primitives and like build the chain like Pro core protocol and let uh emergent Behavior form around it and have like the community and developers really kind of like try to kind of like play around with this basically kind of unique Primitives yeah I think that's a great question man um I think about it a lot in the term of sort of like guided or controlled entropy um in that you don't want to be like a Fed chain you don't want to be a big brother chain you don't want to be building everything because I think that you know takes the root of composable or just other you know rough ecosystems where everything is homecooked and there's actually no new players coming into the market and it's just like a a weird internal knife fight um that doesn't accomplish much right I think that the ideal is actually where you sort of help guide the direction of the chaos but you let people build as they wish right so uh take more of like an arm the rebels approach there you know help people have the tools to build cool [ __ ] give them as much Dev tooling access to liquidity access to market makers liquid funds exchanges whatever like you know be their Concierge in some way um but don't actually do the work for them right so when we think about that it's making sure the builders have everything they need to to strive um even when that's like you know legal stuff or helping with you know setting up different foundations and you know back office and stuff that lots of firsttime Founders haven't done before um but not like doing the whole thing you know yeah I think this is like a very strong point as well um I think like one of the things that I feel like a lot of these like um large L1 uh ecosystem uh are like kind of these like block people trying to build new blockchains that they don't really think about like um what is uh what is kind of like really kind of the vibe of like the chain right I feel like um a lot of these chains they are very sterile they're like is this is kind of like an extension of kind of really the the specialization kind of like um kind of like like you know part right because like a chain that really try to appeal to everyone a chain that tries to be like um like you know basically do everything um is not a very kind of memor memorable kind of like chain right where in like in contrast to like chains like for instance like um bear chain um you're really kind of leading onto that very kind of like you know DJ Vibes and like kind of really leaning on to that like um kind of like you know defi kind of like narrative and I think that's a very powerful tool to kind of like really unlock this like mind share that I don't think like um like other chains are able to develop right and like bir chain obviously like raise a [ __ ] ton of money uh but like there are like l1's and l2s that raise many many times more [ __ ] ton of money um but they don't even come close to having like fractions of the M share just because of like how powerful that like you know like you know like kind of like core community and core brand and core like just identity of like people who are developing and like kind of contributing to that um chain is uh yeah no thank you man I think um you know I think it's important to be t-shaped when building a chain um because it's it's very tough I think to win right now as the Jack of all trades or like you know Swiss army knife chain if you will um because I think if if that's the case right like why wouldn't you just Deploy on ether arbitrum Etc right like there's great liquidity there's you know as long as you're not too concerned about gas prices Etc then you go to arbitrum right there's a community what have you um but I think it's very much if you know that there's a focus area or some aspect that you can have an edge in then you know build the edge and expand horizontally as you need right um so yeah I think like we've been lucky in terms of cultivating an early defi Community a group that's fairly risk on but is also you know very interested in nfts gamey everything in between um but we know that there's an area that we can probably hang our hat on more than anything else and that is really thinking about the effect of I'd say driving utility towards liquidity Beyond simply serving as liquidity right um so yeah we're we're really excited to see how it plays out I think we got a long way to go I think I'll keep on bullying you to turn into a a roll up on bear chain that you know weekly discussion as as one must um but we're pretty excited for what can be done with that down the road as well right like there's groups that could actually just build their own side chains that roll up to Bear chain and draw on that liquidity sync at the core of the chain and actually have their own you know I'd say their contracts powered by the core you know set there so I'm pretty excited about what that could turn into for us I guess kind of like for the audience I know I often get this kind of like question a lot on my Twitter on like where I think there is like interesting design space for like specialized chains um I think I think it might be like something that we can kind of just go rapid fire on I think like some of the most interesting um design space for like um a chain right now is I think a lot of the I think a lot of the lever right now I think is focused on like hey how can we make faster chain and like how faster chain can like unlock more applications um but I think there are also like a crop of um like design space for like a specialized blockchain that doesn't actually necessarily revolve around like just plain and simple like more scale and more speed right um like there are things like oh yeah just the fact that like now you have like more um like like basically an un shrin protocol system that makes it easier for a certain kind of like um like user onboarding right so like at Argus for instance um we spent a lot of time thinking about how we can design a blockchain that makes it even easier for for us to de onboard developers right like while while other game studios are just like struggling trying to deal with evm trying to deal with like um like vanilla like evm vanillas like or salana or whatsoever trying to kind of kind of come up with Clues on how to fix the kind of onboarding problem we're able to kind of just like go like one step deeper onto like the even blockchain design and blockchain architecture itself um to make kind of like things like a constraction much more cleaner and much more idiomatic um to like how like a user would think about identities right so for instance like the concept like a wallet address the zerx like hex encoded like addresses are really kind of like a pain ass to teach the users um and like one of the things that we're able to do then is like okay like we realize that a lot of game developers already understand the concept of like a gamer tag if you've played like Xbox or you kind of concept of like a in-game nickname IGN right and so like why not use that as like an identifier on your chain and that alone just like allows us to like solve like basically this like cut of like common kind of like really kind of like Cop Out For A lot of these like crypto gaming companies with just like blaming on boarding for lack of like user adoption right um and so like that's kind of like I think the really really interesting angles there that is like Beyond scaling because I think like um I think like even then with scaling there's a lot of really interesting ways that you can build a much more scalable chains if you're actually opiniated of like what the chain is going to be used for uh because I think like for some of the people who are like non Engineers here uh often don't realize is that like trying to trying to kind of like scale a very generalized system or like trying to build a generalized system onto itself is incredibly hard and that really kind of limits your um like you know latitude in terms of the things that your inuring team are able to do and the things that um you're really able to kind of design into the protocol as well um so like I think that's really kind of my thing right I think like for I think there is a lot of really interesting design space in like kind of specialized blockchains in terms of how specialized like you know um like you know use cases unlocks better like much like orders of magnitude of scal more scalability than existing Solutions and also how it can also solve problems um that really is inherited by that generalization kind of for instance like the account the account exraction problem um and and like yeah um I'm kind of curious in terms of like where you're seeing a lot of these like interesting kind of like design space are for like specialized chain yeah man um I think that we're seeing it's kind of a little bit towards the same point do you noted in that right now I think there's like you know 20,000 users that are actually kind of doing something on chain of that there's maybe 2,000 power users and you know there's just a bunch of bots doing a bunch of nonsense um and at some point you actually do need to be able to grow The Pie as much of a meme as that is um and I do think that the next million users narrative has always been kind of [ __ ] um because I I don't think the next million users want to be like using crypto right now I don't I think it's a little bit of like a a prior term SL a priia industry as a whole um but I do think that either way if we want people to come in the door at some point and the industry to grow uh the user experience has to be meaningfully improved right so um again as much of a meme as intents are I think they're actually kind of interesting in terms of being able to say like hey I'm putting in a I want B out um I don't care what happens in the interim but like let my input output machine function right so then groups like a Nar are doing cool stuff there um and I'll definitely keep an eye on that space as a whole I think that the move ecosystem is also pretty interesting um I think that we've seen a lot of chains fail to take off or a lot of groups fail to fully take off there from a liquidity point of view but I've rarely talked to devs that actually don't enjoy like building with move um in fact like I think it's been one of like the most sort of like ubiquitously positive experiences I've heard about um but again limited by actual like you know current liquidity and market feasibility right yeah um and I know they're also pushing a lot on the gaming angle but I think there's something to be said there both about security ease of use TPS yada y y y um again bit of a meme when it comes to TPS but theoretically there's something there right y um I just don't think we've actually seen anything on chain that has like pushed much stuff to its very limits as of yet right from Maybe random air drops and it's like okay cool like you know arbitr air drop's going to crash thing or like ZK sing air drop's going to be [ __ ] like now one right um so I think that there's the most area to be gained um in in sort of the ux process for sure um I think the TPS has a role but I just don't think we're there as of yet um and I'm sure that'll be part of the equation at the end of the day I also think that there's interesting stuff in the realm of like collaborative privacy um and basically allowing people to permission access to information in a manner that's not just like hey this is like a you know an untrackable chain effectively or like a you know secret Network or you know like a tornado style thing but more like hey I will selectively allow X or Y party to have access to my information at at a at a chain state level um because I think that gets really cool from like sort of a an Institutional subnet from like any sort of a later stage Capital group that actually needs to be aware of counterparty risk and anyone who they're working with right um so actually something like that has been I've seen a couple groups cooking up cool stuff there super early stages but I think broadly ux and controlled privacy get very interesting down the road for like mature adoption got it got it I guess like kind of like one thing that I think is kind of a really interesting kind of discussion point is um with like like I think like for many many kind of like years we've seen kind of people um building chains more as kind of these like generalized chains right I think this is really kind of a kind of like habit that kind of like come like really born I guess like from Bitcoin Al to bitcoin is actually if you want to like think about it dat actually specializ specialized chain um and like after ethereum everyone's just basically cargo cting ethereum everyone's just trying to build it like the next ethereum right was that's like 2018 like 2019 like um like Rush was like oh yeah we want to build like a better ethereum like there's a bunch of projects are until this day still trying to do this like displace ethereum kind of like um kind of like meme um and I think like only until very recently I think there is again like um this like realization and there's a rush to actually build build um kind of like specialized blockchains right I think like um some of those catalysts being um like things like modular blockchain narrative being kind of like a meme that um is like now pervasive in kind of the space and like um with ma blockchain the whole like I I would say the whole philosophy was to basically build chains that are like you know like really mix and match it's like you have legal blocks for a blockchain um and now you can have like you know these you can basically build um these like customized and special change much easier than like you know I think like what most people would be able to kind of Imagine right and I think like um I think like one of the jokes that I think like a lot of the um like people on Twitter like to use is like how like everyone is just like basically um stealing Cosmos ideas and are bringing it to ethereum um and like I think there's kind of like that elements of kind of like um like reality here as well with regards to kind of like um like kind of modular blockchains or like specialized blockchains where like um the philosophy of Cosmos I think like like app chains and like these like specializations and all of that I actually think like um are actually starting to kind of like bear fruition and like and like we're starting to see a lot of these kind of like um kind of like um developers actually uh forming kind of a shelling point that like there's a lot of like really designed space um for kind of the U for like these like specialized blockchains and most importantly I think like when we're talking about these infrastructures and like these new chains um I think like it's also important to have the conversation of like how these new infrastructure or new chains are going to like lead to um like basically become a catalyst for next kind of like um like you know like you know Renaissance Era for like applications on a blockchain um and and and like yeah um yeah I think that's actually the bigger question right it's um okay cool you know we can build new infrastructure we can always invest in infrastructure because that's kind of like passing the buck in the the most like beautiful VC way possible it's like okay cool like I don't have to take a bet that this is going to work I have to take a bet that someone else believes that this is going to work and then Builds on top of it and I can say that because I'm building an L1 so it's it's chill I'm I'm self-aware but broadly I think that um investing in infrastructure or building infrastructure is a little bit of a meme as well right because uh I think what we've seen the least of over the last few years is real use cases and real apps that find product Market fit um I very much believe that a chain is the sum of the daps that are built on top of it um and I think in many cases those are unremarkable or are clones of that which already exists on eth or somewhere else right um so I guess the question that I often think about a lot and I I don't have a great answer to this as of yet um because I think there's maybe sub 10 daps in crypto that have actually found pmf at some point in their Cycles right um I think there's a lot of fluff and I think there's a lot of like over specialized things that don't actually have an audience at the moment um but like it's really what will these new like consensus layers what will these new dragon Drop Like build the blockchain systems actually enable right and and you know what does that mean for users at the end of the day because I I think as as Engineers as Builders what have you it's very easy to get you know married to the creative process and the technical process and like hey I'm going to build this sick new thing I'm going to like it's perfect for me I'm going to love it um but then it's tough to sometimes zoom out and say okay cool what do people actually need and what do people actually care about um so I guess the question i' POS back to you Scott is like you know what do you think this next generation of modular technology specialized chains Etc will ideally enable is it you know better trading is it you know gaming is it art is it [ __ ] of All Sorts like what's the end game yeah so I think like my my the best answer I can give you there is that I don't know and I want to keep it that way right when I think ethereum was created um we don't know that defi will be a thing we didn't know that like um like basically kind of like nfts were are going to be a thing we don't even know like you know dexus um we're going to be like kind of like a basically the the major consumer of block space right um and so the key thing here is that now we have more information in terms of like how people are using blockchains however we still don't know of like what what what how our applications are actually going to kind of like really come up right and so like the best way to kind of really position kind of like yourself in my opinion is to basically like provide these core Primitives and like realize that hey um like things are are going to come out of this um and like when that moment happens you want to make sure that you are like you know in the right position to capitalize on that kind of like like Paradigm Shift um and so this is kind of like I think the the the biggest problem that I feel like a lot of like people in the space is trying to work on is like they really try to lean onto this like oh like some Oracle like figure that like we'll say oh yeah this will be the next narrative this will be the narrative but like in reality like we've never actually seen like people predict nft is going to be a thing like we've never seen anyone predict that like I don't know like you know these like crazy stuff was going to be like a thing right nobody kind of like taught defi summer was going to happen in like one year or two year so when I every time people talk about crypto games and like they say oh yeah we're going to have a billion user once we have like you know better onboarding and better users I would actually push back and I would say that like how do you know that like you know the form of like crypto games are actually going to take off is like this like skew morphic idea of like you know basically um application design right because like a bunch of people on 2018 tried to build Amazon on on like you know Amazon on a Blain but we quickly realized that this this C morphic applications is doesn't really take off and it was like actually a novel and Crypton native like you know zero to one kind of like application design it was the the one that actually captured a lot of like the Mind share no I think that's super valid man and I I think I share a lot of the same take sadly which is that I don't think we have a good answer as of yet and and sometimes that's like a little bit doomish for the sake of our industry right um but other other times I think you can think about all the use cases that are enabled and a lot of the things that we can do right now that get very interesting I think one of the things like I think about the most nowadays like stable coins and how those just get very interesting from like a third world like developing country point of view um and even though we may not have perfect infrastructure we're seeing more and more institutions coming on board we're seeing PayPal get involved we're seeing FD USD go everywhere yeah I think we'll probably see a lot more evolutions on that side over the next few months um and sometimes while the application seems super simple and and things that are like okay does this need to be on chain which is probably the question I ask most frequently if like almost anything crypto I I do believe that there's an end game where some of those Tech Innovations actually move in the right direction right yeah and I think like I think a lot of people really try to kind of like um like oh yeah like what should I build next what what should I build next like what is the next Str in or whatsoever and I think like the best answer to that is really just like [ __ ] around and find out like I think like that is like the best thing I can kind of really uh give us an answer because like um like when I first started like you know like you know my journey into like crypto games I built like one of the first uh fully onchain game called like dark forest and I didn't know that you know again fully onchain games are going to become this like entirely new category until like now like where everyone else want to like basically build like fully onchain games and everyone want to like fun like fully onchain games and whatsoever um but like yeah I think like uh I think like we're on time here and I I don't want to get cancelled by the organizer so yeah that's valid that's valid and like like FRS is like staring at you right now yeah going shoot us after bro all right all right all right thank you so much guys that's us talking to trash about one thank you very much