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

1. 0:00 – 1:20

   Intro

   1. BPBryan Pellegrino0:00

      In 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.

   2. RZRyan Zarick0:14

      We were nobodies. And 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 wanna work on.

   3. BPBryan Pellegrino0:24

      Reset everything. Think completely from first principles. How can I break it? How can I break it?

   4. RZRyan Zarick0:29

      And that the why matters more than anything. Why are we here? Why? Why do we get up in the morning?

   5. BPBryan Pellegrino0:34

      In the shower, when you're going to bed at night, when you wake up in the middle of the night and you have an idea, it was just like, it's just a pure obsession.

   6. RZRyan Zarick0:40

      Can we have high performance and maximum decentralization? It's the holy grail, the impossible thing, an impossible problem. My favorite.

   7. BPBryan Pellegrino0:49

      What started as an idea now is a reality. We were the first company ever in history to have both Andreessen Horowitz and Sequoia both co-lead a round.

   8. RZRyan Zarick0:57

      Vitalik said the trilemma is broken. He means theoretically it's broken, but we actually broke it. There are no more bottlenecks.

   9. BPBryan Pellegrino1:04

      I'm Bryan Pellegrino, co-founder and CEO of LayerZero Labs.

   10. RZRyan Zarick1:08

       I'm Raz, co-founder and CTO of LayerZero. Zero is the last blockchain that'll ever be built.

2. 1:20 – 12:33

   Two Outsiders, One Impossible Bet

   1. BPBryan Pellegrino1:23

      And I 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. You 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. When 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 it was the first time of I need to literally move where I live to my entire life and its sort of career just got taken away from me. Uh, 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 certain, s- like, given regulatory regime, uh, had the ability to become something more. For 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, and 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 gonna go and sign up on those because they needed to continue to make a living. And 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? And 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. And 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. So poker was a perfect example of this. Poker is purely meritocratic. It doesn't matter anything about you, it's just you are 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, and so that was one of the things that I, 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. It was just build the best possible system that you can build and permissionless open access to anybody. Just build the best thing.

   2. RZRyan Zarick4:38

      You know, I've been building with Bryan since we were in school together. And nobody would give us money 'cause we were nobodies and we didn't come from a great pedigree and we didn't have a great school. And 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 wanna work on. When Bryan was, like, uh, our hero, like my hero or like the older than grades heroes. He's a genius to everybody. And so I always looked to Bryan and I wanted to be like him. I didn't know we were gonna do that, uh, to be, be working together basically our whole lives, the rest of our lives.

   3. BPBryan Pellegrino5:17

      So two things happened. For the crypto side, all of poker, all the shady sites that remained, the only way to deposit, because PayPal, Moneybookers, Neteller, Skrill, they were all shut down. But Bitcoin was the way that you would deposit to these sites. So everybody in poker who was in the United States in 2011 era found Bitcoin. Ev- everybody used it as a way to deposit between. So it was a first real product market fit. And then on the entrepreneurship side, I'd got really interested by this affiliate idea, and that created a, a doorway for a new industry, which was called daily fantasy sports, 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 wanna learn. Uh, let me just, you know, see how it is." And 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 LayerZero with, and I brought them in, and we grew to being third overall in revenue. So we were just turning profitable, we were just doing this, and then we got an acquisition offer, and we sold it.

   4. RZRyan Zarick6:16

      It was a hard time, like, in our lives. At- that was a hard- the first time we felt, like, real hardship. Year and a half, maybe two years of zero income and me working 80-hour weeks. Uh, 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, and we were making money, and reinvesting it into the business, reinvesting in the servers, reinvesting. My biggest learning, uh, the biggest takeaway was, like, I worked very hard with Bryan on it. Bryan doesn't really give up, and I don't... And my, 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, it wasn't going anywhere. We 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 Bryan. So was Bryan. And we had an offer. And it wasn't a great offer. And Bryan said, "We shouldn't- I don't think we should take it." And 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.

   5. BPBryan Pellegrino7:14

      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. You 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. It was really the spark of, well, now you can build something really interesting. And we saw that need very early on of, of course you have to be able to move back and forth. You'd 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? And 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 that 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 amounts 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. And so 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.

   6. RZRyan Zarick8:58

      I wanna, I wanna 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 two weeks." And I never moved back. My daughter didn't sleep well, and she would be up all the time. Uh, it was actually, like, the worst time to, to go and take a shot and do these things. [laughs] That's where I learned GPU. Every morning at- like, I would strap my daughter in, uh, to these straps, and I'd walk around Bryan'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, 'cause I couldn't- I didn't have a computer. So I would just do it in my head. From 2:00 in the morning to 7:00 in the morning every single day for six 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.

   7. BPBryan Pellegrino9:51

      The 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. What 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. You 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 LayerZero. And that was us solving our own problem. It was us building examples. But all of the 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. November we did $38 billion. $38 billion is five and a half times what Western Union does in a month. And that is just, like, crazy to think about, is you can really change how some of this works.

   8. RZRyan Zarick11:00

      That's what drives me, is solving hard problems. And I wanna solve a hard problem that helps people. And it's not about how much money you make, but, like, how much better you can make their lives overall. Enriching others' lives.

   9. BPBryan Pellegrino11:11

      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. And even the banks and the financial institutions there 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. Nobody 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 gonna be Stripe, and you're gonna be in the United States, and you're gonna service institutions and developers there, and then you're gonna expand, and you're gonna expand. And 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, and 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? Hundreds 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 gonna see in a really long time. [upbeat music]

3. 12:33 – 19:07

   Build the World's Last Blockchain- Cracking the Trilemma

   1. BPBryan Pellegrino12:33

      A 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. And 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 and what existed, it was exactly like that. You have Ethereum, you have Solana. You have different environments. None 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 LayerZero did was exactly like the internet. It just connected these environment. Strange and foreign concepts early on. This 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. Larry Fink just stood up at the World Economic Forum in Davos and said, "Institutions are not trusted anymore by the average person." And 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.

   2. RZRyan Zarick13:56

      There's, it's essentially a series of trade-offs, the trilemma. 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. And what is a block? It's a series of transactions. Like, so I'm gonna transfer money to, from, from myself to my friend Bill, and Bill's friend transferring money to somebody else. We're performing this transaction. And they're a series of transactions. Every 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 that was, they don't need to say, "We all agree on this. This is the new block. We all agreed to this thing." Now, 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, the more network communication. And so the trilemma really boils down to higher TPS. The faster I want my blockchain to be, the bigger the device. And the bigger the device means the less people who could run it 'cause it's more expensive, and 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, and so they're giving up on performance. Solana wants higher performance, so they're giving up on maximum decentralization. And it's, 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. And then, 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 the internet on, and, like, all financial rails? Like, uh, New York Stock Exchange, 2 million TPS, you're never gonna get that even on a Solana. How do you achieve that and still be decentralized? Uh, it's the holy grail, the impossible thing, an impossible problem. My favorite.

   3. SPSpeaker15:46

      What we needed was a spark. [dramatic music] Our Wild West is full of stories of freedom, of ghosts, of riches, of possibility. Consider 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?

   4. RZRyan Zarick16:10

      Ethereum couldn't scale fast enough, and they said, "These layer twos, they inherit our security. Go build there. So 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." That lie struck a nerve with me. It made me feel like no one is left to do this thing. It was 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." I felt like I had to pick it up. I felt like I had to do it 'cause I thought no one else would.

   5. BPBryan Pellegrino16:51

      Well, 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 bi- ubiquitous, that is adopted universally. So it's really a question of, can we win? My favorite example of this is, like, Demis from DeepMind is, like, my all-time just personal hero of, like, even from, like, he has 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. Like, 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. Like, 10 out of 10 you want to bet on them every single time.

   6. RZRyan Zarick17:39

      There has been so many times, even internally, where it's so easy to say, "Well, 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. Canada 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 and you earned. I don't need more money. I don't... I want impact. I want to, I want a certain outcome for the world.

   7. BPBryan Pellegrino18:14

      Forget anything in the short term. What does the world look like- Five 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 Uniswap here to something, you know, across the two blockchains now. What does it look like when the entire world and 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 happen? 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. W- how can I break it? How can I break it?

   8. RZRyan Zarick18:57

      That architecture unlocks a new internet. It, it would add more freedom everywhere. And so Web3, for the first time to me, is real.

4. 19:07 – 25:14

   On Conviction, Obsession, and the Long Game

   1. BPBryan Pellegrino19:10

      It 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, you 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. People 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, 'cause you know. You're not questioning. You don't need approval from anybody else. You 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 in your ba- I think Tobi from Shopify talks about them hiring for spikes. You 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 Andreessen Horowitz and Sequoia both co-lead a round. And, like, that is very rare, and we're about as atypical as you could possibly get from, like, a16z and Sequoia-backed founders, right? They're normally Stanford grads who did a PhD, worked in a lab, or worked at this big company. And we're like, went to the University of Ha- New Hampshire, like, dropped out of school. Uh, but it really was that, like, spikiness, I think. We were completely convinced of the thing that we were doing. We didn't, we didn't care. Like, we didn't need them to write a check. They wanted to be involved 'cause they saw that we were, like, driven in a direction. And so we were, we were definitely gonna build the thing. I think what I would say to people is, like, the whole point of this 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 and what I say. You shouldn't have to trust us. You'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 gonna stand on stage and we're gonna prove Ethereum's history real-time, verifying at a million transactions per second at 110 bits of security, right? Nobody 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, 'cause that's how you get somebody to have conviction. Me telling you something, you're not gonna have conviction.

   2. RZRyan Zarick21:34

      Is it technically possible? [smacks lips] Uh, or s- you might also get people saying, "Well, I had some of these ideas. They're not that smart." But I think, "So what? You haven't done anything yet," right? Talk is cheap. So we're gonna go out there and do it.

   3. BPBryan Pellegrino21:47

      Building a company is unbelievably hard. It's a thankless, miserable job most [laughs] of the time. I could have never, ever done it without Raz. Like, n- with no question. There is zero doubt in my mind. Specifically, I mean specifically him. There is just no way I ever could've 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. No question.

   4. RZRyan Zarick22:13

      Likewise. It's destiny, is what it feels like. Like, like almost, like, everything that's happened, it feels like it was meant to happen, like it was preordained. I know that sounds crazy and, like, probably cringey, but it does. Like, the right people show up at the right time for us, and 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, Bryan was meant to pop over the fence and say, "Hey, I'm Bryan," right? And, like, I couldn't, could not do this with anybody else.

   5. BPBryan Pellegrino22:46

      Never heard some of this stuff before. It's, like, emot- emotional, you know? It's, uh-

   6. RZRyan Zarick22:51

      [laughs] 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. Whether or not we ever had succeeded with LayerZero, like, before LayerZero, 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?" And I, and I, and I, and I was, I kept asking, "What is my goal?" It's doing the thing. So people are like, "Are, are you stressed about February launch?" I'm like, "No. Just part of, I'm just enjoying it. This is part of the moment." Every day is the moment. Enjoy it.

   7. BPBryan Pellegrino23:27

      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'm, I listen to a lot of biographies. I'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? Uh, Egyptians had the pyramids, and then technology was lost. Romans had the aqueducts and all this stuff, lost in the Dark Ages. Like, technology is not guaranteed to move forward. The 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. That 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. So yeah. [gentle music]

Episode duration: 25:14