Welcome to FinTech TV.
Blockchain is at a crossroad.
We have hundreds of powerful networks, but fragmentation does remain a challenge.
Layer Zero Labs is building the translation layer that connects these networks with backing from giants like Citadel Securities, Google Cloud.
As well as DTCC Layer Zero launching a 0 to handle the massive workloads of global finance.
Well, joining me here at Digital Asset Summit is Bryan Pellegrino, co-founder and CEO of LayerZero Labs.
Great to have you here.
Thank you so much for joining me.
Thank you so much for having me.
Well, you and I were talking about the speed with which things are moving when it comes to adoption, as well as the technology.
So first and foremost, give us your take on what we're seeing unfold right now.
Yeah, I mean I think it's been just really a massive transition or even, even a couple of years ago, I would have never imagined, and I think maybe I could have imagined FinTechs, and I think Fintechs are, they're first movers, you see what Robinhood is doing now, you see what Stripe is doing now, all the acquisitions all the time, PayPal, etc.
So that maybe you could have predicted, but on the pure institutional side, again some of the partners you named, groups like TTCC, groups like that, you know, and I see all of these groups, NASDAQ just had their big announcement, uh, I, I, I never would have thought, and so people are moving.
Way faster, and part of that is due to we're getting, you know, some semblance of regulatory clarity and hopefully much more of that after clarity bill passes, uh, but it's just, it has been a whirlwind, but in the, in the best possible way.
Yeah, and Brian, I understand that you have compared what we're seeing unfold right now to blockchain at its internet moment, so walk us through this.
Yeah, I mean I, I, I think There's, there's been a couple of different iterations, and first iteration of blockchain was just the technology, which was like really fascinating, uh, and this is back in, you know, 2009 forward, and it's just proving the point that you can have a self-custodial, decentralized.
Uh, system without human coordination and you have that it's resilient, and then you get smart contracts, you had this whole other, uh, layer, and you had this proliferation of chains and proliferation of activity, but there was no way to connect them, and so that was for us, my mental model was Early days of internet, you had, you know, uh, Stanford and DARPA and you have all these different intranet small clusters, and you used to have to literally get on a plane, take your data, fly, put in your, you know, printout, bring it home, uh, and then you get the internet, and the internet does this amazing thing and it connects all of this stuff, and you have this seamless system that starts to work a little bit, uh, more at large, and so, at Layer Zero, that was our original goal, it was sort of solving this and connect.
170 blockchains today, do kind of hundreds of billions of dollars volume across them, and so that was that first layer, but now we're really seeing is that movement to static, uh, hobbyist, sort of consumer things, to really, really large scale institutional things.
Now it's like you just take it for granted, everything we do is just built and underpinned by the internet, right?
Uh, and I think you're starting to see that more and more, and I think, uh, stablecoin's paved the way for this, uh, you know, broaching.
Many hundreds of billions of dollars in circulation, uh, making record sort of profits, uh, some of the most efficient per capita companies on the planet in terms of actual, uh, underlying profitability.
And so that I think immediately paved the way for, hey, what about everything else, and now we live in a world where we're fortunate that we do, that we have even, you know, Larry Fink is out there evangelizing the tokenization of everything, and that's not a world I could have imagined a couple of years ago.
Yeah, you really do walk us through what has happened and this comparison, this analogy is really helpful, but when it comes to speed comes security.
So tell us what's needed when it comes to security right now, why?
Yeah, so I think security there's I think we have systems that are reasonably, like Ethereum is reasonably secure, but the problem is in order to create that level of security, you'd have a really large trade-off on speed, right?
So you're constrained at 20 transactions per second, uh, and you can go down other routes that are going to be faster, but they're going to heavily trade off, they're gonna be much more centralized, and I think what you're looking at is that there's a need for a credibly neutral layer that is decentralized, that is secure, but can be performant, right?
And so, I actually I think security in just security for security's sake is relatively solved, but the problem is you can't do what you need to do, and so when we talked to some of these institutions, one of the first things they're saying when we showed them 0 was, we've tried.
Everything that has existed prior to this, and actually we couldn't do what we needed to do, and now we have the potential to, and that for us I think was sort of like, the most validating moment is, is It felt like we got here, again, I, I, you and I were just talking, I've been in here 15 years of my life, sort of dedicated to space, and the space won largely by the merits of, of the underlying, a lot of, a lot of the institutional side didn't care if they could have snapped their fingers and killed the industry, they would have many, many, many times over the last decade.
But now everybody's here at the table, they realize the underlying sort of power on unlock on on global markets, on, on rails that are neutral by default, that are secure, that have sort of uh the, the underlying properties, and then at the last mile, we couldn't deliver what they needed on, on scale and on speed and on these other things, and people had to make really centralizing trade-offs, and I think the Most interesting part right now is to be able to be able to provide a system that doesn't make those trade-offs and can still provide what they need, and so as this transition happens of global capital markets and as this transition happens of uh sort of the existing financial system, I think it's a really, really unique opportunity.
Tune in.
That's what we're seeing from partners across the board.
Yeah.
And speaking of which, for the viewer out there who might not be as familiar with layer zero, when it comes to the architecture, tell us what's different and how you are fixing the hacks.
Yeah, yeah, so, uh, I think there's Really two big things that have happened.
One was zero knowledge proofs, which is this really amazing technology, and you had all these existing systems.
And the technology is really nascent and so people were trying to figure out if, if it eventually. gets to maturity, how will we fit it into our existing system, and kind of our early insight was, take it to the extreme, who knows when it's gonna happen, but like assume it's a solved problem, what does the world actually look like with this?
And so part of it is building from the ground up with zero knowledge proofs, uh, and then the second was actually going out and and tackling all of the technical hurdles to make that happen, and so what happens now is you have a system that Uh, you know, can support hundreds of thousands of nodes, sort of as as decentralized as, as possible, and at the same time can support millions of transactions per second, and that's on the backbone of sort of multiple, uh, breakthroughs.
We published kind of 5 corners.
Cornerstone papers over the last year or so, uh, but that really is what sets the stage for all of this, and it's underpinned by ZKIP or zero knowledge proofs themselves is a thing that unlocks this.
It gives you compression of compute and compression of data where you now have something where In a system that does have hundreds of thousands or millions of validators, in order to do that you need these to be small devices, cheap consumer devices, uh, you can still have extreme, extreme, uh, throughput or bandwidth overall, to the tune of many millions of transactions per second, and so when you think about something like The New York Stock Exchange, which has 2 million messages per second, roughly, uh, trying to fit that into an existing system that does 15 to low single digit thousands of transactions per second, it's just night and day, you're not going to be able to do it, uh, and so, Um, you know, happy, you, you tell me how deep technically you want to go, but this is, this is the high level of, of how we got there.
Yeah, and finally, before I let you go, you've talked to me about the past as well as the present, what's unfolding right now.
So what does the next 5 years look like?
I mean, I think people are going to be really shocked, and again I think I, I've been really shocked at just the number, you're talking every major financial institution on the planet, central banks, like all of the The backbone of the financial system as we know it today, is now exploring the technology or actively developing around the technology, uh, in a way that is not just a proof of concept, in a way that is not just, oh this is interesting, let's see what you're gonna do, but like really exploring production systems and really moving some of this stuff on chain, and so, I mean I think 5 years from now, there's a world and I, I'm A very big believer in like probabilistic outcomes.
I can't tell you with certainty what's going to happen, but the world that we're building for is the world is moving from 7.5 to 24/7 markets, they're going to trade globally, they're going to trade across every possible asset class, and our goal, one of the things we've done on the inter upside is, is help the Asset issuers, you know, we've grown from nothing to hundreds of billions of dollars of assets moving around, and our goal is to create an environment that is as uh creative and frictionless and easy as possible for them to do that, and so with Zero, the goal, and what I think people will see is that transition happening where we're Systems, I mean, DTC is an amazing example where we're talking about an organization that does 4 quadrillion dollars of AI numbers that are literally hard to even say of volume per year, and they have a direct mandate to tokenize $100 trillion worth of equities over the next couple of years, right?
Like, these are the systems that are the backbone of the entire financial system, and they are moving at a pace that I, I never could have imagined, uh, and so I think people are going to be very surprised how quickly it happens.
Hopefully the end consumer, hopefully the end consumer doesn't notice anything, they don't, uh, they never think about it, they don't see it, it doesn't faze them, but I think it's really going to start to be more and more of the backbone, and you see even some of the largest critics, uh, Jamie Dimon is a perfect example, he's been, uh, sort of, uh, Nemesis to the industry for a very long time now, and now he's, you know, even outright saying that, hey, like, uh, maybe this is kind of what the system needs, and again, Larry Fink and many others, and so I think it's been really amazing to see and I think people will be blown away by just how the magnitude I guess of systems that migrate.
Well Brian, thank you so much for joining me here at Digital Asset Summit.
I appreciate your time and we covered a lot of ground, so I appreciate all of your insights.
Thank you so much for having me.
Thank you.
