The Wolf Of All Streets - Solana Is Thriving, Here’s What Is Driving Adoption | Austin Federa, Solana Foundation

Episode Date: February 2, 2023

Austin Federa is the Head of Strategy & Communications at Solana. In this podcast episode we discuss how Solana managed to survive the FTX crash, what are the driving forces behind the project, economic theories that are being built in the blockchain space, identity management, blockchain gaming, and why Austin is so excited about crypto that he can hardly imagine working anywhere else. Austin Federa: https://twitter.com/Austin_Federa ►► JOIN THE FREE WOLF DEN NEWSLETTER https://thewolfden.substack.com/  GET UP TO A $8,000 BONUS IN USDT AND TRADE ALL SPOT PAIRS ON BITGET FOR ZERO FEES! ►► https://thewolfofallstreets.info/bitget   Follow Scott Melker: Twitter: https://twitter.com/scottmelker  Facebook: https://www.facebook.com/wolfofallstreets   Web: https://www.thewolfofallstreets.io  Spotify: https://spoti.fi/30N5FDe  Apple podcast: https://apple.co/3FASB2c  #Solana The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

In the wake of the FTX collapse and the downfall of SBF, arguably no project or protocol saw more FUD and damage than Solana. But since then, they've come out smelling like Rose's development is up. People did not leave. The community is strong and price, of course, has also risen back to those levels where it was before the FTX drama. I talked to Austin Federer today, who's the head of the Solana Foundation, about everything that's being built there and, of course, what it was before the XTX drama. I talked to Austin Federer today, who's the head of the Solana Foundation, about everything that's being built there. And of course, what it was like going through the last few months. You guys don't want to miss this. I don't know if there's anything you're dying to talk about, but probably worth. Yeah.

Yeah. I mean, probably worth starting at the point where Solana has made a raging comeback. Yeah. It's a look. I think if you if you looked at the headlines, if you looked at Twitter in, you know, let's say, you know, mid-November, even into late November, and potentially even early December, there was a lot of doom and gloom that was being talked about about the Solana ecosystem. And this was a moment where we have to see if this network was going to sink or swim. And I

think what we've seen is that developers are still here, the community is still here. Solana still has the most active users of any blockchain and settles more transactions than all their chains combined nowadays. So it's been a really interesting thing to see. The community is really like the bread and butter of everything here, right? There's no point of a blockchain if it's not actually decentralized from a community standpoint. And so what we saw is a really quite scary moment when I think there was something around 30 million soul being unstaked from validators. And, you know, I think the fear in the community and for

some of us in the foundation too, was this was all sell pressure. And it turned out that it was not, it was folks potentially getting ready to sell, but then everyone just was like, yeah, is anyone else going to blink? And no one blinked. And, you know, we got through it. So it's been really, it's been pretty cool to see the community really come together and start deploying tooling that kind of pulls out some of the FTX parts of the ecosystem out. Like Serum has been redeployed as OpenBook. And that's the same.

Yeah, it's the same open source code, but now it's a community run project. And so, you know, it's been, it's been great to see little things like that pop up. So was the fear sort of being perpetuated, which I understand where it was coming from, obviously. I mean, everything on the back of FTX sort of got this extremely amplified and Salon obviously took the brunt of that, but was it largely hyperbole? Or was there legitimately a risk at that point when you saw people, you know, withdrawing and that there was a concern that, oh, no, maybe we can't continue on? You know, I don't think there was ever a risk that the project was going to truly fail. You know, I think at the end of the day, you can't kill

any open source piece of software. People can only abandon it. And so the fear was, and you know, I think a lot of people in the community, some people in the community kind of hold it against folks who got out or, you know, decided, oh, I have to, this is the moment to go cross chain, you know, or something along those lines. And I don't think you can blame folks for that. I think, you know, as FTX, I think when when the initial rumors of the FTX story broke, almost universally on the foundation team was like, Oh, this is just Binance FUD. This is just two billionaires jockeying with each other to see, you know, who can take a little bit of market share from the others. And it's just, you know, when elephants fight, the grass gets trampled, right. And so

that's kind of what it felt like a little bit from that perspective of like a bunch of retail users are going to get hurt by this. But fundamentally, this wasn't there, there wasn't a story here. And then, you know, very quickly, it became the case that wasn't the case. And I think when you have that much confidence lost in such a prominent ecosystem player for all blockchain ecosystems like FTX, I mean, they were massive investors in Polygon and Aptos and Sui and Solana, of course, that fear is real.

And I don't think you can really hold that fear against folks. So, you know, in retrospect, was there anything to be afraid of? No, but you know, fear usually, was there anything to be afraid of? No. But, you know, fear usually doesn't operate on perfect information. I mean, in fact, when everybody says something's going to zero and is dead, that's usually your greatest buy signal as a trader investor that there is, but really hard to execute

that in the moment. Yeah, I don't think I legally I don't think I can say anything about that. But of course, I've heard that. I'm just saying that, you know, going back to the earliest days of trading anything, that's a truism, I think, that's universal. Completely. Yeah. And was it overblown how much involvement Sam and FTX actually had as well? I mean, obviously, it goes back to the famous tweet,

CoinMob, I'll buy all your Solana now for $3 and fuck off. Yeah. That was amazing for a couple of years there, but it's not that fun when they drudge it back up. You know, it's interesting because I think the thing folks forget is that Solana launched its mainnet beta in March of 2020 in the depths of an incredible financial recession. The world was in lockdown.

I'm in New York City. We weren't really leaving our apartments. I'm in Brooklyn. I can look over onto the highways on the edge of Manhattan, and it was just ambulances 24-7 for three weeks and no one else on the road. I think we forget, A, how scary that time was, but B, how capital-scared every market was at that point.

There was no one making investments in anything at that point. And you fast forward a few months and you get to the summer of 2020, and the team at FTX, Anatoly and some of their co-founders have been going around giving this demo called Break. And Break is a demo you can still find today on the footer of the Solana website. But you load up Testnet and you get airdropped some Testnet Sol and you smash your keyboard. You can see all those transactions confirming in real time on the blockchain. And that was the demo that the team at FTX saw and was like, we can build a decentralized order book protocol that's going to be just as performant as a centralized exchange. And so they were the

first engineering team of really any major prowess to take a bet on Solana and say, we can actually build something that's game changing on here. And, you know, it's hard to talk about this in a way that is subtle, because serum, and the decentralized order book, the central limit order book built on chain, that is like impressive technology that was not something that anyone else was doing at the time, there's still no other real central limit order books built in other chains that operate this way. And that really helped cement Solana as a technical leader. Now, from that standpoint, I think it's fair to say that was the last substantive technical

project that FTX and Alameda built on the Solana blockchain. Their interest shifted after that. They started launching other types of tokens and projects. And, you know, by the summer of 2021, their competitive advantage had shifted, in my view, from being a really great exchange to someone who had started participating in the regulatory capture game in DC. And they were they were pushing legislation that was a little bit more anti DeFi. And you know, the incentives just didn't make sense to be working with them.

So there was really only this period of like one year where there was any real substantive work that was being done on the Solana network by those folks. They were never building validator clients. They were never kind of involved in network operations from that standpoint. But it was early. And I think Sam helped put Solana on the map in the early days and so a lot of people still felt that he was intricately involved in the network in some way and and that was not the case at that point so so basically they took what had happened

years before and extrapolated to believe that he was still participating and extremely active when really they had already moved on. Right, and from a trading standpoint, I have no idea what they were doing, right? But from a builder standpoint, which is stuff we care about at the foundation, they were not building anything interesting on the network at past Serum. Speaking of the foundation,

what's the differentiation between the foundation and the actual project and protocol? Yeah, great question. So Solana, the thing Solana, just the name Solana, is an open source decentralized software protocol. No one owns it. No one runs it. No one's employed by it. It's sort of like saying you work for Linux or you work for SSH or something like that.

Those aren't really things people say. So Solana Labs is a for-profit entity that, you know, sort of it's similar to like ConsenSys' role in the Ethereum ecosystem in the early days. It's a bit of a product studio. You know, it's building the Solana Saga, the mobile phone project. It built Solana Pay. It builds a lot of different implementations of technologies on the network

that have a profit motivation behind them. Solana Ventures is based out of Solana Labs and that's a for-profit VC arm that invests in stuff on the network. The foundation is kind of where all the fun stuff, I would say, really takes place. So the foundation is a Swiss foundation. And the reason I think that's important

is like the structure of a Swiss foundation makes it very hard for it to be captured by someone. So it's like Ethereum foundation, same, same kind of structure there. You want the foundation to have a mission statement that can't be changed and is always in the interest of the community. And, you know, I think, uh, if, if someone ever decided that a foundation wasn't in the interest of a community anymore, based on what it was doing, you know, there's the possibility to take that up with Swiss authorities and potentially take over that foundation. So there's a lot of protections

that come from working in that structure. But the Solana Foundation is a nonprofit, it is not set out to make money is not set out to make revenue. In fact, it is probably on like a 10 year clock to going away, right? Or even less than that. I think if you look at like the role the Ethereum Foundation played in the early days of Ethereum to now, they've stepped back massively as that ecosystem has evolved. Solana Foundation is on the same path, right? We build and invest in open source tooling that's in the public interest and public goods. You know, that includes like the grant to build FireDancer,

which is the second validator client for the Solana network. There's all sorts of things like that that are done out of the foundation because there aren't entities that have those same community treasuries behind them to deploy to basically build public interest goods on the Solana network. Yeah, that's an important differentiation

and I think very confusing for most people who don't understand the interplay between the different entities and the fact that we're really just talking about a technology. Yeah, it can feel like there's sort of a bunch of like arbitrary abstraction that goes on there. And part of this is decentralization

and part of this is like, we got to work within the existing legal system, right? And so you really don't want a for-profit entity to be the one uh helping coordinate the protocol spec and protocol development because their incentives could be to jack up fees and try to extract as much value as possible like private you don't want a private equity firm to go buy the ethereum foundation and suddenly say like all right guys like our goal is to maximize profit for this entity not to grow the ecosystem. Yeah, absolutely. And you talk a lot about community. You've said it five, six, seven times already.

Some would argue that that, at the core, is what really drives the success of any project. In crypto, certainly, right? Considering that you can argue that these are all experimental technologies and, you know, comparable in certain ways, at the end of the day, maybe it's just how many people are passionate about it and care about it and are willing to use it and build on it that matters. Totally. Yeah, the, you know, one of the funny things to go back to is like, you know, open source software, before we invented the idea of open source software with tokens attached to it. That was all just volunteer work for the most part.

Like folks in their in their spare time, like the reason Microsoft could never kill Linux is the Microsoft engineers would, you know, clock out at 5pm, go home, like pour a glass of wine and start building Linux kernel. And like, you can't do anything about that, right? It's open source code. It's on their free time. Like these are folks who just really believed in the mission behind something, a piece of open source software like Linux, right?

And so that becomes the catalyst that keeps this all going. You see this in crypto nowadays, too, where there's a lot of people who are just like some of the coolest computer science and technology problems I can work on just happen to be in blockchain. It's really funny. Some of the engineers who work at Slano Labs, they don't even really care about tokens. They don't really like they're not really sold on this whole idea of blockchain necessarily. They're just like, I want to work on the coolest problems in computer science and distributed systems.

And like, that means I have to work for a blockchain foundation. Like I'm not a I'm not a huge believer in blockchain. I don't like, you know, want to destroy like, the world's monetary system and replace it with something as decentralized. I just really love these problems. I think it's awesome that like, crypto is a big enough tent that you can have the kind of folks who are like, purest libertarian values that brought them to Bitcoin originally. And you can have folks that are just like, these are the coolest engineering problems I could possibly ever attempt to solve. And it all fits within the same industry. I think that's pretty cool. So what problems are they working on solving now? Because if they're the coolest,

and we've got the greatest computer scientists here, and they literally don't care about the token or making money, there must be something really compelling there for them to work on. Yeah, look, I think a lot of the process of working for a large Web2 tech company nowadays is pretty rough. Everything now is about, you know, how can you squeeze like the famous like Google testing 40 shades of blue to figure out what button at a higher conversion rate. Not many people like doing that work. Most people want to experiment.

They want to build cool stuff. So like, you know, some of the stuff on Solana now is we're working on these things called multiple concurrent block producers. There's this really interesting thing with proof of history where proof of history, it's sort of a turbocharger for proof of stake systems where transactions as they come into the network are sort of timestamped. Now, it's a distributed clock, so it's not like it's a centralized clock, but they're timestamped.

So you know what order they all came in on. What that means is that, you know, theoretically, you can actually have two validators producing blocks at the same time in different locations in the world. And then the process of finalizing consensus is basically taking two sides of the zipper and zipping it back up together. And there you get the whole path of what transactions look like. That hasn't really been done before in distributed systems. Most other blockchains that are working, sorry, all other blockchains that are working on the problem of how do you have multiple block producers, they're using sharding to accomplish that. And sharding is basically multiple copies of the blockchain where you have bridges between those. So it's really interesting. Like that, that's just like one of those small engineering problems about like, uh, that's the kind of work that very few people are doing, uh, in

other systems because most scaling is fractal scaling. And what's very cool about this is this is still running in one global state. Yeah. That is really interesting. It kind of sounds like every time we have these conversations that we've solved our zero to one moment in blockchain, but now the one to 10 can go in a lot of different directions. Software is never done. I think there's this like myth that like someday we'll be done building software.

And it's sort of like when like when is Apple going to have the perfect iphone the answer is never right there's always going to be something better you can do to the thing yeah absolutely so moving on from the the tech right we've had sort of these bull markets of defy and nfts and metaverse and move to earn, right? And these sort of cycles through different buckets in the crypto space. And it feels like we've been thirsty for a new narrative for a little while here. So I would just love to hear the most interesting things in your perspective of what's being built right now on Solana, but in crypto in general, or if we're just going to sort of get a washing machine another round of each of those things with better iterations and improvements. Yeah, look, one of the things I love about this space is that it moves so fast. And one

of the things that's really annoying about this space is it moves so fast. It's a blessing and a curse, right? and the curse part of it is it feels like the entire space has ADD there's ideas that enter the space and then they get 75% there and then suddenly we're off to something else this is the story of layer 2s vs rollups vs zero knowledge systems

I think we hit peak hype on zero-knowledge systems maybe 18 months ago. They're just barely coming online now. And I think the same thing with L2s. L2s were all the rage two and a half years ago. They're basically not shipped yet. And I think that's fine. I think it takes a lot of time to build this.

Nothing in blockchain ever ships on time. What I kind of wish is like culturally, we would slow down a bit and get a little bit more rigorous about the ideas that people are investing time and engineering in and sort of do a little bit less like, sometimes I can feel like Twitter's

kind of rubberneck angle on whatever like the new sexy ideas and we're not actually looking at the fundamentals. And that's how you get things like FTX, right that that's how you get these sort of like pieces of the ecosystem that end up having systemic risk or like the axi infinity bridge that was running a three of five multi-sig for hundreds of millions of dollars and you know my favorite story about this and i'm not sure if this one's real but but it's a great Twitter story. And it's very illustrative anyway, was a guy figured out that all the ETH was gone on the bridge and he shorted Axie and no one believed him when he tweeted

about it. And then the price went up and he got liquidated. And, and that sort of thing, like there was a four day lag between when the ETH was stolen and when anyone noticed it was missing. And there's, Which is insane. Which is insane, right? Insane. Could you imagine JP Morgan being like, oh, you know what? It took us five days to realize someone actually had pulled the $2 billion out.

Right, yeah. And that's kind of what I mean by there's so much excitement and there's so many people who are in this space for the right reasons. That they're really excited about the technology. They want to build something new, they see like more of a future here. At the same time, like sometimes you just need some operators and adults in the room who are saying like, yeah, these ideas are amazing. Let's actually spend the time to make sure we're building these things worthy of our missions and goals. I think that's kind of a really tricky one when the space wants a lot of forgiveness

for mistakes. And I think we should have a lot of forgiveness for mistakes in the space. At the same time, we got to make sure that we're actually building something that is robust enough that it could be a replacement for the existing financial infrastructure. I think what you just described highlights two issues. One is that we're concerned about price and not fundamentals at the end of the day. Yeah. Right. And I think that that's been illustrated with different communities, certainly with different NFT projects, where it seems like they have this passionate community

until the price goes down. Right. And then all of a sudden, people don't care so much about their lion or their turtle or their flamingo or whatever it was. So I think that the bulk of the community are speculators who are just chasing the pump. So that's one. Then let me say the second, then you can address it, is that in technology technology we love to move fast and break things but when it's people's money maybe you need to like move slow and not break things i don't know i'm actually i'm still okay with moving fast and breaking things i just think we need to be more transparent around like you know solana mainnet is still called solana mainnet beta and we get a lot of shit for that you do can i say that on this podcast yeah oh yeah beta. And we get a lot of shit for that.

You do. Can I say that on this podcast? Yeah, oh yeah. All right, great. Yeah, we get a lot of shit for that. I think it's honest. I think if you really look at it, like Bitcoin is probably the only network

that's out of beta. I think everything else at the end of the day, I mean, Ethereum just literally changed the engine while the car was still going down the highway. It was literally a beta. It was an incredible technical feat, like huge props to all the folks who pulled that off. But like you look at the roadmap of Ethereum and we are still very far out from that end

state vision. I think that means it's probably still a beta. I don't know. This is just kind of one of those things that I have struggled with because block explorers don't make it clear what's been audited. Wallets don't make it clear what's been audited. Protocols often don't. Things like formal verification all really address this stuff.

But I think the risk for this space over time is that these sort of these things that get hacked, these exploits that happen, the sort of the trust me, bro, kind of mentality of this stuff ends up making it so we basically miss out on an entire generation of adoption. And that would be that would be really bad. I would hate to see that it's sort of the same the same way that for all of the flack Facebook got for everything from the social experiments that they ran on people's timelines, see if they could make them happy or sad, to the election interference stuff, to all of that. Gen Z just is not on any Facebook or meta projects. And you can really see in the price of that company right now how much that's hurting

them. And I'm not very worried about it, but it is in the back of my mind every once in a while about like, are we being honest enough to be worthy of the future we're trying to create? Right. So how much did all of the events then of 2022 damage that vision long term? Do you think that's a bump in the road? Or do you think that, oh, wow, we really lost a meaningful percentage of potential market participants who would have been or already were passionate about this? I think FTX did a huge amount of damage, right? I think if most people's first impression of something on crypto is a Super Bowl ad, and then nine months later, or 11 months later, the thing's insolvent.

I don't think that's great. And if you look at all the failures of 2022, apart from Terra, it was all centralized finance that failed, that just happened to be trading crypto assets. It wasn't DeFi that failed. It wasn't the chains that failed. And you can make an argument that

Terra was basically CeFi at the end of the day. I think that's a pretty compelling argument there. But you know, fundamentally... Or that it was just a failed experiment and something that didn't work and a lot of people happen to have money in it when it happened, which is to my point earlier. Yeah, exactly, right? It's like, but the stuff that failed wasn't crypto. But I don't know if the average person looking from the outside

cares. They don't. Should the average person looking from the outside cares. They don't. Should they? Should they? Yeah. So, so look. Yeah, but I think that's an echo. I agree with you, of course, because I'm in our echo chamber, but like, think about all the things in life we're dismissive of because they go bad that maybe we should have cared about. Yeah, but I think this is way more universal than just crypto. And I think we fundamentally have an opportunity here that if you go back to the pre-dot-com bubble,

even before a bunch of those things ran out, there were a bunch of incumbent monopolies that basically everyone hated, but they had no option. Liberals hate YouTube. Conservatives hate YouTube. All the social media platforms, same thing. Across the board, if you are anywhere outside of the middle, you're probably mad at the social media platform you use for some form of perceived bias or perceived censorship, right? Like liberal socialists are upset about it, like very far right Republicans or whatever

you call them nowadays are upset about it, right? Like it's pretty universal that like these centralized entities have failed the intent of what we want them to do. There's no good options now. I don't, there isn't a good decentralized Twitter. There isn't a good decentralized YouTube, but give it a few years and somewhere on one network, there's going to be that sort of stuff. And I think people actually like the one people don't care about is privacy, right? Universally, we see people that ever choose privacy. They always

choose convenience. But I think when we're talking about things like censorship, when we're talking about, you know, when we're talking about PayPal with that weird terms of service thing they put out. Those things get to people on an emotional level. Something about it is like, wait a minute, this isn't the way I want an institution that I use as, and I'm in the United States, you're in the United States.

It's not the way that Americans want to interact with technology platforms in a highly mediated experience. And I think the problem right now is there's no alternatives that are good enough yet. But there's a huge market there for when someone cracks it. And I think that's the avenue back in. I think you're totally right that no one cares about crypto in the abstract, but they're going to really care about

the freedom that it gives people to use tools in the abstract, but they're going to really care about the freedom that it gives people to use tools in different ways, especially as the circle is closing on Apple, right? The circle's closing on Google. All these companies are laying off employees. They're focusing on revenue. They're going to get more anti-creator and anti-consumer as they go. That's the trend I see over the last two years. That's very interesting because it implies that people care deeply about the problem, at least when it enters their sphere. Like you said, with PayPal, maybe they didn't know they cared about their privacy and their money until they saw that it could be threatened, but they're just not aware yet that this is the

solution. I think that's super fair. And I don't think they need to be, right? Like, if you think about it, like, how many consumers are like, man, I'll only use stuff built on Rust. I don't want to touch C++. Exactly. Right? No one cares, right? We're trying to sell a base level implementation technology as a product to consumers.

I don't think it works that way. But I think what you're going to see is the products built on top of blockchain that are user facing, you know, give it a few years and maybe you don't really need to know the difference between your wallet on Solana and your wallet on Ethereum. Maybe that's all abstracted away the same way that like, you know, unless you go to Europe, it really doesn't matter what credit card company you're using. Yeah, or the underlying technology of the internet or how your phone is being powered. You don't care, you just want to use it. Right, do I care the restaurant's using Toast or Square or some weird system from like 1980? No, I just care that I can pay for my food and I can get my food.

Yeah. It's interesting. Last time I spoke to Anatoly, I kind of asked him the question, you know, is it possible to have one chain to rule them all, to reference the Lord of the Rings, or are we going to live in the multi-chain world, which you somewhat just described? And I thought he was going to say multi-chain because that's what everyone says. He says, no, we can do it all. I think we can do it all. Yeah. Except for storage. This is the thing where it's like Solana is an execution level protocol at the end of the day, it's meant to be the fastest, most high throughput chain in one global state to execute all of the world's information. I think there's a role for something like Arweave and Filecoin and these sort of long-term storage protocols.

They're solving a very different problem. But yeah, I think to Toli's point, you can do 95% of it on Solana. The question is, is Solana's performance going to be so far divergent from other offerings that it doesn't make any sense to build anywhere else? Who knows? We'll see. That's possible. other offerings that it doesn't make any sense to build anywhere else. Who knows? We'll see. But you saw this too, where it was like, you roll back the clock to the late 80s. How many different CPU architectures were there? How many different operating system versions were there out there? At the end of the day, it's all x86 and it's all Linux.

Yeah. And everybody bought apples because they look cool. Yeah. You had to have the blueberry or the orange one or the purple one. I loved my blueberry Mac that had the 52.2 or whatever modem. People thought I had the fastest internet in the entire world. That's showing my age here, I think. But even looking back, for me, to what that was like in the 1990s, that was 1999, how far we've come. I can't even imagine now with the, I guess, exponential increase in progress with technology, where we'll be in 30 years with blockchain, but much less,

I would imagine the 30-year evolution I've seen since then will be two or three years now. Yeah. It's very interesting, right? When you think about that from that perspective, part of Solana's pitch is that it's hardware-based scaling. Software innovations are hard to predict. You don't know exactly when they're going to come, but hardware is basically on a curve that you can project into the future, especially when Intel and tsmc and amd and all those guys they make their investments on a 10-year horizon anyway so they have pretty good projections into the future so even if you see like you know develop like mining a bitcoin block is so much harder than it was five years ago yeah and that's because bitcoin takes in it you know improvements in in hardware performance and they they trade security for it, right? They say like, oh, the math is going to get harder, so we can do the same price as before, right? That's kind of the yin and the yang of that, right? You can accomplish both. You can basically choose which of the two things you want. But since a lot of that's hardware-based, you know, that is something

that is more predictable than basing stuff on pure software innovations. And being that it's hardware-based, that's sort of been the, I guess, base root of some of the criticism that Solana is too centralized, right? Because you have to be able to participate in the network, you have to be able to afford a certain level of technology and such. But isn't that then, if that is true, isn't that then a bet in the sort of deflationary aspects of technology that the price of those things will eventually come down and that won't be an issue in the future? Yeah, you know, I think it's also kind of interesting because, you know, the cost of running a Solana block producer right now, if you're running it in data center, it's about $750 a month. If you're buying all the hardware and setting up at home,

it's probably around $4,000, somewhere around that. That's a substantial amount of money, but there's no minimum stake required, right? Solana's minimum stake requirement, I think, is one sole. It's not 32 ETH. 32 ETH costs a lot of money, right? And nothing against Ethereum. It's just like you're optimizing for different things there, right? The cost to run a Solana validator needs to be low enough that the business interests

make sense to run one. But with light clients and diet clients, I think we're going to get to a place where the folks who need to validate the state themselves can do it. But also, there's over 2,000 validators producing blocks on mainnet beta today. There's a Nakamoto coefficient of 31. ETH's Nakamoto coefficient is 5, right? So the higher that number, the more decentralized the network is in terms of a real-time censorship resistance standpoint.

There's about 7,500 nodes on ETH2 running today. There's about 3,600 on Solana. So Ethereum has definitely got more copies of the ledger out there. It's awesome, right? But we're not that far apart when you actually look at the details there. Is there a sort of number there where it ceases to be important? Right. I mean, is 7,500 different than 15,000 different than 75,000?

Where does that curve sort of flatten where it's enough? So I don't know the answer. Yeah, so Toli and I have talked about this. I think, you know, in a very unofficial way, we've both kind of got the idea that there's probably some magic ratio between the value transmitted over the network and the amount of decentralization required. So like, would all of us feel great about, you know, $10 trillion transacting over a network with 100 validators? I think the answer is no, that doesn't seem great. Is 2000 better? Yeah, but is 2000 sufficient? I don't know. about systems that are going to replace credit cards or they're going to replace ACH, we probably

need to be talking about 10, 15, 20,000 validators on networks to really get to that point where that feels good. That's not so far. That's not so far away considering zero to 2,500 are the number you said in just a short period of time. Yeah. I mean, look, the funny thing about all of this is there has to be a reason for people to run the nodes. They're not just running the nodes out of the goodness of their heart, right? The beauty of blockchain is it takes brutish human self interest, and it uses it for good, whereas most systems just ask you to be nice and hope you don't cause a problem. So if there's an economic reason for people to run nodes, they're going to run nodes, whether that's staking rewards, whether that's for trading, whether that's for some other reason. That's the point of these systems is it's economic coercion, but in a positive way. I've never seen another system solve that problem the way that crypto does. It's really incredible how well self-interest aligns with creating the interest of the greater good. And it's, it's funny. That to me is the

greatest problem solved by Satoshi. The only thing that's come close to it. Um, there's an economist named Eleanor Ostrom who won the Nobel prize for a bunch of research he did in the nineties and two thousands, uh, which is basically a decentralized solution to governing the commons. This is that famous, you know, philosophy problem of like, if everyone's allowed to graze their sheep on the town common,

the incentive is for everyone to overgraze because if you don't overgraze, you're a sucker. But if everyone overgrazes, the field is completely destroyed. She has a whole framework for how to build, they're called collective self-management organizations. It's very, yeah, it's basically, it's very cool. I actually like, I think it's funny, all my undergraduate stuff in college was all around like that kind of economic research and work.

And it's funny now coming back to it, you know, 10 or 12 years later and just being like, oh yeah, this is blockchain governance. Like these problems actually, like there's a lot of really smart economic theories out there that can, I think, be applied to blockchain very well. So it's very cool to see like all this stuff converging. Right. And in her case, it's theory and it's actually being built here. Exactly. Yeah. It's like- Which is pretty remarkable. Yeah. I think that's one of it's actually being built here. Exactly. Yeah. It's like remarkable. Yeah.

I think that's one of the coolest parts about it personally. So I sort of hinted at this before and we went off on a bit of a tangent, but NFTs, DeFi, Metaverse, is there anything new right now that you're seeing built that's getting you really, really excited? I was skeptical of blockchain gaming. i'm going to be honest i like you know this time it's interesting because solana has been arguably the best place to build it so yeah yeah yeah but that doesn't like you know just because you can build something doesn't mean you should build something and for the a long time what i was basically seeing is a lot of

large centralized gaming companies being like we we're going to have a few NFTs or web free now. And you know, that that kind of stuff always like rubbed me the wrong way is a little grifty. What we've seen, though, is like, while a lot of those projects definitely started out that way, as the developers have gotten into it, they've kind of been crypto pilled just by the process of like building out an NFT. And we're seeing like gaming companies starting to do more and more stuff that actually is full web three. And so that's really cool to see that sort of both of those things have combined and enmeshed really nicely to a point where I'm actually quite excited

about blockchain gaming and seeing where that goes in the future. I would say decentralized social is another one. Yeah. But this is another thing where it's like, yeah, that's definitely in that category of like, okay, let's not move on to the new shiny thing before we figured out the old thing. I think like there's really smart people working on decentralized social. I think it will be awesome if it gets anywhere. We're still probably a year to 18 months away from real products at scale that will compete

with the centralized versions. The gaming thing is interesting. You sort of talked about it from the perspective of the existing large-scale gaming companies coming in to adopt it, to basically find a way to utilize it within their existing framework. And then we have the crypto native or blockchain native gaming. And it seems like there's a sort of gaping chasm between them. We have these Axie Infinity type, really simple games where there's an economic model and you can make money, but we haven't built a Fortnite or a Call of Duty on blockchain yet. So do you think that, well, I guess the question there is, do you think that we'll get to the

point where we have games that are sort of from crypto natives or blockchain natives that are actually competitive in quality with what's being built by these studios? I don't see a reason over the long term that that won't happen i think the biggest the biggest challenge is uh historically every game that's gone out and tried to crowdsource money on like kickstarter or indiegogo to like build a fan favorite they've been terrible games or they've failed completely right and so i think the the the challenge here is the process of building an excellent game usually requires a little bit of a dictator, right? It's sort of like, could you imagine a David Lynch movie being built by a DAO?

Like, it would just like what you're paying for is the singular vision of someone who makes a game like The Last of Us. Like, if The Last of Us were built by a committee, it would have been a very different game, right? And so I think that's kind of one of the challenges there is we need to let go of some of our assumptions about how Web3 things need to be run. I think for gaming to really get to a place where it's rivaling a Call of Duty or it's rivaling like, you know, a game like The Last of Us or sort of a big blockbuster centralized game, you need funding models that are diverse, but you also need like, you need funding models that are diverse and distributed, but you also need the ability for like a singular vision to produce the thing that everyone wants them to produce. And then a process

where that kind of then gets turned over to the community in some capacity. I think that is, look, one of the hardest things to do by far in this world is participatory democracy. And so I think we're getting into a place with all of this stuff where the problems we're going to have are going to become less technical, and they're going to become more human over time. And I think that's an incredibly exciting intersection. Yeah, I don't think that DAOs solve everything, which was sort of a trend that we had. I just, I view most of them as sort of this Lord of the Flies dystopian. Yeah, DAOs solve everything the way that electing all of your local officials solves the problem

of local governance. Like, it doesn't solve it at all most most communities are terribly governed right most most local town governments are a disaster like you ever been to your uh your you know your your town meeting or you know your city council meeting like screaming yeah exactly right it's like giving people a voice is not enough to ensure that things will be done well. There's a lot of structure involved in actually making that stuff work. Especially when people believe literally anything is fact and screaming at the top of their lungs, unsubstantiated. Right, exactly.

The flip side, I guess, of what you might be excited about, is there anything that you're seeing built in blockchain that just makes you shake your head right now and say, don't do that? Bad idea. Flaring red flags. I can't think of one off the top of my head, by the way, so I hate to put you on the spot. I'm going to say, I mean, okay,

I wouldn't say don't build it, but I think identity is a Pandora's box that we have to be very careful about opening. There's a ton of folks who've been talking about building identity on-chain for a while. Look, I've spent enough time looking at how the ad industry actually works online to know that, like, Apple released this thing in Safari called differential privacy. And what it would basically do is it would produce a bunch of random characteristics about your browser, and it would feed them to the ad networks to try and anonymize you.

Turns out, the way it generated the algorithm to anonymize data for you was specific to your computer. And the people selling ads were like, oh, we can recognize this pattern of random gibberish. This is Austin's computer. right? And so the ad tech people, there's so much money around trying to figure out how you can track users that they figure out how to do it, right? What I'm worried about with identity is it's basically a slow doxing of yourself.

People are like, oh, you can only let a little bit of information be known to this website and a little bit be known to this website. Well, your commonality is still your wallet address. And all you need is like, you know, an NSA style prism dragnet. And suddenly I've got a complete picture of your entire identity linked to your wallet address. And I think as we also... Which is worse, right? Which is worse than if you just did it the way it's done now. Which is so much worse. It's so much more personal, right? There's no way that an ad

agency can figure out how much money I have in my bank account. If they have my wallet address, they can. And so I think that a lot of the folks who are pushing identity solutions right now, they haven't red teamed them enough. They haven't figured out the attack vector. I think multi-sigs fall into that same category too. A lot of people are like, yeah, right. They're like, oh, it's a, you know, it's an eight out of 10 multisig. That's super secure. It's also a three out of 10,

destroy it and you're locked out of your funds forever, right? Like all of our models are based on the assumption that the goal of the adversary is to steal funds. To, you know, pull a Batman, some people just want to watch the world burn.

And if they can lock a billion dollars of ETH up in a bridge, they might do it. That's absolutely true. I really never considered that side of the identity argument because obviously, as I ask these questions, that seems to be right now the most common what I'm excited about is, you know, you'll have your identity, you'll hold it in like your crypto and a wallet with your keys, and you'll be able to use it to sign into Twitter and everything in Web 2 and also into Web 3. But as you just said, and I didn't really think about it, you're giving small puzzle pieces that eventually can only lead to one outcome. Yeah. And that outcome is, if we don't do it carefully, I think it betrays a lot of the values that this place was founded on. It's a bit scary. That's the thing I love about blockchain. We're always like

one or two things away from it being really scary and falling apart. Yeah, that one kind of rocked my world a little bit because I hadn't considered that and I wasn't really aware of that example from Apple. Yeah, yeah. Because I would argue the Apple engineers are pretty talented. Should have seen that coming. No, no, from like a mass market privacy standpoint, like that is Apple's bread and butter. And even them, right? The folks who want to run click farms, the folks who want to sell you more

toilet paper, they figured out a way around them. Right. And you can extrapolate that greater. That's kind of the scariest part about everything that's happening in blockchain in general, it always seems like the hackers, because they have more incentive, are looking to, whether they are or not, are looking to get a step ahead of anything that's built. Yeah. I mean, I will say though, that this was the early critique of the internet too, right? It was like, you know, you've got the stories about the kids hacking into the phone

company with a whistle, right? Like the security usually lags innovation, but then security catches up. And I think we're at a point now where for the amount of economic activity transacted over the internet, it's pretty safe. And we, or we figured out these weird little things like, yeah, you pay, you know, the merchant pays 2% on a credit card, but that also means the user's protected from fraud charges, right? I think we're just, we're very early on building out what decentralized insurance looks like, right? There's all sorts of weird things like that, that you can start building. There's folks working on it. I haven't seen anything that I'm particularly taken with right now, but it's a lot of people working in the right direction, I would say. Yeah, and I think they'll get there.

So what comes next for you when the Solana Foundation eventually winds down over whatever spectrum that happens? Oh, I mean, it's still so far away. It's not even worth thinking about, right? Like we're still talking about like more in the future than when Ethereum was invented. Created, right. Yeah, exactly. So I think we'll see. Look, what I'll say is that I think after working in this space now for a number of years, it would be very hard to go back to any centralized company. I will say, if there was one industry, like if someone came up to me and said

like, hey, you're never allowed to work in blockchain again, I think there's some extremely interesting work being done on nuclear fusion. Yeah, that's the breakthroughs that happened. That's way above my pay grade, frankly, and I don't think I'm going to go back and get the schooling.

But yes, I think that that is equally, if not more, groundbreaking than this, And it's hard to say that about many things. and blockchain are two of the technologies that are going to, over a 10-year time horizon, change most of how we interact with software and potentially even the world. Absolutely. Where can people follow you after this conversation and check out what the Solana Foundation is working on? Solana.com to learn about what's going on. If you're a developer, Solana.com slash developers.

We have a global hackathon launching soon. I'm not sure exactly when this episode comes out. It might already be out, but look for it in early February. And then for myself, Twitter is great. Just Austin underscore Federa on Twitter. Thank you. I really appreciate that conversation. You made me think, which doesn't always happen, frankly, in these conversations. And it really gives some perspective as to what we should be building and what we shouldn't and how fast maybe we should be doing it. So thank you for that.

Yeah, this was great. Thank you. I would love to have you back down the road for a check-in and see how far, I guess, along that path we are. Would love to. Thank you, Austin. It's been a pleasure. Thank you.