Pod Insights Bankless Jito's Impact on Solana with CEO Lucas Bruder About this episode This is an exploration of Jito, the Solana validator client, the staked Solana token JITOSOL, and MEV optimization engine.
The recent Jito airdrop show the whole industry as millions of dollars in value flooded into the Solana ecosystem.
Joining us today is Lucas Bruder from the Jito team to walk us through the basics and nuances of this multifaceted project.
-----
🏹 Airdrop Hunter is HERE, join your first HUNT today
https://bankless.cc/JoinYourFirstHUNT
------
BANKLESS SPONSOR TOOLS:
🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE
https://k.xyz/bankless-pod-q2
🦊METAMASK PORTFOLIO | MANAGE YOUR WEB3 EVERYTHING
https://bankless.cc/MetaMask
⚖️ARBITRUM | SCALING ETHEREUM
https://bankless.cc/Arbitrum
🔗CELO | CEL2 COMING SOON
https://bankless.cc/Celo
🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION
https://bankless.cc/Toku
------
TIMESTAMPS
0:00 Intro
6:00 Jito Airdrop
8:45 What is Jito
12:00 Staking and Decentralization
17:20 MEV Optimization
25:20 Fees and Failed Transactions
33:20 JITOSOL
37:00 Solana Economics
42:00 Staking vs JITOSOL
45:40 Ethereum vs Solana
53:30 Jito Governance
59:15 Stakenet
1:05:40 Solana Governance
1:09:40 Choosing Solana
1:13:30 A Successful Network
------
RESOURCES
Lucas Bruder
https://x.com/buffalu__?s=20
Jito Labs
https://www.jito.wtf/
Explorer
https://explorer.jito.wtf/
------
Not financial or tax advice. See our investment disclosures here:
https://bankless.com/disclosures
Transcript 14,089 words · 2 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:03 David Hoffman? Bankless Nation, welcome to this exploration of GTO. GTO is a Solana validator client, a staked soul token called GTO Soul, and an MEV optimization engine, all built into a single software suite, which we call GTO. Recently, the GTO airdrop shook the entire crypto industry as $200 million worth of GTO is distributed to over 10,000 addresses on Solana. And the Solana ecosystem seems to have turned a new page ever since. Notably, fees on Solana have started to emerge. Changing the game when it comes to Solana economics in GTO has found itself right at the center of this conversation. Today on the show, we have Lucas from the GTO team to walk us through the basics and the nuances of the GTO system. How does it work? How is it similar to Ethereum? How is it different?
0:46 David Hoffman? Bankless Nation, I've been doing some of my Solana homework. I think you're going to learn a ton about Solana and GTO in this conversation, as well as where Solana is in its development arc. But first, before we get into this conversation, our friends and sponsors over at Ambier want you to check out their wallet. But calling it a wallet really is underselling it. You've heard Ryan and I talk about account abstraction and smart contract wallets for a while now. The Ambier team is shipping that into reality with their Ambier V2 browser extension wallet. It's a browser extension, like you already know, except instead of a vanilla wallet under the hood, Ambier has a breakthrough, first of its kind, account abstraction wallet, aka smart contract wallet, under the hood. So if you've wanted to get your hands on a smart contract wallet
1:29 David Hoffman? on the new era of wallets that we all know is coming, Ambier is delivering that opportunity to you today. There is a link in the show notes, so you can unlock the full power of account abstraction without any compromise on user experience or security. There's a link in the show notes, ambier.com/v2, to get started. A quick moment of reflection and thoughts before we get into this episode today with Lucas from GTO. I think the GTO conversation is a gateway into a broader conversation about Solana. GTO is a Solana app that relates deeply to the Solana protocol itself. And the emergence of alternative Solana clients like GTO and FireDancer spawns the conversation about Solana governance,
2:10 David Hoffman? right at the same time that GTO airdrops its governance token to govern over GTO. To me, the Solana conversation is potentially at the beginning of a very interesting arc when it comes to Solana economics and Solana governance. I think it's pretty easy to say today that Solana has captured the attention and energy of these low-level systems engineers and system designers, hardware people, and as a result, has produced a very well-engineered crypto system. And with the launch of GTO and other developments, Solana is moving into needing new character archetypes to enter the scene. There is an airdrop season happening on Solana right now, where Solana apps are launching their governance tokens, and the emergence of multiple Solana clients will require human
2:54 David Hoffman? meats-based conversations to make non-breaking upgrades with each other. In the Ethereum world, we have the Ethereum Magicians forums and the All Core Devs Call in order to produce rough consensus as to how Ethereum upgrades. Solana will also need to establish some sort of system and process to make this happen for itself. Solana is entering the very messy world of governance, something that all successful Layer Ones must enter in order to truly maximize their decentralization and robustness. This is a rite of passage that very few Layer Ones ever get through. Solana has gotten to that point, and now it needs to get through that point. And as a podcast maxi myself, I am absolutely here to host these interesting and challenging
3:36 David Hoffman? conversations, and probably the best way that I can play any role at all in the growth of the Solana project, now that Solana is entering conversations that I feel familiar with. And so with that context and preamble out of the way, let's go ahead and get right into the episode with Lucas from GTO. But first, a moment to talk about some of these fantastic sponsors that make the show possible, especially Kraken, our preferred crypto exchange for 2023 and 2024. If you do not have an account with Kraken, consider clicking the link in the show notes to getting started with Kraken today. Kraken knows crypto. Kraken's been in the crypto game for over a decade, and as one of the largest and most trusted exchanges in the industry, Kraken is on the journey with all of us to see what crypto can be. Human history is a story of progress. It's part of us, hardwired.
4:18 David Hoffman? We're designed to seek change everywhere, to improve, to strive. And if anything can be improved, why not finance? Is a financial system designed with the modern world in mind. Instant, permissionless, and 24/7. It's not perfect, and nothing ever will be perfect. But crypto is a world-changing technology at a time when the world needs it the most. That's the Kraken mission: to accelerate the global adoption of cryptocurrency, so that you and the rest of the world can achieve financial freedom and inclusion. Head on over to kraken.com/bankless to see what crypto can be. Not investment advice. Crypto trading involves risk of loss. Cryptocurrency services are provided to US and US territory customers by Payward Ventures. PVI, doing business as Kraken. With MetaMask portfolio, swapping tokens on-chain has never been easier. Swap tokens at any time with the most competitive pricing around.
5:02 David Hoffman? The MetaMask portfolio swap feature allows you to swap tokens directly by aggregating and comparing various decentralized exchanges to ensure you get competitive prices and low network fees. Choose the token you want to swap from and what you want to swap into, and tap into combined liquidity across providers, all automatically. Within MetaMask portfolio, you can easily swap tokens with low fees, fewer approvals, and slippage protection for all of your trades. Manage your Web3 everything at metamask.io-portfolios. Arbitrum is the leading Ethereum scaling solution that is home to hundreds of decentralized applications. Arbitrum's technology allows you to interact with Ethereum at scale with low fees and faster transactions. Arbitrum has the leading DeFi ecosystem, strong infrastructure options,
5:46 David Hoffman? flourishing NFTs, and is quickly becoming the Web3 gaming hub. Explore the ecosystem at portal.arbitrum.io. Are you looking to permissionlessly launch your own Arbitrum Orbit chain? Arbitrum Orbit allows anyone to utilize Arbitrum's secure scaling technology to build your own Orbit chain, giving you access to interoperable, customizable permissions with dedicated throughput. Whether you're a developer, an enterprise, or a user, Arbitrum Orbit lets you take your project to new heights. All of these technologies leverage the security and decentralization of Ethereum. Experience Web3 development the way it was always meant to be: secure, fast, cheap, and friction-free. Visit arbitrum.io and get your journey started in one of the largest Ethereum communities. Bankless Nation, I'm super excited to introduce you to Lucas, aka Buffalo on Twitter.
6:30 David Hoffman? He is the co-founder and CEO of GTO Labs, which recently had an airdrop inside of the Solana ecosystem that more or less changed the game for the entire crypto landscape. Lucas, welcome to Bankless.
6:41 Speaker 01 Hey, thanks for having me. Excited to be here and talk more about GTO and Solana.
6:46 David Hoffman? There's a number of different ways that I think GTO nerdsnipes people. One is from the MEV side of things. One is from the Solana latency hardware networking side of things. Another one is just from the economics side of things. And I think that's the way that I approach to GTO is like the economics conversation. But of course, all of these Venn diagrams overlap. I think we're going to approach each one of these angles one by one here on the episode today. But I kind of want to give a take and then a question about what I saw the GTO airdrop from the external perspective, from the outside perspective, because the GTO airdrop seemed to be something larger than itself. You know, it was an airdrop for an app when we've seen these before, but it wasn't really a typical airdrop. It kind of represented something larger than
7:31 David Hoffman? just a drop for a Solana app. It really turned into a symbol for the Solana community at large. And there's this like before and after the GTO drop moment for Solana. And after GTO, if we have before GTO and after GTO, after GTO is marked by a large uptick in Solana new addresses, new like new highs in Solana volume, new TVLs, like a showing of Solana fees. And now there kind of seems to be a post moment for the post GTO drop. That's at least how I interpret it from the external perspective. I kind of just want to ask, what was this moment like for you? What was it like to be on the inside?
8:09 Speaker 01 Yeah, it was super exciting, very overwhelming. We didn't expect it to go this well. I think, you know, it went much better than we could have ever anticipated. I think there's a lot of people excited about participating in GTO governance. And there's a lot of other protocols that are looking to decentralize very soon on Solana. And so I think, you know, it got a lot of people excited about Solana. There's a lot of good press there. And now you have a lot of people coming over to Solana from other ecosystems and, you know, interacting with a lot of the dApps on Solana and really just realizing like how good of a network it is, how fast it is, how cheap it is. And I just love to see people coming over and trying it out.
8:52 David Hoffman? So one of the reasons I think why the Jito drop was so significant is because Jito isn't just an app on Solana, in the same way that Lido is not just an app on Ethereum. Like, these things relate to the protocols that they stand upon. And so that's one of the reasons why I think this airdrop made such a significant mark on the Solana ecosystem and also the broader ecosystem as well. So maybe we can just start at the very beginning. Like, what is Jito and why is it so important for the Solana ecosystem?
9:21 Speaker 01 Yeah, so Jito Labs builds infrastructure to efficiently extract MEV on Solana. There's a lot of spam and arbitrage transactions that are failing on Solana, and we kind of predicted this would happen back in 2021 and wanted to work on solving it. So Jito Labs built a lot of MEV infrastructure, created the Jito Solana client, which enables the efficient MEV extraction, built the Jito block engine, which is kind of like a block builder equivalent, like a Beaver build or RSync and stuff like that on Ethereum to kind of efficiently extract MEV, and then also built a lot of systems to make sure
10:03 Speaker 01 that the MEV is distributed to stakers. I think that's super important. Validators can choose how much they want to distribute to their stakers. And also, I'm also a contributor to Jito Network, which is a liquid staking protocol on Solana. So Jito Network operates the Jito Soul liquid staking token.
10:25 David Hoffman? So the Jito Soul liquid staking token, for the Ethereum-familiar people out there, that's like the staked ETH from Lido, or the RETH from Rocketpool. But the interesting thing about Jito is that that is stacked upon a client. And so in Ethereum, we have things like Prism from Prismatic Labs, we have Lighthouse, Nimbus, we have these different clients that run Ethereum consensus. And that is also what Jito is. Jito is also a client, along with a staked soul token called Jito Soul. And then it's also this MEV extraction optimization engine. So it's like these three core products all kind of stacked on top of each other, right?
11:07 Speaker 01 Yeah, so yeah, anyone, it's a little, the staking on Solana is a little different than Ethereum. So anyone can run the GTO Solana client. Actually, like currently today, there's like 46% of Solana stake running the client, over 300 validators and roughly $14 billion of Sol stake to the client. And Stakepool, because Solana is delegated, has delegated staking, Stakepools can delegate to any validator that they want. So there's, there's validators and that are running GTO Solana that don't have any GTO Sol stake. And there's validators that do have GTO Sol stake. There's also, I think every liquid staking token on Solana delegates some percentage of their pool to the GTO Solana client as well.
11:53 Speaker 01 So it's really just like an open source, permissionless validator client that anyone can run.
11:58 David Hoffman? Can you talk about just the synergies between this tech stack? Because some parts of it just make a lot of elegant sense. There is like having a client that also is MEV optimized relating to a staked Sol token. All of these things kind of make sense. Can you put these pieces together for us?
12:15 Speaker 01 Yeah, I think there's, I think there's definitely a lot of overlap. I think liquid staking tokens are a really good opportunity to decentralize stake on Solana. That can be, you know, geographic decentralization, client decentralization, and you know, all the other, you know, types of decentralization that exist. And so, you know, I think GTO Sol does pretty well at that. You know, helps kind of bootstrap the growth of the GTO Solana client. And also it can, you know, a lot of the validators that GTO Sol stakes to in the Stakepool are sharing the MEV with stakers. So there's like a very, you know,
12:59 Speaker 01 Up until a few weeks ago is a very small amount of MEV, but with the recent uptick in trading activity on Solana, that has massively increased. I think the, I was looking at the numbers earlier today and basically over 50% of all MEV extracted by the system has happened in the last two weeks and it's been live for a year now. So there's been like a massive, massive uptick in trading. There's a lot of improvements on the block engine that we can dive into later.
13:27 David Hoffman? Why, can we stop and unpack why the existence of a staked soul token adds to the decentralization of Solana? Can you unpack that?
13:37 Speaker 01 Yeah. So typically, what, what stakers will do is they will go to like their phantom wallet or soul flare, some other wallet on Solana. You know, they, they go through the validators, they want to stick their soul, they'll just choose one validator to stake that to. And so, you know, they're, they're sticking that to one validator. It's not spread across a network of validators. Geta soul kind of improves that. And basically when you deposit soul into the stake pool program that Geta soul runs on, there is an algorithm running that will kind of look at all the different validators that are variable to delegate to and will delegate
14:19 Speaker 01 to those validators according to some like performance and decentralization metric. So instead of your soul, like if you have a hundred soul, staking it to one validator, now you have a hundred soul, you know, there's a hundred validators, you know, one soul per validator and those validators are spread across the entire world. So anywhere from like California, New York, Germany, Tokyo, Singapore. It's kind of spread all over the world. So, you know, it increases the decentralization of the network from like a geographic standpoint and then also, you know, helps with some of the uptime that you, it helps reduce, it
14:59 Speaker 01 helps reduce the potential for like downtime and validators and losing staking rewards as well.
15:06 David Hoffman? Okay, so if I just have soul in my phantom wallet, my Solana wallet, I could just delegate that soul to a single validator and then I would start to get some of the issuance of soul and some of the fees of Solana, just because that's what that validator provides me, which is, which is a step towards decentralization. It's better than just me having vanilla soul in my wallet and not using that at all. But what you're saying is that if you just simply have this GTO system, you can actually not really have to be locked into one single validator and instead the GTO system is a little bit, again, we're probably gonna have to use a lot of Ethereum metaphors here because that's what the bankless, bankless audience is familiar with. In the same way that if you buy Lido stake ETH, you are actually spreading out
15:50 David Hoffman? your ether to like 32 node operators and eventually like that is destined to be the, according to the Lido roadmap, that's supposed to be permissionless. So the same kind of way, like rather than just picking one validator and having that be locked into that one validator and that one validator accrue a lot of soul, GTO spreads it out to many, many, many, an open set of potential validators. And it also solves a simultaneous problem of having non-homogenous soul, right? And so if I stake to one validator, my soul is stuck to that one validator. But if I put my soul in GTO, I get GTO soul back in the same way I get staked ETH back from, from Lido. And so it is both spreads it out to many, many validators
16:32 David Hoffman? and I get a token back in return that can go back into the Solana DeFi ecosystem. Is this all correct?
16:39 Speaker 01 Yes, correct. And yeah, the, there's an algorithm that's currently running and that'll transition to StakeNet, which I think we'll dive into in a bit, assuming that the GTO governance wants to switch over to StakeNet. And basically that will allow the protocol to, if it sees a validator is performing poorly, or maybe you have like validators that are moving around and there's too much stake in one region or something like that, then you can start to move that stake around. So like, as a, you know, if you want to support the decentralization of Solana and also have like a very high performing validator set that your soul stake to, then the GTO soul stake pool kind of just takes care of a lot of that for you.
17:22 David Hoffman? I think if we were talking about a standard staking pool system on Solana, everything that we've talked about thus far is more or less like table stakes. Like you have a system for spreading out Sol, so that no one validator is enshrined. And you kind of load balance based on metrics to optimize for things. This is all kind of like table stakes. And we haven't actually yet added in the MEV component as well. And I think that's really kind of the thing that makes GTO go from table stakes to something like unique and special to Solana. And so you talked about it a little bit, MEV extraction optimization. Why is that important, not just from like being a good product, but being good for Solana, the ecosystem?
18:02 Speaker 01 Yeah, so there's, you know, we ran some numbers like close to a year ago. I think the numbers last I checked were pretty similar. But 98% of arbitrage transactions on Solana fail. And there's roughly 56% of compute wasted executing these failed arbitrages. So if you go on a Solana block explorer and you like look at the transactions, you'll see like all the DEXs and a ton of failures. And so, you know, that's kind of, that has a downstream impact on users. Like if you want to interact with the chain and the blocks are consistently full and they're kind of just like spending time executing this entire transaction and then rolling back the state, that's not really like the best, in my opinion,
18:46 Speaker 01 like not the best use of block space. I think, you know, you want to see a high success rate of transactions. And so the GTO client and the block engine kind of helps mitigate some of that. And essentially, you know, a lot of these people that are spamming the arbitrages, they are trying to, they're trying to order transactions. So like you send a trade, they'll kind of monitor it, you know, see if there's an arbitrage between two DEXs. And then they'll fire off one or two or three trades that try to capture that arbitrage. And using the GTO Solana client and the GTO block engine, those searchers can bundle those trades together.
19:29 Speaker 01 So they actually execute back to back inside the block. And it's actually, if you know about proof of history, you've heard about it. It's actually right next to each other in the proof of history tick chain. So it's literally like the fastest that you can capture it by the Solana protocol rules. It's just instantly captured. So the goal there is, you know, we want to try to enable this like efficient ordering so that people aren't spamming and try to free up some of the block space. And then also there's the validator and staker economics as well.
20:01 David Hoffman? Can we go into why there is so much spam and so many failed transactions on Solana? And this is just a product of Solana being such a high throughput, low latency chain, correct? Can you talk about why there is this incentive for traders and arbitragers to send out so many transactions?
20:20 Speaker 01 I think the one thing is that it's really cheap for transactions. So I think it's like a hundredth of a penny per transaction. So there's not really like, you know, if someone has a failed transaction on Solana, it's not going to cost them a lot compared to Ethereum where, you know, if you have a failed transaction, then you might end up paying 30, 50, a hundred dollars, whatever the gas price is.
20:44 David Hoffman? Right, a hundred dollars to like try and get like five dollars of revenue. So it really costs you to make that failed transaction.
20:51 Speaker 01 Yeah, that also the, you know, the price of the transactions is so low that there's just so many microscopic arbitrages available. So the price of this, as I mentioned earlier, the price of a transaction is like a hundredth of a penny. So basically if there's any profit over a hundredth of a penny available on Solana, an arbitrator is going to capture that. So there's just a massive amount of arbitrage transactions. Only the first one is going to succeed, the rest are going to fail. And so, you know, I think that's, that's a lot of the reason why I think there's, there's some like more engineering related things as well.
21:32 Speaker 01 Like, you know, there's, there's a lot of work going into the scheduler to make it have less jitter and make it be more deterministic. So when you set a priority fee, it actually lands in the block where you expect it to. I think another big thing that core engineers and like the FireDancer team and us and people on Twitter and a lot of people are talking about some other type of, you know, you have the carrot, you need the stick. So how do you kind of throttle those transactions, you know, probably through some dynamic base fee? I don't think copying EIP 1559 and copy pasting it onto Solana is the same thing. I think there's unique things that there's Solana's unique, unique architecture.
22:17 Speaker 01 So I think there's like some tweaks that you can make to EIP 1559.
22:23 Speaker 01 And yeah, I think that will be, that's, that's an area of research that I'm pretty excited about. And we're starting to see kind of more people think about that and work on that.
22:33 David Hoffman? For the reasoning behind why so many of these transactions are failing, is it because I'm an arbitrage, arbitrager, and I really just want my transaction in and because it's so low cost, I'll send out 10,000 transactions. And only one of them will work and then then 9,999 will fail. Or is it that like, there's so many Dex arbors out there that, you know, there's 10,000 of them and everyone's sending out one transaction. And but only one of them gets it. Like, what is the actual reason? And then, of course, why are they failing? Well, because these conflict after these transactions conflict with each other after one of them succeeds. What is the actual reasoning as to why there's so many failed transactions?
23:12 Speaker 01 Yeah, I think you hit both points. There's a lot of arbitragers on Solana. I think there's a few hundred at this point, or at least there's a few hundreds signers. TBD on how many entities are like running those signers. So there's a lot of arbitragers. I think arbitragers will typically send their transaction more than once. I wouldn't, I wouldn't say as high as 10,000 times, maybe like, you know, a single digit number of times. And basically only the first arbitrage will win. So, you know, you, and everyone, everyone's seeing the arbitrage opportunity pop up at different times depending on, you know, your proximity to the leader that produced that arbitrage, network propagation, your own code speed.
23:57 Speaker 01 So like, you know, one searcher might see it 10 milliseconds after it happened. Another might see it 15, another might see it 20, another might see it like 200 milliseconds later. And so you, everyone's seeing it at different times. Everyone's firing off trades at different times. There's different propagation latencies associated with all that. And so, you know, you'll, you have arbitrages show up. The first person will capture it and then you'll see like a ton of failures. And then also going back to the point of like the fees are so low that there's so many microscopic arbitrages. Last time I looked, I think the average profit on an arbitrage was like a tenth of a penny. So there's just like a ton of super micro arbitrages.
24:41 Speaker 01 I think, you know, it is a good thing. I think the, um, it's like, I think it's a good thing that there's so many microscopic arbitrages. I think that it results in better prices. You have all these bots that are constantly rebalancing prices compared to Ethereum where like, you know, you basically are going to arbitrage. If you can offset the price of gas, so there's pools that sit around that could be arbitrage, but the gas price is too high. On Solana, I guess price is so low that, you know, there's a ton of these arbitrages, prices are in line. There's just that the issue of the failed transactions that I think base fees and maybe some other protocol changes will help fix.
25:22 David Hoffman? How does GTO produce fewer failed transactions?
25:27 Speaker 01 Yeah. So we provide searchers opportunity to bundle those transactions.
25:32 David Hoffman? Can't they just do that themselves? Can't they just bundle up a transaction and send it to them just to Vanilla Solana?
25:38 Speaker 01 Uh, so the Vanilla Solana validator doesn't support bundles. Another thing is that the, yeah, so the bundles are feature specific to the GTO Solana validator. And, um, so, yeah, another thing is that there's a, uh, there's like a very, very short-lived mempool in the, the block engine. And basically this lets searchers see these opportunities before they're going to happen. They can simulate and predict what's going to happen. And basically, you know, you send a trade, they will kind of see that, predict the arbitrage and bundle the user's trade and their arbitrage.
26:19 Speaker 01 Send it to our system, the GTO Labs block engine will simulate it and basically choose the highest pair for that arbitrage. I think, you know, there's, we're also running in the block engine, we're running a lot of different auctions at the same time. Because you, if you've ever interacted with Solana, you probably see like, if you go to the Block Explorer, you'll see all these accounts. And you know, for someone coming from Ethereum, you're like, what the heck? Like, what are all these accounts doing? So when you build a Solana transaction, you have to specify that account state that you're reading to or writing from upfront. So you'll say, oh, I want to like, trade on like this Orca market at this public key.
27:02 Speaker 01 And you know, here's my token account and this is going to be written to this I'm only reading from and so on. And so our block engine will actually like, separate all these bundles and all these trades into different auctions based on the read and write flags for each account. So we can actually run an auction. Where on Ethereum, you're kind of like auctioning off the entire block. And your price that you pay is relative, you know, there's just a basically a single auction running. And the block engine, we're actually like looking to see what's being read and written to. And then you can kind of pull them apart into disjoint sets and then you can simulate all of them.
27:44 Speaker 01 So you're actually like, you know, if there's a lot of MEV on like some Orca pool or like NFTs and stuff like that, it won't affect like Radium or Phoenix. That's something we spent a lot of time engineering and working on. And I think it's, it's been working pretty well.
28:00 David Hoffman? Yeah, that seems like a pretty big engineering lift. Let me try and put that into Ethereum words so that the Ethereum people can interpret that for the people who aren't familiar with Solana. So Solana has this, you know, local, local fee markets, right? And this I think is downstream of that conversation. So like, if this was in Ethereum, it would be something along the lines of an application or a transaction that is going to, you know, change some state of Ethereum. And that state is an arbitrage transaction between Uniswap and Sushi Swap and Zero X, for example, or like Matcha. The transaction itself would label in the front of the transaction,
28:41 David Hoffman? I am going to engage and change the state of Uniswap and Sushi Swap and Zero X. And I'm only going to change the state of these contracts. And things I'm not going to touch is like everything else, you know, like AVE, MakerDAO. Open C, I'm only touching these three things that I've specified. And then, and then it unlocks those for state changes and then, you know, then the computation happens because that leaves room for other transactions to talk to AVE and not have to be worried about any transaction that is Arbing, you know, the DEXs, for example. And so what you're saying, Lucas, is that in the GTO client, when you guys are running these auctions, you can actually create separate auctions for space in the block, in the Solana
29:26 David Hoffman? block, for highest bidders that are segregated per activity. And so there's probably some optimization, some algorithm, because there's going to be like some Venn diagram of semi-overlapping transactions. Some are touching the same contracts, some are not touching the same contracts. And so it's a little bit of Tetris-ing going on to make sure that you can create a very high-value block with all of these transactions. But the point is that there's multiple auctions for multiple different slots, depending on what that transaction is doing. And then the GTO, what GTO is, is like an optimization for making sure that the highest-value transactions get filtered up and allowed to be in the very first slot, because that's what they're paying for. And then it starts to like fill in from there.
30:09 David Hoffman? But the cool thing is, is that it gets to fill in multiple places at the same time. Because if my transaction is touching Uniswap and I really want to pay a very high price for that, somebody else's transaction can ArVE, and those two won't conflict with each other. They can both take the number one slot because they're only touching separate contracts. Did I explain all of that correctly?
30:32 Speaker 01 Yeah, that was perfect. I couldn't have explained it any better. Yeah, I think you hit the nail on the head. It's kind of like the, yeah.
30:43 Speaker 01 Yeah, I think you hit the nail on the head. It's kind of like the parallel fee markets on Solana, basically kind of applying a similar concept in the block engine. I think, you know... Getting into that a little bit more, I think it's maybe not even like the AVE contract. It would be like, oh, I'm going to touch this like specific pool and set inside AVE. Or like if I'm talking to Uniswap, it's like I'm only talking to like the like staked ETH USDC pool at this address and like, you know, it's not the entire contract. So like, we can actually run, you know, Orca is a popular AMM on Solana. We could basically run an auction in parallel for every single pool on Orca. And as long as they're not sharing,
31:28 Speaker 01 as long as there's not a overlap state there.
31:31 David Hoffman? Right. And all the point of this is to say that once Jito is done doing its work, it's produced a, the highest value block possible that it could produce because it has, it's like a pre-processing layer for Solana, right? It almost is kind of like, in a way, I know the engineers of Solana don't like my more imagination-based metaphors, but I'll try and do that anyways, which is like, Jito is a little bit of a mempool for Solana, and that it processes transactions and orders them in this nice orderly way before it actually like puts a block into the chain. Is that like a fair metaphor?
32:08 Speaker 01 Yeah, for sure. It's kind of like, it's like an optimization layer for validators to build more efficient blocks. I think the, the one thing is on Ethereum with PBS, you have the builders are actually building the entire block. And so you run into some issues there, like a lot of the potential censorship issues where Jito is, we're not actually building the entire block, we're building pieces of it. So it's kind of like, I think, you know, I think in Shrine PBS is looking at like partial block building inside there. So you can kind of think of it like that, where we are, we're building like the, the really profitable pieces of the block as efficiently as possible. And then the validator software is handling the rest of the stuff.
32:53 David Hoffman? And the reason why I want to spend so much time on this is A, because it's interesting and worth noting, but also B, because it's like kind of the tip of the GTO stack. Like, what is GTO? It is delegated staking. It is a staked soul token, GTO soul. But it really, again, like I said, the really the shining part of GTO is the MEV optimization and high-value block building aspect of it. Can you talk about how that circuits back into the value of the GTO soul token? Because to me, like, if my understanding of GTO is correctly, like, GTO will live or die by the value of GTO soul, right? Like, that is like the pinnacle of the GTO system. GTO soul is supposed to be the most efficient soul asset to own natively on Solana.
33:38 David Hoffman? Can you talk about, can you just complete the circle for us? How does all of the things we've talked about go into increasing the value of GTO soul?
33:44 Speaker 01 Yeah, so GTO soul is a reward-bearing liquid staking token. So on, I think on Ethereum, like, Lido, it's a rebase, so they will kind of credit you more staked ETH when you receive the rewards. On Solana, all of the liquid staking tokens are reward-bearing. So the price of GTO soul and liquid staking tokens as a whole go up relative to the price of soul. So you stick your soul into the stake pool, you get back GTO soul. That soul represents the soul that you initially deposited, plus accrued inflation and MEV rewards.
34:26 Speaker 01 So the goal is like, you know, any stake pool can delegate to the GTO Solana Vouch Air client. The hope is that MEV becomes a main, like, revenue driver for Solana, so that liquid staking tokens can start to realize some of these rewards in the price of the liquid staking token relative to soul. So essentially, it has the opportunity to add more rewards to GTO soul, and, you know, it ultimately impacts the API of liquid staking tokens on Solana.
35:03 David Hoffman? And people run the GTO client because it optimizes MEV extraction on their behalf, right? Like, and so I, I have enough technical chops to be able to like, download a client and run it, but I do not have enough technical chops to be able to run an MEV bot. Like, that's roughly about where my line is. And so like, for me, as an individual, if I could run a Solana validator, I could just run the GTO client and I could like, raise significantly the bar for me to be able to engage in MEV extraction. Maybe I'm not at the tip top of the Solana ecosystem, but like, it's a way higher than I would ever be as like a semi-technical individual. And so that's kind of the motivation and the, and the democratizing access that GTO has, or the democratizing power that GTO has for the Solana ecosystem, correct?
35:48 Speaker 01 So yeah, we want to make sure that like, everyone can have opportunity to do this and access to it. Client's open source, it's permissionless. Anyone can connect to the block engine and start receiving these bundles. And there's kind of this marketplace of searchers and traders that are available that we, we kind of, like, GTO Labs will kind of handle that side and talk to searchers and market makers and figure out, you know, what features do they want? How can we make your transactions more successful? Just make it a better experience. So we kind of have this marketplace that we built up over time with these traders and market makers. And, you know, validators can basically get access to that through the block engine. So, you know, there's block engines all over the world.
36:33 Speaker 01 Right now, there's four. There will likely be more next year that will kind of go into more decentralized parts of the world, like Singapore and, you know, other parts of Europe that don't have a lot of stake right now. And the goal is to basically give access to this to anyone. So if you're a validator, you don't really need to care about this stuff. You can just run the GTO Solana client, hook into the block engine and start receiving these profitable bundles and help make the network run more efficiently.
37:02 David Hoffman? Can we talk about the way that the economics of GTO impacts Solana? And so maybe we can start with, how much of the MEV is being able to be pocketed by arbiters? Versus how much of that MEV is getting sent into the GTO soul token? So like, what's that like pie split? There's a bunch of value being created here, a bunch of value being divvied up. How much goes into the GTO soul and how much is left being pocketed by arbitrators?
37:29 Speaker 01 So yeah, basically, anyone can run the GTO Salon of Outlier client.
37:35 Speaker 01 The way it works is that when there is a tip that's sent to the block engine, we try to optimize the tip for a given set of state that is running the auction. That tip will then get paid out to these programs. The program will kind of split the fee there. So right now, GTO Labs takes 5%. That's to cover infrastructure and engineering costs. You know, to be transparent, it's not really close to that right now.
38:05 Speaker 01 But you know, we're betting on more, we're betting on more trading activity coming to Solana and things getting more efficient. So GTO Labs will take 5%. The other 95% goes to a, what we call a tip distribution account. Essentially, the tips will aggregate there for an entire epoch. You can think of it like a validator's MEV piggy bank. So for the epoch, the MEV is accumulating in this piggy bank, which is unique to that validator for that epoch. And essentially, what happens is at the end of the epoch, there is a process that runs off-chain, which will distribute, it'll calculate a Merkle tree and a Merkle root. Basically, it does an MEV airdrop.
38:47 Speaker 01 So airdrop, the Merkle root will get uploaded to this account. And then there's a bunch of transactions sent out. Right now, it's around 400,000 transactions every two or three days that get sent out and pays out the MEV to the validator and then all of these stake accounts on the validator. So validators can set their own commission rate. I think if you go to, there's a, there's a retool dashboard I can share after, but it will show all of the validators running the client and their MEV commission rate. And so, you know, the Merkle root contains the information to kind of break that piece off that goes to the validator. The rest of it goes to the stake accounts.
39:28 Speaker 01 For liquid staking tokens that are delegating to these validators.
39:33 Speaker 01 The liquid stake, the stake pool has, it manages a bunch of stake accounts. So what happens is the pool has, you know, there's the pool and then there's like 100 or more stake accounts that are sitting on these validators. So in the last step I was describing where the MEV is distributed to stake accounts, there is basically the stake pool will receive the MEV in that stake account. And that's prorata to its share of stake on that validator. And so the MEV gets sent there, sets a soul and then the pool can basically collect that and restake it and then, you know, it kind of compounds that.
40:16 Speaker 01 And then the, um, the MEV that goes there, the, the stake pools have a, what they call an epoch fee. And this is basically a fee that goes to the treasury. So if you go to gov.geto.network, there's a fee account that has GTO soul in it. And that's basically 4% of inflation and MEV rewards. So that's kind of how, you know, that, that's the super high level picture. And then how it flows back to the treasury. And then it also gets auto compounded back into the protocol as well.
40:52 David Hoffman? Okay. So that was 4%, 5% to GTO Labs, 4% to the GTO Treasury. And the, the, those two numbers are correct?
41:00 Speaker 01 Yeah. So the 4% to the GTO Treasury is just, the, the, the 5% to GTO Labs is on all MEV. And then the 4% to the treasury is just on the soul that the GTO soul stake pool manages that portion of MEV.
41:18 David Hoffman? Understood. Okay. And then the, the large majority is just sent to either the GTO soul or validators who run the GTO client, correct?
41:29 Speaker 01 Uh, so majority, I guess the majority of it gets sent to the validators, these stake accounts on the validator. And, uh, if the GTO soul stake pool is staking to that validator, then it will receive it in that stake account, which basically funnels back up into the pool. So it's not like, I guess, to the GTO soul protocol is not like today, it's not earning like an unfair amount of MEV compared to everyone else. It's basically equalized between everyone.
42:02 David Hoffman? Okay, so with the GTO client and the MEV optimization and building the block, how, so I guess the question I really want to know is, what is the value capture difference between just like staking and or delegated staking your soul to a validator versus holding GTO soul? Because GTO soul captures some of the MEV, correct? So like, how, how much, I guess, is it more advantageous to hold GTO soul? And how much more value do you accrue doing that versus just holding normally staked soul?
42:34 Speaker 01 So yeah, I think the, the yield is pretty similar between the two. So if you go to like Solana Compass or something like that, the yield is currently roughly around, you know, 6.8, 6.9%. Pretty similar to staking to normal validators. I think normal validators are maybe a little bit higher because there's not the 4% fee, but you get some benefits as well to liquid staking. So, you know, you can, similar to like, if you, if you run your own validator on Ethereum, you might earn a little bit more yield, but you're kind of, there's downsides to that. So with GTO soul, you know, you have a liquidity and, you know, you don't have to worry about the downtime and all that.
43:14 David Hoffman? Okay, so you, you actually make less money holding GTO soul due to the 4% fee that you talked about earlier than you would if you had just staked your Solana directly to a validator. But then the nice thing is, is that you can go and use your GTO soul inside of GTO, inside of Solana DeFi, which, you know, if you can somehow find a way to get more than 4% value out of that, then all of a sudden you're in the green, correct?
43:38 Speaker 01 Correct. Yeah, there's a lot of exciting opportunities going on in Solana DeFi. And, you know, not financial advice, but there's certainly ways to
43:50 Speaker 01 use that GTO soul and other liquid staking tokens to kind of get higher yield.
43:56 David Hoffman? Okay, and since the GTO drop, like I kind of said at the beginning, the activity in Solana has just jumped in a very, very big way and fees on Solana have started to actually, you know, show up. Does that impact the economics of GTO Sol? Or is there kind of like a wall where that that doesn't really, the fees and MEV opportunities on Solana, do those permeate into GTO Sol very much?
44:21 Speaker 01 Yeah, we're definitely seeing the beginning of it. I think it's kind of the first inning.
44:26 Speaker 01 So yeah, the MEV system has made, I think, 50 or over 50% of all fees and MEV have been made in the last two weeks compared to the previous year. So there's definitely been, there's been a lot more trading activity. I think the interesting thing is that the the priority fee on Solana, that has provided pretty good economics for validators, but the priority fee isn't actually passed on to stakers. And so, stakers never see if, without GTO, there, you know, there's the validators earning those priority fees. Those priority fees can be significant. It's pretty volatile depending on the trading
45:09 Speaker 01 activity and what bots are doing. With MEV, you're actually, the stakers are actually able to receive some of the MEV. So I think we're kind of in the first inning.
45:21 Speaker 01 I don't, I don't feel comfortable saying like what type of boost it will provide to yield. I think there's, there's a lot that can change, but I do think that, you know, that potential is there in the future.
45:34 David Hoffman? Right. I guess, yeah, it's, I guess I'm wrapping my head around the fact that just the economics between Ethereum and Solana are just fundamentally different at the transaction level because, you know, Ethereum is all about passing value down to ETH stakers because it is like the widest, largest, most accessible and most decentralized part of the Ethereum blockchain transaction supply chain. So if you can like prevent MEV arbors, if the gas that they pay gets passed, if the searchers... Bid into the block builders who bid into the stakers. Well, then the stakers are ultimately the people that get it. And so when there's more gas fees, stakers get more healed. But it sounds like that's just not the pattern that exists in Solana.
46:19 Speaker 01 Yeah, so there's, I guess, there's a few ways that passes on to Ethereum stakers. Correct me if I'm wrong here. It's been a while since I looked at the economics in detail. But you know, there's EIP 1559 and that burns the base fee. It's dynamic based on usage.
46:39 David Hoffman? Right. And that goes to everyone, not just stakers. That goes to just ETH as an asset.
46:45 Speaker 01 And then you have the, I think they call them the priority, is it the priority fee or the tip?
46:51 David Hoffman? Yeah.
46:52 Speaker 01 There's the tip. So yeah, the tip goes to the stakers or basically the stake on that validator.
47:02 Speaker 01 So yeah, it's a little different on Solana. The base fee, 50% of it gets burned, 50% goes to the validator operator. They're static on Solana at 5,000 lamports. And then there's the priority fee as well, which 50% of that gets burned and 50% goes to the validator operator.
47:23 David Hoffman? Oh, okay. So wait, so is there really any difference between the economics of a base fee versus the economics of a priority fee on Solana, other than like one is required and the other one is just gets you higher in the list?
47:35 Speaker 01 Today, no. I think they, I think that needs to change.
47:42 Speaker 01 You, I think the fact that the priority fee is burned, I think is one of the shortcomings in the protocol, but I think, you know, that's pretty easy to fix. I think priority fees have the incentive to.
47:59 Speaker 01 They can potentially incentivize like out of band payment. And you know, if I'm a validator, hey, I want you to pay me. You can pay me through the system where if I don't get, I only get 50% of it. Or you can pay me through this other system where I get 100% of it. You know, which one are you going to choose? And so I think, you know, priority fee, I imagine. I don't want to speak for the core engineers or the foundation or anything, but I think that will probably get changed pretty soon here to where the validator keeps 100% of the priority fee.
48:33 David Hoffman? Well, to me, that is exciting because like I said at the start of this episode, I think the economics question, the economics conversation of GTO is the most interesting one. And I think the most interesting thing about Ethereum was the arc of its economics over time. Like I got into Ethereum when the economic, the monetary policy was five ether was issued per block and that was it. And then we got to watch it go down to three and then we watched it go down to two and then we saw EIP 1559 become merged and then we saw proof of stake happen. And it was like one of the most fascinating stories that I think was just ever to like unfold in the crypto space. And so if you're telling me that there is like a bunch of conversations about the future economics of Sol, I certainly think that that's a pretty fascinating conversation.
49:17 David Hoffman? Where do those conversations get held? What are the state of these conversations? If, if people like me are interested in following along with those conversations, like where, what would I tap into in order to do that?
49:27 Speaker 01 Yeah, there's a lot of the, a lot of the conversations are happening in Discord, in the, there's a Solana Tech Discord. There's some happening in Telegram. It's kind of, it's decentralized, pretty decentralized right now. So there's a lot of conversations happening in a lot of different places. I think ultimately people are trying to kind of get back to the forum as like a single place to discuss these ideas. So you're seeing, I think we'll start to see that happen pretty soon as these like ideas materialize into more concrete ideas and implementations. Another place that you're seeing these happen is there's a
50:06 Speaker 01 There's a CMD repo. It's a Solana Improvement Proposal or Solana Improvement Document Repository. And you're starting to see some, you know, it's, that's kind of the place for these like, large protocol changes that need to be coordinated between a lot of different stakeholders. We're starting to see more conversation happen there. So there's, if you look up the Solana
50:35 Speaker 01 PRAW, P R A W, in the CMD repo, there's a ton of discussion in there. It's kind of a alternative path to some type of dynamic fees to, to charge users and bots. So there's, yeah, there's some conversation happening there. But yeah, no, I think, I think there's, you know, no system's perfect in its economics, at least at the beginning. And I think there's, there's a ton of flexibility in the Solana protocol. You know, we were talking about the, the different accounts that you have to specify upfront that you're going to modify, and you can run a lot of these transactions in parallel. So, you know, there's potentially,
51:18 Speaker 01 some ideas are to run like an EIP type mechanism on each account. Maybe you run it per program. There's a lot of flexibility, I think, you know, it's going to be.
51:30 Speaker 01 Yeah, yeah. So there's going to be a, there's going to be a large opportunity to
51:37 Speaker 01 like, figure this out. And I think, you know, it's, it's going to be like herding cats for a little bit. But I'm pretty confident the, the community is open to change. And I think Solana, one of its strengths is taking feedback and implementing it pretty fast. And I think we'll see that happen hopefully in 2024.
51:54 David Hoffman? Are you launching a token? Is it already live? How are you managing the legal and tax for providing token awards for your team? Toku simplifies everything about managing token grant compensation, and you can get started with them for free. You'll have access to top-notch legal and tax support to handle the distribution and management of tokens for your team. Toku caters to every step in the process, from user-friendly Friendly legal templates for granting tokens to track investing periods and calculating withholding taxes. Toku understands every grant structure, token purchase agreements, restricted token awards, restricted token units, token options, and all the other ones. Toku is already simplifying this today for leading companies like Protocol Labs, DYDX Foundation, Mina Foundation, and many more.
52:35 David Hoffman? You can learn more about how Toku can help you streamline your token management and get started for free. Visit Toku at toku.com/bankless or click the link in the description below. Cello is the mobile-first, EVM-compatible, carbon-negative blockchain built for the real world. And now, something big is happening. Introducing the Cello Layer 2. It's a game-changing proposal that's going to bring Cello's rapidly-growing ecosystem home to Ethereum. Vitalik has shared his excitement for the Cello Layer 2 on the Cello forum, so has Ben Jones from Optimism. But why? The Cello Layer 2 will bring huge advantages, like a decentralized sequencer, off-chain data availability, and one-block finality. What does all that mean? Rock-solid security, a trustless bridge to Ethereum, and more real-world use cases for Ethereum without compromise. And real-world adoption is happening.
53:19 David Hoffman? Active addresses on Cello have grown over 500% in the last six months. With the Cello Layer 2, gas fees will stay low and you can even pay for gas using ERC20 tokens. But Cello is a community-governed protocol. This means that Cello needs you to weigh in and make your voice heard. Join the conversation in the Cello forum. Follow @celloorg on Twitter and visit cello.org to shape the future of Ethereum. I think with that bit of conversation right there, we start to open up the rabbit hole of Solana governance. Because now Solana governance is a conversation because there's newer clients of Solana. And when there are multiple clients of Solana, all of a sudden, what Solana is, is no longer determined by one single client, hence, because there's multiple of them.
54:01 David Hoffman? And so, who says what Solana is is now a governance conversation? But I want to leave that at the very end of this podcast. In order to get there, I actually want to talk about the decentralization of GTO, because that is a microcosm of the decentralization and governance of Solana. So we'll have to start with GTO first. What is the long-term plan for the decentralization of GTO?
54:23 Speaker 01 Yeah, so the GTO Foundation just released the Governance Token, JTO. It allows the token holders to participate in governance. And the GTO network, as we've kind of gone over, has its hands in a lot of things. And, you know, I'm like pretty excited to see people participate in governance here. Right now, it's the governance control is the stake pool. So there's some fees associated that governance can vote in. You know, maybe governance wants to drop fees, maybe they want to lower fees. You know, you can put these proposals up at forum.gto.network and, you know, get some input there.
55:06 Speaker 01 There's 240 million JTO tokens that governance controls. So that can be used in, you know, any way that token holders please. And there's a few other parameters as well. I think, you know, we'll probably get, probably seeing a lot about StakeNet as well. StakeNet will be the way that, assuming that governance votes it in, will be the way that the GTO Sol stake pool runs. And there's some parameters in there that, because it's an open source delegation strategy, token holders can actually change the way that the stake pool runs. And it all happens on-chain.
55:50 David Hoffman? An open source, let's unpack StakeNet really quick. An open source delegation strategy, what is that? And why is that important infrastructure for GTO?
55:59 Speaker 01 Yeah, I think it will be like the most, assuming that the GTO token holders and governance vote to kind of transfer the running of GTO Sol stake pool to StakeNet.
56:13 Speaker 01 I think it'll be the most decentralized stake pool in existence.
56:18 Speaker 01 Basically, what StakeNet is, is an open source delegation strategy that runs on Solana.
56:26 Speaker 01 And so basically, anyone can contribute to running the stake pool if it's, if it delegates that authority to StakeNet. So I think today, or the data filming, we just open sourced a piece of StakeNet, which is the first component is the validator history program. Basically, the validator history program is using Solana as a database for validator performance metrics, which I don't think has ever been done before. So basically, you can see how well a validator is voting, their history of commission. You can see like when they're changing their commission rates, how well they voted in the past.
57:12 Speaker 01 You can see what version of client they're running. You can see the client type. So you could see like Solana Labs, Jito Solana, when FireDancer is out, or the Zig client, that will be stored in there as well. And there's 512 epochs worth of data, which is several years of data. This data started getting collected on September. So there's actually like a few months of data in there already. And so, you know, this is one piece of the program. There's a lot of other features that I look forward to contributors contributing to, like block production quality. There's this big issue or like challenge of how do you figure out where a validator is located in the world?
57:54 Speaker 01 And yeah, there's a bunch of other cool things I'm sure people will come up with to add to StakeNet. And basically, this is like the source of truth for all validators on Solana. And then there's going to be another program, which will be released in the near future. And basically, it will reference that data to operate the stake pool. So all of the delegation logic and parameters for Controlling stake pools will live on Solana. So basically you can write math. It's like, hey, I want to look back six months. How did this validator do? How did, how did you compare to everyone else? So, you know, you can score all these validators on chain.
58:35 Speaker 01 And then you can write the logic to basically say, oh, like I have this stake delegated this validator and this one delegated to this validator. You know, this, this one's doing better. So StakeNet can basically take the stake off that validator and move it to a different one. You can expand the size of the stake pool. I think, you know, the, the possibilities are kind of endless, but I think the main goal is like putting all the delegation logic onto Solana, using Solana as this like database for validator history and essentially, yeah, just putting all the logic on chain so that GTO Sol and other stake pools, if they adopt it, can live forever.
59:16 David Hoffman? The way I kind of see StakeNet from what you described is kind of like the brain of GTO, where you're, you're, since Solana is a, you know, a system that you can put data on, you're taking all the data about the state or health of Solana validators that are part of the GTO system and putting that on chain. So that StakeNet can consume that data, evaluate the GTO validators and then load balance or, you know, determine who gets what stake as determined by the StakeNet algorithm. Urn is a system in DeFi, in Ethereum DeFi that optimizes for yield with different strategies. And it kind of sounds like that's kind of similar, it can be kind of similar, where
59:57 David Hoffman? we can like load up a algorithm, load up some strategy into StakeNet that load balances across all GTO validators into an optimized fashion. And what does it mean to be optimized? Well, that's up for GTO governance to determine. Is that a fair way to articulate this?
1:00:15 Speaker 01 That's a perfect way to articulate it. A lot of the, basically all the data that StakeNet uses, except for like one, I think there's one piece that isn't available on chain. All of it is copied from. Backing up, I guess, a lot of the data that we're referencing is in what's called a vote account. And a vote account lives on chain. If you remember, you know, there's been some stupid FUD in the past from like the Solana non-vote versus voting transactions. You know, people are saying a lot of the transactions are vote transactions. Well, yeah, votes are transactions and the state of how well a validator is voting is actually stored on chain.
1:01:00 Speaker 01 And those transactions reference that. So what StakeNet is doing is basically, there's keepers that anyone can run. And when you crank this program, it will basically copy the vote account into StakeNet. And so StakeNet is basically checkpointing this data periodically and storing historical analysis of it. So it's not like there's like a centralized party that's like, you need to like, trust to like, upload this data. It's like, this is actually like, you can look at the code, it's all open source, it's copying this data on chain. There's a few things that aren't available on chain. And for that, we're actually using data available in Gossip.
1:01:40 Speaker 01 So all the Solana nodes are gossiping with each other. They're not actually transactions, they're just kind of like packets. And in order to gossip those transactions, it's every validator signing that transaction with their key. And basically, you know, you can say, oh, Lucas's node said that their IP is this, or they're running this version. And we're actually taking that gossip data and uploading it on chain and signature verifying it on chain. So all the data in StakeNet is, it's either signature verified, or it's copied from the actual voting accounts on chain. So it's very like, high-quality trusted data. And yeah, basically like, if like, the GTO token holders want to adopt StakeNet,
1:02:23 Speaker 01 they can. And all this data is available on chain. So I think, you know, my personal opinion and like vision for this is like people start to like explore this data more and they look at the, you know, there, there would be like a current like V1 delegation strategy where it's like, okay, this is kind of like a first pass at what this looks like. It's very simple, reliable work, but there's going to be opportunities to tweak that. And all that data is available on chain. So I think this is going to kind of encourage people to get more involved in governance, take a look at this data. There's probably going to be some like data science people that are like looking at all this data and being like, oh, what if, you know, what if we tweak the algorithm a little bit this much? We can, you know, expect
1:03:07 Speaker 01 GTO sole API to increase this much. Or, you know, what if we look at the locations of all these validators and, um, you know, tweak, tweak the locations of all of them to kind of spread it out. So I think it, it just opens up a lot more possibilities and a lot more people to get involved in the operation and governance of the GTO sole stake pool.
1:03:27 David Hoffman? And the reason why we like this product, this component of the GTO system StakeNet is that because it, we prefer things to be governed by code. Uh, and so we have this like code, this open source code system to be a manager of the GTO tech stack. And the only way that humans get involved is when like somebody is writing an alternative version of the code and then they show everyone else in the GTO ecosystem like, yo, guys, look at this code that I wrote. It's better than the one that we currently have. I propose that we merge it and that is the new code that governs. But ultimately it's code that governs and humans only update things when they decide that they have better code.
1:04:06 Speaker 01 For sure. Yeah, I think that's super important. Um, because all StakeNet lives on chain. I think you can have StakeNet interact directly with governance. So you can build your own governance platform or potentially have a reference realms and actually have it be, the stake pool can be directly controlled by governance, all on chain, uh, minimal human coordination there. I think that's like a really cool idea. Um, so yeah, I'm super excited about it.
1:04:37 David Hoffman? Would you say that that's the main governance lever or vector inside of the GTO system, or is that just a pretty big part of it, but there's other things that are relevant to GTO governance as well that we need to discuss?
1:04:51 Speaker 01 I think that that will be a main piece of governance moving into 2024. I think there is some more flexibility with stake pool fees. So token holders can kind of look and do more fee math if they want to and, you know, figure out if the if the fees need to go up or down. I think there's also, you know, the 240 million GTO tokens that the, if you go to gov.gto.network, you can see those, they're in the treasury, they're controlled directly by token holders. So token holders can kind of find creative use cases for those tokens, put up proposals, get them to pass and kind of take the take the control GTO network into their own hands.
1:05:36 David Hoffman? All right. And now GTO is a part of Solana governance at large. So there's GTO governance governing GTO, but then there's GTO that has its share of Solana governance. Lucas, can you talk about just like why Solana needs governance and where Solana is in its like arc of its own internal governance conversations? What for somebody who's not totally familiar with the state of things, like where what should people know?
1:06:03 Speaker 01 Yeah, I think like up until this point, I think there's been a few parties involved with governance on Solana. And, you know, similar to Ethereum, you kind of have, I don't think, as far as I know, there hasn't been any like Ethereum votes. There's kind of like this like soft governance going on where, you know, they have core devs and the client teams and, you know, you have the stake pools are kind of involved. Maybe not directly so much yet, maybe in the future. There's basically, there's a ton of stakeholders involved. I think on Solana, that's starting to grow, or you're starting to see more stakeholders
1:06:44 Speaker 01 get involved. So, you know, I think it'll play out pretty similar. I think it's probably in like the second inning of of getting to more decentralized governance right now.
1:06:56 Speaker 01 So I think, you know, that I think the community is starting to take more control. I think the client teams are starting to get more involved, like GTO Labs and FireDancer team. There's been kind of, some of the independent validators are starting to push for governance more. There's actually a vote on Solana in October. And then, I think you might have been there, but there was at the at Breakpoint, there was a community conference that was held that was kind of talking about governance. So I think like, there's definitely a lot of room for improvement there. We're definitely starting to see more progress on that front.
1:07:39 Speaker 01 And I think that will continue to develop into 2024 and beyond.
1:07:44 David Hoffman? Yeah, I was at that one panel about Solana governance in at Breakpoint. And it seemed just pretty obvious to me that these conversations, people weren't used to having these conversations and they didn't know how to think about these conversations. And so like, it's just, I think the Solana community at large, like learning about a vector of what these cryptoeconomic systems are, that it's kind of like ignored for a while. Because like Solana, there's like all the hardware engineers, all the low level, low level engineers. And so like these governance conversations are like these new things that everyone's kind of like, what is these, what are these conversations? What do we do with these conversations? And so it kind of seems like everyone's kind of, kind of figuring it out as they go. Is that kind of the vibe?
1:08:29 Speaker 01 Yeah, I think there's, there's definitely, I think it's, it's still pretty early in Solana governance. I think there's a lot of opportunities to learn from other ecosystems here on what has worked and what hasn't worked. There's a lot of governance experiments going on. And then there's some, some, you know, pretty long running governance procedures on things like Ethereum and Cosmos, or lack of governance in some cases. And so I think.
1:09:01 Speaker 01 Hopefully, you know, the Solana community can kind of like use those as case studies. You know, when you, if you take like a business class or something, there's like all those, those case study documents that you read. It's like, oh, this is what, this is why this business succeeded or failed. And, you know, here's some key learnings there. I think that's super important. I don't think, um, there's no need to like invent the, um, reinvent the wheel here. But I think that there is like, you know, there's a lot of experiments that have kind of run or a lack of experience, experiments that have happened. And you can kind of see what happens there. And I think that, um, I'm hoping the Solana community and the stakeholders involved will kind of look at that as a reference.
1:09:44 David Hoffman? Well, Lucas, I, I've learned a lot in this episode. So thanks for, for coming on Bankless and teaching me and a lot of the listeners all about GTO and Solana. Just like zooming all the way back out. I think most people ask these questions at the very beginning, but I like to ask them at the very end. What got you started with GTO and of all of the ecosystems that you could spend your time on? Like you could have been on Ethereum, you could have been in Ethereum layer twos, you could have been on Avalanche, you could have been on Cosmos. But you chose to build GTO on Solana. Why?
1:10:14 Speaker 01 I really resonated with Anatoly and the team's vision on Solana. I come from a computer engineering and firmware background. So working in like pretty low level C, C++ code on like very resource constrained devices. I love making code run faster. I love making code use less resources. It's like what I went to school for. I did that for several years and worked in robotics before working at GTO. And I think that, um, this like high performance state machine and trying to use memory and the resources available and most efficiently as possible really resonated with me.
1:10:53 Speaker 01 And, um, I dove into my first foray into Solana was the, I think it was the March 2021 Hackathon. And, uh, built a project there and really just kind of like, I did MEV on Ethereum before starting GTO. And that was kind of my first like introduction into programming, um, and interfacing with chains. Learned a ton there and then switching over to Solana. It was pretty rough at first. There wasn't that much documentation, but I really just like fell in love with the process of like. You know, they used to call it chewing glass. I think they kind of moved away from that at this point, but the chewing glass meme used to be a real thing and I love that. And you know, just kind of interacting with the chain from like a programming standpoint, it was just
1:11:38 Speaker 01 super cool. So yeah, I'm pretty excited to see the Solana community have leaned into that. I think, you know, they're really like diving headfirst into that high performance efficiency with FireDancer. I think, you know, super excited to see how that pans out in 2024 and beyond.
1:11:57 David Hoffman? Do you have any perspectives as to what the Ethereum community or outside of Solana communities, or I don't know, the ETH maxi podcasters, what they don't understand about Solana, or what they misrepresent about Solana the most?
1:12:12 Speaker 01 I think the the centralization narrative of Solana, I think that's massively overblown. I think the the there's like thousands of validators running on Solana all across the world. And so I think from like a server and like geopolitical and geographical standpoint, the network is extremely decentralized. I think that my personal opinion is that like running nodes at home is a little overrated. I think that running in data centers is probably fine, as long as they're kind of like spread throughout the world. You know, maybe with FireDancer and more efficiencies in the protocol, you will be able to run Solana
1:12:57 Speaker 01 node at home. But I think more importantly, like this like ultra-fast, super fair, super cheap state machine is like the most important goal here to like really unlock access to the these this technology and these services to anyone. And so I think that's.
1:13:16 Speaker 01 That's, those are some things that I think, um, maybe there's like some disagreements there with the Ethereum community from Solana people.
1:13:24 David Hoffman? Sure. Interestingly enough, I'm actually about to have Anatoly on the podcast later today in about an hour, actually. And I'm going to ask him the same question, uh, but I'll, I'll ask it to you as well, but it'll be a question in the form of a monologue, if you will. So spare me. Um, uh, Nick Carter, once upon a time on an episode that I was listening to on his podcast, uh, this was right after OFAC banned tornado cash. Uh, and Nick Carter is a famous Bitcoiner. Uh, and he said a line that kind of stuck with me is that like, this kind of shows that Ethereum is actually the spearhead of the crypto movement in, and trumping Bitcoin because Bitcoin didn't really have this, it
1:14:05 David Hoffman? didn't offend the nation state in this way because, um, it's, you can't do tornado cash on Bitcoin. And if, and if Ethereum is pushing up against like the treasury and FinCEN and all of these things, it kind of is proof that Ethereum is doing something right because it is, it has teeth, right? It has claws. Uh, and then after, as a result of that OFAC, um, banning of tornado cash addresses, there was a big movement inside of the Ethereum blockchain supply chain when it comes to censoring tornado cash transactions. And then like websites like mevwatch.com, I think, uh, spun up and you could see like the red and the green of the blocks that were being proposed that were banning OFAC transactions
1:14:49 David Hoffman? or weren't. And for a while, the number of censoring blocks crept up to like 80 to 85%. And then it's been down only ever since. It's somewhere around like 33% now. Um, and I think that conversation has spawned a lot of, that is one of the most impactful things that's happened in crypto to this day because it's really about like, oh, crypto is getting so large that is going up against the largest powers that exist. And I think when, we can go back and forth about how decentralized Solana is. But I don't think, I think the real test will be like, does Solana produce something that offends the nation state to that level of degree? And I think using that as an acid test is like, well, it's great if we have geographically distributed Solana validators.
1:15:33 David Hoffman? But what happens when some tornado cash alternative lookalike is built on Solana? And so the Solana ecosystem has the massive amounts of success that all the Solana community wants for it. And if it does have that success, it will attract the Lazarus group. It will attract hacks. It will attract North Korea playing around, trying to do the things they've been doing on Ethereum for the last four years. And so I think my question to you is, do you think the Solana community, the Solana tech stack is ready for that?
1:16:04 Speaker 01 I think it is. I think there's, there's a lot of, there's a lot of validators that are outside of the US. And so, you know, they, validators can kind of make their own choices, you know? People have different opinions on whether they should respect the rules of the US government or not, based on if they're in the US or not, or other personal beliefs. And, you know, people can have that. I think that there's enough stake outside of the US to where if it was an issue, then people might have a little more flexibility. I think a lot of this also revolves around the way that PBS has kind of shaped up, especially the MEV.
1:16:47 Speaker 01 And you kind of got around to this in the MEV transaction supply chain. This is actually one of the major like learnings that we had. And I think maybe like, I don't know if like Flashbot's predicted this or not, but it's been a really good learning experience in the way that our system works and the architecture. And because we're actually building partial blocks on GTO, the GTO block engine doesn't have the same issue. And it's kind of up to validators if they want to make that decision or not. So I think from that angle, that was like a pretty, pretty powerful learning experience. I think, you know, outside of that, I think. It will definitely stress the network. I think anything of that magnitude.
1:17:31 Speaker 01 Ultimately, you want to be a super successful network. And like you said, like, or what Nick said, it's like, at a certain point, you become so successful that you start attracting attention from the government. And so that, you know, if Solana is successful, it will have to deal with these issues. And I think it'll be pretty hard. But as we were like mentioning earlier, I think there's, in the governance conversation, I think there's a lot to learn from other ecosystems here like Ethereum. And so I think, you know, hopefully the Solana community can take some of those learnings and apply it to any hardship that it has in the future.
1:18:10 David Hoffman? Well, Lucas, I wouldn't wish the ire of OFAC on any ecosystem, but also I kind of do because it means that ecosystem is doing extremely, extremely well. And it is kind of like the final boss. And the more chains that we can go battling the final boss, the better. So in some weird, sick way, I do wish the Solana ecosystem well in its endeavors in order to get to that point. Lucas, thanks for coming on Bankless today. Just one last question for you. Just GTO metrics and dashboards and maybe Solana metrics and dashboards. If listeners want to just look at GTO, what websites can they go to to go check this thing out? Like what websites or metrics or dashboards do you frequent on a daily basis?
1:18:52 Speaker 01 Yeah, so one of my favorites is the GTO Bundle Explorer. So let's explore dot GTO dot WTF. You can see all of the bundles that searchers and traders are submitting. Super cool to see like, you know, it's doing over 100,000 bundles a day. So there's a lot of cool information in there. Another one is there's some Dune dashboards. Can share you the link, share the link with you after. There's someone that works at Dune, Andrew Hong. He's been helping out a lot on the Solana dashboards. And so there's some GTO sol-specific ones. And then another favorite one that recently popped up is the 21CO released a dashboard on Solana key metrics.
1:19:37 Speaker 01 So, you know, it shows the volume and the price and number of user transactions and fee burns and all that stuff. So. Yeah. Big fan of Dune and the GTO Bundle Explorer. And then actually, I guess now that we're filming this, I think it'll be released later this week. There's actually a GTO StakeNet, kind of like a V1 UI. So you can go to, let me see here, I think it's a GTO dot network. I want to say it's slash StakeNet. And you can view a lot of the StakeNet stats there.
1:20:12 David Hoffman? Well, Lucas, we will get all of those links in the show notes for the Bankless listeners. Lucas, thanks for coming on, my man. I learned a lot. And like I said, the economics conversation around Solana, I think is going to be a very interesting one to track, especially this bull market while Solana gets new levels of stress testing in terms of just like numbers of transactions and users and all this kind of stuff. So it's a sonic success. It's a sign of health. Lucas, you've been putting in the work through, throughout the bear market. So congratulations on getting to this point and I wish you well, my man.
1:20:42 Speaker 01 Thank you. Thanks for having me. It was a pleasure.
1:20:45 David Hoffman? Bankless Nation, you know the deal. Crypto is risky. Ethereum is risky. Solana is risky. Tech stacks of this nature, they're all risky. You can lose what you put in. We are headed west. This is a frontier. It's not for everyone, but we are glad you are with us on the Bankless journey. Thanks a lot.
Previous Ryan Selkis Shares His 2024 Crypto Predictions Next ROLLUP: The Inscription Infestation | Solana Flips Ethereum Volume | Restaking Heats Up Page updated October 26, 2026 · transcript and summary are machine-generated
