Interview: Chloe, PANews

Written by: Weilin, PANews

Ed Felten may be one of the most academically inclined entrepreneurs in the blockchain industry. He is currently the co-founder and chief scientist of Offchain Labs and a key proponent of the Ethereum Layer 2 scaling solution, Arbitrum.

As early as 2003, Ed was promoted to a professor in the Department of Computer Science at Princeton University and served as the first chief technology officer of the U.S. Federal Trade Commission in 2010. In 2012, he returned to academia and began to engage with and study Bitcoin and blockchain technology. In early 2015, Arbitrum initially caught Felten's attention as a final project in a Princeton computer science course, prompting him to delve into the research of Rollup technology. Shortly after, he was invited to join the White House as the deputy chief technology officer, responsible for technology security affairs. After returning to academia in 2018, Felten, along with two PhD students, restarted the Arbitrum project and co-founded Offchain Labs that same year, officially pushing Arbitrum into a systematic development phase.

During the Hong Kong Web3 Carnival, PANews interviewed Ed Felten, who shared his journey from academia and government to blockchain entrepreneurship, discussing topics such as how Layer 2 can balance the development of the Ethereum ecosystem, the construction of Arbitrum's technological competitiveness, and the integration of AI and blockchain.

In his view, Ethereum indeed faces a choice: does it want to maximize income for validators, or does it want to have the most users and the most active developers? Currently, its strategy leans towards developing users and developers, which is precisely what L2 excels at. When discussing the development path of Arbitrum, Ed mentioned that sustainable development must start with "creating value," and his role is focused on this.

PANews: You have held important positions in academia and government. What prompted you to venture into blockchain entrepreneurship? How has your past experience influenced the research direction and technical decisions of Offchain Labs?

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

Initially, I approached it from the economic perspective of the chain, which was my earliest research direction, and later gradually began to focus on scalability issues. In 2014, when I learned about smart contracts, I was very excited because it reminded me of the early growth phase of the internet—web pages transformed from a purely static reading or browsing experience into something interactive and programmable. When I saw smart contracts, I felt that this change would happen again, and it was equally important.

So I began to think about how to scale it, which also led to my initial work on Arbitrum. After that, I worked at the White House for two years, and when I returned, I met with my co-founders. We began more formal collaboration in 2017 and 2018.

My experience as a professor has continued in several ways. On one hand, as a professor in the tech field, to succeed, you have to do a lot of management work, such as spending time recruiting talent, managing them, managing budgets, and pushing progress on time—these skills are very practical in running a business. So, running a startup is quite similar to managing an academic research team.

But I think one thing I learned is to look at problems with a long-term perspective and focus on foundational issues—this is a way of thinking that formed during my time as a professor. This has also greatly influenced our thinking about mid- to long-term research.

During my time in government, I interacted with many excellent leaders. I learned some valuable lessons from them and how to build communities and reach consensus. I believe this focus on "building community" and "involving the community in governance" is at the core of Arbitrum.

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

In the early days of Arbitrum, back in 2014, we foresaw that public chains for smart contracts would be very important, but at the same time, "scalability" would become a core challenge. Therefore, from the very beginning, we tackled the ability to scale smart contracts as a fundamental issue.

PANews: The Layer 2 space currently shows a clear head effect, and diversification has led to fragmentation of liquidity and user experience. How do you think Layer 2 projects should address this dilemma?

Ed Felten: Regarding your first question—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 more traffic.

Take Ethereum as an example; currently, over 95% of the activity is actually happening on L2 and L3. Without these L2s, this activity would likely shift to other L1s.

Of course, daily data will fluctuate, but this ratio remains very high. L2 greatly expands the overall capacity of the Ethereum system, which would not be possible without L2.

I believe that part of the reason the Ethereum community has reached its current scale is due to the existence of L2. I also think that L2 has played a significant role in Ethereum's continued leadership in the smart contract blockchain space. I see L2 as part of the Ethereum tech stack. Viewing L2 and L1 as competing against each other is a mistaken binary perspective—they actually work in synergy, serving users together.

The second question is about fragmented liquidity and fragmented user experience. This is indeed one of the most important issues that L2 teams are currently focusing on solving. I believe we will see significant progress in this area.

We have a grand vision of creating a more unified user interface. While users still need to know which chain they are using, just as you know which website you are visiting on the internet, this is important because it involves differences in trust and security. But just like the internet, you can easily jump from one website to another, and the entire experience is interconnected. I believe we can achieve this kind of experience in the blockchain world as well.

However, this requires us to design cleverly at the user interface level while also providing the necessary support at the core protocol level to achieve the kind of interface and interaction that users truly want.

I believe we will ultimately achieve this. We will usher in a smoother cross-chain experience: users holding funds on one chain will be able to conveniently use those funds on another chain without cumbersome clicks and complex cross-chain operations.

Of course, achieving this will require the long-term collaborative efforts of many teams.

PANews: In this market cycle, many attribute the decline in the economic value of the Ethereum mainnet to Layer 2, even labeling it as "parasitic." How do you view this? How should Layer 2 balance its own development with the long-term development of the Ethereum mainnet?

Ed Felten: This actually boils down to a core challenge in operating a blockchain: do you want to maximize income, or do you want to maximize user volume and community size?

Because if you want to maximize income, you will tend to shrink network capacity, allowing people to bid for scarce block space. And when L2 appears, expanding Ethereum's block space, I believe this has always been part of Ethereum's strategy—to try to provide more block space.

But you can't increase block space while also wanting to raise prices, right? Because these two are opposing.

In my view, Ethereum indeed faces a choice: does it want to maximize income for validators, or does it want to have the most users and the most active developers? Currently, its strategy leans towards developing users and developers, which is precisely what L2 excels at. But I believe you can't have both.

PANews: Currently, Optimistic holds the vast majority of the Layer 2 market share. Compared to ZK and other technologies, what is its core competitive advantage? How does Arbitrum ensure the long-term competitiveness of its tech stack?

Ed Felten: Compared to ZK, Optimistic rollup has two main advantages: first, it is simpler, and second, it is cheaper.

Specifically, it is simpler because it does not involve those very complex cryptographic techniques and does not require a large and entirely new toolchain to convert programs into mathematical proof systems—that is a very complex process.

Another advantage is that the cost of the Optimistic protocol is very low. With ZK, generating proofs is itself very expensive. In the Optimistic protocol, on-chain verification is only required when disputes arise. If a dispute does occur, it means one party is malicious, and their stake will be forfeited. Therefore, in the Optimistic system, honest participants never have to pay for verification, which brings a significant cost advantage.

Of course, the costs of ZK are gradually decreasing. I do believe we will eventually enter a stage where different chains will mix the use of Optimistic and ZK verification mechanisms. But to achieve this mix, the costs of ZK need to be lower than they are now.

Currently, Arbitrum only supports Optimistic. In the future, we expect to support both mechanisms simultaneously, allowing users to choose freely based on cost or other factors.

PANews: DAOs are playing an increasingly important role in ecological governance, but they also face challenges such as centralized decision-making, increasing voter participation, and balancing commercial interests. How will Arbitrum DAO further enhance governance efficiency while maintaining decentralization principles?

Ed Felten: Arbitrum DAO decides its own actions autonomously. So I do not speak on behalf of Arbitrum DAO in any form, but I can share my personal views.

One thing I learned during my time in government is that a decision-making process driven by public participation is both challenging and powerful. Yes, this process can be chaotic and sometimes slow, but I believe it is very resilient. When the community reaches a consensus, it can achieve some very ambitious things.

I believe we are still in a very early stage. Arbitrum DAO is different from other DAOs; it has real power and operates in a truly decentralized manner. You can see different voices presenting different viewpoints, and everyone engages in debate—this is a healthy state. This is exactly the outcome we hope to see when transferring control of the chain to the DAO.

I think overall this is a success, but it also faces—and will always face—some challenges common to governing any large and diverse group.

PANews: Offchain Labs recently launched Onchain Labs to support early projects. Can you share what specific support (such as technical, financial, or market resources) will be provided to these projects? What future plans are there to incentivize the diversification of the Arbitrum ecosystem?

Ed Felten: I prefer to see it as a "lightweight incubator" aimed at driving project launches and ensuring these projects receive funding support.

One of the goals of Onchain Labs is to stimulate creativity and promote rapid action.

We do not intend to impose strong guidance or control over these teams; rather, we hope to help them kickstart their projects, provide some funding support, and then let them grow independently.

PANews: We have noticed that Arbitrum is also venturing into the AI space, such as proposing the Trailblazer AI Agent Grant Program and supporting AI projects like ElizaOS. How do you think AI technology will revolutionize the blockchain industry, and what unique advantages does Arbitrum have in its AI initiatives?

Ed Felten: I believe there are two distinctly different interactions between AI and blockchain.

One is off-chain AI agents that perform actions on behalf of users or are themselves users of the chain. For these off-chain agents, their needs are very similar to those of ordinary users: they require a low-cost, reliable blockchain system. For them, response time is even more critical than for human users. For a user, a response time of 0.1 seconds or 0.2 seconds is already fast, but for a machine, that might be considered a "long" delay.

As these AI agents become widely adopted, I think we will see more complex and dynamic DeFi markets, as well as some more interesting gaming applications.

The next important stage is to realize on-chain AI agents. This requires stronger computational and data processing capabilities than most current blockchains can provide.

We are working hard to both expand the chain's capacity to directly support this goal and develop specialized support mechanisms for training, validating, and evaluating AI models on-chain.

PANews: Buyback plans are becoming a common strategy for crypto projects, but some believe this can only boost market confidence in the short term and is unlikely to address fundamental issues. What specific considerations, long-term goals, and execution methods underpin Arbitrum's buyback plan?

Ed Felten: I believe my role is actually focused on long-term growth and sustainability. I have always firmly believed that it 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 that value.

So for me, as I mentioned earlier, my focus is on creating value, and how to obtain that value should be determined by the community.

PANews: Currently, the altcoin market is generally sluggish. Besides buybacks, does Arbitrum have deeper plans to enhance the intrinsic value of its tokens?

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

At Offchain Labs, we have always viewed the development of technology and the creation of value from a long-term perspective. I believe the DAO's stance is similar.

In my view, the DAO is focused on driving growth to achieve long-term value creation.

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