Ishan Pandey: Hi Kevin, welcome to our series “Behind the Startup.” Would you please tell us about yourself and the story behind Metis?
Kevin Liu: My name is Kevin, co-founder of Metis. I have over five years of experience in product development, and I have studied DAO, governance, and decentralized collaboration since 2018. That is when I met Elena and Yuan, my other two co-founders. In the beginning, we hoped to solve the issues of decentralized and distributed collaborations happening more and more frequently in the physical world. Later, we found out that we will need a robust infrastructure to support the decentralized business running on the blockchain. The current Layer1 blockchains are hard to handle, and we can only support these kinds of collaborations on Layer2, and that’s the beginning of the Metis project.
Ishan Pandey: Interoperability and the new Layer 2 chain are expected to revolutionize the crypto space. How does the layer 2 chains operate? Would you please provide a high-level overview of the same?
Kevin Liu: Layer 2 refers to a wide range of scaling solutions(rollups, validium, plasma, state channels, etc.) designed to help scale your application by handling transactions off the Ethereum mainnet (layer 1), while taking advantage of the robust decentralized security model of mainnet. Metis is in the rollup battlefield, and generally speaking, rollups are solutions that perform transaction execution outside the main Ethereum chain (layer 1), but post transaction data on the layer.
As transaction data is on layer 1, this allows rollups to be secured by layer 1. Inheriting the security properties of layer 1, while performing execution outside of layer 1, is a defining characteristic of rollups.
Three simplified properties of rollups are:
- Transaction execution outside layer 1
- Data or proof of transactions is on layer 1
- A roll-up smart contract in layer 1 that can enforce correct transaction execution on layer 2 by using the transaction data on layer 1
Rollups require “operators” to stake a bond in the rollup contract. This incentivizes operators to verify and execute transactions correctly.
Ishan Pandey: Can you tell us about some of the existing drawbacks with the layer 2 protocol and how can they be effectively addressed and resolved?
Kevin Liu: For Layer 2 Optimistic Rollups, the common criticisms are long wait times for on-chain transactions due to potential fraud challenges(actually it is because of lack of incentives as we always assume that no one will do sth bad, and that is why it is called Optimistic Rollup), and some people also criticize that the standard layer 2 design is usually very centralized. Many of these constructs duplicate a centralized structure from a single sequencer, relying on the verification mechanism to deter malicious players from fraudulent behaviours.
The decentralized design includes multi Virtual Machines, Sequencer Pools to eliminate the bottleneck of one virtual machine and one sequencer. Metis introduces a Ranger’s system to incentivize the fast validators with Metis token mining rewards to solve the problem of long validation time, leveraging economic ways to speed up the transaction validation time.
Ishan Pandey: The DAO legislation is to take effect from July 2021. Please tell us a little bit about how blockchain startups view this legislation that governs decentralized autonomous organizations?
Kevin Liu: Currently, a big obstacle facing DAOs is the worry that any member of the organization could be held personally liable for the actions of the DAO. The new law permits DAOs to incorporate as limited liability companies – a corporate structure whereby the company members are not held personally liable for the debts and liabilities of the company. So this formal legal framework is a big step for the crypto industry and may solve the issue of member liability. It also brings the possibility of connecting DAO with the real-world business, imaging a consultant DAO as a service provider to a big corporation.
Ishan Pandey: High Ethereum gas prices have consistently been among the most flagged issues within the Ethereum ecosystem. How can this very pertinent issue be tackled to promote the overall growth of the system?
Kevin Liu: That’s why we need layer 2 solutions to help scale Ethereum, lower the cost and increase the transaction speed. With Metis Layer 2, we feature the 1 cent transaction cost and 1-second transaction speed on Layer 2 to solve the most flagged issues. Besides, storage on Ethereum is also super expensive, so integrating with IPFS or Swarm on Layer2 is also the option for projects on Ethereum to lower down the operating costs.
Ishan Pandey: The Bitcoin Mining Council (BMC) has recently debuted as an open platform for Bitcoin miners in the wake of an outcry over the volume of fossil fuel-based energy used to mine the cryptocurrency. Do you think this council will really be able to make a difference in terms of protecting the environment? Further, what are your views on bitcoin’s electricity consumption?
Kevin Liu: First, Any good deeds or initiatives toward protecting the environment is highly appreciated and welcomed. We can find that more and more countries or states have offered various solutions to speed the transition from fuel-based energy to clean energy, like wind, solar, hydro and even geothermal. Making people realize this environmental issue is a good start to solve it anyway. The energy consumption to generate bitcoin is a reasonable way to create something valuable. Many years ago, people also criticized the energy consumption of the internet, but see the progress that the Internet has brought to human beings. The energy consumption will generate more value than it consumes.
Ishan Pandey: There is a lot of competition within the DeFi sector. According to you, between Polkadot, Binance Smart Chain and Tron, which blockchain will win the race for the second position next to Ethereum?
Kevin Liu: It is still too early to tell. EOS was so popular back to the last bull run, and was claimed to replace Ethereum, but later turned out to be an almost dead blockchain with no solid projects and users. To race for the second position, the blockchain will need a solid infrastructure and the active involvement of community members. And it is not just the trading of tokens, but to build applications one by one, so it really takes time to see who will last to the end.
Ishan Pandey: El Salvador is now the world’s first nation to embrace bitcoin as legal tender. President Nayib Bukele applauded its potential to enable Salvadorans living abroad to send remittances home. From a regulatory standpoint, what are your views on this move, especially since the IMF has cited several legal concerns over making bitcoin a legal tender?
Kevin Liu: I do not doubt that more and more countries will take bitcoin as the reserve along the way, but taking bitcoin as the legal tender will need to solve KYC and AML from the regulatory perspective and also, the tax issues need to be addressed. To make it work, I think there will be a trade-off between purely decentralization and centralized administration. El Salvador will need to set up an official reserve of Bitcoin and also a whole system to recognize, track and evaluate the bitcoin sending back from overseas.
Ishan Pandey: Recently, all crypto miners in China’s Qinghai Province have been ordered to shut down amidst China’s attempt at implementing strict crypto regulations. In your opinion, what impact will this have on the crypto industry globally?
Kevin Liu: In my opinion, the decentralization of mining power is a good thing for the crypto industry in the long run. If large mining pools or players control 65% of the mining power, it does not coincide with the decentralization spirit of crypto either.
Ishan Pandey: What are your views on NFT art and the valuation of NFT-based artwork? Kevin Liu: NFT art is only at the beginning of a global and long term trend. NFT will speed up the circulation and trade of artworks, but now the users are still in a small circle of crypto users or some early adopters. So there is still a long way to go. For the valuation of NFT-based artwork, I think most of them are overvalued, which is used to attract the public’s attention. IMO, with blockchain as the infrastructure, DAO enabled the community to participate. There will be many different styles of NFT artwork emerging, not just paintings or music.
Disclaimer: The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence by asking the right questions and equipping readers with better opinions to make informed decisions. The material does not constitute any investment, financial, or legal advice. Please do your research before investing in any digital assets or tokens, etc. The writer does not have any vested interest in the company. Ishan Pandey.