Less Than 1% Is Onchain: Crypto's Biggest Opportunity Yet

Karl Floersch (0:00)

We have less than 1% of the global financial system on chain, probably less than 0.5%.

And so we have so much room to grow here. We are in the very early stages, and we are really in the kind of prove out the use case phase.

John Gillum (0:16)

Optimism is one of the most popular and most successful solutions for layer twos in all of crypto, but what have they been up to lately? How do they see the ecosystem evolving from here? And what does all of this mean for the future of digital assets and investors? Hello, and welcome to Milk Road Crypto, the show that's pretty sure that every major financial institution is just slowly turning into its own layer two. I'm your host, John Gillum. Today is Friday, September 18th, and today we are joined by Karl Floersch. Karl is the co-founder and CTO of OP Labs, the team behind Optimism and the OP Stack. A huge amount of the crypto industry is built on the tech that he and his team have built, and today he's going to give us his updated outlook for everything going on in the crypto industry. If that sounds good to you, make sure you like and subscribe, share this episode with somebody who's going to enjoy it. And as a reminder, our podcast today is free, and that would not be possible without our partners at Nexo, the digital asset platform that lets you trade, earn, borrow all in one place. So keep an ear out for more information on them later in the episode. But for now, welcome to Milk Road Crypto. Karl, how are you today?

Karl Floersch (1:14)

Hey, how's it going? Thanks for having me.

John Gillum (1:18)

It's going really well. I'm excited to talk to you. You're a major player in this space, and somebody I haven't gotten to interview yet, so I'm really excited to catch up.

For starters, though, let's lay out some basics here. Tell us a little bit about optimism for people who aren't familiar, and just a little bit about the business, the business model there, and what people should know about optimism.

Karl Floersch (1:36)

Awesome. Yes. First off, I could not agree more. Every single institution, every single company will have a chain, will have a layer 2, and we have been building for that future. We've got more than 50 organizations with layer 2s, built on the OP Stack, you know, the optimism layer 2 technology stack rooted into Ethereum, and they're all in production. Last year, we did like 6 billion transactions. We are, you can see our Twitter, we're having announcements with major organizations month after month. It is heating up right now in the crypto space for real institutional adoption.

And we are essentially right in the center, enabling each one of these companies to come on chain and have their own chain. And so that is effectively what we do. We make it incredibly easy to deploy a chain and scale it.

John Gillum (2:34)

Okay. So why does a company decide to go with optimism, as opposed to either building their own L1 or building on an existing L1? Why do they go with a layer 2 and why optimism?

Karl Floersch (2:47)

Yeah, lots of reasons. But one of the big ones is differentiation and product focus. Enabling your use case on chain is the thing that people are trying to do. Sometimes the crypto industry gets a little bit seduced by vanity metrics. Oh, I want to have this fancy new technology with this abstract sounding marketing pitch. But the reality is that for real institutions coming on chain, they want to build a product that enables capabilities for their users. So what does that mean? That means not reinventing a data availability solution. That means deploying on production software that is battle tested. That means building on top of software that enables the expressibility, the customization, the interoperability that the OP Stack is providing. So ultimately, a lot of these things kind of boil down to a compelling product that we talk with a lot of institutions about every day.

John Gillum (3:51)

Okay. So you've gotten deals with Coinbase, Kraken, OKX, Upbit, Bitpanda. All of these have built their own L2s, all using the OP Stack. Talk to me a little bit about the pitch that you make when you go to these companies. And then a follow up question I have on this is like, how many companies do you think are in this addressable market? Do you really think it is every financial institution or is it a smaller pool than that? And how do you think about that?