Interview with Offchain Labs co-founder Ed Felten: Having traversed academia and the White House, how he shapes the future path of Arbitrum with a long-term perspective.

Interview: Chloe, PANews

Written by: 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 promoter of Arbitrum, an Ethereum Layer 2 scaling solution.

As early as 2003, Ed had already been promoted to a professor in the Department of Computer Science at Princeton University and served as the first Chief Technology Officer of the Federal Trade Commission in 2010. Starting in 2012, he returned to academia and began to engage with and research Bitcoin and blockchain technology. In early 2015, Arbitrum initially impressed Felten as a final project in a Princeton computer course, and Felten immediately began to delve into the Rollup technology route. However, shortly thereafter, he was invited to join the White House as Deputy Chief Technology Officer, responsible for technology security matters. After returning to academia in 2018, Felten, along with two doctoral students, relaunched the Arbitrum project and co-founded Offchain Labs the same year, officially advancing Arbitrum into a systematic development phase.

During the Hong Kong Web3 Carnival, PANews interviewed Ed Felten, who shared in-depth about his journey from research and policy to blockchain entrepreneurship. He discussed topics such as how Layer 2 balances the development of the Ethereum ecosystem, the technological competitiveness of Arbitrum, 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 sustainability must start with "creating value," and his role is focused on this.

PANews: You have held important positions in academia and government agencies. What motivated you to venture into blockchain entrepreneurship? How have your past experiences influenced the research direction and technical decisions at Offchain Labs?

Ed Felten: I have been a professor for many years, and during this time, I have 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 around 2011, I have been studying blockchain-related topics from a purely academic perspective. I have always been thinking: what technical factors might hinder the development of this technology or prevent it from realizing its potential?

Initially, I approached it from the perspective of blockchain economics, which was my earliest research direction, and later I gradually began to focus on scalability issues. In 2014, when I learned about smart contracts, I felt very excited because it reminded me of the early growth phase of the internet—webpages transformed from a purely static experience of reading or browsing images 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 started to think about how to expand 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 aspects. On one hand, to succeed as a professor in the technical field, you must engage in a lot of management work, such as spending time recruiting talent, managing them, managing the budget, and pushing progress on schedule—these skills are very useful when running a business. Therefore, operating a startup is actually quite similar to managing an academic research team.

But I think one thing I've learned is to look at issues with a long-term perspective, focusing on fundamental aspects—this is the way of thinking I developed as a professor. This has also played a significant role in our thinking about medium- to long-term research.

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

When I think of Arbitrum DAO and how it governs itself and manages the various chains of Arbitrum, it reminds me of the process of political operations.

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

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

Ed Felten: Regarding the first question you mentioned—whether L2 has "extractiveness"—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.

Taking Ethereum as an example, over 95% of the activity is actually happening on L2 and L3 now. Without these L2s, these activities would likely transfer to other L1s.

Of course, there will be fluctuations in the data every day, but this ratio remains very high. L2 greatly expands the overall capacity of the Ethereum system, which would be impossible without L2.

I believe that the reason the Ethereum community has reached its current scale is partly 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 consider L2 to be part of the Ethereum tech stack. Viewing L2 and L1 as competing against each other is a mistaken binary opposition perspective – they actually work synergistically, serving users together.

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

We have a grand vision to create a more unified user interface. Although users still need to know which chain they are using, just as you would know which website you are visiting on the internet, this is important because it involves differences in trust and security levels. 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.

But this requires us to have clever design on the user interface, while also providing the necessary support at the core protocol layer to achieve the kind of interface and interaction that users truly want.

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

Of course, achieving this requires a long-term joint effort from many teams.

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

Ed Felten: This actually comes down to a core challenge when operating a blockchain: do you want to maximize revenue, or do you want to maximize user engagement and community size?

Because if you want to maximize income, you will tend to reduce network capacity, allowing people to bid for scarce block space. And when L2 emerges, 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 contradictory.

In my opinion, 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 seems to lean towards developing users and developers, which is exactly what L2 excels at. But I believe that you cannot have both.

PANews: Currently, Optimistic occupies the vast majority of the Layer 2 market share. What is its core competitive advantage compared to technologies like ZK? How does Arbitrum ensure the long-term competitiveness of its technology stack?

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

Specifically, it is simpler because it does not involve those very complex cryptographic techniques, nor does it require a large and entirely new toolchain to convert programs into mathematical proof systems—that is a very complicated process.

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

Of course, the costs of ZK are gradually decreasing. I do believe that we will eventually enter a stage where different chains will mix Optimistic and ZK verification mechanisms. However, to achieve this mix, the costs of ZK still 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: The Arbitrum DAO autonomously decides its actions. So I do not speak on behalf of the Arbitrum DAO in any form, but I can share my personal views.

One thing I learned while working in government is that decision-making processes driven by public participation are both challenging and powerful. Yes, this process can be messy and sometimes slow, but I believe it is very resilient. When a community reaches a consensus, it is possible to 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 truly operates in a 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 believe that overall this is successful, 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. Could you reveal what specific support will be provided to these projects (such as technical, financial, or marketing resources)? What future plans are there to incentivize the diversification of the Arbitrum ecosystem?

Ed Felten: I prefer to think of it as a "lightweight incubator" designed to facilitate project launches and ensure that these projects receive funding support.

One of Onchain Labs' goals is to inspire creativity and drive rapid action.

We do not intend to impose strong guidance or control over these teams, but rather hope to assist them in launching their projects, providing some financial support, and then allowing them to grow independently.

PANews: We have noticed that Arbitrum is also making moves in the AI sector, 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 strategy?

Ed Felten: I believe there are two distinctly different ways in which AI interacts with blockchain.

One type is off-chain AI agents that perform operations 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. Furthermore, response speed is even more critical for them 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, this might be considered a "long" delay.

When these AI agents are widely adopted, I believe we will see a more complex and dynamic DeFi market, as well as some more interesting gaming applications.

The next important phase is to achieve AI agents on the blockchain. This requires stronger computing power and data processing capabilities than most current blockchains can provide.

We are working hard, on one hand to expand the capacity of the chain to directly support this goal; on the other hand, we are also developing specialized support mechanisms for training, validating, and evaluating AI models on the chain.

PANews: Buyback plans are becoming a common strategy for crypto projects, but some believe that 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 are behind Arbitrum's buyback plan?

Ed Felten: I believe my role is actually focused on long-term growth and sustainability. I have always been convinced 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, the focus I have is on creating value, and how to acquire that value, I believe should be decided by the community.

PANews: The current altcoin market is generally sluggish. Besides repurchase, 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 income generated on-chain. And income comes from traffic and usage rates. Therefore, promoting the growth of technology usage is the most important factor in achieving all of this.

We at Offchain Labs have always viewed the development of technology and the creation of value from a long-term perspective. I believe the position of DAOs is similar.

In my opinion, DAOs are focusing on driving growth to achieve long-term value creation.