Alon Morch, founder and CEO of SSV Labs. Welcome to the show. Thank you for having me. um Before we started recording, we talked about uh your service in the Israeli uh IDF, uh your military service. And I'd love to hear stories from people that have served. um Before we get into your entrepreneurship story, we'd love to hear about the things that you learned during your military service and how you're applying that as uh a founder uh of a crypto startup. I actually uh had a bunch of conversations with veterans from the US as well. I think it's something which is potentially common between veterans in general, which is I think that uh Service puts you in a special perspective about the things that happen around you and the world, right? And I think perspective is pretty crucial in business in general. The idea that you can one, detach yourself at least emotionally from a situation and also kind of try to re-examine things in a very cold way and kind of cut through way. I think this is something which is common and kind of a lot of veterans are know, experience that, especially if you had ah combat experience or been in combat units. ah So definitely that's something I take with me and I think a lot of other veterans are doing as well. Yeah, the perspective definitely helps. And in some cases when things are getting like really, really hard at the startup, do you often think of like a time during your service that makes you say, you know what, I've done harder things. I don't think it works that way. It works differently in a sense that when my head is always busy at trying to figure out what is the next step, regardless of how existential it might be. So it's kind of breaking down things into little pieces and trying to focus on now and instead of kind of being intimidated or kind of. feel lot of pressure because something doesn't go well or there's a big decision to be made. And so it's more about, I don't think the experience is comparable, ah but what you get out of them I think is applicable to kind of the civilian world. um And so, and also with distance of time, the older you are, you actually start to, at least me, start to forget kind of the... like the details of things you've experienced back in the day, but more like the general sentiment and kind of the bigger, how you felt in that situation more. Yeah, yeah. Well, let's get into SSV Labs. Tell us what SSV Labs is for the audience who might not know. What it is in the target audiences that you guys provide, and then we can get into the product. So SSV Labs is an engineering team. It's the core team behind SSV Network. We've been developing SSV Network for quite a while, focusing heavily on kind of core Ethereum problems, mainly um staking and the economics around staking, and now also getting into uh the world of based applications, which is kind of the idea that we want to extend what Ethereum validators can do. and also enable them to earn extra rewards by doing so and also strengthening Ethereum itself by enabling that. And so, kind of this layer of magic happening beneath Ethereum, which not a lot of people interact with, but in reality is what Ethereum is. Ultimately, those validators are the keepers of the Ethereum state. And so we are very much focused on that. We launched two main nets at the beginning of 2024 and grew quite rapidly ever since today. SSV is, or there's around 11 % of the Ethereum stake on SSV. So basically one out of 10 Ethereum validators is run on SSV by various operators. um And that's roughly 3.5 million ETH. And yeah, that's pretty much what we're focused on. How does that work with the SSV network and validator? guess validators are customers of and users of the SSV network. Okay. So we're mostly an infrastructure layer. So mostly developers integrate with SSV and then run their validators on the protocol. So it might be solo stakers or some kind of staking service, staking pools, restaking pools. And even institutions, biggest institutions are basically integrating SSV into their. backend and running it because of the technology and how distributed and decentralized it is. ah got it. Now from some of the research I've done, it looks like you've been in crypto for a long time. 2013. So you've seen a lot of changes during that time. Maybe take us through kind of like what first interested you and where you think we are right now in terms of how we are maturing as an industry. So I actually heard about Bitcoin from a guy that I worked with, but I didn't really pay attention to it until I kind of had a weird interaction with banking and kind of thought to myself like that was back in 2013. I have no idea what this Bitcoin thing is all about, but there's no way the banking system should be working the way it is. That was 12 years ago in 2013. And so I decided to kind of dig in more into crypto and Bitcoin at the time. I'm an engineer, so I've started contributing code to the Bitcoin client back in the day and then developed my own wallet, multi-party wallet. And then Ethereum came along early, kind of 2014, 2015. And so I kind of also worked on the Ethereum Java client back in the day. And really that's what kind of inspired me to get into the Ethereum world and Ethereum was really a revolution. mean, the idea that you're moving from basically from mono to stereo, right? I mean, on Bitcoin, you could have really done one thing, which is move assets from one account to the other. All of a sudden, touring complete thing came along and you could have built anything you wanted. And then obviously, you know, the ICO craze of 2017 and the death fight craze of 2020 and now scaling and all of that. So that's, that was quite a journey. That's cool. ah You know, going back to SSV Labs and SSV Network, in some of the research I've done, SSV is said at the same time as LIDO and Rocket Pool. Are those, uh you know, in thinking in terms of like competition or co-opetition, couldn't, yeah, go ahead. definitely a coordination here, so we work closely with Lido, for example, and ah And there are definitely rocket pool validators running on SSV. So think of SSV more as an infrastructure and LIDO and rocket pool more as kind of the application. ah And so anyone who's running validators can run validators on SSV regardless if they're running validators on LIDO, rocket pool, if they have an eigen pod on eigen layer or some risk taking protocol. It doesn't really matter because ultimately everyone needs to run validators somewhere. And by somewhere, we hope that somewhere will be SSB. Yeah. So tell us then your thoughts around like decentralization since you're kind of powering the validators. if let's say the majority of the validators are using the SSV network, does that run counter to decentralization? Yeah, I would definitely not encourage the majority of um Ethereum right now to run on SSV. And for the simple fact that in order for that to happen, we need to do a lot of different things until then. So for example, we need to be a multi-client protocol with multiple clients. Currently we have one client implementation in production and shortly we'll have a second one by Sigma Prime. So that's definitely an improvement in that regard. uh But I think that... um Yeah, I mean, obviously I think SSV has a lot of room to grow. And I think that DVT should be the go-to way of running validators. uh What did you say DV, DVT? Got it, got it. Tell us more about that. Because on the homepage, um it feels like you're branding that as this very specific technology to SSV network. Yeah, so DVT uh started out life in the Ethereum Foundation as a research project and we took it into mainnet. The idea there is really to take an Ethereum validator and let it run on multiple parties, individual unique parties, and they coordinate and collaborate through the protocol. And so that gives you a lot of robustness, decentralization and censorship resistance built into your validator. So if you do that at scale, you can really improve the infrastructure in which validators on Ethereum run. So instead of running in a single machine, which is susceptible for hacking or errors or downtime, now you have your validator run on multiple machines. And if one of them fails or... something happens to it, the validator continues to work and it's not compromised and it's completely operational. So this infrastructure is really, really important, I think, for Ethereum. And now we're moving also into the direction of what we call based applications, which is the idea that those validators are so performant, they can actually be doing more things than just securing Ethereum and in return getting more rewards because Ethereum has the best and most exciting validator set on earth. And that valid asset can be applied to do other things as well. Tell us why you think that is, that it has the most exciting and distributed validator set. Well, just look at the numbers. mean, there's one point, almost 1.1 million validators on Ethereum, tens of thousands of different unique entities running them. uh Multiple clients. uh In the middle, you have things like DVT, SSV, which also has multiple clients. uh Audited spec and all of that. Like that's a really performant infrastructure to do more things than. you know, just Ethereum's securing Ethereum. And so imagine that you want to bootstrap some kind of a protocol, it can be an Oracle, it can be a base Trollop. um You need somebody to run that infrastructure, right? You need somebody to kind of to be the, you know, the operators of that infrastructure. And so why not use Ethereum? It's the best validator set on earth. Yeah, I think in the market right now, there's kind of uh bifurcated thinking. uh You know, what you're sharing is true, and I agree with it. Ethereum as a network is incredibly robust. But for some reason, ETH, the token, the asset, uh that, you know, that we're not seeing value accruing to it, or maybe I'm wrong. And I'm curious your thoughts around like why ETH, the asset is you know, it's not occurring value or representing the value on the Ethereum network, which is incredibly robust. Well, I think it's pretty hard to argue with the price of ETH. mean, uh it's not a secret. It's been lagging behind, definitely lagging behind Bitcoin, for example. And I think that... um Ethereum has tech supremacy, right? If you're a developer and you want to build a serious business, you'll go and do that on Ethereum. Look at, for example, the stable coin issuance and usage. It's mostly on Ethereum. If you look at real world asset, it's mostly on Ethereum. If you look at tokenization in general, it's mostly on Ethereum. If you look at DeFi at large, it's mostly on Ethereum. Ethereum in that sense has both the network the kind of the network effect, but also the tech supremacy. I think that we can talk about the roadmap of Ethereum going forward, but the idea of L2s is super unique and enabled Ethereum to grow quite rapidly without compromising its credibly neutral position and decentralization. uh Kind of the next evolution of rollups with uh base sequencing, uh composability and all of that is gonna make it even better. pre-confirmations will allow sub hundred millisecond transaction confirmation. in terms of tax supremacy, it's there. I think that um there's not enough good communication of why you should be holding if the asset. So, and it wasn't always the case. I mean, if you go back in history, to the, for example, the ICO age, right? There was a very clear reason to hold ETH, which was to participate in ICOs, right? You had to hold ETH. With that ETH, you participated in ICOs. So that was a really good reason to hold ETH. Then came along DeFi, ah and there was, again, another really good reason to hold ETH, because you can provide liquidity. Most of the pairs were ETH and something, some other token. And so there was, again, like a really good reason and synergy between the tech. and the token. And now I think we kind of, don't have that kind of crystal clear reason. And I think that reason should be focused around value capturing for the very simple fact that Ethereum has the highest interaction and uh engagement from developers and users. And those create value. Not enough of it is trickling back to if holders and not enough of it is, and we don't really even Optimized for for that kind of focus. And so if we can turn our uh Focus on that I think that we can accrue much more value back to eat the asset and then again There's a really good reason to hold if because no other blockchain can say that no other blockchain has the amount of activity happening on Ethereum at such a high quality and so um If we can go back to the simple question, why would the average or hold if? besides just speculating on the price, are there fundamentals? I think there are. And we just need to communicate better on that. And I think that will also be represented in the price. uh And again, that goes back to what we're doing with based applications and something I strongly believe in called base sequencing and composability. All of those things ultimately tell the story of improving the usage of Ethereum for developers and users, but also in a way that accrues value back to ETH holders. Do you think the L2 roadmap is extracting value from ETH, the asset? I don't think it's extracting value from ETH yesterday. I think it doesn't have the right sharing properties. ah I don't think it's correct to say that it's extracting value, because it's clearly bringing value in. mean, if base and optimism and arbitrum can process 10x more transactions than Ethereum and still settle on Ethereum, people still feel that they are on Ethereum. And so the value there is amazing. But I think that if we can make, for example, the sequencing on L2s be powered by L1 validators, then all of a sudden you'll have more value accrual. If we can make use of pre-confirmations, that's again, value back to ETH holders. If you can in general make based rollups, something which is prominent, you're giving back value to ETH holders and so on and so forth. So there's a lot of way to do ah this, but I think we just need to focus on it. oh wrote an article about this a while ago. I called it the uh Ethereum the Orphaned Mother. And then the story goes like this, and I'd love your take on it. If you look at disciplines like mathematics and physics, before they became their own specific subjects, they were first philosophy. um And so it was called natural philosophy or natural physics. um And when they became mature enough, then they left philosophy and they became physics, they became mathematics, they became chemistry. um And philosophy has become known as what's called the orphaned mother, because it gives birth to these children and then the children leave her. And I often think of like the L2 roadmap in a similar way, uh where, you know, we've had hundreds, maybe thousands at this point of L2s, right? And they... and very few of them really kind of harken back to Ethereum in a way that kind of brings value to Ethereum. And I've been part of a couple of L2 rollouts. And I remember very clearly one specific one where the founder himself was an Ethereum that I met back in 2016, very, very active in the Ethereum community. the second he created his own chain, he stopped being like an Ethereum kind of a promoter or maximalist, but instead he started focusing on his own users and growing his own user base, growing applications and developers on his own chain. And so it became less about Ethereum and more about him as an entrepreneur building his own chain. And I think that transition was very interesting to me and it was very subtle because he stopped being like the Ethereum maximalist that I once knew. And instead he became this business owner that, and his sole focus was growing his business. And I think that transformation is missed by a lot of um folks in the Ethereum ecosystem. When they talk in abstract terms about L1, L2, rollups, L3s, they miss that subtle transformation that these are business owners. and they have a responsibility to grow their business. And so it becomes less about Ethereum, but more about their business. so um anyway, so that was kind of like the gist of this article that I wrote. I'd love your take on that. What are your thoughts? agree more. think one of the major risks of not having non-based or centralized sequencers for L2s is the worry that at some point those L2s will grow and eject out of Ethereum. And I think that's why it's so important to have ultimately based rollups. And maybe we should kind of stop for a second and kind of define what a based rollup is, which is a based rollup is a rollup. that is one, it's a roll up, meaning that it uses the settlement layer of Ethereum for fault proofs, and it uses the Ethereum data availability layer for storing the blocks. And it's based because the sequencing or rather the thing that creates L2 blocks is RdL1 validator or Ethereum validators themselves. And so at that point, if you are a base roll up, you can have eat the cake and have it whole because you can continue growing your network but you're very connected to Ethereum in a very uh meaningful way um but also it also then gives way to composability uh asynchronous composability but also more importantly synchronous composability which is the idea that you can then do cross roll up transactions which are atomic and with a single block within a single block. And so you can also have an amazing user experience and based and composable rollups will never eject out of Ethereum because they are Ethereum in of themselves, right? But they are kind of um an Ethereum growth coming out and expanding what Ethereum is. um And so I think that's paramount to understand that the less those rollups are dependent on Ethereum, um the more likely they will be ejecting at some point. And I think that if they are doing their own sequencing, that's a major, major thing for them because it basically means they are controlling the stream of transactions and where they are originated from. And so, you know, ultimately, A blockchain is the set of users and transactions they generate. And so if you're holding the, if you're the owner of the users and the owner of the way those users interact and broadcast transactions, I mean, you can always replace the settlement in the DA layer. That's not a problem. That's a technical decision. ah And so I think that's extremely important to understand. And also one of the reasons why I based sequencing or based roll-ups are so important. So any of your view, if we could just summarize it, um for Ethereum to capture the value, uh these L2 rollups, they need to use the Ethereum validator set as the sequencer and also data availability on native Ethereum L1. Got it. um they have three anchors to Ethereum. Data availability, uh settlement or execution and then, not execution, settlement more, and then uh sequencing. Yeah, I missed the settlement part. those so those three anchors would bring back these, you know, for to use my analogy, bring back these children back to the mother. Yeah, but it's even in a more profound way because if the Ethereum L1 validators are also the sequencers, that also means that there's rev share between the two, right? Because the sequencer takes profit out of the transactions of the L2. And if the sequencer is the actual Ethereum validator, then it's ETH holders getting the value back. And so the more L2s you have, the more Ethereum scales up, the more fees are ultimately generated back to ETH holders. Again, it's not just economics, it's also in terms of developer and user experience because if you have an Ethereum proposer, an Ethereum validator, sequencing multiple L2s at the same time, they can do wonderful things in terms of composability. They can do wonderful things in terms of blob optimization and compression, which reduces the cost of... actually running in L2. So there's a lot of secondary and tertiary effects which are quite remarkable if you just make this one change. I think those architectural changes, um that feels like that's what the Ethereum Foundation and the new heads of it are really focused on. And I'm seeing a lot of uh kind of cultural changes too. They're listening more and being more open to um rather than just kind of abstract talk. They're talking like, you know, the dirt and sweat of kind of people's businesses, right? Like you guys have a business to run. And so you're really relying on the Ethereum Foundation to make some good decisions on the architectural side. um What are your thoughts around the cultural and kind of, I don't know, the softer kind of side of things? Here's what I mean. I'm seeing a lot of, uh I'm seeing kind of some socialists and some communist kind of um threads in the Ethereum community that I'm not comfortable with. um And that's not definitely why I did not enter the Ethereum community or really crypto because of kind of those ideals, but that exists. And because we're an open community, anyone can think whatever they want. But I'm seeing kind of that type of thinking that for some reason, I think it's also bleeding into Ethereum in general and probably has some impact on the token itself. I don't know, maybe I'm making that up. What do you think? I think uh there is definitely a shift happening, but I think a shift towards Ethereum at war. think the Ethereum community realized that, and maybe the token price kind of was the ringer that kind of sparked everything, but I think we realized as a community that it's not enough to talk the talk, you need to walk the walk. And to walk the walk, you need to be competitive. And ah it's not enough to say and shout decentralization all the time because, you know, who knows what decentralization is. It's not a mathematical or scientific definition of anything. It's a million different things folded into one ambiguous terminology. um So you have to talk about actual things you can do. Features. um competitive advantages, you need to communicate who you are and what you are, you need to be on stage and when your competitors are talking about why they are good for institutions or why they are good for whatever, you need to be there and explain as well, you need to explain to people why they should be holding ETH, it's a simple thing but you need to be active in it. And so I think there is definitely a shift there. from complacent Ethereum to wartime Ethereum. Understanding that um whatever we built until now is great, but whatever comes in the future we need to fight for because there is competition and there is really good narratives for our competitors and saying that you are the world computer is not enough. There's a lot of world computers out there. Saying your smart contract platform is not enough. There's a lot of them. Saying that you are uh Store of value is not enough because there's a lot of different projects saying there are store of value. We need to be much more uh aggressive about it. We need to be much more purposeful about it. ah And so I think that there is a sentiment change I feel about in that sense. ah Being more proactive, being more competitive, something Ethereum never really did ah compete. if you never really competed, if you almost always kind of um just did things. And I think now we understand we need to be competitive. Yeah, I like the wartime arc. And I'm really pleased by some of the, at least from my purview, some of the changes and some of the behavioral changes, the actual changes haven't happened yet, but the actual behavioral changes are interesting and I think um encouraging. And so I'm pleased about that. um And Ethereum has a lot going for it. I the robustness of the network is incredible, right? um power in Ethereum is second to none. I think the two greatest human achievements in open source programs are Linux and Ethereum. Both of them have fundamental shift, shifted and changed the world. You know, that's really interesting you say that, because I remember uh back in the day when there was, know, first there was, you Unix and then there was Linux. And then, and I remember when Red Hat became more more popular, uh there was a big debate in the industry, right? Around like, you know, why is Red Hat kind of professionalizing? And I see kind of a lot of analogs with Ethereum and Solana being kind of the the modern day kind of Linux in Red Hat in a way, in a way. That's not a perfect analogy, but in my mind, as you're saying that, that kind of made me think about that time. it actually just worked out fine. mean, there's Linux, it's still open source, but there's businesses that have kind of spun out from that that are more professional and they're conducting business in a different way. and they have a different philosophy, and so there's definitely room for, you know... I think L2s might be the correct analogy, the idea that you have the kernel which is Ethereum itself and then you have distributions which are the L2s which ultimately is the one that you really interact with. I think the future of Ethereum is most people won't interact with Ethereum directly. they will interact with L2s and those L2s are kind of different flavors of Ethereum, right? So, you you might have the professional for-profit um licensed version of Ethereum, which is maybe base or something along those lines, but you really want and need the free open source, credibly neutral flavor of Ethereum. That's why based roll-ups are so important. um But also I think unlike uh Linux, Ethereum has a, because of its token, it has a built-in mechanism for ah continuing to fund and develop this whole thing. And that's a really, really powerful layer of blockchains. ah And so... But again, we need to understand how value trickles back from different distributions or L2s back to Ethereum because otherwise you'll have disconnect, right? And that's really, really important. No, I appreciate you. I think that correction is correct. um And that gives me a different view into kind of where we are in this point in history in the Ethereum story. And it's exciting. It's really exciting to be where we are um and to have been here for 10 plus years that you have, me less so. um But it's been quite exciting. Tom, let's go back to SSV and um Tell us kind of in the next, I don't know, six to 12 months or maybe the remainder of 2025, maybe some of the goals that you guys have from a community perspective and from a growth perspective and anything maybe the community can look forward to that you can share publicly. Our main goal is to create the best infrastructure for validators. And that currently ah means two things. One is um how you run a validator. And the second thing is how much can you earn as a validator. those two things become more more coupled because validators are driven by economics, right? And so my goal for the next six to 12 months is to really prove the point that based applications or in other words, the idea that validators can extend their functionality and security to other protocols and other functions and earn more rewards out of it. I want to validate that idea. I want to make sure that we create this marketplace where validators all of a sudden have more opportunities to earn extra rewards and by running their values on SSV they open themselves up to it and then it means that DVT as a technology will be much more widespread. validators will find more opportunities and more importantly we can actually help Ethereum continue to decentralize because if you can create ah an actual business case for running validators not uh being the capital owner of the validator but running validators that opens up a lot of doors for solo stakers and small time stakers to go to protocols like Lido and Eterfine, Rocketpool put out one or two ETH collateral and run validators on their behalf. But by doing so, now they have additional opportunity so they can actually make much more money out of it and then get that money back, run another validator and the will goes on and on. And so you can inadvertently actually increase the number of sole stakers and uh small time stakers, which is what really keeps Ethereum decentralized the way we like it to be. And so I think that this is kind of a triangle of winds between stakers applications that look for security and functionality and Ethereum itself, is a big part of that. That's what I want to do in the next six to 12 months. And it all goes through this concept of based applications, the idea that we can coordinate and enable validators to do more and earn more. ah And this is, I think, the next evolution of the validator set on Ethereum. Yeah, would that include L2s that have their own token and then maybe use their own? I think that based roll-ups are a major part of this story. Because based roll-ups are based, first and foremost, right? And so they are probably the biggest form of based apps. ah And so if we can make it happen, yeah, that's a major, major step forward. What about L2s that use their own token as gas and not ETH? That's fine, they will pay in their own token for those validators, that's fine. Validators would love to have other sources of rewards, not just ETH. mean, again, depends on strategy, right? If you are a validator, maybe you wanna get some other tokens you think will go up in price. Maybe you want to diversify, maybe you are willing to take some risks, right? So. That's exciting. That's exciting. uh So it feels like a lot of SSV is uh because validators are your solo validators as well as larger, more institutional ones are your customers. I imagine there's a lot of kind of out maybe inbound and outbound business development type of work that's happening versus kind of a consumer type of growth marketing. Is that correct? Yeah, we are mostly focusing on developers ah and how we can attract developers to create value back to the validators and SSV in general. So yeah, very much an infrastructure project and yeah. oh How are you reaching these developers right now? We've been at it for so long, so I mean, in the staking world, we're pretty well known and in general, kind of the theorem ecosystem. And so it's a combination of both reaching out and being reached. ah So yeah. um So I've attended a lot of hackathons during my time in blockchain. um Is our hackathon still an effective way of reaching developers for SSV? It used to be, now it's less so I think, because there's a lot of consolidation in the staking world. uh But I think that uh now going into based applications, I think we might start going and kind of promoting uh hackathons as well. Well, thank you so much, Alun. um This has been really, really helpful. um I will be sure to share in the show notes all the relevant URLs for SSV labs so people can learn and hopefully get involved. um Tell me about the... One last question in terms of... For those that are not validators, um but they are just community members that want to... you know, be part of your story and maybe support in ways that are meaningful to them. Are there opportunities like that for non-validator community members? be introducing SSV staking and of course, SSV governance ah and going into base steps. We're working a lot with the community around content and just general engagement. So there's a lot of opportunities out there. Just reach out and if you want to help, if you want to be part of what we're doing, yeah, we would love to. Awesome. Well, appreciate you sharing all the cool things you guys are doing and cheers. Thank you. Thank you for having me.