Dialogue with Solana Co-founder: Execution is the only moat, and commercialization is the key to success

Original title: The Next Chapter Of Solana Mobile | Emmett Hollyer

Original source: Lightspeed

Оригинальный перевод: TechFlow

Guest: Anatoly Yakovenko, Co-founder of Solana

Moderator: Mert Mumtaz, Helius CEO

Справочная информация

This week, we have Anatoly Yakovenko, co-founder of Solana Labs, on board. We’ll dive into Solana’s transaction fees, how to stay competitive in the криптовалюта space, SOL’s inflation, competition with Apple and Google, and whether Solana has a moat. Hope you enjoy!

Solana’s Transaction Frontloading

Mert had an in-depth conversation with Anatoly Yakovenko, co-founder of Solana Labs, about the challenges of transaction processing on the Solana network, especially regarding front running. Anatoly explained the original intention of Solana and the current reality it faces.

Solana’s Original Intentions and Current Challenges

Anatoly mentioned that one of the reasons he founded Solana was because of the frequent front-end transactions in traditional markets. He hopes to achieve global information synchronization through Solana, maximize competition, and minimize arbitrage. However, in reality, front-end transactions are still common, and in many cases, the priority fees paid by users even exceed Solanas priority fees.

Solutions and future prospects

Anatoly believes that users can set up their own validators and submit transactions, which is not possible in the traditional market. He pointed out that although this feature exists, the difficulty of setting up validators and the immaturity of the market make it difficult for users to fully take advantage of this. He emphasized that future solutions lie in increasing bandwidth, reducing latency, and optimizing the network to eliminate unfair bottlenecks.

Рынок dynamics and competition

He further explained that the current market dynamics give users with more stakes an advantage in transaction priority, resulting in a rich get richer phenomenon. Anatoly believes that by improving performance and lowering the entry barrier for honest participants, market dynamics can be changed, fair competition can be promoted, and an ideal market balance can be achieved.

Anatoly emphasized that the key difference between Solana and Ethereum is that solving these problems is mainly an engineering challenge. He firmly believes that by continuously optimizing the network, increasing the number of leaders and block size per second, Solana will be able to achieve the fair and efficient transaction environment it originally envisioned.

Solana’s Fee Market

Current state of the fee market

In this segment, Mert raises questions about the Solana fee market, specifically why transaction tips (Jito tips) exceed priority fees.

Anatoly explained that this is mainly due to the fact that the current implementation of transaction processing is not ideal, especially under high load conditions, and the fee market performs far worse than expected.

Transaction processing and performance bottlenecks

Anatoly pointed out that during periods of low load, Solanas transaction processing is very smooth, with confirmation times even below one second. However, when transaction volume increases, queues become congested, making it impossible to effectively prioritize, thus disrupting the normal operation of the local fee market. He emphasized that these problems are engineering challenges that require optimization of the processing pipeline.

Comparison with other solutions

Mert mentioned that some Layer 2 solutions do not seem to face the same problem.

Anatoly countered that even if Layer 2 adopts a centralized sorter, similar priority issues will still occur. He pointed out that while these platforms may be faster in iteration, the fundamental problem remains. Even in a Layer 2 environment, competition between multiple applications will lead to congestion in the fee market.

Future solutions

Anatoly believes that solving these problems does not rely solely on different architectures, but requires continuous optimization and improvement of existing systems. He said that although Layer 2 may perform well in some cases, it still faces similar challenges when multiple markets exist at the same time. Therefore, Solana needs to make further efforts in engineering investment to optimize its transaction processing capabilities.

Large-scale composability

Mert raised the question about how Solana can compete with specific-purpose chains like Atlas, a DeFi-focused chain that is able to optimize its performance without having to worry about the overhead of consensus and shared block space.

Simplifying the optimization challenge

Anatoly pointed out that chains like Atlas can be optimized more easily because it has a smaller number of validators and a relatively concentrated processing load. However, he stressed that the key is whether synchronous composability is still important at a large scale. Atlas may only cover a specific region, but the information still needs to be spread globally.

The complexity of global information dissemination

Anatoly further explained that Solana’s advantage is that it has multiple validators, can submit transactions globally at the same time, and is a permissionless open network. He pointed out that solving the problem of rapid global information dissemination and consensus is a more challenging task. This means that although Atlas may perform well in local optimization, it still needs to face the same consensus and consistency problems as Solana in a wider range of application scenarios.

Competition and User Experience

He compared such single-purpose chains to larger applications such as ByteDance, emphasizing the importance of user experience. Ultimately, users will choose the platform that provides a better experience. Therefore, Solana needs to become the best version of a decentralized exchange to stand out from the competition. Anatoly believes that this can only be achieved by adopting a decentralized multi-proposal architecture.

Competition with L2

Solana’s Challenges and L2’s Advantages

Mert mentioned that Solana has to solve a series of problems, and L2 can solve these problems faster in some aspects.

Anatoly responded that although single-purpose chains have advantages in local optimization, it does not mean that they can easily solve all engineering challenges. He emphasized that deploying a single chain does not automatically solve all problems, especially when facing complex engineering challenges.

Similarities in Engineering Challenges

Anatoly further pointed out that while L2 may be faster in some aspects, they still face the same engineering challenges as Solana, especially in terms of transaction submission pipeline. Even a single chain like Jito may encounter bottlenecks when processing a large number of transactions, and therefore may be limited in data transfer rate.

The Dilemma of Shared Blockspace

Mert raised the issue of shared block space, noting that Solana could face the challenge of the “tragedy of the commons,” especially when multiple applications share the same chain. Anatoly emphasized that such sharing can only be effective in a permissioned environment. However, once permissionless validators are introduced, competition between multiple applications will cause interference and affect overall performance.

Importance of Isolation Problems

Anatoly emphasized that even in a permissioned environment, isolation issues still need to be addressed to ensure that a single market or application does not affect the performance of other markets. This isolation problem is similar in engineering to the challenges solved in Solana. He pointed out that if these issues are not effectively solved, more specialized payment chains or single-market L2s may emerge in the future.

Diversity of application scenarios

Mert asked whether this market analogy applies to other types of applications.

Anatoly responded that some applications, such as peer-to-peer payments, may not face congestion issues, so scheduling is relatively simple. However, if there is no guarantee that a single market will not cause global congestion, companies like Visa may launch their own payment-specific L2.

Anatoly believes that the concept of a giant composable state machine becomes invalid if isolation is not implemented correctly. He believes that if these engineering problems can be solved, composability in a single environment will have huge advantages because it will reduce the friction of moving funds between different states and liquidity. He concluded that Solana survived the bear market in part because of its composability and greater capital efficiency.

Synchronous Combinability

Mert cited Vitalik’s view that synchronous composability is overrated and mentioned the lack of empirical evidence to support this claim. He expressed doubts about this view and asked Anatoly for his opinion.

Anatolys Rebuttal

Anatoly refuted Vitaliks point of view, pointing out that Jupiter is a classic example of sync-composability. He emphasized that Jupiter has a huge market share in the Solana ecosystem, proving the importance of sync-composability in real-world applications. He believes that Jupiters success cannot be achieved without sync-composability.

Take Ethereum as an example

Anatoly further mentioned that competitor 1inch performed poorly on Ethereum, partly due to the high and slow transaction costs between L2s. He believes that this situation shows that the lack of effective synchronous composability will limit the scalability of DeFi applications.

Asynchronous vs. synchronous

Anatoly acknowledged the existence of asynchronous finance, pointing out that most financial systems operate asynchronously, which does not mean that these systems will die. However, he firmly believes that if Solana continues to solve the current problems and maintains continuous improvement, then synchronous composability will become the ultimate winner.

Перспективы будущего

Anatoly is optimistic about the future of Solana, believing that as the ecosystem continues to grow and problems are solved, sync composability will gain greater advantages in the crypto space. He believes that in the long run, systems that enable more efficient and faster transactions will lead the market.

Validator

Mert’s Questions for Validators

Mert asked how the role and number of validators would affect the success of a network, assuming that other chains are able to overcome the engineering problems and achieve sync composability. He asked Anatoly, if engineering is not a moat, then what is?

Anatoly’s opinion on the number of validators

Anatoly said that Solana does not have a specific validator target. He wants the number of validators to be as large as possible to prepare for the future of the network. He believes that having more validators can improve the chances of block production and allow more people to participate in various parts of the network without permission.

Network Scalability

Anatoly emphasized that the cost of solving these problems is relatively low, so Solana does not need to reduce the number of validators for performance. He believes that if Solana can attract more users, more users will want to run their own nodes, thereby increasing the security and decentralization of the network.

Changes in the number of validators

Mert mentioned that although the goal is to increase the number of validators, data shows that the number of validators has decreased over time. He asked Anatoly whether this is related to the lack of product market fit (PMF), resulting in users not having enough incentive to run their own nodes.

Self-sustaining validators

Anatoly agreed and said he is interested in the number of validators that are self-sustaining. He mentioned that while the overall number of validators may be large, the number of validators that are truly self-sustaining may be small. He believes that the network must be able to scale to support all users who want to run nodes.

Commission and stress testing

Anatoly explained the purpose of the delegation process, which is to get as many people as possible to participate in the network in order to perform stress testing. He believes that although the testnet cannot fully simulate the characteristics of the mainnet, the growth in the number of self-sustaining validators is a positive trend.

Theory and practice of validators

Mert noted that delegation can help stress-test the network, but Anatoly stressed that what matters most is self-sustaining validators. Even if in theory a single validator might still help in a catastrophic failure, fundamentally it’s whether the network is growing and succeeding that matters.

Solana Inflation

Merts doubts about inflation

Mert brought up that Solana’s inflation plan has been criticized for potentially subsidizing validators by providing more rewards, but this could be detrimental to pure investors, and he asked Anatoly about inflation being too high.

Anatolys response

Anatoly suggested referring to John Carbonos article, and thought that the discussion about inflation was somewhat meaningless. He said that moving numbers does not really create or destroy value, but only affects accounting numbers. Inflation exists because it is copied from Cosmos, and most of the initial validators are from Cosmos.

Влияние инфляции

Anatoly further explained that the impact of inflation on individuals depends on their specific tax system, but from the perspective of the entire network, inflation is a cost for non-stakers and a corresponding benefit for stakers, and the two add up to zero. Therefore, from an accounting perspective, inflation is not important in the overall performance of the network.

Views on reducing inflation

Mert mentioned that some people think that if inflation is arbitrary, then why not lower it. Anatoly responded that anyone can try to change the inflation rate, but ultimately validators need to be convinced to adopt the change. He pointed out that the main constraint in choosing these numbers is to ensure that no catastrophic consequences will result, and Cosmos model is effective in this regard.

How does Solana compete?

Merts question about competition

Mert mentioned, in an environment where everyone can run systems quickly, cheaply, and without permissions, why should people choose Solana?

Anatolys thoughts on competition

Anatoly believes that the future winner will either be Solana because its ecosystem performs well in terms of execution and is able to get ahead of other issues, or other projects that are very similar to Solana but execute faster. He noted that the only thing that makes it not Solana is because they execute faster, thus overcoming the network effects that Solana may not have yet.

The Importance of Execution

Anatoly emphasized that execution is the only moat. Without an advantage in execution, other projects are likely to surpass Solana. He mentioned that the shift in user behavior (i.e., product-market fit, PMF) is key. For example, if transaction fees are ten times cheaper, will users switch? If users are already paying low fees (such as half a cent), then they may not switch even if other platforms have lower fees.

Changes in user behavior

Anatoly gave an example, saying that the difference between Solana and Ethereum is that users will see fees of up to $30 when making transactions, and this price difference is enough to prompt a change in user behavior. In addition, confirmation time is also an important factor. Ethereums confirmation time may take two minutes, while Solanas confirmation time is around 2 seconds, and sometimes even up to 8 seconds.

Potential for performance optimization

He noted that it remains to be seen whether the improvement from 8 seconds to 400 milliseconds will be enough to prompt users to switch products. However, Solana’s engineering design does not prevent the network from being optimized to improve latency and throughput.

The Challenge of Competition

Anatoly concluded that while Solana may grow faster than Ethereum, the marginal differences of other competitors are relatively small, making it difficult to achieve significant changes in user behavior. This is the main challenge facing Solana.

Execution is the moat

Mert on execution and organizational challenges

Mert mentioned that if execution is the most important moat, then this becomes a challenge of organization and coordination to some extent. He used Solana and modularity (although this term is not entirely accurate) as an example, pointing out that when developing applications on Solana (such as Drip), developers need to wait for L1 (first layer) to make some changes, such as handling congestion or fixing errors. On the application chain (M L2), developers can make these changes themselves, so faster execution may be achieved on other chains.

Anatolys thoughts on execution speed

Anatoly believes that the execution speed gap will get smaller over time. He cited the example of Ethereum, pointing out that if an application is developed on Ethereum and the fee rises to $50, developers may need to ask Vitalik when the problem will be solved, and he may answer that there is a six-year roadmap and it takes time to solve the problem. However, on Solana, the team will respond quickly and work hard to solve the problem in the next version.

Differences in culture and responsiveness

Anatoly stressed that in Solana’s ecosystem, the entire infrastructure for submitting transactions understands that when there is a slowdown or global congestion, it is a priority zero emergency issue that must be resolved immediately. He said that as the network’s usage grows, major changes in design (such as changes to the rate market) become increasingly unlikely.

Possibility of design changes

He noted that there are no significant design changes imminent, which means the network will not face a situation where a major design fix will take six months to a year. Although there will be some unexpected release errors that require the team to work overtime to solve, this is normal.

Advantages and costs of application-specific L2

Anatoly further mentioned that if developers have their own application-specific L2 instead of shared infrastructure, they may move faster, but the cost of doing so is also high. Therefore, for most use cases, using a shared, composable infrastructure layer may be cheaper and faster, and this gap will gradually narrow as the software layer improves and bugs are fixed.

Firedancer

Merts opinion on Firedancer

Mert mentioned the recent buzz around Firedancer, quoted Jerrys opinion that the project may be overestimated, and mentioned that it did slow progress in the early days because ANSA engineers and other engineers needed to agree on certain things and develop from them. He asked Anatolys opinion on whether faster iterations would be possible once the specifications and interfaces were clear.

Anatolys steps to design and implementation

Anatoly explained the three steps: design, implementation, and testing and verification. He believes that the design phase may take longer, but the implementation can be done in parallel, and the testing and auditing phases should be faster because there is less chance of two independent teams making the same mistakes. He pointed out that the characteristic of Ethereum is that all target functions are launched in a centralized manner with each major version release, while Solana sets a release date, and if a function is not completed, it will be deleted, so Solanas version release speed is faster.

Speed up the iteration cycle

Anatoly believes that in theory, the iteration cycle of the two teams can be accelerated as long as the core engineers are willing to release quickly. He emphasized that cultural background is also important, and both teams work in a high-pressure environment and are able to respond and execute quickly.

Challenges of coordination and implementation

Mert then raised the third point about coordination and execution, assuming that there is no execution capability in development work, whether it is correct.

Anatoly said that one of the major changes he was involved in was moving the account database index out of RAM. He was able to design and come up with a solution, but to successfully implement it would require a full-time engineer dedicated to this task.

Personal role and influence

Anatoly believes that as an individual contributor (IC), he would like to focus on the development of Firedancer, but in reality his time is spread across many different projects. He finds that where he has the most impact is defining problem states, such as the multiple concurrent leaders problem or the MEV contention problem, and proposing solutions, discussing them with the team and reaching consensus.

Design cohesion and implementation

Anatoly emphasized that once the design is approved, it will gradually solidify and solidify as the discussion deepens. When the urgency he foresaw began to rise, the team already had a design foundation, and the next step was implementation and testing. His role is similar to that of a chief engineer in a large company, mainly responsible for coordinating various teams, helping them solve problems and reach consensus.

Solana Mobile

Mert asked Anatoly if that meant he thought successful people like Jack Dorsey and Elon Musk would be able to coordinate and execute while launching phones at the same time.

Anatolys trust in the team

Anatoly said that he does not bear all the responsibilities alone, but there is an excellent engineer and an excellent general manager who are responsible for the execution of the mobile phone project together. He emphasized that his role is to set the vision that it is possible to build a trusted mobile phone platform. He mentioned that the firmware of Android and iOS is cryptographically signed, which provides a trust foundation for the entire platform.

The Importance of Cryptographic Signatures

Anatoly further explained that the signature is verified when the firmware is updated, and this process is the key to the entire security. He imagined that if a company like Apple could control the cryptographic signature certificate through a DAO (decentralized autonomous organization), this would subvert the concept of the existing software platform.

Setting vision and team execution

Anatoly pointed out that his job is to set the vision and motivate the team to sell more phones so that the project makes sense and eventually achieves the goal of the entire ecosystem controlling its firmware. He is not involved in the day-to-day execution. He mentioned that Elon Musks way of working is to set a big goal and then find an engineer who can complete it from start to finish. He believes that if this engineer is given enough money and time, they will be able to complete the entire project.

Merts discussion on business and ideals

Mert further explored whether Apple would lower its fees if the phone project succeeded and disrupted the existing market. Anatoly believed that this change was to allow small and medium-sized software companies to no longer pay Apple a 30% fee like a ransom, which would promote more productivity and software development.

The combination of ideal and business

Anatoly stressed that the project can only achieve its aspirational goals if it is commercially successful. He pointed out that Apple must see competitive pressure from a growing and commercially viable ecosystem to change its fee structure. Therefore, the project must find product-market fit and remain self-sustainable. He believes that this does not hinder its potential to change the world, because by reducing fees, the market economics will change and consumers will benefit.

Competition with Apple and Google

Mert asked Anatoly if he thought they had the ability to compete with the worlds largest companies – Apple and Google – and what made him so confident.

Anatolys view on the current market situation

Anatoly said that the 30% fee is obviously too high, and this issue has attracted a lot of attention, including Tim Sweeneys lawsuit against Apple and Google. He pointed out that this rent-seeking behavior of Apple and Google has caused trouble for businesses that rely on these platforms for distribution. Consumers dont care about these hidden fees because 30% of the amount they pay to the application will be deducted by Apple.

Solution Challenges

Anatoly emphasized that the key to solving this problem lies in how to break the existing fee model, which is actually a problem of network creation. He believes that blockchain technology has advantages in financializing digital assets and scarcity, which is different from the traditional Web2 model. He admitted that although this idea has potential, it may also fail.

Reasons for failure

Anatoly pointed out that the reason for the failure was not because application developers did not want lower fees, but because they had not yet found an effective way to use the incentives provided by encryption technology to expand the network. He emphasized that this is not a problem of product or business model, but a problem of how to really prompt user behavior changes and make them willing to switch networks.

L1 Business Model

Mert started discussing ZK (zero-knowledge proof) technology, asking Anatoly about Solana’s vision in this area. He mentioned that future blockchains may rely entirely on ZK technology, only needing to verify proofs without having to perform all operations on full nodes. He questioned whether Solana has any plans for this.

Anatolys explanation of asynchronous execution

Anatoly responded that if you look at his previous article about asynchronous execution, you will understand his point about verifiers. He mentioned that there can be multiple verifiers sharing a common prover to verify the state. This means that different trust models (such as Te or ZK 1) can be used, and this can be achieved once the application packages the entire asynchronous execution and calculates the snapshot hash.

ZK and Solana compatibility

Anatoly stressed that fully verifiable ZK packaging is not something Solana doesn’t have. He said that asynchronous execution allows snapshot hashes to be calculated regardless of the trust model used. He pointed out that if users run their own full nodes, the environment they use has no impact on their full nodes.

Solana’s Business Model

Anatoly further elaborated on Solanas survival, which is that it must be commercially viable. He believes that the only business model for L1 is priority fees, which is the same as the maximum extractable value (MAV). This means that Rollups that generate their own mathematics need to be built and L1 is sorted externally. These Rollups are a parasitic relationship to L1.

The importance of the competitive environment

Anatoly believes that these competitive environments are beneficial and can make each other better. He mentioned that, like LeBron, excellent athletes want to compete with the best opponents instead of participating in high school leagues. He mentioned that although other technologies (such as SVMs) are also accelerating development, this is different from the core concept of the Solana ecosystem.

The difference between ZK technology and Solana

Anatoly concluded that there is a fundamental difference between ZK technology and other technologies in the application of Solana and Ethereum. He mentioned that Solanas light protocol is excellent because its sorting is performed by Solana validators on the Solana mainnet. This mechanism gives Solana a unique advantage in processing transactions and executing smart contracts.

bandwidth

Merts Theoretical Discussion on Bandwidth

Mert offered a theoretical example, assuming bandwidth is increased as much as possible, latency is reduced, taking full advantage of Moores Law, and just adding some additional hardware when the channel is saturated. If we assume that cryptocurrency does increase adoption, then what would happen?

Anatolys thoughts on network saturation

Anatoly said that even if the bandwidth is increased, it is still impossible to launch another network because Solanas full nodes have completely saturated the bandwidth of every Internet Service Provider (ISP), and there is no more capacity for others. He emphasized that Solana has eaten all available bandwidth.

The relationship between bandwidth and TPS

Anatoly further explained that almost every mobile phone in the world can reach 1 Gbps bandwidth, which means that Solanas Turbine mechanism can handle 250,000 transactions per second (TPS) under the current low efficiency. He believes that this is an astronomical number and that this bandwidth must be saturated before discussing other issues. He pointed out that Solana is currently 250 times behind in load and must achieve a 250-fold improvement before starting to consider other issues.

Current state of the art

Anatoly emphasized that the 1 Gbps technology standard has been around for 25 years, but Solana has not yet reached this saturation point. He mentioned that although the Fire Dancer team has demonstrated this capability in a laboratory environment, there are still many other problems that need to be solved in an actual commercial environment in order to effectively utilize these technologies.

Merts question about the competitive environment

Mert concluded by asking, in a world where Ethereum has higher quality assets due to its existing security effect, how can Solana compete in terms of trading volume, and especially if the quality of an asset or stablecoin is not high enough, what should change?

Anatolys view on assets

Anatoly responded by saying that Ethereum assets could be called “traditional assets” and that new assets need to be launched in large numbers. He said that this narrative must be changed to emphasize that Ethereum is a platform for “traditional assets” in order to attract new attention and use.

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