Bryan Pellegrino: The shift in foundation shows independence in the OP Stack, why fragmentation is the future of the blockchain, and the growing importance of institutional interoperability.

Important takeaways

• The foundation is breaking away from the OP Stack, which marks a major change in the second layer of the Ethereum ecosystem.
• The Base step shows the reaction to being treated as second-class citizens on the scaling road map.
• Changing chains to follow outdated trends is not a strategic move.
• The two layers that do not inherit human security can be independent blockchains.
• Super chain development is now more focused on speed and pragmatism.
• Fragmentation of the Ethereum ecosystem may increase as ETH alignment loses its premium.
• High coordination costs make independent work efficient for technological development.
• Base holds 120 million OP tokens, valued at approximately $40 million.
• The future of blockchain is likely to see more fragmentation, not integration.
• Institutions care more about interoperability than expected, driving blockchain adoption.
• Chains must focus on their performance while maintaining interoperability.
• The structure of the crypto token market is broken at the moment, with the shift to perps and meme coins.
• Institutions use large amounts of money compared to standard crypto currencies.
• The cost of maintaining open source software has fallen, favoring its growth.

Guest introduction

Bryan Pellegrino is the CEO and founder of LayerZero Labs, an interoperability protocol that allows applications to communicate seamlessly across multiple blockchains. Before building LayerZero, Pellegrino was a professional poker player and serial entrepreneur who founded several technology companies, including Coder Den and OpenToken. His work at LayerZero addresses one of crypto’s fundamental challenges: enabling secure, frictionless communication and asset transfers between different blockchain networks.

Base shift in the Ethereum landscape

• “Base has decided to break away from the hope stack… they say they will stay with the op stack doing upgrades and so on and so forth.” – Bryan Pellegrino
• Base’s decision marks a significant strategic change in Ethereum’s two-layer solution.
• “It feels like we’re going to keep going back for a while before we go off to do our own thing… – Bryan Pellegrino
• Movement can be seen as a second stage visual response in the measurement roadmap.
• Understanding the dynamics of Ethereum’s two solutions is essential to grasping Base’s motivations.
• The independence of Base represents a potential change in the competitive landscape of Ethereum layer twos.
• The decision reflects a wider concern within the second tier of society about their role in growth.
• The departure of Base may influence other projects to reconsider their alignment with the OP Stack.

Implications for chain independence and interoperability

• “If these two don’t inherit the basic security of one l then they are like others paying rent on ethereum.” – Bryan Pellegrino
• The two layers that do not inherit human security can evolve into independent blockchains.
• The relationship between the first layer and the second layer of the blockchain is important in understanding their security models.
• “We don’t want to be seen by someone else’s technology program to kill ourselves … give us the best bridges and let us have our own garbage in our house.” – Bryan Pellegrino
• Chains must prioritize their execution while maintaining collaboration with others.
• Focusing on non-maintenance on-chain operations is the most logical approach for chains.
• The shift from custody to non-custodial settlement highlights the trend towards alienation.
• Chain independence and interoperability are key to making strategic decisions in the blockchain ecosystem.

The changing landscape of blockchain fragmentation

• “I think he knows that the future looks like more separation, not less.” – Bryan Pellegrino
• The future of blockchain is likely to see more fragmentation than integration.
• Institutional players who want to own their stack contribute to this trend of fragmentation.
• “This is kind of slowing down now so whether you’re going to start seeing this clip happen more and more who knows.” – Bryan Pellegrino
• The split may increase as the ETH alignment premium rises.
• Competitive forces in the blockchain space are shifting to more diverse ecosystems.
• Classification can affect future development and collaboration between projects.
• Understanding the role of institutional players is important in shaping the future of the ecosystem.

Institutional interest and collaborative role

• “You’d be surprised how much they care about interop which was a bit of a mystery to me.” – Bryan Pellegrino
• Institutions care more about collaboration than one might expect.
• Collaboration is essential to efficient distribution of goods and customer service.
• “I think it’s bullish for crypto that people find that like interop that’s actually where the value is.” – Bryan Pellegrino
• The focus on collaboration is bullish for the future of crypto.
• Institutional behavior shows a shift towards valuing collaboration on the blockchain.
• Institutional motivations emphasize the importance of asset distribution.
• The collaboration will promote future growth and adoption in the crypto industry.

Challenges in the crypto community and branding

• “His experience this time was as bad as ours dealing with those people as it is but he doesn’t have the crypto side so imagine if you were dealing with the people we dealt with for the past three years without anything bad.” – Bryan Pellegrino
• The crypto community can be very negative, especially for those who don’t have a financial situation.
• A negative experience can lead to a desire to withdraw from the crypto ecosystem.
• “We have to figure out how to fix it as a global crypto symbol because this is like a big bowl ad coin is like the same thing where like moaning and groaning like we did to us guys.” – Bryan Pellegrino
• The current state of the global crypto market is dangerous and needs to change.
• The presence of bot armies on social media disrupts real interactions.
• Understanding the challenges of working with the community is essential to sustaining the industry.
• Addressing brand issues and social issues is critical to crypto growth and public perception.

The role of traditional currencies in the crypto space

• “If we don’t introduce the right kind of technology that they will use, you know it’s too big.” – Bryan Pellegrino
• The presence of traditional financial institutions in crypto is inevitable, it continues to adapt to technology.
• Partner trust is an important issue in traditional finance.
• “We can’t trust counterparties to be good actors because they don’t have to be because it’s not a blockchain it’s a database.” – Bryan Pellegrino
• The difference between the trustless nature of blockchain and the power of traditional finance.
• Institutions are motivated by fear of disruption and the power to make a profit.
• Understanding institutional motivations is essential to the integration of crypto and traditional currencies.
• The involvement of traditional financial institutions in altcoins is a positive development.

Security challenges and the role of AI

• “I was very suspicious I think the last time as you know why the old contracts continue to be exploited it seemed very coincidental that we just have all these weird ways…” – Bryan Pellegrino
• The prevalence of exploitation in old contracts raises a serious problem.
• AI models are currently better at exploiting vulnerabilities than protecting systems.
• “This graph can be exploited as if they have the ability to exploit they are actually much better at exploiting than hatching and protecting.” – Bryan Pellegrino
• Paradigm uses on-chain data and AI models to improve smart contract security.
• The development of tools like Codex 5.3 can greatly improve security in smart contract development.
• Automated security testing tools can be more effective than human testing.
• The optimization of AI models is mainly focused on the top layers, which hinders the efficiency.

Open source software and its implications for security

• “The cost of keeping it down to zero … one of the biggest barriers to keeping open source software is gone and open source is going to win absolutely.” – Bryan Pellegrino
• The cost of maintaining open source software has effectively dropped to zero.
• Open source software is very secure because of the wide range of contributors.
• “The reason is that the incentives for bad actors to come in even if the source is closed and find problems and exploit them are higher than your team can protect but once you open the source you have different people…” – Bryan Pellegrino
• The argument that closed source software is more secure is flawed.
• The growth of open source tools is important for the future of security in the crypto space.
• Open source governance may see the emergence of independent agents managing contributions.
• Understanding the conflict between open source and closed source security models is important.

Future trends in blockchain and AI

• “You’re going to see an open source repo where there’s an independent agent … they’re going to figure out how to do governance like who’s going to meet with Maine.” – Bryan Pellegrino
• The emergence of independent agents running open source software is expected.
• The future will see multiple agents interacting with smart contracts, leading to new structures for exploit management.
• “It’s going to be interesting to see if we can create more automation like a type of untrusted property to like so that the agent if it’s like let me exploit this let’s go give them a way to like any report or … safe harbor.” – Bryan Pellegrino
• Creating automated, reliable architectures for exploits is necessary.
• The deployment of tools will lead to faster standardization of security practices.
• Public markets will eventually care about the right vehicles for crypto exposure.
• Understanding future trends in blockchain and AI is essential to anticipating industry developments.