Solana 2024: Fee Markets, SVM Economics, and Saga Phone | Anatoly Yakovenko & Ben Sparango

Transcript

and you can try to like meme it into ultrasound money but what I would rather see is Real World stuff that has value to humans like a wireless cellplant like something that is external to crypto that is forcing somebody that's like you know did their job and grew some food and got money to pay a validator to go include transactions that kind of like real world tie into the economy I think is really really important and we need more of that and stuff that's not reflexive I'd rather see things priced in real world assets instead of soul and those generate enough fees for validators to pay themselves all right everyone so on Empire you obviously know that we talk a lot about the

institutions coming into crypto and that is why we are super excited to share that we are hosting the digital assets Summit we've hosted this since 2019 it's coming up in London March 18th to 20th don't miss your chance to get ahead of the curve you can get 20% off with code Empire 20 we'll see in London hey everyone if you have been listening to Empire you know that Santi and I are fed up with unaffordable fees and frustrating transaction speeds that make the onchain experience basically unusable so the arbitrum team reached out and they showed us the platform they showed us what you can do on arbitrum whatever you're doing you can experience frictionless transactions at lightning speed on arbitrum so head over to portal. arbitrum doio and check it out what's up everyone before we jump into

today's episode I'm excited to share Empire's first first ever security partner Harpy is the best tool to prevent your wallet from theft in real time Harpy is not just a security solution they are a peace of mind solution but don't just take our word for it Harpy is the only wallet security solution that protected 100% of its users from attacks like The Ledger one and Q4 which was an offchain signature attack to learn more about Harpy click the link in the show notes or visit Harpy doio Empire all right everyone uh special lab 13 months ago we recorded an episode with Anatoli and Ben Ben springo head of BD over salana Foundation toly founder

at salana Labs I think I got that right um and the episode was basically around the premise of can salana move past SPF and that was I think 13 months ago to the date and uh since then salana has in fact moved past F FBF s SPF and a lot has happened so I think like totally I mean we want to make this episode more about 2024 but toally I think I'd throw this first question to you of just like did it was it always obvious to you that we would move past the FTX and SPF debacle or were there some like late nights there sitting in bed thinking I'm this this might be the end here um my stomach was definitely churning Raj is much better at this is nothing every all the ecosystem teams

are are building it like like I'm I don't know uh if it definitely felt like uh a moment where I was terrified oh man like the the first thing that I thought was like all the ecosystem teams had their funds in FDX and all their runways now zero and we're dead luckily that was not the case most teams very few teams actually had any cash on there uh and the second one was that like I didn't think there was going to be an exodus I just thought that the a really long prolonged bar Market is just like kills funding and the new batch of new startups that come in and build stuff is really really

important just to keep momentum going um and that was like kind of I thought oh man like a really long barar market and like FTX because of the size of the implosion is going to prolong it and within like 18 to 24 months it's just going to be worse than the bottom of the last beer which was bad when eth was at 80 like air from zerox I don't know if he remembers it I was getting coffee with him he was like dex's are dead so literally he told me that like there's no point so like I thought it was gonna get there and that's for a smaller ecosystem that's much harder to survive that um but like yeah I'm very surprised by how

fast things are bound it to be honest U maybe vard totally um you know from your stand Point like what would you attribute the market like waking up to salana over the course of the last 13 months Bon just I've been hearing you totally being very vocal about why you're building salana like the I think you have a very good understanding of the type of user that is going to use this whereas I think in crypto historically it's been let's just build this cool decentralized systems but not really but I think you have a very unique appreciation of why you're building yeah um my view is that like it's the builders that are building on top that

ship products that go get users so the infrastructure layer is metalware like we don't actually make anything happen right we just unblock devs and then somebody like Armani builds madlads and attracts a bunch of users and then builds backpack and builds a exchange now right like that person is doing all the kind of like value creation all the drive and everything else and because of somebody like Armani and like a whole bunch of other devs opportunity for like n to build Bon and capture like the imagination of a bunch of people arise because Bon is able to integrate across like 50 projects right and like people start messing around with it and then

like that catches fire so like we just did a pretty good job shipping the system with not too many bugs to where those dabs were not blocked that's kind of how I I look at it we didn't screw it up that that's like the and it's hard not to do that because these systems are so complex and you're trying to optimize for like a bajillion different variables but I can't imagine we would be here if it wasn't for those developers because like what's the point of a fast blockchain if no one's using it right and we're not building products for users we're like the the court team that's working on the protocol with fire dancer and Cheeto and

all those guys are working on mware they're optimizing latencies and stuff like that it takes a bunch of devs to go build products that that makes stuff happen and I think like breakpoint has been like a place for a lot of developers to do launches and announce products and it just kind of happened that way it's not like a no one's coordinating it but like it just started happening simply because it's a good time to do announcements and like this break point there were like over 30 close close to 50 or something like that just different launches of products and protocols and like Integrations and all this stuff and it kind of all like finally I think got over the

hump I also excited I I all of that um for sure I think that something that I've sensed kind of like broadly in the crypto ecosystem like right around the time of breakpoint or maybe right before is people are frustrated in this bare Market with applications that are still hard to use and they're thinking about like their long-term thesis around why they're building in this space and why they're where this is going long term and people were like look like you know fees are still high it's still clunky for like the average person to use this stuff and then there was this point where like some people started trying some of the salana applications and some of like the really cool stuff that people are building over here and that kind of led into breakpoint where there

were more announcements and more cool stuff and that started to really feed the fire which got more people using the chain and then once people use it like they make a swap on Jupiter they try something they're like oh my God this is like complete I don't feel like I'm using a blockchain and I think that kind of precipitated everything that we saw after that where they're like okay you know maybe the way that salana is architected is the way that we get this millions or billions of concurrent blockchain users um onto web 3 or onto crypto long term and I think that they a little bit of a a mindset shift in that capacity that that happened uh was there a turning point Ben that made it really obvious was there a point in 2023 where you're like

this is this is yeah for me the madl Mad Lads launch was that Turning Point um because you kind of saw the nft EOS nfts were dying across the entire space and they were because salana is smaller than ethereum they were hurting even more than ethereum like it was just like kind of the energy was really being sucked out and just Tristan and and Armani did such a good job creating that community and and building like excitement around it so when we saw it launch and it like captured you know volumes and everything else at the top of the charts I was like okay there's like really really good devs still able to capture market share and that that to me was like the turning

point where things I think psychologically rebounded for a lot of the developers because once you see like somebody else do it you're like oh I can do better you know like like like startup Founders are always like think that they're the the best right but they need to see an example as somebody succeed they see that road and then they think they can do a better job and that that's what keeps driving everything mine's a mine's a little bit of an intangible um but I would say that everyone here is familiar with mert but when mert really started to find his voice on Twitter that felt that felt like like a point that felt like a hardening point where it was like we're going no lower than where mer will allow

the ecosystem hear something funny then is so we have called with all these other like l1s and l2s and stuff and different ecosystems and you know we're talking to them about you know one of the ways block Works makes money is like sponsorships and ads and stuff like that you know talking to them about their marketing strategies and everyone's like we just need our mer we just need a mer can you help us get a merch he's gonna love this yeah I guess I um I want to ask you know I think you know toy you I've seen you be very you're probably one of the founders that is most engaging in Twitter and like taking criticism Solana is no not perfect I think you're probably the first one to call that out and appreciate that as you think about the current state of salana you know you

talk about all these applications and people like bridging over to salana and having like this aha moment what are some of the things that you guys are focused on first let's start what are the things that salana still needs to figure out as a as a like a L1 um and then what are the priorities for this year so like uh I look at this is kind of a like the Linux kernel or any operating system and because Hardware changes the software is never done you're always going to have to go like oh there's cashes are now bigger or like this thing is now slower and there's more cores and you got to like go retrigger stuff it's always going to be the case unless Humanity stops building silicon and then we should all focus on Bunker coin so as long as long as human progress is moving

forward the software that kind of tries to expose that Hardware up and get out of the way the hardware is going to need some some work where where I feel like salana is done is when that work is kind of moving downhill and I almost feel like we're there but I feel like we're actually like with fire dancer out I will feel like there's no single point of failure left anymore because now you have two different client teams they both understand they have like bus Factor you know there's two bus fact two two people for every component like two teams two different code bases that to me is like a really really important hump and once that's there I feel like it's really really downhill from there and there's

still going to be changes like that are you know performance improvements and it's just a bunch of people looking at grafana and doing analysis and stuff like that I think for the most part we're almost there the major changes that I feel like we need to fix that are kind of glaring issues that we have designs for is just got to coordinate and and roll this stuff out are like State fees how do we deal with like evicting Old State that's in the chain and charging people for being in the hot State how do we deal with like right lock saturation like kind of like the 1559 for salana what does that look like it has to be multi-dimensional it can't be like Global in the block all those

problems we're aware of and there's design it's just a matter of like you know what you need to do you don't know the order the order is typically uh it's almost like fire driven development as we called it is that like what is the biggest kind of like glaring issue right now that's blocking developers if developers are yelling about like fees or like transaction inclusion you actually have to dig into the problem and understand why is it actually because we need a 1559 or is it a bug in the scheduler that's slowing things down so things are not getting prioritized and stuff like this is like part of the you know General day-to-day kind of like okay there's a you know

there was like inscription event and things slowed down why did they slow down is it actually like saturation in the processing blocks of data and whatever and it takes like a week to figure it out okay this is the bug let's go fix it um I think like yeah my my my feeling is that like the ecosystem devs should focus on getting fire dancer out because that's a very very huge milestone even if that means slowing down some of the feature development that we know we need to do and then after that like crank out the all the the fee optimizations and stuff like that yeah fire dancer was a big and Shout out again M I think this team put out a fantastic blog really detailing

fired answer so we don't have to go into all full detail I would just encourage people to go and read that to me it was very Illuminating can you just briefly touch on fire dance for its significance so my whole vision for salana and why I built it was that like I didn't care about star value Bitcoin was already good at that I didn't care about settlement ethereum's already good at that what I cared about was execution and specifically making sure that information is fairly and quickly decimated across the world uh and this is because if I did a bunch of trading as an amateur and every time I had a good trade it would take a little longer to land and the data would take a little longer to arrive and somebody would get ahead of me and what I thought was

really cool is that like if you can build a global system that's this is kind of the opposite of scaling I'm like no we need A Single Shard because two shards then information's propagating at different speeds between them you have Arbitrage so like I'm not I don't care about scaling what I cared about was solving this one problem for synchronizing Global Information and if you do that you actually end up building something really fast and cheap because you utilize the hardware to its maximum capacity and that means that you you're kind of aggregating all the pipes that you have available into one genant pipe and things and prices get better that way right like everything works

better and fire dancer is a second implementation by a different team coming out of jump trading that's really really awesome highfrequency trading engineers um that have built pipelines to handle like terabits of Market data so they're they like know how to manage how to move bits through through silicon um and they're not rewrite they're not changing the salon protocol there's some stuff that they found like that could be better and they're like hey you guys should you know change how this hash is calculated or whatever but the fundamental Salon of protocol is the same they're just writing it from the ground up because they see our implementation and where we end it up and they can actually do the big rewrite

let's make this architecture as fast as Hardware allows and when they do that they can prove out the system at much much larger bandwidth we were able to prove out salana at about one gigabit one like with like you know in a big box with like 200 cores we could set we can get it to handle like one gigabit worth of data there with like four cores to eight cores are able to saturate 10 to 20 gigabits which mean so so there's like an order Improvement in just like rewriting the software knowing exactly what it's supposed to be doing from the ground up and you can't really do that at the start like sure if we had 10 years and infinite budget and we would

have done a whole bunch of like engineering work and testing and all this other stuff and been like this is what it looks like yeah we could have done that but you can't do that as a startup you have to ship and you have to get a product out and uh we were able to do that while maintaining the vision and getting the big bones of the design out and that to me has been like holy we did a really good job on the engineering side because Sal is still like no competitors cut up to it I think in terms of speed and cost and the fire dancer guys didn't tell us to go rewrite a whole bunch of stuff that was stupid so what what does that do for the user toally or for the for the founder building on Solana what does what does

fire dancer actually enable two clients means that the prob ility of a bug in both clients is pretty low because two different teams are very unlikely to write the exact same bug so kind of like stupid bugs that could be very C catastrophic to the chain not talking about halt I'm talking about like uh exploit which prints Soul right or something or like overwrite State like that could be really really catastrophic if there's two implementations it's very unlikely the chain will halt if if there's enough stake right like one node will will Halt and that's great we we've dealt with those it's egg in our face you know whatever within 24 hours the chain will be back up so if you're not time

sensitive it doesn't matter there's no loss of funds um but that's really really important that catastrophic bugs are caught by two different implementations so that's one thing the other thing is that like since they figured out all the all the bottlenecks it's very it's much much easier for the labs Engineers to know okay this these are the bottlenecks in these pipelines let's go fix those up and get the lab's client to up to speed to where fire dancers at and when both clients are equally fast you can actually increase the capacity of the network so we can then start handling more and more transactions so then we start really leveraging Hardware improvements like

the number of cores that you can buy per dollar goes up like a system that you buy at a data center per month is is going to cost somewhere between 100 to you know 400 bucks a month no matter what you do you're never going to spend $5 for a high availability system so there's just a minimum cost to how much High availability Hardware costs and at the bottom cost the amount of Hardware you get per dollar doubles every two years and even if Solano is running at that bottom cost is going to continue improving just from data centers continuously updating their Hardware but I think like if there's demand I don't see a reason why the validators won run at like 400 bucks a month doesn't matter

right like as long as there's demand the hardware is the cheapest part um in that case Broadband becomes like the the most expensive component over time what do you imagine is the cost per terabyte at out of a data center of egress like you just take a wild guess good luck good luck it's 64 yeah for a terabyte yeah W so like uh a single transaction that you send like you would have a node just pay to send it to every other node so you have the dumbest implementation I'm G to give this my blockboard user a

transaction that's 128 bytes and it's going to send it to 10,000 machines without leveraging any kind of like anything else it costs like a fraction of a penny because it's 64 cents for terabyte and a single transaction that's 100 28 btes so right so like this is what the cost of using a blockchain should be because the dumbest implementation is literally the block producer sends all the data to every other note I think this is this is what's lost on like a a lot of crypto Twitter too is that like the the novelty of the way that the Sal blockchain was architected is that it scales in this capacity where it should scale on the basis of just

computing getting better into the future rather than us having to reach some sort of ceiling on saturated blocks and then needing to figure out our way out of that until we reach some new ceiling so this is this is what I think when going back to your question yo is is like when it comes to like people using the blockchain or people building their companies on top of this architecture it's they can have assurances well into the future that this architecture is going to support their application regardless of who else is building on the Chain how many people are transacting on it long term um and I think that gives a lot of Solace to people when they when they think about architectures that they need to be using that's a I want to ask you that Ben

because a lot of the teams you know that are trying to build a defi protocol or an nft whatever a game they're like hey we're interested in some of these next gen l1s whether it's opto suie say and I ask him well have you thought about just salana particularly salana with fire dancer like why even go through the ex size of and I'm curious what you would say to that right like when you compare across forget about it the and sort of the but some of these other kind of um competing lill ones if you will yeah so uh usually by the time that someone comes through my inbox they've already somewhat made the decision that they're going to deploy on top of salana so I haven't had too many scenarios

where I've had to like make those distinctions um what I would say theoretically is that being here since 2020 and going through all the trials and tribulations of what we needed to do as an ecosystem to harden the ecosystem and what needed to happen on the technical side in terms of implementations in terms of bug fixes in terms of all of these things that we had to go through is that when you are using one of these newer High throughput chains you are in Uncharted Territory um you are you are working on an architecture that you have no idea how it's going to perform when users come back in drone to use that uh stack whereas you have three plus years of history in the salon ecosystem of us

handling those types of Market events um so that is the biggest thing that I don't think a lot of people understand is like yes it might be performant today but what happens when the users 20x over the span of the next 12 months what is you have no idea what that end state is going to be the other thing that I would say is that the work that we did in the early days to create relationships with the necessary onramps uh implementation Partners or other things that now incompass the entire Salon ecosystem that is something that doesn't happen overnight and each one of these people has their own business and their own balance sheet that they need to think about and think about driving Revenue so like when it comes to custodians exchanges uh just like data like Dune

analytics Flipside those kinds of people you need to go independently with each of these new AR ures and Pitch them on why they should integrate your blockchain where the users are coming from and what's the business case for them and that is such a long-term task that a lot of these people are not even going to be like dipping their feet into so you might you might launch on another chain now but then you know you're not going to have all the tools and all of the access that you might have in the salana ecosystem so salana is the complete package today and uh it's why I think people shouldn't be going anywhere else at least at the moment can we start to um talk about some of these big maybe issues that you guys are or maybe not issues but topics that you guys are thinking about going

into the into 2024 things like fees and uh the svm so maybe toally I could pick on you um how are you thinking about just like execution e basically just the economics of the svm right now at at a very high level yeah we got like lucky with the design um I think my the reason why the svm works the way it does and kind of the weird Nuance about it that's very different from even like Aptos and Monet and all these other approaches is that every developer has to kind of go through this painful process of explicitly declaring all the state that they're going to read and write on the Chain so effectively every transaction is required to have a complete access

list and that means that it's very easy for the underlying runtime to go schedule everything and make sure parallelism works but that was my dumb luck of working on digital signal processors that was how you had to code on a DSP on on mobile is you have to lay out the memories so like I knew exactly that if we do it this way it's going to be fast what was cool about it is that it that information is what you need to then do local fee markets because then you can find hotspots by state all of these nfts are minting the same nft they're all touching the same auction there's now contention on the writable part of that auction that's common between all of these transactions and

then you can sort them and pick the top ones for that particular State and then do the same thing for all the other ones and that only is obvious in retrospect and should have been obvious because it's kind of very common database hotspot problem but that information that we have allows us to do this isolation at the economic side and that means that we can also build like multi multi-dimensional 1559 is kind of like the the big next thing is you have exponentially increasing fees for everyone that's touching the exact same hotspot and that creates a base fee that goes up and forces spammers to back off and that means that like we can actually run Defi and payments and nfts and

liquidations all in the same environment without them causing the bottom price of transactions to be the highest price of any use case this is like the key part that um a shared system needs to solve is if you have use case a and use case b if a can force the price for B to go up B is going to move to its own chain its own rollup if we can't solve it it means you should have svms on top of Celestia as as your rollup right like if we can solve it it means it's possible to have a single shared computer that's Atomic and I think that completely changes the economics of how these systems work

because you have hotpots at generate all the value creation like all the fees come from content not from not from infro and that that's like in my mind like the best economics you can have is when you're charging for user generated content is like always new always hot it's always being created infrastructure is always getting cheaper so in my mind like the only way that these systems survive like over the long term is not by separating the da layer from execution it's by combining the two and having hot content that's unique to the content of the system subsidize the infra to be like as cheap as as possible um and I I don't think that's possible

to do in like if those are separate teams like it it it becomes very very hard to align incentives but it becomes very very easy on a single integrated giant State machine so that's you you mentioned 1559 a couple times so I just can tell it's like maybe top of mine for you um what what do you think 1559 got right about like alignment of incentives across different actors and what do you think 1559 got wrong about alignment between different actors actually I don't care about the monetary policy of it what I cared about it and I thought was really cool was that it's a exponential backup for spam so you have some resource on

the network that you have you have a the reason why this is like hard is that you have a bunch of machines that you don't control they kind of slightly different all over all over the world they're all going to kind of behave a little differently and you can force the network to over provision and like have 10 times the capacity that you use just so everything executes perfectly well um or you could actually provision it to be about like the the average or a little bit above the average and when things get saturated you start increasing the cost of that resource because you know that some machine somewhere is going to start to slow down because it's getting hit in that particular chunk of memory and caches are being missed and they just like things are bad when things are

redlining it's just kind of like when you're running a system at at its capacity like stuff starts happening that that's not good and if you could start increasing the cost to run the system at capacity exponentially you force the attacker to back off and this is like I think the really really beautiful property of 1559 is it kind of like at a very lowlevel engineering way it forces resources to be priced correctly and you're actually able to manage the system and provision it better instead of trying to provision it for the worst case you can do it up slightly better than the average case and force this kind of like the attacker

to back off so the system's always running well um so I thought that was like I think again I was very critical of the 1559 initially but seeing it in action and work on ethereum um really switched my my mind I feel like every resource that we have on salana needs to have like exponential economic back off that if it gets saturated you just push back so the challenge the reason why I was skeptical of it is because I knew it was going to raise the cost of access to the system for everyone to be basically at the cost of defi so if you have Define a system you of Arbitrage and Arbitrage is like I sent a transaction that checks hey is this trade profitable

and if if it's not a board but if it is take the trade and I just Spam the network and as long as even if 1% of my transactions succeed as long as the ROI is above that I will spam it SP right right even even if so I'm sending transactions that effectively fail because 1% of them will succeed and that will pay for all the fees so that will naturally increase the the the cost of using the chain up to the cost of defi right just no matter what you do you're kind of like if you have defi you have monetary incentives to access the state I have monetary incentives to spam and I will spam as long as it it's like I can make money off of it so I knew that 1559

was going to cause it and that was my initial gut reaction to like not supported but now that I've seen it work I believe that multi-dimensional like 1559 we can force that specific sole usdc Market on Orca that's the one that all the Arbitrage Bots are hitting to start going up in price in terms of access that will force the defi to pay more but payments to continue to go through and this this is kind of like the really really it it's just you only see the stuff it's obvious in retrospect but like you have to actually go build something deploy it see it not work as expect and then try to like really wrap your head around it what when you're on

a walk thinking about this problem like who is in your mind like are you trying to in are you optimizing the economics of salana to incentivize for validators um or for it to be like cheaper for Founders and Builders to build things like who who's in your mind there I actually think of it as like uh shared system like isolation like I have user a and user B how do I protect user a from B like how do I make sure like I think of it as like almost like security like I don't want a single attacker to increase the cost for everyone else just like in consensus you don't want a single attacker to like cause the performance drop for everyone else right like so it's almost like a s uh like if

you're building like working in the Linux kernel it's called the denial of service if you have a single application that can spam the kernel to the point that somebody else can't use the network card so you have to kind of build these like very similar problem resource containers like around uh in any kind of shared system yeah and with crypto like you don't have like the hardest thing about crypto is you have a a a financial incentive to spam yeah yeah yeah like well I mean the way I think about it is like there's been like anti- Network effects with usage for pretty much every Network and then with this you probably could solve it can you talk a little bit on this fee stuff local fee markets but also like

prior fees kicking in I think with goo it was just like you started to see like a whole but not all my understanding not all projects have like adopted this so what does that kind of state look like today um so and so the way that like Salon priority fees work is that the app developer can add them to the to the transaction or the wallet so it's kind of flexible where it's done um and usually actually recommend that app developers do it because they are monitoring their own markets and they know exactly when they're getting saturated or not so they are probably best at figuring out what the priority price should be to access that um and the way that the scheduler works and it's not perfect is that it sorts all

the transactions By Priority fee so that seems simple right you just like you verify validate that they can pay the fee then you sort them and then you start filling up the block and there's two two two Dimensions to the block one is the total block space which is like 48 million compute units and then no single writable account can exceed 12 million compute units so if you have a nft mint or a like liquidation or like Bonk with whatever Market that is being spammed right that particular Market has State and that state is writable and everyone that is trying to access that particular Market is going to add

compute units to that one location on chain and if eventually it it'll hit 12 million and you can no longer add any more transactions to exceed that that capacity so then you you have to go find some other state that isn't saturated and you will add highest priority fees there so that incentivizes people that are accessing that specific Market to outbid the 12 million limit right to be at the bottom price there but that doesn't mean that for Block inclusion you have to out bid the entire like that market you can still send a a normal transaction and like we our ping service sends an un if you go to like explore.

salon.com we have this ping and it sends unprioritized transactions and it shows you the average pink time of a of a dumb un unprioritized transaction and how long it would take for it to land in a block and we do see some block s saturation now which is kind of cool so it does that does what's cool about it is that like the incentives for validators are now like okay blocks are saturated I should actually double the block space so we have more hotspots that can all increase their fees concurrently instead of limiting the block space and trying to squeeze more out of the average user just for just for any listener that

might be might be unfamiliar with the topic we were discussing when we're talking about fees going up and fee spikes and those kinds of things our fee spikes are still fractions of a penny so these are not fee spikes as you might be familiar with on on uh other I think you you have to be a bit more accurate there so if you go to like salana Compass they have a pretty good real time system and you if you can look you can actually look at Max versus Min and average versus median and you see that like sometimes in a block Max extra fee is like one Soul like 1.2 Soul which is like what do you expect to pay in ethereum that's a 100 bucks so usually

there that means some bot Liquidator right decided that the maximum fee at that opportunity was like worth it that much but at the same time you can see the minimum fee was like basically zero it's right it's the blue part right and and and the minimum also to your point it still gets there's still inclusion so that was that was observed minimum included fee and then you can also look at the average versus the median and mo most of the time there's a very large difference between the two although sometimes they cross yeah well this is like this is a perfect example of what you were just referring to with like the defi example totally it's like somebody made the decision that the decision to send that one Soul fee was profitable for that

particular transaction yet uh it's not affecting you know folks who are trying to use the chain for alternate purposes um yeah and you cannot so this is like what about l2s what about DK you cannot solve hotspots with any of those Technologies because they're content dependent like if you think about it there's that one opportunity that one price disparity between the whatever that market a and Market B that's worth a hundred bucks it doesn't matter if you if you like handle it in zero with zero knowledge proofs or in a rollup or whatever it's the cost of that accessing that opportunity is a hundred bucks somebody that is

economically incentivized is going to pay 100 to be first to access it and it doesn't matter right like I moving that to a different layer is not going to solve anything and this is like to me like the economics of a single integrated system that can handle multiple of these in parallel are awesome because yeah let's increase block space let's handle more hotspots let's get more stuff on chain that's worth money right like more nfts more of everything and the hotspots should subsidize the cost of the the Val validators to just keep buying more cores because like it it's like a really really well aligned like I think economics yeah just to round out this

discussion because I'd be remiss not to ask the question because I feel like a lot of criticism has been like oh inflation and it's not sustainable and validators being subsidized by the foundation and they're not profitable this is all a Ponzi this is all there and I want to give you guys an opportunity to really like parse this through because I feel like some of that is lost in the discourse of Twitter so like the this is you guys push back if I'm making an an argument that's not logical please push back so my understanding is that salana is going to run as long as the validators can pay for the hardware and for their operational overhead right like if if whatever their returns are cover the cost of the

hardware and like the opsac they will continue running the chain because why not right they don't really care about the price as long as like they're getting paid more than the cost of the boxes right a hobbyist is going to cost is going to put their cost of their opset at zero because they're doing it as a hobby but they still have to pay for the hardware right now a system from latitude costs 350 bucks a month right you can go buy it it covers like one gigabit connected connection 64 cents per terabyte is pretty cheap so you have 2200 validators right now times 3 50 time 12 it's about 9.2 million a year in Hardware costs this is the Bare

Bones you can probably the lowest estimate we can give for running salana right so it does 30 million uh there's 30 million seconds per year right and it does about 500 TPS of user transactions not votes so n bucks divide divided by 30 million time 500 is 0.616 so that's the average price per transaction that that the network needs to charge to keep it running that's really cheap right sometimes they're lower than that because our fee markets are like priority based sometimes they're higher right now they're much

higher than that so as long as like no one no one's going to balk at the idea that salana if if salana can charge 06 so like what is it 06 cents per transaction and survive it means it's a very cheap Network right that's sustainable if it if the average fee is above that great validators the network is making money if it's below that then yeah the network is subsidizing the cost of running it um and I think this is like kind of the the Miss point is that the cost of proof of stake networks is really really cheap ridiculously cheap they're not paying for electricity to to pick the quorum so it's just the hardware and because we can stuff a lot of transactions in this

Hardware the the average cost that each transaction needs to pay is pretty low now that may not always be the case right like during the bare Market it was not generating that many fees I think it was like maybe doing about $3 million worth of fees per year during the bottom of the pair right now I think it's close to 100 million so like yeah inflation yeah inflation is like uh in my mind it's like needs to be high enough for people to rationally want to stake but low enough that not everybody Stakes 100% of their tokens and two the slashing risk needs to be significant

enough that people take care and picking who they stake with this is all inflation and slashing need to balance is those two kind of two dependencies I have a let's see I have a much that was a I mean that was a good push back toally I have a much like more left bell curve basically response when when folks ask about like validators being subsidized by Sal Salon the salana foundation which is because you guys have the um Ben what's the program called the program right where like X percentage of validators I think are paid through the delegation program program um I would just look at like the history of eth um and like look at the

you know consensus basically like consensus in 2016 and 2017 and Luben and the ethereum foundation and basically like spending Capital to bootstrap uh growth in an ecosystem with whether it's tooling or um like infura and metamask and infrastructure and grants like that's a way to get a network off the ground but I'd be curious how you think about that Ben totally um and I I'll just make a clear distinction just so people are aware so like the delegation program is not uh the salana foundation paying anybody or anything like that to run infrastructure on the network all it is is a delegation of the soul that the salon Foundation has some portion of the soul to your validator um for some duration of time so that you can get

your validator up and running so that you're somewhat profitable and that you can start to go get your own organic stake with the intention that over time the salon Foundation removes that stake and you are your own self-sufficient validator um and so that's not there's no like payment of Soul there's no payment of cash or anything like that it's just delegation of stake for some predeter determined amount of time and then it's as long as you meet certain uptime and performance requirements like if you are constantly offline and all of these things Sal of foundation pulls that way um it's also important to note that uh we recently hired a head of staking ecosystem Ben Hawkins who used to run the cogent validator um in the salon ecosystem he's actually working on a revamp for how we do the delegation

program in the era of the salon ecosystem has grown to the point where it is we might not need this in the form that it was current that it was uh created originally how can we make it better and more efficient in the future given that the ecosystem is like more mature and might not need this subsidy and the capacity that we're doing it at the moment what percentage of the stake does the foundation run right now that's a good question number off the top of my head it's below 20 anything above 10 side was like 14ish or so okay right so so like the way that inflation works is global inflation if this 14% left everyone else returns go higher right every does everyone makees

sense does that make sense so like so that means that like there will be some amount of nodes that keep running the network given that the fees right now are north of 100 Mil right so so I think it's really like if you're look at it from a like Financial like a like a p&l standpoint of the network and people have done this for ethereum and for what you're saying is fixed overhead is like roughly n million that potentially goes down with Hardware improvements or Mo's law y y if you believe that but let's just assume n 10 million spread across everyone that participates and does validation um and then on the Fe side like the the variable cost of of processing a transaction relative to what you're

charging the there's a pretty big gap there like a margin of of like an operating margin of like I forget the numbers that you quoted but it's it's fairly healthy it's like like um what you're saying is you need to believe that you know the network continues to crank out decent fees and look sure that margin might compress over time but you know it's still pretty healthy Tech likee margin if it's content based it might not compress if if the network was purely charging for data it should 100% compress this is like because it's commoditized but if it's high value content then the margin stays high this is I feel like the Achilles heel of the modularity thesis is that like the data

is going to be commodity based and also have would have to compete with a network that can take content and subsidize the data right like um the point on inflation that I just want to hash out is what people in a of stake system I push back or correct me if none of this is right but if everyone is stake if 100% of the supply is being staked no one gets diluted it's sort of just you know um ma mathematically inflation is equivalent Global inflation right like is equivalent to you burn 5% of the stakers account balances and then you do a split to bring like one you know 95 to one

split right across the entire thing so the non- stakers are back back to where they originally were but everyone else balance goes up yeah it's really the nonsters that get diluted the the way that I've been trying to describe it to people who are not steeped in crypto like my my father for example over Christmas he was trying to understand Salon staking and I was explaining it to him it's kind of like treasure buying treasury bills you are you are locking up your capital for some period of time obviously this is not a loan but it's the same type of mechanic you are locking up your capital for some period of time in order to remain with the inflation rate of the monetary uh system of the United States and then you if you keep buying treasury bills or you

keep your money in treasury bills you do not get diluted by inflation but if you are like on salana if you are staking you do not get it diluted by staking um but it but or by inflation but if you are not staking then you are getting diluted the question that I just wanted to finish this discussion is around when you initially design the inflation curve back in the day right my understand so like you have to make certain assumptions of how profitable the network you know do you think that that is high today do you remork it how do you do that I I just uh I didn't think inflation mattered and because I'm in like John carbo's Camp it's just numbers moving around the the black box so like

I honestly like I thought the curve that cosmos had was pretty good and most of the validators that we had initially came from Cosmos and they kind of picked a similar one um so that was kind of the theory that I had like I don't I don't think it matters like it needs to be high enough that some people stake rationally you need some stakers to pick the Quorum the Quorum can't cause a safety violation they can halt the network but a well managed run system the Quorum cannot really do anything um so you need some incentives for people to STI to pick the quorum and you need some a stick slashing for people to do a good job when they pick the Quorum

that's it and like what the curve is and like it's probably too high right now like I think it could actually be like 10 times lower and everything would be fine so like uh I don't think the costs matter that much at the end of the day all right everyone so we talk a lot about the institutions coming into crypto on Empire Santi and I are both headed out to London March 18th to 20th for blockworks is 8th ever digital asset Summit D this is an Institutional buttoned up conference that we've hosted since 2019 I like to joke that it is probably the last remaining kind of suit and tie event in crypto people are still wearing suit and tie it's pretty funny

but you'll actually hear from a lot of the largest institutions in the world coming from Standard Charter FIS JP Morgan framework folks coming out winter mute vanc Goldman Sachs there are a couple big themes of this conference one Bitcoin Catalyst the having and the spot ETF two A View From the buy side three rw's tokenization and stable coins four Global regulatory Frameworks five institutional infrastructure including Banking and payments and six the macro case for crypto if you have anything to do with the institutional side of crypto you have to be there Santi and I got you back we hooked you up with a 20% off code it is Empire 20 there is a little competition running internally at blockworks to see who can drive the most

number of tickets so help Santi and I out register with our code and you get 20% off that is Empire 20 all right I mentioned them in the pre-roll now I'm going to bring them up again it's arbitrum Santi and I are really fed up with these high fees and we're really excited to have teamed up with arbitrum for the next couple of months on Empire as the leading ethereum scaling solution arbitrum now Powers hundreds of decentralized apps across defi perss nfts gaming and a whole lot more the team has showed us everything in the ecosystem both now and what's to come and we're really really excited about it arbitrum allows both daily users and developers to interact with ethereum at scale with low fees and faster transactions the way the team got me excited was through portal. arbitrum

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iempire you want it to be even easier just click the link in the show notes I want to get us into um start moving into the next part of the conversation but like maybe to wrap this part about this the you know svm and stuff there's this kind of uh Trend right now of like talking about the svm for execution ethereum for settlement Celestia for data availability um like Eclipse came out obviously like I'd just be curious maybe two-part question totally like what are your thoughts on shipping the SPM elsewhere and like maybe it's just one question like how how does that impact you guys like how does that tie into your strategy like what are the economics of that in your mind like what do you think of that strategy as a whole

and like how's that going to play out I'm uh like so the way to think of it is that like I hope I would wish my competitors were so blinded by greed that they build close sword systems that try to keep keep all of their like Jewels locked up that would be great right like that that's kind of like you love L you love Linux I can tell yeah I mean like uh there's no way you could you could compete with a the fastest growing possible like ecosystem and the fastest growing one is the one that like is able to commoditize the

commodity parts of it the fastest and give them away and that prevents a competitor from establishing a foothold and stuff like that so like it would be bad for salana if another parallel virtual machine was gaining traction as a rollup environment actually like um so it's actually good like even though execution fees that could be captured on salana could are now being captured on Eclipse right you can think of it as that way the total addressable Market of getting priority fees in any network is X and now eclipse is gain some of that right instead of salana it's better for that to be svm it would be better if coinbase launched an svm rollup it'd be

better if binance launch an svm rollup than an evm one yeah um because I think the the bigger picture here is like getting more devs to launch more products and growing the overall pie and having a bigger share of that pie is more important than having you know a big share of a very very beb beb get comfortable with it um one just one minor Point around security and the developer experience you know obviously from my standpoint one of the biggest issues that crypto faces today is security you keep having re-entrancy attacks um you could argue a language like move potentially is just more

robust to fix Security One how do you guys think about Security in general like and like I think when when I've talked to you years ago it was like a lot of the projects in Santa were closed Source I think a the majority now are actually open source which is I was surprised by that stat suror bias like I guess good point but uh yeah I I just wanted to pick your brain on how do you think about security uh at the code level just preventing bugs and and if move is ever in your radar of like you know yeah close source is not going to save you uh um because attackers will just fuzz the binaries they have built tools that are sophisticated enough that

it doesn't matter if it's open source or not um and I think it'll slow down growth right like I my uh on the security side specifically move I think is is pretty cool um it's really really hard to build a language and we have a team that is actually building a lvm front end that will compile move to svm and part of that challenge is making sure that svm can support that uh and that's making some changes to the svm environment that are like making it a bit more generalized to support languages with a bit with a bit heavier runtime that's great um I think that you can do the same proof systems

with rust Connie proofs exist for us Cura does this so squads protocol proved their multisig with um using otter sux uh prover um so all the stuff you can do in Rust you can do in solidity too provs exist for for every language because they work actually on not on the most of the time they don't work in the front end language to work on some intermediate representation and actually the lower level you go the better for for like finding bugs in my opinion um I think that security there's some changes that I've thought about that I've proposed but we haven't really like seriously considered them my feeling for

security is that uh redundancy is the best way you have two client implementations right fire dancer and and blbs and maybe three like syndic is working on the zig version you can also have two implementations of the exact same Orca Market built by different teams and if the transactions ever diverge you abort we can do that actually in the svm layer we can add start adding support for redundancy see at the implementation side and I think to me that's probably the only way we can ever make these systems robust and secure um I'll one but like yeah I'll just add one last thing on the security

front and then we can move on to next topic but um I this was a good opportunity to just plug token extensions otherwise known as token 22 uh token extensions are basically like uh the next iteration of the SPL token standard um one of the key features of token extensions is something called permanent delegate Authority where theoretically you can mint tokens to this standard um and say you have a dow that owns the permanent mint Authority you actually have like burn and revoke rights over that token uh in perpetuity until that is until that is uh removed from that Dow so for example there's a huge hack um you say usdc is a token

extensions token 100 million usdc gets drained out of this thing the Dow can actually meet together and take a vote to revoke those tokens directly from the wallet um so that's just another thing as it relates to like compliance and security as we get further into like the maturation of crypto and crypto abiding by all the laws that we're going to need to abide by at least in the United States um that's something that we can at least throw a bone to regulators and like uh uh people in in the in the legal profession um where know we can avoid these types of you know huge hacks in the future um in novel ways outside of just the the the technology security that toy was talking

about yeah I guess usdc is kind of like this across all chains is my understanding right and tether right they can freeze it they can burn it they can but not so they can they can freeze as it exists today but until it get until they if they were to change it into a token extensions token on salana um that would give them full like physical revoke or burn um capacity you can always freeze the tokens in that wallet they always just stay in that wallet you just need to remint them elsewhere yeah the yeah the problem here is that the the these are like governance yeah governance becomes hard and then there's delays between the attack happens you need like somebody to convince the

governance and that usually requires like a court order and that's two weeks after that well how are you thinking about governance in general like when you started bringing up multiple clients totally like the thing I was thinking about in my head I I've seen you writing more and I was like ah this is totally going into the next stage of like now this is you need MTH soul soul alignment the vision of soul and like yeah how are you think about governance in general alignment is just like uh L7 engineering you have to go talk to a bunch of people across the or and get everyone aligned and you pitch him a dock and you're like we're GNA do this yeah do are you guys gonna support it or block or not yeah yeah exactly well like how all of a sudden it's a job man like how do you

think about who has the power because if you so Linux like you've mentioned Linux a bunch and I can tell you of a strong affinity for Linux like decentralized like open source but like uh what's the guy's name L like lonus has you know an overwhelming amount of power I'd say there so like got influence but he how much influence would you like to have in I don't think I think influence you can have as much of it as you want as long as uh everyone else can take it away as soon as you do something bad so it doesn't matter how much it doesn't matter how much influence somebody has as long as it's not actual power Linus doesn't control Linux he's got influence over it because he keeps doing a pretty good job he doesn't have power he has

the influence yeah right so like lots of people in the salana ecosystem of influence I mean I probably have the most because of you know I'm an engineer and I kind of I see stuff but like as soon as I like people push back and my ideas all the time then this has been probably because I hired a bunch of my friends that I worked with as peers that they were like able to like in their 10 years prior to salana were like no that's a dumb idea and it's like we're not gonna build that so G that like that yeah you're yeah I also think you're under selling it too I mean it's a testament to like your personality is that like people feel comfortable

pushing back on your ideas because they know you're just trying to get to the right answer and I think that that is so important when it relates to the ecosystem and the technology that everyone is collectively building is that it's not what toally says goes it's toly has an idea let's make this better yeah and like that that's been like I think that's just kind of like how actually software is develop basically everywhere else like if you go inside Microsoft or Google you have a bunch of teams with different needs and and ideas of what they want to do the CEO doesn't make any of those decisions there's like people that have influence over the direction of the technology but that influence is not based on the orc chart

it's based on their ability to argue a specific design um and I think that's actually like fine like there's going to be like like we'll fight over the right way to do economic you know exponential fees on right locks or like bonding curve for state that's all fine like and that process is good and people like come to a decision like yeah you've identified the right problem and you have a good solution and it's the right one to do right now we'll go fix we'll go we'll go ship it um ultimately though like I think you have this like power of the user soft fork and you've seen this play out I think in Bitcoin land and

probably the best during the the blocksize wars and that's the ultimate power like I think it's kind of the futarchy system where If people really want it they can Fork it and like there's an economic opportunity to Fork right there's like a reason for somebody to go create a salana no anatol allow right and like maybe if if I suck that would be viable and there's nothing anyone could I can do nothing to stop them and as soon as there's enough like of a market demand to do that all the centralized exchanges will list that coin and because they'll get fees from

Trading they don't care right it'll just like all that stuff is playing out I think in in the the normal kind of like development I think there's stuff that we generally like to do is any questions of setting hyper parameters for economics we leave it we try to make that a validator like vote uh because the economics impact they're how they're able to monetize stake right and that impacts their ability to run the network so generally that's been like I think a pretty good filter is that like hey if this impacts how validators earn money like this change is necessary for XYZ you guys set the high parameters we'll

try to you know or we just try to make sure that they don't cause the system to fail right like that that's I've heard you um maybe transitioning more towards like things that you're excited in terms of use cases and Ben I want to also pick on you because I think you see a lot of this but I've heard you totally say hey look I don't I don't necessarily care if most of the value URS to apps if you know not to talk about price but I am curious uh you know you could call it the fat protocol thesis you know people have try to think about where value AC cruel will happen we've talked a lot about economics and fees uh I'm curious picking on both of you um you know what um how do you foresee the network to evolve as you

start getting more usage all these different applications and content and you value acrel I think like um I would say that like up to now all of crypto has been disappointing in the ACC cruel because it's very reflexive I think protocols in ethereum make the most fees not because they're serving the most users or creating the most value is because eth is valued highly and they're able to kind of get a percentage of that and that to me is like a bad sign it means that they're kind of like scraping a little bit off the top of the value of ethereum and kind of like it and it kind of works

right like and you can try to like meme it into ultrasound money but what I would rather see is Real World stuff that has value to humans like a wireless sell plan like something that is external to crypto that is forcing somebody that's like you know did their job and grew some food and got money to pay a validator to go include transactions that kind of like real world tie into the economy I think is really really important and we need more of that and stuff that's not reflexive I'd rather see things priced in real world assets instead of soul and those generate enough fees for validators to pay themselves like if if the dex's on salana were trading real

world assets against usdc and that was generating enough fees to cover the hardware cost of the network it will run forever right it's no longer dependent on the price of Soul no longer depend on anything it's just keeps running right and it's providing value to humans it's done right but right now we're not there yet like things are still tied to the underlying spam resistant asset for some reason reason right like and I think like I think this is part of The Hangover from Bitcoin and like I think there is tremendous value that Bitcoin creates is a decentralized censorship censorship resistance store value like when my parents stuff the USSR literally

they would only let people take 50 bucks a person so seven people $350 that was it like you need something like Bitcoin right but like I think everything else that's in the exec layer doesn't need to be that and Bitcoin runs without economics it's just exists because it's because of the yeah I I I tweet I tweeted about this not long ago is like the goal of what we're building here is a hardened infrastructure layer to allow people to create monetary transfer or or value transfer applications um I think once you have a hardened infrastructure layer the value of cruel moves up the

stack just as it did in web 2 you know people built applications people built businesses on top of this Tech stack and the applications were the things that acred value and people can figure out value acral mechanisms there now I'll caveat that with like like The Hangover of Bitcoin and maybe like uh the the ethereum ultrasound money meme is that you know it's entirely out of our hands like the salana foundation Salon Labs Anatoli anybody you know the ecosystem alone can decide that hey we want to introduce some like larger burn mechanism and we want to drive value to like the the soul token or we want to do something like that like longer term it's it's a decentralized ecosystem and

we we don't know how that's ultimately going to play out but the the the mission statement of why toi originally created the blockchain and what the salon Foundation is trying to do from like an ecosystem growth perspective is to make it a easyto use platform to build these types of applications and have hopefully most of the value to the applications that are being built at top yeah now for a for this is where I foresee the skeptic saying well that that's blockchain not crypto like why why even have a token called Soul like you know and the the real answer how the network works ex well exactly right because I was just I was just imagining someone like saying blockchain not crypto but it's like the reality is you need a token for coordination and and economic security like it doesn't

obliviate the need for soul it's just if if 10 if value has been created today on a 991 system have zero value yeah like that you like the why would you like ass soon as you build a permission system you're like well why don't you use your database right like the whole point of it being permissionless is that the it creates trust minimization when you have a very large uncountably large number of people that run the system you kind of get a very hard sense of security right like I don't know what what it would take for these systems to like act actually handle like world's finances like trillions of dollars per day moving

through this maybe you do need 100,000 full nodes run by every financial institution in the world right and there's no way that's a permissioned environment so like in my mind like the the highest impact thing we could build is permissionless high performance like you know single state machine how how far off are you do you think from that Vision toally this like vision of NASDAQ on salon um fired dancers performance numbers we could probably get there but it would we would have to cheat by like running on Specialized Hardware in specific data centers and stuff but the fact that it would work would be like if there's if

there's demand like you can kind of get there and then start working on like okay how do we solve all these other problems how do we get more data centers more more infra involved like the problem isn't I think the technolog is there already it's just the demand isn't there to drive everything else where do you think demand ends up coming from H this is a really good question man my my theory is that like when it first started I thought like I was replaying that moment in Mobile when we went from feature phones to smartphones and it was like one year you went from we literally saw 80% dominance by smartphones and I

thought oh man we have to get salana out the door as fast as possible it's gonna be like one year be the iPhone moment and like boom and it's good to go and I think what I realize now is that um finance and money is something that humans really really have a hard time giving up control over to automated systems for good reason because when this breaks it's bad so so it's going to take a very long time for re like High Finance to actually start kind of a moving moving stuff over but I like you know the the world the science fiction version of the future 100% of the world's Finance runs

on these systems that are trust minimized probably a big chunk of the execution runs on something like salana that's like information bus that's synchronized with the speed of light is really really cool right like why why would she use it once it's there right how long that's going to take a long long ass time well I I want to get your thoughts on privacy on that point I think that's a feature of the smart contracts I don't think you need privacy for the Quorum like I think I think you need attribution for slashing and stuff like that so you kind of like if you're trying to build like a some really really low-level privacy version of Bitcoin you could probably do

something very clever at the proof of work and Quorum and kind of layer stuff on top to where things are super super private but I think for payments like businesses want privacy but they also want auditability and compliance and all this other stuff right like there there's so many different constraints that that feels very much like custom Smart contracts for different for different features Ben where do you I I guess same question over to you like where do you think the demand ends up coming from because you you probably talked more folks building in salana than anyone else yeah I so I've kind of like flipped on where I thought the demand was going

to come from I originally thought it was going to come from the growth of defi in the earlier days uh like earlier days I'm talking about like 2019 ethereum I thought that that was like a real pivotal moment coinbase and totally um and and I've kind of flipped to I I I guess it's like a product of like me maturing as like my own inner product Builder but like you need a product that is just 10 times better and equally as easy to use for the end user for people to make a switch from one thing to another and it wasn't until like somewhat recently where I saw that well people have always been talking about stable coins as this killer use case but I kind of thought like Beyond this as

I've talked to a few people who are building different types of payments or financial applications specifically in like the rwa tokenization space I'm specifically talking about like what Franklin Templeton is doing with their Benji token or what Ando is doing with usdy is basically they're tokenizing a money market fund so it's a yield bearing token but it's essentially representing cash so you have effectively a money market token that is yielding you whatever the risk-free rate is that you can use as cash so in a in a future scenario say the user experience of crypto is super easy we have it easily custo custody on your mobile phone and you can effectively do like a tap to pay type system you have the option to hold a non-yield bearing cash

in usdc usdt or something else or you have a yield bearing cach in like the Benji token or the usdy why would any consumer hold the non-yield bearing token over the yield bearing token I currently I have money in Money Market funds if I ever need that cash it's a minimum T plus2 event for me to get liquidity for that thing and then I can then go pay for groceries or pay or pay whatever I need to do if I just have this yield bearing token sitting in my wallet I can pay rent at any time with that token and I think that's just like a fundamentally better product the thing that is just impeding us right now is the user experience of that which is why we were excited about Saga and about the mobile push and these types of things to try and make it more usable move crypto

from desktop to mobile and I think we're still in that phase but it's those types of applications that I think get a lot of people using crypto immediately and then everything else is down stream from there when you already have tokens in your wallet then you're like where can I put this to work oh maybe I'll go buy an nft maybe I'll use this application over here and you're already crypto native you're already digitally native yeah yeah it it unlocks like nonlinear consumer demand at different like the velocity of it is is I think gonna really surprise all of us on the upside uh you spoke about the Saga uh we uh this is something funny enough a lot of people are like why are they wasting their time this you know I'm like I actually felt at the time when we had you I felt that this is the type of

thinking that is kind of a Hallmark of your team which is you're willing to try stuff that just for better for worse other teams just can't or won't um and it was a felt like a moonshot but you know now everyone's like wow this thing can actually disrupt now now it's like okay can we disrupt the App Store can we disrupt this oligopoly so we we sold 20,000 phones to Apple and Samsung six billion so the probability of us disrupting the app stores are 20,000 to 6 billion it's not zero but it's 20,000 to 6 billion yeah it's it's like it's like sold out because sold out bunk basically I mean I this is like kind of

a meme and kind of a joke but like how has your okay your thought process evolved around like using yeah I just want to get your updated refresh views on Saga and it's the theory and this sounds you guys push back and but I think it actually sounds good in theory but I don't know if it's based is if it's still based in reality or not or if I just you know like oh boy yeah so like Apple and Google charge 20 to 30% on on App Store fees that's a very large tax and that's very disruptable the problem is is like distribution and getting getting like comp comparable distribution devs are going to look at what what makes them

the most money regardless of to the tax right similarly to why nobody cares about ethereum gas fees as long as you're making money um so that's the thing that we need to overcome is the network effects but it's a huge opportunity because the most of the way that the app stores make money is not from Uber it's not the applications that you use for like for like the stuff that you think about oh my mobile phone is really really really important for Uber no most of the way they make money is from loot boxes from all of these like games and everything else that's like a hundred billion dollar business that Apple and Google simply take a cut off and that's very disruptable because crypto people are super Spenders

on the internet they're the whales and lot a lot of how these games monetize is 1% of the audience generates 90% of the of the revenues so if we can get 20,000 100,000 of the spendest people in the internet in the same distribution channel it's a very lucrative channel right so that that's the theory like is it gonna work I don't know right like and the reason why it would work is because those devs are now incentivized to get their whales off of their stores into Saga and they're incentivized to give rewards and reason for that to happen so my theory was like we launch this phone salana ecosystem teams start

building apps crypto incentives and something will pop and that happened to be Bon but now you've saw like an nft air drop that paid for the phone basically like a bunch of other coin drops so like the big question is that works for 20,000 audience can we scale this up to 100,000 can we scale it up to a million I mean I actually don't think you're cra okay so here's what's happening on R end totally is um so block works as a media company and a lot of the ways that we make money is like advertis in and sponsorships 90 like five% of the world's or at least the US's ad spend is controlled by the three or four big uh group M Publis Horizon the big the big

agencies basically so you know normal person there might spend 500 million managing Budweisers like you know TV spend alone they have now started coming to crypto companies and crypto Publishers and podcasters and media companies saying and the reason that they're coming is because they believe that we have the wealthiest audience in the world basically they say there is no group of 20 to 30 year olds in the world with this much wealth so we need it's the highest value consumer in the world basically is the crypto audience now there are a lot of wealthy 40y olds there are a lot of wealthy 50y olds in the world there's no group of in incredibly internet native sub35 years

old with this much wealth anywhere else in the world world and they want to do anything that they'll they'll spend uh like in in advertising at CPM rates they might spend 10 times the CPM to go reach that consumer so if that's the pitch for the salon of phone like let's say I mean like my base case is that the the industry will grow let's say in number of people by 10x um in in this cycle like if there's 20,000 people today like then that's 200,000 people like it's a it's a decent size yeah that's a real thing so you need like at least 100,000 yeah to make it like worthwhile from the hardware perspective it's really really hard to 20,000 units in Hardware 100,000 I'm on board I can get

on board so like yeah that's um and yeah what's next uh are you g sh another we don't know Raj and I are like are wrestling with the with the idea of what to do um we'll we'll figure it out but I think this is probably the one opportunity in a lifetime to drive a wedge into between like in Google and apple like I I don't think there's any other you you will probably see any other one so um it's like what else would I be doing I don't [Music] know are there are there other type of

these type of moonshots that you've thought about or may Implement in the future um like phone like Hardware is always like top of mind for me because of my background so like and I work I worked on like the first segmented reality like device um stuff like that it's just um that stuff gets really really exciting but it's so early like you're layering like crypto risk of is this crypto idea even gonna have adoption to like is the augmented reality thing GNA have any compelling use cases right like with a phone do you at least have like a product that people use um I mean I'd be down to ship everything it's yeah like we've talked about like

all sorts of random stuff I think you have to have a it comes down to like this is a could be a really cool idea can we find a team that we can fund to do that versus do we do it internally um and there's a lot of trade-offs with both of those approaches but if we're not the like I think if I wasn't like X Qualcomm and had like deep connections to how to go build and ship this device where I knew like okay we will within two within 50% of the of the timeline we will we will actually ship this thing if I didn't have that kind of confidence I don't think that would' be doing it um it's hard to do that for things that you don't

know I have a question for both you guys when you look at um the other the other ecosystems like are there any ex is there anything that you look at the when when you look at other ecosystems like is there anything that you say like oh they're doing it really really well and I want to take this from that ecosystem this year and start to implement it maybe Ben it's on a marketing or BD side or toally whether it's you Cosmos or something in Avalanche or something with that one of the l2s is doing like anything that you guys see that you're really impressed by I was impressed by polygon's BD efforts last year I would I would like I was very uh dismissive like my theory was that like we shouldn't be paying for for

Logos or users or like it doesn't none of the stuff matters um and I think it does actually create enough momentum to where people will like it it takes work to get any of those BD deals you actually have to have like the CEO of that company decide okay I'm GNA associate this thing with this so they have to do due diligence and get the stuff over the line when you have enough of those people will be like oh right there they've been vetted by X Y and Z I'm gonna go build there so that does actually create some some some effects um beyond that like I don't know I haven't seen any anything that was like really exciting I

think Celestia data availability sampling the fact that they like built it and shipped it is pretty cool that's a technology that I think is worthwhile to have in every blockchain like I think that that should be just adopted everywhere um say yeah things I've noticed I'm in the I'm in the same boat I mean there's nothing like major that stands out um the only thing that came to my mind which is not really something that anyone is doing but it is the network effects of the evm and the mind Shar that comes along with that uh in most of our conversations um where we know that them using salana as the architecture

for for whatever they're trying to build is the right architecture for the thing that they are they're working on it's so hard to get them away from the idea that they need to build on ethereum or they need to build on ethereum L2 just because that is where the majority of people have built or have been building over time and it's a gradual process of convincing them otherwise that like hey you know you're not foregoing decentralization you're not foregoing all of these other things that you might have been told like here let us walk you through it um so there the network offense effects around the evm are definitely really real um the thing that we obviously have on our side is that still feels like we're early in this in this very long-term game and it is very

much a positive sum game um so I I I think that we are just looking for a portion of the overall pie it's not like ethereum is going anywhere or the evm is going anywhere um but salana is going to be a large portion of that pie moving forward there can be only one well uh I've half jokingly but I I felt that uh like yeah like I Feel Like These Chains like there's always a multi-chain world maybe but when you think about like the relevance of one chain it does feel like duopoly is or monopolistic technolog has always been kind of hovering around certain

standards and aify so my thesis is like we're finally entering the stage where have real applications and usage and that's when I think you start to realize the have and the Have Nots from a technology standpoint like and it all It ultimately shows up in the consumer activity you know anyone that bridges are they going back how many more trades are they doing on Jupiter um can you have drip elsewhere probably not because compression is like super unique and ultimately when I look at that I think it's so far we've been in a state in crypto where even the top 10 there's stuff there that hasn't shipped and crypto's been in a 10 years of we captured the imagination of what if

nasda can come on chain but we're coming closer to that state whether it's in the next 5 to 10 years but I think you can reasonably underwrite based on real activity and I think that's going to be a major theme in this next cycle where you're like yeah this chain actually has million devs or million users or multiple million users and and there's others that just can't and break um and so I think that uh that's I think that's different this time versus other cycles and historically in crypto so for what it's worth we've uh I guess we've covered a lot Yano anything else or toally Ben any parting thoughts it's been great having you on and getting the the refresh it's been a it's been a long year I can

imagine anything we're missing guys anything we didn't cover that you really want to head on no I think we we got everything yeah um um it's it's always a pleasure coming on and talking with you guys maybe we can make it a a regular annual thing all that' be great yeah one day you'll get that one day you'll get that invite on the light speed Ben one day perfect that would be great come on M I'm looking at you yeah looking at M well well totally Ben appreciate everything congrats on everything guys it's been it's crazy to look back and say 13 months ago we were saying will salana recover post FTX so it's very cool to see everything that's happened all right awesome guys thanks for coming on thanks hey everyone Jason here thank you so much for watching

today's episode wanted to take a quick second to thank today's title sponsor arbitrum we know you are tired of onchain experiences that have unaffordable fees and frustrating transaction speeds and that's why we partnered with arbitrum you can experience frictionless trades lightning speed and lag-free transactions all for pennies per transaction explore arbitrum expanding ecosystem at portal. arbitrum doio that's portal. arbitrum iio see you for the next episode hey everyone thank you so much for watching today's episode really hope you enjoyed it we wanted to take a second to just remind you about our upcoming digital asset Summit in London March 18th to 20th Santi and I got your back seats are limited and we

hooked you up with a 20% off discount code it is Empire 20 if you heard it earlier in the podcast there's a little competition running at blockworks to see who can drive the most number of tickets so when you register for the digital asset Summit make sure you use our code Empire 20 see you in [Music] London