While You Build Casinos, We Build Real Finance | LayerZero, co-founders

Intro

00:00In order to truly change things, in order to build something great, you must have conviction. A college dropout poker player. I didn't go to Harvard or MIT. I didn't go to, you know, amazing school. I didn't have any connections. We were nobodyies.

00:14And so I always wanted to prove that we could do impossible things. You can't do this. Nobody can. When I hear that, uh, that's all I want to work on. Reset everything. Think completely from first principles. How can I break it? How can I break it?

00:28And that the why matters more than anything. Why are we here? Why why do we get up in the morning in the shower when you're going to bed at night, when you wake up in the middle of the night, you have an idea is just like it's just a pure obsession.

00:40Can we have high performance and maximum decentralization? It's the holy grail. The impossible thing, an impossible problem. My favorite. What started as an idea now is a reality. We were the first company ever in history to have both Andre Horwitz and Sequoia both co-lead around.

00:57Vitalic said that trial was broken. He means theoretically it's broken, but we actually broke it. There were no more bottlenecks. I'm Brian Pelgro, co-founder and CEO of Layer Zero Labs. I'm Raz, co-founder and CTO of Layer Zero. Zero is the last blockchain that'll ever be built.

Two Outsiders, One Impossible Bet

01:23I woke up one morning, April 15th, and I sat down at my computer and there's a big seal of the Department of Justice, the DOJ, on the website. And what had happened was overnight they had banned all online poker within the United States. All of the websites are down.

01:38You can no longer play online poker in the United States. All of the payment processors are down. So, you can no longer move money between or do anything. And it was just like overnight like that the industry was just gone. And I think those were the first times where you said okay you saw the reach of of sort of policy and government sort of impacting you in your real life.

01:57When you're a kid you don't think about it too much. When you're a young adult you don't think about it but there's the first time of I need to literally move where I live to my entire life and it's sort of career just got taken away from me.

02:10Uh, and so I think that really grounded me early on in kind of like the libertarian ethos of crypto and having something that uh was bigger than a single jurisdiction, was bigger than a current like given regulatory regime uh had the ability to become something more.

02:26For the first 24 hours, I just spent feeling sorry for myself, which I think is like a kind of natural reaction. You're just like, "Oh man, my my career is over. All my money is gone." Like, you know, you don't really know what to do. But then immediately after that, like the next day, I woke up and I was just very I saw that the world was changing very quickly.

02:45And so, one thing that I noticed was that all of the main poker sites were now gone, but there's a bunch of smaller kind of shady poker sites that still existed and that everybody was going to go and sign up on those because they needed to continue to make a living.

03:00And I knew all of the highest stakes poker players in the world. So, I created an affiliate and I signed up all of my friends to all of these sites. I found them the best deals and I negotiated these things and it went from me making, you know, no money to me making like 20 $30,000 a month within a couple of weeks, right?

03:17And so, very quickly I saw that a changing reshuffle of a landscape created an opportunity and then that really drew me to entrepreneurship in general. I think that was the first real catalyst. I grew up in a town of 900 people, right? Like very very small village, not a lot of opportunity, not a lot of anything.

03:39And so I really valued for most of my life a meritocratic environment. I didn't go to Harvard or MIT. I didn't go to, you know, amazing school. I didn't have any connections. I was a poker player who dropped out of college, right? And so what I really valued was the ability to to just do something where I could earn my own way or like prove my own value over time.

04:00So poker was a perfect example of this. Poker is purely meritocratic. It doesn't matter anything about you. It's just you're smarter or better at the game or you're not. Like that's it. It was very very linear. Those are just the systems and environments that I valued.

04:12And so that was one of the things I was very drawn to in crypto. I didn't need to know the banking executives. I didn't need to have an uncle who worked at Goldman Sachs. All I needed to do was be able to build something that was more useful to the world that actually had a higher degree of utility.

04:28It was just build the best possible system that you can build and permissionless open access to anybody. Just build the best thing. You know, I've been building with Brian since we're in school together. And nobody would give us money cuz we were nobodyies and we didn't come from a great pedigree and we didn't have a great school.

04:45And so I always wanted to prove that we could do impossible things, great things. And so I'm always chasing is when someone says something's not possible, right? This is not technically possible. this uh you you can't do this, nobody can. When I hear that, uh that's all I want to work on.

05:03And Brian was like uh our hero, like my hero, our like the older grade's heroes. He's a genius to everybody. And so I always looked at the Brian and I wanted to be like him. I didn't know we were going to do that uh to be be working together basically our whole lives, the rest of our lives.

05:17So two things happened through the crypto side. All of poker, all the shady sites that remained, the only way to deposit because PayPal, Money Bookers, Netteller, Skril, they were all shut down, but Bitcoin was the way that you would deposit to these sites.

05:29So, everybody in poker who was in the United States in 2011 era found Bitcoin. Everybody used it as a way to deposit between. So, it was the first real product market fit. And then on the entrepreneurship side, I'd got really interested by this affiliate idea.

05:42And that created a a doorway for a new industry which was called daily fantasy sport. Sort of a faster version of that. I went to them and said, "Can I just work for free? Like just let me do some affiliate stuff. I want to learn uh let me just, you know, see how it is."

05:57And they said, "Sure, great." And then the sort of board of the company said, "Hey, we actually want you to become CEO a couple months and run the company." But I actually took my two co-founders here that I started layer zero with and I brought them in and we grew to being third overall in revenue.

06:09So we were just turning profitable. We were just doing this and then we got an acquisition offer and we sold it. It was a hard time like in our lives like that was a hard the first time we felt like real hardship. Year and a half maybe 2 years of zero income and me working 80our weeks.

06:24Uh, every day I was on because it was just us maintaining a site that had, you know, tens of thousands of users with real money playing on our site and us taking every dollar we made. We were making money and reinvesting into the business, reinvesting in the servers, reinvesting.

06:38My biggest learning, the biggest takeaway was like I worked very hard with Brian on it. Brian doesn't really give up and I don't and my my whole life my father pushed me like never give up on things. And it was the first time where I I I felt like uh, you know, wasn't going anywhere.

06:53We were out of money. I was paying money out of pocket at this point from my wife's salary to like keep things alive with Brian. So was Brian and we had an offer and it wasn't a great offer and Brian said we shouldn't I don't think we should take it.

07:07And I said I have to take it. We have to take it. I just need to tap out at this point. Like I I can't do it. That was the first time I ever tapped out. Ryan actually came back to me later and said like, I really really believe that we can build something incredible and I promise you the next time that we do something, I will run my life into the ground.

07:25You know, I'll I'll I'll go all the way to maximum suffering and everything uh and we won't kind of give up early. And we said, okay, like we'll do that. And then Ethereum sort of was launching at the same time. Ethereum was this great layer that you could trust and you could build value upon, but it was slow and you could never build complex applications.

07:44It was really the spark of well now you can build something really interesting. We saw that need very early on of of course you have to be able to move back and forth. You write the code and you'd host it on a server. Maybe the server was in my house or maybe it was in a data center but it was just like one computer and if the computer went down like the website your application was offline you know so you had to make sure that computer was online and everything but now when you build an application you have a million microservices you have databases things

08:14that are optimized for throughput for speed for every different component and we saw blockchains will really start to leverage that you'll have layers that are really optimized for storage layers that are really optimized for throughput and for high amount bunch of transactions layer that are extremely security focused and there was a way to connect those all together to create something that was sort of more valuable than the sum of the parts.

08:35So I I called Ryan and I said like I know you said the next time we did something we would like really do it. I I was like, I think now is the time. And I called him two days after Christmas. And within 10 days, he had sold his house, packed up his life, taken his four-month old daughter, and flown across the world to come in Vancouver and be in Vancouver with me.

08:58I want to I want to get the band back together and just start building again. I don't think we can do this remote. And I said, I'll be there in 2 weeks. And I never moved back. My daughter didn't sleep well and she would be up all the time.

09:09Uh it was actually like the worst time to to go and take a shot and do these things. That's where I learned GPU. Every morning at I would strap my daughter in uh to these straps and I'd walk around Brian's downstairs living room. I would read the docs and everything about that Nvidia had on how to GPU program, read textbooks without doing the work cuz I couldn't I didn't have a computer.

09:31So I was just do it in my head from 2:00 in the morning to 7:00 in the morning every single day for 6 months. And then I sat down and just started coding GPU. It was the worst time to go, which is the best time for me. Finances, stress, um, time, and, uh, that's that's when like I have to hit my shot.

09:51The first thing that happened that had been really interesting since smart contracts was you started to hear Binance Smart Chain, more volume than Ethereum, more users than Ethereum. It was very strange. Uh, there was a bunch of other things that had launched, but nobody really used them.

10:04What could you build with that? Can you build something that leverages the speed here and then brings it back to the security over here. We started to build this. We built some toy examples and then only then did we realize that everything we were building you couldn't send a message between the two networks.

10:18You couldn't go between Binance Smart Chain and Ethereum. And so we started to build kind of a better form of a bridge. And then we very quickly realized, hey, this is this is really the problem is connecting these things. And that became that became layer zero.

10:30That was us solving our own problem. It was us building examples. But all of this stuff that we had done prior brought us to that. You know, what started as an idea now is a reality. And now we're sort of on the precipice of like really meaningfully changing a large part of the financial system.

10:47November we did $ 38 billion. $38 billion is 5.5 times what Western Union does in a month. And that is just like crazy to think about because you can really change how some of this works. That's what drives me is solving hard problems. And I want to solve a hard problem that helps people.

11:03And it's not about how much money you make, but like how much better you can make their lives overall, enriching others lives. It's very easy to forget growing up in a country that was stable and wealthy. There's a lot of places that don't have any access to any sort of financial infrastructure.

11:21And even the banks and the financial institutions aren't trustworthy, right? They'll scam you. They'll charge egregious rates. They'll go under. There's fraud. Early on, what resonated about Bitcoin was that nobody could come and just seize your money.

11:35Nobody could come and do these things. You had ownership and control. I think Tether is the best possible example of this where most companies really try to focus on a certain geography. So, you're going to be Stripe and you're going to be in the United States and you're going to service institutions and developers there and then you're going to expand and you're going to expand.

11:52and Tether went and they said, "We're going to offer access to the US dollar to all the places that don't have easy access." So, Egypt and Nigeria and Argentina and places where their currency is inflating at hundreds of percent a year. The institutions aren't trusted and the central banks aren't trusted and they really made arguably one of the best businesses in the entire world out of that, right?

12:14Hundreds of billions of dollars of assets, 15th largest holder of sovereign debt in the world. And all of that was just by giving the average person just access to the dollar. And I think that is uh as powerful a change as the world is going to see in a really long time.

Build the World's Last Blockchain- Cracking the Trilemma

12:33A long time ago, the internet wasn't the internet. It was just groups of computers. And you would have a group at Stanford and a group at DARPA. And they each ran in their own cluster, but I couldn't talk to each other. And so if I had some data or something, I would have to take my disk of data, fly to Stanford, plug it in, run it on their program, and then I would fly back with the results.

12:54And then we invented the internet. And the internet gave us connectivity between all of these things, global connectivity. If you go back to the beginning of blockchains, what existed, it was exactly like that. You have Ethereum, you have Salana, you have different environments.

13:08None of them could talk to each other. There was no way to take your money from here to there. There's no way to communicate between an application. So all that layers did was exactly like the internet. It just connected these environment. Strange and foreign concepts early on.

13:23This was, you know, felt like fantasy land craziness. But now 15 years later, every major institution in the world is figuring out how do we actually leverage this? And there's more and more conviction. And Larry Frink just stood up at the World Economic Forum in Davos and said institutions are not trusted anymore by the average person.

13:40And so like what does a world look like where there is not trust in the existing institutions? What it looks like is a world where you don't have to trust and again is open to anybody. And so that's incredibly important for us and again I think the only true thing of value within the space.

13:56There's it's essentially a series of trade-offs and a trauma. You can choose two of the trade-offs but you lose one of them. You live somewhere in this triangle. Every blockchain has to do the same thing. They're all in a network and they're all communicating with each other.

14:08And what is a block? It's a series of transactions like so I'm going to transfer money to from from myself to my friend Bill and Bill's friend transferring money to somebody else or performing this transaction. And they're a series of transactions.

14:18Every single validator or participant in the network has downloaded executed. So they ran it and agreed on the outcome and then come to consensus with each other. And all they need to say we all agree on this. This is the new block. We all agreed to this thing.

14:31Now, since everybody's taking turns doing this, they all need to have the same hardware. You know, the bigger the block, the more pipe they need, more network communication. And so, the trilmma really boils down to higher TPS, the faster I want my blockchain to be, the bigger the device.

14:47And the bigger the device means the less people who could run it cuz it's more expensive. It's less accessible. So, if you want somebody in a third world country participating and helping decentralize the network, um they can't if it's a, you know, $40,000 a month server that you have to pay through AWS, uh that's why Ethereum has chosen, hey, we want maximum decentralization.

15:04And so, they're giving up on performance. Salana wants higher performance. So, they're giving up on maximum decentralization. And this the the requirements to participate is you need to stake a lot. You need to have a big beefy machine. It eliminates that that uh ability to have that maximum decentralization.

15:19and and the more performant you go, the less decentralized it becomes. But nobody could get the best of both worlds. How do you have something that's really fast and high performant and you could build like the actual internet and like applications on internet on and like all financial rails like uh New York Stock Exchange, 2 million TPS, you're never going to get that even on a Salana.

15:36How do you achieve that and still be decentralized? Uh it's the holy grail, the impossible thing, an impossible problem. My favorite. What we needed was a spark. Our Wild West is full of stories of freedom, of ghosts, of riches, of possibility.

15:57Consider for a moment that maybe at last those stories might be true. What if the inevitable was finally here? The building done, the rails laid. What would you do if you saw it with your own eyes? Ethereum couldn't scale fast enough. And they said, "These layer twos, they inherit our security.

16:15go build there. That's how we scale. When they said that, I call that a noble lie. A noble lie saying that you know, you know, we care about these principles. We can't scale yet, so we need to lie to you, so you stay. And then we'll hopefully find a way to scale in the future.

16:30That lie struck a nerve with me and made me feel like no one is left to do this thing. It'll all for nothing. This experiment will die. We'll just have a more redundant financial system, but not a freer one. But it felt like the last samurai putting their sword down and saying, "This cause is over."

16:45I felt like I had to pick it up. I felt like I had to do it because I thought no one else would. I don't care to build a technology that makes a bunch of money early on but then never gets used. Like we want to build a technology that is used everywhere that is a bit ubiquitous that is adopted universally.

17:01So it's really a question of can we win. My favorite example of this is like Demis from Deep Mind is like my all-time just personal hero of like even from like he's never changed his story in like 20 years and the industry like blew up in 2014 and then it died and then it came back and he's like the whole time been like pretty intellectually honest of like here is what is useful, here is what is not.

17:24Like we're really focused on like protein folding and like solving real problems and he's just never wavered and he stayed at the very top of the field throughout the entire time. And I just think that kind of person is just like inspirational.

17:35Like 10 out of 10, you want to bet on them every single time. There's been so many times even internally where it's so easy to say, "Let's let's compromise our principles so we win." This corner a little bit, just this one time. We get tested all the time on how we build or decisions we make.

17:52Canada certainly showed that to us here in this country that I live in. When if you donated to the trucker cause, you should be outraged at the fact that donating to a cause that they didn't like, they seized your bank accounts and turned off money you worked for, you earned.

18:07I don't need more money. I don't I want impact. I want to I want a certain outcome for the world. Forget anything in the short term. What does the world look like 5 years from now, 10 years from now? How is the world changing? and how do we build the systems such that they are still useful then it's great that I can you know send money from unis swap here to something you know across the two blockchains now what does it look like when the entire when every bank in the world has a ledger when all of the world's assets move on chain when stable coins are like the dominant way that these things

18:43happen when global markets emerge right uh what does that actually look like how does everyone else do it great we can make it a little bit better it's reset everything think completely from first principles. How can I break it? How can I break it?

18:57That architecture unlocks a new internet. It would add more freedom everywhere. And so web 3 for the first time to me is real.

On Conviction, Obsession, and the Long Game

19:10It is so hard to build a company. There was like six different times we could have just like walked away. We could have killed the company. there were so many times that you know we we almost didn't make it. You only really do that and you only really keep doing it if you really really believe in the thing that you're doing without conviction.

19:27You will just in any industry you will just never get there. And so I think you're way better off finding something you really deeply believe in and going for that even if other industries are more exciting at the time or whatever. I think that's the only way you get like true success in anything.

19:42People are really drawn to passion. And so one of the things I love about conviction, having conviction, is naturally you're you're more passionate about the thing that you're doing because you know you're not questioning, you don't need approval from anybody else.

19:53You know that you believe that a thing is right, should exist in the world, like is the right way to solve the problem. And I think people are drawn to that. I think it's good to have something that's interesting and you're I think Toby from Shopify talks about them hiring for spikes.

20:07You don't really want a perfectly well-rounded generalist. What you really want is somebody with with crazy spikes. We were the first company ever in history to have both Andre Horwitz and Sequoia both co-lead out and like that is very rare and we're about as atypical as you could possibly get from like A6Z and Sequoia backed founders right they're normally Stanford grads who did a PhD who worked in a lab who worked at this big company and we're like went to the University of H New Hampshire like dropped out of school uh but it really was that like spikiness I

20:36think we were completely convinced of the thing that we were doing we didn't we didn't hair like we didn't need them to write a check. They wanted to be involved cuz they saw that we were like driven in a direction and so we were we were definitely going to build the thing.

20:57I think what I would say to people is like the whole point of the space like the whole premise of everything crypto is that you shouldn't have to right trust but verify right? You shouldn't have to trust me in what I say. You shouldn't have to trust us.

21:07You're going to be able to trust the code. You're going to be able to observe it for itself. On February 10th, we're going to stand on stage. We're going to prove Ethereum's history real time verifying at a million transactions per second at 110 bits of security, right?

21:18Nobody has ever done even remotely close to that. And then every step of the way from now until September, we will show and like you will be able to touch and feel it. I want people to go and do that cuz that's how you get somebody to have conviction.

21:32Me telling you something, you're not going to have conviction. Is it technically possible? Uh or so you might also get people saying, "Well, I had some of these ideas. They're not that smart." Well, I think so. What? You haven't done anything yet, right?

21:43Talk is cheap. So, we're going to go out there and do it. Building a company is unbelievably hard. It's a thankless, miserable job most of the time. I could have never ever done it without Raz. Like, no, with no question. There is zero doubt in my mind.

22:00Specifically, I mean, specifically him. There is just no way I ever could have done it alone. I would never. People talk about how hard co-founders are and they talk about how they could never have a co-founder. I could have never ever ever done it alone.

22:11No question. Likewise, it's destiny is what it feels like. Like almost like everything that's happened, it feels like it was meant to happen. Like it was pre-ordained. I know it sounds crazy and like probably cringy, but it does. Like the right people show up at the right time for us.

22:28And it's probably just a matter of us putting ourselves in those positions where that happens. Uh, I think about the first time I met you fairly regularly. Like it is a part like it is like a that was meant Brian was meant to pop over the fence and say, "Hey, I'm Brian."

22:42Right. And like I couldn't could not do this with anybody else. Never heard some of this stuff before. It's like emot emotional. You know, it's uh this is the best time of your life. You are healthy. You get to work with your best friends and you get to work on something cool.

22:58whether or not we had succeeded with layer zero, like before layer zero, we were not succeeding financially, but I was happy. I didn't quite get that until like um a couple years ago when my wife kept asking me like, "When does this end? What is your goal?"

23:12And I and I and and I was I kept ask what is my goal? It's the doing the thing. So people like, "Are are you stressed about February launch?" I'm like, "No, it's just part of I'm just enjoying it. This is part of the moment. Every day is the moment.

23:24Enjoy it." There's only one thing I can have people remember. In order to truly change things in order to build something great, you must have conviction. Like it is that the undying conviction and passion. Now as I drive into work, I listen to a lot of biographies.

23:43I'm listening to Elon's biography and one thing that resonated a lot with that is uh he says like it's very easy to think that technology just progresses automatically, right? Egyptians had the pyramids and then technology was lost. the Romans and the aqueducts and all this stuff lost in the dark ages like technology is not guaranteed to move forward.

23:59The world is not even though it's been moving forward in a wonderful state over the last hundred years not guaranteed to move forward or even move in a positive direction like technology advances and the world changes because a group of people are like really really passionate and work really really hard to make that thing happen.

24:18That conviction, that passion, that hard work should not be taken for granted. it's not expected and like it's cool and it deserves the utmost respect for anybody who's like trying to do those things but it is a prerequisite to do and I think people should realize that that is what it takes and and decide that they want to do that thing and caring about something is like again it is uh it's the best.

24:42though. Yeah.