The Ethereum vs. Solana Debate | Justin Drake vs. Anatoly Yakovenko

✨ Mint the episode on Zora ✨ https://zora.co/collect/zora:0x0c294913a7596b427add7dcbd6d7bbfc7338d53f/9?referrer=0x077Fe9e96Aa9b20Bd36F1C6290f54F8717C5674E ------ 🎬 DEBRIEF | Ryan & David unpacking the episode: https://www.bankless.com/debrief-the-justin-drake-vs-anatoly-yakovenko-interview ------ Ethereum vs. Solana. That’s the debate we’re having today. On Ethereum’s side we have Ethereum Researcher Justin Drake, and on the Solana’s we have Solana’s Co-Founder Anatoly Yakovenko. They give us the good, the bad and the ugly of each other’s blockchain, settling their endgame towards the end of the episode. This was one, if not the spiciest debate we had on the show. We tried our best to give both guests time with minimal intervention. At times went well, at others it caused deep semantic rabbit holes. But overall both guests were able to communicate their messages. ------ 📣 SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo 🏠 CASA | SECURE YOUR GENERATIONAL WEALTH https://bankless.cc/Casa. 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle 🌐 TRANSPORTER | CROSS CHAINS WITH CONFIDENCE https://transporter.io/ ⚡️ CARTESI | LINUX-POWERED ROLLUPS https://bankless.cc/CartesiGovernance ------ TIMESTAMPS 0:00 Intro 7:16 The Good 22:30 The Bad 52:03 Global Shared State 1:06:07 Economic Security 1:30:08 The Ugly 1:47:23 The Endgame 1:55:22 Closing & Disclaimers ------ RESOURCES Anatoly Yakovenko https://twitter.com/aeyakovenko Justin Drake https://twitter.com/drakefjustin ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  There is a reason why Ethereum data availability is worth more than Solana's data availability.

• 0:07Speaker 01

  Because of network effects?

• 0:08Speaker 00

  Because of network effects. Yes, this notion of shared security, this notion of synchronous composability.

• 0:12Speaker 01

  Because of the economic security.

• 0:15Speaker 00

  Not just that, but also access to TVL, access to applications. There's only one ENS in the world, right? There's only one Ethereum and Internet name system.

• 0:24Speaker 01

  This is really weak. This is, this is why I think it's ugly and it's not fixable. Is it's not a fundamentally hard thing.

• 0:37Ryan Sean Adams?

  Welcome to Bankless, where today we're exploring the frontier of Ethereum versus Solana in debate-style format. This is Ryan Sean Adams. I'm here with David Hoffman and we're here to help you become more bankless. So on the debate track today, Ethereum versus Solana. We've got a conversation between Ethereum researcher Justin Drake and co-founder of Solana Anatoly Yakovenko. Now, both of these were previous Bankless guests. I'm sure you know them from their respective communities. The prompt for this episode was really simple. Give us the good, the bad, and the ugly of each other's respective blockchain ecosystems. Take the conversation wherever you want. You could talk about architecture, you could talk about economic security, and indeed, the guests did.

• 1:20Ryan Sean Adams?

  David and I tried to give both guests time to debate each other with minimal intervention. And I think at times this went well. At other times, it probably caused us to go down into semantic rabbit holes fairly deeply. But overall, I think both guests were able to communicate their, their main messages throughout this episode. Sometimes they were attacking, sometimes they were defending, occasionally they were throwing each other compliments. It's a very entertaining episode overall.

• 1:43David Hoffman?

  If you pay attention to Anatoly and Drake on Twitter, you'll know of a couple of topics that are coming your way. Is economic security a meme? Is issuance a cost? Some big dividing lines finally get sussed out in long form on this episode. How did this episode come to be? It was actually kind of spawned out of just a simple ping from a member of the Bankless Discord, asking if it would be possible to get Justin and Anatoly on a podcast together to have a debate. And I was like, Hmm, I also want this. And since it didn't really hurt to ask, upon asking both Justin and Anish, fully said, yeah, sure. And so after a bit of scheduling, here we are. I think the one thing I'll say about this episode and generally like crypto at large, when people enter crypto, they generally find a tribe pretty quickly. Like you come into crypto, you learn about it,

• 2:28David Hoffman?

  and then you learn about a layer one that you like identify with more than others because it aligns with your vibe. The how and why people become members of the tribe is like personally, I think one of the more interesting things to explore in crypto. And you can really see it come out in this debate. You can really see some of the dividing lines between just who Justin is and what Ethereum is and who Anatoly is and what Solana is. So that's kind of like the frame of a frame of mind that I encourage listeners to go into this episode with as they hear Justin and Anatoly parse out some of these things, finally, in a long form conversation. So let's go ahead and get to that long form conversation. But first, a moment to talk about some of these fantastic sponsors that make this show possible. So whether you are convinced by Anatoly and you

• 3:13David Hoffman?

  want to buy Solana, or you're convinced by Drake, and you want to buy ETH, you can all do it on the same place, which is Kraken, our preferred crypto exchange for 2024. If you do not have an account with Kraken, consider clicking the links in the show notes to getting started with Kraken today. If you want a crypto trading experience backed by world-class security and award-winning support teams, then head over to Kraken, one of the longest-standing and most secure crypto platforms in the world. Kraken is on a journey to build a more accessible, inclusive, and fair financial system, making it simple and secure for everyone, everywhere, to trade crypto. Kraken's intuitive trading tools are designed to grow with you, empowering you to make your first or your hundredth trade in just a few clicks. And there's an award-winning client support team available 24/7 to help you along the way, along with a whole range of educational guides, articles, and videos. With products and features like Kraken Pro and Kraken

• 3:58David Hoffman?

  NFT Marketplace and a seamless app to bring it all together, it's really the perfect place to get your complete crypto experience. So check out the simple, secure, and powerful way for everyone to trade crypto, whether you're a complete beginner or a seasoned pro. Go to kraken.com/banklist to see what crypto can be. Not investment advice. Crypto trading involves risk of loss. Cello is the mobile-first and EVM-compatible blockchain that's built for the real world and designed for fast, Low-cost payments worldwide, driving real-world use cases like Opera MiniPay, one of the fastest-growing Web3 wallets with over 2 million users across Africa. Cello is seeing a meteoric rise with over 375 million transactions and a million monthly active users. Not to mention Tether and Circle just deployed native USDT and USDC on Cello, supported by leading exchanges like Binance. And now, Cello is looking to come home to Ethereum as a Layer 2.

• 4:43David Hoffman?

  With a game-changing proposal, Core contributors at C-Labs aims to leverage Optimism's OP stack, pioneering a transition as the biggest L1 to become a Layer 2, with Testnet arriving as early as summer 2024. With a Cello Layer 2, gas fees will stay low and users can even pay for gas using ERC20 tokens, including native USDC and USDT, sending crypto to phone numbers, across wallets, using social connect. But Cello is a community-governed protocol. Make your VORs hurt in the Cello forum to shape the future of Ethereum. Follow @cello on Twitter and explore the ecosystem built for the real world on cello.org/quest. Taking self-custody of your crypto is one of the most important things you can do on your bankless journey. It's also one of the hardest things to get right, with huge consequences if you don't. If you want help going bankless, talk to CASA.

• 5:25David Hoffman?

  CASA helps you take custody of your crypto assets, so you don't have to wonder whether you're doing it right. CASA is a one-stop shop for doing self-custody the right way. With CASA Vaults, you can hold Ether, Bitcoins, stable coins, all with one simple app and multiple keys for the ultimate peace of mind, with a support team to help you every step of the way. But it doesn't stop at self-custody, because even though crypto is forever, you are not. We all plan on making life-changing wealth in crypto, but with CASA's inheritance product, life-changing wealth can elevate to generational wealth for your kids and your loved ones who don't know anything about crypto. With CASA, you won't lose your private keys, and you won't accidentally take them to the grave either. Click the link in the description to get started securing your generational wealth.

• 6:06Ryan Sean Adams?

  Bankless Nation, we are extremely excited to tee up this conversation with two esteemed guests. We have Anatoly Yakovenko. He's the creator of Solana. He's the co-founder of Solana Labs. He is Mr. Consensus at the speed of light. Anatoly, welcome to Bankless.

• 6:22Speaker 01

  Love that intro. Thank you for having me.

• 6:24Ryan Sean Adams?

  And in the other corner, I don't know if I should do a fighting meme for this, but Justin Drake, he is a researcher at the Ethereum Foundation. He is Mr. Ultrasound Money. Justin, welcome to Bankless.

• 6:36Speaker 00

  Thanks for having me as well.

• 6:37Ryan Sean Adams?

  Guys, this is going to be a conversation between some of the design decisions and differences between Solana and Ethereum. I think this is a conversation that the entire crypto community will tune in for, and it's great to have you both. I think the way we're going to organize this is in a few seconds, sections. So the good, the bad, the ugly. First, we're going to talk about the good. Then we're going to talk about maybe the bad, the things that are correctable over time. And then we're going to talk about the ugly. And of course, we can veer from one section to the other as you guys see fit. But let's start the conversation with something hopeful, something optimistic, the good side of things.

• 7:16Ryan Sean Adams?

  I want to start the question with you, Justin. So let's talk about the good. What is good about Solana from your perspective?

• 7:26Speaker 00

  So if I were to think of... Sorry.

• 7:30Speaker 00

  I was just unmuting. I had to unmute.

• 7:34Ryan Sean Adams?

  Sure.

• 7:37Speaker 00

  So if I were to have a metaphor in mind, I'm thinking of the good as a bucket with balls in it. And I actually think of the good bucket as being the one with the most balls, so the largest one with the most volume. And Solana has lots of obvious good balls in its bucket. It has very high throughput, very low fees, very good UX, low latency. It has good traction, millions of users. It has good adoption, good financial performance. Actually, that has been amazing, right? We've seen Solana race to basically position number three. So if you go to CoinGecko and sort by fully diluted valuation,

• 8:15Speaker 00

  Solana is the number three, layer one. And I'm tempted to change the quote by Michael Saylor and say that there is no fourth best. If you look at...

• 8:31Speaker 00

  If you look at fully diluted valuations, there's like, there's a ripple, there's BNB, there's Ton, but like, they don't really compete, in my opinion, with Solana. So it really is those three players in the Layer 1 space. And I think what Solana is doing for Ethereum is that it's providing healthy competition. It's a sort of accelerationism. And not only accelerationism partly because of good execution, but also because of contrarianism. Like, the way that I think of Anatoly as this constantly contrarian person, like, his brain is wired in a very unusual way, and I say this in the best of ways possible.

• 9:10Speaker 01

  My wife loves this. This is her favorite feature about me.

• 9:17Speaker 00

  And I think you guys, you know, bring forward like, interesting insights, and you have, you know, good vision. So, for example, I think that, you know, you want to build this idea of a global state machine. What does that mean? Global means that a single L1 can support the whole world. Like, in my mind, we're gonna see L1s that can support 10 million transactions per second, which is enough for the whole world. It's 100 transactions per second per human per day. And then the other big idea that Solana brings to the table is this idea of synchronicity, that not only is there like, high scalability, but also different parts of the state can call each other synchronously, at least

• 10:01Speaker 00

  if you're willing to pay for it. I also think that Solana has like, very good pace and reactivity. There's been all sorts of issues in the past that we're gonna talk about in the bad section, but broadly speaking, it just keeps on chugging along and moving along. And in terms of the insights, I think like, there are real insights that Anatoly, you bring to the table. For example, the fact that we live in this exponential world with Nielsen's law, right? The fundamental bottleneck for scaling blockchains is bandwidth, and we are in this very luxurious position where bandwidth keeps on scaling exponentially. So, overall, this is a massive bucket of good for Solana.

• 10:47David Hoffman?

  And totally, your turn to talk about Ethereum. What is in the good bucket for Ethereum?

• 10:53Speaker 01

  I mean, tons of stuff like I think what I envy out of Ethereum is it has a the main net has a very large distributed network across a very large number of physical end nodes and very large number of actual internet links. So when you look at it as a whole and you think of like, what are these networks supposed to do? The mission that Ethereum has, it's supposed to provide security guarantees that are stronger than an honest majority. So if you kind of, if you, if you end up with like, accepting honest majority guarantees, which is fine for a lot of use cases, it's a multi-sig at the end of the day. I think you just can't really scale it to support the world in a trustless way.

• 11:34Speaker 01

  Just nobody like, you can't have banks and 401ks and like human finance trust some honest majority that could go, that could blow up at any moment. Nobody wants that. So you need better than that. And I think Ethereum has been so hyper focused on this that like when they started working on charting, they pivoted away from that because there's no way to do it.

• 11:57Speaker 01

  Which is awesome. Like they, it's actually like the coolest thing to see somebody be like, you know what? This is not going to work because of the security properties we care so much about. We're going to work on this other roadmap first because that one doesn't compromise something really, really important. And the execution for people like think Ethereum is moving slow, but if you look at the size of the network, that its value, I would be terrified of any changes to Solana. If it was at that value, it's just, it's just terrifying, right? For something to go wrong. Outages at that point are much more catastrophic, I think. So Ethereum actually moves pretty fast for project at size. The four clients is awesome.

• 12:42Speaker 01

  I think this is again, the biggest thing that you're supposed to provide is. This better than honest majority security guarantees. And when you have four clients, you're not trusting a single piece of software. Even with the best of human intentions, it's still written by humans, right? Like, the original BFT paper actually talks about you need to write, you need to have separate teams building stuff in isolation. So you can actually have this fault tolerance across the human buzz factor. So there's a lot of envy there, and I think that's awesome. Like, from my perspective, Ethereum is at a point where to cause a double spend attack, you need NATO to coordinate across the thousands of different ISPs

• 13:24Speaker 01

  and to have everyone execute like a thing all at once. And that's basically like, great. I don't think you can do better than that in the real world. So it's at a point which I think every other L1 should be envious of and trying to get there as fast as they can, right? As fast as they reasonably can. All of that, I think, is puts it in a class, I think, in my mind, actually, above Bitcoin. So for what that's worth.

• 13:51Ryan Sean Adams?

  We're starting this off on a very nice foot then. Both of you've said nice things about the other's primary ecosystem. Anatoly, just curious, your reflections on what Justin said about Solana? Do you agree with his characterization? Like, what was going through your mind as Justin was saying these things?

• 14:12Speaker 01

  Sure, I mean, like, I think I find those to be positives of what Solana has accomplished. I think probably because of my experience working at Qualcomm for like a decade, I saw how fast Nielsen's law moves and how fast Moore's law moves when it's targeting an industry that's in hypergrowth. And you just kind of, your brain as an engineer shifts. You're not writing for code for hardware today or yesterday even. You're writing for hardware that's going to be out in two to four years. So you're expecting just everything to get faster. So this is something that I think has been something that I've been like, kind of hitting the table with to all the engineers that are working on Solana is you got to build things.

• 14:57Speaker 01

  To scale as if the hardware is twice as fast. Just assume it's going to be twice as fast. How you're writing the code, how you're designing the SIMDs and kind of leverage that. And I think that focus has paid off, honestly. Like, that was a big bet that a small team, like a very small team, that was had way less funding than all our, all our competitors took from 2018 to 2020 to launch. And we launched faster because we're like, don't make this complicated. Just throw a thread pool there. It's that it's, it takes work, right? It takes engineering, but it's much easier to think of problems like, okay. Like even look at proof of history.

• 15:37Speaker 01

  It's not, I remember talking to Justin like a week after we like became an official company about VDFs. And our solution was this very, very extremely dumb approach. Just verify the VDF with as many cores as you have available to you. And don't worry about these, this fancy math that I don't understand if it's secure or not. And that worked. So like, stuff like this, I think, is underappreciated. And I'm glad that, you know, Justin has recognized that in some ways.

• 16:12Ryan Sean Adams?

  So Justin Anatoly has said some nice things about Ethereum, said it would take NATO to disrupt the network and cause a double spend. And like, maybe they couldn't even do it, said it's, you know, like more, I, I forget the phraseology Anatoly, but like on a higher pedestal than Bitcoin. Let, let's just say. So what was going through your head as Anatoly was extolling the virtues and the values of Ethereum there?

• 16:38Speaker 00

  Yeah, so one thing that Anatoly said, which I agree with, is that we, it's kind of bad design nowadays to try and rely on honest majority. And it is true that our previous sharding design did rely on honest majority. But this is something that we have moved away from just through technological innovation. So now there's this idea of data availability sampling where you don't have an honest majority. You have an honest minority. And we have this new flavor of sharding, which is dank sharding. And not only have we removed the honest majority assumption, but we've also added synchrony. So it used to be that we had a 1024 or 64 asynchronous shots that would each have its own independent proposer.

• 17:20Speaker 00

  And instead now we have kind of this one big proposer that that basically publishes a big block that everyone is capable of verifying is indeed available using very, very little bandwidth. And this technique is called data validity sampling. And I think Anatoly had a podcast called No Shouting and, you know, eventually decided to change the name. And I think this is good because the fundamentals are really in favor of shouting, or at least dank shouting. In terms of other things that he said, is one is that it's very, very difficult for to double spend Ethereum. Now, while I agree with that statement,

• 18:00Speaker 00

  I think this is kind of the wrong lens. And the reason is that there is a much easier attack than double spend, which is basically around censorship and liveness. So Anatoly focuses a lot, in my opinion, on safety. And to a very, very large extent, I agree that safety is not an issue. One, because the validity of blocks can be checked by full nodes. So if you try and just create an invalid chain, it will just get rejected. And for specifically reorgs and double spends, there's this notion of slashing. It's just so expensive to do the attack that it's basically impossible. But there is like these these more subtle attacks around liveness and censorship resistance, which I think are

• 18:44Speaker 00

  the ones that are most important. And I think are ones that Anatoly is under indexing upon. And maybe we can talk about this later. And then another thing that Anatoly said is SIMD, and maybe the listener might not know what that means. So I just wanted to highlight it. It's the equivalent of an EIP for Solana, and it means Solana Improvement Document.

• 19:04David Hoffman?

  Beautiful. As we kind of wrap up this good section, I want to give also a chance for each of you guys to maybe elevate something that is unsung about your own ecosystem. So Anatoly talked about what's good about Ethereum. Justin talked about what's good about Solana. All of a sudden, this is really feeling like therapy, but we'll ignore that.

• 19:22David Hoffman?

  There's something wrong with therapy, David.

• 19:25David Hoffman?

  We did not mean for this to feel like a therapy session, but nonetheless, here we are. But maybe Justin, maybe you can advocate for Ethereum. What's something unsung about Ethereum that you think is definitely in the good category that is worth elevating? And of course, we'll go to Anatoly afterwards.

• 19:40Speaker 00

  Right, so one of my mental models is that the layer one space is winner take most. And so we need to ask ourselves, who is going to be the winner? Like, what are the selling points? What are the structural advantages? And in my opinion, Ethereum has one, in the sense that it is the place with the most network effects, with the most liquidity. It is the one that is the most mature, the most secure. And so, you know, that is maybe like the best compliment that you can give to Ethereum is that it's preordained in some sense, as Antonio mentioned, to flip Bitcoin and become number one. And you know, this meme where there's this guy who says, "It's not just about winning, but everyone else needs to lose."

• 20:24Speaker 00

  Well, it's a little bit like that, just because of market dynamics. Like, I really do see a world where, at the layer one level, the network effects are so strong that it makes it extremely difficult to be an alternative layer one. And I think this is one of the struggles that Solana will have going forward.

• 20:43David Hoffman?

  Antonio, feel free to reflect upon that. And then also just elevate something that you think that is unsung about Solana that deserves more praise.

• 20:50Speaker 01

  Yeah, I guess from my perspective, I kind of treat these systems as backend systems. And developers are expected to kind of learn and switch every two to five years. Like, it's just part of life. So it's really, really hard to have a moat. And you see that with languages and databases and stuff like that. Even Oracle is still around, but makes most of its money through licensing.

• 21:15Speaker 01

  And people use Redis and SQLite. And as hardware improves, SQLite becomes, you know, easier and easier to deploy for the kind of use cases that you would need, like Oracle MySQL before. So you kind of have like a lot of tension and competition in the backend, even though being first mover is an awesome advantage. I think what's unsung about Solana, probably that, I think, why we are succeeding in a lot of ways is because the developers are not infrastructure focused, for the most part. They're focused on apps. So if you look at Trying to get users, you need to give them something to use, right?

• 21:57Speaker 01

  Like, that's fundamentally, you need to provide value to a user. And if you look at Solana, investment dollars are smaller than Ethereum's, but vast majority of them are going to products that are user targeting. You can actually, I don't know if this is true or not, I haven't done the numbers, but my guess is that actual product investment to Solana and Ethereum might even be compatible. So what's unsung is that how well the Solana devs are executing on actually user capture, building products and stuff like that. More so than, you know, people talk about Ethereum having network effects. I think most of those are around in the infra side,

• 22:38Speaker 01

  which is just a piece that's not necessary if you have a high-performance, low-cost chain. So there.

• 22:46Speaker 00

  I mean, while I would agree with the statement that Ethereum culture, to a very large extent, focuses on infrastructure historically. I think there is a shift now. So we have L2s like Base, Arbitrum, Optimism, where you just come in as a dev and you just don't have to think about infrastructure. It just scales magically, it just works. You don't have to worry about scaling, about fast confirmations and things like that. And, you know, the metrics speak for themselves, actually.

• 23:18Speaker 01

  With no trade-offs, right?

• 23:20Speaker 00

  So there are trade-offs, but they're being taken. And in some sense, what these teams are doing is that they're making even more trade-offs than Solana and being willing to kind of play the even longer game, right? In some sense, Solana is like fake it until you make it. So it comes in with like lots and lots of technical debt and then is using that as a strategy for user acquisition. And then, you know, as there's a new fire that comes in, you kind of have to fix your technical debt. And in some sense, what the L2s are all about is playing this game even harder. So, you know, you have chains like Base and Optimism that don't even have a fraud proof, right? That's the game that they're willing to play.

• 24:05Speaker 00

  They're willing to fake it until they make it. They have a totally centralized sequencer. But the good news, the fundamentals, is that if you're willing to project ahead, there are ways to decentralize all of these things, all of these things. So. A lot of my personal research in the last six to 12 months has been around, for example, decentralized preconfirmations. How can we have the 100 millisecond user experience that Arbitrum and Baze provide, but in a decentralized fashion? And it turns out it's not that difficult. And not only that, in some sense, it destroys the user experience of Solana, because Solana has 400 millisecond block times. About 5% of the blocks are skipped. On the other hand, with a decentralized preconfirmation mechanism that I suggest,

• 24:50Speaker 00

  you have 100 millisecond preconfirmations. So it's really, we can have the best of both worlds. We can have the speed of light preconfirmations and the decentralization.

• 25:02Ryan Sean Adams?

  I think we have moved into the bad section. It squarely feels out of the good section here.

• 25:10David Hoffman?

  Maybe to just set up the bad section, again, the good, the bad, the ugly. We've moved into the bad. Bad, I'll characterize as temporal, the current problem set. Whereas the ugly are things that are just completely untenable, unrecoverable, like final in nature. But the bad is just like the current, the current problem set of respective ecosystems. And so we've now drifted into the bad. Justin opened up the good section. So Anatoly, maybe we can throw this one to you. The bad about Ethereum, we've kind of like touched on it a little bit. Justin just touched on it with talking about transaction finality just now. How would you characterize the current problem set, the bad side of Ethereum right now?

• 25:55Speaker 01

  I mean, like EVM is really designed by academics. It's just a VM that no one with VM experience would have ever built. So it has a lot of technical debt, like design debt. It's fixable, but it's like blood, sweat and tears to do that. And I think you're going to see very slow progress there. And a lot, like because it's so central, it kind of permeates to everything. Like there's stuff that I feel like.

• 26:28Speaker 01

  Like the expensive L1 and the split between L2s is kind of breaking a lot of the financial dynamics and splitting liquidity, which diminishes the value of Ethereum as an L1, you know, two years ago. So if you're now as an alternative L1 like Solana, you're not really competing with the Ethereum ecosystem. A developer has to make a decision, do I deploy on Eth1, Eth2, or where do I put my focus, right? I can't focus on all of these different environments at the same time. It's, it is difficult, right? And that means that Solana now being one aggregate layer might be an easier and simpler choice for a lot of devs.

• 27:09Speaker 01

  So in a lot of ways, that's maybe fixable, but I don't know, that's a hard one. And because of the split, in terms of you're going to have different confirmation semantics, different levels of fraud proofs, different levels of security, people will take those decisions, like those factors into account, and they won't all decide to go in one place. So it's going to be very hard to have like one single dominant winner. But it's possible there'll be power law distribution there.

• 27:38David Hoffman?

  Are you kind of characterizing that as just like developmental friction? It's just like kind of devving through quicksand?

• 27:45Speaker 01

  Exactly. But the quicksand is never ending. Like, it's just gonna get worse. Like, this is like, I think, kind of this like, it's both a strength, but it's, it's a weakness, right? You have a copy of options and too many options create developer friction and prevent and create user friction at the top. I think maybe there's decisions that the L1 can do on its own, but these are, this is governance and that's, that's above my pay grade.

• 28:18Ryan Sean Adams?

  This is interesting in Italy because it feels like you're, you're talking about the bad, but you're also bringing in some of the ugly too, right? In, in indicating that some of these things might be unresolvable. Would you say that's true?

• 28:29Speaker 01

  I think they're hard to resolve. They're hard to resolve. These are hard problems because they require a lot of coordination and potentially sacrificing. But the proof of work to proof of stakes, which sacrificed, right? The POW miners. So it's possible, right? To like, it's possible to fix these, but it's hard. Justin, back to you.

• 28:51Speaker 00

  Right. So one of the things that Anatoly asks is, as a dev, should I launch on L1 or L2? Well, I'll answer that for you. You should launch on L2. There is no future for the L1 directly. The L1 is a settlement layer. Now, a fair question is which L2? And the reason why it's a fair question today is because the L2s are like silos. There's fragmentation on Ethereum. But my vision is that we can fix fragmentation. And there's a whole Bankless episode on that whereby the silos basically meld together. It's almost like what we're left with is the boundaries between a smart contract. You could argue, for example, that AVE and Uniswap being separate smart contracts are in some sense siloed.

• 29:36Speaker 00

  But really, you benefit from synchronous composability. So synchronous composability is the strongest form of melding and removal of the frontiers. Now, it is true that it's going to take significant amount of engineering to get to this magical land of synchronous composability. And there's two pillars that were discussed in the episode. One is shared sequencing. That is actually fairly trivial technically. It's mostly a coordination thing where we all need, as an ecosystem, to choose a sequencer that we will use as the shared sequencer that can give us synchronous composability. And I have a specific thesis here, which is that the base sequencer, meaning the L1 sequencer,

• 30:17Speaker 00

  the Ethereum sequencer itself, is the primary candidate to be that shared sequencer. And then there's this other, like, highly technical thing, which is real-time proving. And by that, I mean real-time snark proving. We need to be able to make a transaction and a few milliseconds later have a snark proof proving that this transaction is valid. And so now, the various L2s don't need to trust each other. And so now you can send assets in and out of L2s essentially immediately. And they act like contracts at Layer 1, where there's no longer this boundary. So yes, today, as a dev, you do have to make a bet for the short and medium term.

• 31:02Speaker 00

  But eventually Ethereum will fix its fragmentation and will be one massive virtual machine. Now, one of the things that you said is that the EVM is, for example, hard to parallelize. And there's just some cap in terms of TPS.

• 31:19Speaker 01

  That's just one of its problems. Like 32 byte registers, storage values. There's like a whole bunch of things that are really fugly about it from a VM design perspective.

• 31:34Speaker 00

  Right, that's fair. But these 32 bit registers, what do they ultimately impact as performance? So like, any single instance of the EVM will have some cap on how many transactions per second they can process. Let's say that this cap is X. Well, what we can do is just have multiple instances of the EVM. We can have 1,000 instances. And now with synchronous composability, if you're willing to pay for this, then you basically have the ability to spread your state across multiple instances of these EVMs and still have them act like one super EVM. Now, another thing worth mentioning is that we don't have to use the EVM. The beauty of rollups is choose your virtual machine.

• 32:19Speaker 00

  And if it turns out that SVM is like the best and greatest virtual machine for the rest of humanity, well, guess what? What we're going to see is we're going to see SVM rollups. And there's actually teams building exactly that. Actually, one of the best teams on Solana has migrated away from Solana and is now building an L2. They're building a rollup on Ethereum, putting the SVM there. And they're essentially decided to really buy into this thesis that the L1 is winner take most. And Solana is probably not going to make it as an L1. And so really, the next best thing that they can do is launch as a rollup on Ethereum

• 33:03Speaker 00

  and be a dominant execution chain on top of the...

• 33:07Speaker 01

  I think you're a little bit mistaking, mistating their intentions. They're going to run a product on Solana and one on Ethereum. I don't think they're going to migrate away. Go ahead. Sorry, I didn't. I didn't mean to interrupt you, but like you're kind of overselling.

• 33:23Speaker 00

  No, this is the end of my of my right. Like you don't have to use the EVM. If you don't like, if it turns out SPM is the answer, Ethereum will use the SPM.

• 33:32Speaker 01

  So the the core benefit of what Solana does is global synchronization. And when you move stuff into L twos and preconfirmation, you're effectively running a centralized exchange. Like it's trustless and you can verify it, but you have a single spot, whether you're trading in New York or Singapore where stuff happens. And that's fine, but that's not a single giant global state machine. Like the whole point of Solana is to synchronize data around the world. The fact that it's high throughput, the fact that it's parallel and all this other stuff, these are secondary effects. And why data synchronization is really, really important is because if an event happens in Singapore,

• 34:15Speaker 01

  that news wire has to go travel to the market where it's executing in New York. And by the time it gets there, what I want is the markets running in Solana to already reflect that price. So a trader that gets that news wire in New York cannot arbitrage it between their centralized L two, their NASDAQ exchange. Doesn't really matter to me what that is, but with sub millisecond preconfirmations in that little region. It's going to be as good at price discovery as this giant state machine that is propagating information around the world as fast as possible. And the part where it's high throughput is kind of a side effect of us needing to get to that low latency and global distribution of data.

• 35:00Speaker 01

  Cause that requires parallelism and a whole bunch of cores and fast links and all this other stuff. That's the core important part that Solana brings to the world. So when all these SPMs and everything else launch in these separate little environments, that's fine. It's just Solana is competing with centralized exchanges. It's competing with Binance. It's competing with NASDAQ. And all those things are faster than those L twos, but what they can't. Do is the fact that if and for something, some event happens anywhere in the world, you can permissionlessly change the price of a market that is impacted by that news event in Singapore and be competitive with everyone. That's the really, really cool part.

• 35:43Speaker 01

  And when I think about like the world and the future, like a hundred years from now in sci fi, finance land, I see that as the winning piece. I don't see all this merit of different environments with local markets and local information kind of synchronizing in these local spots. I see one giant state machine with neutrinos going through the center of the earth because that's faster.

• 36:08Speaker 00

  So you're highlighting three things. One is that we're talking about throughput. Two is that there's latency and then three is this idea of synchronicity where everything comes together. And you're saying that throughput is not very important. It's a commodity and everyone have it. Great. You know, I would say that's maybe one of Ethereum's biggest weaknesses. And so if it's going to become a commodity soon, that's all the better for Ethereum. Now, the other thing that you brought up is synchronicity. And here I do think we can fix Ethereum's asynchrony using real time proving and chat sequencing. So now let's focus on the middle one, which is what you say is the most important, which is the latency aspect. Well,

• 36:47Speaker 01

  It's not, it's not, you can't reduce late, you can't like fix the shared sequencing by moving it all into one giant block producer. Cause then that thing is the NASDAQ. All the information happens there, right? Like, and if I'm jump or whatever, I just run my shit right next to it.

• 37:07Speaker 00

  I mean, one thing that we do agree upon is this idea of having very sophisticated block builders and having unsophisticated validators. This is part of your end game vision. And really what we're saying here is that the sophisticated entity, which is only the leader for a very small amount of time, for 12 seconds, in the case of Ethereum, is getting rotated on a continuous basis. Now, are you saying that this, this number 12 seconds is just too long because there's just too much time to have a monopoly on global state?

• 37:42Speaker 01

  Yeah. That's like, our goal is, you know, the latency around the world is around 120 milliseconds with speed of light through fiber. If we get to neutrinos, it'll be like 40 or whatever, but we're not there yet. I want multiple block producers on Solana rotating every 120 milliseconds. So there's one in Singapore, one in New York, one in every region in the world, as many as we need, and every 120 milliseconds they switch. That's, that's the end state.

• 38:11Speaker 00

  What you're saying basically is that whoever is this sophisticated entity that has monopoly over the next 12 seconds, they act like some sort of centralized exchanges, and this is not great. Well, there's a few things here. Like, one is that I expect transactions to eventually become encrypted. So today we have plain text mempools, and soon we're gonna have encrypted mempools.

• 38:33Speaker 01

  All these trade-offs will delay when information that becomes globally available.

• 38:38Speaker 00

  Okay, so we are talking about latency. I thought we were talking about...

• 38:41Speaker 01

  There's, there's multiple variables to optimize, and this is the challenge. Like, as soon as, if you, if you encrypt data and it's revealed later, you're delaying when that data is available to the rest of the global markets.

• 38:55Speaker 00

  If you have a fully homomorphic encryption, you can execute the transaction immediately, even though it is encrypted.

• 39:01Speaker 01

  But the result of that is important to the rest of the world. So me as a market maker, and if I am putting price at risk, and this shit happens later, and I can't respond and cancel, right, it means that I have to have wider spreads. Well, I can't because it's fully homomorphically encrypted.

• 39:19Speaker 00

  Well, I can come in with a transaction which says, if the price is X under the encryption scheme, you know, do such and such action. So I can still arbitrage a market even though they're encrypted.

• 39:29Speaker 01

  Then when, me knowing when this stuff is actually... Executed or not is delayed and that increases spreads. There is, there is a system where everything is executed as fast as possible and that information is available as fast as possible to the entire world. That system will have the lowest spreads and the best price discovery. That's the ideal.

• 39:53Speaker 00

  Okay, so you want the decryption to happen as fast as possible. Now, here's the thing, we can have the decryption happen in a matter of milliseconds. And the reason is that we can have decentralized preconfirmations. We can be in a position where the entity that is receiving these encrypted transactions can commit to including those or including them in a specific order. And the once the commitment has been made, if they were to change their mind, they would lose a very large bond that they put forward.

• 40:22Speaker 01

  So those are communication cycles. There are hops there.

• 40:26Speaker 00

  It's one, it's one round of latency, which is the same as, as with Solana. If I want to interact with Solana, I need to do at minimum one round of latency.

• 40:36Speaker 01

  Sure, but the goal there is that you submit and you know that it's going to be accepted simply because the block producer has accepted it and has very low probability of failing at that point. So you as a trader, you can start building on the next, on the next block as if that data is already there and the market's already reflecting it.

• 40:56Speaker 00

  Okay, so you're saying there's two rounds of latency instead of one round of latency. Basically, there's one round to send your encrypted transaction, get a, get a preconfirmation and then the second round in order to actually know what the result is. But actually, that can be reduced to maybe one and a half rounds of latency because as soon as, as soon as the-

• 41:19Speaker 01

  The easiest way for Ethereum to have this is to just have, take Solana blocks and dump them into Ethereum DA and say that Solana is an Ethereum L2.

• 41:32Speaker 01

  Right, and be done with it.

• 41:35Speaker 00

  One of the things that we're not ready to do is have these really, you know, short block times. And we'll talk about this in the ugly section. And the reason is that that introduces ugly timing games. And that starts weakening the security of the chain. So one of the concepts, but again, we'll talk about it later, is slot to ping ratio. So the slot duration, for example, in the case of Ethereum is 12 seconds. And ping time roughly, let's say, is 100 milliseconds, just to make the math easy. So we have a slot to ping ratio of 120. You have a slot to ping ratio of four. And I believe as soon as you get, you know, kind of close to one, even four is kind of,

• 42:16Speaker 00

  relatively close, you start getting these weird effects where even optimizing, you know, a few milliseconds gives you a crazy edge. And so then you end up in a position where all the participants, the validators, the block builders, everyone is basically, you know, building radio towers and, you know, programming FPGAs. And it is not fine for the validators to have, to have access to, to radio towers. That is not fine.

• 42:47Speaker 01

  The verifiers don't, like the validators are the, the people verifying the data. They're going to be receiving it sprayed around the world. That, I don't think that matters there.

• 42:59Speaker 00

  We've already seen timing games in Solana where, you know, the, the, the validators are willing to, you know, to wait a little bit so they have a bit more information. They can get a similar edge just by optimizing their latency and using radio towers.

• 43:14Speaker 01

  That's fine, like the.

• 43:15Speaker 00

  It's not fine because what will end up happening is that only the, the, the validators with the best infrastructure will survive and everyone else will have a suboptimal yield. Let's say the yield is whatever, X percent. Well, we're going to have those that get X percent and those that get, you know, half of X.

• 43:30Speaker 01

  What's the difference between the super Mev optimized yields on Ethereum versus plain vanilla yield? Is it 4.4 versus 4.44 or something like that?

• 43:44Speaker 00

  One of the things I've tried to do when thinking about Solana is actually trying to steel man it. Okay. And it turns out that block building specifically, and I think this is something you might agree with, is something that can be decoupled from validation. So we already have proposal builder separation, but we can go even further. We have this notion called execution tickets. We have this notion called execution auctions. I don't think all the latency games with block building and MEV will be relevant in the long term. So that's squarely kind of a temporary bad thing. But what is much more fundamental is timing game for attestors, those that are making the votes. They are meant to be as unsophisticated as possible. And I think this is something you agree with.

• 44:25Speaker 00

  Now, if I am an attester, a voter, that has, let's say, 20 milliseconds or 50 millisecond edge over all my other fellow attestors, I'm going to be making more money.

• 44:37Speaker 01

  How?

• 44:38Speaker 00

  How? Because I'm going to be making more informed vote. Like whenever I vote, I'm going to be voting correctly on the head as opposed to voting on some sort of block that gets reorged and then me not getting.

• 44:48Speaker 01

  The way that Solana distributes data is we get effectively a sample that the rest of the network has to block. So there's very little to optimize there. Even if you're like, you're talking about like, it's a very small portion of the overall returns for the validator to skip, to never pick a bad fork. It's, you're gonna, it's a one hundredth of a percentage. Because when, the way turbine works is that you receive a whole bunch of samples from the rest of the network and you know that everyone in the network got the block. So if you vote on it, you know that everyone else is going to vote on it. Like.

• 45:33Speaker 01

  You don't need to wait to two, two to 50 milliseconds to see, do I see anyone else vote on it and vote on it too, especially in the environment where the validators don't execute any code, they just vote on, did they receive the data, are we picking this fork or not? Like, when you look at Solana, it's a long run of blocks that are all built on top of heaviest fork. So what percentage of blocks actually are forked? It's 5%. So like 5% of your votes are skewed. It's, it's a insignificant difference in return.

• 46:05Speaker 00

  But that's today, but that's not the fundamentals. And the reason is that, put yourself in the shoes of a block builder, sophisticated, who has, you know, the right to build the next block.

• 46:15Speaker 01

  No, like, the, the returns from votes are not tied to the value of the block.

• 46:20Speaker 00

  They are. Well, they are, they are. It's subtle. Put yourself in the shoes of a block builder for the next lot. What they want to do is they want to gossip and build their block at the very last moment. And the reason is that from their perspective, every millisecond counts. And what they're gonna do is that they're gonna gossip the block right at the point where whatever number of votes they need, let's say it's two thirds, let's say they need two thirds for their block to get accepted. They're gonna gossip it just at the point where two thirds plus one of the validators are gonna see it. And then one third of the validators, they're just not gonna see it in time. And so they're gonna vote on some parent or some, some other block. And they're gonna get penalized. And these

• 47:02Speaker 00

  effects are just massively amplified when the slot tipping ratio is too small.

• 47:08Speaker 01

  That's not what we see in the data. You actually see-

• 47:10Speaker 00

  That's because today, the, the blockchain is immature. We don't even have PBS on, on Solana. Just come on, you're not, you're not-

• 47:18Speaker 01

  Revenue on Solana is equal to Ethereum.

• 47:23Speaker 00

  Yeah, but you don't have PBS. You don't have PBS. This is something that's coming soon, presumably. Like, I'm gonna have a call with the GTO guys on PBS specifically. Like, this is something that is basic infrastructure in 2024 that you don't have. The actors on Solana are not acting rationally. Like, they're just running the default software because they're not sophisticated. But over time, this is something that we've learnt.

• 47:46Speaker 01

  The amount of benefit that you get isn't significant because you only have 400 milliseconds to build your block. You will get overrun by the next guy. And if you will miss your block, you miss it. You miss all the rewards there.

• 47:58Speaker 00

  You said it yourself. You only have 400 milliseconds. So let's say that you have a tiny edge. Let's say you have 40 millisecond edge. That's 10% more energy.

• 48:06Speaker 01

  Why would you wait to transmit your block at the last moment and let the next guy an opportunity to overrun you? Why won't you transmit your block as fast as possible?

• 48:18Speaker 00

  Because you're gonna submit it right at the point where two thirds of the validators are gonna see it on time and one third of the validators are gonna be exploited.

• 48:25Speaker 01

  Why is that more profitable than to do the default?

• 48:28Speaker 00

  Because you win a few more milliseconds versus the naive strategy.

• 48:32Speaker 01

  Millisecond in terms of what? Mav?

• 48:34Speaker 00

  Yeah, yeah. And like, if you have 400 millisecond slot times, 4 milliseconds is 1%. And as a block builder, I'm competing relative to the other builders. And so my profit margin might only be 1%. And so by having a 4-millisecond edge, I could double my profit margin.

• 48:53Speaker 01

  I don't think so. I just don't see that as like a realistic result. Look at Ethereum right now. What is the difference between a totally no Mav client and a fully maximum Mav client in terms of APY?

• 49:08Speaker 00

  It's huge. It's like something like 2X difference.

• 49:12Speaker 01

  No, it's not. It's like 4.4 versus 4.5 APY.

• 49:18David Hoffman?

  Uh, no. New projects are coming online to the Mantle Layer 2 every single week. Why is this happening? Maybe it's because Mantle has been on the frontier of Layer 2 design architecture since it first started building Mantle DA powered by technology from EigenDA. Maybe it's because users are coming on to the Mantle Layer 2 to capture some of the highest yields available in DeFi and to automatically receive the points and tokens being accrued by the $3 billion Mantle Treasury in the Mantle Rewards Station. Maybe it's because the Mantle team is one of the most helpful teams to build with, giving you grants, liquidity support, and venture partners to help bootstrap your Mantle application. Maybe it's all of these reasons all put together. So if you're a dev and you want to build on one of the best foundations in crypto, or you're a user looking to claim some ownership on Mantle's DeFi apps,

• 50:02David Hoffman?

  click the link in the show notes to getting started with Mantle. Are you worried about the security of your cross-chain transactions? Crosschains with confidence using Transporter, the revolutionary token bridging app designed to give you peace of mind. Powered by Chainlink CCIP, Transporter is your trusted gateway for securely moving assets like ETH, native USDC, and LINGK, and so many more across some of your favorite blockchains. Over $2.8 billion has been hacked from token bridges to date. Transporter puts a stop to this by ensuring your transfers are protected by the most robust security features available. Chainlink CCIP provides Level 5 security backed by multiple decentralized oracle networks and an independent risk management network. Transporter also provides real-time tracking throughout your transaction with its newly engineered user experience,

• 50:46David Hoffman?

  so you'll never have to second-guess the safety or location of your assets ever again. And the best part? Transporter makes it simple. Whether you're a blockchain beginner or a seasoned trader, Transporter's intuitive interface lets you execute cross-chain transactions with just a few clicks. No additional fees, just a low cost for using CCIP, which can be paid in LINGK or your blockchain's native gas token. But don't just take my word for it. See for yourself why Transporter offers a stress-free bridging experience. Experience the future of token bridging at transporter.io and just send it. Are you launching a token? Is it already live? How are you managing the legal and tax obligations for providing token grants to your team? It's no secret that token management gets complicated. Between learning all the legal language and tax obligations in every country that your team is in,

• 51:29David Hoffman?

  token grant management can feel like an obstacle course. But it doesn't have to. That's where Toku steps in. Toku provides practical tools to handle token grants, allowing for effective oversight of token distributions and payroll tax compliance for employees, contractors, advisors, and investors. They also handle tax withholdings through their real-time tax calculations that can be done by Toku or integrated into any payroll EOR providers in any jurisdiction. Toku is a trusted provider of Protocol Labs, DYDX Foundation, Mina Protocol, and many more. Get started for free and make token compensation simple at toku.com/bankless. Justin, can you kind of help us handhold of some of the listeners who might have lost the thread a little bit? You're doing some MEV calculations with regard to block times,

• 52:13David Hoffman?

  and I think you're alluding to an acceleratingly centralizing network as a result of increased value capture. Can you kind of present some napkin math and where that actually points to your conclusion?

• 52:27Speaker 00

  Right. So as a rough heuristic, MEV grows linearly with time. So if you have 400 milliseconds, that's worth twice as much as having 200 milliseconds. And like one way to think about it is that there's twice as many transactions that come in during this period of time, and so twice as many fees.

• 52:47Speaker 01

  That's not true, though, because a lot of transactions land before your slot. So you have accumulated more than a block's worth of transactions prior to your slot. And then you may get 400 milliseconds more, but your period of when you're actually receiving data is anytime. Just like I'm in a mempool, people just submit shit ahead of time. So you have a bunch of data that you can work with. The extra 400 milliseconds account for a very small window of that. So when you're cutting that 4%, you're talking about getting the very last bit of people that are trying to snipe something. Maybe, or just or just stay or late and the one they clicked something.

• 53:27Speaker 00

  Look, I'm one of the operators of the ultrasound relay, which is the top relay on Ethereum. And I have very good visibility on timing games. You know, all the builders will co-locate, all the relays will do crazy optimizations to shave a few milliseconds. This thing is real, even with 12 second block times. It's gonna get insane when the block times are 400 milliseconds, because the marginal improvement, you know, for every, let's say, millisecond that you get, from a relative standpoint, it's much, much bigger, you know, return on investment than than with Ethereum where you have 12 seconds.

• 54:06Speaker 01

  I think when you have high throughput, the number of transactions you're dealing with is much higher. And any individual one, the ROI is much lower. So you're like talking about median fee on Solana is 0.2 cents. So that extra 400 millisecond, extra 200 milliseconds even, over the amount of time that you're waiting and receiving transactions is accounting for a very small amount of actual fees.

• 54:33Speaker 00

  No, I mean, if your start time is 400 milliseconds and you have a 200 millisecond edge, which you, you know, you wouldn't, that that's too high. But let's say you have a 40 millisecond edge, then you get 10% more time to build your blocks and you get 10% more transactions and therefore more fees.

• 54:49Speaker 01

  You get, because you get a bunch of transactions before your block starts.

• 54:53Speaker 00

  But these are the ones that the previous builder didn't want to pick, like they're like garbage transactions.

• 54:58Speaker 01

  These are just people retransmitting and trying to land. And like, they're not garbage transactions, they're high value transactions.

• 55:06Speaker 00

  Is a Solana problem, like this is not something that we have in the context of Ethereum. In the context of Ethereum, we have low value transactions that kind of just sit in the men pool for slots and slots and slots.

• 55:17Speaker 01

  They're all of, like, the median transaction fee in Solana is 0.2 cents.

• 55:22Speaker 00

  So it doesn't matter what the median transaction fee is.

• 55:25Speaker 01

  Sure, so the average transaction fee is 2 cents, let's say. That last 200 milliseconds is gonna get you 500 times, what, 2 cents worth of extra data, maybe?

• 55:38Ryan Sean Adams?

  But don't you just make it up on volume? I think that's Justin's point is like, sure, we're measuring things in milliseconds.

• 55:44Speaker 01

  Those transactions are not higher ROI. You can go look at, go compute this, go look at the flood of transactions and see, do you actually get higher value transactions in the last 40 milliseconds versus the first? And even then, does it even matter to delay sending the previous transactions versus just, I have 40 milliseconds left in my block, I will take the highest paying transactions at the last moment and send those out? Like, there's no, there's no real, like, you have to show me that there's a massive financial advantage to not transmit whatever you have early in the block, because you only have 40 milliseconds and you gotta generate those sticks and send them out.

• 56:29Speaker 01

  And this is happening in Solana in a concurrent environment. We only have one block producer, but the design is for concurrent block producers. So now you have multiple block producers around the world that are not aware of what each, the other one has. So they have to race to fill the block together. And if they delay and that one particular one gets dropped, that guy has pushing his boundary of terms of losing all his block rewards.

• 56:57Ryan Sean Adams?

  I feel like some of, some of these details maybe require some follow up, like after the episode, if Justin wants to like prove something to Anatoly and Anatoly wants to refute it.

• 57:06Speaker 01

  The interesting point here is I think the goal of Solana is to solve these problems with hardware.

• 57:12Ryan Sean Adams?

  Right.

• 57:12Speaker 01

  We have, we reduce the block times to what the physical limit allows, let's say 120 milliseconds. We have multiple block producers that requires more bandwidth, so we need more cores and bigger pipes. And we create this very highly competitive environment from the hardware itself. So when you have these games, it's very, very hard to get an edge over the default. And that's possible you may get an edge in any given time, but it's not going to be 20x or 10x. It's going to be basis points.

• 57:46Ryan Sean Adams?

  So I want to zoom out at this point. So last time we kind of handed the mic to Anatoly, who mentioned the bad. If I were to sort of summarize the bad, it's almost like the bad and the ugly. I think what you were saying, Anatoly, we got in the minutia of like, you know, millisecond block times and MEV and all of this. But I think what you're saying is the reason Ethereum is under optimized is because it's not doing like transaction confirmation as close to the speed of light as possible. Right. And like, it's not propagating this global shared state at that level.

• 58:21Speaker 01

  The longer the window you have, the longer that window is for front running and queue jumping. And the transactions go up and the spreads go up and the fees go up and the worst experience it is for users.

• 58:34Ryan Sean Adams?

  So, so Justin, what's your take on that? That like we got, without going to the minutia, I don't know if you want to steal Man and Anatoly's case for this, but like, why, why does Ethereum not do this? Why is that, why is this not bad for Ethereum? Not to, you know, optimize for global shared state at near the speed of light as he's saying, in the way he's saying it. Maybe give, give your reason for that. And then maybe you could get into some of the bad, you know, that you see on the Solana side of things.

• 59:01Speaker 00

  So one of the pieces of good news here is that at the end of the day, it's largely a parameter. Like it's some sort of number that we can pick. How many milliseconds per slot? Is it 400? Is it 12,000? And if Ethereum got it wrong, then you know, maybe this is something that, that, that we can change. The way that I see it is that it boils down to this slot to ping ratio. So like we're bottlenecked by speed of light here. It takes roughly 130 milliseconds for light to go all around the earth. And ping times, you know, roughly can be approximated as, as 100 milliseconds. And what happens is that there's boundary effects between the slots

• 59:45Speaker 00

  that are on the order of this ping time. This is where the so-called timing games can be played. So if you have 120 ping times that are all, you know, one next to the other, and then you concatenate the next one, like where they touch each other, like where there's potential for timing game is actually very, very small. But once your slot times become so, so small, then the edge cases start to accumulate.

• 1:00:11Speaker 01

  This is all of Solana engineering isn't solving that. And this is how turbine and profistry and all this stuff works well together. Is that boundary is deterministic from any validator's perspective. Like, so when you receive all the data from potentially N number of block producers, how you receive it gives you a very, very good statistical guarantee that everyone else saw the exact same partition as you.

• 1:00:36Speaker 00

  Timeliness is fundamentally subjective. There's no way to have a global agreement on when we receive. Every different validator sees the packets at different points in time.

• 1:00:46Speaker 01

  And all of our engineering is to make the best case the average case. This is what all of Solana's engineering is about, is make sure when my validator-

• 1:00:57Speaker 00

  What will happen is that the block builders will gossip the block just at the right point so that two thirds of the validators see it on time. They vote, the block gets accepted. And then one further of the validators are left in the dust.

• 1:01:07Speaker 01

  They can't do that because of how the blocks have to propagate through turbine. There's a deterministic path that shuffles the data around the world with erasure codes. So when I receive it and recover that block, I know that with a very high guarantee that everyone else has done the same thing. So when I vote based on that information, it's very, very sound.

• 1:01:29Speaker 00

  Yes, but that is, what you're talking about here with erasure codes is data availability. I'm talking about timeliness, which is a different thing, which is that-

• 1:01:37Speaker 01

  Same thing.

• 1:01:38Speaker 00

  When on my clock, which millisecond did it arrive? And fundamentally, different routes on the internet take different amounts of time. There's jitter, there's all sorts of issues.

• 1:01:46Speaker 01

  And we sample all the routes. So when I, when 50% of my routes for every shred that has to take a different path around the network arrive, I know that statistically, they have arrived for the vast majority of the network as well. So when I vote, I know it arrived for everyone else.

• 1:02:04Speaker 00

  The end game is that the builders have a direct pipe to two thirds of the closest validators.

• 1:02:10Speaker 01

  They don't, not on Solana.

• 1:02:13Speaker 00

  They can, it's just an implementation detail. There's nothing in consensus that prevents them to just have a direct pipe, you know, even like colocation.

• 1:02:20Ryan Sean Adams?

  Justin, why does that matter? Why does, why does any of this even matter? Why have we been talking about this for so long?

• 1:02:25Speaker 01

  There is, there is a global world, right? If you have a, your direct pipe is as fast as everyone else's because you still have to get your blocks to the, to the validator on the other side of the world.

• 1:02:38Speaker 00

  The reason it matters-

• 1:02:38Speaker 01

  It has to go through the same fiber.

• 1:02:42Speaker 00

  The reason it matters is because it is a centralization vector. What happens is that the own, it elevates the barrier to entry. In order to even be able to play the game, you need to have outstanding networking infrastructure.

• 1:02:56Speaker 01

  You don't-

• 1:02:57Speaker 00

  And by outstanding, I mean above and beyond what is available to, to the, to the commoner. Like, one of the things-

• 1:03:04Speaker 01

  Every commoner can go look through their phone book and find a data center in their city that has tier three-

• 1:03:10Speaker 00

  Data centers won't make it. And part of the reason is that you're gonna need access to like private-

• 1:03:16Speaker 01

  No, you won't.

• 1:03:17Speaker 00

  Links that only like the HFT firms have. That is why we're having-

• 1:03:21Speaker 01

  No, you don't. This is, this is like, that, that's just, the, the world, to get this validator, if then, if the Solana network is actually distributed around the world, like, I, sure, in the world where everyone stuffs all their validators in like two, two data centers, that's bad. But if the validators are actually physically distributed around the world, those HFT links are not gonna help you.

• 1:03:47Speaker 00

  There's gonna be incentives for the validators to migrate.

• 1:03:50Ryan Sean Adams?

  Okay.

• 1:03:51Speaker 01

  To, why?

• 1:03:53Speaker 00

  Why? Because they're gonna be closer to the builders, therefore they're gonna be able to make better votes and therefore have a higher-

• 1:03:59Ryan Sean Adams?

  I feel like this-

• 1:04:00Speaker 01

  Again, like, like I, like I've said, you can't make better votes to get an edge when every block is built on top of the heaviest fork.

• 1:04:07Ryan Sean Adams?

  So, so because-

• 1:04:08Speaker 01

  And you have statistical sample that tells you, yeah, everyone else saw this block. This is the whole point of like Solana's design is to eliminate the, the forking choice from, from that as much as possible.

• 1:04:19Ryan Sean Adams?

  So Anatoly, is your prediction that like making these design decisions for, for Solana will not result in centralization of the network in the way Justin's describing? And Justin, is your prediction that these design decisions will centralize the network in the way that you're describing? It feels like we won't be able to resolve- This in this in the scope of this conversation, we just have to kind of wait. Do we not? And like, do we have any concrete predictions that either of you would make some point in the future so that we could look back on maybe years from now and say, oh, you know, this is how it happened. You know, like, one of us was more right than the other. Justin, do you have a concrete prediction here as to like, what the outcome of this might might become so we can table this topic and move on?

• 1:05:00Speaker 00

  Yes. So if Solana does go forward, you know, towards its end game where it reduces slot times to the minimum, let's say 100 milliseconds. And this is my understanding of what Solana want Anatoly wants to achieve. Then yes, I think we're going to see hyper centralization within any given slot. So in slot N, what we're going to see is like all your testers just being in a data center or in a few data centers that are all proximate to each other.

• 1:05:25Ryan Sean Adams?

  And Anatoly, if you are right, none of that happens, right? That this remains with the kind of like the properties Solana has today remain in place. It doesn't centralize in the way Justin's talking.

• 1:05:37Speaker 01

  I think if the parameters are set correctly, that we have like, you know, 130 millisecond block times, you can have a validator anywhere in the world and vote and you will get this about the same API as anyone else. I think the difference is going to be basis points.

• 1:05:52Ryan Sean Adams?

  Well, the future, we'll have to see in the future. We'll have to replay this episode, this clip in particular, and see which prediction pans out. We're still on kind of the bad section. So Anatoly had the floor. No, I think that was definitely the ugly section. Yeah, it's all combining, isn't it? Justin, do you want to give your take on either the bad, the ugly, or both for the Solana side that's outside of the scope of the conversation that that we just had? So something new.

• 1:06:17Speaker 00

  Yeah, I mean, I didn't touch upon the bad facts, but in some sense, they're not really important. And as David said, like, they will just dwindle with the passage of time. So there's all sorts of bad facts, like the altages, you know, being very proximate to the largest financial fraudster since Madoff, the misleading marketing, like even today, I went on Solana Compass, I thought this marketing was kind of gone, but still there's this marketing that Solana can do 65,000 transactions per second, which is First of all, that was a claim that was made four years ago. And it's still not achieved.

• 1:06:59Speaker 01

  You can, you can go run the code yourself and test it at a very, very simple transfer.

• 1:07:04Speaker 00

  Okay, show me on production. There's also, you know, bad present facts. There's, there's no client diversity, there's no formal spec, there's, there's, there's no PBS, there's just general immaturity. But again, I think these are not, you know, fundamental things because they're being worked on. You know, there's another client being worked on. I'm sure there's some, some academic somewhere that's working on the formal spec. And I do know that Jito is working on PBS. So all of these things will get resolved. But then there's a final category of items in this bad bucket, which is the bad takes. And in my opinion, there's a couple of bad takes Anatoly that you have been spreading, which hopefully this, this podcast can help you spread less.

• 1:07:47Speaker 00

  One is this idea that issuance is not a cost to the network. Now, there's a very simple reason why it is a cost and it has to do with taxes. My assumption Anatoly is that you pay your taxes, is that correct?

• 1:08:01Speaker 01

  Of course.

• 1:08:02Speaker 00

  Okay, so if you were to stake and you were to make, let's say, a million dollars of income staking, you will have to, my understanding is that you're based in California and I looked it up. The income taxes in California is roughly 50%. So you will have to pay half a million dollars of income taxes on your staking. That is direct sell pressure, that is a cost to the network. Now Solana is roughly speaking a 100 billion dollar network.

• 1:08:27Speaker 01

  Sell pressure is not a cost.

• 1:08:33Speaker 01

  Wow, we have to go into this, okay.

• 1:08:35Speaker 00

  Wow.

• 1:08:36Speaker 01

  The, the value, like the value of an asset is not determined by how much is sold. Like it has, if you're talking about like how much Apple, Apple stock somebody sells does not, is not a cost to Apple.

• 1:08:49Speaker 00

  Okay, so someone has to pay for these costs. So for example, in Bitcoin, like someone has to pay for the electricity, someone has to pay for the e-waste.

• 1:08:57Speaker 01

  That's, that is a cost. That is an actual cost to run the network. That's a physical cost.

• 1:09:02Speaker 00

  And in the case, yes, it's a physical cost, sure. Then like taxes, even though it's like not physical.

• 1:09:08Speaker 01

  So every share of Apple stock sold is a cost to Apple?

• 1:09:12Speaker 00

  No, like if, if there were, let's say that there were no taxes. Let's say that we live in a world without taxes.

• 1:09:19Speaker 01

  So if I sell Apple stock, can I pay taxes on it? That's a cost to Apple?

• 1:09:22Ryan Sean Adams?

  Are you differentiating Anatoly between a cost to, a cost to Apple and like sell pressure? Are these kind of different concepts in your mind?

• 1:09:30Speaker 01

  Sell pressure is a local event that's temporal, but the value of the company is based on Apple. It's based on their future cash flow. And in the US, the monetary market will expand to capture that value. Somebody will go buy all that stock because the future cash flow of Apple is so much, worth so much. So like selling Apple stock is not a cost to Apple. That's, that's like obvious to, to everyone.

• 1:09:59Speaker 00

  Apple does not issue stock, you know, to, to, to pay for its security. So Solana is a roughly $100 billion network. Roughly speaking, 5% of issuance per year, which means that.

• 1:10:12Speaker 01

  It's not for its security.

• 1:10:15Speaker 00

  Which means that 2.5.

• 1:10:16Speaker 01

  Security of the network doesn't come from the issuance. That's absurd.

• 1:10:19Speaker 00

  $2.5 billion per year of taxes is being borne by the Solana token holders. If we were to live in a world where there were no taxes, then this sell pressure would not exist. That is definitely a burden to the network.

• 1:10:33Speaker 01

  So this is, this is like a complex thing to analyze because people that are offshore can earn their rewards offshore and only pay taxes and value they appropriate to the US.

• 1:10:47Speaker 00

  Okay, but let's take your example.

• 1:10:49Speaker 01

  Sure.

• 1:10:50Speaker 00

  Anatoly, do you contribute to sell pressure of, of Solana?

• 1:10:54Speaker 01

  Probably, but like.

• 1:10:55Speaker 00

  Okay. Is that a burden to?

• 1:10:58Speaker 01

  And I pay my taxes.

• 1:10:59Speaker 00

  Okay, good.

• 1:11:01Speaker 01

  Yeah, of course.

• 1:11:04Speaker 01

  That does not change the future cash flow of any asset like when somebody sells their stock. So it has no relevance on that.

• 1:11:15Speaker 00

  It is, it is the exact same thing as proof of work. In the context of proof of work.

• 1:11:18Speaker 01

  It's absolutely the opposite of proof of work. Proof of work actually have to go buy electricity and burn an external exogenous asset to run this.

• 1:11:28Speaker 00

  You have to go buy an exogenous asset called US dollars in order to be able to pay your taxes. And in doing so, you're selling your Solana.

• 1:11:35Speaker 01

  That's, does not, it's, there's not a cost to the network. That's like.

• 1:11:40Ryan Sean Adams?

  Anatoly, you said something else here, which is like issuance does not provide economic security. Did I hear you correctly there? I'm wondering if you could say that again.

• 1:11:50Speaker 01

  First, it does not provide security. Security of the network is the physical boxes and links. Like if I'm running a system that cares about detecting double spends and invalid state transitions. I run a whole bunch of nodes, a whole bunch of clients and make it really, really hard for an attacker to partition my, my clients such that they can double spend. So if they try to double spend, they have to reveal two headers to two different sides of the network. And they don't know which nodes are mine. Right? So it becomes the more, more nodes I run and the longer I wait, the harder it is for the attacker to do the double spend. So it's irrelevant. Like this is why we don't see double spends on the Solana testnet.

• 1:12:32Speaker 01

  We have as much economic security in the Solana testnet as Ethereum mainnet. It's as good at defending against double spends.

• 1:12:42Speaker 01

  Every, the Chihuahua Tenderman chain has seen as many double spend attacks as Ethereum mainnet. Because it's as good as defending against double spends as Ethereum mainnet.

• 1:12:53Speaker 00

  So this ties into the second bad take that, you know, you've just spread and you, you're constantly spread, which is basically that you're saying that economic security is a meme. And you are right in the sense that economic security is not necessary to verify the correctness of blocks. I run a full node. If a block's invalid, I just filter it out.

• 1:13:13Speaker 01

  Yep.

• 1:13:14Speaker 00

  And then there's, there's two other things that economic security could potentially be helpful for. One is, as you said, double spends. Now, it turns out that doing a double spend, you know, you need to have a very, very good reason for, for, for, for doing so. And. You know, this is a little bit of a tangent, but we can also just completely solve double spends with cryptography. There's this notion called one-shot signatures. And it turns out double spends is not fundamental to consensus. But now let's focus on where economic security is fundamental, which is to do with liveness and censorship resistance. Let's say that I can 51% attack a chain. Then what I can do is I can selectively filter out transactions.

• 1:13:58Speaker 00

  For example, I can filter out oracle transactions. I could filter out liquidations. I could filter out fraud proofs. I could filter out buy orders or sell orders. I can manipulate markets. Now, let's say that I can make a billion dollars manipulating markets through this selective censorship. And the economic security is, let's say, $1 million. Well, now it's a no-brainer for me to invest the $1 million to go 51% attack and make a billion dollars of profit. And so economic security is not a meme. It is fundamental to censorship resistance.

• 1:14:33Speaker 01

  When you talk about security, it implies safety.

• 1:14:37Speaker 00

  No.

• 1:14:38Speaker 01

  Sure.

• 1:14:38Speaker 00

  No, there's two aspects of security, safety and liveness. This is basics.

• 1:14:43Speaker 01

  Sure, sure. But when we talk about security, you would want to place safety over liveness.

• 1:14:51Speaker 00

  No, no, no, both are important.

• 1:14:54Speaker 01

  So you would allow a network to run with an invalid state transition?

• 1:14:59Speaker 00

  No, no, they're both important. We've talked about this. The invalid state transitions are easy to fix just because you can run a full node and you can just discard them immediately. This is something that has been known for 15 years since Bitcoin. If you run a full Bitcoin node and some sort of miner tries to create an invalid Bitcoin chain that prints, you know, 10 trillion BTC, it will just get rejected.

• 1:15:22Speaker 01

  Of course, of course. And that could cause a liveness failure if the vast majority of the network is trying to produce invalid nodes, like invalid blocks. You have no confirmation, you can't tell, right? It's effectively a liveness failure. So you pick safety over liveness. Any case, like economic security to a lot of folks implies safety. So when we talk about censorship resistance and liveness, it does have impact there, but it does not provide enough.

• 1:15:57Speaker 00

  So it's not a meme.

• 1:15:58Speaker 01

  Oh, I think my point is is that other networks like tenderment networks like Chihuahua Chain, like the Solana test nut, provide equivalent amount of security there, even for liveness and censorship resistance. Yes.

• 1:16:12Speaker 00

  I go on Chihuahua, I buy whatever required number of tokens. Let's say I need to spend $10 million to get enough tokens, Chihuahua tokens to go for 20% attack.

• 1:16:22Speaker 01

  And you take all the Mev for a day. And people recognize that you take all the Mev and they fork and slash you.

• 1:16:30Speaker 00

  Okay, so you do agree that now it basically depends on how much profit you make. Now, we have ambition in Ethereum, which is to be the Internet of Value. We want to have trillions, tens of trillions of dollars that are settled and traded on Ethereum. If you can disrupt the Internet of Value, even for one hour, even for one minute, that is worth an insane amount of money. And we cannot have tens of trillions of dollars secured by $1 billion of economic security.

• 1:17:02Speaker 01

  Go ahead, Anat. The rest of the world runs on T plus two to T plus 10 settlement. It handles trillions of dollars. It has outages all the time and liveness failures. It works. So you're trying to replace it with a better system. I get it. But you can't tell me that an hour outage or 10 hour outage is fundamentally going to stop the world and everyone's going to be panic on fire. That's just bullshit. So like, yeah, economic security protects against a very specific attack, but that attack does not exist on any other chain because it requires more than epsilon stake. You have to go buy a huge chunk. It's detected. Once it's detected, the attacker is slashed. So that that effect exists on every chain.

• 1:17:48Speaker 01

  The fact that it's detectable. And the fact that it's easy and trivial to slash, those are the things that secure the Solana testnet and the Tenderman Chihuahua chain. And this is why you don't see these attacks anywhere. So you can't tell me like, why, why like this meme is bad is like you're using it as bad marketing. Ethereum has World War III level economic security. This bullshit, because one, I can't tell looking at the stake and there's no way you can prove to me that all of that stake didn't come from the ICO. There's zero way you can guarantee that the cost basis for all the current stakers is not what they pay, like the ICO price. There's no way you can prove that. It's impossible.

• 1:18:31Speaker 01

  I trust that it's not because I'm not, I'm a rational person that believes in mostly functioning markets and most people are honest and stuff like that. But if we're doing hard analysis and like, what can we actually prove? You cannot prove that. So the actual economic security based on some number based on a current spot market price is meaningless. The real security is it's detectable, it's apparent in any network. And that's why we don't see them in even testnets.

• 1:19:02Speaker 00

  No, so I think we've agreed that economic security is not a meme because it is relevant to this one specific, because it is relevant to this attack called censorship.

• 1:19:12Speaker 01

  It's a meme because that attack is every network, proof of stake network, does as good of a job defending against that as Ethereum mainnet.

• 1:19:21Speaker 00

  Okay, so what you're saying basically is that if this attack were to happen, then the social layer can come in and do social slashing, which is correct. But there's a few, a few points here. One, social interventions are extremely expensive. We've gone through one in Ethereum's history. It's called Ethereum Classic, it's called the DAO. It is not something that you want to go into. Secondly,

• 1:19:46Speaker 01

  So it's, it's what $300 billion worth of economic security to defend against an attack that never happens in any proof of stake network?

• 1:19:56Speaker 00

  It's never happened because two things need to happen. One is you need to have a sophisticated attacker who knows about this attack and is willing to plan it. And two, the incentives need to be there. Right now, almost all of the value secured on Ethereum is Ether itself and it's staking. So in some sense, there's nothing to attack. But project yourself 10 years in the future where tens of trillions, hundreds of trillions.

• 1:20:22Speaker 01

  I could potentially take over an Ethereum testnet, cause it to double spend, right? With my economic attack while shorting Ethereum and say, look, there's a bug in Ethereum. Everyone panics, Ethereum drops.

• 1:20:36Speaker 00

  Yeah, but this is actually.

• 1:20:37Speaker 01

  There's a massive economic incentive to attack an Ethereum testnet that has zero cost, right? I assume in terms of economic security.

• 1:20:46Speaker 00

  Yeah, so this particular attack wouldn't necessarily work because the social layer knows that it can fork it and it doesn't affect the rest of the market. But once you're willing to censor oracles, you're willing to censor fault proofs, willing to censor liquidations and, you know, market buys and market sells, then you're in a position where you can harvest toxic MEV. And if the amount of toxic MEV that you can harvest is greater than the cost of attack, then yes, it's going to happen. Just because it hasn't happened doesn't mean it's not going to happen. Now, you said that the social layer can intervene. That is correct, but that is a very expensive process.

• 1:21:24Speaker 01

  How's it any more expensive than rebooting from an outage?

• 1:21:28Speaker 00

  Well, in the case of Solana, you know, these outages don't have real significance because there's no value on Solana.

• 1:21:41Speaker 01

  It has the same revenue as Ethereum.

• 1:21:44Speaker 00

  It's not about revenue. It's about like TVL and things like that. Solana has 0.7% of all USDT. It is like miniscule.

• 1:21:53Speaker 01

  Why are outages important for TVL that's sitting at rest and doing nothing? Why is revenue is what's actually important?

• 1:22:00Speaker 00

  It needs to be active. So it needs to be, you know, like there needs to be over collateralized loans. There needs to be.

• 1:22:05Speaker 01

  Which is determined by revenue, right? A proxy for all that activity is actual on-chain revenue.

• 1:22:10Speaker 00

  No, like a lot of the revenue for the validators, you know, come in this form of of sandwiching, right? Like this is one of the primary forms of revenue.

• 1:22:18Speaker 01

  So MEV, so MEV plus priority fees on Solana are about equal to Ethereum one.

• 1:22:23Speaker 00

  No, but we're talking about like really, really toxic levels of MEV. Like sandwiching is nothing compared to the type of MEV that you can harvest. If you were to do a 51% attack.

• 1:22:34Speaker 01

  But like, so if somebody does that and that that's bad, the network halts, slashes them and moves on and it's a 24 hour thing.

• 1:22:44Speaker 00

  Okay, let's say I can make $10 billion from this attack and it only cost me $1 billion. That is, that is, that is a bad outcome. Now, another thing.

• 1:22:53Speaker 01

  Unlike, it's unlikely that that could be true because you would have to go buy up all of this. It, it seems unlikely that the revenues within 24 hours, the maximum MEV revenues could be that high, $10 billion that are, basically the threshold here is if it takes 24 hours to go fuck this, fuck over this attacker, right? They're doing the bad thing, everyone halts, they get slashed in the fork and everyone continues. That's a 24 hour process, maybe. They have to make more money than, than the 50% of the stake within that 24 hours.

• 1:23:36Speaker 00

  Okay, so there's a couple of things here. One is that they can pick whatever 24 hours has the most impact, like they can pick, you know, whenever like the Fed decides to change their rate.

• 1:23:46Speaker 01

  So, so the potential for revenue, right?

• 1:23:49Speaker 00

  It doesn't take 24 hours, like we're talking potentially an event that can take, you know, days to, to, to, to resolve. And thirdly, in your end game document, one of the things that you highlight Anatoly is this idea of sampling committees. You talk about committees of size 200, where let's say you have 20,000 validators, you pick a committee of size 200 and now only 1% of the validators are in control of the chain for a whole epoch, which is let's say two days. What are you going to do? You're going to slash one third of the 1%, which is like 0.3%. And now the attacker can do the attack again and again and again and again. And so what you're suggesting in your game, end game is ugly because the social slashing doesn't even work there.

• 1:24:32Speaker 01

  Um, I would imagine the stake representation there is going to be higher than to 1%. Simply because when you're sampling like power law distribution of nodes, your 200 nodes already make up more than like 50%.

• 1:24:47Speaker 00

  What an attacker will do is that they'll spread their stake across, you know, equally.

• 1:24:51Speaker 01

  But then, but then they're not going to be majority in the subcommittee. They're only going to be picked, right? Like they need like, if you're, if you have like 10% of the stake, you're going to be in 10, in like, you're going to have 10% of the subcommittee.

• 1:25:05Speaker 00

  In any case, there is like a degradation of the amount that is slashed. It's not going to slash the whole attacker. The attacker can do the attack several times.

• 1:25:13Speaker 01

  Sure. And again, that's just like in Chihuahua chain. They buy 10 million worth of Chihuahua coins. They do the attack, they get detected, they get slashed. This is why it doesn't happen because the revenue.

• 1:25:26Speaker 00

  You're trivializing slashing.

• 1:25:28Ryan Sean Adams?

  We, we, we are full circle to Chihuahua chain again. So I just want, I don't think either of you is convincing the other one of the point. So Anatol, your position.

• 1:25:37Speaker 01

  There's never been, there's never been this level of attack in any proof of stake network. It happens in like proof of work networks because you can do an anonymous 51% attack. And this is like the, the big flaw in proof of state and proof of work. Cause one is you can roll back two weeks worth of Ethereum classic with an anonymous like chain of, of links and nobody knows who you are. And you effectively like robbed everyone that believed the previous thing. But in proof of stake, you have branded validators that compete for stake. And like they're staked for an epoch. So there's a cooldown and warm up period. So they're known and it's very, very hard to get to even point to what you can do.

• 1:26:21Speaker 01

  And once you pull off the attack, everyone knows who did it immediately. Like it's just, and like the information is out there. So you're completely left yourself open to being slashed immediately. This meme is benign in Ethereum because Ethereum does a really, really good job with engineering and they actually do have a lot of validators and a lot of links and independent clients. All that stuff they do. It's a dangerous meme for everyone else because people will, like Luna, will roll up to some absurd number of stake and say, "We have massive economic security," where it's like not real in any way.

• 1:27:02Speaker 01

  And that gives people false confidence. I would actually like, but I would, what wish Ethereum would do is just like, forget that meme, just talk about the really excellent engineering. Like, these attacks are impossible because the engineering is really, really good.

• 1:27:19Speaker 00

  So Luna is incomparable. Like, they were not building, they were building a stablecoin and the design was just flawed.

• 1:27:24Speaker 01

  But their TVL, the amount of stake that they had, stake to secure their proof of stake network was massive and they could literally just go, "Say, we have massive economic security." It takes a lot of work to go and like parse those details and to tell a person that's not like plugged in, "No, you can't compare that economic security to Ethereum's." But you can literally easily say, "Look, that's 100 nodes all run by the same people. This is bajillion nodes, geographically distributed with a bajillion links. This is secure, this is not."

• 1:27:59Ryan Sean Adams?

  Okay, so, once again, on that item of economic security, is there anything predictive, you could say? Like, so, like, I think listeners might be asking, "Why does all of this matter?" Right? So like, Justin, why, why, why is that bad in your book? That, you know, you think that economic security does matter and that it's bad for Anatoly to propagate it and say that it doesn't matter? And I think listeners might be wondering why. Like, why, why did we just have this conversation, this debate about economic security? And if you're right, is there something predictive that you can say about some kind of future attack that Solana or chains like it might face if they're not considering economic security? Because we could, we could test that in the future.

• 1:28:37Speaker 01

  Somebody with actually weak security will have strong economic security and then will get wrecked.

• 1:28:44Ryan Sean Adams?

  That's your prediction.

• 1:28:45Speaker 01

  This is the bad outcome. This is the bad outcome that I think as an industry, we should strive to strive to avoid, right? Because then you're giving people like a very, very easy meme to like brand themselves with versus really, really hard engineering, which is hard to do.

• 1:29:03Ryan Sean Adams?

  I see. And you're saying that at some level, it's already happened with something like Terra Luna, using economic security as a meme. Justin, how would you put a bookend on why this matters?

• 1:29:14Speaker 00

  I think it's more of an intellectual point for Solana specifically because ironically, Solana has very high amounts of economic security because the vast majority of its

• 1:29:23Speaker 01

  I don't trust it. I don't trust the economic security on Solana.

• 1:29:29Speaker 00

  Well, you do trust that the social layer can slash them if they were to misbehave, right?

• 1:29:33Speaker 01

  But you can't say that the chain is more secure, like, what is it, 20 times more secure now than a year ago? You cannot possibly say that. No, you can't.

• 1:29:43Speaker 00

  Because there is money to be made from 51% attacks. And now the money to be made needs to be so much higher to compensate for the loss of slashing. Now, in terms of a concrete prediction, my prediction would be that like some smaller chain that has much lower amounts of economic security than Solana will get 51% attacked and will be harvested for toxic MEV through, for example, the censoring of Oracles.

• 1:30:08Ryan Sean Adams?

  Okay. All right. Let's move on. Are we into the ugly territory yet from your side, Justin? Or are we still on the bad? What's ugly about Solana to finish up this conversation? Then maybe we talk about kind of the end game of both ecosystems and we call this a wrap. But what stones have we left unturned?

• 1:30:29Speaker 00

  Yeah, so happy to finish off on the ugly part. And it's kind of. Interesting, because it has to do with things that seem innocuous. And specifically, one of the things that I think is ugly is the fact that Solana is an L1. The mental model that I have is that it's decided to create an island in the Pacific as opposed to being connected to Wall Street, right? There's existing network effects, these are extremely strong network effects. And it's by being an L1, you don't get to tap into these existing network effects. And now, if my thesis is correct, that the L1 is where it takes most, then Solana is not gonna, is not gonna make it.

• 1:31:12Speaker 00

  Now, let's look at concrete numbers, and I think these are extremely telling. You have Solana, which is a four-year-old project. How much USDT has it accumulated? It's accumulated under 800 million, which is about 0.7% of all your USDT. Now, let's look at a, for comparison, on the L2s. A single L2 Arbitrum, which is only three years old, has three times the amount of USDT. Why is that? Because they are connected to the epicenter.

• 1:31:40Speaker 01

  TVL is irrelevant.

• 1:31:42Speaker 00

  It's not irrelevant. It's not useless.

• 1:31:45Speaker 01

  It is. How much, how much revenue is Arbitrum making off of that bajillion in, in USDT? Like, who's, who cares about it?

• 1:31:56Speaker 00

  I have no idea, but it is a sign that people are using USDT for loans and savings and payments and all sorts of, all the reasons that USDT is used.

• 1:32:05Speaker 01

  That's actually like very, very misleading bullshit. Amount of TVL in a, in a, in a protocol is meaningless. Big Data Protocol had 6 billion TVL. What happens? It had big, that was, that was an Ethereum protocol that had like a big run last cycle, doesn't exist anymore. What happened? I thought TVL, TVL is really important.

• 1:32:29Speaker 00

  If the average user puts forward, you know, a hundred dollars of USDT wherever they're living, and you know, let's say there's a hundred million dollars of TVL in a specific chain, that means that, you know, on average, roughly speaking, like a million users.

• 1:32:44Speaker 01

  That would be if you have actually a million users that are actively using that money and doing commerce with it. True, but that's not what TVL actually is. TVL is people fishing for rewards.

• 1:32:56Speaker 00

  Look at Tron, for example. Tron has a huge amount of USDT TVL. Why is that? Because Tron is actually being used for payments. It's actually being used by real people. You can't say that TVL is irrelevant. It is one of the strongest signals that you can have, that the chain is actually being used.

• 1:33:11Speaker 01

  Those are, again, there's many, many examples, counterexamples of that. When I'd have to look at actual Tron data, how much of the Tron TVL is somebody's money sitting in a protocol earning like useless tokens? How much of it is actually spent on peer-to-peer payments? You gotta separate those out. Like, there's, TVL is not like a good signal at all.

• 1:33:37Ryan Sean Adams?

  Justin, beyond TVL, can you finish your thought on the ugly? And then I want to get, we want to get Anatoly to respond in your comments and then state his ugly before we get to the end. So finish your thoughts on the ugly.

• 1:33:50Speaker 01

  The fact that Tron has a lot of TVL is, again, a point against TVL being a good signal.

• 1:33:57Speaker 00

  No, Tron is like providing tons of utility for payments. This is a well-known fact that tons of payments in Asia.

• 1:34:04Ryan Sean Adams?

  Let's move beyond the TVL. What else you got, Justin?

• 1:34:06Speaker 00

  Right. So basically, what we have is that Solana is moving towards being isolationist, is being disconnected. Now, the L1 is only one aspect. There's more, there's more to it. One is that Solana has no support for like clients. It has no real-time marketization of the state. There's literally zero like clients. And what that means is that the only way to interact with the chain, unless you're willing to be on a data center, if you have a phone or even if you're another blockchain. Let's say you want to build a trustless bridge between Solana and Ethereum. You can't. And so this is why the only kind of bridges that you have are trusted bridges,

• 1:34:48Speaker 00

  like Wormhole, because Solana has no like client support. And my prediction is that it will never have like client support for a couple of reasons. One is that it's taken this shortcut of not having marketization. And it turns out that marketization is the bottleneck. And so if it were to reintroduce it, it would affect its writeability and its TPS. And that's not something that it wants to do.

• 1:35:10Speaker 01

  You don't need marketization for like clients. Like, why? All I need is like data availability proofs. That's totally doable. And you need a path to the vote from my transaction that asserts the value of the state. Like, I just need to submit a transaction that says, check the state is equal to this hash.

• 1:35:29Speaker 00

  OK, so basically, what Anatoly is suggesting is that every time you want to read the chain, you make a transaction. That is crazy. That is absolutely insane. Yes, it is.

• 1:35:40Speaker 01

  Why? Not for a high throughput chain with medium P's below .2 cents.

• 1:35:45Speaker 00

  Because you make orders of magnitude more reads, more reads on the blockchain than you do writes. So that would like increase.

• 1:35:52Speaker 01

  The transaction that you care about verifying can do that as its last instruction. You don't have to actually do this for every time you need to do a read. It's that if you're a payment provider that needs to receive like payment flow in your UI, you force the user to do this. They sign the transaction. You then do the whole SPV proof and DA and you're done. Like, this is not like it's an extra instruction for people that want to want that cost. That's it. That's bundled in a transaction.

• 1:36:24Speaker 00

  Good luck with that. My personal prediction is that no one will be paying for that. Everyone will go through trusted intermediaries. They're going to be willing to just trust whoever, you know, Helios or Helium or whatever it's called, is telling them, all the RPC providers. And they will not be making a transaction first.

• 1:36:44Speaker 01

  If it's a commercial differentiator for those guys to do it, they can bake it into their APIs.

• 1:36:50Ryan Sean Adams?

  Anatoly, just because we want to make sure you have an opportunity to get, you know, like, we asked you about the bad section. I think that bled into the ugly for Ethereum. But is there anything from your perspective that we haven't talked about that is ugly about Ethereum's design choices, value, architecture? I mean, one thing we haven't talked about-

• 1:37:10David Hoffman?

  Why is Ethereum fundamentally broken?

• 1:37:11Ryan Sean Adams?

  Yeah, well, I mean, one thing we haven't talked about, just to spark things, maybe, is like, running a node at home. Like, and it seems to me that maybe slanted design decisions do not think that that's very valuable at all. We could talk about that, but the floor is open.

• 1:37:27Speaker 01

  No, Nielsen's law takes care of that. Like, I already have one gigabit at home, and like, my test boxes work fine. Like, I think the ugly parts on Ethereum are that are not fixable is this focus on ultrasound money and like decentralized money. And this is what pigeons it into a specific direction, which is, means you're trying to build the lowest, smallest possible L1. And it's very, very hard to do that and do all the execution on all these L2s and have any value capture on the L1. Execution is what makes money,

• 1:38:09Speaker 01

  is when you have priority fees, people competing for content, they want this particular dog coin versus another one, they're willing to pay extra fees to be there first. That's all in the execution layer. That's where all the money is made. And that pays for a normal user that doesn't care about whether they land in this 40 millisecond block or the next one, and they just want to pay for a mobile phone. To that user, they're not, they don't give a shit. Like, when they click that pay purchase button, they don't care if it takes extra 40 milliseconds. So their fees are fractions of a penny, right? Does this make sense? This is all because execution is able to capture high average fees and

• 1:38:52Speaker 01

  provide a low median fee. That's really, really hard to do in the settlement part. And when you move all the value capture away from the L1, what are you left with? It's just trying to compete with Bitcoin and being the most better money. But that is not like real. It's all, it's a meme.

• 1:39:12Speaker 01

  Decentralized money like I agree is important. When my parents fled the Soviet Union, had these technologies existed, they would have preferred USDT on Trump versus Bitcoin or Ethereum. And there's no way you could convince him that, hey, you're going to take this massive move and flee this country, that if you take Ethereum, it's going to be within 90% of the value that you put in within a year. Because the variability and all this other shit makes it a much riskier bet. So like, you need stable coins for normal people. So like, once you accept that, like, as the thing, this like decentralized money meme

• 1:39:54Speaker 01

  is like, is like, puts you into design decisions that are all kind of like ruin the cool part of the network, which is like, execution can pay for super, super fast, cheap, stable coin payments.

• 1:40:08Ryan Sean Adams?

  Justin, I want to get you to respond to that. And then we'll end with closing thoughts from each of you. So how do you respond to what Anatoly said about the ugly of Ethereum?

• 1:40:19Speaker 00

  So Anatoly is right that there is no money to be made, no value to be captured in the settlement of execution, which is just verifying a snog. But there is this other part of settlement, which is data. And it turns out that data scales linearly. Snogs are magic. This is exponential scaling, where you can take arbitrarily large computation and shrink it down to a single snog. You cannot do that with data. Like, every user needs to consume a certain number of bytes. Now, one of the things that Anatoly said is that we're trying to build the smallest chain possible so that we can extract the highest fees. That is completely wrong, right? We have a whole roadmap of scaling.

• 1:41:01Speaker 00

  And it's not about per transaction fees being high. We actually want per transaction fees to be low. It's about the product of the number of transactions times the median or the average transaction. So we want to have 10 million transactions per second, each of which are paying a tiny fraction of a penny, but in aggregate, that could be hundreds of millions of dollars per day.

• 1:41:26Speaker 01

  To the L1, they're just paying for data, right?

• 1:41:29Speaker 00

  That is correct. To the L1, they're just paying for data, yes.

• 1:41:32Speaker 01

  And data is a commodity. Like, there's no way the L1 can charge more than a small multiple off the cost of bandwidth.

• 1:41:39Speaker 00

  Okay, so let's say that we have a validator and they're on like the best connection that is available to them, you know, from their home or whatever it is.

• 1:41:48Speaker 01

  Sixty four cents a terabyte. That's the cost of data. Not everywhere, but like that's the cost that I can get and it's going to be everywhere within a couple of years.

• 1:41:58Speaker 00

  You cannot put the whole internet on the one internet connection. Like that's just not gonna work.

• 1:42:04Speaker 01

  Sure, no, sure. But like today, today I can get sixty four cents per terabyte. Within ten years, the world is going to be below that and my price is going to be even lower.

• 1:42:14Speaker 00

  But there's this notion called induced demand. Like this is the guy who said, you know, whatever, like a hundred kilobytes of memory is going to be sufficient for the whole world. Like you need to project into the future. Today, we might only be doing ten transactions a second, but you know, in the future, we might have our personal AIs do, you know, millions of transactions per second on our behalf. And so we're never gonna be able to fit everything on a single internet connection. The more resources we have, the more we want to consume.

• 1:42:42Speaker 01

  But like the data portion is not, uh, it's opaque. It has no content-based pricing, no time-based pricing. It is just pure commodity throughput. So the L one, as the L one cannot charge more than a constant factor off the physical cost of it, because if it charges a hundred X off the, off the cost of the physical access, somebody's gonna build.

• 1:43:08Speaker 01

  This is like, again.

• 1:43:10Speaker 00

  There is, there is a reason why Ethereum data availability is worth more than Solana's data availability.

• 1:43:17Speaker 01

  Because of network effects?

• 1:43:18Speaker 00

  Because of network effects. Yes, this notion of shared security, this notion of synchronous composability.

• 1:43:23Speaker 01

  Because of the economic security.

• 1:43:25Speaker 00

  Not just that, but also access to TVL, access to applications. There's only one ENS in the world, right? There's only one Ethereum and internet name system.

• 1:43:35Speaker 01

  This is really weak. This is, this is why I think it's ugly and it's not fixable, is it's not a fundamentally hard thing.

• 1:43:44Speaker 00

  I thought we agreed that synchronicity is important. If you're on a separate chain and then suddenly you become asynchronous relative to all the, the applications that are, that are living in the other chain.

• 1:43:56Speaker 01

  Sure.

• 1:43:57Speaker 00

  And so you pay a premium for synchronicity and, and composability.

• 1:44:02Speaker 01

  If the Ethereum, I mean, like, if its main purpose is to charge for L2 data, this is how it's gonna end up. It's going to be very, very hard to capture value, like real value capture. All this stuff you're talking about is very hand-wavy because you can't like do cash flow analysis on it like Apple. I build this phone for X, I sell it for Y, right? Like, maybe, maybe it has value, maybe not, I don't know. But it's, it's wobbly to me. Like, if you're charging just for data, there's a fixed amount cap that you can charge for it because if you charge 100X on the cost of data, it's just open to competitors. Like, there's just no way you can run a business

• 1:44:47Speaker 01

  that runs 100X cost on a commodity service, like just providing data. So Lastier or whoever else will, will eat your lunch and they'll be like, this is the better place for L2s. It's just gonna be downward spiral. So this is like the hard part. I don't know if it's fixable. It's, it's easy for me to like argue how an execution layer will survive and work.

• 1:45:10Ryan Sean Adams?

  Justin, brief comment on that and then let's get to closing. So what's your brief comment on what Anatoly just said?

• 1:45:16Speaker 00

  Fundamentally, we're gonna be limited by bandwidth. Even though it grows exponentially, we always want to consume more. That is the nature of humanity. And we can't put all the internet of value, every single transaction through one, you know, home internet connection or even one data center internet connection. So fundamentally, there's gonna be congestion. And why is there gonna be congestion? Because everyone is gonna be willing to use this prime resource, which gives us network effects, gives us access to liquidity, gives us access to security.

• 1:45:48Speaker 01

  So you're expecting that the Ethereum L1 will have blob congestion?

• 1:45:54Speaker 00

  100%, yes. Like, right now, there's no blob congestion.

• 1:45:59Speaker 01

  So it's going to be under spec'd for its demand?

• 1:46:03Speaker 00

  No, we're gonna have as much as we can, but even that's not gonna be enough.

• 1:46:07Speaker 01

  I think you're overstating demands. My guess is that the top 100,000 transactions per second will cover 99.99999% of value.

• 1:46:22Speaker 00

  Underestimating the, you know, demand is like saying there's only demand for five computers in the world.

• 1:46:27Speaker 01

  No, no, that's not true.

• 1:46:29Speaker 00

  There's going to be way more transactions than you expect. We're gonna have bots and AIers and...

• 1:46:35Speaker 01

  Yeah, again, you're talking about science fiction future stuff instead of looking at a current data. Google does about 40,000 to 80,000 searches per second. That is a single global application that is scaled to every human and permeated their lives. That is 80,000 events per second.

• 1:46:53Speaker 00

  There's always new applications. Every time with 10x bandwidth, we've unlocked new applications. You know, we've gone from text to images, to videos.

• 1:47:03Speaker 01

  But not like transaction events.

• 1:47:06Ryan Sean Adams?

  So there are many points of difference throughout this conversation and I've thoroughly enjoyed everything that's been said.

• 1:47:12Speaker 01

  I pray my competitors build for a world with infinite demand. If that is as bad as, overestimating demand is as bad as underestimating it.

• 1:47:23Ryan Sean Adams?

  Anatoly, why don't you get to kind of your closing arguments? Maybe talk about what you think the endgame is going to be and how Solana fits there? And where you think the points of, you know, debate are or dissimilarities here? And just like, close us out on the discussion so far. So you have the floor.

• 1:47:41Speaker 01

  I mean, I think Solana's accomplished something really awesome. We have high average fees and low median fees. That means users can get very low access to the chain, fractions of a penny. I think L2s are still nowhere, like not even within 10x dot. And the network makes sustainable revenues. I can pay for all the hardware 10 times over. So like it's it's a miracle. Like as far as I'm concerned, like holy shit. There's enough money to be made here that these boxes are going to run forever. And access for users and like use cases that I care about, which is just selling products with through stable coins, like selling stupid phones that works.

• 1:48:24Speaker 01

  That's like a I've I've like done created something that is useful for people. And what Solana's goal is to maximize this Moore's Law and Nielsen's Law as far as I can go and optimize the network because every time we do that, it's a benefit to the users. Spreads get lower, latencies get better. All these things converge on just better outcomes for all the users. And hopefully it still remains financially like stable. So that's the vision and it's very, very simple. There's no infinities there. It's just like the really current release works well at 16 cores. Let's get it to work better at 32 cores.

• 1:49:06Ryan Sean Adams?

  And Anatoly, how does Ethereum fit in that kind of end state vision of what Solana is? Do these coexist? Does one become larger than the other? How do you think of that end game?

• 1:49:16Speaker 01

  Um, I have no clue like if this like decentralized money thing like I it might work. Like Bitcoin is worth a bajillion dollars and it doesn't make any sense to me. Like, so yeah, network effects, TVL, all these things could matter, but it's not hard. Like, it's not something that I can like bet my work on, like that I would want to bet my career on. Like, I want to build stuff that I know is going to work. So from my perspective, like the more L2s and networks and different environments start for digital assets, the better, because the more of that stuff exists, the easier it is for a price discovery engine that runs as fast as the speed of light allows to actually

• 1:50:01Speaker 01

  find product market fit. There's just more stuff to do price discovery on, right? Like, so please go build as many L2s as you can, build as many ultrasound monies as you can. Like, go, go forth.

• 1:50:16Speaker 01

  We're gonna build a chain that runs as fast as physics allow, given the hardware gods and where they go.

• 1:50:24Ryan Sean Adams?

  Justin, what are your closing arguments on this whole discussion so far? And what is Ethereum's endgame? Where does Solana fit in the picture here?

• 1:50:33Speaker 00

  I mean, in hearing Anatoly give his closing argument, I think of Anatoly as a pure technologist. I am grateful for all the technology that it has provided. But from my perspective, blockchain are one of the most multidisciplinary creatures that exist out there. And it's more than just about the technology. It's about the culture. It's about the memetic forces. It's about economic forces. It's about network effects. It's about forces that are way larger than just pure technology. Anatoly is building open source software, coming up with new virtual machines, new gossip, new networking technologies. All of these things have little moat. They can be copied very easily.

• 1:51:15Speaker 00

  And they are in the process of being copied on Ethereum altus today. What is difficult to copy are network effects, memetic forces, brand reputation. This is what will stand the test of time. And the network effects are so large that it makes it difficult to have an isolationist policy. We want to build everything from scratch. Not invented here. I don't want it. I want everything to be on my little Solana island, disconnected from reality. And that will mean that fundamentally, you have headwinds, constant headwinds. And this is being reflected. One of the very interesting things is when you have an exotic island,

• 1:52:00Speaker 00

  you have exotic life forms that emerge. You have weird things like geo Bodens and dog with hats and all of these things. And you can have circle jerking within this little island where everyone's happy worshipping these little images. But even Solana, which is the primary place for meme coins, is still minuscule. Look, Solana has tens of thousands, if not hundreds of thousands of meme coins. If you take the sum of the market values of all the meme coins is about $10 billion. On Ethereum, you have one meme coin called Shiba Inu, which is $15 billion, a single meme coin.

• 1:52:42Speaker 00

  And this is where we see the distinction between quality and quantity. Anatoly and Solana is going in for quantity, quantity, quantity, and at the expense of all sorts of things that are more important in the grand scheme.

• 1:52:57Ryan Sean Adams?

  So just because I asked Anatoly the same question, I want to ask you the same question. So the end game for Ethereum, what does Solana look like? What does Ethereum look like? Is one larger than the other? How do you think this plays out, Justin?

• 1:53:10Speaker 00

  Again, in the end game, I think it's winner take most. I think the network effects are extremely strong. And so there's, just like there's one internet, there's going to be one internet of value, right? There isn't, I mean, okay, maybe arguably, there's like two internets. There's like the Chinese internet behind the firewall and other internets. But that is kind of a bit of an anomaly. Really, you can think of there being one big internet with massive network effects. And what I think will happen is that we're going to see, you know, a flourishing of activity where the network effects reside and grow. And in order to have these healthy network effects, you need to have synchronous composition. You need to have shared security. And also, you need to have shared economic bandwidth. The monetary premium is not just about economic security. It's also about economic bandwidth.

• 1:53:54Speaker 00

  The end game, for example, is to have decentralized stablecoins. How do you build decentralized stablecoins? It's by taking pristine collateral and issuing stablecoins out of that. In order to have trillions of dollars of over-collateralized stablecoins, we need trillions of dollars of pristine collateral. And so you can't discount the importance of memetic value. And there's going to be strong network effects where these decentralized stablecoins are issued. And what I think will happen is that Ethereum is the most likely candidate of winning it all. Now, you might ask, if the layer one landscape is winner take all, like, how can you justify the Solana $100 billion valuation?

• 1:54:38Speaker 00

  The way that I rationalize it is that there's a 1% chance, let's say, that Solana can become the internet of value. And that is enough because there's a 1% chance that it 100 x's from $100 billion to $10 trillion. And so that is a worthy bet to be making. But in 99% of the time, if you were to roll the dice of...

• 1:55:01Speaker 00

  Of humanity and you run these parallel simulations, you're going to have a dominant network, the Internet of Value, that is going to eat everything up. And the lead that Ethereum has is so high that a little bit of technology that is easily copyable and that is being copied right now with the L2s is not going to be a sustainable mode.

• 1:55:22Ryan Sean Adams?

  There we go. I think we have to end it there. We've gone on for almost two hours. Gentlemen, thank you both for joining us and having this conversation, this discussion. It's been at times exciting, at times heated, but always done with good faith, I think, from both sides. So I certainly appreciate it. Anything else you want to say before we conclude? Anatoly, you look like you want to say something.

• 1:55:47Speaker 01

  No, this is great. I don't think anyone's mind has changed, which is funny. So we'll keep arguing about this.

• 1:55:54Ryan Sean Adams?

  It's usually how it works with these conversations. That's usually how these go. Justin, was your mind changed at all?

• 1:56:00Speaker 00

  Not really. I am looking forward to the feedback from the community. I mean, I want to see, for example, if people really buy the fact that paying your taxes and cell pressure is not a costly network. That just seems like absurd, but we'll see.

• 1:56:14Ryan Sean Adams?

  Well, I think there will be some follow-ups in community. As always, you can let us know what you think of this episode. Let us know if you want a round two at some point in the future and maybe we convince these guests to come on and resolve the unresolved questions. But we'll end it there. Got to let you know, of course, none of this has been financial advice. We have no idea what the price of Sol will do, no idea what the price of ETH will do in the near term future. You could definitely lose what you put in, but we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.