Dialogue with Offchain Labs Ed Felten: How he shaped Arbitrum's future path from a long-term perspective through academics and the White House

Interview: Chloe, PANews

Written by: Weilin, PANews

Ed Felten is perhaps one of the most academic entrepreneurs in the blockchain industry. He is currently the co-founder and chief scientist of Offchain Labs and is also the core enabler of the Ethereum Layer 2 expansion plan Arbitrum.

As early as 2003, Ed was promoted to professor of computer science at Princeton University and became the first chief technology officer of the Federal Trade Commission in 2010. Since 2012, he has returned to academic positions and has been exposed to and researched Bitcoin and blockchain technology. In early 2015, Arbitrum initially shone Felten as a final program in Princeton's computer course, and Felten then began to study the Rollup technology route in depth. But soon after, he was invited to join the White House as Deputy Chief Technology Officer of the White House, mainly responsible for technical security. After returning to academics in 2018, Felten and two doctoral students restarted the Arbitrum project and co-founded Offchain Labs in the same year, officially pushing Arbitrum into the stage of systematic development.

During the Hong Kong Web3 Carnival, PANews interviewed Ed Felten. He deeply shared his journey from cross-border scientific research and policy to blockchain entrepreneurship, and discussed topics such as Layer2 how to balance the development of Ethereum ecosystem, the construction of Arbitrum's technological competitiveness, and the integration of AI and blockchain.

In his opinion, Ethereum does face a choice: does it want to maximize revenue for validators, or does it want to have the most users and the most active developers? At present, its strategy is to tend to develop users and developers, and that's exactly what L2 is very good at. Speaking about Arbitrum's development path, Ed mentioned that sustainability must start with "creating value", and his role is focused on it.

PANews: You have held important positions in academia and government agencies. What opportunities have prompted you to join the blockchain entrepreneurship? What impact does your past experience have on Offchain Labs’ research direction and technical decision-making?

Ed Felten: I've been a professor for many years, and during this time I've been looking for research directions that combine deep technical issues with social or public policy issues. When I first learned about blockchain technology through Bitcoin, I immediately felt that this was a very typical example. Since around 2011, I have been studying blockchain-related topics from a purely academic perspective. I'm always thinking: What technical factors will hinder the development of this technology or prevent it from realizing its potential?

At first I started from the economics of chains, which was my earliest research direction, and later I gradually began to focus on scalability issues. In 2014, I was very excited when I learned about smart contracts because it reminded me of the early growth phase of the Internet—web pages went from a purely static experience of reading or browsing pictures to something interactive and programmable. When I see smart contracts, I feel like this change will happen again and it is just as important.

So I started thinking about how to expand it, which also led to my initial work at Arbitrum. After that, I went to work in the White House for two years and met with my co-founders upon coming back. We started a more formal collaboration in 2017 and 2018.

My experience as a professor has continued in several aspects. On the one hand, as a professor in the technology field, you have to do a lot of management work to succeed, such as spending time recruiting talents, managing them, managing budgets, and advancing progress on time – these skills are very practical when running a business. So, running a startup is actually very similar to managing an academic research team.

But I think one thing I have learned is: look at problems from a long-term perspective and focus on basic things - this is the way of thinking I formed as a professor. This also plays a great role in our thinking on medium- and long-term research.

During my time in government, I have come into contact with many outstanding leaders. I learned some valuable experience from them, and also learned how to build a community and how to reach consensus. I think this focus on “building a community” and “making the community involved in governance” is at the heart of Arbitrum.

When I think of Arbitrum DAO and how it self-governs, governs Arbitrum chains, it reminds me of the process of political operations.

In the early days of Arbitrum, that is, in 2014, we had already foreseen that smart contract public chains would be very important, but at the same time, "scalability" will also become the core challenge. Therefore, from the very beginning, we have overcome the ability to expand smart contracts as the most fundamental problem.

PANews: The Layer2 field currently has a clear head effect, and diversification leads to fragmentation of liquidity and user experience. How do you think the Layer2 project should deal with this dilemma?

Ed Felten: Regarding the first question you mentioned - whether L2 is "extractive" - ​​I don't think so. If you look at the relationship between L2 and L1, L2 is actually the largest user of L1. L2 brings more users, more transactions and traffic.

Taking Ethereum as an example, more than 95% of the activities are actually carried out on L2 and L3. Without these L2s, these activities will likely be transferred to other L1s.

Of course, the data will fluctuate every day, but this proportion is always very high. L2 greatly expands the capacity of the overall Ethereum system, which is simply impossible without L2.

I think the reason why the Ethereum community has reached its current scale is partly because of the existence of L2. I also think that L2 plays a big role in the reason why Ethereum is still leading the field of smart contract blockchain. I think L2 is part of the Ethereum technology stack. It is a wrong binary opposition to treat L2 and L1 as competing with each other - they actually work together and serve users together.

The second question is about fragmented liquidity and fragmented user experience. This is indeed one of the most important issues that the L2 team is currently solving. I think we will see a lot of progress in this regard.

We have a grand vision to create a more unified user interface. Although users still need to know which link they are using, just like when you go online, you will know which website you are visiting, which is important because the differences in trust and security are involved. But just like the internet, you can easily jump from one website to another, and the whole experience is interconnected. I think we can achieve this experience in the blockchain world.

But this requires us to design the user interface ingeniously, and at the same time, we also need to provide the necessary support at the core protocol layer to achieve the interface and interaction method that users really want.

I believe we will achieve this eventually. We will usher in a smoother inter-chain experience: users can easily use these funds on another chain to operate on another chain without the need for cumbersome clicks and complex cross-chain operations.

Of course, to achieve this, many teams need to work together for a long time.

PANews: In this market cycle, many people blame Layer2 for the decline in the economic value of the Ethereum main network, and even labeled "parasitic". What do you think? How do you think Layer 2 should balance its own development with the long-term development of the Ethereum main network?

Ed Felten: This actually boils down to a core challenge when operating a blockchain: Do you want to maximize revenue, or do you want to maximize user usage and community size?

Because if you want to maximize revenue, you tend to narrow down the network capacity and let people bid for scarce block space. When L2 appeared and expanded Ethereum's block space, I think this is actually part of the Ethereum strategy that has always been an attempt to provide more block space.

But you can't increase the block space while trying to increase the price, right? Because the two are opposite to each other.

In my opinion, Ethereum does face a choice: does it want to maximize revenue for validators, or does it want to have the most users and the most active developers? At present, its strategy is to tend to develop users and developers, and that's exactly what L2 is very good at. But I don't think you can have both.

PANews: Currently, Optimistic occupies the vast majority of the Layer 2 market share. Compared with technologies such as ZK, what is its core competitive advantage? How does Arbitrum ensure the long-term competitiveness of its technology stack?

Ed Felten: Compared with ZK, Optimistic rollup has two main advantages: the first is simpler, and the second is the lower cost.

Specifically, it is simpler because it does not involve those very complex cryptography techniques, nor does it require a huge and completely new toolchain to transform programs into mathematical proof systems—that is a very complex process.

Another advantage is that the Optimistic protocol is very low. Generating proofs is very expensive in itself when using ZK. In the Optimistic protocol, on-chain verification is only required when a dispute occurs. If a dispute does occur, it means that one party is malicious and its pledge will be confiscated. So in Optimistic systems, honest participants never have to pay for verification, which brings a huge cost advantage.

Of course, the cost of ZK is gradually declining. I do think we will eventually enter a stage where different chains will use a mix of Optimistic and ZK verification mechanisms. But to achieve this mixing, the cost of ZK needs to be lower than it is now.

Currently, Arbitrum only supports Optimistic. In the future, we expect to support these two mechanisms at the same time, and users can choose freely based on costs or other factors.

PANews: DAO plays an increasingly important role in ecological governance, but it also faces problems such as centralized decision-making, enhancing voter participation and balancing business interests. How will Arbitrum DAO further improve governance efficiency and maintain the principles of decentralization?

Ed Felten: Arbitrum DAO decides its own actions. So I don't speak on behalf of Arbitrum DAO in any form, but I can talk about my personal opinion.

One thing I learned while working in government is that the decision-making process driven by public participation is both challenging and powerful. Yes, the process can be very confusing and sometimes slow, but I think it's very resilient. When the community reaches a consensus, something very ambitious can be achieved.

I think it's still in a very early stage. Unlike other DAOs, Arbitrum DAO has real power and does operate in a decentralized way. You can see that different voices raise different opinions and everyone debates - this is a healthy state. This is exactly what we want to see when we hand over control of the chain to the DAO.

I think this is successful overall, but it also faces – and will always face – some of the challenges that are shared by any large and diverse group.

PANews: Offchain Labs recently launched Onchain Labs to support early stage projects. Can you disclose what specific support (such as technology, capital or market resources) will be provided to these projects? What other plans will be available to inspire the diversification of the Arbitrum ecosystem in the future?

Ed Felten: I prefer to see it as a “lightweight incubator” that aims to drive projects and ensure that these projects are funded.

One of Onchain Labs’ goals is to inspire creativity and drive fast action.

We do not intend to strengthen strong guidance or control of these teams, but we hope to help them start the project, provide some financial support, and then allow them to grow independently.

PANews: We have noticed that Arbitrum has also made plans to enter the AI ​​track, such as proposing the Trailblazer AI agent funding program and supporting AI projects such as ElizaOS. How do you think AI technology will innovate the blockchain industry? What are the unique advantages of Arbitrum in AI layout?

Ed Felten: I think there are two completely different ways of interacting between AI and blockchain.

One is an off-chain AI agent that performs operations on behalf of the user, or is itself a user of the chain. For these off-chain agents, their needs are very close to those of ordinary users: what they need is a low-cost, reliable blockchain system. And for them, the response speed is even more important than for human users. For users, 0.1 or 0.2 seconds response times are already fast, but for a machine, this may already be considered a "long" delay.

When these AI agents are widely adopted, I think we will see a more complex and dynamic DeFi market, and there will be some more interesting gaming applications.

The next important stage is to implement the on-chain AI proxy. This requires stronger computing power and data processing power than most blockchains can provide.

We are working to extend the capacity of the chain on the one hand so that it can directly support this goal; on the other hand, we are also developing special support mechanisms for training, validating and evaluating AI models on the chain.

PANews: Repurchase plans are becoming a common strategy for crypto projects, but some people believe that this will only boost market confidence in the short term and will be difficult to solve the fundamental problem. What specific considerations, long-term goals and execution methods are based on Arbitrum 's repurchase plan?

Ed Felten: I think my role is actually focusing on long-term growth and sustainability. I always believe that we must start with "creating value". If you can create value for users and for the community, people will naturally find ways to utilize and obtain these values.

So for me, as I said before, my focus is on creating value, and how to obtain these values, I think it should be decided by the community.

PANews: The current altcoin market is generally sluggish. In addition to repurchases, does Arbitrum have a deeper plan to enhance the intrinsic value of the token?

This question should actually be answered by DAO, not me. However, I think value ultimately comes from people's willingness to participate in governance and the income generated on the chain. And revenue comes from traffic and usage. Therefore, driving the growth of technology use is the most important factor in achieving all of this.

Offchain Labs has always viewed the development of technology and the creation of value from a long-term perspective. I think DAO's position is similar.

In my opinion, DAO is focusing on driving growth to achieve long-term value creation.