Is Solana the Future of Crypto?
Read in 7 mins
Raoul Pal, founder, and CEO of Global Macro Investor & Real Vision hosts Anatoly Yakovenko, co-founder, and CEO of Solana (SOL) on the Raoul Pal Adventures in Crypto podcast. Raoul questions Anatoly about SOL's sudden emergence, the upcoming SOL phone, and more.
Anatoly’s Journey in Crypto & Founding SOL
●Thought what was interesting in 2017 was ETH, because of the smart contracts side.
●Saw smart contracts as a way for developers to write new kinds of code, which were weird, interesting, and good at something.
●Speaking about founding SOL, he had a eureka moment when he realized that there’s a way to generate proofs for time, called verifiable delayed functions.
●Anatoly utilized his experience and co-workers from Qualcomm to help build SOL.
●The Blockchain trilemma (the idea that between security, decentralization and scalability, decentralized blockchains can only deliver two of these values at a time) only applies if you’re exceeding the bandwidth of the network.
●ETH wasn’t built to handle much load, whereas SOL from the beginning was conceived as an alternative cheap, fast, and easy-to-use network.
●This approach makes the nodes more expensive, but hardware only gets cheaper as time goes by.
SOL’s Consensus Mechanism PoH (Proof of History)
●Everything in a blockchain network needs to be proof of something, and the consensus mechanism that SOL uses is called PoH.
●PoH uses a recursive verifiable delay function, which is a chunk of data that when you look at it, you can identify how much time was spent in generating it, as there are limits on how fast a computer can work.
●The trick is to create a mathematical function that is sequential so that it cannot be parallelized, as well as publicly verifiable.
●The data that is generated needs to be verified quicker than the time it takes to generate.
●SOL’s implementation of PoH was trivial and it isn’t being researched anymore.
●SOL implements SHA-256, the hash function that BTC uses, and runs it sequentially
●There is no way to parallelize SHA-256. To verify it, they checkpointed it every 1,000 or 100,000 iterations.
●This process happens based on the availability of the cores, to verify the data in parallel.
SOL’s Scalability Prospects
●Initially, envisioned a TPS of 710,000 at a 1-gigabit node, and achieved 1/10th of that.
●At the moment, SOL does 500-600 TPS based on the application that has been deployed. Claims that the cap depends on the hardware that’s deployed.
●The testnet is bigger than the mainnet, even with the same hardware. Have performed tests at 15,000 TPS on the testnet.
Issues With the SOL Chain
●Anatoly mentioned that the continuous halting of the chain has been their biggest challenge.
●SOL processes 30 million transactions per day, unexpected things happen.
●They were shortsighted on the kinds of attacks that people will throw at the network, such as botting NFT mints which could result in validators shutting down, breaking, or running out of memory.
●If this happens to a third of the validators, then the network is stalled until manual intervention brings it back up.
●SOL’s cheap fees and fast network enable high amounts of spam and bot activity, which can congest the chain.
●The turnaround time with fixes is painful for engineers and builders.
●When the Chinese hash power for BTC shut down, the network was processing each block in 2 hours: if this same thing happens to a fast network like SOL, it would be declared dead.
How Did the SOL Network Grow?
●Never raised a ton of money, only had an 18-20 month runway. When their competitors were raising hundreds of millions of dollars, SOL raised $14 million in the summer of 2018.
●Team did not have the resources to build EVM compatibility or anything that wasn’t necessary.
●Had to build their smart contract language, and mentioned that devs are naturally curious, so that helped.
●They got lucky in that they didn’t have enough resources, otherwise, they’d have built EVM compatibility, and ended up competing with ETH L2's and ETH itself.
●Emphasized the time of the launch, being earlier to the market than Polkadot and Binance Smart Chain helped.
●Making NFT tools freely available to non-tech people to go and mint NFTs helped build community.
●They felt that if they could get Serum, a SOL native DEX featuring on chain order books, to work then anything would be possible from a tech POV.
Crypto Mass Adoption
Raoul Pal explains that to stay relevant in the space, you need to own a part of the space. BTC and ETH have done a great job with that. He believes that SOL is targeting the mass adoption consumer layer with the applications they’re building, the phone, and the shop, and that is their narrative
●For mass adoption, he believes that non-crypto communities refuse crypto and blockchain tech, they have an immune response. For example, with gaming, the industry is slowly and incrementally moving forwards, and whenever a major publisher announces support for NFTs, most gamers have a negative response.
●A game or NFTs should derive value from consumption and enjoyment to the end user, and not just considered an investment. The entertainment value is worth the cost of whatever the user is spending in a particular game.
●Questioned how the community can get to 100 million active users signing transactions.
●We’re still a ways away from creating a whole experience, wherein the end users can, for instance, store their SOL NFTs and ETH NFTs seamlessly.
●Working on solutions to keep the seed phrase truly safe will also help with increased adoption.
●In terms of Music NFTs as a means for mass adoption, Anatoly feels that there’s a lot of value for artists and platforms, but it is hard to show that value to fans.
Why the SOL Phone?
●Anatoly brought up the importance of meeting Jason, who is the founder of Awesome Privacy, which is the OEM building the phone.
●Privacy and Web3 are closely related, no Web3 dapp asks for a username and password. We need a business model that depends on privacy, otherwise, we’ll be left holding the privacy that Google and Apple sell us.
●Feels that if we get to the scale of 100 million people in crypto, signing transactions, there has to be a mobile phone, as that is what most people use.
●Working on adding BIP39, helping with seed creation and recovery. This will connect directly to the mobile device, so when a Web3 dapp loads, it won’t have to mention which wallets it supports as it will automatically connect based on the seed.
●Working on a Web3 dapp store and crypto payments as well.
● Hopes there’s an app that is built that garners widespread attention, and then has someone acquire the hardware.
●Based on the specs, the phone will be priced at $1000. They want to build a lower-end device next.
●The goal is not to make a general-purpose device, but to make an awesome phone for crypto natives, and a great application store for devs.
What Gets Anatoly Excited in the Crypto Space?
●Fascinated by the Constitution DAO, and how quickly people can come together and accumulate capital collectively.
●Crypto eliminates many bottlenecks, enables communities to form with a clear purpose.
●Interestingly, he feels that there probably isn’t a need for a Web3 version of Discord or Twitter. Web3 groups such as DAOs provide enough community by just being in the group, where they communicate doesn’t matter much.
About SOL Hacker Houses
●The community response after the first SOL conference, Breakpoint.
●Many devs got together and started building dapps, and the team wanted to support that.
●The SOL team organizes these Hacker Houses across the world.
●Around 9,000 developers showed up to these events.
●Month over month, the amount of funding the SOL-based projects are getting can’t be faked.
Handling the Massive Correction in $SOL Price
●Having seen $ETH drop 70%, as they started building SOL at the end of the last bull cycle made it digestible this recent drop digestible.
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