Solana's MEV Inflection Point: Users vs Protocol | Deep Dive | Eugene & Lucas

Transcript

so it's really a question of like sovereignty over the block space does the network own the block space does Network own these like account hotspots or is that something that belongs to the application that created the hotspot so like who who sort of deserves that economic value kind of a philosophical debate at the end of the day of who who like owns the block Bas and deserves the economic rights to it hey everyone this episode is brought to you by say the Blazing fast parallelized blockchain which is unlocking salonik performance for the vast ocean of e devs out there now you're going to be hearing all about say and their new V2 upgrade but if you take away one thing the evm is here to stay there are some problems with it

which we're going to get into later in the episode but say and especially their V2 upgrade is helping solve that so thank you very much say for making this episode possible hey guys big shout out to Unis swap Unis swap is delivering the best onchain trading experience period Bar None they've got a bunch of cool new features coming out like Unis swap X limit orders realtime data insight we're going to be hearing all about those features later in the program but for now un SW thanks for making this episode possible we get right back to it all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-host today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied

upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode all right everyone welcome back to another episode of bell curve U today I'm joined by two beat guests Eugene from Ellipsis and Lucas from jto fellas welcome hey thanks for having us on again Jinx um guys I'm I'm really pumped to have the two of you on here we're just mentioning before we got on I think this is almost the one-year anniversary of the first salana me episode that we did with hu as part of that me season which was a t of fun and uh maybe you know one of the strongest episodes of the season

I thought and it felt like a really appropriate time to revisit the topic of Meb on salana because feels like it's at a little bit of an inflection point in terms of the overall approach to dealing with and mitigating me and it's going in a very different direction than ethereum it's going and I want to maybe before we get into so the the interesting philosophical Divergence that's happening right now for folks that might be a little bit less familiar I think many listeners will have at least highle mental model for how meev works and sort of the transaction supply chain on ethereum one of you guys just give just a little bit of an overview about what is sort of the some of the critical differences in between the ethereum transaction Supply Chain versus how

things work over in Solon I can take a stab here and then MCAS can correct me on anything I'm wrong about um I think there's a few big differences between let's call it salana of block building and ethereum block building the first big one is where transactions get sent to by default so in the ethereum world previously the vast majority of transactions sent directly to the men pool these days they're sent more to private men pools for me protection uh this is never the case on salana where the default Behavior has been when a user sends a transaction to an RPC the RPC will forward the transaction directly to the leader and and the the

next Future Leaders as well so there's no like big public gossip meol uh which means there's less opportunity for direct front running or direct back running without without uh something out of protocol building up the men poool and then the other really big difference in my mind is continuous block building versus discreet block building where under me boost today and even even without me boost the default Behavior for Block building on ethereum is effectively to let a bunch of transactions pile up in the men poool for 11.9 seconds of a 12C slot and then build the most valuable block possible in that um last bit of time whereas on salana the default behavior is for the

leader to be building the block uh incrementally continuously as transactions are are coming in and so this trades off um building the theoretically most optimal block with uh pre-confirmation for users by default uh partial blocks getting streamed out to other validators and one big uh engineering difference here is the cost to build and propagate and replay the block is actually somewhat significant relative to the block time so if you were to build the blocks completely in a in a discreet way you run into some computational issues and you run into some network issues trying to propagate

the block and make sure it gets included Lucas anything to add there um no I think covered it pretty well I think the the stream the block streaming piece that he was just talking about is definitely like the the much harder piece when you start to look at me but I think that was pretty good overview of how that works can you say more about that block streaming piece actually wasn't something I was super familiar with I'm sort of loosely uh you know aware of how the attestations work in ethereum but what's up with the additional why is that where so much of the computational load and work is in Sal yeah so I guess you know Eugene said that uh e theum you can basically wait 11.9 seconds and then

build your block and Adit it and the entire thing is emitted on this kind of like interval the the slot time interval on salana the validator is basically every validator kind of has their own like internal uh I don't even know if I want to call it a mempool but they just have kind of their own internal state of like what the pending transactions are and they are process as soon as the slot starts uh so like a time equals zero they start processing those transactions and will start propagating them out to the rest of the network immediately and it's basically doing that until it reaches 400 milliseconds or the block is full

and while that's happening what you know processing it's sending them out over turbine as shreds and uh while that's happening every other RPC and validator on the network is receiving those shreds reassembling it to the transactions and actually replaying it so it's it's kind of cool it's just like a you know it's like a video stream as opposed to like ethereum it's like kind of like choppy like you like on ethereum I guess you get like the whole like picture at once but on salana you're kind of just building the picture like the lines and the pixels are being streamed out to other validators and they're reassembling it live super interesting and you know

maybe to uh you know Eugene underlined this this point that you brought out about the I think the discreete block building versus continuous block building is super critical because the approach that ethereum has largely taken around me is uh running these sorts of auctions right and there's sort of this principle where you want to extend end out the the length of time that you have to run this auction because you get more data right you have more view of transactions that are going on you can build a more profitable block I think one of the other big differences in between ethereum versus salana is this idea of deterministic ordering right the way that the fee Market works on ethereum is you can essentially pay pretty granularly to slot where you want one or multiple different transactions

to fall within the block whereas my understanding of the way that it works mostly in salana today is that you don't quite have that option as much right there's um you do have you do have a priority fee that you can sort of pay for but because of something called Jitter it's just you don't nearly as much have that much granularity in terms of where you can place your transaction and to avoid myself the embarrassment of explaining Jitter maybe Eugene you could give an explanation of why that is and correct me if I just said anything wrong there yeah that all sounds pretty accurate to me uh I think one way to think about it is on ethereum if I send a transaction with a slightly higher priority fee than Lucas's transaction and we're both in the same block I am

very very likely to have my transaction land in front of Lucas's or if exactly one of our transactions lands it's very likely to be mine whereas on salana with continuous block building and given the way the default block Builder or what we call the scheduler on the salana side the way that's implemented uh you don't really have any such guarantee so there's some combination of latency and priority fee and what we call Jitter which is sort of this Randomness um which affects who lands and how early you land in the block and so this creates an incentive to spam because if I send 10 transactions

instead of one I'm just going to be a little bit more likely to land ahead because of this Randomness factor and so we call that Jitter um and as we understand it today there are a couple main sources of Jitter on salana today being the first the network layer uh as transactions are sent to the validator in what order do they actually are they actually received by the validator and the other is within the scheduler itself so the block Builder because it's receiving these transactions and trying to include them and execute them uh continuously there is uh some some Jitter that that gets created there as

well yeah I think a lot of and I guess to comment on that I think a lot of the focus up until like maybe a few weeks ago public I guess the the public focus on this problem on solanos with respect to the scheduler but now we're kind of seeing a lot of this move to the networking layer and um you know you know I guess back in the last run and maybe up until like mid 2022 salana was using UDP as the networking protocol to send transactions and uh basically people are just blasting the leader with transactions like 50 gigabits per second

of like nft mints and Arbitrage and stuff like that so they added quick which kind of lets you like back pressure uh senders and you can do quality of service based on the amount of stake you have or other you know kind of just make up whatever rules you want but it kind of lets you back pressure people like TCP does and now we're kind of seeing people start to uh you know meev Searchers are pretty clever and we'll find ways to uh take advantage of things and uh I don't want to go too much in detail but you're you're kind of seeing people start to uh um like abuse or take advantage of uh

the quick implementation I actually do want to get into this a little bit because just for folks who might not even be aware like when when you say networking can you just describe what that ultimately is then can you also just Define what quick is because it feels like that's a really core component of the networking approach on salana yeah so earlier when Eugene was talking about the transaction supply chain on salana um you know basically you send your transaction to an RPC server it can be like helus Triton you know maybe you run your own whatever doesn't uh it's not super important but that will look up the current leader and then the next like one or two leaders and uh it will forward that transaction

to the validator over the internet and the protocol that it uses for that is quick it's cuic it's a protocol I think it is invent at Google and it's it's basically um UDP is connectionless uh and then there's something called TCP which is connection oriented so like I have to establish a connection with you and there's like some handshake process and um quick is kind of like a combination of those two things where it's it's using UDP but it's there's some connection to it and um I guess the one benefit is that it doesn't have head of line blocking like TCP does

and uh I don't know how important it is to get into a line blocking on this call but uh basically um yeah the validator uses quick to RPC clients and uh validators use Quick to communicate and so there's a quick server running inside the validator which uh I think it's it's a 500 unstake connections and 2,000 State connections and the I think the the theory is that um staked senders should get more priority or more better quality of service than the unstake connections and um yeah I think that's that's kind of a high level of how the quick stuff works

awesome so I want to get into maybe to just summarize the high level construction of each one of these systems just one put up against one another I want to start to get into sort of the pros and cons and just kind of formally Define what the different approaches are that ethereum versus salana has taken in terms of um frankly just dealing with Meb r large so on the ethereum system this is changing be but basically you could very simplistically think about it that all these transactions that are happening in defi or whatever get sent to this public M poool that everyone can see uh various specialized actors called Searchers put those things into bundles they submit them to a builder which goes to a relay and then ultimately that gets signed by

proposer and then propagated to the network and the defining characteristics of this system at least from my perspective is the sort of idea that me is um going to happen no matter what uh the the trade-off of everything being very Democratic and out in the open is that um users end up getting some like front run basically um front run and back run which is called sandwiched so even though we like this idea of transactions being public although I will say more and more transactions are moving towards sources of private order flow the negative externality of that is that users ultimately end up getting taken advantage of and the way that ethereum has dealt with this is to return that meev to initially proposers

uh right to validators so it's like okay well not great for users of the network but ultimately it's going to go to proposers more recently through things like orderflow auctions it's being returned actually to users salana it looks like um is taking a a well there's very different construction of the protocol there isn't a public mem pool pool everything just gets forwarded to the leader um but one of the disadvantages of the approach that Salon is taking is um you know some of the negative externalities that the ethereum approach thought to avoid which is uh spam and then also maybe we can talk about this a little bit later there's a because spamming is very important uh to being able to land arbitrages and things like that on chain then there's a there's a huge push and incentive towards minimizing latency

which can lead to collocating Services things like that which we decided that probably wouldn't be good for the overall health of the network or the fairness of the network in large so it looks like um I mean you you guys tell me like my from my vantage point it looks like I think there are a lot of reasons to be not super happy with the approach that ethereum has taken towards Mev I think it's just a really tricky thorny problem there's no good one way to do it the biggest criticism of the E approach to meev is that the user seems to come last I think in in many of these situations or they have for a long time um and salana it seems like it's taking another approach here putting the user first um so Lucas maybe I can segue this right after to you to talk about why goo

is discontinuing its U me poool but you know my follow-up question to you guys is going to be then how do we mitigate some of these negative externalities that ethereum is trying to avoid namely the spam and the uh collocation so maybe maybe Lucas um you could talked a little bit about how like am I am I viewing this sort of ideological Divergence correctly and then maybe we can get into the whole men poool part of Goo I think think so I think like ethereum is starting to move to this uh like thought process or I don't know what you want to call it but like they don't really like no one's really going to be executing anything on the L1 or they you know they're kind of pushing

everything to these l2s and I feel like like if you look at like the ethereum blog posts and the way that people talk They Don't Really ever talk about the users it's kind of just like ultrasound money and like you know whatever narrative they're they're trying to push whatever the flavor of the week is and I guess the the common theme is that there there's not really any focus on the user and so um yeah I think like salana the there's definitely different different network Dynamics where I think this can work uh like the decision that we made which I'll get into in a bit is like I think it will work I think the

network is like small enough and has seen enough [ __ ] that people like have a lot of stake in seeing the network succeed and so I think that you know there's the valider sets much smaller there's a lot of branded valids that have a reputation and uh I think that the Dynamics are just different and also salana has something to prove and that is that it's the best place to build it's the best place to do execution and uh has a a very bright future ahead of it and I think ignoring users is not going to be a successful uh strategy like we haven't really seen any PBS or

like front running on l2s like why do you think that is it's because they actually care about the users and they want to see people stick around and no one's going to interact on L2 if they're getting screwed over um so yeah I had this product called the mempool is like one of the first things we built in like started building it in like beginning of 2022 and basically let you see transactions before they are executed um we released it from the very beginning you know when we had like 3% of stake started growing to 20 30 D5 was kind of dead uh for a while and then all

of a sudden in like December there was a massive upti massive uptick in meme coin trading and just D5 volumes in general like I think it was like the first week of December um that we started seeing a lot of this and we just started seeing like behavior that we didn't really like um and so you know we tried a few things to stop it we tried to prevent sandwiching through code but kind of ended up being this cat and mouse game people were going around it and we realized that it would have been like a really hard and tricky game to play from an engineering standpoint but also operationally so we decided to shove

that and then uh we tried a few other things but basically um decided that you know we should probably be spending our time focusing on more positive things and so we ended up just disabling that product and uh yeah I mean I think the um it wasn't like an overnight decision we talked to a lot of people about it and you know we've been talking about it and trying to do something since December or January U but overall I mean I think seems like the feedback from the community is super positive and um the Mev tips like last week I think we were like a few hundred Sol from breaking our

record for the amount of Mev tips going through the system even when the me pool is enabled so there's still a massive appetite for meev and getting into the blockfest on salana I think we're actually doing more valid air tips than ethereum now doing around a million dollars a day so uh it's pretty cool to see that too like you know we ate a lot of [ __ ] for the for 2022 in uh the first part of the year but uh yeah pretty cool to see that and then you know we're also uh seeing massive adoption in the network even we disabled the M Pools I think we're at like 64 65% of stake today we're at right around 71% of

stake that's awesome man that is phenomenal uh I've got I've got a lot more questions for you actually to follow up on that but Eugene I wanted to get your take on everything that uh Lucas said about just putting the user first and maybe your comment on the sort of ideology and different approach and direction that Sal is taking to ethereum here for sure I mean I think the problem space is pretty different uh there's no Apples to Apples comparison here but at a high level I view ethereum as from a cultural standpoint really emphasizing incentive compatibility you see a lot of the narrative around PBS uh and the reason for PBS to exist is

around centralization of stake and stake flowing to whoever is going to be able to offer the highest apys so with some something like PBS you're going to be able to roughly equalize the staking yields across different validators unsophisticated and sophisticated validators so really helping to equalize um uh the solo staking opportunity and salana has a very different approach which is to prioritize user experience over all else uh I think we've seen that a couple of different times the jeto decision is one that's quite obvious where where you know users who are playing some of these shitcoin games on chain

just really getting screwed um by by sandwiching where when the user sets 50% slippage what they're really trying to say is not that I'm really happy to get filled 50% worse than the current price what they're trying to say is I want a market order and once you insert front running into the equation uh your Market order just turns out to give you the worst possible execution uh and we also see that today with with salana really focusing on these issues with the network layer and the and the scheduler where the user experience on salana has been degraded over the last few months because it's been operating at such high capacity such high throughput and uh so I think that's the

biggest cultural difference but again the problems are quite different where if you go back to you know 2020 2019 the sort of origin story of Flash B just when defi was taking off on ethereum because the men pool was public there were all these games that were getting played between these defi Traders uh some combination of Arbitrage and sandwiching and this is just happening in public this is happening in the mempool besides uh externalities to users there's also these externalities to the network and the focus was on mitigating these as quickly as possible and at that time remember there this is in the proof Work World there were only a handful of miners with significant

stake and they were already starting to one spin up their own searching operations which would create uh you know better economics for for some miners over other Miners and uh some were already making under the table arrangements with with Searchers and so I think avoiding accelerationism was a lot harder for ethereum in 2020 than it potentially is for salana today and it's not to say that like everything that was accelerationist on ethereum happened the the most high-profile example of this was there was an attempt to build rior as a service on ethereum and that

effectively got blocked by the social layer even though it would have been locally good for greedy validators to participate in yeah I think that's such an interesting bit of lore actually you can go back on a an old episode of zero knowledge um with one of the I believe one of the project Blanc guys uh talking about this it's an X flash Bots guy that was doing that um and it was the social layer I think the way at least he tells it right publicly on this podcast episode is that uh it was a DM from vitalik that sort of got him to stop which was the ultimate uh social layer but maybe actually to uh yeah maybe just because we're getting only the salon perspective here so to give you the eth

perspective what I think some folks might say in response to what you guys just mentioned is that one of the other big differences in ethereum versus Salon even though Lucas those are super impressive numbers like the amount of Me overall in ethereum for for a long time right was much much larger than salon and I believe is still larger today um and so I think I'd say maybe it's a little bit less about like prioritizing ultrasound money but it's more about like they were I know that um some of the folks over in ethereum land were extremely concerned about like the impact of latency and collocation um and very frankly worried about the impact of spam as well so the way that I've always understood it is like I I don't know if there's a way to ultimately arrive at some sort of shangra law type solution

but you know if you don't charge um you know I think the maybe the counterargument to what you guys are describing is that yes well salana is a very small community today ultimately if the network is going to be successful over time it's not going to be like that and just saying saying hey like we shouldn't you know sandwich users that's not going to work as the network ultimately ends up scaling and you need some sort of structural uh something structural in place to get people to stop doing that so that that's what I guess I'm not really still understanding in terms of uh the vision here for salana and actually we were talking about beforehand it looks like uh this is one of the things that people mentioned Lucas when you guys discontin to mempool it's like well this was open

source right so what's to stop another team from just coming in and spinning this up and I think it looks like another team has actually done that although maybe they're exaggerating some of their their metrics a little bit he everyone want to give a big shout out to today's title sponsor SE now I want to talk to you guys a little bit about why I think SE is cool from a design standpoint a big problem that it solves for E theevs out there and then some cool stuff that se has coming up the reason I like say from an architecture perspective is again it's a very fast blockchain parallelization all of that stuff but SE has essentially been custom building block space which is for Consumer apps and dexes now they have some very cool featur shes which enable that so twin turbo consensus optimistic

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know the history of bell curve you know I did an entire season on dexes with Dan Robinson of Paradigm that one was the blast we ended up talking about Unis swap quite a bit so I'm a huge fan of the product and team there are three really cool new features that I want to talk to you about today one limit orders two real-time data and insights and three Unis swap X so limit orders you guys know what those are but now you can buy and sell 700 tokens at your price on your turns also we're going to get into this later but it's powered by Unis swap X so you don't have to pay any gas fees two realtime data and insights now when you log onto this Unis swap interface you can see real-time charts transaction logs pool data and project information looks really neat all that information

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is going to look like here especially if you do have significant amounts of um you know real state on the L1 the problem looks very different for l2s um and no one no one I think is representing this jto decision uh removing the mempool as this thing that is you know going to fix the network forever um but it does mitigate a lot of the issues that we were seeing uh in the first couple months of this year uh I would guess on the order of high six figures low seven figures per day of using welfare being lost to the sandwich Bots and I think that's already you know a pretty big win uh

it's definitely not a long-term solution if you play everything out to the equilibrium uh in the long run yeah you probably have some construction that looks like PBS is um You probably have some something that looks like either public men pools or or private M Pools because that's like the economically most efficient uh thing to do or at least more eff than what we have on on salana today but the barrier to getting there I think is a lot higher on salana because of the throughput because of the pace at which the network runs compared to ethereum where yeah kind of like time is stopped for 12 seconds between each block and that's kind of an eternity in um in compute

time um but at the very least this buys us sometime uh I think everyone realizes you know know you can't rely on the social layer forever no one expects to rely on the social layer forever but if you can buy another year or two of better user welfare uh and then give some of the big brains a little bit more time to work through what some of the longer term Solutions might look like that's still a huge win for the for the users and for the network as a whole yeah I think I think just that that is one thing I think uh that it just feels like a really Stark difference and we'll just have to see how it ultim ends up playing out I think what ethereum would say is we are thinking about the users we're thinking

on a very long time Horizon that we don't want a network which is co-opted by you know a couple big uh entities that collocate with different validators and they just get to land all of their transactions and then in the long run even though it's not great for users today at least we're building a more Equitable Network um the issue with that from where I see it is that actually you have they have kind of wound up with like three Builders right that build all of blocks and there are two large staking op it's Lido and coinbase and actually um interestingly I'm not sure if you guys have heard anything about this and not sure how much I I heard from one of these uh builders that actually you know that whole assumption that users would go to where yield is highest is actually not necessarily true

and the convenience of something like coinbase is much stickier than everyone thought it was ultimately going to be um so maybe some of the core assumptions that went into the current uh PBS implementation over on ethereum weren't necessarily sound either but that's that those those are sort of the pros and cons the way that I see it is like they do have like ethereum does have this very long-term oriented view but some of the negative externalities I think we see playing out already whereas on salana today we've chosen to prioritize the users today and to not create infrastructure that's ultimately going to sandwich them but we don't really have like a long-term solution about how to avoid that holistically in the long run yeah and on the ethereum side today so first of all I totally agree with that representation that uh a lot of

stake is not particularly sensitive to the staking yield if you're getting 4% or 4 and a half% most people or a lot of capital just doesn't care I think one issue with a lot of these econom a lot of these economic models they don't actually take into account all of the preferences of the user like uh just kind of nice to have uh staking within coinbase even if I'm paying 25% of the yield back to um the coinbase uh entity uh a lot of capital may also have you know some sort of compliance requirements that prevents them from you know running their own validators or whatnot um and so a lot of the economic models sort of break down at the at the edges here and what you really care

about is how strong each of these incentives are where you know if the staking difference was instead of 4% versus 4 and a half% like 4% versus 20% Then yeah maybe you would see or almost certainly you would see a lot more gravitating towards the 20% and so in that sense you could call PBS a success where the um the the staking rewards are close enough between all all of these different types of uh staking opportunities but the convenience factor is pretty big yeah the convenience factor I feel like is just one of these things frankly it's what makes base pretty interesting over on um the ethereum rollup side it's just like they have so many users I'm sure that user flow is going to be really easy yeah

it's just maybe an interesting thing to to think about I've got a question for you guys because I have a lot of trouble reasoning through this which is I think like zooming out of both these different systems and the tradeoffs that they've chosen to make we are trying to avoid some of what we view uh the problem of trafi being like some of the problems in trafi is like one there's a lot of like regulatory capture and lock in right like two there aren't very many entities which are responsible for you know doing things like internalizing order flow uh you know matching buyers and sellers Etc and theoretically over time that could lead to like pretty unfair unbalanced practices and I think everyone's goal whether it's ethereum or salana is to set up a system that mitigates some of

these tradeoffs but it does feel like we're sort of starting to gravitate like the laws of you know economics and uh physics are starting to pull on our networks here and over in ethereum land like we have wound up with uh three builders that build all the blocks um albeit we have a really decentralized you know proposer set it feels like over in salana like maybe what we're a little little bit more okay with is you know we don't have this PBS separation yet so we do have more validators but it feels like um there are more companies and maybe Searchers that are kind of doing like mini colocated you know like they're running their own validator so that they can place transactions more quickly I guess like from from your guys perspective when you when you really

zoom out you're like what are the what is the end state that we're trying to avoid and what are we doing better here like what are some of the tradeoffs that you feel like are red lines that we just should not should not cross versus I don't know just like being totally realistic and pragmatic like what are some of the maybe less you know ideal sort of tradeoffs that we're going to have to accept that but aren't the end of the world if you know what I mean uh yeah I think um trying to I think one of Solana's strongest uh like cells is low latency but that kind of turns into this game

where you know you just over a long enough time Horizon maybe a bunch of Stak ends up next to like the major Sexes like in Tokyo or something um so I think uh trying something I think a lot about is like trying to avoid that uh while also not slowing salana down or like impacting the performance of the network so much that it loses one of the main in points I guess like if you if you think about me acceleration on salana like I think the most optimal thing would probably just be like every leader is four consecutive slots so you could just like hold all the transactions And just pack a block uh

pack your last block with like all these transactions that have been delayed a lot um obviously not ideal and I think um you know you'd probably piss some Market maker and Searchers and other things like that off but you would make a lot of money so I think that's something that I think a lot about is like how do we kind of balance those two things like how do we get low latency but also not make it low enough to where you just have people you just have these large forces of gravity around economic activity uh on like the geographic scale so you know something the way that that might look is like um I guess we kind of try to avoid this right now with our

block engine where we're running 200 millisecond auctions but that's still like kind of long so maybe we can like bump those down to like 50 or 20 milliseconds or something like that on a a longer time Horizon um but yeah I think that's like the thing I think a lot about kind of curious to hear uh maybe a different angle from Eugene yeah at a high level I agree I mean at the end of the day no matter how much research you do the speed of light still exists economies of scale still exists um you know when I think about

democratizing Finance I think of that on like a few different angles one of them is accessibility uh and one of them is decreasing the barrier to entry the really nice thing you get by lowering the barrier to entry and lowering the barrier to Innovation is you increase competition which not in all cases but generally improves the end user outcomes and so what we do see in Trad today is there's a lot of capture um you know you have these entities that have spent tens of billions of dollars in R&D and they want to protect those Investments and they're in these pretty entrenched positions and it's very difficult to compete with them and that's the type of thing we'd like to avoid uh in crypto to the extent that is

possible and I think like again going back to the ethereum side of things the goal of PBS was to democratize access to me to all proposers so the less sophisticated as well as the more sophisticated proposers because we know they're centralizing forces there and the goal explicitly was to move that force from the proposer layer the validator layer the consensus layer over to this new block Builder layer and I don't think anyone really thought that you're going to have have you know 20 competitive block Builders each with like 5% market share there's just a bunch of centralizing forces here but at least they're not on the on the validator layer

and even even today we're already seeing these forms of entrenchment by these block Builders mostly in the form of private order flow so there's like two types of private order flow one of them is order flow that a builder generates themselves so this is a builder that's doing their own searching or perhaps you know someday like uh coinbase or binance wanted to start up a builder they send a lot of transactions on the network so that's sort of their own order flow that they can choose to keep for themselves and then there's this other type of private order flow which is coming from the external world I believe the biggest sources today are like some

combination of uh these private auction like things like Meb boost uh Meb blocker as well as from the telegram trading apps and that is a little bit more worrying to me because that really does increase the barrier to entry on the on the Block building side where if the top three block Builders have access to this flow uh and that's organized through these uh I don't want to call them like back room deals but very public deals uh a new block Builder just not really going to be able to compete with them and in fact like the more market share

you have the easier it is for you to give better guarantees to some telegram trading app that you're going to be able to include their transactions in a timely manner it's going to be less costly for you to do that so there are some uh let's call them economies of scale there and then of course there's this verticalization which again relates to the speed of light where because the speed of light exists and it is uh not infinite you get this verticalization and collocation between the searching layer the building layer uh and the relay layer and if we really care about lowering the be entry and increasing Geographic um Geographic

decentralization that's just something your old is going to have to fight against and at the end of the day the network Val do have to come into play here because the most economically efficient system is going to be one even if it is on a blockchain it's like everything is in the same data center to lower the latency as much as possible and there just has to be this value of geographic decentralization and at some point the the network has to decide in some in some way that this is a a strong priority I agree with you on that I think that eventually like the sort of there's this early wave of early there

is the early wave of adopters in crypto very ideologically driven for good reason right like and that's what has created so much staying pow staying pow such a strong Community Etc But ultimately there needs to be some sort of market value to the decentralization that we're creating here otherwise like most of the world isn't ideologically motivated right like we need people to actually use this because they have a selfish reason to do that I do think that exists though um actually maybe a maybe a dumb or contrarian take that I don't really wish but like you know it would take like one government Crackdown to sort of show you the value of this uh it could be this Overton window shift and everyone just wakes up like oh yeah this isn't a nice to have it's it's a need to have so I agree with you on that

Eugene I think that's yeah the the like I think censorship resistance is very important to the network but the users are not going to care about it until they're getting censored and then from the network layer at that point might be too late so you might have to do things that are a little bit unpopular uh or you know the people who care the most about the users today would disagree with from a prioritization perspective but hedge against some of these tail risks down the road can we talk a little bit about some of the just what's going on on the ux of salana right now so I feel like you know the the amount of activity that's happening on salana has exploded recently you guys would know that better than anyone certainly more than me and

I'm maybe if you have some statistic or something off the top of your head but it you know it feels like Salon is actually winning in terms of things like Dex volumes uh even the transaction fees that are landing on chain I saw surpassed Bitcoin or got very close to bitcoin which is pretty nuts uh so but one of the one of the uh side effects of that which is maybe uh slightly less good is the ux has been impacted here so there have been more failed transactions it's taking longer for transactions uh to succeed the fees have started to go up um and the network has become a little bit less usable in recent days so I'm curious like you were I think uh Lucas you were mentioning this a little bit there was a debate between I think there's the uh the margin five folks and

Labs about is this a scheduler issue versus a networking issue it seems like we've aligned on that it's a networking issue but yeah what's I guess in your guys mind what's driving the some of the degradation in ux on the Sal side of things and like do we have a fix yeah so yeah the there's been an insane increase like record volume um there's a lot of mcoin activity um and you know which at the surface seems like pretty insane but uh if that's like what people are doing on your network then you need to uh you know make sure you're taking care of them and so I think uh last time I looked validators were getting around

50,000 packets per second 50,000 transactions per second and you know block are like roughly I think they're like a few hundred or like a thousand non-vote transactions so there's there's not enough block space um there's a few things that are going on right now one is kind of looking at this networking layer a little closer and figuring out how to make it perform better um there's some schedu or changes that are coming up in 118 which is the next software release which should be live in like the next one to one and a half months uh which

basically the the schedulers change to have less Jitter and respect the priority fees more so I was actually like if you look at blocks now and you like order if you look at the priority feed throughout the Block it's basically random uh I looked at some of the blocks where there's some canaries that are you know with a very small amount of stake running 118 with this newer if you look at those the priority fees are nice and ordered so I think you know fixing the networking layer fixing Scher is huge um there's a lot of discussion around fees uh I think I've been a part of like 20 different conversations very heated conversations around fees um you know does salana need Dynamic base fee what

does that look like um things like that um and we're trying to help out with some of our infrastructure as well uh at jto trying to um I think we have capacity to help out kind of speed these transactions up so providing people that infrastructure and things like that um but yeah I mean these are all like obviously in a in a perfect world these things would be working perfect perfectly and everyone would be happy but salana is like hitting some massive growing pains and so I think it's good problems to have and uh shows that people want to use salana and people are excited about

trading on it I I also I W to just because I've been pushing a little bit uh on the ethereum side of thing I do want to push back on some of these people some of these takes that I've seen where it's like oh you know Sal is a meme coin chain sort of looking down on it as being illegitimate like a lot of meme coinery that used to happen on ethereum and I didn't see anyone pushing back saying that wasn't legitimate activity back then you know so I feel like that's not a very fair criticism that I've seen come out so I don't know yeah just it's I mean yeah it's pretty crazy if you go to uh I think it's analytics. Soul scan. okay if you scroll down they have a uh there's a a chart showing the number of new tokens per day and let's

see um I mean back in like let's see back in like December you know there's maybe 500 or a thousand um today there's been 7,000 so far we peaked a few days ago March 15th there was almost 10,000 new tokens launching a day man that is nuts and you know what I I just feel like every freaking discussion that I have these days devolves into meme coins so I don't really want to give a take on Meme coins but I do think it's indicative of like where new activity is happening like I I just don't think you could look at this any other way that this is extremely positive that this is happening on salon and probably a pretty good indicator of like when new users come where they're

ultimately going to land right like it feels like this bodess this is a good forward-looking indicator for who's going to end up acquiring more new users this cycle so for sure yeah I mean this is like a pretty crazy metric and then one more I'll share is um this is uh defi llama salana volume and yeah you can see like you know let's go 200 roughly 200 milon dollar a day in November um and then you know a few days ago it was hitting uh like above three billion looks like we're right around one and a half billion today so there's just been this crazy uptick and uh you know good problems to have but it's also

starting to stress some of the engineering and potentially economics of salana we call that a champagne problem but but yeah Al also a real problem what do you guys think uh you know I I would be curious to get your take in Eugene you're at our office is uh a couple months ago we were talking about solopi markets in general but um it does feel like that there's kind of this debate that was brewing now is maybe like uh moving a little bit more into the four and talking about doing some sort of fee overhaul on the salon Network like you know ultimately now everyone talks about 59 within the context of the burn and

tokenomics and stuff like that but originally it was really intended as a ux upgrade for ethereum right like before that ethereum has obviously much higher fees than salana there was essentially a first- price auction I don't know if you guys remember interacting on ethereum back then but it was impossible it was like you know you had to place you had to place an order some amount of gas you just guessed at most of the time it didn't land you found out 10 minutes later you're like God damn it you know like what am I so originally 1559 even though now it's always gets touted about like the tokenomics there's really just a ux upgrade and I think the question is like is salana going to get one of those eventually and maybe Dynamic base fees just like 1559 would be a part of that Eugene what's your what's your take on

the maybe you could summarize some of the debate that's happening internally in the salonic camp for folks who aren't as in the weeds as you are yeah so the fundamental thing that's happening is the demand for Block space exceeds the supply of block space and so you need some mechanism for allocating the the block space uh among that demand and so like one very natural thing to do is increase the price until you've equalized supply and demand obviously you would also like to increase the amount of block space but you can't do that forever um and so yeah there's this like big ux effect on salana today I think basically all the arguments you see on Twitter about salon's failed transactions are wrong there's a lot of

nuance here uh the first piece is that there's multiple types of failed transactions so when you send a transaction to the network let's say this like 6 months ago you're transferring from just transferring funds from one address to another you uh sign the transaction and send off to the network and you know less than a second later you hear back from the network it's like okay you're good to go you paid like one 100th of a penny and now what happens is a lot of times your transaction just never makes it onchain because again the demand exceeds the supply which means plenty of transactions never show up so there's that type of fail transaction

which is the user sends it off they wait for a minute and they just like never hear back from the network essentially like you you sent your transaction off and then it just like disappeared Into The Ether and then there's this other type of fail transaction which is your transaction landed on chain but the state change that you wanted did not occur this would usually be some type of trade where you're buying some mcoin you said a 10% slippage and then by the time your transaction uh hit the scheduler and was scheduled for Execution and made it into the block the price had moved enough such that uh your trade doesn't actually go through and it is really difficult to observe the former because you can't like if all you're looking at as public

chain data you will never be aware of all these transactions that have been sent out that just never made it to The Ledger itself and so only like RPC providers and validators have access to this data uh and then of course a lot of those transactions that are coming in uh if there's 50,000 of them I assume a bunch of them are these like spammed arbitrages and and nft mins when those are happening and you know at Ellipsis Labs we're application developers and we have some amount of users and when it's really difficult for users to to land the transactions it means our application ux is a lot worse it means the users are complaining all the time and the only

lever that app developers today have to pull is increasing the priority fee and because this mechanism doesn't work particularly well with the current scheduler it's not very effective and what ends up happening is the application developers just like continue to increase the priority fee so massive ux degradation and at the end of the day in the same way that the meme coin Traders just want to place a market order for some meme coin the vast majority of users just want to know hey salana just tell me how much it's going to [ __ ] cost to land my transaction and then I'm going to decide if I'm

going to pay it or not and if I decide to pay it you're going to include my transaction really quickly and for something like this you are going to need some some type of fee model whether it's uh enforced by consensus or not um where you're really giving the choice back to the user in terms of are the transactions going to make it on chain or not and so I view the the the scheduler issues or the fee issues as separate than the networking layer issues I think there's like pretty significant can room for improvement on on both sides and there

is progress being made on both sides but even if you had a perfect networking layer at the end of the day when the demand for Block space exceeds the supply you're going to need some sort of mechanism here and one very natural thing to do looks sort of like 1559 where you know we can toss out anything about the burn um the the real important piece there is this natural fee escalator where if you're seeing a bunch of blocks that are really full uh that probably means that the market price or the market clearing price for the fixed Supply is actually higher and so you need to increase that price and if you can do that in a predictable way then you can um deliver the ux that we want to

have and this is the basis behind one of the proposals that is out there to implement an in protocol fee model it's a little bit different from 1559 because there's not just a global block space limit of 48 million compute units or gas units per block there's also a uh per state uh per account um compute limit and so this proposal is out there which is called uh simd 110 implements this uh sort of local fee

Market where you have to pay for each account that you touch in a transaction and the amount that you pay is based on prior utilization of of those accounts and I think in Ideal World you would implement it both at the per account layer as well as the at the global layer because again the demand is just like really really high relative to the supply today and you are going to run into some ux issues here no matter what because from the end user perspect perspective I think the vast majority of user demand is really insensitive to whether the the price to land on chain is you know one 100th of a cent versus one cent or maybe even versus 10 cents and the folks

you're going to price out here are going to be the spam Bots which I think is still a pretty good outcome but I think if activity stays at as is basically no matter what sort of fee mechanism you put in uh yeah the fees are going to be higher than the were uh six months ago and that's just a function of the demand increasing so how similar Eugene I think back in whenever we did this research hang in the office people were talking about something called pra um which were program rebatable account write fees which is sort of similar right it address it addressed this um this idea that you can basically um right lock any number of accounts now for free or up to

like 64 or something crazy like that and this would be an automatic um payment for doing that which then the owner of the account could choose to rebate I mean is this sort of a similar type idea and do we need to fix something with because basically what it sounds like you're saying is that for the way the Bas fee gets set in 1559 over on ethereum it's sort of a there's a global you're not you're not doing uh pricing based on discrete pieces of state or anything like that it's just this very Global um sort of unit of account which has sort of pros and it has cons as well um like you can make the argument that just because nft mints are popping off that shouldn't really impact defi activity and vice versa so yeah sorry

there was like five questions in one but um is this is this basically just a more it's almost like should listeners be thinking about this as um sort of the 1559 base fee but you can be much more specific um based on the type of uh State that's being impacted is that the long and short of it yeah that's exactly the way to think about it uh where the gas model in ethereum is such that you're basically trying to price all the resources um all the limited resources of the network into a single Dimension that we call gas now technically there are multiple Dimensions with the The Blob space markets as well yeah uh which operate on a different um or a very

similar model but like separate uh completely separate from the um the the gas market and on salana there's you know many millions of accounts many millions of pieces of state and this proposal would be to implement this type of Market on every single one of those pieces of State uh and that's done uh at least in this proposal at the at the network layer or or like like a salono wide enforced by consensus type of deal and the pr proposal that you're referring to which came from mango markets uh I believe in like December of 2022 so quite a while ago is more to put that fee decision in the

hands of the application developer so the application developer um will say sort of like hey I own this piece of state and I'm going to charge anyone who touches the state um some fee and then the idea behind that was if you're a some sort of defi application and you're seeing a lot of these uh spam spam like transactions that are coming through maybe a lot of them are failing you still want to charge the failed transactions that are eating up this block space eating up this limited resource and then rebate that's the r in PR uh to who you think the good users are so like one naive

implementation here would be I'm just going to charge a dollar to everyone who touches the state and then if later down the road I decide like oh these were like real users uh people interacting through the UI their transactions succeed rather than fail I'm just going to rebate that back to them so their effective fee paid for the state is zero or negligible whereas these spam Bots I'm going to make this uh opinionated decision to say this is like a bad use of the block space I'm not going to rebate you so it's really a question of like sovereignty over the block space does the Network own the block space does Network own these like account hotspots or is that something that belongs to the application that

created the Hotpot so like who who sort of deserves that economic value that's actually something that Kanto uh experimented with rebating the gas to the application developer uh for the or some portion of the the gas that their application use I think it's interesting model uh and it you know is kind of a philosophical debate at the end of the day of who who like owns the block bace and deserves the economic rights to it well it's it is a philosophical debate but I feel like it also is sort of an important debate that might end up coming sooner rather than later and one thing that at least I've started to hear sort of like Rumblings about is the possibility of salana l2s as well and I

I actually saw I haven't actually confirmed this with the team but I saw that like Zeta markets very quietly just launched or announced that they were launching an L2 on Sala um but I'd be curious uh if what your guys thoughts are maybe less on I don't know like general purpose l2s on Sal don't make an enormous amount of sense to me but maybe app specific l2s for exactly the reason that you're describing there Eugene less of a you know in ethereum we have l2s because gas fees are so high on the L1 that you needed basically to move a whole bunch of that compute essentially off of ethereum main chain up to this other sort of area but maybe the other sort of reason why you might want to do that as well is you just have a lot a

lot more granular control over your block space and the economics that you create and it does feel like there is an incentive maybe for applications on salana to do the same thing and they'd be motivated not necessarily by cost or speed which is already really great on salana main chain but maybe I could see app developers that are interested in having more sovereignty over the economics that they're creating or I don't know additional aspects of control uh something like that I mean have you guys heard any Rumblings about this or think it makes sense or you wouldn't be supportive or what do you think I haven't seen much Beyond uh the Twitter discourse about Sala l2s I think it's more of a gut reaction to it seems

like there's not enough block space and one way to create more block space is through an L2 I think um well I haven't thought about this too much but my initial reaction is it doesn't make too much sense if you are going to go build in L2 you want a really good settlement layer that gives you guarantees around things like when I need to post my transaction I can post them uh you need the network to be up like actually 100% of the time instead in 99.9% of the time so you can uh you know like post your your new state routs in your in your state transitions um and there I think you know because ethereum has been well really for quite

a few few years now um focusing on being the most robust settlement layer uh it probably makes the most sense to either settle there or settle to to bitcoin which also has a lot of uh pretty strong guarantees very easy to reason through compared to salana where like if you're building an L2 you actually don't need the settlement layer to be particularly performant there are some uh cost implications for sure but uh salana is huge advantage today is on performance and speed uh and sacrifices some other things to to get there and for like a settlement layer I don't think you need the performance and speed

that that Salon operates that Salon provides can I challenge that a little bit though because one thing that I have at least thought about is so right now one of the things that people are very interested in on ethereum is this idea of Base sequencing and I think the reason I think there are a couple reasons to be interested in that which is one I think there maybe is a little bit of like uh worry from the ethereum the asset side of things like hey uh you know no one uses us for da anymore and is settlement is that really enough to you know for number grow up technology for eat the asset like I don't know um so the idea of like there being additional lock in by using ethereum itself as a sequencer but I think the other reason why people are excited

about it is because ethereum is like they're 12C block times right and interop is a massive Challenge from L2 to L2 uh that it actually is um it would be nice in terms of uh fixing some of these interoperable problems but the problem is ethereum itself isn't super performant whereas something like base sequencing on salana would be and so what you end up having to do is these like shared sequencer networks and like you could make this argument that you're basically creating another ethereum on top of ethereum and it's like man there's so many layers to all this right whereas honestly in salana I could kind of see it like well actually the block times are really fast right it's like 200 millisecond block times like

honestly you could probably just route something right down to salana and back up to another L2 and you have to be hardly noticeable and maybe actually uh liveness is not the thing to be optimizing for and instead the performance of the L1 is kind of critical I I don't know like I I this is just something I've you've definitely thought about this more deeply than me but I could see that argument happening as well yeah the the interop problem for l2s is really cursed right now uh I think it depends a lot on if if you're a ZK L2 or an optimistic L2 because of the time to finality so for example if you're an optimistic L2 on top of salana um and you still have some like fraud

challenge window before which you commit to the state being finalized uh you're not going to get any of the performance benefits doing some sort of uh uh interupt here by going back to the settlement layer because you're still going to have to wait for the state to be finalized uh before the other L2 will like accept this uh or before the other L2 like should accept this and the only only other the only way you're going to get that is through some sort of shared validity which is basically like taking multiple l2s and uh making their uh making their validity depend on each other which is basically like building one big L2 uh and this is going to be different

if you are able to ZK everything in a more performant way where yeah once you are able to post back to the settlement layer then everyone can treat it as finalized um but I think the the tech to do that in a performant way is just like not really there yet the primary bottleneck is the pr cost so for an optimistic L2 today you basically pay for two things you pay for da and you pay for settlement and then uh yeah like the sequencer cost some amount to run but it's let's call it negligible and the da is the biggest cost here and with the ZK L2 you also add in this Pro cost which is linear in transaction so it's actually like uh

relatively expensive uh and those numbers are coming down like really really dramatically so maybe in a couple of years um those will be ready but if the goal is to like increase the amount of block space available to salana like things or things that need access to the salon estate uh the optimistic version is just not going to work too well yeah well I feel like it's still early days very maybe nothing ends up amounting to anything there there's just been rubbling about it but I've just started to hear people talk about it I was curious to get your guys opinions yeah it feels a little bit more like a narrative play than uh like a Tech play that makes a ton of sense yeah yeah you might be right um all right fellas I know we got to start to wind down here

in a second any I don't know closing thoughts on anything that we might not have gotten to on just Salon of uh me in general um I don't know anything that we missed or stuff you want to something that you want to leave the audience with uh yeah I got one there's um I think the the idea is still being developed there's a new simd out that I think is pretty interesting simd 130 Dynamic block limits and basically like um the idea is like 48 million Compu units is kind of like an arbitrary number I think the math is like a compute units roughly like 33 nanc or something and there's four threads and

you know it's it's pretty handwavy but uh this proposal is pretty interesting um it's basically like um you can potentially increase block space if the utilization is uh if if people are using more than I guess this proposal says 75% you know kind of choose a number there but uh if the if the Network's being used a lot then you can potentially increase the block space on the network and basically um yeah I think it's pretty interesting proposal I think there's another proposal that would probably be nice here which is timely vote credits

uh which um Sant tetsu Shinobi systems has been leading up a lot basically um you get rewarded more credits if you are voting on a timely manner and so you can imagine like um it could be I think it's pretty interesting proposal if you like start to increase the block size and uh basically increase it until like some percentage of the network can't keep up and then um yeah it would be a good incentive to uh for validators to upgrade hardware and um it's just kind of an interesting discussion I don't know if something like this has been proposed other than like the the gas

increasing the block size on ethereum well shout out to the author of this particular proposal who is caveman lover boy so yeah Mr K is a legend in the salana community uh I I agree with like the high level here which is again because the demand exceeds the supply we should do whatever ever we can to increase the supply of block space but cly there's some max amount of block space that the network is able to provide at a uh you know while maintaining whatever guarantees you want to maintain uh around like Hardware requirements or or whatever else and then the natural progression would

be okay we'll increase the block space if it's highly utilized up until some point and then the question is why do we need this controller in the first place why don't we just increase the block space to that and it there unless the goal is revenue maximization rather than um uh ux and fees I think like at a cultural level Sal really prioritize user experience I think that's Sal's biggest competitive advantage over every other blockchain today and Sal should never toss that out uh Eugene what do you one of the I don't know maybe design CL philosophies or design choices or whatever

um that I see one of the biggest differences that I see between I actually think Celestia and salana are similar in this instance and it contrasts against ethereum versus Bitcoin it's it's kind of like to really drastically oversimplify like the small scarce blocks versus larger more abundant blocks and there kind there's kind of this idea like this was famously what the block size were and Bitcoin were fought over right it's like keep the blocks extremely small um and there are some desirable properties that you get out of that you can keep really low hardware and bandwidth requirements for you know the node operators on ethereum or the prop or the node operators on bitcoin or the uh proposers on ethereum but the downside of that is like you

know you fees Spike through the roof right because you're kind of artificially constraining uh the amount of uh space that you can write to whereas like you could just take this totally different approach and say like honestly we should be striving like the fees shouldn't be the dynamic thing we should be targeting extremely low fees and we should just build out our networks of computers to accommodate for more block space like right why why wouldn't we do that so I guess there is some theoretical limit right to the amount of block space but like why shouldn't we just be you know you it's almost like the inverse of the way that ethereum and and Bitcoin think about it which is like keep the the block size relatively static right it is dynamic a little bit but like keep it relatively

small and constricted let the fees um uh move but you could just like Target really low fees and just have the block space sort of modulate which which is what it seems like this simd is saying um I don't know I think I think the elephant in the room here is the value capture question where the revenue maximizing thing for the network is not maximally increasing the block space and then yeah the other piece that you touched on is the hardware requirements where I think salana and ethereum can't really speak for Celestia or Bitcoin have very different approaches where ethereum has somewhat explicitly um or parts of the ethereum

community have expressed a preference for you know ethereum being World War II proof and yeah that means you're not going to be able to have uh or or rely on like data centers for example and then it comes down to okay so what should be the minimum Hardware requirement to be able to participate on the network is it like I should be able to run this like run a validating node from a TI 84 on the moon or should it be like if I have a 10 gigabit internet connection and $220,000 of Hardware that's the guarantee and like you know someone is sufficiently motivated they'll be able to acquire that okay but

let me I guess this is this is I've had a really hard time articulating this thought but all right let's just play this out right it's World War 3 resistant on eth main chain but you get all these new superpowered l2s like Mega ether whatever right and everyone builds applications that are based on having extremely abundant very cheap block space right like the unit economics of all these businesses that got get built on the l2s are based on L2 economics not based on L1 economics then World War III ends up happening and all of these like all of these uh you know centralized sequencers that are getting run out of data centers have to shut down what the hell do you have you have a bunch of businesses that that don't make any sense based on the

network this is what I don't I don't actually think if you were to like really imagine a World War III scenario I don't think the current system actually supports that like yes you would probably get some like base functionality like you'd still be able to you know transfer eth tokens and and stuff like that and that wouldn't be disrupted but like theoretically the entire value of the network would be based on the apps that are built on the network and they'd all be built to a spec that no longer makes sense in a World War III scenario I I don't know this has always bothered me it doesn't I feel like the logic doesn't foot yeah I think no matter what during World War III uh some stuff is not going to work as as well as we hope it to yeah that's true uh I think the ethereum folks would say

here well yeah some of the l2s are going to get into trouble but if the L2 is in a roughly finalized State you will still be able to do things like uh uh Force include transactions through the L1 you'll still be able to um yeah like transfer e transfer assets anywhere around the world in not quite the speed of life but in like 12 seconds and there's a lot of value there still you still be able to like use Unis swap on Main net yeah maybe the fees will be high but uh it'll be better than having no system at all okay that makes sense let me address the point that you made about revenue and that sort of tension how do you guys think about revenue from

the like I guess Revenue to who because because I don't know there's kind of um it's unclear to me that we should I've seen a lot of people try to jam like L1 transaction fees into a p&l format and I'm coming down pretty strongly on the side that that doesn't make a lot of sense I think there can be intersecting sets of pnls around a network like I think a validator p&l makes a ton of sense right like that is it's a it's a business they're a service provider to the network but Soul eth Bitcoin these are Commodities you wouldn't say what's the p&l of oil that's a nonsensical statement um and so I I guess when you say like it's unsustainable from a revenue standpoint from whose perspective are you talking about

because I'm actually not 100% clear or certain on the idea that like you know we need to be running this like positive p&l from a fees perspective for the network yeah and to be clear I'm not arguing for that either uh but I'm just saying that the revenue maximizing thing for the network is not to maximally increase the block space um but yeah I don't I don't think like any of these assets any of these crypto assets today are valued based on some you know DCF analysis uh that's like you know the the first like most mid curve thing anyone does when they get into crypto it's like okay what is the revenue does make sense what's like the the PE on

ethereum um and yeah like so I think like none of the coins trade like this today is unclear if that will be the cas case in perpetuity um and you also sort of see this pivot from The Narrative side that ethereum has been pushing for a while towards like ultrasound money narrative which is effectively trying to turn ethereum into a meme coin or at least get valued as as a mem coin rather than based on the the the fundamentals why do you think it not why do you think it's not re Revenue maximizing to increase block space yeah I didn't um well there there there

there's right now there's uh you know 50,000 transactions that want to get included but there's only 50,000 per second but there's like a thousand or 2,000 that are actually getting included so it seems like I'm not I'm an engineer I'm not an economist but seems like if you were to include those then valers would make a lot of a lot more money yeah so it depends like how much you want to increase it so for example you increase Supply to Infinity then the um the the price becomes like Epsilon unless you have uh some oh yeah you have some like basee fee mechanism in there as well which would have to be enforced by

consensus um but at the end of the day it depends on like the elasticity of demand and then there's going to be some sweet spot between like price and quantity uh that that is revenue maximizing but it's almost never at uh increases Supply to Infinity so like I think I think it's very possible that if we doubled the block space today on salana that the validated Revenue just goes up but I think if you you know 100x it assuming that was possible uh it's not it's not clear whatsoever do you guys I I know that this uh so just also I'm not a huge fan of the ultrasound money meme I I do think my framework for a long time has been I think these L1 assets look like

something like commodity money type things um but uh and I think there's going to be a basket of ones that people ultimately end up holding and using but do you guys uh I know there's like less even appetite in Salon to talk about things like this but do you view Soul as potentially really long a long time down the road like some sort of store value you know uni of account money like thing and then I don't know it sort of feels like the there's like two ways that you could look at the business model of an L1 and one would be like you're an operating system for applications to build on the other would be you're an exporter of a commodity money thing and it in theory those two things should be really linked but they're kind of not

are they I mean you can just look at Bitcoin which has basically been aifi for years and years very few technical upgrades have been made but obviously the export of the money has been pretty good you know like just look at what bitcoin's done um and it's been pretty divorced frankly from much technical progress so I don't know I mean I know it's kind of a high level question but how do you guys what's your sort of mental model framework for looking at these l1s in general I don't have any view on what is money what is not money uh certainly not in the long run uh I will say one one thing that is important for these proof of stake L ones in particular is the economic security of the network

does depend on the value of the network token and so there is some incentive from the network perspective to uh do what it can to to pump the token whether that's uh meme it into existence or generate revenue and return it to the Token holders um yeah I think I would agree with that point um I think that uh anat kind of has an interesting view on this where like so like a lot of the stuff it will be somewhat commoditized in the future like block space and

things like that and so I think um viewing viewing it from that angle is certainly pretty interesting when you compare like salana versus ethereum and the high fees versus low fees and trying to maximize the amount of block space on salana um I mean I think so right now it's like access to block space and me and I don't think that focusing on ultrasound money is like a good thing for salana be focusing on yeah fellas I appreciate you've been super generous with your time um I think

we covered a lot of really interesting ground if folks want to follow either one of you find out more about the work that you're doing like what's the best way uh for people to do that yeah you can follow me on Twitter Buffalo uh Cheeto Labs as well and Lucas what is the origin of Buffalo what I'm just kidding I will put you through that if you don't save it for H you gota buy me a beer to get that out of all right we'll get permissionless this year uh Eugene yeah you can follow me on Twitter I'm zerx [ __ ] Trader uh and you can follow ellipses Labs as well sweet fellas this was a fun one as

always um maybe we'll do another one of these in a year we we'll give the big update on uh Sal M make an annual thing but appreciate you [Music] guys