Offchain Labs co-founder Ed Felten: From Princeton professor and White House official to promoting Arbitrum

Interview: Chloe, PANews Words: 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 a core enabler of Arbitrum, an Ethereum Layer 2 scaling solution. Ed was promoted to professor of computer science at Princeton University in 2003 and became the first CTO of the U.S. Federal Trade Commission in 2010. Since 2012, he has returned to academia and has been involved in Bitcoin and blockchain technology. In early 2015, Felten was impressed by Arbitrum as the final project of Princeton's computer science course, and Felten began to delve into the rollup technology roadmap. But soon after, he was invited to join the White House as the White House's deputy chief technology officer, responsible for technical security. After returning to academia in 2018, Felten and two PhD students restarted the Arbitrum project and co-founded Offchain Labs in the same year, officially promoting Arbitrum into the systematic development stage. During the Hong Kong Web3 Carnival, PANews interviewed Ed Felten, who shared his journey from scientific research and policy to blockchain entrepreneurship, and discussed how Layer 2 balances the development of the Ethereum ecosystem, the construction of Arbitrum's technical 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? For now, its strategy is to lean towards developing users and developers, and that's what L2 is very good at. Commenting on Arbitrum's growth path, Ed mentioned that sustainability must start with "creating value," and that's where his role is focused. PANews: You've held key positions in academia and government, what inspired you to venture into blockchain entrepreneurship? How has your past experience influenced Offchain Labs' research direction and technology decisions? Ed Felten: I've been a professor for many years, and during that time I've been looking for research directions that can 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 about 2011, I've been working on blockchain-related topics from a purely academic perspective. I'm always wondering: What are the technical factors that are holding this technology back from developing or preventing it from realizing its potential? Initially, I started from the economics of chains, which was my earliest research direction, and then gradually began to focus on scalability. In 2014, I was very excited when I learned about smart contracts because it reminded me of the early days of the internet, when web pages went from a purely static experience of reading or browsing pictures to something interactive, programmable. When I look at smart contracts, I feel like this change is going to happen again, and just as important. That's when I started thinking about how I could scale it, which led to my initial work at Arbitrum. After that, I went to work in the White House for two years and came back to meet with my co-founders. We started a more formal collaboration in 2017 and 2018. My experience as a professor has continued in several ways. On the one hand, to be successful as a professor in a technical field, you have to do a lot of management work, such as spending time recruiting talent, managing them, managing budgets, and staying on schedule – skills that are very useful when running a business. So, running a startup is a lot like managing an academic research team. But I think one of the things I've also learned is to take a long-term view and focus on the basics – that's the way I think when I was a professor. This also plays a big role in our thinking about medium- and long-term research. During my time in government, I came into contact with a lot of great leaders. I learned some valuable lessons from them, how to build a community, how to build consensus. I think this focus on "building community" and "involving community in governance" is at the heart of Arbitrum. When I think about the Arbitrum DAO and how it does self-governance, how it governs the Arbitrum chains, it reminds me of the process by which politics works. In the early days of Arbitrum, in 2014, we foresaw that the public blockchain of smart contracts would be very important, but at the same time, "scalability" would also be a core challenge. Therefore, from the very beginning, we have made the ability to scale smart contracts the most fundamental problem. PANews: At present, the Layer 2 field presents an obvious head effect, and diversification leads to fragmentation of liquidity and user experience. How do you think Layer2 projects should address this dilemma? Ed Felten: On 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 biggest consumer of L1. L2 brings more users, more transactions, and more traffic. In the case of Ethereum, for example, more than 95% of activity is now actually happening on L2 and L3. Without these L2s, these activities are likely to move to other L1s. Of course, the data fluctuates from day to day, but the percentage is always very high. L2 dramatically expands the capacity of Ethereum's overall system, which would simply not be possible without L2. I think part of the reason why the Ethereum community is where it is today is because of L2. I also think L2 plays a big role in the reason why Ethereum is still leading the way in the smart contract blockchain space. I think L2 is part of Ethereum's tech stack. It's a misnomer to think of L2 and L1 as competing with each other – they actually work together to serve the user. The second question is about fragmented liquidity and fragmented user experience. This is really one of the most important issues that the L2 team is focusing on right now. I think we're going to see a lot of progress on that. We have an ambitious vision for a more unified user interface. While users still need to know which chain they're using, just as you'll know which website you're visiting when you're online, it's important because there's a difference in trust and security 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 also achieve this experience in the blockchain world. But it requires clever design on the user interface, as well as the necessary support at the core protocol layer to achieve the kind of interface and interaction that users really want. I am confident that we will eventually achieve this. We're coming with a smoother inter-chain experience: users who hold funds on one chain can easily use those funds on another chain to operate, without the need for tedious clicks and complex cross-chain operations. Of course, to achieve this, it takes a lot of teams to work together over a long period of time. PANews: In this market cycle, many people blame Layer 2 for the decline in the economic value of the Ethereum mainnet, or even be labeled as "parasitic"? How do you think Layer 2 should balance its own development with the long-term development of the Ethereum mainnet? Ed Felten: It really comes down to a core challenge when running 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're inclined to shrink network capacity and let people bid for scarce block space. And when L2 came along and expanded Ethereum's block space, I think that was part of Ethereum's strategy all along, which was to try to provide more block space. But you can't increase the block space and increase the price at the same time, right? Because the two are in opposition 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? For now, its strategy is to lean towards developing users and developers, and that's what L2 is very good at. But I don't think you can have both. PANews: At present, Optimistic accounts for the majority of the Layer 2 market share, what is its core competitive advantage compared to technologies such as ZK? How does Arbitrum ensure the long-term competitiveness of its technology stack? Ed Felten: Optimistic rollups have two main advantages over ZK: the first is that they are simpler, and the second is that they are less expensive. Specifically, it's simpler because it doesn't involve those very complex cryptography techniques, and it doesn't require a large and entirely new toolchain to turn a program into a system of mathematical proofs, which is a very complex process. Another advantage is that the cost of the Optimistic protocol is very low. When using ZK, generating proofs is inherently expensive. In the Optimistic protocol, on-chain verification is only required in the event of a dispute. If a dispute does occur, indicating that one party is acting in bad faith, their stake will be confiscated. As a result, in the Optimistic system, honest participants never have to pay for verification, which brings a huge cost advantage. Of course, the cost of ZK is gradually decreasing. I do think we're going to end up at a stage where different chains use a mix of Optimistic and ZK validation. But to achieve this hybridization, the cost of ZK needs to be lower than it is today. Currently, Arbitrum only supports Optimistic. In the future, we expect to support both mechanisms, and users are free to choose based on cost or other factors. PANews: DAOs are playing an increasingly important role in ecological governance, but they also face challenges such as centralizing decision-making, increasing voter participation, and balancing business interests. How will Arbitrum DAO further improve governance efficiency and uphold the principle of decentralization? Ed Felten: The Arbitrum DAO autonomously determines its own actions. So I'm not speaking on behalf of the Arbitrum DAO in any way, but I can share my personal opinion. One of the things I've learned while working in government is that decision-making processes driven by public participation are both challenging and powerful. Yes, the process can be messy and slow at times, but I think it's very resilient. When the community agrees, there are some very ambitious things that can be achieved. I think it's still very early days. The Arbitrum DAO is different from other DAOs in that it has real power and does operate in a decentralized manner. You can see that different voices are coming up with different points of view and people are debating – it's a healthy state. This is exactly what we want to see when we hand over control of the chain to a DAO. I think it's been a success overall, but it's also faced – and always will be – some of the challenges of governing that are common to any large and diverse group. PANews: Offchain Labs recently launched Onchain Labs to support early-stage projects, can you tell us what specific support (e.g., technical, funding, or marketing resources) will be provided for these projects? What are the other plans for the future to incentivize the diversification of the Arbitrum ecosystem? Ed Felten: I prefer to think of it as a 'lightweight incubator' that aims to get projects off the ground and make sure those projects are funded. One of Onchain Labs' goals is to spark creativity and drive quick action. We don't intend to exert strong guidance or control over these teams, but we want to help them get the project off the ground, provide some financial support, and then let them grow on their own. PANews: We have noticed that Arbitrum has also laid out the AI track, such as proposing the Trailblazer AI Agency Grant Program, and supporting AI projects such as ElizaOS, how do you think AI technology will revolutionize the blockchain industry, and what are Arbitrum's unique advantages in AI layout? Ed Felten: I think there are two very different ways of interacting with AI and blockchain. One is off-chain AI proxies, which perform actions on behalf of the user or are consumers of the chain themselves. For these off-chain proxies, their needs are very close to those of the average user: what they need is a low-cost, reliable blockchain system. And for them, responsiveness is even more important than for human users. A response time of 0.1 or 0.2 seconds is fast enough for a user, but it can be considered a "long" delay for a machine. When these AI proxies are widely adopted, I think we'll see a more complex and dynamic DeFi market, and some more interesting gaming applications will emerge as well. The next important stage is the implementation of on-chain AI agents. And this requires more computing power and data processing power than most current blockchains can provide. We are working to, on the one hand, expand the capacity of the chain so that it can directly support this goal; On the other hand, specialized support mechanisms are being developed for training, validating, and evaluating AI models on-chain. PANews: Buyback programs are becoming a common strategy for crypto projects, but some argue that this will only boost market confidence in the short term and will not solve the underlying problem. What are the specific considerations, long-term goals, and execution of Arbitrum's buyback program? Ed Felten: I think my role is really focused on long-term growth and sustainability. I have always believed that we must start with "creating value". If you can create value for your users, for your community, people will naturally find ways to harness and capture that value. So for me, as I said before, my focus is on creating value, and how to capture that value, I think it's up to the community to decide. PANews: With the current general downturn in the altcoin market, does Arbitrum have deeper plans to enhance the intrinsic value of the token in addition to buybacks? Ed Felten: That's really a question that should be answered by the DAO, not me. However, I believe that value ultimately comes from people's willingness to participate in governance, as well as the revenue generated on-chain. And the revenue comes from traffic and usage. Therefore, driving the growth of the use of technology is the most important factor in making this happen. At Offchain Labs, we have always taken a long-term view of technology development and value creation. I think the position of the DAO is similar. In my opinion, DAOs are focusing on driving growth for long-term value creation.