What Ethereum can Learn from Easy Solana Staking | Lucas & Xavier

Transcript

all right everyone welcome back to another episode of bell curve before we jump in quick disclaimer the views expressed by my co-hosts today are their personal views and they do not represent the views of any organization with which the co-hosts are associated with uh nothing in the episode is construed or relied upon as Financial technical tax legal or other advice you know the deal now let's jump into the episode [Music] I sometimes think that the staking designs itself can really influence how major liquid staking is in that Network I would almost make the argument that the more broken mistaking model and design is the better liquid staking or the more urgent and liquid saving solution is needed for that Network

which might be controversial but it seems to me like this is like sort of been the way in the past alright everyone welcome back to another episode of bell curve here I'm joined as always by my Fearless co-host miles O'Neill today we're going to be traveling to a new blockchain ecosystem to end the season we're going to be talking about liquid seeking on Solana and I excited for this one because Solana I think similarly to Cosmos you and I Mouse have talked about how liquid staking originated in an ecosystem that was not ethereum in Cosmos but found product Market fit in ethereum due to a couple of reasons which is no in protocol delegation the original sort of constraints around the beacon chain and not being able to withdraw for a long period of time and then having a robust

defy ecosystem if you look over it Solana it's you know we have a much higher sort of native stake rates around between 70 and 80 percent but the penetration of liquid staking is much lower I think the statistic Lucas gave us was around three percent so we're gonna be delving into why that is we've also got zave on the podcast today who is the CIO at chorus one he's going to take us inside the economics actually of being a node operator and the cost and revenue drivers of validating on Solana which is a super interesting uh conversation then we're going to end with sort of uh talking about the state of defy on on Salon as well so should be a great episode yeah excited to get into it hey everyone we've got a great episode here but before we do I just wanted to give a quick shout out to

permissionless this is the biggest and best conference in all of D5 it's the one that we do with bankless who's a great partner for us last year we had almost 7 000 people there in West Palm Beach we are moving this year to Austin Texas from September 11th through the 13th and if you're a listener of bell curve any of these last five seasons this conference is basically custom made for you we're going to be talking about liquid staking the theme of this season we've got a bunch of great panels on Mev if you listen to the app chain thesis we've got a bunch of Cosmos folks out there in full force we're talking about the converging architecture of Solana the roll-up space in eth and Cosmos so I would love to see all of you there and to reward you for being such great

listeners to bell curve you get a special 30 off code it's bell curve 30 that'll get you 30 off tickets click the link in the show notes and then head over to the permissionless site and make sure that you get your ticket today again that is bell curve 30 click the link in the show notes alright everyone welcome back to another episode of bell curve this is the final interview episode of this season where Miles and I are going to be talking to Lucas Bruder and zave Megan of uh who's the CIO of course one and then the the uh founder at cheetah Labs guys welcome to the show yeah yeah we are too guys we're pumped to talk about this uh for most of this season we've concentrated our discussion around liquid staking in ethereum we

just talked to some of the folks on Cosmos and we wanted to end by talking about what's going on in liquid staking in Solana so before we get into the weeds of liquid staking some of the and compare and contrast some of what's going on in Solana compared to the other blockchain ecosystems we've covered I actually just want to give listeners an overview of sort of the basic mechanisms of Solana and how consensus works and things like that because that's going to inform some of the some of our uh preceding discussions so Lucas maybe can I can I pick on you as someone who's explained this to us on bell curve in the past can you just give us an overview of some of the main differences between say Solana and ethereum and then we can get into the guts of liquid sticking so um yeah I mean both Solana

and ethereum are proof of stake networks Solana tends to be more focused on like this maximally decentralized high performance chain whereas ethereum is kind of you know taking some compromises at the performance of the chain um and um yeah I mean Solana uses something called the salon a virtual machine for programming you can program in like C C plus plus rust I think it compiles down to like llvm so anything that will work there ethereum is obviously the ethereum virtual machine which is like solidity and Viper and a few other programming languages um

and then yeah I mean there's some differences in kind of the economics as well that I think will kind of dive into here in a bit I I wanted to um to get into some of the differences of Economics of being a node operator on Solana versus some of the other ecosystems like uh like ethereum and Cosmos and one of the things I think a lot of discussion ends up coming back to this idea of the blockchain trilemma of scalability between decentralization scalability and security and I think the reason frankly ethereum uh Cosmos Solana are kind of interesting is because they started optimizing for two of those things and are now kind of reaching over and trying to get the other thing that they didn't optimize for as much in the beginning I would say and what I wanted to what I wanted to

ask you zave is that the CIO at chorus one which is one of the most prolific and kind of earliest uh node operators in the ecosystem is there's a great post by barnabay benote from the ethereum foundation about seeing like a protocol and I wanted to get your perspective of seeing like an node operator and many times you know a lot of the discussion of like what a validator should look like is based on sort of this values-based approach like this is what I think um a node a validator should be and what its role should be but I want to get your understanding and talk about what the economics of validating these blockchains actually look like and you guys wrote a great research piece we can link it in the show notes sort of outlining what are the the revenue um sort of the revenue drivers and cost

drivers of being node operator but I think what many folks on this call probably know is that they have some vague idea that it's more expensive to validate from a hardware perspective on Solana but kind of walk us through the profitability metrics of validating on Solana and then we can transition from the the economics of staking into liquid staking yeah it sounds good so yeah as you mentioned Mike uh at chorus one we have done research relatively recently uh for a while we were the number one node actually on spawner especially during that big cycle when Solana was really rising to the top and yeah we have quite a nice history with Salama we were on the network quite early Tour de soul and then you know we found a bug at some

stage as well and reported that slana and we we've been very close with their team as well as other teams in the salon ecosystem such as Judo so it's great to be in the podcast with Judo today um yeah of course as a validator you know as you mentioned there's values based approaches to understanding what would be the ideal sort of setup for a validator and what do the economics look like for a validator depending on the network Etc with Solana um actually what we experienced the most back in the day which is what our research is about um is actually just the time the block times essentially and what was being reported and what was in the Solana docs versus what like the actual block times so for a while when Solana was having some Network performance issues the block times went from you know maybe 400

milliseconds out to maybe 600 650. so actually the speed is still incredibly fast versus every other chain but in reality that's about you know 50 less blocks and therefore like 50 basically less rewards going to validators at that point because they didn't change the inflation this really did impact the economics on some validators and we ended up doing some research into like I guess the sort of yeah exactly the viability of running a validator on solar man like what it costs and the hard thing about validator economics is that there are so many variables so you see here you know there are epochs there's inflation there's different staking rates there's different rewards different block times so it's really hard to put a number on this really for for how feasible it is to actually run a

validator however you know we did a pretty nice job I would say overall with you know releasing this research and I think really the takeaway and the conclusion is in any network but especially Solana with such fast block times where the variables are actually you know even more volatile than an average Network you know you talk about decentralization on a lot of these networks um but it's really hard uh you know even Solana right now trying to decentralize the network I think there's many thousands of nodes running about that is but if you really actually break that down you'd probably find and again like I haven't looked at the recent data yet you'd probably find many of those validators at the lower end aren't covering their costs right now and or breaking even so then you have to question is it false decentralization in

a sense and like what is that break even right now on Solana to actually run the validator and like you just run a validator out of Goodwill or do you run into decentralize a network or do you run up to make a profit and you know foreign institutional State and provider and I can tell you right now we're trying to run validators to make a profit so it's a really interesting question uh you know whether or not you decentralize the network with many of our letters what the costs of that is and of course as many know and Solana as well the actual cost of machines and just the setups in general everyone knows it's more expensive you need beefier setups to actually run the machines Etc so it's quite a fine Balancing Act I would say in any network of making sure validators are being

rewarded as well as making sure your network is sufficiently decentralized yeah it's a really good point and you know just to defend Salon a little bit here I think the uh decentralization of a validator set is kind of the key question that a lot of these debates end up going back to and I think every network is going to have to reckon with this in some way shape or form because as we ask our validators to do more and there are many different lines of reasoning around like sort of Pepsi is one discussion that's going on in ethereum uh that's equivalent to vote extensions in Cosmos and we're all sort of asking our validators to do more but at the same time we want them to be you know these solo stakers running their Raspberry Pi validator out of the woods and have it be perfectly decentralized

around the woods around the world and we all need to be a little bit realistic right because uh ethereum I'm pretty sure despite probably having the the most robust network of solo stickers I think it's only like six percent or something like that of their Network as well so the reason we bring these economics up are not to pick on any one ecosystem but it's to highlight a problem where there's a natural tendency to centralize uh within the validator um at the validator layer and we need to combat that but to also just outline kind of Revenue drivers and cost centers for being a node operator right the block time the actual amount of epochs that happen during a year that's critical because the way rewards rewards get distributed every Epoch if you're watching along we're looking at a table so at 400 millisecond block times that's

every two days but if you start to lengthen out the block time that uh six or 800 milliseconds that could be 3.3 days or four days and literally that the staking rate could get cut in half the more that you lengthen a block um and then I also thought saver is very interesting how you sort of broke out like Opex versus capex costs from the perspective of a node operator so capex being the actual Hardware equipment for running uh a validator but there are also Opex costs in the form of personnel so this would be more relevant to something like Cosmos right where hey I can support you know it's lower Hardware costs but if I want to support 10 different chains then there's a lot of expertise and like kind of you need you want to engage in governance and things

like that so your Opex line item ends up increasing so I just want to stress that like Hardware is only one part of the picture is that do you agree with that statement or no yeah I mean that's exactly right Mike um as we have spoken about previously as well I think it's always a really interesting discussion especially with proof of stake blockchains you have to keep in mind that running an extra blockchain in terms of like the cost of that like you said the capex cost is really negligible compared to like the earnings you could have from the token staking rewards essentially coming through your node so it's never really a question especially at chorus on like you know do we have the resources to set it up in terms of like infrastructure it's actually do we have the Personnel to actually run these nodes and being

completely honest at chorus you know during the sort of peak of the ball cycle we run into some of these problems because during a bull market there's so many proof of stake blockchains going live and you have to sort of really prioritize and that's actually half the reason chorus Venture started because you start sort of earning some of these tokens and staking rewards and then if you don't have a lot of personnel and people running the nodes then you have to sort of choose the best networks and that's sort of part of the not arthritis job right now at the end of the day you know you have ethereum which is a stable Network you have a few stable networks like Solana as well for example and then you have the cosmos as an ecosystem but the tricky part with Cosmos so right now I think we're running nodes in about

30 different Cosmos networks however what I think there is that every time we onboard a network in Cosmos we have to spend more money on governance upgrades all of these fancy and sort of tricky things that you wouldn't really think about in Solana or ethereum they're really important in Cosmos so yeah it can be tricky and it's like I said like it's really about prioritizing and being on networks with the highest amount of potential because most of us know like ethereum is a super strong Network that's always going to beat it Cosmos is a really burgeoning ecosystem and super great like teams building there and Solana I think by now it's really established itself as a mature ecosystem that's not going to go away and going to come back really strong in the next cycle so yeah major change between ethereum and Cosmos in terms of like

running the infrastructure we spoke as well Mike about you know an ethereum value that is a bit quote unquote dumb where they you know run the nodes and that's what they do in the network whereas in Cosmos as I know miles has spoken about a bunch in the past on bell curve you know you really participate actively in governance and you represent the people who are delegating to you and in in essence you end up probably contributing back a little bit more especially on the infrastructure and because you know they they sort of really speak to you first before anyone else like you are the heart and soul of their Network the network wouldn't run as a layer one blockchain without the node operator so that's a major difference between ethereum and Cosmos especially and I would say Solana is somewhere in between where Anatoly and

Solana and people like Lucas and Judo like they really emphasize validators which I think is what makes Solana such a special Network in the end uh so yeah it's interesting how each ecosystem sort of treats the valve that is and how each of our data in those ecosystems contribute back yeah couldn't agree more and I think that's a great overview of the cost side and the differences between you know Cosmos which is very Hands-On Solano which is very I would say you know capex heavy right and just you need big machines and then ethereum where you can stay as dumb as possible and run this on a Raspberry Pi um now when I think about the revenue side of the economics you know the drivers of revenue for a validator are really what like the um inflation is so you have the staking

yield from rewards uh you have the amount of stake delegated to you you have obviously the price of a token and then you have transaction fees and of those four things transaction fees are really kind of the only thing that a validator can control in some ways by opting into something like PBS um and so Lucas I kind of point this to you you released the first client on Salina on Solana that actually uh enables PBS um and that obviously is a way to boost your the transaction fee portion of your of your uh revenue and it's been interesting to me first of all you know maybe just an overview of why it is a little bit more difficult to run PBS on

a low latency chain like Solana um and how you were able to achieve it and then what are some of the trade-offs associated with with running you know a p BS enabled client and is are any of those trade-offs you know have they been a challenge to sort of bootstrap adoption right because on ethereum it's a no-brainer that you run Mev boost almost everybody does right and so very curious to just understand you know how challenging it was to actually get this in production and then what you know adoption is look like in in any headwinds you face there um yeah I guess before I dive into that I wanted to comment on the uh some of the numbers that were in that course one

article I guess um yeah I was just looking at the salon Explorer the last the slot time average for the last day is like 450 milliseconds so we're seeing like massive improvements over uh 114 and even 116 which is like slowly it's been running on testnet for a while and well I think um the foundation has asked like 10 of mainnet to go to that in that uh we're seeing I think validators are reporting their RAM usage is was like it was like previously like 100 gigabytes or so now we're down to like 30 or 40 gigabytes of RAM so we're seeing like massive reduction and compute and uh RAM required and then

also the Network's running a little faster so it seems like things are pointing in the right direction as far as like the performance of the node goes um but yeah to answer your question I guess uh we kind of have like the first iteration of uh what PBS could look like on Solana with the Judo so Judo Salon is a Mev enabled valid air client very similar to for those are uh familiar with the ethereum ecosystem it's very similar to like Mev Geth which is kind of flashbot's first iteration at this so essentially it's a custom valid air client uh based on the work of Solana Labs that we forked and we added uh support for like executing bundles and

there's some like tip management as well so you know how some stuff to answer the question like how do Searchers tip and how do those tips go to stakers because we think that like stakers and validators should be seeing some of this Mev and just based on the way that staking Works in Solana it wasn't super out of the box um I guess also uh priority fees right now on salon at 50 are burning at 50 only go to the validator so we kind of built this like out of band system to make sure that 100 of it goes to stickers and valid errors and validators can choose how much of them what percentage of the Mev they want to keep

there's a lot of challenges with running the system and we're still working through a lot of them I guess one is like getting valid errors on board so we're currently at just over 31 percent of stake running the client so very close to that 33 Mark um we're battling we're battling that chicken and egg problem for a long time where um you know you kind of have this new system there's a different way to send uh you know bundles didn't exist on Solana before this so you kind of have to convince Searchers to add bundles and support for that and then um on the valid air side you know there as Xavier mentioned you know it comes

down to running a profitable business so it's like how much how much more do we make from running the software and you know at the very beginning it's essentially zero because you're kind of fighting that two-sided Marketplace um I think we finally got past the hump on that um so yeah there's that side and then most of it's just been engineering related so like you know block times 400 milliseconds roughly 400 milliseconds you could have a leader in like Tokyo then one point uh 1.6 seconds later because that revalid errors four consecutive slots they might be in like Germany or New York or something so uh we kind of have this like distributed

set of servers that we run in a few locations around the world that are essentially always simulating and trying to build the most profitable block so there's a lot of like tricky stuff around that like getting accurate simulators getting access to the newest day as fast as possible um tweaking the simulators um trying to avoid Searchers like blasting us with bundles um there's a lot of like tricky high performance stuff that um figured out a lot of it but we still have a lot of progress to make on that I I want to um I wanna sort of get into liquid staking here and the there's going to be an intersection between Mev

and liquid staking what the connection is there and uh Lucas I think you're doing something really interesting with Judo sort of merging those two activities but you know miles and I have been one central question that we've been asking throughout the season is you know pointed out that liquid staking was a concept that originated in the cosmos right with that was uh and of course of course one recent alumni Felix Felix Lutz uh who wrote the first first white paper for the blog post I suppose about this calling him delegation vouchers and although it was a cosmos idea it didn't really take off in Cosmos to begin with a found product Market fit on ethereum and we narrowed that down to the hypotheses for why that is is one there's no in protocol delegation so it's not delegated proof of stakes just

regular proof of stake people want to delegate anyway and Lido provided them an outlet for doing that and then two there's a much more robust defy ecosystem on ethereum than there was on on Cosmos at that time so people actually wanted to use their asset eth in a capital efficient way uh so that they weren't foregoing opportunity costs and those those two variables sort of pushed this enormous uh growth that we've seen from Lido and some of the other liquid staking protocols on ethereum I I would be curious liquid staking is growing on uh Solana with um liquid staking protocols like Judo Sol but it's not quite as fast and when I look at it on the surface there are

similarities in between Solana and Cosmos in that instance there is native delegation so long as a delegated proof of stake chain and while at one point there was a um uh you know a large defy ecosystem on Solana it's taking a big hit we're building back but uh it's it's there's a big hit for today so I'd be curious do you do you guys think that's the reason why the adoption of liquid staking is a little bit slower on Solana are there other reasons like give us sort of your perspective on state of the Union for liquid staking on Solano today so I can give a perspective perhaps so Lucas of course right now is much further in the weeds with Judo Soul which is super exciting development for

Solana's ecosystem um so we at chorus one we had some experience we built lighter for Solana which I think actually is the second liquid staking protocol by TBR right now it's lineup I'm correct there so that was actually a really sort of unique learning curve for Felix and if only enough uh we were doing BD for sort of Lido State Soul I'd say and you mentioned Mike before about sort of D5 and ethereum and that being potentially one of the factors that really made State e such a big asset in the ethereum ecosystem I think one thing that we realize in general with liquid staking that there's quite like I don't know if you've explored it very much with some other yes but there's quite a big money element to liquid staking like the liquid staking asset and when there's a

money element incentives are really important and so we learned actually when we came out with Solana on Solana we weren't able to compete as well with marinade Finance machine which I think is the number one by TV right now that was taking on Solana because funnily enough marinade Finance had their own token essentially so we actually took some learnings here where it's quite it's a bit easier to actually compete in the liquid staking ecosystem and Arena let's say if you have more incentives and you know more tokens to issue one of the unique things about Lido as a sort of Dow is that it's cross-chain and there's only one asset right now that they're using for incentives across all these chains and they've had a lot of success in ethereum which I know you've explored on bell curve already but one

ecosystem that they didn't have as much success on which of course that we built was Solana and we sort of wondered if some of this came down to incentives a lot of it is BD as well so like we would chat with Judo very early on saying you know what are you doing with your Meb solution but back then Mev wasn't such a big thing with that sort of intersection of liquids taking Mev wasn't a thing sort of late 2021 early 2022 now it is on Salon which I think is super interesting and actually a massive differentiator about liquid State against Solana versus some other ecosystems but I do think one reason is because of that just incentives in general and liquidity as you mentioned Mike I also think one thing that we sort of learned in our experience doing some BD for later Persona back in the day was

just the fact that if you think about ethereum it was about a year withdrawal time let's say you know you wanted to stake your ethereum and be locked up for a year that's a massive amount of time and you just want liquidity and so the value prop of that and ethereum state eth is really obvious early on I would say right now you're seeing some success in the cosmos ecosystem when it comes to Adam already which sort of makes sense in a sense because there's some liquidity there but I also just think the unbonding time in Cosmos Hub is three weeks so the value prop of having liquidity on your atom at stake like that's quite immense let's say because you you're saving three weeks of time on Solana you know even when we were building for Solana we always sort of questions and like you know you only

have a two or three day lock up time normally on Solana which isn't a massive amount of time that's in develop so you can do some funky D5 stuff and you know use it as collateral for those types of reasons but if you're just using liquid state Assets in Solana just for you know the actual liquidity to sell it faster in case of any events then you it's not that much difference just delegating the asset versus liquid staking you know one might say and I'm actually very curious to hear what Lucas thinks about this because I do think that's one major element in Solana especially in terms of its own staking design and liquid staking is always influenced by the staking design in each Network and we probably won't talk about it today but you know Avalanche is another completely different design and I I sometimes think

that the staking designs itself can really influence how major liquid staking is in that Network I would almost make the argument that the more broken mistaking model and design is the better liquid staking or the more urgent and liquid saving solution is needed for that Network which might be controversial but it seems to me like this is like sort of been the way in the past yeah so I want to give you a chance to respond there Lucas but of course one of the other reasons that it found product Market fit in ethereum is your stake was locked up for like two years right so that's such a strong value proposition there um so you're absolutely right about that but sorry Lucas would love to get your yeah that's funny uh yeah I mean I think you guys touched on a lot of it I think uh you

know solanus had withdrawals from day one the withdrawal time is like three days at most um so super short withdrawal period and um I think there also hasn't been like a team that's like really nailed the like narrative and messaging on liquid staking on Solana I feel like you know cheetah doesn't have any incentives right now there's no token or anything so but you know we're continuing to see like the protocol a hit uh like all-time high marks unlike a daily basis so I feel like the like narrative around that is important and the differentiator with the Mev side of things um has certainly helped out a lot I

think there's also kind of like a few other things there's you know ethereum had a pretty strong defy ecosystem like let's see it was probably like 20 20 21 I guess mostly 2020 was D5 summer if I remember correctly so um you know you saw a lot of D5 protocols popping up there's kind of that like chicken and egg problem there where similar to the Mev thing where it's like oh I have liquid staking tokens but where am I going to use them um you know there's not uh there might not be that many good options for D5 uh applications that you can use your liquid staking token on and I think you also on the flip side you have D5

protocols that are building and you know maybe they see this defy or this LST tvl our activity isn't super large so maybe they don't cater to that as much I think we'll see that change especially when you look at what happened with margin Phi um and Judo so margin Finance our points and you know it's they do borrow and lend and uh Judah saw massive growth of tvl during the month of July I think we doubled tvl in terms of Seoul um and then you see that I don't know off the top of my head what percent of lsts are in their protocol but I'd imagine it's like over 50 percent so I think there's uh certainly like a lot of other protocols looking at that and you

know I think lsds are like one of the strongest like base assets that you can have and a defy ecosystem so I think we'll see like more protocols start to uh like cater towards that um I think there's also like this issue of like um like security and Trust in Solana I think you know the more the more TV all these ecosystems have and the more battle tested they are the more people trust in them and I think Solana is like finally rounding the turn there we're we're seeing like more protocols have tvl and you know Protocols are taking security very very seriously uh multiple audits like the Geo Soul stake pools seven

audits it was written by Solana Labs um so I think you know as we see that uh protocols taking security more seriously some of these um tvl numbers rise and these protocols get more adoption and I think as we see some like larger institutions start to deposit more solid to lsts I think a lot of that will kind of get this thing kick started yeah I actually just have a point on that actually Lucas um which I find quite interesting in liquid staking in general I think branding in in the liquid staking sort of arena is really interesting if you look at that from a

web 3 marketing perspective you know Judo has such an incredible brand it's been there you know from the start you know Lucas is a star himself the team is amazing and they're building really cutting edge protocols and Solana and I think even that in itself and just the fact that you know if you think about Meb and liquid stating like these are really at the core of security of any network and so if there's a team building there that you trust anyway you trust that they have the best interest at heart and you can also use that with Lido honestly on ethereum you know a lot of it was built by a P2P you know originally and that was a validator on ethereum with a bunch of experience with other validators around it you know Lucas and his team are due to have a bunch of experience running validators

and speaking with Val that is like us as well and I think that really gives an element of trust with not just validators and node operators but also delegators and I know Mike we've spoken about this before in the past I've like when you build a liquid staking Network it's not just the extra yield or the liquidity that users get you know the other half of that is the network effect of like the validators wanting to join your network which I think actually Judo has done terrifically well and that's in my opinion why it's growing so fast right now because there's an actual value prop for people like us to run that node on board to learn more about the muv that they're applying and then on the topic of institutional liquid staking which Lucas brought up as well I think that will come in Solana

especially you're seeing it in ethereum right now with teams like alluvial Etc and I think as Solana sort of gets past this phase of the network that it's in right now as performance gets better as Lucas mentioned before people will be more willing to provide liquidity into the network at that point I think Judo is set up for you know a nice path to success with you know once you're across liquid stacking Mev and you have institutional trust I think you know sky's the limit basically there's a liquid staking Network so I think it's really exciting times for liquid staking teams in general but especially you know yeah I totally agree and Lucas I didn't realize that you know you said almost a third of all stake right now is running on the Judo client um it's me to me that seems like you know a perfect opportunity for your go

to market right it's you already have all of the relationships with all of these validators and so there's a lot a large part of your focus right now basically just converting the stake that is running on your client to Judo you know liquid staking tokens um it's very interesting positioning I think kind of yeah so I guess like the the staking is a little different on Solana than ethereum like I guess you know Xavier can probably correct me if I'm wrong here but I think that like validator is on ethereum kind of need to opt into running uh the actual nodes for the liquid staking protocols on ethereum where on Solana they it's it's all

delegated so there's not really any like opt-in from validators you can kind of just like you know if a valid air meets the delegation criteria you can delegate to them I assume that they would like it um every validator likes more stake and more money um but uh yeah I mean I think going back to your question I think um you know there's Solana is like a I think it's like a nine or ten billion dollar Network 90 around 97 or it's as a very high stake rate compared to other networks I think it's might be around like 70 or so percent where ethereum is much lower and um like of that 70 around three percent of

it is liquid staked so I think it's like figuring out the main thing is like figuring out the messaging on like how do how do you sell liquid staking to those people that are uh just doing normal delegate staking um I think like the MAV certainly helps I think there's other opportunities for like real yields with like some D5 protocols like you know provide 50 50 liquidity Judo salsoul and earn trading fees and in some cases um those fees can be like almost competitive with uh just putting 100 of it into liquid staking um

yeah guys I I have one more question just about uh maybe a difference between Solana and eth before we move into this this idea of sort of teasing out the um the similarities in between the med part of your business Lucas and the the liquid staking I want to dive into but before we do one one other thing I forget which of you guys just mentioned this but uh part of the reason liquid staking is so attractive in the ethereum ecosystem is because of this idea of etha's it's money-ness or its desirability as collateral right people actually want to hold ease but that they want Capital efficiency on that eth the vision for soul the token from my

understanding at least just listening to Anatoly talk is a little bit different I think he has explicitly come out and said this is Solana does not is not a money um it doesn't need to be now that doesn't mean it's not as good of collateral or there might not be as much desire to hold that collateral but like Eve has made these trade-offs where you know I think the trade-offs are pretty clear with uh things like one five five nine where they've limited the supply I think that's actually severely impacted the usability of right it's like uh of eth main chain but what it has done is made eth as an asset very attractive to hold and I think there's a bit of a different vision for Seoul the token uh which doesn't have to be good or bad it's just a trade-off so I'd be

curious if you think that different vision for soul also impacts the the adoption of liquid staking because it might not have the same perception of like kind of hard money uh asset thing that you want to hold I'd be curious what you guys think about that so Lucas probably understands a lot better than me what the end goal of sold the asset would be um in terms of like the moneyness of a liquid staking asset though I do agree that a liquid staking asset that is treated like money has incredible Network effects and I think that's basically been proven now on ethereum and Lucas mentioned actually earlier that they're sort of now facing this cold start problem a little bit in terms of like you know sort of liquidity against liquidity and right now you have

a very small percent versus the rest of state and so it's like how do you actually match that and make it appealing enough and actually get them using the network to you know change into a liquid staking position on ethereum you sort of had to because you had no choice almost like it was just so far away the withdrawal that was your incentive and Solana you know crypto uses especially stake is the stake in general is just completely sticky so as a Staker I think you're going to find basically a lot of people that invest in Seoul very early I doubt they've made any other transactions since then and I'd be interested to see the data on this but staking is known to be very sticky so as a validator if you receive stake on Solana uh you know you can sort of know and have guarantees in some sort

of way that they'll be staking with you for some time because it's very unlikely they're going to swap their steak every day with different validators because there's no point almost whereas with liquid staking you know it brings this point of being like okay if it's sticky how can we get it sticky in a liquid staking protocol itself and to do that what we actually found in ethereum and I remember back in the days early Lido you know the curve pool was massive here the state each curve pool because there's just so many fees flowing through it and then I was like wow there's fees I can borrow with my asset there's a lot to do and I think in general probably there's more to do in the ethereum ecosystem compared to what you can do in Solana so I actually think that money side and

that collateral and that change of hands and like the flexibility of steak eat is very different to what you would have with like steak Soul where like even me as a soul Staker myself right now I can tell you sort of honestly I'm actually not using you know steak salt because for me I'm just securing the network with My Soul I'm quite passive so as Lucas was saying before you just sort of give something appealing enough for them to get interactive with the network and in general I think probably as you said on Solana there's less exciting things to do right now potentially than there was in the past there's a lot of things being built but when there's a lot of liquidity and volume flying everywhere there's sort of fomo and people are moving around a lot like for the best opportunity whereas right now in a bear

Market the opportunities are a lot less and I think that in itself probably you know reduces the amount of people wanting to liquid state so yeah I think my argument here would be like the minus of Eve is an asset is sort of a reason why I think it was more popular on ethereum but I think even if Solana isn't like money in itself if Anatoly doesn't want it to be like that I think honestly that doesn't matter so much because it'll be more to do with like what you can do with liquid staking asset the more volume the more liquidity to come to the network the more validators that run the software also maybe there's more Mev solutions that are built on slum that you don't have on ethereum and it just becomes more exciting in general and then there's fomo there's opportunity so I do

expect in this next cycle on Solana especially liquid staking will really start taking off when these opportunities start becoming more obvious and that's what's going to give you the incentive to use soul in a different way to use it as like a passive Staker that could be completely wrong but that's how I could see it and I'd be interested to hear from you Lucas actually if that makes sense um yeah I mean I think that um at some point that will probably change for Solana I think the foundation it's not like the highest making it money or like ultrasound money or whatever you want to call it isn't the highest priority for the foundation right now and I think those are things that you know ethereum's been out since uh what like

20 2014 or something like that um and you know they just had EIP 1559 in this like money narrative form um so I think that um that can certainly happen to Solana later I think it just comes down to like usability um and I think you know trying to solve that chicken and egg problem I think we're there's a lot of Hardcore builders on Solana that are focused on solving that for liquid seeking so I expect that to like get better over time maybe just changing gears a little bit I'd love to um get into I guess delegation uh within liquid staking protocols on Solana we've

talked a lot about delegation strategies um and really the role of of lsts and their delegation strategies within the broader ecosystem on ethereum and Cosmos before um and so just a level set on ethereum you have say Lido that has a curated set of node operators and they've worked very hard to ensure that that is the most you know diverse set of node operators possible both in terms of their location their client types everything right and so you know you can look at that as a force of decentralization versus given you know giving users just the the ability to choose and then Cosmos you're picking you know again it's a curated set but

it's within it's a it's a subset of an active set of say 150 validators and on that side you know it goes beyond on just the technical sort of qualities it also gets into qualitative things like you know does this validator participate in governance do they you know uh contribute to some of the core development right um and I'd love to compare kind of you know those two approaches to how it looks on on Solana and you know as I understand there's a bit more automation that you can do in terms of your delegation strategies um and so yeah Lucas I'd love to hear first of all you know does judo have a curated set of node operators that it you know splits distributes delegations

across um and what is the what does the strategy look like compared to say like a light out yeah so um yeah right now there's a curated set and the the minimum criteria for cheetahs running the cheetah Solana valid air client so if you're staking to if you're staking soul and Judah Soul then you're earning the normal inflation from the network plus Mev um and um yeah that's something that we're like um researching a lot or spending a lot of resources on this right now I think there's a lot of um there's certainly still like some uh

automation involved with running even a curated set so like stake pool receives new stake of this curated set which valid area do you delegate that state to um if you have like bad performing validators or ones that have uh downtime or maybe they're not most of the rewards on Solana come from voting on the correct fork in like a um there's like a slight time manner to it but you know basically all right most of the rewards come from voting on The Right Fork so um you know there's some monitoring around credits uh Comm vote credits basically how many times you're landing on the Right Fork um and yeah a lot of the Solana protocols

like use some form of automation I think um something that we're like doing a lot right now we're actually in the process of building a system that will fully automate it'll have the ability to fully automate any stake pool and it it'll live purely on chain so you will be able to basically have a network of Keepers that are like uploading these metrics on chain or even just like these some of these metrics exist on chain already so just copying them from one account to the other and having like history of how well the vowders voting and what their commission was and basically like transitioning to A system that is like fully automated and doesn't rely on any like single party to run

um so I think there's a lot of interesting things there like you know you can look at like validators locations and what version they're running how well are they doing on voting how many blocks are they skipping things like that in um basically generate scores on chain and have your delegation uh all your delegation logic live on chain and uh basically it's like a fully automated stake pool at that point it's really interesting um and obviously it's very different because Gino doesn't have a dow as far as I understand they would vote on these things with a token right and save maybe you can compare to when you migrated

Lido you know over to Solana I mean was it more or less let's just copy and paste the same approach that we take on ethereum and it when you did that were their learnings around like okay this this works the same but maybe this is a little bit different on Solana and it's not working quite as well um curious if you if there were any learnings from that yeah no it's uh certainly it was similar when we went to Solana with Lido in terms of like a core group of five elevatives that were very active um in Solana already um I want to plug in actually some research again here that Felix luch uh chorus one alumni uh has posted quite a while ago so he he wrote an article on how proof of State networks nurture

decentralization and it talks a lot about and we'll put it in the show notes hopefully it talks a lot about how foundations in the past have delegated essentially to different validators and their criteria so I just want to list a few here that I think are pretty interesting um so essentially every network does it differently and in the past Felix and I have worked quite a lot with different types of foundations and maybe in the future we might even work with Judo potentially to like help them as they try and decentralize their network but there are some sort of four categories that Felix has put them in in terms of like what to look at when you want on board a power data and or delegate to them if you're a foundation so it's performance and participation ecosystem contributions security and potentialization and other and their

performance Lucas mentioned a few just standing where you have like uptime you know what's that test their participation how active are you in governance can you prove that ecosystem contributions like a lot of this is sort of subjective and qualitative so it can be hard to rate let's say and because she said that his logic is Unchained so it might be more difficult for the fully on chain types of stuff but certainly for Lido you know they definitely look at Community contributions for example and also tooling contributions and also security and decentralization probably imagine you're already doing this to Judo Lucas but you know you look at the data centers where they're set up the geographies of them as well you know live has an application process which is a really massive process so we actually have someone chorus one who spends considerable amount of time just

reviewing node operators applying for Lido and that in itself takes a long time and I imagine Judo and the Judo Foundation has a very similar thing where they have to actually review everything make sure everything's up to scratch the application itself can actually determine you know the amount of delegations that you get uh you also have infrastructure due diligence and you know the state for the valve data has versus the rest of the network already and then you know finally something interesting to think about which is very prevalent and Cosmos actually which I'd be curious uh Lucas if you look at this at oingito but in Cosmos you know they look at the commission quite a lot so there's actually in Cosmos there refuse to delegate to you if the foundation refutes I mean uh if you have a commission over a certain percent so if

your commission is eight percent they'll say we're only going to delegate to you if you bring it down to five percent so this is actually probably the major uh item I would say that a lot of Foundations look at when they try and decentralize the network for delegation so yeah I don't know Lucas you actually look at this or any of these types of items when you're looking to delegate but just because it's curated we do look a lot at a lot of those things I think um there'll probably still be like some human in the loop for certain things certain like some of these things that are off chain but I think on Solana the biggest like the biggest biggest impact of uh the staking rewards is the voting performance um like uptime a lot of things go into that like server quality uh you know are

you running on a good internet connection so on and then the commission as you mentioned so um you know if you have a lot of validators that have a high commission rate like 10 or higher then that starts to have a massive impact on the like yield and um you know there are some some stake pools that have higher commission than others and those tend to have a little bit lower yield um I think there's also trade-off like you probably don't um I want to try you probably want to try to avoid this like race to the bottom where people are just taking zero percent fees so I think um some interesting ideas around that like how do you

um you know you want high quality operators that are like making a living on this and like are making money to buy server upgrades and run like a good operation so you want to support those as well and commission is like the main way they make money foreign the automation strategy I feel like that's maybe something that's and whatever the meme is only possible on Solana it just in it right it's opos it's It's Tricky with ethereum because there are node operators that have many different validators so you could easily just find yourself it's hard to assess the entities that actually own all these

different validators with 32e so it'd be much more difficult and then if we're talking about with Cosmos it's much more involved so I feel like that's such a classic Solana mindset if we should just automate yes kind of thing uh that feels that feels on point yeah we were like why don't we uh I mean there's other some other liquid staking protocols in Solana that do this but I feel like it's like um you know lsts are like pretty important base asset for D5 but a lot of them aren't like they a lot of them on Salon is still kind of rely on like some centralized party or centralized like server running to operate them so you know we're thinking a lot how do we just

like move this totally on chain make this data available to anyone so anyone can actually like read the chain and read these stats how do you generate scoring algorithms for these validators on chain and uh for the things that you can and then how do you actually like build a stake pool that will uh basically fully run itself and you know there's a lot of engineering work but also like incentives and things that we have to think about as well um because yeah I think the incentive piece to get more than one person running it is pretty important yeah agreed with that one thing um I want to return to this line of questioning that Miles opened up earlier

in this episode but Judo originally started by tackling the Meb problem on Solana and then recently with the announcement of Judo soul and uh you know you've kind of transitioned into also doing liquid staking and um you know it sort of reminds me a little bit we had a conversation with Sam kazami and of frax who on the surface looks like are doing a lot of things in a lot of different products but when you boil it down to what the internal competencies are it is managing assets and liabilities and he actually expanded the you know the definition of stable coins that's very simple similar thing that you're doing in stable coins is you're doing to lsts as even to lending markets and bridges and when you

really boil it down it's kind of like that Meme everything is uh managing assets and liabilities always has been with the astronauts and the gun but uh I wanna I wanna I Wanna Give listeners an understanding strategically for you Lucas of what that connection is in between Nev and liquid staking and I think Miles was sort of getting into it maybe there's a similar Channel and really what you're trying to do is um you know your your one side of your Marketplace in both of those marketplaces are validators so there's kind of a natural Synergy there but also I'm wondering if uh if yield right like you like you guys are I think the only one on Solana right now which is actually running on chain auctions right and there's probably a yield advantage that you can give your LST versus other

providers so you gotta just walk us through strategically how this all ended up playing out yeah um yeah I guess the initial idea is like um how do we like build like a Mev Dao in you know it's kind of like two buzzwords put together but uh you know uh my co-foundered in 2021 you got to raise a billion dollars so yeah I think like we were thinking a lot about that and I think um yeah my co-founder and I were thinking a lot about that I feel like lsts are certainly like the best way to achieve something similar to that um I think uh Mev and like lsts are some

of there's not like a ton of I mean crypto sorrow then there's not a ton of like products that are showing true like product Market fit and usage and I think that I like MAV um an LST you're certainly like up there probably in the top five of like the two things showing the most product Market fit so I think there's like you know from like a CEO standpoint that's those are certainly things that we want to look to um I think also like as you mentioned like for institutions I think the highest like real yield is critical to get their adoption I think you talk to some of these institutions and they're like when

you know why haven't you used other liquid staking tokens on Solana or why are you not liquid staking it's like well it's this like risk reward trade-off that you know can receive a little bit governance tokens but like if we have like a billion dollars of governance tokens like ten thousand dollar or if we have a billion dollars of Soul then like ten thousand dollars a year of governance tokens isn't really gonna like move the needle for us and I feel like liquid staking and like like Mev is like one thing to potentially move the needle for the yield to make the like marginal risk worth it um I think also as you mentioned there's a lot of like validator Network Dynamics understanding the performance of

validators you know we've done a lot of study into the performance so the cheetah Solana valid air client compared to the Solana lab style or clients so we kind of like a good understanding of like what to look for in a high performing valid errors um I think also like we wanted to be like pretty involved with D5 I think you certainly like you like kind of see this with like PBS and their involvement with D5 but I think you know they're not uh they're not like directly contributing to defy um kind of like partially contributing to it and we like wanted to be like really involved with salon and D5 so

yeah there's a lot of like reasons why we chose that those are just some of the the few but I think ultimately it comes down to like uh one of the best reasons to hold Seoul is that you like is because of Meb like you get access to the New York State faster and you can send transactions slightly faster you have better connections um I think it's not the same for eth but you know you um Mev is a major Drive of yield on ethereum so um I think there's kind of just like a natural fit between those two yeah last question maybe before we get into Solana D5 is how do you see the mix of consensus level versus execution

level rewards paying out for lsts moving into the future I think one thing that investors are starting to become more conscious of certainly in ethereum with 1559 the burn is trying to get that net inflation rate down right so I would guess the sort of inflation like that consensus rewards which is really talking about like emissions or inflation there would go down over time and then maybe it's made up by the Mev part of the of the yield that comes from lsts or how do you overall see that that mix playing out uh yeah I guess I can try them in real quick but also curious to hear Xavier's responses like a professional operator um yeah I mean I think Solana has a like inflation curve that will the uh like

consensus level rewards will go down over time the inflation's going down um everyone is betting that um the like increase of D5 and Mev on Solana is like in addition to like the work that fire dancer and Trump cryptos doing with fire dancer to increase the throughput will uh result in like more transactions and more fee Burns and um also more priority fees and Mev so I think similar to ethereum I think the inflation will go down but um over time like the usage on the network will go up and that

will kind of offset the inflation yeah I think maybe I could chip in potentially here and how we see that chorus one and also maybe also contribute to something after what Lucas said there in terms of like the infrastructure layer with Val that is you know and being close to validators and you know a company like chorus one we've been researching Mev and liquid staking for the longest time already so I think it makes a lot of sense to actually combine both of those two um into one protocol or product let's say at that especially validators can run at the same time I think that's a huge value prop for someone like us and Mike we were talking last week as well about like why would a validator run a

liquid stating protocol anyway and with us on ethereum which I haven't mentioned yet on this podcast but you know when before Lido came around there wasn't really any products that we had at correspondent we couldn't really even get started in previous take ethereum because there's a 32 eth requirement and so you need to build a product around that and the lighter sort of comes around and says okay we'll do this for you and then you can run it and we put in the work and then you'll capture some of the fees essentially it'll take a color that as well I think in a sense you know what you don't doing right now in Solana is very similar um and it's just a lot earlier than ethereum as you've mentioned a bit in this podcast as well I do think one of the really nice things about Mev though

is just how much of validator can specialize uh if you understand Mev very well so like at chorus one you know as mentioned in the first episode of the series we researched liquid staking back in like 2019 2020 it's actually how I found the company back in the day and we also started doing research into Mev quite early for a note operator so around the time we met uh Lucas and Judo you know back in November 2021 we were already researching this quite a lot but up to the point where we actually researched and open sourced a Solana AED client which I can also potentially get up in the show notes for anyone interested and you know we sort of looked at what would it take to sort of embed a builder inside the validator so when it was our time to propose we would

look at all the opportunities and try and execute those as we propose instead of proceeding from researcher who would do it ourselves and so that was interesting but actually as we realized in Solana and Cosmos to be fair is and we also published another dydx mud paper just written me the actual Mev being extracted right now is quite minimal in some of these networks like Solana and Cosmos or dydx a lot of it still is taking rewards realistically and you're sort of talking about like when does it actually make sense or when will actual transaction fees and any rewards uh our last sort of and also become increase versus the staking rewards I would say and so that's going to take a long time on networks like Solana and Cosmos at least a few years whereas on ethereum

don't have the exact data right now around a third of rewards are from Mev and if you're an ethereum stake here but you know a year or two ago maybe you would use Lido to earn extra yield and that's you know you're using D5 Etc you know at course one we've sort of proven actually in the last month or two we can earn rewards that actually are higher than lighter over a sustained period of time and that's from actually tweaking from some things in the Mev supply chain and this is like actually proprietories with a specialized knowledge and so here is where it's going to get really interesting because you have a network like Judo for example and you know Lucas is like a gun that muv as most people know and so you know maybe they're doing some unique things there which gives them an opportunity to rise up above the

other liquid staking protocols because they're not going to have any be there at all and that in itself it's not really D5 it's really at the infrastructure layer um and liquid staking is more of the D5 layer whereas Meb is really pure infrastructure as also Lucas was alluded to before where you know Builders aren't necessarily contributing back to D finder sort of property themselves and also talking infrastructure in unique ways you know Etc so they can put in bids in Faster whatever the reasons are and so for that reason I would say like ethereum is much more mature when it comes to like me rewards and that actually overtaking you know sort of uh staking rewards but I do think in Solana and also Cosmos this will come it'll just take time and for a validator like us there's always an opportunity and that's the reason why we

researched Amy be on Salon in the first place that's because we want we already had quite a bit of stake and if you're a delegator you want to earn more yield on your soul so it makes sense to go with the ballad let's give you 20 30 extra soul that we'd receive if you didn't stick with us let's say so it's really interesting and I do think Meb especially mixed with liquid staking will be a really sort of area that innovates a lot in the next year or two especially when it comes to Val that is specializing for more stake and that's what's going to make the validated industry hyper competitive so it's going to be yeah cool to watch genetics as that develops yeah I uh and I've spoken to a couple members of your team about the new ethereum client and you know I think

it's fascinating and probably ahead of its time um and I would maybe pose this to both of you but you know Lucas will you basically try to you know I could imagine if you wanted to be hyper competitive you know only innovate your client um for or maybe offer it to validators that are part of your curated set right for the for the liquid staking token rather than allowing anybody to run this Mev client um and that could be a way to get more stake distributed to you know your LST rather than just broad adoption of of the um of the client in general is that something you could see happening because I I think like you know say if

you break Braille up a specialized client uh on ethereum and you know I think Lido's trying to expand their set right and that's a higher node that's a higher you know operational requirement that would probably only be possible for us subset of of their you know validator set and so I am very curious to see how this will play out in different ecosystems where you can innovate you know at the hardware level like Way Beyond what you could for maybe an LST that's trying to cater and keep everybody happy and expand the set um yeah generally would love to hear your thoughts on that yeah I mean I think that I don't see that happening right now I think that could

um could certainly be like a pretty slippery slope if Mev was actually like Mev is still a relatively small on Solana compared to ethereum but um I think it going that route would be like a pretty slippery slope in the wrong direction I think I think there are there might be other ways to like get higher quality about air sets but I feel like um like discriminating who can and can't capture Mev is not really the the best idea is like us as like an infrastructure company um

but I think there's like there might be other ways to get a better valid air set where maybe you have certain Hardware requirements or um like for instance I think pithnet is running a Solana clone it's like a Solana basically running the Solana valid air client on like their own network and they have extremely high valid air requirements I think it's it might be a proof of authority Network I don't know the specifics of it so don't quote me on that but you know that could certainly be a way if if it was shown that running much higher Hardware requirements would result in higher rewards than that could be something that would be worth

exploring but I think um like only providing the client to a certain number of people is certainly a slippery slope right maybe it's better said it's a way for individual validators to counter position against you know the network effects and all the benefits right because the individual validators sure they use you know the staking polls as a distribution Channel and that's great but they're only getting you know a sliver of that whereas with course one can come out and say hey if you delegate just to us maybe you don't get a liquid snaking token because we haven't launched that yet but you know you will get a couple of percentage points of higher yield and that you know over time

is the only way maybe for individual validators to compete with the staking pools um yeah I don't know I mean I'm I'm kind of curious to learn more about what they're doing there but I think for someone like a course one I think that 100 makes sense I think you know you're uh you're running a business and you need to make money and I think you got to innovate and stay ahead of everyone yeah and I think as well in complete honesty here you know this is also very early for us in terms of this being implemented and executed and you know we're very mindful of the ramifications of something like this and ultimately we would hope that the whole ecosystem would benefit and becomes more competitive to create their own mov type

flows that you know capture value unique ways for their own delegators and that helps security of developer theorem you know overall so you know we're very mindful of what we're doing and how we're doing it and you know maybe we can potentially apply it across ecosystems maybe there could also be some sort of learnings across networks there but yeah it's pretty like nice actually working at course and seeing the different teams you know working on these mnb type problems across various networks as well um but yeah very early and as you mentioned miles as well actually you know if you think about a note Opera like us like Lido in all honesty has been such an incredible team to work with and you know can't say speak highly enough of lotto as like a as a Dao and you know it's fantastic to work alongside lighter and then you know

maybe with some other business you know maybe with some institution or something like that you know there's always going to be a mixture of Institutions that want to use Lido or use us or use something else so it's just choice at the end of the day and you know maybe one choice is that an institution being prepared for us to experiment a bit with trying to get some high yield with our own nodes and maybe we run some of those nodes and honestly a lot of our work is open source and published eventually anyway so I'm sure we'll probably give back some of that to the community at some stage so yeah and I'd say it's exciting times of course regarding that nice well guys just one final question to to leave on which is the maybe the the state of defy on Solana um

something we've talked about in previous episodes of this show as well as Lightspeed which is another block box show but you know the question just being it feels to me as a as an observer like there's I guess the metaphor would be Phoenix Rise From the Ashes sort of you know after the SBF FTX pull out you know sort of collapse there recently have been it seems like a number of very high quality entrepreneurs which are interested in exploring uh what you can do on D5 on Solana and in particular I feel like operating in a non-gas constrained environment removes a critical constraint um for things that you couldn't do first

so like llping right becomes much more freeing and the flexibility that you have there on an amm to the point where you know Central limit order books make sense on Solana but they don't really make sense on ethereum and I would just be curious maybe we could just close because it feels relevant to liquid staking right if you have a more robust D5 ecosystem there's opportunity cost if you don't liquid stake so people want to be more Capital efficient so I'll just be curious get a sort of a state of the union of what's going on on Solana D5 yeah I think there's a lot of super dedicated teams that have been like grinding it out and doubling down on Solana since the whole FTX Fiasco um

you know like margin five has been doing very well recently with their product and points and seeing the impact that's had on like Judo soul and be Seoul and some other lsts um there's a lot of like you know the the oppos only possible and Solana meme like you have like drifts and um Ellipsis which is building like a a serum reboot with some Excel on a lab exelona Lab engineer and then Eugene which was um on the last season of bell curve with uh Yumi and hasu to some of the other like cooler products like kamino which is basically doing like actively managed LP positions on like Orca and radium

clmms so I think you know they're constantly adjusting positions and trying to earn the highest yield um there's a lot of other teams that are shipping to not to uh forget anyone but um yeah I feel like there's like a lot of Hardcore Builders um I think it's it's showing up it's going to be pretty promising like for the next six 12 months is a lot of these protocols finish their audits and go live and uh expecting some like Solana token launches as well coming up around breakpoint and like into the end of this year so I think there will be a lot of renewed interests in Solana I appreciate

it guys it's been a phenomenal episode and you've given us a lot to to think about mostly I think many people in the crypto ecosystem no matter regardless if you own Cosmos ethereum Avalanche wherever you are I really admire Solana for the community it has and the builders it has as well gents thanks appreciate your time this has been a really fun one we'll have to do it again soon all right partner great episode there nice um it was good good to end the season with Solana what did you what'd you think yeah I totally agree I'm glad we ended with Cosmos and then Solana because you can start to you know I think the comparisons add color to understanding ethereum too right um like we can get into it but there it's there's clear differences in terms

of the amount of adoption of lsts that go back to some of the design choices at the protocol level right um and I think zave said it put it very well you know like the better the design of staking and the more you know that is designed actually built into the protocol to make staking as easy as possible like the less attractive it becomes you know a relatively attractive lsts become um and you could say the same thing for a lot of a lot of these design choices but yeah we can start wherever you want yeah I like the early part of the discussion and so often we think about this from the standpoint of this very limited definition of decentralization I

think which is the hardware requirements for being a node operator and each one of these different ethereum uh blockchain ecosystems I think has you know there's more Nuance to it I think than that which is one you know Solana gets some flack around decentralization but I I would push back on that I think one of the assumptions that I never really agreed with when the bitcoiners first made this argument was that the hardware requirements are going to remain stagnant or static right that's Dynamic there's Moore's Law that's going on that's reducing the overall Hardware requirements for the same amount of compute on an annual basis I think it's a totally fair assumption to say hey overall like this is what starting from this is what we want the role of the uh validator to be and then assuming that

Hardware requirements are going to catch up I think is totally fair it but it was interesting to hear zaves discussion and then the other thing I think is people assume that these are the default assumption is that these are individuals validating these networks where it it's mostly the chorus ones and the figments and the block Demons of the world which is fine as long as they have internal controls and they make sure the stake is geographically distributed and all the other things that we talked about but I think it's important to just call spade a spade and say that's the current state of how most of these chains are getting validated yeah I think that's fair um and if you just think about like a Venn diagram between you know Cosmos Solana and ethereum I think you know Cosmos and Solana both started with the

expectation that validators would be for the most part professionals and that is baked into the design choices of you know 150 validator active set on Cosmos where they ask a lot of the validators that's baked into say you know the hardware requirements of Solana but Solana and ethereum are both similar in that they're both general purpose chains right and so by being a general purpose chain you need to decentralization matters even more right your the risks are not isolated to a single app there the risks of centralization are isolated to everything built on top um and so you know I think they're going about it two different ways where ethereum is trying to keep the validators as as dumb as possible so

it's as accessible as possible um that doesn't really fit into I guess the vision of Solana and what it needs to be from a performance standpoint um so there's actually you know unlike Cosmos Solana validators don't need to like vote in governance and do a lot of other things but it is really all about the performance um so yeah it's very interesting yeah and I would say the I don't I don't feel confident enough to make a prediction out of this but again Cosmos has there are the full nodes and then there are like clients and I think the cosmos perspective would be that professional validator you can be a solo professional validator as well but in general that will Trend towards even if they're solo

people Solo in it more professional entities that are operating validators and then users should use like clients and in ethereum land the perspectives is that we should make the requirements for operating a full node so low and so easy that any user should be able to do it probably I think if they look at the facts in the cold hard light of day they say that's maybe not realistic and maybe we do need to move to a system where there are professional full modes and then I think they have a there is a like client or light node implementation or something in ethereum and I think uh Solana you can see the seeds of that there's fire dancer and then there's going to be Tiny Dancer and then Celeste is probably a little ahead of this on the curve as well they've got their uh

their light nodes so right I kind of feel like that's the future that we're moving towards here and I could see in in five years or so the hardware requirements being less less of a discussion Point than they are today yeah because the assumption is that users will just run light versions of whatever the full modes are yeah I think that's that's very interesting um and you know I do think the native delegation also plays a lot into this if you just look at the the staking ratio of Solana and Cosmos genes it's very high right it's it's in this 50 plus percent typically I think Salon is 70 right but the LST penetration is very very low

um and that's because you know the ease of Delegation really versus like if you want to stake on ethereum you're either standing up your own node or you're doing you know delegating to a liquid staking protocol I think that's like a a much easier Choice um obviously you're gonna most people will not you know go out and buy Hardware where to just just to be able to stake if they don't have to um and you know by building it into the protocol it makes it a lot easier but that also you know decreases the relative value prop of liquid staking um and you know they've it's lacked because of that but we're starting to see it come back yeah I think the most poignant observation of that entire episode was that the more broken the

native liquid state the native delegation is the better your liquid staking out of protocol will take off and if you rewind the clock to the conditions that made that allowed Lido to find pmf on ethereum originally it actually ironically was because you had this enormous period unknown time before you could withdraw there was no in protocol way of doing it that you know didn't ethereum doesn't support in protocol delegation and you had this opportunity cost uh or this desire for Capital efficiency in the form of a D5 market so it is just ironic it I think many crypto Builders will probably empathize eyes with the idea that sometimes you get rewarded for the wrong

thing and I think listening to that if I were a designer of the Solana protocol I'd be saying to myself man I feel this kind of sucks because I I built a solution for this and my reward right is that I don't have this thriving ecosystem that it seems like ethereum has although this is an explicit design choice of ethereum they want to limit what goes in the protocol and I guess this is this is a benefit of that design risk they allow outside providers to flourish right and we'll see if they end up adopting something like the liquid staking module right because you technically can build liquid staking into the chain if delegation is already built into the chain um and that's through the use of nfts and then pulling those nfts right so

maybe something will come around on Solana for that at some point and maybe Judo will get involved but um yeah it'll be very interesting to see one of the other things that stuck out to me this episode Jito I mean so interesting going in it reminded me a lot of the frax conversation that we had with Sam where on the face of it lsts stable coins what's the connection there it turns out the competency is managing assets and liabilities and I know I I think your your point was probably the one that made the most sense of if you're you're building a two-sided Marketplace between Searchers and validators well then you are if you want to bootstrap a liquid staking token then you already have one side of that

Marketplace because you have relationships with many of the validators and so it just seems to make an enormous amount of sense then you couple that with you can add additional layer of yield because you're the only one that's running an auction that makes a lot of sense and I think you're gonna see this Mev LST intersection get explored outside of just salon on Judo what do you think no I think it's that's absolutely right um you know Mev and lsts are so close to the middle of the protocol um and so if you're coming at you know lsts from a position where you're already have built a brand basically that is associated with being an expert in the infrastructure of Solana like Judo has then that's going to like give

you you know it's you're coming from a position of strength in terms of trust uh that you know what you're doing and then you know I think the second piece is you could potentially make yourself more competitive than other staking options by being the you know only way to earn Mev or PBS on Salata um and Lucas you know came out and said no we're not doing that right we we're making this client available to everybody but I do think that that's an interesting Dynamic um and and something to pay attention to because it's it's just it is a competitive differentiator um and you know we talked a little bit about it but I think professional validators like chorus one you know they're building really specialized you

know nodes and Hardware to capture to maximize Mev um and that's the way that they're competing against say you know liquid staking pools while also being a part of the liquid staking you know sets um but to get more individuals they contracted to them you know I think we'll we'll see more of this with restaking when it comes in but competing on yield has not really been a big uh differentiating Factor so far um and maybe it will as you know we turn into the the bull market and inevitably people start caring more about yield uh relative to trust brand safety Etc I I I do agree with you that I think Safety and Security are probably the number one seller but yield is not going

to be inconsequential I would say as well according to the Future so the the last part of this is similar observation maybe to the point about you're getting rewarded for the wrong thing it you know the the amount that your your mechanism for delegating stake is broken is proportionate to how much lsds end up taking off on your protocol the Solana D5 you know part of the reason why it doesn't have it isn't at the state that ethereum is is one and they have the FTX debacle which was not good right that was wind out of their sales um but additionally you know even if you look at what is

driving trading on something like uniswap there's a lot of organic activity there but there's also a lot of Arbitrage right in between the price of binance say and the price of uniswap and that's I think you showed me this there was a tweet from Hayden saying this is a transfer of wealth from LPS to East Acres and one thing I've noticed a little bit it's hard to really fully critique it because I don't have a better solution and I I do I generally agree with most of the design choices that have been made on ethereum that said I do think this idea of Mev getting burned sort of leads to this unhealthy set of incentives where even

if the lpers are getting you know getting taken advantage of up well at least it's gonna get burned and that'll come back to us as as uh you know as etholders and uh you know if it doesn't really make sense that these uh Roll-Ups are all going to have to pay an enormous amount to pay for ethereum D.A that's a lot of Youth they're going to have to buy and get burned that's going to get returned you know what I mean there's this it can be the uh it's a little bit of a not great incentive there in terms of the user experience because you've linked burning eth which could be which leads to a not great user experience to the price of your bags going up so I've just noticed that and again I don't want to criticize here without having a great solution but I

think probably over the long term that's not super healthy what do you think yeah no I agree um this is kind of maybe tangential to the to the LST conversation but you know that that is essentially ethereum's platform tax is you know comes from these design choices that they've made that really kind of I would say prioritize eth's money-ness as well as I would say you know censorship resistance and decentralization by making proposers dumb in the 12 second block times um and there's kind of an acceptance of Mev over there and it's all about how do we redistribute it and then if you go to other ecosystems it's about how do we minimize Mev right like in in the Highlight low latency event it helps to

minimize it uh so does things like threshold encryption right that we're working on over in osmosis um and you know it's not the great thing if if a uniswap is feels this way and then you know to circumvent the platform tax launches something like uniswap X which uses leverages a lot of off-chain activity right uh to get basically what the user wants yeah I think that's it's just a very interesting Dynamic that we have touched on this season because we're getting so close to the middle and getting into these design choices um and you can kind of see like the downstream implications on you know the apps that are building on it the staking yield I'm sorry the staking ratio how

many people want to stake how they're staking um yeah there's a lot there but um I think it's starting to hear the leading apps on ethereum you know becoming a little bit more unhappy with the platform tax whether it's in the form of uniswap and unit swap X or dydx you know arching off to their own chain um yeah we'll see we'll see how it plays out it'll be interesting l2s are going to do with this too if the strategy is to bundle which sounds like it is right right so yeah everyone's going to run into this in in one time or another and it I'm just very excited to see how this all shakes out we're in this phase of it's been done to death and so I don't want

to repeat anything here that wouldn't be super useful but very tribal very binary this is the way or that is the way modular monolithic all of these and you know what the future is probably going to be more interesting and more nuanced than any of us are projecting at the current time and I just can't wait to see how it all plays out frankly because the users will at the end of the day decide what's what was the correct answer in hindsight right uh and we yeah once that activity comes back we will see just you know what the user preferences actually are and if it really aligns to our expectations from this you know research infrastructure phase then we're clearly in um yeah that's the that's the Wild Card Miles because we don't buy a classical

definition we don't have outside of I would even argue ethereum Bitcoin and Solana we don't have anything with real product Market fit by the definition of web 2 Silicon Valley we don't have anything with millions of users other than also the the centralized exchanges yeah now maybe you could argue that maybe some of these Roll-Ups or even a platform like you to swap is actually more B2B I think you'll be I think you could make a pretty convincing argument that uniswap has uh product Market fit even though it doesn't have millions of users so but all so a lot of the assumptions that many of us hold dear those can all change is is the only point so all right partner this was a really fun episode this was these were all the

interviews of the Season that we're going to do but you and I still have our wrap up which is going to go live next week and that'll be a lot of fun we've covered a lot of ground this season we have we have we've traveled across the ecosystems we've you know heard a lot of very interesting you know people coming at this from a lot of different angles um and so yeah we'll try to tie it all together as best we can next week but um yeah there's a still probably a lot of open questions extract those Pearls of Wisdom buddy all right we'll see you here next week [Music]