Solana: From On-Chain Nasdaq to the Pump Fun Craze - Anatoly Yakovenko. Ep. 590

Transcript

that was weird like I didn't expect nfts to take off I didn't expect mem coins to take off I think the big innovation in blockchain is actually that you can create programmatic market makers through amm and all these kind of clever curves that eliminate a lot of the layers that you have in Trad fi that are necessary to get to run trafi based trading my feeling with M was that we need to maximize competition so users always have the option to go to the best sour for their trade whether that means that validator is maximum sandwiching and then giving everybody a rebate that could be one model that actually works if there's truly an exploit and you continue running the chain even if you

allow like Define liquidations to run they're mixed in with exploited transactions as as ethereum folks I don't know if you're around for the Dow hack the only reason they were able to deal with the hard Fork is because it was locked all that all those funds were locked up in a smart contract they couldn't exit if they started getting mixed with a whole bunch of things like it's just impossible to unravel you can't roll back the real world there's action that's taking in the real world based on the Chain stage circle is sending funds out based on like mint and burns right I think once you have four clients you could say that the probability of a bug in three is so much smaller than the probability in bug in two that it's fine for one to be down and then you can do this kind of

maintain some leness while while one is down and rotate welcome to abent the show which talks about about the Technologies projects and people driving decentralization and the blockchain revolution I'm Brian Crane and today I'm joined with by my guest host Martin kelman who is the founder of gnosis and we have a very special returning guest today Anatoli the co-founder of salana of course salana needs uh needs no introduction so we're excited today to talk uh you know get into the re a little bit of where salana is at what's coming for salana some of the challenges so really excited for that and now just before we go into it with Anatoli we want to share a few words from our

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network with just one gno and affordable Hardware start your decentralization journey today at nosis doio cool well thanks so much for coming on and toi it's really great to have you back yeah thanks for having me so I wanted to start off with so the original salana Vision right from you know now it's like seven years ago or so uh was to have blockchain at NASDAQ speed and you know at the time salana I was really pretty alone in trying to do a blockchain you know a single chain High throughput maximum performance

speed at the time sharding was like the hot thing when it came to how to scale blockchains and and you guys were kind of alone of course today you know salana has gotten lots of traction and also the idea of single through Pro chain has is something that's gotten a lot more traction with a lot of other companies pursuing something similar but just uh just sort of zooming out like when you think back to your vision at the beginning and where it's at right now how do you feel about it what do you think is are some things that you know happened like you planned what are some things that maybe haven't worked out yeah I mean a lot of stuff kind of came true that I thought would but just in different

order um like the or the order was unpredictable and the applications are also were unpredictable um you know we we thought that trading was going to be a really important use case but we didn't think it was going to be the most important use case I think to me that's pretty obvious that like execution of and launching assets and execution of the trades between them is what's driving most of the volumes and revenues for across all the applications and block and and layer ones and layer twos this is where all the fees come from and if you don't have revenues you can't no matter how many tokens you launch you can't afford to pay all the all six

Engineers somebody somewhere has to figure out how to how to make revenues um and I think that came true what what surprised me was that how slow trafi is adopting the stuff I expected like stocks and all of these things to be the main usage but right now it's basically like gaming like it's nfts and meme coins are like if you look at twitch streamers that are streaming trading it it's exactly the same content as when they're streaming mobile gaming or any kind of game it is effectively gaming uh it's just kind of PVP loot box this is what I kind of how I think of it um that was

weird like I didn't expect nfts to take off I didn't expect meme coins to take off but they're using the same technology it's the same kind of escrow auction processes um unchain I thought like Central limit order books would be the killer uh way to run markets on chain but I think the big innovation in blockchain is actually that you can create programmatic market makers through amm and all these kind of clever curves that that eliminate a lot of the layers that you have in trafi that are necessary to get to run like Trad five based trading um and that's pretty interesting and even if the amm are less

efficient the costs that you spend on professional market makers like citadels and jumps are so large that you might actually as a early stage company you might be better off using an amm to be honest um versus like the the more professional trafi approach um that was unexpected and I think that's a legitimate Innovation I think where you see the explosion of assets and how they've traded it's primarily through automatic based kind of Market making approaches like curves and bonding curves and and amm and stuff like that I I would like to um jump in on a topic um you you hinted at and I think

people have very different opinions about it what makes um blockchain valuable um where does or you you mentioned fees and said yeah somewhere there needs to be fees and I think at least in ethereum land um there is kind of this this uh this debate between should ether be just money and somehow that's where the value comes from or should should there be uh transaction fees seems like you have a very clear uh clear answer year I'm traditional conservative you have you know discounted future cash flows that what G St value there is exceptions to that but I think they're the outliers you can't engineer for them

this is the problem that I have with like oh Bitcoin is so successful therefore we must build a better a better Bitcoin um I don't understand the engineering reasons why Bitcoin is successful so therefore I cannot build a better Bitcoin so would it be fair to say the number one or kind of one absolutely crucial success metric for salana is overall fees yeah I think the network needs to have enough fees to pay for all the engineering effort and the validators and all this stuff if it doesn't have that I think um it will eventually die that that's kind of my belief so where do you think fees will what will be the

scars uh uh thing that people will pay fees for so I mean generally speaking there is is it just general block space or you would say block space in in general will be more or less free and it's specifically congestion block space or congested block space or yeah I think what the value that these systems provide is um they have state that has an Economic Opportunity with cost and the prioritization to access that state and this is where you can charge more than the uh the hardware and the bandwidth and all the the nuts and bolts and if you're Pur purely selling Hardware you know a thousand replicated amount of

storage or whatever you can only charge so many more multiples off the cost of the hardware like maybe 10x otherwise a competitor will just underbid you and um you will lose this way because Hardware just constantly keeps getting cheaper and cheaper and your dominant costs are always going going to be the people right like it's just the at the end of the day it's that you got to pay for the all the all the engineering stuff um so this is where I think like probably again why Salon is so has such a different road map than ethereum is that I do I think that the network cannot survive without the executional layer also paying for for the all the cost to

build the data availability and all this other stuff the execution layers is where you can charge real real fees based on content and everything else has to support that so the uh I mean uh what you just said kind of Priority Access to uh to yeah economically important uh uh content kind of me right yep yeah absolutely so one one um Theory people have been discussing is that um me was or definitely an ethereum for a while it was very much captured by the chain um and and by validators but to

some extent now it seems to be moving more towards uh applications or in principle applications have the power to um yeah to kind of add extra rules uh on top and and kind of protect their me uh do you see that as a as a danger for salana in that case no no I think it's uh the goal for salana is to um so there's designs for application sequencing I actually proposed one a while back called program writable accounts I don't know Brian if you were involved in shooting down that Syd but basically the idea is that I

felt that it's important to for apps to be able to set the cost to to take a right lock on their state so that economically important state that's important to access um if the application can say hey to be able to write to the state because access really means right to modify to take that offer uh I want to set the fee and have that fee be Pro application specific and dynamic and controlled by the business logic of the app uh that would eat into some of the fees that the Shen captures but what's good for the goose is good for the gander basically uh that system would preserve Atomic composition between applications and the cross Atomic all the arbit charge between all

the apps that are extremely profitable um that you cannot remove right if if each application then moves off chain and runs their own L1 or L2 or whatever their own separate environment per app then you lose that Atomic comp composition and you effectively lose those revenues so what I want to see is uh the L1 salana this giant one giant atomic State machine its Revenue to be mostly driven by this the the opportunities that arise from having everything in one one giant State machine that's synchronous that's fast that's as cheap as possible and then give the application the tools to capture what whatever fees they want and they can tune them set them higher lower

distribute them to the Token holders distributed to the uh makers instead of takers you know prioritize cancels instead of other orders um so a bunch of whatever they want to do I want to leave that to the application layer and uh this is I think where Max Resnick and I like really mind melted um because at a gut level I I thought that we need multiple block producers at the same time to create a dynamic Market that's competitive for people to accept these transactions and he kind of came came for from a more economics research angle where he saw that if you don't have multiple proposers then applications

cannot really build these value capturing systems at all because the validator will be able to effectively censor and if you if you're censoring all the inputs that are going into this application specific sequencing thing then you can effectively control the fees that the app sets anyways so what you need is like you need both of those pieces you need the hooks and the system for apps to be able to set their own fees um and you need the competition between block producers and I'm a 100% on board with all those changes even though on the surface they seem to give up some of the economics to the apps but the goal is if we have all the apps in one giant system the economics between

all the cross application arbitrages are going to be way more than enough so with regards to Meb I think you've always had you know in many ecosystems have been like oh me is a bad thing you need to minimize me I think you've always had a a more positive view on me or like how do you view me and how do you think me is going to develop with those changes in the future look a market maker submitting their cancel before everyone else is Meb they're they're getting Priority Access to State ahead of everyone else they're paying for it to the exchange or to the whoever right that is me but that creates better markets because then the market makers

can have tighter spreads so uh my feeling with me was that we need to maximize competition so users always have the option to go to the best source for their trade and whether that means that the VA validator is maximum sandwiching and then giving everybody a rebate that could be one model that actually works that's fine as long as it's competitive and the users can make that decision and I suspect that each individual user is unlikely to make that decision unless they're Pro but like Phantom that wants to serve the best possible blockchain to their users that's competing with soul flare with backpack will make the informed decision

to go with a particular solution for how they route their transactions and stuff but we need competition for that for all that to work out so my view is that like the stuff isn't all that different than a your I'm selling block space I'm buying block space for me to get the best offer I need a healthy Market of buyers and sellers that that's kind of the basics that we need so in ethereum uh propos a builder separation right was like chosen a few years ago and it's it's the state today what do you think about salana do you think we will also end up with proposed the wheer separation and is is it something desirable

um I don't know if there's anything we need to enshrine for that to work um like it's kind of happening right now I don't I don't know if there's changes to the like if you need like enshrine bundles I don't have any objections to those uh what I do care about is concurrent block producers so multiple concurrent proposers or multiple concurrent leaders that we have M like two validators one in Singapore one in New York that are running there that are both accepting transactions and the user can has the option do I sent to the closest one in New York or maybe one that's further away that's offering a better deal and if I'm a market maker and I need my

cancel to to land uh what that means is that I can send to the one that isn't censoring and I can and the network the the actual enshrine protocol needs to support an ordering mechanism where I can pay the network within this block I'm paying a fee to go first so does that make sense yeah I think that's definitely one of the topics I know there a huge Focus for you and and I think currently in the salana developer thing is this multiple concurrent proposer so for you the main reason why you want that is because you want competition between validators and you want basically less ability for

validators to kind of you know gouch the users or like it's also a beautiful thing because this is a way for a truly decentralized Global blockchain to beat trafi to beat NASDAQ on actual pricing and this is a very subtle thing that that changes here is that if like um the how like you think of the network or any exchange or any of these systems as reflecting of the world State and it has there's an error between that state and the real world and constantly people are trying to reduce the that eror by submitting trades they see something a price that's offered they have information in the real world they're

trying to close that that air and if like some event happens in Singapore and there's a local leader there in Singapore the latency for me to submit that trade is much much shorter than to send it all the way to New York so for salana as a blockchain to be with NASDAQ we need a block producer in every spot in the world that has any economic ity so then the user can submit that transaction locally and cut that latency but I want to understand that because um because uh or at least in in ethereum you have For an upcoming block you have exactly one uh proposal um and and that one might sit

in New York they might sit in in in Singapore so in Solana it sounds different or or is it still the same right now that right now that's it's exactly how Solano works but there's no reason why you can't have two proposers or n okay currently but then let's say okay so now on the same yeah slot height block height you have now two one in New York one in Singapore so now let's say they would have do conflicting transactions here in one uh then how how is this merged or how is this resolved this this conflict uh there's a deterministic merge so we need that it has to have that property and two if I want to go first I should burn some soul to be

ahead of somebody else it this merch will be on on the whole block level or individual State uh well probably I mean probably you can think of it as a block that is a chunk of data right one megabyte two megabytes and the first half is written by proposer a the second half is written by proposer B the network receives the entire block and then has runs a deterministic merge to compute the results I see but you can have any number of these proposers the main constraint is basically we think we don't know until we test is how many shreds we can propagate through the network and shreds is our term for

eraser coded chunks of the block but but it also means that if you if you hit if the transaction hits your local proposal at that moment you do not you don't know uh exactly what happens you then need to wait for kind of some second round or is the merge round essentially to to it's it's not around once you receive the data from the block from the others right then you can locally yeah I see yeah so the network could effectively uh the latency there is isn't really lost because uh as soon as the network receives the data it can vote on conf confirming that the data is landed so as soon as you see the

confirmation you can compute the results and you don't need to wait for everybody to compute the result and confirm that because that part is deterministic um you obviously like if you're a professional like system like that's like a custodian or or a bridge you might want to run different boxes with different one fire dancer one Anza make sure all of them agree on the results essentially essentially the blockchain would then become a a deck right or I mean that what is it directed e cylic graph no it's different from a dag uh dags uh resolve their ordering based on the next producer that then decides The

Ordering of the previous transactions this you have literally concurrent leaders it's no diff it it is like leader one writes the first page leader two writes the second page and then you mix them together the the shuffling here is enshrined and deterministic and that's different from the tag it's not dependent on the next producer but so if if you have these two proposers and let's say there's some Arbitrage opportunity and now people uh with both proposals put in transactions that both try to capture the same Arbitrage opportunity then basically it will get merged and then whichever is the first one actually yep

gets executed yep so the highest burn one the the one with the highest burned for fees will execute first okay okay okay what's the hardest thing about making multiple concurrent proposals happen what what are the problems that you need to solve the stability of consensus basically like it's just the implementation is um like prone to outages I would say there isn't I don't think it's design-wise any worse for the worst case because consensus mechanisms all deal with a single leader that produces two different blocks they all have to resolve that um even if you slash that leader right you still don't

want to have an outage in case that you have a bad leader so the worst thing that you want to do is have a is have a performance segregation and slashing for performance segregation is fine because then you reduce them in practice but you cannot you still have to deal with it no matter what so in an environment where you have two leaders the the network will see uh four different views potentially of the result of the block only leader a only leader B neither or both so and the deterministic shuffle would be different for each one right if you only see data from leader a then you just take lader A's block if you see both then you Shuffle if you see neither then you skip

um and this is the complex part uh what you want to do is you want to make sure that there is no partition ition in these views so every time they vote they take the happy path it doesn't matter what partition they see as long as everybody in the network sees the same thing um if everybody sees that leader B failed that's great it means that they all agree on the vote and that you continue doing the on the happy path of of the the consensus rules and salana like we we built our consensus uh it's very complicated and a pain in he has to work with uh but the property that it has that previous systems didn't have is that it was bandwidth efficient that you

have a block on every point in time that there was no stalls waiting for rounds to to finish before the next block starts you start uh we now see systems like I think Aptos and suie have gotten that to work with more modern consensus algorithms it's a whole team from Zurich optimizing and basically getting rid of all my technical DT to to have like a better version of of consensus on salana um and again we can maintain the band ra efficiency and we can deal with all the petitions then talking about yeah efficiencies what are currently uh the bottlenecks or yeah what what's

currently the bottleneck for scaling in Sal um it is basically you've seen like I think like uh eclipse and and a bunch of other kind of saana svm based Slayer 2s uh tune up the compute units um so basically the the bottom La is making sure wait you need to you need to help me here so say again there's a whole bunch of not salana layer 2os but layer twos that use svm okay uh some may even be salana layer twos I don't even know what what the marketing I I don't know I don't know I don't even know which state route they're looking at is it ethereum or

Salas it doesn't matter um I treat them all as competitors because if the fees acre there are not acing on Main not they're not paying for pay that development so and they're fine we're all it's all it's all good we're all Building open source software so it's like redhead versus aunu it's healthy competition but um they've been able to increase their block capacity I think by factors of five to 10 um so if it is basically the blockers are is just testing it's just uh making sure that when we um when onar in fire dancer increase the capacity that there isn't

some um I call them like uh they're denial service attacks there isn't some metering problem in the VM or in the block or whatever that an attacker can exploit and create a block that takes 10 times more to process than normal these are basic basically like the the the worst case kind of scenarios that that are pain in the ass to find let me just repeat because I'm not that deep into salana so you're saying yes there are there are versions essentially of Solana the svm that already run at 5x the capacity of what Solana does right now and it kind of works but you are slightly more conservative uh and and we have to be right they those are not decentralized right they were basically

um roll up like but even doesn't matter they're earlier they can take more risk that's the difference if we if we were just starting out I would I would tune the network to 10x performance and deal with the fires like that's the difference so I mean the other the other point you were making is that you would say kind of l2s are not really interesting you would say to salana from from from an economic or fee perspective so um so they're not interesting to me yes there's people that they're interesting too and that's fine but um what I want is main that to succeed right so to me what matters is

activity and may not trading and may not so essentially the whole idea that um kind of kind of the ethereum idea that somehow you would provide a blob space or or kind of data availability or transaction ordering and then other use it for other space that that you don't think if you could do ordering then yes but um there isn't I I think the based rollup thing is still not fully defined and if the chain is doing ordering and da uh the base rollup the only difference is then like a different

virtual machine or something like that I I I do very much agree with here so there so I am also in the I'm kind of in the ethereum camp of if if rollups then it it should be based rollups because I feel like if ethereum is trying to sell something cannot just be generic data availability because that's a commodity it needs to be specifically transaction ordering we we already have base rollups done like there's there's already like ZK proved Merkel trees or like classically proved Merkel trees but leaves for first SPID to me the interesting thing about based rollups is that they kind of still have this Atomic uh composability or you can have Atomic

transactions that touch L1 and L2 State and and the advantage uh is I think it's fair fair to say okay you still have some validators that have all the state and then it almost doesn't matter whether that's on the L2 or on the L1 but if you care about being able to have um lower perform or kind of have validators I mean where here's my dep node sitting next to me that runs ethereum and I can still do this from home I um if you care about that then it does make sense to say okay some state that kind of exists but it doesn't have to be available uh to anyone who is who's running a validator on the

L1 there's already sort of stuff like that running on salana so metap pla built this thing called compression I don't know if you saw this terrible marketing name I came off the bat so but it's basically a Merkel it's a Merkel route that's on chain and you can atomically prove the data exists in this tree and another piece of data exists in a totally separate tree push them to the L1 state run a computation on them through a program like a token Swap and then push them back into the trees all of this in a single Atomic transaction so the state that is effectively cold can be offloaded and run grammatically in these Merkel trees and um the primary

thing that they're used for is like nft like you you meant your 20,000 nfts you can instantly like mint them in one batch in one Merkel tree and you just register the leaves with the chain so wallets and stuff can pick him up and there's now a ZK based approach to make the proof smaller and a bit more composable but that part is is like the easy part I think the base rollup is a bit more a bigger piece of tecknowledgey than that it involves developers defining their virtual machine and the the state transition function that connects their VM to the state route on the L1

um my problem with those is that there's just no need for that many RS like I'm sorry frankly frankly I yeah frankly I I would also kind of for the base rollup say just do evm and kind of just but then what's the point to have like a dozen different evm Bas rollups the the point might be uh to reduce to kind of still allow people to I mean run uh relatively lightweight uh L1 validators and kind of say if you if you want to do the full thing then you run the L1 and and the l2s um and has the full State available but how's that any

any different from like I have a like a program that has like a dedicated circuit like a ZK circuit and I just prove that program like I don't need any evm general purpose evm I have like my my minimized whatever the like Lego piece of of a smart contract I just prove that smart contract only and now I have a way to Route data through that that thing through the L1 so you have your transaction approves the state calls the contract right with approve calls another one and and like a a series and then it's done so that's effectively like the old stateless like design right like um like

what what is the difference between that and a based rollup like why why aren't based rollups just simply smart contracts I think you can view it as that yeah then like those already fact kind of exist with some traction like they're useful for I think um like large uh like if you're trying to air drop to a very large user base and that kind that kind of thing people have found tractions about but they haven't found traction with like like what what I think is is kind of interesting that you see that works well is like Jupiter uh

radium like even pump all these things are all really really tied together in the execution and you can see in the transaction that a single transaction will hit like five different markets all at the same time and we haven't seen like anyone be able to build um a ZK based or something that is truly offchain that still plugs into the atomic execution piece for trading so let's talk about fired answer and sort of salon our clients right so fire dancer has been in the works for a long time uh aiming to you know speed up and remove a lot of the performance bottleneck in the client uh what are your thoughts on you know what the impact will be on the

network and you you see in the future you want to see a bunch of different clients running uh in mainnet at the same time do we need a bunch I think four is what people it's like four or five is like you kind of need technically you should have five for bft so you can do maintenance and one and then you still have reliability of one going down without a liveness failure um that's like the dream but the you just get an astronomical Improvement on safety when you have two um like because it's just such a this is the SK the thing that keeps me up at

night is like some bike that Auditors and testing and all that stuff Miss that's a critical vulnerability that's a zero day that could steal everyone's funds that's a scary part you have two separate teams that built the same code it's very unlikely that they would have the same bug in both code bases that can be executed the same way at the same time so you have some redundancy there that that's just really really critical for these systems but if fire danc now is you know can process more transactions then I mean I would expect that all of the validators will switch to that no because they will earn more fees so no it's the the limits are set

network wide to make sure that both clients can uh can run it and um agabi is not a slow client you can actually just you can literally just remove our limits and then run it at like 10x capacity right now there's no uh the the limits there to kind of slowly like there's no fire to increase block space because even like during the the crazy the worst case day with like uh Trump coin launching the fees the median fee was like 15 cents of transaction and this is when the network is doing 40 billion now that's high and if that was sustained they would become fire but

that being the worst case like Peak demand that was you know 10% of nasdaq's volume that's actually really really good uh in terms of in terms of fees so there isn't a fire there is a like there's a reason to increase block space that I think is more longterm and what I care more about is that like every release in bumps block Space by 20 40% versus on getting 10x in two years like as long as the developers are push pushing themselves like hey what is the what is the bottleneck that is keeping them up at night that could be exploited or whatever they write the test they get comfortable with it and

then they tune that parameter up this is what I want to see um more so than like let's 10x and then see what breaks and have like a bunch of weekends where everyone has to go like fight fires you you mentioned the security improvements from having a second client so how would the network behave in different scenarios let's say 10% of the validators would run or let's say fire Den is new and only 10% run it we need more than 33% run by the minority client so some it doesn't matter where but as long as the the smallest client is more than 33% than the network would halt right it would halt okay I see and

that's okay we're not e Thea this yeah yeah and you see this as preferable so you would say if if if there is a bu then it should hold yeah yeah and people can quickly fix it and it's an egga on everyone's face and it sucks and it should never happen and there's a lot of effort to put in to make sure it never happens uh but if there is a exploit then yeah please hold like right away uh and then people can go fix it that that's the preferable outcome to anything else cuz like I mean if there's truly an exploit um and you continue run running the chain even if you allow like Define liquidations to run they're mixed in with exploited transactions you it un

that state the resulting that state is a nightmare it's like wor it's worse than a 18h hour outage or whatever like as as ethereum folks I don't know if you're around for the Dow hack there was the only reason they were able to deal with the uh the da with a state like with the hard Fork is because it was locked all that all those funds were locked up in a smart contract they couldn't exit once if they started getting mixed with a whole bunch of things like it's just impossible to unravel you have like somebody launches a meme coin the attacker launches a meme coin buys it with the funds it's mixed in with a whole bunch of liquidity like you cannot like really untangle that in

any sane way yeah you'd have to like actually roll back I think know and reset from an earlier State probably yeah to me that is far worse than just a hard liveness failure um because that like not you can't roll back the real world there's action that's taking in the real world based on the Chain State like circle is sending funds out or based on like mint like mint and burns right you can't like tell them hey go roll back use transfers it's better to haul this this is like I I think in all these cases like it's basically better to Halt um I think once you have four

clients um you could say that like the probability of a bug in three is so much smaller than the probability in uh you know bug and two that it's fine for one to be down and then you can do this kind of maintain some liess while while one is down and rotate but yeah the terrifying this is this is like the worst nightmare well I I I want to I want to ask another maybe a little bit more on the scaling thing before we go to security what do you think is is possible here like if you think of like I don't know five 10 years ahead where

do you want to see salana in terms of um throughput and do you think it's uh feasible to basically have salana scale to such a level that it can absorb you know kind of like or it can satisfy like all the demand of the world in terms of block space our blocks right now are like two to four megabytes in size the New York Times website is like 20 megabytes my my very mediocre goal is to get blocks to the size of the New York Times website like you don't even need uh the crazy 2D eraser code sampling for light clients when your blocks are the

size of the New York Times website people can just download full blocks to their phone and nobody like you don't need these like next Generation Technologies yet so uh and that would be like a 10x increase and um it is that enough to handle the entire world I think somewhere between 10 10x to like my my belief is that like you look at Google they um when the their estimated searches per second is somewhere like around 50,000 to 880,000 that's a fully globally scaled web application that is fully permeated the entire world that people use constantly and people use finance a

lot less often than that um so like 100,000 TPS in a single one would cover the 99% of the most important Financial transactions for sure sure so somewhere between like you know one 10ax and another 10ax I think that is actually probably as far as crypto needs to scale it sucks to put limits on it and people feel like oh you're being so pessimistic but like I pray that all my competitors are designing for INF infinite demand that is like the worst worst engineering trap and I don't even tell on people to 10x the capacity what I

tell them is like just 2x at this year just think incremental improvements that year you can ship confidently and then twox it again next year and just like that that's how you get to like the the scale that is needed for demand so one uh I know one project has gotten uh a little bit of attention I think still still very very early is dou zero so where they're trying to create this you know private fiber Network do think that's going to be needed uh yeah it's not it's not really fiber and this is maybe I can explain to folks why how it works and why it's not scary uh basically there there's nothing you need to change about fiber the cables are all

basically the same for like the last you know 30 years um and light is very fast what what the differences are is the signal processing in each hand the switches that like handle the that load um the way they're designed for throughput is with big buffers and those buffers in increase latency and finance and us right like effectively part of the the finance world we want to have the lowest latency possible so what we need is different kinds of switches so every data center in the world you can just go and tell them hey give me this switch I want a super low latency switch I want this dedicated

Lane uh and somebody has to go do that work to go do those deals talk to the people and stuff and but in end of itself it can be very decentralized all these switches are in different parts of the world and different data centers under different isps they can all be owned by different providers or whatever so that part could actually be very decentralized the fiber no one's going to change that it's already laid um so a a bunch of the stuff is very much like um in spirit of the interet and and crypto I think uh but it is one protocol and the goal is to use double zero as an overlay just to have a if the network is running in the

fast happy path that all the messages like when we need to send out votes that can all go through the multicast super fast path for double zero if that fails they're still going to arrive this over the internet you know four 500 milliseconds later uh but what we want is for the happy path on not everything is working for things to be as fast as possible cool um on the topic of then security so on ethereum over the many years there have been yeah kind of a number of of huge hacks and um uh yeah ways where people lost money how so far

has this been on Solana what has been the biggest security incidents I think War Wormhole was the biggest one um and that was really unfortunate bug um there was this bug didn't exist in World home one and then in the second version they introduced this bug where you could fake the proof that there was a mint on the other side um and an attacker exploited it right when they posted the fix for it in their public GitHub so the attacker was watching their GitHub and waiting for the balances and Wormhole to increase up to the m you know as much as they could before they did the bug so it's like a

professional attacker I don't remember for sure but it might have been lazer's group um that sucks like this this this stuff sucks um it's hard to really fix uh there's formal verification companies that I think similar similar approach to how they formally verify stuff in ethereum is uh typically you recompile the code through lvm and you can use the intermediate output and run there's formal provs that can run on top about to to tent properties um I have thought of like adding like the the nice thing about salana is the code is separated

from state so you could actually load in theory separate programs that implement the exact same state transition function run them both and then see if they disagree and then abort do we need that level of redundancy so we have redundant implementations for smart contracts too and obviously the user would need to pay for twice as much compute and stuff but like computer is one of the easiest much easier to scale than bandwidth so like to me that that's almost like a no-brainer if it would help um so that that's scary I I don't think salana is any safer than ethereum for new code uh one advantage that that's kind of weird

um is that because of some idos synchronicities of svm people don't really write interfaces for smart contracts so there's no erc20 interface there's an implementation of the token program and everybody uses that program um so it's like as if you had one canonical erc20 so that means that if you're a defi protocol and you only accept SPL tokens there's no um way for the attacker to make to create a bad implementation of your C20 and steal funds from your users so that has reduced a bunch of the kind of uh attacks that you see sometimes with like

pool exploits or like bugs in the c20s OR legitimately like people making bad air SE Ms to track to to trick users um and that has reduced I think a lot of the composability friction because then like you can build a company that doesn't write any smart contracts at all you simply just reuse all these already pre-built Lego pieces and they're all composable because everyone accepts the exact same implementations um and that's been interesting to see so I don't know if pump wrote their own bun bonding curve they might have but they didn't build the amm they didn't write the the token contract all those than standard uh like I think they use a radium amm um so that

that's kind of like one of the examples of that yeah in ethereum I think we had seen first this class of or kind of a bunch of well smart contract hacks but very recently there was yeah kind of a new very very large Hack That was not related to Smart contracts directly but rather uh to yeah interfaces being compromised and because I mean the reality is um if you interact was a somewhat more complex uh uh program then yeah go to some interface it essentially triggers a transaction that kind of on the interface promises you you to do something but of course unfortunately if the

website interface is hacked in some form um it is absolutely or at least in ethereum and I kind of would be curious about you're talking about buyit for example yeah or I mean for sure yes so you're talking UI interface right the user interface not the programmatic interface of the user interface user interface shows you you're doing transaction a but to the wallet it's sending some malicious payload and the question is now do you have any chance to understand in the wallet uh what what the state change uh of the transaction will be and uh yeah kind of is is there a realistic chance to I don't actually think that this I

imagine this should be possible to do on ethereum but maybe easier on salana is that like because you know which accounts are token accounts and the implementation of those tokens uh they're all the same what i' been recommending people and there's a project called Lighthouse protocol is they add guard construction that aborts if the resulting State at the end of the transaction is different than the user expect so this would also protect you from like the you write a you write a transaction you think you're hitting an amm attacker does a program upgrade that just steals your your coins right so they fake the simulation like this is kind of like a

classic attack you simulate your transaction looks fine you submit it but then something something changes in the in the chain attacker sets a bit right and it does something different so to Pro protect against that you can add that guard transaction and then your like um your cold storage system should have effectively rules and policies in the cold implement it in the cold storage not relying on the human to go look at the trusted display and parse that string that actually checks for that guard transaction and checks that the spending limits and all the policies that you want are not exceeded this is what I been like pushing people to do and I you can kind of get there I think

with Keystone wallet that would developer API where you can programmatically set some rule sets and stuff um but yeah this is I think this particular UI hack issues are solvable um through kind of more robust security policies around cold signing and stuff um I don't know if simulation is much more complicated in ethereum but if you know this is a cold storage system you know that it should only be doing Le transfers you know the accounts passed to it should only be token accounts you can then add guard transactions that assert all that and assert the balances and then when you hit the chain it'll abort attacker did

something or screwed up the thing aborts pagor Duty goes off everyone figures out just I was like what happened right um I think that that is solvable with technology I think stuff that's really hard I think is just SM contracts in general uh because the the more interesting ones are like uh risk systems like a or perss or and any of these systems are not just purely trading they're managing risk they have a lot of inputs like oracles and the attack vectors there are not obvious right you have poorly like there's latency games and exit games

between the liquidity Bots and the capital and the contracts those those are very very hard to get right um and proving systems can't help there but I I think that these uh kind of high level smart contracts that manage risk if they can scale they're probably the most disruptive part to traditional Finance because this is the entire function of any bank or any any fund or anything is managing risk if you can automate it you've uh and you can scale it up I think that's very very disruptive and and very valuable so with regards to Smart contract security I think today in salana a lot of smart contracts are

upgradeable and there also pretty common for smart contracts to be closed Source what do you don't use those don't use them to don't do it you have the power as a user to not use those but if you do have to use them um there's a difference between being an l p into a Clos Source smart contract versus trading in it if you're trading in it then use light protocol which will guard your transaction if that close Source contract does something wacky or is or there's an upgrade that happens in the mle year transaction you can actually protect yourself against that if you're an LP you're moving your funds

into that thing and you're letting it custody your funds you should know what who the hell you're giving your funds to don't do that look for open source contracts look for formally verified smart contracts look for like multisig with time locks if they have to have a multistick for upgrade to make sure there's time locks on on those things like there's a whole bunch of things you can do to defend yourself and you should ask the companies that provide these services to go do that and advertise that they are um but yeah like I think that part sucks and the part of it is I think developers being lazy or probably not lazy they're

just uh you know limited Runway limited time trying to get traction but I think as protocols mature like I think you really need to demand them uh for them to kind of put in the work to uh to level up their opsac and the security that and the rest they expose their users too do you think there's anything that can be done I don't know from your side or uh the CL or you know like what can be done to try to accelerate this and try to get more open source immutable contracts or is it just a user demand type thing that you know it's um hopefully comes with time IM maturity it' be good if there were like

groups in the ecosystem that could kind of uh make a list of all the all the best practices who's following them um neodyme tried this with like security txt in the in the in the GitHub and that that had some some limited positive impact yeah it's probably should be like a group ecosystem effort it's hard to maintain those systems and and like keep them up to dat so it needs I think like input from a lot of folks so we we talked about economics a little bit before um but you know right now I feel like we've seen actually the most

vibrant uh sort of governance discussion that at least I'm aware of in salana with this uh Sim uh 228 right that multi-coin proposed uh change to the inflation which would make it dependent on how much is being staked because I think right now like we've had this inflation that kind of gradually slowly goes down with time uh what are your thoughts first first of all on on this specific proposal yeah so um I think the perfect way to have inflation is that um like the network needs to get some stakers to

run boxes and pay for the box is running um and the only thing that the network can really sell is more tokens so this is what the inflation piece so if you were to run an auction um you can take the top best bit bids that are sufficient for you to to run a secure network and you don't know what those are you kind of guess what that number is but effectively you can kind of run this algorithm you start with 50% you take the top best 50% bids to stake and only those and you offer everybody the same price to run like a Dutch auction and if that price is below zero because people can bid a negative

interest rate that they're willing to burn some of their tokens for the right to make blocks um you then increase the amount of stake that you want so you're targeting zero and if the bid is above zero then you decrease within some limits that at a high level people think are safe we've seen ethereum run at like 20 to 30% stake without any problems at all like in the security side so I think having the lowest limit of 20 would be reasonable and I don't I don't see any marginal benefit above like 80% so between 20 and 80% right this thing is bouncing around and people are bidding um those bids have actually create a

curve that looks very similar to The Curve proposed in 228 now there's an error there because the curve in 228 is fixed there's uh this curve that you know Max and a bunch of other smart people thought would be the best approximation um but that error between the market rate in all these Dynamic environments and the proposed curve is going to show up as the network overpaying for stake it's much much smaller than the current setup so my view is that like running these auctions and the complexity of telling users oh you need to pick a price and maybe you need to pick a negative price because there's a lot of block rewards it's just so complicated that there's no way to

really scale it up outside of like a few small professionals and it's a pain in the ass to run imagine you as a valid that your stakers constantly have to bid like every EPO no matter how long it is right every three months could be the validator biding no sure could be the validator bidding but it's still like a pain and pain to run and manage that um I think my view is like don't let the perfect be the enemy of the good this curve is a the proposed curve is a pretty good approximation of that process and it's much much simpler to implement uh there's no auction there's no like auctions themselves have a whole bunch of complexity that's gnarly uh and running them is gnarly so in general I'm

I'm very supportive to 228 what I want to emphasize is that like salana has never been a money like the the point of soul is to disin incentivize spam if that we have another 97% negative downturn in the market and it's the bottom of the bear and this curve is not working out people will change it that's okay like that right I think people need to understand that there isn't like this uh Bitcoin uh ask we we don't care about our grandfather the sins of our grandfather don't bother us like it doesn't matter what Bitcoin did in their monetary policy salana can do a whole bunch of

stuff that I think ethereum is still stuck on in this trying to be money and and like compete with Bitcoin that the Sal ecosystem is not so I think this curve is an improvement and um I'm supportive and I'm encouraging people to vote for it and I think it'll reduce emissions and Emissions are um in a perfect world emissions don't matter because the there is no taxes and there's no middlemen that can take a cut um but in the reality you know like if you look at fees from custodians and centralized exchanges and the rewards is just like a huge subsidy and that's not even counting the the average global tax rate on on those earnings um maybe maybe on

this note would would you agree with with with the statement to say emissions are a tax on on everyone who's not staking oh yeah the the emissions themselves it's just money moving around the black box but it's not like the group of users that are staking and not staking are different people you can literally be both at the same time right well yeah certainly in ethereum there are some people that have a strong feeling there should be reasons for ISSA to not be staked and just be held in Issa um and they see kind of staked Isa potentially as a threat to the whatever moneyness of those so things again you don't really care about or yeah so what

what would you say um 90 or even close to 100% Solan Stak or or be be in the form of some Stak salana or something like that tokenize Stak salana that you wouldn't see as an issue if there's like ux issues around it like that's what I would care more I think I don't I don't like when things hit the limit like it it seems like there's a bug somewhere incentives wise like it it you don't need 100% State sure yeah yeah you don't need it but but the question is um wouldn't it be rational or if if if Stak um kind of a tokenized Stak version is just so easy

to access then why not get the additional 1% essentially or Whatever It Is Well then why isn't the rate negative would be my question like if it's 100% then people should be then somebody's overpaying right so to me it bugs my market like free market thing more than like whether it's us able as money or not it's like H it seems like the whatever curve you picked it has a bug in it and has caused the it to hit the limit point right so that's what you want to avoid you want the parameters to be set somewhere where you're not at zero or 100% but like in general like I I don't think there's any threat to the

moneyness of it and uh I don't really care if soul is used as money um if you know if there's 10 billion per day volume of eth versus everything else on salana it's great we hit pmf There's real activity like why why would anyone be upset trade more I don't care cool um I think you started you started was um was saying that uh yeah some things came as expected other things specifically the use cases did not came as expected so maybe U making an Outlook um for yeah the next uh uh couple of years do do you

think that those um Finance use cases that you initially expected or what are the blockers there and how how do you see that or what too difficult to guess these unexpected use cases surfaced a lot of problems that I think are real um I think there's like I I think we need multiple concurrent leaders and like the the ability for applications to prioritize Market maker cancels before takers like all that stuff that needs to be implemented before trafi really takes the system seriously because the like not even like the the launches

themselves like I think are like a BD problem like you've seen a lot of like really extractive launches launched by like terrible people that should all be nuked from orbit like that stuff I feel like is is like Business Development you just need more plus platforms that have better enforcement and stuff like that but on the network layer itself there's a whole bunch of micr structure problems with the the way that transaction land and how Mev uh works that I think need to be fixed and addressed um for me to feel comfortable with like people's 401ks running in these things like that that's like I think with mem coins and nfts it's like the stakes are medium like the volumes are real and the

numbers are real and there's real real money at stake and people really need to take it seriously but uh we're not yet like dealing with like people's uh savings right and I want the network to be so robust that I can tell like you should you know don't trade on NASDAQ trade on salana like it's going to be better pricing for people it's more fair more transparent that that's the ultimate goal because that like there's a whole I was more I was more I thought it would take four years ago I would have said we're ready in a year now I'm like this is going to take five years to fix just those problems are are so hard then maybe just one more push back

on the on the on the on the thesis of um yeah it needs to be faster and it needs to be um I have an alternative thesis that um I think there is pretty good um literature that shows um that at some point um yeah uh faster uh faster systems do not lead to to more efficiency uh but that there are Alternative Market structures namely B auctions or or um yeah microbatch auctions and to me that seems like a very interesting approach has been the approach that I have always been pushing for blockchain because if you have a

block then in a way that is kind of you can see it as a batch and you can try to do things like single price clearing in this uh in in in this block so that is in my View kind of a counter rout to this we just need to be faster to to to solve things I actually agree with you but I think my batch aution is 100 milliseconds not not fair not not not 12 seconds yeah but I mean I mean I think my my counter point would be how many real world events really happen in uh in in in 12 seconds so I mean I think is theoretical argument that that if if well to beat NASDAQ I think we need like the latency to be basically the round

trip around the world and for the inclusion latency to be shorter so Lo local block producers that are concurrently within this 120 millisecond auction I think at that point you can reasonably argue that it's as good as price Discovery assuming there's no like Mev extraction we solve that throw some salt over knock on wood if we saw those problems uh I think it's very hard to argue that a faster system is more than marginally better I think at 12 seconds you have like thisinformation games that are that are still harder to solve because you

literally can go to NASDAQ take the trade and then arv against the chain and like that that's the opportunity that I want to like once once you eliminate that for the most part then Trader that sees that newswire and Bloomberg they look at the chain price or NASDAQ price is the same price then it's as good you know but like I I agree with you you don't need to go to like below that latency for a global system um because the world you still have like the event that happens in Singapore still has to go travel to New York right so you have still these embedded latencies that are on the order of you know round trip time around the world yeah and I mean I think the with regards to the whole you know Finance coming on chain and stuff I I I I do

think there's a huge upside even with all of this you know mem coin defi stuff is that you know in the end a lot of the the infrastructure right the applications the ability to compose different protocols to collateralize one thing and the other and I think there's just so much happening there and so much progress there and then I think once you plug in more traditional Financial Assets in there you you just have a very powerful system yeah on the on the plus side your if your risk engine survives mcoins and crypto it can deal with like real world assets that are much more

stable that that's the the hope at least is it fair to say for you blockchain means financial applications or do you see other things it's a good question I think like I think this it is like kind of melted with the internet like if you have truly globally Global Payments with no friction every everyone can pay everywhere that's very different than the the way the internet works now because you effectively because you don't have money on the internet you have all these subscriptions and all this kind of friction that created these silos and around ads ads as a business model instead of just a

yeah so like and that model silos everything right YouTube wants its own Silo like Facebook wants its on Silo and they're very they're fighting each other right to for market share you still have some of that but I I feel like just making it easy to pay everywhere and everyone could start unraveling it in in a more open way um and I like the web I like the idea of like you know minimize the cost of publishing and like let free world free market figure it out right like I I think that that's cool and and kind of a really cool beautiful thing um I think the finance will unlock a lot of other use cases that I'm hoping are are

destructive to the big kind of big Tech monopolies but we'll see cool you want to share anything else that's like on your mind at the moment salana mobile is coming out soon so stay tuned oh yeah the the secret buil a phone yeah Seeker uh we're trying to disrupt the duopoly what's your hope for the phone and like how what what you see is the role of the phone so the goal is to get uh enough crypto people in the same ecosystem to where developers have like a distribution Channel and there's like 150,000 pre-orders that's a reasonably sized group for a crypto app that's

actually like 50,000 daily active users is huge um so if we have the if we were able to capture the right kind of audience and there's a high probability that we were because people have to pay 500 bucks for a crypto phone those are kind of the users that you want as a developer in crypto so they have money and they're already Crypton native if you can build apps for them that keep their attention and they're like super cool you're saving money on the 20 to 30% rake that Apple and Google charge you know we talk about just disrupting Finance they charge basis points Apple and Google charge thousands of basis points what is

that like 3,000 basis points right or whatever it's absurd rake uh it's just crazy that for like 20 you know 20 years now that they've been able to get away with it so to me that like massive massive rake that they take seems like an opportunity because if devs have can distribute to crypto users and there's enough High spending users in that distribution Channel they will actually look at their like top 1% users that are the spendest users in iOS or Android and literally give them the phone for free or like offer them incentives like their air drops or whatever that that's the hope that we can get that flywheel work working if if it works then that's like a huge opportunity how how strong will be the

connection between the phone and the chain I mean I assume there will be by default wallet on the on the phone yeah there there's an embedded wallet and an enclave to run the seed phrase and there's a bunch of work to kind of unify The Experience so people don't have to switch UI it's more like Apple pay um that that's the goal uh I'm actually not like opposed to adding ethereum support or anything else in the future um it's just these are like iteration times with Hardware so long it seems like we've been at it for a while but this is just like the second release it's and got to keep the team focused and and ship you know and I assume technically it's it's it's based

on Android or yeah it's Android yeah yeah vanilla Android with The Enclave kind of wallet signing feature out it yeah I know I mean good luck with this initiative certainly think the uh reserves uh yeah should get more competition if we lose because they compressed their fees then that's the beauty of capitalism then that worked right like a competitor was able to change the equilibrium in the market and that that's an awesome outcome cool well thank you so much for coming on and to it was really great to have you and I super excited about the salana road map and the pace at which it

the ecosystem is moving and you know all of the things that are ahead thanks for having me in this is super fun